Issue #35

Welcome to Capriole’s micro update. Where we consolidate the most important Bitcoin news, technicals and fundamentals into a 3-minute update. Two technical charts, two fundamental charts and our chart of the week.

Market Summary

Since our last update, Bitcoin dived from $29K to $26K. The technical breakdown we documented in Update#2 has seen volatility kick in and the bearish scenario expected by our technical and fundamental readings played out. The collapse saw a sizable leverage flush out as Bitcoin futures open interest collapsed and funding rates went into negative territory. A healthy cleanse.

Today, while technicals and fundamentals both remain in a bearish trend, the relative risk-reward for long-term trades is increasing with technical weekly support at $24K and Bitcoin’s Electrical Price at $23K. We discussed Bitcoin’s Electrical price last update, it’s a historically hard price floor and level with a 100% long hit rate. You can monitor the chart live here. Together these price points give very strong confluence from a fundamental and technical perspective to the opportunity that $23-24K presents, should we get there.

Technicals

High Timeframe Technicals: The trend remains bearish but we are approaching weekly support ($24.3K) and the historical price floor of Bitcoin’s Electrical Cost at $23.1K Interactive Chart here.

Low Timeframe Technicals: The drop has started to form a potential Wyckoff Reaccumulation (TBC) on the Daily timeframe. Price between $23-26K would represent the spring. Price closing back above $29K and ultimately above resistance gives progressively greater confidence to this structure completing. Wyckoff Accumulations typically result in expansion trends of similar magnitude to the prior move, so we would be looking at a breakout taking us into the $40Ks (a circa $10K move). Interactive Chart here.

Fundamentals

Price is only half the picture. What about on-chain flows? What are retail and institutional investors doing with their capital? Is the mining network and security growing? How can we incorporate macroeconomic changes, equity market risk and broader market sentiment into Bitcoin? Finally, how do all these metrics compare on a relative basis to prior Bitcoin cycles?

We believe the full picture of fundamentals is best summarized by Capriole’s Bitcoin Macro Index.

Over 40 of the most powerful Bitcoin on-chain, macro market and equities metrics combined into a single machine learning model. This is a pure fundamentals-only value investing approach to Bitcoin. Price isn’t an input.

Unfortunately today, the trend in fundamentals is still strongly to the downside, as it has been for the last month. This is the primary bearish factor today in what is otherwise cyclically a great long-term opportunity at what also appears to be a technically good zone. Sometimes the fundamentals can be quite late in turning around though, as this data by its nature responds slower to fast changes. Something to bear in mind.

Bitcoin Macro Index: The Macro Index today remains in a contractive downtrend but has re-entered a substantial value zone for this stage of the Bitcoin cycle.

Chart of the Week

Introducing the crypto Speculation Index.

This chart tracks the percentage of altcoins which have outperformed Bitcoin over the last 90 days. It gives us a good indication where we are in the hype cycle.

If speculation is high (60-80% of altcoins are outperforming Bitcoin) it probably pays to be conservative.

On the other hand, lower readings of speculation (sub 15%), suggest the market has seen broad capitulation and there has also historically has been an increased likelihood of altcoins outperforming in the near-term.

The speculation index today is at a low 11%. You can track it live here: capriole.com/charts.

The Speculation Index shows we are in the value stage of the cycle.

Bottom-line

Last update we reiterated the importance of awaiting technical confirmation. That didn’t come and the bearish price breakdown expanded. This is why it’s so important to define your triggers and risk management and only act accordingly. This update, there is a more robust technical argument to start building a long position for the long-term investors. The opportunity at Electrical Cost ($23K) is historically extraordinary, so the opportunity at $26K is probably also very good. Nonetheless, I would sit more comfortable entering measurable long positions with one of the following occurring first:

  1. Price above $29K (Wyckoff resistance), or
  2. Price below $24K (Electrical Value and technical support), or
  3. Fundamentals trending back up

Charles Edwards
Founder
Capriole Investments Limited

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 #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 following...

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