Bitcoin intraday plunge 15%. View: Big structural shift in trading this year


November 26, 2020
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Beijing, Nov. 26 (Xinhua) -- Bitcoin briefly fell below the $17,000 barrier Monday Beijing time, according to The Economic Voice of the China Media Group. On the evening of December 25, Beijing time, Bitcoin broke through $19,000 per coin, setting a three-year high and further approaching its all-time high. Bitcoin was on a rollercoaster ride, tumbling $3,000 on the day. What do you think of the short-term bitcoin market and the overall market this year?

Bitcoin and other digital currencies fell sharply Tuesday, with each coin hitting a low of $16,500, a 15% drop on the day and the biggest drop since August. The move came after bitcoin hit a three-year high of $19,500 a coin, just shy of its all-time peak of $19,783 at the end of 2017.

What do you think of this roller coaster ride? Yu Jianing, rotating chairman of the Blockchain Committee of the China Communications Industry Association, said in an interview that no matter what the market situation is, it should be noted that digital assets represented by Bitcoin are still in the early stage, and high volatility and high risk are the basic characteristics. There are three main reasons for the recent sharp market correction. He said: "First, the early market rose too fast, the high adjustment is in line with the general law, 'fast bear slow bull' is relatively normal, too fast rise but contains a greater risk; Second, the OVERALL situation of the US presidential election has been settled. The previous risks have been released and investors' demand for safety has declined. Third, there may be unknown headwinds."

Institutional point of view, points out that the currency as a special kind of asset classes, unlike stocks or bonds, won't produce any predictable cash flow, investors get return is the only way the currency prices, like all risky assets, and the price of the currency by investor sentiment pendulum and risk attitude change will present the characteristics of periodic change.

In fact, bitcoin's price has been remarkably volatile this year. Since October, the price of a bitcoin has soared, nearly doubling from $10,000 to $19,500. Bitcoin is up more than 150% this year, according to data.

According to Miu, a veteran digital currency investor, bitcoin prices have skyrocketed this year on two main grounds. Since this year, the bitcoin trading market has changed from being dominated by retail investors to being dominated by large investors and institutions. This is an important new feature and also a major structural change in the trading market since the birth of Bitcoin.

"The first point is that in May of this year, bitcoin was halving once every four years," Said Mukeyan. What is' halved '? That is, for bitcoin miners, the amount of bitcoin that can be produced per block has halved. Roughly speaking, the original output was 1,800 COINS a day, but this year it has been 900 COINS a day, reducing the supply by 50%. Second, on the demand side, until this year, the bitcoin exchange was a completely retail-driven market, so this year we focused on a particular institution called Grayscale Trust. How do they operate? Securities trading in the US can buy bitcoin directly through grayscale trusts, thus building a bridge from compliance capital to bitcoin. So grayscale trust buys more than 1,500 bitcoins a day, but we say there are only 900 bitcoins put into the market every day, so the market is in short supply."

Yu also said that a large number of professional investors and institutions began to allocate digital assets represented by Bitcoin. In his view, these investors want to deploy digital assets to hedge against expectations of global currency overshoot and inflation.

However, industry opinion cautioned that the bitcoin exchange market was "already in a frenetic state" and investment choices should be made carefully.