Grin and Bear It

Bitcoin and Ethereum suddenly dropped below $40k and $3k respectively last night for the first time in a month and everyone’s all a flutter. What does it mean?! Does it mean anything? Let’s have a look at the facts:

• Bitcoin has been steadily dropping over the last week since its monthly high of $47k, and Ethereum has followed it from $3.5k in two steps down.
• Arthur Hayes had warned of carnage on Sunday and within 24 hours it came, with one trader losing 10 million in a single trade.
• The macro environment remains much the same: high inflation, rising interest rates and the Ukraine-Russia war continuing to impact commercial markets.
• As the central bank starts to reduce its balance sheet it continues to exert downward pressure on both stocks and crypto, with Bitcoin more correlated to stocks these days than previously.
• One additional factor, as Raoul Pal points out, is that U.S. investors may be rushing to sell assets in order to optimize their tax returns.
• Despite the sudden move causing over $400 million in liquidations, Glassnode’s weekly report concluded that nearly three quarters of BTC addresses are still in unrealised profit, much higher than closer to 50% during the 2018 bear market.

Market could go up. Market could go down. It seems though that as Bitcoin continues to age more long-term holders are willing to grin and bear it.