Crypto´s Leverage Problem/Fundamentals for the Bearmarket
Hello, i mostly publish TA focused Idea´s and also want to cover the fundamental reasons why it seems
very unlikely for crypto to be bullish this year as there is already a storm coming up on the horizon which could bring the crypto bubble to finaly pop for real.
1. Interest rates are rising ---> beginning of the crypto/stock uptrend in 2020 was massive money ammounts entering he market, with increasing interest rates this year,this now comes to an end.
2. Mt. Gox to release 140.000 BTC (propably mid this year)...In a bulltrend this would propably not tank bitcoin too hard down, but with other factors i wouldnt underestimate the sell pressure
3. Massive (hidden) Leverage in the whole Crypto Market. This is a HUGE problem only a few People are talking about and seem to understand the risk of it.
Without that leverage crypto would have propably never went this far up. You can basically buy eth or btc twice for the same dollar. You Buy eth and then borrow usdt (or whatever) against it and buy more Eth.
Toal Value Locked in DEFI is currently ~200+ Billion (!!!). This "works fine" as long the price is going up but when we are entering the next bearmarket this is a recipe for a disastrous outcome!
A some point there will be a huge liquidation cascade: Price goes down because collateral gets sold which then makes price go lower and trigger more margin calls.
This could tank Bitcoin from 30k to 10k in a matter of Days in Theory. Lets say halve of that 200 billion USD get margin called, who even says there are enough people buying 100B USD worth of crypto sub 30k?
This is stuff for a massive liquidity crisis! Luna just recently bought btc to back its stablecoin UST etc..When these people have to sell btc because of margin calls all at once this will get insanely bearish.
Once btc goes below the 30k support ALOT of People will get margin called because of crypto´s massive leverage.
Crypto is mostly HYPE in its current state with only little real life utility.
To get a perspective: Only 5 Companys World Wide are valued at 1Trillion+ USD, Bitcoin also roughly has 1T Marketcap. So we are definitely not "early", indeed we may be peak Bubble.
Highly advicing to only invest what you can afford to loose as this could definitely become ugly.
TA wise i think Bitcoin is trading still above 30k Support, which means in theory the Bullmarket could still extend altho i wouldnt count on that.
Views are my own. Im not a Defi expert, so if i got something wrong feel free to comment below.
DYOR and please leave a like :)
very unlikely for crypto to be bullish this year as there is already a storm coming up on the horizon which could bring the crypto bubble to finaly pop for real.
1. Interest rates are rising ---> beginning of the crypto/stock uptrend in 2020 was massive money ammounts entering he market, with increasing interest rates this year,this now comes to an end.
2. Mt. Gox to release 140.000 BTC (propably mid this year)...In a bulltrend this would propably not tank bitcoin too hard down, but with other factors i wouldnt underestimate the sell pressure
3. Massive (hidden) Leverage in the whole Crypto Market. This is a HUGE problem only a few People are talking about and seem to understand the risk of it.
Without that leverage crypto would have propably never went this far up. You can basically buy eth or btc twice for the same dollar. You Buy eth and then borrow usdt (or whatever) against it and buy more Eth.
Toal Value Locked in DEFI is currently ~200+ Billion (!!!). This "works fine" as long the price is going up but when we are entering the next bearmarket this is a recipe for a disastrous outcome!
A some point there will be a huge liquidation cascade: Price goes down because collateral gets sold which then makes price go lower and trigger more margin calls.
This could tank Bitcoin from 30k to 10k in a matter of Days in Theory. Lets say halve of that 200 billion USD get margin called, who even says there are enough people buying 100B USD worth of crypto sub 30k?
This is stuff for a massive liquidity crisis! Luna just recently bought btc to back its stablecoin UST etc..When these people have to sell btc because of margin calls all at once this will get insanely bearish.
Once btc goes below the 30k support ALOT of People will get margin called because of crypto´s massive leverage.
Crypto is mostly HYPE in its current state with only little real life utility.
To get a perspective: Only 5 Companys World Wide are valued at 1Trillion+ USD, Bitcoin also roughly has 1T Marketcap. So we are definitely not "early", indeed we may be peak Bubble.
Highly advicing to only invest what you can afford to loose as this could definitely become ugly.
TA wise i think Bitcoin is trading still above 30k Support, which means in theory the Bullmarket could still extend altho i wouldnt count on that.
Views are my own. Im not a Defi expert, so if i got something wrong feel free to comment below.
DYOR and please leave a like :)
Comment:
On a multi year frame btc seems to trade beween these curves. Support could also break at one point.
Comment:
even saylor borrows usd against his btc to buy more...There´s jus so many leverage in this market, what could go wrong lol
Comment:
Just had this thought about some "hidden" fee´s in the btc system.
Not only do miners get transaction fee´s (ranging between 2-60 USD), they also got a Blockreward of currently 6.25 btc per Block.
In the last year an average Block had like 1750 Transactions.
6.25 Btc / 1750 Transactions =
140 USD per transaction at current Btc price !!!
This means an average Btc transaction cost over F****NG 100 USD! as miners will sell those btc and thus decreasing the bitcoin price at which you guys could theoretically sell.
This realisation just blew my mind. Just wanted to share :P
Not only do miners get transaction fee´s (ranging between 2-60 USD), they also got a Blockreward of currently 6.25 btc per Block.
In the last year an average Block had like 1750 Transactions.
6.25 Btc / 1750 Transactions =
140 USD per transaction at current Btc price !!!
This means an average Btc transaction cost over F****NG 100 USD! as miners will sell those btc and thus decreasing the bitcoin price at which you guys could theoretically sell.
This realisation just blew my mind. Just wanted to share :P
Comment:
I mean its not hidden, but when blockreward to btc price ratio is at some point to low to maintain mining, this will decrease btc security. So Mining rewards have to come from somewhere else at some point in the future.
Bitcoin has its niche usecase, but it likely wont suceed getting real "mainstream" because of the cost´s.
Bitcoin has its niche usecase, but it likely wont suceed getting real "mainstream" because of the cost´s.