Cryptocurrency for Beginners: with Crypto Casey

Markets Melting! Is Crypto Dead? (Bear or Bull Trap?) - Last Week Crypto

May 23, 2021 Crypto Casey Season 2021 Episode 22
Cryptocurrency for Beginners: with Crypto Casey
Markets Melting! Is Crypto Dead? (Bear or Bull Trap?) - Last Week Crypto
Show Notes Transcript Chapter Markers

This is another episode of a weekly cryptocurrency news series called Last Week Crypto.

We cover the latest global news stories affecting the cryptocurrency markets May 16th through the 22nd of 2021.


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This week we will discuss reasons for the monster dip, including China FUD, regulatory FUD, and the mass liquidations that sent the market into a tailspin, who’s buying crypto, and why this event may actually have been a big win for crypto in the long run.


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We’ve just experienced the most significant monster dip since the last crypto bull cycle 3 to 4 years ago. Does this signal a pre-mature end to the bull cycle? Or is this the pullback we needed to reach higher highs?

Hello, I’m Crypto Casey, and welcome to another episode of Last Week Crypto.

Every Sunday, we review the performance of the largest cryptocurrencies, top gainers, as well as the latest global news stories affecting the crypto markets this past week.

This week we will discuss reasons for the monster dip, including China FUD, regulatory FUD, and the mass liquidations that sent the market into a tailspin, who’s buying crypto, and why this event may actually have been a big win for crypto in the long run.

To check out the links to all of the articles we discuss, go to CryptoCasey.com/Last-Week-Crypto.

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If you use the link below to sign up for Crypto.com, you will receive $25 worth of cryptocurrency for free when you use the referral code “CryptoCasey,” all while supporting the channel.

Also, every Wednesday I conduct a weekly AMA or an “Ask Me Anything” at Instagram.com/CryptoCasey.

So use the link to my one and only official Instagram account listed in the description area to follow me and ask me anything you want, every Wednesday.

If you’d like to see me livestream with some other crypto experts in the space, I’ve started livestreaming on the Crypto Banter YouTube channel. 

Most Fridays at 10am eastern standard, I plan on bantering with the crew about crypto, and will also co-host some of the weekday shows as well. 

So make sure to follow me on Instagram to get notified when I’m going live. And you can also subscribe to the Crypto Banter YouTube channel for notifications as well.

Awesome. Let’s hit, last week crypto.

1 - Looking at the top cryptocurrencies by market cap, bitcoin 23% off, ETH damn near half price this week, down 42.2%

Cardano down 23.7%, and Binance wow, what a bargain, 47.8% off.

2 - Looking at the top gainers this week: 

Ah, yeah, absolutely no gainers this week. These are literally all just stablecoins, fam.

Ha, you have to admit that’s kind of funny. I literally lol-d when I pulled up the chart to screenshot it for this video.

All in all, if you were here for the last bull cycle, it’s not a big surprise, but it certainly brings up some bad memories for most of us.

If this is your first time, I’m sure you’re not completely unscathed, and probably quite shooketh. Let’s briefly go through some things that happened this week that may have caused and exacerbated the steep pullback.

3 - China bans financial, payment institutions from cryptocurrency business.

4 - Under the ban, such institutions must not offer any service involving cryptocurrency, such as registration, trading, clearing and settlement, three industry bodies said in a joint statement.

Then, later in the week 5 - China Hammers Bitcoin Anew With Warning on Miner Crackdown.

6 - China's moves this week ultimately highlights the country’s continued desire to seek control over the notoriously volatile asset class. 

It’s something China would rather see regulated by the People’s Bank of China, market watchers say.

7 - “It’s not really the mining issue that is the problem,” said Matt Maley, chief market strategist for Miller Tabak and Co. 

“They say they’re doing this as part of an effort to control risk taking in their markets, but it’s really a signal that China is not going to be a big market for cryptos unless it’s a People’s Bank of China-controlled one.”

And it’s not just mainland China: 8 - Hong Kong to restrict crypto exchanges to professional investors.

9 - Cryptocurrency exchanges operating in Hong Kong will have to be licenced by the city's markets’ regulator and will only be allowed to provide services to professional investors, according to government proposals published on Friday.


10 - According to Hong Kong law, an individual must have a portfolio of $8 million Hong Kong dollars, which is about $1.03 million US dollars, to count as a professional investor.

Ouch. But these are old wounds. 11 - China is Reiterating Crypto Bans From 2013 and 2017.

12 - The National Internet Finance Association of China, the China Banking Association and the Payment and Clearing Association of China reiterated their stance on banning crypto services.

13 - The three entities published a note Tuesday confirming bans originally implemented in 2013 and 2017 that bar financial and payment institutions 

from providing any services related to cryptocurrency transactions and saying that initial coin offerings remain illegal.

14 - “Virtual currency’s prices have soared and plummeted recently, resulting in a rebound of speculative trading activities of virtual currency,” the report said. 

“It has seriously damaged the safety of the people’s investment and damaged the normal economic and financial orders.”

Translation: 15 - Centralised Authoritarian Government doesn’t like decentralised Bitcoin I. AM. SHOCKED.

Here’s a chart to help illustrate this in more detail for you 15.5 - China bans bitcoin. 2017, 2018, 2019, 2020, and ah, here we are in 2021, and it will continue thereafter into 2022, 23, 24, 25 and beyond.

China crypto bans are old news and China also isn’t the entire rest of the world. But across the pond, more fuel was added to the dumpster fire that was the crypto markets this week. 

In the US, 16 - SEC chair Gensler says the agency will enforce rules ‘aggressively’ against bad actors.

17 - Gensler said he would be focusing on three issues in particular: 

First: reaching out to the public on the marketing being used to sell securities, particularly “gamification” of trading, in which brokerage companies introduce gaming elements in trading activities. 

“How should we freshen up our rule set? How should we think about our responsibilities to the investing public?” he asked.

18 - Second: a focus on market structure issues, particularly “payment for order flow,” in which brokers pay market makers for routing orders to them. 

This became an issue during the recent hearings on GameStop, Reddit, and Robinhood. The issue is, “How do we ensure that our market stays the best in the world — fair, orderly and efficient?” he said.

Best in the world - fair, orderly, efficient. Pff Delusional.

19 - Third, Gensler said the SEC would concentrate on “transparency-enhancing initiatives” around short selling, stock lending, and securities-based swap rules.

Honestly, if the US government really wanted to protect the “investing” public, they would have financial literacy as part of our traditional, public school system.

Unfortunately it’s excluded by design to keep the public from knowing and understanding what the government and their corporate cronies are really up to, 

like counterfeiting, market manipulation, basically anything to prevent common people like you and I from amassing wealth. 

They want us debt-ridden and ignorant so they can keep lining their pockets at the expense of our planet and humanity at large.

Another dash of FUD from the US this week: 20 - New OCC head requests review of cryptocurrency rules.

21 - Michael Shoe, the newly appointed acting comptroller of the currency, has requested a staff review of former OCC rule-making, regarding the crypto industry as part of his testimony before the House Financial Services Committee on Wednesday.

22 - The new Comptroller of the Currency stressed that his focus will be ensuring that OCC-supervised banks “operate in a safe and sound manner, meet the credit needs of their communities, treat all customers fairly, and comply with laws and regulations.”

Isn’t it so nice that all these new guys assuming positions of great power over our financial system seem to finally be looking out for us. 

Weird why after decades of the same ole, same ole, that crypto sparks a newfound interest in “protecting” the public.

Do they have our back? Or do they want their power back?

23 - US Treasury wants cryptocurrency transfers over $10,000 to be reported to the IRS.
The agency says cryptocurrency ‘facilitates illegal activity, broadly including tax evasion’

24 - The US Treasury Department said Thursday it will require any cryptocurrency transfer worth $10,000 or more to be reported to the IRS. 

“Cryptocurrency already poses a significant detection problem by facilitating illegal activity, broadly including tax evasion,” the agency said in a new report on tax compliance proposals. 

“This is why the President’s proposal includes additional resources for the IRS to address the growth of cryptoassets.”

Dang. They almost had us thinking they cared about something other than money. Like protecting the public against what Gensler is calling “bad actors.”

Bad actors. I think Gensler is a pot calling the kettle black on this one because he’s not very convincing.

Neither are any of the other bad actors, I mean agencies, he works with: 25 - US Fed, OCC and FDIC to set up inter-agency team for crypto regulations.

American financial regulators are considering establishing an “interagency policy sprint team” to address fragmented cryptocurrency regulations.

Yeah, the crypto markets clearly weren’t thrilled about any of that news. In addition to all the bearish news, 26 - the stock market also had a dip from tech stock sell-offs, inflation fears, and threats of higher interest rates.

And then of course, leading up to all of this before the monster dip, Elon Musk tweets, which we covered enough in last week’s episode.

And as angry as some people are with Musk check out this tweet that gives us more insight into his perspective.

26.5 - Shifo tweets: Yo Elon what do you think about the peeps who are angry at you because of crypto

Elon responds: The true battle is between fiat & crypto. On balance, I support the latter.

And during the crash, of course, Elon couldn’t help himself 26.6 - tweeting Tesla has diamond hands, basically saying they weren’t selling their crypto.

At the end of the day, I agree with 26.7 - Vitalik Buterin: that Crypto Will Build an 'Immune System' to Elon Musk Tweets.

26.8 - Vitalik Buterin, the 27-year-old co-founder of Ethereum, told CNN this week that crypto markets won’t be in thrall to the market-moving power of Tesla CEO Elon Musk’s tweets for much longer.

Buterin said: "Elon Musk tweeting is something that the crypto space has only been introduced to for the first time literally last year and this year. 

I think it's reasonable to expect a bit of craziness, but I do think that the markets will learn. Elon is not going to have this influence forever."

Nice. One more bit a bearish news that didn’t exactly help the markets, like at all: 26.9 - BlockFi mistakenly credits users with too much Bitcoin in promo payout.

Just under 100 BlockFi users are reported to be affected, with some allegedly receiving as many as 700 Bitcoin due to a mishandled promotional offer.

26.99 - “BlockFi carries loss reserves as part of its accounting policies and this is a fraction of existing loss reserves – so no negative impact to equity or ongoing platform operations,” 

Zac Prince, co-founder and chief executive officer of BlockFi, told the news site.

“The issue that caused the withdrawals was fixed and incremental safeguards have been developed to prevent any similar issue in the future.”

Man. Well, all the dips from all the bearish news triggered a lot of stop losses, which caused a cascade of lower and lower stop losses to fire, ultimately driving prices straight down, extremely quickly.

27 - Crypto meltdown turbocharged by a mix of leverage and liquidations.

28 - “What causes such deeper pullbacks are a case of system overload, liquidations, and such factors," said Vijay Ayyar, head of Asia Pacific at Luno Private. 

“Crypto is still a much ‘wilder West’ than any other asset class where you can trade on some exchanges for up to 50-100X leverage," and “what we’ve seen is a big funding reset across exchanges due to overleveraged traders."

Okay, so I will give Gensler this: he does recognize that trading apps like Robinhood gameify trading. Which is all fine and dandy, except for when it allows people that aren’t financially savvy to basically engage in dangerous gambling activity.

Lack of public financial education, coupled with greedy, easily accessible trading applications that allow for even more risky activity though leverage and margin trading, on top of the inherently volatile crypto market, 

laced with institutional whale manipulation, and we got paper hands, diamond hands, fomo, fud, retail money, savvy money, bearish news…

And boom. Mass, mass, mass liquidation sends the markets into a nose dive. I’ve always urged people to steer clear of leverage and margin trading in crypto as it’s pretty much gambling.

And what makes it even more of a gamble is, as we saw Wednesday, almost all of the centralized crypto exchanges experienced down time. So even if you wanted to re-position, you could not.

This happened several times in the 2017 bull cycle, and will continue to happen on these centralized exchanges. 

That’s why again, I urge people not to trade, not to use leverage or margin, always take profits along the way, don’t try to time the market, dollar cost average in, and don’t invest more than you can afford to lose.

Open accounts with as many different exchanges as possible to make sure you have multiple options to buy, sell, and exchange cryptos for whenever monster dips like Wednesday happen that brought down a ton of exchanges.

You can access my list of recommended exchanges below by scrolling down to the description area. And once you make your moves, make sure you are transferring your crypto off of exchanges to hold safely in a cold storage hardware wallet.

You can scroll down to the description area below to access the correct and official sites of my recommended hardware wallets.

BC Vault is my personal favorite, another option is the Ledger nano backup pack. So Scroll down to check them out.

Protecting your ability to generate income in these uncertain times is another important thing to consider. So if you’d like to learn more about the advanced technical concepts of blockchain and become a developer in the space, check out Ivan on Tech’s academy.

If you use the link below, you can access the academy at a discounted price, so scroll down, and check it out.

Nice. So does this week mark the end of the bull cycle? I doubt it as this week 29 - MicroStrategy Builds Up Bitcoin Cache by $10 Million Dollars.

And other 30 - Crypto Hedge Funds Buy the Dip in Bitcoin’s Week of Reckoning.

In fact, 30.5 - Institutional Bitcoin Buying Spiked Around Wednesday’s Crash.
Bitcoin outflows from over-the-counter desks spiked, signaling dip-demand from institutional investors.

30.6 - Wallets linked with over-the-counter (OTC) desks registered an outflow of 10,292 BTC on Wednesday, 

when bitcoin tanked from $43,000 to nearly $30,000. That was the largest single-day outflow from OTC addresses in 3.5 months, according to data tracked by Glassnode.

30.7 - “Once again there is strong institutional demand,” Glassnode founders Jan Happel and Jann Allemann said in a tweet, taking note of the spike in outgoing OTC transactions. 

“Whatever bitcoin lows we will see this summer, they won’t be for long. Might as well hold through.”

Just as we discussed last week. Paper hands are selling to whales. And we all know whales manipulate the market, but some people forget the tactics they use to do it. Tell me this isn’t coordinated:

30.75 - Look at all of these articles from all around the internet, Coindesk, Fortune, Bloomberg, Reuters, Economic Times: all of these articles using this bizarre “gyrations” word to describe crypto’s price volatility.  

30.76 - And here’s some more. Financial Times, investment magazine, apple podcasts, come on. What a racket.

I will give it to you though, if you weren’t around for previous crypto bull cycles, and this was your first significant dip, you survived a scary week, indeed. But 30.77 - Here’s some lessons from 2017. 

The 40% pullbacks are meant to shake you out before the 300% run ups $BTC

Traditional market experts in addition to institutional investors are also bullish on bitcoin despite the crypto bloodbath: 30.8 - Bitcoin in a ‘discounted bull market’ unlike stocks — Bloomberg Intelligence.

This week’s price dip showed that cryptocurrency has “entered the mainstream,” says analyst Mike McGlone, and the future is likely “tilted in its favor.”

30.9 - For McGlone, the bull market is still on, with the dip ensuring that tokens are now a steal at current prices.

“Bitcoin’s Advantage vs. Equities: A Discounted Bull Market,” he summarized.

40 - And he highlighted advantageous volatility versus traditional stocks, along with a chart that suggested Bitcoin “may have passed the correction test.” 

41 - The bottom is in, not the top.
McGlone is not alone in considering the broader market trend to be intact after the week’s volatility. Earlier, Cointelegraph noted statistician Willy Woo’s estimate that Bitcoin is only halfway through its current bull cycle. 

42 - Woo was in turn joined by PlanB, creator of the stock-to-flow family of Bitcoin price models, who in an appearance on the Wolf Of All Streets Podcast likewise guessed at the bull market being 50% complete.

“Both models show that we’re certainly not at the end of the cycle,” he told host Scott Melker.

43 - “We still have some room to go until $100,000 on average or $288,000 on average if you follow the stock-to-flow X model.”

The comments were made last week, before the price dip, with PlanB since sticking to his perspective on the market.

44 - “Not Tweeting about BTC for a while,” veteran trader Peter Brandt added. “But hint: Market bottomed yesterday.”

Hmm, are they right? Or is this another form of coordinated manipulation to make crypto go up again so they can sell and make some profit?

Well, let’s look at some charts. Here’s an interesting one: 45 - showing the price movements of bitcoin from the last bull cycle in 2017.

On day 372 after the bitcoin halving, there was a significant pull back as you can see here from $2,800 down to $1,700, before a mad tear to almost $20,000, then back down to around $10,000.

46 - Now, let’s compare it to the current bull cycle. On Day 373, only one day off from the previous bull cycle, what do we have? A significant pull back. Will it be the one before the mad tear to $100k? Only time will tell.

Let’s look at another chart in this tweet from Crypto Tony, he says: 47 - I personally believe we are at the “ bear trap “ phase in the cycle. 

If we truly have topped, we would see the following: Blow off market top, Institutions selling not buying, Bitcoin major inflow to exchanges .. Not outflow. What do you legends think?

And below is the market phase chart with an indicator on the first sell-off bear trap part of the cycle. Which is right before a mad tear upwards.

Is he right? Well, let’s compare the market phase chart, 48 - to the price movement of bitcoin over the last year. Hm, seems to check out.

So, here’s the deal: 49 - Just like the last cycle, there will be several dips in this one. HODL and you will be rewarded for your conviction.

And if huge institutional demand during the dip, bullish sentiments from financial experts during the dip, and comparing historical charts from previous dips, 

following a crazy black swan event that rocked the entire world, if none of those things bring you solace, think about However, 50 - Why the Bitcoin Crash Was a Big Win for Cryptocurrencies.

Under extreme stress, the decentralized finance system worked as designed. 51 - To understand why I believe Wednesday was a big victory for crypto, separate the space into its two main categories: centralized and decentralized finance. 

52 - Centralized is the most familiar. These are the regulated exchanges such as BlockFi Inc., Coinbase Global Inc. and Binance. 

They run traditional order books with bids and offers much like the New York Stock Exchange. And much like Robinhood Markets Inc. and other traditional brokers, when markets get hectic, 

they are saddled with delays, system outages and frustrating customer experiences. These events lead many to conclude that the crypto space is not ready for prime time.

53 - But the decentralized protocols, which many claim are the future of finance, worked as designed and never went down. While customers grumbled about market losses, they were not complaining that these systems failed them at a critical time.
 
That’s right. DeFi didn’t go down. Check out these some of these impressive stats: 

54 - DEXs had an absolutely incredible day. Uniswap version2, version3, and Sushiswap all smashed their All Time Highs, along with many other DEXs. DEXs had their first combined 10B volume day Chart

55 - Aave had its biggest day of liquidations ever without any issues

56 - Compound users seemed especially well positions for this dip, yesterday wasn't even a record-breaking liquidation day for them.

57 - Lending platforms with liquidations mechanisms, that were hardest hit by Black Friday last year, displayed how far they've come since then.

58 - Maker, who struggled a lot on Black Friday, didn't have a single issue yesterday, showing how much more robust their new auction mechanism is. Dai also held its peg better than any of the centralised stablecoins

59 - All of this DeFi activity is especially impressive when many CEXs struggled to stay online. Yesterday was a tremendous stress test for Ethereum based DeFi and it passed with flying colors.

Amazing. This week’s monster dip was pretty scary, but at the end of the day: 60 - Diamond hands are forged through intense pressure.

Awesome.

Well that was Last Week Crypto, with me Crypto Casey.

If you enjoyed the episode, please make sure to like this video and subscribe to my channel for more crypto content.

To check out the links to all of the articles we discussed, go to CryptoCasey.com/Last-Week-Crypto.

So are you guys feeling a little better about the monster dip this week?

Or are you still pretty spooked?

Is crypto dead, or very, very much alive?

Let me know in the comments below.

Be safe out there.

Introduction
Crypto.com
Wednesday AMA
Market Movements
China bans financial institutions from crypto
China Hammers Bitcoin with Miner Crackdown
Hong Kong to restrict crypto exchanges
China Reiterates Bans from 2013 and 2017
China Bitcoin Ban Chart
Centralised Authoritarian Gov doesn’t like Bitcoin
SEC chair Gensler says agency will enforce new rules
New OCC head requests review of crypto rules
US wants crypto transfers over $10k reported to IRS
US Fed, OCC, FDIC to set up team for crypto
Stock Market Dip
Elon Musk Tweets
Crypto Will Become Immune to Elon
BlockFi Credits Users with too much Bitcoin
Crypto meltdown turbocharged by leverage
Buy a Hardware Wallet ASAP!
Protect Your Ability to Generate Income
Crypto Hedge Funds Buy the Dip
Institutional Bitcoin Buying Spiked during Crash
Whales Manipulate News Articles
Lessons from 2017 Bull Cycle
Traditional Market Experts Bullish on Bitcoin
Bullish Charts
Why Bitcoin Crash Was a Big Win for Crypto
DeFi didn’t go down
Outro