The recent viral collapse of 519 coins in the crypto world actually reflects a very interesting phenomenon. I've been thinking, what exactly has this liquidation cleared out?
First, a side note: this weekend, pizza shops worldwide should be especially busy. In 2010, an engineer used 10k bitcoins to buy two pizzas, back then the coin's value was almost zero, now that 10k coins are worth a lot, as you can imagine. Every year on May 21 and 22, crypto enthusiasts eat pizza to commemorate this moment. That’s also why people call Bitcoin "Big Pie."
Back to the logic of 519. From last year's low of 312, dropping to 3,800, then rising all the way to 65,000, a 17-fold increase, with hardly any decent shakeouts along the way. This means most investors are in profit-taking zones, including institutions, with holdings mostly in the 20,000 to 30k USD range. This crash seems to clear leveraged long positions, but in reality, it’s liquidating those profit positions held from the bottom.
Here’s the key point—after this shakeout and reallocation, new investors’ cost basis has risen rapidly. What does rising cost basis mean? It indicates fewer chips left to push the price down later. New investors are holding at over 30k, and they won’t consider selling until it hits 50k. Those with positions locked in by institutions are even more so. Supply shrinks, demand increases, and under this logic, after the panic in the 519 crypto market, Bitcoin is poised to restart its upward trend. But the precondition is that inflationary pressures remain unchanged—that’s a necessary condition for a bull market.
On the regulatory front, the signals are indeed strong. The Fed is set to release a report on digital dollars, the SEC chair is calling for stricter exchange regulation, and the U.S. Treasury requires reporting of crypto assets exceeding $10,000. Meanwhile, in China, CCTV and Securities Daily are repeatedly warning about risks. But Fed’s Kaplan said that inflation will rise in 2021, and balance sheet reduction will likely be delayed until 2022, so the easing environment is still in place this year.
Institutional players are still entering. KKR founder publicly invested in cryptocurrencies, managing assets over trillions. California’s community bank Suncres plans to offer Bitcoin services to clients. Goldman Sachs CEO predicts crypto market cap will eventually surpass gold. Tianqiao Capital’s CEO believes the Bitcoin bull market isn’t over. Musk, Wood, and others are still buying. All these signals make the big players’ stance very clear.
From a technical perspective, 312 and 519 show similar patterns. From 3800, 312 rebounded to 5600—a 47% bounce. From 29,000, 519 rebounded to 42,400—also a 47% bounce. This symmetry suggests the short-term rebound may be over, and the price will oscillate within a range before testing lows again. Based on the 4-hour chart, the second bottom range is roughly between 32,000 and 35k. Don’t panic then; this is just a normal shakeout process.
Regarding various coins: Ethereum is linked with oscillation, waiting for a second bottom opportunity. DOT saw significant bottom-fishing funds in the past two days; holding is recommended. XRP retraced today with low volume, mainly linked to the overall trend. LINK has bottom-fishing funds entering. BCH remains relatively strong, possibly continuing its rebound. LTC has limited opportunities. BSV has entered oversold territory. ADA’s pattern isn’t bad, with high-level oscillation. XMR rebounded sharply, with 340 as a resistance level. ETC has many trapped orders above, with 100 as a strong resistance; short-term, it’s bouncing. Dogecoin is still being hyped by Musk, but Twitter backlash is growing, influence waning, and large trapped positions are hard to rescue. Rebound mainly reduces positions, with resistance at 0.5. SUSHI remains oscillating after 519, with strong capital resistance, and may lead the DEX sector to rebound first. AAVE’s pattern looks fine; holding is advised.
Overall, the 42,400 high is unlikely to be broken in the short term. Once broken, the next resistance is around 45,000. My advice is to only buy below 40,000 and not sell, avoiding missing out on the subsequent rally due to small gains.
Honestly, this market’s volatility isn’t suitable for amateur investors. While earning quick profits, you must learn asset allocation—put most of your money into capital-preserving investments, and use small positions to gamble on high risk and high reward. The fear and greed index is now at 19, still in extreme fear, which is an area with more opportunity than risk. Grayscale GBTC is trading at a -10.6% discount, ETHE at a 3.16% premium, and secondary market funds in the US are showing signs of recovery, which is a good signal. Last night, 10,000 bitcoins moved into exchanges, indicating panic hasn’t fully released, and a second bottom could start at any time.
One last detail: Ethereum Foundation transferred out 35,000 ETH on May 17. The last time this address sold coins was at the 2017 bull market peak. This could shake investors’ confidence and impact ETH/BTC exchange rate.
Bitcoin has been declared dead 414 times, mostly around the 2018 crash. The unkillable thing will eventually become stronger. The trend is irreversible; we can only embrace it.
