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The Crypto Crash Continues, Spotlight Focus on Ethereum and Altcoins

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25 comments on The Crypto Crash Continues, Spotlight Focus on Ethereum and Altcoins

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Ethereum weekly chart courtesy of StockCharts.Com, annotations by Mish

Technically Speaking

  • Ethereum is testing support at the 1700 level for the fifth time.
  • In bear markets, repeated tests of support are overwhelmingly likely to break 
  • The next support level is 1250, then 600, then the 300 area

Fundamentally, the major driver of cryptos is not energy, not the hash rate, not payments, not currency. 

The fundamental driver for the price of Bitcoin and all of the Altcoins is speculative sentiment. 

Major debates along those lines took place on Twitter yesterday. 

What Backs Cryptos?

Flight to Safety?

Sentiment Will Determine the Price

Hashing is irrelevant over the long haul. Sentiment will determine the price of Bitcoin. If the overall desirability and willingness to hold Bitcoin drops, so will the price. That is a statement of fact.

Ethereum Hash Rate

Please compare the hash rate of Ethereum to the price. Let’s do the same for Bitcoin.

The hash rate has been meaningless for six months. The desire to hold Bitcoin has gone the other way. 

Sentiment Crashing Across the Board

 That could be just day to day randomness. But it isn’t.

Basket of Top Cryptos

You can track over 100 cryptos at CoinMarketCap.Com.

I excluded stable coins because they are supposed to be stable, but TerraUSD associated with LUNA is now trading around 2 cents, down 98%. 

If diversification was supposed to help, it didn’t. 

Please note Dogecoin was started as a joke and pumped up spectacularly by Elon Musk. 

How Many Cryptocurrencies Are There?

There are over 18,000 cryptocurrencies in existence as of March 2022. 

The vast majority of them are headed to zero if indeed they are not already at zero. 

Looking Back

Looking back, the early Bitcoin and Ethereum investors are still laughing about this decline as if it is nothing. 

One could have bought Bitcoin under $1. Even if one bought at $1,000 they are up about 28 times on their money.

For those who got in this year, the declines are very real.

I have certainly been wrong about how much these have risen. Then again, I underestimate nearly every bubble.

The prophets look brilliant on the way up. Every decade has a new set of them. Cathie Wood and her ARK fund is one of the new cheerleaders.

Here’s an amusing set.

https://twitter.com/novogratz/status/1478535972560195585

Reflections on Prophets Touting Baskets 

Provable Network Effects

“I just took a small weighting, like 20% of my portfolio, which is now 100% crypto… So I bought a basket…” – @RaoulGMI #RugPal’s Basket: Solana, Avalanche, Terra Luna. Those ones have provable network effects.“

A small basket became a 100% basket. 

Hellen’s Financial Advice

Do Kwon is the founder of LUNA and alleged “Master Stablecoin”. He has over 1,000,000 followers on Twitter. 

LUNA is down 100% and his stablecoin 98%.

I would appreciate the advice from Hellen more if it came out before LUNA went to zero. 

However, Hellen’s advice is still pertinent. Do Kwon just launched LUNA2!

Seven Percent Free Money on LUNA2!

Staking trapped people in LUNA unable to get there money out for 21 days. LUNA went to zero in a week. They were paid 20% for putting up LUNA. They got back their LUNA plus 20% more LUNA. But 0 + 0 = 0.  

Best Luna Strategies

Here’s an amusing flashback on how to get 36% staking LUNA.

LUNA2 Update!

What a Hoot!

Where to Now for Cryptos?

The question, as always, is not where we’ve been but where we are headed. 

Every time I look at lists like the one I posted, I ask myself the same question: Why are they worth anything at all?

But they will always be worth what someone is willing to pay for them. 

Bitcoin advocates believe there is only one true coin, Bitcoin. They label the rest “sh*tcoins”. 

But ultimately, the price of all the coins will not be determined by hashrate, alleged scarcity, or the latest favorite hype (alleged ease at moving alleged money). 

In El Salvador, Bitcoin is officially legal tender. Hooray! But who uses it for that? Almost no one and I am confident almost no one ever will, globally, as any meaningful percentage of transactions.

Even if 100% of the transactions in El Salvador were in Bitcoin, the price of Bitcoin will not be set in El Salvador. 

Rather, the price of Bitcoin will be the price people are willing to pay globally, in the midst of a global liquidity crunch.

End of the 40-Year Bull in Debt and a “Global Depression” Threat

And speaking of a global liquidity crunch, please consider End of the 40-Year Bull in Debt and a “Global Depression” Threat

Also see Where is the Price of Bitcoin Headed and What’s the Fundamental Driver?

This post originated at MishTalk.Com.

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Mike Shedlock

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25 Comments
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Tberend
Tberend
4 years ago
Bloomberg did this great article where they sent a journalist down to El Salvador to try and use Bitcoin to pay for things.
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SAKMAN1
SAKMAN1
4 years ago
Reply to  Tberend

Thanks for that article. The situation for all these coins will be both a comedy and a tragedy.

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BDR45
BDR45
4 years ago
The contrarian in me says it may be time to buy cryptocurrencies. The conservative in me says buy more OXY and gold coins.
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Casual_Observer2020
Casual_Observer2020
4 years ago
If the government ever decided to crackdown on crypto the way they did the similar systems of online trading sites where human trafficking, money laundering and drugs and other illicit and illegal activity occurred, then crypto would be out of commission pretty quickly.
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Maximus_Minimus
Maximus_Minimus
4 years ago
At least one idea has been burried for good: cryptos are not an alternative to fiat, but a derivative of it. A speculative bet at best, criminal and money laundering tool at worst.
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PapaDave
PapaDave
4 years ago
What I find interesting is the certainty of opinion presented here, either for or against bitcoin or any other cryptocurrency. Darned if I know how the future will unfold in crypto, but it sure has garnered a lot of attention from some folks with much deeper pockets than mine. Who am I to question what they do with their money?
As I frequently say, it takes a lot of different opinions in order to make a market. For every seller, there must be a buyer. You can go short or long. You can ignore it or jump in with both feet.
I mostly have ignored it because I see better opportunities (that I can actually understand) elsewhere.
But, I imagine that there are a few here who have done very well in crypto.
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MPO45
MPO45
4 years ago
Reply to  PapaDave
The great irony here is that bitcoin, even with a huge drop, is still worth more than gold. Someone that kept buying gold over bitcoin must feel like a donkey given the returns bitcoin has had but the game isn’t over yet. It will be interesting to see what happens over the next few years but that’s what makes a market – speculative sentiment with buyers and sellers.
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PapaDave
PapaDave
4 years ago
Reply to  MPO45
It all depends on your timing. If you bought Bitcoin at $1, or $1000, or $10000, you probably feel pretty good. But if you bought at $60000, not so good.
As far as gold goes, I agree with Dalio; its a dead asset. Or at least it has been for me. I think of all the effort that goes into producing gold, only to end up putting it into vaults so it can gather dust. I have never understood that. Of course, I can be completely wrong about gold and it could surge to $5000 this year. Who knows?
I prefer to focus on things I can understand, such as oil, which is a real world useful item. Inventories have been falling for two years and are still falling. I can understand that. Oil companies have been restricting capex spending and continue to proclaim they have little intention of expanding that spending anytime soon. Which means restricted supply going forward while demand keeps growing. These are things even a simpleton like me can understand. I like to invest in what I can understand.
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Scooot
Scooot
4 years ago
Reply to  PapaDave
“As far as gold goes, I agree with Dalio; its a dead asset.”
Inert is a better description. For thousands of years Gold has been the choice to store wealth if you didn’t want to spend, lend, or invest it. In its inert form there is no yield but it is relatively safe.
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PapaDave
PapaDave
4 years ago
Reply to  Scooot
Inert. Dead. Sits and gathers dust. Produces nothing. Pays no dividend. Can’t eat it. Can’t burn it for heat.
Not for me then.
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Lisa_Hooker
Lisa_Hooker
4 years ago
Reply to  PapaDave
When we mine gold we refine and store it, the amount available goes up.
When we mine oil we destroy it, end of story.
Ok, we do try to do something about plastics; but it’s not working out well.
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TheCaptain
TheCaptain
4 years ago
Crypto is “backed” by the false notion that value = scarcity when in fact value only derives from scarcity. Thus it is a half truth which is a staple of every con game. Value derives from useful things that are also scarce. But it is also a truth that risk detracts from value. So let’s add it up: bitcoin is reasonably scarce but it has no intrinsic value except for the ability to move wealth across borders without government involvement. That is in fact some utility. But it is more than offset by the risk that the US government will come out with fedcoin and, with the stroke of a pen as China did, make bitcoin illegal to make use possess or sell. And then, in a flash of understanding and poverty, the suckers figure out what Bitcoin and cryptos are actually worth which is zero. That is not to say that bitcoin cannot go to hundreds of thousands of dollars first. But the minute the US government feels threatened by this, it’s game over.
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MPO45
MPO45
4 years ago
Reply to  TheCaptain
Last time I checked, it was illegal to walk into a school with a loaded gun and kill a bunch of kids but that hasn’t stopped it from happening over and over again. Yes, governments can outlaw digital coins any day of the week but how exactly will that be enforced? Shut down the internet? Get rid of encryption and vpns?
I can name 1000 things that are illegal but happen every day: downloading pirated movies and tv, human slavery, transport of all sorts of illegal “medicines” and on and on.
Where there is a market there will be a way.
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SAKMAN1
SAKMAN1
4 years ago
Reply to  MPO45
Your logic is mezzzzmerizing. Bitcoiners wheeling and dealing in the dark corners of the internet. . . the market will find a way.
Once bitcoin crashes a bit more the emperor will have no clothes, and that will be the end of it. You will scurry under the rug with all the other cockroaches, back into the darkness of mediocrity. . .and then the idea that was crazy. . . That bitcoin was always a fraud will be known, and quite obvious, to everyone.
Sure, some will have made money on it, but guess what? They wont broadcast it. Like all the real estate agents in 2011 that live in their big beautiful houses that “never sold a house that was defaulted on”. They will have to pretend like they have a clear concience. They are just gamblers, but they won so they are geniuses in their own mind. Only time will tell, they are predators or gamblers in my book.
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Lisa_Hooker
Lisa_Hooker
4 years ago
Reply to  SAKMAN1
I find a distinction between gambler and predator impossible.
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MPO45
MPO45
4 years ago
“IBM had developed a paper plan for such a machine and took this paper plan across the country to some 20 concerns that we thought could use such a machine. I would like to tell you that the machine rents for between $12,000 and $18,000 a month, so it was not the type of thing that could be sold from place to place. But, as a result of our trip, on which we expected to get orders for five machines, we came home with orders for 18.” -CEO of IBM 1953.
“640k of RAM will be enough for everyone.” Bill Gates 1981.
“Digital currencies are useless.” -People everywhere with no vision.
When it comes to digital currencies, even though there are 18,000+ variants, we are in equivalent of 1953 with many naysayers and people with little or no vision criticizing them. Rest assured most of these people will be long dead after the world moves to 100% digital transactions.
The question isn’t what good is bitcoin today but what will it be in 2080 or better yet, how will transactions be transformed over the next few decades?
Merchants don’t like paying Amex, Visa, Mastercard 3%+ in fees nor do most people like banking fees. Digital currencies and blockchain have the potential to eliminate the old paradigm and it will.
Let the free market think, act and transform.
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Carl_R
Carl_R
4 years ago
Reply to  MPO45
Digital currencies do have a need, and a future. The question is, will any of the current ones continue to exist? My take is that no currency which uses 0.55% of the worlds energy has a future, and will die. When that day becomes foreseeable, what will happen to the price?
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MPO45
MPO45
4 years ago
Reply to  Carl_R
By that standard, gold should never have been a currency. Do you know how much energy it takes to mine gold, refine it, and then distribute or store it? The same for silver or other precious metals that have been used as currency?
The energy issue will sort itself out, the nearby star we call the sun has powered earth and trillions of living creatures for billions of years. It is the myopic view that only oil & gas can produce energy that is the problem.
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SAKMAN1
SAKMAN1
4 years ago
Reply to  MPO45
99% of every dollar I personally transact is already done digitally. You spout endless nonsense.
You do what every charlatan does. You mix four truths with a lie, and when anyone disagrees you claim they are fighting with the truths, when their objection is against the lie.
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PapaDave
PapaDave
4 years ago
I bought a little bitcoin when it dropped below 30k last week. Small potatoes. Just for a trade. Not working out so far.
I would do the same with gold if it dips below $1800.
Good thing my core position is oil and gas, up over 50% ytd. Thanks for the blog Mish. I learn a lot here.
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MPO45
MPO45
4 years ago
Reply to  PapaDave
You should have bought GBTC but only if it dropped below $15, I like the $12-$14 range personally. It never made it that far yet but keeping an eye out.
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PapaDave
PapaDave
4 years ago
Reply to  MPO45
Good to know. Thanks.
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TheWindowCleaner
TheWindowCleaner
4 years ago
Bitcoin etc. among other things will never work because it lacks/objects to the one thing that keeps a fiat currency workable and that is government. HAHAHA terminally orthodox libertarians. Get real and get practical. Better to force government to create half of our money as a gracious and benficent gift that resolves inflation, chronic individual and systemic monetary scarcity and all of the social and psychological cynicism and hopelessness that we’ve all become acculturated to since forever…with a 50% Discount/Rebate policy at retail sale. Anybody that doesn’t “do the math” on that policy and merely scoffs is a stupid, especially if they are a libertarian who says we need deflation to solve our economic problems…because that’s exactly what that single policy effectively does. Nuf said.
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SAKMAN1
SAKMAN1
4 years ago
I read the first twitter feed regarding fiat being backed by violence. Its true, and violence is what makes paper money (or electronic) money useful. A government forces (sometimes violently) the population to use the currency.
The bitcoiners are using bad logic when they say a bitcoin denier is suporting the existing political framework. A bitcoin denier is denying that a peaceful regime can exist in a world at war with guns and knives everywhere. They know violence supports fiat, but no reasonable alternative, certainly not a magic electronic token. . . Valued in the currencies of these violent players. Bitcoin has no value to itself. . . It is only valued in fiat.
Bitcoiners have put the cart before the horse. . . and it will go nowhere.
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RonJ
RonJ
4 years ago
“Then again, I underestimate nearly every bubble.”
But who would have expected Greenspan to support, fog a mirror, buy a house?
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