Special Update - Crypto Crash as Liquidity Crisis Caused by COVID-19 Panic
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A Special Note... March 25th 2020
The past few weeks have been a wild ride across the wider spectrum of markets and we feel it is important to share with you some updates.
A liquidity grab due to COVID-19 sell off triggered cascading closure of margined positions and a 52% BTC fall in 24 hours
Friday the 13th was a red day for markets worldwide and the dumping of assets did extend to bitcoin, despite the commonly held assertion that bitcoin is a non-correlated asset. Does this mean bitcoin is now a correlated asset? Well, not in our eyes, but let me explain.
Two major events occurred on Friday.
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A global liquidity crunch saw a flight to cash, in particular USD
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The sudden sell off triggered a tsunami of forced closures on highly leveraged positions on CFD trading exchanges such as Bitmex.
A whopping $1.6b USD in long positions were liquidated on the 12th/13th
Source: https://www.cryptometer.io/bitmex-rekt
Since the massive sell off, we’re glad to see what appears to be signs of a decoupling from traditional markets.
Source: https://twitter.com/woonomic/status/1242405631903977473/photo/1
USD Fed offering ‘unlimited funds’ to prop up markets
[
](https://video.twimg.com/ext_tw_video/1241904770568388609/pu/vid/1280x720/q-nSX7EBvsaViJ1q.mp4)
The US is embarking on a money printing mission to prop up markets via Quantitative Easing (QE) and handouts to citizens to make it through the covid-19 crisis. Traditionally QE has been criticised as disguised money printing but this time there is little mistake to where this money is coming from.
This $2b USD printing machine has been agreed and is waiting to pass into law. The urgency of this is to help address what is predicted to be a very alarming employment catastrophe in the US.
Satoshi couldn’t have timed it better
If I were to write a script for bitcoin, I couldn't have done it better than what is happening right now. Life is stranger than fiction. You wouldn't believe that a global health pandemic would trigger a complete collapse of markets simultaneously leading to unprecedented and blatant money printing, right when a provably scarce alternative halves its issuance rate.
Source: https://digitalik.net/btc/sf_model/AUD
If you are not familiar with the stock to flow ratio then we highly recommend taking some time to explore it. It’s a fascinating model of the pricing action of bitcoin in relation to the issuance of new ‘stock’ of bitcoin. Note also the above is a log scale.
Bitcoin ‘Halvening’
Less than 50 days until the issuance of bitcoin drops from 12.5 BTC per block to 6.25 BTC per block. It currently takes $12m additional USD entering the market per day to buy the 1800 daily new BTC and keep BTC at the current price. What will happen when issuance drops to 900 BTC per day?
Reading Material
A few people have been asking which tools we use. Here are some useful websites to track pricing as well as learn more about the space.
Trading View
https://www.tradingview.com/chart/
Trading view is excellent for charting crypto as well as traditional equities, indexes and commodities
Great introductions to Bitcoin and why it is relevant
The bitcoin standard - Saifedean Ammous
Available on kindle/ebook for those self-isolating
https://www.amazon.com.au/Bitcoin-Standard-Decentralized-Alternative-Central-ebook/dp/B07BPM3GZQ
The little bitcoin book
Available on kindle/ebook for those self-isolating
https://www.amazon.com.au/Little-Bitcoin-Book-Matters-Finances-ebook/dp/B07W957N7T
Comprehensive bitcoin information repository (some is technical)
https://www.lopp.net/bitcoin-information.html
Interesting charts from Willy Woo
Memes
We couldn’t help but include an oldie but still relevant clip from the ABC - Clarke and Dawe
[
](https://www.youtube.com/watch?v=j2AvU2cfXRk)
Clarke and Dawe - Quantitative Easing
Until next month, Happy Investing!
Stormrake Team
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