$COIN under $200? Sold to the guy with the glowing laser eyes.
During one particular nasty down-day during the April – May crypto-mini winter, I put out an email alert telling everybody to remain calm and keep the bigger picture in mind. At the time I said something like “It is not my intention to step in with a calming letter every time cryptos get beat up”.
Since then, we’ve gone on to fresh all-time highs and when cryptos did start moving again, it happened very fast.
So here we are again, we’ve been pondering for a few issues on whether cryptos will come off with the wider markets now that The Fed is pretending to take the punchbowl away. On top of that, the Russian Central Bank released a report calling for a blanket ban on cryptos. For some reason, when authoritarian states like China or Russia come out against emancipatory non-state money, people take it as a bearish sign. What did you think they were going to do?
So the wider markets are imploding. TLSA, NFLX, ARKK, it’s a total sh*tshow. Cryptos beat up as well. Coinbase, who we already know from previous quarters actually experience increased transaction revenues during times like this, is under $200/share. I just bought more (this note won’t get out before markets close today, but don’t worry, you’ll probably get your chance to add at same or better next week).
So even though I said I wouldn’t make it a habit to do pep talks during drawdowns, we do have quite a lot of new subscribers since last year’s crypto winter. I will bring your attention to a couple things. This is an infographic of Bitcoin corrections by year since 2012:
Measured from the high at around $68.5K USD, we’re off around 44%. I’ve seen worse. Lot’s of times. We will see worse in the future. We may even see worse now. This is what an unfettered, unmanipulated, non-curated market looks like. (It is also worth noting that Bitcoin is, in a typical year, good for about four decent sized pullbacks of 20% or so. Every year).
What I also know is that if the Fed raises rates 4 or 5 or even 7 times, if they come out with a 50bpt “surprise” hike in March, then it means that somewhere along the line the decision has been made to completely destroy the entire global financial system. Because that is what the outcome will be.
If that’s the case, there will be (for starters) a 400 Trillion dollar exodus from the global bond market, and at least some of it is going to flee to where central banks and governments can’t touch it: crypto and precious metals.
As Greg Foss put it in that What Bitcoin Did interview I linked to last issue: Clever hedge funds think the pair trade to be in is: long equities / short Bitcoin. They don’t realize that Bitcoin’s correlation is not a causal one. It will come unglued if interest rates truly rise and the 40-year old bond bubble bursts (the US 10-year treasury touched 1.8% today. It was 1.34% in December, it was 1.15% in August). In addition to being a short on all fiat currencies, Bitcoin is also a short bonds play, with a never expiring call option on long volatility. Bitcoin may more acccurately be viewed as the Short Everything trade. It’s The Great Opt-Out that can’t be manipulated away by plunge protection teams or The Fed.
Never forget the core thesis from The Crypto Capitalist Manifesto:
The other reason why I’m even more confident that cryptos will decouple from equities is because unlike previous corrections, when the hashrate mirrored the drawdowns, the overall hashrate is putting up strings of all-time-highs.
This is a bullish divergence which tells me that at some point, cryptos will unmoor from the wider markets, similar to how gold did during the GFC, after an initial 50% drop along with everything else. The month-end letter will be out in a little over a week.
Thanks again for saying “yes” to Crypto Capitalism. Sincerely,
Mark E. Jeftovic P.S. With the Bitcoin on another pullback, now is the perfect time to start stacking sats in actual Bitcoin. Learn more here.
