Looking for a Cause for Recent Price Trends

By Daniel Goldman | Trading Politics | 15 Aug 2019

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This article is going to be brief, since I really just want to comment on a couple points. Over the last couple of days, most of the crypto world has seen a significant decline in asset values. Very few cryptoassets have been left unaffected. As soon as prices started to decline, everyone started looking for a reason why. I have a few ideas. 

Possible Causes

First, it was announced that Barclays will no longer be servicing CoinBase. Since CoinBase is one of the largest, if not the largest, method of converting from government fiat to crypto, and vise versa, that's going to create a head ache for a lot of people. It also signals that some of the larger financial institutions are not as ready as we thought to support cryptoassets. While access to crypto has declined, supply technically hasn't, so a reduction in access would appear as a demand side shock, rather than a supply side shock.

Second, the IRS has recently started cracking down, and screwing up, with respect to crypto trading profits. They seem to be trying to make sure that people aren't using crypto to avoid taxes. Honestly, I'm not surprised. And as much as I am an anarchist and think that taxation is theft, I don't think that labeling crypto as a way to avoid taxes is smart. The IRS will want their cut and they'll find a way to get it. Since tax evasion is one of the unhealthy sources of demand for crypto, increased activity with tax enforcement is likely to drain some enthusiasm from certain crypto users and holders.

Stop Looking for Exogenous Factors

I've raided on various groups, such as many Elliot Wave traders, that are purely technical analysts that don't believe that fundamentals play any role in market prices. They're honestly almost a cult of people that believe in mystic forces at work in the market. But at the same time, purely fundamentalist analysis is flawed as well. The dynamics of market prices are complicated. Group psychology has a lot to do with it. Simply how the current market makes investors and traders feel, can influence the future of the market. There isn't always an external cause. So while it's not a bad thing to look for potential catalysts that are causing market actions, it's not a good idea to think that there always must be one.

Originally posted on Uptrennd

Daniel Goldman
Daniel Goldman

I’m a polymath and a rōnin scholar. That is to say that I enjoy studying many different topics. Find more at http://danielgoldman.us

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