This is a long story. Here is what we know that happened to Terra (UST, stablecoin) and Luna (altcoin that stakes on UST). Blackrock and Citadel borrowed 100,000 Bitcoin from Gemini. They swapped 25,000 Bitcoin into Terra (UST). This was done to prepare for a planned attack.
At the right time, Blackrock called Do Kwon of Terra Foundation. They wanted to sell a lot of Bitcoin for UST. So as not to move the market, since this was a 25,000 Bitcoin swap, they told Do Kwon they would sell him the Bitcoin at a discount for UST. Do Kwon took the bait, and bought their Bitcoin, cheap. However, the vast amount of UST he had to give them in return left Terra short liquidity, for their UST stablecoin. Then, Blackrock and Citadel dumped all the Bitcoin and UST causing massive slippage and kicking off a mass sell off! Blackrock knew Anchor was a ponzi scheme (they offer 20% staking APY), and they hold massive amounts of Luna. The mass sell off would trigger more withdrawals than Anchor could repay. The subsequent forced withdrawals, triggered a mass selloff in Luna. It went from $120 per coin to $1 per coin in one day this week. This Luna selloff hurt the $1 peg from the stablecoin, UST (Terra).
Now, Blackrock and Citadel can buy back their Bitcoin and UST back much cheaper and pocket the difference without losing their Bitcoin holdings.
Our point is, this was a forced selloff, it was pure manipulation. Fractional reserves amongst stablecoins, is a problem that is mostly caused by not having the money in reserves, to repay if there is a run on a particular stablecoin. Celcius, Blockfi, and USDT (Tether) are also at risk. So what is the lesson here?
Don’t allow companies like Blockfi and Celcius, to rehypothecate your Bitcoin. They give you a return, buy they get your Bitcoin. Hold it offline in cold storage with multisig protection so that you always have the physical Bitcoin. You can do this with Ethereum as well. Also, stay away from leveraged trading, and know the risk in ALL of the altcoins, including Ethereum. They are centralized, and don’t have the proof of work stability, and protection of the blockchain, as Bitcoin does.
What is the upside to all of this, if there is any? First, we believe there will be more pain first. Bitcoin could come closer than we would like to $20K or so. However, as this black swan situation calms down. $Trillions in institutional investment is lining up now to buy Bitcoin. Remember how we said a while back there was 1709 Bitcoin per day of demand, yet only 900 Bitcoin per day of production. That 1709 could go up and eventually, at some point in the future. It could spark a supply shock. These supply shocks happen at the end of every Bitcoin bull market. We are still in a Bitcoin bull market now. This bull market goes back to 2009. You have to zoom out, and look at the big picture. It is there.
This next chart is from last November, ah, good times! However, these are one year candles. Bitcoin never breaks above or below this trend line. Since January 2011. So, where is the lower trendline now? As near as we can tell for May 2022, $29,000. As long as Bitcion closes the year out above this level. It is still in the channel. By year end this channel is well over $30,000. Not an impressive price. We have to understand that historically, Bitcoin has had 3 bull market years, followed by a bear market year. 2022 is beginning to look bear market now. There is still hope for late in the year. Just don’t expect miracles over the next 3 months. Here is the 11 year channel Bitcoin has been in:
This final chart shows us the trajectory Bitcoin has been on. This year has been tough. It would not be surprising though, to see a run up late in the year, once all of this manipulation, and global macro enduced tightening slows down. We can see the supply shock building despite the lowsy price action. Stay patient! Here is the long range chart of Bitcoin:
This chart above is also from late 2021, during happier times. The point is, Bitcoin’s chart has NEVER been bearish, zoomed out this far. If your time horizon in Bitcoin is long enough, and you can time the dips when you buy. You win! We are not financial advisors and this is not financial advise. Bitcoin may actually get to $20K or even $15K this year. It’s what comes after that you will want to stick around for. Embrace the volatility. It is fun! Laugh about it. Yes we lost money on paper. We’re selling nothing to Blackrock! If they are buying Bitcoin up at these prices and below, we should all be buying it up. These are massive bargain prices. How long can Bitcoin stay this low? Not too long. I give it 90 days! Maybe less!
Neutral ATM is here to get everyone off of zero Bitcoin.