It seems like everyone has an opinion on why there's a dip. I'll give you my 2 gwei (as an Etherean).
Crypto prices have been going absolutely bonkers the past few weeks. Everything, and I mean everything doubled in price, and over the 3 month period, tripled in price. Then for some reason, we see a 20% pullback. What are the necessary conditions to cause something like this? Well let's start ruling stuff out that I've seen so far on twitter and following Ockhams Razor:
Possibility 1: The FED is drafting a bill to make cryptocurrency even highly scrutinized and labeled as terrorist activity.
I saw this on twitter, and while it's certainly possible, it's certainly more complex than other possibilities. For example, the necessary conditions for this to happen and us not know about it are hilariously impossible. If you live in the U.S., people are extremely divided to follow the administration at this point and time. It seems very clear Pence is running the show now, and I highly doubt anyone is doing anything drastic. The government is in a bit of a standstill at the moment until Biden comes into office on the 20th. Do I believe cryptocurrency regulation is on the agenda? Sure, but is there some secret plot being brewed to throw everyone in prison who ever touched bitcoin? I'm pretty sure the government is worried about other things, and just taking a pause before the new administration comes in, and possibly doing a bit of a song and dance for Trump Wars: The Impeachement Strikes back.
Possibility 2: People are moving into a risk off scenario like Black Thursday.
Ok, this has more legs. Many countries haven't contained the virus well. With a new strain, I'm sure many people are thinking about going risk-off and locking in some gains for potential sell offs. I'll show you a single picture though: https://imgur.com/a/BHOiths
This is the net flows of ETH to exchanges for the past year. The last risk off scenario sees a level signal that is really obvious. The last week, can we actually say everyone is selling? At least here in the US, there's some confidence that Grandpa Joe will come in and start printing money. I love Grandpa Joe. He's going to make everyone rich here, and we all know it. Are any of you all selling? I highly doubt the money printer will stop going BRR, and I don't think any of you are selling. I'm going to write this one off.
Possibility 3: Bank manipulation via Naked Short Selling.
I think this one has more legs than 1 and 2, but I don't necessarily believe this is what's going on. We all have heard how banks manipulate gold prices. Bitcoin would be an absolute dream for banks to manipulate. We all know they could go out and tank this market with no survivors if they wanted to, but it seems so goofy and hard to coordinate, and it would also seem like everyone would catch on and immediately buy the dip. Not only that, we're a pretty close knit group. Someone would spill alpha saying they're getting calls from Jamie Dixon, and before the hour, there would be 80 videos on Youtube talking about it. While I think this is technically possible, I doubt it. I also don't believe banks can touch crypto assets yet. Many of them simply can't mess with it due to Charter rules. How many large market cap companies have the ability and legal authority to actually mess with crypto markets? Probably only a few. Many companies have also threw in price targets of over $100K for Bitcoin. I mean, why manipulate at that point. It seems easier just to buy.
My Take: Miners locking in Prices.
So, exchange netflows aren't a strong signal, the governments are in disarray, and banks aren't that secret. This really only leaves miners to be the culprits. Miners have a pretty intensive business operation. They have energy overhead that is generally a fixed monthly cost, rent, and employees to pay. In terms of profits, they have previous reserves of coins, and transaction fees. At least on the Ethereum side, transaction fees have been extremely profitable. On chain interactions have boomed in the past 3 months. So let's put ourselves in their shoes.
You're a miner, and you're doing the math. Your operating costs are generally fixed. Energy has been extremely cheap because no one is commuting to work. Gas prices are at a general low, and this also is given the past year, energy costs completely bottomed out. It's January of this year. All the coins have tripled in price over the past 3 weeks, and you tally this up and realize a really good thing: "I can sell off a 10th of my reserves, and cover all operating expenses for the next year."
Ding ding ding! Bitcoin is at all time highs. This is a significant event. In their models, we are in the "black swan" moment where they probably put a run like this as an extremely low probability event. They didn't plan for this much price action, and they're looking at their reserves and locking in operating costs for probably the next 2-3 years. Their rationale must love this situation. They paid their bills for the next year, chain data isn't stopping and adoption is growing, and they can essentially mine every coin from now on and place it in reserves. They don't need to sell any more Bitcoin. Why? They paid their rent for the year. This seems like a far simpler explanation. Miners know exactly how much money they need to operate, and they generally follow the same formulas based on their energy and rent costs versus coin flows and price. Taking some coin off the table just makes sense, and I don't doubt many of them reached that conclusion, which further triggered some stop loss sales.
What I think it means: Big boom incoming. $60K BTC by end of February.
I'm betting we'll shake this dip off. More stimulus is incoming from the U.S. FED. If miners also have sold off their supplies for the near future, they will have no intention of selling over the next few months. Supply shocks are incoming as people get stimulus, and there's just not enough crypto to sell as we all hodl and miners build up their reserves.
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