Bitcoin peaked at almost $20,000 about a month ago on December 17th. As of this writing, the cryptocurrency is below $11,000… a loss of about 45%. That’s more than $150 billion in lost market cap.
Cue a lot of hand wringing and teeth gnashing in the crypto commentary. It’s a neck-and-neck race, but I think the “I told you so” crowd has an edge over the “excuse makers.”
Here’s the thing: sell ethereum in Nigeria Unless you just lost your shirt on Bitcoin, it doesn’t matter at all. And chances are, the “experts” you might see in the press won’t tell you why.
In fact, Bitcoin’s crash is wonderful…because it means we can all just stop thinking about cryptocurrencies.
The Death of Bitcoin…
In about a year, people won’t be talking about Bitcoin in line at the grocery store or on the bus like they are now. Here’s why.
Bitcoin is the product of legitimate frustration. Its designer specifically said the cryptocurrency was a response to government misuse of fiat currencies like the dollar or euro. It was intended to provide an independent peer-to-peer payment system based on a virtual currency that could not be debased as there were only a limited number of them.
That dream has long since been jettisoned in favor of raw speculation. Ironically, most people are interested in bitcoin because it seems like an easy way to get more fiat currency! They don’t own it because they want to use it to buy pizza or gas.
Aside from being a terrible way to conduct electronic transactions — it’s excruciatingly slow — bitcoin’s success as a speculative game has rendered it useless as a currency. Why would anyone spend it when it’s appreciating in value so quickly? Who would accept one if they depreciated quickly?
Bitcoin is also a major source of pollution. It takes 351 kilowatt hours of electricity to process just one transaction – which also releases 172 kilograms of carbon dioxide into the atmosphere. That’s enough to power a US household for a year. The energy consumed by all bitcoin mining so far could power nearly 4 million US homes for a year.
Paradoxically, bitcoin’s success as an old-fashioned speculative game – not as an intended libertarian use – has led to government crackdown.
China, South Korea, Germany, Switzerland and France have introduced or are considering bans or restrictions on bitcoin trading. Several intergovernmental organizations have called for concerted action to contain the apparent bubble. The U.S. Securities and Exchange Commission, which was once likely to approve bitcoin-based financial derivatives, now seems hesitant.
And according to Investing.com: “The European Union is introducing stricter rules to prevent money laundering and terrorist financing on virtual currency platforms. She is also examining restrictions on cryptocurrency trading.”
We may one day see a working, widely accepted cryptocurrency, but it won’t be Bitcoin.
… but a boost for crypto assets
Good. Getting over bitcoin allows us to see where the true value of crypto assets lies. Here’s how.
To use the New York subway system, you need tokens. You can’t use them to buy anything else… although you could sell them to someone who wanted to use the subway more than you did .
If subway tokens were limited, a buoyant market could emerge for them. They could even trade for a lot more than they originally cost. It all depends on how many people want to use the subway.
In a nutshell, this is the scenario for the most promising “cryptocurrencies” other than Bitcoin. They’re not money, they’re tokens – “crypto tokens” if you will. They are not used as general currency. They are only good within the platform they were designed for.
If these platforms provide valuable services, people will want these crypto tokens and that will determine their price. In other words, crypto tokens have value to the extent that people value the things you can get for them from their associated platform.
This makes them real assets with intrinsic value – because they can be used to obtain something that people value. This means that you can reliably expect a stream of income or services from owning such crypto tokens. Crucially, you can measure this stream of future returns by looking at the crypto token’s price, just like we do when we calculate a stock’s price-to-earnings (P/E) multiple.
Bitcoin, on the other hand, has no intrinsic value. It has only one price – the price, which is determined by supply and demand. It can’t generate future revenue streams, and you can’t measure anything like a P/E for it.
One day it will be worthless because it doesn’t really do you any good.
Ether and other crypto assets are the future
The crypto token ether appears to be a currency for sure. It is traded on cryptocurrency exchanges under the code ETH. Its symbol is the Greek capital letter Xi. It is mined in a similar (but less energy-intensive) process to Bitcoin.
But Ether is not a currency. Its designers describe it as “a fuel for running the Ethereum distributed application platform. It is a form of payment made by the platform’s customers to the machines that perform the requested operations.”
Ether tokens give you access to one of the most advanced distributed computing networks in the world. It’s so promising that big companies are rushing each other to develop practical, real-world applications for it.
With most people trading it not really understanding or caring about its true purpose, Ether’s price has seethed and churned like bitcoin over the past few weeks.
But eventually, Ether will return to a stable price based on demand for the computing services it can “buy” for people. This price represents a real value that can be priced into the future. There will be a futures market for it and exchange traded funds (ETFs) because everyone will have the ability to assess the underlying value over time. Just like we do with stocks.
Cryptocurrency volatility, a profitable roller coaster ride
This year we can observe that cryptocurrencies tend to move up and down by as much as 15% of their value on a daily basis. Such price changes are known as volatility . But what if… this is completely normal and sudden changes are one of the characteristics of cryptocurrencies that allow you to make good profits ?
First of all, cryptocurrencies have only recently made it into the mainstream, so all the news and rumors about them are “hot”. After every statement by government officials about a possible regulation or ban on the cryptocurrency market, we see huge price movements.
Second, the nature of cryptocurrencies is more of a “store of value” (like gold was in the past) – many investors see them as a backup investment option for stocks, physical assets like gold, and (traditional) fiat currencies. The transmission speed also has an impact on the volatility of the cryptocurrency. The fastest even take just a few seconds (up to a minute) to transfer, making them a great asset for short-term trading when there isn’t a good trend in other types of assets at the moment.
What everyone should keep in mind – this speed also applies to cryptocurrency lifetime trends. While trends can last for months or even years in regular markets, here they happen within days or hours.
This brings us to the next point – even though we are talking about a market worth hundreds of billions of dollars, this is still a very small amount compared to the daily trading volume compared to traditional forex markets or stocks. buy or sell ethereum Therefore, a single investor making 100 million transactions on the exchange will not cause a large price change, but on a cryptocurrency market scale, this is a significant and noticeable transaction.
Because cryptocurrencies are digital assets, they are subject to technical and software updates of cryptocurrency features or expansion of blockchain collaboration, making them more attractive to potential investors (like enabling SegWit basically caused Bitcoin’s value to double).
These elements together are the reasons why we see such large price changes in cryptocurrencies in a matter of hours, days, weeks, etc.
But to answer the question from the first paragraph – one of the classic trading rules is buy low sell high – hence there are far more chances of having short but strong trends each day (instead of much weaker ones lasting weeks or months, like stocks). to make a decent profit if used correctly.
