Bitcoin continues its descent, now at $3,350 with no bottom in sight still.
I don’t think Bitcoin longs realize how bad things have the potential to be. If they seem bad now, with Bitcoin 84% off the highs, it can get a lot worse. That’s why I have never recommended to buy the dip.
How much do you lose if you invest in something that is already 84% off the highs and it falls to 90% off the highs? Hint: it’s more than 6%.
Bitcoin is a trainwreck of epic proportions and the cars haven’t even stopped moving yet.
I imagine Bitcoin at $50 or lower. That is when I may buy back in again.
How is $50 possible? That seems far too low. But Bitcoin has no big buyers left. It’s dominated by two parties: small-time traders who use exchanges such as Binance and KuCoin, and whales, who use bigger exchanges such as Bitfinex. The entire late-2016 and 2017 boom was driven not by the small-time traders but by deep-pocketed speculators such as hedge funds. However, with those speculators gone, all that is left are whales that are dumping and small-time traders that occasionally buy the dip but are otherwise too small to move the market more than a percent. Who do you think will win in such a match-up? Yeah, the whales obviously. So, that is why Bitcoin will be stable for a few days or weeks and then without warning plunge 10-15%. This process will repeat until either whales run out of coin to sell or tire of selling–or–the big funds return.
Notice how after September there are fewer green candles and the green candles that exist are short and small. This is indicative of few or no big buyers and a lot of big sellers.
There is a single large green candle in October but that was due to the temporary price collapse of the Tether peg, not due to new money flowing into Bitcoin.
Even when Bitcoin was falling in early to mid 2018, there were a lot of big green candles because hedge funds were still buying even as Bitcoin fell. That is why Bitcoin would occasionally surge 30-100% in a couple weeks, giving a lot of false hope for longs but also delaying the collapse. They (these funds) had not yet abandoned hope, and thought that they were getting a ‘steal’ by buying Bitcoin at $8,000. So much for that. Having lost enough money, they have called it quits.
So the death spiral will occur when cold storage wallets start dumping. There are a lot of people who bought or mined Bitcoin from 2010-2013 that are sitting on cold wallets that have anywhere from a couple dozen to thousands of coins. You can find these people on forums, but they don’t brag too much about how much they have, but sometimes post about having a lot of Bitcoin they acquired, usually around 2011 or so. Many of these people still have their coins, and with Bitcoin above $3,000, a sizable fortune. But as the price keeps falling, they may get anxious, knowing that their window of lifetime, effortlessness riches is closing. So when these people start selling to secure what capital is left, shit will get really bad. Because these exchanges will be inundated with cold wallet deposits, the price will fall–fast. By my estimate, without hedge funds to buy the dip and because there are no trading curbs, Bitcoin could conceivably fall from $2500-1500 to $50 in a couple weeks as total panic sets in. [The reason why I choose $50 is because that is the bottom of the 2013 cash, when Bitcoin fell from$250 to $50.] It would be surreal. The sudden decline will cause all sorts of problems for miners and possibly disrupt Bitcoin confirmations. It’s possible the network could grind to a halt, which would temporarily prevent people from moving their Bitcoin. Merchants unable to hedge the price decline would suffer large losses. It would be a huge mess.At some point it will stabilize, maybe at $20-$50 or so, which may last for many months as sellers and dip buyers engage in a tug of war. At some point, the cold wallet sellers will have exhausted their supply and Bitcoin may start going up again as people seize on what they perceive to be a bargain. I will probably be buying too. And I think from there it could get back to as high as $2,000 after a few years