The Bearish Case for Bitcoin

Ready, set…

First of all let me be clear on something: I’m a quasi-BTC maximalist. My background is equities trading and I’ve dedicated the past 18 months trading and studying cryptos from a generalist perspective.

1. Institutionals can short as many “BTCs” they want

CME and CBOE futures operate on cash settlement basis so they don’t really take into account crypto exchanges’ volumes. Hell, they don’t even care about how many BTCs are out there. Let’s face it: it’s a financial bet amongst some very savvy players. If someone starts offering BTC futures below spot market there will always be some other party willing to take this offer. This arbitrator will simply sell (or hedge) it on OTC, exchanges, LedgerX, Bitmex. Bottom line is: we did NOT have this prior to 1Q2018. Any chart you read before that time would be equivalent to compare minor league and UEFA finals.

2. Bitfinex is Mt Gox 2.0

If you don’t believe it, I don’t have time to convince you. Stop trying to fix a sinking ship. It doesn’t really care if they have USD 1,8 billion anymore. Now it’s up to FBI and anti money laundering agencies, it’s just a matter of time. And please don’t say: “Oh, they have less than 20% of Bitcoin’s volume” or “Tether is less than 2% of Bitcoin’s market cap”. Non-fiat exchanges have their hands tied until Tether basically becomes irrelevant but they clearly don’t have the intention to kill it anytime soon. Those exchanges somehow manage to profit from this (non-KYC clients perhaps?) and are only listing other stablecoins to prepare for the worst case, besides showing clients’ some minimal respect

3. BTC-e, 1Broker, EtherDelta

First they came for a Russian money launderer, and I didn’t speak out — cause my exchange is not laundering money (u sure?). Then they came for a CFD non licensed operation, and I didn’t speak out — cause my exchange is regulated (is it?). Then they came for a small crypto DEX, and I didn’t speak out — cause my exchange has deep pockets and lobby power (does it?). STOP FOOLING YOURSELF: THEY ARE COMING. Yes, Binance, Poloniex and Bittrex will certainly be saved for last. Gov agencies don’t want another SAC Capital — legal battles lasting forever. Low hanging fruits first, build momentum, create legal framework… then attack larger companies.

4. USD 11+ billion daily volume

How much liquidity is out there? We all know Coinmarketcap data is useless. Coinbit, Bitforex, Coinbene, DOBI trade,… no way those exchanges have USD 200 million daily volume. OTC volume is probably 5–20x larger than exchanges, but are those guys using cryptos to wire money overseas (tax evasion? laundering?) or is there really a marginal buyer for large blocks every single day? Cause all I see is bots doing scalping, wash trading and short-term arbitrage besides those large arbitrator/OTC players. Interesting use case for XRP and stablecoins but not for Bitcoin. Whenever a large buyer comes in, market spikes. Opposite happens when someone tries to dump.

5. Institutionals are NOT coming, well… at least not to buy crypto indiscriminately

Are Fidelity, Goldman Sachs, Harvard et al buying BTC or mostly investing in the ecosystem? Yes, it all points to a USD 10 trillion market cap within 5y. But what if Amazon Coin, XRP “the standard” or Circle USD lead the race? What if securities tokens become so big that crypto market becomes irrelevant? What makes you so sure that institutionals will get the weaker end of the stick? Banks + government + large companies manipulate equities, commodities and FX markets cause they have leverage: either they control trading & lending systems or somehow can nudge producers and/or large intermediates for their own benefit. Can they do the same trick on Bitcoin? NO. So don’t boo me for not expecting institutionals to “save the day” here.

BOTTOM LINE: I’m pretty sure Bitcoin will lead the crypto (non-centralized coins) race over the long run. I don’t think ETF or BAKKT will be enough to sustain an USD 12k+ level. They’re not a reason for sustainable inflow. Let’s face it: general public is doing fine with USD/EUR/JPY and debit/credit cards. Maybe inflationary countries just need a fiat stablecoin or a security token tied to global bonds — something “safe”. Right now Bitcoin = Investment = Risk. It has all the necessary ingredients to become a perfect store of value and future MoE, but right now it just isn’t just there yet. If you are running away from inflation you are most likely also running away from risk. Bitcoin will not have a sustainable inflow until we clear up this mess.

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Cofounder @ Radar BTC: (portuguese)

Marcel @noshitcoins

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Former equities salestrader; Bitcoin/crypto trader & analyst; 50+ published editorials & research pieces

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