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Fundamental Analysis Prevails For Bitcoin
Well, here we are. After months of frustrating action for traders, Bitcoin has finally given a sizable move. Not too long ago, I had just begun to see the possibility of a bigger relief rally for the largest cryptocurrency. This was due to some technical developments, coupled with the lack of bad news in the crypto market. Granted, I had no intention of purchasing any and still do not. So, my instincts regarding the fundamentals for this market have saved me some extreme losses. For this entire year, I've been writing about why I do not think the fundamentals of Bitcoin and other cryptocurrencies make sense. The vast majority of my posts have been extremely bearish. Many of those posts are linked below. It seemed as though I was just going along with the prevailing sentiment. Yet, my feelings have only become more validated as the year has worn on. When something does not produce an output, and when something lacks usage outside of holding, transferring, and trading, it is subject to speculation - and speculation only. Without a material purpose, an asset like this is easy to manipulate. The question is - would it still be wise to buy Bitcoin from an investing standpoint?
Since money is a somewhat abstract concept, the narrative around Bitcoin and crypto can be warped to fit the intended audience; whether it's empowerment for marginalized/oppressed populations and financial access for the unbanked (political left) or the distrust of big government/big banks (libertarian right), Bitcoin's got a spin for everyone. Or should I say, everyone with the means to access it in the first place. When we saw what happened with El Salvador, that was my "AHA!" moment. No one wants this garbage. People invested in crypto expecting to say F-U to the big banks and avoid a bank run. But here's a very genuine bank run, staring us in the face.
The White Knight is a Wolf in Sheep's Clothing
Enter the snake oil salesmen, as we like to call them. You may know them by name: Sam Bankman-Fried, Do Kwon, and Changpeng Zhao. We call them snake oil salesmen because their entire business runs on selling something that is virtually useless. And my theory is that they know it. Just today, Binance transferred an enormous amount of USD stablecoins out of their exchange. My guess CZ (Binance) and Justin Sun (Tronix) are somehow using their stablecoins BUSD and USDD to manufacture "infinite" money. They extract capital from traders/investors through these unregulated stablecoins and then swap these unregulated stablecoins for more "legitimate" stablecoins such as USDC and even USDT, financing the grandest counterfeiting scheme the world has ever seen, and the first instance of broader DIGITAL counterfeiting. Since this has been a theory of mine for a while (remember, it is only a theory), it came as no surprise to see CZ appear as a "white knight," eliminating the next "bad" player from the crypto market. In taking down SBF, perhaps he bought himself a little time to extract a bit more liquidity from the market. Greed knows no bounds. My theory is that eventually it will all come crashing down. But maybe this is just extreme thinking.
It doesn't seem so extreme after what just happened.
Now, what about the technicals??? Are there any technicals left for Bitcoin???
Well, we have a bounce. The better than expected CPI numbers have sent markets rallying, yet Bitcoin is still substantially lower than it was yesterday morning. Just check out its performance against SPX. This is a chart I show frequently, but I think it illustrates something important:
It shows that equity markets can very well just continue onwards without Bitcoin. The biggest setback for crypto with this FTX disaster is that SBF was a liaison of sorts between U.S. regulators and the shitcoin casino. Lying in the face of the government as the face of an industry will likely leave yet another stain on this market, and perhaps one that is impossible to get out. Yes, I think it is that bad. For those who say, "But no, it's just shitcoins that are in trouble! Not Bitcoin! There will be a new all-time high eventually so buy now while it's cheap!" well....we can clearly see from this last cycle - the average person cares little about Bitcoin itself other than as a speculative investment, and it is now trading below its previous all-time high. The longer Bitcoin stays low, the more likely events like these will continue to occur as there is no bailing out these crypto kingpins, and even the mass production of stablecoins can't keep up with a liquidity crisis. Even back before the LUNA fiasco, I suggested events like these seemed likely.
To move up from here, Bitcoin will need to attract buyers, not sellers here above 17.6k (previous bottom from June). It will also need to hold back above the previously broken downtrend. This trendline has some wiggle room (it's not totally precise), but you can see that breaking back below it yesterday caused a significant selloff.
The next major support level lies near 13.8k - the high from 2019. The $12.5-13.8k zone has a huge amount of historical traded volume. This area seems like it has already been fron-run by traders, given the size of the current bounce from 15.5k to now near 18k. During the initial bounce, USDT de-pegged momentarily as much as 3% and funding became extremely negative for futures, since liquidity dried up instantly as prices went below 16k. If price ventures down there again, I would expect price to get a bit closer to that 13.8k level, and perhaps it would put some stress on those bigger stablecoins and exchange futures funding. But, if Bitcoin can get back above 19.8k soon with decent volume, perhaps the medium-term bottom is indeed in. I just don't see it very likely for crypto prices to sustain higher levels in the future, even if they go up again in the short-medium term.
What a time to be observing and participating in financial markets! It's certainly an amazing lesson in economics and human psychology. Thank you for reading, and for taking part in this journey with me.
As always, this is not meant as financial advice, but for speculation and entertainment only. Please consult a licensed professional financial advisor before making any significant financial decisions. This piece represents my opinion only, and there are plenty of others out there.
-Victor Cobra
Since money is a somewhat abstract concept, the narrative around Bitcoin and crypto can be warped to fit the intended audience; whether it's empowerment for marginalized/oppressed populations and financial access for the unbanked (political left) or the distrust of big government/big banks (libertarian right), Bitcoin's got a spin for everyone. Or should I say, everyone with the means to access it in the first place. When we saw what happened with El Salvador, that was my "AHA!" moment. No one wants this garbage. People invested in crypto expecting to say F-U to the big banks and avoid a bank run. But here's a very genuine bank run, staring us in the face.
The White Knight is a Wolf in Sheep's Clothing
Enter the snake oil salesmen, as we like to call them. You may know them by name: Sam Bankman-Fried, Do Kwon, and Changpeng Zhao. We call them snake oil salesmen because their entire business runs on selling something that is virtually useless. And my theory is that they know it. Just today, Binance transferred an enormous amount of USD stablecoins out of their exchange. My guess CZ (Binance) and Justin Sun (Tronix) are somehow using their stablecoins BUSD and USDD to manufacture "infinite" money. They extract capital from traders/investors through these unregulated stablecoins and then swap these unregulated stablecoins for more "legitimate" stablecoins such as USDC and even USDT, financing the grandest counterfeiting scheme the world has ever seen, and the first instance of broader DIGITAL counterfeiting. Since this has been a theory of mine for a while (remember, it is only a theory), it came as no surprise to see CZ appear as a "white knight," eliminating the next "bad" player from the crypto market. In taking down SBF, perhaps he bought himself a little time to extract a bit more liquidity from the market. Greed knows no bounds. My theory is that eventually it will all come crashing down. But maybe this is just extreme thinking.
It doesn't seem so extreme after what just happened.
Now, what about the technicals??? Are there any technicals left for Bitcoin???
Well, we have a bounce. The better than expected CPI numbers have sent markets rallying, yet Bitcoin is still substantially lower than it was yesterday morning. Just check out its performance against SPX. This is a chart I show frequently, but I think it illustrates something important:
It shows that equity markets can very well just continue onwards without Bitcoin. The biggest setback for crypto with this FTX disaster is that SBF was a liaison of sorts between U.S. regulators and the shitcoin casino. Lying in the face of the government as the face of an industry will likely leave yet another stain on this market, and perhaps one that is impossible to get out. Yes, I think it is that bad. For those who say, "But no, it's just shitcoins that are in trouble! Not Bitcoin! There will be a new all-time high eventually so buy now while it's cheap!" well....we can clearly see from this last cycle - the average person cares little about Bitcoin itself other than as a speculative investment, and it is now trading below its previous all-time high. The longer Bitcoin stays low, the more likely events like these will continue to occur as there is no bailing out these crypto kingpins, and even the mass production of stablecoins can't keep up with a liquidity crisis. Even back before the LUNA fiasco, I suggested events like these seemed likely.
To move up from here, Bitcoin will need to attract buyers, not sellers here above 17.6k (previous bottom from June). It will also need to hold back above the previously broken downtrend. This trendline has some wiggle room (it's not totally precise), but you can see that breaking back below it yesterday caused a significant selloff.
The next major support level lies near 13.8k - the high from 2019. The $12.5-13.8k zone has a huge amount of historical traded volume. This area seems like it has already been fron-run by traders, given the size of the current bounce from 15.5k to now near 18k. During the initial bounce, USDT de-pegged momentarily as much as 3% and funding became extremely negative for futures, since liquidity dried up instantly as prices went below 16k. If price ventures down there again, I would expect price to get a bit closer to that 13.8k level, and perhaps it would put some stress on those bigger stablecoins and exchange futures funding. But, if Bitcoin can get back above 19.8k soon with decent volume, perhaps the medium-term bottom is indeed in. I just don't see it very likely for crypto prices to sustain higher levels in the future, even if they go up again in the short-medium term.
What a time to be observing and participating in financial markets! It's certainly an amazing lesson in economics and human psychology. Thank you for reading, and for taking part in this journey with me.
As always, this is not meant as financial advice, but for speculation and entertainment only. Please consult a licensed professional financial advisor before making any significant financial decisions. This piece represents my opinion only, and there are plenty of others out there.
-Victor Cobra
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