[Silverback Kent Halliburton, Ex-Pat SBs, is our resident Jungle expert on Bitcoin, puts out a daily news letter called Kent’s Corner that’s available on Substack.com. SB SM]

Kent Halliburton’s Daily Ramble

DOGE is worth taking a moment to write about today. If you’ve been living under a rock and haven’t heard of DOGE, it’s a cryptocurrency being voraciously traded. On Friday, its traded volume was $70B, almost three times the SPY, the world’s most popular exchange-traded fund (ETF). DOGE now stands as the 5th most valuable cryptocurrency globally, with a market cap of $49B.

So what is DOGE? It’s the question du jour. Let’s see what John Q Public thinks it is:

There’s a lot to be said here, but let me give ya’ll some facts about DOGE coin:

• There’s an infinite supply.
• The network is barely functional — that means you’re lucky if you can send some DOGE to your neighbor.
• No one has contributed to developing the DOGE network in the last 2 years.
• Since the beginning of the year, it’s risen more than 9000%.

What the bloody whosawhatsit is going on here? Some time ago, Elon Musk decided it would be great to apply his influence and meme’ing capabilities to DOGE, out of pure jest. After his 2018 run-in with the SEC, I also believe his jest was a middle-finger at the SEC since he can promote DOGE without running into trouble. See, you’re not allowed to promote securities (stocks like NIKE, APPL, etc.…) without being properly regulated. DOGE is not a security, so Elon can do as he pleases.

Unbelievably to most, myself included, Elon’s audience is rabid enough that his tweets drove the price. At this point, it seems DOGE has generated a life of its own. The price continues to bring in more and more speculators collectively trying to reach the insane price target of $1. It’s currently worth $.38 per coin. If $1 is reached, DOGE would be the 3rd largest cryptocurrency in the world. And there’s nothing behind it — it doesn’t even work.

Not quite. What is clearly behind DOGE is a large community of people. Where the community takes DOGE is unknown, but what I find fascinating is the social experiment at play. The folks meme’ing DOGE into stratospheric prices seem to know that it has no value but are driving it anyway. DOGE’s price could fall off a cliff tomorrow, making it a game of musical chairs where no one wants to be the last one holding DOGE when the selling comes. Or…the community could suddenly decide to build the network to support the token. We don’t know.

Since there is no “there” there, the token’s value represents the value of the community itself. It’s a cultural zeitgeist moment that roughly translates into cynical, raging, profiteering by a generation whose ability to save for the future has been blown up by central bank money printers. Think of DOGE like 2021’s version of Joker expressed in the financial markets. If we need a signal that we’re societally wading into a weird hall of mirrors moment, DOGE is it. The distortion of the central bank money printing is turning money into funny money, quite literally with DOGE. Hold on…it just gets weirder from here.

Favorite Things on the Interwebs Today

https://www.youtube-nocookie.com/embed/UJqUuSodkEw?rel=0&autoplay=0&showinfo=0&enablejsapi=0

You mean you’ve never seen drones create a video game commercial in the sky, either? 🤯

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Bitcoin Price Prediction

Weekend: $55k – $66k

Today: $53k – $60k

Tomorrow: $53k – $60k

Bitcoin made its best U2 impression yesterday with a rousing rendition of Sunday, bloody Sunday. The price started at $60k and didn’t find buyers again until it hit $51.7k, more than a 14% drop in total and a 20% pullback since the peak of $65k set on the 14th. The leverage has been washed out of the market, and now we wait to see if the bounce from $51k to $57k is an actual recovery or if we are going to see more downside ahead. Although I didn’t want to see Bitcoin break back below $60k after consolidating for two months in the $40-60k region, the way it did so leads me to believe that this was just the market’s way of punishing those who were overextended in their positions. If we can avoid more downside in the days ahead, then the price will likely begin climbing again. But if the price decides to break down further, it could start a rush for the exits. For my part, I am cautiously bullish here. All the best indicators have reset, there’s a massive amount of bitcoin being withdrawn from the exchanges, and while scary in the moment, this type of price action is typical of Bitcoin.

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Bitcoin Q & A

Q: What does open interest mean in the Bitcoin market?

A: The total amount of interest in Bitcoin derivative products.

There are many derivative Bitcoin products: options, futures, and perpetual swaps are all examples. These are financial products that use collateral in either dollars or Bitcoin to open leveraged positions. This allows traders to increase their position size by as much as 100 times. Derivative products are different than spot Bitcoin, which is actual bitcoin being bought and sold using fiat currencies.

When the leverage in the markets reaches a high proportion of the trading volume relative to the spot volume, it can lead to cascading liquidations of long positions. As the price drops, exchanges begin to liquidate people holding long positions to reduce their risk. This puts more selling pressure on Bitcoin and can lead to further liquidations. The violent move in the Bitcoin market yesterday was driven in large part by the over-leveraged long traders in the market being liquidated.

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Thanks for reading,
Kent

Have you got questions or a “Favorite Thing on the Interwebs”? Comment below or reply and drop me a line!

Thanks for reading!

Kent