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Bitcoin daily chart courtesy of Stockcharts.com

What's Goin On?

The short version is Bitcoin's entire life has been in an ocean of liquidity and liquidity is draining. 

Bitcoin rallied earlier this year along with beat up technology stocks on Fed hopium.

Crypto Bank Silvergate to Shut Down, Repay Deposits

The Wall Street Journal reports Crypto Bank Silvergate to Shut Down, Repay Deposits

The California lender, one of the crypto market’s top banks, said it would wind down and return all deposits following a run that forced it to sell off assets at a steep loss to cover billions of dollars of withdrawals. Silvergate “is also considering how best to resolve claims and preserve the residual value of its assets,” the bank said in a news release Wednesday.

Silvergate catered to companies in the crypto business. It helped institutional investors move dollars in and out of crypto-trading platforms through its Silvergate Exchange Network, which it stopped operating last week.

Those customers rushed to pull their deposits out of Silvergate following the FTX collapse. A subsequent regulatory crackdown, in turn, spooked banks serving crypto companies, prompting them to back away from the business.

Silvergate’s nearly 10-year crypto experiment collapsed in a matter of months.

The Silvergate collapse leaves the struggling crypto industry with one less bank. Regulators have been raising concerns about banks’ crypto exposure, leading them to rethink any exposure to the crypto sector, no matter how small, The Wall Street Journal reported last month. 

Silvergate’s shares, down 72% this year before the announcement, fell another 40% in after-hours trading Wednesday.

On Friday, the bank said that its Silvergate Exchange Network, a special payments network popular with crypto customers, would shut down.

Liquidity Crunch

Without banks, crypto companies struggle to pay their employees and enable customers to move money in and out of digital currencies.

Note that this is happening without any big regulatory actions by the Fed, SEC, or president Biden.

People are finding it harder to move money into and out of Bitcoin. 

U.S. Treasury Department Proposes 30% Excise Tax on Crypto Mining Firms

On March 9, CoinDesk reported U.S. Treasury Department Proposes 30% Excise Tax on Crypto Mining Firms

The U.S. Treasury Department has proposed a 30% excise tax on the cost of powering crypto mining facilities.

These companies would also be required to report how much electricity they use and what type of power was tapped. The tax would be phased in over the next three years, increasing 10% each year.

“The increase in energy consumption attributable to the growth of digital asset mining has negative environmental effects and can have environmental justice implications as well as increase energy prices for those that share an electricity grid with digital asset miners,” according to the document. “Digital asset mining also creates uncertainty and risks to local utilities and communities, as mining activity is highly variable and highly mobile. An excise tax on electricity usage by digital asset miners could reduce mining activity along with its associated environmental impacts and other harms,” the document added.

I highly doubt Republicans will go along with this idea. But what would happen if Democrats ever control the Senate , House, and White House?

Why Bitcoin Won't Reach Mass Adoption Ever: A Three Generations Theory Rebuttal

On February 26, I commented Why Bitcoin Won't Reach Mass Adoption Ever: A Three Generations Theory Rebuttal

Undoubtedly, Governments Can Stop Bitcoin

Bitcoin advocates promote the idea that it's impossible to kill Bitcoin. At best they are quite naïve. Some of the advocates are charlatans or manipulators in pump and dump schemes.

All governments have to do to kill Bitcoin is ban conversion to fiat. A transaction ban by the US or EU imposed on merchants, banks and exchanges would kill Bitcoin immediately.

Yep, you still have your Bitcoin. No one will take it away. It's just worthless because you cannot convert it to spendable money.

Q: How long will major governments allow Bitcoin speculation?
A: Until they feel threatened by it.

Perhaps that's a year from now and perhaps it's never. But the lower the price stays, the less likely governments will act to rein it in.

Don't fool yourself. On grounds of money laundering, fraud, or made up excuses, governments can kill Bitcoin. And they will if threatened enough by it.

That is a statement of fact. The only part debatable is the likelihood of such an event.

Three Generations Rebuttal Conclusion

The idea that a Bitcoin mass adoption will happen over 60 years, with governments unable to do anything to stop it, even as Bitcoin sits the entire time, not as money but as a money substitute, potentially taxed to death, and potentially displaced by other technologies or better blockchain representations seems to be extremely wishful, if not outright fantasyland thinking.

Liquidity and Final Thoughts

It's important to note the Fed and central banks are now decreasing liquidity at a rapid pace.

Bitcoin's entire existence until now has been in an ocean of increasing liquidity and falling, even negative interest rates, by central banks.

Wherever Bitcoin is headed, don't expect it to be impervious to Fed actions, central bank actions in general, liquidity, global recessions, US and EU government crypto policies, and whales cashing out. 

Those are just a few snip. My post spawned numerous absurd threads on Twitter with people telling me it was "impossible" for governments to stop Bitcoin. 

"China tried and filed, blah blah blah. They cannot take my Bitcoin away."

Both statements are true on the surface. But, as I responded, Chinese citizens could leave the mainland to Hong Kong or a casino and trade their Bitcoin for dollars. China alone cannot kill Bitcoin. That does not make it invincible.

If the US ever bans banks and merchants from accepting Bitcoin, it is immediately lights out. Yep, "They cannot take my Bitcoin away," but what the hell are you going to do with it? 

Buy a house, a car, get $10,000 at will? No, you won't. If US regulators restrict conversion to fiat, no bank or merchant will touch it. Bitcoin would be restricted to peer-to peer barter, essentially worthless. Only fools debate that idea.

But how likely is that? I don't know, and no one else does either.

In my Tweet responses, I also mentioned taxes. Again, I was pooh-poohed. 

Well, that did not take long. Biden is proposing a 30 percent tax. If Democrats were in total control would it stop there?

Two of my key ideas happened this week in very mild forms. 

And what happens if regulators shut down tether? That's a very real possibility, and a a short term one to boot. How will you get money in and out? 

Yet, the absurd price predictions still remain. 

What Bitcoin Is and Isn't

Bitcoin isn't money, it's a religion ^TM

Bitcoin isn't money, it has to be converted to money to be spend. Before you make a fool of yourself telling me you by things with Bitcoin, you really don't except in extremely rare barter setups. Read my post for discussion.

Despite the obvious, I doubt I convince anyone because ... Bitcoin isn't money, it's a religion ^TM

Yet, people will go on believing a song written about Bitcoin. 

I am Bitcoin

I am Bitcoin, hear me roar
In numbers too big to ignore
And I know too much to go back an' pretend
'Cause I've heard it all before
And I've been down there on the floor
And no one's ever gonna keep me down again

Yes, I am wise
But it's wisdom born of pain
Yes, I've paid the price
But look how much I've gained
If I have to, I can do anything
I am strong (strong)
I am invincible (invincible)
I am Bitcoin

I am Bitcoin
I am invincible
I am strong
I am Bitcoin

Religious delusions out of the way, let's return to the real world.

(Click on image to enlarge)

Bitcoin daily chart courtesy of Stockcharts.com

One possible Ewave count is we just had five waves down from the top and we are now in a corrective pattern starting in November or December.  

If that is the case, a 3 of 3 down awaits and that would likely break every support line I show. 

On a percentage basis, the move from $15,500 to $25,200 was huge, but it was rather insignificant technically other than the ominous double top. 

I struggle to see a strong technical or fundamental case here. Sentiment and liquidity are fundamentals. 

At a minimum, I expect a test of the $10,000 level. 

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