The Crypto Comms #35; BTC Battles Cost Basis

I could enumerate a laundry-list of reasons why crypto is all a scam. In this list I’d include unregistered securities, stories of fraud, bad actors and various forms of ponzinomics, which are contingent on tricking people into willingly parting with their money.

But this would only be half of the story, and at the depths of the bear market everyone and their mum acts as if it’s the whole story. As a once-hailed crypto legend said (prior to being margin called and wrecking the entire market): those who do not manage their risk will have the market manage it for them.

Risk is not a concept that’s restricted to margin trading or leveraged markets. Due diligence in accordance with your personal risk-tolerance is the only way to navigate this racket while maintaining your sanity. For years now, I’ve said to treat any crypto project as a scam until proven otherwise. Time continues to prove this saying correct — you never know who’s swimming naked or who’s out to get you until the proverbial excrement hits the fan.

In 2023, let’s have the humility to stick to time-tested mantras, and the courage to act on our convictions. Let’s also recognise that the Bitcoin story is far more inspiring than it’s given credit for.

In this issue:

  • Bitcoin analysis

Bitcoin analysis

Starting the year a-fresh hasn’t meant anything for Bitcoin yet. BTC/USD is stuck in consolidation, which is not surprising given that everyone’s only just coming back from the Christmas season. So now that the holiday period is over, we should anticipate life creeping back into the market.

As ever, Bitcoin has been traversing a range. The turn of the year, monthly and weekly closes provide more levels to work with.

BTC/USD levels of interest. Liquidity draw to the upside.

The technical picture is fairly straight-forward. On a monthly time-frame, maintaining price above the yearly open ($16,500) is a tailwind for a contrarian bullish viewpoint.

The weekly setup is contextualised by the previous monthly range, i.e., $16,200 & $18,400. These two levels are most important for the immediate short term given that B.VOL is at historical lows. Bitcoin volatility doesn’t tend to stand still forever — it’s now at the lowest point in recorded history.

Similarly, the daily setup is contextualised by prior weekly lows ($16,300) and highs ($16,900). The weekly lows can be discounted given their proximity to last month’s lows. Provided price traverses in this tight range, there is no compelling medium or high-timeframe setup. As noted in the telegram channel, this is merely choppy price-action that has no meaning. It’s noise.

From a technical standpoint, a daily close below $16,000-$16,200 (it’s always a price bloc — this isn’t a science) is bearish. The way this happens is just as important as the bloc profile itself — a slow bleed means another entity is blowing up, and fresh lows are on the table.

That said, in my view, a breakdown would be an excellent buying-opportunity given the wider context at play. Nothing lasts forever, especially bear markets.

Historic BTC Battle

One data point which has me (relatively) convinced that a $20,000 retest is imminent is Bitcoin’s ongoing battle with its cost-basis.

Breaking and holding above $20,000 means price acceleration has begun. Until then, it’s forbidden to show any excitement! I expect price acceleration upwards by March/April 2023.

For now, the market is accumulating BTC, and dumping centralised unregistered securities like Solana — so much so that Bitcoin dominance (BTC.D) is ticking higher (42%). If your protocol(s) of choice has a CEO, a treasury and a marketing department, it is not decentralised and is wide-open to regulatory scrutiny.

Nothing left to sell

The largest and most irresponsible entities have run out of Bitcoin to sell. Everyone who could go bankrupt at the margins, has gone bankrupt. Binance and DCG are considered weak links that could potentially kick off the next leg lower. But if we circle back to the logic that ‘irresponsible entities’ are washed out, then how much panic would it take for responsible entities to suffer the same fate?

It’s becoming exponentially harder to create new lows. Sooner or later, the Fudsters will capitulate and mass market buyers will step in. In 2022, crypto prices were an indication of whether institutional collateral/reserves were liquidated — most tokens are down 95% — some are down 100%. Granted, there’s more room to spiral downwards, but as with every market cycle, once a vapourware project loses momentum, there’s no coming back.

Besides that, we have ourselves a situation where irresponsible leverage has been wiped out of crypto markets, but not legacy markets. If I were a betting man (which I most certainly am), I’d say capital osmosis is coming to Bitcoin— first slowly, then all at once. Led by Gold, the sound-money basket (BTC, LTC, XMR) is well positioned to weather the storm, and emerge strong.

On another note, I’ve come to realise that at its purest form, investing is just an expression of values. The human condition means ‘purity’ is a fantasy, but at extremes this fantasy comes the closest it will ever be to reality.

Enough boomer talk.

Cheers. Stay positive.

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Dear readers,

The purpose of this newsletter analysis is to provide context to current events and cryptocurrency markets. It is released every Tuesday. I am not perfect and this is not a science — nor is this newsletter analysis a signals service or financial advice. While I cannot promise perfection I do my best to be honest and transparent.

Thank you for reading.

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Journalist-turned crypto-writer & analyst; forging the narrative, stacking sats.

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Chris on Crypto

Journalist-turned crypto-writer & analyst; forging the narrative, stacking sats.