Is Bitcoin's Volatility by Design?
Perhaps we are looking at these dips all wrong? What if this is how Bitcoin defends against predatory speculation? What if this is by design?
Disclaimer: I am not a financial advisor. I do own Bitcoin
Yesterday was fun, huh? Elon, China, dump, dump, dump, rise, dump, rise…. it truly never gets easier. But as I was doing research on why we hit a massive dip earlier than expected, it dawned on me… maybe this is a feature not a bug.
Let me explain.
Bitcoin is volatile. We all know this. But did we ever ask ourselves - why? It’s a trillion dollar global asset - yet it trades like a penny stock. Certainly there are many factors that drive the value of Bitcoin - but the more I dig into the dynamics of the last 10 years it feels more and more like Bitcoin itself is “purposefully” rejecting leveraged buyers, short sellers and to some degree institutional investors.
I can’t quite put my finger on how, but maybe this was all done by design. Bitcoin is the “people’s currency”. It was designed to put the power back into the individuals hands, and pull it away from central authority and existing financial systems. It only makes sense that it rejects the Wall Street games that have manipulated markets for years.
Bitcoin hates Leverage
One of the primary reasons we see massive dumps is leverage. People are buying 50x, 100x leverage and betting Bitcoin will go up or down. 99% of the time, these people get liquidated because Bitcoin (by design) is volatile. This is a good thing. Bitcoin refuses to let others manipulate the price through these type of mechanisms - and to ensure it doesn’t fall prey to the same Wall Street games - it destroys them.
In a weird way - it’s almost like it has an “immune system” and fights off impure viruses that try to manipulate the price. Yesterday it destroyed $8,000,000,000 in liquidations. Think about that. The U.S. Sports Betting is only around $15 Billion a year. One day of highly leverage betting on Bitcoin makes Vegas look like a joke.
Bitcoin hates Institutional dominance
We can all agree Bitcoin is meant to avoid any one person or entity to own a large percentage. This would defeat the purpose of being decentralized. However, perhaps it’s more than what is in the code, perhaps there is a deeper culture that has been developed over the years that was meant to repel institutional money (at least for as long as you possibly can).
What would Bitcoin be today if corporations and institutional investors loved the idea and started buying in 2013? It would have been another asset that made the rich richer - and if people like you and me bought in after Wall Street - they would end up screwing us again.
The fact that Warren Buffet, Bill Gates and a lot of the Wall Street hate Bitcoin is a good thing. It means this is truly the asset for the people, and our ONLY chance to ever control our financial future again. If they didn’t hate it and create FUD in the market - we would never have a chance to front run them on the trade of the century.
(One could argue, it’s because of Bitcoin that any alt-coin has a chance for success, because it has created a protective shield from manipulation)
Just remember when you see Bitcoin go down 10%, 20%, 30%, etc - it is protecting us from those who try to turn crypto into a “get rich quick scheme” or manipulate the markets for their own advantage.
If you really think about it - without dips - we lose. They win.