I think you make an interesting point regarding bittrex holding a sizable amount of bitshares. But bittrex has been operating for a number of years now during which bitcoin has had massive corrections, yet bittrex has withstood the volatility just fine. So even if bitshares were to sharply correct further, it would seem bittrex could withstand the correction. Would you agree?
RE: Bittrex vs. Bitshares = Decentralized Bitshares SCARES Centralized Bittrex
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Bittrex vs. Bitshares = Decentralized Bitshares SCARES Centralized Bittrex
If you look at the BTS/BTC chart on bittrex, you could see that the previous down trend was from 1300 to 280 in the course of Sept 16 till March 17 - 7 months. So, it had lost about 4.6x of its value in 7 month. Right now the trend is from 16,000 to about 1300 or about 12x loss in value from June till October or 5 months. So, this downtrend is much more severe. Plus the relative marketcap of BTS and its holdings at bittrex are at least 10x higher now than before compared to the bitcoin, so the exposure to BTS at bittrex grew a lot relative to the bitcoin. Also, there were almost $7Million BitUSD in June 2017, right now it is down to $3 million with the Bitshares DEX exchange trying to cover the $2 million of BitUSD loans automatically by selling the BTS. In the previous bear run, there were just $100,000 of BitUSD in circulation or 30x smaller than the current position. On top of this the leverage required to hold the BitUSD is 1.75, this translates into the selling pressure 1.75 times higher than the BitUSD level in a downtrend.
Consider the extreme scenario, where somebody, say a pro trader X holds those $3 million BitUSD and is not going to sell them until the bear trend clearly reverses. The accounts that sold those BitUSD to trader X are going to be liquidated against the collateral BTS they hold until those accounts buy back the BitUSD by selling BTS or get automatically liquidated to zero BTS. So, the downtrend is more likely to continue until the big trader X considers the bear trend to be over at which point those BitUSD will be converted to back to BTS. I am not saying that it will happen, but if the bear trend in alt coins continue for a few more months, a lot of BitUSD will continue to put additional pressure against the BTS with too little liquidity on the market and the price can continue its collapse. It would be good if the big trader X was the blockchain itself as I proposed, so it could intelligently support the BTS at key points and punish the speculators.
Bitcoin is loved not because of its slow transaction times, but because of its relatively low volatility. In contrast, the BTS essentially absorbs all of the volatility from BitUSD which has zero volatility. If we wanted to make BTS a lower volatility asset, we need to give it a big liquidity pool against the USD, like the central banks do in smaller countries around the world. Those banks buy their own currency by selling the USD from the pool when the national currency falls unreasonably and buy the USD when the national currency rises too fast. This is what the BTS blockhain should have done in June. The same goal could be partially achieved by advertising the benefits of BTS more during the downfalls on Youtube, Google and Facebook with the targeted ads and advertising it less when the price rises too fast - the blockchain should sell the BTS and put it into BitUSD liquidity pool used for advertisement and liquidity support during the bear downfalls.
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A friend of mine who is one of the early investors in BTS and founder of Satoshi Point in London got nearly a 100-bagger out of BTS from March - June. I told him in June it was a classic climax top so to take my chart reading expertise to heart since I used to do this with dot.coms in the late 90s, and sell at least half of his massive profits, if not the whole lot, then buy it back at a much lower price. He did end up selling much of it, so his small investment made him a millionaire.
That said, I couldn't agree more that the BTS blockchain should have been intelligently supporting BTS at critical points on the way down but only if it reduced the drawdown. In the world of stocks, stocks tend to find their level based on the health of the stock, the general market, and overall sentiment.
When it comes to supply/demand and psychology, perception is key. A dot.com with a worthless business model may have ran up hundreds of percents with a $500 million market cap in 1999 only to go bust by 2000. And even those stocks such as AMZN with strong business models had severe drawdowns from 2000-2002.
It was inevitable the 100-fold rise in the price of BTS in just 4 months would result in a severe drawdown which currently stands at -85%.
But how much buying power would blockchain need to support BTS on the way down, especially if the perceived value of BTS was $0.06 where it currently trades? If the market sees BTS worth $0.06 where it currently sits, trying to push it up with massive buying may just encourage other sellers.
As an aside, BTC has had a number of such severe drawdowns with the most recent from the BTC peak in Dec 2013 to the lows in mid-2015 for an -87% drawdown. While BTC may have less severe drawdowns going forward, there is no guarantee. Meanwhile, the price of other cryptocoins correlates to some extent with the direction of BTC. When BTC corrects, other coins correct far more. When BTC rises, many coins rise far more, at least from what we saw from Jan-Jun 2017.
I would think with time, many of these coins will die out leaving on the stronger ones, similar to what happened with the dot.coms.
But in the case of the stock BCST (Broadcast.com) there was much institutional support trying to prop it up, but its model was flawed and sentiment on the whole internet space turned sour after March 2000. Trying to support BCST after March 2000 was wasted money.
BTS on the other hand has a top flight business model in the cryptospace. It would be worthwhile for BTS blockchain to support it at critical levels to prevent fallout, provided the perception of BTS remains healthy.
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