Crypto market crash 2022 — Why is everything collapsing?

Sa. Sam. Foreign.

This is another episode of the Market Report. This is a special edition. We come to you today with very heavy hearts regarding what is going on in the market. And we want to talk to you about what's happening and hopefully reassure you about some of the stuff that you're seeing currently all over Twitter with Bitcoin, with Eth, with Celsius. We're going to be hitting some of the biggest topics that going through the Twitter sphere, seeing what people are talking about and hopefully make some sense of this today. So we have our resident experts here, Marcel Peckman and Jordan Finiseth, and we're going to dive right into this stuff. This is a special edition of the Market Report. Jordan and Marcel, welcome to this special edition today. How and what is going on right now, guys?

Well, Benton, the climate, the general climate couldn't be worse. I'm not saying just specifically of crypto because when you hear traditional analysts comment what happened to the markets on Friday and on Monday, especially the mortgage backed securities, the same thing that collapsed in 2008 with the Lehman Brothers debt instruments related to real estate investments. And the thing is there are no buyers from for those risk assets right now. And when this happens, when there's a panic in the real estate market, all every risk market in the world goes down and so does crypto. So traditional markets caused a very burdensome environment for us and we're feeling the pain right now.

Yeah, we're all somewhat used to volunteer volatility here in crypto, but just think about the fact that crypto was created in 2009, which was around the last time, the last major market shake up that the whole world experienced. So there's a whole generation of traders and even money managers that have never experienced a major market turndown which we're getting now. And it's not just the crypto market, as Marcel was saying, it's hitting all markets across the world, which is definitely going to just take an extra toll on the crypto market with its increased volatility. The people that, especially the newer investors, institutional investors and whatnot that aren't as of the HODL type nature are definitely going to be dumping their tokens in situations like this. So yeah, we've been mentioning it, like I've been saying for a year, like take your profits. These are the reasons because crypto can turn quick. And like you, you don't even got time to get out of the market when it really moves like this. So it's kind of like just hold on for dear life that's where the saying came from. And like, it's going to be a few rough months slogging out of this. But don't, don't get too depressed out there, people. It's just. It's just crypto. It's just money and that it will come back eventually.

Just for the record, gold is down 2.3% at 1828 right now. So even gold, which used to be the most, I don't know, stable assets over the past decade, is losing ground today. And 2, 0.3% for gold. It's like 23% for cryptos.

And I have a question about that, Marcel, but I want to take a second here and thank everyone for jumping in. See, sells with dips here. I see Shalom. I see rich new design. Luciana, friend of the show. Adrian's here. Vikram's back. Want to take a second to thank all of our loyal viewers for tuning in today. But Marcel, what does that tell you when gold is down? Are people flocking to Fiat right now? Is that really the safest place to hold is cash?

Everybody is fearing that the worst is about to happen. A major crisis, et cetera. So, yes, they're going to fly to US dollars, cash. They're going to fly to US treasury bills because they know that the US Cannot default because they simply print out money. So, yes, that's exactly what's happening right now.

That's a. That's a very interesting saying. We have a good question here from, from Ben in the chat here. This could be speculation, but were there ever articles about MicroStrategy getting liquidated once Bitcoin hits 21k? Do you guys know anything about that?

I think I had seen some different articles posted about that, but I think that they've kind of shored up their things and they can get down to a price of. What I saw most recently was $5,000 BTC before they really run into an issue. So.

Yeah, what happened is that they took out $205 million about three months ago from Silvergate and they gave bitcoins as collateral. But to start the trade, you only need to deposit like 30% or 50% collateral. So the price went down by 50%. And even the CFO of MicroStrategy said at that time that if Bitcoin went below $21,000, they will have to further add bitcoin as margin as collateral. And Michael Saylor himself said using the entire 103,000 bitcoins they have, their liquidation price would drop to $3.6K. 3 6, 5, 7. I think that was the number. So $3,000. But even if that's the case, even if bitcoin drops sub $5,000, has other assets from the company that can be used as collateral. So that's not really a liquidation risk for MicroStrategy.

Yeah, and there's microstrategy shows what, like shows what how Celsius should have been better organized in all this because a lot of this is again another platform with a large following that's causing the whole market to tank because they're making some stupid moves or just trying to. To avoid losses. But yeah, like you we mentioned before, you were mentioning before the show, Marcel, like this is kind of exposing how much of like just janky the whole. A lot of crypto projects are and not really up to snuff when it comes to comparing how long. Well, more well established financial institutions operate. And this is just going to kind of light a fire under the whole crypto sphere's butt to try and get our house in order because this is like twice in a couple of months where we just all been thrown into a house fire and everybody run out.

No, exactly.

Can you guys take a step back for me please because I'm really not familiar. First, can US Citizens use services like Blockfi and Celsius and land? And second, why would anyone use that if they have other options, even centralized ones like Binance offers stakings and stuff. Why would anyone use a third party, a third company instead of going directly to defy or to decentralized exchange.

You want to jump in here, Jordan?

Yeah, Celsius. And then we're kind of seeing like Celsius and Nexo we're kind of seeing maybe even on the same level as a Binance where you can deposit your your cryptos there and earn rewards. Binance obviously is not as open to U. S investors and Celsius and Nexo were so is block fee. I think that they actually had a decrease. I know especially block feed it had a decrease how many. How much they were offering to U. S citizens until there was a court case settled. But it was just a different option, some better yields and some. And it was kind of being promoted as being a more safe option than some of the D5 platforms because they're kind of like a centralized entities like Celsius. But again we're just learning that all things in crypto are highly risky and it's something we all need to be aware of.

And I think the big draw is these are kind of Like a very Neo bank esque place where you can kind of sit your crypto, earn your interest as you would in a traditional bank. But we're kind of quickly finding out what's actually going on behind the scenes here and are they actually collateralized enough to be able to give people their, their funds if there is a bank run? And so we're going to see what kind of plays out here. And I think, you know, Celsius is the tip of the iceberg. Maybe it, you know, matriculates over to a blockfi platform. I want to stay here on the macro level and then we're going to kind of dive into Bitcoin, Ethereum and then talk about what's going on with Celsius to really kind of bring some insights because I know we were talking pre show and so those are kind of the big topics. But like the, you know, don't forget CPI came out last week at 8.6% the highest it has ever been. Inflation is at a 40 year high, the highest we've ever seen here in the United States. Did a massive sell off by investors amid heightened inflation fears cause this crash? Marcel, what is your take on why this crash is actually happening right here, right now?

Well Ben, I don't think the CPI has anything to do it because yes, the number was the highest in 40 years but, but it has been extremely high for the past two or three months. So that was not anything news. What happens that starting June 1st the Federal Reserve could not no longer buy back those mbs, the mortgage backed securities, neither any debt instruments because they said or they, they promised to the Senate and to the Americans that they would reduce. So the Federal Reserve would reduce their balance sheet by $1 trillion in 12 months. So they can no longer buy those assets. Debt instruments, MBS, ETFs, they are obligated to either sell or to stay with their position. But they can no longer inflate the balance sheet anymore. So once they exit to those markets, they were the biggest buyers around. The market flipped bearish instantly. So that changed on June 1, but it took a couple of weeks until the market interpreted and understood what was the magnitude of this change. So that's why we're seeing the effects the impacts right now. But it all started on June 1st.

Yeah, and if you want to get really macro with that, this was, this all goes back to 2008 when I've heard some really smart people say that the market broke in 2008 and they have never fixed it, they've just papered it with a whole bunch of money. And we saw that escalate in the last two years and now they're like, oh look, you can't print money forever. Like it's not, it's not going to work in a world where people are actually giving physical assets or something in exchange for this printed money. And like we've, we've been hearing from multiple people yelling like Chicken Little, saying like this is gonna not work. And it's finally starting to break. I mentioned at the end of the last show, like we're at the crux of multiple cycles coming to an end and this is just gonna be rough for the whole planet. We're crypto ain't gonna escape it because it's a new asset class that's really just not, not too involved with a lot of the bigger money as it is. So yeah, we're like, oh, there's no good answers here. And we're all, the whole world's in for a little bit of hurt for a while. As Marcel's saying. The mortgage backed security market, it broke in 2008. They never fixed it and now they papered it over and kicked that can and they just try to kick the can again, but they missed and like fell on her ass.

I, I want to pull up a chart real quick for Bitcoin while we talk.

There's a point that's if the, let's assume that the Federal Reserve says, okay, let's print another $2 trillion, let's keep on buying those assets. There's a point the confidence on the US dollar itself breaks. And that's the worst thing that can happen because that can't be fixed. It took them 100 years to build store confidence. Yeah, the US dollar is strong. We only print like 4% per year. We've been paying our debts and stuff. But you can break, once you break the promise within a month or so, US dollar can lose the spot as the global reserve currency. And it can take a week. It can take a month. We've seen that in Venezuela, we've seen that in Argentina, we've seen that in Turkey, in Brazil, in Iran, in so many countries that hyper inflated the currency. So I think that Federal Reserve will avoid that at all costs. They cannot print another $2 trillion right now to keep buying those assets. So as Jordan said, they kicked the bucket down road, but now they hit a crossroad. They got to decide either we let inflation run its course by itself or you're going to devalue the US Dollar and we're going to lose credibility with the market.

One thing I'll say here is let's not forget if the US Dollar loses its reserve status, that, that is, that's going to cause like tremendous ripple effects across the entire industry. Like, yeah, ultimately maybe we get to the goal of like hyper bitcoinization, but like the collateral damage that will take place will just be catastrophic. And so like, I want to kind of better understand what is the Fed, you know, in your opinion, Jordan, what do you think the Fed is going to do? Do they, you think we're going to see 75 basis points at the next, at the end of the next meeting, are they going to kind of stay the course and continue with 50 basis points? Because at this point doesn't appear to be working.

This is one of those times that I'm like, be grateful you're not the ruler. You're grateful you're not in charge. Because this is a shitty situation that ain't got no good answers. Like, yeah, maybe they need a volcker to come in and raise the interest rate to like 10%. That might like, bam, like really cause a problem. Are they gonna do that? No, because that would tank the stock market, which is really probably their number one goal to keep that elevated. But I don't, I don't, I have no idea what they can do. Like, this just makes me think of that argument how Everybody's like, yeah, let's get 200, 000 Bitcoin. What does that really mean? When the price of an asset goes from $1,000 back in 2017 to $200,000 in potentially 2022. That means the value of the currency that's in use fell out. And that's what's happening. We're, I guess we, we all wanted this. Everybody's like, 600 silver, $200,000 bitcoin. I'm like, what does that mean for the greater world when you can only buy one bitcoin with $200,000, the dollar, which is the reserve currency of the world, like, oh crap, man, this is, this isn't going to be good, folks. And just prepare yourselves. Like, I'm happy I spent the first like 25 of my years finding inner peace because it's going to be coming in handy, coming in real quick.

Happiness comes from within. Marcel, what is your take? Is the Fed going to have to use all the tools in their toolkit? We're going to see 75 basis point hikes.

What do you think, Benton? First, first of all, I don't think in a six to 18 months time frame, it's going to make any difference. Secondly, I don't think anyone wants to be the evil guy, the guy who crashed the markets, the guy who pressed the button to raise interest rates by 100 basis points while everybody was waiting for 50 basis points. So just give out what the market wants. If the majority expects 50 basis points, give 50 basis points. If at least 20% of the market expects 75 basis points, then okay, let's try 75 basis points. But the inflation right now is running at 8.7, maybe even 10% depending on the metrics used. And the interest rates are 2%, 3%. So it won't make a difference in six to 18 months time. That's my point.

I want to take a second to go through a chat here. Looks like rich new design said he is holding with hopes and ecosystem value, keeping things alive until they turn around in 2024, 2025. Looks like he has a long term perspective. Let us know what you all think right now. Where is bitcoin gonna head next? Are we sub 20k? Are we gonna bounce back from this? I think we all kind of know what range we've been looking at recently. We want to hear from you while we're waiting here. I want to pull up a quick chart. So Danil, if you wouldn't mind just sharing my screen. I want to pull up the bitcoin chart which hopefully gives you all just a little bit of hope here. I want to zoom in real quick on this area here. This was the flash crash of March 2020. The whole Covid outbreak we've seen. Look how much things have gained steam and just went parabolic. This was when the money printing happened here. And then the second high over here. We are now currently down almost 67% from that all time high back in November. I mean, so these are kind of key levels, these green lines here that I was looking at. We just lost the 28, 29K. Now we're approaching that 20K mark. Marcel, what kind of ranges are you looking at? Could we potentially see a Bitcoin sub 20k in the next weeks ahead?

Okay, Benton, so I don't want to scare anyone, but I need to put the elephant in the room, which is the US dollar tether, the stablecoin, which holds 72 or $74 billion in market cap. If this stablecoin, it doesn't have an issue, a liquidity issue or it continues to work, it doesn't have regulatory issues and it's because it's the most used currency on the Asian exchanges and derivatives exchanges. So if the tether holds ground, I firmly believe that 21, $22,000 will be this cycle low. But if the elephant decides to create problems, if the tether depegs for over two days below 90 cents, even if it's a liquidity event, yes, they have the money, but it's tied up in commercial papers or whatever, short term loans and they cannot withdraw. If tether creates panic, even if it's momentary, even if it's for two weeks, then Bitcoin can crash down to $12,000 and I have no doubt about that. But I don't think that tether is an issue right now. But if it does, if it becomes an issue, then we can see all the way down to 12 or $14,000. But right now my base call, my base bottom for this cycles bottom is 21,000, $22,000. No lower than this.

Jordan, what are your thoughts here? We gonna see sub 20k bitcoin.

That would take some pretty serious capitulations and as Marcel said, I think that would take some major breakdown in like a tether or USDC that really helps support the market. I, I didn't think that we'd get much lower than 25k. So that shows what I know. Right. But just I, I think like what you were saying Marcel, about how if, like if they say they, if people are expecting a 50 basis point raise, they should do 50, the expecting 75, they should do 75. I think why that's really important now is because what they really need to do is manage people's expectations and, and manage the propensity for humans to freak out. Because that's what really causes, probably assets don't necessarily lose all their value. What happens is humans freak out and sell it at a really low price. And then smart humans are like, thank you sir. They come in and buy it up and jack the price back up. Has the price of Bitcoin really collapsed? Has the value proposition that we've all been looking at really gone away? No, there's just certain events going from Luna to this current cell Celsius thing that's putting a tremendous amount of pressure on the crypto market. Specifically on top of all these events outside, whether it's war or high inflation or interest rates and all this crap. So it's all coming together and people freak out. We do not, we do not behave well in a crisis, just in general. So that's what really needs to be done is to kind of bring some sense of calm to the public and just really like let everybody kind of come to the realization that we're going to be in for a time period of kind of lean across all markets and manage your expectations, but don't just throw out the baby with the bathwater.

And I want to take a second to kind of scroll through the Twitter sphere here and see what people are saying as well. So Danil, if you wouldn't mind just pulling up my screen. I want to get, I want to hit the Twitter, Twitter and kind of see what folks are talking about here. We're going to blow this up here. With BTC fast approaching the 200 week moving average, it's important to be mindful of potential downside wicking behavior. So essentially what REC Capital was talking about here is this yellow line. I'll zoom in here. This yellow line is a 200 day moving average. We've seen wicks go below this moving average and potentially could see something similar. Here is what Wrecked Capital is talking about. Will Clementi saying, this is business as usual for bitcoin. Remember this is in a few years. People will say you were lucky. So it looks like he's has a chart here. Price drawdown from all time highs. We are sitting in that spot where people have accumulated previously and in the long run they've been fine. So Will Clementi has some, some insights here. Let's see. Yeah, go ahead.

The 200 day moving average you showed on Wreck, that's very similar to the realized price and that just crashed down below. And I hate like as an analyst I'm writing articles and I see like every bear market the price has kind of crashed to the realized price before. We've gone up and it's been sitting above it. And I was like, damn it, that means it's going to crash eventually. We don't like to look at those things as like bulls and stuff, but eventually if you just accept it, like if it crashed below the realized price today and I'm like there it is. So maybe like this is, it's a, it's definitely like, I don't want to call it the final shakeout, but it's like we're getting close to what bear markets have typically done. So hopefully like we could trade sideways for three to six months for sure. But hopefully the downside pain is, is pretty much over for the most part. I mean we could still see some. I don't think we'll go down below 20,000 at least like the Baron. But the bull of me is like, no don't go down below 20,000. But like, yeah, just typically what we've seen, all the metrics are starting to get hit. We're like bear market territory. Bear market territory. Okay, we've cleared that and now we can hopefully get rid of some of the more like fair weather traders and get the Hodlers in here and markets can start hardening up. I don't know.

Yeah, I think we can now safely say that today Marks, the blood is out on the streets. The majority of bitcoin wallets, bitcoin addresses are in red. We're touching the 200 day moving average. There's so many. It's not a single indicator. You're seeing a lot of indicators. As Jordan said, there are telling you, well this moment in time is very different from what happened over the past month when bitcoin was hovering near $29,000. So it seems different. It doesn't mean that the bottom is in necessarily, but it tells you that comparing to similar situations in the past, if you look forward, if you advance in time 6 months, 12 months, we're gonna see that moment as a clear buy signal. But right now, yes, it can still go down another 30 to 40%. We don't know for sure, but looking 12 months ahead, 18 months ahead, it's gonna be a clear buy signal. That's what Jordan's saying.

One of the things I think Sam would say I was tweeting back and forth with him here before the show today is that bitcoin has never dropped below its previous all time high. And so this 20k level I think is important for us to kind of monitor because if it does drop below that 20k mark, that'll be the first time in its history. And so very kind of fascinating to look into that. I'm going to take a second here though. Want to thank everyone for jumping in here to this special edition of the Market Report. We are diving into what is going on with this market collapse with bitcoin Ethereum. And we're about to touch on the whole thing with Celsius pausing their withdrawals, swaps and transfers. And so I want to take a second to go into the chat here and thank everyone for jumping in. We got Jonah, why hasn't the petrodollar failed? We got people talking about gold. Gold's even down. We talked about earlier on the show. Are people flocking to cash? Let us know your thoughts. What are you doing in these scenarios? Where are you flocking to? Where are the safe haven, these buying opportunities or is this Time to sit on the sidelines. Next thing I want to get into though is this Celsius business. It seems to me like there's a lot of stuff happening that we are starting to find out about. And so I want to hand this over to Marcel to see if he can kind of tell us what's going on and what have you learned about the current situation and, and why things are. Why did they pause their withdrawals?

Okay, so first what we need to understand that the rapid versions of Bitcoin, Ethereum and Eth 2.0 are not the same as the real thing. Yes, a rapid Bitcoin is secured by ERC and smart contracts, blah blah, yada yada yada, we all know that. But for instance, if the Ethereum network goes down, if they're not validating blocks, or if the transfer fee is, the confirmation on the Ethereum network goes to $2,000. You cannot simply convert back those rapid Bitcoins into Bitcoins and sell them in the market during those crash times when the market is volatile. And the same thing is happening to the staked ethereum, the Ethereum 2.0 that Celsius holds. So it's trading below the value of the Ethereum right now. And also Celsius had some leverage bets on aave. They were lending stuff there using co and they're being forced to deposit more Bitcoins on aave, not to get liquidated. So the way that Celsius run things to create the yield for the deposit is a little bit risky in terms of operational. I'm not saying that they are illiquid. They don't have the money. What I'm saying is that during volatile market times, they sometimes are obligated to deposit large quantities of Bitcoins and rapid Ethereums on defies and sometimes you can have issues doing that because of network congestions. Right now the market is betting that Celsius is going to have problems because most of their assets are locked up on yield farms on staked Eater and stuff like that. So if there's large enough withdrawals, they won't have capacity to pay the holders. So that's why the Celsius token is down and that's why the market thinks that eventually those Aave MakerDAO deposits will be forced to sell to reimburse the requests because they use leverage. So it's kind of a risky business. But if the market was more prepared, if Celsius was more professional and more transparent about it, it wouldn't be a risk. But that's clearly not the case.

Jordan, I'm curious to hear your take on this situation and if you wouldn't mind just in packaging for those who aren't familiar with like the Celsius platform, like what exactly is it and then what could potentially be the contagion factor here? We talked about this with Terra Luna. What kind of contagion factor could we see in quite a potentially collateral damage with Celsius?

Yeah, well CS is basically like, like you kind of mentioned like a pseudo bank almost. You can deposit your crypto on there and you can earn a reward for it. They, what they do with the money is part of their business. Either they lend it out to other institutions at a premium or they deposit it and, and mint some stable coins or something in the back and they use that to try and increase the money of their platform. So as Marcel's saying, it is risky and I think it's kind of exposing or highlighting the risk involved with any of these collateralization platforms and how you really got to monitor your that your collateral collateralization ratio and make sure that if you get, if that ratio gets low, you better put more funds in there or you're going to get liquidated. Because I think what we're seeing is a spark of liquidations just cascading across the crypto ecosystem causing prices of assets to be sold at lower price at lower levels, which again peaks the fear in people and causes them to further want to sell out. So yeah, and this like contagion you mentioned, this is contagion even from Luna because Celsius was exposed to Luna and ust and like this is nothing happens like next day. It takes a while for things to ripple through a system and we're seeing the ripple of Luna catching up to Celsius now and that could just send a whole ripple into other other facets of the crypto ecosystem, especially the defi ecosystem. So like D5 is going to go through a like a calling, a major calling. A lot of these platforms are going to go away and people are going to reevaluate what's actually possible. What's like sane amounts of yields that can be provided and what kind of collateralization and over collateralization they want to take on some of these positions. But again it's just we're all getting a schooling and what it's like to actually try and operate a financial system and we're getting a good lesson.

Jordan, I heard yesterday that a position of leverage eth or wrapped ethereum from Celsius on avi worth like $65 million was liquidated and the average liquidation price was sub $1.2000 while the rest of the market was trading above $1.3000. So why is the liquidation price on Makerdao and Avi different from what we see on Coinbase and Bitstamp and the regular Spot exchange? What happens in this liquidation process?

Because the market isn't as connected as we'd all like it to be. It's siloed like, like little markets siloed in separate areas. And if somebody's selling on this market and the lowest, the, the highest bid for that for Ethereum is 1200 and they can't necessarily connect to Coinbase and sell it for higher, they have to sell it at that price. And that's what gets, gets projected across all the different price feeds, whether it's a chain link, Oracle or whatnot. So again like we're the, it's, it's a liquidity factor in some points and the fact that we're still all these separate D5 platforms can't communicate and, and share liquidity causes these, these just conjunctions in the market and it really ripples across it. Then people go into arbitrage and then people that don't know what they're doing freak out and just sell it. So yeah, it's, it's a whole lot of confusion and, and disjointed markets.

So I, I want to better understand like let's play this out a worst case scenario. This is pure speculation. But I also want to, I want to find out if, if for some reason Celsius cannot with pay the withdrawals or deposits of their users, what would happen in the markets or what would the fallout look like? Jordan, what is your, your take on, on what could potentially be behind the Celsius scenes?

Well, that would really depend on what they do with those funds because they have the funds they're like he's saying if, if they're locked up in different staking contacts or collateralized then they can't just, if, if people start freaking out right now and try to go on and withdraw their funds from Celsius and these funds are locked up, they won't be able to meet those obligations. So look, from, I'm just guessing here, but it looks like they stopped that so they can make it so that the positions that they do have, they don't have to liquidate at lower prices and hopefully try to get back to a more like stable or higher point in the market before they allow people to start withdrawing. So like, it really depends on are they going to just start selling all these positions? Because if they do, then that would just tank the market. I'm like, part of me is happy that people can't get their funds out because they might turn around and sell it because they're freaking out. So I like, I don't. There's no good situation here. Like again, if it's not your keys, it's not your cryptos, anybody that. I used Celsius at one point, but then it ran into problems a few months ago and I took all my cash off of it. So like I knew the risk back then and I, I saw the writing on the wall and got out. If you didn't, I apologize. I'm sorry for that. But this is crypto and there's always risk. If anybody ever tells you that there's no risk, run away from that project. Because there's always risk in crypto.

Tail end risk that we never account for. You know.

I think, for example, Nexo, Celsius competitor just offered to buy all of their assets at a fair price considering the risk on the lockup on each asset. So I don't think Celsius is going to implode, but I do think that if I had like $1 at Celsius right now, I would sell that for somebody at 90 cents at 10% discount. So I think that's what's going to happen basically. So if Nexo or another competitor buys out the Celsius holdings, they're going to give a discount because of the risk and because of the lockup involved because it's going to take some time to withdraw those funds. And there's also the liquidity risk from the defi and having to put more BTC as collateral, not to get liquidated on Aave and MakerDAO. So what I think is most likely all the users are going to get a haircut. What we call, well, yes, we own you $25 billion, but we only got $22 billion from Nexo. So that's what we're paying. That's 10% discount. Sorry for that. It was a risk that was clearly written when you signed up with us as a service. So I think that's the most likely scenario. I don't agree with Jordan necessarily that if an investor lost money on Celsius or Luna that he's going to exit crypto markets. Because when the market tanks, maybe some investor that had been waiting for two years thinks, well, Bitcoin was at $69,000 now it is $20,000. Yeah. I'm gonna step in and buy, buy some back. So a man, one man's, how do you say one man trash is another man's treasure. Yeah, it's another man's treasure. So there's always a buyer to come around.

Yeah, I was just, I was more referring to like they're gonna be panic selling and driving their price lower. Yeah, people, I said the smart people are gonna be there like scooping it up like thank you sir. But yeah, I don't, like I don't want to see those weekends driving the price even lower like unless I want, unless I got orders sitting on. If I got an order sitting on for seventeen thousand dollar Bitcoin, hell yeah, drive that price lower please.

But you don't have bits all the way down to $15,000 on Bitcoin and 800 on Ethereum. If you're, if you don't have bids, you're not doing this right.

I don't got that much free cash right now, man.

I was going to say I feel like most of us deployed our capital already but maybe we're gonna go lower so should have maybe held a little bit longer. I wanna go to the chat real quick. Shalom is saying DEFI is in beta. I think that's probably a good point. We're all very early, especially with Defi and how institutions wanna get involved. But there's a lot of stuff that needs to be worked out. Danil, if you wouldn't mind just pulling up my screen because there was a Twitter thread out there that I wanna cover. But we're gonna pull up this memo actually from Celsius to hear it from the horse's mouth. This is the memo they sent out to their community members. Essentially was saying we were taking this action today to put Celsius in a better position to honor over time its withdrawal obligations. The one thing I want to highlight here is that they said that it could take, there will be delays. So we're working with a singular focus. Protect and preserve assets to meet our obligations. The thing is, is like we don't know when this is going to finish or when they can actually unpause the withdrawals or deposits. So we're going to see what happens when they actually open it up. Hopefully they're ready for is about to happen. We want to get into this thread next though from Jason Yanowitz. He said there's three stages of a bear market. We just entered stage two. Well, what was stage one? Well the unwind this is Excitement from the bull market still exists. Many narratives are popping up. You kind of saw this happen. The stage one doesn't feel like a bear market. Feels like prices have pulled back to realistic valuations. Well, stage two comes along, forced capitulation. This is where it gets ugly. Narratives die. Prices fall 90%, then another 90% layoffs across the board. We're seeing this now. We can say, I think, that stage two was probably part partly due to Luna. So Luna sent us the stage two is what he's saying next. In stage two, diamond hands become forced sellers. They sell not because they want to, but because they have to. Celsius doesn't want to sell. They might have to sell. There will be more funds, companies and individuals like Celsius. So what Jason's saying is there's other companies out there that could be in a very similar position. Who's next? We're going to find out. In stage two, any bounce will be immediately sold into the dead camp. Dead cat bounce price. The lower prices go, the louder the bear gets. Then what is stage three? Well, stage three is bottomless exhaustion. After max pain comes max exhaustion. There are no bounces. There are no narratives. Prices consolidate sideways or slowly move down. It's boring at the bottoms. Anger is replaced by silence. During stage three, you'll want to walk away. Regulators will kick us while we're down. Your favorite Twitter DJs will go quiet. Web2 investors will quietly stop allocating. Talented builders will leave. Companies will shut down. Very grim stage that be sitting here in stage three. Stage three is the toughest. Survive if your company do whatever it takes to get through. If you're a builder, stay interested, find other builders, build with them. If you're an investor, develop your own thesis. Take bets on people you believe in. And this is one point. Thank you, Danilo. Is, is that I want to emphasize. I just got back from consensus and I was talking to a lot of VCs and, and I was asking, well, how are you looking at things right now? And how do you look at your prospectus five years, ten years from now? And what they're telling me is, listen, we're, we're betting on the builders and the team members for projects because they have to have experience and been through the bear markets to be able to get to this point, be able to survive what's about to happen. So the VCs are saying, we're not betting on the technology or this or that. We're betting on the people to be able to innovate and stay strong. And continue to thrive through what could potentially be a historic bear market ahead. Yeah, go ahead, Marcel.

But let's take the simple case, the Axie Infinity game. They created a whole second layer solution, the running blockchain for that. And they placed all their money and bets on a single game. And once they found out, yeah, the players are losing interest on that. So let's create Axie infinity 2.0 with metaverse and stuff. And then the market tanked. So instead of diversifying or creating multiple platforms, or even selling or lending the Ronin platform to other games, no, they decided to do something close. Something like resembles the traditional gaming finance industry. No. We hold the trademarks, we hold the players. We are not sharing the technology with everyone. And they failed miserably. So the VCs are saying one thing, but they are doing another thing. The same thing happened to the Luna ecosystem. A lot of people placed their whole bets and their whole company funds on the Luna Ecosystem on a single Stablecoin. If the VCs were smart enough, they would have created alternative instruments inside the Luna ecosystem. So not only an algorithmic stablecoin, but a traditional stablecoin. But they didn't do that. So I think the VCs are changing their speech as they're seeing their strategy unfold badly. So if you're going to invest in something that it's new, that it's a new technology that is growing, it has potential, you got to diversify. You cannot pick a single ecosystem. I'm going to bet all my bets, all my money in Solana Ecosystem because it's the new Ethereum, etc. No, you cannot do that. There's too much risk involved.

Give me two ecosystems that you are most bullish about in the long term. I'll start with Jordan on this one and then we'll kick it over to Marcel. Next.

Obviously, Ethereum, just because it's the big dog. What would I have to go with next? Oh, put me on the spot. Let me think. Avalanche will probably do well long term. I need to look more into its technology. I do like Solana, even though it's been put through the ringer and tags issues. I don't know, it's just a different technology. I think we could see. We'll see. I don't know. Right now it's hard to tell what's good.

I was gonna say it's hard to pick the winners right now, but if you had to pick two horses to ride on. Marcel, who are you picking?

I always hear compliments about Solana's technology. Like yes, it's centralized, but it works as from a technology perspective it can handle much more transactions and capacity and demand than Avalanche, than Bitcoin cash and whatever big block solution they were planning. So yes, it's a centralized solution, but the team and the project from a technical perspective is good. But I also like Polygon Matic as a scaling solution from Ethereum. So considering Ethereum will never launch the 2.0, I think Polygon Matic is a safe bet for that.

Fair enough. I think my two picks would be obviously Ethereum. Everything is connected to that. That's not going anywhere. Right. And then I would pick Cosmos. I think that ecosystem again, when the dust settles here from the bear market and we're going to be talking about the next bull run, I think interoperability is going to be what ultimately pans out in the long run. Cosmos I think is ahead of the curve there and they've been building and building and building for years. So I think they're going to stay in the the test of time when it comes and the dust settles here. So those are my kind of two long term picks. Go ahead, Jordan.

Yeah, I just want to say like Dr. Go going back back on topic and you mentioned Lehman Brothers, like for anybody that was really caught off guard by what's happening, think about what happened to Lehman and realize like it didn't just happen overnight. That was building up for years, just like what's happening right now has been building up for a while. It's just the state of the world's in a place where it actually affected the market and once one, one little domino tips over, that cascade starts going and the market just falls out. But then that's what we've seen in crypto in the past. So yeah, realize that there was issues coming. There have been issues for months and months. Whether it's Tether or Luna or Celsius, these issues were known to certain people and they were always going to have to be overcome in the future. So we're getting that out of the way now. There will be more issues in the future. But just realize like we're on a journey, a long journey, developing a whole new asset class and there's going to be ups and downs on this road. So just if you have that long term vision in crypto, just stay true to it, diversify as Marcel is mentioning, and just realize that we're in for the long haul here.

And I want to zoom out and add color to that too because if you think about web2 users all the end users lived and thrived at the application layer. When we look at web3, you can put the Dapps inside of that layer as well. And, and when we have this mass adoption cycle, whatever that be in five years, 10 years, whatever that looks like, end users are going to live and breathe at that DAP layer and they're not going to care what chain is doing what and how. They just want to know that is the DAP providing the value. They won't care if they're on Solana or Ethereum or this or that. Does it work? Is it cheap? Does it add value to the end user's life? And so we're going to see what shakes out in the long run. There is a reckoning coming for all of these L1s. It's going to be interesting to see what's going to happen here. But those are my kind of two cents in regards to what could potentially come next here in the future. So the last question I kind of want to jump into here is when we look at things in the short term, what are you, what is your strategy right now? How are you approaching this? We heard kind of like Jordan touch on this. Marcel, how are you strategizing around what trades you should be making and not making? Because sometimes we know best trade to make is the one not to make.

Yeah, let me prep a screen here. So basically there are two indicators that I like to monitor to see if the market is really stressed out, if it's like a potential bottom or not. So, Danilo, can you share my screen please? The first one is the annualized basis. So the premium of the Bitcoin futures contracts versus the spot markets at Coinbase and Bitstamp and Kraken. So futures, the quarterly futures should trade at a 4% to 8% annualized premium. In normal markets, it means that to which stand to hold the segment longer, the traders are demanding more money. So when this premium goes to zero or negative, it means that we're in a bear market and even the professional traders are not willing too long to buy using leverage. And that's exactly the case as what happened today. The futures premium went to zero for a couple of hours, meaning that they were not willing to buy the future contracts at any price except at a discount to the to the current price, which is not a good scenario. So this is the first indicator that tells me, well, the market seems to be stressed. So yes, it can plunge down to $17,000, $18,000. I don't know what the bottom is going to be but right now it's losing the rational for the price. And the second indicator I like to monitor is the options market skill. So the higher the skill means, the less interest in downside risk those professional traders are accepting. So a high skew means those traders are not willing to take downside risk bets for the bitcoin price. And that's again exactly what happened today. The skew indicator reached 27.6, which is the highest reading ever. It means that you call the market maker and sell and say, well, I want to sell you a position that if the market plunges, I win money, I get money and you lose. And the market maker is saying, yeah, I can do that, but I'm going to overcharge you by 27%. And that has never happened in bitcoin history. Thank you, Danilo. So what I'm seeing right now, today is the day to buy at least 20 to 30% of what you're planning over the next year. So if you have fiat to spare and you can wait six months or longer, at least a third of the position, 30% of your position should be deployed today no matter what happens to the market over the next weeks. Because the market lost its reference, it doesn't know how to price things right now.

Real quick, before Jordan, before you jump in here, I want to ask the chat if you have any burning questions that you want us to answer. I'll open up the floor here after Jordan gives his response on how he's approaching things and what his strategy is. Again, we thank you all for joining this special edition of the Market Report. But Jordan, what's your strategy? How are you approaching these markets?

Shalom Dumb's comments. Right now, it's really important. The only chart you need is the weekly RSI which shows the most oversold in history. Right now I just showed you another chart, the bitcoin options skill that showed the most different prices for upside risk and downside risk in options. So just show that even professional traders are completely lost. They don't know how to price bitcoin right now.

Yeah, and that's kind of what I was saying. When you get the, when you get retail, FOMO is like fomoing out of the market. They'll just dump it to unreasonable prices. And this really reminds me of what Sam had been saying for weeks about how this feels like that six thousand dollar range of hell that we were stuck in forever in 2018 and then it dumped to $3,000, which is right now we just dumped from 29, 000 steady for like a month down to 22 something earlier. So that that makes me go like oh contrarian. I might, I could actually like honestly I started deploying a little bit of DCA capital last week on Chain Link so I'm a little underwater in that position. But like I'm like oh, I'm even more motivated now to actually kind of start thinking about dca. Yeah, it can go down more. It's never gone below its previous all time high. So if it does that's going to be a real black swan event. Even in that case, I don't know from here I'm comfortable on a long term outlook to start dollar cost averaging now just because these are really good prices. Some of these prices we haven't seen since 2020 and if it's a legitimate project and the fundamentals are still there, there's no reason that you wouldn't buy it now if you were buying it above the this price.

I think you make some, some great points there and and dollar cost averaging is your friend during these times. Pick your basket of projects that you believe in and that will be here for the long term. Again these are all the expressed personal opinions of ourselves. Non financial advice but now is the time where great projects are built. I said it last week on the show. Great projects are built during bear markets so and so those are the ones that are going to come out the other side of this. And like Jordan said, these price levels we haven't seen in two years and people are banging on the doors when we're at 60k bitcoin. Where are you now? Dollar cost average in dollar cost average out on the way up. I'm going to open up the floor here to the audience though if you have any questions. I'm going to give you one minute here to give us your burning question that you want our panel to answer today. In the meantime I'll let you all.

Question from Lucas Todeskini. What do you guys think about the ETH BDC ratio? Is it bottom or more downside to go?

Do you want to kick us off there Marcel?

I think when the market is stressed investors fly to what their considered more safe. So I think that the ratio for the next couple of months could still find some 20, 30% bottom below what we're seeing right now because when the panic kicks in it takes time for the investors to okay, let's see if Ethereum defy applications are going to continue working if the maker DAO and the DAI algorithmic stablecoins keep its peg and Stuff like that. So they're gonna wait and see for a couple of weeks, two or three weeks until they decide okay, it is safe to buy Ethereum. Doesn't matter if it's $1,000 or $2,000, but the DeFi ecosystem continues working so it's fine now I want to buy it back.

Yeah, I think that Jordan, what's your take? The more. A lot of institutions might be a little bit more prone to wanting to go into btc. So it's a good chance that the ETH price drops, comparatively speaking. But if, if ETH is what you're really entering, like I don't like to try and pick bottoms. That's a, that's a losing game. If you like eth, dollar cost average, ETH if you like bitcoin, dollar cost average. Bitcoin, if you like them both. But dollar cost average, both you can, it's up to you to figure out that ratio, which one you should do more. But ETH is going to be around long term. A majority, vast majority of DEFI and all the different applications are not on top of Ethereum. So that gives it a really good value proposition. Bitcoin on the other hand is just, is more just a store of value and monetarily or transferring value. So a lot of people might be more prone to want to buy ETH in that regards and it might have, I think long term it has a better up, up, up upwards. Like it'll perform better long term than bitcoin will when it, when the market does turn around, just in that perspective. But again that's up to individual investor. And dollar cost averaging is going to be the name of the game probably for the next year.

Exactly. And I think we're going to go lower. I mean that's my, that's my kind of consensus on where we're going, both Bitcoin and Ethereum. But the good news is the fundamentals have not changed for either one of those. With the exception eth with the whole E 2.0 kind of thing. That's still, still yet to be determined. But I don't think we're going to see something catastrophic. Sure it's going to drop below a thousand. Think that's going to happen? Bitcoin, we're going below 20k. That will be a weird funky event for everyone. But I think that will happen. So as Jordan mentioned, just dollar cost averaging in I don't care what the price level is because I know five, ten years from now everyone will win out. Any closing thoughts for today's? Show. This has been the special edition of the Market Report report. Marcel, final thoughts and then, Jordan, I'll let you share and we will close this thing out.

I just want to thank everyone that participated for the good questions. And remember, not a single analyst, not even Microstrategy or Tesla, who bought over a billion dollar worth of bitcoin, knew or could predict that the price would plunge below $30,000. Otherwise they would have waited to buy at a lower price. But what those guys are doing and what we are recommending is for you to have a longer term view. Yes, it's painful to see your portfolio down 40, 50%. We've been that in the last cycle, in 2018, 2019. And those who survived, those who are savvy enough to understand it's a volatile market, were still too early in this game. They saw bitcoin price go from $3,000 or $5,000 all the way to $69,000. And we're gonna see that in the next cycle. So just keep, keep your head up, stay in the game, don't get liquidated, don't use leverage DCA if you need, but stay in the game, don't get out because you're losing 70 to 80%. It's not how it works.

And Jordan, your closing thoughts for today.

Yeah, like I've said it before when, when all those people are like, man, I wish I could have bought Bitcoin at 100 bucks. Realize you would have been in for like six of these types of events which just put gray hair on people's heads. So like crypto is volatile. Accept that risk. It's going to come back eventually. We're just definitely a down market now. There's so he'll. You hear people talk about certain rules like don't invest more in crypto than you can lose. It's really important to kind of monitor those major recommendations and kind of stick with them. And if you're feeling kind of bad or sad or anything right now, don't be afraid to reach out and talk to somebody to get some help. Because if especially the way that crypto market could suck you in, it can really throw people for a loop when we get these downturns. And I don't want to see anybody hurting themselves or anything like that. So if you need to reach out and talk to somebody, realize long term crypto will come back a lot. Some of the coins you have might not get back to their old all time highs or they might fade away. But that's just the game kind of stay positive, stick in there for the long term, try to take a longer time horizon and just kind of keep on keeping on.

Well said. And I think, you know what Jordan is, is also saying that I will emphasize is that your health is your wealth in the day. It's just crypto. All right. So like Marcel said, stay in the game. We appreciate everybody that tuned in today. If you haven't liked and subscribe Cointelegraph on YouTube. We have our show lined up for tomorrow, 12pm Eastern. Our regular scheduled show today was a special one that we want to dive into a lot of this stuff. So we appreciate you tuning in today and asking all those burning questions again. We will see you tomorrow. Until next time, over and out.

Sa.