To understand the Macro position of the market for digital cryptographic assets, we must first review the position of Bitcoin (BTC).
Whilst our focus for investment is a specific set of the 8,000+ other Cryptocurrencies (known as The Alts), Bitcoin still has a significant influence on the price direction of most of our coins
Where are we in the Bitcoin Cycle?
In it’s short 12 year history, clear patterns have emerged in price trends for Bitcoin. Bitcoin has experienced a minimum 50% retrace in every year.
The year began with BTC at $29,000 which then appreciated by 124% to $64,000
Since the top on 14 April, we have retraced 56%
Have we seen the bottom at $30k?
We have spent much of the month of June reviewing our list of indicators to confirm whether there are signals that a bottom has been achieved. Our group of over 50 indicators show that there are no confirmed signals either way.
The below chart details the Macro pattern of these “cycles” going back to 2012:
We note that whenever Bitcoin is above the yellow 9 Moving Average, we are in a Bull run, and conversely, below and a Bear Market.
There are many indicators we use, both on a Macro level as well as a Micro level.
For charting we use a combination of Simple as well as Exponential Moving Averages, a variety of The Fibonacci tools, on-line analysis of Longs/Shorts, Open Interest, Mining Hash Rates, Money Flows, Volumes, MACD’s, various Stochastic Indicators amongst others.
Market sentiment also plays an important role, and we review updates emanating from Institutional Investors, Regulatory Authorities, politics and movement on a global level within the mining community, as well as effects of retail developments such as Reddit, TikTok and Crypto Twitter.
We are currently seeing a chart signature very similar the Bull Run of 2013.
On the chart above, I have highlighted two circles. The left hand being 2013, and the right, 2021.
The below chart details the position in 2013.
The below chart details where we are today:
From on-exchange analysis, we know there is an increasing concentration of buy orders at $18-20k. Of course this may be in hope rather than reality, although a 70% retrace remains a possibility.
My view remains that if Bitcoin does retrace further, the Alts that we are focussing on will bleed harder than Bitcoin, providing excellent entry points for a market reversal.
Our strategy remains that of patience and prudence. From a risk point of view, we will do everything NOT to be caught on the wrong side of a Bull Trap.
The average Bitcoin buy price this year for new wallets is around $50k. These people are under water, and will not return to profit for a while even with a potential bottom already in at $30k. The wise investors are either being patient or are long term holders, they shall deploy to buy further at cheaper prices, thus lowering their Dollar Average In Price.
THE ALTS
Managing a successful fund means being able to read the macro movements in the market, so whilst our focus is not Bitcoin itself, any Fund manager needs to understand Bitcoin.
We at Blockchain Century are focussed in a subsector of The Alts - primarily defi projects. To give us an edge, we must understand the evolution of Blockchain Technology and selected key projects.
At any one time, we will be invested in 15-20 Projects. Identifying the projects with real world use cases is part of our ongoing research. Then we need to know the strengths of The Teams behind them. The ones we’re most interested in are those projects likely to attract the most interest from both Retail Investors as well as Institutional Investors.
We have identified the DeFi Space (Decentralised Finance) as the area of most interest. More than 90% of Blockchain Projects (represented by their Crypto Currency) are built on the Ethereum Blockchain. This has scaling issues as the space has grown. The long awaited Eth 2 launches this month (July). We will closely monitor it’s operability and performance. Any glitches and we will be hedged as part of our portfolio, we have diversified some allocations into alternative Layer 2 Solutions, which will continue to grow with or without a successful Eth 2 update.
Conclusion
We remain in a holding position, patiently waiting to enter the market at the right time. Historically, a Bitcoin monthly close below the Exponential 9 is followed by a 50% retrace. We closed below.
Of course this does not guarantee we drop to $18-20k. But there is plenty of debate within the Crypto space around the difference between this current cycle and previous ones. Namely, we now have Institutional money and even Sovereign States in play.
Should this have the effect of stabilising the market? It is our opinion that this is not necessarily the case. The Market Cap of Bitcoin is still too small, and therefore I believe the volatility will remain. Stability remains a prize that will be achieved with scale, but volatility provides investment opportunities.