Are we entering lengthening Bitcoin cycles?
Daily Crypto Market Update and Investing Report 12.7
Disclaimer: I am not a financial advisor, take all actions at your own risk .
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Overview
Market Insight: Investing the Flash-crash
Crypto Market Update
Major Crypto News
Notable Events
NEWBIES’ Lesson of the day: Bitcoin Lengthening Cycles vs The Stock-to-Flow Model
Market Insight: Investigating the Flash-crash
Bitcoin on-chain metrics
The market rallied strongly last night only to cool off during the morning US session.
Be weary of any major moves up immediately after a large selloff as it’s often a trap to grab liquidity from over-optimistic traders. The probable outcome is various retests of the 48k-50k resistance before price begins to move upwards.
On-chain fundamentals have very little change despite the flash crash on Friday. Fundamentals are better indicators of long-term trend sustainability than price action. Below we explore a few.
Who sold during the flash crash?
The chart above shows that short-term holders (less than 155 days) were grossly affected by the flash crash. Short-term holders are historically bad at timing the market. This closing in positions was the worst since July.
Long-term holders did not sell the flash crash.
On another note. Futures funding rates have gone negative for the first time since late September when the market took a considerable drawdown. On a basic level, this means the short positions are now paying the long positions to stay open. This chart is from the Glassnode weekly report.
This information included in my report yesterday is showing us that the flash crash aided in flushing out leverage in the market. The consistent players did not panic and held their positions. Some factors, such as lower leverage and negative funding rates are in the favor of a bullish outcome.
Crypto Market Update
Bitcoin (BTC) is up 1.43%
Bitcoin Dominance (BTC.D) is currently at 42.19% up .42%
Total Market Cap (TOTAL) is up .59% to 1.3 trillion
Total Market Cap – BTC & ETH (TOTAL.3) is up 1.08% to 866 billion, showing traders are preferring altcoins over Ethereum and Bitcoin
Polkadot (DOT) is having a strong session and is up 8.82% to 30.63. DOT has been underperforming expectations in the past couple of weeks. With Parachains going live on December 18th, DOT is severely undervalued at this price, in my opinion
DOT is severely undervalued at this price
BitTorrent (BTT) a decentralized file-sharing protocol is up 35% in the past 24 hours. Volume is at incredible highs with 2.9 billion in trading volume
Bitcoin Fear and Greed Index 25 Extreme Fear
Bitcoin Google Trends 37
How to use The Fear and Greed Index for investing
Major Crypto News
DraftKings Marketplace in planning to launch a gamified NFT collections next NFL season. NFTs are hitting the mainstream.
A former Google CEO has joined Chainlink Labs as a strategic advisor. This adds to the growing list of corporate people moving into crypto.
Notable Events
NEWBIE’S lesson of the day
Bitcoin Rhetoric change: S2F to Lengthening cycles
Bitcoin prices in December have been struggling and it’s changing the rhetoric in the community. For years the community has trusted in Plan B’s S2F model which has been accurate in predicting Bitcoin price since 2019. Since the recent selloffs, many are beginning to question this model and some are migrating into the belief system of lengthening cycles.
Plan B’s model was used to predict monthly floor prices in the tweet below.
These predictions were dead on until the pattern broke in November and the December selloff put a nail in the coffin.
The lengthening cycle model is more of an observation than a price prediction model. Stately put, the 4-year cycles of Bitcoin are lengthening in duration and shorting in intensity. This report covers the four-year cycle of Bitcoin. This is in relation to the law of diminishing returns. As Bitcoin grows in market cap, the price of Bitcoin becomes harder to move. We are currently in the 4th cycle seen in red in the chart below:
The lengthening cycle doesn’t predict a top price for the cycle or even a time. It simply states that the cycles are lengthening and have brought on the predictions of a bull market lasting well into 2022.
Bitcoin hodlers wanted to believe price would reach 98k in December with a blow-off top as seen in the last cycles, but Bitcoin has matured. Expecting all cycles to be similar becomes less probable. Bitcoin is showing evidence of evolving into a stabler asset. With the stability comes slower and steadier growth that helps sustain a more resilient price pattern.
What are your thoughts? Are we going to have a longer cycle or another blow-off top in the short-term?
Don’t be in a rush to get back into the market at this point, there will be better chances in the next week or two. The flash crash helped the long-term status of the bullish trend and the fundamentals are still strong. Trades are starting to formulate so expect a few set-ups in the coming reports.
Thanks for reading!