Merry Merry BTC
This report is not meant as financial advice and please do your own research and take responsibility for your own trades. This report is meant to update you regarding the markets so that you can make informed decisions.
NOTE: The following article is more for advanced crypto traders. If you are a beginner check out my beginner series here.
Hey guys, what a wonderful week. BTC has broken $20,000 and went to $24300, a new ATH that we waited 3 years for. I have always been telling people to buy BTC and people are finally listening.
I’ll update you regarding the macro BTC news, followed by some short term analysis of price. I’ll also further explain why I’m loading alts now and not BTC.
Bitcoin Macro News
Christopher Wood, global head of $51 billion USD equity strategy at investment firm Jefferies, will be cutting their gold position for U.S.-dollar-based pension funds to 45% from 50% and initiating a 5% holding of bitcoin. Once again, we have explored this idea in a previous article here. We’re looking at potentially $100 million worth of BTC being bought by the them.
We are also expecting more money to flow from gold to BTC as more and more modern portfolio managers understand the true power of BTC. Gold is already a very matured asset class and the upside is limited, while BTC is extremely young and its market cap extremely tiny. For context, BTC’s market cap is at $438 billion while gold is at $10 trillion.
The catalyst for this paraigmth shift would be a Bitcoin ETF that will most probably be released next year. There is a clear demand for a BTC ETF judging by how much Paypal, Square, Grayscale investment trust as well as Microstrategy’s shares spiking in price due to investors wanting indirect exposure to BTC’s price movements.
PWC has also released findings that further confirms that hedge funds and investors are seeing BTC as an inflation hedge and very interested to buy it.
Grayscale’s Bitcoin Trust (GBTC) premium has also hit record highs of 33% premium over spot price, which shows how much demand is coming in from the equities markets. Their holdings grew by 56,000 Bitcoin this month, totaling up to $11.1 billion in Bitcoin which equates to 2.7% of Bitcoin’s total supply.
US-based hedge fund One River Asset Management established a new company oriented in digital asset investments, the fund has purchased $600 million in BTC and plans to add ETH and expand its holdings to $1 billion in the next few months.
Scott Minerd of Guggenheim Investments is among the many institutional investors starting to enter the crypto space. Last month, the firm filed to reserve the right to invest 10% of its $5.3 billion Macro Opportunities Fund into GBTC (530 million). Extremely Bullish as they have a price target of $400,000 per BTC calculated based on the scarcity and relative valuation such as models like gold as a percentage of GDP.
Square is also up 100% on their $50 million BTC purchase, same for Microstragy’s $425 million purchase. Its a matter of time before all corporate decide that it's too dangerous to not hold BTC and instead hold the ever depreciating USD. This is further confirmed by research done by Kraken recently.
We have also seen high amounts of large investors stacking large amounts of BTC. They are the smart money and when they invest, you follow them if you want to make money. What’s interesting is the higher the price, the more of them buy it. Classic FOMO in accredited investors and institutions.
BTC Supply-Side Crisis
The amount of BTCs from miners moving into exchanges has also hit a record high while BTC’s price spikes towards $24,000. However, BTC didn’t dump but went up instead. A clear effect that buying demand is so strong that miners can no longer dump on the market. Extremely bullish.
Further adding to this supply crisis, the amount of BTC lost is at least 3.7 million Bitcoin(roughly 20% of all currently mined BTC). At current prices, that’s $83.3 billion worth of Bitcoin sunk into oblivion. This means that BTC is more scarce than the 21 Million BTC that we have thought, more price movement upwards = moon.
Macro market factors
McConnell says Congress has agreed to $900 billion coronavirus stimulus deal
Congress reached a deal Sunday on a $900 billion coronavirus relief package. The agreement follows months of sniping on…
The new stimulus bill will also mean that precious metals, equities and crypto will move up simply because USD is being devalued. Its commonly misunderstood that you’re getting more value but you do not. It's simply that your asset retains value because the USD is losing its value and thus your asset is worth more in USD.
3 Probable scenarios
Blue: Breaks up and claims new ATH at $28,000 (lowest probability), this is also the scenario I don’t like the most as it means when BTC start topping the drop will be huge, will be good for us to chill and claim support at this levels that will allow us a better base to bounce as we go for $100,000.
Purple: Ranges before a drop to $21,000 (higher probability), Alts are extremely oversold and institutions will buy BTC using iceberg orders to prevent moving the price too much. Retail also tend to flood into ALTs due to their nature of having small capital and are willing to take higher risk.
Although Bitcoin’s 60% ROI for the year is awesome, it is nothing compared to several other altcoins. For example, Chainlink is up 750% and Zilliqa is up 641% in comparison. Every 3 months alts also tend to have a party and this 1 should be big due to alts having a lot of space to catch up with BTC. BTC whales also tend to flow money into alts once BTC starts topping to earn more BTC for themselves.
Yellow: Ascending broadening Wedge is still in play for bigger volatility.This will be the scenario for max pain to wash out all overleveraged position, will be taking the chance to load these dips.
BTC breaking all-time high has bought in much new money into space. Normally this would mean a dump would commence, but this market cycle is different as the money flowing in is huge coming from institutions and we’re experiencing institution FOMO that pump BTC from $10,000 to $21,000. When we hit $21,000, retail started flooding in due to positive sentiment and news regarding BTC. A drop down to $20,000 to $18,000 or a range-bound movement for the next few weeks or months will be good to shake out more weak hands before BTC proceeds for our $100,000 target next year.
Our original analysis has us thinking that altcoins will moon during mid-December or mid-January. Base on the price action recently, I think that the alt rally might be further delayed until February, this is due to the amount of institutional money coming into bitcoin far outweighing the amount of money coming from retail into altcoins (once again a reason why I think it’s not the top of the bubble yet).
Highly probable that we see a spike in BTC’s price to topping at around $24,000-$28,000 and a sharp spike in BTC dominance to 68% before a crash down as liquidity of whales and retail shift to alts for more yield.
However, I’m not selling my alts position as the markets move however and whenever it wants, just like how it the BTC dominance dip so sharply last month and for BTC to dip to $17,600 this week. Thus I’ll be just loading the dips of both alts and BTC with spare cash. I understand most people do not have this luxury, my advice is to sell 10–20% if you really want to and load the dips when it happens.
To tell when alt season starts you need to look at BTC dominance as well as if ETH/BTC has bottomed and started moving upwards.
I see the blue scenario playing out due to is being a very strong support from the previous triangle, together with how overbought BTC is and oversold alts are. ETH/BTC is also forming a descending wedge that is a bullish formation.
Q1 is also typically a good time to get into altcoins. However, take note we might get a drop-down if BTC starts mooning again (yellow scenario), so have spare cash to load this dip if it presents itself. Either way, you’ll be golden next year so don’t worry about your current USD value as we’re looking at future USD value.
XRP moons? Should I buy some?
More and more normie friends are interested to buy BTC but its too expensive for them. What do they buy? They buy Alts. This explains the spike in price for old ghost chain coins like XRP, LTC and ADA where there are little technical developments on them as well as no one using them. The only reason was the Lindy effect where newbie normies who just got onto Coinbase or Paypal will buy the cheapest assets there thinking it will one day be worth as much as BTC.
They rather hold 100000 XRPs than 0.01 BTC or 1 ETH simply due to their hoarding tendencies. Do not be like them as although XRP hit $3.00 before, it doesn’t mean it will hit $3.00 again. What we look at are solid projects with adoption and utility that will guarantee you your upside with minimal risk. (Examples are LINK, ETH, BTC and YFI that I’ve previously covered in my weekly analysis)
BTC and alts are all looking fantastic for 2021. There is no market like crypto giving this kind of returns except if you’re trading tech stocks or TESLA. If you’re more risk-taking like me, this is the time to prep your altcoin bags for 2021. Else, just stack BTC and wait for 1–3 years and you’ll be golden.
Stack sats, alts and chill. Q1 2021 will be glorious.
That’s all for now, do hit me up in the comments or on Twitter if you have any heart-burning questions. Please share this to your friends if you find it useful.
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