Yesterday morning, Bitcoin dumped below $40,000 to trigger selling throughout the collectible crypto currency market. Bitcoin prices are so volatile that they went all the way down to $30,000 and then bounced back towards $40.000. Last week we noted how a drop below $50,000 would trigger a technical slaughter box for the crypto market. That is now in the process of playing out.
Now what was seen is support looks like it is a long ways away with Bitcoin around already way below $50,000 and even further away from $60,000. While crypto cult gurus keep calling bottoms and making wild fantasy statements we stick to the charts. And the reality is money is now going out of Bitcoin and into gold. I put up a video + transcript explaining why this is happening you can find it in this post.
The Nasdaq also gapped down on Wednesday over a percent on the open and then rallied. On the charts you can see a short-term double bottom on the hourly charts for the S&P 500 and Nasdaq now.
You can see here how the drop to the most recent low for the S&P 500 of last week brought in buyers yesterday. The market could bounce here for a few more days off that low, but I cannot call a bottom until we see the VIX get above 30.
Panic is starting to come into the markets, because now the selling is spreading beyond from where it started – fad big cap tech stocks, which make up the bulk of the Robinhood 100 most owned list, and the ARKK ETF and crypto collectible currencies – and into just about everything in the markets. Panic is what leads to a bottom, hopefully soon, but it will probably take one final leg down below last week’s lows to make it happen.
This means if you are looking to buy then now is the time to start to make a list so that you will be ready. The best things to buy are those that are now outperforming the market to not only the upside in recent months, but that also are not falling as much as the the averages do when they pull back too. Hmmm… sounds like gold. But there is more out there than just gold now too, but selling ARKK and buying GDX is a sensible decision for one to make.
This panic was coming and it was obvious it was going to happen, because people piling on record margin made it inevitable and so did some of these people putting some of their money into crypto as a safe haven when it is too volatile to be any such thing.
Around New Years roughly 1.7 million Robinhood customers owned crypto. By March over 9.5 million owned it. They piled in at the top, some on margin, and such behavior went on at other brokerages.
So, here we are.
Those people are getting crushed, forced to sell everything to meet or prevent margin calls. Then the selling spreads to people doing more normal investing. Crypto was fun for those in it on the way up, but was nothing but hot air hype fantasies and now that reality is hurting almost everyone in the markets. The trading app players created more volatility in these markets and now are blowing themselves up. Some will realize that when all they use is Robinhood and message boards to make their trading decisions they are literally taking a paper knife to a gunfight and upgrade by arming themselves with work and research. Trading financial markets is NOT an easy money game.
More will be eliminated forever from trading and the markets as this process works towards a final bottom. A few suffering from this will learn from their mistakes and then thrive to become the future trading winners of the day. But only a few are capable to take the first step necessary – that is to admit when you blow up that you didn’t know what you were doing and need to stop making wild gambles or falling for nonsense and take this seriously – and learn….. this game means lifelong learning instead of believing in some concept like it is a religion. The crypto collectible cult is destroying itself as all speculative trading cults ultimately do. You are witnessing the same thing that happened to the internet daytraders in 2000 and FOREX binary options players in 2011.
-Mike
