Why Bitcoin Suddenly Looks Weak

Bitcoin dropped by 11% in a few days, one of its sharpest pullbacks in recent months at the time of writing.

MicroStrategy disclosed it sold 32 Bitcoin (a drop of water in the Pacific) but strangely triggered a downtrend. As prices fell, they hit leveraged long positions and got liquidated. In 24 hours, $1.64 billion was wiped out, $1.47 billion of that from long positions on Wednesday.

Should we be worried?

Remembering the 2022 Bear Market

In November 2021, Bitcoin hit an all-time high of $68,789 and then started falling for a whole year.

What killed the bull market was powerful macro forces. Inflation was running hot following a gigantic stimulus from the Fed and governments all around the world. Investors started pricing in Federal Reserve rate hikes before they even happened. Risk assets sold off. Bitcoin, sitting near the top of the risk spectrum, sold off hardest. By early 2022, the downtrend was already well underway.

Then in February 2022, Russia invaded Ukraine. The geopolitical shock pushed Bitcoin lower again. Markets don't like uncertainty, and a land war in Europe is about as uncertain as it gets.

Then in November 2022, FTX collapsed. Sam Bankman-Fried's exchange imploded overnight, taking billions in customer funds with it. Bitcoin fell to $15,586, down 77% from its all-time high. The global crypto market cap had gone from over $3 trillion to under $850 billion in roughly twelve months.

If History Is a Teacher...

Some of the forces that move Bitcoin price have nothing to do with Bitcoin: interest rates, geopolitical conflict, the implosion of a fraud.

Look at where we are now. US-Iran tensions, the same kind of geopolitical overhang that dragged markets in early 2022. Inflation is sticky again, and rate cuts that seemed likely at the start of the year are increasingly off the table. And capital is rotating hard into AI stocks, which are pulling attention and flows away from Bitcoin.

None of this is permanent. None of it breaks the long-term case. But it does explain the environment Bitcoin is operating in now. In 2022, the people who understood this held through $15,000 and came out the other side. The macro headwinds eventually became tailwinds.

They will probably again.

A quick check-in!

Are you holding Bitcoin? Does your portfolio look like it just lost a bar fight after this week?

Same. Welcome to the pit-in-your-stomach club.

I've had this exact feeling three times in ten years of doing Bitcoin. So I want to say this as someone who's been on the floor before: it passes. And on the other side of it, the actual thesis for Bitcoin is stronger than it's ever been.

We're building a parallel money system for the day the fiat bubble finally pops... and that makes Bitcoin different (and limitless) from every other "inflation hedge".

Could the price go lower over the next 12 months? Sure.
Will it be a lot higher in three years? My gut and my conviction says a resounding yes.

Zoom out. Touch grass. Drive Ubers for some extra DCA dry powder...
You're on the right side of history 🫡