Suicide By Speculation: Crypto Volatility Chokes Adoption
For a generation brought up on Wall Street, Wall Street: Money Never Sleeps and The Wolf of Wall Street, the world of finance seems very appealing.
Sports cars, tailored suits, slicked-back hair are de rigueur; the parties are bacchanalian, plentiful and full of inveterate winners; work and drudgery is a life experience reserved for other people.
But aside from the glitz and the glamour, what really draws people in is the idea that someone can not just live, but positively thrive by making something out of nothing: that one or two lucky breaks can lead to a substantial amount of money.
This view infected traditional finance in the 1980s, and then again in the runup to the 2008 meltdown. Now it has also taken a firm root in the world of cryptocurrency.
Speculating on the future prices of coins didn’t appear overnight. At present, the only way in which most can engage with cryptocurrency is by buying and selling them as assets; the fact that so many people are doing that should be a sure sign of confidence for the future of the sector.
However, because the crypto price is the principal way in which discussions are framed as well as the metric used to assess the health of the sector, the community is continually running into difficulties whenever the crypto price falls. It gives the mainstream business media a reason to crow about the failures of the industry, and to deter participation by new adherents.
Despite prevailing optimism at the kick-off for 2018, cryptocurrency has so far failed to hit any of the milestones that it was supposed to. From a high of $820bn in the second week of January, the last six months has seen the market continue an almost unimpeded downward trend.
Over the past two weeks alone, the market has sustained three heavy drops in its value. The first ‘Bloody Sunday’ hit, saw $40bn wiped-off the market overnight; later that same week, and following a slight recovery, the market sustained a further $20bn hit. Having seemed to have stabilized over the past week, crypto has now plunged further this weekend.
If the market’s health is determined by price, things are looking pretty bleak for cryptocurrency.
Crypto Price Isn’t Everything
Whenever the market takes a near-universal kicking, crypto news sources generally do the opposite of the business media: we are always quick to bounce out with stories that aim to reassure panicky investors that this is merely a blip… a glitch in the matrix.
Following the recent decline, CCN suggested the Bithumb hack stopped a ‘corrective rally’ in its tracks; FXStreet saw bad news coming out of India and Ireland as having ‘spooked’ the market ; meanwhile newsBTC believed that simply not enough people were investing and that, “buying pressure could not be sustained and the bears once again dominate crypto land“.
Always an excuse. This publication has not been immune: we saw a trillion-dollar market on the horizon until fairly recently.
Bitcoin hitting $20,000 took everyone by surprise. For a few months at the turn of 2017-18, the entire world was captivated by how a line of code – no matter how ingenious – could ever reach such a high valuation.
Bullish sentiments and predictions can become self-fulfilling prophecies. The optimism and confidence in the future of the market leads to higher demand, ergo higher prices.
The same applies to bearish markets. Expectations for any further price rises in Ripple’s XRP token reached their zenith in early January before the market became disillusioned and people began to sell and sell hard, to the extent that in less than a week, XRP fell by 70%: a near $100bn wipeout on its total value. Too bad for those who bought in when it was valued at $3.50.
Since January, the crypto market has seen two bull runs and many failed ones. Some even predicted one in the aftermath of the Consensus Conference back in mid-May.
Each has been heralded as the beginning of the great recovery that will take cryptocurrency over the 1trn mark: each has ended in disappointment and disillusionment as people take their remaining funds, if any, wondering why the lambo-moon miracle passed them by.
As market prices fail to recover so do moods sour and investors sell, something which leads to even more selling and even lower moods.
And worse still, imagine yourself (if you’re a current crypto holder) as someone who had NOT yet made the jump into this market… would the volatility be as appealing today as it was in late 2017?
There are two sides to every coin, as it were.
By today’s definition, the act of speculating is to invest in something with the express knowledge that although failure is possible, the hope is that the value will increase.
However, the word ‘speculation’ didn’t always mean this. Around a century ago, to speculate meant to invest into something which you knew nothing about, staking on a hunch and essentially, betting on luck.
Is it time to revert to the previous definition?
Speculators are, unfortunately, a big and very vocal part of the industry. As developers quietly plug away at building or improving their projects and companies start seriously contemplating how DLT can be integrated into their businesses, unfavorable crypto price trends send the market into a near state of panic.
Price is an inaccurate metric because it can’t determine crypto according to its merits. Sure, it can give an idea about what people feel towards a project, but this is something that can easily be manipulated by clever marketing campaigns (or even dumb ones, featuring renowned crypto shills) or having the right brand.
Cryptocurrency shouldn’t be about people finding their fortune, it should be about harnessing technology to improve people’s lives. When the community focuses too much on the price, it forgets crypto’s real purpose.
Crypto is fine, the technology is sound and its future: glorious. It’s high time the community realized that, and stopped indulging the gleeful victory proclamations issued by the crypto-skeptic business media.
We’ve all got work to do. Let’s get our heads down and do it.
Disclaimer: The author is invested in BTC, which is mentioned in this article.