Why is Bitcoin "digital gold" crashing right now?

Brendan Burgess

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I also have a significant crypto holding (digital gold) as I do not know which will prevail in the event of geopolitical/financial meltdown.
I don't follow gold either but to my knowledge, gold has had a major peak to trough in recent years, yes. Other than that, see the links to video snippets from an investment banker and asset fund manager (neither with past form or interest shown in BTC) both suggesting that BTC is a legitimate consideration in hedging against the current trade war (on the other thread in this sub-forum).
Why is Bitcoin (digital gold) crashing right now?

I thought that Bitcoin was supposed to thrive during times of economic stress?

Brendan
 
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odyssey06

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Theorising... lot of smaller investors cashing out because they need the money (either because of reduced earnings from coronavirus disruption or expected reductons)
 

tecate

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Bitcoin has shown signs in the past of being uncorrelated to the conventional markets. We're now seeing Bitcoin being very much correlated to the traditional markets in panic conditions. However, lets see how this plays out over the time ahead. It may be that Bitcoin goes back to being counter cyclical as central banks look to churn out even more FIAT money - something they've already started to do.

Bear in mind also that whilst investors have flocked to gold, in the 2008 financial crisis, gold dropped around 30% before later recovering.

Edit - gold itself is down a few % over the past 24 hours.
 
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JSnowWinterfell

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I thought that Bitcoin was supposed to thrive during times of economic stress?

Brendan
I have heard this statement but not seen proof?

The decrease looks to have happened over a short space of time, maybe a flash crash? Could it be that a large holder sold and triggered the algorithms to sell? I have read articles about that type of manipulation before.
 

tecate

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I have heard this statement but not seen proof?
You can go back through the charts for bitcoin vs. conventional markets over the course of the last decade and for the most part they will prove that it's uncorrelated. However, bitcoin emerged as a response to the 2008 financial crisis. There hasn't been one since. Therefore, these events in recent days are new territory for bitcoin. Right now, it is acting in correlation with the conventional market. Lets see how it unfolds though. Gold has not risen...its down a few percent today.

The decrease looks to have happened over a short space of time, maybe a flash crash? Could it be that a large holder sold and triggered the algorithms to sell? I have read articles about that type of manipulation before.
It could be that large traders had to pull money out of BTC to pay for margin call loses on the conventional markets. As regards manipulation, any market with a relatively small market cap is vulnerable to manipulation. That will only change as the market cap of Bitcoin expands.
 

cremeegg

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Its not just bitcoin. Traditional gold is not showing the major gains that might be expected in times of uncertainty. Maybe its bluff is being called after 10,000 years. :)
 
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tecate

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Its not just bitcoin. Traditional gold is not showing the major gains that might be expected in times of uncertainty. Maybe its bluff is being called after 10,000 years. :)
Ok, I'll bite. Are you saying then that gold didn't drop 30% at the onset of the last financial crisis?

Brendan asked why BTC hasn't responded as a safe harbour. I think it's pretty reasonable that we look at the performance of an established safe haven when examining that. It wasn't suggested that gold is not an established store of value (as well you knew).

Who's to say that asset managers didn't pull BTC to cover losses in the conventional markets, to prevent margin calls and leveraged positions?
 
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tecate

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That is brilliant. I wonder will my descendants in 3020 be saying "Bitcoin is a bag of hot air."

Brendan
It seems that you think they will Brendan. I've asked you many times to call the date bitcoin will die. Wouldn't right now - with BTC having taken a massive dive - be the perfect opportunity for you to call it?
 

tecate

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You're asking him to predict the irrational!
Sounds like a cop out to me. You speak of the irrational..maybe that's the commitment the Fed made to magic up and pump $1.5 trillion into the system and expect that will be a fix and there won't be a day of reckoning....just seeing as you speak to the irrational , something tangible to work with.;)
 
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Brendan Burgess

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Hi tecate

I thought I had answered this many times before.

I can't.

I know it will go to zero but I can't tell the path or the timing.

I admit that I am surprised it has lasted this long.

Brendan
 

tecate

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Brendan Burgess said:
I can't.
I know it will go to zero but I can't tell the path or the timing.
I admit that I am surprised it has lasted this long.
Brendan
Well I guess we are not talking about a bubble needing to burst then. We've moved beyond that at least.

It looks like things are going to be in the toilet for quite some time so let's see how this all pans out. This isn't just about the Corona Virus. It's also about the problems with the conventional system and markets. Bitcoin wasn't up and running for the last one. Let's see how this all unfolds.
 

Brendan Burgess

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Wow! It fell below $4,000 overnight and rebounded quickly.

4362


I set my stop at $3,000 ages ago. And subsequently regretted being too rigid when it fell to $3,300 and I didn't close out.



Brendan
 

tecate

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Wow! It fell below $4,000 overnight and rebounded quickly.
Indeed it did and recovered in minutes.

“Traders are pulling money out of Bitcoin to fund their margin calls on other asset classes" - Ross Middleton, CFO @ DeversiFi via Bloomberg.

The Central Bank printing presses are at full tilt now. Lets see what happens when a wave of inflation follows.
 
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tecate

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I haven't examined the over 7,000 copycat cryptos, but I presume there is a lot of like behaviour there.
Ok, so you provide crypto generally as an example. Wonderful your Dukeness. Any other such ongoing inflating and deflating bubble besides crypto?

As an aside this gem from Edward Snowden: “This is the first time in a while I’ve felt like buying bitcoin. That drop was too much panic and too little reason.”
 
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