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Since the crypto price peak earlier this year, we've all looked for answers to two questions. The first and most obvious: what makes crypto sellers so happy and makes you, as a long-term investor, so miserable that the value of your portfolio decreases month after month?
And then there is the big one: What makes the prices unable to support any kind of price increase? Technical analysts have always been right to point out negative graphical models, but are reluctant to explain what caused the $ 600 billion cryptographic value to disappear in the last eight months.
Looking for answers
You can not be too critical of those who read the technical sheets of tea. None of us has found a better answer. In recent papers, I have pointed to a number of absurd scientific explanations, using almost all correlation analyzes that are largely useless for identifying causes / effects.
In other words, if you have lost 65% of your investment in Bitcoin this year, and want to know why. Simply saying that you are less than one standard deviation from the average of all investors is not enough.
The need for a rational explanation continued on September 5, when, in minutes, the price of Bitcoin dropped by $ 10 billion and the value of all crypto reached its lowest level in 2018. raise the question WTF just happened?
Goldman Sachs was blamed by the announcement that one of Wall Street's largest trading companies had decided to delay the deployment of its encryption desk. In addition to the evidence, Goldman's presence provided a portal and a secure host for institutional investors with large funds. Even though Goldman's sources have described the delay as "false news", it does not matter.
In the 15 hours that followed the September 5 peak at 7372 dollars, investors in Bitcoin fell by 14%. Keep in mind that even though Goldman's story was a "real news", it only suggested a delay in the project.
Goldman is not the only one to blame
More often, when asset prices change dramatically and dramatically, there may be a tipping event and a host of other factors take over. This is surely what most observers agree with what happened last Wednesday: fear has taken over and one of the most quiet months for prices encrypted has turned into a raging fire. So, Goldman Sachs was not the only cause of the fall.
Now for the third and most important question
What makes the prices unable to support any kind of rally? Having a good answer to this question means having more than just an understanding of what cryptography is worth. This is a general consensus on how to evaluate crypto. Translated into financial terms: a way to measure the return on investment. In other words, revenue and cash flow.
Fundstrat partner Thomas Lee says one of his valuation measures is based on Facebook, where he says the value of the company is based on a multiple of the size of his network. The simplest but valid point is the number of network members, the largest number of screens for advertising and related trade.
It's a free analogy but at least one entry. The number of nodes on the Bitcoin network reflects traffic and interest in cryptocurrency. But every Facebook analyst will agree, the sub-measures like the time spent on Facebook, the number of friends and many others are key elements. What is the purpose of a network if no one uses it?
Loss of interest?
In the case of Bitcoin, the interest in crypto as a means of exchange decreases. Here are some figures from Diar. The boom of cryptocurrency trading processors has greatly facilitated the conversion of cryptos to fiat when buying goods and services. However, merchant processing has dropped nearly 85% in the last 12 months.
It seems obvious that if these data are representative of what is happening in the real world, they will go a long way in explaining why cryptographic prices are not followed by sustainable purchases. This shows that right now, Bitcoin and others are just toys with which investors can play at leisure.
Critics who agree with this view point out that it is the lack or regulatory clarity that thwarts traders. However, it was the same people who claimed that merchant acceptance was being held back due to the volatility of cryptography. Well after the last six months of the lowest volatility in two years, we know at least that it was not a factor.
Image presented with the kind permission of Shutterstock.
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