The crypto sector continues to climb … what history suggests about whether we can trust this breakout … what about the crypto naysayers? … what on-chain data are telling us
The budding crypto bull continues…
If you haven’t been watching, the crypto sector is off to a blazing start this year.
Here’s the recent year-to-date performance for some of the most popular cryptos:
- Bitcoin +38%
- Ethereum +36%
- Solana +147%
- Cardano +54%
- Dogecoin +27%
- Bitcoin Cash +38%
- Litecoin +34%
- Ripple +23%
Over the weekend, bitcoin reached a new recent milestone by briefly topping $23,000. That was the first time it hit that level since mid-August.
Since then, the price has been bouncing above-and-below this $23,000 level.
Behind the strength is growing optimism about cooling inflation, increasing hope of a dovish pivot from the Fed, and the belief the U.S. economy will skirt a major recession
All this fuels Wall Street’s appetite for riskier assets that hold the potential for outsized returns.
On that note, let’s turn to our crypto expert, Luke Lango. From his latest Crypto Investor Network update:
As we’ve been saying for weeks, it really all comes back to the macroeconomic picture.
Cryptos are the quintessential risk asset, and therefore, they have a history of soaring when risk sentiments turn positive.
Right now, for the first time in this crypto winter, risk sentiments are turning positive. That is, last week, the Bloomberg Financial Conditions Index turned positive for the first time since February 2022…
Every single time the Bloomberg Financial Conditions Index turned positive for the first time after being negative for several months – so, every single time risk sentiments turned positive for the first time after being negative for several months – Bitcoin entered a boom cycle.
Per usual, Luke grounds his argument in cold, impartial data.
He points toward December 2010, when financial conditions turned positive, resulting in a 9,500% surge in bitcoin’s price.
Then there was September 2012, when changing conditions led to a 10,000% gain over roughly one year.
November 2016’s return to positive conditions resulted in a 2,500% surge over about a year.
Then there was July 2020. Bitcoin climbed 550% over 34 weeks.
Back to Luke:
Yes… it is happening again right now, in January 2023. Financial conditions have turned positive after being negative for about a year.
Will BTC pop over the next year? Or will this be the first time ever that BTC doesn’t soar after financial conditions turn positive following a long bout of negative financial conditions?
The macros are very conclusive here. They suggest cryptos are about to enter a new boom cycle.
But what about the high-profile investors/CEOs/economists that have been dragging crypto through the mud in recent weeks?
Just one month ago, JPMorgan’s CEO Jamie Dimon slammed cryptos, calling them “pet rocks.”
“Why do we allow this stuff to take place,” Dimon said in an interview with CNBC on Tuesday. He spoke as contagion from the collapse of FTX spreads.
The bank boss told lawmakers in September that cryptocurrencies are “decentralized Ponzi schemes.”
Not to be outdone, economist Nouriel Roubini said most cryptocurrencies are a scam.
From Yahoo! News:
Economist Nouriel Roubini is ratcheting up his fiery commentary on the stricken cryptocurrency industry, particularly toward FTX and its now-disgraced founder, Sam Bankman-Fried, commonly known as SBF.
“FTX and SBF are not an exception — they’re a rule,” the NYU professor, who is known as “Dr. Doom” for his dire perspectives on global trends, said on Yahoo Finance Live at the World Economic Forum in Davos, Switzerland, on Wednesday.
“Literally 99% of crypto is a scam. A criminal activity. A total real-bubble Ponzi scheme that is going bust.”
On that note, on Sunday, CNN featured an article about “Cryptoqueen” Ruja Ignatova, whose “OneCoin” was a pyramid scheme that defrauded crypto investors out of more than $4 billion.
Here’s Luke’s take on all of this:
Through all that bad press and negative commentary, cryptos have sustainably, consistently, and powerfully rallied.
Why? Because opinions don’t drive price – data does.
And while the mainstream media’s opinions of crypto are decidedly negative right now, the data is decidedly positive.
Luke references one especially powerful piece of data that suggests bitcoin is finally turning north
The data point refers to different behaviors from a crypto “tourist” – think a short-term investor who gets swept up in the excitement of a bull run and jumps aboard, hoping for big profits…
And a crypto “resident” – a long-term buy-and-hold crypto investor who isn’t shaken out by down cycles.
As you would expect, residents tend to buy in bear markets and take profits in bull markets. Tourists buy in surging bull markets, then sell out of fear in bear markets.
With this background, let’s go to Luke for the latest data:
BTC supply held by tourists almost always bottoms right around 3 million coins, and bottoms in BTC price tend to be marked by tourist supply that has languished around 3 million coins for about a year.
Current BTC supply held by tourists is 2.9 million coins. It has languished at these levels for a little over a year.
Therefore, current ownership trends in BTC are historically consistent with bear market bottoms.
Even more encouraging, we’re not seeing the bitcoin “whales” taking any profits as bitcoin prices surge today
Glassnode reports that the number of Bitcoin addresses holding between 1,000 to 10,000 BTC (“whales”) has generally remained steady since the start of December.
Meanwhile the number of BTC “Sharks” (holding between 100 to 1,000 BTC) also has held steady in recent weeks.
This is a sign of sector confidence. You sell when you think that gains have topped out. When you believe more gains are coming, you hold.
Today, the big-money crypto investors are holding.
But now, let’s turn to who’s buying.
Bitcoin bulls will be pleased to know that two important address cohorts have continued to accumulate the world’s largest cryptocurrency by market capitalization in recent weeks and at an accelerated pace since the collapse of FTX in early November.
According to Glassnode, the number of Crab Bitcoin addresses (which hold 1-10 Bitcoins) had risen from under 760,000 prior to the FTX collapse to close to 830,000 as of last week.
Over the same time period, the number of Fish addresses (which hold 10-100 Bitcoins) has jumped from around 135,000 to close to 140,000, near its record high.
This suggests that medium to large-sized Bitcoin investors 1) used the drop in price triggered by the collapse of FTX as a dip buying opportunity and 2) are not selling their holdings as prices recover back to their pre-FTX implosion level.
The article goes on to report that we have not yet seen a surge in the growth of “Shrimp” addresses (you have to love these names).
Shrimp hold less than one BTC. Typically, in a rip-roaring crypto bull, the Shrimp are engaging in heavy buying.
Put it all together, and it appears we’re close to a major breakout
Back to Luke:
We remain as confident as ever that a new crypto boom cycle is, indeed, starting and that Bitcoin will rally more than 100% in 2023, while top-performing altcoins will rally 500%-plus…
At this juncture, there are simply too many “buy signals” firing. To us, the picture is pretty clear.
A new crypto boom cycle is most likely starting right now.
As we noted in a prior Digest, Luke is so confident in this breakout that he and his team have been researching which altcoins are likely to benefit the most from this cycle.
Luke writes to his subscribers “we’ve narrowed down our Buy List to a few top-notch altcoins, and we hope to produce a few new Buy Alerts for you within the next couple of weeks.” To join Crypto Investor Network and be a part of these recommendations, click here.
If you’re more of a do-it-yourselfer,” it’s time to give crypto a hard look. Buying pressure is back, and a growing number of indicators are suggesting a new bull is taking shape.
One word about your prospective entry timing
Below, check. out bitcoin’s relative strength index (RSI) reading.
It’s showing massively “overbought” conditions.
While this doesn’t mean bitcoin’s price will drop, it’s logical to think we’ll see at least some price-softening when the surge of buying pressure finally subsides.
So, there are two ways to handle this…
First, if you believe this is the beginning of a new bull market that will see bitcoin push back to $50,000 and then $100,000, then the difference between buying at roughly $23,000 versus, say, $20,000 (if bitcoin sells off) isn’t enormous.
So, you could buy and ride out any near-term price corrections.
But if you’re more concerned about maximizing the odds that you don’t have to sit through a selloff, then I suggest waiting.
Buying at such an elevated RSI level carries a far greater likelihood of a selloff than buying when the RSI is, say, in the 50s and climbing.
Either way, the bigger-picture outlook for crypto is increasingly bullish
Here’s Luke big-picture take:
Sir John Templeton once said:
“Bull markets are born on pessimism, grown on skepticism, mature on optimism, and die on euphoria.”
The widespread existence of crypto pessimism right now is exactly what we need for the birth of a new crypto bull market.
Once that pessimism turns into euphoria, as it did in late 2021, that’s when we’ll know it’s time to sell.
For now, it’s time to buy.
Before we wrap up, another Crypto Cash Calendar event is happening today
Here’s Luke and his partner and fellow crypto expert, Charlie Shrem, to explain:
Crypto is the future. But that doesn’t mean all cryptocurrencies are the future.
To sift through all the blockchain noise, we’ve put together an exclusive team of crypto engineers and coders to collectively research, analyze, and understand the core technologies underlying the cryptocurrency revolution.
Informed by this research, we’re able to interpret the usefulness and potential impacts of those technologies.
Here’s how it works: Behind the scenes, our proprietary research system gathers information and indicates which altcoins and crypto events are of particular interest.
From there, we’ll share with you the most exciting and promising of those coins and events in our Crypto Cash Calendar.
Just this morning, Luke and Charlie announced an event that’s triggered their Crypto Cash Calendar system.
Here’s more from Luke on this specific opportunity:
As a scaling solution for Ethereum (ETH-USD), this crypto has been making waves in the cryptocurrency and non-fungible token (NFT) space…
…Its impressive marketing and social media presence, along with its partnerships, give us confidence that businesses looking to enter the “web3” space will continue to turn to it. It’s also well-known and has proven to be an easy and powerful chain to develop on.
To learn more as a Crypto Investor Network subscriber, click here.
Have a good evening,