Overall Macro View of the Market
Dear Readers,
Given we appear to be in the corrective mode at the moment, in the shorter term, I thought it would be timely to zoom out a little and re-focus on the overall macro view of the market which looks encouraging. The intention here is to show that the establishing of positions at what now looks like the beginning of a recovery off an extended basing range can afford for our longer-term trades and investments to see some consolidation and volatility in the shorter-term to the downside. And that indeed, such consolidation should not serve to surprise us or to shake us out of those positions, but rather should be expected as the normal course that a very speculative market will take.
I’ll look at the Total Market Cap, the BTC chart, ETH/ USD, and finally a specific alt coin that I think typifies the wider market.
Crypto Total Market Cap
In this first chart that looks at the total money invested in this space, we can see that the time elapsed for the recovery off the bottom [2023] equates to the period of the decline [over the course of 2022]. We also see here a series of higher lows and highs. Also of significance in this chart is the comparison with the much more volatile correction and recovery surrounding 2019 [the explanation for this reducing volatility is the macro principle of a maturing market in my opinion].
We have here on the technical face of it, in the chart where only price development matters, a recovering market positioning itself to push on to previous highs and further… though that may yet take some time. When looking at the macro like this, one should be encouraged to take a low time preference [a mindset extended out to the future] which serves to correct that high time preference, not to mention sentiment, that we are all too often habitually used to.
Visually [and the chart on the log scale is always a visual and proportionate reference], we can also see that a later correction after a run up to the previous high of the market cap would not be at all surprising. This is suggested by the base curve that functions akin to the logarithmic growth curve as subscribers are no doubt familiar with on my often posted BTC chart. This curve also denotes diminishing or reducing returns on investment - though returns in the future may not be quite so astronomic as previously, they should nevertheless continue to be stratospheric.
BTC Chart
I doubt how one could get a healthier picture of BTC price development than the one which has actually developed. You have a series of what I call ‘speculative episodes’ or ‘mini bubbles’ correcting heavily each time. Consistent with the principle of a maturing market the range of these episodes are reducing [the macro channel is converging] with the corrections of each episode denoting a process that would culminate in eventual price stability [the realization of a market cap akin to gold’s]. The path toward price discovery/ capitalization is also the logarithmic growth curve.
Here also you see the series of higher highs and lows that are the bread and butter of the trader/ investor, that provide that confidence toward a strengthening market after a prolonged period of consolidation [the ‘popping’ of the previous ‘mini bubble’]. With the low time preference in mind of the investor, the buyer of a position [if not already long] is more tolerant of the volatility that comes with an exponentially moving price. Realistically, if unexposed at all to BTC, they are not going to be too concerned, with price sitting right on the ‘buy zone’ at the moment, with some further consolidation/ volatility potentially to the downside. Buying a tranche would cover risk to the upside while remaining tolerant of the inevitable volatility. The rationale for the investment would be a hedged confidence in the greater macro trend.
ETH/ USD Chart
As the queen of the alts, a chart of ETH is useful in any overall view of the market. At first glance, you can see the increasing stability/ decreasing macro volatility when comparing the subsequent move up and correction to the previous. Also notable is the similar extent of the correction in real [and relative] terms as measured by the fibs. And once again that extended series of higher local lows and highs that bodes well for a renewed bull market at some point. The rationale for establishing a position in alts, beside that in BTC, is that one would have something to sell in a bull market while providing the luxury of continuing to sit on BTC even as it inevitably corrected once again. Also, due to the expected greater volatility in alt/ USD, alts are the obvious trades to sell in order to take some profit.
SNX/ USD
And finally to a particular chart that I believe typifies the more general pattern as found across many of the alts, especially the more major ones. The significant factors here for confidence in a macro recovery are:
1] A 38% correction of the move up [in real terms]
2] The lapse of time at the base equating with and even longer than the decline/ correction
3] A breaking of that basing range to the upside with a series of higher highs and lows.
Conclusion
Like an adolescent, the Crypto market has seen explosive growth, and yet as the market matures that growth [in terms of ROI/ return on investment that interest the investor] is slowing down. It has always taken time and patience to see gains in the market. Given the investor’s low time preference, this is only to be expected. Also expected is the reward that comes, in the not-not-too-distant future, from not only enduring a long grind at the bottom but also from bravely establishing positions in that volatile bottoming range.
Until next time,
Stay, relatively, safe out there,
Dave the Wave.