Market Watch: Trying to price in a mega-bubble early.
Red market got you down?
Imagine all your friends and family being gunned down in the streets!
Feel better now?
I weirdly do.
It's just money.
Sunday, bloody Sunday!
My word, what is going on? So all the overleveraged longs were liquidated four days ago. It looked like we were bottomed out and ready to pop back up, even if it was just a dead-cat-bounce. Instead we crash back down near the $30k support line for the second time this week. Not a great sign.
Perhaps some of you remember back in January when I was flipping my shit over this bull market. Price got too high and it crashed too fast. Most importantly, this was all happening too fast. There was no way we were going to be able to maintain this momentum for an entire year.
2017
In 2017 we didn't break away from the doubling curve until the summer. So the fact that we were so far above the curve at the beginning of 2021 was very alarming to me. I made a lot of claims that BTC might crash back to $20k, but instead we held support at $30k and just kept going up up up.
Ah well, now we are testing $30k again, and if I'm being honest that's not surprising at all. Until now, I just assumed that this was the strongest mega-bubble of all time because of the institutional adoption. Nope, rather the market does what it always does: gets greedy and tries to price these things early.
This is exactly what happened in summer 2019.
The market tried to price in Bakkt institutional investment. From $4k we spiked to $12k back to the doubling curve right after launch.
This is exactly what happened in Summer 2016
The market didn't realize how bullish the first halving event was until after the supply shock hit and the price mooned months later. During the second halving the market attempted to price this in early: again it was a complete fail.
| 2016 | 2017 | 2018 | 2019 | 2020 | 2021 | 2022 |
|---|---|---|---|---|---|---|
| $800 | $1.6k | $3.2k | $6.4k | $12.8k | $25.6k | $51.2k |
We still find ourselves well above the doubling curve for Bitcoin (over 50%). I'm sorry, you wanted your investment to go up more than x2 every year on average? That's just greedy. x2 per year is still the best investment of all time. Hands down period the end. Bitcoin is only worth $20k, and I've been saying that since the beginning of the year.
So what happened here?
The market tried to price in the mega-bubble early once again. And once again this was a huge fail leaving everyone falling flat on their faces. We can still easily touch down to $20k, and if we do I suggest we all buy the dip if possible.
Will $30k hold?
Who knows?
So my little annual cycle chart has really been getting wrecked by this weird market. Feb, March, and April were supposed to be consolidating months, but all we did was consolidate at a bubbled price. Now we are back to December/January prices as we move into summer, which makes sense according to the chart, but Summer could still be a dud.
Very often if we just had a bull run in Q4 that means the following Q2 will be a dud. Also if we had a solid bull market in Q2 the following Q4 is often a dud as well. We very rarely get 2 bull markets in a row. That normally only happens in the mega-bubble years. Considering we are in the mega-bubble year of 2021 I'm still holding out hope, but at the same time a crash to $20k at this point seems just as likely.
For me it's always been about Q4 2021 for the last 3 years. I'm not really phased by the current drop, in fact I feel like it sets us up for a Q4 run even better at these current prices and fear-factors. At this point I'm not sure what summer will be like but then again I don't really care. My prediction has always been $250k-$400k at the end of the year. And I made a bet with @yabapmatt that we'd hit at least $100k by then. I've yet to lose one of these bets. Don't plan on starting now.
But honestly I wish I was wrong.
I don't want a mega bubble. As I've already explained a few times now: mega-bubbles are terrible. Volatility is bad. If Bitcoin could just make consistent x2 gains every year that would be way better than what we have now. Ironically, when every we get this kind of stability it is exactly the cause of everyone loading up their bags and making the market unstable again.
Point of Guaranteed Return
I warned everyone in March that $50k BTC was the point of guaranteed return. Selling some there was an automatic safe play because according to the doubling curve we were almost guaranteed to come back to $50k no matter how high the market got. My, how that advice has aged well... I wonder if anyone actually took it: I certainly didn't. This metric is still in play now: I think we are guaranteed to be at $50k by the end of 2022. Even at $32k BTC, that's not a bad investment for less than 2 years. Pretty amazing really if compared to the stock market.
Hive
Speaking of smart hedges: my last post aged pretty well. Limited time offer: HBD is finally worth holding! Yep, feeling pretty good about shoving all my blogging rewards back into HBD. Easy money.
On that note even after all this blood in the streets my upvote is still worth over $5. That's over $50 a day, over $1500 a month. Crazy stuff. My crypto yields are still well above what I would need to live off of. Not even counting CUB in this equation or my blogging rewards. Small miracles.
Conclusion
We can always count on the market being greedy and impatient. Everyone in the market wants to maximize their gains, and they don't care if they have to stand on the backs of others to do it. I think it's pretty clear there is some blatant manipulation going on in the market right now, but at the same time it's very intelligent manipulation that is possibly even deserved. Going short when BTC is x3.25 higher than the doubling curve is very rarely going to be a bad play. Now we are down to x1.625. Still rocking it but everyone is now wallowing in extreme fear.
I have no idea what the summer holds, but history has shown that summer always trades flat or up, so I'm optimistic. Even though we are "only" x1.625 above the doubling curve that's still basically exactly where we were in 2017 around this time of year.
By all accounts, we are still participating in one of the strongest Bitcoin mega-bubbles of all time, and most people are so afraid of this crash they don't realize it. Maybe that's the point: the market can't know or else it will get greedy and try to price things early again.
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