There is a deep correction on the cryptocurrency market, which has already reached 70% of the December highs last year. I will try to understand what is the reason for such a drop. The technological development of bitcoin and the change in its price corresponds to Gartner HYIP cycle.
https://image.ibb.co/ibhLSy/7a970a.pngThe concept is as follows: each technological innovation in the process of reaching maturity goes through several stages, each of which is characterized by a different degree of interest from society and specialists:
technological trigger — the emergence of innovation, the first publication of new technology;
peak of excessive expectations - people expect from new technology revolutionary properties, technology, due to the novelty, becomes popular and the subject of broad discussion in the community;
getting rid of illusions — reveals the shortcomings of technology, and the loss of novelty does not contribute to enthusiastic publications, the community is disappointed with the new technology;
overcoming of shortcomings - the main shortcomings are eliminated, the interest in technology slowly returns, the technology begins to be implemented in commercial projects;
plateau of productivity — onset of maturity of the technology, the community perceives technology as a given, recognizing its advantages and limitations.
Since its launch in 2010, bitcoin has experienced four major HYIP cycles. Looking back, you can accurately determine the price ranges of each of the previous cycles. It is also possible to qualitatively identify the groups of investors that have been associated with each iteration of previous cycles.
$0-30 (2009-July 2011): the first cycle of HYIP was dominated by cryptographers, computer scientists and cipher banks, who managed to understand the importance of the innovative invention of Satoshi Nakamoto. They established that the bitcoin Protocol has no technical drawbacks.
$30-250 (July 2011-April 2013): the second cycle attracted the attention of both new technology enthusiasts and ideologically motivated investors blinded by the potential of free cash flow.
$250-1100 (April 2013-December 2013): during the third cycle of the HYIP, the market included early private and institutional investors, who were not afraid of complex and risky liquidity channels with which to buy bitcoins.
It is worth noting that the growth of bitcoin value during the above cycles correlates with its liquidity and ease of acquisition for investors. During the first cycle, there were no exchanges. Bitcoins could only be mined or obtained from another miner. During the second cycle, the first exchanges appeared, but their use was complicated by many technical factors. Even in the third cycle of HYIP for a large number of investors remained significant obstacles.
Only by the beginning of the fourth cycle of HYIP in 2016, private investors became relatively easy to buy bitcoins and ensure the safety of funds.
$1100 — 20000 (2014 — December 2018): market key players at this stage represented the "early majority" of private and institutional investors.
The final cycle of the HYIP will begin at the moment when the states begin to accumulate bitcoins in their own reserves of foreign currency. The market capitalization of bitcoin is still too small to be considered a suitable asset for this purpose. The emergence of the first state to officially add bitcoin to its own reserves is likely to encourage other countries to do the same. Thus, in accordance with this model, bitcoin is waiting for a few more cycles of HYIP with rapid ups and downs. Now we are close to the bottom of the current correction. The result will be price stabilization, reduced volatility and legislative regulation of cryptocurrencies, which is at odds with their original idea, but still inevitable. For such an outcome, the capitalization of the cryptocurrency market should be comparable to the capitalization of the gold market ($8.7 trillion).
Main conclusions. First, bitcoin will retain its leadership and no altcoins will be able to move it from the first place.
Secondly, the high volatility of the bitcoin price will remain. The reasons are obvious price manipulation by market whales and the widespread introduction of cryptocurrency market regulation.
Third, given the inevitable rise in the price of bitcoin, you never need to sell it at a loss. Even if you bought bitcoin at $ 20,000 for a coin and it falls to $ 5,000 (that is, with a loss of 75%) - still do not sell it.
Fourth, to make it easier to follow the previous conclusion, never buy bitcoin with borrowed money. Do not take loans from banks to buy bitcoin. Finally, always remember the words of the legendary investor Warren Buffett: "Successful investment requires time, discipline and patience. No matter how talented or diligent you are, some things just take time: a baby won't be born in one month, even if nine women get pregnant at once."
