Bitcoin Is Waiting For A Very Specific Disaster

When Things Go Wrong

Looking back to March of 2020 reveals exactly how dangerous leverage can be. It also reveals that in the moment of disaster, Bitcoin and the broader Crypto market take the hardest blow. However, once a capitulation event has occurred, Crypto generally offers the best odds. Something that you have to be aware of is that many traditional investors are still simply “testing the waters” when it comes to Crypto. For many, stocks are still the primary focus. In an event such as the covid crash, margin calls get triggered, and fast! If you are going to be able to cover those margin calls, then you need to act speedily. This is where the speed and accessibility of Crypto work against itself. Crypto is extremely liquid, especially if you are maintaining custody and making use of a DEX. There is no “processing period” that often occurs on share trading platforms. The market also trades 24/7, ultimately removing further friction and delays.

The Scapegoat

Traditional investors continue to place the majority of their allocation in traditional markets. Bitcoin is simply a minimal play, which means that their commitment is to the majority of their portfolios. Bitcoin becomes “easy liquidity”, which is used to protect their larger positions. This causes an already volatile market to become even more volatile. Traditional investors pull capital as the markets collapse. This accelerates and intensifies the collapse of the Crypto market. This then triggers liquidations, which ultimately sparks a chain of liquidations. There is simply no substantial buying pressure in a capitulation event. Relatively speaking, positions in traditional markets are receiving more capital to buffer and offset liquidations. The Crypto market is, unfortunately, providing a lot of that liquidity and therefore doesn’t stand much of a chance in the face of calamity.

Not So Fast!

As I mentioned, this is simply in the moment. Once the blood has been shed, the best place to be is in a newly acquired Crypto position. You have to do the right thing at the right time! Getting the timing wrong is the equivalent of getting everything wrong because the outcome is exactly the same. In my opinion, further downside is inevitable. Another significant leg down, combined with a significant failure within the banking sector would be the “perfect storm” to send Bitcoin into a fresh bullish phase. If markets find a floor after significant bloodshed, Bitcoin will once again garner attention, similar to that of 2020. If further calamity strikes that affirms a decentralized, unseizable form of money then I would be extremely bullish. A move like this would most likely lead into the halving, where price action would push even higher.


Positioning yourself for the best outcome is at the heart of effective portfolio management. Those who were laughing at the patient when BTC was at $25K recently were suggesting that not buying would result in “missing out”. A simple lesson in risk management: Waiting for markets to unwind and bottom costs nothing. On the other hand, buying too early can be extremely costly. Furthermore, even if one were to miss a move, it also costs nothing. Learning to preserve capital is essential in any market, especially Crypto. I must be honest, this cycle has produced the most “disconnected” market participants that I have personally experienced. This just makes it easier for “Smart Money” to keep riding the waves that “retail” create.

Final Thoughts

Bitcoin actually needs a solid flush-out bottom scenario, followed by an event or events that will ultimately validate it as an “unstoppable alternative”. If this plays out, I believe that we will see some truly significant moves to the upside.

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