Well… that was gross.
HODL & BTFD
So, how was that for you? Did you enjoy that? Even after 4 years of being in this market and experiencing some big draw downs along the way it still stings… like a f’ing murder hornet.
If you read last week’s note, Elon Musk instilled a dose of fear into the market by announcing Tesla will no longer accept BTC as payments, citing Bitcoin’s non-renewable energy use. Markets went into free fall, powered by large volumes of selling. The cascading effect of Bitcoin’s giveth and taketh away’er came to a head on Wednesday as the bottom dropped out of an already weak and whimpering market.
Lots of good on-chain analysis was done this week so I’ll just go ahead and pick and choose some charts to show you:
Arguably the largest exchange in the world, Binance saw the largest inflow of BTC ever on Tuesday. Not good.
ASOL (Average Spent Output Lifespan): the average lifespan (in days) of all spent transaction outputs. ASOL highlights the lifespan of coins on a per transaction output basis that were spent that day. Using this analysis we can come to the conclusion that the average age of coins sold during the sell-off this week were young. It could be that speculative buyers, who recently came into Bitcoin, enjoyed some quick easy gains and got spooked by Elon’s ESG concerns and decided to get out and take their profits.
What we saw at the desk
I almost feel guilty saying it but we smashed it this week. Wednesday might’ve been the most profitable day that we’ve ever had as clients were navigating the markets and subsequently moving in and out of their positions.
It was the first time in a long time that we saw some real panic selling. However, quite a few of the sellers re-entered the market at lower prices — very few were completely spooked into “this just isn’t for me” territory.
Amidst the selling, we had some large buys from clients that had piles of cash on the sidelines waiting for something like this to happen — at least they were happy.
This will go down as one of the most memorable drawdowns in Bitcoin history — not only was it the sixth largest Bitcoin drop to date but it came at a time where adoption is at all time highs.
Look, no one knows where this is going — especially not me. However, we did see a tremendous bounce off $30k to $40k where we’re currently sitting which is comforting to see. This massive move down during arguably the most important time for Bitcoin allowed a flood of new entrants into the market who were waiting on the sidelines for a more attractive entry point.
Bitcoin was all the talk this week and it was covered by seemingly every major news outlet (there is no such thing as bad publicity?). The more people hear about Bitcoin the better.
We’ve had to dispel many deterrents over Bitcoin’s history. The most recent and potentially meaningful piece of FUD that was put to rest was that of USDT (Tether) being used to prop up the price of Bitcoin. When that was finally cleared up it felt like a giant weight off of our shoulders. Now, it is time to fight the ESG narrative.
Bitcoin’s impact on the environment is a genuine concern and we better have some very good answers and solutions for the increasingly loud ESG voices out there. The fact that this narrative is in the spotlight is a very good thing. For Bitcoin to continue its climb to institutional and mainstream adoption we need to break down these misconceptions one-by-one and the only way to do that is to talk about it and educate. The good news is that we do have answers and we are trending very quickly to solutions that will allow us to get over this in short order.
So, although we can’t say for sure that we’re going to be back at ATHs in short order, one thing we know for certain is that leverage has been flushed from the system and that is healthy.
On that note, please chill with the leverage. These drawdowns are much easier to stomach when you’re not concerned about getting rekt.
In case you missed it…
- Best mainstream report on the Bitcoin ESG narrative https://nymag.com/intelligencer/amp/2021/05/jack-dorsey-says-bitcoin-is-climate-friendly-is-he-right.html?__twitter_impression=true
- Bitcoin making history at the Indy 500 this weekend https://www.autoweek.com/racing/indycar/a36418398/bitcoin-indy-500-racing-team/#:~:text=Ed%20Carpenter%20Racing%20this%20week,to%20fund%20a%20race%20team.
- US: businesses receiving crypto to report transactions larger than $10k https://www.theblockcrypto.com/linked/105543/irs-biden-crypto-transactions-report-10000-tax-gap
- Some clarity on the China FUD https://www.coindesk.com/beijings-crypto-crackdown-is-not-new-but-dont-dismiss-it
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