I woke up Sunday morning bleary eyed, after a late evening at a beer festival in Hackney. Upon checking my phone, I let out an exclamation that had my girlfriend yelling from across the room to ask me what was wrong.
Nothing was wrong. I’d simply forgotten how wild the bitcoin market can be, which had begun the weekend at around $8,250 and blew past $9k, on some exchanges passing the $9,300 handle.
As you’ll know if you’ve been reading Capital & Conflict in recent weeks, I expect bitcoin to do well for as long as the Chinese keep using it as a vehicle for capital flight, and especially so once the Federal Reserve begins cutting interest rates. But even so – I wasn’t expecting moves like this so soon.
Source: ByteTree
The sudden jump may have been the work of a single wealthy individual or “whale” in the market, who aggressively bid up prices, knowing that others would buy BTC after it passed the psychological $9k level. The whale then dumped all of the coins they just bought on the new buyers at prices they themselves inflated – indicated by the large red candle in the highlighted section, which took place over just half an hour.
That’s just one theory. It could well just be a load of Chinese flight capital hitting the market all at once, and triggering a load of sell orders after it hit $9k. Whatever the case, since that event BTC has not dipped beneath $9k for long – possibly indicating a new base for the price.
But is it alt season yet?
The crypto market has some interesting macro dynamics, which can alter radically depending on the movement of “Papa BTC”.
Bitcoin trending upwards is positive for the crypto market as a whole. However, on days during such a trend when bitcoin moves up substantially, the other cryptocurrencies, or “altcoins”, tend to suffer. This is a function of investors selling their alts to get a piece of the BTC action.
When altcoins really deliver the ridiculous returns they’re known for, is when bitcoin is in an established uptrend, but on individual days when the bitcoin price is down. This is when investors are comfortable that crypto is going up, and are selling their bitcoin in searching additional returns in other cryptos – hunting for “the next bitcoin” in the even riskier recesses in the crypto market.
When bitcoin is trending down, the relationship changes entirely: whatever bitcoin does, altcoins do, but more so. On days that BTC is down, altcoins get wrecked. On days it’s up, they go up a bit more, but within the downtrend, they’re doomed to disappoint.
We’re witnessing a return to an uptrend in the BTC price – the alts aren’t going nuts, but it’s early days yet. After all, the Chinese aren’t using alts to evacuate their wealth – they’re using BTC. It’s the speculators, drawn by the high BTC price, who will drive alts to the moon in my view.
That’s my thesis, anyhow, and that’s what I’m preparing for, having bought a load of alts beside my BTC stack. And if I’m wrong, I’ll pay the price: I’m prepared to watch the capital I’ve deployed to the alts crumble to nothing – anyone else playing the crypto market should be too.
Now let’s see if I’m right, and sit tight – one of the hardest parts of the trade. For as Jesse Livermore, one of the greatest speculators in history, once said:
“It never was my thinking that made the big money for me. It always was my sitting. Got that? My sitting tight! It is no trick at all to be right on the market. You always find lots of early bulls in bull markets and early bears in bear markets. I’ve known many men who were right at exactly the right time, and began buying or selling stocks when prices were at the very level which should show the greatest profit. And their experience invariably matched mine–that is, they made no real money out of it. Men who can both be right and sit tight are uncommon.”
All the best,
Boaz Shoshan
Editor, Capital & Conflict
Category: Market updates