TWR — Bitcoin Bounces After Sharp Decline
Do you really believe $40k is the highest Bitcoin will ever be?
Ah, now that’s the Bitcoin I remember. You know, the type of Bitcoin that has your average screen time mirroring it’s 1 year performance. The type of Bitcoin that turns you into a light sleeper! The same Bitcoin that…alright, I’ll stop. This week was nuts.
It was just a regular Sunday during a bull market, the sun was shining and Bitcoin was hovering around $40k. Then something unimaginable started happening… Bitcoin started going down. While nocoiners slept peacefully, some bitcoiners had a restless night afraid of what Monday might bring.
Bitcoin plummeted Monday finding a bottom just above $30k — a 20% leg down from the highs of last week. Unfortunately, I can’t answer the obvious question of “what do you think happened?” Nothing goes up in a straight line forever and the momentum really picked up last week when Bitcoin breached $42k. As someone with a good pulse in the mining sector — I can say that I heard from a few prominent players that their much bigger Asian counterparts were selling large volumes of coins that might’ve exacerbated the sell-off.
Like clockwork, anytime Bitcoin shows material strength — especially this time around as it eats the world — the FUD starts. This week we heard from the FCA (UK’s Financial Conduct Authority) warning investors to be prepared to lose all of their money if they invest in crypto. HSBC announced that it has barred Bitcoin holders from depositing profits in UK banks. Lastly, heard from European Central Bank President Christine Lagarde on Wednesday when she called for global regulation of “reprehensible” Bitcoin. Interesting fact: the Euro is just ten years older than bitcoin.
What we saw at the desk
Monday was a record day at the desk and a career day for me personally. The kicker? Not a single coin was sold. Our clients showed off their epically strong hands and bought the dip. Some of the trades came from clients who got in heavy in the mid-teens and woke up down hundreds of thousands or in some cases, millions of dollars. I mean, maybe they were panicking on the inside, but they certainly didn’t show it. The level of conviction on display was something I haven’t seen before.
On Monday, nearly all cash flowed into Bitcoin. As Bitcoin kicked around the mid-30’s Tuesday and Wednesday, the boredom in the air was palpable and we saw an increase in alt coin trading by clients looking to take on more risk. ETH led the charge followed not so closely by ZEC, and XRP which were followed to a much smaller extent by some more exotic tokens.
Everything seemed right in the world on Thursday as Bitcoin found its way back to ~$40k. We noticed a mix bag of trades split up pretty evenly between the majors including BTC, ETH, ADA, and DOT.
The asymmetric Bitcoin trade might be less risky than you think
Typically I dive into a pressing topic (mostly) concerning Bitcoin, to wrap things up. This morning I thought I’d expand on a thought that I had in the middle of the night this week. Hopefully it reads through better than the groggy email I sent to myself at 3am the other night.
It’s commonplace to hear from investors that the risk/reward ratio is skewed to the upside for Bitcoin. What that means is that if it succeeds then there is a lot more room to run and if it fails you can lose all of your money.
“It could either go to $1,000,000 or it could go to $0.”
I think Bitcoin has already succeeded and it’s now just a matter of more people coming to the same realization, but my opinion is unimportant.
Barring a technical failure at the protocol level, my argument is that Bitcoin can’t go to $0. If the Bitcoin network remains secure and nothing fundamental changes then I personally would never sell. It took me years of being in this space 24/7 to get to this level of conviction but everyday more people around the world are getting there and that base will only increase exponentially with the proverbial vote of confidence from institutions and important figureheads, and the growing library of educational resources.
I am far off from the hardcore, borderline toxic “maximalist” that might put their life on the line for Bitcoin and what it stands for — but one can only assume that that number is growing each day as well.
In many ways, Bitcoin is a faith-based religion. It has all the characteristics to be around for a long time. Think about the institutions that have stood the test of time. They’re not banks. They’re not companies. They are churches, universities/colleges and the like that are powered by faith. As MicroStrategy CEO, Michael Saylor puts it:
“Bitcoin is a swarm of cyber hornets serving the goddess of wisdom, feeding on the fire of truth, exponentially growing ever smarter, faster, and stronger behind a wall of encrypted energy.”
A bit intense, I know. But if the swarm of cyber hornets is getting larger everyday, it begs the question: How many coins are currently being held by hardcore HODLers and at what rate is this increasing? What amount of bitcoin sold today will never see the marketplace again?
If all of their strong hands were considered in the equation and their coins were measured versus Bitcoin’s total supply, where does that leave us? The gap is certainly narrowing.
Where is Bitcoin’s real bottom? Just a thought.
In case you missed it…
- Trading platform eToro warns users it’s running out of Bitcoin https://cointelegraph.com/news/etoro-warns-users-it-s-running-out-of-crypto-to-trade-due-to-unprecedented-demand
- Grayscale sees 900% jump in assets to $20 billion amid bitcoin frenzy https://markets.businessinsider.com/currencies/news/bitcoin-price-btc-rally-grayscale-assets-surge-cryptocurrency-investment-firm-2021-1-1029969751
- ECB’s Lagarde calls for regulating Bitcoin’s “funny business” https://www.reuters.com/article/us-crypto-currency-ecb/ecbs-lagarde-calls-for-regulating-bitcoins-funny-business-idUSKBN29I1B1
- Bitcoin holders barred from depositing profits in UK banks https://www.thetimes.co.uk/article/bitcoin-holders-barred-from-depositing-profits-in-uk-banks-pgswbfrdz
- Man has two guesses to unlock bitcoin worth $240m https://ca.finance.yahoo.com/news/password-guess-worth-240m-bitcoin-114623757.html
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Satstreet serves private Canadian clients including some of the largest Bitcoin mining operations, institutions, and high net worth individuals. Satstreet has raised initial funding from Round13 Capital and several prominent investors.
