StepmanZ

Price action this last month has been rough. But it's important to consult history to put into perspective how major the liquidations of Black Friday (Oct 10) were, and what we could expect a recovery to look like. The $19B of liquidations on 10/10 was the largest near instantaneous loss of wealth and deleveraging our industry has ever seen. While the circumstances were different, the size was larger than FTX. Just like the aftermath of FTX, in the period that follows, firms that sustained large losses that had off-exchange leverage needed to paydown their credit. This requires selling assets. Often the assets that are still held, are the high quality liquids that were posted as margin for that credit (BTC / ETH). Then credit tightens. Firms get more defensive lending while they assess borrower credit worthiness, adjust risk models to be more conservative (or the same models just pickup the recent volatility, and given many give outsized weight to recency, they tighten requirements to borrow). Finally, when this happens towards end of year, firms start to harvest tax losses, increasing sell pressure. It took roughly a month and a half for this to all playout post FTX. When the pressure subsided, the subsequent relief rally was swift and strong. This kicked off an incredible year, in which ETH rallied ~90%. History is going to rhyme at best. The longest government shutdown in US history coinciding with this liquidation event throws a bit of a wrench in things in terms of timing the resolution. But I do know that the market is way more resilient than we were in 2022. Just look at the size of the drawdown, we learned some lessons the first time. Whether this subsides tomorrow, or in a matter of weeks, nobody can say. But all government shutdowns do, all access to credit resets, and then when the market is offsides, things can reverse swiftly. Markets like to run fastest when my timeline is saying the top is in...

$BTC Sweet Science...