Bitcoin (BTC) has crashed again. It always has and it always will. This time looks pretty savage and it was caused by China banning bitcoin, no ifs, no buts. Before its banning moves were to shutdown periphery activities leaving Bitcoin open for transactions. Now a bitcoin transaction is banned.
I’m a firm believer that we are the last to hear news. News travels fast but when you are at the base of the pyramid you only learn about something when it’s happened. Famously, share indexes are reacting to what the hive mind thinks a year out will look like. These days with interest rates near zero that time horizon might be even further out because in the end all adult investment is linked to yield, and yield is whatever governments pay plus a premium for risk.
But let’s forget the theory.
In my book, bitcoin zoomed because of the halvening and reduced supply and constant demand. Up it went and institutions FOMO’d in and took it from a retail peak around $38,000 to $65,000.
That was it and it crashed and it would have crashed into the $10,000s, but something happened. That something was Afghanistan and the current China social clampdown. Fleeing Afghanis put a lot of their money into BTC and the corrupt ones had a lot to stash. Then China’s clampdown got to the “we are going to ban bitcoin”’ and all their spicy money poured in before it was illegal and very hard to do.
Remember, the moment you swap fiat for bitcoin it leaves the country you are in and is available anywhere just like fiat isn’t. You can waltz through an airport naked and your wealth is waiting for you wherever you land.
Recall that the gambling industry is being clamped down on in Macau and the billionaires are getting a show of the lash. When you know the hammer is possibly going to fall you are going to park a lot in crypto. So up crypto went.
Now that gate is shut, or at least made small and hard to explain why you climbed through it after prohibition. So Afghanistan has had its day and bitcoin is now a dead or lame duck in its biggest market. That is bearish.
Here is the chart for you to follow the above along:
So what next?
This looks plausible to me as a big bear. Bitcoin is quite capable of swinging around and it will respond to disaster and black swan, by going vertical. I’ve even put a bull trend on the graph for the bullish to consider but I do not expect it, though the last time I did that the price went straight up that vector.
So $20,000 looks highly likely to me. China out of the audience for crypto is a massive negative as China has been a crypto powerhouse until now. However, few are going to risk a trip to re-education to play crypto and that will be an enormous drag. Couple this with regulators attacking like a shoal of barracuda in the U.S. and elsewhere and it’s hard to see bitcoin as a bullish prospect for some time to come.
But it just takes a black swan to change that picture, but you should never bank on one of them.
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