Crypto Crash EXPLAINED: Macro, Leverage & Bearish Catalysts

"On the flip side, meanwhile, temporary crypto catalysts that are bearish tend to mark the local or cycle bottom of a crypto project. One example here is when the original founders of the Pudgy Penguins NFT collection allegedly misappropriated funds and were ousted by the community. This marked the cycle low for the Pudgy Penguins NFT collection and it went on to become one of the largest NFT collections in crypto. Speaking of which, we've seen that crypto traders and investors often tend to overreact to temporary crypto catalysts that are bearish because they think they're permanent."

"In the case of Salana, Soul experienced a 90% token unlock back in January 2021 and then rallied 50x."

"Similarly, Sooie experienced massive token unlocks last year, but was nevertheless one of the top performing altcoins in the second half of the year."

"And yes, this is precisely why so many companies trade at such ridiculous multiples. When new money is created, this money eventually finds its way into assets. And because the markets are forward-looking, investors often price in this future increase in liquidity as soon as it's announced."

"The good news in this case is that it means liquidity is likely to continue rising indefinitely and that it will be very hard to have a recession. In the words of macro analyst Lynn Alden, nothing stops this train."

"If the deficit is rising, you can safely assume that this means liquidity is rising. As you can see, the deficit certainly is rising."

"So if we were to see any escalation between China and Taiwan, that would probably not be a bearish geopolitical catalyst that crypto recovers from very quickly and it could very well be the one that either triggers the next crypto bare market or marks the bottom of the cryptobear market."

"These critical crypto rails were shut down in early 2023 during the banking crisis and they could be a part of why so many altcoins have underperformed. It wasn't easy for institutions like hedge funds to invest in altcoins on exchanges because there were no rails to facilitate these liquidity flows. Thankfully, recent changes to crypto regulations in the US around banking, as well as news that hedge funds are hiring traders to work on weekends, suggest that these institutional rails are slowly being brought back online and could be back online already."

"At the time of shooting this, macro conditions are becoming gradually more bullish as liquidity increases and uncertainty decreases."

"The macro backdrop is currently bullish and getting more bullish by the day."