Bitcoin slipped during the last night some percent lower and revived interest after a phase of lowest volatility, albeit in the wrong direction. See the daily chart below including the glory highs of 2017.
Many investors having an interest in strong crypto markets are touting bitcoin since month as forming a bottom, even a classic one.
Here is another interpretation:
Strong outflows of real money overcompensate influx from new investor interest and the chart shows just that. Attempts of a recovery are getting smaller and smaller since bitcoin’s high in December 2017.
Instead of building a classic bottom it looks more and more as if bitcoin becomes ready to break through the major line of “support” just under 6000 USD (weekly chart below).
But there is no fundamental support level as it is known from stock markets. The company behind a stock has a real value as it produces some real profits. Value investors see these earnings and compare them to bonds and other means of investing. If the stock price drops, they get what they want, a cheap stock with a low price/earnings ratio, which urges them to buy the stock.
For cryptocurrencies the situation is different. There is no intrinsic value and no earnings in cryptos. Instead there are parties that drain real money, dollars and euros, from the crypto-ecosystem in order to pay for operations like these:
- Miners incur hardware and electricity costs. Coin mining even dwarfs the electricity consumptions of smaller countries today.
- Profits of the crypto-exchanges. These are in the billions.
- Development and ongoing costs of companies that did an ICO or similar.
Here are some more real money burners that shouldn’t be underestimated:
- Luxurious crypto events with costly speakers, websites with crypto news, and other companies that sell crypto gadgets for crypto money but need hard dollars to pay the bills. This is no joke — crypto xyz has become a whole industry on its own.
- Criminals stealing coins or betraying someone somehow cryptologically. Don’t expect them to hold the coins or give them back. They want to cash in as quickly as possible and then go on with their next raid.
- The lambo of long-time hodlers.
Investors in bitcoin and altcoins are getting increasingly frustrated. They refuse more and more to invest new money. Recoveries get smaller and smaller. The support level just under 6000 USD is probably at least partly artificially created by long-time investors who fear Bitcoin will break down and fall into a years long winter sleep.
Probably new investors also become increasingly aware that their fresh money just feeds the big crypto money drainage described above. This crypto monster is hungry like a black hole, but it is not putting any money to real work. It is not producing real products that sell for a real profit.
Conclusion: Bitcoin looks tired.
But only for now. The future is still promising. If not for bitcoin, than for some altcoins. And if not for investors, than for traders and probably starting from a lower level.