Last week, I asked a simple question: Bitcoin and Microstrategy: Consolidation or Imminent Correction? We now know the answer. Last week, I said:
My bias at the moment is that Bitcoin, at best, is in a trading range. Support at $92,000 is very strong: Nine times since November $92,000 has offered significant resistance and then support:
So, the prudent approach is to watch and wait. If Bitcoin decisively breaks $92,000 and remains below that level for more than a few days, the chances of a drop to the next level of support ($73,000) grow substantially.
My strategy is simple:
I have a core holding of shares, that I’ve held for over a year. I’m sitting on gains of around 150%. I’m holding.
But, to “juice” my returns, I’ve been selling covered calls.
We now know the answer. On Friday night, Bitcoin traded at around $78,000 for a “correction” of 29% since January 20, 2025.
Is this the end for Bitcoin?
No.
Here’s the chart at 7:20 am Saturday, March 1, 2025
The consolidation range that started in November is over. The “Trump Bump” is largely gone. Bitcoin is back to where it was on US Election Day. Every internet guru has the same opinion:
They are saying what I said last week: If Bitcoin decisively breaks $92,000 and remains below that level for more than a few days, the chances of a drop to the next level of support ($73,000) grow substantially. $73,000 is the pre-election Trump Bump high, and it’s also a .618 Fibonacci level, so it’s not surprising everyone is seeing it.
Well, we got very close to that level, so is that it? Is the correction over? Bitcoin bounced 10% from that bottom, so is that it?
I have no idea, but I will offer this speculation:
If you bought Bitcoin 5 years ago at $4,000, and it traded at well over $100,000, what would you do?
If you bought Bitcoin 2 years ago at around $20,000, and it traded at well over $100,000, what would you do?
It’s difficult to sit on gains of 5X or 20X. For many, that’s life-changing money. Many people would have said, “If it gets to $100,000, I’m taking some money off the table,” and they did. They bought a car. Or a house. Or whatever. It’s completely understandable.
The speculators who FOMO’d in at all-time highs, the “weak hands,” got crushed, and they sold to prevent further losses. So when longer-term HODLers and short-term HODLers both sell, you get a 30% correction. It happens all the time. It happened less than a year ago, in August 2024, and no one remembers it because Bitcoin went on to make all-time highs shortly thereafter.
Here’s another data point: Global Liquidity.
The more cash there is sloshing around the system, the more cash gets dumped in assets, like the stock market. Here’s Global Liquidity (the black line) compared to the SPX, going back to the crash of 2008:
As you can see, there is a high correlation between Global Liquidity and the stock market. Global Liquidity has been falling, so it would be logical to assume that a correction in the stock market is forthcoming.
And here’s the same chart, but with Bitcoin:
The prognosis is the same, except that Bitcoin reacts faster than the stock market (because you can trade Bitcoin 24 – 7, 365 days a year).
This does not mean that Bitcoin will drop to $13,000. It simply means that risk assets fall during periods of lower liquidity.
This brings us to our favourite Bitcoin proxy gamble: MSTR—Microstrategy Inc. MSTR has dropped 57% since the high in November. That’s quite a “correction.” But looking at the chart, it only appears to have fallen to the bottom of the up channel:
So what’s my Strategy (a pun on the new name of Microstrategy)?
Stay the course.
I assume Bitcoin is approaching the end of the correction, and we’ll probably have a period of consolidation before Global Liquidity reverses and trends back upwards. So, I continue to sell out-of-the-money covered calls against my position. I’m losing on the stock, but I’m I’m mitigating those losses with the “juice” from the calls.
I’m fine with that, so I’ll sit and wait.
Enjoy the ride. See you next week.
Bitcoin and Microstrategy: The Crash
by JDH on March 1, 2025
Last week, I asked a simple question: Bitcoin and Microstrategy: Consolidation or Imminent Correction? We now know the answer. Last week, I said:
We now know the answer. On Friday night, Bitcoin traded at around $78,000 for a “correction” of 29% since January 20, 2025.
Is this the end for Bitcoin?
No.
Here’s the chart at 7:20 am Saturday, March 1, 2025
The consolidation range that started in November is over. The “Trump Bump” is largely gone. Bitcoin is back to where it was on US Election Day. Every internet guru has the same opinion:
They are saying what I said last week: If Bitcoin decisively breaks $92,000 and remains below that level for more than a few days, the chances of a drop to the next level of support ($73,000) grow substantially. $73,000 is the pre-election Trump Bump high, and it’s also a .618 Fibonacci level, so it’s not surprising everyone is seeing it.
Well, we got very close to that level, so is that it? Is the correction over? Bitcoin bounced 10% from that bottom, so is that it?
I have no idea, but I will offer this speculation:
If you bought Bitcoin 5 years ago at $4,000, and it traded at well over $100,000, what would you do?
If you bought Bitcoin 2 years ago at around $20,000, and it traded at well over $100,000, what would you do?
It’s difficult to sit on gains of 5X or 20X. For many, that’s life-changing money. Many people would have said, “If it gets to $100,000, I’m taking some money off the table,” and they did. They bought a car. Or a house. Or whatever. It’s completely understandable.
The speculators who FOMO’d in at all-time highs, the “weak hands,” got crushed, and they sold to prevent further losses. So when longer-term HODLers and short-term HODLers both sell, you get a 30% correction. It happens all the time. It happened less than a year ago, in August 2024, and no one remembers it because Bitcoin went on to make all-time highs shortly thereafter.
Here’s another data point: Global Liquidity.
The more cash there is sloshing around the system, the more cash gets dumped in assets, like the stock market. Here’s Global Liquidity (the black line) compared to the SPX, going back to the crash of 2008:
As you can see, there is a high correlation between Global Liquidity and the stock market. Global Liquidity has been falling, so it would be logical to assume that a correction in the stock market is forthcoming.
And here’s the same chart, but with Bitcoin:
The prognosis is the same, except that Bitcoin reacts faster than the stock market (because you can trade Bitcoin 24 – 7, 365 days a year).
This does not mean that Bitcoin will drop to $13,000. It simply means that risk assets fall during periods of lower liquidity.
This brings us to our favourite Bitcoin proxy gamble: MSTR—Microstrategy Inc. MSTR has dropped 57% since the high in November. That’s quite a “correction.” But looking at the chart, it only appears to have fallen to the bottom of the up channel:
So what’s my Strategy (a pun on the new name of Microstrategy)?
Stay the course.
I assume Bitcoin is approaching the end of the correction, and we’ll probably have a period of consolidation before Global Liquidity reverses and trends back upwards. So, I continue to sell out-of-the-money covered calls against my position. I’m losing on the stock, but I’m I’m mitigating those losses with the “juice” from the calls.
I’m fine with that, so I’ll sit and wait.
Enjoy the ride. See you next week.