The current cryptocurrency market is too much small and primitive to be influenced by fundamental economic factors such as technological development or the adoption of currencies and innovative instruments created in this sector.
In fact, the only factor that determines the ups and downs of this market is the flow of capital in and out of the exchanges.
And this has little to do with the development of blockchain. After all, we should already be used to this idea.
Financial markets have benefited for decades from very special mechanisms that create inflation in the prices of securities.
In most cases, this inflation is artificially triggered by making a greater volume of purchases appear than the market would have recorded had it been left to its own devices.
On the stock exchange, these stocks are created by central banks and by listed companies themselves, with both engaged in massive purchases of securities that inflate the value of shares.
In the cryptocurrency market, too, inflation is created by the repurchase of cryptos, carried out by the exchanges under the direction of the same companies that issue such cryptocurrencies.
In both cases the mechanism is the same:
– the programmed increase in purchase volumes leads to the desired increase in prices;
– and the rise in prices makes the assets more desirable, triggering a bullish market.
As far as cryptocurrencies are concerned, so far, the most exhaustive study on the upward manipulation of volumes in exchanges has been that of Sylvain Ribes, praised even by the Binance CEO.
Ribes has calculated that, given the limited size of this market, just $50,000 is enough to upwardly manipulate a mid-range currency with a capitalisation of $3 billion, such as NEO or IOTA.
The study also found that the exchanges with the highest rate of inflated volumes are those that make exchanges from crypto to crypto, not those that exchange from fiat to crypto currency.
This last data can be obvious, since the exchanges that change fiat, like Kraken or Coinbase, are linked to bank accounts and therefore they are “wearing two hats”, so to say. However, this data also helps us to understand the prolonged and deep decrease of the current market.
Because, in my humble opinion, today’s decline is not only due to active manipulations downwards (the infamous manipulations by the media or governments, etc.).
Rather, it is due, perhaps to a greater extent, to the fact that there are no more upward manipulations.
And why are they no longer there? Because, as the Ribes study shows, these manipulations were made in the exchanges that exchange only crypto with crypto.
And precisely in this period, said exchanges (the largest of them) are engaged in operations of seat transfers, mergers or acquisitions and much more which forces them, for a more or less lengthy period, to undergo the verifications of the regulatory bodies.
You will excuse me if I do by no means give you any concrete examples, but I have no desire to be charged with defamation.
However, if you follow the news of the specialized media, you’ll know which exchanges I am referring to and you will notice the singular timing with which almost all of them go through this “cleaning up” phase. It is this that currently prevents them from the essential “programmed inflation” of the prices I was referring to.
Call me cynical, but considering the way the world works, I hope with all my heart that the cryptocurrency market will soon regain possession of its God given mechanisms of programmed inflation.
In the world of central banks, you cannot survive without it.
And in the crypto market there was another powerful mechanism of planned inflation, this time linked to ICOs, which now seems to be at stake.
The price differential of the tokens created during the ICOs in recent years had contributed to very high prices, some of which were independent of the actual value of the issuing companies.
(And if this makes you upset, consider that almost all companies in the Nasdaq, with similar mechanisms, are listed billions more than their real value).
Now, however, the companies that had issued those tokens are facing the downgrading of their assets held in the form of cryptos.
And in order to support further developments of their projects (the well-known roadmaps), they were forced to sell off many of said capitals, thereby eliminating the inflation created previously.
This mechanism, like the previous one, from the beginning of April is hopefully over.
So, summarising, among the main reasons for this important bearish phase we have listed the end of an upward active manipulation (planned inflation freeze), that is:
1 – the blocking of the upward manipulation by the exchanges
2 – the massive sale of cryptos, post-ICOs
In my opinion, we can include the initiation of mechanisms of active manipulation downwards, or programmed deflation (ie. the creation of false volumes, this time of sales) only in a third position, keeping in mind that it can be carried out through a variety of systems:
- false volumes of Coinmarketcap (the well-known site, but after all completely anonymous, which was -anonimously- discussed in this article)
- false futures volumes. In a market that has seen a drastic decline in capital, futures linked to cryptos, although limited in relation to total capital, can have an impact.
- threats of accounts being closed or accounts being verified by exchanges that change from fiat to crypto
- dissemination of negative news by the specialised media
- a legislative confusion created on purpose by the American regulatory bodies
- restrictive application of the rules by Japanese and Korean regulators
- geo-political weakness of pro-crypto countries, such as Europe and Switzerland
Is there a single direction in this series of events, all leading to an active programmed deflation? It is difficult to say.
Many countries, institutions and corporations are engaged in a ferocious activism against this market. However, it is not certain that there is a single plot under way.
Finally, in our opinion, this long decline in cryptocurrencies is not due to a conspiracy, but to a series of economic, political and social factors, both internal and external to this market, as well as due to a combination of rather trivial circumstances that limit its planned inflation.
It is probable that there are several “competitions” in progress, but these only indirectly touch the cryptocurrency sector, even if they heavily condition its course.
For sure, at a certain point the new upward trend will have to be triggered by an event or a series of very strong events that will succeed in reuniting the markets and interrupting the dispersion of resources and the current conflicts.
I do not believe that the event will be linked to technological or economic factors (ie. the advent of new tools and new ways of using cryptos).
It will instead be linked to a convergence of efforts in the financial sector, which will positively influence the ability of the exchanges to resume once more the controlled inflation of the market, as it should be…
We’ll follow this sensitive phase of cryptocurrency history closely and with our updates you’ll always be the first to know what’s going on.
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Mariangela Badano for BlockchainTop News