Insiders always dump
Behavioral implications of the ETH/BTC cross.
Dear readers,
I know many of you own ETH. It just didn’t make sense for you to put all your eggs in one basket. You thought both would succeed and that diversification couldn’t possibly be the incorrect strategy. Yet I mark the ETH/BTC cross only about 10% above what might be the last line in the sand before bitcoin’s oceanic waves disintegrate Ethereum like a sand castle. Today’s post is about why insiders always dump.
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Empirical data
Starting with giving credit where credit is due. Today’s article is inspired by the infographic from @ShireHODL:
And here is the infographic in its full glory, demonstrating how altcoins always fail to outpace bitcoin. Once they break, they enter a death spiral:
Notice the caption at the bottom: “It’s always the same thing. Insiders always dump.”
A bitcoin-only approach to research can come across as close-minded, but it is the only empirically sound conclusion. I verified these pairs on my own trading station, especially because how the Litecoin/bitcoin cross trades is far from the contents of my watchlist and I wanted to make sure the data I’m providing you with is accurate. But ETH/BTC has been front and center on my radar, as I mentioned in a post from two weeks ago:
After ETH’s initial run up versus bitcoin in 2017, it failed to eclipse that ratio in 2018 and then failed to reach 2018 levels again in 2021…Zooming way in, the price action of ETH versus BTC this week was legitimately ugly and had me pondering the death of Ethereum and what that might look like.
The price action was even uglier over the past 48 hours. I only see about 10% left on the ETH/BTC price before the bottom falls out. Somewhere in the 0.055 zone. As of right now, the pair sits at 0.061 and traded with a 5 handle last night.
It brings me back to Shire’s tweet: insiders always dump. Why does the chart pattern of ETH/BTC mirror all the other shitcoins that have died over the years? They all have insiders: people and VCs that have been awarded an early, outsized allocation of tokens that end up selling when the ponzi-type demand of each shitcoin falters. There is no other behavioral way to explain why a massive pump is followed with lower highs until the token reaches essentially zero.
The falling price of the ETH/BTC cross puts Ethereum on funeral watch, completely independent of its dollar price. The chart pattern is mirroring the death of other bitcoin-pretenders. (When looking at its dollar price, Ethereum is about 25% above its 2017 all-time high, while bitcoin is over 45% above its own.)
This cross could rally back to 0.09 and we’ll have to take the death of ETH off our radar. For now, it remains.
Behavioral implications
The ETH/BTC cross is much more than just the price of an asset relative to another. It has significance to the entire digital asset class, including bitcoin and all other cryptocurrency projects. So much hope has been pinned on the “range of capabilities” of Ethereum, specifically versus bitcoin, that the entire approach of a diversified “crypto” portfolio singularly relies on Ethereum’s eventual success in solving real-world problems. It also then warrants including Ethereum’s own copycats in the portfolio. Before you know it, bitcoin represents only a fraction of the digital asset allocation. Looking back at the death of shitcoin after shitcoin, and a diversified portfolio starts to look like a data-blind decision.
Many in the “crypto” industry are not prepared for the death of Ethereum and what it would mean for their companies. Others that have taken a conservative, bitcoin-only approach are watching with emotions ranging from frantic cautioning to outright giddiness. I’m bringing it to your attention because it needs to be watched and understood. Never thought I’d be checking the ETH/BTC cross before Treasury yields or the bitcoin price first thing in the morning, yet here we are.
Until next time,
Nik
This post was sponsored by Voltage, provider of enterprise-grade Bitcoin infrastructure.
