Earlier today I was scrolling through crypto twitter and saw quite a few people preaching bitcoin and other crypto currencies as if they were infinite money trees. This entire thing seems quite concerning as it’s identical to some of the tweets you can find from 2017 right as bitcoin was approaching it’s peak. It seems as if people believe bitcoin to be a company that’s succeeding and that’s what is driving the price up. They then begin to think if they’re doing good now why wouldn’t the price continue to go up. The issue here is obviously bitcoin is not a company but quite literally nothing at all.
Bitcoin is completely unregulated and a very large majority of the circulating volume is owned by a small portion of people. Since there are no rules and laws surrounding what you can do with your bitcoins these very wealthy individuals can move the money as they want to. Let’s say something happens in the future, a really large event of some sort, which causes the United States to feel the need to outlaw crypto currency as it’s a threat to national security. If this was to happen you could see a situation which involves the very small grouping of people that own almost all the coins. Let’s say a couple people start to realize the absolute catastrophic blow to crypto if/when this goes through. This small group may get cold feet and decide it’s time to start selling. Now even if this small people is only a few they’re part of the tiny portion of people that own most of the coins which means when they start selling the price begins to move. If at this point more of the large investors see this as a major problem they may also begin to follow which could in turn create a beginning to a free fall. The real issues begin when the average person buying bitcoin hears about the lack in faith from the people who have the largest investments. This person will then begin to think logically about their investment as if the people most educated about this area are pulling out then maybe they should follow. At this point a complete free fall would be happening and nobody would know where the bottom is.
Some could argue that an example like that is completely unrealistic, I get it. However I also have a somewhat more reasonable example to go alongside it.
Let’s say this some small group of majority holders decide to get together and discuss the future of their investment. All the people involved here understand the deregulation and know that if a majority holder unloaded their investment would be at risk. If someone was looking to get out, they should probably plan accordingly and leave at the same time. This could the have a large impact on the value of the currency. Bitcoin is known to be very volatile and could fall dramatically over a very short period of time. People would begin to panic and sell alongside.
PS: I got really high and typed this idek seemed interesting
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