Bitcoin market structure

[hatshepsut93]

Bitcoin has gone parabolic and now a lot of people this that it will crash, but I think the answer to the question whether it will actually crash lies in the structure of Bitcoin's market. If a lot of coins are owned by speculators or newcomers, there's a good possibility that Bitcoin will face some panic selling kind of crash, because those two types of traders are very likely to trade emotionally. Another type of holders are educated investors - they have spent their time researching the asset and invested because they clearly see its real potential - this kind of people won't sold without a really good reason, they are hodlers. So, the question is, which group has the most coins, and to which group belong whales and who caused the recent parabolic rally?

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[Beerwizzard]

Bitcoin marker was always very sensitive to any significant crypto event. The last time exchanges had troubles its price dropped down by 2k.
I think it is a bit wrong to make a line between speculators and investors and call one of them more experienced or smart. It is two different ways of making profit. You may sell yor coins now and maybe get more of them in an hour. It doesn't mean that you are doing a panic selling.

[pooya87]

interesting but i think it doesn't matter much at this point. whether they are educated investors or they are weak hands, the bitcoin price has gone up too much too fast and many are expecting a correction, a big one actually. a normal correction of about 25% happened recently and seemingly that was it. price is staying up now above $15k and doesn't want to go below it.

but if and when a correction happens, everyone sells. the "educated investors" sell faster than the "weak hands", that is the only difference in my opinion. unless they don't want to trade, because exchanges are not trusted,...

[davis196]

Bitcoin has gone parabolic and now a lot of people this that it will crash, but I think the answer to the question whether it will actually crash lies in the structure of Bitcoin's market. If a lot of coins are owned by speculators or newcomers, there's a good possibility that Bitcoin will face some panic selling kind of crash, because those two types of traders are very likely to trade emotionally. Another type of holders are educated investors - they have spent their time researching the asset and invested because they clearly see its real potential - this kind of people won't sold without a really good reason, they are hodlers. So, the question is, which group has the most coins, and to which group belong whales and who caused the recent parabolic rally?

40% of the btc are holded by 1000 big whales and i think that they won`t let a big crash to happen.They aren`t that stupid.There are millions of small btc HODLers that are aware about panic selling and all the damage it could cause.The bitcoin price is quite stable recently.I was expecting a price correction or a small price crash,but it didn`t happen.This prooves that bitcoin is stronger than before.

[piloder]

Speculators : 50% (they have only bought with high hopes)

Newcomers : 30% (they will be the one who will panic during small correction)

Short term investors : 10% (they will buy sell bitcoin daily for marginal profit)

Long term holders : 10% (they will keep buying bitcoin whenever they have cash in hand)

[Toxic2040]

Speculators : 50% (they have only bought with high hopes)

Newcomers : 30% (they will be the one who will panic during small correction)

Short term investors : 10% (they will buy sell bitcoin daily for marginal profit)

Long term hodler : 10% (they will keep buying bitcoin whenever they have cash in hand)

correction made in bold.   

[cryptodontus]

Bitcoin is paradoxical. Crashes don't tend to last long. A gradual bear market . . . that could take us down quite a bit. But any sudden spikes tend to provoke a near equal reaction.

It's like bitcoin is allergic to being stable. Stable bitcoin = slow death. Volatile bitcoin = easy money.

[TheQuin]

So, the question is, which group has the most coins, and to which group belong whales and who caused the recent parabolic rally?

The really important driver right now is new people and therefore new money coming in. The importance of the whales has always been overexaggerated and becomes less important every day.

You may have heard of Metcalf's Law:

Metcalfe's law states that the value of a telecommunications network is proportional to the square of the number of connected users of the system (n^2).

It has been used by many experts to explain the increasing value of Bitcoin.

A couple of interesting articles about it.

http://uk.businessinsider.com/bitcoin-price-movement-explained-by-one-equation-fundstrat-tom-lee-metcalf-law-network-effect-2017-10

If you build a very simple model valuing bitcoin as the square function number of users times the average transaction value, 94% of the bitcoin movement over the past four years is explained by that equation.

https://www.coindesk.com/bitcoin-investing-10000-year-view/
This one has a lot of relevant facts in it but what I found the most compelling was the projection for the increase in adoption going forward.

Bitcoin users double every 12 months in our current phase of the adoption S-curve. This was calculated with my work tracking Google Trends data on the assumption that users search BTC/USD price.

If this trend continues, we are nine years away from half the world using bitcoin.

[sindikat]

Bitcoin is paradoxical. Crashes don't tend to last long. A gradual bear market . . . that could take us down quite a bit. But any sudden spikes tend to provoke a near equal reaction.

It's like bitcoin is allergic to being stable. Stable bitcoin = slow death. Volatile bitcoin = easy money.

I don't agree with you. Stable why bitcoin's slow death? Do you think that all users of bitcoin speculators? The price of all Fiat in the world is constantly going down. Inflation is the mechanism by which the government makes people pay for their mistakes and corruption. Therefore bitcoin will attract people even with relative stability.

[alyssa85]

Bitcoin has gone parabolic and now a lot of people this that it will crash, but I think the answer to the question whether it will actually crash lies in the structure of Bitcoin's market. If a lot of coins are owned by speculators or newcomers, there's a good possibility that Bitcoin will face some panic selling kind of crash, because those two types of traders are very likely to trade emotionally. Another type of holders are educated investors - they have spent their time researching the asset and invested because they clearly see its real potential - this kind of people won't sold without a really good reason, they are hodlers. So, the question is, which group has the most coins, and to which group belong whales and who caused the recent parabolic rally?

One way to tell whether it is old hands selling, or noobs, is to look at coindays destroyed. (The more coin days destroyed, the more old coins are being sold).

If you look at the following chart

https://en.bitcoin.it/wiki/Bitcoin_Days_Destroyed#Graph_of_Percentage_of_Bitcoin_Days_Destroyed

It shoots up at the end, so old hands are definitely sending their coins to the exchanges to sell.

[TheQuin]

It shoots up at the end, so old hands are definitely sending their coins to the exchanges to sell.

That's an interesting observation, but I think in part that is also due to the forks. There is no way to tell how many old hands were simply moving their coins to split off the forked coins as opposed to sending them to an exchange to sell. I'm sure it is a mixture of both but we cannot know how much each is responsible for the increase in coin days destroyed.

[hatshepsut93]

interesting but i think it doesn't matter much at this point. whether they are educated investors or they are weak hands, the bitcoin price has gone up too much too fast and many are expecting a correction, a big one actually. a normal correction of about 25% happened recently and seemingly that was it. price is staying up now above $15k and doesn't want to go below it.

but if and when a correction happens, everyone sells. the "educated investors" sell faster than the "weak hands", that is the only difference in my opinion. unless they don't want to trade, because exchanges are not trusted,...

I think smart investors are more likely to hodl regardless of crash, because they understand that selling can be very risky, if Bitcoin dropped just some 10-15%, than it doesn't mean that the supposed bubble started popping, if it dropped 30-40% than maybe it's just a flash crash and it will bounce back quickly (happened recently with China ban), if it's even lower than it's probably the bottom, so there's no point in selling.

One way to tell whether it is old hands selling, or noobs, is to look at coindays destroyed. (The more coin days destroyed, the more old coins are being sold).

If you look at the following chart

https://en.bitcoin.it/wiki/Bitcoin_Days_Destroyed#Graph_of_Percentage_of_Bitcoin_Days_Destroyed

It shoots up at the end, so old hands are definitely sending their coins to the exchanges to sell.

Very interesting, but that chart says that it's for June 17th 2011, is there any online explorer that supports this data analysis up to this date?

[joinfree]

They are probably the only thing that is always changing the price, and the newcomers are probably more than a thirty percent...

Speculators : 50% (they have only bought with high hopes)
Newcomers : 30% (they will be the one who will panic during small correction)

You should know that the market is full of FOMO, that is why there are thousands of newbies in here, and newbies being introduced in cryptos too.

I dont have anything about them, it is fine, they are probably the only reason of why the price has been increasing a lot during the last few months/weeks.

And the speculators.. well, maybe you are talking about the big whales.

[vit05]

I think the best answer to this is know how much of the whole market is sit on wallet from exchanges.
Because panic sell is easier when you just need to log in and sell. But if you need at least one day to move your coins, pay a Big fee and them sell, you could just think better and wait for a little more.

[Reid]

Bitcoin has gone parabolic and now a lot of people this that it will crash, but I think the answer to the question whether it will actually crash lies in the structure of Bitcoin's market. If a lot of coins are owned by speculators or newcomers, there's a good possibility that Bitcoin will face some panic selling kind of crash, because those two types of traders are very likely to trade emotionally. Another type of holders are educated investors - they have spent their time researching the asset and invested because they clearly see its real potential - this kind of people won't sold without a really good reason, they are hodlers. So, the question is, which group has the most coins, and to which group belong whales and who caused the recent parabolic rally?

Aint we already know the answer to that? Right?
If this holders have already panicked then it would have not come to this.
The price is already the proof.
Buyers having a hard time to get one just so they could join the trend.
That is why the demands are still incoming.
New question is will the new investors have the same patience as it is with the holders.

[squatter]

Bitcoin has gone parabolic and now a lot of people this that it will crash, but I think the answer to the question whether it will actually crash lies in the structure of Bitcoin's market. If a lot of coins are owned by speculators or newcomers, there's a good possibility that Bitcoin will face some panic selling kind of crash, because those two types of traders are very likely to trade emotionally.

Downside volatility is inevitable in a parabolic rally. Price moves far and fast on low liquidity, and once the music stops: shorts have already been squeezed/margin called, short term speculation dries up, and long term investors are waiting far, far below near the long term trends.

In particular, the mom and pop variety of investor that is entering the market now is prone to panic. The crash will come eventually, although I doubt we'll see sub-$3000 coins again. If we do, it won't be for long. I'm glad I haven't sold any coins, but I also have some fiat money waiting to enter the market for the long term. And it won't be up here above $17,000.