CryptRowe Forecast #017
(Mildly Exhausting) Recession Learnings & Outlook
The CryptRowe Newsletter provides Math, Stats, and Data insight around the current state of Bitcoin and other Digital Assets. Whether you’re new to Crypto, have some experience, or are a seasoned investor or institutional fund manager, this newsletter is for you.
Dear Reader,
Hello and welcome to another edition of the bi-weekly CryptRowe newsletter! 🎉
Since we last met, Bitcoin’s price action has been between $20k and $24k and this morning, at least as of writing this, we are pushing the $24k bound.
Is this the “Bear Market → Bull Market” transition folks have been waiting for? Or another “Bull Trap” as they say?
Let’s tune in and keep reading to find out 🙃.
As a reminder, this email might cut off or not fit into most inboxes so be sure to click “read more” at the bottom or just click the title at the top of the email to be taken to the Newsletter webpage.
Sincerely,
Matt Rowe
Table of Contents
TLDR;
Macro Lens
Zooming Out
Zooming In
Price Levels
“So… should I buy now or no?”
Matt’s Portfolio
Lol of the Day
1: TLDR;
We might be in a Recession, we might not. Regardless, more and more data comes out that doesn’t look great for the future economic outlook.
Long Term Buyers: are still in a great opportunity to have historically positive (outsized) returns in 6 mo. to 1 year.
Short Term Traders: I’m still expecting further downside over the coming weeks and months.
2: Macro Lens
The two biggest Macro Economic headwinds against Digital Assets are (still):
We are most likely in or heading into a Recession. And since Bitcoin is a Risk-On asset (currently), those don’t do well, usually, during a Recession.
QT has begun (and is still slowly ramping up), which adversely affects Risk-On assets (again, of which BTC is currently).
The two big Macro Events that happened since last Newsletter are:
The US got / confirmed two negative quarters of growth (GDP), which some folks use to define a Recession, and others are arguing is an inadequate definition.
The Jobs / Labor report came out which, on the surface, looked “good”.
So let’s take the first one first: two negative quarters of growth (GDP). Some use this to define a Recession. Some don’t. Everyone got in a big huff and started fighting with strangers online about it. Ugh.
Why does or doesn’t this matter? Well, as is always the case when I start learning about something new: I had to learn a few “elementary” things to even understand what everyone was fighting about. The first being:
Learning #1: A Recession is always defined in hindsight.
This seems obvious once I learned it. The key life-reality here being, “We often are most certain that we were in a stage in our past, the further out we get from it.”
Learning #2: An official “Recession” is defined by a group called the NBER, and their definition is *hand-wavey* and vague.
So, given the two things above, I think the most wise takes I saw in the online fights were that, “turning 'are we in a Recession?’ into a binary decision (yes or no), this early on in a possible Recession, is kind of silly.”
Why though?
Because it only becomes clear in hindsight (Learning #1). And what Learning #2 tells us or what’s implied there is that: during a Recession, a Recession is experienced so differently by so many different people. Which is summarized / leads to:
Learning #3: A Recession affects different people differently at different times and in different ways, and thus is always evolving and really hard to “pin down” / “define”, while it is going on.
So you get some people suffering more / less at different times and in different ways (which again is always happening even outside of a Recession), but in a Recession it’s usually heavier and harder and the extremes are worse.
So, given all this then, defining a recession is inherently political (someone gets to blame someone else if we’re in one). So it’s basically a high-stakes game of hot-potato.
Which leads to:
Learning #4: A Recession (or “lack” of one) will be used as political ammunition by all parties/sides.
Classic. 🤦🏼♂️
Ok, so the second point I started with above was the Jobs Report.
TXMC evaluated this better than I could with the nuances here. Basically, the jobs report, if you dive into the details, isn’t as “healthy” as the headlines are telling you.
One day I look forward to giving some positive economic news… but still, for now, mostly not great.
As a reminder, I am but a humble Mathematician and not a Macro Economist and most of what I learn about / signal comes from Lyn Alden, Ecoinometrics, and Mr. Alf. They are smarter than me about Macro things. I am but Big Bird in a Macro Econ board meeting. Go to them for more 🙃.
I should also note one more thing before I go. It’s not “macro” necessarily but it’s not, not, macro.
Ethereum is a cryptocurrency focused on being a Decentralized App platform. It has a big change coming that many are bullish on (switching from Proof of Work to Proof of Stake, which I have a lot of opinions on but I’ll save for another day). There might be quite a bit of volatility around that, just an fyi 🙃 🎉.
Ok, moving on.
3: Zooming Out
So, Macro Economics is still pointing towards more pain with Risk-On assets. And this doesn’t bode well for Bitcoin. But what about High Time Frame (HTF, zoomed-out) On-Chain data?
My Aggregate Bitcoin On-Chain indicator (below) combines about 14 On-Chain and Technical Analysis indicators.
So we are still in a very great long-term buying opportunity. But what’s the outlook analysis? We haven’t done one in a while, let’s do that now. We are currently in the bottom row for risk.
Well, after 180 days we are still in historical guaranteed positive results, which was a little surprising to me.
So long term, still great odds of outsized returns. If you buy now or lower, and never look at the Bitcoin price again for 6 months + to 1 year, the odds are really good you’ll be in profit.
One reason I haven’t deployed all of my capital here though (and more on this below) is the Long Term Holder and Short Term Holder Cost Basis (Realized Price) (chart from last newsletter).
Another is this:
Cohort stacking patterns. The purple all shows times when we had both the less_1 and the 1k_10k cohorts stacking and then they stopped… leading to further drawdown. We see the same pattern here now.
So my bet is on further downside. And. I could be wrong. Always ready to be invalidated and looking out for that.
4: Zooming In
On a shorter-term horizon, here’s the Binary Aggregate chart I built.
It combines some of the metrics I look at for confluence of momentum. Each of the metrics has a “above/below” signal that helps show whether it’s a good time to buy or not. I just put them all together.
It uses the:
Hodl Wave Crosses (24h-1m and 1m-3m)
Some green sprouts on the lower half of the indicators but still desert above. For full confluence of a bullish impulse there needs to be all solid green across le board.
Still a time to be defensive and in cash from a short term perspective, imo.
5: Price Levels
So Macro is not great. But the long term buying opportunity is pretty amazing. But the short term is also not great.
What price levels should we be watching?
From a TA (Technical Analysis) perspective.
$29k or so for heavy resistance, and still $14k-16k for a “soft-ish” landing. Around $10k for a hard landing.
Here’s some updated (blockchain) On-Chain levels of note:
Given there’s some confluence for both TA + On-chain around $14k - $16k I would feel pretty good about targeting bids there. Breaks below that would feel like a temporary swan dive down.
6: “So… should I buy now or no?”
“I Dollar Cost Average (DCA)!”
Yes, I would be buying if I were you… one should always be buying on their DCA cadence 😏😊. As a reminder, DCA is great for folks who value an asset’s long-term potential but don’t have the time nor expertise to try and time tops/bottoms.
If you scale your DCA quantity by whether we are bearish or bullish, now is a great time to scale up the quantity (size or frequency) of your DCA since we are in such a bearish phase.
“I’m a long term 1-2 year investor.”
Yes, I would be and did buy some long-term holdings here. I will also buy more if it goes lower. My target is $14k - $16k for unloading a large portion of my cash bags. Remember, if you’re a 1-2 year investor, “exact timing” or “exact price levels” is a nonsense game to play. Patience is power for the long term investor.
“I’m a short term investor / trader.”
I still am not buying here. I know it’s boring and annoying to wait for lower lows and “miss out” and the bullish impulses within a larger bear environment. I get it. And… I don’t see any confluence on the desert (binary aggregate) chart above. The recessionary vibes are still looming and feeling like they’re growing. Alts are showing weakness like I mentioned in a previous letter (my instinct for alts ripping up 30% - 80% during a Recession still feels off for a “bottom”).
In all things, remember: keeping capital safe and secure in a bear market is top priority.
7: Matt’s Portfolio
My Long Term Portfolio is still 80% in USD and 20% in BTC (put it in Cold Storage).
Trading, I’m still in USD and waiting for lower lows to come. In general, I’m still looking for and waiting for bullish convergence of data and indicators to jump back in. Invalidation to me would be a rip above $23k or more with strength (but even then I’d need to see a lot of consistent strength - without would be skeptical). If that happens I’d look to take profit around $28k - $29k.
Still not there yet.
Stay safe folks 🤝.
8: Lol of the Day
A lol just in case the economy or whatever else has you down.
I would 100% do this if I learned photoshop 😂.
Closing
And that’s it! As always, if you have questions, desires for clarification, or thoughts on how to improve this letter for yourself or others please reply and let me know or reach out on Twitter.
Also, if you are interested in any kinds of individual consulting services regarding your own Bitcoin or Crypto journey (getting started, trading, analytics, learning, advising, etc.), feel free to respond to this email or follow / reach out to me on Twitter, where I also post more nuanced / individual metric-specific charts there more often.
As always, this post is free and if you enjoyed it or learned something feel free to share it 😊 🎉.
Thank you for reading!
Sincerely,
Matt Rowe
Links and References
Data Provider: Glassnode (free on-chain charts, paid tiers available, I have T3).
My Twitter: @mattrowsboats (often provides on-chain analysis)
Crypto Learning Twitter Lists: On-Chain, Macro-Econ, and TA.
Disclaimer 1
Exercise caution, don’t lose it all. Please don’t trade on this newsletter assuming it is perfect information. Everything here is probabilistic and based off of past patterns, which may prove to be invalidated. Short time frames are subject to less accuracy as markets can change on a dime due to a variety of factors and events in the world. Use risk management as much as possible.
Disclaimer 2 (the all caps one)
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Thanks, Rowe! I subscribed a few newsletters back and I’ve really appreciated the time and effort you put into these posts. I love your custom aggregated indicators. Great stuff!