Author: MacroScope
Compiled by: Liam
A brief explanation of the BTC selloff and what to focus on next:
1. I had said that during a gold bull market, Bit should vastly outperform gold. But it's important to note that when risk assets are hit like last week, Bit's risk factor will drive its movement more than its long-term inflation hedge factor. But its "fast horse" relationship with gold remains unchanged. The price levels I mentioned in my Feb 19 tweet are still valid. If the trading price of BTC rebounds to those levels (basically new highs), then we will see a new era of BTC outperforming gold and other assets. The key word is "if"... this is not a forecast.
2. Understanding the institutional mindset is very important. I posted a message after the Nov 10 election: "A pullback in Bit prices may trigger a wave of buying. This has been going on for months, but I think it will intensify going forward. Many institutions are price-sensitive, they tend to sit on the sidelines when the momentum is strong, but when prices reach levels they can accept, they will actively participate in buying." Remember those 13F filings showing large increases in holdings and new buyers (like Middle East sovereign wealth funds)? Those filings were as of Dec 31, so all those purchases happened in Oct, Nov and Dec. Last week's Bit drop has taken us back to mid-Nov prices, and much of the 13F buying happened around that time period. Many price-sensitive buyers are active again. Sovereign wealth funds won't make large purchases just for losses or small gains a few months out. Unless his investment thesis has changed, Paul Tudor Jones won't make IBIT the largest stock/ETF position in his entire portfolio (as per his recent 13F) just to exit soon after. These buyers operate at certain levels, they like to enter liquidity. We'll learn more in the next round of 13F filings.
3. Closely watching DC is important. It's understandable to be frustrated by the slow progress on the Bit reserve strategy, but that's a mistake. Remember, Trump's executive order on Jan 23 gave the working group 180 days to submit the national reserve report. This means by late July at the latest (possibly earlier). Over the next few months, traders will start anticipating this report.
4. Trump has defined his presidency by the stock market performance. Bit is now clearly part of his self-evaluation. If the price weakness persists before the working group submits the report, expect Trump to issue a pro-Bit statement, possibly even unilateral action or announcement. Traders (especially shorts) should understand this could happen at any time.
5. The Lummis Bill proposes a massive US purchase of Bit. I had said that if that bill (or a similar initiative) passes, Bit prices could skyrocket to six figures or higher. But even if the bill doesn't pass, does anyone really think the only country that has started buying Bit recently is the one that has to disclose it through 13F filings?
6. Finally, please remember the prudent position management I mentioned earlier. This is crucial for both investors and traders. If someone is feeling anxious about this selloff, it means they need to re-evaluate the size of their positions. I said this after the Nov 10 election: "Maintaining conservatism will become more important to avoid being wiped out in the long-term markets that have already undergone major changes." We feel for the leveraged traders and speculators.
