This is being a hectic morning. Yesterday’s session has brought consequences for markets that lacked sufficient volume to manage the situation that has occurred with the publication of certain news or intentions by the Bank of Russia regarding cryptocurrencies.
All connoisseurs of market theories are fully aware that there are always events that are beyond our control. In fact, this is the main reason why we must control everything that can be controlled, and manage in an orderly manner all the market situations that we are capable of (control of the economic calendar, active management of our positions…)
But still we have to accept the reality that totally unexpected events are going to happen that can shake the market and cause it to change its bias quickly. It is what we know as black swans.
The black swans, or the management of uncertainty
We do not need to define a black swan as an event that causes a big drop in the market, but as a singular, extraordinary or unexpected event. And in those terms we could define what we have experienced in recent hours.
The Bank of Russia discovers and describes cryptocurrencies
Once again we attend, albeit unconsciously, a huge game of chess. We are a tiny part of the board, but essential. I would like to take advantage of this space to make a reflection and not only extend it to Russia, but to the states as a whole.
And it is that I believe that these organisms for the first time face a threat that they do not know exactly how to manage. The monopoly of currency issuance is something that no one has discussed with them for centuries, until one person or several, in 2008, formulated a decentralized currency proposal.
The digestion of this new paradigm seems to be costly. I am not going to list the many evils and prejudices that the Russian Central Bank has found in cryptocurrencies, because they are already well known to everyone, but I did want to mention a certain aspect:
And that is the key point: The problem is not the assets themselves, but who manages them. It seems that a cryptocurrency managed by a state loses all its drawbacks and dangers, just because it is issued by it.
We are facing a battle of the story to make and convert CBDCs into the new monetary reference for the next generations and we should be clear about that when reading all the information that comes into our hands
The market loses the support zones
But the consequence from the technical point of view is there, and we cannot ignore it.
We have a market that has tested important oversold areas for us, with a PCTATH indicator of 53 points. This is also an area of high uncertainty that opens the door to further declines. The stage is wide open.
But we can make many theories for hours. The reality is that the market is missing something fundamental: buyers. Bullish volume is a basic ingredient for any trend that wants to aim for more than just a technical move. And this one has been missing for weeks. This is the reality that the graphs show us.
Bitcoin, the asset that represents 40% of the market, gives us evidence of this lack of volume. And this is a favorable scenario for any black swan, of any size, to cause significant declines.
This is the factor that keeps us on permanent alert, and the necessary ingredient that can decisively contribute to the return of bullish sentiment to the market.
Accumulation of whales
But meanwhile, there are market operators who do not waste time and dedicate themselves to accumulate in these moments of uncertainty, buying at good prices
This is also the reality, with assets that have not lost value in 24 hours at significantly lower prices
The trend has quickly spread to the Defi market, with online corrections to major assets
Conclusions: caution and prepared to take action
As traders… we must adopt an aseptic position before the market. Our task is never to try to guess what is going to happen, but to design logical scenarios adjusted to reality, linked to a probability that they will occur.
In this sense we can take two approaches:
• Interpret this movement as an isolated event (black swan), caused by entities and organizations with a destabilizing spirit in the market that has found a favorable environment of little bullish volume and has thus caused the fall (ergo… it is a buying opportunity)
• Believing that this is one more manifestation that the entire ecosystem has serious shortcomings and that we have reached a limit or turning point in the market. From here we will see more declines.
It is up to each of us to choose the blue pill or the red pill based on our criteria. For our part, if we analyze the market we see that nothing has changed and that there are still extraordinary projects that continue their course and that can change the vision of the current economy as we know it. That would assign little probability to the second scenario
But… Always remember,