Bitcoin became the victim of its own success

Discussion in 'Crypto Assets' started by Pekelo, May 9, 2022.

  1. Pekelo


    This is an explanation thread for my crypto fan friends, who are not understanding why the price moves the way it does. It is really not that complicated. Bitcoin has become the victim of its own success for at least 2 reasons:

    1. Adoption by financial institutions as a speculation (I mean investment) device. Crypto bros were waiting for this and when it started happening less than 2 years ago, it was hailed as part of the general adoption and was welcomed. Now HFs could put money into cryptos via futures, proxy stocks, and there has been a push for a Bitcoin ETF (so far not successful).
    What happened though as an unintended consequence was that Bitcoin became a high beta tech stock, nothing more, nothing less, with a very high correlation to the Nasdaq. QQQ drops 10%, BTC drops 15%, etc. Don't believe me, just put the 2 charts on the same screen. Sometimes a good or bad crypto news messes with the correlation but that doesn't last more than a day or two.

    This was fine and dandy as long as the markets went up, but when they topped last November, so did Bitcoin. Currently we are in a bear market, so are most cryptos.
    Unless you see the markets going , much much higher, you can forget about 100K BTC, because its value is kind of pegged to QQQ. (simplifying it)

    2. Financial inventions didn't stop at blockchain and the future of money. Geniuses invented DeFi, NFTs, stable coins, who knows what. Generally speaking a new crypto is nothing but a ponzi, meaning it is based on the incoming money of the Bigger Fool. DeFi, NFTs are ponzis, based on a ponzi, or should I say ponzi square. Older folks know what happens to ponzis. When we are talking about ponzi square, that means extra risk for the underlying because when the ponzi square inevitably collapses, there is a very good chance it will bring the base ponzi with it.
    As can be seen in the current weekend sell off, a possible explanation is that a DeFi is trying to protect its underlying peg and selling BTC in the process. I am not sure if this is what is going on, but would be a very good explanation.

    Anyhow, the point here is that be careful what you wish for, because institutional money moving in and extra financial "inventions"* using crypto can easily be the downfall of Bitcoin. The rule of unintended consequences...

    * Here I mean pure, unadulterated scams. Sometimes they are quite honest about it.
    Last edited: May 9, 2022
    VPhantom likes this.
  2. ktm


    We were all so anxiously awaiting thoughts from the village idiot. Finally we can get on with our lives.
  3. Yes the village idiot has spoken and given us his ignorant comment on normal crypto market behavior. It's fools like this who sell because they think Bitcoin is going to zero.

    Don't ever let fear take your Bitcoin...
  4. Specterx


    In ten years BTC may be lower or it may be much higher, but I'm fairly sure we're going to see some major fireworks before this bear market ends - including the collapse of at least one and possibly several major crypto exchanges / trading firms, along with carnage in the Defi space. We might even find out if Tether is swimming naked...
  5. Pekelo


    I understand you are stressed out in these troubling times. Do you need the Suicide Prevention hot line number?
  6. Aisone


    There is a lonterm place for bitcoin (just not in the digital space. :p;))
  7. newwurldmn


    Cryptos aren’t investments. It’s dotcom speculation. One will become Amazon and another will become google. Most will become
  8. This is your moment bitcoin haters!
    Nobert and johnarb like this.
  9. Do you think that is necessarily so?
  10. #10     May 9, 2022
    Nobert likes this.