Ethereum is close to falling below its previous all time high of just above $1,400 with the currency suddenly dropping to $1,420 before somewhat recovering to $1,460.
In inflation adjusted terms and if you account for the added new supply in the past four years, eth has already fallen below its previous all time high by about $200. Now though it’s falling in absolute terms.
Bitcoin has also previously fallen below its all time high in the bear of 2014-16 when it dropped below the $300 line and $250 after it crossed it in March 2013.
Though arguably the previous actual all time high back then would have been in 2011 at $20. Likewise eth dropped to $80 in the last bear in 2018. Its previous all time high being in 2016 at about $20.
In the previous cycle bitcoin kept considerably above its all time high of circa $1,200 to bottom at $3,000. Whether it will stay clear of $20,000 this time though is to be seen.
But eth is seemingly not holding the line at all. One reason potentially being that it just did not rise enough, peaking at $5,000. Coming down to $1,400 is not therefore much of a road, certainly not compared to bitcoin’s journey from $20,000 to $3,000.
So is this a psychological matter, the crossing of the previous all time high? It was in 2014-15 because with no previous history, it’s what bulls claimed. Yet its break down below $300 sort of killed the suggestion it can’t fall below its previous all time high.
Some still cling to it though and for good reasons in a sense because the ethereum ecosystem is now far bigger than four or five years ago, so how can it be worth the same?
It probably isn’t, in a wholistic sense, but the market can be more a game of chairs rather than an actual judgment on value. If some think others will sell to buy back lower, they’ll sell to buy back lower, and so you get a capitulation with reason out of the window.
Brutal, and has it even began? The speed in some ways is surprising, a sign that Powell is going too fast. Yet, there’s nothing unusual so far. Another -50% should bring us to autumn, with a crypto market cap of half a trillion, and from there you can 10x again or even 20x.
Too simple, too predictable? Perhaps, maybe it’ll be even worse, but there’s no loss of confidence in crypto itself. People are divesting from all assets as Fed traps everyone, and so all right now are playing what we should call wait the music.
The violin plays in all corners of the globe and in every single asset, including the dollar which is massively losing purchasing power. No one seems to be fighting it either because it’s summer and people want their holiday with no care.
The drums will come out at some point though, but for now we have to listen to FUD from Coinbase itself.
“People are pulling their money out of Celsius. Latest estimate is something like 50K of ETH ($80-90 million) is leaving Celsius every week.
There’s only about 270K of actual ETH. If this continues for another ~5 weeks, Celsius has some tough choices to make.”
So says Pete Huang, who describes his position as Business Operations and Strategy at Coinbase. He continues:
“This is just the latest in ‘safe’ tokens being challenged post-UST/LUNA. USDT was under threat as people started to pull money out of crypto.
Now stETH, which was viewed as generally safe (“It’s all tied to securing Ethereum, and Ethereum isn’t going away!”) and probably will be just fine given enough time, is starting to drop in price.”
Brian Armstrong, the founder of Coinbase, is clearly losing his grip on his employees. This is why, as awful as it may be and as bad as it may sound, some in crypto have learned to love the bear.
It just gives you an opportunity to purge a lot of dumbness and to clear out a lot of stupidity because when you see Tony Blair on a crypto stage, well you kind of want a slap.
Fox style justification maybe. We can’t have bull, so yeah we love the bear now, but post-UST and stETH in one sentence makes sense only if there’s some manual component to stETH.
From what we understand, stETH is a token linked to an actual eth. There’s no permission or manual intervention in that linking process. It’s just maths. If you present an stETH, you get the eth that are staking. They’re locked, the staking eth, but they will be unlocked.
We haven’t looked at the actual code however, that’s others’ business, but presuming it works as we think it does, then this is better than the violin because here you have some certainty – again presuming the code works – that you’re getting discounted eth.
So there is no Luna situation where stETH goes to zero and stays there – actually down another 7% for UST somehow! Arguably there is no post-Luna at all because the Luna design was clearly just flawed with the only question being whether it was an intentional scam.
In addition stETH can’t lose its peg, again presuming the code does what it says on the tin, but it can be discounted due to numerous factors, and that discount can be long lived because there is no way to arbitrage until the eths are unlocked.
The discount should be kept in check however by more knowledgable people getting cheaper eth, though tokenized. Should a Coinbase employee know all this? Or is Coinbase so big now it doesn’t quite have standards anymore?
At least though we’re used to all this. Love the bear because there’s no choice. Take a holiday if you need to, but don’t leave.
Other spaces aren’t used to it, especially in traditional tech. A bubble is bursting there, has burst. Nasdaq is being kept afloat by the big four, but the floor has fallen with most tech stocks down 70%, 80%, some 90%.
A contraction is coming in traditional tech for the first time since the dotcom bubble. It hasn’t been sudden. It began all the way in 2019.
It might even get brutal. It is already brutal, for many tech stocks. Not the Gulags and not the F*books, but Nasdaq has crashed, the big four have just hidden the fact.
And the question in tech is whether it will recover? The answer is, perhaps, not for years.
The good news though may well be that other industries outside of tech have the ingredients to start becoming less depressed. They have stagnated for 14 years, in both US and Europe. They should start, at the very least, stagnate a bit less.
But Silicon Valley is in trouble, and that means the whole US economy is potentially in big trouble as tech has been the main source of growth there.
For the better hopefully. The likes of Google have gotten too arrogant. Twitter censoring a sitting president, justified or otherwise, was a clear sign of exuberance.
Have you even tried using Google Ads? The system is so clunky, so buggy, you might even consider yourself lucky you can use it because the bots might suspend you even before you start using it at all, for no reason. The Facebook Ad bot might not just suspend you, but disable your account. Then you have to go through some bureaucratic system, but why on earth would you because who on earth do they think they are.
Multiply that by potentially millions of similar cases, maybe even billions, and you get the nice cuddly little bear to assert the dominance and the superiority of objectivity. Here being: serve your customers.
So bad as it may sound, and awful as it may be, the bear was needed and when the bear takes over there are no rules necessarily of previous all time highs.
It’s also worth to know the market can be wrong and often is wrong, but it will make you think and feel that you are actually the one being wrong.
There is however such a thing as objectivity even in markets, there is such a thing as ‘truth’ even in markets, and those forces will kick in, but not before the bears are exuberant.
Until they’re done, we just have to listen to their dum music, and right now they’re of course playing We didn’t start the fire, Powell did.
But this price level for eth should hold at least for a bit, though we’ll have to wait and see what happens on the Monday opening.
