The Tokyo Whale and the Battle Over $9k

Casual Opinion and Insights: The Ghost of MtGox Vs. the Bulls in the Battle for $9k

Rumors were going around that a MtGox trustee (AKA “the Tokyo Whale”) has been selling off massive amounts of BTC pushing the market down. Rumor also has it that this whale won’t have authorization to sell again until September 2018.^[1][2]

However, another related rumor has a little more of a nuanced message that says, “That isn’t true; the whale still has permission to sell. The meeting in September is irrelevant in that respect, although it does seem as though he will hold off selling more until after that meeting anyway. Since he now has the money needed to pay of creditors, perhaps the rest will not be sold on the open market or will simply be distributed in BTC.”

See the stream of Tweets below to play virtual detective along with Coin Panda (you can also read the report on this from MtGox, which is in Japanese).

If I can summarize my understanding of all this, it is this: The Tokyo Whale said he would not sell more until talking to the court in September, however he is and has been authorized to sell more (he can, but likely won’t, as he doesn’t need to). I guess then, we are hoping he won’t since he has essentially now been called out for doing so. NOTE: You can see the addresses and balances of the MtGox wallets here. No selling has occurred since the last round. I.e. so far, so good! See also Cointelegraph’s analysis: Effects of Mt. Gox Trustee’s $400 Mln Sale on Bitcoin Market.

Good news is that, the next court proceeding for Mt Gox bankruptcy won’t happen until Sep 18, 2018. Before then, Nobuaki Kobayashi will not have authorization to dump the remaining 160k #Bitcoin $BTC on open market.

— Coin Panda (@8bitandstuff) March 10, 2018

If the former is true (that he can’t or won’t sell), it could restore some confidence in Bitcoin and stop giving the bears an unfair and hardly needed advantage. If the latter is true (that he can), then the Bitcoin bears have a powerful potential ally waiting in the shadows.

Fun stuff to think about. Here are two videos about the full story and how the Tokyo Whale potentially played a large role in the correction since January.

Oh Ironic Historic Repeating Trends

All that noted, the story is ironic, because MtGox was partly to blame for the 2014 correction and failed recovery (and in this sense, it is like the ghost of MtGox past coming back to haunt us).

Of course, with that said, it is lame to blame failed recoveries on one single person or event.

Yes, FUD helped ensure the correction back in January, just like it had in late 2013 early 2014. And yes, the Tokyo Whale is a cursed and horrid figure who roams the internets and ruins your day by selling into the dips on the way down from $19k, but those aren’t the only things going on here.

Equally to blame is the emotional come down from a period of overly intense speculation. We can see this in the charts of all cryptos over time. There is always a solid pump and climb toward a high, then a long cool off period (then, after some time, another journey to the moon; this being what people HODL for).

Anyway, even taking this logic into account, the story is potentially hopeful. If it is the case that the trustee is going to stop dumping tens of thousands of Bitcoin on the open market (even if he “can”), we might be able to stave off a further correction, keep a range, and help people find confidence in cryptocurrency again.

And it this point what we need is confidence building, not necessarily “moon.”

The Battle for $9k and its History

To that point, where we are at right now (whatever brought us here) is we are seeing bulls and bears battle it out over $9k.

The $9k zone (very roughly $8.5k – $9.5k, but especially $9k+) is somewhat significant on a few different levels.

On one level, the $9.2k – $9.4k zone is important to hold by many analysts counts for rather complex technical reasons (for example, this Goldman Sachs’ analyst).

Furthermore, in a very general sense, BTC hovered around $9k before it broke out on its epic run up to $19k. So it is important to hold in the sense of going back to square one before the over-eager rush to $19k is a very understandable event (stocks do this all the time; no one bats an eye).

A few months back everyone was stoked on $9k, they discussed it over Thanksgiving, and it helped spark on the mania that caused the last bubble and bust. Being back where we started before everyone got overexcited isn’t too bad. Inching up from $9k and actually earning it this time is a pretty good place to be in. Of course, that is “if” it can be held. It’s only fair to tell you that a lot of analysts, even those bullish in the long term, are doubting at the moment for the short term.

For a myriad of reasons $9k-ish is a healthy level for Bitcoin to hold. It tells the world, OK the struggle is real, but crypto is still a force, this wasn’t just part two of a two-part joke, and perhaps you don’t want to pass up an opportunity to buy under $10k.

Meanwhile, on the bearish side of things, if we start dipping past support levels in the $8ks and into the $7k range (meaning 4 hour+ candles closing significantly below $8.5k or less, not just the price quickly touching those levels), things aren’t as attractive.

The $7k range is the level Bitcoin dipped from during the Bitcoin Cash drama, it is where Bitcoin broke out of on its way to $9ks and higher, and it is the only thing standing between HODLers and recent lows. Then, below those recent lows, that is where the problem zone lays. If we start going back to levels we saw before the summer 2017 run… then things start looking ugly even for those who got in somewhat early into the 2017 mania. The last thing anyone who is looking for crypto to be a force in the future wants is to see 2014 repeat, and if we do break the recent lows, then we are starting on that path.

The problem is that if we start dipping our toes back into those lows, then there is going to be more than a little sadness going around. The “I told you so” people will say such things, the holders will start feeling dejected, some earlier investors could start selling, and the would-be investors (of which there must be a countless many) could potentially forget about crypto for a season and go do whatever it is normal people do.

None of that has to happen, none of that is more than speculation based on past events; it is, however, solid logic. Crypto lovers can take some pain, but everyone has a threshold, and we saw that in 2014 at a certain point, the bear market wore on the public and excitement over crypto wore off.

In other words, a set of events like our bearish case is exactly the sort of thing that set the stage for the 2014 – 2016 bear market. Everyone was stoked going into the winter of 2013. They got too stoked, and the price bubbled up and popped. Then when it looked as though the price might recover, a little MtGox panic and a lack of outside money led to a slow collapse of prices.

We all want the big players to love crypto more than their own wallets, but we are dealing with humans, and even the most benevolent of humans is going to protect their vast crypto fortunes at some point.

Thus, on several levels, $9k is important to hold. As holding that level (ish) holds back all those “what if it is like 2014” worst cases and instead gives us a nice on-ramp to the $10ks where FOMO and interest and confidence can be rebuilt without much threat.

With all that said, there is this other theory, that is that we will wave down past recent lows and then elastic band back up… and that could be true. However, this theory relies on history repeating itself right up until the point a low is hit and then a chunk of history being skipped over and us zooming back to rising tides and epic highs again.

It is unclear which path we will take. However, I’m strongly in favor of the one where the Tokyo Whale and the bears take a step back and stop trying to kill Bitcoin for a minute. It would be super cool to live in a world where people are stoked on crypto and chalk the volatility up to it being a new market and not live in a world where literally the events of 2014 play out again because human behavior is so predictable that you can overly the 2014 chart (or the NASDAQ chart from the tech bubble, but on a shorter time frame) on top of Bitcoin’s 2017 – 2018 and just make moves based on that.

Let us not be ironic and predictable, let us carve out a happy path in front of us, one with cute cartoon Whales and good vibes. Not one with bears and ghosts and depressing stuff like that.

Bottomline: If the Whale was truly to blame for the price going down, we may be headed back up. First step first, hold $9k and build confidence. The damage has been done, here is to a brighter future. Meanwhile, if we do have to retest lows, fingers crossed it is quick. 😀

UPDATE FROM A FEW DAYS LATER: $9k didn’t hold, but we can always lower the bar and hold the next support level in line. The sadness really only comes if and when the price starts consistently trading under where it was before it took off back in November. We are on the cusp here, but we aren’t down and out.

1. Investors bullish on bitcoin now that the ‘Tokyo Whale’ has stopped selling. CNBC.com.
2. MtGox’s trustee adds JPY 42.96 billion to account balance of bankruptcy estate. Financefeeds.com. <— this article explains some of the details of the tens of millions of dollars the trustee made from selling off the Bitcoin of MtGox.