Bitcoin Bulls and Bears Go to War

There’s something about $7,000 or $70,000 that you feels. It’s close to $100,000. Are we really gone do this? Too expensive, at first attempt. Gone crash. Bear market. Pack your bags.

But, are bulls holding the line? Is this just an attempt by traders to sell and buy cheaper. Just a dip, another blip. All that bear money back to proper party. Crucially, is this fear good, even comforting? A sign there’s no euphoria yet, still maybe half way?

The W is a double bottom, usually a very bullish formation that also usually comes with hindsight. Once it’s formed in a long time frame, here on weekly, the asset rises and here it also rose.

Now we get a red candle to decorate a bit of that green. Is it a frontrun for the Black Friday discount? This is a ritual in bull years, in 2016 and 2017 and we covered it in 2020.

Our explanation was and remains that an organic ‘discount’ forms by some selling their corn to buy other gifts. However once bitcoin is on discount, 20% Off, then others buy bitcoin to give that as a gift.

Billions are spent on Black Friday, and this year some of that may even go on jpeg gifs or for the smarter ones on the network that gets their burned fees, eth. For others, bitcorn with its comfy fixed limit and 4-year non-upgrades.

This year such discount maybe has come a bit earlier because frontrunning. Or, Shanghai didn’t show up one day and bears pounced on the opportunity.

This Tuesday, some regional leader was charged by the Communist Party with not toeing the party line in allowing some bitcoin miners. He was also accused of “moral decay” and ree bad scapegoat ape no pity this human you plebs and no question the party.

1984 aside, Shanghai didn’t buy that morning. They had the previous mornings almost religiously, which is presumably why the Communist Party thought to put up this show. It seems like it didn’t last a day however because they did buy yesterday.

America is sort of neutral with their dollar weakening a bit after reaching 96 in its strength index, now down to 95.6.

It has been losing value against CNY, but it has been gaining against the euro where they keeping the money printing at unchanged levels.

At the same time both the euro and the dollar are devaluing significantly, so the dollar’s relative gains on the euro are minuscule compared to the loss of the value of both against hard assets.

Bitcoin is global, so a relative change in fiat strength in theory is irrelevant because if Americans don’t buy it at the same rate, euros will. In theory, in practice Europe is about two years behind in awareness generally speaking at the mass level, presumably due to the language barriers. Plenty of euros however bitcoining and plenty NFT-ing too, but NFTs don’t seem to be as culturally prominent as in USA.

In America, some crypto card company spent nearly $1 billion on some baseball stadium as Crypto.com buys naming rights to the Staples Center for $700 million, showing this space is becoming a bit more professional in advertising, certainly compared to the first ads in 2017 that looked straight like from 1995 internet ads with their cute amateurism.

This however is something else. Whatever reverse psychology they may have had in mind should have come a far second to common sense. But Changpeng Zhao of Binance would presumably benefit from less competition due to increased regulatory entrance barriers, even if one can read this as saying don’t regulate crypto.

Advertising works of course, that’s why people spend billions on it. All this should increase awareness, and it speaks of a certain stage for cryptos.

We’re at the dawn of the mainstream wave, in usage. At the dawn, we’re not quite anywhere near there yet, but with an estimated 200 million users globally, more and more are casually coming across cryptos, both online and in real life in casual conversations.

We’re also getting ready to welcome them. ZK tech is changing the game in eth. Realistically, this is probably still Yahoo, there’s no Google yet, but we may be wrong and a zk tech implementation may well be the Google. All we know is that broadband is here and is now being rolled out.

That brings us to the big question which we’re maybe even fools to attempt but the market is thinking of it so maybe it deserves our speculation.

Blow Off Top or Steady Growth

There’s a ritual of sorts in crypto. You buy it, you forget about it, you hear on the news it is now worth WoW, you sell it.

Did those that bought it this summer hear of wow, and therefore sold recently? Who knows but this is one argument against steady growth, as much as we would like it. Bitcoin is volatile because of its very limited supply which can make practical supply a very moving figure.

Institutional investors now however hold more and more of it, but some of them are more volatile than retail. Ruffer, the British investment manager, bought half a billion bitcoin in December last year and quickly sold it a few weeks later.

On the other hand there’s Ark Invest and Tesla still hodling. So, they’re no different than retail, some are happy with 2x, some hodl longer term.

In addition, we don’t think institutional investors are anywhere near dominant in this space. Our out of nothing estimate would be a reversal of stocks, 20% ‘institutional’, and 80% the general public.

That’s because pension funds are still kind of restricted from proper participating. They’re focused on decades, so their proper entrance may make a difference, and since there is probably more of them in this space than before, they might be making a difference but we just had a 50% drop this summer so at best we’d need some more time for the establishment of some evidence.

What is different this time is stock traded miners that can raise capital in fiat and therefore can hold the coins. Institutional investors can participate here and probably do dominate, with that practical reduction in supply raising the floor but we haven’t seen it before so no one quite knows how the mechanics will develop in the medium term.

We do suspect miners set the price, in a way. In isolation you can even blame them for the bull and bear cycle due to a lack of sophistication in appreciating the role they play, and because frankly some of them are wood dum like the F2Pool operator, and we say so simply because there wasn’t much of a barrier to entry and so you’d expect dumbness and amateurism.

If they wanted to, in theory, they could stabilize the price by increasing or decreasing practical supply based on market circumstances. In practice, there isn’t one miner that can dictate, some don’t have the means to sophisticate, and most importantly they have a business to run and business considerations which might not accommodate market conditions.

Then there’s the question of why do we even have such blowoff tops which coincided with a run-up in Google searches, transactions back when we could track them or nowadays fees but they too seem to have stabelized.

Google searches currently, for both bitcoin and eth, are half the peak they were in May 2021 even though price went higher. The amount of bitcoin and eth held on exchanges however is at lows, while fees have been flat during spring summer and now autumn, at least for eth.

So there’s no mania. Or you could say there’s now more institutional investors involvement that we can’t easily track in movement. But interestingly bitcoin’s hashrate is not back to all time high, although it is near there at 175 from 200.

All this data suggests there isn’t euphoria. The conditions are right perhaps for it to begin, but there may be more caution this time that keeps it more steady.

Yet we have seen a significant run this year, and a trough, and a run, and now we have a red candle after six weeks of green with everyone shouting bear market.

They shouting so perhaps just because they want in cheap, not to quite get out. That might mean all that fiat that gotten usdt-ed might go right back, which is perhaps part of what makes them blow off tops.

But we might be slow and steading now with these 20% drops and 30% ups, although it looks like the very same bitcoin and the very same fun in the market.

Bear is coming, but we suspect first there’s the partying. You’re on second glass, it is probably time to dance. You can stay sober, but bitcoin probably won’t. We may be wrong, but at least we won’t know it until months have gone.

It’s just the music, and the show. You’re right in the middle of it, so perform. Go with bears or go with bulls, the party either way will go on as the stage now opens to the middle act, it’s called: they think they’re right.