Towards a crypto-carnage?

On December 3, the tech world stumbled, dragging the crypto world with it. Philippe Béchade turns to analysis.

On Friday night, the operators were scared. Indeed, half an hour after closing, they were afraid to see the same “panic sale” scenario of November 26 come true before their eyes. At the end of a session, Wall Street lived a whole week under the theme of the “classroom doors.”

It was the Nasdaq that caused the most fear with a reversal of steam, from 15,470 points to 14,930 points (-2.9% around 9 p.m.) before initiating a rise of +125 points during the last quarter of an hour (at twelve minutes precisely) to finish in 15,085 points.

It is still 1,100 points lost from the zenith of November 22, but the main thing was to stop the debacle that was coming with the break of 15,000 points, because the oblique support of 14,800 points was dangerously close.

This is the second time in six sessions that the Nasdaq has unwound despite a marked easing of rates (-10 points to 1.345%), while an inverse correlation has prevailed since November 2020.

However, the explanation is clear: the Nasdaq fears rate hikes (risk to growth), but fears even more a direct threat to growth. Currently, the main risks are the various variants of Covid-19 that lead to production cuts in China, border closures, sanitary restrictions, order drops before the holidays, such as Apple’s iPhone13.

And when these fears materialize, it translates into a reduction in “leverage” and a reduction in forward positions, such as call-backs and put-option buybacks, instantly translating into a sudden surge in the VIX.

A crypto crisis caused by …

It rose to + 25% on Friday and was testing a new yearly zenith of 35 (around 9pm) before cutting its lead in half, to + 10.5%, at 30.75, just below its high. December 31 closing date 1.

And it all happened in the last minute … not even! In the last ten seconds, the time of the bell that marks the end of the task.

The day traders have been very hot. And fans of “pure risk” were not saved by the gong on Friday at 10:01 pm, official publication of the final score!

In fact, after the “de-leverage” of technos, it is a “panic sale” that happened a few hours later in the crypto-asset compartment. It was so violent between 4 a.m. and 6 a.m. Saturday – an $ 11,000 drop between $ 53,100 and $ 42,000 to round up in Bitcoin. The Anglo-Saxon media made their headlines about the “crypto-carnage” from Friday night to Saturday (New York time).

It is not less than $ 500 billion of cryptocurrency capitalization that evaporated in a dozen hours, between 3pm on Friday and 5:30 am on Saturday.

In addition to losing money, nearly 420,000 crypto traders saw their positions automatically liquidated and their accounts disintegrated in less than half a day, investors also saw many of their illusions shattered. While they rejected conventional currencies, so shamefully manipulated by central banks into Monopoly banknotes, cryptocurrency fans prefer to rely on “trustworthy” assets, whose holders are treated fairly, anytime, anywhere on the planet … and that nobody wants to hurt.

According to the testimonies of various specialists on Saturday afternoon, the collapse in the price of Bitcoin this Saturday, December 4, 2021 – but also Ethereum, Cardano, Ripple, Dogecoin – was fueled in part by the deliberate stop-loss trigger. Of a few. big hands resulting in massive sell-offs.

The stop loss tsunami would almost certainly be the result of market manipulation by the “whales”, with a coordinated action of the “stop hunting” type (or “chass aux stop” in the French version), with several sell-off orders of hundreds of BTC as a support approach, as reported by Bequant, Coingecko, and Coinmarket Cap.

These “whales” suddenly place large sell orders in the market near well-identified supports: they can leave them in the order book and partially execute (then they make a profit on the Bitcoin they own).

But they can also cancel them as soon as speculators panic, seeing what they believe to be a tidal wave threatening to crush them: they resell BTC bought on credit, typically with “leverage.” 10 “. But it can be so much more! This then sets off a downward chain reaction in other speculators who are even more exposed than they are.

All you have to do is repeat the operation (false massive sell orders) when the crypto has lost -9.5% and the “weak hands” that see themselves losing everything are in the middle of a wave of panic … From there, the automated sales programs do the rest, nothing can stop the spiral.

A simple example: With a deposit of $ 5,000, it is easy to buy 1 BTC (at $ 50,000, that’s just a guess, you needed $ 5,500 on Friday morning), or for a “small account”, with $ 500, you can buy 1 Ethereum.

If BTC approaches -10%, the broker (Binance, Coinbase, Robin Hood, etc.) will liquidate a $ 45,000 position to preserve their capital and reduce their client’s position to zero (their $ 5,000 deposit is completely absorbed).

But for a “lever 20” speculator, from -4.9% in Bitcoin, automatic liquidation kicks in, which will quickly put “lever 10” and then “lever 5” at risk. Lever 5 which in turn loses everything at -20%, when it thought it had enough margin to hold in case of turbulence.

There were many buyers with an average cost price of $ 58 to $ 59,000 (average price since Oct 14), with the breakout of $ 53,500, Bitcoin and many other cryptocurrencies fell into “territory of”. Correction ”(more than 20% decrease from the highs), but it was the break of $ 49,000 (ex-zenith of August 15 to September 5) that triggered the“ sell-off ”.

And the “whales” only had to stretch the net 15% lower before raising the price by $ 8,000 (just under 20%).

Good job and a new all-time high! More than 500,000 accounts settled or reduced to $ 0 in one weekend.

It would be interesting to do a survey of these to determine if they are still determined to rely on cryptocurrencies to beat inflation, give central banks an arm of honor … and, for some, how they will justify themselves. From people who have tapped into their savings, borrowing from their families to make a fortune in a few weeks and buy the Tesla of their dreams for $ 120,000 with their “Shiba Inu.”

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