Quote:
Originally Posted by Onlydo2days
I have a question, I get why BTC gets more expensive as hash rates go UP but why is there supposed to be a massive correction after these cycles all the time? How is that related to the hash rate changes? If the changes are real and provide legitimate changes into the value/price of btc, then why is there a severe downswing that comes after?
Here is the deal...
Hash rate goes up in unison with the price of BTC... however, BTC does NOT go up because the has rate increases.
Valuation of Bitcoin is not dependent on hash rate even though they usually move in tandem.
Valuation of BTC is dependent upon one thing... the price of Bitcoin is the exact representation of the amount of liquidity in the network, It's that simple. We can calculate to the exact dollar the value of Bitcoin based on how much currency is in the system because there is a fixed allocation of BTC.
As the network holds more liquidity, the more there is usage of the network... the more there is usage, the hash rate goes.
Why is there always a retracement as the cycle concludes? Traditionally, it is based on a cascade event, or series of events, as people try and realize their profits. Normally what occurs is those profits that have been realized in Bitcoin begin speculating in alt coins as they continue with the euphoria and people continue to search for more exponential gains... eventually the Valuation can no longer sustain itself and there is a crash/cascade event(s) that causes crypto winter and the whole cycle slowly begins again. This all happens even though there really has been no change or degradation in bitcoin or alt coin network functionality... euphoria and speculation causes crypto winter.
THAT BEING SAID, we could be in for something known as a super cycle because of all the institutional and sovereign investments this particular cycle... that means, we may not see another 'classic' crypto winter.
Last edited by MSchu18; 01-04-2024 at 11:23 PM.