Hi All,
Not much time in Gordon's world for posting these days, but it's hard to ignore the fact that things are heating up in crypto markets, and it's finally starting to look like the bull run is on. Is it? I mean, this is crypto, and between the SEC, shaky regulatory winks and nods, and coming challenges of seeing real mainstream institutional movement, I don't ever assume a full-on bull market.
So, let's take a look at the current state of things!
Bitcoin: New All-Time Highs (ATHs)!
So, whether you are a maxi, a "I wish I got in when it was at 'x'"-er, an NFT-fan, or pretty much into anything crypto other than BSV (sorry, but takes a certain breed), it's impossible to deny the weight that the golden...well orange...original throws around in the market.
Yes, the ETFs ARE largely the reason the market is moving, which is equally exciting to see we hit new ATHs well ahead of the next halving. When Bitcoin moves, it impacts every single other token. The reason being, because it is the original and has continued to operate as designed, it is the first coin that all other future tokens trade against. In the beginning, exchanges could only exchange Bitcoin against fiat. Then, as LTC and ETH came into view, they traded against fiat and BTC.
BTC pairs have continued to be an option, along with much lower volume for ETH pairs and sometimes a few others. With the addition of ETH-based stablecoins like TUSD, USDT, and USDC, a lot more people tend to trade the many thousands of token options against stables over BTC or even fiat. People like stables.
This combination of choices between cash pairs and trading against BTC means that volume and actual fiat value of Bitcoin has a profound impact on all other coins. There is usually a wave where Bitcoin pushes hard against the price of other coins when volume AND price go up in BTC. But, once it settles towards local tops, people often take profit into stables and those other tokens. Another way to look at it, is that when those tokens are going down as BTC goes up, they present an opportunity to buy in cheap, so we usually see a surge in alts after BTC makes its move. When that happens, alts tend to move by as much as 2-3X more than Bitcoin's original rise for one main reason: their volume typically is so much lower than Bitcoin, that it takes very little movement for them to pump.
More On Those Alts...
If you look at Bitcoin vs the literal thousands of other cryptocurrencies, you'll notice a vast majority are still way under water compared to their ATHs. Many top100 tokens are at a fraction of their previous highs, while smaller projects still tend to suffer as low as -87%...still.
It really is important to understand that a steady bull run that lasts months or years is very, very, very rare...and unlikely, for a lot of alts. I'm not going to go preaching about why most are simply dangerous to sink real money into, but the truth is that there are always new rushes of speculative instruments filling in the gap between the previous cycle's "cool new thing", and every token suffers the same issues of being the last trend, the previous fad. The next big thing is always around the corner, and so hundreds of favored projects really settle in to very low volume and price.
What happens is that people get excited that Bitcoin pumped, then other coins pumped maybe as much as 30%, and they think every time Bitcoin beats it's previous ATH, they will do another 30%. But, as the tide settles and they start to correct, they tend to correct all the way back down that entire 30% or so. Why? People get excited and greedy on the way up, and they get rightfully scared as it comes back down. The faster these alts sell off, the more people just want to recover what they can. As the next wave of new coins enter in, people worry more and more that their investments in the cool coins from the previous year and the year before that, will never recover. Other than pump and dump groups, there's a good chance the real value is the one it settles at towards the bottom.
Understanding the ETFs
There are good and bad sides to what is happening with the Exchange-Traded Funds (ETFs). It is good they bring institutional money into Bitcoin, and obviously for anyone who is focused on price...it has placed a lot of buy pressure on Bitcoin, hence the new ATH. For the first time, while people are still speculating on price in parallel to actually buying and HODLing Bitcoin, the impact of parallel trading also includes custody that represents the value of what is being traded. Namely, the companies that have applied and been granted licenses to sell Bitcoin in the form of ETFs are required to HODL the equivalent of customer investments in the underlying asset: Bitcoin.
Since Bitcoin is a scarce asset, it is hitting up against supply more seriously than any time prior. More Bitcoin is being purchased and stored than is being mined on a daily basis. Circulation in spot markets will continue to see buy pressure, and people's expectations going into the next halving are bound to impact price mightily.
The downside to ETFs is the fact that it is speculative, and it is in parallel to the actual direct buying and selling of Bitcoin. This means that although market makers and multi-billion-dollar institutions are now realizing just how valuable Bitcoin could be as its own asset class, the actual volume of Bitcoin owned and stored on exchanges is still largely in circulation, though that is changing as we speak.
Meanwhile, there are massive shorts getting heavily leveraged and liquidated, and that does impact price in the other direction, but surprisingly not by much. In all seriousness, absolutely nothing would surprise me as far as price and volume go. Any kind of real-world event, political hysteria, or realization at how corrupt the powers that be truly are could send markets tumbling. That is just as true when things seem euphoric as any other time. People get scared by world events, and the first thought that enter their mind will be if they just scored big in Bitcoin profits: they better grab those profits and exchange them into fiat to be liquid in the time of a crisis. It could happen even easier and faster this time around as it didn in March 2020.
More likely, we'll continue to see MSM talk about Bitcoin, more institutional money entering in, and for the first time, some big-name corporations finally start to take a listen to Michael Saylor's strategy that has placed him more than $1B higher in value than profits stemming directly from his software business. Genius.
Another downside to the ETFs in Gordon's opinion, is that MSM and general public interest in Bitcoin fuels the dishonest extreme Left and its fools like E. Warren and their mission against all things Capitalist...except their own questionable earnings and hypocritical lust for fueling jets. The push for regulatory rules is not a positive. Yes, people want "clarity" but fail to realize that the guys that are in charge are not honest, and any regulations that come out of current administrations the world over will not be for the benefit of the market, the assets, OR the public. It will be to simply place more control in the hairs, adding heavier taxes, risking the right to privacy and private custody. Trust me on this even if you are still foolish enough to lean to the Left.
Bitcoin's strength as a PoW will continue to be in the crosshairs of ESG sustainability psychopaths (hey, if they can hire their MSM hitmen to call Bitcoiners psychopaths and actually print that in mainstream articles, surely it's fair game for an imaginary 3D cartoon character to do so on a practically-unknown platform). Some see this as an opportunity to show how Bitcoin helps stabilize the grid and make use of otherwise wasted energy source. But, I personally believe any hopefulness that the push for regulatory "clarity" or opportunities to show the strength of PoW are naive at best. You just can't trust the corrupt to suddenly have your best interests because it seems logical for them to do so.
Does Gordon Have Any Advice?
Yeah. The truth is that no one truly knows the right thing to do. Bear market, bull market, in general you should always be clear and determined in your strategy. That is true in life, and its true in investments. Many see the crypto market as one big ponzi scheme. It's a bad analogy. But, yeah there are a ton of scammers, and NFTs often are nothing but a place to launder money. I hate ever saying things in agreement with the government, but sometimes there's a seed of truth in their arguments. Very rarely! I only bring it up because you have many, many, many opportunities to waste your money in things you hope will pop and do a 10X. Yes, it does happen every day in crypto. But, it is a huge guessing game, and the point is for you to ask yourself why you are here, what you are trying to accomplish, and whether your strategy is likely to work.
If you look at crypto as a place to gamble, then just have fun and be careful. Don't "invest" in risky flight-by-night schemes that are likely just designed to pump and dump. Chances are good 90% of you will lose 87% of your investment's value. Ask every single person who has survived a prior alt season. It's exciting to see 30% spikes in a single trading day, but the earlier you were to crypto, the more you'll agree that it pales in comparison to the other 300% it needs to do for most people to break even.
If you are here because you believe in the technology and you want a better future outside of the dishonesty of the current banking system, I sincerely recommend you look at why there are so many die-hard Bitcoin maxi's, and maybe give it a second thought about whether its just "old boomer tech" or whether some of those boomers, like Saylor for instance, know a thing or two about what makes it unique.
Listen, as much as I believe in the optimism surrounding Bitcoin, and even more I have strong convictions about how bogus most of the rest of the market truly is, I DO also recognize that there are plenty of ways Bitcoin could fail. Forget the ridiculous "what if a meteor" crap and just understand that Bitcoin Core Devs are human beings susceptible to good decisions and bad ones. Governments are corrupt. Taxes suck. Computer chip manufacturers hold the entire free world in their hands, and Bitcoin requires very specific, demanding chips to operate. There are a LOT of ways Bitcoin could fail, and it would be a devastating crisis to see that happen. I'm just saying that having strong convictions for a quality asset is fine...in fact maybe it's a great thing. But, no one, and I mean no one, can guarantee that ANY of us have the right guess on what can rescue us to have a prosperous future.
We could see a real bull run fueled by Bitcoin's continued success in ETFs. We could see enough governments give up on the B.S. or ESG and carbon taxing. We could see actual regulatory clarity...I doubt it. We could see ETH ETFs get approved, widening the net of people's positivity about the mainstream's interest in crypto, but also a leveling off of how much institutional buying places pressure on Bitcoin's price, which in turn impacts ETH's price (especially since it is a staking coin with wonky unending supply). A LOT of things can happen and the market can shift in a heartbeat's time.
So, realize that there are a lot of intelligent guesses out there, but none of us have a time machine yet. Nobody knows. So, whatever you buy, do so because you believe in the project. If you're speculating just hoping to make 100X, just realize it's maybe 2-3% better chances than winning the lottery. If you're in Bitcoin to HODL, you probably have the best idea with the best potential outcome, but realize that the world really is that evil and uncertain, and if we fail, we fail mightily, and I'm not certain there are other options available to us.
My advice to everyone is to simply pay attention to what is happening around us, and buy, sell, trade, HODL...with conviction. Do things because you have a strong intention to do them. Don't chase after every shiny new thing. There is so much crap out there, and most of it is made for nothing other than the initial pump. The days of hiding in the pack are over. So, just be careful, and do what you do with eyes wide open. OK? OK!
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