Is the crypto winter over?

[johnarb]

Here's what I think will happen. As we clear above the line drawn below, newbies will think BTC will have finally turned the corner. Naively IMO. That would be the best way for the smart money to entrap the gullibles amongst us. Smart money always like to violently shake out any weak hands before driving the price up (or down).

The smart money not so smart nowadays, was it Blackrock lost over $1.7 Trillion, wasn't there a major revenue miss a couple of days ago from Goldman Sachs, I don't follow too closely, I listen to CNBC for background noise and maybe some gold nuggets of information

The truth is that the smart money was riding on money printing 0% interest Fed, cheap money lever up everywhere. Now Fed took the (liquidity) punch bowl, and those guys got exposed in their dirty drawers

Be that as it may, fuck 'em

All these blowups of centralized crypto banks, borrow/lending, BlockFi, Celsius, Voyager, Genesis and a bunch of other ones have completely cut off the "traders" who were borrowing crypto assets and shorting them, dumping them

FTX dot com was the place for these leverage traders to short bitcoins and cryptos borrowing from the above places, and guess what, all these sophisticated traders got rugged by Sam Scammer-man Fraud, they're wiped out

So, now it's an interesting market. Bitcoin market is more pure, more honest, during this time. We do not know how long this will last, but I'll try to enjoy it and trade it

Tell me, how would you short spot bitcoin tomorrow? and how would the wall street smart money short spot bitcoin tomorrow?

Without FTX dot com and without the crypto lending platform, they now have to take higher risks, at a time when cost of money is over 4% on the short term, now has some hurdle-rate

Anyway, maybe I'm all wrong about this and tomorrow like you said, bitcoin will go below $21,500

 

[NoahA]

I don't know enough about the underlying mechanism of Bitcoin to comment on that. But, after having traded equities and futures markets for 30 years, I can say with confidence that there's nothing new under the sun. It's all driven by human greed and fear. And might I add, EVERYTHING REPEATS, including greed and fear. Last time, it was the Internet bubble. This time, it's the Blockchain. Next time, it's most likely Artificial Intelligence. And so on and so on.

BTW if what you say is correct (viz buy and hold forever), BTC should have never come down from its ATH at 66k, right?

I for sure wouldn't say buy and hold forever. At some point, you have to use your bitcoin, but I think where it stabilizes is much, much higher.

I also don't know exactly how this all works, but I imagine that now that so much of this leverage is gone (I'm sure it will be back though), but more importantly, people learn not to lend bitcoin for yield and learn the importance of self custody, the parallels with any other financial instrument are diminished.

We know how we get prices for ES for example. It all comes from the CME, and I'm sure that price comes from what the 500 companies are doing. But buying an ES contract means nothing to price since its just a derivative. Shares of course matter as does float and all that jazz, but its kind of easy to put on a bet without really affecting the underlying. And buying an ES contract is really just a bet on the direction of price.

Now with bitcoin, I guess we get the price from a bunch of exchanges. In fact, its not uncommon to sometimes have easily a $500 difference in price during spikes between exchanges. But where does the price ultimately come from? Its not from the CME bitcoin futures, its from people actually trading bitcoin (I forget where CME said its gets its price from, but its perhaps a few exchanges). But what if you buy bitcoin and then transfer it out. Now there is much less of it at the exchange. All of a sudden, you might have a scenario where a price is being quoted but can the exchange really honor that price? With contracts, most are cash settled, and even if trading oil, most don't consider physical delivery. But at an exchange, maybe someone sells bitcoin on a jump in price since they are only trading it, but maybe lots more just take it into cold storage and hence want that physical delivery. So I imagine exchanges have to balance stock very carefully. Taking physical delivery of bitcoin is really only possible now and this isn't something that really existed to this degree in the financial world. (of course you can own shares and that is like physical delivery)

I mean we see what happened during the GME short squeeze and how even 130% of the float was shorted... truly insane, and shows how crooked these numbers can be for financial instruments. Now imagine that happening with bitcoin but instead of a short squeeze, its more of a supply squeeze. When you trade gold or silver, the quoted price is one thing, but asking for delivery at the bullion place might not be possible, and if I am to believe some of the zerohedge articles, sometimes they won't get any physical delivery. So all that happens is the price is quoted, but you can't get any, and this won't reflect in the price since the price is only set by paper traders. But with bitcoin, that simply wouldn't be possible if you want to transfer your bitcoin out. What exchange wants to be caught with selling you bitcoin but not having any to transfer to you? FTX was one of course, but now they are gone. So physical delivery of bitcoin can be the mechanism by which all parallels with trading of other equity products breaks down.

So what I'm saying is that all of these traditional patterns we see in financial markets might one day break down when the rush to actually own some bitcoin and move it to cold storage catches hold. I'm not sure if we have a good case study to look at because have we ever really had a truly scare asset that you can own without any counter party risk? As I said with precious metals, its too easy to suppress the paper price even if you want the real thing. But perhaps with bitcoin, once all this leveraged trading and derivatives takes a backseat to holding actual bitcoin, we can see fireworks.

Imagine if every person in the US, or lets even say just the ones who work, went out and bought just $100 next week. If bitcion is 20k right now, buying just $100 worth means 200 people share one bitcoin. Now if we consider 164 million working people, that means that we need 800k bitcoins to fulfill each person having just $100 worth. There is no way that this would even be available for purchase. Only 19 million are out there, 1 million frozen in Satoshi's accounts, and well, you can go down the list of where all the others are, but I doubt 800k is liquid enough to supply a month's worth of buying.

Ok.. just looked up the stats on where bitcoin is... 800k would be twice what Binance has in their books!

https://river.com/learn/who-owns-the-most-bitcoin/

 

[semperfrosty]

I for sure wouldn't say buy and hold forever. At some point, you have to use your bitcoin, but I think where it stabilizes is much, much higher.

I also don't know exactly how this all works, but I imagine that now that so much of this leverage is gone (I'm sure it will be back though), but more importantly, people learn not to lend bitcoin for yield and learn the importance of self custody, the parallels with any other financial instrument are diminished.

We know how we get prices for ES for example. It all comes from the CME, and I'm sure that price comes from what the 500 companies are doing. But buying an ES contract means nothing to price since its just a derivative. Shares of course matter as does float and all that jazz, but its kind of easy to put on a bet without really affecting the underlying. And buying an ES contract is really just a bet on the direction of price.

Now with bitcoin, I guess we get the price from a bunch of exchanges. In fact, its not uncommon to sometimes have easily a $500 difference in price during spikes between exchanges. But where does the price ultimately come from? Its not from the CME bitcoin futures, its from people actually trading bitcoin (I forget where CME said its gets its price from, but its perhaps a few exchanges). But what if you buy bitcoin and then transfer it out. Now there is much less of it at the exchange. All of a sudden, you might have a scenario where a price is being quoted but can the exchange really honor that price? With contracts, most are cash settled, and even if trading oil, most don't consider physical delivery. But at an exchange, maybe someone sells bitcoin on a jump in price since they are only trading it, but maybe lots more just take it into cold storage and hence want that physical delivery. So I imagine exchanges have to balance stock very carefully. Taking physical delivery of bitcoin is really only possible now and this isn't something that really existed to this degree in the financial world. (of course you can own shares and that is like physical delivery)

I mean we see what happened during the GME short squeeze and how even 130% of the float was shorted... truly insane, and shows how crooked these numbers can be for financial instruments. Now imagine that happening with bitcoin but instead of a short squeeze, its more of a supply squeeze. When you trade gold or silver, the quoted price is one thing, but asking for delivery at the bullion place might not be possible, and if I am to believe some of the zerohedge articles, sometimes they won't get any physical delivery. So all that happens is the price is quoted, but you can't get any, and this won't reflect in the price since the price is only set by paper traders. But with bitcoin, that simply wouldn't be possible if you want to transfer your bitcoin out. What exchange wants to be caught with selling you bitcoin but not having any to transfer to you? FTX was one of course, but now they are gone. So physical delivery of bitcoin can be the mechanism by which all parallels with trading of other equity products breaks down.

So what I'm saying is that all of these traditional patterns we see in financial markets might one day break down when the rush to actually own some bitcoin and move it to cold storage catches hold. I'm not sure if we have a good case study to look at because have we ever really had a truly scare asset that you can own without any counter party risk? As I said with precious metals, its too easy to suppress the paper price even if you want the real thing. But perhaps with bitcoin, once all this leveraged trading and derivatives takes a backseat to holding actual bitcoin, we can see fireworks.

Imagine if every person in the US, or lets even say just the ones who work, went out and bought just $100 next week. If bitcion is 20k right now, buying just $100 worth means 200 people share one bitcoin. Now if we consider 164 million working people, that means that we need 800k bitcoins to fulfill each person having just $100 worth. There is no way that this would even be available for purchase. Only 19 million are out there, 1 million frozen in Satoshi's accounts, and well, you can go down the list of where all the others are, but I doubt 800k is liquid enough to supply a month's worth of buying.

Ok.. just looked up the stats on where bitcoin is... 800k would be twice what Binance has in their books!

View attachment 304319

https://river.com/learn/who-owns-the-most-bitcoin/

This was sort of my opinion too,however I noticed Baron in another thread referring to holding BTC as the store of value and to borrow against.

 

[schizo]

Tell me, how would you short spot bitcoin tomorrow? and how would the wall street smart money short spot bitcoin tomorrow?

Anyway, maybe I'm all wrong about this and tomorrow like you said, bitcoin will go below $21,500

I ain't saying it will tank immediately. I think we will eventually head up to 25,000. After that, it can get pretty dicey. I'll let you know when I sniff anything funny.

 

[schizo]

I for sure wouldn't say buy and hold forever. At some point, you have to use your bitcoin, but I think where it stabilizes is much, much higher.

I also don't know exactly how this all works, but I imagine that now that so much of this leverage is gone (I'm sure it will be back though), but more importantly, people learn not to lend bitcoin for yield and learn the importance of self custody, the parallels with any other financial instrument are diminished.

We know how we get prices for ES for example. It all comes from the CME, and I'm sure that price comes from what the 500 companies are doing. But buying an ES contract means nothing to price since its just a derivative. Shares of course matter as does float and all that jazz, but its kind of easy to put on a bet without really affecting the underlying. And buying an ES contract is really just a bet on the direction of price.

Now with bitcoin, I guess we get the price from a bunch of exchanges. In fact, its not uncommon to sometimes have easily a $500 difference in price during spikes between exchanges. But where does the price ultimately come from? Its not from the CME bitcoin futures, its from people actually trading bitcoin (I forget where CME said its gets its price from, but its perhaps a few exchanges). But what if you buy bitcoin and then transfer it out. Now there is much less of it at the exchange. All of a sudden, you might have a scenario where a price is being quoted but can the exchange really honor that price? With contracts, most are cash settled, and even if trading oil, most don't consider physical delivery. But at an exchange, maybe someone sells bitcoin on a jump in price since they are only trading it, but maybe lots more just take it into cold storage and hence want that physical delivery. So I imagine exchanges have to balance stock very carefully. Taking physical delivery of bitcoin is really only possible now and this isn't something that really existed to this degree in the financial world. (of course you can own shares and that is like physical delivery)

I mean we see what happened during the GME short squeeze and how even 130% of the float was shorted... truly insane, and shows how crooked these numbers can be for financial instruments. Now imagine that happening with bitcoin but instead of a short squeeze, its more of a supply squeeze. When you trade gold or silver, the quoted price is one thing, but asking for delivery at the bullion place might not be possible, and if I am to believe some of the zerohedge articles, sometimes they won't get any physical delivery. So all that happens is the price is quoted, but you can't get any, and this won't reflect in the price since the price is only set by paper traders. But with bitcoin, that simply wouldn't be possible if you want to transfer your bitcoin out. What exchange wants to be caught with selling you bitcoin but not having any to transfer to you? FTX was one of course, but now they are gone. So physical delivery of bitcoin can be the mechanism by which all parallels with trading of other equity products breaks down.

So what I'm saying is that all of these traditional patterns we see in financial markets might one day break down when the rush to actually own some bitcoin and move it to cold storage catches hold. I'm not sure if we have a good case study to look at because have we ever really had a truly scare asset that you can own without any counter party risk? As I said with precious metals, its too easy to suppress the paper price even if you want the real thing. But perhaps with bitcoin, once all this leveraged trading and derivatives takes a backseat to holding actual bitcoin, we can see fireworks.

Imagine if every person in the US, or lets even say just the ones who work, went out and bought just $100 next week. If bitcion is 20k right now, buying just $100 worth means 200 people share one bitcoin. Now if we consider 164 million working people, that means that we need 800k bitcoins to fulfill each person having just $100 worth. There is no way that this would even be available for purchase. Only 19 million are out there, 1 million frozen in Satoshi's accounts, and well, you can go down the list of where all the others are, but I doubt 800k is liquid enough to supply a month's worth of buying.

Ok.. just looked up the stats on where bitcoin is... 800k would be twice what Binance has in their books!

View attachment 304319

https://river.com/learn/who-owns-the-most-bitcoin/

Oh, man, I ain't sure I even understood everything you wrote but I appreciate your explanation all the same.

My not-so-sophisticated thinking goes something like this. Even if you hold your BTC in your cold wallet, the value of that BTC is dictated by the price traded on the market. So does it really matter how much is in circulation, be it 1 million or 1 billion? More outstanding BTC might dilute the value, but at the end of the day, it all comes down to pure demand and supply. More demand (eg. buying) will ultimately drive up the price and more supply (selling), on the other hand, will drive down the price.

Personally, I believe everything is already factored in the price. If people want it bad enough, it will get printed on the chart as price soar and vice versa for liquidation.

 

[NoahA]

Oh, man, I ain't sure I even understood everything you wrote but I appreciate your explanation all the same.

My not-so-sophisticated thinking goes something like this. Even if you hold your BTC in your cold wallet, the value of that BTC is dictated by the price traded on the market. So does it really matter how much is in circulation, be it 1 million or 1 billion? More outstanding BTC might dilute the value, but at the end of the day, it all comes down to pure demand and supply. More demand (eg. buying) will ultimately drive up the price and more supply (selling), on the other hand, will drive down the price.

Personally, I believe everything is already factored in the price. If people want it bad enough, it will get printed on the chart as price soar and vice versa for liquidation.

No worries... I'm maybe not the best at explaining anyway.

I agree its all supply and demand, but the supply is the tricky part here. As has been discussed before, on FTX, you could buy bitcoin, and people did, but this bitcoin didn't exist. FTX didn't own any, and when you bought it, it was simply a ledger account. Imagine if FTX had to acquire this bitcoin in order to actually hold it for their customers. Where would they get this bitcoin? The only place to get bitcoin is from people selling or the miners.

It does matter how much is in circulation because those are the only ones available to buy. And for something like bitcoin, you might have to deliver it. Its like the airlines. They always sell more tickets than actual seats cause they know a few people always miss the flight. But what happens if 205 people show up at the gate and the airplane only has 200 seats? Bitcoin is the first financial instrument where theoretically, you can't over sell. So although the charts right now might follow the rules of futures or stocks, and these patterns represent fear and greed, the fear for bitcoin one day might be not of fear of price dropping, but fear or not being able to have any. So you have both greed and fear all working on the same side!

John made a good point. So much bitcoin is locked up, and so much didn't even exist for customers who thought they had it. So what do they do now? If they want to start again and buy here, for an even better price, they can, and that even adds to more demand. And they will be smarter this time and choose to hold it themselves, once again putting pressure on exchanges.

Banks never really worry about a bank run because ultimately, the governments would backstop accounts. But who will backstop a crypto exchange? Binance apparently own 400k bitcoins, but what if all decide to withdraw? It shouldn't be a problem if the 400k that is in the Binance bitcoin wallet matches the total sum of all bitcoin they own on behalf of customers. But imagine if all the customers came forward and we add it all up and find out that the number is actually 500k!

Anyway... I'm sure I'm just saying the same thing over and over again. My only point is that traditional TA we use might break down for bitcoin.

 

[semperfrosty]

Oh, man, I ain't sure I even understood everything you wrote but I appreciate your explanation all the same.

My not-so-sophisticated thinking goes something like this. Even if you hold your BTC in your cold wallet, the value of that BTC is dictated by the price traded on the market. So does it really matter how much is in circulation, be it 1 million or 1 billion? More outstanding BTC might dilute the value, but at the end of the day, it all comes down to pure demand and supply. More demand (eg. buying) will ultimately drive up the price and more supply (selling), on the other hand, will drive down the price.

Personally, I believe everything is already factored in the price. If people want it bad enough, it will get printed on the chart as price soar and vice versa for liquidation.

Interesting perspective.Thanks.

 

[semperfrosty]

No worries... I'm maybe not the best at explaining anyway.

I agree its all supply and demand, but the supply is the tricky part here. As has been discussed before, on FTX, you could buy bitcoin, and people did, but this bitcoin didn't exist. FTX didn't own any, and when you bought it, it was simply a ledger account. Imagine if FTX had to acquire this bitcoin in order to actually hold it for their customers. Where would they get this bitcoin? The only place to get bitcoin is from people selling or the miners.

It does matter how much is in circulation because those are the only ones available to buy. And for something like bitcoin, you might have to deliver it. Its like the airlines. They always sell more tickets than actual seats cause they know a few people always miss the flight. But what happens if 205 people show up at the gate and the airplane only has 200 seats? Bitcoin is the first financial instrument where theoretically, you can't over sell. So although the charts right now might follow the rules of futures or stocks, and these patterns represent fear and greed, the fear for bitcoin one day might be not of fear of price dropping, but fear or not being able to have any. So you have both greed and fear all working on the same side!

John made a good point. So much bitcoin is locked up, and so much didn't even exist for customers who thought they had it. So what do they do now? If they want to start again and buy here, for an even better price, they can, and that even adds to more demand. And they will be smarter this time and choose to hold it themselves, once again putting pressure on exchanges.

Banks never really worry about a bank run because ultimately, the governments would backstop accounts. But who will backstop a crypto exchange? Binance apparently own 400k bitcoins, but what if all decide to withdraw? It shouldn't be a problem if the 400k that is in the Binance bitcoin wallet matches the total sum of all bitcoin they own on behalf of customers. But imagine if all the customers came forward and we add it all up and find out that the number is actually 500k!

Anyway... I'm sure I'm just saying the same thing over and over again. My only point is that traditional TA we use might break down for bitcoin.

X2.Thanks Noah.

 

[johnarb]

I agree its all supply and demand, but the supply is the tricky part here. As has been discussed before, on FTX, you could buy bitcoin, and people did, but this bitcoin didn't exist. FTX didn't own any, and when you bought it, it was simply a ledger account. Imagine if FTX had to acquire this bitcoin in order to actually hold it for their customers. Where would they get this bitcoin? The only place to get bitcoin is from people selling or the miners.

The supply of bitcoins was artificially increased at a time when real demand existed and thus a price was established in the market that was distorted

If all those bitcoins had to be bought at the market now to return to all the rightful owners, bitcoin price will go to $150k within a day

-------

FTX took bitcoin deposits from customers and their Alameda borrowed those bitcoins and "traded" or sold

Those buyers of bitcoins are satisfied, they bought bitcoins at whatever the price is, but those bitcoins did not exist

How many bitcoins FTX created? 70,0000 bitcoins

Genesis and the other crypto borrow/lending platforms took deposits from 340,000 Gemini earn users and lent them hedge funds

Say Shorty-Crypto HF borrowed 1,000 bitcoins and went to FTX dot com to trade, could go long or short, but let's say short at $30,000, intending to cover at $20,000

Shorty-Crypto HF now has $30M in FTX account and was happy, maybe about to cover the short and return the 1000 bitcoins to Genesis. Nope, FTX stole the $ and no bitcoins

Not all of them are like that, many borrowers from Genesis simply got bankrupted by the market metldown, case in point was 3AC

How many bitcoins Genesis and BlockFi and Voyager and Celsius created??? much much much more than FTX

 

[johnarb]

This was sort of my opinion too,however I noticed Baron in another thread referring to holding BTC as the store of value and to borrow against.

What Baron was describing is Bitcoin as a SoV like gold. This is only one use-case for bitcoin

So, let's say you have $1M in the bank and want to invest $100k in gold, you put in safe, in the future you want to spend it, you can take an ounce here or an ounce there, sell for $ and spend on goods and services

Same as bitcoin if you put $100k, you don't spend it until 1 btc is worth $500k or $1m, but don't spend it all, you only spend the amount of btc that you need or want to spend

I do that now, I have most of our liquid net worth invested in bitcoin and crypto assets, but I have no qualms spending 0.01286566 btc on a TradingView annual subscription

This is because I have much more than that amount of bitcoins

If you have other means to spend, let's say you have a job, spend your fiat on goods and services but if you want to spend bitcoins sometimes, you can do that, too

As far as borrowing against bitcoin, sure, but most of the crypto borrow/lend platforms, BlockFi, Celsius, Voyager, Genesis, et al

DeFi is the way. AAVE, Compound, Venus, and others. No counterparty risk, they are smart contract platforms on the blockchain. None of them went bankrupt or had any troubles during this crypto winter

I have a loan from DeFi that I can pay any time 24/7/365 and get my bitcoins collateral back

When you borrow, you can spend it, but it's not a tax event since you did not sell

I did not spend it, though, I bought more crypto assets. This is not adviseable. This is leverage. You gotta know your risks and exposures and understand all the possibilities