Welcome to The Bitcoin Report
In the last report, we described a bear trap developing having seen a bearish slide down to $45.6k, very enticing for short sellers, while investors were accumulating strongly. Our expectation was for a price squeeze into the $50k+
range, this has indeed initiated and is still in play. This is an interim update to keep you informed with the latest data.
Top level summary for 18th Sep 2021 (current price $48.4k):
> Macro & mid-macro: Whales are in a rare zone of macro accumulation, these events are typically followed by months of bullish price action. Meanwhile Long Term Holders are well into their peak accumulation phase. Under these two views, now is a great time for long term investors to accumulate BTC. The macro on-chain structure is setting up for a bull market continuation well into 2022.
> Short term: Investors are demonstrating strong demand while the market has not yet acknowledged this. All prior mismatches between price and demand of similar scale resulted in price rallies. Price needs to climb above $57k to find balance. Price volatility data also suggests a strong move for the weeks ahead.
> Price action expectation: A bullish move to explore the $50k-$60k price range over the next 2 weeks.
> Price action conviction: Medium. This continues to be downrated due to equity markets being weak. Should the SP500 break below long term support BTC could see a short term speculative sell-off. (Note in such an event the sell-off would likely rebound as long term investors continue to buy and hold strongly.)
All the best
DON’T GET REKT!
Please do not trade on this forecast assuming perfect accuracy. All forecasts are probabilistic
with roughly 80% historical reliability for short time frame forecasts. Short time frames are subject to unpredictable events and the randomness of markets, please use appropriate risk management.
Longer range forecasts are more reliable as it takes time for fundamentals to play out.
Investors continue buying, a strong rally is expected
Investors have continued their accumulation. We’ve seen strong demand from short term and long term investors. Our family of Supply Shock metrics continue to climb to new highs.
Supply Shock tracks the underlying demand and supply from investors seen on-chain.
The green line is the most important metric, this one tracks long term investors. If we run a look-back, we can see the market last priced BTC above $57k when demand and supply was at these levels. Price needs to climb to this level to find balance again.
A clearer view into how much the market is undervaluing BTC is best seen in the chart below.
We are now in a zone of peak undervaluation by the market. In all past dips into this zone we’ve seen price rally to address the imbalance.
Supply Shock Oscillator compares the underlying investor demand and supply to how the market is pricing this in.
Price squeeze to the upside likely underway
Here’s an update to the price stability chart I posted in my last letter. If you recall, we were expecting bearish fake-out and a large price move to the upside. This is because periods of high price stability are typically followed by periods of larger volatility and the underlying investor demand is strongly bullish.
The price squeeze is probably already underway.
Macro: Whales expect a period of bullishness
In the chart below, I’m tracking the percentage of the Bitcoin supply held by whales (holders of more than 1000BTC).
Whales have a predictable pattern. Having made their money, they are in a long term divesting program, selling into every BTC bull market.
There are exceptions though. Whales are opportunists, when then they foresee a period of bullish price action ahead, they are known to accumulate. Presently they are in one of these rare periods of accumulation.
Summary: MID-MACRO BULLISH
Whales have good reason to be bullish. Here’s an update on our Long Term Holders Supply Shock chart. We are now well into a period of peak accumulation. Structurally this is a great setup for a strong rally in Q4 2021 and well into 2022.
Once again, I’ll reiterate that it is likely Bitcoin’s 4-year bull/bear cycles is breaking down. We are unlikely to see a bear market in 2022. This is contrary to expectation; under the 4-year cycle thesis, 2022 was expected to be dominated by a bear market.
Summary: MACRO BULLISH
ETH’s underlying investor demand is consolidating at all-time-highs. While this is a bullish picture, I notice that investor demand is not as strong as what we are seeing with BTC.
The chart below compares ETH to BTC demand and supply. We can see ETH is losing ground to BTC, which implies capital rotation back into BTC may be taking place.
Meanwhile ETH under technical analysis shows a high probably zone for trend exhaustion (TD9 bearish signal on the weekly candle chart).
Given this setup, my expectation for the weeks to come is for BTC to lead with bullish price action, then followed by ETH with a “catch-up pump” to explore its own all-time-highs.
ETHBTC price (blue) vs the ratio of their respective Supply Shock (purple)