What happened after 1 year of Bitcoin Black Friday and what happened next?

Exactly a year ago, when the world first began to face an extremely dangerous pandemic and panicking global markets, Bitcoin ran into one of the biggest incidents in its short history. it. Prices almost halved within hours, to as low as $ 4,600 and is often referred to as “Dark Thursday Market Incident”.

The drop in price at the time was the largest percentage drop for Bitcoin since its first launch in 2009 and led to serious questions about the perceived value of the cryptocurrency as a ‘fortune.’ safe-haven assets “,” unrelated to “other assets.

Bitcoin Price on Black Thursday | Source: TradingView

Since its mid-March 2020 crash, Bitcoin has taken off like a rocket, breaking every conceivable record on its way and is now poised to break all-time highs as access to $ 60,000.

In fact, when you scale down the chart, that dreadful Black Thursday crash doesn’t seem so serious any longer.

Bitcoin one year after the COVID | Source: TradingView

“The March 12, 2020 crash affected all categories – even traditional safe-haven assets like gold – in a frenetic flight to cash in on Bitcoin. treat like any other”, said Jason Deane, a cryptocurrency market analyst at Quantum Economics.

“However, the perpetual change in the macro-finance landscape that followed created a new wave of trust in crypto assets, especially Bitcoin, from being an experimental concept and a fringe concept. into a serious contender for the long-term store of value, ”he said.

It only took Bitcoin about a month and a half to regain losses incurred on Dark Thursday – but it did not reach itself as it is today and may even have received some help from competing assets.

A fiery DeFi summer

The DeFi craze during the summer of 2020 is believed to have helped fuel the crypto market’s recovery. Decentralized Finance (DeFi) stands for a set of financial products and services that operate like a bank without the need for an intermediary like a bank. All the actions are peer to peer, and the majority happens to ETH, the second largest cryptocurrency by market cap.

When DeFi started to flare up in the mid-2020s, it caught the attention of investors as well as risk lovers – and as the dominant cryptocurrency in the market, Bitcoin provided a portal to infiltrate this new territory.

As more and more people flocked to participate in DeFi and more Bitcoin was traded, the price of BTC slowly recovered.

DeFi channel | Source: TradingView

Institutional investors add oil to the fire

But if DeFi lit the game, institutional investors fueled it, starting with cloud software company MicroStrategy.

The publicly traded company is probably not entirely new to most crypto market observers as early as 2020. But by August, the company has become a household name in the crypto space.

MicroStrategy made the first jump into Bitcoin with a $ 250 million investment – a modest sum compared to what company CEO Michael Saylor subsequently made. Throughout the year, MicroStrategy continued to make notable announcements about major Bitcoin purchases. The company currently holds more than $ 5 billion in Bitcoin as part of its reserves.

After MicroStrategy, other companies quickly followed suit.

Jack Dorsey’s Square announced a $ 50 million Bitcoin investment in October 2020, before the price spike. A few days later, PayPal announced the launch of a service to buy, sell and store cryptocurrencies. That has helped push prices even higher.

The story does not stop there. Earlier this year, Elon Musk’s Tesla revealed it had invested $ 1.5 billion in Bitcoin, helping BTC finally reach the completely undiscovered territory it discovers today.

Certainly, MicroStrategy’s initial move with Saylor’s new Bitcoin evangelization on Twitter Crypto led the way for people like Musk and others to follow suit.

Organized channel | Source: TradingView

Deane said:

“When the first public company MicroStrategy released strong financial reporting on Bitcoin’s sustainability, it was a clear path for other global institutions and payment systems to follow suit, driving trust. , accept and care more. The network effect of Bitcoin has increased, so has the price ”.

And the result of these moves is that the “typical Bitcoin investor today” is much more aware of the financial reason to invest in Bitcoin, rather than the original buyers who jumped in with “dream thinking. pure dreams in the past ”.

What should Bitcoin Hodler to expect?

For now, according to the analyst, Bitcoin appears poised to continue to reach new heights, although the price drop in the process should not come as a surprise. After all, Bitcoin recently experienced its worst dollar-denomination in history just a few weeks ago.

“We expect the cryptocurrency ecosystem to continue to grow exponentially, cross boundaries, test new concepts and create new services. Some of them will bring new challenges and failures, but the upward trajectory of the operation is now inevitable and unstoppable, ”said Deane.

It all sounds very gratifying if you are a Bitcoin hodler.

What is Bitcoin: Asset, Currency, Commodity or Rare?

As I pointed out in my recent post on cryptocurrencies in general and Bitcoin in particular, I can assert my disagreement over the harsh criticism and sharp proposals surrounding this issue. . Contrary to Jamie Dimon, I do not believe Bitoin is a scam in which only fools buy and pay the price for their stupidity. Unlike Bitcoin’s big fans, I don’t think that the digital currency is and will be an asset class or can change fundamental truths about risks, investments, and management. The reason for the above two views is that they both disagree about the definition of Bitcoin, and on the risk of causing trouble in one way or another, I will point out that Bitcoin is not an asset but a currency, so you cannot evaluate or invest in it. You can only price and exchange.

Assets, Commodities, Currencies and Rare Items

Not everything is value, but nearly everything can be priced. To understand the difference between valuations and valuations, let me begin by reassigning that the investment cases I’ve investigated fall under one of the following four categories:

  1. Cash Generating Asset

An asset class that generates or is expected to generate future cash flows. The business you own is an asset that depends on the cash flow of the business. The above assertions can be a block of contract (bonds or debt), surplus (equity or shares) or even random (options). What these types of assets have in common is that these cash flows can be assessed, and assets with large cash flows and low risk should be prized rather than small and high risk assets. At the same time, assets can be priced in relation to each other by comparing the price you pay for a regular metric. With stocks, assets form a multiple price comparison (PE, EV / EBITDA, Price to Book or Value / Sales Indices) through companies of the same type to form price assessments. See whether the stocks are expensive or cheap.

  1. Commodity

A good creates its value through its use as a raw material for basic needs, be it energy, food or shelter. While value can be measured in terms of the supply and demand of a good, delays and progress in the goods can make the assessment process more difficult for an asset class. Thus goods tend to be priced, often related to their historical development, with the prices of standardized oil, coal powder or iron ore being averaged over long periods.

  1. Currency (Currency)

A unit of currency acts as an intermediary for controlling cash flows, and is also a means of storing value in case you do not want to invest. When viewed independently, currencies have no cash flows and cannot be evaluated, but they can be priced against other currencies. In the long run, currencies are widely accepted as intermediaries and their better storage of value over time will cause their prices to go up, relative to other currencies. have these properties.

In the short term, other forces, including governments trying to manipulate exchange rates, may take over. Using regular currencies as an example, you can look at the chart below depicting the US Dollar against seven other paper currencies, over a long period (1995-2017), you can See the Swiss Franc and the Chinese Yuan rise in value against the dollar, while the Mexican Peso, the Brazilian Real, the Indian Rupee and the British Pound are showing signs of falling against the dollar- la.

  1. Precious and rare goods

A rare commodity has no cash flow nor an intermediary, but sometimes it has aesthetic value (as is the case with a precious painting or sculpture) or valuable mentally (like baseball card or Jersey team). Precious goods cannot be assessed because they do not generate cash flows, however they can be priced, based on people’s perceptions of the desire and scarcity of the commodity.

Observed through this prism, gold is clearly not the cash flow that makes up an asset, but is it a commodity? Since the value of gold has little to do with its practical function, but to a more permanent function, the nature of gold is more monetary than commodity. Real estate is an asset, even if it is in the form of a home, because you do not have to pay rent (cash flow). Private equity funds and hedge funds are forms of investment in assets, currencies, commodities and rare goods, they are not separate groups of assets.

Investment vs. Transaction

The bottom line here is that the cash that creates assets can be valued and priced, goods can be priced much more easily than they are, and we can only value money. and collectibles. So what? I’ve written about the divide between investing and trading, and that contrast is worth revisiting. In order to invest in something, you need to estimate their value, compare them with their prices, and then decide on that comparison to sell if the price is below value and buy otherwise. Trading is made much simpler, when you price something, judge whether the price will go up or down in the near future and bet on that price. Even if you can be successful with both, the skills and “tools” you use are different when investing and trading, and what makes a great investor is certainly different from the other. a must-have of a good trader. The table below shows the difference between a trade (a valuation game) and an investment (a review game).

As far as I see it, you can play both of these games well, but having you “delusional” of the game you are playing and the misuse of the “weapons” or skills in this game will be a feat. stay awake for disaster.

What is Bitcoin?

Bitcoin is not an asset because it does not generate cash flows independent of its holders (until you sell it). It is not a commodity, for it is not the raw material that can be used in the production of something useful. The only exception I can think of is that it is becoming an essential component of smart contracts, it can take on the role of a commodity, it can also compensate for Ethereum because it. is traded as a smart contract rather than as a currency. So the other two options are currency or rare goods, and Bitcoin supporters tend to be the first answer and those who oppose choose the second.

The first step in getting into a serious debate is to decide whether Bitcoin is an asset, currency, commodity or a rare commodity.

In my last post I pointed out Bitcoin as a currency, but still incomplete, to the extent that it is only limitedly accepted as an intermediary exchange and that it is too volatile to becomes a store of value. There are three positive ways for me to see Bitcoin as a currency, in all good to bad cases.

Global digital currency

In the best possible scenario, Bitcoin is widely accepted for exchange around the world, becoming the widely used global cryptocurrency. In order for this to happen, Bitcoin must become more stable (in monetary terms), the Central Banks and Governments around the world have to accept its function (or at least they don’t try to hinder Bitcoin). , and the mysteries surrounding Bitcoin need to be removed. If this happens, it can compete with paper money and set the limit for its creation based on the algorithm, Bitcoin’s high price can be adjusted.

Generation Y “Gold” coins (those born between 1980 and 2000)

In this case, Bitcoin becomes paradise for those who do not trust the Central Bank, Government, and banknotes. In short, Bitcoin has served as gold historically, for those who have lost faith in the rulers of the centralized model. The interesting thing here is that Bitcoin’s language is flooded with the term Mining, because when it intentionally proposed or vice versa, the founders of Bitcoin shared this mission. In fact, Bitcoin’s hard cap of 21 million coins seems more compatible with this case than the first. If this were the case, and Bitcoin exhibited strength like gold, it would behave like gold: rising in price during a crisis and losing value during an economic boom.

The “Tulip Bubble” of the 21st Century

In the worst-case scenario, Bitcoin is seen as a shooting star, attracting money as it “flies” soaring, especially for those who see Bitcoin as an easy source of profit, but likewise. with Bitcoin “flashes and then turns off” so quickly, these traders will switch to something new and different (perhaps a better and better designed digital currency). again Bitcoin holders helpless with memories of the “ruins”. If this happens, Bitcoin could easily become the equivalent of “Tulips”, a speculative asset in which its price rose to 600 in the Netherlands before collapsing in. final result.

It would be a lie if I told me these cases were revealed, but they are still plausible scenarios. If you are trading Bitcoin you may not care but your time range is most likely measured in minutes and hours only, not weeks, months or years. If you have a long-term interest in Bitcoin, instead of focusing too much on the price movement day to day, you should focus more on the advancement of Bitcoin’s use as a kind. currency. Another note is that you can become a cynic with Bitcoin and other digital currencies but be an optimist about the underlying technology, especially Blockchain technology, and its potential for demise. to pour.

Actual inspection

Combining the part I talk about categorizing investments in assets, commodities, currencies and precious goods with the part where I point out Bitcoin as a “nascent” currency, I can draw conclusions. after:
Bitcoin is not an asset group: For those of you who are taking a part in your portfolio in Bitcoin, be really sure of why you did it. Not because you want to diversify your portfolio or hold entire asset classes, it’s because you want to leverage your trading skills for Bitcoin to increase portfolio returns. private. Unless you take this as a risk on cryptocurrencies, I would quickly add that paper money (like the US dollar, the euro or the yen) are also not asset groups.

You cannot value Bitcoin, you can only value it: This is subject to the acceptance that Bitcoin is a currency, not a commodity asset. Anyone who thinks they can value Bitcoin, maybe they define “value” in a completely different way or simply make up and go on playing.

It will be viewed as a currency: In the long run, the price at which you are tied to Bitcoin will depend on how well it performs as a currency. And if it is widely accepted, it should offer a higher price. If it turns out like gold, a sub-currency investors will use to hide in times of crisis because its price will be lower. Even worse, if it were a temporary currency that easily lost purchasing power and was replaced by something new and different, then it would collapse and die.

You don’t want to invest in Bitcoin, use it to trade: In order to be a successful Bitcoin trader, you need to be aware that every price movement has something to do with the fundamentals. Status as well as dynamics, and large price changes are likely based on incremental information.

Should I buy Bitcoin at the price of $ 12,200? The answer is no, but not for the reasons you think. Not because I see it being overrated, when I cannot give an opinion without overestimating it and as I have pointed out that Bitcoin cannot be overrated. That’s because I have never been a good trader, and as a result I can never count on my price judgment. If you have good investment instincts, you should play a valuation game, as long as you are aware that this is a game where you can win or lose millions of dollars, based on your decisions about the move. force. If you win millions, I would like to send you best wishes! And if you lose, please don’t let your paranoia get you to blame institutions, banks and governments for why you lost.

Why billionaires are suddenly accumulating Bitcoin after 113% YTD gain

Billionaires have been increasingly accumulating Bitcoin in recent months as four main factors are making BTC increasingly attractive to money managers.

Billionaires have been increasingly accumulating Bitcoin (BTC) in recent months. Following Paul Tudor Jones’ lead, hedge fund manager Stanley Druckenmiller became the latest billionaire to publicly disclose his Bitcoin investment.

The performance of Bitcoin since 2015. Source: TradingView.com

There are four main reasons Bitcoin is becoming more compelling to high-net-worth investors. The reasons are Bitcoin’s effectiveness as a portfolio diversifier, inflation hedge, gold alternative and large risk-reward potential.

Investors increasingly viewing Bitcoin as “gold 2.0”

Gold is an important store of value and a safe-haven asset for institutional investors. It serves as a hedge against inflation and as a hedge against a potential market downside.

Investors consider gold as more of a method of insurance to protect a portfolio from market corrections and macro uncertainty. As such, safe-haven assets typically do not return large gains in the short to medium term.

Bitcoin has the potential to achieve both, as it is evolving into a safe-haven asset with massive growth potential.

Gold’s market capitalization is estimated to be around $9 trillion. In contrast, Bitcoin is valued at $285 billion, leaving a large gap between the two assets’ valuations.

In an interview with CNBC on Nov. 9, Druckenmiller emphasized that the brand of Bitcoin as a store of value only improves as time passes. He said:

“Bitcoin could be an asset class that has a lot of attraction as a store of value to both millennials and the new West Coast money — and, as you know, they got a lot of it. It’s been around for 13 years and with each passing day it picks up more of its stabilization as a brand.”

Large risk-to-reward potential

During his interview, Druckenmiller noted that he owns “many many more times gold” than Bitcoin. But the billionaire investor emphasized that if gold rises, Bitcoin would also see massive gains and “probably work better.”

Compared to gold, the dominant cryptocurrency is “thinner” and “more illiquid,” the investor said. Hence, there is larger upside potential, even if Bitcoin composes of a smaller percentage of a portfolio than gold.

Bitcoin also goes through a block reward halving every four years. Since the cryptocurrency has a fixed supply of 21 million, the rate at which BTC is mined daily reduces by 50% after each halving.

If the supply of Bitcoin declines but the demand for it increases, it could cause a supply squeeze in the long term, resulting in higher prices.

Inflation play

The price of Bitcoin is often inversely correlated with the U.S. dollar index. Like gold, when the dollar drops, BTC tends to increase.

The inverse correlation between Bitcoin and the DXY. Source: TradingView.com

Over the long term, investors including Tudor Jones consider Bitcoin as an ideal inflation play. Particularly after the Federal Reserve introduced the average 2% inflation target strategy, BTC has become more attractive to institutions hedging against inflation.

Portfolio diversification

Bitcoin does not have to be a singled-out investment. It has historically performed well as a portfolio asset, returning decent gains to a balanced stock-based portfolio. Last month, Dan Tapiero, the co-founder of 10T Holdings, wrote:

“Only 3% BTC position in past 5yrs would have increased performance of a 60/40 portfolio from 6.8% to 10.2%.”

Performance of a portfolio with Bitcoin. Source: Bloomberg, Yahoo Finance, Fidelity Digital Assets, Dan Tapiero

The combination of the abovementioned four factors are making Bitcoin an increasingly attractive portfolio asset for money managers.

Raoul Pal, the CEO of Real Vision Group, further noted that investors like Druckenmiller longing Bitcoin should not be understated in what may be a watershed moment. He said:

“The significance of the worlds greatest and most respected money manager Stan Druckenmiller saying just now that he is long bitcoin can not be overstated. That has removed every obstacle for any hedge fund or endowment to invest.”

Why does the legal action against BitMEX and hacking KuCoin have no effect on Bitcoin price?

Everyone knows the BitMEX situation after CTO Samuel Reed was arrested on October 1. The implications of this are enormous, however, the traders’ perspectives give us a different perspective.

OI on BitMEX decreased before the exchange was ‘touched’ by authorities. However, for now, the OI has decreased enough for its competitors to take its place. As of today, ByBit has surpassed BitMEX in OI.

Source: ByBt

Now, BitMEX has slipped to 3rd place with Binance still holding the top spot.

Perhaps, the BitMEX wallet has been hit the hardest due to the aforementioned problem. The wallet balance has decreased from about 200 thousand BTC to 100 thousand BTC.

Source: CoinMetrics

This drop comes even though BitMEX broke the “traditional once-a-day process of withdrawals” and did 6 times in 2 days to reassure traders that the funds were ‘SAFU’.

If the above two points did not trigger a exodus of traders, then perhaps, it could. One of the top traders on BitMEX “Mercury-Wood-Sprite” may have left the platform. This trader last updated on October 2, one day after the BitMEX CTO was arrested.

Source: ByBt

Will the BitMEX case combined with the KuCoin hack affect Bitcoin price?

While BitMEX has faced massive US legal action, KuCoin has suffered a substantial hack, all within a period of a few days – but why these events have not affected Bitcoin price in a more negative way?

Aleks Svetski, CEO of Bitcoin investment app Amber, said it involves a number of factors, including large players buying Bitcoin.

“The price of Bitcoin is a function of global demand for a tight supply, does not change and decreases according to schedule,” said Aleks Svetski, referring to halving the money supply of the asset and mining .

“As more people, especially large-scale institutions seek to buy back some coins, it not only creates the floor price, but also continues to increase the upward pressure, and ultimately, new players. These are all holding Bitcoin outside of exchanges, and therefore it is not available for sale on the market. ”

Over the course of 2020, several major players publicly announced massive Bitcoin purchases, including MicroStrategy, Paul Tudor Jones, Square and most recently Stone Ridge.

Contrary to the bullish price action, exchange KuCoin has been hit by a hack totaling more than $ 100 million. A few days later, the authorities of the US government took legal action against the BitMEX exchange, arresting one of its leaders.

However, neither of these events has caused Bitcoin to fall into a downtrend. Bitcoin did not drop significantly according to KuCoin news and only dropped a few hundred dollars when BitMEX news came out – a relatively small response to an important news event. Conversely, after the price action has been sideways for a number of days, the asset starts its journey up from the consolidation level.

“This is setting up for an unusual race and hacking the exchange, delaying stimulus or state policy won’t be able to hold it back.”