Bitcoin price drop - what did we learn?
Bitcoin was trading at around $2,800 and then suddenly it was $1,950. Since the prices are based on an agreement between a buyer and a seller, so the seller must have agreed to a price of $1,950. Now let's think about it for a minute.
(1) Was the seller thinking that it is unreasonable to ask for the market price of $2,800 and thought "Nah, I will make somebody happy and sell it for $1,950"? I don't think so.
(2) Was the seller expecting a price drop well below $1,950 so thought of taking profit and then hoping to get back in when the prices actually drop? Possible scenario but not likely as it doesn't justify the severe discount.
(3) Was the seller thinking of selling at market price but the transaction didn't go through and by the transaction went through, the price had dropped? This is very likely what happened.
So what did we learn?
My take is that in a crowded room when there is only one small exit door, all will not be able to escape the fire when there is one. What are you doing to make sure that you get out safely? And as I always say, "In a highly volatile market, hope is not a strategy". So understand how exchanges work, how much time does it take to complete a transaction, what is the value that you can transact at one time etc. Also understand that all exchanges don't use blockchain and there is no entity like SEC to ensure orderly discharge of transactions. For example, I am hearing that Coinbase is taking days to execute a transaction whereas Steem is taking 0.33 seconds!
Also understand that sooner or later ETFs are coming in for cryptos and then the party is over (after getting "high" initially).
I am not very experienced on cryptos so would appreciate your feedback/inputs.
I think it is the sudden appreciation of the RMB which caused the price pressure of bitcoin. Remember, bitcoin has become THE way to get funds out of China these days. When the Chinese government purposefully forces RMB to appreciate in order to drive out hawkers like Soros to short the currency, bitcoin is bound to suffer.
@yalu1006 - You might be correct. I had written about this in my blog https://steemit.com/bitcoin/@ajain/dark-side-of-bitcoin and this is one of the factors that make Bitcoin attractive as well as dangerous. I, however, believe, that Bitcoin exchanges don't convert the currencies equivalent as trading is done in currency of your choosing. So essentially, instead of using the currency ratios (determined by banks), bitcoin users create the true value of currency ratios. Isn't that cool!