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As Bitcoin Breaks Support, Bulls and Bears Pretend to Know the Unknowable

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40 comments on As Bitcoin Breaks Support, Bulls and Bears Pretend to Know the Unknowable

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Bitcoin Breaks Support 

Bitcoin broke technical support at the $35,000 level, but that support was very weak with only one bounce off that level.

Words of Warnings

Technically speaking, the $32,000 level looks far more promising for a bounce. 

But this is a bear market now, not just in Bitcoin but in all risk assets. Thus, there is no reason, fundamental or technical, for a bounce at the $32,000 level to hold. 

And if it doesn’t, the next support is at the $19,000 level.

Margin Calls 

The $19,000 level is an interesting level because margin calls are in play. 

MSTR Takes Out Loan to Buy Bitcoin

MSTR MicroStrategy Weekly Chart 

MSTR chart courtesy of StockCharts.Com annotations by Mish

Casino Is Open

The casino is clearly open folks, and MicroStrategy has morphed into a leveraged speculative play on Bitcoin.

A margin call awaits at $21,000 with support at $19,000.

Place Your Bets! 

https://twitter.com/tim_chal/status/1521929167486345218

Bitcoin Is Going Up Forever

https://twitter.com/realJeanRausis/status/1523391167244558337https://twitter.com/realJeanRausis/status/1523393357623398401https://twitter.com/realJeanRausis/status/1523398975260610560

Will the $10,000 Level Hold?

Michael Saylor 

Image from Michael Saylor’s profile 

That’s the man who leveraged MSTR to the hilt.

Contradictory Ideas

  • Bitcoin is going up forever
  • Bitcoin will hit $10,000 this year or CryptoWhale will give $1,000 to anyone who reTweets his Tweet.

Got Popcorn?

Amusingly, they both can easily be wrong in a major way. 

That aside, let me chime in on the margin call idea, starting with a look at MSTR’s balance Sheet.

MicroStrategy Balance Sheet March 31, 2022

MicroStrategy 10Q Balance Sheet

Potential Cascade

The bulls suggest MSTR can pledge more Bitcoin to meet margin calls as only a portion is leveraged. 

Sorry bulls, this idea does not work well, and in fact will lead to a massive cascade if Saylor tries. 

Any pledge of Bitcoin to meet margin calls will be immediately sold by the creditors into a plunging market. 

Saylor needs cash, not a Bitcoin or other asset pledge, to meet a margin call.  To that end, Saylor has as of March 31, $92,677,000 cash on hand. That’s nowhere near sufficient.

If Bitcoin approaches the margin level, traders will step back and/or hedge funds will short futures. 

The possibility of a very steep plunge is real, arguably self-fulfilling. But hey, don’t worry, because we all know “Bitcoin is going up forever.”

What a hoot!

An Official Denial Suggests Stagflation is Now the Base Case for Europe

Meanwhile An Official Denial Suggests Stagflation is Now the Base Case for Europe

What About the US?

Stagflation is the base case for the US too.

For discussion, Check Out Delusional Fed President Neel Kashkari, Even Worse Than Powell

So, it’s not just Europe. Rather Europe is likely to be first.

There is no reason to believe a speculative risk asset like Bitcoin will do well in the global recession that’s on the horizon, if not here already.

This post originated at MishTalk.Com.

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Mike Shedlock

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40 Comments
Newest
Oldest Most Voted
Rene_FPV
Rene_FPV
3 years ago
@Mish any update on the margin call? BTC is under $20k as I write this.
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Dr. Odyssey
Dr. Odyssey
4 years ago
So $19,000 it is?
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Carl_R
Carl_R
4 years ago
Reply to  Dr. Odyssey
I don’t know what the right answer is, but I’m pretty sure $19,000 can not possibly be the right answer. If it goes under $20,000, the margin call on MSTR will push it much lower, perhaps to $10k. So, in my opinion Bitcoin might bounce here, or at some lower price, like $25k, but $19k will not be the answer.
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RonJ
RonJ
4 years ago
The Non Fungible Token market seems to not be doing so well, lately.
Anyone want to buy a vowel on Wheel of Fortune?
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KidHorn
KidHorn
4 years ago
You don’t get it. I can’t explain why it’s valuable. You either get it or you don’t.
The same nonsense was said about the internet in early 2000. Housing in 2007. etc…
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Kick'n
Kick'n
4 years ago
Reply to  KidHorn
If Bitcoin is a commodity then it’s value should increase with things like hyperinflation and financial instability like gold, correct? Are its’ price swings in line with gold or other commodities? Can I take delivery of it if my internet gets cut off? A friend of mine who read this blog way back in the early 2000’s told me he was selling all his stocks and buying real pieces of gold, not certificates. I asked who are you going to sell them to? He said, “don’t worry, I’ll find someone to buy it if I need!”. That was when gold was $300/oz. He increased his investment 5 fold. Are you confident you can “sell” or use this bitcoin when you need to?
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Lisa_Hooker
Lisa_Hooker
4 years ago
Reply to  Kick’n
Bitcoin is based on a time-proven fact: “There’s a sucker born every minute.” This continues to be repeatedly verified by many successful entrepreneurs.
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Lisa_Hooker
Lisa_Hooker
4 years ago
Reply to  KidHorn
Yeah, what about them Beanie Babies!!! Have you sold your pet rock yet? Or did you put it up for adoption? Should I sell my shares in Supreme Buggy Whip, Mfg. or hold on for a recovery? Hope springs forth in the minds of True Believers!
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Carl_R
Carl_R
4 years ago
Reply to  Lisa_Hooker
Beanie babies? Pet Rocks? I never got them, and no one could explain to me why they were valuable. I guess you either got them, or you didn’t.
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BDR45
BDR45
4 years ago
Egomaniacs who have hitched their wagon to bitcoin. Faith has taken the place of reason. I don’t know where bitcoin is going either, but I feel a lot safer with OXY in my account.
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Six000mileyear
Six000mileyear
4 years ago
The entire financial system is extremely leveraged. Margin calls in one asset have a domino effect on other asset classes. I think margin calls in global equity markets are being met in part with sales of bitcoin positions.
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FromBrussels
FromBrussels
4 years ago
Faites vos jeux mesdames et messieurs……Rien ne va plus…..bonne chance …. Casino indeed ! Btw, have been wondering these days where Ed the dentist is….he used to write make sense comments on economic issues. I did not always agree with him on certain topics, but that s ok, Mish Talk would be a boring echo chamber if we all ‘love’ each other, at least he didn t call me names, like some do when running out of arguments, and neither did I, respect deserves respect….. Have a nice day , mesdames et messieurs ! Jeez, I must be kind of buoyed by that Putin speech….Right Doug ?
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Sunriver
Sunriver
4 years ago
Pepsi or Coke?
This whole market setup reminds me of that commercial from the late 70’s.
Does Pepsi or Coke taste better than bitcoin?
They both do.
Buy tangible dividend stocks if one even wants a taste of this market.
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PapaDave
PapaDave
4 years ago
Not much of a fan of crypto or gold. Though I might buy either for a trade if both keep dropping. I prefer solid companies that pay good dividends. Like most oil companies these days.
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Captain Ahab
Captain Ahab
4 years ago
The value of Bitcoin is entirely a function of peoples’ (Believers) perceptions that Bitcoin has real and actual economic value, when it exists only as imaginary zeroes and ones in the ‘ether’, and can be outdated with the next innovation, or made illegal whenever the government chooses. With such provisions, its true economic value is ZERO, about the same as a 2003 copy of MIcrosoft Word.
Buy tulips!
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SAKMAN1
SAKMAN1
4 years ago
Reply to  Captain Ahab
Call me when a government requires someone to pay taxes in bitcoin. Then it will have value. Until then. . . I’m just waiting, and the longer I wait the more delicious it is going to be when all of these fools learn what money actually is.
The problem is the high priests of bitcoin know, they must know. They were here to get rich (which they have already done) and then leave others holding the bag. In the mean time they will say whatever suits their sociopathic goals.
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Lisa_Hooker
Lisa_Hooker
4 years ago
Reply to  Captain Ahab
I value a legal copy of Word 2003 more than a “subscription” to the current Micro$oft Office.
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MPO45
MPO45
4 years ago
Bitcoin has well outperformed gold. Bitcoin can drop to $3000 and it’s still better than gold. Not bad for floating electrons.
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Esclaro
Esclaro
4 years ago
Reply to  MPO45
Gold is getting hammered by the rising dollar. Sinking like a rock!!
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Mish
Mish
4 years ago
Reply to  Esclaro

“Gold is getting hammered by the rising dollar. Sinking like a rock!!”Ridiculous comment of the day and I can prove it

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Esclaro
Esclaro
4 years ago
Reply to  Mish
Down $20 today. Maybe the rock will fare better than bitcoin lol
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ohno
ohno
4 years ago
“Bitcoin will go up forever”
Yet Bitcoin was around 60k around a year ago. If that’s ‘going up forever’ things sure have changed since I was a kid.
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shamrock
shamrock
4 years ago
I wondered what the interest rate is on that loan. With $2.2b from that loan? and quarterly interest expense of $11m I’m coming up with about 1.8% interest.
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Naphtali
Naphtali
4 years ago
Folderol
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shamrock
shamrock
4 years ago
It’s beyond fiction, MSTR restating like 5 years of earnings was the pin that popped the dot com bubble, and here they are again about to pop the bitcoin bubble?
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whirlaway
whirlaway
4 years ago
Reply to  shamrock
The fact that MSTR (and ridiculous shills like Cramer) are still around and were never put to pasture, is proof enough that none of the bear markets in the last 20 years were allowed to finish their work.
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Zardoz
Zardoz
4 years ago
I bought a few thousand Algorand and a game character nft for gits and shiggles. Valuation swings wildly in a matter of hours. Where she stops, nobody knows!
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Captain Ahab
Captain Ahab
4 years ago
Reply to  Zardoz
Um, it stops at zero.
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Zardoz
Zardoz
4 years ago
Reply to  Captain Ahab
You think you know a lot more than you actually know. Best not to broadcast it.
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Captain Ahab
Captain Ahab
4 years ago
Reply to  Zardoz
I love criticism. Why don’t you give examples to back up your observation?
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Lisa_Hooker
Lisa_Hooker
4 years ago
Reply to  Zardoz
I will be auctioning off a number of my opinions next week.
I will accept Bitcoin and Ether.
Perhaps a once in a lifetime investment opportunity.
Get in on the ground floor before you are priced out.
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goldguy
goldguy
4 years ago
Another great post Mish. Imo people are crazy to buy something the government can cancel in a heartbeat, something that competes with the dollar…come on people, the government will win that fight.
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MPO45
MPO45
4 years ago
Reply to  goldguy
You mean like gold, “goldguy”?
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Captain Ahab
Captain Ahab
4 years ago
Reply to  MPO45
Because gold had real value, which is why central banks are acquiring it now.
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MPO45
MPO45
4 years ago
Reply to  Captain Ahab
Gold is an element of the periodic table. There are many more elements on same table. The “value” of each is merely attributed to the perception of what people think they are worth. Not sure what you mean by “real value” since it’s merely a cluster of protons and neutrons surrounded by floating electrons.
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goldguy
goldguy
4 years ago
Reply to  MPO45
Cut your medication in half…
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prumbly
prumbly
4 years ago
Reply to  MPO45
Your argument appears to be that because some people think that Bitcoin is valuable, then it is valuable. But what if tomorrow no one thinks it has value? This would seem to me to be a very likely scenario as there is no compelling reason why it should be considered valuable. It has no features that one would associate with something of value, other than rarity. Rarity alone is not a great reason to want something. The hairs on my head are quite rare but demand for them is low. Bitcoin is only better than cash if you’re a money launderer or a tax evader or some other type of criminal, and this of course will be its downfall because governments will ban it (as they are).
No one has suddenly decided that gold is valueless over the last several thousand years. There’s a very good chance that tomorrow people will still assign it great value. Gold is beautiful, tangible, difficult to steal, rare, easy to store and has a long history of desirability.
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Captain Ahab
Captain Ahab
4 years ago
Reply to  MPO45
You are entirely correct. All ‘value’ is dependent on perceptions related to peoples’ experiences, and their preexisting beliefs/value systems, all embedded in conscious thought and memory. ‘Value in use’ (functional use of gold for electronics, for example) is the same, though often harder for people to understand.
That said, gold has a long history and application in many cultures. Compare to Bitcoin–short history, limited social exposure, singular use, lacking substance, entirely subject to human innovation… Need I go on?
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Dr. Odyssey
Dr. Odyssey
4 years ago
Reply to  MPO45
My observation is that gold is within $200 dollars of a 2,600 year high.
Global central banks hold over 30,000 tons of gold on their balance sheets.
Does anyone know how much bitcoin global central banks hold on their balance sheets?
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Lisa_Hooker
Lisa_Hooker
4 years ago
Reply to  goldguy
Come to think of it the US government can cancel the dollar in a heartbeat.
Just ask President Putin.
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