Updated Thoughts on Bitcoin
The recent move in the price of Bitcoin provides opportunities for accumulation. That's what the whales are doing.
The price of Bitcoin has plummeted in recent days.
It is currently trading a little under AUD 80K and USD 60K, leading many to say the great bull run is over for the crypto pioneer.
Nothing could be further from the truth.
I believe we are experiencing the manipulation of the market in order for institutions and crypto 'whales' to accumulate more Bitcoin.
Their modus operandi is simple.
They know many traders use leverage to try and maximise gains. They also know these traders use identified price levels to make buying and selling decisions.
These two 'knowns' allow the big guys to move the markets almost at will.
Firstly, when prices move against a leveraged trader's position the lose their equity and face a margin call. This results in liquidations or getting 'rekt'.
The image below shows the total liquidations across four different time periods.
These traders were on the wrong side of the move and experienced hands think things will turn around when a total of $1billion in liquidations are sustained.
Some may wonder why big holders want to drive prices down?
The reason is they want to buy more and want more attractive prices. They do it all the time in the stock market and are busy at work in crypto too.
The second point is that most traders use technical analysis to identify entry and exit points. These are usually well known levels reflecting trader psychology.
By simply pushing prices through these levels the old hands know they will trigger reactions moving the prices even further in the same direction..
However the manipulation can only be sustained for a relatively brief period.
That's why I believe this is not the end of the big upswing in the Bitcoin price and rather an attractive time to accumulate more.
That's exactly what I have done these past few days - added to my Bitcoin holdings and reduced the exposure to some of the lesser know coins and tokens.
The catalyst for me doing so was price and a change that was made to the Bitcoin blockchain.
This change is known as Taproot and provides for enhanced smart-contract functionality, transaction enhancement and improved privacy.
It takes the Bitcoin opportunity much closer to money as well as a store of value.
That may see a slow move away from some of the alternative smart-contract platforms which are getting slower to transact on and proving to be very expensive.
Just what will happen in the space cannot be predicted with any certainty. Things are just moving too fast.
However, I still maintain we are on the cusp of an extraordinary rally in the price of the premier computer coin.