OK, so while cryptocurrency is a terrible investment, there’s a few reasons for this.
The foremost is that we are at a very critical line. Right now, it’s barely unprofitable to mine Bitcoin.
The miners need the price to go up, or they’ll start to shut down and walk away. If that happens too quickly, the mining difficulty won’t be able to adjust. If it does not adjust, the tap basically runs dry. The entire thing collapses.
Now, let’s take Kraken, Bitfinex, and Bitmex. These guys sort of need Bitcoin to keep going, because trading on margin is making them ludicrous amounts of cash. Especially Bitmex, since it has a designated group of ‘market makers’ who get to play around fee-free, and see everyone’s long and short positions.
What does this mean? It means that the price is kept artificially inflated via wash trading. Recall that the actual volume of trades on Bitcoin is super low. Noone is using this thing as a currency.
Remember, for the price to go up, people have to buy the coins at the current price level, which means you have to look at this chart here…
(Thanks, Bitcointicker, 6 month view)
And say to yourself ‘hm, yes, the trends look very good on this, this is where I’m going to put all the money in, yes’.
Since the volume is, in fact, pretty garbage for actual real trades, the price simply doesn’t get the chance to move in either direction.
With each passing month, more of the ambient money in crypto has to leave so that miners can pay their electricity bills. Electricity companies make about 50 cents of every US dollar equivalent of Actual Real Money that enters it.
Also, people dimly recall that when volume was actually real on Bitcoin for that brief moment in December when people were -actually using the blockchain-, transaction fees were hitting $50.
So we’ve left the magical world of 30% daily swings in value, and we’ve entered the slow deathspiral.
The price decline will probably stop around 6k, but noone actually buying in will make that price irrelevant.
Credit