BITO And Bitcoin: History Doesn't Repeat Itself, But It Rhymes

[ad_1] <div data-test-id="content-container"><figure class="getty-figure" data-type="getty-image"><picture><img src="https://static.seekingalpha.com/cdn/s3/uploads/getty_images/1339662679/image_1339662679.jpg?io=getty-c-w750" alt="Bitcoin fall Cryptocurrency trends Graphs and charts" data-id="1339662679" data-type="getty-image" width="7500px" height="4200px" srcset="https://static.seekingalpha.com/cdn/s3/uploads/getty_images/1339662679/image_1339662679.jpg?io=getty-c-w1536 1536w, https://static.seekingalpha.com/cdn/s3/uploads/getty_images/1339662679/image_1339662679.jpg?io=getty-c-w1280 1280w, https://static.seekingalpha.com/cdn/s3/uploads/getty_images/1339662679/image_1339662679.jpg?io=getty-c-w1080 1080w, https://static.seekingalpha.com/cdn/s3/uploads/getty_images/1339662679/image_1339662679.jpg?io=getty-c-w750 750w, https://static.seekingalpha.com/cdn/s3/uploads/getty_images/1339662679/image_1339662679.jpg?io=getty-c-w640 640w, https://static.seekingalpha.com/cdn/s3/uploads/getty_images/1339662679/image_1339662679.jpg?io=getty-c-w480 480w, https://static.seekingalpha.com/cdn/s3/uploads/getty_images/1339662679/image_1339662679.jpg?io=getty-c-w320 320w, https://static.seekingalpha.com/cdn/s3/uploads/getty_images/1339662679/image_1339662679.jpg?io=getty-c-w240 240w" sizes="(max-width: 768px) calc(100vw - 36px), (max-width: 1024px) calc(100vw - 132px), (max-width: 1200px) calc(66.6vw - 72px), 600px"/></picture><figcaption>Vertigo3d</figcaption></figure> <h2>Thesis Abstract</h2> The thesis for that is easy - almost all the things factors at this being a significant capitulation occasion, the primary we have actually seen since 2018 when Bitcoin (<a target="_blank" href="https://seekingalpha.com/symbol/BTC-USD" title="Bitcoin USD" rel="noopener">BTC-USD</a>) fell over 30% in only a matter of two weeks. One may argue there was one other such occasion in 2020, through the liquidity disaster, nevertheless this was a broad-market occasion that affected extra than simply cryptocurrencies, and thus I might argue it was not fairly the identical kind of capitulation. Throughout these capitulation occasions all these identical headlines and perma-bears come out of the woodwork - swearing Bitcoin goes all the way down to <$3,000 and even going to $1 or $0 because it's essentially value nothing of their thoughts. The identical query of the legitimacy and safety of cryptocurrencies and Bitcoin is introduced up - regardless of the on-chain safety not being affected in any respect, and the truth that that is all simply value motion, not a safety risk or vulnerability. With Bitcoin buying and selling at 2-year lows, again to the value it was simply because the inflation narrative took off in 2020, the pot odds down listed here are incredible - almost nothing has to go proper for cryptocurrency to return up. It is my perception that the easiest way to play that is to go lengthy through ProShares Bitcoin Technique ETF (NYSEARCA:<a target="_blank" href="https://seekingalpha.com/symbol/BITO" title="ProShares Bitcoin Strategy ETF" rel="noopener">BITO</a>) as a result of lack of alternate danger mixed with choices availability, as it's not spot Bitcoin however somewhat a futures spinoff that doesn't have custodianship danger. <h2 class="paywall-full-content">Similarities Are All over the place</h2> For people who have not been via these occasions earlier than they are often nerve-racking, particularly when you're closely invested in cryptocurrencies as all the things is put into query throughout these occasions. The very material of the house typically appears to be crumbling, with exchanges collapsing or at-risk of collapsing, consumer funds probably being unsafe or stolen, authorities rules or bans being rumored, and many others. Going again in time to the November 2018 crash, which was the ultimate capitulation of the 2017-2020 bear market the place the true backside in sentiment, curiosity, and weekly value was made, there are lots of similarities to right now. It is nearly unusual what number of similarities there are, with each of those occasions occurring proper across the identical time the U.S. midterm elections occurred - each instances in November. <figure class="regular-img-figure" contenteditable="false"><a target="_blank" href="https://static.seekingalpha.com/uploads/2022/11/9/54108864-16680552573476229_origin.png" rel="lightbox noopener" data-width="1992" data-height="818" data-og-image-twitter_small_card="true" data-og-image-twitter_large_card="true" data-og-image-twitter_image_post="true" data-og-image-msn="true" data-og-image-facebook="true" data-og-image-google_news="true" data-og-image-google_plus="true" data-og-image-linkdin="true"><img src="https://static.seekingalpha.com/uploads/2022/11/9/54108864-16680552573476229.png" alt="BTC chart price action" contenteditable="true" loading="lazy"/></a><figcaption>Coinmarketcap BTC Chart (2018)</figcaption></figure> One other similarity is the volatility; each intervals had the previous couple of months full of seemingly disinterest, nothing taking place, and intensely low volatility relative to the previous. <figure class="regular-img-figure" contenteditable="false"><a target="_blank" href="https://static.seekingalpha.com/uploads/2022/11/9/54108864-16680553464446008_origin.png" rel="lightbox noopener" data-width="1946" data-height="934" data-og-image-twitter_small_card="true" data-og-image-twitter_large_card="true" data-og-image-twitter_image_post="true" data-og-image-msn="true" data-og-image-facebook="true" data-og-image-google_news="true" data-og-image-google_plus="true" data-og-image-linkdin="true"><img src="https://static.seekingalpha.com/uploads/2022/11/9/54108864-16680553464446008.png" alt="Coinmarketcap BTC Chart (2022)" width="640" height="307" contenteditable="true" data-width="640" data-height="307" loading="lazy"/></a><figcaption>Coinmarketcap BTC Chart (2022)</figcaption></figure> However the similarities hardly cease there, with Google traits charts displaying almost an similar image through the time interval as nicely, with a sluggish fall in search curiosity within the previous few months earlier than the collapse in costs. <figure class="regular-img-figure" contenteditable="false"><a target="_blank" href="https://static.seekingalpha.com/uploads/2022/11/9/54108864-16680559607194095_origin.png" rel="lightbox noopener" data-width="2394" data-height="820" data-og-image-twitter_small_card="true" data-og-image-twitter_large_card="true" data-og-image-twitter_image_post="true" data-og-image-msn="true" data-og-image-facebook="true" data-og-image-google_news="true" data-og-image-google_plus="true" data-og-image-linkdin="true"><img src="https://static.seekingalpha.com/uploads/2022/11/9/54108864-16680559607194095.png" alt="Google Search Trends Data (2018)" contenteditable="true" loading="lazy"/></a><figcaption>Google Search Tendencies Knowledge (2018)</figcaption></figure> Searches on Google pertaining to "Bitcoin" globally fell from round 75~ in mid-August 2018 to round 45~ proper as the underside dropped out of the market and the crash started. This represented round a 40% drop in relative searches globally over the interval of 90 days previous the crash. <figure class="regular-img-figure" contenteditable="false"><a target="_blank" href="https://static.seekingalpha.com/uploads/2022/11/9/54108864-16680559853113816_origin.png" rel="lightbox noopener" data-width="2382" data-height="844" data-og-image-twitter_small_card="true" data-og-image-twitter_large_card="true" data-og-image-twitter_image_post="true" data-og-image-msn="true" data-og-image-facebook="true" data-og-image-google_news="true" data-og-image-google_plus="true" data-og-image-linkdin="true"><img src="https://static.seekingalpha.com/uploads/2022/11/9/54108864-16680559853113816.png" alt="Google Search Trends Data (2022)" width="640" height="227" contenteditable="true" data-width="640" data-height="227" loading="lazy"/></a><figcaption>Google Search Tendencies Knowledge (2022)</figcaption></figure> Likewise in 2022 the Google development knowledge for the search time period "Bitcoin" fell globally from round 85 all the way down to 55, representing a 38% decline in relative search curiosity globally within the final 90 days previous this decline. I can proceed with chart after chart, similarity after similarity, however the actuality is the state of affairs in 2018 was very totally different than right now - there was no liquidity crises amongst the largest crypto exchanges. There was no actual danger of cascading collapse of different platforms/exchanges both. <h2 class="paywall-full-content">Historical past Would not Repeat Itself However It Rhymes</h2> The state of affairs right now is totally different than in 2018, the macro atmosphere has developed, the dangers plaguing markets have modified, and rather a lot has modified - but there are lots of similarities between this capitulation occasion and the 2018 capitulation occasion. I might recommend this capitulation occasion is NOT attributable to SBF and the potential collapse of FTX (<a target="_blank" href="https://seekingalpha.com/symbol/FTT-USD" title="FTX Token" rel="noopener">FTT-USD</a>) however somewhat that is simply the rationale we have collectively determined to panic. No one has been keen on crypto for months, curiosity has continued declining to nearly nothing - down almost 40% within the final 3 months alone. Volatility has contracted as no one dares to guess on the upside, nor the draw back as Bitcoin sat in a zone most people thought was affordable, however unsure - with no catalyst to maneuver it up or down. Folks largely did not bounce in and go lengthy as with inflation seemingly not increasing, hawkish financial coverage, and a possible financial disaster on the horizon there was quite a lot of uncertainty, however with Bitcoin down a lot why would you promote after already consuming nearly all of the loss? That is what folks thought - till they woke as much as see that Bitcoin and Ethereum (<a target="_blank" href="https://seekingalpha.com/symbol/ETH-USD" title="Ethereum USD" rel="noopener">ETH-USD</a>) that has been largely secure for a lot of months now, in an "accumulation zone" drop 25% -> 30% in a matter of days with completely no certainty of a backside being set - all facades of stability gone. <figure class="regular-img-figure" contenteditable="false"><a target="_blank" href="https://static.seekingalpha.com/uploads/2022/11/10/54108864-1668057696448672_origin.png" rel="lightbox noopener" data-width="2780" data-height="1260" data-og-image-twitter_small_card="true" data-og-image-twitter_large_card="true" data-og-image-twitter_image_post="true" data-og-image-msn="true" data-og-image-facebook="true" data-og-image-google_news="true" data-og-image-google_plus="true" data-og-image-linkdin="true"><img src="https://static.seekingalpha.com/uploads/2022/11/10/54108864-1668057696448672.png" alt="New York Times Article titled "Is This Crypto's Lehman Moment?"" width="640" height="290" contenteditable="true" data-width="640" data-height="290" loading="lazy"/></a><figcaption>New York Occasions (https://www.nytimes.com/2022/11/09/know-how/cryptocurrency-binance-ftx.html)</figcaption></figure> They woke as much as this actuality after checking their portfolio, or seeing headlines just like the one above, with a style of blood of their mouth, feeling queasy that they simply misplaced one other 1/4th of their funding. What if Bitcoin does go to $3,000? What if this silly web cash has no worth? What if the U.S. bans and regulates all the things to oblivion over this? What if FTX has been propping up the value of Bitcoin? Oh god what about Tether (<a target="_blank" href="https://seekingalpha.com/symbol/USDT-USD" title="Tether USD" rel="noopener">USDT-USD</a>), is that this the time they get regulated and confirmed to be a Ponzi? Chilly chills rush over them, they log in, and so they puke it - promoting at any value they'll because the dread units in that they may lose all the things - because the doubt units in that the bears are proper. This shifted everybody's mindset from "a backside is in, we're accumulating into the following rally" to "why do I personal this rubbish?" as they awoke from their complacency. SBF and FTX may very well be bailed out and this awakening is not going to go away, it was merely the excuse, the occasion, that made everybody collectively panic. <h2 class="paywall-full-content">Neck-Deep In Terror</h2> At this second Bitcoin is round $1000 off its in a single day lows, up at round $16,500~ and I am unable to discover a single soul who's keen to purchase. Not one. With the robust purchase ranking it's possible you'll assume I will say it is solely up and away from right here - and everyone seems to be wrongly afraid. Sadly, I am unable to say that - all the things is simply getting worse and worse. <figure class="regular-img-figure" contenteditable="false"><a target="_blank" href="https://static.seekingalpha.com/uploads/2022/11/10/54108864-16680586977967577_origin.png" rel="lightbox noopener" data-width="1224" data-height="1114" data-og-image-twitter_small_card="true" data-og-image-twitter_large_card="true" data-og-image-twitter_image_post="true" data-og-image-msn="true" data-og-image-facebook="true" data-og-image-google_news="true" data-og-image-google_plus="true" data-og-image-linkdin="true"><img src="https://static.seekingalpha.com/uploads/2022/11/10/54108864-16680586977967577.png" alt="Binance official Twitter announced cancellation of FTX deal" width="640" height="582" contenteditable="true" data-width="640" data-height="582" loading="lazy"/></a><figcaption>Binance official Twitter</figcaption></figure> Beforehand this was all trying prefer it was going to be swept underneath the rug and Binance (<a target="_blank" href="https://seekingalpha.com/symbol/BNB-USD" title="Binance Coin USD" rel="noopener">BNB-USD</a>) was going to soak up FTX and resolve this - however with them backing away from any dealings or affiliation with FTX this risk is gone. There isn't a rescue. There isn't a bailout. There isn't a assist. At the moment there is no such thing as a actual substantive knowledge on how problematic this example is, how a lot of buyer funds are gone, lacking, or misplaced, or the present steadiness sheet of FTX. <h2 class="paywall-full-content">The Deafening Silence Returns</h2> To make issues worse, till this morning, FTX and SBF had gone radio-silent since November eighth, one thing that has solely been finished by corporations which are on their very own, heading straight for <a target="_blank" href="https://seekingalpha.com/news/3906466-bitoin-other-cryptos-resume-decline-after-ftx-files-for-chapter-11" rel="noopener">Chapter</a> <a target="_blank" href="https://seekingalpha.com/news/3906466-bitoin-other-cryptos-resume-decline-after-ftx-files-for-chapter-11" rel="noopener">11 bankruptcy</a> and investigations. The eerie similarity to Celsius Community (<a target="_blank" href="https://seekingalpha.com/symbol/CEL-USD" title="Celsius" rel="noopener">CEL-USD</a>) and different crypto-lending platforms, who additionally selected this route, is placing to me - and screams the probably final result of this example is not going to solely not be smooth, however will likely be far far worse than individuals are anticipating. There isn't a rescue. There isn't a bailout. There isn't a assist. <h2 class="paywall-full-content">Takeaway</h2> God assist us all - the underside has fallen out and I do not see the bottom underneath my ft - all I hear is screaming. That is precisely the way it sounded and felt within the November 2018 crash and the 2020 COVID-19 crash, so I stay lengthy, reluctantly including at these ranges with a sense of illness in my chest as I'm compelled to lift money and delever from different investments to help my cryptocurrency portfolio. The underside needs to be in, or near it - and in time us bulls will probably be known as fortunate backside fishers when the crypto market returns to regular or begins rallying from these lows within the close to future. <h2 class="paywall-full-content">Actionable Takeaways</h2> I like to supply actionable takeaways, commerce concepts for folks in my articles, however I can't actually present one on this case - each commerce can be primarily based on hypothesis and opinion and with excessive danger. With one exception. If you wish to go lengthy the asset class (or I suppose brief), think about shopping for medium-long dated spreads, an instance being shopping for the January 20, 2023 7 places and promoting the 12 places in the identical expiration - netting a breakeven at mid-price (market) with a capped upside of $253 and a capped draw back of $247. This is able to restrict draw back danger in both path relying on when you did the above (going lengthy BITO/Bitcoin) or the alternative of it (going brief BITO/Bitcoin) and supply a method for an investor to achieve publicity with out taking over the acute dangers really holding the asset carry at the moment. <h2 class="paywall-full-content">Dangers To Think about</h2> If you have not taken the trace, bulls like myself are on the verge of being skinned alive by the market. In mere days, if the true impression of this ordeal is confirmed to be catastrophic, we may all be becoming a member of the screaming with everybody else - falling shortly into the abyss with no sight of the underside. Those that should not have a danger tolerance able to withstanding a complete lack of capital ought to probably keep away from all cryptocurrency merchandise till this entire state of affairs has performed out.</div> [ad_2] <a href="https://news.google.com/__i/rss/rd/articles/CBMiZGh0dHBzOi8vc2Vla2luZ2FscGhhLmNvbS9hcnRpY2xlLzQ1NTY1MTAtYml0by1hbmQtYml0Y29pbi1oaXN0b3J5LWRvZXNudC1yZXBlYXQtaXRzZWxmLWJ1dC1pdC1yaHltZXPSAQA?oc=5">Source link </a>