Hi YXI friends,

Most of the weekend saw a mix of rage and disbelief at Trump actually implementing tariffs on Canada and Mexico (there was little sympathy for China). The near-unanimous reaction across market participants was that “this hurts US consumers, quickens inflation, and is bad for growth”.

While the stock market was shut for the weekend, Crypto nosedived. The sell-off started slowly on Friday afternoon and Saturday, then quickly on Sunday. It reached capitulation during Monday Asia hours, severely punishing the longs in every crypto. Interestingly, by the time London opened, the bottom had already been in.

Here is the hourly chart of Bitcoin in the past 4 days.

On Sunday, I was also amidst some of that angry crossfire while explaining why tariffs do not automatically mean inflation, as the answer is far nuanced than the popular belief. I understand that when geopolitics can be an emotional issue - “what did we / they do to deserve this?” - it is easy to want to “take sides”.

However, as a market analyst and observer, my role is to explain the nuance as objectively as possible, regardless of its popularity. I also don’t have any personal feelings for or against Donald Trump / Elon Musk. I simply attempt to explain their likely strategies and outcomes, so we can benefit from their tendencies.

After all, we live in a big social construct, where money can be freely created (Trump Coin) or printed (the Fed), while ordinary people work 12 hour days and need to fight the real-life Squid Games to become the top 1%. The only way to win the game is by not playing the very game imposed on us, but instead choose our own.

Table of Contents

• 1. Leveraged Positions Got Washed Out Again

• 2. Bitcoin Is The Crypto “Hard Money”…

• 3. …But Not Quite “Gold”

• 4. Should We Worry About China Tariffs Too?

• 5. Price Technicals: BTC, ETH, SOL, XRP, COIN, RIO …

  • Bitcoin

  • Ethereum

  • Solana

  • Ripple

  • Coinbase

  • RIOT

DISCLAIMER: This newsletter is strictly educational. Any information or analysis in this note is not an offer to sell or the solicitation of an offer to buy any securities. Nothing in this note is intended to be investment advice and nor should it be relied upon to make investment decisions. Any opinions, analyses, or probabilities expressed in this note are those of the author as of the note's date of publication and are subject to change without notice.

1. Leveraged Positions Got Washed Out Again

Leverage in crypto can be extreme. It’s by far a smaller market than other asset classes, but the participants are regularly Yolo-ing with 50x and 100x leverage.

Below is the current chart of the BTC/USDT liquidation map on Coinglass, showing the various liquidation levels at different price points of Bitcoin.

The biggest liquidation risks come from the 100x (orange) and 50x (yellow) leveraged positions. It takes just a 1 or 2% change in Bitcoin price to bust these positions. The willingness of speculators to take such risks means price can swing wildly and quickly, especially upon market weakness.

Over the weekend and Monday, we saw a liquidation of over $3.5 billion leveraged positions on crypto exchanges. This was reportedly the largest liquidation even in Crypto history, even bigger than when FTX went bust. Allegedly, the real number was several times greater, as exchanges might have significantly underreported their liquidation metrics. This does make sense given the extent of the crash across the ecosystem.

2. Bitcoin Is The Crypto “Hard Money”…

As crypto faltered through the weekend, we saw sizeable drawdowns across all major digital assets.

BTC, ETH, SOL, XRP, DOGE (https://www.tradingview.com/x/EM2yRLzm/)

Bitcoin was by far the most resilient of them all, drew down “only” 11% after the selling climax in Asia. In comparison, Solana and Ether drew down over 20%, while Ripple and Doge drew down over 30%. All in just one weekend.

My view is that this flash crash was extremely important in understanding how investors perceive different cryptocurrencies, and therefore their relative risks. Bitcoin is by far recognised as the leader of the pack in terms of investment safety.

Ethereum and Solana networks have long argued that their cryptocurrencies are also “money”. Even better, they benefit from a peer-to-peer network but even better technology than Bitcoin with tangible value in smart contracts and building decentralised apps.

The reality is that these cryptocurrencies do not share the same “hard money” properties as Bitcoin, due to to their ever-changing network economics and the outsized influence of the founding teams. And that’s not a dig at all. Ether and Solana may actually become more valuable than Bitcoin if their networks truly thrive. They just share different properties and compete on different grounds. Just like how “TradFi” investors don’t directly compare Gold with Microsoft.

A key question that many investors ask is, “What is the utility of Bitcoin? It doesn’t generate cash flows or create wealth”. It is a fair question, and a key reason why Warren Buffett stays away from Gold as well.

Proponents of Gold who are dismissive of Bitcoin would cite that “Gold is used to create jewellery or industrial electronics”. That is not the correct answer. Gold is hard money that was historically treated as money in itself, before bank notes were invented. Gold at one point lent global legitimacy to the US Dollar and is a defensive mechanism against fiat debasement. People like jewellery because it’s made from Gold, not the other way round. And if treated as a pure industrial item, Gold would trade like commodities, as silver often does (after being overtaken by Gold as the world’s most recognised hard money).

The very fact that Bitcoin prices move with the growth or retraction of the Global M2 is a utility in itself, by providing a new defensive mechanism for investors against monetary debasement. Bitcoin does this better than other crypto alternatives due to its self-enforcing network effect, while simultaneously being least malleable by a small group of insiders. This may change in the future, but until that change occurs, I trade according to the statement above.

Don’t believe me? Take a look at the below charts for G5 M2 Money Supply (US, China, EU, UK, Japan) quoted in USD, versus Bitcoin and Gold since 2016. Bitcoin may have in fact done a better job than Gold at tracking the G5 M2 Money Supply changes since COVID.

3. …But Not Quite “Gold”

There is a key difference between Gold and Bitcoin, however, in the status quo.

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