Everyone on Crypto Twitter is always talking about prices of assets. We all want to see BTC cross $100k and we all want that next bull market to hit sooner rather than later.
The lesser-known narrative is that Bitcoin went through one of the craziest series of blow-ups we could imagine:
- One of the largest protocols blew up
- One of the largest exchanges blew up
- Many of the largest crypto hedge funds blew up
- Bank runs galore
- #1 crypto banking partner blew up
- The fastest cycle of QT ever
- ... and Bitcoin is still above $20k
One of the largest protocols blew up
This is one of the most important narratives of 2022. Terra (LUNA) blew up and caused cascading failures throughout the crypto ecosystem. Billions of dollars were lost and people were already growing hawkish because of the FED beginning the fastest cycle of quantitative tightening ever.
Despite all of that, Bitcoin held up rather well. Yeah, we saw markets tank into oblivion, but Bitcoin kept on churning out blocks and the price of BTC held up far better than altcoins and more fringe assets.
One might have thought that the damage of LUNA would have been the end of institutions getting into crypto, but it wasn't.
One of the largest exchanges blew up
If LUNA wasn't bad enough, we then saw FTX completely implode. FTX was just a big ponzi scheme at the end of the day, but nobody even knew it. It's crazy that we had such a mainstream player sitting in front of us and nobody saw the blow up coming.
The failures at FTX were inevitable, but I'd bet that LUNA's downfall sped up the process.
Again- if you thought that institutions would give up after LUNA... you must've been sure they would be gone after FTX blew up. Wrong again, my friend. Institutions still stuck around and Bitcoin kept on bitcoining.
Many of the largest crypto hedge funds blew up
Again, cascading failures from LUNA and then from FTX. We saw many of the largest institutions and funds in crypto blow up.
Platforms like BlockFi and others also blew up. I know people who personally lost money in platforms like these.
Mt. gox 2.0 is dozens of exchanges, funds and firms blowing up simultaneously. It's far worse and things got pretty gloomy. We thought we were through the worst of it, but we weren't.
Still, BTC kept on going.
#1 crypto banking partner blew up
Silvergate is probably a bank that you've never heard of. Turns out, they are one of the primary banking partners for U.S. financial institutions & Crypto Exchanges.
Silvergate started in the 90s as a California Community bank. They were an early adopter of crypto and started offering TradFi services to crypto companies like Coinbase, Galaxy Digital, etc.
Recently, they delayed a filing with the SEC. Then Coinbase, Galaxy and others put out statements saying that they no longer banked with Silvergate.
In the last 24 hours, Silvergate announced that they are shuttering all business operations and will liquidate everything.
Despite that, Bitcoin is barely down 1%.
I mean, what else can you hit Bitcoin with? We've seen more than half of the major firms, institutions and exchanges blow up in the past year. What's another bank blowing up?
This one is actually significant. Serving as an important partner in fiat -> crypto (and vice versa) onramp/offramps.
I believe they'll get bought out and/or other banks will step up and fill the role they were serving. Afterall, there is a shit ton of money to be made in crypto... You just have to do it right.
The fastest cycle of QT ever
AND, if this all wasn't enough to destroy Bitcoin, the macro environment is telling an even crazier story.
Inflation ran rampant. The FED printed more money in a short period of time than ever before and subsequently entered us into the fastest cycle of Quantitative Tightening... EVER.
QT is when the FED raises rates and makes money really expensive. They make money expensive by increasing interest rates, which ultimatley drives up the risk-free rate of return on capital.
When this risk-free rate of return is high, people get out of assets and jump into things like bonds and other easy ways to earn interest.
Think about it -> loans are more expensive. Someone needs to provide cash for these loans. People take money out of assets and it creates a cycle where assets go down and down and people are leaping out of them as fast as they can. It's like a rug pull, but the FED does it across the board to all assets.
Bitcoin, stocks and tech (in a big way) got hit hard by QT. A lot of tech stocks dropped 90% and started looking like altcoins. We've since recovered from that bottom, but it was definitely a painful few months, and I don't expect that it is all over just yet.
Bitcoin Still Above $20k
You'd think that all of the above would send Bitcoin back into the depths of hell. It did not. BTC barely moved on the Silvergate move.
Do what you will, but I'll tell you what I've been doing and will continue to do.
I'm dollar-cost averaging into BTC. Buying up as much as I can on a consistent (daily) basis and storing it away. I believe that the result of all of the above news and blows to the crypto industry is that BTC is bottomed out.
Yeah, we could see it drop to $15k, but I just don't see it sticking down there. We're seeing crazy demand for Bitcoin right now despite being in one of the shittiest economic environments and blow-ups happening on all fronts.
#stacksats frens.
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