Congratulations, you’ve just survived “the largest capitulation event in Bitcoin’s history”. Since it peaked above A$76K (US$59K) on May 9, Bitcoin has taken the elevator down to around A$41K (US$32K) and has since recovered to around A$50,500 (US$38K). It’s still down 10.7% since last Tuesday and 22.7% for the month – although zooming out it’s almost 300% up on a year ago. Altcoins were hit harder and are recovering faster with many up 20-30% in the past day. Ethereum finishes the week 20.1% down at the time of writing, XRP (-34.1%), Bitcoin Cash (-29.7%), Litecoin (-35%), Chainlink (-29.6%), Stellar (-32.7%), Aave (-33.2%), Synthetix (-31.9%). The Bitcoin Hash Rate has fallen from a 7-day average of 180TH/s on May 14 to 145 TH/s currently. The Crypto Fear and Greed Index is at 10, the lowest level since April 2020 — but as analyst Mati Greenspan points out it may: “Just happen to have been the greatest buying opportunity in history”.
Largest weekly candle ever
According to Glassnode the magnitude of this week’s losses was epic and saw the largest weekly candle in history of US$28,136. The USD value of losses realised by spent coins hit a new ATH of US$4.53B on May 19 (worse than Black Thursday). The total weekly onchain realised loss was US$14.2B and around 24% of unique on-chain entities are now underwater. Glassnode notes that the spending of 1-3 year old coins actually declined as a proportion of total activity this week, meaning old hands have learnt not to panic sell events like this.
Elon: the problem and the solution
Many things contributed to this crash including Tether and regulatory FUD but overall the selloff has been defined by Bitcoin’s power consumption. It’s been a ticking time bomb since Hal Finney’s day and it exploded over the past few weeks, first with Musk stopping BTC payments for Tesla on environmental grounds, then with China announcing a ban on Bitcoin mining to help with its carbon emissions problem. Ethereum co-founder Vitalik Buterin said this week Bitcoin risked being “left behind” if it didn’t embrace technological change. This morning it emerged that (battery company owner) Musk and MicroStrategy’s Michael Saylor had met with North American miners to form the Bitcoin Mining Council. It will publish renewable energy figures and push for miners worldwide to embrace renewables. The Bitcoin price surged as a result.
China bans Bitcoin again
China banned Bitcoin in 2013, once more in 2017 and the country banned it again this week. Despite this lots of Chinese people still trade on exchanges. History suggests the government is aware it’s difficult to stop individuals trading in crypto, so it focuses its regulatory efforts on the big players. It seems a similar story with this week’s ban on Bitcoin mining. BTC.TOP founder Jiang Zhuoer says the mining ban is focused on shutting down large data centres operated by financial capital (these will migrate overseas) but will enable small and medium sized miners to continue operations. “The whole Bitcoin network will be as resilient as always,” he said. “The worst scenario would be: large datacenters are shut down and we go back to old days in 2014-15.”
Australian regulations to foster innovation
A Parliamentary inquiry will look at how to regulate cryptocurrencies to protect consumers and encourage financial innovation. The Senate’s select committee on Australia as a technology and financial centre, chaired by NSW Liberal Senator Andrew Bragg, will assess “options for the development of a comprehensive regulatory framework for cryptocurrency and digital assets”.
Goldman Sachs looks towards the flippening
Global investment bank Goldman Sachs has done a complete 180 on its position last year that Bitcoin is not an asset class, with its new 40 page report called “Crypto: A New Asset Class”. It argues Ether is set to take over from Bitcoin because its tech is advancing much more rapidly, most payments, DeFi and NFT projects are building on top of it, and scaling is happening this year. The report foresees “a high likelihood that Bitcoin will eventually lose its crown as the dominant digital store of value to another cryptocurrency with greater practical use and technological agility. Ether looks like the most likely candidate today.”
Bits and pieces
Billionaire Blackrock hedge fund founder Ray Dalio revealed at Consensus his Bitcoin journey of discovery is complete and he’s finally bought some. US $8.7B company Globant has just bought half a million in Bitcoin. The Wall Street Journal today ran a big piece on Ethereum-based decentralised exchange Uniswap, saying that it’s a growing threat to Coinbase. Ethereum founder Vitalik Buterin thinks crypto markets are in a bubble, but he doesn’t know if it’s just popped or if it will pop months from now.
Bull run over/continues
Nobody can say for certain if this crash heralds the beginning of a bear market but various on-chain indicators (MVRV-Z score, HODL waves, Puell Multiple etc) suggest otherwise. Analyst PlanB says his two Stock to Flow models put us about halfway through the bullrun and that his boutique on-chain indicators show a “shortage of coins” is building up. “Pretty sure that we haven’t seen the top yet,” he said.
The CEO of Real Vision Raoul Pal thinks it was just an “interim top”. “Ho hum… I’m now looking for cash in the sofa cushions to add.” he said. Of course, many people failed to recognise the 2017/2018 top and rode it down to Crypto Winter. But if you zoom out a bit, even bear markets look like mere blips on a relentless rise upwards. As Messari’s Qiao Wang argues: “We’ve been in a super cycle since 2010, with multiple mini cycles within it. We went from 0 to a trillion dollars in 10 years… If this is not already a super cycle I don’t know what is.”
Until next week, happy trading!