The Current State of Crypto (October)
Sometimes investing in crypto can be exhausting. Feeling like a never-ending rollercoaster that has its extreme highs, but intense drops as well. It can be too much for some people to handle. This market definitely isn't for everyone. However, if you are able to ignore all of the negativity, fear, stress, and still maintain conviction. Then you will have a great chance to not only change your life but potentially become wealthy as well.
That's where are in the market right now. It's hard to believe but October is rapidly coming to an end, which means that it has almost been exactly a year since Bitcoin set its most recent all-time high price of $69k. Since then, the price has almost been on a constant downturn. Those mornings when you wake up to see that the price of BTC has actually gone up have become so rare that it makes you quickly do a double-take and re-check your phone. This downward movement accelerated even further during the summer when we had a cascade of companies becoming insolvent. I like to call this the summer of "self-inflicted wounds." Due to macro conditions, the crypto market was destined to drop just like nearly all other financial markets. However, the degeneracy and extreme use of leverage in the crypto markets multiplied this downward movement much further.
You live by the sword, and you also die by the sword. During the summer many of us probably grew to dislike the use of leverage in crypto. Wishing that the market would be responsible so that prices could normalize or recover. However, when leverage is working in our favor and making prices go parabolic. Those are times that we become fans of that leverage. It's always interesting how that works.
Impending Bitcoin Mining Company Liquidations?
During the summer we saw the likes of LUNA/UST go to nearly zero. We also saw companies or hedge funds such as 3AC, Celsius, Voyager, Vauld, and many more become insolvent. The question that we all need to be asking is if the domino effect of insolvencies is finally finished?
Unfortunately, I have been seeing many rumors that they might not be finished.
While I enjoy following all crypto news, the area that I have the most interest in is the Bitcoin sector. And there have been rumors that I have been hearing quite often recently that may or may not be true. These rumors are that some of the top Bitcoin mining companies are potentially facing insolvency. This has been due to a combination of prices falling during the summer and also macro/Inflation factors. As most of you know, during the last several months the cost of power has gone through the roof. Making it much more expensive to mine Bitcoin. Then add the fact that prices of Bitcoin have dropped significantly, that is writing the perfect recipe for disaster. There are also rumors that some of these companies got caught up in the summer of insolvencies and lost significant amounts of money as well.
What this all means is that these companies have been forced to sell much more Bitcoin than they normally would. This extreme sell pressure is perhaps the key factor that has been keeping Bitcoin's price down since the summer. If some of these companies would become insolvent they would be forced to liquidate all of their Bitcoin, which would push BTC's price lower. This is definitely a situation that we need to be keeping our eyes on.
Was the Ethereum Merge a Dud?
During the summer many of us were looking for something positive that would be the catalyst to finally help crypto prices recover. Many of us believed that the Ethereum merge would be that catalyst. Technically it did cause prices to increase leading up to the merge, but then macro events got in the way halting that momentum. And so it ended up being a buy the rumor, sell the news type of event.
However, the story is not finished on the Ethereum merge. It has been a month since the merge has taken place and at points, the inflation rate of ETH has dropped by 98%. That is a staggering amount.
While prices may be slumping at the moment. Soon the sleeping giant will be awoken.
In a similar fashion to how it can take several months for the Bitcoin halving supply shock to be felt. The same situation could play out with Ethereum. Also, the market turning bullish would help as well. There is a high chance that we will look back at this moment and have regrets about not buying ETH during this time. Wondering how we couldn't see how incredible of an opportunity it was.
Elon Musk
As much as I hate to admit it, Elon Musk has the power to move markets. I have a feeling that he is about to shake up everything very soon. With his Twitter buy finally becoming official, there is potential that he could integrate dogecoin or other crypto more closely into Twitter. While crypto tipping on Twitter was long ago implemented but is something that most people probably don't use. Elon has discussed using micro crypto payments to post on Twitter. His main aim is trying to eliminate the spam that we currently see on the platform. Something that I would actually be very happy to see. Predicting what Elon will do is a fool's game, but so is underestimating him. If he decides to use crypto, the whole market will benefit greatly.
Macro
Most of you probably already knew, but Macro is still the most important factor that will determine the short-term price movements in crypto. If the Dollar weakens and the US FED decides to change its stance on raising interest rates. These are two factors that could re-ignite the bull market. While the world is made up of many countries. The unfortunate fact is that financial markets are waiting and watching to see what the US will do. If they continue to raise rates significantly, then the market will see more pain. We very well could see the price of Bitcoin drop down to $13k-$15k. On the other hand, if the FED reverses its stance we could see Bitcoin quickly go up to $25k-$30k. Unfortunately, this is something that we can only wait and watch to see what happens.
These are just a few of the biggest things that are happening in crypto now that could greatly affect the market. There could be other unforeseen developments such as a company buying crypto for their balance sheet, a country adopting it, or even countries becoming insolvent could be something to keep an eye on as well. The key point is that no one really knows if the market will be bullish or bearish during the short-term. However, most of us would agree that the current prices that we are seeing are excellent buying opportunities. To be successful, we need to just keep our blinders on, stay focused and continue to dollar-cost-average. Who knows, it could be the smartest thing you ever do.
How about you? What do you think are the biggest topics or factors affecting the crypto market in the short term?
As always, thank you for reading!
