Bitcoin Crash: A Canary In The Coal Mine
Bitcoin has crashed – not the sort of typical bitcoin meltdown, but an old-school, equity-style crash of around 25%. That kind of move is almost not big enough for bitcoiners to consider it significant, but for “grown up assets,” that would be big news.
The fall back from highs will not be easy to explain to many, especially those expecting bitcoin to hit a million – and by Christmas, no less. For them, the only way is up.
I was once a crypto enthusiast expecting BTC to moon. It did. There are, however, limits – especially if you’re looking for real value increases, not just numerical gains. I agreed with the old wild predictions when bitcoin was in four figures, but not the new ones based on logarithmic appreciation. To me, bitcoin is now just another asset embedded in the flying circus of financial markets.
It is bound to liquidity, arbitrage, and hedging just like shares, commodities, and other currencies. It’s in the system and is no longer an outsider destined to destroy “tradfi” and change the world of money. It is now part of tradfi.
That’s an unpopular opinion – one many saw as ridiculous when bitcoin was recently at all-time highs – but not so incredible when it crashes thousand of dollars in a few moments.
So here is a chart of where we are:
The chart doesn’t look too bearish, but we’ve seen two nose-dives in a week, triggered by tariff tantrums and tradfi issues sparked by subprime car loans. This tradfi-driven fraudulent default, built on a pile of trash bonds, might create contagion in small American banks – an echo of Silicon Valley Bank’s implosion – and the markets don’t like that at all. Probably a blip… maybe not. TBA.
In the old bitcoin world, this kind of narrative in tradfi wouldn’t have mattered. Bitcoin’s valuewasn’t tied to U.S. small-bank solvency or market conniptions. Yet here we are.
So, if crypto is absorbed into tradfi, how will this normalisation affect its price or trigger negative repricing? If bitcoin is assimilated into the old system, why is it special anymore? Assimilation feels bearish to me.
So here we are right now:
Bitcoin looks fragile.
If it drops below $100,000 a coin, the chance that a crypto winter crash is underway will suddenly be much higher.
However, there is something deeper going on.
Bitcoin is driven by liquidity in the market. Let’s call it what it is – cash sloshing around in banks, looking for a place to make money. The excess cash ends up in the reverse repo at the Fed.
So here’s the chart of that:
But wait…
The spicy money buying the frothy assets is temporarily out of stock.
The good news? If necessary, there’s more – just a few mouse clicks away.
Click here to watch a video of me talking about the bitcoin crash
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