Update #51

Welcome to Capriole’s Newsletter Update #51. A consolidation of the most important Bitcoin news, technicals and fundamentals.

Market Update

The last 3 weeks has seen transformative industry news. Regulators state that their actions are not influenced by elections, but once again we have seen that is not the case. On May 23rd the Ethereum ETF was approved by the SEC, despite the SEC being staunchly against it. ETH has now been classified as a commodity. Trump raised millions in crypto donations and the Democratic party does a U-turn on their anti-crypto stance as a result. Four years of anti-crypto government and banking action is being rapidly unwound in 2024. Bitcoin is now embedded in the largest banking institutions around the world and in all major equities markets. This isn’t just adoption, Bitcoin has been institutionalized.

With the M2 money supply once again in expansion and the discussion on Federal Reserve rates centering only on how long until the next cut, the Fiat monetary system is once again ramping up for the next debasement wave. Perfectly timed for the November election. The positive impacts of financial easing will likely become readily noticeable in five months time when voters must stand (equities all time highs, ease of financing, etc) but the added negative impacts (higher costs of living, CPI inflation, wealth destruction) of action today won’t be felt for another 12-24 months when the election results are well and truly in. Nothing new. A staunch reminder of why Bitcoin was created 15 years ago.

With crypto now firmly locked into all financial rails and a new wave of election inflation beginning, the crypto surfing season is upon us.

Technicals

You couldn’t ask for a cleaner high time frame chart than the Bitcoin Weekly/Monthly below. With a recent all time high breakout, retest of range high and consolidation at resistance, it doesn’t get much better than this. The story changes if the monthly closes below $58K. But until then, the mid-term target for this chart remains $100K, with the price impulse move likely taking us beyond.

Fundamentals

The collective picture as shown through Capriole’s machine learning fundamentals model Bitcoin Macro Index switched to expansion on May 19th ($66K) as keen observers of Capriole.com/Charts noticed. 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.

Expansion suggests growing on-chain network value and a favourable macroeconomic environment. Under these conditions, we usually see the best Bitcoin price performance. See the light green areas on the two charts below.

Chart Of The Week

Hash Ribbons is back. Perhaps the best long-term Bitcoin buy signal there is, Hash Ribbons is now tempting us with the current Miner Capitulation which started two weeks ago. Miner Capitulations are defined as periods of decline in Bitcoin’s Hash Rate. They are periods where the 30 daily moving average (DMA) of Hash Rate drops below the 60 DMA of Hash Rate. This typically occurs about once a year. Many Miner Capitulations are mild, but some are catastrophic.

You will often see Miner Capitulations sync with shuttering of miner operations, bankruptcies and takeovers. As in the current instance, they also often sync with the Bitcoin Halvings. The Bitcoin Halving means that old, inefficient mining hardware becomes obsolete and no longer profitable to run (costs exceed revenue from the block reward). These mining rigs will typically then be phased out over several weeks following the Halving resulting in falling hash rates. Just as we are seeing today.

Through history, Miner Capitulations have in the vast majority of cases synced with broader Bitcoin market weakness, price volatility and significantly long-term value opportunities. This makes sense as price declines, or other challenging market conditions, mean tighter mining margins, industry consolidation and survival only of the strong. Miner Capitulations also add confluence to many other on-chain metrics which often suggest opportunity in the same region as these signals. The relative capitulation and opportunity at each signal varies widely and should be considered in context. While this capitulation is occuring when miners have broadly been profitable (due to a very high Miner Price from the growing block fees created by Ordinals and Runes as we discussed in Update 49), we would be remiss not to note this rare opportunity.

Hash Ribbons signals are either loved or ridiculed. Every occurance brings some debate about their relevance today, or why the current signal perhaps doesn’t count. This also happened in 2023, but price was also trading in the $20Ks when the last Hash Ribbon buy signal occurred, suggesting this metric still has incredible predictive power today.

The safest (lowest volatility opportunity) to allocate to the Hash Ribbons strategy is on confirmation of the Hash Ribbon Buy which is triggered by renewed Hash Rate growth (30DMA>60DMA) and a positive price trend (as defined by the 10DMA>20DMA of price). However, it’s worth noting we typically see the best price opportunities of each Hash Ribbon buy signal occur during the capitulation period.

The Hash Ribbons strategy was first published five years ago in 2019 and is unchanged since. You can read the original article here.

The Hash Ribbons chart is now plotted live at Capriole.com/Charts

The Bottom Line

This update we have incredible confluence of technicals and fundamentals which suggest Bitcoin is going a lot higher. We are currently entering the summer months, typically a financial lull, so it may take some time to kick start the next impulse up, but given the data on hand that is also not a necessity. As always it’s important to monitor the data and stay nimble. Clear risk management can be defined on both a technical and fundamental level with the data shown. For those on the sideline, Hash Ribbons will likely trigger its optimal buy signal at some point over the coming weeks.

Happy hunting.

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 #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