Topic: If market crashes, BTC will crash twice as hard. (Read 857 times)

Bankruptcies happen for the exact same reason. It's only a matter when the assets are liquidated.

In broad strokes, these assets act exactly the same. This boils down to economic rationality. It doesn't matter if you invested in fine art or real estate. When the economy crashes and your business fails or you lose your job, you may need to liquidate assets to pay your mortgage or rent, bills, etc. This is the part of the underlying drive towards cash during liquidity crises.

This idea that people who invest in stocks or real estate need cash, but people who invest in low-cap or niche markets don'tdoesn't really pan out for me.

And yet Bitcoin crashed much harder than stocks or real estate this past March. Makes you wonder......

This is true for highly liquid assets with huge capitalization such as oil, real estate, stocks, etc. It seems to me that niche/low-cap/unique markets react differently. Goods from these markets were initially bought for a long time, and most of the investors in these goods initially assume that the period before its sale may be 1-2 (or more) economic cycles. I have not heard that someone "urgently" sold a unique painting just to get into the cache (this happens in bankruptcies, but this is a different case).

I think bitcoin is close in characteristics to niche/low capitalization markets therefore, here we are unlikely to see a repetition of the stories of the stock market or the real estate market.

If that were true, asset prices would never drop.

Like you said, the market moves in cycles. At the end of a bullish cycle, this is what happens: profit taking (distribution) and selling because of anticipated lower prices. During trends, prices move in feedback cycles. Lower prices beget lower prices, as the pain of holding losing positions compounds and burnt investors capitulate. This is why downtrends often end with high volume capitulation events. https://www.investopedia.com/terms/c/capitulation.asp

Even if you don't feel forced to sell, others will because of the pain of holding or the need to liquidate for cash (this is an economic crisis we're discussing after all), or because they think they can buy back lower. This all produces increased supply on the market, which pushes prices down.

I agree with you in general, but why am I forced to sell? If we are talking about investors, then it is unlikely that they bought bitcoin on credit. And they all know about economic cycles and the fact that after fiat money becomes strong, there will inevitably be a period when it becomes weak and asset prices soar. The only ones who will sell at any price are miners, but their influence (if we take the total capitalization of bitcoin) is not very large and is gradually decreasing.

Sure it does. An economic crisis may not change the price you paid or the value you put on a diamond or a painting, but it will make them harder to sell. So if you really want to sell during a crisis, you'll probably have to sell cheaper than you otherwise would have.

I see there is a strong correlation between SPY and Bitcoin prices.  BTC has a higher beta, however.  Whenever SPY tanks, BTC tanks twiiiiiice as hard, (as it was the first time, I said good byeeee) 
In March, BTC dropped from $10k to $5k.      I am calling for another BitCoin wipeout when the market crashes. 

neutral reaction for now will keep us safe because we will not react in shit news about this or that and sometimes being in silent is better than in the open.
stop speculating more and trust our coins that is best action now.
10 years from now?i think Bitcoin will be 6 digits,because we come 5 digits in 10 years so what more in the next same range?
anyway we are only speculating but with confidence because we trust bitcoin and this is waht we have to now,with this market up and down.

I think it is very tempting to understand Bitcoin or other cryptocurrencies in terms of the Beta statistic.  Beta the measure of relationship of a security based off past valuations can be valuable in setting up a portfolio.  Bitcoin based off of Gold with deflationary attributes would lead an investor to think it has a negative Beta.  Gold has traditionally has a negative Beta.  There is a definite desire in the Crypto space for Bitcoin to have a negative Beta as well.   Generally, securities with negative Beta are more desired and have higher valuations than similar securities with positive Beta.   That said when you look at the valuations of Bitcoin, the Market and Gold it is extremely difficult to understand the relationship.

Part of the reasoning for that is the extreme growth of Bitcoin between 2014 and 2017.  A growth security can certainly be affected by the market but something growing at the level of Bitcoin it is obvious there are other and much larger factors at play.

Here is a picture from Bittmex that illustrates the lack of a relationship during this period.
https://www.bing.com/images/search?view=detailV2&ccid=6PVd%2fzC7&id=E69A2666F6AC7D1F1926473734A82A58CAC160BF&thid=OIP.6PVd_zC7K7X6Z6WDsoLmcAHaEd&mediaurl=https%3a%2f%2fblog.bitmex.com%2fwp-content%2fuploads%2f2018%2f03%2frolling.png&exph=543&expw=902&q=beta+bitcoin+to+S%26P+500&simid=608031240335721443&ck=1493AE62779D20C45B7620A888675674&selectedIndex=12&FORM=IRPRST&ajaxhist=0

Cryptocurrencies can pick the attributes of a Technology growth stock, Gold, a high risk company and others.
These attributes can change quickly.   Thus if Bitcoin has acts as a high Beta stock for the past year, it could easily be treated more like Gold tomorrow and visversa. 

The ultimate problem with Beta and with many portfolio statistics is that they use prices of assets on a historical basis to derive what is supposed to be the future relationship.  Bitcoin and other cryptocurrencies are simply too new in my opinion for a meaningful relationship to be established.

People think that every fall is the end of bitcoin but actually this incident will not exist for now since as of these days bitcoin gather much attention interms of investment and usage, and those issues about price dump has just been ignored by majority since its already tested that whenever a dump cames there's a huge pump will follow and the only losers here are the people who always afraid to take their step to buy when opportunity is there.

I believe that market will be fine for a while, I do not care if Trump wins or Biden wins, eventually market will readjust and I know that pandemic happened and it killed many economies in the world but right now I do not think that will continue forever, it will probably recover adn that means "next crash" for market will not be soon, it will take years probably over a decade to happen.

This is why I believe right now is perfect time to invest into both bitcoin (or crypto in general) and also investing into stock market as well, for the next 10 years you are going to make a profit from both of them. I believe by the time 2030 comes bitcoin will be over 50k easily (probably closer to 100k) and also we are going to see stock markets be 5x of what they are right now as well.

Basically everything is only temporary, even though the market falls many times but still, the collapse of the crypto market will not make bitcoin lose its value because the price in the cryptocurrency market will continue to increase and decrease every time. Any issues and problems that occur in this world, at least directly or not will affect the price in any market that exists so that way, bitcoin will still recover even if it gets repeated drops and this will be fine. Nothing to worry about either.

they are not comparable. unlike a diamond or a painting, bitcoin has a quite liquid market that is going to always be active and have a volume. even during a crisis ignoring what happens to the price, the volume will be there even if it drops. so even if someone wants to sell/buy bitcoin they still have liquid enough market to sell/buy in.

Sure it does. An economic crisis may not change the price you paid or the value you put on a diamond or a painting, but it will make them harder to sell. So if you really want to sell during a crisis, you'll probably have to sell cheaper than you otherwise would have.

I understand the logic of your reasoning. But why do you think that the liquidity of an asset so strongly affects the degree of its depreciation during a crisis?

A unique diamond/painting or something like that has little liquidity (they are difficult to sell) even when the economy is growing, but this does not mean that during a crisis they lose their value.