Bitcoin (BTC)

Everyone wants bitcoin to go back to over $19,000, especially for those that bought at the December highs. But while there are all sorts of content out giving people hope that bitcoin will be back soon, and probably hit highs of even $100k in 2018, there is need to take such optimistic assertions with a pinch of salt.  Here is why.

For a start, a lot of people underestimate the amount of damage that the collapse of Bitconnect did to bitcoin, and the crypto market in general. There were lots of people who jumped into Bitcoin (BTC) in 2017 through Bitconnect. It was like a money train that was pumping new money into the market every day, and that new money was playing a critical role in pushing up the value of bitcoin. When that money train collapsed, the impact on bitcoin was twofold. Firstly, there was a general level of distaste against the crypto market that saw new investors, mostly those who don’t understand the tech, shy away from bitcoin. Then there is the fact the collapse of Bitconnect itself directly took off a huge chunk of the market liquidity.

Don’t also forget that Bitconnect collapsed at a time when regulatory voices were getting louder. It was that same time that China was on a warpath with centralized exchanges, and South Korea was on the verge of banning anonymous trading. To the average investor who was looking to enter the market, all these events were like a confirmation that bitcoin was probably a scam. A good portion of new money that would shore up the market left, or simply stayed away from the market after these events. It will take lots of enthusiasm for new money to start flowing back into BTC and the crypto market in general.

You are probably thinking, but the futures market and the interest by Wall Street in bitcoin should add some positive energy to the market, right? Well, there is only one problem, the entry by Wall Street could actually slow down the growth of this market significantly. As Wall Street firms take an interest in bitcoin, the market is going to be taken over by high frequency traders and other complex algorithmic market players. HFTs work by capitalizing on the discrepancies between the bid and the ask price. That’s why there is very little difference between the bid and ask price of blue-chip companies. Once these traders hit the market, you can rest assured that trading bitcoin will be more difficult than ever.  Things will not get easier for long-term HODLERs either. With the futures market, it means that price will operate within monthly price ranges as the futures players seek to settle their monthly contracts. In short, investing in BTC is no longer about believing in the tech, it is now about understanding the mechanics of the financial markets, and it’s not easy.

So what’s the future? Bitcoin (BTC) has a future, but going forward, you need to learn the basics of finance before investing in it. The days of just Holding with no fundamental basis to it are long gone. Learn how to make good entry point and when to make one. For instance, if bitcoin starts taking the shape of digital gold, then it would only make sense to invest in it, in times of financial uncertainty. That’s the only time when safe storage assets like Gold tend to pick up in value.

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