What’s Holding Crypto Back? Finance And Crypto Expert Reveals All

finSafe
finSafe
Sep 6, 2018 · 5 min read

In recent years, the price of cryptocurrency has surged dramatically and has propelled thousands of people on the path to investment. But often when it seems safe and reliable to pour money into a bull market, something unpredictable comes up and ruins any plans to make a profit.

That’s what always happens in any maturing industry, where there’s relatively small capitalization, causing a lack of liquidity and high volatility. December 2017 has shown that crypto can be very profitable, as Bitcoin rose to the incredibly high $20,000 mark, before plunging back to $6000, where it has stayed for the last half a year. Bitcoin was no exception to the “laws of the Wild West”. It caused many traditional traders to avoid entering the crypto market because totally unpredictable price movement can cause huge losses. It also made the idea of day trading weak, so professionals decided to leave it for a certain period of time. So why did cryptocurrency prices go down and who’s responsible for it?

Éminence grise

In every story there’s someone powerful who’s playing behind the scenes, bending things to their will. In this case it is the whales. No, not the majestic sea creatures that roam the ocean’s depths, but those big-time crypto investors out to make a quick buck. What’s their goal? — they make as much profit as they can, playing smart on the market. The results of their actions are clear.

Go back to December 31st, 2016, when the price of Bitcoin was $963. Six months later, the price had tripled, reaching a new height of $2843, then in another 6 months, on December 17th it reached its peak. For the asset that cost $0.003 in 2010, this was a 6,585,999,000% increase in its original value — that seems impossible. The market has indeed been manipulated for the last couple of years, and the pattern is the same. So how did it happen and why were whales to blame? In order to understand how it works, let’s break it down into two parts:

Pump the market

The main goal of a pump is to attract people to particular markets by showing them the great returns that can be earned. In turn this generates interest and demand, with investors snapping up the asset. The conditions are perfect, the price grows continuously for a couple of months in a row, and the investor gets the feeling that they’re in the money. That’s what we saw from December 2016 to the end of December 2017.

When the Bitcoin price surged, the media started excitedly speaking about cryptocurrencies and their profitable potential. At the same time, the hype was getting ICOs and different cryptocurrencies lots of attention. People were eager to invest, and the money flowed in. By October 2017, Cryptocurrency exchanges couldn’t handle the sheer volume of registration requests and verification started taking months.

News was often manipulated showing only the positive prospective of investments. People invested hundreds of millions of dollars. In order to provoke growth, whales were doing a series of small pumps, for example raising the price by $500 and waiting for people to buy-in and provoke further growth. Seems a smart scheme, but how did they make profit off this scenario?

Dump the market.

When the market reached its psychological mark of roughly $20,000 for one Bitcoin and capitalization had skyrocketed from $15.5 billion to $330.9 billion, they started dumping the market and selling off their crypto which was bought at the lowest rates in 2016–2017.

This created a series of huge price drops. Every huge price drop was followed fabricated news in order to hide cryptocurrency selling, here’s how it unfolded:

CME started Bitcoin Futures trading on December 17th, showering the media with positive news that institutional investors will start funding the cryptocurrency market and the price will rise again quickly. Consequently, more people bought crypto, but in the next few days the price dipped to $13,000.

January 30, 2018, in the next couple of days price dips to $9,300

07:00 AM: SEC halts one of the largest “ICOs” ever

10:00 AM: U.S. Regulators Subpoena Bitfinex, Tether

11:00 AM: Facebook to ban Bitcoin and Crypto

02:00 PM: CFA “Crypto are threat to National Security”

10:00 PM: Bank pulls support for Cryptopia

March 7, 2018, and the price has fallen again in the last couple of days.

07:00 AM: Ex-CFTC Chief: Bitcoin needs Govt oversight

10:00 AM: Japan to punish several crypto exchanges

10:00 AM: SEC Statement on Potentially Unlawful Crypto Assets

11:00 AM “Binance Hack”

09:00 PM Fed Crackdown sends bitcoin tumbling

10:00 PM Japan’s FSA issues punishment to crypto exchanges

10:00 PM CFTC’s Giancarlo: US & Foreign Regulators Teaming up on Crypto

11:00 PM Tokyo’s Bitcoin Whale Sold $400M, and this is just the start

Note, that the story about Mt.Gox is just not enough to provoke such a big negative price movement. From January 2018, Mt.Gox has withdrawn 78,500 BTC, which is only 0,45% of the whole Bitcoin circulating supply. Moreover, Mt.Gox was selling BTC slowly, trying to avoid unnecessary price fluctuations that could affect the selling price in a negative way.

Where Do We Go From Here?

After such big fluctuations on the market, some investors decided to sell their cryptocurrency and leave, but most of them decided to hold onto it until the price recovers, planning to leave the market once they make their money back. That’s the second part of the so-called “conflict”; investors aren’t pouring in any new money. The market is stagnating because whales can’t cross the $6,000 line — that’s the mining price of one Bitcoin. If they cross this line it means the whole industry will die and no one will be able to make any profit.

Wall Street guys simply can’t jump in, because there are no professional trading tools that they can use to work in the cryptocurrency market. Luckily, the FinSafe start-up plans to unite both Wall Street and the crypto-market in Q4 of 2019, providing a top-notch software solution- a first for the industry. Soon huge amounts of Wall Street money will be invested and the market will rise again.

Although the market seems volatile and “deadly”, the price should soon go up, and we’ll see the same scenario that we saw in 2013, 2015 and 2017. There’s no need to worry because, in the end, the cryptocurrency industry is the driving force for next-gen Finance. As the old rule says, however, expect the best, prepare for the worst.

The first solution to combine the power of Wall Street and the promise of crypto.

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