Another $500 Billion Could Be Wiped - Crypto Loses the 200 Week
In May, 2022, I wrote about how I thought the TOTAL crypto market cap could head down towards the $760 Billion level (all-time high from 2017) when it was still well above $1 Trillion. Here is the original post:
Here is another post I wrote back in April 2022, when Bitcoin was still flirting with $40k. In this post, I wrote about the "death" of Bitcoin, which I began to see as a real possibility this time. You can read my reasoning there, since I've grown a bit tired of writing about it:
The TOTAL market cap did indeed drop to that level. Right now, it flirts with it at this very moment, hanging on by a thread. Two things to note:
1) Bitcoin dominance is still near historically low levels. Bitcoiners are hoping the FTX calamity encourages people to trust only Bitcoin self-custody. However, we aren't really seeing this. If so, Bitcoin would be heading up and other coins rife with lending shenanigans (such as ETH) would be dropping. The situation is more complex than that, and it requires some rational thinking to understand why people are not just piling into Bitcoin, and likely will not.
Here is the dominance chart. I think it's fairly likely we see it rise towards 60% in the coming weeks due to continuous deleveraging.
2) The 9 week EMA is crossing over the 200 week Moving Average (teal), while price sustains below both.
The TOTAL crypto market cap really needs to sustain above $1 Trillion for me to consider any significant upside. As it is, it's hanging on barely to major support with room for downside momentum on the MACD and oscillators.
So for now, I must continue to consider downside. I think it's possible the "real" move has not occurred yet. We've seen a consolidation of stablecoins and a bunch of exchanges offer "reassurance" to their customers in the wake of the FTX collapse.
Now, the title of this post seems pretty extreme, right? Can crypto really return to $230 Billion with all that money supposedly waiting on the sidelines? I think yes - mostly due to liquidity, and a negative feedback loop. I think a lot of that money won't return, and it's unlikely new liquidity will be generated that can flow into the space at the rate we saw in 2020-2021. Crypto has just has its true "dotcom" or "2008" moment. The problem here is that there are no crypto-related companies that provide anything of true value. Again, this means that if the market ceased to exist, the world would hardly be any different, except maybe El Salvador would be in a bit more trouble than they already are.
Collectors enjoy NFT's, but I think those are unlikely to see the astronomical values they once saw during the last bull market. One simple conversation is also all it takes to derail the value proposition.
What does another $500 Billion wipeout look like for Bitcoin and Ethereum price? Well, Bitcoin would probably be back below $10k, and Ethereum below $500. Stablecoin liquidity would dry up as investors pull out to cash, and a lot of these "reserves" go up in smoke. For instance, I wonder what will happen with Genesis and Grayscale this week.
To be honest, I'm not really enjoying writing analysis so much at this time. Maybe it's because it's not particularly satisfying after all, to get it right. That's probably a good thing. I can just focus on getting my book finished and working on my fiction projects. Maybe it's also that work has been exhausting. Regardless, I still try to make a few posts here and there. Even if I don't write much more on here, there's plenty of content to read, and I will be finishing that book.
As always, this is highly speculative, and should not be taken as financial advice, nor is it intended to be so. Let's see what happens!
-Victor Cobra
Here is another post I wrote back in April 2022, when Bitcoin was still flirting with $40k. In this post, I wrote about the "death" of Bitcoin, which I began to see as a real possibility this time. You can read my reasoning there, since I've grown a bit tired of writing about it:
The TOTAL market cap did indeed drop to that level. Right now, it flirts with it at this very moment, hanging on by a thread. Two things to note:
1) Bitcoin dominance is still near historically low levels. Bitcoiners are hoping the FTX calamity encourages people to trust only Bitcoin self-custody. However, we aren't really seeing this. If so, Bitcoin would be heading up and other coins rife with lending shenanigans (such as ETH) would be dropping. The situation is more complex than that, and it requires some rational thinking to understand why people are not just piling into Bitcoin, and likely will not.
Here is the dominance chart. I think it's fairly likely we see it rise towards 60% in the coming weeks due to continuous deleveraging.
2) The 9 week EMA is crossing over the 200 week Moving Average (teal), while price sustains below both.
The TOTAL crypto market cap really needs to sustain above $1 Trillion for me to consider any significant upside. As it is, it's hanging on barely to major support with room for downside momentum on the MACD and oscillators.
So for now, I must continue to consider downside. I think it's possible the "real" move has not occurred yet. We've seen a consolidation of stablecoins and a bunch of exchanges offer "reassurance" to their customers in the wake of the FTX collapse.
Now, the title of this post seems pretty extreme, right? Can crypto really return to $230 Billion with all that money supposedly waiting on the sidelines? I think yes - mostly due to liquidity, and a negative feedback loop. I think a lot of that money won't return, and it's unlikely new liquidity will be generated that can flow into the space at the rate we saw in 2020-2021. Crypto has just has its true "dotcom" or "2008" moment. The problem here is that there are no crypto-related companies that provide anything of true value. Again, this means that if the market ceased to exist, the world would hardly be any different, except maybe El Salvador would be in a bit more trouble than they already are.
Collectors enjoy NFT's, but I think those are unlikely to see the astronomical values they once saw during the last bull market. One simple conversation is also all it takes to derail the value proposition.
What does another $500 Billion wipeout look like for Bitcoin and Ethereum price? Well, Bitcoin would probably be back below $10k, and Ethereum below $500. Stablecoin liquidity would dry up as investors pull out to cash, and a lot of these "reserves" go up in smoke. For instance, I wonder what will happen with Genesis and Grayscale this week.
To be honest, I'm not really enjoying writing analysis so much at this time. Maybe it's because it's not particularly satisfying after all, to get it right. That's probably a good thing. I can just focus on getting my book finished and working on my fiction projects. Maybe it's also that work has been exhausting. Regardless, I still try to make a few posts here and there. Even if I don't write much more on here, there's plenty of content to read, and I will be finishing that book.
As always, this is highly speculative, and should not be taken as financial advice, nor is it intended to be so. Let's see what happens!
-Victor Cobra
