One of the top 5 most crucial questions people across the financial markets are asking now, and we will not attempt to make some type of dramatic declaration to create either doom and gloom fear porn or unnecessary hopium. We are happy to share some tools that may be helpful in determining where we are at and where we might be going.
The Fed Is Helping To Prep Bitcoin For Helping Alleviate Crushed Bubbles
Let's start by comparing the STH (Short Term Holders) profit relative to LTH profit. Here is that current situation and all credit goes to the great work done by the folks at Glassnode:
Here is what we see here, and you can draw your own conclusions. Each BTC "bottom" tends to align with Short Term Holders' profits eroding down to zero or close to zero. Additionally, the long term trend for when Long Term Holders' profit hits a localized bottom continues to rise gradually. Short term speculators get washed out and LTH continue to stack sats and grow their wealth over the long term. Overall - bullish.
Now let's take a peak at the Realized Price of Bitcoin and MVRV ratio relative to other local bottoms. Many folks consider the Realized Price to be an excellent indicator of technical sentiment and potential direction as it measures the "cost basis" overall for Bitcoin. In other words, are people, generally speaking, above or below water on Bitcoin?
We can see that bottoms tend to form when that Realized Price is below water as it is now and has been for several weeks. Do we need to stay here longer or for a certain period of time before an official bottom can be declared? We will let you decide but we don't see, or ever believe there to be, some sort of concrete rule that says "X must do Y" when it comes to investing. We will say that this chart and tools are clear in that there always is some sort of "flushing out" that takes place. Have we already seen capitulation? Time will tell.
Our assessment is that taken in a vacuum, Bitcoin has already done "a lot of the hard work" in terms of weeding out speculative excesses and punishing over-leveraged and never satisfied traders that expect unrealistic profits every second of every day. That said, there is still strong correlation between Bitcoin and risk assets overall. China invading Taiwan (threatening the global chip supply), potential food and energy shortages, struggling economies, the implosion of JPY and EUR - all just a few of the many major factors that can impact the risk on versus risk off decision making process.
Stay nimble.
