I would like to start by saying that I am by no means a cryptocurrency expert or a professional in the space. The following is meant to open up conversations more than be a one sided article. The true purpose of anything I say is to hopefully get everyone thinking, and those smarter than I can solve the problems within the space.
One big problem that I see in the space, is that people tend to try to look at crypto by comparing it to our older financial assets. Mostly by putting them side by side to stocks or the stock market. Some, analyzing them next to gold and other commodities.
This way of looking at them has opened up a huge door for the wealthy to increase their wealth. At the same time, while making smaller investors lose hope or struggle to hold on to their coins.
The problem lies with the way we establish value to each coin or token. Crypto exchanges track price by tracking buy and sell orders. Sites like coinmarketcap, which a majority uses to price check - look at all of the exchanges they track and provide an average between the exchanges to reach a price.
We then have OTC markets, or "Over the Counter" markets. This allows the wealthy or institutions to buy large sums of crypto at an agreed upon price, without causing the price to fluctuate.
So, let's say someone buys 10 million dollars worth of bitcoin OTC. This investor can then receive these purchased coins into a private wallet from the OTC exchange. This investor then takes these 2827 bitcoin(at current value of $3,536 USD per BTC) and they send these to 3 separate wallets. Each wallet now has just under 1000 BTC. The investor can now go onto three or more exchanges and put in large sell orders. This in turn causes other holders, traders, day traders, and bots to panic. Placing sell orders of their own. The investor has two choices, to let the sell orders execute or to simply cancel the order right before the sell completes. If they sold, they can take that same 10 million and purchase even more BTC at a lower price point than before. They could also choose to just hold and purchase more BTC at the lower price point with the other millions of USD that they have sitting in their bank account or the stock market.
I believe that this has been happening all throughout 2018. This practice isn't going to stop until large exchanges go live that are regulated by governments. This could be in the next few months, or the next few years, but I think that it will start within 2019.
Another process that needs to happen is that we can't valuate cryptocurrencies the current way they are calculated. A majority of popular stocks are not sold OTC. Stocks do not have a block chain(at the current moment) to watch stock buys and sells within the market and OTC(for non-listed stocks).
Luckily, since crypto innately was developed around blockchain - all crypto movements should be tracked by blockchain and reported by a new type of software not yet developed. Not tracked by buy and sell orders on retail exchanges. By tracking everything within the blockchain, or ledgers, for some coins - we can see actual supply. We can see what coins have movement and what coins are dormant. If coins are dormant for so many years, why calculate those into the market cap? If the coins suddenly "wake up", then the market cap can quickly be calculated with the adjustment in supply. The coins should be valued simply on supply and demand across the entire blockchain, and not how many sellers and buyers there are on retail exchanges alone. Coins that are sitting on OTC without buyers for too long would show lack of demand as well. If these coins are trading with heavy volume, from OTC to investor, form investor to retail exchanges, this should show movement or volume and be counted as owned coins. Basically, somehow I believe that OTC networks need to be identified and combined with the traditional way we track "buy and sells" to give the price a real value. Our current price of 3,500$ bitcoin is not accurate, we have no way to tell at this current time how many coins are actually available and have not been bought up by institutions.
I believe that the current way we determine value will not be here to stay. The Crypto-sphere is a changing and evolving space and we all want it to change the world for the better.
Please feel free to add your comments below! Like I said at the beginning; I am just trying to identify potential issues in a developing market.
I have no doubt 2019 will turn into a great year for our space!
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