Thread by Travis Kling
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- Mar 9, 2022
- #Politics #Cryptocurrency
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A couple thoughts on the market. It’s obviously really tricky here and the chop has been real.
Not financial advice. I’ve been wrong plenty and recently, so just DYOR and make the best call for you.
We’re currently trading at the point of control for the entire range- going back to the break of $20k in December 2020. At the risk of sounding like The Tradoooor, $38-$39k is an important level.
Going back to Jul-21, we’ve seen significant demand for #Bitcoin in the low-mid $30s. Specifically, as we revisited those levels first in Jul-21 and again in Jan and Feb-22, the demand to buy seems to overwhelm supply to sell & it just dries up & price moves pretty swiftly higher
There’s no way to know for sure, but I would guess there is a *significant* amount of capital that begins DCA’ing into BTC when it’s down 50%. And you couple that with there’s just not that many folks in the mood to sell 50% off the recent top.
The recent Bitcoin PA has been more grinding on the way down and impulsive pops on the way up. We’ve now squeezed shorts twice in the last nine days, despite a pretty horrendous macro backdrop. That's telling IMO.
To be sure, a TON of money has already come out of Bitcoin and crypto broadly. The large majority of the macro tourist money left in Dec and Jan. Not only did they sell bc of Fed tightening fears, they sold bc the rest of Macro got a lot more interesting all of sudden.
That’s even truer now. There’s all kinds of opportunities in equities, commodities, rates, etc. The Macro tourist money is mostly gone from Bitcoin/crypto.
The group left holding BTC here is weighted more heavily toward idealistic bulls with longer time horizons. Unequivocally, the value proposition for Bitcoin has become more compelling in the last month, not less. This also plays into the supply/demand dynamics I just mentioned.
Undoubtedly, there’s a ton of risk out there. A ton. Some really nasty tail events have some likelihood of happening that is much higher than what the market is used to. Nuclear weapons. World war. China/Taiwan escalation. Large scale cyberattacks. The list goes on.
And there are knock-on effect tail risks that are increasing as well too. Treasury market volatility. Commodities. Credit spreads. Overnight funding markets. Things could start breaking in these areas and soon. An inflation driven recession in 2h-22 is certainly on the table now.
But there’s also a TON of fear in the market, both crypto & trad. Tons of derisking has already occurred. Barring a major tail event, the market is already expecting bad things. And the sellers that wanted to sell have largely sold already. But price is where it is.
I don’t think that means we rocket back up to ATH’s in the coming months. That’s not my base case (although you never know with BTC). But so far, despite a really crappy backdrop, BTC demand has held in well against drying up supply in the mid-low $30’s.
So to break that Jul-21 low at ~$29k, I think one or more of those bad tail events will need to come to fruition. If we were to lose that level, I would guess you’d see massive supply come to the market...
...and we’d be in for a really rough ride in $20s, with hundreds of thousands of BTC changing hands. Those events are typically cyclical bottoms. This could certainly happen but its not my base case barring a really bad tail event.
There is absolutely nothing at risk right now to the medium/long-term investment case for Bitcoin and the rest of this asset class. That is stronger now than it was a month ago.
The near-term is highly uncertain and significant risks are present. But this technology and asset class are going to be tremendously important in the future. I’m certain of it. They already are. 
