Bitcoin Quickly Hits Target & Has Healthy Pull Back But Bull Market Remains Intact
After raising our outlook 50% from $25,000 to $40,000 on December 30th, Bitcoin quickly rose to reach our target late last week. Prices then started to consolidate and slide over the weekend before retracing ~25% down to ~$30,000 and now rebounding to ~$33,800. Bitcoin and crypto are volatile assets, but the speed at which prices moved to hit our target was quite fast and we think a pull back is healthy.
We don’t think the retracement was indicative of a bull market top – to be clear we firmly believe the fourth crypto bull market remains intact. We think the sell-off was simply a combination of 1) traders taking profits after 50%+ gains in under two weeks, 2) an uptick in treasury yields and dollar strength, and 3) modestly negative news out of the U.K.
Nearly 70% of investors were in unrealized profit after the sharp move up and that means some selling is to be expected. But investors shouldn’t forget, last time Bitcoin reached these unrealized profit and loss levels during a bull market, Bitcoin still rose from ~$2k to ~$20k or ~10x over the course of the cycle. We think for Bitcoin to sustainably move higher to levels many expect, a similar pattern is necessary.
Reports you may have missed
CORE STRATEGY: FOCUS ON MAJORS, KEEP HEAD ON SWIVEL UNTIL BONDS/DXY RELENT We think it's right to expect a bounce into year-end, potentially starting tomorrow if PCE data comes in soft. In our view, this cycle is far from over, but until bonds find a bottom and the USD tops, it’s likely best for the more tactical investor to stay nimble and prepared for opportunities upon confirmation of this trend...
CORE STRATEGY Our base case assumes that the macro environment will remain accommodative for crypto through year-end. However, in light of recent market action, we remain alert for signs of a local top (not a cycle top). That said, it is difficult to justify a risk-averse stance at this stage and think it is right to lean into this altcoin rally. Source: TradingView, Fundstrat Source: TradingView, Fundstrat STRONG DOLLAR +...
Today's employment numbers broadly met investor expectations, placating a nervous market. Risk assets rallied, aligning with our view that yesterday's de-risking would not persist through today. Yields continued their downward trajectory, and Fed funds futures also declined, reflecting the market's adherence to the Fed's dovish messaging. Yields Falling: Source: TradingView Fed Funds Futures Showing More Cuts: Source: TradingView Oil prices nearing YTD lows likely assisted in alleviating near-term concerns about...
INDICATIONS OF FROTH Given the violent nature of the past month’s rally, we have been vigilant for signs of a local top. It would be disingenuous to claim that some qualitative "top signals" are not flashing right now. XRP—which we noted as a possible election trade back in October—with only 1–2k daily active addresses (vs ETH's over 400k, source: Artemis), is ripping toward new highs while influencers take to TikTok...
