That part in the cartoon when Wiley Coyote runs off a cliff and air cycles for a moment suspend, is where Crypto sits today.
There are a number of companies that seem to be falling dominos after the FTX debacle that like Wiley Coyote at the bottom of the canyon, have yet to hit the ground.
Because of FTX, 3AC before it, Celsius and Blockfi, the chorus crying fraud is back but Crypto is no fantasy fraud. The mere fact that governments are ape-ing into producing so called CBDCs, a centralised type of Crypto, shows the brute power of cryptocurrency and its technology.
It is the power of blockchain plus encryption that unlocks this potential because because combining these technologies enables decentralisation a giant lever of human activity only recently muted by modern centralising forces.
Centralisation has its plusses and negatives and decentralisation likewise, but decentralisation has been cornered by the overwhelming centralisation of economics so that its benefits have been drowned.
Blockchain/Crypto re-enables decentralisation and unlocks its benefits.
You might wonder what the benefits of decentralisation are and one of them is clear, it levels the gate-keepers of commerce and economics that has always unfairly fuelled elites and oligarchs. We do not need to get polemic about that situation, it just boils down to that gatekeepers equate to inefficiencies. If you can disintermediate a process the costs and price goes down. If gate keepers holding centralised power need to be paid, systems runs slower and at greater cost.
At one level Bitcoin for example does a way with the need for banks as a method of depositing money and even while people moan on the energy usage of Blockchain, the 250,000 bank branches in the world carry a huge cost even before you imagine the CO2 of all the other overheads that go into a bank. The ramifications of letting Crypto flatten banking like Google flattened newspapers is however frowned upon by the vast layers of intermediaries that rely on banking for their daily bread, so there aren’t many banker turkeys looking forwards to a crypto Christmas.
However, you cannot put the technology genii and the blockchain revolution back in the bottle. So the question is only how does the technology unfold.
Bitcoin is not going away. So what next for Bitcoin.
Here is the chart and the important thing is, the noise is gone.
Bitcoin is no trading like a proper asset. Since 2021 up to the point of the recent drop the volatility has indicated that the real price of Bitcoin was less than certain to the market. This is not a long term bullish state because of an asset to sustain a value the participants as a whole need to be on the same page and comfortable with that price, not driven by fear and greed to swing the price around.
While I do not think we are at the bottom, yet it does show that Crypto is getting closer to equilibrium.
If there is not another FTX sized default and that is a 50/50 it looks like my long term $13000 is still a good level to consider as the bottom. A major bust in the near term could see the price hit extreme lows for short periods but establish equilibrium around $10,000.
The thing to realise is, the Bitcoin is gone when it comes to any future busts. If they go bust it will because they sold there Bitcoin for more ‘exciting’ opportunities, so the chance there will be big dumps of Bitcoin are not inevitable. Likewise liquidations will lock up tokens as the slowly grinding mill of law and lawyers lock up assets for months even years.
What to do today?
If you are looking for the low then the tactic is to wait for the next ‘shoe to drop’ from the FTX debacle. This will at least involve Genesis and DCG and Greyscale. There might be other disruptions but these named situations are the issues that needs closure. Untill then Crypto is a UXB and untill its defused there is plenty of downside.
Best have a peaceful and merry Christmas and happy new year, before setting off to pick the bottom of Crypto because even if nothing happens by the end of January of 2023, the question will remain, ‘what went right?’