The cryptocurrency marketcap is taking a big hit right now with governments in China and elsewhere getting serious about shutting down exchanges (or threatening them enough to shut themselves down) under the always-comical pretense of "protecting consumers" until they can get more regulation in place. They are trying to control something which is uncontrollable by design.
Good luck with that.
People will continue to use decentralized exchanges like BitShares/OpenLedger.
As I watch my spreadsheet holdings tank, I started thinking about short-term vs. long-term goals in this space. I got to wondering, do we have misaligned motivations between traders and investors/HODLers?
I'm all about people making huge profits. No problem with that, as long as they are operating in voluntary ways and not harming anyone else. That said, traders are making profits off of volatility. They do well if it goes up or down, if they know what they are doing and how to short the market.
Again, I have no real problem with that, but it potentially creates contrary actions for people with similar goals. Long-term investors lose out in terms of the time value of money. They are hoping for mass adoption and prices in the $10k, $100k, and $1M range per bitcoin. It could happen. It's not out of the question.
However, when traders push the price around, we see a further delay in mass adoption such as most of 2014 and 2015 where the bitcoin buzz died down after it crashed from the all-time-high around $1,200 to around $250. As I've said before, I didn't sell but held, and I'm glad I did.
So, in a way, traders may also be hurting their own long-term profits if they are hindering mass adoption by participating in volatility. For every investor who buys and holds, we get a larger market cap and one step closer to stability and more adoption by those who want stability and an alternative to fiat scam money.
What do you think? Are the short and long term incentives of traders and holders misaligned? If so, what should be done about it? Should holders learn to trade to ultimately increase their holdings, even if that means mass adoption is pushed further into the future? Should traders restrict their own profits and HODL more often as that may be better for their long-term interests given the time value of money and how beneficial mass adoption will be for everyone?
It's possible there is no simple answer, and we'll just have to wait and see what the emergent properties of many individual decisions ends up being.
For now, I'm holding and will continue to look for buying opportunities as my budget allows.
Some further reading, if interested:
- Are You Waiting to Buy Cryptocurrency?
- The Big Question: Should You Sell or Hold During a Market Correction
- Understanding Blockchain Freedom — Why So Many Smart People Are Wrong About the Value of Bitcoin
Good points. And I' m not a bot, I actually read the post. Many people do long term and short term as part of the portfolio....but many of us have a long term vison of holding, then the strategies may vary
I just completed a study looking at the comparison between the global net wealth bands, and the bitcoin wallet size bands. It tooks days of study and hard work.
One of the conclusions is that the fastest growth in number of bitcoin investors over the next 12 months will be in the $100k to $1 million net wealth band. Less than one in one-thousand of this group already hold bitcoin.
I also conclude that over the next year we will see around $5 billion of new money invested in bitcoin. This will have a leveraged effect on the price and market-cap. In other words the market cap won't go from $60 billion to $65 billion, but to a much higher number.
I conclude in that Steemit article that the price in 12 months should be in the range of $7000 to $100'000. It depends on the leverage effect, the velocity of circulation, and the number of free-to-trade bitcoins. As for the last variable, the evidence over the last 12 months is that very few wallets were trading.
Excellent work! For those interested, check it out here:
Net dollar wealth bands compared to bitcoin wealth bands, and projection of cashflow into bitcoin over the next 12 months.
To your comment:
Expecting people to see your content without building a following is like tweeting to no followers. No one will see it. It takes many months and many thousands of comments and posts (I'm up over 8,000 myself over a year) to build a following. If you continue to put out content people value and leave informative comments like this, you will find your follower count grow, but it doesn't happen over night. Good luck!
Thank you, Lukestokes, for the words of encouragement. It's encouraging to have followers. The study was done firstly for my personal benefit to reach a rational conclusion about where the future bitcoin price might go. The evidence is that with much less than 1% penetration rate in all but the highest wealth bands, there is a long way to go. Sharing the study with others is my pleasure. I am glad that you enjoyed it. I also appreciate a comment from someone of your reputation which carries more weight than many of the comments on steemit!
https://steemit.com/trading/@igster/for-those-new-to-crypto-welcome-to-bear-market-and-some-resources-to-cope-with-it
My view on the current market above.
I think we need the volatility. Let's be honest, bitcoin only gains eyes on it when it is making new highs. And for that to happen it needs volatility. The tech is sound and solid and adoption is growing by the year. Those who buy high and sell low will not stop that. Even Bill Gates has said bitcoin can't be stopped.
I personally am a long term investor because I'm a believer in the fundamental technology and mission of blockchain. I promote HODL-ing, but I don't feel comfortable telling people not to try to profit from these fluctuations. I imagine once a larger critical mass of people are in this space, we will not see these massive price swings and the markets will become more efficient. I think we're a ways off from that, but as we approach the $1 T market cap number, I'm hopeful the volatility will tame down.
I agree. Much higher market caps should bring stability, assuming enough people stop believing in fiat currency. If they continue to believe in it, the central bankers will just keep buying up cryptocurrency using money they create from nothing to play with the market for their own advantage.
Great points Luke and you touch on an issue that has always been a problem, trader vs investors. Whether it be an individual stock, or a currency, let's say Steem for example, traders always hinder the ability of an asset to find it's true market value. The pursuit of the "quick buck" will always be the primary goal for some. It's an addiction they can't seem to shake.
I no doubt feel it's a hindrance to the investor if they're not truly committed to hold for the long term. I've often thought what the true price of Steem should be if it wasn't used as a personal piggy bank by some whales and by some traders when Steem gets a little momentum going.
If an asset is not viewed as an asset, but just as a financial instrument, the volatility caused by traders can cause a significant amount of short term disturbance and harm to the price. Short term variance in price can make the most die hard investor's knees shake a bit and question his willingness to hold in the face of present losses. Unfortunately it's the world we live in today, but I do feel strongly that the ever increasing amount of traders do more harm than good in today's market place.
I'm really curious to see what will happen 5 years from now. Thankfully, this comment will be on the blockchain so I know I'll be able to refer back to it and find out. :)
Nice share @lukestokes
Can i make design for you... You can check sample on my blog 😄
Just for to be friend...
You can do as you please, of course. No one can stop art from becoming. :)
No promises I'll use it though, but I'm flattered at the request. Thank you.
@lukestokes
haha .. no problem ,, i am just trying to build a good network with friends in steemit .. if you are happy, i am also happy
Oh yeah.. Dont forget to follow me back oke 😄
Buy ir sell?
Be or not to be?
Thanks for sharing! :)
HODL is part of cryptocurrency lore. :)
ok....what does it MEAN?
It is not obvious from the link I replied with?
I'm pretty stupid in some ways...
...not subtle.
If i'm not mistaken it's just hold mispelled
Check the link to the bitcointalk forum. It's not just misspelled, but an hilarious example of a drunk post which is now legendary.
It was a misspelling of "hold" and became a meme over the years.
AH...this is the FIRST time I heard that.
I thought it was some kind of take off on
Whenever I see it I think of Game of Thrones. HODOR
Thanks for sharing the link. I hadn't seen the original post before.
I try to link to the original bitcointalk post every time I use it so people can catch on. Pretty funny stuff. :)
I'm very skeptic of long term gains with cryptocurrencies. As long as more and more come into play what is going to keep any of them popular and hold value? I think unless they are backed by precious metals it's just a popularly contest. How do we know bitcoin won't be the next MySpace once everyone moves to the next best currency like Facebook. Sure, huge gains are possible as long as someone is willing to buy but eventually everyone will be buying something different. Just my thoughts. What are yours?
Thank you for replying! I do believe in gold. It's the currency that has been around the longest. I also do have an open mind about cryptocurrencies. But as the video compared bitcoin to facebook, it could also be compared to MySpace. MySpace was the big thing at the time until Facebook came along. I don't believe Facebook will still be relevant in 100 years. Maybe Steemit will take over as number 1! As the video points out Bitcoin is the most secure but what's to say another one of the many new chains doesn't out do them. My opinion is there's no saying. Thanks again for the info and I'll be glad to start following you!
Do you think gold has "intrinsic value"? And if so, why?
You may enjoy this presentation: Understanding Blockchain Freedom — Why So Many Smart People Are Wrong About the Value of Bitcoin
I have no problems with competing currencies because as the technology progresses we will be able to seamlessly trade between them. We could even have auto-balancing local, decentralized wallets which could keep the overall value consistent.
Oops sorry, I replied to myself. I'm new to this but slowly getting it.
What I replied:
Thank you for replying! I do believe in gold. It's the currency that has been around the longest. I also do have an open mind about cryptocurrencies. But as the video compared bitcoin to facebook, it could also be compared to MySpace. MySpace was the big thing at the time until Facebook came along. I don't believe Facebook will still be relevant in 100 years. Maybe Steemit will take over as number 1! As the video points out Bitcoin is the most secure but what's to say another one of the many new chains doesn't out do them. My opinion is there's no saying. Thanks again for the info and I'll be glad to start following you!
I do think a useful/secure aspect of any blockchain is critically important so we may see many projects going away long term, but unlike Facebook/MySpace, many crypto projects are open source and can be adjusted as needed to adapt to changing market pressures.
Interesting, who controls the adjustments?
Who controls any open-source project? It's up to the community consensus and the developers involved. If they do something people don't like, they fork it to start a new project which better fits their goals.
Holding for sure. No more buy-in budget for me right now.
Great post Luke! You are so0o on the right side of history with this one.
Many happy returns to you steemit friend.
Cheers! from @thedamus
Excelente post, gracias por la info
If people don't buy some now, they are going to regret. This bear market won't last long.
It's a dynamic we will always see. There will always be those trading (looking for short-term profit) and those holding long-term (seeking that one big return).
Sell-offs due kill the buzz, but in the end that is true of any market. In 2008 the masses were certainly not lining up to buy stocks. Though they probably should have.
I'm holding long-term and posted about adding to some positions today. I plan to add again if we leg down to the next level of price support.
HODL is good, but you can't convince everyone to HODL. Just look at chaincoin they tried to convince everyone to hodl, but then once the first whale took profit everyone panicked and the movement died.
You should always take some profits when you're in the green, buy on the dips, and stick to your trading and plan and never trade on emotion. This will create long term value and stabilization for the market.
I'm very much of the view that long-term buy-and-hold is the best approach. Firstly, you don't stress from having to actively track and trade your current holdings and still have the potential to come back after time t and see where you investments now sit without all the hassle in-between.
Secondly, if you spread your investments across a sufficiently large number of investments, you are maximising your chances of hitting upon at least one x1000 successful crypto - which, even with a modest investment of $100 will make it all worthwhile. The only downside is that, to find these little gold nuggets, you need to do some background research which should be all part of the fun anyway for a serious investment approach.
It seems like traders are certainly acting selfishly if you look at it in a big picture context - they are sucking out value for themselves rather than contributing to the overall value of the cryptocurrency network. A day Trader only wins if they successfully take profits at some point.
But that doesn't mean it is unethical - just that it isn't in the best interests of cryptocurrency.
Ray Dalio, legendary investor and founder of Blackwater, offered a few insights about cryptocurrency during an interview w/ Tim Ferriss that dropped a few days ago. He basically suggests that you can measure the long-term value of a blockchain by the amount of HODLers on it - the more, the better. At least that's what I took from it.
Edit: and I'll admit that I could be wrong about all of this because I am not an economist...
Hi Luke,
Glad you prominently mentioned Bitshares/OpenLedger!
I'm both holding and trading. I'm holding crypto and increasing my holdings whenever I can. But I've also started trading with OpenLedger, mostly between Bitshares and Bitcoin, but also some other trading pairs. I won't be selling crypto for dollars anytime soon and I hope to continue to make gains with trading and then maybe spend some of those earnings with merchants and people who will accept crypto, which will encourage continued adoption.
Maybe I can have it both ways...
Another good post Luke. I've found your articles very informative since joining Steemit and enjoyed some good reads in your archives as well. Long time watcher first time player, I think now's a great time to put some of my discretionary funds into cryptos. Sometimes it just gets so hard to choose. All Steem Dollars earned from my content here I'm just pumping into my Steem Power, since I'm a new user. But when it comes to trading some of my fiat money for cryptos for the first time it's hard to choose, BTC, ETH, etc. I looked into EOS by the way which you mentioned to me on an earlier post and it looks like they don't support those in the US at this time. I understand I could use something to change my IP, but making my first currency conversion I thought I'd try and keep it simple.
Again, thanks for the good post Luke! I don't follow a lot (so I actually read the stuff in my feed) and I'm glad I added your blog. I've enjoyed your content as I step into the cryptocurrency pool instead of watching other kids play.
Thanks so much!
You can buy EOS without using the ICO (initial coin offering) via exchanges like Kraken, Shapeshift, or even EtherDelta.
When it comes to crypto, you kind of have to just jump in to get familiar with how things work. Powering up is a great move, IMO, as I think STEEM is one of the best technical cryptocurrencies out there and it has real utility powering Steemit, Busy, ChainBB, DTube, and DSound (with more sure to come).
My recommendation: Create a Bittrex account and start playing around with buying and selling a bit using your SBD. Just getting some experience will be worth it. Don't worry about what you gain or lose. Just knowing how to trade between currencies is a valuable education worth paying for.
Actually, instead of Bittrex, might as well jump in and create a BitShares account and send your SBD/STEEM there to buy and sell on a decentralized exchange. Buying BitShares is a good idea (IMO) with all the FUD about governments going after centralized exchanges.
Thanks for the recommendations Luke. I've been going around, getting different wallets (Electrum for BTC, Ethereum and Monero wallets on their main sites) but I now realize that's just for HODLing. To actually buy, play, and learn I need to setup an exchange account and I can leave my various coins there and just transfer to a wallet when I don't want to trade them.
So, is the difference between Bittrex and BitShares that the latter is decentralized? Simple questions, I'm sure, but your advise has been great and I'm like a sponge. There are many coins out there, but it can seem like there's just as many exchanges. haha.
Yes, that's the primary difference and it's an important one. Unfortunately BitShares doesn't have much volume. If it did, I would never use a centralized exchange again. When you own the private key, you own the cryptocurrency. When you trust a centralized exchange, historically, you get screwed.
Exactly, and that's kinda why I initially thought "well I better get wallets of all these different coins so I hold the keys, not what is essentially just another bank." So if I've got this right (as is coming clear while I create my BitShares account and reading your reply) a centralized exchange holds the keys to your funds (and just lets you access them with a password), that's why they can rip you off or when they go down your coins go with them. A decentralized exchange lets you hold the keys, just rather than a simple wallet, it lets you use multiple coins and exchange them on an open market. And here I thought you only held the keys with designated wallets.
Yep, that's the idea. Your BitShares keys are like your Steemit keys (created by the same guy, Dan Larimer). If Steemit.com went away you could still use Busy.org, ChainBB.com, or even your own cli_wallet. You control the keys, so you own the cryptocurrency.
Forgive me for re-visiting an old comment, but I thought I'd solicit your wisdom once more. I'm excited about BitShares but have had a hard time with its system to deposit fiat USD. I ended up creating a Kraken account to buy some BTC with my USD, then it'll be much easier to deposit funds (other than Steem) into BitShares.
I made a blog post a little about my experience. If you had a moment to give a read and leave a reply, I'd be grateful.
As a side note question as well, is the lower volume on BitShares the reason for the lower trade prices? I've found it curious how ETH/USD and BTC/USD prices on the market are a noticeable amount lower than other markets.
Volume / liquidity is a key to getting good trades. However, I'll likely trade on BitShares for the independent (of government) and decentralized security.
either long term or short term . it depends on individual goal
I got my doctor to buy BTC when it was $2300 so she's still ahead of the game... But, she calls me all the time asking what to do. I keep telling her to hold- it's a volatile market and will be back up. I hope I'm right!
Hahah... the "calling me all the time" ones are the worst. :)
I understand... She's new. She likes to read my stories and I was explaining how Steemit works and it was me that talked her into investing. I'm hoping that when it goes back up I can get her to diversify and buy Steem!
I am the big jerk, to be honest. I will absolutely buy into a dip. And I will sell if I'm nervous, or I feel the price can't be supported. And I don't really believe in the platform. I believe in cryptocurrency, mind you - and decentralization. All of those things are great. But Bitcoin, in particular, I don't think is the best example. Right now I'm trying to buy and sell my tulips to make a quick buck before the market tanks.
Just because I don't have a lot of faith in the thing, doesn't mean I shouldn't be able to make money on the thing. Same thing I'm doing here with Steemit, to be honest :)
Heheh. Eventually you'll use it enough to have to rationalize your theories with the actual reality of your experience. The people I'm taking about who are messing with the volatility are moving 1,000's of bitcoins at a time. I doubt that's you. :)
Blind Men & Elephant.
I trade options on tastyworks.com, making pretty good rate of return. I'm not large enough to move any market.
If I found a similar trading tool crypto, I'd consider trading them too.
I tend to get in when volatility is high and out when it contacts.
Lots of traders have directional bias. They tend to balance out unless the market goes asymptotic. That's always a good time to step out. Then you have funds to reload after the correction.
My view is that traders take lots of volatility/risk away from producers and consumers. Many more traders loose and win in the wild swings than long-term holders.
I've missed several swings in crypto, not my trading space. While making over 20% since November.
I think that it's time to buy while it is low! :) Bitcoin cannot be stopped by any government. The beauty of crypto currency, to decentralize power.
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@lukestokes Excellent submit and very insightful. Have learnt a whole lot from it. Resteemed.
You're another resteem bot, huh? If so, stop, please. You're embarrassing.
The more you spam, the more I'll flag.
Thanks for being... a spammer bot? Sucks I have to waste my voting strength on you. Please, stop.
You resteem bots with your bad english are really starting to bother me.