Hey wanted to share very quickly a message I pushed out to everybody who subscribes to my premium newsletter, Crypto is Easy. I won't go thru the whole post, but thought I would share a very brief idea from it. Read below. I'd love to hear your comments.
Note, if you want to get the full post, which I published this morning, you can subscribe now using this link:
If you don't want to pay for a subscription, you can sign up for the free content I post. Usually 2-3 free posts each month, with the rest reserved for subscribers.
...If we continue going down, I see the market going one of two ways in the long term:
Option 1: bitcoin goes lower for a long time.
This will destroy all the data models. Network-to-value, Stock to Flow, logarithmic growth charts, on-chain metrics, data science, and lots of other correlations will fail. It will take a while for bitcoin to recover, if it recovers at all.
If that happens, we may see some altcoins move away from bitcoin’s trajectory as each crypto’s fundamental strengths and weaknesses get tested in the real world. At some point, bitcoin might recover, possibly going up way way way more than it ever would’ve gone if it had kept going up now.
Option 2: bitcoin goes higher relatively soon.
This option could happen, too, assuming people continue acting in the future as they have in the past.
As a proportion of all HODLers, those who bought within the past week have almost tripled. Their proportion now is at the highest level since crypto winter and those HODLers are not selling when the price dips. At the same time, the percentage of supply in profit has dropped below 50% (which sounds bad, but historically leads to rising prices in the months immediately after).
And, contrary to rumors that the whales sold out, long-term HODLers rose as a proportion of all HODLers over the past few weeks. Not to mention, the forthcoming halving will cull miners, leading to fewer competitors chasing fewer new bitcoins, resulting in less selling pressure from miners and less circulating supply as “strong hands” hoard their stash.
On top of that, many bullish commentators have flipped negative. Usually, this signals the bottom of the market.
Price action and some technical indicators all show similar patterns to when bitcoin hit its bottom in 2015, before the 2016-2017 bull run. Like today, the price crashed down to the 200-week moving average, where it bounced around for a few days, crashed even lower for a day, popped back up, and then danced around the line for a few weeks. Bitcoin has never gone lower since then.
Take a look at the comparisons, with the 2015 price on top and the potential future 2020 price on the bottom (future prices in black):
Interestingly, like today’s crash, that crash (August 2015) also saw the biggest outflows from wallets that had HODLed for 1-6 months. Generally, once these guys exit, long-term HODLers aka “strong hands” step in and the price goes up.
Perhaps that’s wishful thinking. It all depends on whether more money flows into the bitcoin network and HODLers continue to HODL.
What do you think?
Please comment below!
Mark Helfman is editor of Crypto is Easy and a top writer on Medium for bitcoin and investing topics. His book, Consensusland: A Cryptocurrency Utopia, explores the social, cultural, and business challenges of a fictional country that runs on cryptocurrency (and offers some answers to the questions posed above). In a past life, he worked for U.S. House Speaker Nancy Pelosi.