Wednesday, May 19, could be a day that lives in crypto infamy. Bitcoin crashed more than 30%. Ethereum crashed nearly 40%. Billions and billions of dollars were wiped out in forced liquidations.
You surely are sick of the endless rounds of discussions about what caused the dip. But in Dispatch, we try to not only give insights – we also want to make sure that whatever is all the rage today remains in tomorrow’s archives. So, time to dissect the sea of red: FUD certainly played a part and Elon’s environmentally motivated turnabout certainly didn’t help things. Tether critics have been back out in force since they made their first reserve attestation. Bitcoin being used as ransom in the Colonial Pipeline saga brought the ‘crypto is for crime’ narrative right back and, of course, there was China (more on that next).
As prices started plummeting, a self-reinforcing cycle between forced liquidations on exchanges and nervous newbies took hold. Liquidations drove the price down, which scared recent investors who raced to sell. This, in turn, pushed the price further down, which caused more liquidations, and so on. “Because there was quite a lot of leverage, that’s why the crash was so deep,” commented Antoni to CoinDesk.
However, the story of this week must also include the resilience of HODLers across crypto assets. Both Bitcoin and ETH bounced back quickly from their lows. It is the communities of die-hard holders that ensure these assets’ resilience and this instills confidence in new players. Maybe that’s why 19,639 BTC moved off exchanges on Wednesday afternoon – just hours after the worst of the drop. Strong hands are buying aggressively.
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It wouldn’t be a bull market without a sensational story claiming that [insert country name] had banned crypto. In a great example of why it’s important to pick your sources well, Reuters reported that China had banned financial institutions from interacting with crypto. Many analysts claimed this was the driving force behind Wednesday’s sell-off. Then the note in question turned out to simply be a reaffirmation of the existing policy from 2017. Now, there is probably some great conversation to be had about why they felt the need to restate the policy now, and what it suggests about the digital yuan – but it is a far cry from the widely reported “new crypto ban.”
Antoni called the Chinese move “the latest chapter of China tightening the noose around crypto” and “a well-timed newsjack” that may “boost usage of China’s own government-issued asset.” In the long term, it is “nothing more than a tremor on the otherwise defiant crypto world’s surface,” he added.
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Comments from the new acting director of the US Office of the Comptroller of the Currency (OCC), Michael Hsu, added fuel to the fire. Under the leadership of Brian Brooks, this major banking regulator made enormous changes that facilitated banks and financial institutions to interact with crypto. Brooks’ decisions are now going to be reviewed as the OCC is expressing concerns that they weren’t executed with a proper stakeholder process.
If those decisions get reversed, it could put an abrupt stop to the institutional engagement that has driven this bull run. If there is an upshot, it seems at least that Hsu is determined to actually provide regulatory clarity, saying that he wants to form an ‘interagency sprint team’ to get things done.
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Celebrities in Crypto
Nothing like celebs to get a barometer of sentiment in the crypto markets.
Let’s see where different celebs landed this week:
Elon Musk spent all weekend fighting with Bitcoin maximalists, but then said that Tesla had diamond hands (implying that they weren’t selling despite the crash)
Country star Jake Owen implored his followers to #HODL
Tom Brady laughed off a deflate-gate joke by saying that he was buying the dip
I mean, the message is pretty clear, right? As Antoni told Cointelegraph, crypto “is the place to see and be seen. It’s like New York City in the 60s: ungovernable but never boring.”
The Week’s Most Interesting Data Story
The Dip That HODLers Held
They say that dips separate the HODLers from the speculators. Turns out that distinction is written all over on-chain Bitcoin metrics. Coin dormancy went down during the dip, suggesting that it was short-termers who were shaken out of their position while HODLers just kept on keeping on. Some even sold at a loss! Meanwhile, we can see that long-term holders – and miners – accumulated at an increasing pace. It goes without saying, but this base of HODLers is one of the greatest strengths Bitcoin has, and this dip showed that yet again.
What the Community Is Discussing
What does this week do to the Corporate Treasury use case?
If you think that people aren’t still looking ahead, you’re crazy.
As you read above, Antoni commented on just about every big topic this week.
He told CNBC that Bitcoin is still on track to reach $100K in the next 12 to 18 months
Earlier in the week, he forewarned that Elon “has to wake up to the reality that with his following, even single-worded tweets can move markets,” in this Bloomberg piece.
Sharing his take on Ethereum, Antoni told Finder that Ethereum is at a different stage in its cycle and that a lot of Nexo clients are rolling out of Bitcoin and into Ethereum because BTC “is now where ETH was a few months back: it hit $2K in February and then failed to reconquer that territory for more than a month.”
Wrapping up on a positive note, Antoni told The Independent that “[m]ore than anything, what this undeniably large correction and those before it prove is that the crypto market is resilient, that it’s a long-term game ill-suited to the weak-handed.”
What to Watch for Next Week:
On Monday, May 24, Antoni and Bloomberg’s Joanna Ossinger are having a one-on-one session on Bitcoin and Corporate Treasury Management at CoinDesk’s Consensus 2021. No ticket? No problem. We are giving ten tickets away here!
On Wednesday, May 26, at 3 pm BST, we are hosting our monthly live AMA with Antoni. Follow us on Twitter, where we’ll post the Sli.do link for you to submit your questions.