Is anybody still here?
Judging from the growth in new bitcoin addresses, many aren’t.
For those who remain, you have a lot to look forward to. Ironically, far more now than you did in March and April, but it will probably take some time to get where you want to go.
Earlier this year, you probably heard a bunch of people shouting “bitcoin is less risky at $40,000 than $4,000,” referring to the shift in mindset from March 2020 to March 2021.
The idea was institutions and traditional investors needed to have some confidence that bitcoin would not die. That way, they wouldn’t worry about losing their investments. The 10x rise in price gave them confidence that bitcoin would stick around. Obviously, bitcoin can’t die if its price goes up.
In that sense, you can understand where they were coming from. If you have $100 million under management, your fiduciary responsibility probably keeps you from buying tiny assets that crash a lot and “don’t do anything.” Once bitcoin reached $40k, that showed fiduciaries that bitcoin’s long-term trajectory remained positive enough to justify a small allocation.
But that’s an institutional risk for money managers and financial institutions. You and I don’t have to worry about that. We buy for ourselves, privately, and without fear that somebody will sue us when the price goes down.
For us, we only need to worry about market risks.
Bitcoin’s price can drop 80% at any time. The same altcoin that boomed 20x over a few months can drop 95% a few months later.
China can ban crypto at any time. Any country can ban crypto at any time.
Crypto savings platforms can fail at any time. DeFi protocols can get exploited at any time.
When the price goes up, nobody cares. Bad news only matters when the price goes down.
But nothing fundamentally changes when the price does. When you wait for prices to go up, you pay more for less upside and the same amount of risk. You no longer get the same rewards for the risk you take.
Today, your potential upside is at least 2x higher than it was in April because bitcoin’s price is 50% lower than it was in April. Some altcoins will easily surpass their previous all-time highs.
When bitcoin hits $100,000, you will almost triple your investment. If you wait for its price to get back to $65,000, you will barely do better than a 50% gain.
Yet, at $65k, you couldn’t keep yourself from buying. At $35k, you can’t force yourself to buy.
Bitcoin’s price is the lowest it’s been since January.
History suggests the market is in a long consolidation before another leg up.
On-chain metrics show long-term bearish trends have turned neutral, not yet bullish, with clear accumulation by long-term HODLers and large entities. I’ve covered these observations at length in my updates to my newsletter subscribers.
In the coming months, let’s hope we see the market rebuild the foundation it lost from November 2020 to April 2021. If we see that, you can bet you won’t have to wait until the end of the year to see bitcoin’s price get back to $65,000. At that point, $100,000 bitcoin gets more realistic it did at any time this year.
And if it takes another bear market to get there, would you be so upset with only doubling the value of your investment in 18 months? Possibly tripling your investment?
You know those people who posted 3,000% gains earlier this year?
A few bought $180,000 worth of DOGE in January and fell into good luck.
Most of them bought a long time ago, probably in a situation just like this one, a downtrend within a larger bull market.
Then, they waited for the market to turn around.
You may think it’s crazy to say we’re still in a bull market.
If this market peaked in April, it was a peak unlike any other peak ever. We didn’t see any of the signals in the on-chain data and the only confirmation — Pi Cycle cross — has several permutations that did not cross.
While bitcoin’s price dropped 55% from April’s high to June’s low, that drop aligns with the .618 Fibonacci retracement level — the same level we see bitcoin’s price fall during bull market consolidations but never after the market cycle peaks.
Why does the Fibonacci retracement level matter?
Because it accounts for the size of each move up. Bigger move up, bigger move down.
With “Fib levels” we can see the size of the drop in relation to the rise that came before it. As a result, the Fibs allow you to more accurately compare one move to another.
Look at all the .618 Fib retracements during bull markets — drawn from “swing lows” to “swing highs” to the next “local bottom,” excluding moves that came during bear markets.
From April 2021 to today, this correction shares the same proportionality as those bull market consolidations. After the cycle peaks of 2011, 2013, and 2017, bitcoin’s price fell to lower Fib levels.
Is that bullish or bearish? Should we expect bitcoin’s price to fall even lower, to match the drops of the previous peaks? Or assume that this drop is like the others of its kind — down and sideways for 5–7 months?
We shall see. In bull markets, bitcoin’s price doesn’t always go up. Look at this chart, with those consolidations shaded.
(Note — while I consider the April 2013 top as a market cycle peak, most people consider it part of a bull market that ran from 2011 to December 2013. As such, I included it here.)
When prices go down for six months, I can understand why people would call that a bear market. Even two months seems sufficient for most people.
Don’t let a “bear market” scare you. In 2012, 2013, 2015, 2016, and 2019, bitcoin went down or sideways for months and nobody regrets buying during those times. Some people don’t even think those were bear markets.
You can pick out fractals and cherry-pick certain indicators to construct an equal case for a bull market and a bear market.
When I look at the data, it’s mixed.
Clearly, long-time HODLers and small buyers have accumulated a disproportionate share of bitcoins over the past two months. That should form a floor beneath the price, though we don’t know how high that floor will be.
At the same time, user activity, new wallets, and certain specific flows suggest not much new money is coming into the market.
Does it matter?
It’s realistic to expect we will stay below $65,000 until November. You will have to wait six months to double the value of your investment.
There’s an outside chance it will take another year to get back to that price. You will have to wait a year to double the value of your investment.
In any other market, you’d have to wait years to get the same result.
Except unlike every other market, bitcoin’s price can zoom at the drop of a hat tomorrow, leaving you gasping for breath.
You don’t want to have to chase the market as it goes up. You probably won’t catch it until it’s too late.
Once bitcoin’s gets back at $65,000, you will feel more comfortable buying it. People may even tell you it’s less risky at that time.
The truth is, bitcoin’s not going to get any less risky for a long, long time. But it’s almost certainly going to continue to go up in price.
If you wait, you risk a lifetime of growth for a chance to get a small discount.
Yes, this is a risky market. But waiting for the price to go back up before you buy more bitcoin?
That’s a little more risk than I’m willing to take.