Chart from TradingView
Bitcoin and Ethereum were down 20% Friday night with many alt-coins down between 20% to 35%.
It was a flash crash, with much of the reason being attributed to the new variant of the Covid virus spreading out of South Africa. Fear of lockdowns and disruptions in the international supply chain slowing business – “again.”
The leverage in Crypto can be off the chart and it is this leverage being automatically liquated by crypto exchanges, which causes the crash. If you have not noticed by now, week-ends with the USA mostly stepping away from the crypto markets, has always been a low liquidity, thinly traded crypto market. This low liquidity and liquidation of borrowed money combined to drop the price of Bitcoin to $42,000 for 5 minutes before it rebounded $5,000 to above $47,000. We’ll say it again, we strongly suggest not using borrowed money in the crypto market because of the risk of these flash crashes. Certainly not borrowed money from sources connected to the exchanges where your coins are held.
Six months to one year out, LOTM is still very positive on Crypto Currency. Maybe sooner. We suggest, in a conservative tone, that you treat Bitcoin and Ethereum as core holdings and alt-coins as intermediate to longer term trading vehicles. Alt-coins that are in the top fifteen in market cap “could be” core holdings, but only if you understand their applications and why you own them. These might include the Alt-coins – AVAX, Solana, Tera Luna, Cardano, Polkadot, Polygon – there are others.
Development at Bitcoin’s Lightening Network could make many of the alt-coins applications unnecessary in the future. This is always a risk in a new and rapidly developing technology.
- Bitcoin’s Lightning Speed: Eight Mind-Blowing Facts About The Lightning Network.
- Buying The Dip: El Salvador Increases Bitcoin Holding To Over $60 Million, Tron’s Justin Sun Scoops More BTC In Solidarity
- Bitcoin, Ethereum, Polkadot, Chainlink, Filecoin Hit Hardest in Market Wipeout. Uncertainty over the Omicron variant and the Fed’s plans are among the drivers of a brutal crypto market pullback.
From what we are hearing from South Africa, the new variant of covid is mild and not threatening though very contagious.
- A heavily mutated Covid variant emerges in southern Africa: Here’s what we know so far November 27, 2021
- Don’t panic, most early Omicron cases are mild, WHO says Dec 3rd, 2021
With an asset as volatile at crypto, I don’t know why we would ever want to use it as currency, but it certainly could be. Stable coins make more sense as a currency alternative. These are going to be subject to regulation (a good thing) with crypto ultimately ending up as assets that can be taxed IMHO. The US government is ok with an asset being taxed version from everything we have heard so far.
In most cases, a knee jerk reaction to fear headlines is a losing strategy. Know why you own it – understand it and adapt within your over-all strategy.
LOTM continues to be a believer in Blockchain technology even while we recognize the bubble in prices that accompanies every new technology. This is a reason we have gone to buying companies that are in the “pick & shovel” business around Blockchain. It is after all a probability game we are all playing. If Blockchain survives, which we are sure it will, the companies providing the “picks & shovels” will ride though the changes smoother than the individual crypto currencies will. They might out-perform crypto as well.
Grand success to all. Steady as she goes!
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* An account related to LOTM holds a position in this security.
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