Corona-chan rides in on a pale horse — and all the markets crash! It turns out that an international health crisis is a systemic issue not fixed with some central bank cash.

I understand there was also some price action in assets the real world doesn’t care about — such as crypto.

If you think about it, though — this is actually good news for Bitcoin.

Last chance to buy under $100k!





The action on Coinbase started yesterday, 12 March, at around 10:00 UTC. You can see in the chart above (a snapshot at 11:38 UTC) how the price is steady around $7,250 until 10:30 UTC … but the volume — the grey bars at the bottom — has started picking up.

The first crash happens from 10:30 to 10:45 UTC. The price thrashes through the rest of the day — people buying in, people cashing out, Tethers being pumped in as needed. The price finally bottomed at $3,858 at 02:15 UTC this morning, 13 March.

(What are tethers? US-dollar substitute tokens, that provide almost all of the cash flow in the Bitcoin trading system. They’re supposedly backed one-to-one by dollars — except that they aren’t, and nobody’s ever been verified as successfully cashing in their tethers. I recommend Patrick McKenzie’s explanation of the Tether story. “Short version: Tether is the internal accounting system for the largest fraud since Madoff.”) [Patrick McKenzie]

Yesterday’s crash was unusual — almost all Bitcoin price movement since the November 2018 crash can be fully explained by traders manipulating the price to win a margin bet, that the price will go up or down. The most egregious example of such manipulation was in May 2019, when a single sale of 5,000 BTC on Bitstamp won a $250 million margin bet on BitMEX — but this sort of thing really has been all the action in the past year or so.

This sort of manipulation gives a “Bart” formation on price graphs — where the price goes up a few hundred dollars in just minutes, stays there a few hours, then goes down a few hundred dollars, to wreck the traders betting either way. (See right.)

A Bart doesn’t have all that thrashing around — such as we’ve seen in the past two days — after the sudden rise or sudden dip.

So I suspect that today’s crash was someone who’d lost a pile on actual-money investments, and cashed in their riskier assets first. The Bitcoin market is so thin, that one guy is all it takes. Then others got worried.

Today’s recovery has been Tether-fueled — starting with 5,994,000 USDT released at 13:49 UTC yesterday, with further infusions through the past day. You can do a suprising amount with ready dollars when you don’t even need to bother proving they’re really dollars.

What does this mean for Bitcoin?

Not much. There’s no reason for the crypto ice age to thaw — but if bitcoiners weren’t persistent beyond reason, they wouldn’t be bitcoiners.

Bitcoin miners were already worried about the “Halvening” later this year — when the reward for mining a block of transactions is reduced from 12.5 BTC to 6.25 BTC, immediately halving their income.

But this drop will have marginal operations shutting down like they did after the price crash of late 2018.

This doesn’t matter for Bitcoin itself, though. If mining dropped by 90% … nobody would even notice. All the price action happens on exchanges, not on the blockchain.

We saw this in September 2017 — with the crypto bubble in full flow — when miners jumped to Bitcoin Cash, and the main Bitcoin blockchain was taking an hour between blocks. Hardly anyone even cared.

Corona-chan loves you, and wants to be your friend! Maybe your last friend ever!

The dumbest Bitcoiner story is the one that ended up going:

BITCOINERS: In economically troubled times, people will go for the hardest, most trustworthy money!! … Bitcoin. We mean Bitcoin.

ACTUAL INVESTORS: (go all-in on US dollar Treasuries)

NORMAL PEOPLE: Wow, that Bitcoin thing’s still around?

Coiners forget that literally the entire price history of Bitcoin — since it could first be said to have a price, in late 2010 or early 2011 — has been in a conventional asset bull market.

Everything Bitcoin’s ever done has been under the best possible circumstances. There’s no reason for a miracle recovery under the worst.

Alll the stories that Bitcoiners told about “store of value” and “safe hedge” and “uncorrelated asset” and so on were just bagholders trying to convince prospective suckers that Bitcoin wasn’t just gambling.

It’s just gambling, dudes.

Slow down COVID-19 by putting it on the blockchain — Ittay Eyal (@ittayeyal) March 12, 2020