CRYPTOCURRENCY MARKET PROBLEM: EVERYTHING IS TIED TO BTC
Hi everyone,
Due to recent events, it is important for the crypto community as a whole to discuss this at length, and offer ideas for possible solutions. The issue to which I’m referring is BTC being used as the unit of conversion when determining the value of any other coin as well as the overall crypto market value. As we can now see, this is an exploitable weakness in the crypto world. Attack the unit of conversion and you crash most of the market.
For example:
The conversion to fiat goes
ALT > BTC > FIAT
The same is true for other trading pairs.
ALT > ETH > BTC > FIAT
So technically, there is only ONE trading pair, BTC. All others get their valuation from BTC.
If we look at ETH, it has little to no value relative to bitcoin during all of these crashes. It has stayed between 0.09-0.1 BTC. But, due to this conversion issue, ETH’s dollar value appears to drop across the board. Due to its direct connection to the price of BTC, all that anyone has to do is crash BTC and this will still trigger sell offs in ETH that are set in USD and not in satoshi. You’d want to sell ETH if it dropped from 0.1 BTC down to say 0.08 BTC. But people set the orders in dollar value. So if bitcoin drops in price, the dollar stop sell orders are still triggered. On the 18th, both NEO and ETH actually increased in satoshi value while bitcoin was crashing, but the dollar value was declining. Eventually, sell offs hit and dropped the satoshi value as well.
Think of it this way, imagine someone wanted to drop the entire stock market by 50%. What’s the BEST way to do that? Well all valuation is tied to the USD. If you could drop the dollar value by 50% relative to another fiat like the Euro, immediately, the stock market would crash by 50%. Governments prevent this from being possible. BTC is our USD and Alts are stocks. Their value, even if traded for each other is all tied to the value of BTC just like all stocks are tied to the dollar.
Crypto needs a static unit of measure for converting any coin into US dollars in the same way precious metals use weight. Imagine building a house if units of measure were dynamic rather than static?
I hope this makes sense!
Thank you for reading.
Feel free to upvote, comment and/or follow my blog!
Cheers,
MAXIDIGI
Seems to me you laid out the idea that BTC was the unit of measurement. However I would love to see ETH become something of the Euro of the crypto world. Where we have two major competing coins that translate into dollars, but are not as adversely tied to each other.
plus wont you have to a major player in the BTC world to really shake it to its core with such a large sell off to really cause a major crash?
I would also love to see this happen and in the future this might be possible. ETH is definitely gaining ground over Bitcoin right now.
I also feel there are definitely major players in the BTC world that can cause a very hard crash, but in my opinion this would not be a good strategy as cryptocurrencies in general have so much more room for growth.
It feels nice to realise cryptocurrency is still relatively new to the world; demand for crypto is only growing more and slowly it will become a more valuable asset as cryptocurrency goes mainstream.
Thanks for your comment!
It's of matter of time. All truth passes through three stages. First, it is ridiculed. Second, it is violently opposed. Third, it is accepted as being self-evident. We are currently in stage 2.
Good comment!
How do you feel about a coin like Tether, where its goal is 1 Tether = 1 USD?
I thought maybe this is what you were leading to but you never mentioned it. Barring all recent controversies aside, Tether is interesting because it is one of the only stable crypto currencies, which makes it capable of protecting you in bearish markets should you swap into it.
Good comment yes! I spoke about Tether in a previous article:
https://steemit.com/cryptocurrency/@maxdigi/many-questions-arising-about-cryptocoin-tether-and-bitfinex
I do feel Tether is a good way of protecting yourself in a bearish market but I have not used this method myself as I don't trust this solution.
It is not sure whether every Tether is being backed by a US dollar and this kinda worries me as a lot of people in the cryptocurrency-space are saying Tethers are being pumped into Bitcoin by Bitfinex.
The reasoning is kinda simple if you put it like this: For Tether to remain around a price of 1usd, more supply of tether needs to be created when the demand for tether increases (in bearmarket mostly), otherwise the price of tether would increase. Now if the demand for Tether decreases again (when markets are going back into bullphase), the supply of tether needs to reduce again or the price would get cheaper than 1usd.
So there is this theory that everytime the market goes in bullphase Bitfinex is also pumping Tether into bitcoin, creating fake value for bitcoin. I definitely would love to hear your opinion on this!
Thanks for your comment.
Cheers
Should just be the dollar for now.
Hello! Nice article! I agree... and, possible solution could be to change the user's mentality about the whole concept of bitcoin... which is essentially an application within blockchain technology... i ll post my thoughts about soon. I just followed you and upvoted waiting some new thoughts and ideas ... thanks have nice day !
Thanks for the support!
Would love to read your thoughts about this subject :)
Steem-on!
awesome post, i did not know anything about this before i read this.
Feels good to inform you!