Testing patience. The crypto correction is here.

"At the end of the day we can endure much more than we think we can" 

Frida Kahlo

Well here we are folks, the long awaited correction in BTC and the cryto space. For those of us that have been involved in this asset class for longer than you can say "Boo", this is not something new. In the last 5 years there have now been 3 major corrections:  the 2018 70% meltdown, and the early 2020 50% fall. So the current 40% or so retracement, while not a particularly happy experience for Bitcoin investors, is certainly something we have come to expect. 

$34,000 is first resistance level

What has caused the correction? I see 5 key reasons (in no particular order):

  1. Technical factors (see chart above and May 16 link below);
  2. Linked to point 1 are the leveraged positions put on by numerous investors/traders over the past few months that now need to be unwound as losses mount;
  3. Elon Musk tweets/comments about Tesla not accepting Bitcoin for payment;
  4. Environmental concerns (highlighted by Elon as his reason for Tesla reversing course on Bitcoin payments);
  5. Regulatory concerns highlighted by China's recent statement that speculative activity in crypto was “seriously infringing on the safety of people's property and disrupting the normal economic and financial order.”

Total crypto market cap at $1.75trn, still up more than double YtD

Obviously the rise of the past 6-12 months has sucked in a lot of new investors (?) and for those people this is a new phenomenon that will test their patience. Will they heed Frida Kahlo's advice or will they bail out? That is the $60,000 (or $35,000) question. Just a few days ago I wrote about this possibility on the May 16 blog: 

https://thrivingwithinterest.blogspot.com/2021/05/youve-got-to-ask-yourself-one-question.html

At this point we could easily retest the mid $20,000 range on BTC, and that will obviously drive down many of the other crypto assets along with it. To update the recommendation from May 16, this is what I would do:

  • short term investors/traders: stay away, we are in no man's land here
  • ETH vs BTC cross traders: continue to take profits on that ratio (i.e., sell your ETC in favor of buying BTC)
  • long term investors/traders: accumulate on dips, the long term story has not changed
Best of luck to everyone. Happy trading and stay safe.


Comments

Post a Comment

Popular posts from this blog

18 lessons for my 18 year old son...

Image
Dear Misha, This day only happens once in a father's life, when your only son turns 18 and is now considered a fully fledged adult! After shedding a few tears and celebrating with some of his friends (and some adult ones) now was the time to celebrate as a little family unit. Now is a good time to impart 18 lessons (in no particular order) that I hope that you keep in your back pocket as you sets out on your own. Here they are (in no particular order): Use the worlds, "Please", "Thank You", "You're Welcome" early and often; Making mistakes is fine. Learn from them and move on (as a wise man said, "Excuses are the nails, used to build a house of failure"; Make eye contact when talking with others; Offer to lend a helping hand before being asked to do so; Take a public speaking class (or two) in college and practice doing so; Stay physically active, especially when you start feeling a bit down; If a problem arises, deal with it sooner rathe...
Read more

Importance to have a work buddy... Lessons from the trenches!

For the past 13 months we have been working from home. Over the past few weeks my school has dabbled with in person teaching and that has brought on its own set of challenges as well. But one constant throughout this whole ordeal has been the fact that I have had a core group of work friends who have helped bring some levity when things got rough and some perspective when things seemed to be spiraling out of control. Within my math department it's nice to have colleagues who are always there to help out and pick each other up when things seemed dazed and confused, first on the transition from in person teaching to remote and now on the re-entry to in person teaching albeit in a hybrid form. Adapting lessons and assignments from the "old school" paper format to the much more eco-friendly and XXIst century electronic format took some major teamwork. Figuring out the best way to utilize zoom and all of the bells and whistles that it offers also was a team effort. I am so gra...
Read more

20+ years of tennis ended today (goodbye Fed, Serena, Murray and Nadal)... It's the Djokovic show from here on in...

Image
  You read that right, a 6-0 set inflicted on Federer, the man who has won the most Wimbledon singles titles (of course the great Navratilova holds the all time record with 9 singles titles), and who has not lost here in straight sets since 2002. This simply marks the last domino to fall of the greats leaving the stage with a whimper, rather than a bang. Let's recap: Nadal didn't even play the tournament this year. He felt he needed more time to recuperate after a full clay court season and as such withdrew both from Wimbledon and the Olympics in order to "focus on looking at the mid and long term." Of course that is sensible, but with Djokovic one win away from his Major total, London being a short train ride away from Paris, this does strike me as a little strange. Not to mention that Novak beat him in Paris less than a month ago, it does seem that the Nadal challenge is slowly coming to an end; Andy Murray who is often described as a member of the big 4 in men'...
Read more