Didn't they say the market would go crazy parabolic after the halving? What gives?

If you've subscribed for long enough, you know the answer to that question. Let's see what's going on now and what that might mean for us moving forward.

Today’s update covers these topics:

• Video

• HODLers and profit-takers

• Fear and greed

• New addresses and activity

• Altcoins and timing

I strongly advise you to read the summary below and watch the video update! You miss too much when you get only one of them!

Video

Tap this image to watch the video.

To speed up the playback (shorten the playing time), use the gear button at the bottom of the video screen. I circled it above. A playback speed of 1.5 should do ok for most of you.

TL;DW

As of today’s update, my plan says to buy Bitcoin when its price is below $45,000. Seems crazy to think about a price that low. This is a crazy market.

You already have a strong allocation to the market. You sold some Bitcoin in March. You sold some altcoins in April. You bought some Bitcoin last month. You’ve set aside fresh cash for months. Keep setting aside cash for the next opportunity. You may want to start nibbling at altcoins now.

Make sure you caught my most recent update.

HODLers and profit-takers

Even with the recent price drop, not much has changed with the metrics, trends, or anything else I look at.

Let me revisit the 3- to 5-year HODLer cohort on the realized cap HODL waves from last week’s update. It’s booming.

This cohort is crucial because they bought from the summer of 2019 to the summer of 2021. They’re up (some as much as 2,000%) after suffering multiple drops of 70% and haven’t sold.

When was the last time we saw anything like that?

Around the start of the parabolic ascent of 2017.

(Before you start thinking about another 20x like 2017, remember the situation is different now. We would need to look at a bunch of different metrics and behaviors before we can start making comparisons.)

A portion of this cohort includes 20,000 bitcoins that GBTC bought in June 2020. While that may exaggerate the overall size of the band, it’s still directionally valid. Those Bitcoins appeared in the cohort before this most recent rise, too.

Given the timing, today’s growth comes from people who bought in the hysteria of early 2021, then forgot about their coins or gave up. Most came for instant riches, got burned, and then turned into long-term investors.

If they haven’t sold yet, you would imagine they would need to see a much higher price before they do. They're becoming a progressively larger portion of the market. This gives us more room for prices to rise before we need to worry.

We can sense this from the relative unrealized profit, a measure of how much potential profit somebody could make if they sold today.

As Bitcoin’s price goes sideways, this metric continues trending down.

We don’t normally see that.

Usually, unrealized profit moves in line with price. When Bitcoin’s price goes up, so does the unrealized profit. When Bitcoin’s price goes down, so does the unrealized profit.

The only explanation?

As market participants continue to take profits, new buyers are bringing enough inflows to keep the price steady. And they're buying at higher prices than those who are selling, so you would expect they need to see a much higher price before selling their newly bought coins.

Combine that with all the behaviors we’ve seen over the past few weeks, which haven’t changed enough to note in this update. Healthy, constructive trends across several dimensions.

Why hasn't Bitcoin’s price gone up?

As discussed in previous updates, we still have plenty of sellers (mostly miners and OGs), and we don't see much new money coming in.

Order books remain tilted in favor of sellers even as “market buyers” keep chipping away.

(Some hedge funds and market makers may have bought long exposure through the ETFs while buying shorts or placing sell orders. They profit from the difference in the value of the longs vs. shorts without exposing themselves to market risks. It’s impossible to know the extent of this activity.)

Fortunately, the more healthy churn we get, the less money we’ll need to push us higher once that churn is done.

For more on this, watch from the beginning of the video above.

Fear and greed

Bitcoin’s Fear and Greed Index sits at 72. Nothing out of the ordinary and well within historical norms. Watch the video for the chart.

I don't put too much emphasis on fear/greed. The data changes too quickly from one day to the next. Since I'm not interested in the day-to-day swings, I use it only to validate extremes in sentiment and positioning.

That said, you can use this chart to get a sense of perspective. I split it into three sections.

• Above 82, do not buy. This doesn't necessarily signify a major peak, either in the short-term or long-term, but when you look at what the price does after reaching that level, it's not good.

• Below 19, buy what you can. This doesn't necessarily signify a major bottom, either in the short-term or long-term, but when you look at what the price does after reaching that level, it’s good. Even when it bounces temporarily higher before dropping to a lower price, you get great value for your money bitcoin.

• Any number in between, look at market conditions and your financial circumstances, then make the best decision you can.

Like so:

For more on this, skip to the 11-minute mark.

New addresses and activity

The number of new addresses continues to drop.

This metric is a proxy for genuine enthusiasm about Bitcoin. We want to see it go up as more people create new wallets to engage with the Bitcoin blockchain.

Why don't I worry about this?

A lot of new activity runs through ETFs now. These ETFs don't need to create new addresses for each customer. As a result, some of the activity that used to push this metric up no longer exists. But the metric is a fixed formula. It can’t accommodate this change (though we can make a mental note).

Also, the number of transactions has increased.

At the same time, each transaction is, on average, smaller than historical benchmarks—not whales sending tokens to each other.

This suggests engagement is more normal than the first chart might suggest.

It's entirely possible that before ETFs, some portion of the “new addresses” metric came from large entities and exchanges creating wallets for customers who now use the ETF for access instead.

This makes sense if we’re progressing from the “Awareness” phase to the “Mania” phase of this larger bubble cycle, as I suspect.

One key element of this progression: institutional investors start taking market share from early investors who sell some after a big run-up (“smart money” in this chart).

Somewhere in the background, it wouldn't surprise me if sovereign wealth funds and other large entities have started accumulating directly through brokers. I’m sure you’ve heard the same rumors that I’ve heard.

You will never see this activity on-chain (it blends in with everything else), and the trading charts don't even capture that information.

In a few months, US disclosures will tell us which businesses and funds are now using ETFs to get exposure. It reminds me of what happened in 2019 and 2020, when endowments, pensions, and other large entities bought small positions in Bitcoin and other cryptos. Small for them, huge for us, and enough to soak up supply from profit-takers.

For more on this, skip to the 13-minute mark.

Altcoins and timing

The altcoin market is moving closer to my favorite entry signals.

On my chart of altcoin dominance, it has already reached the ideal zone.

As a result, I've started buying more tokens for the projects in my altcoin reports, raising my allocations one coin at a time every few days.

Yes, you could wait for prices to go down another 20% or 40 to reach the preferred zones of the first chart above. For me, close enough is good enough.

(BTW, a 20% swing is normal volatility and a 40% drop can happen anytime.)

For more on this, skip to the 19-minute mark.

In closing, another AI-written haiku, based on this post:

Relax and enjoy the ride!