The Bit has hit the fan - The Big Short 2.0

Yesterday's Bitcoin crash was spectacular. It was forecast over 100 years ago as you will discover in this article. Price dipped down to $30k from a recent all-time high of $63k just four weeks ago. You will hear many people saying, "Ah, told you, cryptos are scams, no value or utility".

Many thousands of ordinary people, driven by, let us be frank, greed, lost their shirts yesterday. Social media is full of comments blaming Elon Musk for negative tweeting. The Chinese Government is banning institutions that enable Crypto ownership, but that is not the real story. 

To understand how this mass liquidation event came about means a quick explanation about how the Bitcoin blockchain rewards miners for maintaining the network and processing transactions. Baked into the Bitcoin protocol is a finite number of coins. The number is 21 million. These coins are given as rewards to the people (the miners) maintaining the network and validating transactions. Roughly every four years, the reward of coins per block added to the chain is cut in half.

A consequence of this event is that there are fewer new coins coming into existence. Assuming demand remains constant, the price per coin rises. This cycle is established. 

Here is what happens typically. Bitcoin goes through halving, creating a shortage of supply of coins as a result. Demand pushes up the price, lots of positive press about the rise in Bitcoin price. Newbies pile in, further driving up the price. FOMO (Fear of Missing Our) takes root. Altcoins like Etherum, Lite Coin, ADA catch fire and 10-100x their values. The market overheats and there is an inevitable correction. Mainstream media and incumbent power players say told you so, then call for more regulation sustaining the FUD (Fear, Uncertainty & Doubt). The market shakes out a ton of people, then stabilises and recovers at a more sustainable rate until guess when? The next halving. 

BUT this time was different. This cycle seemed to be on steroids. There is a saying I recall from a city trader: "When you take a taxi ride, and the driver discovers that you work in City and starts discussing stocks with you, its time to sell".  

Some of my friends who were super sceptical on crypto, to the extent of calling me deluded, were suddenly piling in on XRP, Cardano, Dot, as well as Bitcoin and Ethereum. That was the final trigger for me to exit my modest holdings in March.  

Why was the market behaving as if on steroids?  

From 2020 till now, the bitcoin price rose at a rate way ahead of what was being reasonably forecast for the end of 2022. 

Bad actors have manipulated the market. Because the halving cycle is baked into Bitcoin, the stage was set for a massive fraud based on the Wyckoff distribution.

Richard D. Wyckoff was a trader and market forecaster who started in 1888 as a 15-year-old stock runner. He created a model that exposed market manipulation by wealthy insiders to make money at the expense of retail investors.

In essence, the malevolent entity starts accumulating Bitcoin when it is under $10k. The price was expected to rise after the halving in May 2020, so it was pretty straightforward to begin to increase the underlying upward trend without raising too much suspicion. Then allow the human emotion of greed to do the heavy lifting. If momentum slowed down too much, just pour enough fuel on the fire to get it going again. Then the malevolent gets to price where they start to offload coins at their target profit levels. The market pulls back. Well, that's normal in Bitcoin, everyone knows it volatile, right? So the malevolent makes sure that there is a recovery, more retail investors pile because of FOMO, the price goes up, and they profit again. But there comes the point where the market cannot bear the selloff anymore, so they execute a big short, which happened yesterday.  

Long story short, if you overlay the Wyckoff distribution over the Bitcoin price chart, there is an almost perfect match. 

A Bitcoin Whale is an entity that owns more than a thousand Bitcoins. About a thousand whales own over 40% of Bitcoin. 

The Wyckoff distribution exposes how a few whales who control enough Bitcoin to move the market any way they want, have pulled off a massive heist on the retail investor. 

This orchestration of markets is not new or crypto specific. After all, Richard D. Wyckoff was working in the stock market over 130 years ago. Bad actors have been deploying these techniques for at least a century to relieve the retail investors of their savings. 

Using the Wyckoff Distribution, this crypto trader called this mass liquidation event in April 2021. Watch his video breakdown here.

The takeaway from the last few days are:

Blockchain is here to stay.

Bitcoin value medium term is still on an upward trend.

Some of the Altcoin projects have a bright future and will change the world in ways we have not yet imagined.

Do not invest in assets that you don't understand unless you are a gambler.