With the impending launch of Bitcoin futures, one has to wonder...
Bitcoin once again skyrocketed in value today, reaching a high of around $18 000 USD at the time of this writing, which led me to consider...
Imagine you are in control of a powerful, wealthy, Wall Street firm, with millions - possibly billions - of dollars at your disposal. In a few days, you will have the opportunity to short-sell Bitcoin futures. So, today, you purchase millions of dollars worth of Bitcoin. When futures launch, you choose a short-sell option. Before the time that the future you chose matures, you dump your Bitcoin. The price plummets! You make a decent profit on the Bitcoin you held as you watch the price begin its descent.
As the price rapidly drops, weak hands join in, panic-selling before they lose their shirts. The price craters! And this is where you really make a profit! This profit is on the future you bought, betting that prices would crash. Because the price plummets, you cash in on this gold mine twice! Not only do you pocket the money from the sale of inflated Bitcoin, you also pocket the profit on the futures bet you made.
I don't know about you, but if I had the ability to do such a thing with millions of dollars, why wouldn't I?
In the meantime, Coinbase has been inundated with new buyers wanting to stock up on Bitcoin as it continues its rapid ascent. If this is truly caused by a massive influx of new buyers, it is not near as worrisome as if it's a small number of big buyers.
The trouble is, the entire Bitcoin market cap is only around $300 billion USD - a relatively small and illiquid market. A large influx of many small buyers along with some whales can really cause the price to go crazy. When Coinbase was overwhelmed earlier today and had to shut down services temporarily, the price dropped rapidly because of the sudden stoppage in casual buyers entering the market.
This is what leads me to hope that this is indeed a large number of small buyers as opposed to just a few whales manipulating the market. Of course, in reality, it is likely a combination of the two.
My advice: Be cautious. This could be a fantastic windfall for many buyers and could be the turning point in a global currency revolution. Bitcoin will likely head toward $25K before December 10. But after that point in time, all bets are off. If you have just recently entered the market, you may see a 50% or greater drop in value. In the long term , the price will recover, but it may be a much slower process. Remember that you can't lose money if you don't sell at a loss.
Don't invest what you can not afford. Hopefully, this works out great for all the new Bitcoin buyers. All the best!
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