I’ve got an unconventional way of spotting the bottom in crypto selloffs: I know crypto is nearing the bottom when I’ve gotten four phone calls from people I thought were smart enough not to ask me if it’s time to take their money out of crypto.
I always tell them “no,” but they always call anyway.
I got the third call not long ago – so one more to go, I guess.
OK – I don’t actually base my predictions on jittery friends making panicked late-night phone calls. In reality, I’ve got a much firmer basis for my hunch that the bottom is close.
Bitcoin’s been bouncing around the $20,000 range for the past day or so, which leads me to think that we are in fact near – if not at – the bottom, but as investors we have to leave open the possibility that at least a little more pain could be on the way.
Blasting Out Trash with a Firehose
We’ve already seen significant deleveraging. The kidddies who thought they’d leverage up 100X and play in the big leagues – they’ve been knocked out for a while now.
We’ve already seen most of the bad actors detonate and get blown out – and I’m talking about both bad actors with malign intentions and bad actors that were just arrogant idiots.
I’ve heard a theory – and I’ve got no evidence one way the other – that big exchanges like FTX may have intentionally sold Bitcoin over the past few weeks to “nuke” the positions of bad shops like Celsius and Three Arrows Capital (3AC) and sweep the rot out of the market.
If you give a damn about crypto, this theory makes good sense; it would be a smart move. Knock the operators – the Alex Mashinskys and the Do Kwons and their ilk – out of the market, and you’ve got a much stronger market and a much firmer basis for the next leg higher. Not only that, but markets like this are a breeding ground for crypto innovation – smart people, with good ideas worth that much harder
Is it worth this much volatility just to have a bunch of hucksters and dopes taken out of play? I think so – and this is coming from a guy who’s own net worth was oscillating by a couple of million dollars every few days.
That kind of rough ride shouldn’t rattle you (much) if you keep your eye on the extreme long-term upside potential here.
So, as I said a minute ago, it’s not crazy to expect that there will be a little more selling on the horizon as big players adjust their positions – quite a few of them need to improve their dollar positions after all this, and, well, turning Bitcoin into dollars is the way to do that.
But I don’t think we’re in for any more major, convulsive selling like we’ve seen over the past few weeks.