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"If there is anything that this horrible tragedy can teach us, it's that a [crypto’s] life is a precious, precious commodity. Just because we have [moon juice] and stunning features, it doesn't mean that we too can't not die in a freak gasoline fight accident."
— Derek Zoolander (probably)
In case you live in a tiny house for ants or just didn’t know: we’re currently at the end of our own freak gasoline fight accident.
Truly they can strike anywhere, such a tragedy.
The crypto market is melting down…
Bitcoin is down 54% from it’s recent high and some alts are down 80% or more.
In case you didn’t hear, Bitcoin is dead (for the 3,456th time) and Crypto Twitter is either largely silent or professing the end of times.
Things are bad.
This dip has taken a lot of crypto vets by surprise – it doesn’t fit any of the logic we’ve built up over the last few cycles. The technicals don’t give us much hope either…
NVT Signal has fallen to levels not seen since the March 2020 global sell off. Though this time we’re noticeably missing the shock of a global pandemic. Other sharp lows like this in history mark the end of large sell offs – 2019 and famously 2018.
The 200-day moving average for Bitcoin is another signal of the market – in bull markets we trade above it, in bear markets we trade below it.
When the price crosses the 200d SMA line it is a big deal.
Typically when Bitcoin crosses the 200d SMA to the downside, it indicates a top and then a bear market on the backside of a bull cycle (see 2018).
In 2020 we saw this happen from the shock of global macro forces.
The chart would tell us we’ve just entered a bear market, but wait that doesn’t make sense…
It’s too early ⏰
I’m a big believer in the Halving Cycle and the phenomenon we’ve seen historically where it drives markets – I’ve written in depth about this cycle in this edition here.
If you’ve been reading for awhile you know my targets for this bull cycle are:
November 2021 (based on days post-halving)
$100k-300K Bitcoin (based on several price models that use the halving cycle as an input)
So far we’ve met neither of these conditions.
This dip is huge and it technically it’s indicated an entry to a bear market – but the timing and factors are all wrong.
Bitcoin did not perform in-line with historical multiples off it’s previous all-time high and the time post halving is off by ~180 days. Both of these are unprecedented.
The 4 horsemen 🏇
This dip feels off. It doesn’t make any sense and the technicals aren’t in line with historical data. Conclusion here is that we’ve entered a new period in crypto history.
Given all of this information, I see the market going 1 of 4 ways:
This is the end — Bitcoin goes to zero, Peter Schiff was right (sad!)
This is the mother-of-all bull traps — the system was saturated with too much leverage and the blowout created an unprecedented dip to be followed by upward movement
This time really is different — Bitcoin is charting a new path
The Halving Cycle is bullsh*t — previous data was a series of anomalies
Sooo which is the most likely?
#3 is possible, we could truly be in uncharted waters, but that would nullify years of data which in a probabilistic sense is unlikely.
I believe #2 is the winning ticket. Leverage is the new variable in the crypto market.
The double edged sword ⚔️
Using leverage is the practice of borrowing money to invest.
Leverage in a portfolio amplifies gains but it also equally amplifies losses.
In 2013 and 2017 it was pretty hard to get leverage in crypto. There were few exchanges and only a small portion of these allowed leverage. The ones that did had huge carrying costs.
Fast forward to today and leverage is everywhere.
You can log into BitMEX and trade with 100x leverage with a few clicks. Depositing $10,000 would mean you can control $1M in capital.
DeFi (decentralized finance) also wasn’t a thing in 2013 and 2017. With a few clever clicks investors can syndicate loans using lending protocols and get de-facto leverage.
The kicker here? DeFi is opaque enough that it’s hard to get a clear idea of exactly how much leverage is coming from this part of the system.
In short, the dip we saw in mid April that everyone thought was the major leverage shakeout was just the first act – this dip was much bigger and may not be the end.
👉 This dip was BIG bad and it’s not clear that it is over…
👉 Bitcoin smashed the 200-day moving average — something that hasn’t historically happened in a bull cycle
👉 NVTS it at a long-term local low indicating Bitcoin is very oversold
👉 This being the end doesn’t make sense — we’re likely in the mother-of-all bull traps and the abnormal behavior is the result of historical amounts of leverage
👉 Everything’s on sale — happy hunting out there
Forward and upward.
The Weekly Fund Rundown
This dip was brutal. Peak to trough to the portfolio took a -42% nose-dive — not a great sight to wake up to 🤗.
Bitcoin led the selloff and alts certainly followed, a lot of the major bleeding was contained to more meme focused alts which thankfully spared some of my holdings.
Not many notable call outs to discuss during the dip but the velocity has been promising. The market rebounded firmly off deep lows and seems to have stabilized.
It is still unclear if this dip has more gas left in the tank, Bitcoin is still trading below its 200d SMA which is typically bearish — the next few days will be important to watch.
Regardless of price action there are some smokin’ deals out there to be had — $BNT, $AAVE, and even $ETH have certainly made it back on to my shopping list as well as a few others I hope to discuss soon…
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