“Try your luck in Las Vegas. The food is better there,” said cryptocurrency critic Jeffrey Robinson, who has previously argued that digital assets are not investments and are not currencies. This week, some of the people who poured dollars into Bitcoin are regretting their decision as the price of the digital token fell below $5,000.
Many people view digital currencies as simple gambling.
But in the market era, the fact is that if you lose money in Vegas, you help the local economy, but if you lose money on speculative investments like cryptocurrencies, stocks or oil, you simply lose it.
Speaking on CNBC, Robinson, author of the book “BitCon: The Naked Truth About Bitcoin” Bitcoin"), stated that anyone interested in Bitcoin should Google the “Greater Fool Theory” because, in his words, “cryptocurrencies are a prime example of this theory.”
The Greater Fool Theoryis a concept that states that you can buy an asset even though you know it is very overvalued if you are confident that you will find someone who will buy it at an even higher price. However, this only works if you find the fool before the asset price drops. And this concept is by no means limited to cryptocurrencies.
For example, many argue that the price of Bitcoin is inflated.
In the case of stocks, we can say that the decline in demand for Apple products and the unsatisfactory results of retail sales of gadgets led to a decrease in their prices.
In the case of oil, excessive inventories are one of the reasons why its price is falling to its lowest levels this year.
But the supply of Bitcoin is limited in quantity, therefore the fall in its price is not due to excess. And its current sales at bargain prices look more like someone is preparing to buy goods in bulk.
However, the fact that the decline in these markets is occurring simultaneously may be a bad sign. An unstable situation in one sector can serve as a signal for traders in other industries. And while the market and the economy are two different things, a large-scale loss of global asset value can have a profound economic impact.
Currently, many market analysts are talking about a phenomenon called the “deadly crossover,” which now applies to the oil markets, tech stocks and... the Bitcoin market..
Death Cross is a signal of a long-term downward reversal of the world market, corresponding to the intersection of the short-period (fast) moving average line with the long-period (slow) moving average line from top to bottom.
Although the death crossover appeared during bear runs in the markets in 1929, 1947 and 2008, this signal is not a death sentence, since there was a recovery after it.
According to the Investopedia website:
For small corrections of less than 20%, the temporary appearance of a "death cross" may reflect losses already incurred, thus indicating buying opportunities.
According to www.cbc.ca
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