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The Coming Crypto Spring

The Mass Psychology of Crypto Investing

Moses Ma/DepositPhotos
The Coming Crypto Spring
Source: Moses Ma/DepositPhotos

Every financial publication out there is declaring that it’s crypto winter, while pundits predict that Bitcoin will either scrape bottom for quite a while, or that it’s entirely possible that it will simply evaporate like a tulip market without any tulips. At the same time, the SEC continues to reject ETF proposals and prosecute ICOs, blockchain tech upgrades are delayed, and everyone keeps getting hacked. The hits just keep on coming. So it’s not just winter for cryptocurrency, the media is painting it more like it’s nuclear winter. The market's behavioral response is predictable.

But at the same time, Wall Street’s “PTB” (the Powers That Be) are not abandoning their crypto and blockchain plans. They are continuing to announce deployments and behave as though everything is coming along just peaches. For example, the operator of the New York Stock Exchange (NYSE) is launching the Bakkt digital assets platform.[1] They just acquired certain assets from futures commission merchant Rosenthal Collins Group to support their plan to become the first integrated and institutional grade exchange-traded markets and custody solutions. Further, Li Ka-Shing (the 23rd wealthiest man in the world today), Microsoft’s venture capital arm, and Boston Consulting Group just injected $180 million into the venture.

At the same time, Nasdaq is set to acquire Sweden-based trading solutions provider Cinnober, in a deal that could see the stock exchange move into helping institutional investors gain access to new opportunities around cryptocurrency. There may have been small delays but they are not about to “wait and see” what happens to Bitcoin.

Here’s another example: There were rumors that Goldman Sachs had decided to give up its plans to open a digital currency trading desk, but their CFO responded, “I really have to describe that news as fake news.” What are they working on? Goldman is reputed to be working on developing a derivative for Bitcoin because “clients want it.” Chavez added that “the next stage of the exploration is what is called non-deliverable forwards, settled in U.S. dollars and the reference price is the Bitcoin-U.S. dollar price established by a set of exchanges.”[2]

Actually, it’s quite remarkable how many Wall Street firms are jumping onto the blockchain bandwagon. It has been announced that JPMorgan Chase Bank’s blockchain, Quorum, will be used to “tokenize” gold bars. Quorum is the enterprise version of the Ethereum blockchain, developed by JPMorgan Chase, will ensure users operate smart contracts while using pre-programmed rules to automate them. [3] Further, a blockchain payments trial jointly launched by a trio of banks led by JPMorgan has roped in 75 new banks globally for seamless and faster interbank settlements.[4] American Express recently confirmed that the company was officially using xCurrent, a blockchain-based financial solution from Ripple Inc. The CFO noted that “Ripple offers instantaneous, point-to-point conversations between the sender and receiver of funds. And that provides a real opportunity to alleviate most of the issues our customers are facing.”[5]

The list goes on:

  • Citigroup is expected to offer crypto custodian once approved by regulators
  • Morgan Stanley to offer Bitcoin swap trading
  • Fidelity and TD Ameritrade have both announced crypto products
  • $30 Billion brokerage giant TD Ameritrade support the launch of first multi-crypto futures exchange ErisX
  • Coinbase and BitGo approved as trusted crypto custodians

So what the heck is going on? If all the financial pundits are predicting the death of crypto, why are so many of the dominant players on Wall Street moving forward instead of running for the hills? The reason is simple: institutional investors really do want to play with crypto, but will not pump in significant amounts of money until the prices sink low enough. There’s a saying on Wall Street that the time to buy is when there’s blood on the street. That time is now, and Wall Street is buying.

Looking Under the Hood

To figure out what’s really happening, we can look under the hood, and examine data provided by large over-the-counter (OTC) crypto brokerages and Wall Street research firms which indicate that institutional investors have already started to accumulate massive amounts of crypto in recent months. Bobby Cho, global head of trading at Cumberland, said that the accumulation of institutional investors has allowed the market to operate stably in the current levels. He said: “One of the biggest criticism of crypto by institutional investors has been the volatility. Over the last four to six months, the market has been trading in a very tight range, and that seems to be corresponding with traditional financial institutions becoming more comfortable diving into the space.” [6]

Danny Kim, head of growth at cryptocurrency trading technology firm SFOX, has noted: “Before institutional firms were actively trading crypto or heavily involved (before 2018) Bitcoin price differences between exchanges varied as high as 4.5%”.[7] He adds that although it’s true that high-frequency trading firms (HFTs) have been trading since crypto 2014, they were limited because the infrastructure wasn’t there. For example, HFT firms generally require a FIX connection to an exchange in order to trade efficiently. Crypto exchanges haven’t offered FIX connectivity until just recently. He says that because HFTs can now take advantage of new trading technologies, this is adding stability to the market.

What’s happening today is reminiscent of Muhammad Ali’s bout with George Foreman in their 1974 Rumble in the Jungle match. We are seeing a first round when a more powerful foe (Wall Street) is pummeling Muhammad Ali (crypto early adopters), who seems helpless against the ropes.

The use of the financial industry media engine to pummel crypto startups, repeating a consistent narrative about the death of Bitcoin and nuclear winter simply enables a massive buying opportunity for established players. It also makes it possible for established fintech providers to subsume blockchain tech startups, rather than having to deal with those troublesome ICOs and their stratospheric valuations.

Returning to Muhammad Ali and George Foreman’s Rumble in the Jungle, it should be remembered that Ali ended up winning, doing so by using the rope-a-dope boxing strategy. This tactic had Ali pretending to be trapped against the ropes, but this was intentional, because he was using the elasticity of the ropes to absorb the force of blows. This goaded Foreman to wear himself out without taking too much damage. Once Foreman was out of steam, Ali flipped the dynamic and ended up winning the fight and ruling the day.

In the crypto markets, the elasticity of the ropes is the HODL power of early crypto adopters and whales. If they can demonstrate “Proof of Belief”, by not abandoning their holdings out of fear, they know they can eventually turn the fight around. The early whales have seen it all before. They know this isn’t nuclear winter, it’s just another bear market. They rode the roller coaster down in the 2011 sell-off from $32 to $2 — a gut twisting fall of 94% of value. Pundits immediately declared the death of crypto, but a little over a year, it rebounded to a new peak of $266.

Over the past nine years, Bitcoin has suffered five bubble-crash-build-rally cycles wherein the dominant cryptocurrency dropped by about 85 percent on average and recovered to a new all-time high. On average, it has taken 67 weeks for Bitcoin to recover from its past five major corrections of more than 50%, and achieve a new all-time high.[8]

And so, the PTB isn’t going after the whales, they’re focusing on more recent investors who are experiencing their first bear market, because for them, there is only doom and gloom on the horizon. Another saying on Wall Street is to buy from fear and sell to greed. Are you feeling the fear yet?

When Oh When Is Crypto Spring Coming?

It is important to assume that everything happening in the market is planned by the PTB, not by the odd lot trader. When a market is going up, the smart money is most likely already in, and when a market is heading down, it’s because the smart money has already liquidated its positions. The smart money prefers to always be on the right side of the trade, so to succeed you need to be on the right side of the trade with them. Wall Street has ridden one of the longest bull runs in stock market history, and once they decide to let the stock market cool off for a bit, they need some place to park their money. In other words, the stock market hasn’t had a major correction since 2008 and it’s long overdue.

Let’s take another look under the hood. According to crypto analyst Danny Charvez, there is a correlational bias between Bitcoin and the US Dollar. Basically, when the Dollar Index is in a bear trend, Bitcoin is bullish and vice versa. From April 10, 2017, the Dollar Index fell for a total of 287 days from 101.00 to 89.00 before consolidating then reversing. In the exact same period Bitcoin rose from $1200 to $20,000 before reversing at this level. From the 16th April 2018 the Dollar Index rose in 63 days from 89.00 to 95.00 before consolidating. In the same period, Bitcoin fell from $9900 to $5800.[9]

So what’s happening now? The Dollar Index has hit a descending trendline for the third time and reversed quite violently from that region. Currently stalled below 95.00, this is a pivotal time for the Dollar Index as it could go either way. If it breaks the 100.00 resistance, crypto will continue to fall. But if Brexit ends in a hard crash, and the USA continues to play chicken with trade wars, shutdowns and the like… the Dollar is likely in for a breathtaking ride downhill to 80.00. The PTB is probably setting up crypto as a temporary haven for funds should all heck break loose. If this happens, then they will likely orchestrate one of the biggest bull runs we’ve ever seen.

It’s the Blockchain, Stupid

Also, there’s rule of thumb for crypto investing that should always be remembered: “it’s the blockchain stupid”.

This means that it doesn’t really matter what happens to BitCoin. Deciding to give up on crypto because Bitcoin is in the dumpster, is like deciding not to bet on Google because Lycos and Alta Vista are having problems. The long term play is betting on the larger technological revolution, which is most def happening.

For example, consider China’s ambitious One Belt, One Road (OBOR) initiative[10], which will cost between $4–8 trillion and impact 65 countries. A startup called Matrix AI is the exclusive blockchain and AI partner for development center of OBOR. The national government has already budgeted over a trillion dollars to pour into OBOR projects and has recently invested $2.1 billion in an AI research park in Beijing.[11] This mega-project will drive trade between China, Russia, the Middle East and Africa, capturing 40% of worldwide GDP.

What’s interesting is that trading on the OBOR system will be settled in a new form of cryptocurrency that is meant to dislodge the US dollar as the global reserve currency. There was recently an innocuous press release that Shenzhen, a major city in the Guangdong Province and the first economic special zone in China, will use blockchain technology for electronic tax invoices. [12] What happened is that the Shenzhen Municipal Taxation Bureau and Chinese tech giant Tencent paired up and “successfully connected the blockchain invoice system with the WeChat payment platform.”[13]

And this sort of thing isn’t just happening in China. Recently, there was an announcement that the 21 EU member states and Norway — signed a Declaration that created a European Blockchain Partnership (EBP)[14], and France is now considering investing €500 million (about $569 million) on state-level blockchain deployments over the next three years.[15] The reality is that there is a real shortage of U.S.-based blockchain startups working on projects in health, energy, insurance, supply chain, and many of the other verticals that are being explored in other countries.[16] Part of this is because the U.S. Securities and Exchange Commission has stifled innovation by delaying the development of a regulatory framework for ICOs, thus stagnating U.S. blockchain development.

The crypto/blockchain market has seen more progress in institutionalization, regulation, and infrastructure improvement within the last 60 days than the past nine years. This has led to the most productive period ever for the cryptocurrency sector. The bottom line is that Wall Street does not like disruption and does not trust crypto upstarts. Wall Street trusts in itself, and tends to overlook inconvenient examples of its own negative reputation, like the LIBOR scandal, the subprime mortgage crisis, Enron, Bernard Madoff, whatever.

Never forget that Bitcoin is not Wall Street’s friend. It was a response to the Financial Crisis of 2008, offering a way to “do money” without banks or a central authority. Bitcoin is dependent only on the supply and demand in the market and is free from all kinds of government intervention or manipulation. This is a direct assault on the core value proposition for established financial service companies and the global monetary system. But on the other hand, the customers of these established financial service companies want crypto because it makes sense.

Decentralized financial services are like decimalization of security prices. The U.S. Securities and Exchange Commission (SEC) ordered all stock markets within the U.S. to convert to decimalization by April 9, 2001. Before that date, markets in the United States utilized fractions in price quotes. This was a practice established almost 400 years ago, when Spanish traders used gold doubloons to facilitate trade. These doubloons were divided into two, four or even eight pieces so traders could count them on their fingers. When the New York Stock Exchange (NYSE) started out more than 200 years ago, it was based on the Spanish trading system. So trade began with this base-eight denomination, and 1/8 of a dollar, or 12.5 cents, became the spread, or the smallest amount a stock could be traded at.

How Wall Street trading works is that that market makers seek to match buyers and sellers on an exchange. They seek to facilitate the orderly exchange of securities while also generating a profit from the bid-ask spread. The introduction of decimalization in the market presented some challenges for market makers, because decimalization causes tighter spreads since it causes smaller price movements. For example, prior to decimalization, one-sixteenth (1/16) of $1 was the minimum price movement represented in a price quote, equal to $0.0625. With tighter spreads market makers lose some of their opportunity to receive higher profits.

Bitcoin and decentralized exchanges are a bit like decimalization — it’s better for the customer because it’s cheaper and provides algorithmic trust (so things like LIBOR rate manipulations are harder to do), but it scares established Wall Street companies. So if Wall Street is going to move to blockchains and crypto, they’re going to want an inside track to make sure it all of this creative destruction doesn’t end up destroying them.

One test of this theory is by watching who gets the first approval or no action letter for a crypto ETF. Will it be a crypto/tech upstart, or an established Wall Street broker-dealer? There’s really no reason why the SEC keeps rejecting or delaying a decision. What they’re doing is giving entrenched financial services companies a chance to catch up with the startups. The unarticulated thinking is that the success of a crypto firm may create a thousand new jobs for innovators, but the failure of a single Wall Street behemoth will result in the loss of tens or even hundreds of thousands of jobs. What’s better for the market? The PTB will always bet on itself.

No Crystal Ball for Crypto

So is there any rhyme or reason to the behavior of the crypto market? If all this good news about NYSE, Nasdaq, Goldman Sachs, JPMorgan and everyone else offering crypto and blockchain products, can’t lift the price of Bitcoin, what possibly can? Is crypto winter going to last forever or is spring coming someday soon? How long will this rope a dope pummeling going to continue? What’s a small investor to do?

The answer is that crypto markets are by nature, very hard to predict. A singularity is a point past which mathematical formulas cannot predict, and cryptocurrency is the mother’s milk of technological singularity. It could go either way… it could disintegrate or it could make new highs. Blockchain based companies are likely to do better than Bitcoin, which may end up dying the death of a thousand cuts. Pour enough negative ink on it, and it’s bound to collapse eventually, because the cryptocurrency — like fairies and Santa Claus — requires that people believe in it for it to thrive. But this is true for fiat currency as well, right?

So there’s always a very real chance that Bitcoin will slowly become worthless, an event which will be heralded by a loud sucking sound. And sure, all those ICOs could end up worthless. But at the same time, this could be one of those, “I wish I had invested when Ethereum hit $82 in December of 2018” moments.

If you are adamant about investing, then my one recommendation is to buy ether and hold for two years. Why? Because Ethereum co-founder Vitalik Buterin has announced that a massive increase in scalability for Ethereum is likely, and could kick off bull run for ether. However, this is very difficult to achieve technically, as it requires a complete revamping of the Ethereum. And so, Buterin has cautioned that this could take “a couple of years” to release Ethereum 2.0, a sweeping vision that encompasses multiple projects that Ethereum developers have been working on since 2014.[17]

Ethereum 2.0 is a combination of technologies that include a proof-of-stake algorithm, known as Casper, scalability improvements via a process known as sharding, and scalable autonomous smart contracts, known as Plasma, a critical component being developed by Lightning Labs. It should increase the throughput for Ethereum at least a thousand fold. [18]

Our discussions with Ethereum experts indicated that a prototype/pilot of Ethereum 2.0 is likely going to be released in 9–12 months. And I have heard that Plasma is already running, but everyone is keeping mum. If this comes to pass, and the SEC decides to let crypto flourish in the the spring, I think there could be a blockchain summer of love, to fuel another bull market run.


Even though it is very hard to predict where the blockchain and crypto markets will go, what is undeniable is that they are here to stay. Furthermore it seems clear that what’s really happening is that regulators, policy makers and institutional investors are getting their stake and foot in, even though at times more behind closed doors than in the open public.

If you’re a crypto whale… remember that the conclusion of this chapter of crypto history is actually in your hands. Like the Rumble in the Jungle, it isn’t clear who will end up roping the dope and who will end up the dope. Everything depends on how forcefully the faithful will HODL and how long Wall Street’s pummeling will go on. If it keeps going, we’ll likely see new bottoms and ask how much farther it can drop. But when crypto winter finally turns to spring, everyone will be asking how high is up?


For more information about the ideas and concepts contained in this white paper, please contact the authors Moses Ma and Markus Wllms. The opinions expressed in this article, are personal opinions alone, are not expressing the opinions of any other party, legal or private person.









[8] See:





[13] See:…