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Why is Bitcoin crashing and when will it end?

Today, the status of gold as a standard of value goes into digital field. Bitcoin – digital gold.

Most crypto players believe that the rise of Bitcoin price is inevitable. And since Bitcoin will go up in price, crypto market in general will also go up. Indeed, such an interconnection is real and the rise in prices of most of the represented assets is directly related to the growth of Bitcoin. But, as in any market, the prices of only popular instruments, that attract crypto players, are rising. 

Due to lack of infrastructure for ordinary consumers who use cryptocurrencies in everyday purchases, the main value crypto assets – use as speculative instrument. Volatility, the exchange spread, and sufficient liquidity are necessary to attract the attention of speculators to any market, and Bitcoin has these three components for speculation.

Problem of the crypto market

The lightning-fast growth of the capitalization of the young crypto market to a value over 800 billion USD was replaced by a tendency of a long fall to values below 200 billion USD.

The total cost of crypto assets decreased by 75%. Some assets have lost up to 90% of the value, and some are excluded from list of exchanges.

During the fall of the market, investors lost about 600 billion USD of their crypto assets. In a prolonged staying of crypto market on the bottom, the prices of some assets continue to update the minimum. The owners of such assets gradually lose faith in the market’s ability to grow and begin to get rid of depreciating coins and tokens, aggravating the market.

Reasons of the current crisis

The main reason why the market capitalization has fallen by 70% is obviously inflated capitalization. Due to the peculiarity of calculating the capitalization of crypto markets by rating providers (Coinmarketcap), the values presented in these ratings are not true. Capitalization of assets is calculated by multiplying the number of active coins by the current average market price for one coin. The number of actively circulating coins also cannot be taken as true, because the number of units of some assets in the hands of just a few investors reaches 80-90% from all issued coins.

Therefore, these volumes of assets did not generally participate in market trading, and if they began to participate, they would quickly lower the price of the instrument. Neither investors nor teams paid for these tokens, and the total lack of secondary demand for such assets leaves no chances for these markets. As a result of information which characterizing crypto markets, market-participants are devoid of objective data and are not able to evaluate the depth of current crisis.

Frozen tokens, being in the hands of project co-founders is one of the main hidden threats to the crypto market, and the continued falling of secondary demand saves the tendency to depreciate up to 90% of crypto assets over the next few years. Price decreasing of crypto assets is market pattern, where the fair cost determines demand, supply, extra value and non-competitive business model. Asset prices return to true values that for most of crypto markets equals full depreciation.

Another reason for the current fall in prices of crypto assets, we believe the final leaving of players from “dying” markets. This means that players sell crypto assets without a repurchase goal. The lack of counter purchasing demand makes falling the most likely scenario for such markets. Inaction or intentional insider actions of project teams make a situation hopeless. The stuck volumes of assets helds by large investors will lead to a further fall in prices as soon as investors decide to fix their losses. And it is a matter of time.

The fall observed in the market of crypto assets does not differ in something new – all markets, without exception, are subject to cyclicality. But perhaps one change can not be ignored – Bitcoin. Value will never be the same again.

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