Why we need price crashes and panic selloffs

[GreatBug]

For me those both situations only make market better for investors to just catch some coins at good prices for trade or just hodl next months.

[Canis Majoris]

I dont really think i can cope with this, if an economic crashes and panic selloffs happened then that means the reputation of the investment instrument also at risk. Why would anyone want to invest in an instrument that crashed as soon as it surge, it didn't take a month to crash bitcoin since it highest peak. Also i dont think any wannabe traders sell of their coins when the price is low because their volume didn't even mean anything in the market.

We're talking about huge amount of money that could drive a market into a trend, its not about whether the prices will grow because of people buying or selling but how the price will grow "IF" bitcoin still has a meaning and future in the community.People didn't invest in the price, they invest in a value of something. If something has value much and now the price is undervalue then it would be a good decision to invest but a decrease in price didn't have the same meaning as a price crash.

You may not like it but this is how matters stand nowadays anyway. Besides, i don't think we can actually speak about "reputation" here. Price crashes don't hurt it because there's nothing to hurt. Rather, they reveal Bitcoin's true nature, that of a purely speculative asset. In other words, whatever reputation Bitcoin may have built, metaphorically speaking, it was all false and deceit. One shouldn't expect too much from such an asset apart from extreme volatility and rampant speculation. The leopard can't change its spots.

[STT]

Holy moly thats a really negative view you have there.   Bitcoin has been established a fair while now and its done its job every day of operation.   Where exactly do you see the problem with its operation that it deserves such a poor view.   The failure that occurs in price is not part of the protocol itself, this is part of exchange transactions and its mostly down to the people themselves how fast price rises or falls.

The biggest negative for Bitcoin is the transaction fees and speed/ease of use perhaps.   That is being addressed, there was no real deception here.   There have been scam coins at various times so its not impossible but all the faults you list come with people buying and selling anything.    This is not a socialist enterprise thats for sure

[Fretcy]

In all the financial markets there is a common factor that is price increase and price crash there is no asset with a constant price or steady price in any financial markets. The price of all assets depends on the economic and political factors such as demand and supply as the word of crypto's reach far and wide the price increases and when there is any news on the regulation of bitcoins in some countries lead to ban which causes slight dip in the market and ultimately causes a crash in the market as the crypto user's tend to sell the cryptos when they hear any negative news on the cryptos due to panic with the fear that the prices will not recover. Only when the prices crash and people sell others buy them and invest and the network becomes busy.

[metenjean]

I dont really think i can cope with this, if an economic crashes and panic selloffs happened then that means the reputation of the investment instrument also at risk. Why would anyone want to invest in an instrument that crashed as soon as it surge, it didn't take a month to crash bitcoin since it highest peak. Also i dont think any wannabe traders sell of their coins when the price is low because their volume didn't even mean anything in the market.

We're talking about huge amount of money that could drive a market into a trend, its not about whether the prices will grow because of people buying or selling but how the price will grow "IF" bitcoin still has a meaning and future in the community.People didn't invest in the price, they invest in a value of something. If something has value much and now the price is undervalue then it would be a good decision to invest but a decrease in price didn't have the same meaning as a price crash.

You may not like it but this is how matters stand nowadays anyway. Besides, i don't think we can actually speak about "reputation" here. Price crashes don't hurt it because there's nothing to hurt. Rather, they reveal Bitcoin's true nature, that of a purely speculative asset. In other words, whatever reputation Bitcoin may have built, metaphorically speaking, it was all false and deceit. One shouldn't expect too much from such an asset apart from extreme volatility and rampant speculation. The leopard can't change its spots.

Its true by nature, and thats why i said that i can't agree with this statement that we need price to crash so that people can buy at lower price and hoping bitcoin will rise once again because as we know that bitcoin or any investment assets are at stakes of reputation if they crash. Once that happened there is no turning back, it already happened once last january and i would say that its just a minor crash so basically there are still lots of faith left in bitcoin. However if there would be another case of price fallout, then there is no doubt that bitcoin won't survive long in term of investment instrument.

[dado7]

Well, opinions may vary but as far as my opinion is concerned, I think that a price fall as low as 30% of December highs pretty much counts as a crash. And we are still half the maximum price of $20k. We haven't seen a fall that massive since the Gox fiasco, so it is not something which can be called "normal" whatever yardstick you use. Anyway, right now it is definitely not about "market rising in steps".

We can agree to disagree Look at the Bitcoin, it had 4 of "crashes" like that so far. It even has a predictable trend through the year now. Check it out. But I do agree opinions may vary in this case.

What Bitcoin needs is for the weaker hands (Poker expression is deliberate) to leave the market thus leaving only the strong holders - albeit corrections this actually stabilizes the market. You can consider the market mature only when it stabilizes and that would mean that generally only strong holders are left and the 1-5% percent of weak holders and daily speculators cannot hurt/destabilize the market. The current situation when you have the market reacting to almost every news out there shows us that Bitcoin is far from maturity and that is the ideal situation for experienced investors to take opportunities and take all the money from the fish (Poker expression is deliberate yet again).

This is the interesting part of your post. Your main omission is that weaker and stronger hands are a relative notion. I remember I have already mentioned it somewhere and maybe even in this very thread. In a nutshell, there will always be strong and weak hands, there cannot be only strong hands in the market. It's kind of a given. While weak hands leave, less stronger hands remain, but it takes even higher volatility to shake them out. In other words, it works in the opposite direction toward more volatility. Obviously, this is applicable only to speculative markets, but Bitcoin undoubtedly belongs to this category.

Yes, there cannot, but the ratio will change. The market never moves towards more volatility, except if it is in the adolescent phase or reaching its end.
What you mention "it takes even higher volatility to shake them out" I take as a very valuable mention. You are completely right, as the market reaches the stability phase, what was in is mostly left in because the volatility should go in opposite ways in order to shake things out.

[Wilsonong222]

This is just a thought that occurred to me while reading some posts around here, feel free to discuss it or even criticize it. So if we want Bitcoin to rise in the future, we need it to crash first and many wannabe traders to sell off their coins at a loss when the price is low. If people don't close their positions in panic now and just wait out bad times, they simply won't let prices grow later because they will get out whenever the price rises just enough for them. But if they fix their losses, they will no longer have bitcoins to record minor profits and thus drag the price down in the future. As a consequence, the price can surge higher without a lot of selling pressure at bigger figures when the hype and buying frenzy begins anew.

The bottom line is that it is kinda required for Bitcoin to crash occasionally for the prices to rise higher eventually.

This is due to the law of economics of supply and demand. You cannot dictate people not to panic selloff or hold their account for as long as we want. This is because the law of supply and demand says that if there are many people see the price of BTC become overprice many will do selling for profit taking. After huge profit taking it will hit the lowest price where in many people think that the price of BTC became too cheap then these will be the time again of buying. This cycle of buying and selling will continue as long as there is supply and demand for crypto. The same logic you have interpreted but different approach only.

[Canis Majoris]

I think you do have something there, I can see the point and it feels somewhat true because we
see and experience Bitcoin's eccentric rise and sudden rapid fall more occasionally now. As long
as bitcoin stays decentralized it will create and trigger more panic selloffs and at some point crashes
especially with altcoins whom in recent times developed an uncanny link with bitcoins fluctuating patterns.
The crashes and panic selling of investors does have a bit of constituency with bitcoins increasing prices,
it's price' recovers more better as an aftermath to the whole ordeal. Seems like a cycle to me.

I'd sooner say that Bitcoin's speculative nature contributes to its volatility rather than its decentralization or lack thereof. If we had goods bought and sold for Bitcoin in appreciable amounts, that would definitely help stabilize prices and diminish volatility. On the other hand, though, I'm more inclined to think that proper decentralization actually adds more toward price stability than volatility because at uniform distribution (an ideal situation, or best case scenario), there would be no points of shameless price manipulation via financial muscle.

[BartS]

I'm more interested in the causes of these failures. When the stock market falls, there are reasons for this. It is possible to analyze this phenomenon and to make some predictions. But I can't see the reason for the bitcoin price drop. It bothers me. Of course I also do not like a long period of price decline, but this is not the most important for me.

There are a number of reasons of why the price went down, the most important for the recent decrease in price is that someone began to sell a huge amount of bitcoins this scared traders and investors and this made the demand to go lower and when you have a big supply and lower demand the price will go down, however bitcoin is also susceptible to things like FUD and political manipulation but still with each passing year the effect of those two things goes down.

[Canis Majoris]

Dude I’m always in support of panic sell offs, they are very important. This is a market that we are into and not play thing. There will always be buying and selling for the market to progress, and some people will have lose for others who are more smart to earn from it. So I never advise people not to sell their Bitcoin, all I say is that everyone should sell whenever they think is right. That’s it, nothing else.

Sometimes it is needed for the price to decline and we get a chance to be able to buy when price is cheap but the prolonged panic sellofs are not a good thing for the market. I'm afraid the panic will spread to many users and make mass panic and chaos happen. hopefully the price crashes only lasted briefly, not happen for a long time.

Well, I can't actually say there can be prolonged or extended panic sell-offs because panic, as the word itself suggests, is an action or behavior which happens on the spur of the moment, without planning in advance. Otherwise, how can it be panic, right? Other that that, I generally agree that long price declines is not something which traders should be happy about, unless we are talking about aggressive shorters, of course. But then, they could be blamed, at least partially, for forcing down the market price of Bitcoin or whatever asset traded. Over time, panic sell-off become exhausted on their own since people get somewhat used to low prices and downward volatility.

[crocozino]

I'm more interested in the causes of these failures. When the stock market falls, there are reasons for this. It is possible to analyze this phenomenon and to make some predictions. But I can't see the reason for the bitcoin price drop. It bothers me. Of course I also do not like a long period of price decline, but this is not the most important for me.

There are a number of reasons of why the price went down, the most important for the recent decrease in price is that someone began to sell a huge amount of bitcoins this scared traders and investors and this made the demand to go lower and when you have a big supply and lower demand the price will go down, however bitcoin is also susceptible to things like FUD and political manipulation but still with each passing year the effect of those two things goes down.

yeah, but in fact that sell out started if February but media  pointed out for this only in March why?
I will agree that bitcoins is highly sensitive for all kind of FUD and news.. I'd say extremely sensitive..
and it is really not going to work for TA models)) cause according to TA is should rise to 15K, but instead it is going to 7k))

[TheUltraElite]

For me those both situations only make market better for investors to just catch some coins at good prices for trade or just hodl next months.

True but also consider the fact that bitcoin is main source of money for buying an altcoin. If bitcoin price drops then the value of the altcoin drops too. Those who want to buy that altcoin need to be careful at what price they are buying otherwise they will not be able catch when they drop.

It can lead to a price reduction that is not suspected tampa that we realize must be careful in selling it by waiting for prices to rise ,,, can be seen every hour if you want to get a big profit never follow a friend to sell it.

Unless you do a very in depth minute-to-minute analysis its not possible to make cash for every small pump and dump that may happen. Of course if you talk about personal peer-to-peer trading then its a different issue.

[Canis Majoris]

Crash and panic is not something you want in a normal market.   Think of a market as a crowd of people talking and perhaps exchanging ideas and prices obviously.       These two elements of extreme price movement and emotion over reason mean these ideas are ignored and little discussion and price discovery takes place.

If nothing else a price that moves too rapidly will not be open fully to the range of buyers and sellers around the globe and as Bitcoin is part of a large market that is always partly sleeping we do need some development time for free exchange and benefit to occur for all.
Orderly market is something you will find the Federal reserve always refers, they dont essentially care about the dollar worth but to lose a market completely even for a day or so is not profitable long term as it disturbs holders and investors who are not trading constantly

But what is a normal market to you? Apart from the dotcom bubble some 20 years ago, there was no market as speculative as that of Bitcoin and other cryptocurrencies in the modern era, at least not what I remember of. Commodities are backed up by, well, commodities, currencies are supported by their governments, but the only support that crypto enjoys is faith in its future growth and expansion. This is a perfect speculative environment and it is "normal" for the prices to behave chaotically in this kind of environment. In a nutshell, you can't order Bitcoin to be more stable or somewhat less volatile.

[hisuka]

For me those both situations only make market better for investors to just catch some coins at good prices for trade or just hodl next months.

This price of over corrections should not occourred in our system not to panic. Instead, it serves us to be strong and patience in this market. Yes the chance to catch the prices at a very low rate is good for investors.

[STT]

Commodities are backed up by, well, commodities, currencies are supported by their governments, but the only support that crypto enjoys is faith in its future growth and expansion.

Governments dont support their currencies very well, most western governments are running a budget deficit and filling the void by printing more money.   So they are debasing the countrys exchangeable currency by gifting themselves new money.

I dont really call that support, its more like undermining and the value currency has comes from the people who trade, earn, produce and create value in society with the utility they provide via work, etc.

Why then cant those people be using crypto currency which is at least a known quantity with a clear equation behind its value.    There is no maximum to the amount of paper money produced, ask the people of Venezuela how this ends

[superjeyy]

You got that right, OP. Despite the frustration a decline can give, we can only reach a higher and better rate if we experience these occasional crashes. I think that it somehow maintains a balance that is needed. Despite the factors being barely unknown to the reason of its downfall, a crash should also be considered as a good thing for it allows opportunity for new investors to grab. As more people buy when the market is red and as the supply decreases, this will contribute to the converting of its rate from low to high. A crash is what we need to somehow refresh the rate and bring it into a higher range.

[GalaxyWorld]

I always think about this issue. This is the way of big investors to create fake news to deliberately push the price down. And when BTC goes down the lowest, they will buy a large amount to push up the price of BTC. And the waves of the market will give them a high profit.

[ginika]

panic selling is usually caused by an event that is not expected by the investor. it sparked investor fears and led to a massive sell-off, followed by frightened retailers and selling stocks that resulted in sharp drop prices accompanied by enormous volumes. market crashes are usually caused by panic selling action. I think this is the panic that makes the market stronger because of new opportunities after the panic has started to give special coins to wake up.

[rocketbits]

It can lead to a price reduction that is not suspected tampa that we realize must be careful in selling it by waiting for prices to rise ,,, can be seen every hour if you want to get a big profit never follow a friend to sell it.

We need to analyses market ourselves in detail so that we can take right decisions in the nick of time. Bindley following others in financial regards is not sagacious at all. Your financial status and needs are very different from your friend or relatives. You need to come up with your strategies and ideas. For bitcoin, obviously selling off in dips is going to put you in great loss if you had bought it at high rates.

[ArnoldChippy]

panic selling is usually caused by an event that is not expected by the investor. it sparked investor fears and led to a massive sell-off, followed by frightened retailers and selling stocks that resulted in sharp drop prices accompanied by enormous volumes. market crashes are usually caused by panic selling action. I think this is the panic that makes the market stronger because of new opportunities after the panic has started to give special coins to wake up.

Investors never like panic selling, even those who are waiting for the price decrease, in fact investors mostly wait for the time when the market take a correction and the price comes down a little but we always hope that the market will recover its position very soon, when the market crash then investors feel reluctant to invest money there.