Market crash - what to do


#1

As I have invested in Mid 2017 in the Crypto World, the current market crash hurts a lot. I wonder what strategies you have for dealing with such a crash. I personally only see two responses:

  1. You do think BTC and Crypto was just a huge Tulip-like Bubble and the value of it will never come up near to the level it has been in Dec 2017: in this case I should probably sell. However, I believe in the underlying technology and the concept of currencies having value

  2. You think that this crash is an internet-bubble-like crash: big players with good products will survive while smaller ones and scammy ones are going to disappear. I believe this is the case. Thus I sold my speculative investments and only hold BTC, ETH and NEO. I am sure there will be applications for those three in the future and they will grow in value in the long run. For most smaller coins I do not see this potential.

What do you think?


#2

Not financial advise by any means:

  • Personally I think you should hold out on selling, yes, I agree that looking at the current charts hurts if you’ve bought higher than current value, but such is the volatility of the market. If you have invested, and were smart about investing as much as you were willing to lose, there is little harm in holding.

  • I think we are closing in on case 2: internet-bubble type crash, I also don’t think we are there just yet.

  • I agree that there will be smaller / unknown coins that will simply depreciate to zero or close to but whether they will stay there is another question. Heck even fraudulent Bitconnect BCC still has a value of 4.427 USD at this time (what gives it value is anyone’s guess).

  • The market has been bombarded with bad news lately, and this will chase away many a new investor for quite some time or those that didn’t care to educate themselves prior to investing. Informed investors will hold out and - depending on conditions - likely start to buy again in the next weeks / months.

  • While I’m against regulation, there clearly is some need for regulation specifically looking at ICOs, I actually agree with the chairman of the SEC and the chairman of the CFTC’s views on monitoring of ICOs; to protect the small investor from scams and fraud.

  • Will ethereum survive, personally I believe they will.

  • Will IOTA and Raiblocks and Cardano survive, personally I believe they will, they are just starting out and while this current market may hurt their funding abilities, they still have a ways to go in terms of growth, market penetration, establishing a foothold as a blockchain technology, etc.

  • Will blockchain technology survive, beyond a doubt it will. It can and is doing so much more than cryptocurrency and as such there is a definite market out there for it.

  • Will we see better structured ICOs going forward, hopefully we will. There’s too much scamming going on and the market needs to normalise itself.

  • Will bitcoin reach the level again of December 2017, now there’s an interesting question. Should it have been at that level in the first place? Will bitcoin survive?

I think it will survive this crash but I don’t think it has a long life span (6-14 years to go?). Bitcoin in its current structure is economically and environmentally not sustainable, yes the lightning network is helping with this but the lightning network also brings with it a great deal of centralisation (which is contrary to the fundamental principles of bitcoin / blockchain).

Aside from this, in order for mining to remain profitable (remember that 80% of mined coin revenue is expended on mining itself) the price MUST go up, since the coins go down every 4 years by 50%. So to sustain hashing capacity at the current level by 2020 a price of +/- USD 15,000 MUST double to USD 30,000 or ASIC mining will not pay for itself any more (at least not with a healthy profit margin). That is an issue even the lightning network doesn’t address and which has always been a point of contention for me.

Either we will see an artificial inflation of the price, or we will see an adjustment of the bitcoin code to allow for PoS or we will see a vast increase in transaction fees to counter the price / mined coins equation, considering that transaction fees today are already astronomically nonsensical I don’t see how this will truly be addressed. Result may be that mining other coins will simply be far more profitable in the long term.

Here’s a very interesting write up on price manipulation in crypto markets (starts about halfway down the page): https://www.reddit.com/r/CryptoCurrency/comments/7vga1y/i_will_tell_you_exactly_what_is_going_on_here/


#3

@Jenny, I am not a financial advisor either, here are my thoughts as our money is our responsibility and happiness is a direct outcome of our thoughts and control of our emotions and actions.

I wish I could ask people what they are buying when they buy cryptocurrencies/digital assets. (cc/da from here on out) Are they buying a dream to a better world or is money a means to an end? How do they want to assume risk with money and can happiness be tied to more than just money? (ie risk defined as exposure to danger – loss of money and/or loss of happiness)

Anyway, I don’t think we are in a bubble at all, we are in a sense birthing a child, and we are going through growing pains (and even if there is going to be a bubble, I believe the market is too small right now to be in a real bubble). Governments are overwhelmed, confused, uneducated about blockchain/cc/da’s, anxious, paternalistic, greedy and above all, they wish to push a status quo that does not or will not exist with the rate of new technology that will swamp and overwhelm and challenge our ideals about globalism, who we are as humans, how our existence is boundless as it is singular. Decentralization is a global characteristic that governments (a national construct) are ill equipped to even mentally handle let alone coordinate (and agree upon) any massive action globally to really control this technology. We are going to go through some rough patches as governments figure out their role and what parts of this space they can control and fit this technology into their national construct. Cc/da is mathematically based and if you believe it will survive and be used as its intention on a global scale then more than likely the value now is lower than it will be in the future which is why I hold. If this space is to die out one could still make money as cc/da’s rise and fall as we all (governments and its members) shift like playing a game of musical chairs until the music stops. I don’t think the music has even begun to stop in this space and cc/da’s are not dead yet. (I say yet because something better is always waiting to be created as long as we can dream our unrealized desires for alternate universes.)


#4

Wow thanks for this well structured answer!

Your point about mining costs and BTC-prices is new to me and quite interesting. Now the market is going up again but i still do not trust it. I just trust in the technology but not in most of the coins that are out there.

I think IOTA, Railblocks and Cadano have innovative technology, but they are not as probable to succeed and be around in 5 years as Ethereum or Bitcoin I guess.

Anyway, I hold what I believe in.


#5

Yeah I also doubt that every thing is lost now. I mean there was no rational reason for this hypercrash. As long as you believe in the concept of decentraliziation and you trust the technology than you have to hodl. But I think most minor coins that we saw skyrocketing over the last months will disappear or at least not come back to the prices we have seen at the beginning of this year.


#6

I agree, I trust in the technology as well, I’m mainly here learning about blockchain, not so much about cryptocurrency (from an investor point of view, I do like to follow it from a tech point of view).

The bitcoin transaction cost is honestly insane, but most people don’t dive that deep. Here’s some background data I compiled over time:

in July 2017 bitcoin was consuming about 14TWh / year; by January 2018 this had increased to 44TWh / year or triple the energy consumption. Right now it sits at 47.65TWh / year so almost up another 10% in the last month.

To put this in understandable terms, a US household consumes an average of 29.5890 KWh; so bitcoin could power 4,049,860 households. A single bitcoin transaction consumes about 385 KWh, in other words one bitcoin transaction can power 13 households for a single day … one bitcoin transaction!

This means that to-date, Bitcoin consumes more power than the Republic of Ireland or New Zealand or Hungary and is just trailing behind Peru.

Add to that the environmental impact, I.e. the carbon footprint, bitcoin has a footprint of 21,432 kiloton (kt) of CO2, which is equal to 188.45 kilogram (kg) of CO2 per transaction. This total footprint is equal to 1 million transatlantic flights…

Now knowing that every miners mines every block, but the block reward goes only to one miner that means that most of the mining effort is literally wasted effort. Hence 80% of mining gains being spend on mining cost.

This implies that in the long term this isn’t an economically viable nor environmentally sustainable currency. Having said that I still think the concept and the blockchain are absolutely awesome; and I love the revolution this has started in the technology field. Hence my belief in the likes of Raiblocks, Tangle, Hashgraph; which don’t have this economical and environmental waste.


#7

I always thought BTC could become sustainable. But your numbers show that this is not possible with the current technology. I just hope that the smart Bitcoin Core guys actually come up with a smart way to improve the consensus algorithm. :wink:


#8

@Jenny, you have a very interesting approach, however, I would have to disagree with both of your assumptions!

First of all, Crypto is not a Tulip-like Bubble and it will reach the Dec 2017 level and even pass it.

Second of all, it’s not only big players that will be benefitting from it. Lots of my friends (not big players at all, invested $100-$1000, are earning up to $70-90 per month since they have started mining and trading cryptocurrencies). I do respect all of your assumptions and conclusions, and investing in BTC, ETH, and NEO is a great idea. however, I know that the golden rule of cryptocurrency trading (and mining) is to not focus on a limited amount of coins. There are many perspective coins that always offer great alternative features to the existing ones, so, by focusing on three cryptocurrencies, you will probably miss other ongoing market opportunities.

Thus, never lose your faith in the future of crypto and blockchain, and remember, that it is created for EVERYONE, and not for certain whales having some good cash!


#9

Now knowing that every miners mines every block, but the block reward goes only to one miner that means that most of the mining effort is literally wasted effort. Hence 80% of mining gains being spend on mining cost.

What if someone invents a mining algoritm were the network actually computes omething useful, like prime numbers for instance?


#10

I’ve been thinking the same, with the use of AI and ML they could actually use all of that excess mining effort and use it for something more tangible, Google has done the same by introducing DeepMind into their data centre and were able to reduce their cooling costs by 40%.

Unfortunately, when it comes to bitcoin, you don’t actually know if the effort is wasted until the results are in, I.e. you can only reduce the cooling cost at source (at the miners facility) but not as an overall effort.

The blokchain is an awesome concept, and Bitcoin a great implementation of it, but it has been overtaken by greed (through price manipulation and ASIC mining) and unless you can take away that greed factor, I don’t see any workable solution to it consuming ridiculous amounts of energy per transaction. Even the lightning network only takes away part of the problem.

I’m convinced that if this isn’t addressed in due time, Bitcoin will simple be replaced by faster, more economical and more environmentally sound tech. It will always be the grandfather or cryptocurrencies, but I’m not sure whether it will have a life in 6 - 10 years time.


#11

I hear you but the problem is that this is what makes Bitcoin worth something. If you make it cheap and easy then the coin will be worth less/nothing or everything all the maximalists say is wrong. I see it as no problem because a lot of these operations have been set up in the cheapest remote places possible which in turn helps that area grow an actual economy that is only supported by the money they pay for power. At least that is a thing I read about all the mining in China. Outside of that there is always Solar and hydro power to think about and if these get more efficient and cheaper then things get better.


#12

I honestly disagree, if the bitcoin price was tied to mining then the price wouldn’t fluctuate, it would simply go up with more people investing in mining. The value of bitcoin is through it’s limited availability and the concept of proof of work, not the actual expenditure on mining.

Mining was supposed to be completely decentralised, which is far from where it is today.

I’m not advocating to make it cheap nor easy, I.e. I’m happy with the complexity mechanism to discover a nonce; what I’m advocating is using the huge expenses of mining for something better, I.e. recycle the effort in some way. This will give it great added value and will reduce the highly damaging carbon footprint of a transaction, which to be honest is completely ridiculous.

When I studied this in early January a single bitcoin transaction could provide power to 13 households in the US, or a total of 4,000,000 households per year could be powered by all bitcoin transactions (the power consumption is higher today). The carbon footprint at the time was close to 1,000,000 transatlantic flights. This is a higher consumption rate than the Republic of Ireland, or New Zealand or Hungary; for an electronic currency and shouldn’t be acceptable in anyone’s eyes in the long term.

One of the reasons China is banning mining is because of power consumption, the second reason (and higher on the agenda) is criminal activities it can support.

Iceland is introducing taxes on mining, because of the high consumption and waste.

I agree that alternative energies can make this cheaper but they won’t make it more efficient by any margin; the energy still needs to be produced.

Imagine a global uptake of cryptocurrencies in the current state (right now there’s about 3.5million active Bitcoin accounts) if this moves to 3.5 billion then mining bitcoin would generate more power than global household needs.

  • Edited, added Bitcoin in this statement: (right now there’s about 3.5million active Bitcoin accounts) to make it accurate.

#13

Very good points. Over time I still believe the power issues will be addressed. It costs too much and to make more money they will look into better sources that are cheaper and more Eco-friendly. When this much money is involved we always side with the money. Sad but true.


#14

Time is a very good question here, it is believed that the break-even point for most large miners is currently BTC @ 7,500 USD, dipping below this would make current mass mining not lucrative (they could sustain this for a while though).

Obviously you can pump the coin to stay above this (has likely already happened a few times) but isn’t sustainable over the long term.

Then again if it dips below, miners may move to strengthen other coins and the doors open up again for non ASIC miners to mine BTC and it’s value will stabilise at a lower level for a while.