Strange Behaviour in the BTC Market – Adoption Goes up, Price Goes Down

Opinion

It appears that people are asking themselves the wrong question about the BTC market crash and the wider crypto collapse. Why was it stable is a much more relevant question than why it crashed. After all, volatility is the hallmark of cryptocurrency and what sets it apart from many other assets. A lack of predictability is often a sign of a pure free market.

What is the real “price” of BTC?

BTC is now valued at around USD 4,200, down nearly 80% from all-time highs reached in December 2017. Throughout August, September, October, and the start of November 2018, the crypto asset showed remarkable stability, as global markets bounced in turmoil. It hovered in the range of USD 6,200 to USD 6,600, pretty much a neat and straight line. On the 15th of November, it dropped from USD 6,300 to USD 5,600 and has since trailed down to USD 4,200 as of today. How such a volatile asset remained so stable for so long is a mystery, and why the BTC market dropped so suddenly is also a cause for concern.

This drop is only recent, but BTC bulls are still waiting for a price increase that may never materialize to 2017 levels. This is because it is difficult to establish the true value of BTC. Indeed, there actually appears to be an inverse correlation between the market price and adoption/usage levels. The start of 2018 has seen positive regulatory announcements, more applications, institutional investment, a vast increase in Lightning Network nodes, record BTC trade volume, and increased online vendor and physical merchant acceptance. It has been an incredible year for BTC and the wider DLT industry in every respect except for the price, steadily declining since late December 2017.

Establishing the true value of a cryptocurrency can be a difficult affair. Hyperbitcoinization proponents assert that, with a straight swap of all assets for BTC, one BTC is worth USD 100,000,000. In words that is USD One Hundred Million. Such a valuation is meaningless and makes a wide variety of unrealistic assumptions, the main one being that everybody agrees to transact in one cryptocurrency. However, it merely serves as an indication that BTC has ‘upside’ potential. It is also entirely possible that there is a huge amount of hidden wealth that will only appear when people make the transition to decentralized currencies.

Four options against BTC market manipulation

It is naive to believe that the BTC market is not actively manipulated, like numerous other markets. A far better question is who is manipulating it, why, and how. Most importantly, is to ask what should be done about it. There are four basic options.

First, it is possible to hold onto BTC and its alternatives on the basis that it will eventually appreciate. Given the volatile nature of BTC, it stands to reason that it will go up again, at some stage. There is a good argument that now is the perfect time for savvy investors to enter the market and another strong argument that the market had to be trashed for high-profile investors to get in at a good price.

Second, hold onto BTC, for an entirely different reason – that the market price is an arbitrary figure created at random by bots and institutions. Real value can only be established when the financial system crashes and true supply and demand principals dictate the price. This will mean that you are not seeking to “cash out” by ever trading your coins back into the fiat financial complex, but waiting until BTC can be used to buy what you need. This is the “ethical” option for people tired of the fiat industrial complex.

Third, invest in non manipulated coins. Zcash and Monero are good ethical decisions due to their privacy features. Coins like Metaverse ETP are also seeking to break away from BTC correlation. Until this happens, the entire cryptocurrency industry is at the mercy of BTC price manipulation.

The fourth choice is to sell BTC and go back to the fiat game. Many are doing this, though as the decentralized movement moves on it could prove a disastrous maneuver. It is the opposite of buying low and selling high. According to Smart Ethereum, first-time investors are now facing capital gains tax from profits made in 2017, selling before they file in April. The Genesis Trading CEO has also affirmed this occurrence. However, in itself, this fails to account for such a sudden and severe drop in the BTC market. Additionally, these same individuals could be kicking themselves in the near future.

Digital Nomad with an interest in Zen and Blockchain technology.

Law graduate with 3 years experience as a consultant in the capital markets industry and 4 years experience freelancing on UpWork as a Creative Writer.