This week we saw a huge disturbance in the force cryptoland. During the 48 hours between midnight on Monday to midnight Wednesday crypto speculators saw perhaps the largest broadbase correction ever seen in that space.
Ironically this correction occured within days after this New York Times article started making the rounds and this Bitcoin Rapper’s song went viral. Perhaps some of the old tell tale bubbles signs from history are in fact true...
The main culprits of the sell off were regulatory in nature, stemming from China and South Korea both taking hard stances at cracking down on crypto exchanges and trading.
But the icing on the cake was the news that BitConnect, a recent ICO company, was a fraud. BitConnect’s business model was to invite crypto speculators to deposit Bitcoin into their company which would then be lent to others a a very high interest rate (upwards of 40%) per month.
It was basically a loan shark pawn shop operating a classic Ponzi scheme that was successful only due to the general euphoria in cryptoland.
And while BitConnect was one of the first such schemes to blow up, I can say with 100% certainty that it won’t be the last.
The volatility in crypto was incredible those few days. Social media was littered with talking heads from both bull and bear camps aggressively taking both sides of the debate.
Tears were cried, money was lost and blood was shed.
The Koreans seemed to take it harder than anyone else out there and the fact that cryptocurrencies both rise and fall in price seemed to be an unfathomable concept to them
When the dust finally settled this morning, crypto addicts were greeted with this headline:
Source: Bloomberg
The interesting thing to note was that during the 48 hour or so sell off, all the chat rooms I am in were by and large silent about what was happening. Either these chat room guys were too busy buying the f-ing dip (BTFD) or they were too shell shocked to say a thing after seeing their portfolios down 30-50% and trying to wrap their heads around the fact that this entire bubble might all go to zero.
I’m guessing it was the latter.
At this point and given where we are in the maturity of the “asset class” (if you can even call it one) as more and more “civilians” open up accounts to start trading crypto I can say with 100% certainty that Bitcoin (and all crypto) will crash again.
The largest corrections we’ve seen in recent history have always come on the back of regulatory or security concerns whether it be governments “cracking down” on crypto usage or exchanges getting hacked, or in this case fraud happening.
As long as civilians keep piling in this regulatory scrutiny will only increase (you can’t have people losing their pensions over this) and more and more hack attacks will occur.
If you are long crypto the best thing to do is buckle up for a wild ride.
Credits to Jay Kim, studied Business Administration & Technology at University of North Carolina at Chapel Hill (2001)for writing this post in Quora.com
Original post link: https://www.quora.com/Will-Bitcoin-crash-again
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