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‘Bitcoin is just one big Ponzi scheme’

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Popular day trader and founder of Barstool Sports Dave Portnoy revealed that he bought $1.25 million worth of Bitcoin even though he thinks its “just one big Ponzi scheme” in an interview with crypto podcaster Anthony Pompliano. Portnoy summed up his view of crypto trading as:

“You get in, and you just have to not be the one left holding the bag.”

The sport and pop culture celebrity, whose day trading exploits have become hugely popular during the coronavirus pandemic, only recently delved into the world of crypto. He entered the Bitcoin (BTC) market in mid-August, following a meeting with the billionaire Winklevoss twins.

Portnoy said that he knew within 15 minutes of seeing responses to his Twitter posts about Bitcoin, that he had to get into crypto because “these are kind of like my people.”

At one point, Portnoy claimed, he held $1.25 million in BTC. However just eight days into his crypto experience, his Chainlink investment took a sharp hit, at which time Portnoy announced: “I’m out on crypto because coins don’t always go up.”

Following his exit, Portnoy appeared to be having withdrawals, claiming his “heart is crypto” and he’ll be back.

However, Portnoy appears to have been shaken by the experience. The price volatility on his crypto portfolio of over $1 million was too erratic and he thought it was too much money to gamble with when he didn’t know what was going on. “There is no rationale why it is going up, I have no idea why it is going up or down,” he explained,

Even though he’s pulled out, he still intends to get back into Bitcoin eventually. “I’ll get back into Bitcoin. I don’t know when,” he said. “I don’t have much liquid really — it’s all invested.”

Pompliano suggested to Portnoy that when he does, rather than trade, he should hold Bitcoin until the end of next year:

“You can’t look at it, because you’ve got weak hands. You’ll sell it.”





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Bad call? Bitfinex bears closed a block of Bitcoin shorts before the drop below $32K

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Bitcoin price is still in a rut, trading near $33,000 and trapped in a downtrend that just seems to get worse with the passing of each day. As the price slumps, analysts have consulted with several technical and on-chain metrics to explain the price collapse, but none of these have picked up on the exact reason. 

One area of interest has been the sharp rise in short positions at Bitfinex in the past week. Traders are placing exaggerated importance on these Bitcoin (BTC) margin shorts as if they are predictors of the current market crash. Still, as Cointelegraph previously reported, analysts forget that Bitcoin margin longs are usually much larger.

On June 18, longs outnumbered Bitfinex shorts by at least 22,800 BTC, but 87% of the short positions were closed before June 22. Currently, margin longs are 43,850 BTC higher than the amount shorted.

While those shorts are usually savvy traders, it is unlikely that they knew in advance that Chinese banks would prevent their clients from engaging in activities involving crypto trading or mining.

More importantly, these bearish positions were built while MicroStrategy was buying $500 million in Bitcoin after a successful senior secured note private offer. To make things worse, Michael Saylor’s business intelligence firm announced the intention to raise another $1 billion by selling stocks to buy Bitcoin.

Let’s take a look at how these courageous shorts fared.

Bitfinex margin shorts (blue) vs. Bitcoin price in USD (orange). Source: TradingView

On June 6, shorts increased from 1,380 to 6,700 at an average price of $36,150. Three days later, another 12,180 shorts were added when Bitcoin was trading at $37,050. Lastly, between June 14 and 15, shorts increased 6,000 to a 25,000 peak while Bitcoin averaged $40,100.

By looking at the Bitcoin prices when those short position increases took place, it is reasonable to assume that the 23,500 contract increase (green circles) had an average price of $37,625.

Related: Traders search for bearish signals after Bitcoin futures enter backwardation

Traders closed positions before BTC crashed bel$32,000

These short positions were steadily closed over the past three days when Bitcoin was already trading below $37,000. However, 17,000 short contracts had already been closed by the time the price plunged below $33,500. Therefore, it is implausible that the average price was below $34,500.

No one would complain about gaining 8%, shorting the market to generate a $73 million profit. However, it is essential to note that on June 16, when Bitcoin reached $40,400, these shorts were underwater by $65 million.

This analysis shows how even highly professional traders can go deep underwater. There’s no way to know if this trade would have been profitable had the crackdown on China not aggravated Bitcoin price or if MicroStrategy managed to raise the $1 billion before the price drop.

If anyone still believes in market manipulation, at least there’s comfort in knowing that pro traders can face drastic losses as well. However, unlike us mortals, whales have deep pockets and patience to withhold even the most rigorous thunderstorms.

The views and opinions expressed here are solely those of the author and do not necessarily reflect the views of Cointelegraph. Every investment and trading move involves risk. You should conduct your own research when making a decision.