Many people jump into the cryptocurrency market and will rarely wonder about how it works. Why? They are drawn like moths to a flame. There is significant profit potential in the market at this current stage and many people are fascinated by the gains that take place in the crypto industry regularly.
The volatility can bless people with a massive increase in their goods or it can curse them and take their initial capital away. Those who are not careful will find themselves robbed of their capital. But people who are interested in staying in it for the long term think about creating systems, placing set ups, and creating opportunities to succeed.
It is essential for them to triangulate with the right people and advisors (robotic or otherwise) who have found success and will help them to navigate through these different trials and complex trading situations.
Further, to stay in the game for a while people must understand why experts push for and are enamored by the leading digital asset and the general cryptocurrency market in general. We want to understand who controls bitcoin and the general cryptocurrency market. It will shed some light on why many people build on the blockchain and want to see these principles come to pass.
Blockchain, Decentralization and Control
Control is at the core of what the leading digital asset is all about right now. The codebase for bitcoin came out in 2009 and it had fundamental parameters that decentralized control and participation. Governance and distributions was the novel aspect of the top tier digital currency.
We know that Satoshi worked to input fundamental concepts into the codebase that would be different from traditional government controlled currencies. He was able to place specific components that made bitcoin highly desirable multiple ways.
The critical principles were that it is peer to peer and would continue to be that way forever.
One element is that it is peer to peer. The second is that it would be open source in nature and foster collaboration as anyone could get involved, process transactions and mint rewards. Third, it is decentralized by nature so no one is in true control of it.
There are people who work on the core codebase and have contributed to it in the past. These people have some level of control in that they can reorganize the chain or configure it in some fashion. But the truth is that the community has a say and they can not willy nilly alter things at their will.
It would not make sense for them to do so because it would destroy the point of decentralization and cause people to doubt the provenance of the blockchain, digital assets, and their value in general.
Who controls bitcoin then?
Codebase over Humans
The codebase executes the commands and will do so forever. The codebase and algorithms are in control over the humans. The humans can modify the codebase and make updates but they will typically stay away from making major changes that defeat the principles of bitcoin. Remember that the main principle is that bitcoin will have a total coin release cap, and will continue to halve rewards every four years.
Everything can run without any regular intervention from humans, everything is already coded into the leading digital asset.
Therefore, humans do not control bitcoin; it is the code that executes and humans help it run and process transactions as regular.
But remember that humans play their specific roles and each of them matter. Who are they and how do they matter?
The first one is miners. Miners matter because they input energy to run machines that will continue to process transactions. Then there are the holders. These people matter because they will help to stabilize the system and make it worthwhile for miners. If holders continue to buy satoshis and keep them, it will go up in value. If it goes up in value, it makes sense for the miners to continue to participate and keep it going.
But remember that entities such as exchanges also play a role in the bitcoin ecosystem. For instance, exchanges play a role in helping to facilitate price discovery and matter in this world. Finally, developers are important in this ecosystem too because they can help build on top of the codebase and gain reward because of their efforts.
These individuals can attract a stronger user base and provide more value to the bitcoin ecosystem.
All of these roles matter and help to propel the digital currency system further.
But one of these people matters much more than one would think in the long run. Those that hold the currency help to dictate a significant portion of the ecosystem. They help to drive interest, mining hash power, and the strength of the network. Remember that increased demand for the currency matters because it means that people are optimizing for retaining more value in the network.
Holders matter even more because they can nudge the right moves to the protocol. Why? Everyone knows that people want to make sure the native digital asset of each network is extremely valuable. The point here is that investors matter. Remember that bitcoin experienced a significant attack in 2017. Another party did not agree with a special improvement to it and they wanted to go their own way.
They would be called bitcoin cash.
Thanks to the holders and the miners, not many people switched over to join that network and bitcoin went on to reach new highs. They were not successful because bitcoiners believed in the one true leading digital asset and stuck with it. Holders led the way and made sure that they stuck with the right chain thus giving less credence to the new fork. Remember that holders dictate demand and how situations unfold.
Investors are important but they are in balance with other people in the ecosystem. While people know that network effects and a strong user base lead to substantial value, developers and other participants in a chain matter to keep making it more valuable.
Who Controls the Crypto Market?
From an asset perspective, bitcoin controls the crypto market. Why does it control the crypto market? It is one of the most transparent, leading name brands, and trustworthy assets. It is like no other coin because no one has a face attached to it, there is no one that marketed it like other coins and networks. It was, it is, and it will continue to be that way. The leading asset carries significant weight in the market because it is the one that aggregates value from its wide base of users.
Investors in bitcoin help to show current sentiment and future investor interest through derivatives such as futures. These financial vehicles continue to have significant demand and will help to move the markets.
People don’t expect to see detachment from the bitcoin lead and control over the next few years and maybe ever. The digital asset will continue to hold the lead with more people gravitating toward it due its digital gold narrative and value increase.
When we are talking about market control, we are talking about what will move the markets. If bitcoin were to fall, then we know that other coins and assets would fall as well because it carries the most trust. As you can see, there are micro level movements in each network and how they change. But the macro level is that bitcoin is the one that continues to collect users, investment, and trust as more people and institutions gain exposure to the asset.
Then there is another theory that states stablecoins control the market. Rumors float around that USDT is one that is printed like fiat money and helps to inflate bitcoin value. Why is this important? If this is correct and these stablecoins can manipulate the market, and the underlying value is dictated by these stablecoins, then if something were to go wrong with the originators, then bitcoin holders might see a massive crash. The massive crash would lead to a downward spiral and may cause negative sentiment over the long term depending on the situation.
What would cause problems for stablecoin providers and creators?
Lack of solvency is one. If the companies behind stablecoins like USDT are insolvent for some reason, and if the theory holds true, then this may affect the value of bitcoin and other assets.
Legal issues is another problem for companies that might have a more opaque history like the companies behind Bitfinex.
Stablecoins matter because they capture a significant portion of the volume in the cryptocurrency world today. People love them because they help people have a stable value and quickly convert to cryptocurrencies when they sense an opportunity for a massive gain.
These assets are sophisticated and have a bifurcation, the first one is dollar pegged, the other is algorithmic. The more complex they get and the more sway they have in the market, the higher the effect it may cause, if the theory is correct.
Exchanges produce their own stablecoins, can go awry in times of high activity and can have some influence on the market. For example, if there’s a lot of activity happening in the market, and exchanges have extreme use, they can cool the market down by potentially stopping servers.
Insider trading within exchanges can also affect the market. They can slow down the rate of sign ups, and have different issues like flash crashes that cause value destruction.
The cryptocurrency market is complex with many people who have different interests in seeing opportunities and holding fast for several reasons. There are institutional banks, exchanges, retail investors, and many other entities that are involved that are essential in the digital asset industry.
It is not straightforward and will get more complex over time as people seek to preserve value and perpetuate it further. The principles stand strong and will continue to hold value as long as the fundamental philosophy of the industry is protected.