But what is the main Reason For the Bitcoin Drop?

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But what is the main Reason why Bitcoin has Dropped from a High of $19000 to $3700?
The main driving force of bitcoin short is the miners.
2018 has been in a steady decline with all the charts indicating further downward movement, so instead of selling their coins cheaper and cheaper, miners bought short sale contract to lock in the price they can sell their future mined coins at.
Now, what is a short contract?

A short contract allows you to borrow assets from somebody else, in this case, coins. You then proceed to sell it at market price. Later on, you buy the coins back and pay back the lender. A short contract will only make senses if you know, or think, the price will be lower in the future.

Still don’t understand? here is an example to really dumb it down:

October price hovers around 6K, November average out to 5K, December is around 3K. A short sell contract made in October and due December, essentially allows you to sell the coins you would have mined in November and December at October’s price, 6K a piece. A pre-sale if that makes sense. Later on, when the contract is due, you buy the coins at 3K a piece, December’s market price, and return the coins back to the lender who lend you the coins in the first place in October. You profited 3K per coin.

Now, obviously miners don’t need to buy the coin back, they will just return the coins they have mined from those two months. So, they are basically forced into this short position, because they are stuck with bitcoin, not fiat, from their operation. Exponentially more miners are doing this now because the price breaks their cost to mine, they are shorting to limit their loss. In the summer, miners are just making less money, now they are losing and everyone is panicking.

So long as the expectation is bearish, the shorts will always be there, from the miners, and it would be foolish to do otherwise. Kind of a vicious cycle as more shorts in the market represent an overall negative outlook which will drive down the price.

 

Author: Cryptobonx

Cryptobonx is a Crypto –Currency and Blockchain Enthusiast.He is a believer of transforming complex information into simple, actionable content.

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