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Cryptogram - 30SEP2022

Cryptogram - 30SEP2022

Five signals on Bitcoin to help you decide

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30 September 2022

In this issue

Should you buy more Bitcoin now? || The Top Five stories this week

Hello, After much of our attention was taken away by Ethereum these past few weeks, the market’s focus shifted back to Bitcoin as its price yo-yoed on the two sides of the psychological $20k level, taking investors on a wild ride and keeping us guessing on whether this is the right time to buy more Bitcoin or not.Bitcoin, for the foreseeable future, will be the Mother Coin which will dictate the market. It is a lot more stable, and for retail investors, it continues to be the safest crypto to invest in compared to others. So, at a time like this, you really need to seize the moment and take the right decisions. We are here to help you with that.

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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THE BIG STORY

Should you buy more Bitcoin now?

We cannot give you clear “buy” or “sell” signals. But we can help you decide. We have lots of graphs, but also simplified inferences from them so you don’t have to scratch your head trying to understand what we are really trying to tell you.So, here are five deeply researched signals we have parsed for you, which should help you make up your mind on the next course of action. 1. There is STILL room for decline As explained in detail here, typical bear markets in 2014 and 2018 saw BTC drop more than 80%. An 80% drop from all-time high this year would mean a price of about $13,000-14,000. And this is without accounting for macroeconomic headwinds that can take it even further down. So, caution, caution, caution. Remind yourself that it is not just that no one knows how low it can go, it is that we know it can go lower. 2. Altcoins still don’t show a clear sign of a bottom To further buttress the point above, we can look at the share of investors’ capital in Altcoins.

Image source: TradingView

BTC dominance (as share of total crypto market cap) is currently hovering around 41%. When a bottom occurs, investors divert capital to BTC as the safer asset making its dominance go up beyond 50% . We are not there yet, and we can get there in either of these two ways: ONE, the entire market, including BTC, loses value but altcoins decline higher than BTC, or TWO, BTC trades are current price but altcoins lose a lot more value.In both scenarios, its best to hold on to BTC (or invest in BTC only) till a bottom is found.3. BTC is inversely correlated to US dollar index DXYThe US dollar is gaining ground as it outperforms other major currencies as a store of value. Risk-free investors are allocating capital to US dollar and waiting for market reversal, to invest them into financial markets, including BTC.

Image Source: Into the Cryptoverse

From the chart above, we can see that when DXY (US Dollar index) goes up, BTC declines in value. As long as US dollar continues to do well, do not expect BTC to break new ceilings.4. Three indicators that Bitcoin is already in the BUY zone At least three metrics point out that Bitcoin is already in the buy zone: Realized Price, MVRV Ratio and Puell Multiple. REALIZED PRICE Realized Price is calculated by adding the value of all Bitcoins at the price they were bought, and dividing it by the total number of Bitcoins in supply. This gives us the average cost at which Bitcoin was bought. It can be interpreted as the resistance price.Bitcoins realized price is around $21,000. According to the graph below, exactly $21,290.8.

MVRV RATIOMVRV (Market Value to Realized Value) ratio is defined as an asset's market capitalization, divided by realized capitalization. By comparing two valuation methods, the MVRV ratio can tell us to get a sense of whether the price is fair or not, which means it is useful to get market tops and bottoms.

As MVRV increases, it indicates that the market cap is outpacing realized cap meaning there is an increasing motive for selling in the market. As MVRV decreases, it indicates that realized cap is outpacing the market cap meaning there is decreasing motive for selling in the market. At the price of $19,080, the MVRV ratio is 0.826. Our reading of the map is that if the ratio goes over 3.7, it will be in a sell-zone and if the values go under 1, it is time for taking a gradual long position. As the MVRV Ratio is less than one, we can assume that the BTC is in possible market bottom and it is time to take a gradual long position. PUELL MULTIPLEPuell Multiple is defined as the ratio of the daily value of the coin in USD, divided by the 365-day moving average of the daily value of the coin in USD.If all mined bitcoins were sold immediately in the market, how profitable are mining pools, compared to last historical one year? This metric helps traders gauge the market cycles. Miners are the only entity that requires constant cost such as running electricity. Thus, miners' behaviours are always linked to price to certain degree. Puell Multiple compares 365 days average estimated revenue with short-term revenue of miners. If we look at the entire history of BTC trading, we see that the Puell Multiple has proven to be very accurate in trying to estimate the peaks and bottoms of Bitcoin’s historical cycles.Three areas are marked on the long-term chart from Glassnode:Green/buying: the range of 0.3-0.5White/neutral: the range of 0.5-4Red/selling: the range of 4-10

As of September 27, the Puell Multiple for Bitcoin is 0.458. That’s the green/buy zone. All the above indicate that it is good to park some capital into BTC at any rate below $20,000 for long term gains though the asset may drop further. Weekly/Monthly SIPs are the best way to navigate this.5. Our read on how Bitcoin is going to move from here on This is what we think is going to happen with Bitcoin, based on the above and our assumptions of how global economy will recover in the coming year.Phase One (now): Consolidate in $19,000-$22,000 region for next 3-6 months, with short term rallies to $25,000. Phase Two: Capitulate to below $15,000 when investors are not expecting it toPhase Three: Recover quickly and go back to the phase one range. Phase Four: Consolidate and regain strength (>$30,000) likely beginning Q1 2023.Phase Five: Rally towards $50,000 in 2023, depending on macroeconomic recovery.

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