Bitcoin's sudden price drop
Yesterday evening demonstrated a perfect example of crypto price volatility. After two weeks of big gains and Bitcoin seeming to be breaking new all-time highs every day this week, there was a flash price crash yesterday evening.
As the price crept over $1,600, it then crashed back down to $1,478, which is a fall of over 7.5%. To put this in perspective, when United Airlines recently dragged a passenger off a plane, knocking out two of his teeth and the CEO blamed the passenger, the share price fell only 1.1%, yet the business has a similar market cap to Bitcoin.
I have identified two possible reasons for the price drop:
1. $1,600 is a marker within the charts for profit taking for traders.
2. There was an announcement that Celery, a New York based trading exchange was stopping withdrawals and deposits, and as such is likely going bust.
It could be neither but my best guess it is a mixture of the two with Celery being a catalyst. The reality is that Celery isn't a large player but the market is already nervous due to issues with Bitfinex.
The drop triggered a wider selloff across other coins and personally, the 9% portfolio growth I had achieved through what was a positive day halved within 30 minutes.
Things like this used to cause me to panic and make rash decisions, but I have come to accept the volatility of crypto as the market is still maturing. The number of institutional investors v retail investors is very different. Thus the level of rational v emotional decision making is also very different. You can often see this on Reddit with new investors panicking and thinking of selling when the market turns.
My view is always the same. Follow your strategy. My strategy is always that I believe in the tech, I believe it will change the Internet, I, therefore, believe the market cap will grow. When a flash crash happens, and there is no other wider, concerning news, then I just ignore it.
My experience is that for every dip there has always been a positive retrace and we are a long way from achieving a stable market cap. Remember people invest in the future. On April 10th, Tesla's market cap hit $51bn, just slightly ahead of General Motors, Tesla produced 76k vehicles, making a loss on revenues of $7bn where as GM made a profit of $9.4bn on revenue of $166bn. Why? Where can GM go? Tesla is changing the world.
You invest in potential, and you sell when it has been achieved.
If you take a look at the chart, the Bitcoin dip has almost been entirely filled, and I will expect a new all-time high today. Though being a Friday, some traders may take profits as we head into the weekend.
If anyone is thinking of getting involved and needs help, then please give me a shout. Please only invest anything you can afford to lose, the markets are crazy at the moment, and this always means the risk of a bubble.