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This week’s “flash crash” that brought bitcoin (BTC-USD) below $ 50,000 – and toppled other digital coins in its wake – tainted what should have been the momentous opportunity for the first sovereign country in the world to adopt cryptocurrency as legal tender.
Despite the ugly price action, most true crypto believers are still just that – even though some observers question bitcoin’s dizzying volatility and El Salvador’s decision to put its weight on it.
Michael Sonnenshein, CEO of Grayscale Investments, the world’s largest cryptocurrency fund manager by assets, who told Yahoo Finance Live this week that other countries are likely to join El Salvador in the race to teach. legal to crypto.
And Matt Hougan, CIO of Bitwise, also told Yahoo Finance Live that “this is the best time, I think, to enter the crypto market. Much of the first decade of crypto was around zero to one. … Now the question is how fast do we go from 1 to 100. A lot of that depends on the regulatory clarity we get.
Granted, it’s been a hectic week for digital currencies like bitcoin – which traded above $ 52,000 on Monday but hovered around $ 45,000 on Friday – as well as Ethereum (ETH-USD) and Cardano (ADA-USD). However, from top to bottom, the latter two did not lose as much as bitcoin, which suffered offshore outflows of more than $ 3 billion in Tuesday’s sale, according to an investor.
On the other hand, the price of the cryptocurrency (SOL1-USD), which powers the Solana blockchain, is already above its pre-flash crash highs, trading above $ 175 on Friday. .
Anatomy of a ‘telltale’ crypto crash
In an interview with Yahoo Finance, Jeff Sekinger, a financial guru, founder of Miami-based crypto hedge fund Orca Capital, said he believes the global crypto market is likely to experience strong growth by the end of this month. year, despite the rout this week. .
Like Coinbase’s IPO week, this week began with another major market event – El Salvador’s new Bitcoin law, which was to be a boon to the industry.
Sekinger has witnessed its part of the crypto market cycles. He first bought bitcoin in college in 2013, and the bull market of 2017 convinced him to quit his job at JPMorgan Chase to focus full-time on the asset class. He launched Orca Capital in April two years later.
Breaking down trade volume, open interest levels, and on-chain analysis, Sekinger actually called this week’s flash crash in a Youtube video he posted on August 31. He told Yahoo Finance it comes down to volume and three big uptrends.
“When perpetual funding, opening interest and price action all go up but volume slows down, it was a telltale sign of the last three major crashes,” Sekinger told Yahoo Finance.
This time around, the slowdown has come from the combination of high leverage in the markets and cryptocurrency traders “buying the rumor and selling the news,” he said. This was proof enough that the market is still relatively small – and still heavily manipulated by a few big players, according to Sekinger.
Acknowledging that market cycles are notoriously difficult to predict, Sekinger said the current crypto bull market will likely end in the first or second quarter of next year.
“There will be too much euphoria and too much leverage and everything will fall apart. Because we’re starting to see a lot of money in space, I think in terms of percentage correction it will be less, ”Sekinger said.
Currently, Orca has two funds that each hold about 10 to 15 different assets that cumulatively hold $ 50 million under management today, with 167 limited partners. Since Orca’s inception, both funds have outperformed bitcoin while one has doubled the cryptocurrency’s return over the past year.
Within two months, Orca will deploy two more funds, including a more aggressive decentralized finance (DeFi) fund. These additions are expected to double the total value of their assets under management, Sekinger said.
Retail investors “see all these crazy stories about the ridiculous amount of money being made on NFTs and it piques their interest.”Jeff Sekinger, crypto portfolio manager
In terms of leverage, Sekinger said his funds can raise up to 5% of their value, but they’ve never had the desire to go close to 5%, and typically use it at more “two to three times a year in small quantities.”
Orca’s future offerings come from retail demand for non-fungible token (NFT) related investments, according to Sekinger – something he has linked to Solana’s meteoric growth over the summer.
“One of the reasons SOL is exploding is that a ton of NFT goes from Ethereum to Solana, because it’s so much cheaper to launch, buy and sell on the Solana blockchain,” Sekinger said.
Retail investors “see all these crazy stories about the ridiculous amount of money being made on NFTs that piques their interest,” he said.
In light of the source of investment brought to the crypto market by NFTs, investor interest in blockchains with higher transaction speed quickly dominated the price action.
Since its hardfork update in London, the Ethereum blockchain is said to be making 15 transactions per second, but reports of high fees due to network congestion have shocked traders.
Based on testing, Cardano would perform 257 transactions per second and potentially many more with upgrades, while Solana can perform 50,000 transactions per second.
David Hollerith covers cryptocurrency for Yahoo Finance. Follow it @dshollers.
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For more information on cryptocurrency, see:
What is Dogecoin? How to buy it
Ethereum: What is it and how do you invest in it?
The 21 best crypto leaders to watch in the second half of 2021
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