Why has Bitcoin Crashed?

It was a nice night on gold and silver markets last night and further enhanced with the AUD dropping seeing silver in particular up over 1.5% in the session.  As we’ve discussed before, bonds are falling, the yield curve tanking, and now shares following suit. Even Alan Greenspan last night warned of an imminent equities and bonds bubble pop.  On the other hand big cap crypto did little as it appears to have found its bottom.  

When we had THAT day on 17 January when the big drops in crypto happened we published a few graphs putting these drops into perspective.  In essence, we’ve been here before over each of the last 4 January’s…

January 2015

Bitcoin 2015

January 2016

Bitcoin 2016

January 2017

Bitcoin 2017

January 2018

Bitcoin 218

Take a good hard look at the 5 year price graph at the bottom of each graph and see if you can spot each of those ‘crashes’….

The ‘micro’ reasons for each January have varied.  This year of course it has all been about regulatory crackdowns (so what?), exchanges being hacked (well, don’t expose yourself to exchange risk!?), or the uncertainty around USD Tether (per yesterday’s article, use gold and silver as your safe haven, not a dodgy USD derivative).  The ‘macro’ reason, possibly the governing reason amongst the aforementioned FUD micro reasons, could well be the Chinese Lunar New Year.  From Bloomberg:

“The Lunar New Year, which marks the first day of the year in the Chinese calendar, is being cited by some as contributing to Bitcoin’s slump as Asian traders cash out their cryptocurrencies to travel and buy gifts for the holiday that starts Feb. 16 this year. The festivity is celebrated not just in China, but in other Asian countries including Singapore, Indonesia, Malaysia, Korea and Thailand.

"The January drop is a recurring theme in cryptocurrencies as people celebrating the Chinese New Year, aka Lunar New Year, exchange their crypto for fiat currency," said Alexander Wallin, chief executive officer of trading social network SprinkleBit in New York. "The timing is about four to six weeks before the lunar year, when most people make their travel arrangements and start buying presents."”

The following graph puts this all in context…

Bitcoin Lunar year

On 17 January we republished the famous Rothschild ‘blood in the streets’ quote.  There is of course also Warren Buffet’s famous "Be fearful when others are greedy, and be greedy when others are fearful!"….