Market Sentiment #6


Bitcoin price: $29,812.92

Fear and greed index: 14 (Extreme Fear)

Welcome the Bear

Bitcoin has reminded even the most hardened veterans how quickly it can move in either direction when it wants. From the 5th of May to the 9th of May Bitcoin put in four consecutive red candles barreling downwards from a high of nearly $40k to a low of $27k.

Major Events

May 4th. The FED rose interest rates by 50 base points to tackle inflation- this marks the greatest hike seen in 22 years. Colin Powell has been reelected and the next meeting in June will see another hike in interest rates. This measure is too little too late. The official CPI (Consumer Price Index) report shows inflation sits at 8.3% on average for the last twelve months in the United States. Inflation continues to rage in Europe and Great Britain. The Bank of England has raised rates recently by 25 base points. And the European Central Bank looks primed to increase interest rates for the first time since 2011.

Geopolitical uncertainty remains with the war on Europe's doorstep entering its fourth month. Europe has drafted a proposal to ban the import of Russian oil in its next round of sanctions which will cause energy prices to soar within Europe worsening inflation. The price of oil still stands tall at close to $110 a barrel.

Terra USD (UST) a popular stablecoin depegged. UST had a market cap of $18 billion and was utilised in the overwhelmingly popular Anchor protocol offering 19.5% APR on UST a ‘stable coin’. This event saw billions of dollars evaporate overnight and is the largest loss event in crypto history.

UST is an algorithmic stablecoin and not backed by assets like other stable coins such as USDC which is a full reserve currency. Instead, it could be redeemed for LUNA and vice versa. It utilised a clever mechanism involving burning and minting to remain pegged to the dollar. It turns out this clever mechanism is not so clever and could not withstand a shorting attack. The rumour on the street is that Blackrock is involved. The Luna Foundation started to dump bitcoin onto the market in a desperate attempt to regain the peg further driving down Bitcoin’s price.


Trading View BTC/USDT Daily Chart

Bitcoin touched the 200-day moving average on the 28th of March, it was rejected and has gone on to put in a lower low. The events of the last week have been interpreted within the community to be the start of a prolonged bear market.

The Time to Buy

Altcoins have been hit savagely and some lost as much as 80% in value. Bitcoin is trading well below the 200-day moving average and now represents a fantastic buying opportunity. Understand that the market is likely to continue in a protracted downwards trend so prioritise building a cash position until the reversal is seen. It is painful for many new investors to see their portfolios crumble overnight. But Bitcoin will be back and like it has always done will proceed to put in another ATH (All Time High).

Investment Goals

I think the market is in the Anxiety phase. Short-term market swings should only distress you if you are a trader. Folks who invest with a long-term perspective are freed from the anxiety that comes with these severe market swings. The true capitulation has yet to happen and I believe Bitcoin is likely to see another dive downwards. Understand that now is the hardest time to buy, but making a bold decision now will likely drastically change your life in years to come.

Adoption continues to rise, the technological fundamentals are still there, it is just the price that has changed.

‘Buy on the sound of cannons, sell to the sound of trumpets.’

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