Crypto Markets in an Uproar: Are We Back?
Not to say that we told you so, but we did. There has been a major reversal on weekly price action in accordance to the macro data that we have been evaluating. Bitcoin is sitting at a price of $49,595 on August 23rd which is a 68% increase from the lows in July. DeFi king Ethereum currently has recovered to $3,327, up 86% in the same period. The global market cap of crypto is finally back above 2.15 Trillion, an 800 Billion dollar bounce back is encouraging for the continuation of this cycle.
Bitcoin Fear and Greed Index
Public sentiment has risen to match levels not seen since our previous rally during the spring. It can be considered bullish that the Fear and Greed Index was the most over extended to the downside that is has been without breaking lower support levels in price. Historically, these were always great times to buy in and that proved correct this time as well. It is concerning that the sentiment has gone parabolic over the past few weeks, we should see some sideways action eventually to gear up for continuation.
Bitcoin Investor Tool: 2-Year MA Multiplier
We are still in range for the Bitcoin Investor tool to assess that we are not even close to the top of this run. BTC needs to break the 2 year moving average x 5 before we are in top territory. As you can see, during previous cycles we broke this as our blow off top that lasts roughly 3 weeks. We will likely see $110,000 before the final push happens that lands us in the $200,000 range.
The Puell Multiple
During the bottom in July, the Puell Multiple flashed a buy signal that has been historically accurate for prices that lead to more profitable returns. Each of the 5 touches in the green buy-zone have been extremely lucrative and without any false signals, our confidence is high that there is room to run. Also, we never broke the red range which was a historically fantastic sell opportunity. Consider it a blessing for the time we are running without breaking that indicator.
The Golden Ratio Multiplier
The fibonacci sequence is one of the most powerful indicators in all of finance at finding important price levels for future support and resistance. According the this ratio, BTC has bounced off the major support at the 350 Day MA. Breaking below could have been devastating to the bullish case. As of now, breaking above $60,000 will be quite a feat as we will have two other moving averages to overcome.
200 Week Moving Average Heatmap
We are still in uncharted territory on the 200 week MA heatmap. In our last assessment, we saw the first blue flash in the middle of a bull market after turning green and yellow. Markets are still in the blue and not in a euphoric phase whatsoever. Look for a change back to green as we continue to recover and break the last all time high. Many analysts were calling for the end of the cycle months ago in May while to us, it appears that it was merely a mid cycle correction. Adding to the health of this uptrend for the final run up.
Bitcoin Logarithmic Growth Curves
Reviewing the logarithmic growth curve is also powerful in assessing where we are in the cycle. Last time we broke the MidDev indicator and went back below during the bull run was in the 2013–2014 cycle. During that run, there were 2 large parabolas but this cycle is more subdued. This is to be expected as the growth curve yields less returns over time. Despite that, each cycle top has touched the HighDev indicator which has not come close as of yet. This is good for the bulls. If we get rejected by the .5 of the Oscillator, there could be some trouble so things are not all rose petals at this point but we are encouraged.
Remember Confluence?
Like we said before and will continue to emphasis, confluence is key and not one indicator will be the center of our bias. Given where many of the macro trends are pointing including a bullish cross on the Weekly Stochastic RSI, it appears the downside action is over for the time being. Many charts have front run BTC and ETH and already made new all time highs like ADA, LUNA, and SOL. These are excellent indications of what the laggards will do next.
Enough about the technicals, NFTs are everything.
Since January, the NFT space has been booming from NBA Topshots, Bored Ape Yacht Club, to Pudgy Penguins.
But what even are they? AND Why have they taken over the current narrative to where the largest firms on planet earth like Visa are buying CryptoPunks to diversify?
NFTs are Non-Fungible Tokens that have a host of applications across the metaverse. They prove ownership over digital or real world assets hosted on the blockchain. Ownership over these assets can be soley to one owner or fractionalized amongst as many owners. Sectors that are currently being revolutionized by this are Music, Art, and Real Estate.
Art
In this space, smart contracts are completely customized and offer a host of benefits that have never been possible for content creators. For the first time in history, an artist can create a piece that they receive a commission off of every aftermarket sale. As the piece appreciates over time and passes hands, the artist continues to make money from their work.
Real Estate
Maybe you are trying to diversify into Real Estate but do not have the money for nor have the ability to maintain this property. Owners can fractionalize their home, sell 49% of the equity of it to as many parties as they prefer and still live there as the majority owners. That capital can be utilized to invest in various ventures or saved until money is tight.
Music
Music creators can release whole albums in the form of NFTs where their fans can own an exclusive piece of content from their favorite artists and of course the resale value comes back to to creator as well. It benefits the fans who receive access to the exclusivity while the artists can have a more intimate relationship to their fanbase with this kind of release, boosting longevity of these relationships.
At the moment, NFT markets are dominated by avatar related pieces like CryptoPunks, Pudgy Penguins, and the Bored Ape Yacht Club. It is not uncommon for these projects to increase their floor price by over 10,000% in a week once they hit a higher level of adoption. These quick gains have been attracting gamblers to enter the space and try their hand at the NFT casino that the platform OpenSea has become.
We have some tips for those entering this space:
- Look for art that is unique and fits a current bullish NFT narrative
- A strong community backing the project to drive eyes to it
- Large amount of holders — typically 2.5 pieces per owner is nicely decentralized
- A check mark on OpenSea helps for legitimacy, not all great projects have it as some are derivatives of original launches
- Assess for upward trending volume, can be indication of higher prices soon as floor gets bought up
- Try to buy pieces with multiple rare traits that make it more unique in the collection
- If you can’t get rare ones, go for aesthetically pleasing
- Best bet to get them at cheapest prices is to buy during the mint or shortly after
As this is such a newer space, there is no one size fits all strategy to invest but those have been points that have helped our team and clients to navigate the sea of JPEGs that are making some millions in the matter of weeks.
The Bottom Line:
At this point, markets are in a state of recovery and despite the majors like BTC, ETH, and LINK not breaking all time high prices. Some of the innovators that were previously mentioned have already created new ATHs and are likely an indication of what is to come next. The NFT narrative has been the talk fo most people in the Crypto space but only dabble if you have ETH to lose since 99% of the projects are not profitable. Art is subjective at the end of the day and not everything in that space can be evaluated to the same degree of protocols that most of us are used to. We are at an incredible time in history where possibilities for creators are virtually limitless compared to before, time will tell what becomes of this nascent trend. Overall, we are bullish on the 10–20 year outlook on this space. Get ready for a wild ride!
