Why Another 10 Percent Drop in BTC is Good News

After trading up to 4100 this week, Bitcoin's price has given back all that gain. Now a more realistic price support level seems to be 3200 which was the last launch point for the prior move which ran to 5000. If past is any indication expect the Bitcoin/USD price to drift lower from here with brief periods of enthusiasm flaring up.

You can blame it on China, or the Bitcoin Cash split, or even self-serving comments by Big Business leaders, however I would suggest a more basic re-thinking of the BTC / USD price index.

Consider the BTC price as a corruption gauge.

You know an asset class is hot when the scam artists start coming out of the woodwork. Few ICO papers actually present new technologies that will change our world and stand a real chance of surviving over the next five years. The rest, including some great ideas will not survive the periodic collapses of liquidity which are an inevitable part of growth cycles.

My first thought when I logged in to the BINANCE exchange a couple of weeks ago and was met with a web page filled with ad tiles for hastily-translated Chinese Initial Coin Offering (ICO) deals was what were they thinking? Now I am not calling BINANCE scammers - they provide a valuable blockchain-related service. But did they not expect a knock on the door from officials? Needless to say ICOs are not a prominent part of the BINANCE site today.

I grew up in Chicago near corruption-infested Rush Street which is now a distant memory after multiple decades of local police raids and Federal sting operations. There was a working agreement between both sides that temporary wins needed to be made for public consumption and that eventually things needed to change. This included advanced warnings of raids so the usual suspects could be rounded up. Today if you visit the Rush Street area it has a surreal Disneyland quality about it with families shopping in high-end boutiques. Images of the past are now something for nostalgia fans.

There's bad news and good in this abstract idea of corruption waves and how much time it takes to change things in cryptocurrency. It's a mistake to think that cryptocurrency is immune from all forms of regulation and politics - we see it at all levels where there is interaction with humans - the true weak link in the network.

The bad news is that near term the human fear factor will accelerate as nervous investors see the price dropping further. Take a look at Youtube sentiment which is increasingly bearish after the drop from 5000 and BTC's inability to head back in the upward direction.

Going back to the concept of corruption cycles, a point can be made that it would take a substantial, sustained dip in BTC price to discourage speculators and con artists to exit cryptocurrency in search of more lucrative opportunities.

The good news is that we do not really expect all the corruption to be wrung out of BTC because of a few uninformed and amateur players being taken off the streets.

The cryptocurrency game will go on with larger players using more elaborate structures and new forms of payment.

For example, I am already looking forward to the day when local electric power utility companies get involved in Internet-of-things metering of my appliances. That level of corruption will dwarf anything we have seen so far in ICOs.

So a 10% drop in an over-heated asset class is a good thing - for now.

And stay on watch for future raids.