The short answer to the question of whether bitcoin is going to die? It’s not. Bitcoin will survive the China crash, just as the internet survived the dot-com bubble and the global economy survived the Great Recession.
But China’s move to halt initial coin offerings (ICOs), close bitcoin exchanges and possibly make Bitcoin illegal in that country does hold an important lesson that traders ignored for most of the year.
As the price of BTC skyrocketed in 2017 (going from about $100 per coin in January to a high of nearly $5,000 early in September) the commentary was a lot like that on the internet itself in the 1990s. Bitcoin was global and governments can’t touch it, they said.
The truth is quite different.
The Lesson
Bitcoin is global, just like the internet, but governments can indeed touch it. While cryptocurrency does not need government sanction, it does require government sufferance. China has removed that sufferance.
China can do this. It has made internet freedom an economic good — Jack Ma of Alibaba Group Holding Ltd (NASDAQ:BABA) can see any site he wants. But citizens there accept that there are things you don’t talk about and truths you don’t access, even online. It’s part of the Chinese social contract.
China may be a special case, but it represents nearly one-fourth of all humanity, and it’s not alone. The big trend of 2017 is the nationalization of the internet, with Europeans finding they can make the internet forget them, and even Americans seeking limits on violent rhetoric.
This is now finding its way into cryptocurrency markets.
Size Matters
Another important point is that the size of the market matters when you’re looking to make an investment.
Of all the cryptocurrencies, bitcoin has done better during the crash than others. Bitcoin prices are down 30%, but those of Ethereum have been cut in half. This is also true for coins like Ripple that were supposedly based on other factors, like international trade.
The bigger a market, the more liquid it is, and the more resistant it is to shocks. Bitcoin’s share of the cryptocurrency market was down to 40% a few months ago. It’s now back up to 50%,
Cryptocurrency boosters are trying to buoy the market by writing about how celebrities are bitcoin curious or professional traders are giving bitcoin a second look, but if you read closely the traders aren’t buying. They are waiting to see where the price stabilizes.
You should, too.
https://investorplace.com/2017/09/this-is-why-traders-have-stopped-buying-bitcoin/#.Wb1KT7KGOiN
