After some time, Bitcoin has finally tested the 20k level. All the cryptos I held throughout the bull market are now below the levels where I first de-risked in January, 2021. This means that prices are now below every single one of my sell points. A move like this seemed likely to me, considering the breakdown of the 3-day 200 MA back in April. Prior to that, I liquidated most of my crypto earlier in 2022, due to a multitude of other warning signs. Here is the post from April, calling for 20k:
In my last Bitcoin analysis, I wrote about the potential for some sort of relief rally heading into the U.S. Midterm elections. Since then, price has continued to drop, but this scenario remains in play. This is not a time where I feel comfortable putting in a lot of capital, but it's a time where I'm certainly looking or opportunities. This is why I'm toying with some small alt positions to see if I can catch a bounce. Here's the last analysis:
Bitcoin now sits dangerously below the 200 week MA (teal), and must get above soon, otherwise it risks becoming major resistance. As Ethereum is now decidedly below its 2017 all-time high (near $1440 on Binance), it seems a real possibility Bitcoin will drop below the key $19-20k zone. Some liquidity still exists in the large area between 13.6k and 17.2k, so price can even venture briefly down there before any meaningful recovery for the market.
The theme of this post is ESCALATION or REPRIEVE.
What would ESCALATION look like? Well, as you might have noticed, a few major funds, platforms, and exchanges are in danger of insolvency. Many in this space were irresponsibly leveraged, most likely because they did not believe Bitcoin would ever retest its 2017 high and continue its established pattern. Escalation would mean that this creates a domino effect, until almost every exchange and firm shuts down, resulting in an extreme liquidity crisis. This could, in theory, push Bitcoin price continuously lower with no end in sight. This is what most sellers fear at the moment. And it's a very real possibility.
Now, what would a REPRIEVE look like? A reprieve is a delay in punishment. Sure, Bitcoin can bounce here and slowly grind up towards some other Moving Average resistances in the coming months. Historically, it has done this, once it reaches the 200 week MA. The way I see it, a relief rally would simply delay the inevitable. I no longer believe Bitcoin is in a long term uptrend, and instead has reversed to the downside. Almost every bullish narrative for Bitcoin price has now unwinded, in my opinion. I think the last remaining chance is forced adoption. This would mean that although most people would not choose to use it (the evidence for this already exists in El Salvador), the government could enslave everyone by buying a bunch of Bitcoin and doling out limited amounts of it to the populace once the Dollar collapses. This is the doomsday scenario Bitcoiners have been prepping for this whole time. There is an incredibly amount of irony in this. You take a currency that hardly anyone wants to use, so how do you make sure that people use it? You enlist the government and big banks. But wait, I thought big government and banks couldn't control Bitcoin? I thought that was the whole point! You mean to say Bitcoin adoption inevitably evolves into authoritarianism? WHAAAT??
You can see how this argument can end up in absurd circles with logical fallacy upon logical fallacy. But, let's say something like the scenario I wrote about above actually happens. Even in this circumstance, the government may simply end up buying a ton of Bitcoin for $1000 a piece (or lower). Depending on liquidity, this can finally push price above 100k. So, I guess I understand why Bitcoiners want to hold onto their coins no matter what. But will they hold on no matter the value?
Even so, I think the above circumstance is unlikely. Bitcoin has broken its long term trend against traditional markets, as I wrote about here:
As I've also pointed out, a currency with a fixed supply is not a great unit of exchange since it encourages hoarding and not spending. With this logic, it makes sense why Bitcoin price is decreasing rapidly in an inflationary environment - people are finally selling or spending it, and not buying it! This is because its value far exceeded the dollar over the last 10 years, so it's actually a GREAT currency....for those who bought early. Now, even those who bought at the 2017 bubble peak are merely around break-even, and at a loss if they bought Ethereum. This doesn't even take into account inflation.
Here is my post where I outlined a speculative trajectory for the coming months. So far, so good. Now, if it fails to even attempt a bounce near these levels it'll probably look even worse than that.
Nevertheless, there always exists a possibility counter to my bias. For instance, if Bitcoin can bounce hard here and clear the $37-42k resistance zone, then maintaining above 40k for many weeks, I may consider a longer term ranging market with some eventual upside. I do think there is somewhat of a chance we see some slow relief here with low volume throughout the rest of the Summer, into the fall. During this time, a select few altcoins would probably again pump and dump in a "last hurrah." This is why I have toyed with entering some small altcoin spot positions. Really, I can't help myself. It's the "I might as well" trade. Come on Bitcoin, let's just give the 200 week MA a chance!
In the event of a recovery soon, I can see a media narrative where it is blamed on the FED's perceived inability to tame inflation (meaning that although it may not be true, the market expects no matter WHAT the interest rates are, inflation will still exist, so they YOLO everything back into assets because, well, we're irrational beings). Then, as interest rates continue higher, unemployment jumps, and markets begin their true multi-year decline into the next great depression. Inflation eventually drops, but by then markets are deep into a bear market and unemployment so high that few can buy stocks or other assets. Then, we get The New Deal, Part II. All fun (and scary) speculation of course!
Thanks for sticking with me on this crazy ride!
This is not meant as financial advice - it represents only my opinion and it is highly speculative.
-Victor Cobra
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The 50 month MA is pretty important.
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Closing June above there could open the door for a bounce back to $34-37k.
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Pressing play on this is interesting. Roughly a year later, and BItcoin barely managed to scrape 30k, even a little lower than what I had been thinking for a relief rally.
I’ve been following your posts and really appreciate your dead honest and realistic views. You definitely see what others don’t see.
nigelgjones
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Sooo Victor, you are definitely one of the more thoughtful analysts we see on Trading view. It's hard to fault your' critique despite me desperately wanting too. The only thing! I would say hahah is... the complete disarray in the world at the moment. I guess Im thinking that if ever there was a time for Bitcoin and the wider crypto market to show its chops then this is it. You mention that you cant see a use for crypto in the world at the moment. This is definitely a problem. If there is ultimately no use for crypto then I agree it will surely die. But ultimately isn't the blockchain supposed to make the money-go-round simpler and easier to manage? Are not CBDC's a better way of controlling people? I think China is well down this route already and the US and Europe must be aware of this and trying to understand how to implement their own CBDC and managing the transition from the dollar to new digital coins. Everyone ultimately wants to use blockchain for their money now. Do you agree? It must be the future good or bad, surely it is coming as its a natural progression for our broken monetary system. Probably the final hurrah if you're that way inclined. Sooo in a world dominated by CBDC's which looks likely will there be room for Bitcoin? How about Ethereum? These projects for all their faults have been functioning for quite a few years now and must be some sort of useful dataset for a government. Projects like Polkadot, trying to create an autonomous digital environment, secure and efficient for many businesses to thrive together in a digitised world. Is there some sort of value in these projects in this brave new world we are entering? I don't know but just say the existing financial system does actually hit the wall which we have all been predicting for 20 years now and looks very close, would bitcoin really be that bad if people still want to use it? Granted it would probably only be worth $500 for a long time but you never know. I guess what this is all about is the level of very real uncertainty that is facing the world at the moment. Splitting into dangerous factions, East v West etc the US losing its dominance and the appetite for good old hot war (thanks Vlad) makes everything so uncertain. As you say a dystopian sci fi scenario I completely agree with you. But isn't that a place where all this funny money could thrive? Just sayin... love to hear your thoughts.
VictorCobra
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@nigelgjones, Thanks so much for your thoughts! I think CBDC's are basically digital fiat. Nations will be able to control the supply and distribution, as well as track users' transactions. This would be heavy surveillance, I think.
One of the issues I see with future growth is that after 4 years, the entire crypto market cap is almost right back to where it was at the peak of the 2017 bubble. Meanwhile, the number of cryptocurrencies has only gone up, and all new projects (like Polkadot) have failed to really do well long term against Bitcoin. In fact, the only coin I follow that has done well against Bitcoin in the long term is BNB. What does that tell us about the space? Even Ethereum is now below its 2017 high price. Stablecoins have way more market share this time around, but their primary function is to act as mediums of exchange between many different coins. If the value of said market hasn't really sustained meaningful appreciation in 4 years....and even during the peak, where did all that money go? I strongly believe in the future humanity will be in deep shit if it can't invest in things that have a lasting impact (infrastructure, education, fighting climate change, creativity, etc.). Crypto has (so far) proven that nothing of value really comes of it. Mostly depression and losses. And NFT's. Is that really all it can offer? I'm just not convinced. I have more thoughts and will try to respond to you a little more later. A bit braindead at the moment.
UnknownUnicorn18205093
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I'm going to jump out the window
VictorCobra
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@morishej, Just read it as dystopian sci-fi and it gets a little better. But please, if you're seeking considering anything like that seek help.
EssStSt
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So basically, crypto is dead either way?
VictorCobra
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@EssStSt, Yes, that’s my current opinion. At least dead in terms of long term price appreciation. If it’s to be adopted, I don’t think it fully matters what price it is.
But as I wrote, my longer term bearish view would probably be invalidated if Bitcoin can sustain a bounce back above $37-42k without rolling over to the downside.