Timing any market is near impossible, but when you see irrational exuberance and volatility together it is often an indicator that you are near a market top. I’ve had a pretty good run with cryptos in 2017 but over the last couple of weeks I’ve been unwinding my crypto investments to the point where I’ve pretty much sold anything that isn’t nailed down. I still firmly believe in the future of blockchain technology and its potential to transform our world, but I see a number of potential Black Swan events on the horizon that are giving me good reasons to sell now. Here are my top 5 :-
Source 1 2
Source
The Bitcoin war has been raging in earnest for some time now and we have already had one major scare with Bitcoin Cash threatening to topple the SegWit Bitcoin as the One True Bitcoin. We have seen conspiracy theories like Operation Dragonslayer come and go, but if you put politics aside and just look at the technical aspects of these two competing Bitcoins the threat of a Flippening is very real. All that is needed is a slight change in sentiment and it can create a shift of buying from BTC to BCH on the price front and that can cause BCH to become more profitable for miners. That in turn can cause a shift in the hash power which in turn can cause a slowdown in block times for BTC, a spike in transaction backlog and fees for BTC and before you know it you have a positive feedback loop. Confidence in BTC can quickly turn in what is commonly known as a hash rate Death Spiral. In isolation I don’t much care if BCH topples BTC as I do believe bigger blocks is a better scaling solution and I prefer to see Bitcoin try and stay true to the original Satoshi whitepaper as a crypto Currency rather than a Speculative Asset. The problem is that BTC is the main trading pair for just about every other alt-coin on the market, so if BTC tanks in favour of BCH then it will cause carnage across the entire crypto-sphere.
On the 20th of November Tether (USDT) was hacked for a $31 million loss and since then Tether has come under a lot of scrutiny. Reading through the legal terms for usage of Tether it is clear that they do not actually guarantee redemption of Tethers for USD and there still does not appear to be a credible audit of the USD that they are supposedly backing this crypto currency with. Tether has become a very important trading pair on big alt-coin exchanges like Poloniex and Bittrex. In addition, new Tethers are continuously being issued in very large amounts and the timing is corresponding with downturns in BTC. There is legitimate concern that Tethers are just being printed at will and used to pump up the market in a way that reminds me of the Willy Bot in the lead up to the Mt Gox collapse. Bitfinex has already had some shady history and there is a risk here that if Tethers do turn out to be unredeemable then that will have devastating effect on the crypto market. According to coinmarketcap.com the market capitalisation of Tether is currently about $816 million USD so that will make a serious dent if it goes up in smoke and alt-coin exchanges like Poloniex and Bittrex could be crippled in the fallout.
Another shady coin which has undergone a lot of scrutiny in recent times yet it still has investors pouring money into it. BitConnect makes the claim it guarantees 1% return on investment DAILY, which any sane person would be able to see straight away is an outrageous promise that can’t possibly be sustained. We saw here on Steemit recently what happens when someone promises unrealistic returns with even 45% per annum being too much for the Bellyrub Bank. When the going is good there is no problem, but when there is a bump in the road an exit scam is never too far away. BitConnect is putting investors money into BTC and has been riding the coat-tails of the 1000% return of BTC so far in 2017. But it’s not going to take much of a dip to trigger the inevitable collapse of this Ponzi so while it may not be the catalyst for a big crypto correction it is likely to be one of the first big dominos to fall when sentiment does finally turn and it’ll make the crash harder. According to coinmarketcap.com the market capitalisation of BitConnect is currently over $1 billion USD so that’s another ticking bomb that can blow a big hole in this crypto market rally.
Everyone here on Steemit should understand how the Steem Dollar works and that it was designed and programmed to always return to the value of $1 USD. It is not a hard peg like Tether but it typically fluctuates somewhere between 0.92 and 1.08 most of the time. Then on November 23rd all of a sudden it spiked up to over $2 for no apparent reason. It has continued to trade at a vastly over-inflated price ever since with several more spikes on high volume over the last couple of weeks. There are lots of very knowledgeable people on Steemit commenting on this but to date there has still been no credible reason for this sustained price spike. Considering the SBD is programmed to return to the value of $1 USD, whoever is buying up the SBD is likely going to cop a massive loss. It is nothing short of madness and while a Korean exchange did list SBD and STEEM on the 23rd even an extended pump of this magnitude cannot be explained with investor ignorance – especially since STEEM itself has not pumped anywhere near as hard as SBD. Is it a co-incidence that this SBD pumping started just 3 days after the Tether hack and serious questions have been asked about Tether redemptions? I wrote some months back about the use of both Tether and Steem Dollars as relatively stable cryptos to use when the market turns but they both have huge question marks over them right now and the SBD pumping (more than any other issue) is a giant red flag for me. I never EVER wanted to convert my crypto wealth back to fiat but these developments have me spooked. Something is going on and even the brightest minds on Steemit cannot explain it....but the market does not lie.
Bitcoin has been around since 2009 and has a history of major price pumps followed by massive crashes. You might hear people claiming that This time it is different and It’s a new paradigm. Well maybe it is, but that’s the same thing that gets said before every bubble bursts. We have had over a 1000% increase in the price of Bitcoin in 2017. Do people REALLY think this trajectory is sustainable? Are we REALLY getting massive mainstream adoption? I don’t think so. To me Bitcoin is still clunky, hard to use, slow and it’s becoming even more expensive to transact – to the point where it no longer has utility as a currency for me and I just won’t use it. Where I live people have started talking about it because it is making the news but still nobody is actually using it. It would be different if they were talking about DASH or Ethereum or one of the newer cryptos too, but this Bitcoin-centric exposure reeks of HYPE and FAD trending. If you have a look at the daily charts you’ll see an Evening Star occurred on November 30 with some solid volume and this is frequently a topping indicator. It has since gone on to make a slightly higher high but the price has been volatile and this can be another indicator we might be near the top. Sentiment is very strong right now but you have to ask if we can keep this up or is this enormous bull market running on fumes?
Source
Now after saying all that I do re-iterate that it is nearly impossible to time the market and BTC is possibly going to go on and double its price in the next month but it’s going to do it without me on board. I do love crypto and Bitcoin will always have a special place in the history books but I am firmly of the opinion that the market has lost its collective mind and it needs to come back to earth to flush away the garbage in this market. If there is one thing I’ve learnt from investing over the years it is to not be greedy. I have done very well in the crypto markets over 2017 and it’s time to take a break to enjoy the festive season. It will be a very good Christmas for my family this year that is for sure.
Images and Credits
https://www.projectsmart.co.uk
https://bitcoinwisdom.com
https://coinmarketcap.com
http://www.azquotes.com
Thanks for analysis!
I could add up regulators' crusade on crypto which i feel round the conner. Apparently they dont like what is happening. Core exchanges shutting down may be the result.
I cashed out at 6000 for bitcoin, dont regret it at all. I was here in 2013 i saw it all. See you at next depression phase, probably in 2018-21.
Yes, regulation is definitely a big threat too. Though we saw China ban ICOs and then shut exchanges and really the market didn't flinch much. They are even threatening to shut down the miners but the market isn't concerned. China was a huge player in the early crypto market but most of the Chinese trade just moved to South Korea. So regulation didn't make my top 5 but it's probably there at #6.
I dread SEC and FED/ECB to take some action even more than chineese guys.
Chineese dealt with their problem for now.
Well my inner conspiracy theorist would suggest that this would be best to happen AFTER the futures exchange is launched and the Wall St insiders have had a good chance to load up on shorts first.
Regardless, the next few weeks will be very interesting to watch from the sidelines.
Hi Buggedout, sorry to read you are leaving the crypto space, but I am glad you have made good money out of it and are happy to move on.
Me, I feel really comfortable in STEEM and EOS - and these are the only two I like. Both are highly capable to take this industry mainstream - where we will eventually go. In other words - there is value in their utility.
I believe that the Bitcoin rise of the past few days is due to the vast amount of money trying to get into blockchain assets, however this has become bottlenecked by Ethereum. I believe a number of exchanges have suspended trading on Ethereum and ERC20 tokens now. So money is coming into Bitcoin but is unable to be divested to the alt-coins - pushing the price up.
My guess is that the Steem Dollars have gone so high is because there is only 3 million tokens and I assume it is being used as a medium of exchange (for some other crypto - not sure what).
Keep in mind that there is now over $US8 million going into EOS daily, this is before any trading. This is some serious money now - likely corporate and institutional, and they likes what they sees. This is not a tap that will turn off overnight. IMO.
Good luck with your future endevours mate.
SK
Thanks @sirknight I am not leaving the space, just cashing out for now due to some of the risks and problems I see. Still a big believer in crypto long term and I do see the potential in EOS and STEEM. I just fear that anything that hits BTC hard will hit them all - whether they deserve it or not, it is the way sentiment works for better or worse.
I might even put my developers hat on again and play with the EOS testnet instead of spending my days just trading cryptos and burning hours on Steemit. Time will tell. I see this as just a hiatus to enjoy the summer for now and figure out what comes next later :)
Sad to see you cash out :-/ I have actually been thinking the same exact thoughts this week especially with Bitcoin entering hyperbolic growth and looking at the MASSIVE rise in Bitconnect token prices over the past year.
If anything, Bitcoin's biggest threat is Ethereum taking over it's market share because it does what BTC can do only faster, cheaper and with smart contracts.
I have been enjoying my massive gains the past ten days- I have made something like 50% profits on my entire portfolio :)!
Thanks. I'm cashing out but not going away. I still really believe in the crypto space I just think the market needs a shakeout and a cleanup. I'm thinking I won't be touching anything without real world utility though until that happens.
Congrats on the great returns. I hope you have a good festive season too! Don't forget to enjoy it! :)
If you cash out now and wait till next crypto despair moment, you will better see what will be center of next iteration hype.
Not nessesarily ethereum.
Very sound advice here if you can resist the FOMO. It's tough to do!
I have some ideas of how the next despair moment might play out and what the next iteration hype might (or should) look like. I won't be right on the money but I only need to be close.
Might write about that next if I can find the time.
I just wrote a little piece on FOMO sapiens in the crypto world. Not an article as solid as yours, but let me know what you think :-)
https://steemit.com/cryptocurrency/@cryptotem/to-all-of-us-fomo-sapiens-in-this-world-of-cryptocurrencies
Haha Eth? CryptoKitties just
cashedcrashed EthIn general, it's a sound mindset. The parabolic ramp for bitcoin just keeps getting steeper and that must ultimately come to a head. I think the issue is that the head must be way above where we are at. In a 3 year timeframe, 10,000 for BTC is cheap if we understand that it is used for a currency to back most all cryptocurrency trades. In the end, this sort of prevents or limits the impact of a flippening event.
Tether needs competition in the market, I think. We need a more decentralized alternative, or a less risky alternative.
Like let's say BTC hits 14k.... it could then crash 50% and be at 7k... at which point, I think the buying resumes. Certainly good to take some off the table if this does happen, but I would just add that I am not expecting a long-term 6+ month lull in the market for cryptocurrency. 3 to 4 month lull is maybe the max I would anticipate.
So certainly some of the issues you mentioned could blow up, we get a pull back, but 400 bil for a market is kind of like small potatoes. I think the market is very heavily centered on bitcoin which is not great. Ideally, the crypto market broadens its diversification of offerings into many realms and doesn't have 1 vehicle holding most of the wealth. In other words, what we see is indicative of an immature market that has a lot of room to grow, because it is centralized into a few products that people are beginning to grasp, without a more broad-base of understanding and market interest which happens as a market matures into the multi-trillions.
Thanks for the solid comment.
I guess I am questioning the role of BTC as a "Reserve Currency" or "Store of Wealth" it is being promoted as. I think it only has that position at the moment because it is part of all the alt-coin trading pairs. As the crypto market matures and diversifies I don't think we need that function in a properly decentralised crypto market.
You've nailed the issue though, it is about the immaturity of the market. Dumb teenagers make dumb mistakes and come unstuck, but they learn from it in the long run :)
I mostly agree, and I'd add there are an unknown number of alternate ponzi schemes which should have collapsed long ago, thriving and growing like cancer. USI-tech is a big one.
I believe the correction will hit the bitcoins hard, but a lot of the smart money has already been diversified into other cryptos.
I don't think these users will be spooked by a flippening or hash rate death spiral (which is fascinating to contemplate, if a little morbid).
If anything, I can see a lot of the profit taking moving into undervalued, speculative alts with long term promise, like steem, smartcash, PODs, EOS, etc.
I haven't studied USI-tech but when I first heard of them I thought it was just BitConnect with different branding. No doubt about it there are a lot of ponzis and other scams operating right now and getting away with it. BitConnect is just the biggest I can see so it's the poster child :)
Initially I was trying to diversify into alts and then I was trying to find stable coins I could move around in but because BTC sentiment seems to dominate the entire market it's still the main risk. We have seen plenty of times where BTC has dipped and STEEM with other altcoins have been murdered through no fault of their own.
I wonder if that's a factor in this SBD pump.
Someone trying to find a safe harbor.
That's what has me concerned. Someone trying to find safe harbour....who is overpaying so much they are accepting over a 50% loss when SBD inevitably returns to $1? What would that say about where they see the broader market going? What do they know that we don't? If that doesn't tingle the spidey senses for a trader then they're too new to have had the experience of being ambushed by the market before!
I was using SBD as a safe harbour and sold it for over 100% gain on the first spike. It is not a safe place to park funds at this price and that's the main reason why I am reluctantly returning to fiat :(
My question to people cashing out is always: When you bought in how did you imagine a best case scenario to look like?
It’s impossible to differentiate between Bitcoin/cryptos simply working as expected and what people are calling a bubble.
Honestly, this has far exceeded my best case scenarios. For example I bought BCH the day after the SegWit2X fork was cancelled and would have been happy to get a 50% return after 3 months....I got it after 2 days.
Then I parked a decent sum of crypto into Steem Dollars thinking it was a bit of a safe haven and was expecting ZERO effective ROI....then it spiked to over $2 and I sold the lot. It was just free money.
Both of those were just in the last month. You can't deny there is some serious mania and crazy speculation going on right now.
To be fair we are dealing with a very fundamental property that is the nature of money itself which almost all of us need every day.
But I believe you were talking about Bitcoin specifically and I agree that Bitcoin centricity is a problem but I don't think we can escape that until the masses are educated about other currencies as well and see them as better alternatives. While I do think 2018 will a big year maybe it's just the year for Bitcoin bubble coming down, and that taking other cryptos also down. Who knows.
Or maybe Bitcoin keeps rising and then slowly fades to the history with the years to come as the "first crypto to start it all" but as an outdated solution, like the first steam cars. They might be cool, but like Bitcoin in its own unique technology, not a sustainable solution for a really long term (5+ years or so).
All in all you had some good points and in the euphoria we are experiencing it's always good to be aware of different possibilities. Knowing both sides of the coin is never a bad thing.
Enjoy your crypto earnings and Christmas holidays!
Thanks for the great comments.
You are correct I am primarily talking about Bitcoin and some of the crazy going on there with the potential for a Bitcoin bubble bursting and bringing the rest of the market down with it. There are risks on the periphery but anything that hits Bitcoin hard will hurt everything.
I personally would like to see Bitcoin pushed aside, some of these obvious scams flushed out and money can then flow into the newer innovative cryptos that can take the market and technology forward. I doubt it could every be an orderly transition though so that is why I am cautious off a boom-bust transition.
Luckily is seems like the market is now catching up with Bitcoin; BTC dominance has now come down to 57.5% from the 60+%
If it feels like the right time to exit, then it probably is. No use pushing the limits against your gut feel, and then lose what you have gained. If it goes up, so be it, but you got your payday. Enjoy it!
I'll keep playing with my small change and learn as I go. May make a few bucks in the process, who knows!!
Thanks @bmj. The important thing for all of us is to keep studying and learning. Never getting in over our heads but doing our best to be in the right place at the right time. Cryptos are here to stay but there is bound to be a bump or two in the road ahead so we've got to keep our eyes open.
now this is a great analysis. We need to hear actual places and people transacting. The SBD issue is a problem as well. STEEM should be up, not SBD.
Thanks for the kind words. There is a good post by @acidyo about the Korean exchange listing HERE that is worth a read.
Great post my friend, were is all this money coming from to bid up the price so quickly? To me this reeks of central banks and government intervention setting everyone up for a big fall hoping to break everyone's enthusiasm in the cryptos. This is just my opinion but I think you've done the right thing by bailing out of bitcoin, cheers mate.
Thanks @silverbug it is hard to know where the money is coming from. Some speculation is that Tether is just printing USDT and pumping the market with it. Others think it's just the mainstream herd and institutional investors finally moving in.
I share your concerns about the central bank and government intervention. I have wondered why the SEC knocked back the Bitcoin ETF....but then seems to have rushed through Futures trading. When it comes to "Protecting Investors" an ETF has surely got to be safer than a leveraged Futures contract....? It just doesn't smell right to me.
Wont it be profitable to convert crypto into some currency with lower market capacity????????? bitcoins are making so mucg progress right now all for what coz it has only 21 million market cap max... if u invest into something into even lower market cap then today or tomorrow u can make way more money
Most of smallcaps priced insanely high too. Even more insanely than bitcoin.
They are not as high as bit coin though... but someday they might be as valueable as bitcoin but m pretty sure that they wont go down
They might not have as high coin price or as large a market cap, but they can still be grossly over-valued.
As I mentioned in my post though, because the way the alt-coin markets are structured - with Tether and BTC trading pairs, any problem with those currencies will hit the alt-coins hard. What we need is more diverse and decentralised exchanges and more trading pairs against fiat and other top 10 coins. Diversity is strength and it's probably one of the next big infrastructure improvements we need to see in the crypto space over coming years.
i think cryptocurrency is more like a collectible iteam lesser the iteams out thr more people will try to grab it.....so what u said can be true that they could be overrated.....but still it wont change the fact that rich people r holding most of currency and they wont b willing to sell it for cheap
I don’t see it that way at all. Crypto must have real world utility and do something better than existing tools and systems in the non-crypto world.
Any crypto that doesn’t do that is destined to be a fad and left in the dustbin of history in my opinion….and that includes Bitcoin!
true that....Thanks for sharing ur thoughts...ur posts are really nice
Seems like you just enjoy selling the doomsday scenario. There are many valid reasons why SBD is rising and it's largely because users are still behaving in ways that is creating the demand
Crypto is definitely a risk, but so is the S&P 500. Taking profits along the way is fine, and wise, but "selling all crypto" is laughably ridiculous
Thanks for the comment. I do try to stay balanced and really just am being transparent about what I am doing and why. At the moment I am bearish, or more accurately cautious, but it hasn't always been the case if you want to look over my older posts.
I'd be very interested to hear your many valid reasons why the SBD is rising and perhaps an explanation of why SBD is outperforming STEEM itself?
Eh no you aren't. You pulled your witness vote because I commented on your post. Your feelings are clear.
Haha. I wondered if you'd notice and then I wondered if you'd comment. I'm glad you did!
I try and vote for witnesses who are not just involved in the community but are also constructive and helpful to other users. I don't have a problem with you disagreeing with me (I even upvoted your comment!) but when you accuse someone of "selling" the doomsday scenario and label their opinion "laughably ridiculous" that is not really constructive, it's kinda obnoxious.
I've had you on my witness list since you were ranked 50. It's time for me to give someone else a go.
Yeah I watch that stuff very close. It's cool though as it so happens I hit 20 again today.
I was on mobile when I made the comment and didn't even have a chance to reply to your questions about why SBD might be rising.
I am making a post about it tonight because I see too many people still powering up their posts 100%.
No hard feelings. Enjoy your leave and I hope all goes well for you. Don't sell all your coins!
Btw, as it is clear that you have a decent amount powered up and it will take months to power down I don't believe you are selling all of your crypto. So you are defending a position I am willing to bet you don't even agree with. I wasn't intending to attack your opinions, but I do like to preach diversification of assets so no one asset will bankrupt you.
Thanks. If you have a read of my post I did say "I’ve pretty much sold anything that isn’t nailed down" and when it comes to vested SP it is pretty much nailed down :)
I have a few odds and sods left but over 90% of what I was holding is gone for now. Last week I was buying physical gold. Yesterday I bought my wife a car. Christmas is paid for and the rest of the proceeds is going into the ASX for now. I like to stay liquid and I hope I'll be balls deep in crypto again soon, but not right now.
I will look forward to having a read of your post on SBD.
Great article. Coincidently I read the Warren Buffet quote somewhere else today as well and I believe it is very true. Fits your piece perfectly :-)
I have taken some profits in the last few days as well. Not sure whether I will pull out fully though. I feel most comfortable to at least have some coins for the long-term.
Thanks. Sounds like a smart move to take some profits, though we do have a new All-Time-High today.
It's always the way. Getting the timing right is hard :)
Thanks for your article mate! Glad to meet fellow Aussies on this. I'm from Sydney! I'm hoping to create an active community in Sydney
Man I wish I read your article earlier for steem dollars.
All the best mate
CryptoZen
RSI levels are too damn high to take a long position on Bitcoin right now (although there is still room for the price to go up to a RSI level around 95. A major correction, likely going to 7000 euros (sorry, I am not working with dollars) or even to 6500 euros will probably happen soon. The price will find strong supports at those levels and only when it breaks through 6500 there will be a real mess. I am expecting the price to return to a bullish movement from those support levels though.
I guess we'll find out soon enough :)
Interesting stuff. Bitcoin is
Yep, Merry New Year you guys
Wow this was very interesting. Pardon my ignorance but is the STEEM listed on coinmarketcap the same as the STEEMDOLLAR? Also, I'm not sure if your familiar with bitUSD on bitshares, but is a STEEMDOLLAR pegged to the dollar in the same manner (e.g. it can be settle for a $1 worth of STEEM or whatever from a collateralised lender)? If so that's quite incredible that people are buying it at $2. It seems so irrational I can't quite believe myself that that happened!
nvm they're different, apparently coinmarketcap says SBD trades $8 now though....
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