FOR IMMEDIATE RELEASE
What does the collapse in crypto currencies mean? In the last couple of weeks the whole market, including Bitcoin, is down around 30% with Bitcoin itself falling as much as 35% at one point. Some coins are down 50%+.
Some recovery has taken place, but the market as a whole has shrunk from over $100billion to just over $70billion.
Is that it? Are we on a permanent downtrend? Have the public seen (or think they have seen) the Emperor with no clothes?
In my view this is a healthy situation. NOTHING goes up forever. Participants in markets buy and sell as they see fit, and – being brutally honest – so much money has been made recently that NOT taking a substantial profit makes no sense.
Bitcoin in particular has suffered from falls of a third several times over the years but has always moved back higher within a few months. Quite apart from anything else, the miners need the prices higher to pay for all that electricity. I’d be astonished if in fact they were not large sellers at the high prices.
So what else is good news? Adoption of and interest in crypto currencies continues to grow. That is not going to stop just because the market has fallen. Indeed, there are several groups who are wanting to use crypto currencies in closed groups. For example, in a casino you buy chips and use them to gamble with. You could do the same with a tailored altcoin, and it could all be done online at a fraction of the cost of handling cash or using bank accounts.
But the other thing that really interests and pleases me is that the crypto currency markets are behaving exactly as conventional markets do. Even down to the buy and sell signals on the charts. Before the last rise, the charts for Bitcoin were indicating a potential “top” of around $3000. That arrived. Then there was the reducing triangle formation - means a drop. For reasons completely beyond me coin journalists thought this meant it was about to go UP! The price duly dropped. Then, a bottom target of $1850 suddenly appeared, and hey guess what that pretty much appeared too.
I think this episode shows how un-knowing people in the crypto currency space actually are. The usual investment tools applied to these markets have yielded exceptional profits – but I’m willing to bet most of the participants have never even heard of a double top or head and shoulders, but have set themselves up as experts on the back of rising prices.
Of course, the coins apart from Bitcoin have suffered just because of Bitcoin – it is, after all the reserve currency in this space. If it falls, everything else has to fall too, or arbitrage situations will emerge.
I’m pretty confident there will be a period of sideways movement. “ Sell in May etc etc” isn’t quite true, but would have paid dividends here in the last few years. Conversely, once the holidays are over and people return to their desks, hopefully the crypto “experts” will be somewhat chastened. When everyone shouts “buy” that is the time to sell.
The autumn will be the time to see gains again.
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29 Jun 2017 18:00
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