The Four Horsemen of the Crypto Apocalypse
At the beginning of the year, many financial experts predicted that Bitcoin could easily surge into the six figures by the end of 2021. Things, as we know, have turned out much differently. With Bitcoin falling in price, cryptocurrency’s biggest figures - El Salvador President Nayib Bukele, Tesla CEO Elon Musk, and Microstrategy CEO Michael Saylor - could see their own futures imperiled as their fortunes are tied to the success of the top cryptocurrency.
El Salvador President Bets An Entire Country on Bitcoin
In 2020, the President of El Salvador - Nayib Bukele - proposed Bitcoin become legal tender in the country. Weeks later, the Salvadorian legislature passed legislation to make Bitcoin legal to use as a currency throughout the Central American nation. The move was met with mixed responses. While many cryptocurrency proponents saw President Bukele as a visionary, the International Monetary Fund saw Bukele as a pariah. Months later, the price of Bitcoin had fallen from the $60,000 level down the $40,000 level.
However, the story does not end here. The president of El Salvador has also invested millions of public funds into Bitcoin. With the price of Bitcoin trending downward, President Bukele is not only facing backlash from his citizens, his entire administration could be in trouble. While volatility is expected in the cryptocurrency market, citizens of an economically poor country may not be able to handle such a rapid devaluation in their home currency.
Despite the downturn in the Bitcoin market, President Bukele has not been deterred. The Salvadoran President purchased $6.4 million more in Bitcoin after a crash in the price of crypto in September of 2021. Also, the country is continuing to move forward to the geothermal mining of the cryptocurrency. As of 2022, El Salvador is down $10 million on its Bitcoin investment. (1,391 Bitcoin at an average price of $52,613)
Tesla Founder Elon Musk Looking for Bitcoin To Go Back Into Passing Lane
Never one to shy away from innovation, Elon Musk has arguably been the biggest single driver on the price of Bitcoin in 2021. First, the billionaire founder of Tesla and Space X shook up the price of Bitcoin by agreeing to add the cryptocurrency to Tesla’s holdings (43,000 Bitcoin at average price of $31,700). This alone caused tens of billions of dollars to go into the price of Bitcoin. However, months later, the Tesla CEO caused a crash in the cryptocurrency’s price when he raised concerns about the environmental cost of Bitcoin mining. However, Tesla still owns billions in Bitcoin.
Now, that the price of Bitcoin has crashed, Elon Musk could find himself in the ultimate hot seat at Tesla. Shareholders may be wondering how much more money they will have to lose before they compel Musk to sell his shares. While Musk may seem like an invincible “Iron Man” in the tech world, big name CEOs can be easily replaced. One can only look at Steve Job’s surprising ouster at Apple in the 1980s as an indication of how volatile shareholders can be when it comes to losing money.
With Tesla’s market capitalization north of $1 trillion, Elon Musk’s CEO job at the company should be safe. However, if the price of Bitcoin continues to fall, some may call the CEO’s judgment into question. This may compel him to sell the cryptocurrency.
Michael Saylor Continues to Buy Every Dip, Hoarding Billions in Bitcoin
There is perhaps no biggest Bitcoin bull on the planet than Michael Saylor, the longtime CEO of MicroStrategy. The charismatic tech billionaire is not a stranger to making big moves. After all, the MicroStrategy CEO is famous for making and losing $6 billion back in the early 2000s. He was also the first CEO to start adding thousands of Bitcoins to his company’s balance sheet. As of early 2022, Microstrategy holds 121,044 bitcoin at an average price of $29,681 worth about $5 billion dollars at the time of writing this. Considering the fact that Microstrategy has a market cap of $5 billion, it’s safe to say that the fortunes of the company lie squarely on the price of Bitcoin.
Saylor is one of the longest running CEOs of a Fortune 500 company. In fact, Mr. Saylor has been running the software services company since 1989. Therefore, it is a good chance that he will be able to weather the storm of Bitcoin for a little while more. However, if the existence of the company is threatened by a further fall in the cryptocurrency, then one could wonder how much longer Saylor could remain as CEO of MicroStrategy.
Another question is what will happen if Michael Saylor decides to stop buying. Right now, MicroStrategy is responsible for 25% of the current demand for Bitcoin. If MicroStrategy decides to stop buying, then the demand for the cryptocurrency could fall through the floor. In effect, Michael Saylor may have to keep buying just to prevent the price of Bitcoin from collapsing his company’s share price.
CME Gaps Can Take Down the Other “Three Horsemen”
The fourth horsemen is neither a horse nor a man. It is the dreaded CME gaps that can drive Bitcoin, Ethereum and the rest of the three crypto to lower price levels. What is a CME gap? These gaps are the difference between the closing price of Bitcoin on the CME compared to the opening price of Bitcoin the next trading period. The fact is that CME gaps have a historical fill rate more than 90% of the time. Where are the gaps on the BItcoin price chart? Currently, we can find CME price gaps at the $23,745- $26,650 and $18,020- $19,155 levels. That means that there is a better than even chance that Bitcoin can hit these price levels which could cause panic selling by the other three “horsemen.” These three men are in control of this Bitcoin, but it is not their own. You have to ask yourself how many tens of millions of dollars can they lose before they are replaced by someone who is less Bitcoin friendly? There has to be a Bitcoin price where the people of El Slavador or the shareholders for Musk and Slayor demand they sell right ? With us having a 92% chance Bitcoin hits either one of the gaps and a 85% chance we hit both of these gaps, where these guys will be under water millions of dollars be careful!
What Can We Learn From the Four Horsemen of the Bitcoin Apocalypse?
First, all three of these powerful men were celebrated for their entrance into the cryptocurrency market through Bitcoin. Now a historical chance of CME gap fills at incredibly low BItcoin price levels could lead to panic selling. However, it should be noted that Bitcoin has had major crashes and corrections in the past. Therefore, all three Bitcoin bulls may be ready to ride out whatever the cryptocurrency does the next year or two. The question is, will their supporters be willing to go along with the ride.
REFERENCE:
https://www.govconwire.com/2022/01/microstrategy-bought-more-than-94m-worth-of-bitcoin-in-december/
https://www.bbc.com/news/business-57924354
https://www.cnn.com/2022/01/05/investing/bitcoin-goldman-sachs/index.html
https://www.tradingview.com/chart/BTC1!/F1QO54KW-Unfilled-CME-Gaps/
