Many of us have been wondering why Bitcoin value has dropped significantly recently. I'm going to explain it to you, explain why you should pull out of the BTC scene, and explain why the cost per Bitcoin is so disproportionate from how much BTC you're getting (i.e. 1 BTC costing hundreds of US dollars).
I, Professor, have researched and written this on my own. My sources are cited at the end.
A term you need to know to understand the following:
Oligopoly - this is market type where an industry (crypocurrenty in this situation) is dominated by a small number of sellers.
Note that an oligopoly is different from a monopolistic competition market type.
Consider the value of USD. It's constant, or pretty close, unless the government messes up and produces too much, etc. Now look at the value of BTC over its short lifetime (2009-now).
These are VERY dramatic shifts in value. In retrospect, what we are seeing are similar patterns as we see with anything else that has a quick jump in public interest, or is considered as an advance in technology. People get excited and want to be involved. A spike in value, then a gradual decrease till it settles down to where it originated. Ever since FDR got rid of the gold standard in the 30's, the US dollar hasn't seen jumps in value like this. It's been relatively stable, minus a few times here and there. However, BTC at its peak was 1 BTC = $1,151, while its bottom (not counting when it started up at a value of less than $0.10/1 BTC) was about 1 BTC = $76, and that's being generous. If we examine industries who promote well, have advancements in technology, etc., our research will yield results similar to the BTC industry. A spike in value of their stocks and a shift in pricing of their products.
Consider what an oligopoly is. As we know, there are very few forms of cryptocurrency, and most newcomers/sellers who try to start up a form of cryptocurrency usually fail fairly quickly because they can't keep up with the bigger firms with more resources and assets. These are defined as barriers to entry, which is pretty much what separates an oligopoly market type from monopolistic competition market type.
We will refer back to stock charts now.
Nike stock value over its lifetime (1980-now) v. Under Armor stock value over its lifetime (2005-now)
Nike
Under Armour
These two companies produce identical products at identical prices with identical technology. Consequently, we see similar prices in stocks. Both are growing companies in a growing industry and have pretty much taken the industry over so their stocks are constantly rising at an even pace.
Nokia stock value over its lifetime (1994-now) v. Apple Inc. stock value over its lifetime (1980-now)
Nokia
Apple
This can be explained by advances in technology. Apple has made huge technological strides, while Nokia hasn't. Apple is convenient, has a considerably larger amount of consumers, and therefore has higher spikes in its stock while Nokia hasn't produced the same quality phones as Apple and therefore cannot keep up.
Bitcoin is a stock. You invest $(x) into it and get so much BTC for your dollar as you do with any other stock. Bitcoin is failing because no business will ever accept payments via BTC. BTC is unreliable, and there would be an enormous inconvenience to have to convert your BTC to USD (or another currency) all of the time. Bitcoin is not trustable. BTC, as a currency, can be compared to the gold standard the USA once used. Many banks and businesses incurred large losses due to the gold standard because of the variables that using gold presented. Values fluctuated as their gold reserves filled/depleted, contributing to the great depression as people hoarded gold, which is why FDR took us off of the gold standard. No business in their right mind would even consider investing in BTC after a brief glance at its shift in value over time.
Sell your BTC as soon as possible. You may lose money, but some losses are better than losing everything. That's part of buying and selling stocks, and I'm having a very hard time believing that the value in BTC will rise again.
Hope this helped! Please comment if you have anything to add or feel something is wrong.
Sources:
Knowledge from school
https://blockchain.info/charts/mark...ageString=1&show_header=true&scale=0&address=
Stock+ on Mac
I, Professor, have researched and written this on my own. My sources are cited at the end.
A term you need to know to understand the following:
Oligopoly - this is market type where an industry (crypocurrenty in this situation) is dominated by a small number of sellers.
Note that an oligopoly is different from a monopolistic competition market type.
Consider the value of USD. It's constant, or pretty close, unless the government messes up and produces too much, etc. Now look at the value of BTC over its short lifetime (2009-now).
These are VERY dramatic shifts in value. In retrospect, what we are seeing are similar patterns as we see with anything else that has a quick jump in public interest, or is considered as an advance in technology. People get excited and want to be involved. A spike in value, then a gradual decrease till it settles down to where it originated. Ever since FDR got rid of the gold standard in the 30's, the US dollar hasn't seen jumps in value like this. It's been relatively stable, minus a few times here and there. However, BTC at its peak was 1 BTC = $1,151, while its bottom (not counting when it started up at a value of less than $0.10/1 BTC) was about 1 BTC = $76, and that's being generous. If we examine industries who promote well, have advancements in technology, etc., our research will yield results similar to the BTC industry. A spike in value of their stocks and a shift in pricing of their products.
Consider what an oligopoly is. As we know, there are very few forms of cryptocurrency, and most newcomers/sellers who try to start up a form of cryptocurrency usually fail fairly quickly because they can't keep up with the bigger firms with more resources and assets. These are defined as barriers to entry, which is pretty much what separates an oligopoly market type from monopolistic competition market type.
We will refer back to stock charts now.
Nike stock value over its lifetime (1980-now) v. Under Armor stock value over its lifetime (2005-now)
Nike
Under Armour
These two companies produce identical products at identical prices with identical technology. Consequently, we see similar prices in stocks. Both are growing companies in a growing industry and have pretty much taken the industry over so their stocks are constantly rising at an even pace.
Nokia stock value over its lifetime (1994-now) v. Apple Inc. stock value over its lifetime (1980-now)
Nokia
Apple
This can be explained by advances in technology. Apple has made huge technological strides, while Nokia hasn't. Apple is convenient, has a considerably larger amount of consumers, and therefore has higher spikes in its stock while Nokia hasn't produced the same quality phones as Apple and therefore cannot keep up.
Bitcoin is a stock. You invest $(x) into it and get so much BTC for your dollar as you do with any other stock. Bitcoin is failing because no business will ever accept payments via BTC. BTC is unreliable, and there would be an enormous inconvenience to have to convert your BTC to USD (or another currency) all of the time. Bitcoin is not trustable. BTC, as a currency, can be compared to the gold standard the USA once used. Many banks and businesses incurred large losses due to the gold standard because of the variables that using gold presented. Values fluctuated as their gold reserves filled/depleted, contributing to the great depression as people hoarded gold, which is why FDR took us off of the gold standard. No business in their right mind would even consider investing in BTC after a brief glance at its shift in value over time.
Sell your BTC as soon as possible. You may lose money, but some losses are better than losing everything. That's part of buying and selling stocks, and I'm having a very hard time believing that the value in BTC will rise again.
Hope this helped! Please comment if you have anything to add or feel something is wrong.
Sources:
Knowledge from school
https://blockchain.info/charts/mark...ageString=1&show_header=true&scale=0&address=
Stock+ on Mac