If you add in the fact that these exchanges allow trading on margin, you could have a situation where people are forced to liquidate their holdings regardless of the current price. It's the perfect storm for a flash crash.
If you add in the fact that these exchanges allow trading on margin, you could have a situation where people are forced to liquidate their holdings regardless of the current price. It's the perfect storm for a flash crash.
(assuming there's a fixed set of HODLRS). As bitcoin sells off, the number of sellers decreases, correct?
Assume on a given day, 10K buyers and 10k sellers.
As the number of sellers decreases, the ratio of buyers to sellers increases, correct?
maybe 10K buyers, 5k sellers, then 10k buyers, 1k sellers, then 10kbuyers 500 sellers, etc. this continues to put increasing upward pressure on BTC.
The above example would still be true even if bitcoin buying demand went from 10k to 2k. (collapse of tether BTC demand)
All that matters is that there's a certain minimum number of people willing to buy bitcoin for a given time period and the HODLRs who won't sell there BTC. as long as those two conditions are met, the number of buyers will soon outnumber sellers. it's just math in the end.
how can this be wrong?
First of all, in financial markets there is almost never a "fixed number" of buyers for anything, and especially not for something like Bitcoin. If you want to see something with (as good as you can get) to a fixed number of buyers, look at uranium. It's almost entirely used as fuel for nuclear reactors, which take years to build and to be shut down, so not only is the demand very stable, the future demand (for the next few years) can be pretty easily predicted. You'll be surprised to see that yes, sharp price drops can occur, even in such conditions.
Next, of course, the market of sellers for Bitcoin, "HODLR" or not, certainly does not behave how you imagine. Some sellers are forced to exit large Bitcoin positions every day, with reasons ranging from tax liabilities not payable in Bitcoin, businesses that accept Bitcoin that do not wish to maintain a Bitcoin position, divorces, governments that seize Bitcoin, etc etc. Then of course you have people exiting Bitcoin because they're people and life happens: their partner told them Bitcoin was stupid, or their government added rules to holding Bitcoin that scare them, or they read that a shady entity was printing billions of fake dollars to buy Bitcoin, or they bought in years ago and wow, they can buy a car with the profit! or they bought in yesterday and the drop in price spooked them.
None of this is to say anything about the price of Bitcoin or if you should buy Bitcoin - I'm just saying that your _reasons_ are deeply flawed.