TL;DR
Two key narratives (Germany promoting BTC and Mt. Gox repaying collectors) induced the market to dump, however there’s not a lot liquidity left to be swept under present costs, so the market ought to stabilize over the approaching week(s).
Full Story
When you’ve ever seen Chevy’s uncle Frank eat scallops, you’ll understand it’s a sight to be seen.
At each flip you’re considering “There’s no means he can inhale one other plate” — however alas, Frank at all times finds room…till his spouse Miriam inevitably has to step in, inform him he’s embarrassing her, and waddle him to the automobile.
Watching the crypto market dump over this previous week has felt akin to Frank consuming scallops.
Bitcoin’s worth dipped under $60k on Thursday, then right down to $56k, earlier than bottoming out at $53.5k final Friday, taking the remainder of the market down decrease with it.
(And at each step down, we’ve thought “certainly it will possibly’t go decrease”…)
Right here’re the narratives driving the dump:
The German authorities has began promoting its stash of ~$2.2B value of Bitcoin.
127,000 collectors are about to be repaid the Bitcoin they misplaced within the Mt. Gox change collapse of 2014.
On prime of that, the summer time months often see lulls in market actions and there’s nonetheless no strong assertion from the Federal Reserve on after they may decrease rates of interest.
Right here’s the chance being leveraged:
The massive canines which have the wealth to maneuver markets (aka ‘market makers’) acknowledge the promoting occasions that these narratives are more likely to set off, and select to amplify them (when there’s cash to be made).
The cash to be made right here is usually within the loans that individuals took out to purchase extra crypto, again when Bitcoin hit ~$56k just a few months again — and as soon as costs began dipping under $60k, they noticed their alternative.
Trigger if market makers promote big chunks of Bitcoin, they will help to:
Push costs down → pressure these loans to be repaid → which requires folks to promote their Bitcoin → which pushes costs even decrease.
…at which level, market makers should purchase again in at a closely discounted costs.
(This is called a ‘liquidity sweep’).
It’s a posh technique of ‘shopping for low, and promoting excessive,’ and as convoluted as it’s — it really works!
Excellent news is:
There’s not a lot liquidity (loans) left to be swept under the present worth.
So the market ought to stabilize over the approaching week(s) and hopefully begin to recuperate.
