BTC Fails the Acid Test
Sell Bitcoin (BTC) when it rallies.
The goalposts have narrowed lately for the digital gold and investors need to trade the market we have, not the market we want.
Even for long term, the crypto bull case is alive and kicking. In the short term, the flight to safety trade has shown that bitcoin is yet the safety asset believers want you to think it is.
Cash or treasuries are better options even with inflation running a hot 7.5%.
An ominous sign of late was when the co-founder of the Ethereum (ETH) blockchain Vitalik Buterin told us the digital-asset universe may actually benefit from a selloff in coin prices.
That’s bad news for prices if he says that.
“The people who are deep into crypto, and especially building things, a lot of them welcome a bear market,” Buterin said during an interview with Bloomberg.
“They welcome the bear market because when there are these long periods of prices moving up by huge amounts like it does — it does obviously make a lot of people happy — but it does also tend to invite a lot of very short-term speculative attention.”
I don’t agree with his statement and it’s an engineer talking about something important but at a technical level.
Investors don’t care what happens at that technical level in the short term.
Although there will always be speculators in every asset class, there is room for all sorts of investors long and short.
The speculators add liquidity to the market in an asset class where many coin creators are begging for more adoption.
For Buterin, to make this selloff about speculators is somewhat arrogant.
The truth is that he should be cheerleading anyone and everyone to get into crypto no matter where the funds come from.
On a micro level, Buterin should be more worried about competing against Bitcoin which is a tough ask.
Unfortunately, crypto has performed poorly against the flight to safety bid when a cornerstone premise had it that bitcoin and crypto were supposed to be part of that safety trade.
The currency is not mature enough and the weakness in prices tell the whole story.
Some highly publicized crypto hacks haven’t helped the case of the normal guy putting money into crypto either.
It continues to be a selective niche industry where it’s a hassle to go from fiat to crypto exchange and many can’t figure out the tax reporting rules.
Buterin has shifted his focus to scaling Ethereum in recent years. The popular blockchain has long suffered criticism because transactions on Ethereum can be slow and expensive.
Buterin should just worry about his own digital currency lasting the test of time instead of thinking he can pick and choose what type of investors goes into crypto.
Investors dumped Bitcoin after Russian President Vladimir Putin ordered troops into Ukraine.
Therefore, expect any geopolitical flareups to include huge bitcoin selloffs and a flight to the US dollar.
Any kinetic war means another leg down in bitcoin.
Volatility will play a huge role in the next move in bitcoin.
If there is a moderate solution to the Eastern European military hostility, then expect Bitcoin to jump back into the $40,000 area while an acceleration of aggressiveness will be met with a selloff down to $30,000.
So yes, guys like Buterin aren’t building the quality that needs to be built.
Clearly, they have been penalized and boxed up as if digital crypto is of inferior value to a normal equity stock.
The trust in the asset is not broad-based and it lends to the theory that readers shouldn’t double down in any crypto-related asset, but inch in and go from there.
Crypto has also performed poorly with rapidly advancing interest yields which is also worrying for readers looking for asset appreciation.
If bitcoin bounces back to over $40,000, I will sell that rally.
