When I woke up this morning and took a look at the cryptos going down and then the news taking like they know about the cryptos phenomena. The problems with the current financial analysts is that they have almost no experience or understanding of the cryptos. Like this professor here.
And then some making crispy headlines like here calling it a monday massacre which in terms is for the time being a massacre of many starters.
This article is to make investors understand how cryptos work and why their prices fall down so steep.
I will try make make it as simple to understand as possible.
Let's say I have a great idea like the idea of IOTA explained very nicely here
https://www.cryptocoinsnews.com/iota-falls-hard-topping-nearly-crypto-losses/
and
Now I need money to implement my great idea. The good thing about cryptos is that you can crowdfund yourself which is not very easy without the cryptos . Now I create tokens based on BitCoin or Ethereum contracts and put up on exchanges for sale. Investors come in and buy this token which provides me with the money to start an office hire some people and making my idea reality. The factors here are that I have to pay
- Employees
- Rent for the office
- Electricity/Utility bills
- Buy hardware for my employees to work on
- Marketing expenses
- Eat and drink to stay alive
And all of these things are not yet possible with any of the current cryptos even the Father of all Alts Bitcoin.
In order to meet with my expenses I will cash the pre-mined tokens or coins I had mentioned before launch that are kept for development and this is where the so called MASSACRE starts. Let's say I need 1 million dollars in cash to start my work. I will sell my development coins/tokens and the people who do not realize this whole scene will count it as a Pump/Dump and start dumping whatever they have at whatever price they can get and this becomes their own massacre just because of fear and lack of knowledge of the whole process.
Next thing happens is that most of the people mining are selling their hashing power through services like nicehash so when the price on exchange goes down the people buying the hashing power from nicehash take down their order prices in order to keep their profits in sync which the current coin price. So then they start selling coins for low pricing and then this ripple effect keeps on going until the people with low patience have lost all they had. During these times people with patience will buy or will not sell what they have under the price + profit and will wait until this ripple is over and things bounce back.
[b]Why Ethereum is falling so Hard?[/b]
Most of the new tokens issues and put for sale were based on ethereum and so when the process explained above starts the currency with most of the tokens based on will get hit most. But the good thing is that it will bounce back again even at more speed since most tokens are based on it.
I am not saying that there had not been any Pumps/Dumps in cryptos yes there had been but there are not as many financial frauds by established financial institutions like Insurance Companies, Banks, Mutual Funds, Bonds and most of all the fiat currencies themselves. Cryptos numbers in comparison are far less. So cryptos will not only survive but thrive the people who loose here are the ones who do not have patience and just want to be billionaire overnight.
Cryptos right now are for the ones who can play long enough to make profit not for the people who want to become billionaire overnight. Read all the stories of people who made money from cryptos all had one thing in common...
[b]Patience!!![/b]
Keep always 1 rule in mind if you want to make profits from cryptos.
[b]Always sell in profit no matter how long the wait is.[/b]
The solution for this will be a platform to shift people from fiats to cryptos even for normal day operations which will be coming very soon so be patient please.
You can also read this article @ https://bitcointalk.org/index.php?topic=1987291.0