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To investors,
Capital allocators have attention spans of ants and now they seem to have short-term amnesia as well. In recent days, bitcoin has fallen from the latest all-time high of $124,000, which has sparked a debate on whether the bitcoin cycle is over.
Does it matter that bitcoin is up 20% year-to-date or up nearly 2x in the last year? Nope, of course not. The media and market commentators are busy injecting fear and uncertainty into the market. They want to know if the pullback signals the end of this cycle. They say maybe the bitcoin hype was unsubstantiated. Maybe the bitcoin bears were right that the digital currency could never fulfill its promise.
This is all noise.
The data is overwhelming — the bitcoin bull market is not over yet. Let’s start with the 30 Bitcoin Bull Market Peak Indicators from CoinGlass. We have not hit a single one of them yet. Zero for Thirty.
It is hard for the bull market to be over if we haven’t hit any of the market peak indicators.
We also know that bitcoin tends to cool off in late August and all of September in bull markets. Investor Yannick Maurer writes “In each of the 2013, 2017 and 2021 bull market years, July, August, September and October were green, green, red and green respectively. The same is likely to occur this year. We might see a pullback in September followed by a final 20-30% of gains in October and into early November.”
And if you are merely focused on the short-term, analyst Frank Fetter points out that bitcoin appears to be oversold at the moment according to the Relative Strength Index.
So the recent drawdown in price is likely part of the normal volatility in bitcoin bull markets. We used to get multiple 30% drawdowns in a bull market, now we tend to only get one or two of the large drawdowns. Instead, we continue to see 5-15% drops in price which are healthy. They help to clear out leverage and allow the asset to set itself for the next leg higher in price.
You can see this reset clearly in this dashboard assembled by Frank Fetter. All four metrics are either neutral to cool, which means the market is still in great shape for continued appreciation in price through the coming months.
And here is a crazy stat from Fidelity’s Chris Kuiper. He writes “A significant shift happened in Bitcoin’s ecosystem post-2024 halving: For the first time, the amount of BTC held for 10+ years (ancient supply) is growing faster than new coins are mined. An average of 566 BTC per day are moving into this long-term category, compared to 450 new BTC issued daily. This signals strong conviction from these long-term holders.”
These on-chain analytics, combined with the broader market trends, prove that bitcoin is simply maturing. We are now getting to a market cap size and a market education level where every market participant can now prudently allocate capital to bitcoin.
This will bring down volatility over time. I went on CNBC’s Squawk Box this morning to explain:
So regardless of what you are hearing from friends, family, or the media, I do not believe the bitcoin bull market is over. It appears we are watching the seasonal cool-off for the asset before the final leg up in this bull market. October and November should be fun, but we must pay our dues in the meantime by holding through some short-term choppiness. A small price to pay for an asset that has a 10-year compound annual growth rate over 85%.
Hope you all have a great day. I’ll talk to everyone tomorrow.
- Anthony Pompliano
Founder & CEO, Professional Capital Management
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Bitcoin Stock Risks & The End of The 4-Year Cycle?
Matthew Sigel is the Head of Digital Assets Research at VanEck, and also the Portfolio Manager of the NODE ETF.
In this conversation we talk about public equities related to crypto, recent staking decision from the government, the Fed, bitcoin mining companies, what will happen with stablecoins, and expectations for the US government buying bitcoin.
Enjoy!
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