THE BULL

It’s hard to describe the speculative fever that had gripped Bitcoin by late 2017. Bulls were talking about “new paradigms” and the impossibility of a bear market manifesting. Skeptics were predicting a major collapse. And those who’d just arrived on the scene, such as the institutions that could now access Bitcoin futures through CBOE, were pondering whether to go long, short, or sit it out on the sidelines. There was widespread consensus that Bitcoin was about to make another parabolic move, but in which direction was a matter of fierce debate.

On December 10, 2017, the Chicago Board Options Exchange (CBOE) opened trading on the first-ever regulated Bitcoin futures contract. Rather than crashing, Bitcoin continued its upward trajectory in the ensuing days. So far, so good. But the market, already highly volatile, became extremely jumpy as traders tried to figure out what Bitcoin was worth, while second-guessing the other traders attempting to do the same. These were nervy times for holders, especially those who’d just bought their first BTC at the start of the month for $15,000 a coin.

Still, by December 17, as Bitcoin futures trading was set to commence on the CME that evening, the bull market appeared to be on track, with mainstream media reporting that BTC was “heading towards the $20,000 mark.” They weren’t wrong – BTC came within touching distance of the symbolic price point as CME futures went live before pulling back slightly. There were no grounds for concern at this stage; it’s common for assets to retreat when they’re on the verge of breaking a new all-time high, consolidating for a while as sellers are flushed out before moving higher.

Fear and Loathing

On December 18, Bitcoin began the day trading in the mid-$19,000s…then it dropped a little. Then a little bit more. And then a whole lot more. By December 22, it had plunged below $14,000, marking a 30% drop in just five days and recording one of Bitcoin’s greatest single-day losses in history. Top buyers were now running scared, unsure whether to buy the dip or panic sell. Earlier buyers, who had been in significant profit and now saw much of it erased were equally uncertain of what to do. Was this just another market correction or the beginning of the end of the glorious bull market?

Making rational decisions while the market was bouncing about and mainstream media were providing wall-to-wall coverage of Bitcoin’s implosion wasn’t for the faint-hearted. Bubble predictors were jubilant; bears were smug; and those who’d sold the top – be it through luck or perspicacity – were smugger still. It was the best of times, it was the worst of times.

While pro traders are prone to flexing their wins and masking their losses, there’s evidence that several shrewd institutions shorted Bitcoin from the moment CBOE futures went live, booking huge profits as the market moved down. As 2018 ground into gear, no one was disputing the evidence any more: Bitcoin was in a bear market. Better times lay ahead, but in the interim, the party was over.