Behind the “Black Wednesday” of the cryptocurrency world: What is the value of Bitcoin?

On the evening of May 19, cryptocurrencies (assets) such as BTC (Bitcoin), ETH (Ether), LTC (Litecoin), ZEC (Big Zero Coin), DOT (Boka Coin), OKT (OKExChain Token), BNB (Coin On Coin), OKB (Platform Coin), HT (HuobiToken), etc. dropped by nearly 10% or 56%. The news was also reported this night that 130,000 ETH worth about $326 million were transferred between unknown wallets.

Behind the "Black Wednesday" of the cryptocurrency world: What is the value of Bitcoin?

It’s no surprise that the cryptocurrency world has gone “crazy” in the form of ups and downs. During this period, Bank of America has warned that bitcoin longs are the most crowded trade, with 75% of investors saying bitcoin is in a “bubble”. JPMorgan’s latest report shows that institutional investors are selling bitcoin and buying gold instead, reversing the trend of the past two quarters. The Federal Reserve’s Bullard said the cryptocurrency crash is not a systemic problem.

“Cryptocurrencies crash across the board hits No. 3 on Baidu’s hot list”, “Coin 5.19 corpses all over the world” ……

On the evening of May 19, cryptocurrencies (assets) such as BTC (Bitcoin), ETH (Ether), LTC (Litecoin), ZEC (Big Zero Coin), DOT (Boka Coin), OKT (OKExChain Token), BNB (Coinan Coin), OKB (Platform Coin), HT (HuobiToken), etc. fell by as little as 10% or as much as 56%. The news was also reported this night that 130,000 ETH worth about $326 million were transferred between unknown wallets.

It is not surprising that the cryptocurrency world has gone “crazy” in the form of spikes and drops. During this time, Bank of America has warned that long Bitcoin is the most crowded trade, with 75% of investors saying Bitcoin is in a “bubble”. JPMorgan’s latest report shows that institutional investors are selling bitcoin and buying gold instead, reversing the trend of the past two quarters. The Fed’s Bullard, on the other hand, said that the cryptocurrency collapse is not a systemic problem.

On the same day, bitcoin moved steeply, once falling to $29,563, a daily instalment of more than 30%; as of 6 p.m. GMT on May 20, it was at $38,795.

But in the view of Vijay Ayyar, head of business development at cryptocurrency exchange Luno, this round of bitcoin’s decline is normal – because a 30%-40% pullback is “normal” during bitcoin’s bull market; BTC also saw a correction of about 35% in January this year. BTC also saw a correction of about 35% in January of this year, and had a similar drop during the bitcoin bull market in 2017.

According to William, chief researcher at digital asset trading platform OKEx Research Institute, the crypto asset market, represented by Bitcoin, has been tumbling since the rally ended on May 9. It had stopped falling on May 18, but the three major associations of the financial industry made statements that sent the market back into a downward spiral.

BTIG’s Julian Emanuel also kept his investment target for bitcoin at $50,000, despite the frenzied sell-off. Institutional investors became buyers after the dollar plunged to $30,000, he said. “The sell-off is partly due to new regulations in China and the possibility of the U.S. regulating the cryptocurrency market.”

On May 19, cryptocurrency trading platform Coinan issued a notice saying it had suspended trading in all leveraged tokens other than BTCUP, BTCDOWN, ETHUP, ETHDOWN, BNBUP and BNBDOWN, and suspended the subscription and redemption functions of all leveraged tokens. Trading, subscriptions and redemptions will resume at a later date.

Previously, on the evening of May 18, China Internet Finance Association, China Banking Association and China Payment Clearing Association jointly announced that conducting exchange business between legal tender and virtual currencies and between virtual currencies, trading virtual currencies as central counterparties, providing information intermediary and pricing services for virtual currency transactions, financing token issuance and trading virtual currency derivatives and other related trading activities violate The company is suspected of illegal fund raising, illegal issuance of securities, illegal offering of tokens and coupons, and other criminal activities.

On May 19, even the VIX panic index was rising, at 22.18 (+3.94%). On the same day, the latest regular meeting of the state set the tone – attach great importance to the commodity price increases, to investigate malicious speculation, the commodity market, as of the close of business, the domestic futures market black system across the board, coking coal fell 7.98%, iron ore fell 7.92%.

The reason for the plunge of bitcoin and other virtual currencies is attributed to four aspects: first, the three major associations of the Chinese financial industry jointly issued a voice to resist speculation in virtual currencies; second, the suspension of ERC20 token withdrawals by Coinan and Hotcoin, the trading platform “unplugged”, and the reaction of users during the market volatility. During the market volatility, users responded that they could not close their short positions. This also contributed to the accelerated decline in the price of the currency. Third, Musk tweeted “Tesla has (emoji) Diamond hands” as a metaphor for being a staunch supporter of something. Tesla previously held bitcoin. As a Bitcoin opinion leader, his “tweet effect” often causes huge market swings. Finally, the U.S. blockchain sector was implicated in the opening plunge, with Coinbase falling more than 12% in a chain reaction.

Some investors even said that Musk had completely undermined the confidence of the market, and that the wave had wiped out the hopes of many bulls.

“Technically, bitcoin and others do have the need to pull back down sharply.” Liu Xia said.

What a miserable night, 5.19 was undoubtedly a sleepless night for the cryptocurrency community.

Look, bitcoin home statistics show that in the last 24 hours, a total of 578,467 people blew their positions! The largest single blowout order occurred in Huobi-BTC, worth $67 million!

The largest single burst order occurred in Huobi-BTC, worth $67 million! 23,092,200,000 USD in one hour, 6,890,000,000 in 24 hours; of which, $2,939,000,000 USD in BTC, about 80,000 BTC; $1,817,000,000 USD in ETH, about 690,000 ETH. 5,630,000 USD in multiple orders on this day, May 19. 30 days total burst amount on the whole network: $34,876,000,000, long to short burst ratio: 3.14.

However, as of May 20 at around 6:30 p.m. BST, BTC was up 2.14% in five minutes to $39,575.61. Bitwise’s chief investment officer even said that the decline has not changed the long-term trend of Bitcoin, and the founder of New Street Advisors said that now is a great opportunity to buy Bitcoin.

And the facts? That’s a matter of opinion. If you’re a novice investor, it’s probably not a coincidence that you’ve been “chipped” by similar speculative trades.

A senior foreign exchange trader who had been in the Bitcoin market for several years at around $5,000 and got out near $30,000 said frankly that this kind of trading is actually a kind of speculation, and the key is to know how to stop loss and control the risk, so you don’t put too much money into it and just see it as a possibility of alternative income, but most ordinary people don’t know this.

“Daydreaming all day long, thinking you can buy a worthless aircoin and then get rich in two days, the probability of this happening is certainly there, but there will be many more variables involved.” The source said.

It explained that he later invested his bitcoin proceeds in other small blockchain-related coins, but closed his position long ago; the basic increase was around a dozen times. The bottom logic of doing investment transactions is to have a correct value, just like Ye Fei recently broke the news that the stock market is boiling with the matter of sitting on the bank, in fact, it is the same reason – to pour, to pull the plate of some low-value enterprises, the thing itself does not have any value, sooner or later, something will happen.

And looking back at the bitcoin trend in the past year, the highest rose to $64,805 a piece; up hundreds of times; but ten years ago the SSE index more than 3,000 points, ten years later, or more than 3,000 points. While it is not appropriate to make similar comparisons between the two, its true that for the more risk-averse investor or speculator, its also a deliberate search for high yielding assets.

Those so-called crypto-digital coins (assets) then naturally become their investment targets. “The main thing is that no asset can now have as many multiples as these coins have risen, so it has become gambling in nature – ordinary investors (ordinary people) are coming in with a whimper; if the matter is allowed to develop, the consequences are unimaginable and it could end up getting out of control …… so, the regulation also showed the attitude, but indeed a moment ‘card’, may also ‘card’ can not.” The senior foreign exchange trading person said.

This is why after the “three major associations of China’s financial industry jointly issued a voice to resist virtual currency speculation”, it will make the whole network cryptocurrency (assets) collapse, “ordinary retail investors need to go through the digital currency exchanges to trade, and most of these exchanges are created by the Chinese …… and this form of investment may also lead to – eventually – losses resulting in capital outflows, and such incidents are actually what the regulation has been cracking down on.” The senior trading source said.

And the chairman of the U.S. Senate Banking Committee said the OCC (Office of the Comptroller of the Currency) is unable to regulate companies that hold cryptocurrency licenses.

According to Coin Dance, 132 of the world’s 257 economies currently deem bitcoin legal and do not impose restrictions on it, according to a research report by CTS. If you exclude the economies that have not collected the relevant information, the percentage of economies that do not have restrictions on bitcoin is going to be over 90%, with only 14 economies identifying bitcoin as illegal or placing restrictions on it.

And Chinese regulators issued documents warning of the risks of bitcoin trading as early as 2013, such as the 2013 “Notice on Preventing Bitcoin Risks” jointly issued by the People’s Bank of China and five other ministries, which clarified that the attributes of bitcoin are virtual commodities and not currency, and that financial institutions and payment institutions are not allowed to conduct business related to bitcoin.

However, in the view of industry veterans, some cryptocurrencies (assets) do have their value, such as bitcoin; in addition, the recent expectation of rising inflation in the global market has led to the emergence of many air coins …… without real value like the dog coin that Musk previously supported, which has no limit on the number of issues and has no value. And in the country, a whole bunch of air coins are now derived indirectly and short-term, many of which have become a new form of fraud.

“These air coins, the vast majority of the market value is very low, its price is also easy to be manipulated, so, after the regulatory news comes out, from the crowd of retail investors a dump, its impact on the price of the coin is very big.” The above-mentioned person analysis.

So, what is the value of bitcoin again?

“Bitcoin to the asset, CBDC (Central Bank Digital Currency) to the currency.” Cheng Shi, chief economist and managing director of ICBC International, points out. He explained that on January 3, 2009, the first bitcoin was introduced, and founder Satoshi Nakamoto wrote in the block that “it was the time when the British Chancellor of the Exchequer stepped in for the second time to bail out the banking crisis”, pointing out my biggest motivation for creating bitcoin. 2008, when the subprime crisis swept the world, the Federal Reserve launched a series of quantitative Bitcoin was launched at this time with the primary goal of countering the uncontrolled watering down of monetary authorities and potential hyperinflation.

In Cheng’s view, bitcoin’s volatility and transaction speed are often criticized, but this is not a material obstacle to its difficulty in becoming a common currency. First, the high volatility is relative to the U.S. dollar, rather than pointing to physical purchasing power. Bitcoin’s volatility tends to refer to fluctuations relative to the price of the U.S. dollar, and the price of bitcoin has risen from nearly $29,000 to as high as above $63,000 this year, which is well beyond the range of volatility for a normal currency value. However, our most direct basis for judging currency volatility should be the change in physical purchasing power, and the reality is that items directly denominated in bitcoin are very rare. If viewed through the lens of Bitcoin, it could instead be the volatility of traditional fiat currencies that is huge. Second, the undesirable transaction speeds are simply a technical issue.

“We believe that the real determinants of Bitcoin’s difficulty in becoming a universal currency need to return to the economism behind it.” Cheng Shih claims.

The logic is that the first is niche, and bitcoin is not naturally geared towards the general public. In order to ensure scarcity and autonomy, users need to be firmly in charge of their private keys (256-bit binary numbers) on the one hand, so that once they lose them, there is no possibility of recovering their assets, and on the other hand, they must fully understand the correspondence between transaction addresses and private keys in order to prevent being cheated by intelligently generated wallet software. The current easy way to do this is to have a digital currency exchange hold bitcoin on your behalf, but this still requires the public to trust the exchange, losing the fundamental meaning of bitcoin. The second is deflation. The number of bitcoins is capped at 21 million, and there are now outside fiat currencies with which to exchange them. Bitcoin is able to achieve internal deflation and external inflation by dividing the smallest unit. But if bitcoin does become the dominant currency for economic activity, and fiat currencies are withdrawn from the stage of history, then a deflationary spiral in bitcoin will be unavoidable, meaning that people will be willing to hoard bitcoin and exacerbate the momentum of the economic downturn.

ICBC International macroeconomic analyst Gao Xinhong believes that, in contrast, CBDC is more in line with the public’s currency usage habits at this stage. In addition, CBDC is not involved in money creation, but there are electronic deposits from banks (central bank digital currency) to complement it, so there is no deflationary concern. In its view, the scarcity of bitcoin reinforces the asset properties, making it positioned closer to the gold of the digital world. While gold has long since ceased to assume the monetary function of payment, its physical scarcity has always led it to be seen as a value-preserving asset when inflation hits, which helps us revisit the value of bitcoin.

It is also worth mentioning that some in the investment community believe that the plunge in cryptocurrencies such as Bitcoin is the result of a combination of factors, but that the liquidity factor has a greater weighting. Bitcoin’s plunge, which topped out at more than $68,000 back to more than 38,000, a drop of more than 30%, is essentially a result of speculators no longer believing in the flood of liquidity in the face of higher inflation and actively selling off under the prick of the massive bubble. Including and then drive the high valuation of high growth stocks down, squeezing the growth bubble, especially Tesla is the most obvious.

Cheng also said, admittedly, hyperinflation will pose a danger to the economy, but moderate inflation and bank debt is also a source of economic growth, from this point of view, not involving credit creation of bitcoin is difficult to be adopted on a large scale.

At this stage, Cheng Shi said, bitcoin does perform better than gold in terms of safe-haven properties by providing scarcity based on mathematical consensus in addition to solving the defects of gold such as not easy to divide, not easy to identify authenticity and inconvenient to carry. “There is a validity to the valuation logic that emphasizes bitcoin’s asset attributes, while valuation methods that favor monetary attributes are less reliable.”

However, “starting with Bitcoin, the constantly self-evolving digital currency has officially taken the stage of history, and history will eventually make the right choice to move towards a more advanced, secure and inclusive digital currency system.” Cheng Shih claims.

In fact, “Bitcoin is compared to gold and highly closed: the total amount and the new supply per unit of time are strictly locked by the system and cannot be artificially regulated, which makes it difficult to adapt to the growth of social wealth; there are expectations of appreciation, which is conducive to speculation and speculation, but violates the laws of monetary development and operational logic, and is regressive rather than innovative at the monetary level, making it impossible to become a real circulating currency. ” Wang Yongli, former vice president of the Bank of China and chief economist of Shenzhen Neptune Group, believes. And, he says, purely endogenous network “digital coins” such as Bitcoin, despite simulating gold, are not gold, so there are opportunities for speculation, but the risks are very high!

Therefore, “despite the emergence of multiple ‘digital currency’ concepts, in a strict sense, the only one that can really exist and develop as a ‘currency’ is CBDC,” Wang said. .

Posted by:CoinYuppie,Reprinted with attribution to:
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