Is Bitcoin Having a Wile E Coyote Moment?
There are a number of companies that seem to fall dominoes after the FTX debacle that, like … [+]
The part in the cartoon when Wile E Coyote runs off a cliff and air cycles momentarily suspended is where the crypto sits today.
There are a number of companies that seem to be dominoes falling after the FTX debacle that, like Wile E Coyote at the bottom of the canyon, have yet to hit the ground running.
Because of FTX, 3AC before that, Celsius
It is the power of blockchain plus encryption that unlocks this potential because the combination of these technologies enables decentralization, a giant lever for human activity that has only recently been dampened by modern centralizing forces.
Centralization has its positives and negatives, and so does decentralization, but decentralization has been affected by the overwhelming centralization of the economy so that its benefits have been drowned out.
Blockchain/crypto re-enables decentralization and unlocks its benefits.
You may be wondering what the benefits of decentralization are, and one of them is clear: it evens out the gatekeepers to commerce and economics that have always unfairly driven elites and oligarchs. We don’t need to get polemic about that situation, it just boils down to gatekeepers equaling inefficiency. If you can disintermediate a process, costs and prices go down. If gatekeepers who have centralized power have to be paid, the systems run more slowly and at higher costs.
On one level, for example, bitcoin removes the need for banks as a method of depositing money, and even while people moan about the energy use of blockchain, the 250,000 bank branches in the world bear a huge cost even before you imagine the CO2 of all other fixed costs who enters a bank. The consequences of letting crypto flatten banking services like Google
However, you cannot put the tech geniuses and the blockchain revolution back in the bottle. So the question is just how the technology plays out.
Bitcoin
Here is the diagram and the most important thing is that the noise is gone:
Bitcoin chart: The noise has died down as volatility calms
Bitcoin is now traded as a real resource. Since 2021 until the last drop, the volatility indicated that the real price of bitcoin was less than safe for the market. This is not a long-term bullish condition because if an asset is to maintain a value, the participants as a whole must be on the same page and comfortable with that price, not driven by fear and greed to swing the price around.
While I don’t think we’re bottoming out, it still shows that crypto is approaching equilibrium.
If there isn’t another default in FTX size – and it’s a 50/50 – it looks like my long-term $13,000 is still a good level to consider as the bottom. A major short-term bust could see the price hit extreme lows for short periods, but establish equilibrium around $10,000.
What one has to realize is that bitcoin is gone when it comes to future busts. If they go bust it will be because they sold bitcoin for more “exciting” opportunities, so the chance of major dumping of bitcoin is not inevitable. Likewise, liquidations will unlock tokens while the slow grinding mill of law and lawyers locks up assets for months, even years.
What to do today?
If you’re looking for the low, the tactic is to wait for the next shoe to drop from the FTX debacle. This will at least involve Genesis, DCG and Greyscale. There may be other disturbances, but these named situations are the problems that need to be closed. Until then, crypto is a UXB, and until it is neutered there are many downsides.
It’s best to have a peaceful and happy Christmas and Happy New Year, before you set out to pick the bottom of crypto, because even if nothing happens by the end of January 2023, the question will remain, “what went right?”
