THE BITCOIN ROLLERCOASTER RETURNS is how they played it on Bloomberg TV Monday morning.
Of course, if you’re following along with Alex Benfield, Sam Blumenfeld and Weiss Crypto Alert, you know the kind of volatility that characterized Bitcoin’s over-the-weekend trading is normal for what’s still a developing market.
It sure does make for great chyrons, though, and headlines, too.
Meanwhile, fortunes are being made amid the volatility in this developing market. The most lucrative intersection right now is what’s called decentralized finance (DeFi), led by the world’s second-largest cryptocurrency, Ethereum (ETH, Tech/Adoption Grade “A-”).
It’s the nature of developing markets to be volatile — and this one is unique.
It won’t be a straight line from here to $100,000 for Bitcoin (BTC, Tech/Adoption Grade “A-”), nor will the DeFi revolution unfold seamlessly. As many have said, it’s difficult to make predictions, especially about the future. But we can anticipate; we can identify and follow trends. And that demands nuance and patience.
Old school investors might say crypto investors are beginning to see the bricks that’ll comprise the nascent market’s proverbial “wall of worry.”
Nir Kaissar, in a paywall-protected piece for Bloomberg Opinion, noted that Coinbase makes everyone a cryptocurrency investor. Of course, multiple outlets reported that, upon its direct listing last week, Coinbase Global, Inc. (Nasdaq: COIN) CEO Brian Armstrong sold $291.8 million worth of COIN.
COINBASE CEO SOLD $291 MILLION OF HIS SHARES ON OPENING DAY.
— Michael Batnick (@michaelbatnick) April 18, 2021
Coinbase CEO sold 1.5% of his shares on opening day.
Not many made the point that the 749,999 shares Armstrong sold represent 1.5% of his total COIN holdings.
A Bloomberg News article, meanwhile, noted the environmental impact of Bitcoin mining: Bitcoin Mining Operations in China Threaten Climate Goals.
Now, this is highly specific to the Middle Kingdom, which “accounts for more than 75% of Bitcoin blockchain operations globally as of April 2020.” But it’s a factor, a “brick in the wall.”
Another factor to weigh is whether Bitcoin represents a threat to U.S. dollar reserve currency status.
It’s that last bit that really, really matters. Reserve currency status confers enormous and, actually, calculable benefits to regular Americans in terms of our low cost of living, for example. It’s the type of relative advantage empires are wont to preserve, protect and defend.
As Alex Benfield noted in Monday’s Weiss Crypto Alert, “it’s impossible to pinpoint a single factor” for what happened last weekend.
What we can do is follow “price” for distillation of an incalculable set of factors in what is the world’s most exciting market right now. Here’s how Alex framed last weekend’s action for Bitcoin and crypto:
Bolstered by the news of Coinbase Global, Inc.’s (Nasdaq: COIN) direct listing, Bitcoin reached new highs above $64,000 last week. After the plummet to $51,500 on Sunday, it bounced back to around $56,000 as of midday Monday.
It’s impossible to pinpoint a single factor, but it looks like a large amount of leverage in the cryptocurrency market contributed to this mini-crash.
BTC has now fallen below its 21-day moving average, an indication that this mini-crash could turn into a longer correction. Holding current levels and establishing a base for recovery will be key this week. There’s some support volume around $56,000, though there’s much more around $50,000. On the upside, $60,000 is resistance …
Cryptocurrency markets had been looking a bit overextended for a while now. As is the case with old-school financial markets, from time to time, excess has to be flushed from the system in order to cleanse it for a resumption of healthy, sustainable, long-term growth.
It being the case that an excess of leverage has been building in the cryptosystem, we wouldn’t be surprised to see the market go either direction at this point.
On the downside, we could be looking at the $46,000-to-$48,000 neighborhood as a bottom for Bitcoin. That would represent a retracement of approximately 30%. Indeed, we’ve been anticipating such a move for months now. It would create an excellent buying opportunity — a meaningful correction amid what looks to us like at least another year of bullish action for this market.
Now, if Bitcoin could break and hold above $60,000 for three days straight, we’d likely see it move to new highs in short time.
One thing we can absolutely confirm today is that we’re still in “altcoin season.” At the same time, we expect more volatility in the altcoin market, as altcoins will likely continue to outperform the King of Crypto in the weeks ahead. Any sustained bullish or sideways trading in Bitcoin would likely send altcoins to new highs.
Stay vigilant. And don’t get overleveraged.
Click here to follow Weiss Crypto Alert for daily updates on Bitcoin, Ethereum, “altseason” and the rapidly unfolding decentralized finance revolution.
Best,
David Dittman
