On April 13th 2021, in an article titled THE END OF CRYPTOS that triggered a lot of comments and social media activity, we were calling the top of the cryptos and predicting their future collapse.
Some readers even took pictures of our post to create a Non-Fungible Token…. We hope they really did.
Our case was that Crypto-currencies were isn the middle of an irrational investment mania, that they would never survive as a currency and would ultimately be outlawed by Governments.
All those elements proved right in a matter of one month only …
The mania ended as the main promoter of Bitcoins and Doge Coins reversed course for reasons that will become apparent one day, two Turkish exchanges blew-up, China re-iterated their ban on cryptocurrencies, the European Central Bank described the mania as worse than the dutch Tulip bulb bubble in 1600 and the US Department of Justice started probing Binance, the main crypto exchange for money laundering and sheltering of criminal activities.
Our rationale was that the much-hyped IPO of CoinBase would mark the beginning of the ned of the crypto mania and that the collapse would be a rude awakening within the long list of bubbles engineered by the FED bursting one after the other once.
Bitcoins and most other Cryptos peaked on that very day at 64’000 and traded today at our target level of 30’000 for the initial stage of the collapse, down 54 % in a matter of a month.
There is blood on the street and reading te comments on social media, Elon Musk has lost a lot of his luster, enticing milleniums to speculate and causing their demise by his tweets…
But it is the entire world of crypto currencies that is being shaken…
The entire rationale of holding cryptos and the infatuation with the technology are being questioned as investors and many newcomers are sitting on either losses or have seen their cherished profits evaporate..
More worrying is how far and how much traditional financial institutions have been dragged into the sphere by the pressure of their clients, offering funds, ETFs, and solutions to invest in the mania and that will now be facing clients wanting to bail out.
When looking at it technically, the damage is severe, but it is only the first leg of the collapse.
Even CoinBase got hammered, trade g below its IPO price for the first time, despite suicidal Cathy Wood piling in like a poker player that is losing so mu^ch money that he has no choice but to go all-in.
It is clearly not over but the first leg of the bear market is completed and today we took our profits on our two remaining short positions.
We closed Bitcoin just under 31’000 as we were nearing our major support level at 30’000 and closed our Grayscale Ether Trust short position with a 37 % profit in less than ten days
Our Model portfolio is up another + 7.38 % since the week-end, for a 45.3 % performance year to date, and we are happy to take our profits and de-risk as much as we can.
We expect the cryptos to rebound and are ready to short again in the coming days or weeks, but for now the first target has been reached and we are happy to tale our chips off the table.
It remains to be seen how TESLA will fare in the second quarter of the year if it has kept its 1.5 Billion investment in Bitcoins at 39’000, with the collapse of its Chinese car sales and 10’000 cars on parking lots for lack of adequate chips.
We stay short Elon Musk….
At the end of the day, having the ability to identify bubbles and turning points and having the courage to trade the downside does also deliver substantial performances ..
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