Good morning Banter,
Do you remember the Bitcoin Stock-2-Flow chart that came to fame during the heights of the bull run?
According to the model, the price of Bitcoin should be at a whopping $US125,000. Since we aren’t all driving Lambos, it’s safe to assume the price deviation has rendered the model invalid. At least for now. In reality, the model’s not broken until the next halving.
So you’re telling me there’s a chance!?
Bitcoin Rainbow Price Chart
A model still providing hope for Twitter influencers is the Bitcoin Rainbow Price Chart. It’s a logarithmic growth curve model that uses color bands to look fancy. JK. In actuality, the colors represent a price range denoting market conditions. According to the model, Bitcoin is highly undervalued. It also predicts a $1 million bitcoin by 2026! #fingerscrossed
The problems with models.
There’s a saying about models. “They work great until they don’t.”
In finance, mathematicians construct models using past information to predict future outcomes. However, what models fail to do, is predict unforeseen factors. In the case of many of Bitcoin’s models, it was the collapse of macroeconomics factors such as diminishing money supply led by quantitative tightening efforts of the Federal Reserve.
The good news, though, is that once the Fed tames inflation, many analysts see them returning to quantitative easing. It’s really what they do best! So maybe then, these models will return to fruition.
Market update 🌍
The broader crypto markets experienced one of the worst weeks on record last week, with Bitcoin (BTC) falling by -22.58% and quickly visiting a low of US$17.662k before rebounding to US$20.662k to close the week. The drop marked the first time BTC fell below its 2017 highs since breaking past the Dec 2020 levels. Volume skyrocketed during the drawdown after several confirmed liquidations. The US$20k level showcased promising resistance seen by the large wick on the weekly charts, but fear and capitulation continue to rule the market’s sentiment. Moreover, The relative strength indicator reached an oversold area for the first time since Dec 2018, adding the slightest promise of a turn-a-round.
Several analysts have turned their attention to a trendline (green) that began in Dec 2018 that if price reaches, can see BTC fall to lows nearing US$14k.
On a slightly promising note, Ethereum (ETH) outperformed Bitcoin (BTC) for the first time in five weeks after ETH rejected lows of US$879.00. Moreover, a long-wicked hammer candle, which typically signals a trend reversal, formed on the weekly chart near the 5.0% level. A relief rally in altcoins could be brewing if the price closes above the hammer candle this week. Although, macroeconomic factors are still rulers in the current markets.
|US markets close||Gain|
Notable Gainers (7d):
|Protocol (Coin)||Price ($)||Gain (%)|
|Basic Attention (BAT)||0.34||+12|
|Theta Network (THETA)||1.22||+11|
|Bitcoin Fear and Greed Index||9 Extreme Fear|
|“Crypto” Google Trends 90d||23|
|“Bitcoin” Google Trends 90d||69|
US Sports fans love crypto. A recent survey by Seton Hall discovers that 60% of avid US American sports fans bought or sold crypto/NFTs. The study additionally found that 24% of the US population participated in the crypto market. Furthermore, 42% of the participants were aged 18-34.
Celsius Recovery Plan. Simon Dixon, the co-founder of BnkToTheFuture, has written a proposal titled the “Celsius Recovery Plan.” Analysts predict the plan to be similar to Dixon’s strategy to save the crypto exchange Bitfinex during a liquidation crisis in 2016. Moreover, the Celsius community has taken matters into their own hands and began campaigning for a CEL token short squeeze. The Celsians Network went as far as to post instructions on Twitter.
- Immutable (IMX) launches a $500m development and venture fund.
- Magic Internet Money (MIM) team addresses insolvency claims.
- Lending platform Babel Finance pauses withdrawals.
At the protocol level ⛓
Solend Liquidation Crisis. A single position on Solend represents 95% of the protocol’s entire SOL position and 88% of USDC borrowings. If SOL price hits $22.30, the protocol would automatically liquidate 20% of the position. The Solend team fears the liquidation would prompt a flood into Solana decentralized exchanges (DEX) and could even bring the Solana blockchain to a halt. The team created a proposal to mitigate the risk by asking the community for “emergency powers” to manage the position. A Solend team member explains the situation in this Twitter thread.
Protocol level tidbits:
- A complete intro into Gitcoin Passport.
- Deep dive into Arweave (AR)
- How to DCA into liquidations with Liquity (LQTY).
- How to manage liquidity like a pro on Uniswap (UNI).
- Bancor (BNT) pauses impermanent loss protection.
The drama continues in the cryptosphere with liquidation problems coming in thick and fast. The contagion risk that began with the collapse of Terra is toppling the unsteady dominoes one by one.
💥 Terra Collapse 💥—> 3AC —> Celsius —-> Solend —–> ???
In truth, all the madness is a good thing. The market continues to flush out weak structures and bring attention back to quality. The following months will continually weed out the greedy, overleveraged, and poorly built. And if the market doesn’t complete the job, regulators likely will.
The challenge now comes in the form of finding quality. Some protocols like Bitcoin are easy to spot, but others are tucked away just waiting to be discovered!
Thanks for reading.
–Gabri (The Daily Candle)
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Good Morning crypto (issued by Crypto Banter) is a newsletter for entertainment purposes only.
All opinions expressed by the publisher, writers, and chartists should not be construed as financial advice and do not necessarily reflect the views of Crypto Banter. The publisher, writers, and chartists may hold positions in the tokens and assets discussed. Readers are encouraged to do their own research.