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Short Bitcoin

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What is bitcoin but a fancy spreadsheet? Its not backed by anything, unless you count the drugs and porn its used to buy online. Which I dont. Its nothing. A fugazi. A good story pitched hard by a legion of really passionate salesman.

I am not angry about it. I am not even disappointed. I know this is exactly how markets work. At least once a generation, manias like this develop. In that sense, it carries valuable lessons:

First, dont get sucked into manias. This doesnt mean you can never be long of maniacal markets. You can make a lot of money in big uprushes. Just make sure you can get out. I never had anything to do with Bitcoin until the futures contract came out because I did not trust the exchanges associated with it to provide liquidity for my exit.

Now that there is a liquid market, it is no surprise the immediate result was a crash and then a grinding sell off. Bottom line, as soon as traders were able to reliably sell Bitcoin short it has done nothing but fall in a series of stair step crashes.

I am looking for another one here. After falling from $21,000 per coin, BTC managed to bounce off $3000 and make a run to $4000 (the CME is demanding 40% margin on the futures contracts because of that extreme volatility). It failed to hold that psychologically critical level and is now hovering around $3300 and its chart is flagging an imminent break of $3000.

Since thee is nothing but flagging confidence propping up the price, these round number thousand levels are the only way to evaluate the market. In other words, a break of the psychologically important support at $3000 will likely result in a sell-off to the psychologically important $2000 level.

One thing I like about this, is it can go on for a long time. Bitcoin has been falling for a year now. It could easily keep stair stepping down to fair value (which I think is zero) for the next year. That creates a great opportunity for those who are paying attention.

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Global Macro

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