2021.16 - Reset
TLDR:
Last week’s dump and liquidations are just Bitcoin’s way of shaking off a few degens. Hodlers are thankful for the dip and have been stacking aggressively in preparation for the next leg up.
THE STANCE
My personal opinion on where the ball might be heading.
Seeing the Matrix
Like Neo seeing the Matrix, Bitcoin’s Onchain wizards study the blockchain and extract meaning from it. They come up with fascinating analysis.
A newcomer that I’ve been following with interest is William Clemente III who popped out of nowhere and started dropping excellent analysis:
If you want to read up on On-chain Analysis I can think of no better place to start than these two articles by Yassine Elmandjra and David Puell.
In a Nutshell
It’s difficult to understand Bitcoin’s price action if you don’t understand derivatives —and maybe I should write a blog post about it— but the short version is that they are financial instruments that allow you to shift risk. They can be used for hedging (protecting against possible price movements) or speculating (hoping to profit from said price movements).
What this means is that there are people who can just as easily make money on price decreases as most people can on increases; I like to think of derivatives as instruments that “tense the rubber band” of price action. It takes more effort to pull the band in any one direction and it tends to snap back more violently when the tension is released.
With over $3 Billion in liquidations (explained below-left) in Bitcoin alone, last week was a bloodbath for leveraged traders, but as the quote below-right points out, this is healthy for Bitcoin as it “cools down” an overheating market after six straight months of gains.
Bitcoin’s price dynamics are not always easy to understand. There’s always a flood of narratives after a dip to understand WHY? In most cases it’s both unknowable and irrelevant. Rarely do price drops track truly significant news.
“We believe the root cause of the sell-off had to do with investor positioning rather than fundamental news. Simply put, traders were overleveraged and positioned long, resulting in forced liquidations."
—Greg Cipolaro, Global Head of Research, NYDIG
Instead of focusing on short-term price narratives. Make a plan to buy regularly, stack extra-hard on dips, and study Bitcoin’s long-term value proposition. That will strengthen your conviction in the asset and make these dips feel like blessings.
LONG BITCOIN
Recent news that keeps me bullish on Bitcoin —"long / bullish" means you have the expectation something will rise in value.
Venmo me Bitcoin
Following in PayPal and Cashapp’s footsteps, the enormously popular, US-based payment platform Venmo has announced it will integrate Bitcoin into its platform. This is not just big because of Venmo’s size, but also because of what it signals for the industry.
Then there were three
The third crypto-bank in the USA was just approved. Following Anchorage and Protego, NY-based Paxos —who are also Paypal’s cryptocurrency partner— has been conditionally approved for a national bank charter.
Paxos has been conditionally approved for a bank charter from the US Office of the Comptroller of the Currency (OCC), becoming the first crypto firm to get the green light to create an entirely new bank.
State Lines
US States will have to define their positions vis-a-vis Bitcoin sooner than you may think. indeed we’ve already heard from several with Wyoming leading the race, Florida wanting to catch up and Kentucky offering Bitcoin miners a tax-free status.
This week two more states joined the race in their own way:
The biggest takeaway for me is this:
Bitcoin is a race. A global one. Early adopters can benefit disproportionately and the world is starting to split into those who understand this and those who don’t.
If you are reading these words you are already ahead of more than 90% of the world, don’t get left behind.
Striking El Salvador
I was planning on writing an update on Lighning Strike’s rollout in El Salvador, only to realize it I didn’t share the news when it happened. Inexcusable as I’m a huge fan of Jack Mallers.
After a successful US release, Mallers and team decided to start their global rollout in El Salvador. The results speak for themselves.
Put simply Lightning Strike is one of those “change the world” caliber ideas. It will make money transfer fees go the way of telephone long-distance fees. And it can’t happen soon enough.
CRYPTO WARS
crypto- | ˈˌkrɪpˌtoʊ | concealed; secret.
The monopoly over fiat money will not be given up without a fight.
IRS’ Hidden Treasure
The recent popularity of cryptocurrencies has not escaped the IRS’ notice. They are gearing up to do something about it:
This one is going to get messy. Anyone who’s tried to do tax reporting on crypto transactions will tell you, it’s not fun.
This is not my area, so I’m just thinking out loud here: When you pay in Bitcoin you’d have to calculate the difference between Bitcoin’s exchange rate at the time of your spend and compare with the exchange rate at which you bought those particular sats to see if you had a taxable gain/loss(?), oh boy.
All I can say is if I were an accountant, I’d be studying how to help people with their crypto tax reports.
SHORT FIAT
Recent news that makes me bearish on the legacy financial system —"short / bearish" means betting it will go down in value.
Eat the Rich?
Let me be clear, I’m not opposed to the rich paying taxes. I’m opposed to stupid plans. And if you think that raising the taxes on the rich will mean a healthier economy, well I have a bridge to sell you.
I won’t go off on a rant here, I’ll just make 2 quick points:
The rich can afford sophisticated tax strategies.
If you confiscated the wealth of the top 1% you wouldn’t make a dent in the deficit.
Speaking of the devil, have you seen the deficit lately?
Screwing Savers
Convicted criminal and ECB President Christine Lagarde had a message for those who have spent their lives cultivating the discipline of saving part of their earnings and living debt-free: your discipline and responsibility will not go unpunished.
For the young couples of the EU, her message was : get into debt, we are making it a no brainer for you! so I’m including a little reminder here next to her video:
Gigi summarizes most people’s the situation well here and adds a timely reminder that should you choose to not participate in Bitcoin, you may be assigned a role in “The Great Reset”:
It’s not ALL bad though. As a client of mine —who knows what he’s talking about— reminded me:
Negative rates are one of the best opportunities to generate wealth. If you acquire good debt…it’s basically free money
—JPM
He is definitely not wrong.
PRICE DISCOVERY
This is the section where I talk about price with an updated weekly price chart. If this is your first time here, there’s a “how to interpret” guide below the chart.
Slipping
Bitcoin is close to “falling off the board” this week, if it doesn’t manage to hang on to the board it could keep falling until it touches “water” (currently at just over $37.5k). As I state below, I’d be surprised if that happens but it’s not out of the question. Remember that the entire airspace above the water and below the stratosphere is fair game in Bitcoin surfing.
Speaking of the stratosphere, notice how this prolonged chop between $50k and $60k is helping the stratosphere bend upwards —which means Bitcoin can rise higher (Stratosphere currently starts at $98.5K) without crashing
This makes me grateful for this sideways price action —it’s like Bitcoin is being given the chance to get acclimated after a steep climb, allowing it go getter strength before the next leg up.
Dip Fishing
Did you buy the dip? If you haven’t, it’s not too late! Let’s revisit our chart from April 12th. It immediately broke $60k only to spend dive back down to the high probability area at the end of that same week, and dipping down to moderate levels the week after that.
After a couple of exploratory wicks, price dipped into the “Low” probability category and seems to be bouncing straight back up.
If you used the chart as a map to go fishing for dips, I hope you caught some nice ones!
The “white washed” area contains the price activity published 2 weeks ago, the more “vibrant-colored” candles correspond to price action since the original chart was published. Each candle in this chart corresponds to 1 day.
Price predictions are risky business, but I’m happy with how this analysis turned out and I stand by it —I’d be surprised if we dip below $43k, although it’s good to remember that the end of the month tends to be a time for carnage (not that there’s been a shortage), Bitcoin could be shoved off the board yet:
Regardless of whether it goes down further or not, this is a great opportunity to add to your Bitcoin stack. We have much higher to go this cycle.
Never invest in something you don’t understand.
I coach individuals, families and corporations in the Why and How of investing in Bitcoin.
Schedule a free call with me to find out if Bitcoin coaching could be a good fit for you.
