Altcoins were pumping, Bitcoin was trading sideways as dominance fell, and leverage was piling up. I was hearing from many newcomers to crypto that DOGE is superior tech and Safemoon is the future.
This is nothing new.
In 2017, every new coin was the Bitcoin and Ethereum killer. Bitcoin was just the MySpace of blockchain. I started to hear these exact same comments. The dilemma is, just because new altcoins are running hot, it doesn’t necessarily mean the global top of the cycle is around the corner. Prices ran super hot in 2017 with a series of local tops and resets on its way to a parabolic move.
Looking at this reality, I thought two scenarios are likely to take place:
We get another positive Bitcoin catalyst like an ETF announcement and investors start taking profits in alts and moving into Bitcoin.
We have a huge dump to wash out the weak hands, money moves back into Bitcoin from alts.
In both scenarios, Bitcoin takes back dominance from the market. Shortly after the 50%+ dump, it’s starting to look like scenario 2.
Here are the potential reason for the crash, likely a combination of them all:
Tesla stops accepting Bitcoin payments and fear of them selling their holdings
Wasteful energy narrative becomes louder thanks to Elon
Bankrupted Monex exchange opens accounts back up to customers on the day of the mega dump to allow them to withdraw before May 29
More China FUD
Insane amounts of leverage built up into the system during the whole uptrend
The negative press created fear, more supply entered the market, and excess leverage in the system got liquidated creating a massive dump.
According to Jason Choi, during the 24 hours of the price dump:
$3.8B was liquidated, 1.69 in the past hour
470,587 traders liquidated
20% of Open Interest wiped
500% increase in liquidation volume
$BTC wicked to $36186 on Coinbase
$ETH wicked to $2446 on Coinbase
Open interest took a heavy reset signalling a heavy reset in leverage.
Billions of dollars in liquidations in Bitcoin alone which attributed to hundreds of thousands of accounts wiped out.
Funding rates even went negative for perpetuals swaps showing the market went bear overall in futures trading.
aSOPR went below 1 which tells us traders are selling at a loss, likely those that are more short-term focused.
It was a massive liquidation event and currently hard to tell whether it was a global top (end of cycle) or local top (reset but bull cycle continues). Tesla is still holding but confidence in their position is still up in the air. On-chain metrics are still showing we’re mid cycle. I wish I had the answers but for now it’s best to be cautious in the short-term until price trend starts to reveal itself.
In the mean time, I’d like to offer you three pieces of content to consume over the weekend.
There are so many bad takes going around, these three pieces will give you better clarity into why Bitcoin matters and a deeper understanding of the narratives taking place.
In the news…
If you’re interested to learn more about crypto trading, macro analysis, and on-chain metrics, you can get a free intro course and access to a crypto chatroom run by my friends at Bulls on Wall Street.
Resources I Use
I use Glassnode for all the metrics I track on the Bitcoin network. Their platform is extremely user friendly and fun to use.
Binance is the main exchange to trade the crypto markets.
Coinsquare offers Bitcoin trading in Canadian dollars and is one of the top exchanges in Canada.
I use Tradingview daily to analyze trading charts and find areas of support and resistance.
I use TokenTax to calculate my crypto taxes at the end of the year. They plug in directly to the exchange you use through an API. After you get the full report you can send it to your accountant or have their accountants finalize everything.
Nothing in this article is investment advice. I’m not a financial advisor. Do not make investment decisions based on what is in this article or any other article written by BTC News or Blockedia.