Crypto Market Sells Off. Is This the End of the Ride?

•  Bitcoin (BTC, Tech/Adoption Grade “A-”) touched lows of $30,000 earlier today before retracing slightly.

•  Ethereum (ETH, Tech/Adoption Grade “A-”) also lost some major ground from its recent all-time high but has found support.

•  Polygon (MATIC) is showing extremely impressive resilience so far today and has almost entirely recovered from the morning dip. Earlier today, we sent out a special blast to keep you abreast of the extreme action seen in the broad crypto market today.

For those of you who are new to crypto and unfamiliar with corrections like this, we salute you. Days like today can test the conviction of even the most veteran crypto investors.

We try to prepare you for this type of volatility, reminding you that corrections as high as 30% and 40% are expected in crypto. The only thing unusual about today was the speed of the correction.

Still, I think this tweet sums up the experience for a newer crypto investor pretty well ...

Remember, unrealized losses are just that: unrealized (unless you sell). We hope you HODL (hold on for dear life), and here’s why.

Bitcoin dipped all the way to levels not seen since the start of the year this morning. Fierce buying in the afternoon brought it back slightly, possibly suggesting a short-term bottom near $35k.

This slide pushed many weak-handed traders — along with lots of leverage — out of the market, which is exactly why we say dips like this are healthy. Now, Bitcoin can begin to build up healthy price action.

And we believe it will do just that. After all, the fundamental forces pushing Bitcoin higher haven’t changed. As my colleague Juan Villaverde put it, “Before the Bitcoin rocket launches, the launchpad needs to be prepped.”

Shaking out the weak-handed traders and excess leverage will prep the market for the next run-up.

Juan continued by saying, “Like in 2017, that will be just the prelude to a new, parabolic phase of the Bitcoin bull market — when prices go up faster and further than during any other period.” 

Here’s BTC in U.S. dollar terms via Coinbase Global, Inc. (Nasdaq: COIN):

Ethereum suffered a similar fate as Bitcoin, perhaps sinking a little bit faster and further than the King of Crypto.

ETH crossed below its 21-day moving average on Sunday night before dropping to brief lows of under $2,000 this morning. It has since climbed its way back above $2,800 in the last few hours, representing a 15% loss on the day and as much as 35% from its all-time high set on May 12.

There appears to be decent support around $2,500. If this correction persists, look for ETH to bounce off of that level.

Here’s ETH in U.S. dollar terms via Coinbase:

We’ve been talking a lot about Polygon lately ... and for good reason.

This project is seriously impressing us; its network growth and total value locked (TVL) are on the rise, and the user experience on the network and the supported decentralized applications (dApps) is excellent.

Most notable though is MATIC’s price performance, as the asset held up extremely well during the market panic of the last 48 hours.

While the rest of the market was dumping Sunday night and into Monday, MATIC posted a 40% gain on the day and briefly touched $2.80 on Coinbase, setting a new all-time high.

Today MATIC posted a one-hour candle that dipped from $1.70 all the way down to $1.05, then regained the $2.00 level shortly after.

Talk about a fast dip, and anybody that had the opportunity to buy at that level, I personally applaud you.

There is a lot going on here with the Polygon project. We at Weiss believe that the Polygon network might be the next natural progression of decentralized finance (DeFi). That, combined with the recent price action, has us leaning heavily bullish on MATIC.

Here’s MATIC in U.S. dollar terms via Coinbase:

Notable News, Notes and Tweets

There is a lot to cover today as crypto Twitter went nuts following today’s market action.

•  Ryan Selkis of Messari, aka @twobitidiot, had a lot to say about the notable exchange outages and errors during the big move this morning.

•  He also provided some rationality for those wondering to sell or HODL.

•  Cathie Wood of ARK Invest took to Bloomberg to back her conviction on Bitcoin, where she proceeded to give a $500k price target for Bitcoin.

•  Michael Saylor, the newfound Bitcoin prophet and CEO of MicroStrategy Inc. (Nasdaq: MSTR), confirmed that he has continued to buy the dip and hasn’t sold any Bitcoin.

•  I recommend those of you concerned with Bitcoin’s environmental impact check out Nic Carter’s research on the topic.

What’s Next

Despite the steep correction, the fundamentals of Bitcoin and the other cryptocurrencies we cover have not changed. In fact, they’re fresh off the best levels we have ever seen. Adoption is growing as new investors — both retail and institutions — get in.

This likely marks the end of the first bull cycle phase that we’ve been talking about. The second, potentially larger bull phase will follow.

This was actually the big 30%-plus correction we’ve been expecting to use as a buying opportunity for the next leg up in the bull market. Until you experience it firsthand, though, it’s easy to underestimate just how ugly these corrections are and how depressing they can feel.

Our optimistic outlook from here is supported by our research. Bitcoin has followed the same pattern it established in 2017 almost perfectly this year. If history continues to repeat itself, just like it has so far, then the sky’s the limit.

There will likely be sideways trading or range trading between the end of the first cycle and the start of the second.

Worry not — things are still tracking along with our long-term macro outlook. We see big, exciting things in the future for both Bitcoin and the rest of the market over the course of the next year or so.

So, buckle up and hold on tight; this ride can get bumpy at times, but the destination should be worth it.

Best,

Alex