The Crypto Warning
Starting from January 2022 I have been issuing prognosis regarding the size and duration of the upcoming crypto-winter. Also, I have tried to convey to you some sporadic signs of price recovery found in charts during Jan-April period.
However, today I want to issue a warning.
The recent LUNA crush might have been triggered by an orchestrated de-pegging of UST initiated by simultaneously pulling ~350 million on-chained UST from the Luna Foundation Guard’s (LFG) UST / BTC pool (old and small ‘3pool’) and then selling 650 million UST on Binance. It was followed by a sell-chain-reaction across all digital assets classes.
According to some commentators, which already dubbed this attack ‘Soros-Style’, it was aimed not at LUNA — but at BTC. Crashing UST was used by an unknown agent(s) to steer a panic sale of BTC where an attacker accumulated a very large (~4 bln USD) short position by borrowing ~ 100K BTC.
At this point it is not clear whether that attack really took place or this narrative serves now as an another post-factum justification of a market ‘snowball-sale’ panic, which root causes are difficult to establish (this panic might, even, have been triggered by some of UST largest stakeholders simultaneous withdraws of UST liquidity from a number of pools).
Notwithstanding all those conspiracy (or not) theories, because of that event’s global ramifications (we have already seen an unprecedentedly fast reaction of US govs officials commenting on LUNA) we are facing a new situation on crypto-markets.
Right now we are getting through a significant price-disturbance phase when the key BTC support levels are tested by an avalanche of small sale orders across all crypto-platforms. At the same time, the sharply increased volumes on centralized exchanges are still far below those we saw in May 2021, when several big players were ‘buying the deep’. The conclusion is that retail holders are now actively selling, while whales, which had already closed most of their long positions and accumulated massive stacks of cash / stable coins, are waiting on the side line, expecting BTC drops further (presumably, to 21–19k) to start closing their shorts and accumulating again.
That creates a risk of a sudden, much deeper, than predicted by most analytics, price plunge caused by a self-perpetuating psychological reaction (Soros calls it ‘reflectionary’) of big market agents on others agents’ ‘price expectations’ (not on their real actions, mirrored in assets prices).
It also coincides with the technical analysis data, which almost uniformly signal the severe bear market. For example, according to a classical Elliot analysis, we might stand now right at the beginning of the longest series of ‘low-highs-low-lows’ (or ‘C-Wave’), which might end only after we pass (and stabilized under) 20th and get us as low as 14k USD / BTC and even lower.
At the same time, on a fundamental analysis side, we see a unique combination of the macro factors, which are likely to negatively affect market prices for a substantially long period of time (up to 1–2 years). Among those factors is not only the increasing inflationary pressure on low-income consumers caused by continuing supply chain crisis, accompanying the lock-downs in major world’s economies, as well as an armed conflict on the European continent, which now enters its most prolong a ‘trench war’ phase, and which risks to overgrow into the full fledge war among several countries.
It is also added by a knee-jerking, highly politicized reaction of, so-called, ‘monetary authorities’ on signals received not so much from several outdated economic indicators as from the US political establishment, which want to show ‘results’ before the upcoming November elections to the U.S. Senate (34 of the 100 seats will be at stake). As a results, those ‘measures’ they are now taking (including, but not limited to a ‘quantitative tightening’) have the better chance to get us into the world economic depression rather than to prevent energy or foods supplies shortages.
All world’s power mechanisms are now in hands of the old, low-tech generation of politicians, which are incapable to radically change the existing archaic governance paradigm and to apply innovative approaches addressing the number of cascading global issues.
This ‘passage of power’ generational crises may look to be absolutely non-related to a current situation on crypto-markets. However, it highly increases the probability of some ‘wavering’ elderly politicians radically changing their somehow pro-crypto stance, when they will start perceiving more of such highly publicized events as the LUNA ‘crash-landing’ negatively affecting their electoral constituency.
On top of that we have a couple of ‘internal’ issues lurking in the dark, including, that we have almost 70% of all crypto-market participants joined the space during the past 1–2 years, which makes them highly prone not only to FOMO-buys but also to FUD-sales, and, on the technical side, we now have a number of new, bugs-prone, millions of users’ platforms, which haven’t been yet stressed-tests by deep and prolonged market overturns.
If you and your families depend on high or growing crypto assets prices (including all forms of yield and trading profits) to cover your food, lodging, communicating, commuting and other crucial living expenses, please, make sure that you have accumulated cash liquidity outside of crypto-markets which, might last you and your relatives at least 24 months at your present level of expenses.
Of course, there are also a number of positive factors (including the rapidly growing world-wide crypto adaption and govs / corps acceptance of its as well as price-stabilizing factor of corporate BTC holdings), which might negate (partially or not) most of the above-mentioned elements.
In fact, I, personally, will be highly satisfied to see my own forecasts to be proved completely false when current markets are reversed by players taking advantage of the FUD spread by many ‘prognosticators’ like myself :)
Regardless, I, as an author and a reviewer, is obliged to issue this warning to my readers now, before some of potentially avoidable but highly financially ruinous global events enfold. Those sudden developments might then lead many of you to face severe personal difficulties and, as a result, to start prematurely question your earlier decision to join the crypto-movement, which main goals — to change our lives for better — still remains justifiably unchanged.