18 Aug 2023

Here we go again…

Bitcoin (BTC) collapsed overnight and reached a 2-month low near $25,200 before regaining value to trade at $26,500 currently. Naturally, altcoins have taken a nosedive, too. More than $1 billion in liquidations have been observed across exchanges as a result. A big move was expected – given a long consolidation leading into it. It’s unfortunate that it has taken the wrong side to move.

Two reasons why this may have happened: 1) Evergrande filing bankruptcy in the US and 2) Reports of Elon Musk’s SpaceX selling off all their Bitcoin holdings from 2021.

Now, the burning question for all of you – what should a crypto investor do now? what is the ideal approach leading into the BTC halving in April 2024? We answer these and more in today’s Hot Take.

Top-3 stories of the week:

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The newsletter is put together by Giottus Crypto Platform and The News Minute’s Brand Studio. You can read all the previous issues of Cryptogram here.

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WEEKLY MACROS

• Total crypto market cap - $1.06 trillion - DOWN 10.4%

• Bitcoin price - $26,450 - DOWN 11.1%

• The dollar index (DXY) - 103.28 - UP 0.7%

• Bitcoin Dominance - 49.75% - DOWN 1.4%

• Crypto Fear and Greed Index - 37 - The market is in fear

ICO CALENDAR

• 24^th August - SOLA-X (SAX)

THE HOT TAKE

Planning for Bitcoin’s next bull run

None of the following is financial advice. We are going to speculate, a lot, today. Markets don’t play out exactly as anyone predicts but we are confident of spotting the trends that can shape the next bull run in crypto. Of course, we expect you to understand the risks involved and plan the investment journey according to your risk tolerance and expected gains. Here we go.

1. More short-term pain likely for Bitcoin

We had predicted a dull August and a painful September for the asset class. You can see the monthly returns table below on how seasonal trends play out. Looking at 2019, the last year before last halving, there were a lot of negative months in the 2^nd half of the year after a strong start. 2023 seems to be playing out similarly.

2. Look at key lower targets for a bounce

Now, what are the targets we should look at? BTC has broken down from a key upward trendline now indicating that targets near $25,000 and $20,000 (blue lines) are likely to be hit before bouncing off for the cycle. These targets have provided key support and acted as key resistances in the past year. This is likely to play out over next 2-3 months.

When this happens, BTC dominance (currently near 50%) should increase towards 60% as altcoins including Ethereum underperform against it.

3. On-chain data supports our argument

On-chain data shows Bitcoin and the other top assets are observing a high amount of loss-taking currently. According to data from the on-chain analytics firm Santiment, the current trader capitulation has led to large crypto assets seeing a bottom signal.

The ratio of daily on-chain transaction volume in profit/loss shows how the profit-taking volume for any given coin compares with its loss-taking volume right now.

This indicates that traders have finally started to give up on the market after experiencing consolidation, as they are ready to take losses to make their exit. Historically, when such events happen, capitulation from investors has made bottoms more probable to form, leading to price drops in the near term.

4. Epoch data suggest an incoming bull run 2024 onwards

From a purely time perspective, Bitcoin is trading similar to how it did during previous “4-year” market cycles. The chart below compares each epoch starting from their prior cycle high, with this current one shown in black. We are able to notice similar trend in price movements that was witnessed in the 2^nd and 3^rd halving cycles. This leads us to believe that there could be major upswing in coming months – essentially leading to the halving in April 2024.

5. Major regulatory changes on the horizon

What if Bitcoin spot ETF gets approved early 2024? What if governments soften their stances by the time of the halving? What if institutional stablecoins and CBDCs become prevalent in the upcoming years?

The signs of a revival in the crypto market are visible. We need to play time to eventually get there.

How can an investor plan the next 2 years?

Essentially, we had mapped this out in one of our newsletters in April (link).

The best (and relatively risk-free) strategy is –

• Invest in Bitcoin around Oct-Nov 2023 (6 months before the halving)

• Wait for Bitcoin to reach a new all-time high while observing that BTC dominance is on the rise

• Post halving, diversify some of your portfolio into major altcoins when BTC dominance seems to have peaked

• Reap rewards (and take profits) over the next 2 years

Simple and efficient to implement. However, the road will be hard and bumpy. Are we ready for the next ride?

Disclaimer: Crypto-asset or cryptocurrency investments are subject to market risks such as volatility and have no guaranteed returns. Please do your own research before investing and seek independent legal/financial advice if you are unsure about the investments.

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If you have any questions or feedback for us, write to us at [email protected]. You can check out the previous issues here.l