I want to talk about the strength we are seeing in bitcoin and the wider crypto market. Let’s talk about where we stand through a series of charts as well as on-chain data to see where this market is trending next. Before we move forward, take into consideration that there is a copy trading platform, Jet-Bot, where you can earn from 200% up to 2,000% APY using Binance trading bots to stay ahead in the crypto game. Register now and get 3 days trial access. It has 4565 Active copy trading bots. Every Jet-Bot account includes a free $100,000 virtual portfolio. You also may get notifications to Telegram. Check out top traders rating and choose best traders whose deals you would like to copy trade.
Bitcoin Jumps Above 200-Week Moving Average
This is starting with bitcoin. This is BTC on the weekly scale. As we can see, for the first time in over a month, bitcoin has reclaimed the very important 200WMA. Now, keep in mind, we still have probably 3 or 4 more days until this closes, so anything could happen, but this is a very positive sign thus far.
Why is this important? Well, throughout bitcoin’s history, over and over again. This has acted as strong historical support for Bitcoin. In fact, as early as 2014, 2015, again in 2019 and 2020, even though on occasion we have dipped below, like right now, that has always signaled in retrospect a great time to buy because we’ve never stayed under for long. Will it hold now? Time will tell.
Just to be realistic, we may see something like this in the coming weeks, and essentially what this is showing us is that our next big support level would be around the $29,000-30,000 level, which was once support, but now acts as resistance for that next level up.
Has Bitcoin Price Bottomed? (On-Chain Data)
A lot of the on-chain data signals yes. Realized losses might prove bitcoin’s gain if signaling a market bottom. Again, I want to keep this channel as realistic as possible. This does not mean an overall market bottom may be later this year as the Fed continues to raise rates. We could go lower. Everything is possible or this could be the ultimate bottom. But either way, the point is that the on-chain data is signaling at least a local bottom for now. The on-chain data supports it. We saw the same signal at the end of the 2012 bear market, the same signal as the end of the 2015 bear market, the same signal as the end of the 2018 bear market, and we’re seeing it again now.
Let’s talk about realized losses and what that tells us about the market. Signs of seller exhaustion are creating conditions that resemble a market bottom for bitcoin realized losses, or the losses incurred by selling assets show the extent of investor capitulation, and we can see all this because the blockchain data is public. So let’s go over to realized cap HODL wave and just pay attention to the colors. Specifically, the difference between the lighter yellows, the short-term HODLers anywhere from three to six to twelve months or one to two year short-term huddlers and the longer HODLers in the darker colors. What do you notice? Well, starting in 2011 all the way to 2022 today, we can see that whenever the market began to fill up with longer term investors, the darker colors indicated the end of a bear market and a good launch pad for the bull market. And why is that? Let’s talk about it.
As retail and short-term investors are purged from the market during these massive sell-offs, the saturation of HODLers, meaning people holding for the long term, swells. The more HODLers there are, the stabler crypto prices become and the more likely it is that the market has bottomed. We’re starting to see that now those short-term HODLers over these last several months are getting purged from the market, leaving the long-term people right now.
The US dollar wealth stored in bitcoin is now older than three months, signaling the sell-off waves in May and June have exhausted nearly all short-term traders. This figure of 80% corresponds to data from the bear market bottoms of 2012, 2015, and 2018, all of which occurred when USD wealth older than three months climbed above 80%. This is such a positive sign if you hold bitcoin. I had to share this with you now.
Just looking at the last two cycles that this happened, this does not mean we’re in full bull market territory yet. For example, when we saw this data at the end of the 2015 bear right around here, we rallied for the next several weeks, and then a huge drop in a little summer rally. So when this happened at the end of 2018, we kept climbing higher for weeks and weeks and then dropped back into bear for the next few months. So what this means to you is that I would still be careful. Summer rallies are not new. In fact, we’ve seen them over and over again.
History is Repeating for Bitcoin Hodlers?
So this is bitcoin, and if we look at the chart and set it to one year, let’s just go back to 2020. This is not the biggest example, but it still stands. We had a nice little summer rally at the end of July 2020, stayed up for a few weeks, and then dropped back down to almost where we started for the summer.
Looking at 2019, it started the year very quiet, then around May, June, and July rallied hard and then corrected into the fall. Looking at 2018, this was the first year of the bear market after the $20K bitcoin in 2017. Despite the fact that we had a dead cat bounced dead. People thought this was a summer rally to change things, but in fact it lasted a few weeks and then continued to correct itself because we were in bear.
I’m not going to go back and show you other years, no matter how big or small, where we’ve gotten a summer alley and then corrected into the fall. The only question is, will we end the bull or will we end the bear?
My Crypto Trading Strategy HAS CHANGED..
Something interesting to note, and also something we talked about months ago, is that bitcoin dominance is continuing to rise slowly. The reason I think that is that as some of these altcoins continue to follow bitcoin and maybe make some of the gains, I think people are honestly going to use that as a reason to maybe get out of their more speculative alts and into less risky plays like cash, like bitcoin, etc.
So what that means to me is that my original strategy at the start of this year hasn’t changed, but there are aspects that I’m learning that I’m growing as I get new information. For example, I am very heavy on bitcoin. I’m also very heavy on stable coins. Right now, I still have my ethereum. I still have my bags of altcoins, but I’ve been exclusively DCAing into bitcoin in 2022 based on my thesis of bitcoin dominance. That’s me. That’s me. That’s just what I’m doing. I could be totally wrong, but you know, I’m a more conservative person.
I would say investors are less prone to risk, so I like these higher caps, especially in a bear market or at least before we confirm a bull market. At least for now, at least today, it’s holding its own fairly well. So much against bitcoin, which is still the king, but against these other altcoins, a lot of people are moving their altcoins into ethereum. I think that’s in large part due to the ethereum merge happening in September. I had thought people would see that as a risky upgrade. It’s a huge unknown upgrade happening to the entire network, and in a risk-off environment, I thought that would make people less excited about ethereum. But I was wrong. I’ve updated my opinion based on the data. People are clearly still excited.
What If I’m Wrong About Bitcoin?!
If I was unclear on how my strategy changed, just to sum it all up, I am still actively invested in bitcoin. I don’t know if bitcoins could end the year up sideways or down from where we are today, but it’s still my belief that bitcoin dominance will rise in this risk-off market. Ethereum may be one to take a look at as well, up to September because it appears the excitement is still there. Even if I’m wrong, meaning bitcoin never falls lower, we enter a new bull market and it’s up only from here. I’d rather be a little late to the altcoin party than a little early. That’s me as a risk-averse investor. As a sort of example and how this looks in real time if you would for last cycle, if you would have waited until bitcoin surpassed $20,000 at the end of the last cycle before looking at alts, you wouldn’t have got a 100% of those altcoin gains, but you would have done fine. The alt coins really didn’t even start to rally until bitcoin surpassed $20,000.
[This article is a transcription of a video made by Altcoin Daily]
[Original video: https://youtu.be/05lsK56uOic]