Abraham George Crypto Musings
It was absolute mayhem in crypto land yesterday! And it all happened in under one hour. About 165,000 accounts were wiped out and 300 bio dollars worth of market cap was lost. Bitcoin dropped from about 53,000 to 42,000 and now it is trading around 47,000. In % terms, the fall in XRP was much bigger. After touching almost 1.4, it made a swan dive under 1. What must have caused it ? There are many theories floating around but one thing for sure is the market was highly leveraged. Otherwise, why would 165,000 accounts get wiped out?
The other thing is officially El Salvador officially migrated to Bitcoin yesterday. 70% of the general public are purportedly opposed to this as it is impossible for the public to use Bitcoin as legal tender in its current state of volatility. The IMF and World bank are also opposed to El Salvador’s moves. With the public losing faith in the dollar as a reserve currency and more printing in the pipeline, many countries could adopt to Bitcoin as reserve currency. I think the likes of Iran, Venezuela and North Korea are already doing it. Extreme volatility is a part and parcel of all cryptocurrencies until it gets to global adoption the volume of two-way activity stabilizes. That’s the nature of the beast!
As an individual, one needs to decide if you want to be a trader or investor in crypto based on the merits of the instrument. One thing for sure, the changes that are happening now is bigger than the Internet revolution. The piece that is central to all that is happening now is the blockchain technology. More on this in the coming days.
My crypto investments are concentrated in XRP, Stellar and Vee Chain. The lions share is in XRP.
The current situation is something like the major two investments I made in Tanla Platforms and Subex. Prices at 89 in Tanla and 13 in Subex were defying and defining levels which were never seen again. XRP is in a very similar position technically and fundamentally though it is totally a different asset class. Above all, the sentiments align too. Let me explain.
When XRP traded down to .50 I suggested that it is a good buying opportunity. However at that point, I did not buy it myself. When it traded down again to .50, I knew this was my second opportunity. However by the time I arranged for funds to be credited into my Australian account, prices moved up to .68 to .70 . I bought at .70. Not having money for quick deployment cost me around 40% of the move up. The move up since then was impulsive and I was confident that we will not see .50 again.
After topping out just above 1.30, XRP dropped down to 1.09. Again I wrote in my report then that it can face strong resistance at 1.30 and above. However, I myself did not take any profit then. XRP clearly broke above 1.30 again but then we had this change of events yesterday damaging the structure. Further up moves will happen but it will take time and current levels should provide buying opportunity for those not invested or planning to add more. I think it is very important for investors to be not leveraged in cryptos and not go beyond one pct of your total wealth.
Yesterday we also had a move up in interest rates, in anticipation of the Fed beginning the end of QE may be as early as next month. Another risk to Bitcoin which will soon be announced is the Fed’s report on whether or not they see a viable path toward adopting a digital Dollar (CBDC). That report was promised by Jerome Powell, to be published and made public this month. Will that be bullish for XRP? Too early to tell.
One of the main reason that had suppressed the price of XRP is the ongoing case with SEC. SEC has made such a mess of this case that they have lost all respect of the folks who have been following the case. They have acted like a monkey with its hand stuck in a cookie jar. The monkey cannot run with the cookie jar and it won’t let go of the cookie and free its hand. Therefore, the monkey is trapped ‘hands down’.
The SEC is in a similar situation. Every move the SEC has made has sunk them deeper into more trouble. They have maintained a policy of ‘heads I win, tails you lose’. They have not provided a single document the Department of Justice has asked them to provide but they expect Ripple to provide everything that the SEC wants to examine. So far, everything has worked in Ripple’s favour. So, I cannot see Ripple losing this case. If Ripple wins the case, that will be excellent for Ripple and the ruling will become the standard for many other cases with similar problems. Most likely, what will happen is that Ripple will get a slap on its wrist on some technicality with a much smaller fine than originally anticipated and SEC will save their face. When this will happen is difficult to say but it could happen sooner than later.
Secondly, one of the main original founders of Ripple, Jed McCaleb was awarded around 9 bio tokens as his parting fees. Under some prearranged conditions, McCaleb has been selling XRP tokens since 2014. This year particularly he has sold a lot and what is remaining is about 600 mio. This remaining part should be soon sold as well. These two factors have been holding down XRP’s prices down artificially. Once they are out of the way, XRP should soon finds it own mojo.
So far XRP has mostly followed the price trajectory of Bitcoin and Ethereum, but going forward it doesn’t have to. Look what is happening to Solana. Finally, please watch the below video from ‘Legal Briefs’. Attorney Jeremy Hogan has an interesting way of explaining what is in store for the SEC/Ripple case ahead. My conservative estimates for XRP prices by month end are 3 to 4 dollars . I won’t be surprised if it is even higher.
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Abraham George is a seasoned investment manager with more than 40 years of experience in trading & investment and portfolio management spanning diverse environments like banks (HSBC, ADCB), sovereign wealth fund (ADIA), a royal family office and a hedge fund.