I believe that the price of Bitcoin is drastically overvalued. It's driven by speculation than actual economic activity occurring within the Bitcoin ecosystem. This was especially true at the height of the Bitcoin price, when it hit $20,000 or a market cap of $330 billion.
Speculators are speculating against other speculators When you think of speculators, you may imagine big bankers being the problem. I would be generally inclined to agree with that. In reality, they make up a small portion of the market. The real issue are these so-called investors from home who do technical analysis and try base the value of Bitcoin on previous pattern movements.
On one end of the spectrum you have those trying to short and others who are longing. These aren't just a few loonies, there is a sizeable chunk of these speculators who are shorting and those who are longing. I would say the distribution is 40/60 long.
Who in the world thinks that at the height there was $320 billion in economic activity? There most definitely wasn't $20,000 of services and goods being exchanged per coin.
What goods and services are actually being offered?Let's be realistic, there isn't $60 billion of economic activity being generated with Bitcoin. If that were true, then it would be much harder to explain the fluctuations in price. You don't just go from $330 billion to $200 billion in a matter of months with no justification.
It used to be that the price of Bitcoin was based on goods and services... back when Silk Road was a thing. The closure of Silk Road sent the price of Bitcoin into free fall.
Lambo's don't helpThe idea of cashing out Bitcoin for a Lambo sounds sexy. It is a great marketing draw for the inexperienced to buy some Bitcoin. Who doesn't want a fast car?
It's this idea which is only popular with the greedies and not those concerned what Bitcoin and Blockchain can do. You're buying Bitcoin in USD, promoting theories that the USD is over, only to cash out into USD and buy your Lamborghini. Good for you if you do that, but don't be a hypocrite about the USD just to use it.
Putting money into Bitcoin, only to hold it, does nothing to grow the actual value. The only way an economy grows is by having money circulating around. Putting sums of money into Bitcoin just to have it sitting there creates deflation which can quickly spiral into a deflationary spiral.
Instead of talking about technical analysis and scribbling onto charts, we ought to look at the fundamentals of the price of Bitcoin. We need to be objective and not subjective about Bitcoin. I'm an ardent fan of Bitcoin, but I find the community's view of finances to be amateur, especially on Reddit.
Resources:https://smallbusiness.chron.com/importance-consumer-spending-3882.htmlhttps://www.economicshelp.org/blog/1888/economics/deflationary-spiral/https://www.theguardian.com/technology/2018/feb/02/bitcoin-biggest-bubble-in-history-says-economist-who-predicted-2008-crash