Bitcoin, the rollercoaster of money we all love to love, hate, love and freak out over.
Decentralized yet highly centralized. Anonymous, private, and completely public and transparent.
We are said to be in a bull market, and I see the pumpamentals and you do too.
But, I started to get that nervous tick of an instinct when the euphoria started losing rational logic, and here we are, 1/10-1/11-2021 and the drop is substantial.
I recently wrote an article that this market has officially confirmed the importance of following percentages of movement, and that we do not have any historical data to compare where we are now; not in traditional stocks and investments and not in crypto. So, the assumption as the value tops previous $560 Billion marketcaps, now passing $1 Trillion if any of us can believe that- amazing, that it would remain equally challenging for Bitcoin to buy or sell beyond "x" percentage based on volume. But, we really didn't know if that was the case. See, when the price gets significantly higher, the volume it takes to maintain those percentages can become a foggy figure because we really don't know how much previous consolidations have accumulated into profits that whales have to work with. Now, we can see that Bitcoin can maintain growth above $30K price value and even $40K price value; again amazing! We don't know where the peak is yet, but there is good reason to assume $100K or $200K is possible even within a year.
So, it's important to note that extremely large drops happen every week in Bitcoin, and massively major drops tend to happen 1-3 times in a year. This one we saw Bitcoin essentially drop from over $41,000 to around $30,000. There have been times where it has dumped more than 29% before finally getting a full buy-in and heading back up. In today's case, we don't know where it ends, and unfortunately every day is a new opportunity for politicians to take the chance to make or break the news cycle with, lies, scandal, and bad policies. Have we actually had a single full trading day since 2017 that didn't include some kind of scare and some kind of relief? There is no trading without drama in crypto.
The percentages are still holding strong, between 15-30% could still be possible up OR down in Bitcoin, so the question then becomes, just how much liquid capital is available in the market for these kinds of moves?
The answer appears to be "quite a heckin' lot"!
Now, for anyone not completely clear about it, 24 hour volume represents the total value of the buys and sells on the order books in a 24 hours period.
So, for instance, I like to use BINANCE as a barometer for all other markets. Even though it hovers between 2-4% of the entire trading supply of Bitcoin, it is a fast, reasonably accurate average in value all the time. I do not trade on their platform any longer, but I still watch how the USD compares to Binance USDT (Tether) in volume on an hourly basis. In the most worrisome, slowest market between 2019 and now, Bitcoin traded at a pitiful $80 Million Dollars 24HrV (24 hour volume). Prior to now, breaking the $1.3B Binance 24HrV was huge. Then, we saw it break $2B. Then again, we saw it break $3B. This is significant.
It does not mean that there is $3B of funds in Bitcoin. In fact, it can be the same $100M trading over and over again, and often is. But it does mean that everything sitting very high and low on the order books is not thinning out the liquid assets available to keep fueling the volume rise. Volume is directly tied to liquidity, and it is how global markets are measured; not just the actual circulating supply of value, but how often it circulates, meaning how much of it is actually being utilized.
This sell-off is the first time in cryptocurrency where it looks like we are going to see 4X the historical record of the amount of volume trading in Bitcoin during this sell-off, and that, my friends, is what makes this historically significant. In Binance terms, in 13 months we have now seen both $80M Bitcoin traded in a day, and $8 BILLION in Bitcoin traded in a day. That is yuge!!!!!!!!!!!!!!
More than the current price, more than the FUD and FOMO in the cycle, the fact that there is so much selling volume, and it is followed by so much capital to buy back in, shows that interest in the active liquidity of Bitcoin assets is still only increasing the deeper the scare-pit. That is massively significant. It is a good sign that the institutional market is continuing to grow, and this should be a clarion call to widen the markets for retail. We do NOT want this to be a power grab for the bankers and top investors to simply get more of the remaining coins at market, but rather we want the common man to have access to this price discovery.
I do believe we are seeing signs of proof that the scarcity model is going to play a key role in Bitcoin's price, and I do believe it suggests we could top all previous models above $1M for a Bitcoin. Man, just imagine being able to mine those first coins on a normal computer, and going from tens of thousands of Bitcoins barely worthy of 2 pizza deliveries, to HODLing until that placed you in the top 50 under Bezos Musk and Gates. Wowzers.
We have certainly proven this is the century of nerd-dominance.
So, that is all Gordon wishes to say. He does wish for us to break out of the $32,000 range and head back up above $39,000 for myself and also for those worried over longs and shorts. If this wasn't low enough for your shorts, well I think Bitcoin is saying it's not ready for the mid-$25's quite yet, and if you were over-invested in optimism it would never stop beyond $42K, then that was a vast under-estimation of Bitcoin's ability to buckle your knees.
I believe 2021 is going to be a bigger shock market than 2020, and that is saying a lot. It will be historical, it will be legendary, and it will be the sequel that everyone talks about.
Please play it smart, keep an eye on the movement before you take risks that were not part of the plan.
Wishing all the very best.
God bless the crypto revolution, I hope.
And for now, Crypto Gordon Freeman, out.
