Bitcoin has crashed, not the sort of typical Bitcoin meltdown but an old school equity style crash of around 25%. That kind of move is almost not big enough for Bitcoiners to consider it significant but for ‘grown up assets’ that would be big news.
The fall back from highs will not be explainable to many especially those people expecting Bitcoin to go to million and by Christmas to boot. For them the only way is up.
I was once a crypto enthusiast expecting BTC to moon. It did. There are however limits especially if you are looking for value increase not just numerical increases. I agreed with the old wild predictions when it was 4 figures but not the new ones of logarithmic appreciation. Bitcoin to me is now just another asset embedded into the flying circus of financial markets.
It is bound to liquidity, arbitrage and hedging just like shares, commodities and other currencies. It is in the system and is no longer an outsider fated to destroy ‘tradfi’ and change the world of money. It is now part of ‘Tradfi.’
That is an unpopular opinion that many see as ridiculous when Bitcoin was recently at all time highs, but not so incredible when it crashes thousand of dollars in a few moments.
So here is where we are is a chart.
The chart doesn’t look too bearish, but we have seen two nose dives in a week coming out of tariff tantrums and ‘tradfi’ issues sparked by sub prime car loans. This ‘tradfi’ fraudulent default created by and a hill of trash bonds might create contagion in small American banks, an echo of Silicon Valley Bank’s implosion, and the markets don’t like that at all. Probably a blip, maybe not.. tba
In the old Bitcoin world this narrative in ‘Tradfi’would not be a thing. Bitcoin’s value is not predicate on US small bank solvency or conniptions. Yet here we are. So, if Crypto is absorbed into ‘Tradfi’ how this normalisation effects cramp the price or make for a negative repricing. If Bitcoin is assimilated into the old system why is it special anymore? Assimilation feels bearish to me.
So here we are right now..
Bitcoin looks fragile.
If it goes under $100,000 a coin the chance that the Crypto Winter crash is underway will suddenly be a lot higher.
However there is something deeper going on.
Bitcoin is driven by liquidity in the market. Lets call it what it is cash sloshing around in banks and places looking for a place to make money. The cash excess cash ends up in the reverse repo at the Fed.
So heres the chart of that.
But wait…
Te spicy money buying the throthy assets is temporarily out of stock.
The good news is, if necessary, more cash liquidity is only a few mouse clicks away for the Fed.