Explaining todays chaos in crypto
What happened????
Look at this theory about todays chaos in crypto markets:
https://www.reddit.com/r/CryptoCurrency/comments/7qw4ej/my_theory_on_the_real_cause_of_todays_chaos/
My theory on the real cause of today's chaos (expiring futures contracts allowing for risk-free market manipulation) (self.CryptoCurrency)
submitted 59 minutes ago by Gigged
TL;DR - The cause of today's chaos is likely large hedge funds using expiring BTC futures contracts as safety nets to exploit the only sure-thing in this market: a large amount of new/overextended investors who are easily moved to panic sell during a flash-crash.
On December 10, BTC futures trading went live. The first set of those contracts is set to expire tomorrow, January 17.
For those who don't know, futures contracts are agreements to buy/sell an asset (like BTC) at a specified future date and price. As the price of BTC was ~$15,000 on Dec. 10 , the first BTC futures contracts, which expire tomorrow, were fixed at about that same price. In a simplified form, this means that tomorrow:
the "short" side of those contracts must give the "long" side a BTC (which, if they don't already have, could simply be bought at tomorrow's market price); and
the "long" side of those contracts must pay the "short" side $15,000 in return.
Now imagine you are a large hedge fund evaluating these contracts, and the crypto market as a whole, on Dec. 10. Obviously, making a large bet on either the "long" or "short" side is extremely risky, since the price of BTC when the contracts expire (January 17) could very easily be $50,000 or $500. This makes large bets on either side a bad option for a large institutional investor like yourself.
However, you also know that crypto is still an emerging market with a large amount of new investors and "dumb money." And because you are a large hedge fund, futures contracts opens the door to a third option: use large bets on both sides to manufacture market chaos and make money on the ripple effects with little to no risk. Here is how:
Bet big on the "short" side of the futures contracts on Dec. 10. Let's say you do this for 10,000 BTCs. This means that on January 17 you will owe 10,000 BTCs to the "long" side of those contracts, receiving $15k per ($150,000,000) in return.
Buy an equally large amount of BTC on Dec. 10 at the market price ($15k/BTC). This cancels out your risk/reward for the futures contracts, making you essentially immune to changes in BTC's price while you hold both the contracts and BTCs. This also allows you to accumulate and hold an extremely large portion of the BTC market while taking little if any risk .
Shortly before your futures contracts expire, dump all of your 10,000 BTC on the market at once. Like clockwork, this will trigger stop-losses and panic sells from the consumer BTC market, virtually guaranteeing that the BTC price will continue to dip well below whatever price you just sold those 10,000 BTC for.
Ride that dip you just created to buy back the 10,000 BTC for much less than the price you just sold them for. This is particularly easy, since the funds you need are already liquid and ready to get back in the market.
Use the re-purchased 10,000 BTC for the expiring futures contracts, which get swapped for your initial investment ($15k/BTC). The difference in the price that you sold the 10,000 BTCs to start the dip from the price that you bought the BTCs back during the dip becomes your net profit.
For funds with access to enough capital to move the crypto market, this play should be easy money. It would also explain the series of huge dips (seemingly out of nowhere) that we are dealing with today.
If I'm right about the cause (and I'm fairly confident that I am), the good news is that today's dips are likely temporary and not signs of a more serious issue with cryptocurrencies as a whole. The bad news is that I don't know how this can be stopped as long as the prospect of capitalizing off of market fear remains a huge carrot for the sharks in this market.
source: https://www.reddit.com/r/CryptoCurrency/comments/7qw4ej/my_theory_on_the_real_cause_of_todays_chaos/
It's a jungle out there
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ouzo and out
@onceuponatime
I just almost hit the button to sell everything. At the same time I saw your post and it somehow stopped me doing what I wanted to do. This is panic and we should make these kind of decisions with cool head. I’m gona take a cold shower now.
Thank you so much for your post!
Resteemed!
It's funny really. I nearly sold several positions as well with the idea that I would buy them back later. Then I looked up what time the contracts expired and saw I had another hour at most. So I just waited. I was both pleasantly surprised and shocked when, practically on the dot, everything turned around and started climbing again.
That's great to hear that we can help each other. I post daily updates on the market and different coins. Hope this post will give you some insight:
IMPORTANT Coin Updates (BTC, ADA, BTS, EMC2, ETC, GNT, SBD, STEEM, XVG)
https://steemit.com/bitcoin/@benkalashnikov/important-coin-updates-btc-ada-bts-emc2-etc-gnt-sbd-steem-xvg
chill ...you will not regret for this decision in future..
There is no word to describe how I feel now. This moment could have just changed me. I have always panicked just like most of the people do. Of course, it’s natural, but I’m cool now. I have a plan and I stick to it.
Thank you steemit😂
Good for you. Next time instead of panicking just add to your position. That’s the reaction of bold guys.
Yeah..till u run out of btc lolsss
A though crossed my mind this morning, that this drop may be a good thing. With the low price, I'v made a few investments (IOTA, LITECOIN and VERGE) and I expect them to grow.
Top Cryptocurrencies Pending Price Target and their due dates//
https://steemit.com/cryptocurrencies/@salahuddin2004/top-cryptocurrencies-pending-price-target-and-their-due-dates
If you can't even take a 50% dip, then you are wrong in crypto speculation.
It used to be 80% or even 90% for Bitcoin.
Panic selling or buying is always a bad decision, the more aware you are, the better. These kind of posts are key to educate new investors, thanks =)
I agree with @onceuponatime and the only thing I would like to add to the rest of us the regular people is that in times like this the bitshares DEX can save a lot of the pain.
Don't be all in in crypto. I know it is difficult not to be all in and I also can't resist be all in crypto when we have a bull market, but keeping some bitusd, bitgold,biteur,bitcny for times like this is something we all need to consider more in the future
The history of cryptocurrencies have taught me so far that when we have so big % changes either up or down, usually a centralized exchange all of the sudden is "hacked" and people lose their money. Keep it safe and trade in bitshares DEX...
If you want to trade with leverage, just buy some bts and short bitassets into existence within the DEX. Not the best thing to do in a bear crypto market like now but definitely something to consider when the bulls are back. If you do decide to go down that road make sure you understand the risks and you are capable to maintain collaterilized your position.
When you are in a bear market and you don't know which crypto to buy just buy some bitshares and steem of course and HODL..Don't buy shitcoins but just buy something that has some utility.
A fellow bitshares enthusiast!!!! Hail there, well met!
Just another sale :D
I think since 2015 which I started watching crypto and bitcoin mid January was always the lowest BTC would get and any other crypto for that matter.
Lunar Year and New Years eve beeing so close really affect the markets in my opinion.
In a side note Steemit made it at the top 500 sites at USA so I don't mind the sales these days. It makes it easier to chose an investment. Have a nice day.
I had a habit and I would panic before and sell, now I just sit back and relax , I got time , and the market will eventually rise . They want us to sell under pressure . Not this time tho :D
Yup. Thats their plan. It won't work!
Certainly seems like as good an explanation as any; the fundamentals of cryptos and blockchain technology didn't suddenly change overnight, so some other influence would have to be at play. I noticed BTC bounced hard when it briefly hit $9500, so maybe that was some limit among institutional investors?
Seems to me like this would be a singularly dumb time to bail ib panic selling, and possibly a good time to pick up things at a "sale price" if you happen to have any cash sitting on the sidelines.
The only question that remains somewhat open in my mind is how long it will be before the (dumb?) money stops treating "all cryptos" like BTC. Surely we must soon reach a point where BTC starts doing it's own thing without every alt coin following like "sheep."
If you have bitshares you always have the possibility of "cash sitting on the sidelines" because of the ability to use bts as collateral to leverage up.
A friend of mine (the one who introduced me to steemit) told me all about this last night and I got alarmed. I mean...I was thinking to sell ALL the $150 I've earned so far and go have the biggest feast in a miserable tavern's history (and make the owner's day since no one ever steps foot there). Also, I was about to cry for my Wacky Facts series, as it would be cut after "airing" for only 3 episodes. Then, I read this article by Lord Vader accompanied with a few shots of good red Nemean wine and I saw the world with happy, vivid and bright colours again. (It may be the wine though)
I also prefer wining and dining to whining and dining :-)
Therefore, it means we are ahead for more turbulence. Or, effects will be nullified by the competing hedge funds. In the future, with the additions of more futures such as "basket of top 20 altcoins", we will see more such crash and bumps, or will we? How can then cryptocurrency be stable market which already swings like pendulum.