My 2 sats…Bitcoin dumps hard initially (50-70%) in a liquidity crunch. Everything correlates to 1.0 when the selling starts.
But the policy response is what matters. Another housing crisis means extreme money printing since central banks are already boxed in. That’s when Bitcoin’s supply cap gets its real test.
Brutal drawdown first, then potential massive recovery when the printers turn on. March 2020 to late 2021 was exactly this pattern.
Thanks for this. What do you mean by “everything correlates to 1.0 when the selling starts?”
When I say “everything correlates to 1.0” I mean all asset correlations converge toward perfect positive correlation during panic selling.
Normally, different assets move independently or inversely (stocks vs bonds, crypto vs gold, etc). But in a liquidity crisis, institutions and investors are forced to sell everything they can to raise cash…margin calls, redemptions, meeting obligations, etc.
So you get indiscriminate selling across all risk assets simultaneously. Bitcoin, stocks, gold, real estate, bonds, they all dump together because people need dollars/liquidity NOW. The usual diversification benefits disappear.
Got it! Thanks 😀
