Time for a Group HODL

January 12, 2018
“All truth passes through three stages. First, it is ridiculed. Second, it is violently opposed. Third, it is accepted as being self-evident.” – Schopenhauer

The promise of blockchain

It’s an exciting time for those who believe in the potential for blockchain, the digital and decentralized ledger for virtual currency transactions that eliminate the need for third-party intermediaries like banks. Enterprise customers are showing heavy interest in blockchain, and since nearly all are open-source networks, it would make altering logged data practically impossible. That makes blockchain particularly secure and should be viewed as promising for those that truly understand the commerce possibilities.

The speed of speculation

The fear of missing out on fast money created strong demand  and aggressive buying in bitcoin and other cryptocurrency.  What we are experiencing is the early stages of an auction market for cryptocurrency that is going through an adoption phase. Growing pains, that is all. Decentralization is not a process that happens overnight despite all the massive speculations over the projections of this space. Rational exuberance is definitely in order here.  The forming intelligence of this auction market structure has determined that the speed of this price discovery to value bitcoin in relation to these obstacles required a re-pricing.  Bitcoin price had to re-adjust to align with the timeline of adoption. There MUST be two sided trade in any market for it to be sustainable. And that is what we are seeing in this price pullback.
That Bitcoin has dropped nearly 50% in just a few weeks shows that volatility is supreme until market infrastructure reaches alignment with the promise of its utility and real world adoption on a mass scale. There is no doubt that bitcoin is the flagship for the altcoin space as many coins are trading against it as a pair and are levered to bitcoin as a corrollary, for now at least.

The reality of regulation

Regulation is a double-edged sword for bitcoin. On one side, the CME Group launching bitcoin futures and Japan accepting bitcoin as legal tender earlier this year, helps validate its existence and use. On the other side, central banks and governments have the authority to suppress bitcoin despite market demand. We could be talking about tens of billions of dollars  whose investors are willing but unable to invest in bitcoin.
This is just one of many obstacles that bitcoin faces on a short term and long-term basis. In addition to regulation issues, bitcoin has to try to stand out from a growing number of cryptocurrencies which are creating unique and improved ways of interacting with the blockchain that could gain mass appeal with faster and improved coin technology. Despite bitcoin having early mover advantage, the space is fluid with new coins that could overtake bitcoin and gain acceptance.
That in mind, crypto markets are reacting again to previous news that South Korea will ban anonymous exchanges starting January 30. Plans to apply a  corporation tax and local income tax of 24.2% on exchange profits have capped unbridled exuberance for now.  These bans are likely to be slowly lifted country by country. The shift will occur over time when banks realize that the era of third party transaction fees are over.  When these oppositions gradually lose their strongholds then we are likely to see a surge in acceptance points on an international level.

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