Bit The Dust

One of the consequences of chaos is that it can be difficult to take decisive action and feel good about it. Our confused brains gravitate towards an extreme outcome rather than a sensible balance. Will Bitcoin plumb to new depths or just sweep the current floor?

• Bitcoin lost a quarter of its value in five days, diving to $30k last night.
• Of concern is the Coinbase Premium Index, which has turned negative. It measures the difference in price between BTCUSD on Coinbase and BTCUSDT on Binance.
• Coinbase is used more by institutions, who normally pay a premium for their BTC compared to the majority of retail buyers on Binance. Going negative suggests institutions are currently less interested in buying Bitcoin than retail are.
• As investors get spooked it has a knock-on effect on other ecosystems. The loss of the UST peg was followed up by the Luna Foundation Guard (LFG) loaning ~$1.5 billion of Bitcoin and UST to defend it. For more about this event, check out yesterday’s newsletter, link here.
• Bitmex Research predicted in a February blog post that Fed actions to combat rising inflation would have significant impact on equities and crypto, in “an environment where investor flow is king, rather than fundamentals or valuation ratios”.

In a related article, Arthur Hayes emphasised the importance of acting decisively on the few trading days of the year that matter. We may be programmed to prefer binary outcomes, but if you trust your system more than your current state of mind you may find yourself in the happier, less stressful middle.