Dumpster day

Author

The Triple Scoop
July 05, 2024

SCOOP’S TL;DR

📈 MARKET Update - BloodBath, But hold on to your hats.

  • Crypto Total Market Cap $2T - 24/hour change 4.79%

  • Crypto Market Cap Total Volume $127B - 24/hour Change 41%

BLOOD BATH - BUT HOLD ONTO YOUR HATS

If the current market conditions are making you anxious, consider this:

In the 2017 bull run, Bitcoin had over 20% pullbacks 12 times.

In the 2021 bull market, this occurred 9 times.

Each time, many believed the bull run was finished and that Bitcoin was doomed.

Smart investors bought during these dips and made millions.

Fearful investors sold during the dips and later bought back at higher prices out of FOMO.

Which type of investor are you?

If you are panicking. We ask that you please Relax.

  • We will keep today brief following today’s sell-off.

  • It isn’t clear yet if the local bottom is in so we do not wish to recommend potential opportunities or narratives to take advantage of.

  • We do advise that if your portfolio has been heavily affected by this move to the downside, you stay calm and try not to over react.

    What is causing the sell-off?

    Mt. Gox Repayment FUD 🚨

  • There are concerns about the impact of Mt. Gox starting the repayment of 141,686 BTC this month. Some fear this could cause Bitcoin to drop to $45K or even $40K. Let's clarify this FUD.

    Mt. Gox BTC Distribution Phases:

    1. Early Payment (July to October): 71,403 BTC will be distributed.

    2. Intermediate Payment: Final creditors will receive their share.

    3. Final Payment: This will occur years later.

    Focus on Early Payment:

    • The early payment phase involves distributing 71,403 BTC to various types of investors:

      • Individual creditors

      • Credit funds

      • Exchanges

    Market Context:

    • When Mt. Gox was hacked, BTC was trading at $600. Holders are already up 100x.

    • Given the current bull market, significant selling is unlikely.

    • Assuming 50% of these coins are sold, that's 35,700 BTC, worth approximately $2.1 billion.

    Market Impact:

    • The market can handle 6K–10K BTC sell pressure currently.

    • During high ETF inflows, the market can absorb 15K–25K BTC daily.

    • Therefore, the sale of 35,700 BTC will not have as severe an impact as feared.

    Conclusion:

    • The market reaction is due to the overestimation of the Mt. Gox sell-off.

    • Bitcoin will likely find support between $44K and $52K.

    • Only a significant unforeseen event (like a war or pandemic) could push BTC below this range.

Crypto Macro Outlook

Bull Market - The 'Climax' Zone

The market's greatest trick is convincing everyone it's over just as the fun begins. As Warren Buffet said, “The bull market is like sex. It feels best just before it ends.” Here are seven reasons why the most exciting stage hasn't started yet:

  1. The Greatest Trick Of The Market: The market often convinces people it’s over before the real excitement begins, primarily due to the "wall of worry."

  2. What Is The Wall Of Worry? During a bull run, the market ascends a wall built of worries and skepticism. Each piece of pessimistic news adds another brick to this wall, fueling lower prices.

  3. The Wall Of Worry Is Steep: Moderate FUD in bull markets is healthy, sidelining people and creating fuel for rallies when doubters become believers. Despite BTC being near ATHs, doubts remain about consumer crypto apps, global liquidity, ETH ETFs, and altcoins.

  4. Maximum Opportunity: To profit from this, stay calm during uncertainty. Panic causes tunnel vision, while calm acceptance of danger allows us to assess the situation and see opportunities.

  5. More Liquidity Incoming: The main reason the cycle top likely isn't in yet is due to liquidity. As global macro policies ease, liquidity is set to surge into 2025, usually translating to higher crypto prices.

  6. Market Ends With A Bang: The final stages of previous bull markets have been notably parabolic. While history doesn't always repeat, it often rhymes, and we haven't seen this climax yet. According to recent data, only around 30% of altcoins have appreciated YTD.

  7. Banana Zone Is Programmed: The "Banana Zone" is a period when asset prices soar, driven by the 4-year global liquidity cycle. Typically topping in the ‘fall’ phase, we’re currently in the summer phase.

Additional Insights:

  • Post-Halving Performance: BTC’s post-halving performance suggests more upside. Macro tops weren’t hit until after 200 days post-halving. The current post-halving chop is normal.

  • Four Year Cycle Theory: The 4-year cycle is like astrology for crypto, possibly driven by global liquidity cycles and election seasons. If it repeats, expect a high in October 2025.

  • The Pre-Image Fallacy: Signals happen sooner each cycle due to more "pre-images" of crypto. This creates a tendency to think a cycle’s over before the new phase begins, which blooms later with experimentation and optimism.

  • Extremely Low Social Risk: The most fun and dangerous market times are marked by extreme euphoria. The first half of 2024 saw very low social risk — the market wasn’t overheated but rather icy cold, with retail showing no interest in altcoins.

To summarise

  • The last stage of the bull run is the most parabolic.

  • The wall of worry will trick people into thinking it’s over.

  • Liquidity is set to rise, possibly leading to a "banana zone."

  • The 4-year cycle suggests a macro top in 2025.