Blain’s Morning Porridge 28th Feb 2025: Crypto is crashing. Oh Dear. How Sad. What a shame. Never mind.
“If you are looking for sympathy try a dictionary; between sh*t and syphilis.”
Crypto looks to be in Free Fall. If it previous crashes are any guide, it will fall between 70 and 80% before it stages yet another improbable recovery, or will it? There is so much noise, manipulation and outright shysterism around Crypto it makes little sense to risk playing the greater fool and buying falling knives. That doesn’t mean you can’t still trade the market’s gullibility!
Bitcoin has slid below $80k – 25% down from its Trump election high. There have been more than $1 bln in liquidations on BTC ETFs. No one is buying any of the multiple half-baked, dimly explained new coin-based deals looking to come to market. Everyone’s a motivated seller. And to cap it all, the North Koreans pulled off the biggest heist in history, stealing $1.5 bln of Ethereum from the ByBit exchange! Throw in a number of meme-coin pump, dumps and rug-pulls… like $Trump, $Melania and Argentina’s Milei telling folk to buy, and I shake my head and wonder what financial madness causes folk to invest in such patently ungrounded financial scams.
Regular readers will know I am not a believer in the Crypto market.
I accept and admit the underlying crypto-tech is terribly, terribly clever. I just don’t get what the point is in terms of it being money. Every time I ask the crypto hustlers the same question: “but, what does it do we don’t already do – better?”, I get rambling narratives about use cases, and why they are the future, but never a convincing argument they’re an evolutionary step forwards towards better than existing cash, markets or exchanges.
When I dive deeper, I usually get meaningless mumbo-jumbo disguised as “jargon only clever folk understand”, or Libertarian slogans like “Freedom Money” spittled into my face. When I ask what that means, or how something that claims to be Freedom Money is backed the unknowable Satoshi Nakamoto and other whales holding over 20% of the total float… I get the same blank looks monkeys would likely give if I asked them how their script for Hamlet was coming along.
The reality – whatever the Crypto Bros and Meme-coin shills try to tell you – is Bitcoin is a HYPE-CYCLE asset. We are now into its fourth cycle of sudden rise, adoption, FOMO, Greater-Fool Top and precipitous tumble. It not that it happens that surprises me – that is predictable, but that it’s happened more than once. Fool me 4 times is just daft..
Bitcoin and Crypto prey on the hopes of disappointed people (an awful lot of young men, but older investors also) that their humdrum lives of constant overdrafts will be turned around by investing genius, and all they have to do is invest any and all savings into Crypto. The narrative is reinforced by constant noise about Bitcoin’s increasing credibility, the fact respectable ETF providers are backing it, and… Donald Trump is going to make it the defacto currency of the world. Get in and out early enough, and you can make money – from the suffering of later, greater fools.
Folk get sucked up and spat out by Crypto. A whole industry of crypto shills has sprung up around it, and ecosystem of bloodsucking ticks gorging on collective stupidity and FOMO.
The main driver of Bitcoin and its associated baggage of NFTs, Memecoins and other scams is not underlying financial conditions, but the noise. When Trump embraced Crypto, correctly judging the nerdy herd of right-wing, libertarian INCELs, would likely embrace him if sounded positive about their cult, it soared. He bilked them for billions, selling the now $12 $Trump Memecoin on the eve of his inauguration for $74, netting himself millions.
Since the election, he has clearly listened to wiser counsel – saying nothing further on expectations of the strategic bitcoin reserve he raised during the election.
Smart investors have therefore paused. They know Trump says a lot but delivers less. They realise it would be unwise to invest long-term in the rambling thoughts of what is likely to be an explosive, disruptive, but fairly short-term presidency (Trump faces the possibility of losing House and Senate in the mid-terms next year.). Smart money knows how Trump thinks. They know he has no intrinsic interest in crypto beyond what its going to pay him – which is over $80mm overnight on $Trump. Suckers…
That knowledge informs my bitcoin trading strategy. It’s dead simple at the moment: If you aint already flat, get out sharpish. When Trump starts to mutter about a Bitcoin reserve again, get ready to buy – it will be because more of his $Trump memecoins are vesting, and he will want to sell them immediately (knowing they are inherently worthless) at the best possible price. Check out the vesting schedule of $Trump – which you can find here. (In any normal market that would be called market manipulation, but I guess the guy at the SEC charged with looking after that has already been collared by DOGE..)
If Trump does say he’s going to enact a BTC strategic reserve – then buy and then dump it before nothing happens. Don’t be fooled by Eric Trump’s current calls to “buy the dips”. If you were building a nuclear reactor would you ask Eric to design it? No. So why take his or Barron’s advice about investment strategy?
Now, I do admit my scepticism of Bitcoin and crypto has been an expensive choice in the past. I shorted BTC ahead of the US election (guessing Trump would narrowly lose). I got caught wrong in the 52% rally that followed. Ouch. Now Bitcoin has retraced half these gains as it tumbles. I don’t think I’ve called Bitcoin wrong as a scam, I’ve just underestimated how gullible the market is.
The big question is this just a minor 25% correction or are we into the 4th major Bitcoin sell off. All three previous sell off have seen Bitcoin collapse between 70-80%. As Bitcoin continues to tumble – I will start watching at $30k, but have a target around $23k in mind; in line with previous sell offs.
What’s happened to change sentiment? The most important factor has been that big money is not engaging. Hedge Fund type investors trade it – they don’t invest. For Bitcoin to rise it needs Greater Fools to keep buying and pouring money in at each progressive top. Institutional money is not convinced – so the only new money coming in was from retail, the always losers in BTC. When Bitcoin runs out of new Greater Fools.. it falls.
Then it emerges Norte Korean hackers – the Lazarus Group (personal chums of Fatboy Kim) are behind the heist of a $1.5 bln hack which apparently involved suborning HUMINT resources inside the BYBit exchange through spearfishing attacks, which enabled them access, layer and cover as they hacked accounts. They distributed the stolen coin to thousands of addresses to effectively launder and place the stolen funds back into the market. Gosh.. who knew you could do that? (Er.. lots and lots of bad actors.)
Despite it being the biggest ever theft in financial history, and the exchange scrabbling to repay the money, stealing crypto barely merits a mention in the mainstream media. Look for it on Twitter and you can find kilometres of jargon-laden verbiage about how they apparently did it.. The reality is… apparently no one in financial regulation or defence seems to care about 0or is really interested that the North Koreans just funded half their Nuclear Bomb and Missile Programme by stealing money from gullible Western Investors….
Even as ByBit wobbles, there are rumours President Trump is set to pardon Sam Bankman-Fried, who is busily rewriting crypto history from his prison cell arguing his FTX exchange and Almeda piggy-bank were innocent victims, even as it becomes the second costliest bankruptcy in history. The incredible thing is.. FTX creditors may get more than all their money back: 118% according to BBerg!
And there is BitCoin uber-guru Michael Saylor and his BitCoin Fund; Strategy (formerly MicroStrategy). Exactly as promised, he’s still buying Bitcoin on the way down. He just raised another $2bln in a convertible to pay for more, more and more BTC at a price of $97K – meaning he’s already down $18k! Now that really is interesting. Saylor might even survive a short-term 70% crash in Bitcoin – although there is some $8 bln of debt, its mostly convertible and very low or zero rate. Saylor’s average Bitcoin price is $66.4k meaning he’s still in the money.. but for how long.
The real issue with Bitcoin is the liquidity myth – there is no liquidity behind it. Except from Saylor and his promise to keep buying… who else is the backstop? Each successive bitcoin rally has come on the back of either very cheap interest rates through the 20-Teens or Zero-cost Covid loan/handouts in 2021. The current rally comes on the back of expectations Trump was going to deliver lots of upside – which he hasn’t, and is unlikely to support except in his personal interest.
What could reinvigorate Crypto this time…? As other market watchers have pointed out.. Elon Musk recently propped his desire to pass on DOGE savings directly to US Votes, giving each a cheque for $5k. Guess what crypto shills will want you to spend that windfall on!
Have a great weekend. No Porridge Next Week – on the Slopes!
Out of time and off to do the day job…
Bill Blain
Author Morning Porridge
One Comment
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Bill, you have never been a crypto fan. I agree that the price movements have never seemed to have any logic nor proper causes. The price graph looks like a mathematical random walk – a progression where each move is determined by probability. All random walks eventually reach any given limit, high or low, there is just no way of predicting when; it is not a good basis for investing. I am in the group that doesn’t invest in crypto, just sits back and enjoys the show.