The bitcoin crash, piece by piece

Do you call it a long day trip into … twilight?

As of this writing, the price of Bitcoin is hovering around $ 3,807. The bottom was a little over $ 3,100, and not far behind us, in the rearview mirror, looking back a little over a year, was an all-time high of nearly $ 20,000.

A long, long time ago, Bitcoin craze was measured in dollars, and what a difference a year makes.

Depending on where you are, the Bitcoin crash, which can still, well, crash – or it can be the prelude to another attempt, as Bitcoin has lost almost 90 percent of its value in the past few years, just to yourself to recover – classified as either a perfect storm or perfectly obvious.

Speculating upon speculation has its advantages as it can help avoid the pitfalls of “this time is different”.

Voting vs. Libra

To borrow an old investment maxim: when it comes to the pricing of a stake, there is a difference between those who choose and those who weigh. Just vote? Well, that’s a popularity contest, and Bitcoin was popular, as evidenced by the roughly $ 20,000 that the cryptocurrency switched hands for, a heady surge from the less than $ 800 level it was marked in early 2017, that crypto would essentially be used as a substitute for fiat, the hard stuff in paper and coins that changes hands for everything from coffee to the house.

Also, the idea of ​​some skeptics of the current way we trade is that cryptocurrencies could or should replace fiat. Consider the fact that UBS said last summer that Bitcoin could replace fiat if it reached $ 213,000. In addition, according to UBS, Bitcoin must be viewed as “money or even a viable asset class”.

To be accepted as money? Well, merchants and all types of businesses must be ready to accept Bitcoin both as a store of value and as a fluid mechanism for transporting that value between the parties to a transaction. August data shows that, as Bloomberg reported in August, Bitcoin, as used in everyday life, was not used in everyday life. A proxy was highlighted when the top 17 crypto merchant processing services raised as much as $ 411 million in September 2017, but only $ 60 million in May 2018.

“It’s not really useful,” Bloomberg quoted Nicholas Weaver, a senior researcher at the International Computer Science Institute, in an email. “The net cost of a Bitcoin transaction is far higher than that of a credit card transaction.” In addition, the transactions have a sticking point, as they remain irreversible and there is no way of combating fraud.

So if the promise did not back up anything in terms of easily applicable real-world use cases, then the voting engine had to … continue voting.

Until the scales started. This is another part of that investing maxim, and the part that likely caused Bitcoin to land in one fell swoop. The blow came when at least some of the oxygen came from the idea of ​​tokens as currency. You may be familiar with the Initial Coin Offering, where fiat is issued by investors for tokens.

That year – in November, a month in which Bitcoin lost about a third of its value – the Securities and Exchange Commission imposed a quarter of a million dollars in civil sanctions on two providers of initial coin offerings, the two companies that were CarrierEQ and role models.

The ruling meant investors could be compensated for losses – in hard currency. Perhaps implicit in all of this is the thought that maybe the hard things will stay the way we do business – and in God We Trust everyone else pays cash. It turns out that you are not going to buy coffee using Bitcoin (even Starbucks said that).

Do you think it’s all about individuals and that the speculation is spreading among moms and dads who wanted to do something new and maybe life changing? Think again

When institutions come into play, too, and use financial firepower (and sometimes leverage) to generate returns … well, what goes up can fall with a vengeance. As detailed in MarketWatch, dozens of hedge funds that have focused on cryptocurrencies have closed amid the steep sell-off. We are a long way from the beginning of the year, when 44 funds were launched in January alone. Selling stocks to take losses or close doors has undoubtedly increased downward pressure on Bitcoin and brothers. Call it a vicious circle. Along the way, some investment / financial services powerhouses like Goldman Sachs have shed the nascent plans to open cryptocurrency trading desks.

Fed control too

Oh, and it never helps when the feds pee into what you’re doing, by the way. There was no Thanksgiving for Bitcoin as it became known in the financial media that the U.S. Department of Justice is investigating whether the aforementioned rocket-propelled rally in Bitcoin price is at least partially related to tampering.

Bloomberg reported that “a tangled web” that includes Bitcoin, a digital token known as tether, and the Bitfinex exchange may have been used to raise Bitcoin prices – illegally. The machination is one that allegedly used tethers to buy Bitcoin when the latter saw a downward move, which actually helped pricing as the marquee cryptocurrency neared its record highs of 2017. The summons are flying and a University of Texas paper says Tether was used to manipulate Bitcoin prices.

Hmm A speculative vehicle with no real intrinsic value (and volatile to say the least), with use cases moving slowly and regulatory lights still flashing … maybe the question that is better put to this bubble is not “why”? but “what took so long?”



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