crypto has been pumping and investors are optimistic
btc may have bottomed, ethereum is looking like the most fundamentally bullish digital asset at the moment, and we could be set up for an extensive bull run
there's potential, and also very many hurdles. let's dive in🧵
why is eth so promising over the long term?
1. Recent move to PoS blockchain, reducing carbon emissions by 99% and dropping the avg inflation rate to <1% 2. Yield incentives are much higher inviting a high volume of nodes as yields are directly. affected by tvl
3. The 'Surge" (est. mid 2023) will implement sharding via side-chains to improve tx/s and improved scalability to sustain more volume flow. 4. the implementation of 'verkle' trees which allow smaller proof sizes and stronger cryptography, aiding in scalability
5. L2 solutions, zk rollups, and addition building on top of the ethereum blockchain aids in scalability, flexibility of users and devs, and offers testimony to the confidence of web3 building on ethereum.
6. the ethereum network can currently support ~21 billion in daily settlements.
7. it, alongside btc has established itself as a globally respected digital asset (despite regulatory discretions). it no longer deserves the title "altcoin". it is the backbone of the web3 space in many ways.
so the recent pump has you in FOMO? let's take a look👇
let's actually start with two btc data science models:
1. he Puell Multiple examines daily issuance to the avg of the last 365 days - an excellent miner capitulation signal, historically in line with bitcoin bottoms.
2. The MVRV Z-score compares the current market value of btc to the historical average transacted price, and produces a Z-score.
this shows us periods where there are large discrepancies between the market value of btc and what people have paid.
great signal for capitulation
from the standpoint of timeframes and historical performance, we are right in line with a btc bottom
do note - past performance will not always produce similar results in the future & the 200 weekly moving averages are acting as resistance.
the bottom/reversal signals are screaming on btc indicators:
1. bullish weekly RSI divergence 2. bullish MACD histogram 3. Bullish TSI cross 4. 3-day bullish supertrend reversal 5. strong heiken-ashi candlestick trend
macro sentiment is beginning to shift and most risk assets tend to be the most forward thinking. i would certainly expect a crypto bottom before and equity bottom.
but there is a misconception
CPI is cooling as is the rate hiking cycle.. okay. the FED is in control. that seems to be the narrative that has bulls in frenzy
understand this - the job isn't done, and entering a recovery doesn't equal entering an expansion.
markets are forward thinking but economics are not. 1. 12-24 month leases signed at 40%+ of household income. 2. housing prices and rates still high 3. big tech layoffs -> reduced earnings 4. CPI dropping primarily due to energy alone 5. sustained stance on tight liquidity
a "true" recession here, what ever you want to call that, is still a looming possibility. but the next step is recovery.
there is a dry period in between where capital inflows cannot sustain beyond outflows.
bull markets come back, but in phases.
the notion for crypto - our bottom may very well be in. but, runs in the market should not be met with FOMO behavior. it takes fresh and expansive amounts of liquidity to drive a real bull market. don't get caught up in the euphoria
it's a trader's market, meanwhile stack up
also here are a couple pieces of equity data:
1. index performance - taking a look at the SPX NDX and DJX. all showing a clear pattern of lower highs, a series of rejections or failures to sustain the 200 daily moving averages. looking like a tough spot.
movement has been largely predictable, and an inability to break this trend would ultimately favor downside in the broader equity markets.
also the VIX - stocks have general seen peak local strength in the highlighted pocket. spikes in volatility have been in line with buy ops
DXY daily; the U.S dollar is primed for a bounce. 1. 4 momentum oscillators suggesting peak sell pressure as the dollar retests a previously strong level of resistance around 100 pts 2. bullish MACD divergence at support 3. Remember low VIX and local index valuations.
so lets take it back to crypto...
if we are not thwarted by a potential drop in equity valuations, we have room for upside and. a couple of bullish scenarios seem juicy.
1. btc to 25k; price range through 2023
they key here is holding the ~18k level. 25k serves as summer range high and is in line with a second test of 200 weekly MAs as resistance
2. btc rips to a familiar range; intense FOMO
bitcoin dips are bought like wildfire and shorts are squeezed. BTC jumps to 30k in a multi-week/month move. FOMO intensifies as narrative becomes bull market targets and halving talk. we top (see 2019)
btc is gaining market cap as it is outpacing most plays right now. I would like to see this continue to the ~50% range. Altcoins are setup for drops in btc ratio valuations, especially at a point at which the crypto market it's faced with resistance.
key strategy -
we are in dollar cost average territory, but we don't have to chase pumps. be mindful of levels of resistance and deploy capital on future pullbacks.
always stay liquid; if you find yourself in profit following a more extensive run make sure to take some
Q1 is already shaping up to be a lot of fun, btc and ethereum have much to prove, and equities will remain important. i believe our top two digital assets continue to outpace most asset classes :)
next fomc will be fun
just some thoughts. love y'allThis post is based on this twitter thread.