Why is Bitcoin still crashing? Are we ever going to recover? Who caused this latest dip?
Was it Tether? Bitcoin Futures? What about price manipulation?
If you’re wondering who is benefiting from this massive dump, consider your current status if you sold in December 2017. For the rest, like me, who hold on tight to my crypto-assets, 2018 has been a disappointment. Was I expecting the Bitcoin price to continue rising exponentially? Obviously not; but I really didn’t see the connection between Tether being massively printed by Bitfinex, bitcoin’s price volatility, and the dump we’re currently seeing.
Of course, there are more variants to the cryptocurrency market crash, like Bitcoin futures, hacks, news manipulation and other pearls. I cannot say I agree with analysts stating Bitcoin Futures to be the major reason for the Bitcoin price action, as history tells a different story .
Did we really get a huge spike because hordes of new users came into the market?
What is causing the 2018 bear market?
Hopefully my opinionated analysis will give you more tools to take your own conclusions.
Before we dive into the Tether issue and since we’re talking about scams I would like to take a moment and give you a fair warning:
Do not bluntly trust people who write in crypto-newspapers, famous crypto-youtubers, telegram analysis chats, ICO reviews, etc. We’re all here for the same reason: to make money; the more the merrier. Of course some of us will be honest and transparent about our beliefs, caring more about the truth and our own values, while others make decisions based on how much money they can make.
Money usually talks louder. And many “experts” I meet (either face-to-face or digitally) are a bunch of scammers who do not really understand economic incentives, the benefits of decentralization or even the purpose of cryptocurrencies. They want money, as fast as possible, by any means necessary.
Some tips I give friends who start learning or investing in more crypto-assets than Bitcoin:
- Don’t trust Telegram channels. Most either give crappy advice, are just pump and dumps, or simply want to trick you into investing long term in terrible projects that pay them large amounts to promote them. I will write a whole article about that soon enough as I have plenty of delightful telegram conversations with really shameful people. Like for example a channel called “Royal Investment” (@royaladvisor ). They use weird tricks to promote a insanely high number of pump & dump groups and are purposely mischief by not giving proper and accurate reports of tasks they set up to undertake. If people do not give you proper credentials, ones you can check for yourself, do not trust them.
- Listen to reliable crypto-youtubers. To understand how you can sort the cereal from the weed, there are some tricks. Do they usually say “I’m certain”, “This will happen” or “I guarantee you”? If so, run like the wind. If they focus their analysis on the market by actually providing a good analysis with meaningful value and are knowledgeable you should still listen to everything with a grain of salt. If they promote projects go check the whitepaper, team, project development and so on. Some examples of youtubers I consider to have good values: Coin Mastery, BoxMinning, Jimmy Song, Data Dash, Andreas Antonopolous, Ivan on Tech, Richard Heart and, of course, the amazing Craig Wright, who claims to be Satoshi except he cannot sign a bitcoin transaction proving he is Satoshi. I was kidding, do not listen to that man, he’s most likely lying and simply wants to trick you. I back Vitalik’s statement. Craig Wright, “you’re a fraud”.
- Never put your money into projects that only have a website and a whitepaper. If you have to ask me why, I will be extremely disappointed. Look at EOS. I think that should be enough. I mean if you want to risk it and ride the “hype” wave, feel free. You can make loads of money, that’s for sure, but you won’t be contributing to a meaningful crypto-world. Can you live with that decision?! If I told this to Richard Heart he would probably laugh at my face. With good reason: if you have a chance to make money why waste it, right? But please, always consider investing in good projects, with something actually built.
- Do not trust ICO rating websites. Unless they follow the Weiss method and are 100% transparent on their ratings, the likelihood is that whatever project they rate higher, is because they got paid to do it. There’s plenty of proof around that, you just need to do a bit of googling.
Hopefully these warnings might help you making better decisions and better understanding the market.
Now, let’s discuss the topic at hand.
Bitcoin is crashing. What’s up with that?
For the past couple of months the only thing is a continuous downtrend that resembles something familiar.
Although I highly doubt we’ll suffer the same outcome, at the same time I remember the wise words someone said “insanity is doing the same thing over and over while expecting a different outcome”.
Am I that crazy to believe there’s way more interesting things to care about rather than price?
Isn’t technology development what we should be concerned about?
The tide will eventually turn. We just have to be patient and wait for big time investors, like institutions, wealthy players, investment funds and so on start pouring their USD into the crypto-markets.
Am I sure that will happen?
Well, I’m sure I will eventually die. Or that I will have to pay taxes during my working years. Or that the world will most likely keep spinning tomorrow.
I believe smart-money is coming full force. Like it happened after every Bitcoin bear season.
Want an expert opinion on the real value of Bitcoin? Check this one from a lead Bitcoin dev
If you want to understand some reasons that led to this over-valuation please stick around. I can’t be sure these are the variables which influence the outcome the most, but hopefully due to their magnitude I really think they were at least connected to the root cause, even if said root-cause is something I do not mention here.
Tether
To me this is definitely the grand-master behind the major price run we’ve seen in late December 2017 and January 2018. It did take me some time to truly understand why, but due to the amazing work of so many different people, we now have a better, clearer picture of what really happened .
Tether manipulated the markets by manipulating the price of Bitcoin. It wasn’t any technology advancement in neither Bitcoin, nor the large quantities of dumb money entering the market.
The key argument pointed out by Prof. Griffin on the research paper “Bit “, was that “When Bitcoin’s price fell, purchases with Tether tended to increase, helping to reverse the decline. But during times when Bitcoin rose, Griffin said he didn’t see the reverse occur.” Seems Tether was protecting the price of Bitcoin from crashing.
To accomplish this, large quantities of Tether were issued and used to buy Bitcoin on Bitfinex. Of course this wouldn’t be such a big deal if Bitfinex wasn’t owned by the same people who own and mint Tether. But that’s not even the worse. Consider this: wouldn’t you expect a company that claims they own reserves on a 1:1 ratio between Tether and USD, to be fully externally audited and show proof of those USD reserves?
Another huge red flag if you ask me.
To those who now claim “oh but some lawyer dudes just came out and said Tether bank accounts are fully backed so it’s all good”, please I beg you to actually do some digging .
The only thing Freeh, Sporkin & Sullivan LLP (FSS) said about Tether was: “FSS is confident that Tether’s unencumbered assets exceed the balance of fully-backed USD Tethers in circulation as of June 1st, 2018.”
That doesn’t sound like a real assurance to me.
Especially when you consider the “official” news-source, that appeared unsigned by the FSS board on Tether’s website, also stated “procedures performed are not for the purpose of providing assurance”.
Well…Thanks for nothing, I guess?
Bitcoin Futures
My view on futures is a bit blurry. I understand their purpose and I also recognize their effectiveness in taming markets, especially during the short-term. Does it work in the long-term?
In 1974 the first gold futures contract was traded on the COMEX exchange in New York. Trading started on December 31.
Fast-forward three years and gold was back rising to new highs.
What about if we buckle up and ask Chewie to hit hyper speed? Where would it take us?
That’s right. No one can tame the ambition of human beings to exponentially increase their wealth, time after time; there is no futures market that can ever stop speculation. Money talks louder and that means there will always be new smart-money coming into the actual asset, making its price go higher. What will happen is that those same people will have an extra incentive.
What if we short Bitcoin and buy a couple of CME contracts? Double profit, baby!
I’m kidding, I’m sure nobody would do that.
Welcome to the world of Speculation
If Bitcoin is the show, speculation would be the master of ceremonies. After all the show must go on, right?
Between an inflationary currency and a deflationary currency, which would you prefer? In the long-term your incentive is to hold the asset which keeps valuing in price.
Sure, there are bumps. But who cares?
Just buy some more and don’t complain.
Nothing is sure in life except death, taxes, and bitcoin blasting through the moon.
Share your opinions and thoughts down below!
Disclaimer: The views expressed in the article are solely that of the author and do not represent those of, nor should they be attributed to CCN.com.
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