Is it just because of the corona virus?
Why this Bitcoin crash occurred, is it just because of the corona virus? I will try to give more of an explanation as to why this crash happened. So everyone has heard about the corona virus this is the virus that is causing the economic recession across the entire world and yes this is a recession, People do not realize it yet however, as the situation does get worse there is a decrease in consumer spending and the entire world goes round because of consumer spending and with this decrease in consumer spending even if it’s just a couple dollars per person that will cause an economic recession so although people can say that corona virus is fake etc. as long as people are spending less money in the economy there we’ll be a further recession so, if we look at Bitcoin you can say well I thought this was a store of value why did it go down and this is due to the fact that although Bitcoin is considered a store value similar to gold both gold and Bitcoin did go down as during these times of a financial recession a lot of institutions and people in general like to be in the dollar so although these are considered stores of value they do go down during financial recessions however obviously you will notice that there is a large difference between the move that happened on gold and the move that happened on Bitcoin so what happened on Bitcoin to make it move so much farther down than gold or similar markets even if it is an extreme situation being a global financial recession so the reason why Bitcoin moved down so much further then any of these other assets is because of the nature of how Bitcoin is being traded.
The reason why people trade Bitcoin is to make money
The reason why people trade Bitcoin is to make money, it’s a very speculative asset and that’s why we’ve seen a lot of the volume shift in cryptocurrency markets over time from initially altcoins to now the futures trading platforms such as bit mechs so initially, people were trading the underlying asset of Bitcoin and altcoins however as these future trading platforms became increasingly more popular people started taking more risk on Bitcoin by trading with leverage and that has caused this massive shift of all these speculative traders to move over to these future trading platforms and obviously, there are repercussions for everyone trading on these futures trading platforms what happened is because everyone shifted over to these futures trading platforms most of the volume on Bitcoin that’s very evidently seen you can look this up right now is on actual futures itself and not on the underlying asset if you look at the volume on let’s say coin base or bitFinex two of the largest exchanges trading the underlying asset of Bitcoin the volume on there is much lower than the volume on bit max so what happened with this move
The reason, why Bitcoin crashed 50%
The reason, why Bitcoin crashed 50%, is because when these institutions that were previously invested in Bitcoin started to sell during this recession so it’s very obvious it’s very clear as to why they started to sell because of these institutions they were invested in Bitcoin initially because they thought this could be you know upcoming investment in the future however whenever there’s a recession a lot of these institutions like to close their positions they like to be in cash once again that’s why gold went down that’s why Bitcoin went down a little bit right so these institutions they started to sell due to the looming concerns of a financial recession however, because there is no volume on the actual underlying asset of Bitcoin when these institutions started to sell larger amounts of Bitcoin on the market this then triggered the price to move down faster and faster than maybe people initially expected because of no one realizes that everyone’s trading on Bitcoin and no one’s trading on the actual real exchanges trading the underlying Bitcoin asset and so then this triggered the price to move downwards as these institutions and individuals were selling and then that eventually triggered the long squeeze as everyone’s trading these super leveraged positions on Bitcoin I think the average is something like 20X leverage on Bitcoin so once again many people may be not making the best decisions how ever the price started to move down people started to get liquidated that’s why bit Mex was completely laggy you couldn’t even trade on the platform at all and that’s also why so many people got liquidated as their engine was overwhelmed with all the liquidations that it had to make as the price was collapsing due to people trip due to people selling on-the-spot exchanges as well as getting liquidated on the future platforms.
Lack of stability in the Market!
One of the most important things, one of the most important foundations for a successful financial market to profit from it in manual trading or any trading at all has to be some level of stability and that comes from the volume on the underlying asset if you look at stock trading you will see that there is an actual volume on the stocks itself and if you look in forex there’s an actual volume on the currency themselves and then there is also volume on top of that on the futures platforms but on basically any other financial markets maybe I am mistaken in this but most other financial markets you will see that the volume on the actual underlying asset itself is higher than the futures trading platform or if not at least comparable so it’s at least maybe 50 or 25% however on Bitcoin when an asset like this becomes so dominated by not actually trading the underlying asset itself it becomes super vulnerable to manipulation and to different events like this as so many people are trading such high-risk positions on these future platforms so, in other words, I think that this cryptocurrency market Bitcoin in general had just slowly deteriorated overtime and I think this was really the tipping point that was just waiting to happen I know obviously, I didn’t see this before it happened.
Is Bitcoin a market that you want to continue to trade?
The reason why people are trading the mover all on these futures platforms with so much risk is just not going to be good for this market in general. I think that the fundamental reason for Bitcoin being popular for Bitcoin being successful is not gone, cryptocurrencies can still, be the future but I think you have to think about it as most people are trading Bitcoin for speculative profits you know. Is Bitcoin a market that you want to continue to trade? I’m sure a lot of people lost money on this move,there’d be their position getting liquidated whether they’re just holding Bitcoin on a hard wallet or something and losing a bunch of money you know if you’re trading Bitcoin short term you need to reassess why you’re trading Bitcoin short term and possibly if other markets or maybe more desirable whether it be stock market forex or any other market because I think it’s very important to reassess why you’re trading something especially during these times that test the markets right because we would have never seen this move had the economy not started to collapse outside of cryptocurrencies.