It's a common misconception that Bitcoin is a safe haven. It's not. Not even Gold is a safe haven during a liquidity crisis. In sharp downturns, cash is king.
Think of Bitcoin and Gold as call options on the entire global monetary system. If Govs become insolvent, Bitcoin and Gold is there. If the masses lose faith in central banks, Bitcoin and Gold is there. If central banks debase currencies too quickly, Bitcoin and Gold is there. That is the staying power of scarcity via well known stock to flow ratios.
I'm glad Bitcoin is not inversely correlated to equities, because that would mean Bitcoin went down in an equities uptrend. Being non-correlated is superior: Bitcoin marches to it's own drum.
All this being said: cash is king in times of uncertainty. Bitcoin is a speculative bet that "money without masters" will become an essential part of the future monetary system. We're a long way from that still.
Advice in good times and bad: maintain a deep safety net and don't get too nuts with debt or leverage.
One of the supposed benefits of holding cryptocurrency that has been peddled is that it is a strong hedge against a down turn in traditional securities. Here we have a new, real data point to the contrary.
I still think this is true in a "traditional" bear market where companies are doing poorly. I don't think is applies when the entire market is panic selling to acquire supplies.
Many of us in the cryptocurrency community always knew this wasn't true. Unfortunately it's a misconception that was long and frequently advertised as recently as last week.
If you mean the OPEC thing: this really is a wild guess, I'm not convinced in the least. And insane volatility of Bitcoin is old news, anybody who said otherwise obviously never looked at the trading charts in his whole life. In fact, it's volatility is the main real reason it's interesting to the majority of BTC users: they only need it to speculate. Nobody really buys anything for BTC.
And other cryptocurrencies are still very much tied to BTC, so when BTCUSD falls dramatically, they do as well.
I have to say, the crypto market's strong ties to traditional finance in this crash surprise me. I understand selling off stock because of expected corporate losses, I don't understand mass conversions to FIAT especially when "print more money" seems to be the fed's response to this.
My take on the selloff is people looking for liquid cash. Very similar to stockpiling home supplies. People are looking for stuff they can use or trade in the very short term because they don't know how bad it would get. It's a lot harder to do that today with crypto.
I haven't seen anyone with strong reason to believe that companies are gonna be that much worse off a year from now than they were a month ago, or for the four years after that, so I don't see a reason to sell stocks based on expected company performance anymore than to sell crypto - but in the short term, everyone's stockpiling immediate goods.
One possibility is that it's because the stock market seems like a good buy for speculators right now. The stock market does have an underlying value long-term, in that stocks are pieces of companies that produce products. The true value of that is always uncertain, but various measures indicate that it may be approaching reality (after a long, overheated bull market).
Crypto is more purely speculative, with no real underlying value aside from the hope that it will some day become the fiat currency of some nation. (Fiat currencies have a "value" in that they are the only thing a government will accept.)
So it's possible that people are seeing bargains in another market. They need to move through fiat currency in order to buy it, but they don't hold it long enough for inflationary measures by central banks to affect it.
During the financial crisis circa 2007-8 gold also sold off initially when a lot of gold bugs believed it should rise higher given the financial markets instability.
The reason was that people needed to sell their "winners" in order to cover their "losers". Stocks were down, they sold gold which was way up at that point to cover some of the losses and get cash.
Just an hypothesis (which applies to the stock market as well): if you already thought things were overvalued, but were just waiting for the right moment to cash out, then whether this moment makes rational sense or not, you get out now because you were going to get out soon anyway.
Also, you may think everyone else is going to be "irrational" in this way, and wish to get out before they do. Sort of like buying toilet paper because you're worried about everybody else hoarding toilet paper.
because bitcoin is not money, it is an asset, it is a property that can be traded for money but its value fluctuates and is not tied to anything other than people's perceived future value in it (which can be valuable, don't get me wrong there, all I am saying that it will change all the time)
If you understand that the market is just a reflection of human emotions, then you understand what happened to the cryptocurrency market. Panic spreads, and it is not rational.
> especially when "print more money" seems to be the fed's response to this
The simple answer is that the quoted text isn't even a concern in your average investors head. Also why gold isn't doing great, and why the US dollar is doing just fine.
People are escaping equities specifically, not the dollar.
edit: If i had to guess, people are probably looking to maximize cash on hand with the goal of "buying the dip" when it looks like the market is going to bottom out.
Say you have an extra tampon and want a banana. I want a tampon but don't have a banana. What would you rather accept from me in exchange for a tampon, $cash or some BTC in your online crypto wallet? What do you believe has better chance of being exchangeable for a banana, from someone else?
I have a hypothesis that Bitcoin post-2018 is largely held by a handful of major banks as a way to sidestep anti money laundering rules. It's widely known (and proven in court) that the major banks routinely serve billionaire-class criminals (real criminals like drug cartels and terror groups) and large crypto holdings and prop trading operations allow them to move money on and off their books with relative ease.
A slowdown in money laundering activity (as would be expected during an extended period of restriction of goods and services) would lead to a rapid drop in crypto prices.
I actively trade crypto. Today's crash was due (from what I'm seeing) to a massive Bitmex contract liquidation (probably in the $100m-300m range). The market, with panic, couldn't get the price in sync across all exchanges. At some point the difference between two exchanges is close to $1000/btc. Very profitable if you know what you are doing. You can AMA.
I saw that the large majority today was lost on longs, with shorts being much less active.
Do you believe it’s likely that the crash was intentional with the large exchanges pushing the price down on various exchanges to make money off the leveraged longs? Obviously panic plays into this as well.
I’m not one to get involved in any type of trading personally, as I don’t trust myself, so this is outside of my space. Please excuse and correct me if I misused any terminology or don’t understand stuff. Some of my family is heavily invested in crypto, so I like to know what is going on.
Anyway, does my assessment sound accurate to you? I would love to see you expand on this.
I still assume it is possible and likely that something like cryptocurrency will eventually become incredibly valuable, but I see that happening only when technical and social hurdles are overcome to make it as widespread and scalable as the current credit card system for everyday transactions.
Unfortunately for current cryptocurrencies, they just don't have what it takes to compete with decades of trust to get everyone to put their daily spending money in them, that is what will make a future system valuable. The current role they play as a speculative investment seems quite silly to me, literally they only thing they are good for is transactions, if you can't do that effectively I don't see value in the tokens at all.
Imagine if someone started a stock exchange and listed a single stock, their own, the stock for the exchange itself, and no one else's. While you can buy some things with bitcoin or ethereum, it's nowhere near widespread, so that really seems to be effectively what it functions as for now, which looks very bizarre on its face. Unfortunately for the people who do want to get rich, if there is an eventual winner in crypto, their rise will probably look something like what we see now, limited buy in from speculators followed by some inflection point, so it's entirely possible buying this dip of ethereum or some other coin might be the right thing, but I'm just not sure any of them are ready yet. Even with SegWit and other stuff happening in bitcoin, it just isn't clear to me that becoming a cash or credit card replacement system is even the goal anymore, which seems like they are just riding on their first mover advantage to prop up the value more than anything at this point.
Note: reposting this from the stock trading halt discussion after its parent appears to have been deleted.
> I still assume it is possible and likely that something like cryptocurrency will eventually become incredibly valuable
Probably, but whatever it is, it won't be Bitcoin and some magic software updates won't make your Bitcoins turn into whatever cryptocurrency-ish thing wins.
The other thing to remember is that cash doesn't appreciate in value. (In the US, we typically have 4% inflation every year.) If a cryptocurrency is going to work for day-to-day commerce, its value needs to be rather steady. (Either low inflation or low deflation.) This means you can't just stick a bunch of cryptocurrency in your wallet and expect it to make you rich overnight.
(Note: We don't have a lot of experience with deflation as "normal" in modern economies, so if crypocurrency comes with low deflation, like we have low inflation, we'll all have to adjust our expectations with money.)
I've been trying to avoid looking at my bitcoin portfolio lol. I agree the volatility in its price makes it far from ideal as an alternative currency. That being said what keeps me invested (a relatively small portion) is looking at places like Venezuela and a few other pockets of areas where the monetary system has collapsed or undergone hyper-inflation, bitcoin is being used as a means of exchange, albeit still rather limited. That goes to show the proof of concept works. Hence I think there is somewhat of a chance that there could be a more widespread use case for it, especially as the ecb and possibly the fed start flooding the markets with liquidity again.
> Last Saturday, ahead of the traditional market rout caused by Opec, PlusToken scammers moved a little over $100 million worth of bitcoin to so-called mixers, designed to disguise the origin and destination of the coins.
> The fraudsters may have then sold off the bitcoins, causing prices to fall as supply flooded the market, according to Singhal.
May have? Is this anything more than pure speculation? I mean, I am a very, very big fan of using time to correlate events ("what changed"), so the mixing is certainly a signal, but how good of a signal?
Why highlight PlusToken vs bitcoin holders en masse wanting to get cash out thanks to the market downturn?
It will be interesting seeing how cryptocurrency performs during and after worldwide panic surrounding the coronavirus, the fed printing a trillion USD and so forth.
I was astonished when Bitcoin rose above $30 so calling it a "crash" at $6,000 might be somewhat accurate short-term, but anything over $0.00 for randomized bits on a hard drive will always seem bananas to me.
Well the market pointed to that, with the majority of liquidation today being on leveraged longs. So it’s more likely the market is corrupt and the exchanges just spent their vast wealth pushing the price down to make a killing off leverage… pair that with panic and today makes sense even though it originally seemed most people believed what you did.
Turns out humans are selfish and emotional, who would have thought?
I have made a large amount of money trading cryptocurrency over the years. This correlation is spurious at best. These stories are so wrong it is hilarious. The price action of crypto is unlike any other market. What we have seen over the last month is massive legs down caused by whales flooding the market at specific times. These bart patterns are so obvious I can't believe people can't draw these incredibly easy to see conclusions. Crypto is pure manipulation. This coronavirus panic happens to coincide with a period right before the block reward halving where it is in the interest of miners to drop the price as much as possible as to make the mining operations of competitors infeasible leaving them with a larger slice of the mining pool.
There is zero value in crypto as a currency with this kind of volatility. It would be equivalent to trying to buy coffee at Starbucks with shares of Boeing stock.
[+] [-] unhashable|6 years ago|reply
Think of Bitcoin and Gold as call options on the entire global monetary system. If Govs become insolvent, Bitcoin and Gold is there. If the masses lose faith in central banks, Bitcoin and Gold is there. If central banks debase currencies too quickly, Bitcoin and Gold is there. That is the staying power of scarcity via well known stock to flow ratios.
I'm glad Bitcoin is not inversely correlated to equities, because that would mean Bitcoin went down in an equities uptrend. Being non-correlated is superior: Bitcoin marches to it's own drum.
All this being said: cash is king in times of uncertainty. Bitcoin is a speculative bet that "money without masters" will become an essential part of the future monetary system. We're a long way from that still.
Advice in good times and bad: maintain a deep safety net and don't get too nuts with debt or leverage.
[+] [-] ErikAugust|6 years ago|reply
[+] [-] Ididntdothis|6 years ago|reply
[+] [-] zionic|6 years ago|reply
[+] [-] spir|6 years ago|reply
[+] [-] baby|6 years ago|reply
[+] [-] krick|6 years ago|reply
And other cryptocurrencies are still very much tied to BTC, so when BTCUSD falls dramatically, they do as well.
[+] [-] zionic|6 years ago|reply
[+] [-] majormajor|6 years ago|reply
I haven't seen anyone with strong reason to believe that companies are gonna be that much worse off a year from now than they were a month ago, or for the four years after that, so I don't see a reason to sell stocks based on expected company performance anymore than to sell crypto - but in the short term, everyone's stockpiling immediate goods.
[+] [-] jfengel|6 years ago|reply
Crypto is more purely speculative, with no real underlying value aside from the hope that it will some day become the fiat currency of some nation. (Fiat currencies have a "value" in that they are the only thing a government will accept.)
So it's possible that people are seeing bargains in another market. They need to move through fiat currency in order to buy it, but they don't hold it long enough for inflationary measures by central banks to affect it.
[+] [-] dageshi|6 years ago|reply
The reason was that people needed to sell their "winners" in order to cover their "losers". Stocks were down, they sold gold which was way up at that point to cover some of the losses and get cash.
[+] [-] rossdavidh|6 years ago|reply
Also, you may think everyone else is going to be "irrational" in this way, and wish to get out before they do. Sort of like buying toilet paper because you're worried about everybody else hoarding toilet paper.
[+] [-] glofish|6 years ago|reply
[+] [-] baby|6 years ago|reply
[+] [-] unknown|6 years ago|reply
[deleted]
[+] [-] Finnucane|6 years ago|reply
[+] [-] qqn|6 years ago|reply
[+] [-] helen___keller|6 years ago|reply
The simple answer is that the quoted text isn't even a concern in your average investors head. Also why gold isn't doing great, and why the US dollar is doing just fine.
People are escaping equities specifically, not the dollar.
edit: If i had to guess, people are probably looking to maximize cash on hand with the goal of "buying the dip" when it looks like the market is going to bottom out.
[+] [-] tomp|6 years ago|reply
[+] [-] wayoutthere|6 years ago|reply
A slowdown in money laundering activity (as would be expected during an extended period of restriction of goods and services) would lead to a rapid drop in crypto prices.
[+] [-] csomar|6 years ago|reply
[+] [-] OGWhales|6 years ago|reply
I’m not one to get involved in any type of trading personally, as I don’t trust myself, so this is outside of my space. Please excuse and correct me if I misused any terminology or don’t understand stuff. Some of my family is heavily invested in crypto, so I like to know what is going on.
Anyway, does my assessment sound accurate to you? I would love to see you expand on this.
[+] [-] abandonliberty|6 years ago|reply
[+] [-] jaltekruse|6 years ago|reply
Imagine if someone started a stock exchange and listed a single stock, their own, the stock for the exchange itself, and no one else's. While you can buy some things with bitcoin or ethereum, it's nowhere near widespread, so that really seems to be effectively what it functions as for now, which looks very bizarre on its face. Unfortunately for the people who do want to get rich, if there is an eventual winner in crypto, their rise will probably look something like what we see now, limited buy in from speculators followed by some inflection point, so it's entirely possible buying this dip of ethereum or some other coin might be the right thing, but I'm just not sure any of them are ready yet. Even with SegWit and other stuff happening in bitcoin, it just isn't clear to me that becoming a cash or credit card replacement system is even the goal anymore, which seems like they are just riding on their first mover advantage to prop up the value more than anything at this point.
Note: reposting this from the stock trading halt discussion after its parent appears to have been deleted.
[+] [-] whiskyant|6 years ago|reply
[+] [-] baby|6 years ago|reply
[+] [-] gwbas1c|6 years ago|reply
Probably, but whatever it is, it won't be Bitcoin and some magic software updates won't make your Bitcoins turn into whatever cryptocurrency-ish thing wins.
The other thing to remember is that cash doesn't appreciate in value. (In the US, we typically have 4% inflation every year.) If a cryptocurrency is going to work for day-to-day commerce, its value needs to be rather steady. (Either low inflation or low deflation.) This means you can't just stick a bunch of cryptocurrency in your wallet and expect it to make you rich overnight.
(Note: We don't have a lot of experience with deflation as "normal" in modern economies, so if crypocurrency comes with low deflation, like we have low inflation, we'll all have to adjust our expectations with money.)
[+] [-] ackbar03|6 years ago|reply
[+] [-] webninja|6 years ago|reply
Crypto usually rallies when the Fed undergoes extensive QE for a long period of time but the current popular crypto’s have flaws.
[+] [-] jiveturkey|6 years ago|reply
> The fraudsters may have then sold off the bitcoins, causing prices to fall as supply flooded the market, according to Singhal.
May have? Is this anything more than pure speculation? I mean, I am a very, very big fan of using time to correlate events ("what changed"), so the mixing is certainly a signal, but how good of a signal? Why highlight PlusToken vs bitcoin holders en masse wanting to get cash out thanks to the market downturn?
[+] [-] m3kw9|6 years ago|reply
[+] [-] sna1l|6 years ago|reply
[+] [-] d-d|6 years ago|reply
I was astonished when Bitcoin rose above $30 so calling it a "crash" at $6,000 might be somewhat accurate short-term, but anything over $0.00 for randomized bits on a hard drive will always seem bananas to me.
[+] [-] JTon|6 years ago|reply
[+] [-] shawnz|6 years ago|reply
I'll happily buy the randomized bits making up your debit card number and PIN for $0.00
[+] [-] vidanay|6 years ago|reply
[+] [-] OGWhales|6 years ago|reply
Turns out humans are selfish and emotional, who would have thought?
[+] [-] darawk|6 years ago|reply
[+] [-] shiado|6 years ago|reply
[+] [-] 3fe9a03ccd14ca5|6 years ago|reply
[+] [-] notyourday|6 years ago|reply
[+] [-] mrlala|6 years ago|reply
If it can't go up during a global crisis or EVEN be resilient.. then it's proven it's just a house of cards.
Crypto technology itself has value, but not in most of it's current forms as some magical gambling currency/asset.
[+] [-] hurricanetc|6 years ago|reply
[+] [-] strin|6 years ago|reply
[+] [-] edf13|6 years ago|reply
When everything gets locked down cash is what you need
[+] [-] unknown|6 years ago|reply
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[+] [-] thefounder|6 years ago|reply
[+] [-] econcon|6 years ago|reply
[+] [-] 0x1221|6 years ago|reply
[+] [-] glofish|6 years ago|reply