If you’ve perused Crypto Twitter at all over the past months, you’ve likely seen the term “Bitcoin echo bubble” mentioned over and over again; bears of BTC and its ilk believe that the cryptocurrency market is in the midst of effectively a “do-over” of 2018’s Crypto Winter.
While some have laughed this off as pure conjecture, citing the fundamental developments of the cryptocurrency ecosystem and adoption events, a hedge fund manager recently backed the idea that Bitcoin is in the midst of an echo bubble, triggering permabulls.
Nearly two years ago, just days after Bitcoin tapped $20,000 in a jaw-dropping surge, Mark Dow, a hedge fund manager and chartist, took to his blog to bash BTC. In an entry titled, “So You Want To Short Bitcoin? Here’s Your Road Map,” Dow, using the age-old anti-crypto argument, lambasted cryptocurrencies for being situated in a bubble, before claiming that a dramatic correction could be bound to happen.
As you likely well know, the American investor was right. Extremely right. In the months after his blog post, the cryptocurrency fell to $15,000, then $12,000, then $10,000, and lower and lower until it ended the year just a smidgen above $3,000. He had made the crypto short of the century, then he closed it, just three days after Bitcoin found it’s ultimate bottom.
BTC has surged since then, topping at $14,000 in June. Even still, Dow has persisted with his bearishness, recently issuing the tweet below asserting that “truly strong assets don’t give back moves [like the 42% surge past $10,000, especially when they start from so far below all-time highs.]” Dow concluded then that the bleeding price seen over the past few days is a sign that the “thesis of a echo bubble unwind, with occasional upside spasms & progressively weaker FOMO, just got a lot stronger.”
The funny thing is, hedge funds (may include Dow’s fund) agree with this bearish sentiment. Ryan Todd
, a researcher at industry publication The Block, recently found that for the CME futures, Bitcoin short positions held by investors that are deemed “hedge funds” are at all-time highs, with two-thirds of investors. To add to this confluence, the top eight long traders according to the open interest calculations is at all-time lows, suggesting a relatively strong bearish bias.Photo by Lanju Fotografie on Unsplash