After the Crash of 2018, causing bitcoin to drop from $20,000 to $3,000, losing 85% of its value in the process, the narrative was that another similar crash would be impossible. Although corrections were taking place, the introduction of institutional investors into the Crypto market would supposedly secure bitcoin as a store of value. However, the past month has been a testament to the opposite.

The ESG Argument

As we’ve talked about in the past,  there’s been a rising  concern about bitcoin mining’s ESG practice. Cathie Wood, the founder of Ark Invest Management, appeared in Coindesk’s consensus on Thursday.  “Cathie Wood, the founder of Ark Investment Management said bitcoin has come under pressure from institutional investors concerned about its environmental profile.”

If you want to learn more about Cathie's ARK, check out my previous video of ARKK’s top 10 holdings. The allocation might now be slightly different, but you’ll get a general understanding of the companies and technologies Cathie Wood and Ark Invest are betting on. 

“It was precipitated by the ESG [environmental, social and governance] movement and this notion, which was exacerbated by Elon Musk, that there are some real environmental problems with the mining of bitcoin. A lot of institutional buying went on pause,” “Elon probably got a few calls from institutions,” Wood said. “I noticed that BlackRock is [Tesla]’s number three shareholder and Larry Fink is the CEO. He is focused on ESG and especially on climate change. I’m sure BlackRock registered some complaints and perhaps there are some very large holders in Europe who are extremely sensitive to this.”

This doesn’t mean that Cathie Wood is underplaying the impact of climate change. Or other issues such as poor working conditions in China. In a Bloomberg Business Week Interview she argues that most of bitcoin mining comes from renewables, and that it will provide an increasing number of incentives for broader renewable adoption.

Wyckoff Method

Back in the 20s and the 30s, retail investors, although not as common as today were getting wrecked by institutions, as institutions had the necessary funds to manipulate markets and move prices to their advantage. This is when Richard Wyckoff came up with a method for retail traders to analyse the markets and protect themselves against institutions. Wyckoff does not posit that institutional investors are manipulating the market, but that they are creating a very elaborate strategy. Their aim is to shake off retail investors from the market, to get in at a lower price later. A crash or a correction every now and then helps markets have a more sustainable rate of growth. 

Whyckoff distinguishes between the accumulation and the distribution patterns of institutional trading. We saw those patterns back in 2020, and we saw them again in the recent BTC-USD spike.

A reason to drive prices down is for more institutional investors to buy the dip.  And indeed, we’ve seen a number of big names getting involved with bitcoin. 

Ray Dalio revealed that he himself has some bitcoin in Coindesk’s  Consensus on Monday. He seems to concur with Michael Saylor that Bitcoin is becoming the preliminary store of value, posing a threat not only to gold, but also to Bonds.

Carl Ichan, the legendary investor has also endorsed bitcoin as a store of value:.

Price Target

Cathie Wood says we are in the capitulation phase, which is a great time to buy. There is no way to predict what is the low. In terms of price target for Bitcoin, I it could reach $500k if S&P500 companies invest just 1% of their balance sheets. I keep DCAing in all the assets,I am confident in. Trying to time the market almost never works, and I’ve found that a more laid off approach is the best strategy for me. 

Until we meet again, #dontstopinvesting.