You are currently viewing What does underlie the birth of the crypto market?  |  by Sunflower Corporation |  Coinmonks |  Aug, 2022

What does underlie the birth of the crypto market? | by Sunflower Corporation | Coinmonks | Aug, 2022

The first exchange appeared on February 6, 2010. The price of 1 BTC was $0.003. How was it evolving? Who were the first investors? Let’s find out!, the first exchange, appeared on February 6, 2010. At that time the price for 1 BTC was $0.003. For $1 you could buy 333 BTC. was a spot exchange: people could put their fiat money there, buy BTC for them and store them on the exchange, or put them into the blockchain for use

In the beginning, used PayPal, to deposit fiat funds into the exchange. On June 4, 2011, the exchange stopped using PayPal due to several fraudulent transactions.

The platform for sales was not only the Bitcoin market exchange but also eBay as an OTC platform (Over-the-counter). It is noteworthy that on eBay, the price was often higher than on the exchange.

The price of BTC:

The price of one BTC was $0.09 (07/19/2010) and $13.45 (12/31/2012). The local high was $29.6 (06/09/2011). The profit of early users who bought bitcoin in 2010 by the end of 2012 was about 149 times more. lost out to Mt.Gox. It was opened in July 2011 and by 2013 had taken about 47% of the bitcoin transaction market and by 2014–70%. Read more about Mt.Gox in the next article of the tutorial series soon.

Market characteristics:

– a small amount of computing power for mining

– niche prominence of blockchain

– a small number of user applications

– lack of any information apart from BTC whitepaper

– the highest number of rewards per block before first halving (halving rewards per mined block)

– Miners maintain the blockchain through computing devices that check and record blocks of transactions. For this, they receive rewards in BTC tokens.

– BTC has to be worth some real money for miners to maintain their computing power and increase their number. It means that it requires people who are ready to buy BTCs and a market where buyers and sellers can meet. We have already discussed the example of such markets: (exchange), and eBay (OTC).

– The Users who believed in the technology and its prospect, and understood the potential scale of blockchain.

– The Users who saw the demand for the asset, and its volatility. They believe in the constant existence of the supply’s liquidity at the expense of miners. Miners had a direct motivation to sell BTC to compensate for the cost of maintaining the computing capacity, to increase the computing capacity for greater earnings, and to increase the net profit. At that time people could buy BTC for $10 on exchanges or directly from miners and sell them for $20 to OTC users who didn’t know about exchanges or how to use them.

– Users taking advantage of anonymous transfers (there were almost no OpSec specialists at that time who could keep records of wallets’ users)

– People who could not mine BTC themselves due to the lack of technical skills

– People who understood how to make money on the price change by implementing an on-chain analysis of migration, supply, and demand of an asset

1.Long-term investors

These Users buy an asset in any zones. Their strategy — is to stay in the market as long as possible and not to sell assets. They can move the price up and down collectively.

2. Speculators

These Users gain positions only at the bottom. They sell the asset gradually by the price movement and the demand growth. As soon as the demand level decreases, they begin to fix profits. They do not influence the price as much as long-term investors, because they usually do not buy during price fluctuations.

3. Regular users

These Users buy and sell only when they need to and have little or no influence on the price.

Taking into account the further price growth and certain price fluctuations, for example from June 2011 to November 2011 when the price went down from $29 to $3 (-90%)we can assume that:

– Most of the early buyers accumulated BTC until June 2011, when a lot of new buyers came to the market and the price began to rise, and the early buyers began to sell more to fix the excess profits

– Then the inflow of new buyers was getting lower and lower, so early sellers, miners, and new users drove the price down to $3 by their sales

Most likely at the $3 price level all the stakeholders except the miners began to actively buy again, realizing that $29 was not the limit for the price if more users would come to the market

It became clear that The profit of the sphere would depend on new userswho would buy more and more assets and move the price up by their chaotic purchasesand their chaotic sales would not affect the price movement much.

The strongest impact on the price was the fact that no new users were willing to buy at market prices. There were also active sales by current sellers who did not see that there were fewer buyers. The supply became much greater than the demand. It had been lasting until the crypto-winter of 2018, never going into a correction of -90% for BTC again

  1. Looking at the current market and previous market cycles, not much has changed. The market still goes into a correction when new users do not want to buy or do not come, and current sellers don’t stop selling. We saw this in the trading history in 2018, and we see it now. Small local bounces are temporary, a bullish cycle will when the global environment pushes new users to buy the asset and begin and they will new enter the market.
  2. BTC is becoming more marketable as halving reduces the power of miners in the supply structure. In the future, the most considerable influence on the price of the asset will have those who have accumulated the most of the asset.
  3. Exactly in BTC people who were earlier in the market, increased their assets, and did not lose them, have the biggest influence. There were almost 8 years of uninterrupted growth plus a bullish cycle in 2021 that set a new price maximum of $69 000.
  4. The BTC market logic is similar in 2010 and 2022, most probably, because the most significant users with the largest amount of assets at the moment formed a certain model of behavior in those days, using it later.
  5. The period from 2018 to 2020 can be considered the most interesting of all the stages of market development. Just then the strategy of the rapid growth of assets did not work and the price went into a two-year sideways trend.

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