In the original version of the article, I stated the fork was in Bitcoin rather than Bitcoin Cash. A correction was made on November 24th. As of November 15, Bitcoin Cash had a fork that briefly led to the creation of Bitcoin SV (SV stands for Satoshi Version) and Bitcoin Cash ABC. Bitcoin Cash has dropped from $511 on Nov. 13 to $212 on Nov. 23 (according to Bloomberg). Bitcoin SV which was $55 on a Nov.
23 (according to CoinMarketCap ) creating a combined value of under $270 (holders of Bitcoin Cash received 1 Bitcoin SV for every Bitcoin Cash they had at the time of the fork).
Bitcoin Cash was briefly valued at $227.04 before mainstream price aggregator CoinMarketCap merged the prices into a single number.
In the meantime, while Bitcoin itself wasn’t affected by this fork, it has fallen from $6280 on Nov. 14 to under $3,800 on Nov.
26 (according to coinbase ). In theory the fork in Bitcoin Cash shouldn’t have impacted Bitcoin, but it seems like it has. In fact, it seems like this fork triggered a wave of selling across all cryptocurrencies.
This latest drop in price made many already awkward Thanksgiving conversations even more awkward.
I remain of the view that it isn’t a total coincidence that the meteoric rise in Bitcoin to almost $19,000 in December 2017 started just ahead of American Thanksgiving as college students came home and explained the potential investment to their family and friends how to purchase it and why they needed to purchase it. Bitcoin futures were also due to be launched, giving Bitcoin bulls more reason to be bullish.
As of now, with Bitcoin under $3,800 you had to have purchased Bitcoin before October 2017 to have a profit (ignoring any short term day trading). A year is a long time to have anyone who purchased an asset have losses (in US dollars). Not making money in a year is enough to demoralize some die hard HODLers of Bitcoin. It certainly makes potential investors who were largely drawn to crypto by the fear of missing out (FOMO) very reluctant to commit capital to Bitcoin or any cryptocurrency.
Why is the decline in Bitcoin continuing?
I think Bitcoin, and the entire cryptocurrency space is too confusing for many potential investors. These forks that have occurred (the fork that create Bitcoin Cash in the first place and now the Bitcoin Cash to Bitcoin SV) and the variety of cryptocurrencies confuse too many potential investors.
On my Bloomberg Terminal, there is a Cryptcurrency Monitor that shows Bitcoin, Bitcoin Cash, Dash, EOS, Ethereum, Ethereum Classic, Litecoin, Monero, XRP and Zcash.
Which one to pick? Which one will win? How many casual investors will do the work to make that decision? Cryptocurrencies, which I think rely heavily on new users adopting it, scare away investors who think critical mass will be a key to ongoing success.
I want to focus on one particular aspect that is problematic for a lot of potential investors. That problem is ‘decentralization’ . Supposedly, not having centralized control is a good thing. I’ve questioned that from the start and now I see at least two problems with this alleged benefit:
Decentralization makes it easy to create forks and to create new cryptocurrencies , adding to the choices and the confusion for many.
Heck, the Wall Street Journal created their own mock cryptocurrency to demonstrate how easy it could be. These forks and new products diminish the power of the original Bitcoin and all cryptocurrencies as even avid investors have trouble keeping up, let alone someone just looking to dip their toe in the water. The proliferation of cryptocurrency options makes it difficult for those of us who believe critical mass is important, to see how we achieve it. Bitcoin futures open interest is steadily declining as another sign of diminished demand, especially from casual investors who in theory should have found it easier to invest in futures than in actual Bitcoin. Even the hype around ETFs has diminished.
If we get a crypto ETF in the U.
S., it is likely to reference a basket of cryptocurrenices – which I think makes it less attractive rather than more attractive than a Bitcoin only ETF as it seems to imply that even the crypto aficionados don’t know what will work (but they remain adamant that at least one will work). Sometimes ‘choice’ isn’t a good as it is a sign to many, that the market is too fractured and too easily split to reach the full potential many crypto bulls tout. For all the talk of decentralization it seems as though the miners carry a lot of weight.
If there was a ‘governance void’ that human nature has a tendency to fill, it seems as though the miners and a handful of early HODLers are filling that void – to their own ends . Determining which forks or new cyrptocurrencies to support seems heavily influenced by a few.
Why does a certain large holder want to go down a certain path? For the public good? Hmmm. Why do miners want to pursue a certain path? For the public good? Hmmm. Not only are the miners very powerful, they have their own self-interest to serve. There are widely published reports that the largest crypto mining enterprises are based in countries or regions of the world not known for pristine business practices (to say the least). Again, with everything else going on, that doesn’t give new investors, already wary of the product, the incentive to rush out and commit capital. By not having any centralization of power, the power seems to have centralized to the miners over time – which doesn’t give the average potential investor a lot of confidence.
What Can Change The Current Downward Trend?
Price action. Let’s not be naive.
If Bitcoin itself (or any or all of the cryptocurrencies) can start trading higher and regain a lot of the lost momentum, then people would care again. We could see a return of FOMO which could see another wave of fresh adopters ‘forced’ into the market. I suspect we’d need to see almost a doubling of prices in Bitcoin or other cryptocurrencies to get back to a widespread FOMO.
The reality though is someone needs to get cryptocurrencies back on track. I think the Maximalists are possibly right, as Bitcoin is the best known cryptocurrency, it could be the one that refocuses the arguments and reduces confusion (I admit that I sometimes use Bitcoin in casual conversation when I really mean cryptocurrencies just like Kleenex has become synonymous with tissues).
I am not sure how to get back the traction that Bitcoin and cryptocurrencies had last year, increasing the number of alternative investment choices doesn’t seem to help that cause.
I think Bitcoin and cryptocurrencies in general have lost their luster, in part because they seem to be offering increasingly confusing choices, rather than harnessing investor demand and understanding.
I think Bitcoin will break $2,000 before it hits $6,000..