Issue #7

Welcome to Issue #7!

Every month we write a short update on the market. We try to time this around pivotal moments for Bitcoin.

It can be hard to time a newsletter around a market top, as Bitcoin dumps quickly. A lot has happened in the last few days and this -22% flash crash represents a huge opportunity.

It’s a bull market, so sometimes these updates can sound repetitive, but as we have talked about in prior issues, dips are generally for buying this year.

And this one happens to be very special.

The News

The Good:
  • Coinbase IPO launches and trades at over $100B market cap.
  • Ray Dalio, founder of the largest hedge fund in the world “Bridgewater Associates”, finally acknowledges the value of Bitcoin in portfolios.
  • TIME magazine, the 98 year-old publication, plans to start hodling Bitcoin on its balance sheet.
  • Third Point, a $17B hedge fund reveals they are holding Bitcoin.
  • Caruso, one of the largest private real-estate companies in the US, now has Bitcoin on its balance sheet.
  • Korean crypto trading volumes surpass that of the Korean national stock exchange
  • Goldman Sachs to offer investment vehicles for Bitcoin.
The Bad:
  • Turkey bans use of cryptocurrencies for trade.
  • C-Suite of Coinbase market dumps stock on IPO suggesting overvaluation. CEO Brian Armstrong alone sold $291M on opening day.
  • US Treasury sanctions 32 Russian entities over alleged digital currency-related election interference.
The Ugly:
  • Blackout in areas of Xinjiang causes a -46% drop in Bitcoin Hash Rate in just 48 hours. Highlighting the concentration of mining still in China.

The Markets

Bitcoin holds its correlation with the markets and the S&P has printed fresh new all time highs this week. Generally speaking, this is a positive for Bitcoin.

Systematic risk, and opportunity, remains tied to the traditional markets in the short-term. As we have written about before, keep an eye out for any major changes to macro-economic policy or other major risk/volatility factors in the stock market.

The Fear and Greed index printed 80 today, suggesting high levels of greed in the market. Values greater than 80, and less than 20, suggest significant correlation with Bitcoin.

In other words, expect any substantial upside or downside in stocks over the next 1-2 weeks to be reflected in Bitcoin.

https://money.cnn.com/data/fear-and-greed/

The Fundamentals

This last week has seen some significant events for Bitcoin.

The Coinbase IPO on 14 April marked the local top at $65K. Many were debating if this would be a “buy the news” or “sell the news” event. In hindsight the obvious answer was sell.

But what happened over the last 5 day period?

  1. Bitcoin broke out fresh all time highs to $65K.
  2. $65K marked the 3.618 Fibonacci extension from the 2017 cycle top to 2018 bottom, a natural resistance point, which so happened to mark the exact top.
  3. It also marked the Coinbase IPO “sell the news” event.
  4. Bitcoin then closed under the daily upper bollinger band of $63K, suggesting the breakout was a “fakeout” and high risk of dumping.
  5. The upper bollinger band was re-tested and failed (bearish).
  6. News came out in China that Xinjiang had a power blackout.
  7. Over the next 48hours, hash rates dropped -46% as a result of the blackout.
  8. During this period the FUD was compounded with the news that the U.S. Treasury is charging several financial institutions for money laundering using cryptocurrencies.

Bitcoin dropped -22% over the period of 4 days, with the collapse bottoming on the news of the hash rate collapse (point 7).

As of writing, Bitcoin is trading at $55.2K and the fallout of the flash crash has left some prime entry opportunities:

  1. Overleveraged traders have been cleansed. Futures Open Interest is down -22% to $21B, a healthy correction to allow for continuation. When everyone is “long” and there are no more “sellers” to trade into, the market tops out. This is why you sell when the shoe-shine boy (today’s uber driver) is buying. This cleansing of positions over the last week helps clear the path forward for Bitcoin.
  2. Funding rates have reset and are negative for the first time in 2021.
  3. GBTC is still trading at a -10% discount (more on this here).
  4. USDT prints suggest the market has “de-risked” and identified a bottom.
  5. Dynamic Range Network-Transaction Value (DNTV) is green on the 4HR. The four other times this occurred in 2021 marked local bottoms.
  6. The Bitcoin Utilisation Indicator is green.
  7. The Mayer Multiple is the lowest it has been since $19K (December 2020).

https://www.tradingview.com/x/NQIkeyXP/

Let’s take a look at adoption.

These are the 10 largest banks in the US. We have collated their latest public view on Bitcoin loosely grouped as BULL, BEAR and NEUTRAL based on their most recent announcements, investments or services:

  1. JPMorgan Chase & Co. ($3T Assets): BULL
  2. Bank of America Corp. ($2.3T Assets): BEAR
  3. Wells Fargo & Co. ($1.8T Assets): NEUTRAL
  4. Citigroup Inc. ($1.7T Assets): BULL
  5. U.S. Bancorp ($0.54B Assets): NEUTRAL
  6. Truist Bank ($0.5B Assets): NEUTRAL
  7. PNC Financial Services Group Inc. ($0.46B Assets): NEUTRAL
  8. TD Group US Holdings LLC ($0.4B Assets): BULL
  9. Bank of New York Mellon Corp. ($0.39B Assets): BULL
  10. Capital One Financial Corp. ($0.36B Assets): BULL

Institutional adoption is well underway this bull-run.
But as you can see, just 40% of major US banks are pro-Bitcoin (“BULL”).

We are still early.

The Technicals

[Reminder – we are an algorithmic investment manager – the below provides us insight but charting is not used in our investment strategy]

The topic of this month’s technicals is the beautiful RSI diagonal retest we are currently forming. There is some chance this retest could test lower over the next 12-24 hours, but continuation up is more likely. It has a great track record over the last 1 year plus of identifying bottoms for Bitcoin (examples below).

The key is to look for at least two peaks forming an approximately 45 degree downward line. Three or more peaks which form the trend line is even better. Ideally RSI has also penetrated sub-30 (it did last week). Great buy zones are then identified after the “Test” shown below. This is happening as of writing on the current 4HR candle.

https://www.tradingview.com/x/kP8YFp4r/

The Bottom-Line

The current flash-crash and liquidation run is a Bitcoin bull-run gift.

Onchain fundamentals are pointing to the current price being a great buy opportunity and institutional banking adoption is still relatively low.

RSI is confirming a local buy opportunity.

This is the dip.

Content we love

We are hiring!

P.S. Capriole is hiring! If you are interested in what we do, send us your CV and some sample work to: [email protected]

The Capriole Fund

The Capriole Fund has one goal: outperform Bitcoin.

We are open to professional investors, but the fund has limited spaces.

Share the Post:

Leave a Reply

Your email address will not be published. Required fields are marked *

Disclaimer

The information contained here is provided to you solely for informational purposes only. Opinions and projections included are provided as of the date of publication, may prove to be inaccurate, and are subject to change without notice. This information does not constitute an offering. Prospective investors should not treat these materials as advice regarding legal, tax, or investment matters. No recommendations are made to invest in Capriole Investments Limited nor any other investment. An offering may be made only by delivery of a confidential offering memorandum to appropriate investors. Past performance is no guarantee of future results. Investing in digital assets in general involves risk. Digital asset risks include, but are not limited to, exchange risk, legal risk, hacking risk, market risk, liquidity risk, trading risk and default risk. As with any investment, investing in digital assets could result in loss of investment. Additional digital asset risks are outlined at www.capriole.com/legal. Decisions or actions based on the information provided are at the reader’s own account and risk.

Related Posts

Update #51

Hash Ribbons is back. Perhaps the best long-term Bitcoin buy signal there...

Charles Edwards

Update #50

Is Bitcoin's longest winning streak finally coming to an end?...

Charles Edwards

Update #49

A dive on the forth Bitcoin Halving, Runes, Onchain valuations and macroeconomic...

Charles Edwards

Update #48

Welcome to Bitcoin price discovery, it's been a long time coming. With...

Charles Edwards

Update #47

The era of deep value is over. Bitcoin is fairly valued for...

Charles Edwards

Update #46

With the big Fidelity news, Bitcoin is finally being acknowledged in traditional...

Charles Edwards

Update #45

The brand names of these two behemoths in the traditional asset space...

Charles Edwards

Update #44

Today's Bitcoin ETF launch was the most successful launch in history and...

Charles Edwards

Update #43

ETF fever is coming to a head with approvals expected within the...

Charles Edwards

Update #42

Two major and positive events just unfolded in the Bitcoin space. According...

Charles Edwards

Update #41

Bitcoin is heating up, in both opportunity and across derivatives markets. And...

Charles Edwards

Issue #40

A new major trend has formed. We now have the biggest asset...

Charles Edwards

Issue #39

We have historically rare risk-asset signals appearing, amidst a period of Bitcoin's...

Charles Edwards

Issue #38

The last week has seen the biggest improvements across Bitcoin technicals and...

Charles Edwards

Issue #37

Bitcoin is pricing as a better-and-better inflation hedge. It is rapidly skewing...

Charles Edwards

Issue #36

The Fed is Building a War Chest. A macroeconomic deep dive to...

Charles Edwards

Issue #35

We are seeing some promising and rare structures form on Bitcoin which...

Charles Edwards

Issue #34

All else equal, Bitcoin is like a beach ball submerged underwater. Nonetheless,...

Charles Edwards

Issue #33

Last update technicals and fundamentals told us to be cautious with Bitcoin....

Charles Edwards

The Three Factor Model

90% of the S&P500 returns over the last half century can be...

Charles Edwards

Issue #32

Welcome to Capriole’s micro update #1. Where we consolidate the most important...

Charles Edwards

Issue #31

At $29K, Bitcoin’s on-chain fundamentals are not too hot and not too...

Charles Edwards

Issue #30

The failures of the Federal Reserve in managing the value of money...

Charles Edwards

Issue #29

This newsletter explores a taboo topic. The idea of the impossible, a...

Charles Edwards

Issue #28

Bitcoin’s deep value is slipping away and in its place a new...

Charles Edwards

Issue #27

We believe the 2020s will be the decade of hard money, much...

Charles Edwards

Why markets are not as overvalued as you might think.

Charles Edwards

Issue #26

The crypto world was shaken to the core in November as top...

Charles Edwards

Bitcoin Miner Sell Pressure

Charles Edwards

The Bitcoin Yardstick

Charles Edwards

Issue #25

We crack open the rarest of Bitcoin value metric readings you can...

Charles Edwards

Everything you need to know about yield curves

Charles Edwards

Issue #24

This month we deep dive into the macro and make the case...

Charles Edwards

SLRV Ribbons

Charles Edwards

Issue #23

Fear struck the market again with a blunt Fed speech. The broader...

Charles Edwards

Issue #22

This issue we deep dive into the many Bitcoin and macro metrics...

Charles Edwards

Issue #21

Today, we now find ourselves in a special juncture in the crypto...

Charles Edwards

The Digital Asset Thesis

Charles Edwards

The Capriole Macro Index

Charles Edwards

Issue #20

The S&P500 and Bitcoin showcased a strong recovery recently and today both...

Charles Edwards

Issue #19

Traditional markets have been taking a beating. Our February Newsletter and analysis...

Charles Edwards

Issue #18

The first quarter of 2022 is coming to a close. War in...

Ryan McCoy

Issue #17

For the past few months, Bitcoin has been driven by macro events...

Yassine Zrigui

Issue #16

Last month was mostly dominated by macro news much like December, namely...

Mick Herfkens

Capriole’s 2022 Market Outlook

A year ago, we published our “Christmas Special” newsletter. We wrote the...

Charles Edwards

Issue #15

If you have been around the cryptospace long enough, you have probably...

Ryan McCoy

Issue #14

Bitcoin started the month of November strong with a new all time...

Mick Herfkens

Issue #13

Bitcoin is up over 30% to date in October, reaching as high...

Charles Edwards

A Simple Metric to Identify Bitcoin Tops

Charles Edwards

Issue #12

Last issue, at $47K we noted some concerning metrics, but noted the...

Charles Edwards

Issue #11

Last issue we noted the improving fundamentals for Bitcoin...

Charles Edwards

Issue #10

Last issue we reviewed the China’s crypto exodus and argued why we...

Charles Edwards

Issue #9

These are unprecedented times. The Bitcoin network has just experienced the biggest...

Charles Edwards

Issue #8

Bitcoin is trading at more than 40% below the all-time high for...

Jan Uytenhout

Issue #7

Every month we write a short update on the market. We try...

Charles Edwards

Issue #6

Every month we write a short update on the market. Last issue,...

Jan Uytenhout

Issue #5

Every month we write a short update on the market. We try...

Charles Edwards

Issue #4

Every month we write a short update on the market. We try...

Jan Uytenhout

Issue #3

Every month we write a short update on the market. We try...

Charles Edwards

Issue #2

We try to release our newsletters when we see key opportunities. Today...

Jan Uytenhout

What is Money?

Charles Edwards

Issue #1

This newsletter provides our airplane view of the Bitcoin market. It summarises...

Charles Edwards

The Energy Standard

Charles Edwards

Bitcoin Energy-Value Equivalence

Charles Edwards

Bitcoin’s Production Cost

Charles Edwards

Hash Ribbons & Bitcoin Bottoms

Charles Edwards

Metcalfe’s Law Says Bitcoin is Overvalued

Charles Edwards

Bitcoin Valuation using Dynamic Range NVT Signal

Charles Edwards

The Next Resession

Charles Edwards

Bitcoin Bottom Fishing with Miner Capitulation

Charles Edwards