BTC: In Search of Maturity
On May 19, there was a rollback of Bitcoin, and according to the website of the rating agency CoinMarketRate, the rollback reached the level of $30,681. As usual, the alcoin market followed in the wake of the flagship coin.
What will happen to Bitcoin now?
For those who discovered cryptocurrency this year or last year, what is happening today can scare the hell out of them. But everything that happens is relatively common for the crypto market. Why?
Bitcoin has reached $30,000 (critical support level) on some exchanges. This sudden collapse was caused by the liquidation of leveraged positions. These sales, driven by margin requirements, have a snowball effect. There are few buyers, so the price drops sharply.
This is why you should be especially careful when trading with borrowed funds. If you bought for, say, $50,000 without leverage, just keep your cool. These crazy fixes have been the hallmark of Bitcoin since its inception. Unless a major event occurs that casts doubt on the future of the cryptocurrency, it is usually enough to wait to at least get your bet back.
The problem is with liquidity, plus the market is too exposed to the flow of “news”, and we have what we have. However, this crypto glitch provides some valuable lessons.
Despite the undoubtedly growing interest of institutional investors, this shows that this market is still strongly influenced by small investors. Unfortunately, it is difficult to imagine an asset that weighs about a trillion dollars to exhibit such volatility. It is for this reason that Nassim Taleb, an American publicist, economist, trader, and author of the best-selling book “Antifragility. How to Capitalize on Chaos, “ et al., announced the sale of their Bitcoins long before this crash.
Another problem that shows that the cryptocurrency market, despite its importance, is still far from mature is the incredibly large impact of the news feed. How do you explain that a simple Elon Musk tweet can have such an impact on prices, whether up or down?
Responsibility of members of the crypto Community
But, in the end, the market is made by crypto investors. In the end, if the price falls like that, they are entirely responsible for it. Unfortunately, many investors have a huge dogmatism. No matter how high it is, it is never enough, and you have to be optimistic no matter what. If Bitcoin reaches $1 million, they will find reasons why you should justify the $10 million price, and so on.
Any criticism is considered an attack, no matter how justified it may be. As proof — the case of Elon. Probably, many in the crypto space regret his involvement in the cryptocurrency. Today, even those who worshipped him are attacking him. Investors should think more on their own, rather than absorb information from influencers and other people whose livelihoods are far from being in cryptocurrency.
Unfortunately, the current market structure does not provide the necessary tools for price stability. For this volatility to be a thing of the past, instruments that are widely available for mature asset classes should also be available for BTC (ETFs, futures markets, credit market, etc.). Of course, regulators should act in this direction, and not cut off from the shoulder, throwing bans.
At the time of writing this article, the situation has stabilized, as you can see for yourself here. Bitcoin has grown significantly to $40,500, Ethereum-to $2,600–2,700. Beginners just need to carefully study the historical data of the crypto-currency market, and then their fear eyes will become much smaller.