This week in crypto, we explore the recent events in the world of Bitcoin & crypto.
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Good morning. It’s Friday, April 1st. It’s not April fool’s conversation, but it’s time for this week in crypto with Dave Weisberger, I’m the CEO of coin routes. Well, there’s a lot going on in both the US. and in Europe. We’re starting starting to see evidence of a famous conversation that has been adapted by Nicholas Klein, who was a famous union organizer. He said, paraphrased, first they ignore you, then they laugh at you, then they fight you, then you win. It’s important to understand where we are in the case of crypto because we’re clearly already past the ignoring stage. We’re past the laughing stage and now they’re fighting us. What are the examples? Well, there have been three in the last couple of weeks. First we have Elizabeth Warren’s attempt to try to claim that bitcoin was going to be used for avoiding sanctions. I’ve talked about this many times on podcasts with the wolf of all streets. You can look that up. The reality is bitcoin is terrible for trying to avoid sanctions.
It’s perfectly fine if people want to try to do things anonymously by paying a few hundred dollars to their friends. But try to move a few hundred million dollars in the bitcoin blockchain and the law enforcement authorities across the world will find you. But that doesn’t stop them. Then we had yesterday the big news of the European union is now trying to say that all centralized exchanges and places will have to KYC all unhosted wallets. Well, that sounds horrible, but the reality is it just means that people who want to own their own coins will have to have a KYC wallet.
It doesn’t mean they have to keep their coins in the KYC wallet after they have taken the possession, but it does mean that they’re going to have to do that. It’s a bit annoying and yes, it does open the door for further regulation to do blacklisting and whitelisting later, but as of now, it’s not that big of a deal. It was, however, caused for a selloff yesterday, but we’ll get to the charts of the technicals in a minute. Last, we had the even more ridiculous idea that Greenpeace and Chris Larsen, one of the early ripple investors, we’ll just leave it at that, teamed up to say bitcoin should switch to proof of stake because proof of work is environmentally dangerous. Now, there are so many flaws in this analysis that I could go on for hours, but let’s just put it this way.
Proof of work takes energy and converts it into money. Michael Saylor will talk about this chapter in verse. There’s lots of people who will talk about it. But what’s important to understand about bitcoin in particular is that its proof of work have used to stabilize grids, which we’re seeing in Texas right now. It could be used to incentivize renewables that would otherwise not be economical. And it is relatively small compared to the value it creates, especially when you compare it to the traditional financial system, which nobody ever wants to do when they’re making these comparisons. But in any case, bitcoin is not going to switch from proof of work. It is what it is. Now, where does this leave us? Well, the reality is, over the last few weeks, we’ve seen a very powerful, very frustrating rally for traders.
What do I mean by that? Well, it’s gone from the bottom of its long trading range that we’ve been in for several months toward the top of the trading range, and it’s done so in a grinding slow, not terribly volatile manner. Actually, the last couple of days are some of the more volatile we’ve had when it’s sold off on the European news and bounced back this morning. But the reality is, as crypto as a whole is towards the top of its trading range. It’s doing so in a way that makes this commenter believe we’re looking at actual natural buying.
We’ve seen a market decrease in speculator activity, both long and short, over the last couple of months, ever since Putin invaded Ukraine, because speculators don’t want to have open positions when they go to bed at night, when a bomb could go off in the wrong place or something could happen. So the reality is that we’re seeing this type of rally being very slow, but it’s very steady. Why do I say to this natural buying? Well, because large institutions and smart money don’t chase. They don’t immediately say, oh, my God, I have to buy this second. They buy slow and steady, and they only reset their prices upwards when they can’t get liquidity. That’s what we’ve been seeing. It continues to be the case. Now, does this mean that the upside breakout is imminent? Probably not. We probably have more of the same. But we’ve also seen traders think that because of next week’s conference, Bitcoin 2022 -and by the way, anyone who’s watching this come by the Coin Routes booth, we’re a sponsor of the event. US and 20 and some thousand other people will be there.
Generally, when we’ve had these big party-like conferences for Bitcoin, the market sells off. Last year, it sold off despite the fact that El Salvador made its historic announcement of being the first sovereign nation to adopt bitcoin as legal tender. So maybe traders were leaning into that yesterday and maybe they had to cover their shorts today, and that’s what happened. I don’t know. But the reality of the situation is we’re setting up for a very interesting time as we get towards the top of this range, and shorts are starting to feel the pain of being short in this market. We still haven’t seen any speculation, we still haven’t seen any FOMO, but who knows? If we don’t get a set up in this conference, it could make for an interesting few weeks as we get through April.