It’s been a bloody week in crypto, and I think we’re all feeling it. I have a lot of thoughts so I’m just going to share a few:
This drawdown was made worse by leverage
On Tuesday $7.56 billion in longs were liquidated among the top exchanges. During a liquidation assets are forcibly sold to cover positions, creating a downward pressure on the price of the asset.
This creates a cascading effect whereby longs are liquidated -> causing downward pressure on the price -> leading to more liquidations -> leading to more selling
When that happens there are no buyers because who would stand in front of a moving train?
Eventually a bottom forms
At some point the train runs out of steam and buyers start stepping in which creates upward pressure on the price. That’s how a bottom forms.
However, no one knows when that’ll be so you’re probably better off sitting on your hands and not trying to time the market.
I’m still long-term bullish
The only thing keeping me sane at the moment is my belief that crypto adoption reached a pivotal moment this year.
- Total Market Cap reached > $2.5 trillion
- Most major banks have announced or are now offering crypto services to investors
- Elon Musk appeared on SNL to shill Doge and it was live-streamed internationally for the first time
These events and more lead me to believe that crypto has gone mainstream and that we’ve passed the turning point of adoption.
I will still be exploring other asset classes
Gold continues to be the save haven that I thought it could be and honestly needed it to be at this time. It’s given my portfolio some stability and if the trend continues then I will continue to add to it.
Financials, energy, and commodities are also on my radar as they have outperformed tech so far this year.
I still have concerns about the broader stock market and will be watching the S&P for confirmation.
DeFi continues to intrigue me as an industry and potential source of income.
