Bullish(ish)
MacroTactical Crypto #26
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Bullish(ish)
The exogenous and endogenous stories have simultaneously improved for crypto since my last note discussed the intriguing resilience of crypto and NFTs. A bunch of outside and inside factors have now converged at once to jolt crypto off the lows, with ETH and alts especially zippy.
There is an ongoing dance between global macro and crypto-centric factors that looks something like this:
Bitcoin with major global macro (blue) and cryptocentric (orange) moments (2019 to now)
That chart is not meant to be an exhaustive summary of everything that has mattered for crypto in the past few years… It’s just a snapshot diagram of the ongoing interplay between the endogenous and exogenous factors that take turns buffeting crypto.
The best trades in finance are always ones where most or all winds are blowing in the same direction. Right now, global macro is a short-term tailwind for crypto and institutional liquidations climaxed right on schedule at half-year-end, so we have a bounce. Here are some of the factors to think about going forward. Some are good, some are less good.
1. GOOD. Forced crypto liquidation from 3AC, Celsius, and others is done. Institutional redemptions into month-end, quarter-end, and half-year-end are done. Amazingly, the exact low tick in GBTC was 4:00 PM closing time on June 30. Bullish.
GBTC 30-minute chart, June 8 to now
And for what it’s worth, TSLA selling 75% of their bitcoin is good news for BTC, not bad. Elon is an unserious participant in crypto and now he’s one less paper hand that needs to liquidate. Musk has been more of a reverse indicator than a directional one in crypto anyway. His frequent flip-flops and sophomoric crypto chicanery make the asset class seem sketchier, not more credible. Bullish.
2. GOOD. A wide range of extreme bearish sentiment indicators in stocks triggered a massive wave of tactical buying, creating what is now a mildly confusing scenario where everyone is bullish stocks because everyone is bearish stocks (!)
I could find 100 of these charts, but here’s one of the nicer ones to show how risk-averse fund managers are right now.
3. GOOD. There was a similar torrent of technical bottom signals in crypto. The price action in NFTs and some of the stuff I described in my last piece in early July, and more recently many more signals have emerged. For example, Glassnode points out that the number of paper handed BTC owners is back down to levels that typically mark the bottoms in BTC. Mostly diamond hands remain.
Here is one of many interesting charts they feature in this commentary.
% of BTC wealth, by holding period
4. GOOD. Depending on who you believe on the cost of production, BTC also bottomed near its cost of production around $17,500. The current cost of production is debatable and depends on a range of assumptions, but most estimates put it in the $13k/$20k area. If you want to read more about how much it costs to mine one bitcoin, this article is good.
For reference, this is how bitcoin prices have behaved relative to cost of production…
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This has been a free preview of the latest MTC. The rest of the note covers four more points and explains my thought process for why we are bottoming, but not yet ready to fly to the moon. There is also some discussion of the CeFi vs. DeFi debate post 3AC/LUNA/Celcius implosions and a specific forecast of the range for BTC over the next few weeks.
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Thanks.
bd