Did you watch today’s US Congressional hearing on SEC Commissioner Gary Gensler?
Neither did I, but I heard that crypto was a hot topic! Tap this button to watch a video with my thoughts.
Scroll down for a market update. Things are not as rosy as they seem!
Today’s update covers these topics:
- Altseason
- Stablecoins: more evidence that non-US countries matter more now
- 2019 was not what it seemed
- Don’t fade the metrics
- Beware of HODLers
- Institutions and Traditional Investors
- Bottom line
I strongly advise watching the update for nuance, perspective, background, and the best results, but I realize you may not have much time to spare.
To speed up the video (shorten the playing time), tap the circled gear button at the bottom-right corner of the video:
TL;DW
As of today’s update, my plan says to buy bitcoin when its price is below $17,000.
Don’t be surprised if we see bitcoin’s price drop to $14,000, a natural technical level, but if you’re waiting for that to happen, you could be waiting forever.
I’ll alert you when it’s time to buy again. For now, set aside cash for the next buying opportunity. That may come soon or possibly not for a long time.
If you feel like you don’t have enough money in this market, buy more whenever bitcoin’s price goes below $22,700.
Also, make sure you caught my most recent update.
Altseason
I’ll talk about altseason when I see signs of altseason. I see no signs of altseason.
I spent almost a year raising my allocation to altcoins (and produced tons of altcoin content along the way).
Now that the market’s moving up, I’m only looking for new projects and opportunities to buy more bitcoin.
If you don’t have a decent allocation to bitcoin, get a nice stack of sats before you buy more altcoins. Altseason’s nice but it may never come and even if it does, if you don’t catch the prices just right, you may end up worse than you’d get from bitcoin.
Watch the beginning of the video for more on that.
Stablecoins: more evidence that non-US countries matter more now
In the previous update, I gave some reasons to look beyond the US “macro” and economic situation when thinking about the market.
Now, I’ve found more evidence that emerging markets and Asian countries are playing a bigger role than before.
What’s that evidence?
A shift from US-centric to Asia-centric stablecoins.
US-based stablecoins BUSD and USDC went down $12 billion over the past month. Non-US stablecoins USDT and TUSD went up $10 billion over the past month.
(BUSD is sold by Binance but minted/burned by US stablecoin provider Paxos, who no longer allows foreigners to buy or redeem tokens).
This fits with last update’s observation about non-US drivers of this upswing. We can’t ignore what’s going on in the US but we don’t need to focus on it so much anymore.
Watch from the 4-minute mark for more on this.
2019 was not what it seemed
In 2019, a lot of Western analysts thought the move from $3k to $14k came from domestic enthusiasm for Facebook’s stablecoin, US institutional adoption, and Wall Street’s big plans.
We later learned that the spark came from the PlusToken scandal, an Asian crypto fraud. Once the markets pumped above $4,000, it triggered a short squeeze that convinced sidelined cash to enter and push prices higher (which made the PlusToken look even more attractive).
Keep that in mind when you look at the price action of today’s market.
We know from previous updates that some entity or entities used Binance’s exchange, stablecoins, and mining pool to facilitate a few big deals in November, December, and January. These deals wiped out a lot of sellers.
Whether there’s more to it than that—e.g., something similar to a PlusToken scandal? I doubt it, but it wouldn’t surprise me. Keep this in the back of your mind.
For more on all of this, skip to the 8-minute mark.
Don’t fade the metrics
Do you want the good news or the bad news?
Good:
All the core “on-chain” metrics look great, no worries. I walk through the charts in the video, it’s too much to put here.
Bad:
Percent supply in profit and realized profit/loss ratio, two metrics that show how much gains people have on average, have started climbing. They’re still below danger zones.
While we don’t see any signs these people are antsy, they’re not likely to sit on gains if prices go too much higher. Skip to the 11-minute mark for further information.
(Next update I’ll have some more metrics.)
Beware of HODLers
OGs and bottom-buyers have started to sell. You can see this in the Realized Cap HODL waves.
For a long time, 1-2 yr HODLers moved into the 2-3 yr cohort, suggesting strong conviction and no selling. They suffered the highs and lows, but HODLed the whole time. Those 2-3yr HODLers are still growing as a proportion of the market cap.
Sadly, more 1-2 yr HODLers are dropping off. Some are still filtering into that 2-3 yr cohort, but less than before. They’ve started to take profits or exit in enough volume to show up on the HODL waves band.
How do I know?
Because when you combine 1-2 yr HODLers with 2-3 yr HODLers, their combined proportion of the market cap drops—for the first time in at least 6 months.
Earlier this year, 1-2 yr HODLers shrunk because they moved into the 2-3 yr band. They were HODLing. This month, they’re still shrinking but not moving into the 2-3 yr band. That means they’re selling.
Pump-buyers are peeling out, too. Look at the bands for people HODLing for 1-3 months, presumably traders entering the break of resistance and bottom-dwellers FOMOing into the pump (for fear that they missed the bottom).
To sustain the market, these bands need to grow or hold steady. They’re not doing that.
We’ll keep an eye on the 3-6 month band. So far, so good. No chart here, watch the video.
You won’t see these changes in the normal HODL waves chart because that chart includes millions of old, dead wallets. While each band moves in the same direction in both charts, some changes barely register in the normal HODL chart.
In fact, if you looked at the normal chart, 1-3yr HODLers fell from 28% to 27%, barely noticeable. Once you use the realized cap chart to weigh the value of those bitcoins in relation to the overall market cap, the drop’s more noticeable: 57% to 54%.
Skip to the 14-minute mark for more on this topic.
Institutions and Traditional Investors
Signs of life from traditional investors and funds.
Institutions and traditional investors seem more interested in getting into the market as prices go up.
It’s casual interest—funds, money managers, and people who want exposure to the crypto market without holding actual crypto. Also, these funds have only a tangential impact on the spot market (prices are set by the spot market, not the investment funds).
Still, this may signal a more positive attitude from casual investors. Price may have gone up long enough for them to think it’ll keep going up. Let’s see where this data goes as the price moves in the coming weeks.
For more on these topics, skip to the 20-minute mark.
Bottom line
We have plenty of room to go higher but also signs that the market’s weakening.
All the conditions we’ve talked about in previous updates remain valid, including miners still selling at a more aggressive pace. People who bought earlier this year aren’t HODLing as strongly as I’d hoped. 1-2yr HODLers are dropping out more than before. Some on-chain metrics are starting to heat up.
What does this mean?
It’s time to put up our guard. Caution for now, but no action. If the market keeps rising and the trends continue or get stronger, we’ll have reasons to worry.
Keep setting aside cash for the next opportunity. A 30% drop makes a lot of sense, but with low volume, rising interest among casual buyers, and a potential short squeeze in play, you have the perfect conditions for another leg higher.
Relax and enjoy the ride!