Should we see the recent quick recovery (after a ~30% drop of many crypto’s) as proof of resilience of crypto currencies?

Alfonso Llanes, studied at Florida International University

Answered just now

Resilience might be too strong of a word to describe a subject which depends on a highly volatile and speculative market existing in cyberspace unlike coin based markets that support trade and commercial transactions.

Crypto currencies view from the Winklevoss Blended Bitcoin Index

“The Winklevoss Blended Bitcoin Index (WBBI)1 is used to collar the 4pm Eastern Time Gemini BTCUSD auction (Gemini Auction). The Gemini Auction is the settlement pricing mechanism used for the Bitcoin Futures Contracts (XBT), which trade on the Cboe Futures Exchange, LLC (CFE) under the ticker symbol “XBT” contract specifications. XBT futures are cash-settled contracts based on Gemini’s Auction price for bitcoin, denominated in U.S. dollars (symbol: BTCUSD).”

The Chinese Weight In

China cracked down on so-called “Initial Coin Offerings,” and there has been rumbling rumors that the Communist government is going to ban trading crypto-currency altogether. In response, the most prominent exchange, BTCChina, said it will end trading.

The question becomes then how to choose a narrative that explains bitcoin’s long-term place in the world: Should it be taken as a new monetary forte—or, in in the words of Jamie Dimon’s view, a modern-day “It's 'a fraud?” Or the view, sponsored by columnist Mohamed A. El-Erian, that” bitcoin and other crypto-assets are now a permanent part of the investment landscape and will have a role alongside precious metals as long-term sources of value?” It seems that either outcome could be possible—but so does a future collapse.

San Francisco-based Coin-base, GDAX exchange, which is a trading platform backed by the New York Stock Exchange, and venture capitalists recently a announced the launch of margin trading a Global Digital Asset Exchange (GDAX). However the SEC dealt a blow to the digital currency industry when it refused to approve a new Exchange Traded Funds (ETF), which would have let in bitcoin be traded like any other fund. The SEC in the meantime is reconsidering the decision however, the only stock-like alternative is the Bitcoin Investment Trust. This is a trust that holds bitcoin that lets people trade its shares under the ticker GBTC.

The volatility of crypto coins is mainly due to speculation boiling from margin purchases and short sales which follows the same route as selling a stock short:

• Borrow on a margin account to buy a stock to bet against.
• Immediately sell the shares of the stock
• Wait for the stock to fall in price and then buy the shares back at the new, lower price.
• Next, return the margin borrowed to the brokerage and pocket the difference.

The major risk of doing this is that the stock might actually increase in value, resulting in a loss. The price appreciation of a stock is theoretically unlimited and, therefore, there is no limit to the loss posed by a short position. Additionally, the uptick rule is another restriction to short selling. This rule is designed to stop short selling from further driving down the price of a stock that has dropped more than 10% in one trading day.

In conclusion the Jury is still out on the future acceptance of crypto currencies as a replacement of coin-based currencies for trade, commerce, banking and financial services.