Original Post – https://www.omoku.io/blog/decouple_iota_from_bitcoin
All Credits to by Hatice
The latest price changes of the IOTA token show once again very impressively why a real IOTA / fiat money bridge is needed in the coming year more than ever.
What exactly happened?
Source: Bitfinex, 12/22/2017 (17:15)
The price of the IOTA token fell temporarily from $4.80 to $1.10 within approximately 6 hours on December 22, 2017, for no apparent reason, which corresponds to a price loss of about 77%. After that, the price recovered, but initially remained below the price of $4.00 . The price changes correlated remarkably strongly with the price of the bitcoin. But it is not only since December 22, 2017 that it is obvious that the Bitcoin is mainly responsible for the high volatility of the price of the IOTA token.
What does this volatility mean for IOTA?
If this high volatility and dependence on other cryptocurrencies – especially on the bitcoin – should remain in the coming years, in which IOTA is expected to be increasingly used in the real economy, there is a risk of negative effects that go beyond pure price volatility. Although certain price fluctuations are a part of cryptocurrencies so far, it is not conducive to companies’ confidence in IOTA if the IOTA token loses more than 60% of its value within a very short period of time, even though the technology has not changed fundamentally. For example, a dwindling confidence in the stability during the test and implementation phase in real companies could actually have a negative impact on the speed of implementation and adoption of IOTA technology. If today’s devices or sensors would already have their own IOTA Wallet on a large scale, it would make a big difference whether, for example, 100 MIOTA with a value of $4.80 each or 100 MIOTA with a value of $1.10 each was deposited on a IOTA Wallet 6 hours later.
IOTA does not need the Bitcoin
From a technical perspective, the IOTA technology is not dependent at all on the Blockchain technology, the Bitcoin or its price. From this point of view, therefore, it makes no sense why the price of the IOTA token reacts at all to price changes of the bitcoin or other cryptocurrencies. The fact that the IOTA token still reacts in reality is mainly due to the following two effects:
- Relative cryptocurrency pair volume: The two currency pairs IOTA/BTC and IOTA/ETH together represent on average at least half of the total IOTA trading volume. The direct currency pair to the USD often times is a minority of the total volume. This inevitably causes the price of the IOTA token to fall with falling Bitcoin and Ethereum prices. This inevitably causes the price of the IOTA token to fall with falling Bitcoin and Ethereum prices.
- Distorted market perception and speculation: Most of the market sees IOTA directly linked to bitcoin. In addition, many speculators are not only invested in IOTA, but also own tokens of other cryptocurrencies, which are often bought and sold at the same time.
Omoku wants to decouple IOTA
This is where omoku comes in. We aim to reduce these two effects in order to increase the stability of IOTA by decoupling it from bitcoin and other cryptocurrencies in the medium term, thereby strengthen confidence and adoption of IOTA. First and foremost, this is to be achieved by weakening the relative volume of the cryptocurrency pairs IOTA/BTC and IOTA/ETH by first establishing the currency pair IOTA/Euro and making it available to the market at the most favourable conditions possible. In the medium term, IOTA is to be decoupled from the market perception of Bitcoin and Ethereum as far as possible.
While the omoku team continues to work intensively on the development of the platform, I can already tell you that the company is now officially registered in Estonia. We will report on it in the next few days and publish further information on omoku.io. Until then, we are looking forward to your visit on our platform and social media channels as well as on Slack. On behalf of the whole team, I wish you a pleasant holiday season and a happy new year!