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RE: Introducing the idea of a Bitcoin counter-currency which might actually work...

in #cryptocurrency7 years ago (edited)

Because of the way the market works, it's difficult to explain but you'd understand it if you've been trading a while.

With the Chinese announcing they'd be banning exchanges, it was obvious it would send BTC crashing, it wasn't a hard call to make, in fact if you look back through my blog posts I called it the second it initially happened.

Bitcoin fell from nearly 5k to just under 3k.

Now, knowing that's about to happen, a trader will attempt to park his money somewhere,usually USDT, but they're not really cryptocurrencies, so there's many problems with them, the main is that they don't keep up with crypto growth.

However if we had one coin that we had all agreed was the coin that was the "bomb shelter" we can hide in when the market is falling, that coin would instead rise, because buy orders on exchanges would push it up. To guarantee people flock to it, that's why you'd offer proof-of-stake distribution as btc falls, people would buy it not only as a shelter, but because it would be paying out and increasing their stake. Likewise, the price would fall, rise slower or stay static when BTC rises because there would be no incentive to hold it at these times. But it would still be rising overall against USD.

For a short time, Litecoin looked as though it was the shelter coin, but it started aligning back with other cryptocurrencies.


Thank you very kindly for taking the time to offer me such explanation @purpleprose. :c)

Yes, the China announcement was a shock - and leads me to believe that they (unlike JP Morgan who merely engaged in market manipulation via their statements) have reason to fear the power-un-consolidating effect of crypto-currencies.

Of course over-dependence upon Bitcoin as flagship sent many cryptocurrencies reeling.

I think that I better understand the notion of an emergency 'stability-based' crypto-currency - but there are two things that come to mind here.

First of all - confidence in a coin to have worth independent from Bitcoin, etc. seems like shaky territory if without true backing - a stable foundation upon which such a crypto's worth is inherently founded.

Secondly, in the event that people can just trade in their imminent loss-making cryptos in exchange for this stable medium, does this not mean that somebody chose, wittingly or not, to carry the explosive can which then detonates in their hands and leaves them with a net loss?

Yes, some could move fast enough to ensure that they aren't the ones left holding the can - but I feel that I may be missing an important piece of the puzzle here - as the 'overall' outcome doesn't seem all too attractive (somebody still loses just as much).

Out of curiosity - what did Litecoin initially aim at to do hat seemed to indicate it as a potential shelter coin?

Thank you again for your patience. :c)

Litecoin didn't really aim to do anything, it just acted as a hedge because people were using it that way. It kind of explains the questions you have...

...because during that month or so, both LTC and BTC rose against the USD. It wasn't like you lost out by taking shelter in LTC, because even when it's BTC price fell, the value of the coin was actually rising. Whereas if it was tied to gold or USD, Bitcoin could have gotten out of reach.

It's not that the currency has to be stable, it just has to react different to the rest of the market. Again, it's difficult to explain.

Also, you really don't have to be that fast to not lose out, even during minor crashes you can still make money if you pay attention to the news and the charts, I lost some on this last crash, but when BTC started to recover I actually gain value in my portfolio because I'd been buying the dips.

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