Crypto is up. Is the bottom in?. The crypto market is up 60% this year… | by Mark Helfman | March 2023
The crypto market is up 60% this year, but few seem to care – and for good reason.
The US looks set to enter a recession at any moment. A too-big-to-fail bank, Credit Suisse, is on life support. China’s economy cannot function without stimulus and government intervention. Most Western economies continue to raise interest rates, squeezing capital out of “risk-on” assets such as cryptocurrency.
Despite that, the crypto market is still behaving exactly as it has on all major market bottoms. Remember this graphic from the January issue Crypto is simple newsletter?
Two months later, not much has changed:
Experts say this is not a bull market.
That’s fine, I don’t like to use the words “bull” and “bear” to describe crypto markets anyway.
The circumstances are crystal clear. We covered this for months in my newsletter, Crypto is simplelast in the update March 16, 2023.
While bitcoin’s price remains uncomfortably low relative to historical benchmarks, it’s doing what you’d expect at market bottoms.
Perhaps that’s why the four-year cycle, the Stock-to-Flow model, Dave the Wave’s LGC chart, and all the key metrics on the chain agree, despite the dire warnings of global recession and chaos in the financial markets.
So, is the bottom in?
Do not be stupid. The bottom is $0. $14,000 is the most natural price for a technical bottom, for reasons I included Is $14k bitcoin the new $100k bitcoin?
Will the price of bitcoin go that low?
As long as the price stays above $15,600, we have been in a bull market for several months.
It might sound crazy, but it’s the literal truth, even if it doesn’t feel like it.
If you get wrapped up in bottoms, bulls and bears, it’s too easy to psyche yourself into or out of decisions. Bitcoin’s price rises 100-300% in bear markets and falls 30-50% in bull markets. Altcoins crash 50-80% in bull markets and rise 100-1000% in bear markets.
Whether you wait for the bull market or not, you will still suffer large price swings. Why bother whether the bottom is in or not?
Consider the money you lose waiting until you’re sure the bottom is in.
For example, if you bought altcoins in 2019, a real crypto winter, you peaked at 4000% gain. If you waited until December 2020, you peaked at 800% profit.
When you wait, you lose a lot of upside to avoid a temporary drop in prices – but you get the same risk and volatility!
On top of that, the market becomes much more difficult, expensive and stressful during bull runs. Especially if you are waiting for the altseason! Fees will go up, prices will zoom, and you’ll feel like you missed out.
You may feel that way now, especially if you’ve sold or exited the market at any point in the past ten months.
You will have another chance to buy into the market when it crashes again. Especially if the bottom is really in. Most of the biggest crashes come during bull markets. See below.
In May 2022, we saw the first signs of behavioral capitulation. In June 2022, we saw all these signs.
Over the past ten months, the market has acted as a perfect combination of 2011, 2015 and 2018-2019, despite the continuous deterioration of macroeconomic conditions, collapse of global liquidity and a gloomy investment environment.
Funnily enough, if you bought bitcoin at the May 2022 crash, you’re sitting on a 7% gain. Not bad for a ten-month punt.
You may decide that now is the time to play daytrader, investment allocator and macro tactician.
For me, good enough is good enough. If you follow my plan, you’re up as much as 400%, down as much as 48%, and probably ahead about 10% on your investment.
Technically, my plan says not to buy now, as of this post, but that’s ok – you would have bought a lot of crypto at lower prices from May to January. You should have a decent allotment. You can set aside money for the next opportunity, which may come when you read this post.
No need to worry if you’re sitting on cash. A crash of 30-50% is inevitable. We get some of them at every bull market.
When? From what price?
We’ll see. $14,000 is still realistic. If that happens, you’ll have a chance to double your return on investment if you get the timing right.
Even if the timing is off, your patience is likely to be rewarded.
But . . .
What will you do if it isn’t?