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Hodlers of Last Resort
Last night, $BTC dropped below $30,000 for the second time this year, with the first being a 10-minute support-check on May 19th. From about 8:30pm Manila time to just before 10pm, we watched it exploring a new yearly low, ultimately rebounding off a $28,800 floor. It’s currently trading exactly where it was prior, at $32,000. Bitcoin investors who came in at the start of the year are now all likely in the red. (Ethereum investors are still up by over 100% from January, since their bull run started later in the year.) I've written a longer, better piece about how to survive a down-market, so I suggest giving that one a look if you’re feeling depressed about these movements.
For today’s newsletter I’m presenting three different voices that are relevant to these last few days worth of market activity. I happen to agree with all of these takes, which is why I’m sharing them here, but they’re all commenting on very different aspects of the 2021 markets.
Ki Young Ju, CEO of CryptoQuant.com: “The $BTC bear market is confirmed. Too many whales are sending $BTC to exchanges.”I hate to say this, but it seems like the $BTC bear market confirmed. Too many whales are sending $BTC to exchanges.$BTC market is very uncertain right now. Whale selling indicates a bear/fake-bull market, and retail selling implies a bull market. We're in neutral now. Stop trade, be patient and wait for the next volatility. https://t.co/obXS6eFBGNKi Young Ju 주기영 @ki_young_ju
The CryptoQuant data (their “Whale Capitulation Index”) reveals a strong correlation between large exchange deposits and an overall bearish pattern. Why? Because it indicates that the whales are sending their coins to the exchanges to liquidate them. Conversely, bull markets often see a lot of large exchange withdrawals, because investors are pulling their funds for long-term safekeeping. Even without the CryptoQuant data, I don’t think there’s any question now that we’re in a bear market. I still haven’t called this a “crypto winter” though; the typical winter is greater than 75% below the ATH and lasts 2 years.
Legendary investor Stanley Druckenmiller, from an interview last month, described a phenomenon in Bitcoin that most beginners don’t fully appreciate. He says, “do you know that when Bitcoin went from $17,000 to $3000 that 86% of the people that owned it at $17,000, never sold it? […] Here’s something with a finite supply and 86% of the owners are religious zealots. I mean, who the hell holds something through $17,000 to $3000?”
The numbers themselves are difficult to verify, but Druckenmiller is describing such a well-known phenomenon within the community that we actually have a name for it: The Hodlers of Last Resort. These are the believers whose convictions aren’t moved by market price, and will hold on to their Bitcoin regardless of how irrational that looks. Note that there are no sizeable cohorts of a similar conviction for Doge, Cardano, XRP, or any of the other altcoins currently weighing down your bags.
And finally, Bitcoin evangelist and startup investor Anthony Pompliano is advocating for a long, long view on $BTC: he sees it as something to hand over to his grandchildren.11/11 So here is what I'm thinking and doing right now: - Strong belief in bitcoin - Long term view on asset - Dollar cost averaging aggressively - Not worried over short term price - Plan to hand bitcoin to my grandchildren Could I be wrong? Sure. I'm not betting on it though.
On a timeframe of that scale, these dips tend to get smoothened out; they feel more like bumps in the road and less like cave-diving expeditions. Of course, thinking that way is a luxury that most Filipinos can’t afford, because we don’t typically have enough personal liquidity to allow us to make the optimal long-term investments. So my advice here is to think long and hard about your Bitcoin holdings if you currently have one, and ask yourself if it’s financially feasible for you to freeze it for even just 3 years. If the answer to that is “no,” there is no shame in just cutting your losses.
We’re only one day away from our drop at the new Binance NFT marketplace! “T4N6” (shown below) combines digital painting, procedural animation, and some of the best music you’ll ever hear on an NFT, courtesy of my collaborator Ian Magbanua.
I talked about it on ANC yesterday, describing how the NFTart scene was opening doors for Filipino artists to compete on a global stage.
On Thursday June 24th at 3pm, we’ll be sharing this 1/1 work for the first time with everyone, so stay tuned!
See you all tomorrow, cryptofam, and don’t forget to sign up at the www.bloomx.app waitlist!