Pre 1929-Crash Or Crypto Correction Coming?
Last Updated on 11 February 2021 by CryptoTips.eu
Earlier this week, in the euphoria which reigned on crypto markets after Elon Musk had decided to invest $1.5 billion of Tesla’s cash (that lay sleeping) into Bitcoin, I was presented with an altered version of the infamous Wall Street Cheat Sheet in my twitter feed.
The graph shows an overlay of every stock market bubble that’s ever existed, whether it’s the Tulip Craze in Holland, the 1929 crash, the 1970 oil crisis, the Dotcom of the 2000s or the 2007-2008 Lehman Brothers crash. It marks every point with each commentary one would at that moment find in the market.
Smart money, euphoria, we’re getting rich, who shorted the market… very recognizable.
Parabolic graph
This time round, someone had re-drawn the first parabolic graph to eternally continue, noting that in 2021 the markets would just keep rising because Elon Musk.
Price often needs to go down to be able to go up.
— The Wolf Of All Streets (@scottmelker) February 10, 2021
Getting bearish on each little drop is a trap for emotional, over leveraged traders.
Funny, but it makes you think though. Is this type of hype we’re seeing right now, with several altcoins climbing 100 to even 200 percent in a week (I checked Coinmarketcap’s ranking of the past week, there were at least 15 coins like that) justified, is a possible 20% correction incoming, or are we, as some are speculating, even at the forefront of a legendary 1929 crash repeat?
Max Raskin wrote an oped in the Wall Street Journal yesterday asking whether or not you could get rich by investing in crypto?
His answer was:
When stocks shift by hundreds of percentage points in a day, there’s only so much the government can do to protect you. Instead, investors should look past the tweets and Reddit posts and get back to fundamentals.
Let’s do that, lets look at fundamentals. Certainly the stock market looks at higher risk than the crypto market at this point, but given that the latter has no built in market stops in case of a 20% fall, this could be changing quickly.
In an overview piece in the Economist this week, Jonathan Golub of Credit Suisse, an investment bank, warned that at the moment “the market is rewarding failure”.
Let’s check.
As long as the music is playing
The legendary Dutch anonymous trader PlanB reacted to the Elon Musk news with a meme accompanied by his text “$40k down, next target $50k”. I would normally agree with that, but tend to see a correction and retest first, and a slight possibility is even that a correction of stock markets could coincide with another retest of $20,000 (or lower) for Bitcoin even.
The news that the AstraZeneca vaccine is only 10% effective on the South African variant could soon be followed by even worse news of the effectiveness of other vaccines on other variants. A long-shot, but a possibility. If that happens, stock markets would crumble.
Euh.... What happened to the Wall Street Cheat sheet?!? We can throw that in the bin??? 😳 pic.twitter.com/9Hh5qSNCBV
— Mickey Holland (@mroering) February 6, 2021
Back in the summer of 2007, just before the floor would be pulled from underneath their feet, global bankers were dancing and celebrating.
Citi CEO Chuck Prince made an infamous comment during an interview session with the Financial Times, explaining that:
Global liquidity was enormous and only a significant disruptive event could create difficulty in the leveraged buyout market.
His quote has since haunted him.
As long as the music is playing, you’ve got to get up and dance
Prince said. The US housing market started crashing a few weeks later. Stock markets soon followed.
The music comment was later immortalized by Jeremy Irons. in the 2011 movie Margin Call, where he, in the role as a sort of Lehman Brothers CEO said:
Do you want to know why I’m sitting here in this chair with you all, why I get the big bucks, so to speak? I’m here to guess what the music is gonna do a week, month, a year from now.
That’s it, nothing more……. and I’m afraid… standing here tonight… that I don’t hear… a… thing… just silence.
The question that you yourself have to ask now is this. Are you hearing music?
Wall Street Cheat Sheet
For those of us who don’t know the infamous Wall Street Cheat Sheet, simply type the term into the search engine and click Images. Check the graph and ask yourself, seeing all the euphoric social media posts about Bitcoin this week, which phase we are likely in?
If your honest answer to yourself is that we might be in Euphoria then a good answer could be to take some chips off the table just in case. If you believe something fundamentally has changed, please leave them on.
A few quotes from 1929 just before the crash. pic.twitter.com/HRrgYKqV6A
— Crypto Whale (@CryptoWhale) February 8, 2021
The last time I made an argument like this, which was around half January, Bitcoin dropped from $40k to $29k for a retest. I’m not saying $50k is impossible, I’m simply repeating this website’s mantra: always do your own research.
