Bitcoin’s Latest Dip: Why This Dip May Not Be Just Another Dip

Now for many reading the above headline that are of the “Diamond Hands” persuasion, let me say this clearly: You, may no longer be a factor in any ‘dip’ to be bought or sold.

“Diamond Hands” (aka HODL, hold on for dear life, etc.) only matters for possible narrative control across either social media platforms or, to fill air/print space across the mainstream business/financial media outlets when needed. In other words: it’s no longer about what you think or do – it’s about what businesses that have invested looking for returns will do. Period.

When an investment does not perform as expected (aka, go up) there is no such concept as “HODL” or “Diamond Hands.” If it’s not making returns – it gets sold. Again, period. See, Warren Buffett for clues, for those that doubt this premise. (more on this later)

The reason for the above clarification is to possibly nullify the now incessant arguments on why this latest draw down in Bitcoin™ is something to be looked at through the eyes of prior draw downs that have come before. i.e., Losing over 50% of its value in a flash is normal, and they’ve been through worse. Hence “Diamond Hands” aka: won’t sell, regardless.

Well, maybe they’ve been there, seen that. But guess who has not? Hint: Large scale investors (think banks, insurance companies et. al.) that have to file earnings reports and whose salaries and bonuses depend on those reports.

And that’s a very big problem for why this dip may not be just any dip.

Bitcoin of late has been nothing more than the last bastion (all my conjecture, of course) for Wall Street to formulate another narrative to help persuade their clients to throw money at in the hopes that there was some possible real returns still possible, for everything else has been crushed by central banks.

And what better story to tell/sell to desperate clients (think those in charge of your retirement funds and more) than one that propelled a narrative that “The more central banks print – the more you make!”

They (the big banks and brokers) collect fees, get control of ever-the-more AUM (assets under management), reduce the risk for comparisons to indexing with hyped-up crypto gains and more. All sounds fantastic in theory, and even better when it actually seems to do just that.

However, just like anything else in life – it all sounds great, until out of the blue there’s a 50% plus sell off. Can you say, “Uh-Oh?”

Wait! Did you hear Tom Brady bought the dip?! That’s just one in the latest for what has now been used as “proof” this latest dip is just another in a long line of previous dips to be bought.

BTFD (buy the f’n dip) is back baby!!

Maybe, however, I just have one question: When did Tom Brady’s prowess for cryptos suddenly take precedent over one such as Mr. Winklevoss who gave everyone a “Pro Tip” to BTFD at around the $50K level? You know, right before it dropped another $20K where the 54% plunge of record needed it to sport a 2 handle rather than the 5 handle when he gave out his “Pro Tip.”

Asking, for a friend.

(Screen shot source)

And, just in case you may not be into all this Bitcoin stuff, that “Pro Tip” is still 10 to 20 $thousand underwater depending on when you want to look at price chart. But, look quick. Because as of this writing – it’s still falling and now sporting a three handle. i.e., It’s closer to its 54% down dip (and getting closer by the moment) than it is to when Mr. Winklevoss’s “Pro Tip” to BTFD was issued.

Maybe it’s just me, but that seems to not be such a good “Pro Tip.” But, then again, that’s just me.

Mark Cuban is supposedly, also, championing why cryptos are going to lead the way in environmental issues and more. Again, all the power to him.

However, all I’ll say to that, is this: The moment your ticket price bought in crytos today ends up netting his basketball franchise profits negatively? (i.e., goes down where he can’t hedge and loses money on the deal) All I’ll suggest is that you also bring your leather wallet and a few greenbacks, you know, in case your crypto wallet suddenly becomes “inoperable.” Just sayin’.

Remember: the reason of late that has been told-and-sold across the media airwaves about Bitcoin and cryptos has been its “adoption” via the investing public. i.e., real money in size and scale. That’s when you began hearing about investments from the likes of Mass Mutual™ and others. The narrative from there went into hyper-drive from the doldrums it had languished ever since it’s last fall from grace.

To call it a frenzy of late, would be an understatement.

But, then a funny thing happened – another, sudden 50% drop, some even larger depending on the crypto vehicle. Why is this different? Hint…

All that profit from all those “institutions” that were banking on all those gains are suddenly gone. For some, worse than gone, as in – negative balance sheet gone. And they do not appear to be recovering in any suitable form that would give those “investment managers” solace. Regardless if Tom Brady’s in or out of “the game.”

Here’s my two-cents…

Even a Tom Brady “hail-mary” ain’t worth jack if the game clock’s at zero and his team’s down more than 10 or 20 $thousand points. Tom Brady is a big star and has a very big wallet and a ton of cachet. But, his ability to “influence a game” the size of what institutional investors need for a “win” is minuscule. And they don’t play on a field of hope – it’s either net gains or, they exit the field.

I believe what you are watching is just that. i.e., The big-money that drove the run up in points (all via narrative building) are now exiting the playing field, while there’s still something left of any prior gains or, anything left in toto.

“Diamond Hands” are for Tom Brady and others – not institutional investors that have to answer to investor demands for profits as to pay their salaries and bonuses. Think about it.

Again, it’s all my conjecture. Yet, remember I said prior when referencing, Mr. Buffett, I would come back to him? Well, let me add the following for a bit more context for you to think about when trying to get a handle on how all these crypto hypotheses may play out.

Mr. Buffett via his Berkshire Hathaway™ are currently big into, Apple™. As a matter of fact Apple, currently, is its largest position as reported in their latest 13F filing. It’s also been reported that Mr. Buffett said that trimming his holding in Apple was “probably a mistake.”

Well, just to make sure we’re looking at that statement through the right “lens.” Let’s look at when and where both actions were made. i.e., when he (possibly) sold and when he implied, maybe it was a mistake.

In Berkshire Hathaway’s latest earnings report in April it showed the Apple position from QtoQ was down near $10Billion in value (aka lost money). In May (when Mr. Buffet was saying it was “probably a mistake.”) Apple was rebounding from where that loss was probably recorded, and had recovered better than half its fall from those January highs. Apple, also, had just reported another stellar earnings report and Mr. Cook also increased the buyback program to an unprecedented $90Billion. All the right narrative and correct assumptions for what should be easily construed to be “back to winning!”, yes?

Ah, no.

Guess what happened and is still happening? Hint: Apple is not only not getting back to its former highs but, more importantly, to people like Mr. Buffett and others – it is solidifying those losses – not erasing them as it has so many times prior. i.e. Apple’s share price is still closer to that $10Billion loss in value than it is to breaking even for 2021.

If those $Billions in lost value don’t recover in the very near future, do you think Mr. Buffett is going to be more “Diamond Hands” or more like, maybe, he wasn’t as mistaken as he thought and decides to sell more?

This is what Bitcoin is now dealing with, not to mention Mr. Cook.

As always, we shall see.

© 2021 Mark St.Cyr

Note: This is not trading or investing advice of any sort. This commentary is for “big picture” discussion purposes only. Please read, or re-read the “About This Site” page for any questions or clarifications.