This report covers:
What caused Bitcoin’s 20% crash. I’ve spent 10+ hours devouring news and charts so that you don’t have to.
Where is crypto headed in the short and long-term? I’ve been on an insane heater, let’s see if I can keep it going.
Will there be another crypto bull cycle? What to watch for next.
Read time: 4 minutes
Summary:
Technicals: Bearish. On the weekly chart, Bitcoin failed to break out to a higher to a higher-higher at the end of June, sliced down below the 200-week moving average, and has fully retraced the BlackRock ETF news pump candle.
Fundamentals: Bearish. Bloomberg ETF analysts only give the Bitcoin spot ETF a 65% chance of getting approved by the end of the year. I don’t even know if approval would send price higher.
Sentiment: Bearish. There are still too many perma-bulls who expect there to be another bull cycle and for it to play out like previous cycles (even though the most recent cycle was under extraordinary circumstances).
Why Crypto Crashed (And Why I Had Been Bearish Since July)
I’ve been publicly bearish since July 6th. That was the literal top of the recent swing high. Bitcoin dumped 20% since then.
Everyone was bullish back in July because BlackRock filed for an ETF. I called bullshit and showed my work. I shared:
My technical analysis—Bitcoin failed to sustain a break out and make a higher-high at $30.3K.
My fundamental analysis—The reason for lack of demand for crypto is not lack of ETF. It’s because we’re no longer in a regime of zero interest rates and excessive money printing. We’ve shifted from easing to tightening. And because the GBTC arbitrage trade and access to leverage to pile into it no longer exists.
My analysis of sentiment—that everyone was bullish because BlackRock filed for an ETF, the asset manager’s CEO went on CNBC and shilled crypto, and XRP was ruled to not be a security, and yet price couldn’t make a new swing high.
My Game Plan Now
I’ve made great medium to long-term calls on this newsletter—including being bullish after FTX collapsed when Bitcoin was at $16K. I’ve been on a crypto heater since before I started this newsletter—I sold close enough to the top of the last cycle. I’ve had some failed short-term trades but those were tiny losses because I always have stop losses in place.
After being in crypto for over seven years, I’ve learned what moves the markets and how people respond to different news events and price action. I believe that the crypto market regime of years past is ending, and I’ll need to develop a new strategy for the new regime. My heater will end eventually too. But until then, here’s my game plan.
This week, crypto broke down below the 200-week moving average (blue line) to the low prior to the ETF news at $26K.
If Bitcoin closes a weekly candle below $26K, I’ll be expecting it to go all the way down to $17K—maybe even $14K. I’m not interested in buying $17K though. I’d only be interested in buying $14K (if it gets there).
Bitcoin would also get bullish based on technicals if it can actually break out above $30K. I wouldn’t buy there though. I’d only consider buying if it shows even more strength by breaking out above $35K (I don’t think that’s likely to happen any time soon).
The other scenario that I could see playing out is for Bitcoin to range between $26K and $30K for the next few months. But I’m leaning towards the more bearish scenario above.
Watch Out for Binance
Technicals don't always match fundamentals, but they often rhyme.
Binance Coin (BNB) is currently at an extremely crucial level of support, within a bearish trend formation. See the orange lines in the chart above.
Prior to yesterday’s crash, BNB had been holding on to its 200-week moving average (blue line) for dear life. It had been in a tiny 8% range for two months. It was kinda spooky actually.
If BNB goes below $210, it's pretty much Game Over. It would probably indicate that Binance is collapsing (insiders know and are front-running) or that it has already collapsed publicly.
If BNB collapses, it probably means that the current iteration of crypto will be dead for years. We'd get new protocols, companies, and VCs in 5+ years though. Maybe we’d even return to the zero interest rate and money printing macro regime by then.
I’m still bullish on crypto over the super long-term. We need a better monetary system, better banking systems, and a decentralized internet. But the current iteration of the crypto ecosystem is so messed up that I’m pretty bearish in the medium-term.