As I predicted weeks ago in the Gab.com Cryptocurrency group, Bitcoin had to crash.
I mused about a coming BTC crash because it had stalled in the low 50s after hitting its all-time high just weeks before. After a crazy long run up, that stalling sure seemed like a classic sign of a pending crash. Margin buying gets expensive when ever high prices do not materialize. It was clear, pressure would fall heavily on margined speculators. Today, Investing.com confirmed my wisdom (see: Crypto Meltdown Turbocharged by Mix of Leverage and Liquidations)
After BTC fell on the announcement of the worst inflation news in 30 years, it became clear that BTC is not a hedge against inflation. Stalling and falling by $10,000 on that news revealed to me that a major crash was about ready to hit.
It was clear to me, that weaker hands would sell their margined positions to cut losses. It was clear also that shorts would come in and get their turns to take profits. Hence the falls would happen splotches.
BTC having fallen down -31.4% from its all-time high hit only a month ago certainly crashed folks. Bitcoin maximalists love to claim that is mere volatility. That is not "volatility."
Organized markets work the same way, always, everywhere. Bull markets always overrun.
Too much cheap, idle credit in banks gives rise to too much bullish speculation, especially by a overly greedy public who rush in with big eyes but who are little more than gamblers. They trade on too thin margins and the rising price of their collateral, in this case BTC, gets them ever more credit, which has them leveraging to the hilt.
This was as predictable as reciting the alphabet. Rightly, I stated that over-leveraged margin players would be forced to liquidate after fresh buying would not be forthcoming to keep up their collateral.
Sure enough, that is what happened and why BTC fell all the way to $33k.
After clawing up to the other side of $40k, BTC is back in $39k territory. More leveraged positions need to sellout. Likely there are more shorts now than there were at the peak of nearly $65k hit only a month plus a few days ago.
Certainly, this Bitcoin crash has been a great time to study the market, to see where true belief about cryptocurrency is, the crypto that is forging the Blockchain Economy of the fast-approaching future. BTC does not really have a role in that future.
To see which crypto weathered best in the Bitcoin Crash of 2021, see my work: What Crypto Fared Best in the Rough Seas of the Last 30 Days? What Should You Think Going Forward?
While Bitcoin will make for a good speculative play piece over the next year or so owing strictly to its name recognition—many believe Bitcoin means cryptocurrency in the same way many once believed Yahoo! was the Internet and the starting page for the whole Internet—in the long run, coins that power smart blockchains and decentralized finance upon those smart blockchains will be the winners.
Bitcoin will go the way of the Model-T Ford. Like the Model-T, Bitcoin started a revolution that will have changed way people live, but as the Model-T was a crude form of car technology and destined to be supplanted, so too, is Bitcoin.
This crash could have a ways to go, maybe all the way to $10,888, but maybe not that far. How much further will it go until margined players are pushed out? BTC is now down to February 2021 levels. If it crashes through $39,999, a lows 30s should not beyond expectation.
BTC's future is in doubt as it is a walking dead man with proof of work (PoW) as its block writing mechanism. Headlines-grabbing politicians and governments are now attacking PoW and using the guise of green rhetoric to do so. Laws could be forthcoming to ban PoW.
As I stated in my forecasts, BTC has been proven not to be an inflation hedge since it fell significantly after the official announcement of the worst inflation news in 30 years. Since it is lousy for a retail transactions substitute for checkable deposit bank credit (the transaction clearing times are a pathetic 10 minutes), why own Bitcoin at all as the world pivots to a Blockchain Economy? Certainly, Bitcoin is not as good as gold. It is more like a gold rush speculative play. This NYU Ph.D. egghead agrees with me: ther is a Better Commodity than Bitcoin, says NYU Professor.
The future likely does not have BTC in it. The altcoins that power programmable smart block chains are where the future is headed.
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