Over the past three weeks, we have seen ‘scam’ pumps and dumps, especially on the weekends. Generally, the market will skew towards one side after the close of the US markets on Friday, before stabilizing on Monday. Both the US stock market and crypto have been moving together hand-in-hand. We saw a bullish bias since 1st August but have now reverted to dump central. This pattern indicates very low liquidity during the weekends, which leads to solid price movements during buys/sells. Over the weekend, we saw a massive correction, slicing through support, including everyone’s favorite 200 WMA for BTC.
Friday alone saw $560M worth of longs liquidated across crypto, the highest for the month.
A likely catalyst for this was the expiration of $2.1T worth of monthly US options during the same day. Many anticipated increased volatility and sold ahead of time to mitigate risk. The debate is out on whether these call-option holders will roll them forward. Selling them and buying new ones with later expiry dates will require more capital and, therefore, more risk. Pundits believe that the market can go both ways, and it would heavily depend on the Fed’s direction. If the Fed continues to ramp up its hawkish behavior, everything will likely dump. However, if the Fed becomes more dovish in response to slowing inflation, bidders will be under pressure to revive the rally, given the size of sidelined capital.
For the most part, we have discussed the price action from a largely macro-oriented point of view. However, there are other ways to interpret this. During bear markets, buyers/HODLers dry up as everyone expects the price to dump further. With no bidders left in the market, capitulation leads to drastic price drops. There are not many new prevalent market narratives/events, for now, to lead to reactionary price movements (other than the options expiry), which suggests that existential fears over the imminent/current recession remain unchanged. In other words, HODLers got bored/tired of waiting for that pump and exited the market.
The contrarian view is that market makers (i.e. whales) are manipulating the price for more accumulation. By removing their bids and dumping, they can scare people off and buy your coins for cheap. Some hopium for those interested in the TA side of this angle can be seen below:
#Bitcoin / $BTC— K A L E O (@CryptoKaleo) August 21, 2022
Another day accumulating in the $21K range, and another day where the doom prophecies on your feed aren't being fulfilled.
Patiently waiting for a bit more accumulation before the bounce / reclaim of early August highs, and then $28K+. pic.twitter.com/8wkKGc0nyA
Surprisingly, ETH fared much worse and dumped from $2000 to $1540, despite muh Merge. ETH/BTC peaked at 0.082 and is now 0.074.
One possible reason for this, beyond the macro side of things, could be the growing censorship concerns discussed further below.