Crypto is caving in. What’s up?

Stan Schroeder – Mashable – 06/13/2022

“It hasn’t been a great couple of months for cryptocurrency owners. Bitcoin, Ethereum, and basically all other major cryptocurrencies are sharply down Monday, with Bitcoin at one point trading at $23,500, a level we haven’t seen since December 2020. Ethereum fared similarly, having touched the price of $1,180 and erasing all gains made since January 2021. The prices have recovered slightly in the past couple of hours, but everything is still sharply red.”

“Worse, Bitcoin, Ethereum, and other major cryptocurrencies have been on a downward spiral since early April this year, with little to no relief. What’s happening? Is crypto over? Was it a mistake to quit your job six months ago by climbing onto your boss’ desk and yelling “I am a crypto god”?

“As always, no one knows, but here’s a little overview of what’s happening.”

https://www.msn.com/en-us/money/markets/crypto-is-caving-in-whats-up/ar-AAYoTJ6

A bagholder’s response when rationalizing being consistently wrong on a sector for months and months.

Ok buddy! 😂

Ex, of course the claims of meteoric rise for Bitcoin were and likely will continue to be horse dung, as is the case with gold bug claims here and with kitco pundits. Better still the BS on a silver skyrocket into the hundreds, mind you it’s at some ill defined point in the future, by guys like Savage and others for the past couple years or more.
I made no claim that gold sector shares are an inflation hedge, just that they are significantly off their highs, in particular the dregs, which are most favoured and touted here, as is the case with the bitcoin sector.
However the gold bugs aren’t the bagholders of the past year or more, just everybody else who bought tech, bitcoin etc.
There is no apples and oranges story here, just a bagholder’s response which you happen to agree with.

Jonsyl, I’d agree with Matthew they are apples and oranges. There are plenty of tech stocks, vaccine stocks, defi stocks, meme stocks, and stay-at-home stocks also down 65%-80% too, but that wasn’t the point of the above posts at all.

The point was that so many in the crypto community boasted that Bitcoin was the hardest money, the best “store of value” and the best “inflation hedge” out there. Clearly that is 100% horse dung as the Bitcoin price pulled back 65%+ since last November as inflation raged to the highest level in 41 years during that period, and market turbulence has only increased. If Bitcoin truly was a good store of value or inflation hedge, then it should have ripped even higher during the last 7 months…. not crashed by 2/3rds.

Nobody ever said the PM mining stocks were great stores of value or inflation hedges, so you are conflating a comparison that is not there in some kind of strawman arguement. In contrast, people have said that about Gold, the actual metal. All things considered it has been a substantially better “store of value” through the last 7-8 months simply by not getting crushed like almost every other sector, and also has 5000 years of history as holding it’s purchasing power as store of value.

The other asinine thing trumpeted out of the Crypto community last year was that Bitcoin was going to go from $69,000 to $220,000 by the end of this year in 2022. It is now down at $22,000 instead (90% lower than their target they were so sure of). They also tweeted out snarky things to the gold community like “Have fun staying broke.” So can’t say this crypto correction couldn’t have happened to a more deserving group, and maybe it will knock the chip off their shoulder, so they drop their attitude of certainty moving forward… as their entire thesis just crumbled before their diamond hands.

Agreed Silverdollar. He’s been nailing a number of sectors from Cryptos, to Oil, to Gold/Silver, and even the general stock market indexes for the last year or two, and feel he’s been more accurate overall than many other market technicians. I try to check in on his videos when people do them, and have considered reaching out to him to invite him on the KE Report as a guest just to get another perspective on the technicals.

Hi Matthew – I had responded back to you on the weekend show, agreeing with your point about the insane parabolic moves in the general markets and cryptoverse, culminating with the Matt Damon crypto commercials, and since it ties in with the theme on this daily editorial and blog thread I’ll just repost my rant here as well.

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Yes, the Matt Damon Superbowl commercials endorsing cryptos, along with Tom Brady having “Laser Eyes”, Elon Musk pushing around joke altcoins like Dogecoin and Shiba Inu with mere texts, and Michael Sailors god-complex, were all signs of a bell ringing in the crypto froth.

To your point, I’ve also never seen anything as frothy as 2020 going into mid 2021 either after over 2 decades trading the markets.

It really started getting silly when we saw the “Stay At Home Stocks” like Peloton, Zoom, Paypal, Squarespace, Shopify, and Teledoc Health start spiking after the pandemic, and a rush of new biotech “Vaccine Stocks” where it appeared the markets no longer cared about valuations or earnings. When we’d ask generalist guests about this the mantra we heard back was that “Valuations don’t matter… until they do.” Well, I guess now they do. 😉

Then we saw Growth stocks become all the rage, typified by Cathy Woods Ark Innovation Fund, where it was growth to the moon and valuations at multiples that were laughable. Investors said don’t fight the trend and only knew one thing… “buy the dip!”. These investors were not smart or savvy, they were just in the blow-off top of one of the longest running bull markets in memory.

Next we saw all those Unicorn IPO and then the creation of SPACS which was showing the unbridled speculative fervor that had taken over the markets. Truly nutty stuff.

Then there was the “meme stocks” craze where throngs of retail investors had just opened up trading accounts on Robinhood, WeBull, and Stash platform and were using those messaging platforms along with WallStreetBets and Reddit to simply trade bankrupt companies based on outsized short positions. That all started with reviving Hertz rental car from bankrupt to vitality once again, and then they did it with Gamestop, AMC Entertainment, Blackberry, and Bed Bath and Beyond.

Then there was the whole “Reopening Stocks” narrative last year where people were all jacked up on hospitality and travel stocks, and consumer discretionary, etc… because we were going to see all this growth to infinity and beyond now the world was “open” again. Those market pundits failed to consider the reality for most families though, after 2 years of lockdowns, the destruction of small businesses and their staffs from ongoing riots burning over 60 US cities and terrible covid policies, or that people that just quit working and were living off savings, etc… The “reopening trade” was just a little bit of a sugar high that fizzled right out by the 3rd quarter of last year, and was more market hopium than a realistic sustainable trend.

Finally by November of last year we saw the insane craze in all things digitial – Cryptocurrencies, Decentralized Finance (DeFi) companies, and the insanity around NFTs head to an epic parabolic move higher of sheer frothy speculative exuberance. The digital speculative trades topped right around that time in sympathy with the largest tech companies including the FAANGS and Tesla and Social Media stocks finally topped. That was all she wrote and while many sectors were already correcting by Q3 of 2021 and the market breadth was troubling, by Q4 the final holdouts rolled over and have been crashing down ever since then in a big market implosion.

That was all very “late cycle” and “end-of-cycle” nonsense, and it had a been a long time coming to finally bite off more than it could chew. Even the dimmest bulbs in the financial media and social media pundits started to realize that the valuations were way up in the stratosphere and most companies had no business trading where they were. This all synched up nicely with inflation ratcheting higher and higher each month from last year into this year, with the Fed starting it’s tapering of accommodative bond buying QE after 12 years of “emergency” market intervention, and then they kicked off their rate hiking cycle this year in March, and after only 2 hikes we are seeing bear markets across the board in most sectors.

None of this implosion of sectors or investors getting spanked hard is very surprising. In a way, this is actually a very good thing to have let some air out of the speculative “everything bubble” over the last 8-10 months. The crazy thing is that some markets really aren’t that oversold on the longer duration charts yet, so there is likely more pain in store for generalist investors.

Hopefully they all got rich trading Stay At Home Stocks, Reopening Stocks, Meme Stocks, Growth Stocks, NFTs, Cryptos, SPACs, etc… because by last year, everyone was suddenly a genius investor, and had Lambos on their minds. Maybe all the newly minted Twitter millionaires can weather the ongoing storm, but it’s quite likely that trillions of dollars of speculative capital has been lit on fire and incinerated over the last year. It’s not clear where all the money will come from to fuel the markets to new highs and keep the everything bubble inflated.

Interesting stuff, Ex. It’s funny how the little guy doesn’t understand that such advertising is paid for by large holders that want to dump their positions. Extremely long term tops form when you have such popular characters as Musk and Damon doing the promoting because of the huge number of people they can influence.

“Men, it has been well said, think in herds; it will be seen that they go mad in herds, while they only recover their senses slowly, and one by one. — Charles Mackay, Extraordinary Popular Delusions and the Madness of Crowds, 1841