Thinking in Crypto

in #cryptocurrency7 years ago (edited)

Imgur

newbreakline_darker_color.png

It’s been a long day of convincing my cryptotrading colleagues that the sky isn’t falling and that the Bitcoin has gone down in value before and most probably will bounce back to reach new heights. But one thing that became very clear that a lot of them aren’t used to thinking in crypto.

newbreakline_darker_color.png


Imgur

Let me start with an example. I live in Europe and our currency is the euro of course (just in case you didn’t know). On the other side of the ocean we have the United States who use the Dollar. Now the euro is worth more than the dollar but for the sake of my story let’s say that these currency are worth the same.
Now say that I am going on holiday to the U.S. and I want to buy a Sony Playstation while I am over there. Now this will set me back around $400 (of course I am going for the pro version but that’s beside the point).
When I exchange my €400 euro I will get $400 (again for the sake of my story I have banned transaction fees and other hidden costs).

Now let’s say that the euro becomes more valuable while I am vacationing in the U.S., the euro suddenly doubles in value compared to the dollar. So now when I exchange my euros I will get more dollars, right? For every euro I will receive 2 dollars (are you with me so far?).
The result of this increase of value of the euro is that I only have to exchange €200 to get $400 (nice!).
In short the Sony Playstation now will only cost me €200 instead of €400.

Older Europeans are quite used to this because in the olden days before the euro this kind of math was quite normal. People would go to neighboring countries to buy goods if the exchange of currency was in their favor.

The thing is that the Playstation still has the same price tag, the price hasn’t gone down but yet I payed less. Now if we turn the scenario around the opposite will happen. If the euro's value drops in half it would mean that I have to exchange €800 to get $400 so the Playstation will cost much more, and again the price of the Playstation has remained the same.


Imgur

newbreakline_darker_color.png


Imgur

Now back to Cryptocurrency. Let’s replace the dollar with the Bitcoin and the euro with...well any altcoin actually. The value of the Bitcoin has gone down 50% since its recent surge and a lot of people are panic selling because they see the dollar value of their altcoins going down with it.
But what they are forgetting is that the dollar value is going down as extreme as it is because the Bitcoin’s value is going down. What they need to do is compare the value of the altcoin against the Bitcoin (satoshi) instead of the dollar.

Again an example. Let’s say you own Steem (Yeah, let’s pretend), you buy Steem with Bitcoin and if you exchange it..you get Bitcoin, right? Now if you want to cash out, you sell that Bitcoin for dollars (or euros... or whatever currency you prefer). Let’s say you own 16,000 Steem and decided to sell it (because of the fact that the Bitcoin is hitting that $16,000 mark) and you get 1 Bitcoin (the price compared to the bitcoin is 0.00006250 BTC or 6,250 satoshi in this example).
Now fast forward to present day when the Bitcoin is worth $8,000 (price is slashed in half), if you would sell your Steem now you will get the same amount of BTC (namely 1). You see the price of Steem compared to BTC has not changed, 16,000 Steem is still worth 1 Bitcoin.

However in your Blockfolio app or price chart online you will see something different, that same amount of Steem that was worth $16,000 in the old situation (when BTC was worth $16,000) is now "only" worth $8,000.

But the actual value of Steem has remained the same.


Imgur

newbreakline_darker_color.png


Imgur

Yes, the price of altcoins is going down at the moment but be sure to compare the price of the altcoins against BTC (if that is the coin that you bought it with). You will see a different (the actual) picture. Remember you only lose money when you sell at a loss, don't panic sell, keep calm and wait for the coins to bounce back.


Don_t_forget_to_leave_a_comment_banner.png

newbreakline_darker_color.png


Imgur




newbreakline_darker_color.png

recent_posts_header.png

Imgur

Imgur

Imgur

newbreakline_darker_color.png

Imgur

newbreakline_darker_color.png

Sort:  

Awesome post, this is exactly what I am trying to bring over to some of my friends. Look at your altcoins from the ethereum/Bitcoin exchange rates. These are acting the same as they did before the Bitcoin crash.

Thanks for explaining it this clear.

Thank you. It was a exhausting day trying to explain to some of my colleagues and even friends who are new to cryptocurrency that in some cases the value of their coins had not gone down but actually gone up. They only saw the decrease of value on their blockfolio app and were stressing out like crazy.

Best part blockfolio (like most other apps) can change the base currency to Bitcoin...did that yesterday. Looking a lot better, Bitcoin will regain it's momentum and will lead the way to more use of cryptocurrencies as actual currency.

@xervantes, you bring up a very good point. We have a hard time thinking of financial transactions that are not based on fiat money.

People need to realize that they have not lost any of their holdings (or shares) of BTC or other type of crypocurrency. They only way you lose in this case is if you sell (just like you said).

I see a rebound in the future with a stronger pricing base. We still have a lot of room to grow.

Sorry to hear about your loss with bitconnect.

Nah, I didn't invest in bitconnect :) I was just kiddin'.. I did considered investing a while ago but the posts here on Steemit convinced me that maybe it wasn't a solid investment....Thank you Steemians!

That's good to hear! I was a bit concerned for you after hearing that news. So glad that it was fake news :)

Steemit is the place to be. Steem is the coin to buy!

That's good to hear! I was a bit concerned for you after hearing that news. So glad that it was fake news :)

Steemit is the place to be. Steem is the coin to buy!

Nice perspective on crypto. Its the truth

thanks audio guy, it is indeed the truth but for people new to crypto hard to fathom.

"Remember you only lose money when you sell at a loss, don't panic sell, keep calm and wait for the coins to bounce back".

This is a great advice and that many do not understand

True, it's almost funny seeing people who jumped on crypto around december of last year running for the hills.

Good point. Another mistake is thinking you made a profit trading altcoins when they're up against the dollar, but not against Bitcoin.

But today most altcoins are down compared to BTC. I'm buying cheap coins just for trading, which I haven't done in months.

Yup, it's like a sale at the moment. Alas I have no funds to buy some, saving my money for the upcoming bee token ICO.

BTC is coming again with new high price im sure

I am sure of it. The market will bounce back, hopefully with a vengeance.

Excellent analogy with the US$ and Euro story... Crystal clear. And yes, if we think cyrpto-crytpo instead of crypto-fiat then the picture looks totally different. I would like to say that the mentality of investors, whether crypto / stock / real estate or actually any type of investment, is totally different from that of traders. When prices go down, it's an EXCELLENT time for investors who know what they are doing because it's a great chance to strengthen their portfolios by buying more. So, I'm actually happy that this dip is happening.

I can't.. I invested all my money in bitconnect now my only source of income is Steemit :) But maybe you can elaborate on your very short comment.

OK so maybe you got lucky. lol Congratulations! :)