Will There Be Another Crypto Bull Cycle?
Bitcoin spot ETF news whipsaws the market—here's what the charts say now
This report covers:
What the latest Bitcoin spot ETF news means for the future of crypto
My latest outlook and game plan based on the recent crazy price action
Read time: 5 minutes
Summary:
Technicals: Bearish. Bitcoin’s monthly chart broke its uptrend and made a lower-low. The daily chart has given four bearish signals (covered below) and is now simply disgusting.
Fundamentals: Bearish. There’s no more money printing, no more crypto banks (e.g. BlockFi) lending to degenerate hedge funds (e.g. 3AC) so that they can buy more crypto on margin, no more GBTC arbitrage trade (Grayscale doesn’t need to keep buying massive amounts of Bitcoin), no more illusion that the crypto industry was just “a few bad apples” (a huge portion of the space turned out to be fraudulent and/or incompetent), and no more normies FOMO buying with their stimmy checks. And there’s still a possibility that Binance collapses.
Sentiment: Bearish. The BlackRock ETF is obviously bullish long-term. But I think the crypto perma-bulls are overestimating it. After FTX collapsed, even the OGs turned bearish. That turned out to be a great time to be bullish. I need to see the perma-bulls completely demoralized and ashamed of their bullish propaganda about a next cycle happening before I can get bullish.
The Bottom Line on the Latest ETF News
Here’s the good news:
On Tuesday, DC federal circuit court rejected the SEC's view that Grayscale's ETF proposal was not "designed to prevent fraudulent and manipulative acts and practices."
Based on the above news, Bloomberg ETF analysts upped their odds to 75% of spot bitcoin ETFs launching this year and 95% by the end of 2024.
Here’s the bad news:
The court didn't order the SEC to approve Grayscale's ETF proposal. It just said that the SEC's analysis on the "fraud and manipulation" issue was wrong.
On Friday, The SEC delayed their decision on approving or denying spot ETFs.
BlackRock is not buying Bitcoin. They are passively buying public miners for their index funds. But they’re not making any bets on the price of Bitcoin going up.
Net-net:
Meh. The BlackRock ETF should bring in a bit of money and add some much needed credibility to the space. But it’s probably not as big of a deal as the perma-bulls are making it out to be. There are more bearish variables than this one bullish variable.
How the ETF News Changed the Charts
Bitcoin rallied hard on Tuesday after news broke that the SEC’s reason for rejecting Grayscale’s request to convert GBTC from a trust to an ETF was not valid. Bitcoin then promptly retracted the entire move in the next two days. Brutal.
This wasn’t the first bearish signal on the daily chart. This chart started giving bearish signals a month and a half ago:
July 14th: Failed to make a higher-high break out above the prior swing high (orange horizontal line). This was after BlackRock announced it had filed for a spot ETF, and Larry Fink, the asset manager’s CEO, went on CNBC to shill crypto. This should have been super bullish.
August 16th: Broke down from the uptrend line (orange diagonal line). Trend lines don’t get much cleaner than that one. After it broke down from there, it sold off hard.
August 30th: Failed to reclaim the 200-day moving average (blue line). Then fully retraced the Grayscale-SEC news.
Today: Breaking down from prior support at around $25.8K (small orange line) and making a lower-low.
The daily chart looks absolutely hideous guys. I almost always try to provide bearish and bullish cases (while telling you my bias). But I simply do not see anything bullish on this daily chart.
If Bitcoin closes a daily candle or two below ~$25.8K (small orange line), I’ll be expecting it to go to $20K.
Long-Term Outlook
The August monthly candle closed last night. It was not a good looking candle.
Bitcoin has broken its uptrend by making a lower-lower (small orange line) below the May candle. The trend on the monthly chart is an extremely important signal to me as an investor. This makes me bearish.
The next levels of support are $23K and $20K. But I’m not interested in buying there unless fundamentals improve. I’m interested in buying ~$14K if it gets there.
My Game Plan
If Bitcoin breaks down back below ~$25.2K, the weekly chart would look horrible. I would assume that there isn’t going to be a “next cycle” and that we’re headed much lower.
Bitcoin is currently sitting right above it—after spending nearly three weeks here. I think it’ll probably break down but let’s see how the week closes on Sunday night.
The level where Bitcoin is mostly likely to bottom out (or at least catch a bounce) is around $19.5K. But I won’t be buying there unless fundamentals improve.
If Bitcoin crashes to $14K (perhaps because of extremely bad news such as Binance collapsing), it would be too good a price not to buy. I still believe we need decentralized currency and internet and that the world trends towards freedom in the long run.
If Bitcoin is able to break out above ~$30.4K, that would in theory be a buy signal based on technicals. But I won’t be taking that trade.