[0234] Top 5 Reasons for Crypto Market Crash-and-Burn
If you're into crypto, you will have noticed the crash over the last couple of weeks that has sent coin prices down the drain.
But what is not apparent are the reasons why. Here's a summary of what I have learned around the interwebs. Here are 5 factors, in no real order. But they do add up.
#1 - Bitcoin Cash Fork
While Bitcoin Cash will want to claim 100% responsibility for crashing the market, the current hash war is not the sole reason of crypto prices going down the toilet.
But it is having an effect.
Bitcoin is being sold off to fund mining power, to fund the nonsense race for supremacy of whose blockchain processes the most transactions. And therefore is the winner of the #hashwars.
The sales of Bitcoin are enough of an amount to move the market slightly, but as the war may go on for awhile ( long after victory has been announced ), the sell pressure on the market is enough to push price downward for the short term.
#2 - ICO's In Financial Trouble
Remember all those ICO's and startups of 2017 and their gigantic revenue raises? Startups with a promise on a white paper valued at more than SpaceX and companies that actually have real products? Remember those times?
Fast forward to a time where the price of Ethereum is 10% of what it was and it spells bankruptcy for any company who didn't turn their investors ETH into dollars.
And a lot of companies didn't, prefering to speculate in the markets rather than secure finances for paying staff. Which total an estimated 100,000 people who work for these startups. All of whom need to pay rent and buy groceries.
Record number of liquidations of Bitcoin and Ethereum have been hitting the markets in 2018 driving the price down. Given the fact that the ICO market has all but dried up, that means there is no one buying Ethereum to uphold the price.
So what you end up with is a falling price of Ethereum and every altcoin based on it. Which will be the case for sometime yet, I imagine.
#3 - ICO's in Trouble with the Law
If financial mismanagement isn't a big enough issue, then the current wave of fines by the SEC in the USA doubles the problem.
The SEC has now begun fining ICO's for avoiding securities laws. These fines will have to be paid in USD, so you can expect this to add even more pressure to the downward trend.
#4 - Retail Investor Capitulation
If you go on Twitter, you will occasionally see a newbie investors publicly rage quit the markets. Selling off at a loss and going home, with a few curse words as they leave the building.
You have to realize that the vast majority of people are up to their eyeballs in debt. And invested into the crypto markets as a way of buying their way out of a hole.
Houses were mortgaged, loans were taken out and a host of desperate measures have taken their tool in the falling market. Bad decisions have come home to roost, resulting in crazy sell offs at a time you should be "buying the dip".
#5 - Retail Market Down, OTC Market Up
I wrote about this one recently. The surface bear market but bull undercurrent.
Currently everyone is looking at the prices in the retail market and thinking crypto is dead. But in reality the retail market is nickel and dime stuff. It isn't the whole market. It's about half of it according to guestimates.
The OTC, over the counter market, is the thing to watch. Big investors with big money don't buy Bitcoin in the retail markets because they would move the market. Rather, they buy off the books, privately.
Rumours are that the OTC market is as big as the retail market and has steadily increased in volume in the bear market of 2018. If you get what's going on, there is something of a bull market underneath the bear market. Big players buying up for investment products that need bitcoin to back them.
So, essentially, the big whales are swallowing up all that juicy tethered bitcoin on Binance, etc. Buying for dirt cheap while there is panic in the retail market of noob investors.
Which makes me think. One day, retail investors won't be able to get their bitcoin back after 'safely' tethering it. It just won't be there.
The Perfect Storm
If you add these factors together, plus what else is going on that I haven't mentioned and what you have is a 'death spiral' in the crypto markets. Downward forces that will continue to drive prices down for quite sometime.
Which may just result in a perfect storm of massive gains later on when the market rebounds. And stays on the up.
Added to this, the force of development and release of new products will drive the market upward. The current downward pressure is just that. Temporary pressure. Whereas innovation is a constant upward pressure.
Which is perfect for retail investors who want to play the markets once the smoke clears and the markets return to green.
Thanks for watching,
Brendan Rohan - Indie developer of 'next gen' natural medicine from Melbourne, Australia
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