Over the course of the past year, one of the most remarkable developments within the digital asset space has been the proliferation of non-fungible tokens (NFT). An NFT is a unique digital asset, whose ownership is tracked on a digital ledger. Within any given day, NFT trading accounts for more than $50 million in trading activity, including a record-setting daily trading volume of $350 million, which occurred on August 27.

NFTs, without a doubt, have been generating a lot of buzz. But this asset class includes so much more than novelty memes, digital images, and other tradeable assets—it represents an opportunity for brands around the world to grow and increase engagement with their audience.

In a very short amount of time, the NFT marketplace has gone from being a sort-of unknown realm of possibility to something that now plays a crucial role in many of the world’s biggest brands’ day-to-day operations—comparable to what we have witnessed over the course of the past decade with cryptocurrencies and even the decade before that with social media.

Brands that don’t begin taking advantage of this growing digital asset will soon fall behind their competitors. As was discussed in a recent “NFT Now” podcast, featuring VaynerNFT President Avery Akkineni, there are many big brands that have begun harvesting excitement about NFTs but aren’t quite sure about the best way to begin exploring this ever-changing field.

Some brands are hesitant to begin utilizing NFTs because, due to the fact they have very little familiarity with them, there is a perceived degree of risk. But in reality, the bigger risk is choosing to not begin developing an NFT-based marketing strategy and losing an opportunity to become an industry pioneer.

 

The NFT Marketplace: Combining Creativity and Expertise

A quick review of Google Trends reveals that public interest in NFTs has absolutely skyrocketed over the course of the past year. As a new asset class, people—including ordinary, brand-facing consumers—have a strong interest in NFTs and, as reflected by the market, are also willing to make some serious financial commitments.

Big brands know this. Big brands want to take advantage of these new opportunities, just as they would with any other opportunity of such magnitude. Only some, however, have invested in the expertise and resources needed to be successful.

Companies such as Sasco Digital Assets (SDA), among others, have begun fulfilling this natural need for NFT and digital asset expertise, along with supporting services (such as custody solutions). These companies make it possible for brands to identify NFT marketing strategies that are both profitable and feasible, securely execute their plans, and continue generating value for their consumers over time. It is no longer necessary to invest in an in-house NFT and Digital Asset department because the support is readily available.

Of course, the potential value of NFTs isn’t just something that exists in theory—it’s something that has already helped dozens of major brands reach new heights.

 

NFT Marketing Success Stories

“If you had to pat someone on the back for pushing NFTs into the mainstream, it’s the NBA (National Basketball Association)”, claims MethodShop in a recent article. Through the NBA’s “Top Shot” website—a platform where people can purchase NFT video highlights of their favorite basketball players—the NBA was able to successfully cultivate $250 million dollars (including royalties) across more than 100,000 different buyers. Certainly not a small chunk of change.

NBA Topshots logo

Some people invest in these NFTs because they (rightfully) believe they are destined to increase in value. Others invest because they sincerely love their favorite players and want to have the exclusive right to be the owner of their favorite dunk, steal, or three-point shot.

The NBA’s success with NFTs doesn’t stop there—the league has also made a considerable amount of money with NFT trading cards. Other sporting leagues across the US (and elsewhere around the world) have taken note of the NBA’s success and have begun developing comparable strategies of their own.

The NBA is hardly the only major NFT success story. Christie’s Art Auction House—the most prestigious art auction house in the United States—has also begun treating NFTs as a form of digital art that can be bought and sold just as easily as their physical counterparts. Gucci, Coca-Cola, Asics, and other large brands have also generated significant profits and engagements through their innovative use of NFTs.

 

A New Frontier

NFTs have only been a “mainstream” digital asset for about a year, meaning there is not always a complete and perfect playbook available for brands to use. Being willing to take chances and be creative will be absolutely paramount. But with a supportive team of NFT experts, dedication to their clients, and a willingness to explore this new digital frontier, brands across the world can benefit tremendously from these remarkably dynamic digital assets.

Bitcoin Market Update | Week 33 – August 25, 2021

Last week we identified the makings of a supply crunch that will be playing out in the next few weeks and months, barring any unforeseen market developments.

As of today, the price of Bitcoin continues to range in the 45-50K region as long-term holders and the DCA army continues to accumulate Bitcoin. This accumulation will continue until demand exceeds the supply of Bitcoins up for sale at this price range.

I was expecting to see a momentary dip below $45K, an excellent potential buy-the-dip opportunity with a limit order or two but hopes of discounted Bitcoin were dashed this morning by a $1B purchase from Coinbase early this morning.

As there’s little to no news on the market front, we’ll use this week’s update to explore what we can expect over the next several months. We’ll also reference Bitcoin’s performance at various points in historical market cycles to anticipate upcoming scenarios.

Confidence Strengthens with Infrastructure Bill
Congress passed the $1 Trillion infrastructure bill two weeks ago, and Democrats have votes needed for an additional $3.5 Trillion. In the final moments of the Senate vote, there was debate over the language used in an amendment intended to set new regulatory standards on tax reporting of exchanges. Unfortunately, the amendment included language that was frankly embarrassing to anyone with even a basic knowledge of cryptocurrencies. It mandated that wallet providers and software developers are ‘brokers’ and therefore required to report on taxable events of their end-users.

Efforts by Senators Lummis, Wyden, and Toomey to pass an amendment with more precise regulatory language failed to garner unanimous consent after outgoing Senator Richard Shelby objected. Shelby intended to add $50B to defense spending, which was sure to be met with resistance from the Democratic leadership. Toomey and Cruz rejected Shelby’s request. Ultimately, the Senate passed the bill with problematic regulatory language. Several Senators vowed to re-visit the issue when they return to session in the fall and before any 2021 tax reporting.

It’s no surprise that Congress is struggling to understand this new emerging financial system. It’s was also not surprising that not a single senator or congressional leader advocated for punitive legislation that could hurt Bitcoin and other digital assets. Instead, surprising some, Sen. Ted Cruz offered his full-throated support of the crypto industry, exalting the benefits to the American economy and, by extension, the American people.

The key takeaway from last week’s events in Congress is that Bitcoin is entering a new era of acceptance by the US political establishment. Bitcoin’s favorable treatment should serve as a sign of things to come with several issues on the table, including SEC approval of an ETF. It’s not a matter of if but when the SEC approves a Bitcoin ETF.

Congress’s dovish view of Bitcoin is a stark contrast to their treatment of Facebook’s Libra project, which was met with outright hostility when hearings were held in October 2019.

Many crypto investors remain hopeful that Congress will take a thoughtful approach to crypto-focused legislation while the most risk-averse investors will remain on the sideline seeking regulatory clarity.

Current Key Market Indicators
As we continue to progress through this mid-cycle corrective phase, there are two indicators I’m looking at that will inform how the market structure has changed in this 2021 cycle.

LTH/STH Ratio
The mid-cycle correction was put to an end by Long Term Holders (LTHers). LTHers have completed their purchase of the Bitcoins made available after the May 19 liquidation event, these Bitcoins are now off the exchanges making them unavailable to Short Term Holders (STHers) or traders. We saw this pattern play out in 2016 and 2020 before the rapid price appreciation of Bitcoin in 2017 and 2021 and we’re seeing it play out at a much more aggressive pace right now.

Exchange Supply Balances
We’re approaching ATLs (all-time lows) of Bitcoin supply on the major exchanges. As a result, we can expect the price to bid up dramatically as we enter unchartered territory. Price will bid up until short-term holders are shaken out, and long-term holders capitulate.

Bitcoin Dominance
Bitcoin Dominance measures the amount of market capitalization represented by Bitcoin compared to all other altcoins combined. When digital asset investors flee risk, they move into Bitcoin or stablecoins. Whenever Bitcoin Dominance increases, so does the price which induces FOMO which adds fuel to the run-up. This was last seen at the end of the 2017 cycle.

It’s yet to be seen if this cycle is different so we’ll be keeping a close eye on this metric.

Even though we may see altcoins outperforming Bitcoin on shorter timeframes, the trend continues to show that altcoins lose value against Bitcoin. Put another way, an investment in Bitcoin will perform better than altcoin investments for long-term investors.

Conclusion
We’re monitoring several other metrics that strengthen confidence that Bitcoin will trade hands for over $100K at some point in the next several months.

I’m continuing to DCA and take advantage of buying dips. We can expect to see several minor corrections, likely 10-30% between now and the 100K milestone.

Bitcoin Market Update | Week 32 – August 11, 2021


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The Bitcoin market has shown continued strength over the past week in several on-chain and technical indicators. This leads me to believe we will continue to see a bullish advance into the previously set ATH of $65K within a few weeks. Although I’m typically weary of predicting prices above those once established, the data suggests prices above $100K later in this market cycle, barring any unknown major news or changes to the global macroeconomic environment.

Here are this week’s curated data points:

  • The 200-day SMA has been breached and has been holding above pretty consistently.
  • Bitcoins are selling into demand, not weakness.
  • Those hoping for Bitcoin below $30K are now buying Bitcoin above $40K.
  • Exchange balances are at their lowest levels, not previously seen since the May 19 liquidation event, indicating we’re in the early stages of a supply crunch.
The 200-day Moving Average (MA)

Those who have followed these updates know that I’m not a massive fan of Technical Analysis (TA) for analyzing Bitcoin on timeframes longer than a few days. However, TA, used effectively, may provide some value in the stock markets but only because stock markets are inherently opaque.

I prefer analyzing on-chain data, but some TA metrics are helpful simply because we know that others, particularly technical traders, use TA and make investment decisions on the insights they reveal.

Technical traders use moving averages to identify changes in market trends.  The most popular moving averages are the 50, 100, and 200-day averages – these are three lines on a price chart showing the average price over 50, 100, and 200 days.

Earlier this week, Bitcoin surpassed the 200 Day MA at $45,200 and has continued to sustain above this level since. I should note that every mid-cycle correction in Bitcoin’s history has breached the 200 Day MA on the way down. The current mid-cycle correction found the 200 MA at nearly the halfway point between the high of $65K and $30K.  this is an interesting observation and shows how cleanly the price fell and recovered.

 Bitcoins are Selling into Demand, not Weakness

Spent Output Profit Ratio (SOPR) is a metric that tells us whether a more significant number or lesser number of Bitcoin is selling at a profit. It’s a pretty good indicator of the level of demand in the market. When this metric hits a value of 1, there’s a 1:1 ratio of buyers and sellers. When it’s above 1, there are more buyers than sellers. This metric also reveals clues of the predominant behavior of market participants if we relate it to price action.

SOPR recently printed a clear bounce off the 1:1 ratio, indicating a higher level of investor confidence in future higher prices.

An analysis of historical exchange order book data shows not only that bears that were holding out for sub-30K prices were disappointed; we see signs of capitulation and purchases above 40K.

We’ve not yet seen complete capitulation or sustained periods of FOMO that marks later stage buying behavior.  This tells us that this bull has a long way to run. Nevertheless, sustained prices at these levels and above may lend confidence to investors that maintain a wait-and-see approach.

Early Days of the 2021 Supply Crunch

The 2021 Bull Cycle’s intermission is now over.  It’s time to return to your seats for the second act. I strongly believe this act will be marked by a supply crunch and institutional FOMO that will bring prices above $100K and beyond.

Why am I so confident? It’s simple – Bitcoin is a perfectly scarce asset with an open-dataset.  Furthermore, global monetary policy is continuing to trend towards evermore fiat debasement and government spending. The data shows that we are well positioned for an incredibly bullish period, as long as the inflation hedge narrative persist and demand and volume return.

The unique behavior of a massive contingent of Bitcoin investors who will always buy and never sell at any level sets a strong base of support. These investors are comprised of retail, in capital terms, but also of institutional and corporate treasury capital.

We’re entering unprecedented times in terms of available exchange supply.  The next few weeks and months will be interesting to say the least.

Key Takeaways

The Intermission is Over.  We have front-row seats to one of the most exciting times in Bitcoin history. I’ve never seen a more perfectly structured setup for bullish price action over the next several weeks and months.

The global macroeconomic conditions are particularly fertile, with Central Bank driven monetary inflation continuing as well as other actions like the passage of a $3.5 Trillion infrastructure bill in the United States.

Significant fear, uncertainty and doubt (FUD) has been shaken off, including the China ban, ESG, energy debate, Elon Musk’s tweets and Congress’ fumble over new tax reporting requirements.

Short of a black swan event, the coast is clear for Bitcoin to print prices at and above $100K later between September and end of December 2021. We’ll have a better idea of the market action’s texture, amplitude, and behavior as we approach those price levels.

Bitcoin Market Update | Week of August 2, 2021

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In this week’s update, we’re going to dig a little deeper into understanding how some of Bitcoin’s unique attributes give us a level of predictive power that can’t be found in any other asset or commodity.

Bitcoin’s Predictive Power Explained

One of the things I love most about Bitcoin is its blockchain. The Bitcoin blockchain is an open and auditable ledger of every UTXO (unspent transaction output), transaction, block, and many more pieces of data that represent the permanent record to Bitcoins history. If you’ve ever sent some Bitcoin to someone else, that transaction is permanently stored in the blockchain for eternity.

We can analyze this data to identify patterns and trends that could help us determine how and when to invest in Bitcoin, or sell Bitcoin. Companies like Glassnode and Cryptoquant make analyzing the blockchain easy by providing a user-friendly interface with tools and relatively popular metrics.

If that weren’t enough, there are a few more unique properties of Bitcoin that empower us to understand what’s happening under the hood reasonably accurately:

  • Bitcoin is perfectly scarce, there are currently 18,773,597.75 Bitcoins as of August 1, 2021, @ 9:35 PM EST. There is nothing else that can be audited so easily, precisely, and with unforgeable consensus.
  • In addition to Bitcoin’s perfect scarcity, it also maintains an unalterable supply curve. This means that the rate of new supply will always remain the same. Until sometime in 2024, every mined block ‘releases’ 6.25 BTC to the total supply. There is no way to speed this up or slow it down regardless of the price action. With virtually every other asset and commodity, an increase in the rate of new supply is the natural economic response to a rise in price. As an example, as the price of a barrel of sweet crude oil approaches $100, oil producers are incentivized to produce more oil to meet the demand and take advantage of the recent higher prices. Price begins to decline as supply meets demand and inevitably overtakes it.

 

When illiquid supply is at an all-time high, a supply crunch is incoming

Illiquid supply is defined as the number of Bitcoins that reside in deep cold storage, these are Bitcoins held by long-term holders. They’re not sitting on an exchange to be quickly sold – these Bitcoins being owned by long-term convicted holders are not available to be sold thereby reducing the number of available coins on the market.

A look at the number of illiquid Bitcoins shows us that between April 12 and today, 200K Bitcoins were sold to conviction. The price on April 12 was $59K, compared to today’s $40K. This means long-term holders took advantage of the mid-cycle correction to buy Bitcoin, making these Bitcoins unavailable to new investors. The net effect is a hardened supply of available Bitcoin that is more inelastic to demand, which will result in a rapid increase in Bitcoin price over the coming weeks.

We’re in a particular moment in Bitcoin’s history that represents a fantastic risk-managed entry-point for investors.

As we covered in last week’s update, the 2021 mid-cycle correction failed to violate the 1.618 Fibonacci level at $30K confirming for market technicians (ie, Wall Street) a continuing bull market.

More importantly, we’ve seen an incredible recovery over a 10-day period that drove the price from 30K to 42K, a 25%+ gain.

This begs the question, how did Bitcoin perform after the previous 10-day ‘green candles’?

Let’s first look at the 10-day streak that occurred between Dec. 24, 2020, and Jan 2, 2021:

After gaining 53.82% in 10 days, the price went on to gain an additional 70% in 90 days.

Let’s also take a look at the 10-day streak that occurred between October 6, 2017, and October 15, 2017:

Key Takeaway:

Bitcoin’s simple supply/demand dynamics, coupled with an incredible level of data and transparency provides us with the predictive power of determining where the price will move on mid to longer timeframes – the longer the better.

A supply crunch is on the near horizon, we should see rapid price gains over the next few weeks and months. This moment in time is one of the best risk-managed entry points in Bitcoin’s history as we’ve come out of the mid-cycle correction posting 10 new green candles.

My base case is we’ll see rapid price increases with limited volatility between now and $65K, after surpassing $65K we’ll see an uptick in volume and volatility on the approach to $100,000 at some point in the next 2-4 months.

Bitcoin Market Update | Week of July 26, 2021

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On Sunday night, the market found its direction with a short squeeze that took the price from $35K to $40K. This short squeeze was historic, the largest in Bitcoin’s brief history, and certainly not the last. This event changed the price direction and provided traditional market technicians (i.e., Wall Street) with confirmation of a continuing bull market.

What’s a Short Squeeze?

A short squeeze occurs when a large number of short positions are liquidated, i.e., forced to buy Bitcoin. This forced buying of Bitcoin leads to a rapid increase in price. As the price increases, a cascading effect occurs as more and more short positions become liquidated. It is essentially the opposite of the long squeeze of May 19 that brought the price down from 60K to 30K.

The underlying cause of the volatility leading to these events is two of humankind’s most challenging emotions: fear and greed. The result of short and long squeezes is typically a change in sentiment and

market direction.

Update on the Golden Ratio holding and GBTC Unlocks

It bears noting of the confirmation of two predictions we made that panned out:

The Golden Ratio will hold – this is the 1.618 FIB level, it has never been violated in Bitcoin’s history – and history repeated in this most recent market action.

The high number of ‘GBTC unlocks’ will be a non-event – this was in response to social media influencers predicting bearish market action due to GBTC shares becoming available. Instead, there was a reduction in the discount of GBTC and no appreciable selling of BTC on the spot markets.

What happens next?

If previous short squeezes are any indication, we should see price trending upwards for the next few weeks. At some point, we’ll exceed the ATH of $65K, which will generate new headlines and FOMO. The difference now is much of the supply has been moved from shorter term investors to longer term investors, as we can see from on-chain analysis. With a tighter supply will come even more rapid price appreciation.

Price Predictions

$100K per Bitcoin is very much in play and highly likely to occur before December 31, 2021, if Bitcoin’s market history is any indication. The setup is undoubtedly there; we have an alignment between global economic and geopolitical events, narrative and human action as reflected by on-chain analysis.

If Bitcoin surpasses $100K, I’m expecting to see rapid price appreciation from there, with prices potentially doubling or tripling in a relatively short timeframe, similar to the late-cycle action of 2017.

Within one month in 2017, from mid-November to mid-December, the price nearly quadrupled from $5.5K to 20K after a ~40% capitulation event. We’re seeing a similar on-chain setup this time around; the only difference (aside from greater adoption and market action) is the introduction of two new Bitcoin use-cases that have the potential to make the 2021 cycle’s price action more dramatic.

In 2017, to take advantage of an increase in Bitcoin’s price, investors had to sell and incur a taxable event. Some believe this to be a driver to the end-of-year sell-offs we saw in 2013 and 2017.

Alas, here we are in 2021, and Bitcoin is much more mature and of keen interest to investors worldwide. Moreover, investors can also enjoy the benefits of Bitcoin-denominated high-yield interest accounts and collateralized lending. These products will reduce the number of Bitcoins available to be sold during market downturns and may dampen late-stage market volatility.

That said, we’re a long way away from the end of this cycle. It has certainly been a wild year with too many events to count here. So I’m continuing to keep an eye on the buying and selling trends, identifying the market participants, and monitoring the nature of their custody solution.

Analyzing and synthesizing this mix of hard and anecdotal data has been, above all, the most valuable indicator of future-looking price action on mid to longer timeframes.

Bitcoin Market Update – July 7, 2021

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The market continues to look for direction as we see a steep decline in volume across the exchanges. We’re not seeing much activity on-chain with the declining demand. However, the pre-existing trend of coins moving from short-term to longer-term investors is continuing to hold.
Price continues to range between $30K-35K and will continue to range until either sellers are exhausted, or institutional demand returns. It appears we are in a “sell in May and go away” regime. The process of understanding Bitcoin is no different for institutional investors than it is for individual investors. It requires time, focus, and research. This current phase of consolidation and accumulation will remove a considerable amount of supply if and when demand returns at the end of the summer.

As we continue through this mid-cycle correction, we continue to see press releases indicating continuing infrastructure development, strategic partnerships, and venture capital allocations into Bitcoin and crypto-centered companies. Infrastructure development is a crucial component to continued market growth as it is typically a lack of infrastructure that puts out the fire on bull markets. Broad infrastructure development brings new waves of investors by making Bitcoin more accessible and provides investors with a range of options to gain exposure. Therefore, it’s essential to continue to monitor how, where, and the scale at which new infrastructure is being developed to support the Bitcoin and broader crypto ecosystem.

Patience is Crucial
For long-term investors, patience is critical during periods of consolidation. I harken back to a similar timeframe of incredible opportunity, the dot-com boom in the late ’90s.  In 1998, Paul Krugman, the Nobel-prize winning economist that serves on the Editorial Board of the New York Times, famously stated, “The growth of the Internet will slow drastically, as the flaw in ‘Metcalfe’s law’ becomes apparent: most people have nothing to say to each other! By 2005, it will become clear that the Internet’s impact on the economy has been no greater than the fax machines.”

Paul Krugman and many others at the time failed to properly assess the value of an open, permissionless, and decentralized entity that lowered the barriers of access to information and created an environment that enabled peer-to-peer communication. Google, Amazon, eBay, and many others capitalized on the Internet precisely because it had a decentralized value-set. Established brands like Sears missed or delayed building an internet presence because they operated under a different status-quo value-set. Investors that saw the value of the Internet as integral to the success of Google, Amazon, and eBay were handsomely rewarded for the risk of putting conviction in a new regime.

Paul Krugman and others in the media and finance establishment continue to see Bitcoin as a “trend” that will subside as they expected the Internet “craze” to subside. Yet, as they’ve been proven wrong each year, Bitcoin investors have been rewarded for their conviction year after year.

Will this trend of Bitcoin’s success continue to play out? No one knows for sure, but there certainly has never been a more bullish setup for patient investors than right now.

The market has been largely mixed and indecisive over the past few days and weeks. On Tuesday morning, we saw a steep sell-off to $28.8K followed by a steep recovery up to $34K. That market event, like others that preceded it, presented an opportunity for well positioned Long Term Holders (LTHers) to pick up discounted Bitcoin from capitulating Short Term Holders (STHers).
China’s Bitcoin mining ban is being reflected in a downturn in the network hashrate. It appears this is a real ban on mining and there are indications it is due to a crackdown on corruption by regional CCP officials found to be allocating energy grid power to miners. China has worked extensively to centralize control of their energy grid to better plan power delivery to high population centers. Most energy produced in China are in far-flung central provinces, not where the major population centers along the eastern and south eastern coastslike Beijing, Guangzhou, Shanghai, Shenzen, Tianjin and several others.

I expect the indecisiveness to continue for a period of time as the market digests the China ban.

Here’s my take:

The China ban on mining is short term bearish. We saw the price spike down early Tuesday morning as western news outlets carried the story.

The China ban on mining is long term bullish. A historical 60% of hashrate in China has been a long term issue in the Bitcoin community’s desire to maintain decentralization. Mining equipment is hitting the market with Bitmain, the largest manufacturer, hosting a conference between their largest clients and American mining businesses. Texas Governor Greg Abbott attended to welcome the attendees.

Ultimately, it’s an unfortunate development for the people of China, but not unexpected behavior from the totalitarian nature of the CCP. Bitcoin is a technology that promotes freedom from the trappings of monetary surveillance, the CCP has demonstrated time and again its willingness to restrict any perceived threats to its own power structure.

Now, onto the market:

Tuesday was a high volume day, lots of coins moving from STHers to LTHers..

We saw a V-shaped recovery which is a pretty good indicator of a local bottom. Could it be that sellers sold on the bearish China news while buyers bought on the bullish China news? We’ll need a few days and weeks to see how this plays out.

On-chain activity is at lows not seen since earlier this year, it’s quiet on the blockchain.

  • This is typical of mid-cycle corrections, 2021 is tracking market behavior closer to the 2013 cycle
    than the 2017 cycle.
  • During the 2013 cycle, Bitcoin hit an ATH of $240 in early April before correcting down to a low of $45. It ranged for months (197 days) before surpassing the $240 ATH on November 6, 2013. Bitcoin then went on to 5x from there several weeks later to $1150, a classic supply crunch leading to a blow-off top. It was a nice clean bang to the end of the bull-cycle and not seen again until 2017.

Bitcoin dominance is up from 39% to 46%. Bitcoin dominance is the percentage of the total value in Bitcoin vs. all other cryptocurrencies combined.  I’m not a big fan of this metric as it implies that all cryptocurrencies are the same. Cryptocurrencies fall into to several categories – Bitcoin stands unique as the only decentralized monetary network, while the others address particular use cases. That said, Bitcoin dominance increasing indicates that value has either moved out of altcoins into USD or into Bitcoin.

The longer Bitcoin consolidates in this price range, the better it will be positioned to drive stronger upside momentum later in the cycle. The reason is simple, Bitcoin has both a finite supply and a finite rate of new supply as the price goes up. Those investors that doubted, capitulated and have lesser conviction on their altcoin investments start to fear missing out (FOMO). As they FOMO back in, price continues to rise which creates continual FOMO at the same time the supply is being further reduced.

One indication this is starting to happen is Ethereum is losing value against Bitcoin. Put another way, investing US dollars in Bitcoin has been a better performing strategy over the past couple of weeks. We’ve seen this metric develop later in the 2017 cycle, I believe it’s due to a couple of reasons:

  • Ethereum was out-speculated by other altcoins in 2017. In 2021, it was out-speculated by DeFi Tokens – this leaves short-term investors in a constant state of paranoia over their investment decision.
  • Ethereum’s roadmap and malleable monetary policy doesn’t create a strong enough value proposition for those longer-term investors looking to hedge against monetary inflation of fiat currencies compared to Bitcoin.
  • Bitcoin’s attributes and fundamentals are stronger than Ethereum and other altcoins – it’s the best risk-managed trade in the space.
  • New investors may come into the space through Ethereum, Ripple, Dogecoin, and other cryptocurrencies where they get exposure to Bitcoin. Some will convert into Bitcoin after suffering extreme losses. As more investors capitulate into Bitcoin, a feedback loop is created causing more capitulation as observed in 2017.

In summary:

There is a lots of indecisiveness but also indications of capital inflow from other coins.

  1. If price ranges for the next few weeks between $30K and $40K, then we’ll watch the metrics closely to determine how it will develop.
  2. If price goes above $37K sustained, we’ll then look for $42.5K sustained to confirm a bull market continuation.
  3. If price moves below $30K sustained, it will be a strong indication that we’re entering an early bear market and we’ll monitor metrics to determine new developments.

The next few days and weeks will be crucial towards establishing a market direction, but if the current on-chain patterns and trends continue, I’d expect a continuation of the bull market.

Leave any questions, thoughts and comments below!