When the courses dance and the whales hold

Yesterday was a record-breaking day. The price plummeted, and the price rose again. There was rarely so much movement in the markets, perhaps never before. But was it a black Wednesday – or a white one? The confirmation of the bear market – or its refutation? Is it time to short bitcoin?

What a day. If we look at the absolute numbers, Bitcoin saw its sharpest drop ever yesterday – but also its strongest breakout. On the night this remarkable day dawned, the price was still at just over 35,000 euros. The downward trend was already clearly visible at this point; the signs that the bull market had passed its zenith were too visible.

The markets then reacted

The btc marketBy late morning, the price had already fallen to 33,000 euros, from where it continued to descend to 32,000. Between 1:10 p.m. and 1:30 p.m., the first collapse occurred, pushing the price down by 2,500 euros to around 29,500. But that was only the prelude. After recovering back to 31,600, the price plunged to as low as 25,000 euros between 14:00 and 15:00.

To summarize: Within 15 hours, Bitcoin lost 10,000 euros, and within a single hour, 6,500 euros. In absolute terms, this is by far the sharpest and most violent Bitcoin crash of all time.

Many media outlets of course gratefully picked up on this template: “Bitcoin in free fall – a trillion dollars burned on the crypto market” was the headline of Manager Magazin, while N-TV astonishingly wrote “Bitcoin crash hits Wall Street” and even speculated that the Bitcoin crash had dragged the US stock markets down with it. Spiegel Online also reports the 20 percent collapse, and again Bitcoin is “in free fall,” whereas Shareholder reports a bloodbath and panic selling.

However, bloodbaths, free falls and panic selling were already over by the time the German publishers had put their news online. Wirtschaftswoche deserves the honor of having already recognized this when it not only reports on the crash, but in the same paragraph also asks its readers to recognize that we now have “buying prices”.

So, after a (temporary, daily) bottom with buy rates was found at 25,000 euros, the price shot up again. The recovery was unprecedented: in the 30 minutes between 15:10 and 15:40, Bitcoin jumped back to 30,500 euros – a jump of 5,500 euros. After some back and forth, the price formed a top at just under 35,000 euros – almost back to where it started that day – to then oscillate back and forth to arrive at a good 32,000 or 33,000 currently.

What can one say about this? I hope you didn’t spill too much coffee out of shock and joy and made the right trades, or at least didn’t let Spiegel-Manager Magazin-und-Aktionär get you into panic selling at the bottom.

Bitcoin has never made such leaps in absolute terms. Even in relative terms, the loss of up to 28 percent in one day or 19 percent in one hour is one of the rather rare events. Not surprisingly, exchanges recorded the highest trading volume ever, according to Coinmarketcap.

So we had the crash that everyone expected – but also a recovery that was stronger than most expected. On the one hand, this confirmed fears that we had arrived in a bear market – and on the other hand, it challenged them again just minutes later.

So we still don’t know much

Is this now the prelude to the bear market, which begins with a violent, but in itself typical cushioning? Or is this rather the prelude to a continuation of the bull market, in that even such a strong offensive of the bears – i.e. such a strong slump – is countered with a huge cushioning? Are we just getting started now that a healthy correction has taken place and worries about overly violent dips have been allayed? Was it a black Wednesday or a bright white one? – I’m having a hard time committing to an answer, and from my perspective can only tentatively-cowardly advise positioning yourself to not lose (too much) in either scenario. I think in this situation, single, powerful events – a major state bans Bitcoin, a major company invests – can push the market one way or the other.

bitcoin on pcWhat we do know is, after all, that the market was caught yesterday by some “diamond hands” and propped up by “buyers of last resort.” There are now enough players in the crypto market who are holding firm and, when in doubt, are willing to hold the price with large amounts of capital when it falls. An indication of what happened can be seen in a chart from Glassnode about incoming and outgoing coins on exchanges.

According to the chart, the exchange Binance first had the highest deposits ever – and then the highest withdrawals in one day. One whale sold in bulk, the other whale bought. If the coins didn’t move from one pocket to another, a huge transfer of wealth took place yesterday.

Some whales are known to have re-bought. For example, Justin Sun, the founder of the cryptocurrency Tron, made a big splash. By his own admission, he bought 4,145 Bitcoins for just over $150 million and just over 54,000 Ether for $135 million.

  • Michael Saylor, the permabullish head of MicroStrategy and the laser-eyed idol of all hodlers, at least hasn’t sold and promises never to. If you match his tweets, and he says yesterday he now has control of 111,000 Bitcoins, that suggests he also bought yesterday.
  • Finally, Elon Musk, who as Tesla CEO tends to a huge bitcoin trove, tweeted simply “Tesla has” followed by a diamond and a hand icon: Tesla has diamond hands – hands that don’t shake when things get stormy, but hold with a firm grip no matter what.
  • Even if this is only meager info that barely scratches the surface: The foundation on which this bull market is built – the hoarding of Bitcoins by big treasuries and heavy-wealthy players – didn’t falter yesterday despite the earthquake-like collapse. And that can be taken as a good sign, regardless of what happens next.