Estimated read time: 3 minutes & 10 seconds
GM. This is the Milk Road, the newsletter that keeps up with crypto like it’s the 4th Kardashian sister. (And I don’t know who has more drama right now… Crypto or Kim K?)
We officially entered uncharted territory over the weekend.
Bitcoin dropped below $19k and ETH went under $900. Both are down from the previous cycles' all-time highs.
Everyone in crypto knows there are cycles. Ups and downs. But it’s one thing to say it, another thing to experience it.
So, what’s driving the price down right now?
Liquidations & Lack of Fresh Buy Power.
Let's start with Liquidations. There are more liquidations than an open bar at an Indian wedding right now.
When crypto prices drop, people sell because they want to.
At this point, people aren’t selling because they want to. They are selling because they have to.
Over $600m of crypto was sold due to liquidations over the weekend.
So, will prices drop further?
The key lies in looking at upcoming possible liquidations:
- Celsius holds ~$500m worth of Bitcoin. It will get liquidated if Bitcoin hits $13,602. You can follow the wallet here
- A wallet holding $150m worth of ETH would be liquidated if ETH hits $895 (it got insanely close on Sunday)
- A wallet holding $170m worth of SOL will get liquidated if SOL hits $22.30. In an insane twist - the protocol held a vote to “take over the account” so that the liquidation can be executed over the counter and avoid pushing Solana to its limits.
So what? Big liquidations like these cause the market to freefall which…triggers more liquidations.
In summary: Crypto has a lot of leverage (people borrowing) and when prices fall, those borrowers' collateral gets liquidated (people forced to sell).
Of course, the borrower can post more collateral to avoid liquidation, so it’s a high-stakes game of risk.
IS THERE ANOTHER DOMINO ABOUT TO FALL?
Luna. Celsius. 3 Arrows Capital.
Big names in crypto that went under like the Lehman Brothers and Bear Stearns in the 2008 Wall Street crash.
Now, rumors are swirling about two others…
BlockFi is an exchange. And like Celsius, they offered juicy yields to attract users.
Leaked documents showed that they lost $285m in the past two years, they’re going through a liquidity crisis, and are trying to raise money from VCs at a way lower valuation ($1B now, was $5B last year) to save themselves.
If you have money on BlockFi, you probably want to get it out right now, because the risk/reward just doesn’t make sense at the moment.
2/ Babel Finance
Babel Finance is a crypto lending business. Their tagline is “we have your best interests in mind.”
LOL, as they stop allowing people to withdraw money.
They have billions under management and were averaging $800m+ in monthly trading volume.
The Milk Road’s Take: Mismanaged companies getting flushed out of the system. Painful but ultimately good that you don’t get rewarded for taking such huge risks.
CRYPTOPUNKS ARE GETTING VOLUME AGAIN
We bought a Cryptopunk 90 days ago.
Since then, the price had steadily dropped from 70e → 45e. At the same time, ETH has plummeted 75%.
Oof. A double KO.
Well, the Cryptopunks recently started to pick up some momentum. There were 121 Punks bought on Saturday, the most for a single day in the past 8 months.
Hmmm.. you smell that? That’s the smell of someone leaking inside info.
That’s usually the reason we see a flurry of activity around one project.
Some people think there might be an announcement at NFT.NYC. But rumors are ultimately just rumors.
If you’re in NYC make sure to say hi! Billy (our TikTok king) will be there!
TODAY'S NEWSLETTER IS BROUGHT TO YOU BY COINTRACKER
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MEME OF THE DAY
That's all for today folks, see ya tomorrow!
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We hope all of you CryptoDads had a great Father's Day. Especially you Poppa Buterin!
DISCLAIMER: None of this is financial advice. This newsletter is strictly educational and is not investment advice or a solicitation to buy or sell any assets or to make any financial decisions. Please be careful and do your own research.
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