Bitcoin fork is important but also a red herring.
Red herrings only matter if people pay attention to them. In the case of the bitcoin fork, this red herring matters because it psychologically affects people. I will say the declines began well before this bitcoin split story was big. In fact, Segwit2x was one of the reasons the market rallied some time ago.
During every bear market (or bull market), the media cycle creates a narrative. At least half the time, this narrative is only mildly correct. Often, I have seen the narrative to be totally false, both in the world of stocks and in cryptos.
This is one of the rules I value greatly in the investing world, that the news can harm your perspective as much as it can help it. There are expert chart people who wont even look at news, they just look at charts (usually traders). This does not work for fundamental investing, but from them we can realize there are other mechanics besides news events which affect price. If a coin goes up 20%, the media cycle may try to assign a story to it, but what if the real story was, some millionaire entered a buy order wrong? It happens, but this is never the story because the media cycle would usually not be privy to that info. Then they might create a news event and narrative about an increase. In the case of the bitcoin split, there is some truth to it, so I will cover this issue.
Segwit2X is an old story, the split is an old story. It was a decision reached in late May: https://www.cryptocoinsnews.com/bitcoin-scaling-agreement-officially-met-segwit-2mb-hard-fork/
When this info was leaked on twitter that an agreement had been reached, Bitcoin soared. This is one of the primary reasons the market went so high in the first place.
Now that this agreement is being enacted, it has become a focal point for FUD (fear-uncertainty-doubt). There is a risk that people will lose coins due to this fork... ect. ect. Most of this speculation about what could go wrong is all put into one very simple basket of probability:
- Are the miners & nodes & developers of bitcoin so totally incompetent that they can't continue to keep their network operational?
If this were just on bitcoin core team, I would suggest they are this incompetent. They are the people who have failed to lead the users into a system wide upgrade for 2+ years, and have been the cause of high transaction fees. However, this agreement of Segwit2x was not authored by them. It was not their plan. It was a compromise reached by miners and other end users in the community.
Imagine if it all went horribly wrong come August 1st... have you ever heard of a hot patch? They just issue a quick fix for the bug, and maybe the network is down for a couple hours. I do not think this would or could happen, but even if it did, woopidy-do! It is better than the Greek banking system which shuts out depositors from their funds for months or years.
My point here is, the market is declining and everyone needed something to focus on, and this was it. Now that everyone is focused on it, it becomes a market important event. When in fact, it should have almost no importance at all for people holding diversified positions. "Chance of total network failure and the loss of bitcoin forever and ever..." it makes a great news article on a website and creates juicy reddit discussions, but in the world of probabilities and factoring in risk, I do not even consider it.
In terms of probability, you would rather consider the case of Ethereum, where a coin fork caused people to make tons of money as both subsequent coins went up higher.
My concern is the August 1st upgrade and/or fork which ensues, creates a nice rally off of a bottom. Hopefully it will, yet is that the end of the market declines?
If you can follow what I am saying here, what is supposedly crashing the market today, is the very same story that caused it to rally to 100 bil+ market cap. In my viewpoint, the bigger story here is buying and selling, psychology and movements of money. And the Segwit2x is the backdrop for the actual story. When the Segwit2x finalizes, it was not the actual story, but just a backdrop to it. The real story is not something I am fully privileged to. The only people who are run the exchanges and keep that a secret.
It could be the end of the July we see a bottom. Yet it could also be that after that rally we dip to new lows as the real story continues. This story is not so hard to guess:
When a market expands from less than 20 bil, to 115 bil in a couple months, creating gains for people in the range of +400%, it lets off steam by tanking in a few months. People sitting on hundred percent gains are very quick to sell because they are sitting in good profit and what is there to lose by selling? Then, whatever negative event exists during this period becomes the central point of focus.
For a decent bottom to happen, people need to see crypto as a value buying proposition, rather than a hot air balloon about to be popped.
how far will it go down
Where do u see market going from here
I developed a guess in the comments of my last post. My worst case bottom is like $45 bil total market cap with bitcoin sitting at $1,800. I suppose if I wanted to be methodical about it, the top was 3k for bitcoin, so a 50% decline from the top is standard ($1,500 for bitcoin), I just think buyers of bitcoin step in before the 50% decline is reached. In the estimate, I had other more speculative cryptos taking a larger beating.
Markets rarely ever reach the worst case bottom, so I would anticipate a floor in the 50 bil to 60 bil range.
A lot of this is gauging sentiments, rather than pricing because sentiment has to change, and until it does the prices can go lower.
I'm weary of a false bottom or a large double bottom at this point. People are so hopeful that when sentiment seems to change, crypto people will just jump on board, and you could have a huge rally back up to something like 80 bil. Yet if there is not enough new capital to sustain it, it should decline off of such a spike, reshapping how crypto people view the market they are in... it's when that mentality of bubble FOMO expectation begins to get weeded out of their thinking that I would be more confident of increases. FOMO works on the way up initially, it creates massive rallies and isn't to be underestimated, but once the market shifts to bear market, it's more about those people with that mentality reversing their viewpoint.
Yes, we need more of this sober appraisal from those who are insightful as well as informed. But what a false world we live in! What is known is always a ray of light, but it is always surrounded on all sides by the darkness of the unknown. Metaphysical fact of life.
It has only now recently dawned on me that the crypto-craze was really just an exude of the tech bubble with hot money overflowing into a related sector. That, and the fact that the crypto currencies are not quite ready for prime time or mass adoption as yet means patience and then the show will go on.
This time I accumulate during the long drought if that's the way it plays out.
I agree with your explanation!
We truly live in a "headline" society whereas even a whisper sends the markets crashing or booming. No fundamentals at all, just speculation. Narratives are created to fleece the weak hands and they've got this thing down to a science. They simply shape the story to get the desired reaction.
Really great article man. More people really need to read your work. Resteemed!
Do you think all these new cryptos (probably a few doomed to fail) are pulling money from bitcoin and ethereum and causing a lot of volatility ?
Cryptos like bitcoin and ethereum have demonstrated that once they are created and the network is operational on a large scale, from that point on they fail to innovate fast enough. Long-term, older coins like bitcoin and ethereum are more likely to fail, and they are likely to be replaced by upstart coins. That said, which ones? There are a lot. Bitcoin for example still has the 10 minute block times, even if it ran as fast as it could. There are other coins with 30 second block times. There are coins that are basically instant just like Steem.
A person could never really pay at a cash register with bitcoin like we do with credit card systems, nor could we use Ethereum really, their bitcoin system just can't handle it, unless we just route it all through a 3rd party service that holds all the funds and the keys... and if they ever get hacked all your money is gone. Otherwise, bitcoin isn't fast enough without radically changing the software.
I'm not sure what trick the prepaid cards use, but likely you send the funds in advance of spending, and they turn your crypto into fiat on their end to mitigate risks, and then deduct funds from your fiat prepaid balance.
thanks for that .. Definitely an interesting topic to follow and see what evolves
Great post Ted - interesting view point. I see your $75B market cap prediction was spot on. I have bought up some Steem around this level but have plenty more to buy. So what your thoughts on where to from? (Next couple of weeks.)
I expect a rally toward the end of July / early August. The Segwit2x success rally. People may be buying in advance of it, or they may actually wait until early August. Maybe the rally begins Monday because it's dropped so much already. Not sure it is the actual bottom, though.
Bottoms are moods usually. Like you pick up on some things people are thinking and talking about in the community and you realize the bottom is here. It's strange it works that way but it does. Pricing affects it less than mood does in these situations.
Thanks Ted... will keep buying as opportunity permits. This pull back and your observations have worked well for me thus far. SK.
Personally, I see a good opportunity for late BTC adopters who couldn't get or invest traditional money on to crypto currency, now on down guards, Bitcoin is the way to go for a new wave of users, and that's a good thing for early adopters as well, as transaction numbers will increase after the July 1st events, I see BTC or BTU (depending on bifurcation) go high, stabilizing blockchain fees and speeding up times for a transaction, that's good news for all of us , users of this exciting crypto currency world of possibilities!