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By CCN: A Bitcoin analyst and blogger has confirmed that the recent rise in the price of bitcoin was due to no flow of organic investors.
My theory was that crypto-whale traders exploded at the end of last year, not only because of the 85% drop in BTC, but because of an essential commercial factor – and nothing more.
Willy Woo confirms that the recent price increase was caused by the purchase of whales and the attempt to manufacture a short squeeze.
Willy Woo points out bitcoin short squeeze | Source: Twitter
This is both good and bad news for bulls.
Good news for BTC Bulls
The good news is that bitcoin will behave like most illiquid low float stocks.
With low float illiquid stocks, the stock limit means that equities will always be subject to high levels of volatility and large spreads on the bid / ask price.
It also means that any attempt to reduce inventory goes with a disproportionate risk, as a sudden increase in purchases will crush sellers short.
With Bitcoin, there will always be a number of short sellers, which means that pressures as short as these will occur. This should theoretically provide a level of price support over time.
Bad news for BTC Bulls
The bad news is that Bitcoin has a wrinkle that makes it more vulnerable than low-floating illiquid stocks.
Willy Woo and other bitcoin bulls talk about organic investing. Even with an illiquid, low-float security, an investor actually buys something that produces a good or service and generates a revenue stream (assuming the business is profitable).
As long as this good or service is in demand and the company itself is competitive, it will receive a real organic investment.
Bitcoin is neither a good nor a service. It is a vague investment product that produces nothing.
Bitcoin is a lousy value store
It's not even a good store of value for Willy Woo's only reason: volatility.
Something is not a store of value when this value can fluctuate up to 15% or more during a given day.
Over the past three years, bitcoin has had an average annual return of 144%, plus or minus 197%.
Gold has an average annual yield of 1.8%, plus or minus 21%.
Although I would not call gold the most stable value stock, it's a much more stable value store than bitcoin.
Eventually, speculation will disappear. When that happens, then maybe bitcoin will become a real store of value.
Disclaimer: The opinions expressed in the article only commit the author and in no way represent those of NCC Markets.
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