Cowboys and Native Americans: Who Sparked Panic in the Crypto Market?

Lower cryptocurrency prices are of no concern for professional traders and large companies, Alexey Markov from United Traders believes. In his column for RBC Crypto, he explains what is now going on in the digital money industry.

Worries about the price of Bitcoin and major cryptocurrencies are not subsiding, and understandably so: crypto market capitalization has fallen to $120 billion from over $600 billion a year ago. All relevant news resources are full of forecasts on the future price of Bitcoin. Authors of these forecasts continuously generate plenty of opposite opinions, most of which devalue as soon as each individual forecast’s timeline is reached. And ending any such text with something like «maybe everything will turn out the opposite way» instinctively raises doubts whether authors themselves believe in what they write.

But just as last December was dominated by enthusiasm, today’s headlines are nothing short of eternal pessimism. Browsing through crypto news websites, one can’t avoid feeling that the crypto world is going straight to hell. To add insult to injury, sad miners came out of the shadow as their power costs started to exceed the mining output of their precious ethers, while mining hardware manufacturers feel even more sad: some unknown ill-wishers from, like, China, publish photos supposedly confirming that mining farms are sold for scrap in bulk... Well, as you see, it’s a horror of horrors!

However, as it’s usually the case, everything is not quite what it seems at first glance. Every manager knows that upon a closer view there is rarely any news that is as bad or as good as it seems the very first second. The case with the crypto market environment is the same: neither a drama, nor a disaster, but a heavy bitcoin price decline. It’s not a land mine that exploded right under your feet, it’s just less dollars per bitcoin. Feel the difference?

Now I will tell you an amazing thing. Almost one hundred percent of people who are sincerely worried about the current value of cryptocurrencies are people who have crypto investments and try to make money off of it with some success.
Most of these people aren’t traders: they were going to make money, or rather, to be more precise, to earn additional income simply expecting the crypto prices to continue increasing forever and at a high pace. Mostly, this part of the society and its representatives in the media are now generating panic posts in astonishing quantities on the Internet. And, by the way, jokes aside, I can understand them. I would also panic if last fall I pledged my apartment to take a loan and bought mining farms at their price peak or a dozen bitcoins at $20,000 apiece. So I’m not willing to make fun of their worries, I’ve been in a similar position.

A much smaller share of the society worried about crypto prices are exactly traders, i.e. people who know how to make money in both a growing and a declining market. They are worried, but much more restrained and using various financial terms; in addition, many of them continue to make money in the current environment because they are professionals. Yes, many of them have seen their turnover go lower, and yes, many have bet on the wrong horse and lost some money. But overall, a professional is someone who understands that mistakes in trading (and cryptocurrency trading may be considered as such to some extent) are an integral part of the business, and, therefore, acts accordingly.

People involved in cryptocurrencies generally fall into four categories: those who try to make money off of them in a linear fashion (see above); those who create them (this is a story of its own); those who make money selling related services (exchanges, exchangers, niche media, etc.); and those who only use crypto. Exchanges, exchangers and the like will never be in loss under any circumstances as long as there are cryptos: they don’t care how much cryptocurrencies are worth, they care to collect their fees from transactions. These players are very moderately worried now, if at all.

The fourth category is users. They are companies that accept cryptocurrencies as payment for their goods and services, individuals who pay for services of the companies with bitcoin, and finally, individuals whose financial relationships with other individuals are based on blockchain. These guys, I can assure you, don’t give a damn how much bitcoin is worth, be it a thousand dollars or twenty thousand dollars: the cost of their services or goods is now measured in one of the fiat currencies in any case, and the equivalent price in crypto is calculated using the exchange rate applicable at any given moment.

All the companies and people I know who use cryptocurrencies for settlements have an established and perfectly functioning mechanism for immediate, if necessary, conversion of the received cryptocurrency into a fiat of choice. Therefore, they largely couldn’t care less how much Satoshis they receive as payment for the goods — the main thing is that the quantity of crypto equals the price of goods, in rubles or dollars, at the time of the transaction at the applicable rate of exchange.

Let’s be honest, all these stories about «the game’s over» are told by miners and speculators to miners and speculators. Those who need crypto as a universal equivalent of goods and services, have hardly noticed anything; I mean they certainly observe the developments with some curiosity but that’s about it. Crypto business as usual.

Over time, the situation will change, but it will only happen when the bitcoin price stabilizes, and (this is my personal opinion) this stabilization will look like a consistent slow growth. And when will that happen, what will be the prerequisites for it, and how it will affect the world, we are going to learn very soon.