Greetings, and welcome to the Ides of March, Crypto Limbo edition. Did we say “lambo”? No, get your proverbial head out of your proverbial backside.
We said “Limbo”, as in “how low can you go”.
So it’s been a few weeks, and the inverted head and shoulders pattern we were watching on bitcoin at the end of February failed with prejudice.
Lots of “news following price” reasons have been given for those long bear candles at the neckline. A credible one in our opinion is the dumping of around $400 million in recovered Mt. Gox bitcoin by the Gox bankruptcy trustee on the open market on March 7. This was around 40,000 bitcoin. Why this was done on the exchanges, at market prices, instead of OTC (over the counter) is befuddling. But had you known about this ahead of time and opened a short you would have made out like one of the Mt. Gox bandits. Some of those candles on the 7th and 8th are $1,000 each.
And lest you thought we were out of the woods, the Gox trustee still has 160,000 btc which has yet to be sold (about $1.9 billion at current prices). There are no statements that that will indeed happen in the near future. In fact, the $400 million earned by the most recent sales appears to cover the outstanding debts to the creditors. But that is a not insignificant overhang in the global bitcoin market which lately has seen daily volume hanging around $6 billion.
The fault, dear Bitcoin, is not in our stars, But in ourselves.
Bitcoin dominance of the total cryptocurrency market cap is sitting at around 42% as of the time of writing. Bitcoin was the first across the fintech Rubicon and has been the leader of the overall crypto markets ever since. Yes, there was a time in 2014 and 2015 when altcoins ‘soared’ as bitcoin floundered. But the health of the overall crypto space was clearly still controlled by bitcoin.
But looking at the charts of each of the top market cap coins, they all seem to be following Caesars’ lead.
So clearly, though the dominant narrative has been about bitcoin, and the Mt. Gox dump, the price action is weighing fairly equally on all crypto at the moment.
Not that I loved Bitcoin less, but that I loved Crypto more.
So, what does all of this tell us about the possibilities for where we might be headed? And, as someone asked recently, when we will know to “back up the truck”?
All good questions.
First, let’s get this out of the way – if you ever intend to “back up the truck” on crypto then you are betting on the macro trend. And if you haven’t figured it out yet, we at BST are definitely betting on the macro trend long term. We do not pretend to know, nor will we hazard a guess at whether it will be Julius or Brutus or Augustus who sails the great crypto ship of state into the waters of history. But we are betting on it being a Roman and not a Carthaginian.
Now, let’s talk timeframes/catalysts.
Looking at the chart below which maps total cryptocurrency market cap in USD (and also the reason we have been using USD/USDT charts instead of BTC pairing charts) you can clearly see the break in the 2017 trend in February 2018.
So, the narrative for the next little bit is going to be this – can we hold support between $320 billion and $300 billion? If not, then we would certainly be waiting on any trades till we saw whether the trend bounced of the edge of the downward channel. If it did it would confirm the pattern and we would have an idea of where the market might rebound to in macro terms. This of course informs our decisions on what positions and types of positions we’re holding. If on the other hand we invalidate the channel and drop, shorts might have a nice spring. Then we would be looking for support around the $200 billion range to reassess direction.