Bitcoin Crashed to Over $80,000 a Coin

Over the last five days, Bitcoin is down close to 14% and has fallen from over $96,000 to touching below $83,000. Candidly, I had a different newsletter scheduled to come out but given the current events, I felt obligated to dive in and write about price action and provide some analysis as well as my thoughts on everything going on in the world of Bitcoin.

Fundamentally, nothing has changed with Bitcoin. Bitcoin is still the apex asset in the world and the only truly scarce asset in cyberspace. From a macro level, it seems I am waking up to productive and encouraging headlines regarding the crypto and Bitcoin industry every day. Domestically, it seems one after another the SEC lawsuits against prominent firms in the space are being dropped. Just this week the SEC halted investigations on Robinhood, Uniswap, Gemini, Consensys, and Coinbase. Bills are still moving through the state legislative process (the Texas Strategic Bitcoin Reserve Bill has been passed by the committee and now goes to the whole state senate) and a Bitcoin Strategic Reserve is still a daily talking point. However, as the price has “plummeted” to prices we have not seen in the last 90 days it begs the question of why people are feeling the level of fear they are feeling.

I have been involved in the Bitcoin and crypto space since before FTX collapsed. FTX collapsing was a generational black swan event—or at least that is how it felt. Bitcoin dropped 22% in less than a day when FTX blew up. One of the leading exchanges in the industry suddenly disappearing amidst a web of fraud is far scarier than anything that has happened in the world of Bitcoin today. That is a fact.

My opinion is that what is currently happening with the price of Bitcoin is none other than a typical bullrun pullback that commonly follows Bitcoin. In the 2016-2017 bull market, there were multiple 30% dips on the way to the ultimate top. What we just saw was less than half of that drop.

If you look back to the initial run up to $100,000, as Joe Consorti explains in the clip below, it was a rush. Bitcoin spent hardly any time between $76,000 to $86,000 and is now finding itself in price discovery. Joe also points out, from a prior analysis he performed, that Bitcoin trails the global M2 money supply at an approximate 70-day delay. Bitcoin has corrected to the trend recently but the M2 money supply is ticking up again. Under the 70-day assumption, Bitcoin should mimic the M2 supply soon enough.

I believe since we spent such little time in the $80,000s moving up toward $100,000 many new investors have sold. They may have purchased as a reaction to a fear of missing out (FOMO) and have now capitulated when their investment retraced. It’s possible that people at the retail level either overextended themselves or largely did not understand the investment that they made. On the other hand, whales are some of the biggest buyers during this current pullback. The numbers seem to back up this idea. I personally value whales buying more than retail members selling.

All this to say, until Bitcoin removes volatility as a key feature, pullbacks will happen. Since volatility is a feature, and not a bug, of Bitcoin, I expect this characteristic to remain.

As Pierre implies in the above statement, people think Bitcoin is “cheap” when it lowers because of anchoring bias at higher fiat terms. I believe, that unless you educate yourself about Bitcoin and understand what it actually is, you will be inclined to follow typical human psychology that makes you want to buy something when it is high in price and be scared of it when it is low in price. Understanding Bitcoin helps remove this implicit bias we face and enables you to recognize the reality of the situation:

When Bitcoin lowers in dollar terms, your dollar purchases more Bitcoin.

Nothing about Bitcoin has fundamentally changed other than the exchange rate you now see. As a Bitcoiner, my philosophy is to embrace these pullbacks as an opportunity to use my “newly strengthened” dollar to purchase more Sats. I personally will choose to believe in the pattern of the typical 4-year cycles until we live in a world where history does not repeat itself. Under this belief, we are very much still in a bull run and this is just a minor correction before we continue our ascent during the later parts of this year. It’s okay to feel nervous if you are underwater on your investments but it is irrational to act like a black swan event has occurred and is making you feel this way. Instead, educate yourself more, and choose to see the current price action for what it is—a chance for you to purchase more of the most asymmetric bet in human history at a lower price.

Don’t be a victim. Be the hero.

Stack SATs.

The views and opinions expressed here are for entertainment purposes only and should, in no way, be interpreted as financial or investment advice. Always conduct your own research when making an investment or trading decision, as each such move involves risk. I am not a financial advisor and do not claim to be qualified to convey information or advice that a registered financial advisor would convey to clients as guidance. Nothing contained in this e-mail/article constitutes, or shall be construed as, an offering of financial instruments, investment advice, or recommendations of an investment strategy. If you are seeking financial advice, find a professional who is right for you.