Zhou Qing decided to take a gamble.
As a enthusiast of digital currency investment, he watched the price of Bitcoin rise to 50,000 U.S. dollars after standing at 30,000 U.S. dollars on January 2, and he could no longer hold back.
On February 18, Zhou Qing chose to open a 20-fold multi-position contract to enter the market. The opening price was about 52,000 US dollars, and the total margin was 38,000 US dollars.
Unlike his past “small troubles” investment, the high-leverage long position contract he bought this time means high risk and high return; once Bitcoin falls by more than 5%, it will trigger a liquidation.
In the next few trading days, the value of Zhou Qing’s position contract continued to rise until February 22, when the Bitcoin price historically broke through 58,000 USD/unit, reaching a maximum of 58352.80 USD/unit. In just 4 trading days, his contract profit has more than doubled.
However, the rise did not continue. On February 23, Zhou Qing watched the bitcoin price begin to pull back, but he hoped to counterattack the rise, and did not close the position in time. What he didn’t expect was that the price of Bitcoin broke through the $50,000, $49,000…$45,000 mark that day.
In the rapid slump in the market, Zhou Qing held the bitcoin contract price flashed, until the margin was zero and the position broke out, and the $38,000 margin was instantly wiped out.
As the price of Bitcoin plunged, according to the statistics of Bitcoin Homeland, nearly 530,000 people broke their positions in nearly 24 hours on February 23, with a total of more than RMB 32 billion.
The reporter saw from the forum in the contract app, a player posted on February 25 with emotion, “I just felt that I was going to get rich, and I opened up more than three times and five times the leverage, and the result was liquidated.” Some players also said, “ It took 80% of profits in two months in three days.”
A trading platform person told reporters that domestic bitcoin trading platforms are generally divided into spot and contract transactions, and the leverage of some platform contract transactions can be magnified up to 125 times. Generally, ordinary investors do not recommend playing contracts, because the risk is too great, and if there is a slight fluctuation, the position will be blown out.
Bitcoin BTC (BitCoin), its concept was originally proposed by Satoshi Nakamoto on November 1, 2008. In 2010, the price of a Bitcoin was only around $0.1. On February 25, the price of Bitcoin retreated to around US$51,000. On February 26, the price of Bitcoin once again dropped to around US$47,000. In 10 years, the price of Bitcoin has increased more than 450,000 times.
What are the factors behind the crazy rise of Bitcoin? Is Bitcoin a tulip bubble? How long can Bitcoin be “crazy” in the future? Is it possible for Bitcoin to break the $100,000 mark in 2021, and even replace gold as a new generation of reserve currency?
Sometimes it is a diamond that illuminates wealth and light, and sometimes it is a deep and dark abyss. The rapid rise and fall of Bitcoin makes people crazy. Panic and greed accompany investors, both happy and sad.
“Roller Coaster” Quotes
On December 16, 2020, the price of a bitcoin stood at US$20,000 for the first time; on January 2, 2021, this figure had become US$30,000. Then, there was a sudden acceleration. On January 8, it was $40,000; on February 16, it was $50,000; on February 22, Bitcoin broke through $58,000 in intraday trading…
The price of Bitcoin broke through frantically, and the huge money-making effect attracted some investors.
After the most dramatic round of Bitcoin’s volatility in history, some people left the market with a blood loss, and some made a lot of money.
Compared to Zhou Qing’s experience, as the founder of a company engaged in blockchain and Bitcoin mining, Lin Xiao is obviously lucky. Since 2016, Lin Xiao and his team have been looking for arbitrage opportunities in the Bitcoin and other digital currency markets.
On February 16, 2021, when the price of a Bitcoin exceeded $50,000, although the price was still on the rise, Lin Xiao chose to make a decisive move at this moment-selling 5 Bitcoins for a total of about 1.6 million yuan .
In early February, he bought Bitcoin at a price of $37,000. The profit from the sale exceeded 410,000 RMB, and the profit was nearly 35% in two weeks.
In the multiple trading days after Lin Xiao sold, the price of Bitcoin continued to rise. In the early morning of February 22, Beijing time, the price of Bitcoin broke through $58,000, reaching a maximum of $58,352.80. The price of a single Bitcoin is crazy enough to exceed the price of 1 kilogram of gold.
On February 23, Bitcoin once fell below US$45,000 per coin in intraday trading, and broke through the six major barriers of US$50,000, 49,000, 48,000, 47,000, 46,000, and 45,000 within the day, falling more than 17% within 24 hours.
Fortunately, Lin Xiao had already made a profit and left the market in time. “Looking at Bitcoin prices soaring one after another, sometimes I want to enter the market, but I am a little afraid of falling sharply. Sometimes when I am afraid, the price of Bitcoin accelerates up, always anxious to miss the rising market, and panic is accompanied by greed. “Lin Xiao recalled.
On February 26, the price of Bitcoin once again pulled back to around $51,000. However, the statistics of Bitcoin Homestead’s liquidation are still being updated. On February 24, the liquidation scale exceeded RMB 2.7 billion; on February 25, the liquidation scale exceeded RMB 2.2 billion.
On February 24, the Datang Wealth Research Center stated in an interview with reporters that the current phased drop in bitcoin prices is just a sharp adjustment in the bubble bull. On the one hand, it is to wash away the long-term chips with high leverage and late entry; on the other hand, it is to reduce the main cost.
Regarding the risk of liquidation, Datang Wealth Research Center stated that there are many risks behind the drastic adjustment of bitcoin prices, especially the high leverage of bitcoin futures. Leverage itself is a risk. Regardless of whether it is long or short, as long as the leverage is increased, it may be forced to liquidate amidst the violent volatility of Bitcoin.
On February 23, a partner of a blockchain asset management company in the south also said that because Bitcoin has already experienced a high rate of increase in the early period, a callback is normal. But the strength of the short-term correction depends on whether more institutional investors will continue to enter the market.
Who is boosting the rise?
This round of Bitcoin market started in October 2020. At that time, after a three-year bear market, the price of Bitcoin fluctuated around $12,000.
At present, compared with the price of about 12,000 US dollars in October last year, Bitcoin has increased by more than three times.
Zhou Qing has the habit of investment and financial management in daily life, and usually invests more in the stock market. Since 2018, he has successively started trading bitcoins in positions, but he has basically not incurred large losses. Because trading platforms such as Huobi provide leveraged trading, they have tried the waters before and made some money.
Since the beginning of this year, with the rapid rise of Bitcoin, there are more and more friends around Zhou Qing who are watching and discussing Bitcoin. He mobilized the funds in the stock market to speculate in Bitcoin, never expecting to encounter a slump in the market and a liquidation situation.
Bitcoin, which makes Bitcoin speculators crazy, is it a “digital gold” and “anti-inflation” artifact? Or a “tulip-like” bubble? What is the logic of its price continued to rise?
According to the reporter’s understanding, the entry of some institutional investors is one of the boosting forces of this round of bitcoin market.
Tesla CEO Elon Musk is a well-known cryptocurrency supporter. In January 2021, he stated that he would not refuse to accept Bitcoin payments; in early February, Musk stated that Bitcoin would soon be widely accepted. At the same time, he also expressed his support for this cryptocurrency. In addition, Tesla disclosed in a document submitted to the US Securities and Exchange Commission that the company has bought $1.5 billion worth of Bitcoin.
On the one hand, the price of Bitcoin is skyrocketing. On the other hand, more institutional funds are entering the cryptocurrency market. At the same time, Bitcoin concept stocks are popular with capital in the global stock market.
In addition, the Guosheng Securities Research Report shows that according to relevant data from bitcointreasuries.org, as of February 20, 2021, 40 companies worldwide, including overseas mining stocks, have owned more than 1.31 million Bitcoins, surpassing Bitcoins. 6% of the total number of 21 million, worth more than 73 billion US dollars.
One of the reasons Zhou Qing entered the market was also because he noticed the participation of many institutional investors. Looking back on this trading experience, he was deeply regretful, especially that he shouldn’t use leverage to play contracts. Otherwise, it will not lose everything.
On February 23, Huobi co-founder Du Jun said in an interview with reporters that the main reasons for the surge in Bitcoin prices are as follows: First, 2020 is a special year. Due to the impact of the epidemic, the global The central bank implemented an excessively loose monetary policy to release water. Under the stimulus of the policy, institutions bought Bitcoin in order to resist the pressure of inflation, and injected a lot of multi-party funds into the market to promote the rise of currency prices. Second, due to the intervention of traditional financial institutions, they first bought Bitcoin on a large scale with gray scale, and later launched a series of trust products that also provided a channel for institutional investors to buy. Bitcoin has seen a wave of gains and went public. The company is also buying BTC as the company’s asset, which has brought the “Fear of Missing Out” (“FOMO”) sentiment to the retail investors in the market, and one after another has entered the market to continue to promote the rise of currency prices. Third, due to the quantitative characteristics of the underlying technology of Bitcoin, there will be no new supply after 2140. Therefore, the consensus on “digital gold” is increasing in each cycle. In the eyes of long-term investors , Bitcoin prices will eventually rise.
Some people joked that it is not that Moutai and Bitcoin have risen too much, but that too much money has been issued. For example, in December 2013, one hand of Moutai was exchanged for 1.5 BTC; in December 2020, one hand of Moutai was still exchanged for 1.5 BTC.
Datang Wealth Research Center also believes that Bitcoin’s record high is mainly due to excessive global liquidity overflow. Bitcoin is priced in U.S. dollars, so it is mainly related to the liquidity of the U.S. dollar, which is closely related to the Fed’s policy.
Moreover, US brokerages allowed Bitcoin accounts to be opened and the launch of Bitcoin ETFs in the US market has aggravated the bullish atmosphere in the Bitcoin market. However, with the increasing growth of Bitcoin trading volume, more and more securities firms in the United States have begun to increase their Bitcoin futures business, and launched a Bitcoin ETF last year, which makes it more convenient for American investors to trade Bitcoin and increases in Bitcoin. Stage, intensified the enthusiasm of the bulls.
How long can it be “crazy”?
How long can the price of Bitcoin be “crazy”? This question draws the heart of every investor.
On February 26, the price of Bitcoin was reported to be around US$47,000, and there was still a huge shock between US$46,000 and US$51,000. Lin Xiao believes that under the rapid rise and fall of Bitcoin, some investors who have benefited before will have to ship. Therefore, the space for downward exploration cannot be determined. At present, it is mainly based on wait-and-see.
Lin Xiao said frankly that since he entered the currency circle in 2015, although he is currently profitable, he has experienced ICO currency account zeroing and running off in 2015. With the market of digital currency soaring and plummeting, his daily work is like wandering. On the blade.
In September 2017, the Central Bank and other seven ministries and commissions issued the “Announcement on Preventing the Risks of Proxy Issuance Financing”, requiring that all types of token issuance financing activities should be stopped immediately. Organizations and individuals that have completed the issuance and financing of tokens should make arrangements such as liquidation and withdrawal, reasonably protect the rights and interests of investors, and properly handle risks.
Lin Xiao recalled that at that time, practitioners and speculators in the currency circle mourned all over, and tens of thousands of people lost their money. The price of Bitcoin immediately fell back to around $3,000.
In December 2017, the price of Bitcoin soared to $20,000, and later entered a three-year bear market. Until October 2020, the Bitcoin price skyrocketed again and subsequently exceeded $50,000. Liu Xia, a financial trader, bought Bitcoin at a cost of US$5,000. After holding the position for several years through the so-called “bear market”, she chose to close her position at US$30,000. Currently, she only holds digital assets in a few small currencies. .
Liu Xia explained that there were three reasons for its liquidation of Bitcoin: the price was greatly influenced by institutions; the opacity increased; the dollar appreciated in stages; the initial holding of Bitcoin was used to diversify the risk, and now the function of hedging the depreciation of the dollar has been achieved. “The rise in recent months has created a new group of wealth-free groups; but I haven’t, because I don’t buy much, and a few friends I know earn at least several hundred million yuan in RMB.” Liu Xia told reporters. .
She frankly admitted that this sharp drop was also caused by the closing of some profits, and that $50,000 is an important psychological barrier and resistance level.
Regarding how long the bitcoin market can go crazy in the later period, Lin Xiao said that it is still cautious to wait and see. The company will mainly focus on mining operations.
Liu Xia believes that this callback may be deeper and last for a long time; but it is still bullish on Bitcoin in the long run.
In recent days, international bigwigs have frequently voiced reminders of the risks of Bitcoin trading.
On February 22nd, Microsoft co-founder Bill Gates also said that if you don’t have as much money as Elon (Musk), you should still be careful. He stated that he is not a fan of Bitcoin because the mining of Bitcoin consumes a lot of energy and has an impact on the environment.
On February 24, Warren Buffett’s close friend and Berkshire Hathaway vice chairman Charlie Munger (Charlie Munger) stated at the shareholders meeting of his newspaper company DailyJournal that Bitcoin will not become a global medium of exchange. It is too volatile to be a good trading medium. It is actually an artificial gold substitute. “And since I never buy any gold, I never buy any Bitcoin.”
Regarding when the Bitcoin bull market will end, Du Jun said that it is necessary to continue to pay attention to the central bank’s expectations of shrinking QE. In the early morning of 2.22, the US Treasury Secretary stated that due to inflation-induced water release expectations have narrowed, it may raise interest rates before the end of 2022. Bitcoin will be in a short period of time. The plunge indicates that if the central bank raises interest rates, Bitcoin’s anti-inflationary demand will fall, and if interest rates rise, it will cause the valuation of risky assets to decrease. Since Canada has recently passed the application for the first Bitcoin ETF, and many institutions in the United States have also provided ETF applications to the SEC, indicating that Bitcoin is proceeding in the direction of compliance, this is good news for fundamentals outside the circle.
In addition, he believes that the risk of investing in Bitcoin is that Bitcoin does not have a mature valuation system and generally adopts a subjective asset benchmarking method. The future trend of Bitcoin is more dependent on fundamental news. And compared with gold, Bitcoin’s capital pool is relatively small, and its price is easily affected by the entry and exit of funds from large institutions.
However, for ordinary investors, many people in the blockchain industry said that for ordinary investors, it is necessary to always pay attention to the sudden price changes that may affect the stop loss level, so it is necessary to continue to pay attention to the setting of the stop loss level and pay attention to risk control when investing.
Lin Xiao also said that if you are a white investor, it is recommended to understand and learn first, and it is not recommended to directly enter the market to participate in such a high-risk transaction of Bitcoin.
On February 26, Zhou Qing also told reporters that the Bitcoin market is soaring and slumping. It is not recommended for novices to participate in transactions, especially in the contract transactions provided by the platform. The probability of liquidation is too high. If it reinvests this year, it will still consider more stocks, and the relative risk will be much smaller due to the limit of ups and downs.
Datang Wealth Research Center believes that, for domestic investors, there is not much need to chase high Bitcoin and carry others a sedan chair. Deeply cultivating A-shares and Hong Kong stocks, in 2021, they will be able to obtain good investment returns under the premise of controllable risks.
Author/ Translator: Jamie Kim
Bio: Jamie Kim is a technology journalist. Raised in Hong Kong and always vocal at heart. She aims to share her expertise with the readers at blockreview.net. Kim is a Bitcoin maximalist who believes with unwavering conviction that Bitcoin is the only cryptocurrency – in fact, currency – worth caring about.