Bitcoin markets got absolutely crushed on Monday, dropping almost 20% at one point during the day. This was something that I have been warning about for the last couple of weeks, and now we have seen it happen. You do not lose 20% and one day and completely forget about it. I think this is the beginning of a deeper correction, which is bullish for Bitcoin long term. These parabolic moves always end poorly, and at least now some reality has been forced back into the market. Unfortunately, I suspect that a lot of people just got hurt.
If you've been following me here, you know that I had suggested that we would get a pullback like this and that we could take advantage of it by going long at lower levels. I would not short the market even though I believe that it is going lower. I had bought puts on a digital exchange and have already taken profit. This is because there is almost certainly going to be a bounce from here, and then probably another flush lower. The behavior of this parabolic move has been identical to the last one. There will be a lot of people more than willing to get out of Bitcoin once it bounces, getting as close to breakeven as possible. This is why I suspect that we will get a little bit of a bounce before seeing a continuation. After all, real yields in the United States are starting to rise, and that tends to put upward pressure on the US dollar. Therefore, a certain amount of knock-on effect has to happen over here.
I would also point out that the $30,000 level did offer support, which is a large, round, psychologically significant figure. You could say it is a little bit of a “dead cat bounce”, because there is nothing special about the figure, and there is no real structural support there. At this point, I anticipate that we will see signs of exhaustion and then another leg lower. Bitcoin is not a very big market, so it does not take much in the way of panic to get the market breaking apart quickly. What the bullish traders out there need to see is several days of stability.