CryptRowe Forecast #12
Home, home on the (bear) range.
Prologue
Well hello there đ.
I am currently sick with a cold and it is rainy and storming outside. But alas, as they say in show biz, âThe CryptRowe Newsletter must go onâ.
*Narrator: âNo one says that.â*
Ok, so on to Bitcoin⌠đ.
On the surface for Bitcoin price action, itâs been quite⌠er⌠boring, ranging between $28,500 and $31,500.
However, under the surface, itâs been quite informative and interesting. Lots of fun things to share.
As a reminder, this email might cut off or not fit into most inboxes so be sure to click âread moreâ at the bottom or just click the title at the top of the email to be taken to the Newsletter webpage.
Ready? Letâs dive in đ đ .
Table of Contents
TLDR;
Macro Lens
Zooming Out
Zooming In
Price Levels
âSo⌠should I buy now or no?â
Mattâs Portfolio
1: TLDR;
Last Newsletter I was a tricksy hobbit and put the TLDR; (Too Long, Didnât Read) in the middle of the newsletter LIKE A WILD MAN. This time I will be more generous đ đ.
Macro Economic Environment still pulling against upward Bitcoin / Crypto Price Action. Recession vibes looming.
Long Term Buyers (1-2 years) are still in a guaranteed historical positive return zone.
Short Term Buyers be careful. Further downside expected with shorter-term bullish relief bounces along the way.
2: Macro Lens
Last Newsletter, we talked about four headwinds moving against Bitcoin. They were:
Most likely in or heading into a Recession.
Bitcoin is a Risk-On asset (currently) and in a Recession, those donât do well, usually.
Bitcoin is trading in an inverse correlation to the Dollar Index (DXY). Strong dollar ~ less strong Bitcoin.
Bitcoin is trading in correlation with the Stock Market (SPX, QQQ) and those are in a drawdown currently.
So whatâs happened since last time? What are the updates in the Macro world?
Well, not too much has changed in the bullet points above. The only things that have changed slightly is the last two correlations are weakening a bit and of the SPX/QQQ correlation has broken slightly.
Nothing to shake a stick at though yet imoÂŻ\_(ă)_/ÂŻ.
Additionally, I need to add another macro headwind against Bitcoin.
On Wednesday, the Fed will start something called QT (Quantitative Tightening).
QT hasnât historically been bullish for Bitcoin.
So, the update is, âThere arenât four Macro headwinds against Bitcoin and Crypto assets, there are now five.â đ đ¤Śđźââď¸
As a reminder, I am 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. Go to them for more đ.
3: Zooming Out
So, Macro Economics arenât boding well for Bitcoin. What about High Time Frame (HTF, zoomed-out) looks at On-Chain data?
Well, weâre still basically where we were last time. Lots and lots of indicators in historically optimal long-term buy zones.
A sampling of some ratios that are signaling "We are in a Great Long Term Buy Opportunityâ are:
Some on-chain indicators though, are low but arenât yet screaming âBuy now for the best long term investment!â. Those include:
So given the mix (and I am leaving quite a bit of minutia out), how do we think about this?
Well I built the Aggregate Indicator to combine 14 metrics so we wouldnât have to parse through each macro-esque indicator. Here it is (we are currently in the Blue Circle).
But what kinds of returns can we expect, and when, if we buy Bitcoin here?
As we can see, buying where we are now, has never, historically, led to a negative return after 2 years. So if you have a 2 year time horizon, itâs a great time to buy, close your computer, and come back after 2 years.
Additionally, I started to wonder⌠what if we were to slice the data here up a little more? What if we looked at this indicator, but only when the price today is less than the price was 30 days ago? So only looking at this indicator when we are in a price downtrend (which we are in now)?
Hereâs what we see.
Basically, we have historically always had positive returns in a 30-day downtrend, at these levels, after one year.
So if you bought now, you could peek at your computer after a year and odds are very good youâd be up / in profit đ đ.
4: Zooming In
Ok, so Macro looks not great for Bitcoin, and zooming out we feel pretty good about long-term buying here, but what about in the shorter term?
I recently built a Binary Aggregator which combines some of the metrics I look at for confluence of momentum. Each of the metrics has a âabove/belowâ signal that helps show whether itâs a good time to buy or not. I just put them all together.
It uses the:
Hodl Wave Crosses (24h-1m and 1m-3m)
Heikin Ashiâs
Size Cohortâs Net Change (for 1k-10k BTC Holders).
Beige above shows a âdesertâ region where itâs not a great time of confluence to buy in the shorter term.
Thereâs a few other shorter-term cautions including, as I said last time, we are hitting this âsupportâ level for the 5th time (Supports become weaker as they get hit more often, and become stronger when flipped to Resistance).
Oh I almost forgot one other bearish woe of note that Iâm seeing is that Long Term holders are just starting to sell at a loss in a sustained way. Could always invalidate of course. But itâs rarely a good sign.
So all of this combined, means in the short term, I expect further downside. Could be wrong of course (and Iâm ready / looking for invalidations), lots could change with the Macro environment or on-chain data, but for now, this is what Iâm seeing.
5: Price Levels
So given that we are in a â1-2 yearâ time horizon good buy opportunity, but short term are expecting some downside still, what are some good price levels to watch for support, resistance, and invalidation criteria?
$31,500 - this is the top of the current range we are in. Breaking it, I could see a push to $33,000 or so, but without much on-chain changing, I would expect it to be a bullish impulse still within a broader bearish trend. (i.e. wouldnât stay up for long)
$28,500 - this is the bottom of the current range we are in. Breaking to the downside I could see us swing down to the $22,000 range, give or take a few thousand. The Realized Price of the network and 200 Week SMA are there.
Below that, would be further pain and downside but Iâm not sure how far down or long weâd stay. I feel like below $22,000 the buyers would be having a field day (as long as they have cash and capital to spare that is).
Hereâs a chart with those levels.
6: âSo⌠should I buy now or no?â
Ok, so weâve looked at the Macro landscape (yikes), the 1-2 year time frame (hurray), and the short term time frame (yikes).
So what do we do? Should we buy now or no?
I get this question all the time. A short answer I give isâŚ
Bitcoin is now to the point where, itâs not a speculative asset anymore. I mean itâs volatile. But itâs here. It doesnât make sense to have a 100% all in strategy for Bitcoin or Crypto. And similarly, it doesnât make sense to have a 0% strategy.
The best strategy for Bitcoin or Crypto is to have a strategy. And there are lots of options! Depending on your risk preference, time horizon, technical saavy, etc.
Hereâs some of those options:
Dollar Cost Averaging (DCA)
If I were risk averse, didnât have a lot of time to put into research or monitoring, and had a long time horizon⌠DCA is a great strategy. You basically just buy a fixed amount on a regular cadence (daily, weekly, etc.). Always a good time to DCA into Bitcoin (and maybe ETH or other L1âs you believe will be around in the long term).
Some folks DCA âharderâ / more when weâre in a Bear Market. Now would be the time to do that for sure.
Long Term Buy (1-2 years)
Looking solid for a positive return if you buy here and hold for 1-2 years.
Short Term Buy
Not looking great. Seems weâll be entering further downside, most likely. (With shorter term bullish rallies along the way down of course.)
7: Mattâs Portfolio
My Trading Portfolio (smaller subset of my overall long-term Bitcoin portfolio in Cold Storage) is currently still all in USD. As annoying as it is to be patient, I am staying there. As annoying as it is to âmiss outâ on bullish impulses within larger bearish downtrends, I am staying there. Waiting for the next leg down or an invalidation to my bearish current thesis.
We are also starting to also see lots of Altcoins start to bleed out versus BTC and even ETH in many instances (reminiscent of the 2017 bear market). As a reminder, I moved my Altcoin strategy over to this.
Closing
And thatâs 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.
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, donât lose it all. Please donât 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.Â
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