Hey everyone, it’s Whatever Wednesdays again. Over the last few days we’ve seen a pretty significant “crash” in the Crypto Market. So let’s talk about “Is the Crypto Crash Over Yet?”
Stock Photo from: Pixabay
Is the Crypto Crash Over Yet?
Well, here’s the thing, this wasn’t even “the crash” this was actually the normal “correction” that occurs at the beginning of every year. People have been calling it “The Yearly Dip”.
From: Reddit
For some reason, around the middle of January over the past 4 years, the entire Crypto Market drops about 30%. This could be related there almost always being a bull run-up at year’s end, to whales consolidating, or any host of things. There is discussion of it being related to Lunar New Year and even speculation of insider trading/collusion related to the new bitcoin futures trading that just started this year.
One thing to remember is that the crypto market never sleeps. It’s a continuous market and there is no real “open” or “close”. Asia wakes up and starts trading, then Europe comes online, then United States comes online and the cycle continues infinitely.
Please remember, the crypto market is essentially an unregulated market. There is no one to fix things for you if lose money or get scammed. I say it over and over again, but it bears repeating because crypto in its current state is the wild, wild west and is the highest stakes of gambling. Please, please, please, only gamble what you can afford to lose.
Greed
In my opinion, I think the majority of people in the current crypto market have no idea of the technology that cryptocurrency actually provides. If you asked them to discuss blockchain or debate Proof of Work versus Proof of Stake they would probably look at you sideways with a big ? floating above their heads.
This sweeping generalization would probably even include many “whales”. The truth is people will flock to areas that they perceive will help them “get rich quick”. This goes beyond mere speculation. People are throwing money into whatever is “hot” at the time because of FOMO (Fear of Missing Out).
Greed is a scarily powerful human behavior.
There is no better example than this Ponzi Scheme:
Bitconnect
There were red flags all over this cryptocurrency. You buy the cryptocurrency with Bitcoin (BTC) and exchange it on their private exchange for their token BitconnectCoin (BCC). Then “loan” your BCC to the company which through some magic (they called it a bot), uses the volatility of the market to make returns for you, ~ 1% a day. Your BCC is locked up for some period of time, but you get see those returns on your account, until your loan is over and you can exchange your BitconnectCoin for Bitcoin. Also, anyone you refer to the system you receive a % of whatever they loan out.
If you read the above, I hope all kinds of alarms are going off in your head. How does this bot make money? Why do I have to use their coin? I can only exchange my Bitcoin for their coin on their exchange!??!? Why is my BCC locked up for the loan? Percentage based referral based on how much others under you loan out?
I think anyone in a normal mindset would be like, this is a Ponzi scheme. However, greed clouds judgement. Many, many people bought into this Ponzi scheme.
As you would expect, like all Ponzi schemes, eventually it dried up – with the top people parachuting their way out and the “little guys” who got in late holding the bag:
BitConnect Investors Left in the Lurch as Token’s Price Drops 90%
This reminds me of a scene from Rush Hour 2 where Ricky Tan is talking to Inspector Lee (Jackie Chan):
Imagine a business where people hand you money… and you hand them back… absolutely nothing.
Now, that’s the real American dream.
The old adage of: “If it seems too good to be true – it probably is.” holds up here.
Ok, so Bitconnect is gone, the Crypto Market “Corrected”, now what?
Looking at coinmarketcap.com or livecoinwatch.com today, it looks like things are starting to restabilize – it’s not just a Sea of Red anymore. There is actually a lot of green, although we aren’t seeing gains in the same ranges of the drops that occurred, the last 24 hours have looked “ok”.
However, I must remind everyone, this wasn’t even a crash. When a real crash happens, and I believe it will, I think we’ll see a greater than 60% loss in the total market cap. I believe a lot of coins without any true value will go to $0. Only a handful of coins with true value will be left, I’m guessing maybe 50-100 of them, depending on when this crash happens.
Did you sell during this correction?
No. I only hold a tiny amount of Ripple (XRP), Cardano (ADA), Steem (STEEM), and Funfair (FUN). It’s such an insignificant amount that I wouldn’t even notice if it was gone. The plan was to just buy them and see where they go — which includes the possibility of zero.
If you have so little, why even buy?
[[—
I kind of answered this in a quora comment recently, so I’ll just copy and paste it here:
The truth of the matter is that I don’t really like gambling — and that is what cryptocurrency is at the moment. I bought a tiny bit of those coins mostly just for fun to check on and see how they’re doing — I guess to have “some skin in the game”.
It’s kind of like playing fantasy football in a league without any money at stake. When nothing is at stake, people don’t really take it very seriously. It’s a lot more exciting if, at the end of the league, someone is the champion and gets a little money, or a trophy or something. It also makes for good, fun conversation and maybe a little bit of light-hearted trash-talking amongst friends.
Also, I stick to the “Only invest what you can afford to lose” mantra. I don’t really have all that much disposable income with student loans, a mortgage, etc. So the money I have in crypto is the probably in the same realm as a trip to Las Vegas to most people.
In some of the above comments, I mention that I think that a crypto crash will happen at some point in the future, when in the future I have no idea. Maybe as early as end of 2018, or maybe 2019 or 2020 — it really depends on when we start seeing mass-adoption of crypto. At that point, many coins will got to $0. Only the coins with true value will be left.
Which coins will be left?
Well, it’s anyone’s guess of course. However, I think Ripple will probably be one of them.
—]]
You’re still using Quora?
Oh yea, I answered a few questions on Quora awhile back, mainly about medicine/radiology. However, I decided to offer my opinions on crypto, namely Ripple (XRP).
I received a surprising amount of exposure- ~187k views and 610 upvotes as of this blog post:
I was definitely not expecting for my answer to get so much exposure.
Hopefully I end up being right about Ripple (XRP), otherwise I may be forever known as “that dumb doctor who liked Ripple back in 2018”. Interestingly, around the same time I posted this, the whole crypto market crashed. Ripple was probably hit the hardest and fastest out of all of them. It went from ~$2.50 to $0.93 in a matter of days – that’s a 67% drop!
Even so, I still believe Ripple will recover and hit $5 by mid 2018. Of course, that is just speculation, but that’s what I am guessing under the assumption that its trials go well (Moneygram, Japanese-South Korea Banks) and we begin to see early adoption.
If there is interest, I will do some analysis on why I chose Cardano (ADA) as well.
TL;DR
This wasn’t a Crypto Crash, just a normal correction – relative to crypto.
Greed is running the crypto market right now.
Scams are still out there, like Bitconnect was. Buyer beware.
Please, please, please, only gamble what you can afford to lose.
The real Crypto Crash will probably be a more than 60% loss in total market cap. When? Who knows?
Speculation (and Gambling) is still fun.
-Sensei
Agree? Disagree? Questions, Comments and Suggestions are welcome.
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Interesting post. I am hesitant to agree we are out of the woods for one simple reason: The corrections you documented happened after run-ups that, on average, increased the value of Bitcoin only by about 2x. The run-up at the end of 2017 was 20x. The last time there was an increase of that magnitude was in late 2013 when the price rallied from $125 to $1,150 in 7 weeks. With the exception of one rally, the price tanked for the entirety of 2014. It took three whole years for it to recover to that level. With that being said, who knows how this will pan out?
That’s true… but we have to consider that 2017 was essentially the year that Bitcoin (and crypto) began working its way into everyday conversations — rather than just hushed voices in the shadows. It’s becoming more and more mainstream by the day. That said, I still think we’re in for a “real crash” sometime in the near future — I just don’t know when.
In truth, I don’t really like Bitcoin. I think it has served its purpose as successfully bringing blockchain to mainstream. However, I just don’t know how useful it will be, other than potentially a store of value. But I seem to be in the minority…
Thanks for your comment!
I fully agree. I began my research and investments, not so long ago, in March 2017. At the time, there was no conversation about altcoins in my world. Sure, everyone had heard of Bitcoin, but it wasn’t part of everyday life for most. Come December… I overheard “crypto” everywhere. My father even jumped into ETH via Coinbase.
I believe that many of these people are sitting on the sidelines. They either jumped in right at the top, or heard about it, and were too late to get in. Now that we are seeing a correction, they are worried the drop won’t stop. But as soon as the market turns, they are back in. That’s when we’ll see the real crash. Masses will move into the market and we will probably see a ton of regulations place on it. At which point., we’re in for a treat…
Hi Jamie,
Thanks for your comment! Yea, I am of the belief that you should invest (gamble) in what you believe in.
I am hoping to keep a few bucks on the sidelines if a real crash does happen to put toward the ones I like at the bottom of the crash. I have hypothetical “floors” in my head.
It’s gonna be a wild ride!