Bitcoin: Is A 15-20% Drop Normal?

As I frequently say, Bitcoin does nothing if it does not surprise you, and present price action is doing exactly that.

Yes 15% movement up or down is not at all unusual, but things feel a bit different this time round.

Despite everyone yelling to have Bitcoin spot ETFs, in the last ten days or so some $900 million has been taken out. Practically ALL the ETFs suffered some outflow, with even the mighty Blackrock only managing a tiny plus which in normal circumstance would be described as negligible.

Falling network activity is weighing heavily on price action – Glassnode, who monitor such things, say active accounts dropped from nearly one million by 35%. That is massive. It also means the hashrate is well down, and hashrate is one of the parameters that needs to be UP to get the price moving. Exchange inflow is also down, which indicates a slowing and decreasing investor interest and network activity.

The other thing weighing on the price is the fact that the average price paid by short terms holders is creeping relentlessly up. When the cost rises above the market price all sorts of things may happen. These are the so-called weak hands, and if the Bitcoin price is to improve, they need to capitulate and the hashrate needs to burgeon.

The last two support levels – 10-day and 50-day EMAs (Exponential Moving Average) got taken out in short order, and the 200 day EMA is in play. There is some increase in activity around there which sadly does not mean strength – it means the sell-off is continuing.

On a strictly analytic basis, the next price will be $60,000, swiftly followed by $56,000 and if the buyers don’t turn up at that point we will be well below $50,000. You might wonder why Michael Saylor announced a $500m bond to buy more Bitcoin. The answer – quite apart from the fact he never seems to get his timing right though he just might this time – is he is looking at a near $3.5billion drop in value. Propping that up (which in general terms is always wrong) is a knee-jerk reaction waiting to happen.

The price action is quite different this time after the halving. Before, there has always been an uptick followed by a sustained rally. This time we have a down lurch rather than tick, so it remains to be seen what might happen next.

The more interesting question is what is to happen to legacy banks? As of now I can only see them as being portals, not lending money in the traditional sense.

There was an attempt in the eighties to group various banks from different countries into one lending pot for multinationals. It never worked terribly well and as far as I know they all lost money and had to be bought out by one or other of the constituent parts.

Now, we have what is dubbed the Finternet, and it has its own financial system which is borderless. The best example is Revolut with over 40 million account holders across the globe.

Perhaps, in the redemption walk, Bitcoin is to be the reserve currency for these kind of banks. Quite apart from anything else the systems the legacy banks have are very outdated Cobalt), but the cost of bringing them up to date would be so massive as to be impossible.

There are programmers in their sixties being paid several hundred thousand pounds, dollars etc a year just to keep them running. That’s one of the reasons we now have purely online banks with top notch tech. I love it.

Temple Melville, CEO Scotcoin Project CIC

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