Over the last 24 hours we've seen two big pieces of news that have many in the crypto world a bit spooked. I look around on different forums and people are freaking out as to why this is occurring. I believe that the main driver of this drop is that we now have sophisticated or institutional traders in the crypto world. These traders have algorithm assistance, and historical big data on reactions from years of market experience. For those of us who HODL we are going to continue to see turbulent times. The traders now hold significant sway, and will seek to take profits at the beginning of negative news cycles. We can use pattern recognition also, this is how institutional traders work. Negative news breaks, they sell massive volumes, this creates panic selling from the more risk averse HODLer, or inexperienced crypto savages. By the time we little people start to sell in panic mode, the institutional investors begin to come back in. As evidenced yesterday, traders sell BTC at $10,600 in huge volume 74k according to cryptocompare, then start coming back in where they believe the floor will be, this time at just under $9,400. They move volume and take profit according to their models. And we just don't have access to these sophisticated models and is why HODL is the best practice for me, and may be for you as well.
I can look back in my 'instement' history, which didn't equate to much in a fiat sense, and see that by the time I would try to exit the sheep are getting slaughtered. I would sell after the profits have been taken, and I would buy back in after the run back up. So it was my gains that traders sought. It was a hard pill to swallow, but I learned it early enough to hopefully head off future losses. It was a good learning experience and one that I now apply to my crypto asset portfolio.
Back to the news, the two drives in this news cycle were the SEC statement and the Binance 'hack'. The Binance hack is easily determine as FUD, and that is was a successfull phishing scam for those unfortunate to not realize the they were logging into a fake skin and didn't have two factor authentication. It is also a good learning experience, we must set up proper security, and additionally if you HODL don't hold all your assets on an exchange, get a secure wallet or paper wallet. Again it is important to realize that sophisticated traders are now in the crypto space, and they have built fortunes on negative news events.
The SEC Statement (see release at below link):
https://www.sec.gov/news/public-statement/enforcement-tm-statement-potentially-unlawful-online-platforms-trading
It was always going to be the case that regulation would occur. The SEC is still in the beginning stages of developing a plan around crypto assets. The statement:
"If a platform offers trading of digital assets that are securities and operates as an "exchange," as defined by the federal securities laws, then the platform must register with the SEC as a national securities exchange or be exempt from registration. The federal regulatory framework governing registered national securities exchanges and exempt markets is designed to protect investors and prevent against fraudulent and manipulative trading practices."
We have all been waiting and holding our collectives breaths on what the SEC and other regulators would do. This statement though can and should be viewed as guidance for the trading platforms. The SEC has detailed verbiage on what is and is not an 'exchange' and should assist crypto platforms to either meet, or identify their exemption from these requirements. There is long term good news here, and that it legitimizes crypto assets, and provides the path for us to move forward. So I am going to continue to HODL, and try not to think of myself as the smartest in the room, how about you?