Update #53

Under Pressure.

Welcome to Capriole’s Newsletter Update #53. A consolidation of the most important Bitcoin news, technicals and fundamentals.

It’s been a little while between reads, I write this issue as I recover from recent surgery. In our last issue in early July, we noted the growing number of bearish on-chain signals justifying risk management as Bitcoin traded at $62.5K. A lot has happened in the weeks since. Multi-billion German Government selling, Mt Gox selling, the Japanese market melting down and the VIX reaching 2008 levels. But today we find ourselves at $60.5K following 2 months of sideways-down consolidation.

As of writing, Bitcoin has now spent a total of 6 months consolidating at the 2021 all time highs (ATH). Bitcoin is under pressure. This is the longest period of time Bitcoin has consolidated at any ATH, making this period quite unusual historically, and that has been throwing people off. However, volatility compression leads to volatility expansion, and the resulting breakout will be big.

Technicals

In early July, I shared this tweet which highlighted the current similarities between the most comparable point in time in Gold’s history, to Bitcoin today. In 2008, Gold was consolidating at its previous all time high set in 1980, almost 30 years prior. This was Gold’s first significant period of consolidation following its own ETF launches prior. This was also Gold’s first revisit of that all time high and was an agonising 9 month period of consolidation and mostly downside volatility, culminating in a -33% drawdown which ended up setting a generational bottom for Gold. What followed for Gold was a two year 180% rally in an almost straight line up. And this was an asset, much larger than Bitcoin is today.

The similarities to Bitcoin today are uncanny. At $60K, Bitcoin is at its first significant consolidation following its ETF launches. We are also consolidating at the prior all time high, following the first revisit since 2021 and it’s now been 6 months of agonising consolidation. In the tweet I noted that if the Bitcoin structure today is the same as Gold’s then:

“That would be the same as Bitcoin potentially dipping again to around $48K, then ripping straight to $140K with no dips by around May 2025.”

The first part of that statement has now occurred. The July 2024 Bitcoin dip saw a -28% drop to $53K (within 1% of Gold’s as shown on the tweet), and the more recent August 2024 dip saw a -33% drop to $48K (within a mere half a percent of Gold’s final plunge).

Of course, this is just a single datapoint and single scenario and it does not have to happen for Bitcoin. But Gold is the most comparable asset to Bitcoin, and I believe this was the most comparable time in history to today. It suggests we have something pretty phenomenal ahead of us.

The most comparable asset at the most comparable time in its history suggests the bottom is in, and we have a lot of upside to go.

Zooming in just on Bitcoin, we are currently trading at monthly support ($60.6K). Provided August closes above this level, we will be:

  1. At monthly range lows (technical support)
  2. Having flushed out leverage with the liquidation runs to $54K and $48K respectively
  3. Having finished the summer months, where Bitcoin typically performs its worst.

Still 11 days required for Monthly confirmation, but if Bitcoin can close here at Monthly support, having cleared out Weekly support at $50K (and liquidated a lot of leverage), that would be a very attractive technical setup.

Fundamentals

The collective picture as shown through Capriole’s machine learning fundamentals model Bitcoin Macro Index still suggests risk management here, but has a conservative long positioning. This Index includes over 60 of the most powerful Bitcoin on-chain, macro market and equities metrics combined into a single machine learning model. It is a pure fundamentals-only value investing approach to Bitcoin, where price isn’t an input.

Given the massive degree of forced selling from major entities and bankruptcy cases over the last 2-3 months, it’s not surprising that we would see Bitcoin on-chain data suffer here. However, other value opportunities have recently emerged, including:

1. Bitcoin is trading back below production cost.

2. Capriole’s Bitcoin Heater suggesting the futures market recently reached very bearish levels, not seen since the September 2023 lows at $25K.

3. A Hash Ribbon buy signal just occured.

…and more.

While I put more weight in the aggregate view given by Bitcoin Macro Index, the significance of recent data points, in the context of the typical Bitcoin Halving cycle and recent world events tend me to believe the 2008 Gold scenario is currently in play. To be determined.

Chart Of The Week

The Global money supply, as represented by the top 30 global countries fiat currency supply priced in US Dollars, has broken out a new all time high after nearly four years of consolidation. Provided this trend sticks, we can expect a lot of risk assets to continue repricing to the upside, especially hard assets like Bitcoin.

You can track this chart live, including its year-on-year variant, at Capriole.com/Charts. We also added four new charts there this week.

The Bottom Line

I believe we are at a significant turning point, and likely putting the worst of this cycle behind us with the recent visit of $48K. The last 6 months has been a very challenging period to navigate. There was a lack of signal confluence we noted last issue, significant world market events, massive forced Bitcoin selling, election uncertainty and general chop. I believe this period of market consolidation is coming to a close as we exit summer, and I maintain strong conviction that the next 12 months will be the best time out of the last 3 years to be allocated to this asset class.

Given we still have some fundamental data signal discrepancies today, and we are still awaiting the Monthly close; the conservative position would be to await further bullish confirmations (and potentially Q4) to fully clear what is typically the most bearish period of each calendar year for Bitcoin and risk assets.

A question to ask yourself:

How have you felt about Bitcoin recently?

If you are like many people today, you will be quite disenchanted from the last 6 months. Perhaps you are questioning this asset class given the relative strength other assets like Gold and Equities have seen, and perhaps you are even questioning your Bitcoin holdings altogether. From experience we each have these feelings (and see it across social media) near major bottoms. This in itself is not a signal to act upon, but it can be a very useful guide.

Charles Edwards

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 #54

Don't trust on-chain data. A lot of metrics have been manipulated in...

Charles Edwards

Update #53

Bitcoin is under pressure. But the most comparable asset to Bitcoin, at...

Charles Edwards

Update #52

Is the cycle top in? This issue, we will revisit the Bitcoin...

Charles Edwards

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