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Monday, June 11, 2018

Why recent Bitcoin dips aren't as bad as you think...

I'm going to try to keep this 'short and sweet' and link to the detailed analysis for those who want to dive in deeper - but here's the basics of what you need to know.

Recently analysis released by Chainalysis states one simple thing happening - old investors selling, and new speculators picking up where they left off.  In their report they write:

"Since September 2015, the majority of bitcoin has been held for investment, as shown in the chart below. However, this has declined in the last year, from 72% of available bitcoin in April 2017 to 50% in April 2018. At the same time, there has been an increase in bitcoin held for speculation, from 14% of available bitcoin in April 2017 to 35% in April 2018. This suggests that investors have cashed out some of their holdings. These bitcoin are now in the hands of new users who use their bitcoin to speculate or make personal transactions, rather than hold their bitcoin as a longer term investment."

Two questions you must ask yourself if you're thinking it's the end of the world:

Is it strange that people who have held Bitcoin since it was nearly worthless, would now like to enjoy their investment paying off?  No, it is not.

When these long term investors sell, are they finding people to buy? Yes! Plenty of them.

It's time to worry when these answers change.  If there's more sellers than buyers - that's when a market ends - it's a situation we aren't even close to.

In other words - if someone is selling 1000 BTC, and the sell order sits there for days or weeks because there is no buyer - worry.   But currently, there's a buy order for every sell order.

So what does this mean for the immediate future though?  Be prepared for Bitcoin to remain around it's current price for awhile. Now that possession has changed hands from early investors, to new speculators, something else now needs to happen for the price to go up.

Last week I covered a story about one of those things that could send the price skyrocketing - but keep in mind even if everything goes as planned, it's a few months away from happening.

You can read Chainalysis' full report here.

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Author: Oliver Redding
Seattle News Desk