While the previous session had a clear, risk-on tilt, yesterday traded with a clear, risk-off feel. With developments on the Covid delta variant front and the fear of a more real impact on the economy, equity indexes in the US, Europe and Asia pulled back from elevated levels. Historically speaking, we’re still at very good levels, but, on the session, it felt a bit like a cold shower.
The feeling was definitely mutual in the crypto space. Yesterday, with massive crypto holders dumping on retail that was starting to FOMO, a massive amount of leveraged longs got “rekt.” I’m talking about more than $4 billion worth.
From the intraday high to the intraday low, BTC fell a good 18% and then closed the session about 10% down, at $46,500. BTC's dominance held steady during the move, suggesting alts are coping just as well, or maybe just as badly.
Among the worst performers are THETA, down 25%, DOT -20%, MATIC and VET almost -20%, and AAVE and TERRA, down almost 15%.
The question is, what happened? I’m personally always looking at traditional markets for a hint at what large players are doing. There is a correlation, whether we like it or not. With a lot of leveraged longs feeling optimistic about the mid 50Ks, or even maybe the 60Ks, a small pullback can - and probably did - create a cascading effect of liquidation, which is always behind those violent corrections.
Some friends highlighted the roll-out of the BTC as legal tender in El Salvador. Maybe they expected fireworks and a massive enthusiasm, or maybe smart money took advantage of an army of smaller investors buying in. But, the reality is, it is still interesting. McDonalds, for example, now has to accept BTC there, and so has accepted its first BTC transaction, which they can then either hold as BTC or convert into USD.
A very interesting piece of news that came up and might also constrain prices is the post by Coinbase addressed to the SEC. Apparently, the latter is about to pursue legal action against Coinbase’s lending business, even though Coinbase has - apparently - always been ready to communicate and adapt its business model. Let’s see if this will end well or badly.
On a last note: What am I doing at these levels? Just holding. Fundamentals and interest in crypto haven't waned, it seems, and while those dramatic moves will shake some players, they shouldn’t take us off course for now.
The natural ebb-and-flow of price, has replaced the bullish moves seen through October and early November
It looks like crypto isn’t correlated to traditional markets, at least not during this past session.
Investors aren’t ready to give up on equities yet.
One of the big factors contributing to bitcoin’s expansion over gold is that millennials are becoming more knowledgeable of the investing world.
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