Speculation

Speculation is described by the modern dictionary in two related yet different ways :(1) “the forming of a theory or conjecture without firm evidence.” and  (2)“investment in stocks, property, or other ventures in the hope of gain but with the risk of loss”. 

In the context of cryptocurrencies – definition (1) seems to have an impact on the definition (2). The past week has seen an immense number of theories – from the banning of exchanges by China, to a known name in the financial world calling cryptocurrencies frauds. The market reacts to every one of these news articles that are sourced sometimes from unconfirmed sources – irrespective of whether the player has any real investment in that asset class or not.

News

There are 160+ obituaries written for Bitcoin documented here since Genesis. Prices have dropped (sometimes significantly) each time any negative news makes it to the headlines causing significant profit booking by active traders. A classic event study will demonstrate the reliability of these markets on information from any source -reliable or not. Most of these news articles are the basis of Speculation but increase the “risk of loss” to long term investors.

Mature markets

Mature securities markets do not react with such swings in the face of unconfirmed news or rumours, since firms usually control their public announcements.The biggest difference between an evolving technological market, and, a mature one is  in the level of volatility (- mismatch in supply and demand -)  a market exhibits in the face of external news (- e.g. a trader who has zero stake in the Bitcoin ecosystem commenting about its problems without providing any evidence). Overall, mature markets will need more evidence, so as to increase the “risk of loss”.

In other words, the higher the evidence an actor provides to either support or oppose a viewpoint, the lower the “Risk of loss” would be. This maturity in terms of resilience (of supply and demand) is probably coming soon (and) will probably be a facet of these markets. Such maturity and reliance can happen only when we see mass adoption of applications such as the  “Brave Browser” , or, the instantaneous remittance application ABRA.

Bitcoin speculation