Thought I'd do a little copy past from one of my earlier posts given we're hitting some recent highs and seeing a significant rally in 2019. As I said this draws on a previous post I made on the bitcoin 500MA post here.
What moves the price of Bitcoin?
It is a truly truly truly inelastic asset. When gold goes up, people start producing more. When oil tanks, people don't pump as much. Even housing and infrastructure will be able to scale up or down depending on demand. Crypto however has a fixed amount being created which is mathematically restrained and can't be altered. When demand shifts people will gobble up the inelastic asset and supply demand curves will react accordingly. UPDATE: still think this is very relevant.
Liquidity is thin. Honestly - don't just take my word for it - have a look at the global volumes. All it takes is a $100,000 dollars odd and you can move the price of some of these assets a hundred dollars or so. Thin liquidity means that prices can move very quickly either way. At the moment we are in a downward trend, but as soon as that turns and people jump on the bandwagon again ... well, we've seen it happen before. UPDATE: Not as much as prices are higher so the same amount of USD value won't hit the exchanges in the same way, liquidity is better in OTC venues which is where the majority of Crypto switches hands, exchanges have better order types and order routing these days as well. Lots of 'risk off' groups as well - algo V algo buying and selling giving false liquidity. Still, look at the book. Thin-o-saurus-rex.
Hold. Become rich. Simple. EVERYONE knows about a mate, or a mate of a mate, or at the very least an article somewhere talking about buying crypto, holding onto it, and becoming rich. That's the way things are. It's happened over the last ten years and now the world has it in it's psyche that it's fact. Those who hold wont sell, whilst those on the sidelines are just waiting to get in. UPDATE: still the case, if not even more so.
Bitcoin halving event in 2020. Over the last two halving events BTC prices have doubled. Again, this is all we have to go on, but people think that it's happened in the past so it's sure to happen in the future. Wait for it ... we'll see parabolic once more. UPDATE: was early on this one - but it'll come and i think we're heading for 50k BTC.
ETF city. People want it. It's coming. It's just a matter of time. UPDATE: this has happened to some extent in certain markets. BTC values soared. ETH is looking for the same - futures and ETFs are argubly still on the cards because exchanges and ETF providers are all private or listed these days and need to either keep an eye on share holder value and capital growth. They can either - a) increase prices (tough), b) increase flow (tough), c) add new asset types to create new revenue streams (easiest of the three).
What are your thoughts? Lets get a thread going...