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Another Bitcoin Plunge, Will This One Stick?

Top to bottom, Bitcoin dropped 17% in an overnight rout. What's going on?
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The Start of Something Bitcoin

3 Reasons Behind the Crypto Crash 

Yahoo Finance provides 3 Reasons Behind the Crypto Crash 

The Fed

First weakness in plain vanilla equities, in part brought about by Federal Reserve taper talk, has investors spooked by speculative assets. “that the US Federal Reserve’s tapering could burst the Bitcoin and crypto bubble.” 

Navellier said the Fed’s tapering “should create a correction in risk assets, of which Bitcoin is a part.” He also warned that Bitcoin’s price could drop below $10,000.

Covid-19

The Omicron variant outbreak and the uncertainty surrounding its severity – and the efficacy of vaccines, which is still to be determined – also has investors running for the hills.

The Holidays 

Also, ‘tis the season. Many investors seeing the year winding down are looking to lock in gains and take money off the table. After all, even with recent decline, BTC is still up 66% year to date (Bitcoin started the year around $29,400)

Where do we go from here? Always hard to tell. For sure winter is coming. But is it crypto winter?

If I were to guess, I would say that the severity (or not) of Omicron could be a big determining factor.

Bitcoin Price Tumbles After Wall Street Selloff

The Wall Street Journal reports Bitcoin Price Tumbles After Wall Street Selloff

Bitcoin and other cryptocurrencies are notoriously volatile and often plunge for mysterious reasons. Disquiet in the stock market over the new Omicron variant of Covid-19 and the Federal Reserve’s response to inflation might have played a role.

Another possible factor accelerating the bitcoin selloff was the unwinding of heavily leveraged crypto derivatives, said Noelle Acheson, head of market insights at cryptolender Genesis Global Trading. She pointed to a large sell order that might have triggered margin calls and liquidations for investors.

Higher rates make holding speculative assets such as bitcoin less attractive. When the Federal Reserve raised rates in 2017 and 2018, bitcoin prices fell dramatically, referred to among crypto aficionados as a bitcoin winter. The coin took off again during the pandemic. Bitcoin hit an all-time high on Nov. 9 of $67,802.

Ranking the Reasons

I dismiss the Holidays and Covid-19. There is no pattern of Bitcoin selling off due to holidays. Nor did a Delta surge negatively affect Bitcoin or Ethereum. 

A margin call could have triggered a cascading decline. But is it another temporary crypto thing? 

The Fed is more plausible but it's really more of an excuse. All risk assets have been hit recently.

Omicron 

I agree with Ian on all points. 

Eventually Valuation Matters

This Tweet did not involve Bitcoin, but it easily applies.

Largest Intraday Swing in a Year

We had the Largest Intraday Market Swing in a Year, What's Going On?

Both the stock market and bond market had huge intraday swings. Let's investigate the likely cause as well as excuses.

What's Going On?

  1. Something is bothering Mr. Market. Omicron?
  2. Powell's recent Hawkishness?
  3. Maybe extreme valuations are finally catching up with reality.

I strongly vote for door number three.

Anyone with an ounce of sense understands the market is immensely overvalued but the Greater Fool's Game is enormous (thanks of course to the Fed and unwarranted stimulus).

Many Possibilities

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Trigger Discussion

The above Tweets were all related to the stock market but they all apply to Bitcoin as well.

Bitcoin Word of Warning 

Bitcoin vs Ethereum

Ether, the second-largest cryptocurrency, also tumbled by more than 15%, but recovered to a 1% decline late Saturday afternoon.

For whatever reason, or none at all, Ethereum has been stronger albeit more volatile than Bitcoin in 2021. 

If nothing else, it represents possible herding. 

Spotlight El Salvador

El Salvador adopted Bitcoin as its currency with much fanfare. 

Nayib Armando Bukele Ortez is El Slavador's president. He calls himself El Salvador's CEO on Twitter. 

Start of Something or So What?

I have no vested interest in cryptos. I watch them with amusement. 

The above Tweet pair was quite amusing. 

Amusement aside, eventually valuations matter and bubbles pop. 

Is that time now?

I don't know nor does anyone else. 

For anyone not on the crypto bandwagon "So what?" may seem like the appropriate response. 

That is of course a continued selloff is just on crypto assets not all bubble assets. 

Feeling lucky on either cryptos or the market? 

Bitcoin Addendum

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