Thread by @AlamedaTrabucco

For a few weeks, BTC was boring -- it only moved like 10% over the course of (plural) days. I hope you all caught up on sleep, because crypto is now fun again! What exactly has been going on?

A thread about the calm and the storm.

On Sunday night, BTC bounded up quite fast -- it rallied steadily from $34k to $36k or so, and then shot RIGHT up to $40k all at once. What's the story there?

I think a few small effects combined here. First, there was some vague positive sentiment:
- Elon is in a "he loves us" phase
- Now maybe Amazon is in too? Maybe not but, like, maybe?
- China FUD in general, maybe they'll buy BTC instead?

Second, the run-up happened on Sunday night U.S. time, very early morning Asia time. As we've seen before, this is the type of period when liquidity can be at its lowest because it's not really part of anyone's "normal working hours" (it's not zero because it's still crypto) ...

... and low liquidity + some directional impetus tends to trigger much bigger moves than would happen during a period of "regular liquidity," more sellers that the net buyers need to work their way through to have the same impact.

Third -- and, I'll be brief since this is a classic -- yes, buying liquidations did happen on Sunday night, especially during the quick rally to $40k (and WAY beyond, on some platforms where 100x leverage runs rampant).

Combined with the low liquidity at the time, these liquidations were a TON of what drove the market first to $38k and then to $40k and beyond. And as we've seen so many times, this quick liquidation-driven follow-on to a rally was an obviously great short-term sale.

BTC ping-ponged around a bit before, ultimately, something REALLY similar happened the next day. First:
- Chinese market crashed a lot -> China gonna buy?
- Etc., more of the same kinds of good news for the market.
Second, liquidations.

... and third, this time, was an even sharper crash (abetted by the U.S. stock market getting hit a bit, too, and when the U.S. market gets significantly hit, especially amidst renewed COVID fears, crypto does often follow -- but a TON of this was liquidation reversion).

And I think the market recovered faster this time for a few reasons:
- Faster life cycle: in March 2020 crypto was hit off COVID and took months to recover; this time, we expected it to, so the market acted *quickly*
- The China stock news seems to have more legs than average?

... and, maybe the biggest reason -- this time, I legitimately *do* think people are coming around to the idea that the market's current recovery is WAY less leverage-driven than in the past. Where we once saw rallies driven by Binance perps, now we see them led elsewhere.

FTX -- a platform known for its lack of liquidations relative to peers -- had the richest bids by a LOT during this run-up, as you can see by looking at its elevated funding. If their users are less levered, somehow this seems less likely to undo itself when someone gets rekt.

And -- on FTX and elsewhere -- spot margin systems are getting SUPER popular. And they generally allow less leverage than derivatives platforms do, again leading -- I think -- the market to see this as a huge deal.

So! That leaves us here, hanging out just under $40k. A lot can happen from here -- BTC has had a stock beta, so there's potential for it to remain sorta beholden to that, and there has historically been "round number resistance" maybe causing it to struggle staying >$40k.

But $40k is a local max, so there's also LOTS of potential for shorts put on much lower to get liquidated if we rally even a little more. We'll see! It should be an interesting next few days, and I'm sure glad I caught up on sleep.