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THE STATE OF CRYPTO

Hi all,

 

To start with, I will do a very quick resume of what happened during this 2018 from the technical and fundamental perspective:

 

As we all remember, year started in full euphoria mode after the tremendous 2017. Almost everyone, me included, was expecting the bubble to keep going to 30k-50k-100k before crashing. BTC had been all over the place since October vertical rise. “3 months of mainstream is too little, this mania has to last longer before crashing”. That was the main thought of almost everyone in crypto back then. And as always happen in markets, the mass sentiment was wrong. After the first crash of the key 10K level, which represented a -50% retrace from ATH, market recovered from 6K to 12k, giving some hopes that the bull market was going to continue there. But very far from that, 12K got rejected hard and easy, and 10K broken again. 10K level has not been surpassed again since then back in March, showing that we’re in a clear bear market.

Nevertheless, the real drama has happened in the altcoin sector. After the mega rise of most altcoins in January, it has been a general crash in altcoins in BTC and $ values. A crash never seen since 2014, which was the last bear market. There was a little oasis in altcoins with some rises between March and May, especially in Binance exchange. These pumps were probably directly or indirectly done by Binance exchange itself to don’t extinguish the flame of the sector, and to maximize profits from it’s big and hungry userbase they acquired (deserved). And after that, a sea of blood and suffering in the altcoin sector. Most altcoins, the big ones included, are down more than -85% from ATH in $ values. And there’s a bunch of old shitcoins and 2017 ICO’s which are more than -95% down from ATH. Not bad.

 

IS THIS THE END?

 

 

This is the picture of the first BTC bubble back in 2011. BTC went up from a few cents in 2010 to 30$ in the peak in 2011. Bottom was approximately at 3$. -90% for BTC in early days. Bear market lasted about half a year. And after that, 6 more moths of what I call the “magic plateau”. A period of very low volatility, low volumes and a very defined range of prices. These plateaus basically mean the exhaustion of selling supply. BTC, due to it’s very rigid supply and holders profile nature, goes up or down mainly because it’s supply expansion (people willing to sell) and supply contraction. In the plateaus, supply starts to contract quickly because the ones that wanted to sell already did so in the bear market. Supply contraction + just a constant demand (not necessarily big) creates these plateaus, then it’s just needed a bit of demand to push again prices up and restart the bullish virtuous cycle.

 

 

This was the 2013 bubble, aprox from 20$ to 1000$ at the peak, to find the ground at 200$ 1 year later. A -80% retrace with a 1 year lasting bear market. And again, after that, a magic plateau happening before bull session coming. This one lasted about 9 months. So in total, the 2014 bear lasted almost 2 years.

It’s important to notice a very interesting fact: big bottoms after big runs usually coincide with the start of “parabolic rises” and previous bubbles ATHs. That happens not only in BTC but in all altcoins in general.

 

 

And finally, the bubble of 2017. From 400$ to 20,000$ and for now, with a bottom in 6,000%. Aprox a -70% retrace from ATH.  For now, lower ups and lower downs, we’re still in a bear market that’s lasting 9 months already and doesn’t seem to end here.

  

Contexts of the sector in the 3 bubbles have changed a lot for sure and you could say that past events don’t guarantee future ones and timelines of cycles should be different. IMO, cycle timelines will always be quite similar, because as said before, it’s the supply contraction the main factor that determines the end of bears. It’s true that now it’s needed much more money to move prices up, but it’s also true that exchanges quality and security has improved a lot from last bubbles, reputation of BTC is much better than it was, awareness is much bigger, regulations are starting to appear and doors to mainstream institutional $ are opening. So in my opinion, the bigger market cap factor equals to the bigger awareness & bigger $ entrance doors.

 

Said that, it’s important to say that to keep going with the long term super bullish cycle, BTC will have to keep it’s FUNDAMENTALS intact and improve them. But which are these fundamentals? I will make an extend post about these one day, but resumed these are: Robust network that guarantees BTC holders their balances, limited supply, and some degree of utility. 3 fundamental factors that each “reserve of value” asset must have, although the 3rd one it’s not required at all (physical gold it’s not useful at all).

 

By looking at the current state of the network, with hashrate at ATH levels, BTC monetary policy very unlikely to change, and LN network making some progress to boost BTC utility in the future, we can conclude that fundamentals are not only kept, but are actually improving. In addition, most governments around the world are likely to start realising clear laws that will consider BTC as another financial asset or coin depending on it’s use. Most governments aren’t declaring war to BTC, just the opposite, and these are very good news. When laws are clear, big players will be on board, new exchanges, much more reputable and operative than the current ones will appear, making it easier for the financial institutions to enter in the sector.  

 

Having seen the bigger picture, the question “Is this the end?” can be answered by a 5 year old kid. HELL NO!

 

THE FUTURE & HOW TO PROFIT FROM IT

 

What’s gonna happen to BTC and altcoin in the coming weeks and months? Will the magic plateau happen in the 6-10K range or will it happen in the 3-6K zone? The question is not what’s gonna happen, but how are you gonna profit the market that is coming.

 

For a conservative investor, profiting in the actual context is quite easy, just wait for the magic plateau to appear in the coming months, invest, and ride the entire next bull run. Not complicated, but we’re talking about trades with a 2-4 year timeframe, not “cool” for a lot of people.

 

For the profit maximizers and altcoin addicts, things will be more difficult in the coming times. To start with, it will be important to start looking at fundamentals of coins again to profit from them. There won’t likely be another general “altseason” until BTC makes another bull run. In the meanwhile (which can perfectly be another year or 2), the good alts will perform well while the shit ones will keep bleeding. A shitcoin that’s -95% down, doesn’t mean it cannot go -99%. I will post next week about altcoin future situation that’s coming. But as said, while BTC keeps on the bear and consolidating, there won’t be altseasons. There will be some pumps and good projects having nice returns, but it won’t be that crazy where you could buy whatever and make a X20 with or without fundamentals.

 

The good thing about this is that truly good projects will get what they deserve, and same situation for good traders. To be honest, it was quite frustrating to see noobs buying X coin at 0,001$ because it was “cheap coins” and getting X20 profits, and seeing bullshit projects getting funded with tens of millions just for writing whitepapers heh.

 

Have a nice week.

 

Frank PM

 

 

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