World Cup fever is on, despite the oddness of having it in Nov/Dec, games like England - Iran or Argentina - Saudi A surely put everyone in the world cup mode.
In the meantime our Crypto “World Cup” has no winners in sight as everything kept moving down last few days. One to watch out for is clearly BNB, only 55% down, but there are some question marks on how Binance took down FTX and possibly the general group of CEX’es could be in trouble if Bitcoin keeps going lower over the next weeks/months.
Many other potential bankruptcies could be hitting us hard very soon and macro outlook has not pivoted to dovish as some could think considering where S&P 500, NASDAQ etc. are.
FOMC meeting minutes coming out tonight, don’t think there will be any dovish surprises there as all FED members since last interest rates increase were fairly clear, they will hike more and it is too soon to say that inflation peaked or that they have done enough. If meeting minutes don’t tank the stock market and in turn push crypto to new lows, I am sure J Powell will on 30th during his speech.
If we continue up today, I see SPX topping out at 4100, but considering Thanskgiving tomorrow, there isn’t much time this week and lower volumes could also persist in crypto market until next week.
This lower volume extended holiday period could give more time the FTX hacker to dump more ETH into renBTC as he/she (though most are sure it is actually SBF himself) was doing last weekend. That would add more stress to already dampened ETH price.
For anyone that is interested in adding to their positions apart from BTC, please DON’T, there is more pain coming and there is no point to catch a falling knife especially on the likes of Solana, that not only lost most of their Total Value Locked, stablecoins moving out of the chain, but even the development activity been dropping hard since last year. Remember my previous newsletters, only few that made headlines in 2021, can achieve new all time highs in next bull cycle and IMO Solana isn’t one of them.
Now let’s have a look at what is On-chain data telling me in terms of how close to hitting rock bottom we might be.
On-Chain Analysis
As TA has not changed much and current bounce from around 15.5k area, is just that small pullback within current formation and I am expecting we will see price back under 16k very soon. Whether we have another leg down to my 10-12k range remains to be seen and we can check on-chain metrics to give us some more insight.
STOCK TO FLOW RATIO (REVERSION)
You should know S2F ratio from my separate analysis I published in March where the expectation was for BTC to fall under 16.7k which we did recently. The reversed chart can shows us clearly when value is under 1 (green) meaning price of BTC is undervalued and in a price range worth buying some.
If we look at 2018 final market capitulation (highlighted in yellow) I would expect similar further drop in ratio and deeper value from Bitcoin over the coming weeks.
BITCOIN ACTIVE ADDRESSES
What I am expecting here is a drop in activity as we’ve experienced with capitulations in 2018 and mid bull cycle in 2021. I would like to see a drop under 650k active addresses to synch up with any near future capitulation.
MVRV RATIO
Green area lets us know when BTC is a good value buy, but of course those looking for optimal entry would likely look for MVRV to hit under 0.75 maybe even closer to 0.7 on the final decisive move down on BTC’s price. We are close, but not yet there in my book.
PUELL MULTIPLE
Similarly to MVRV, I’d like to see another drop into the deeper oversold area under 0.4. There is a lot of pressure on miners, high mining cost, higher difficulty and low BTC price is forcing some to abandon their ventures. Many most likely never sold last year and worst of all probably took loans against BTC to expand their mining operations. Usual lesson hear, take profits during bull market even if you plan to HODL for 10 years plus.
SUPPLY IN PROFIT
This is IMO key metric to finding the bottom and having very good confidence that final capitulation took place.
What I am expecting to see is a period of time with Supply in Profit % staying under 45%. This was consistent in all previous bear cycles and I don’t expect it would be different this time. Again it looks like we are close, but not there yet.
For those that do not follow me yet on Twitter please do, as I post there more frequently when I spot anything important like today on 10k “old” BTC moving, most likely to take advantage of this little pump and selling.
Stay safe, add to your Bitcoin position slowly and wait for final capitulation before even remotely thinking about adding ETH or any lower mcap coins.
hey there, thank you for the article and Happy Thanksgiving!!
Thanks!