Below, we summarize the evolution in our thinking over the past few months. Our regular newsletters (or trading strategy reports) offer a detailed day-to-day analysis. Still, this summary focuses on insights from various TV interviews in which we have participated recently. These interviews have yielded many important lessons. | As we noted in our newsletter reports during recent weeks, Bitcoin may be at a critical juncture. | 👇1-7) April 19, 2024: Why Bitcoin May Fall to $52,000 | (Video link) | Summary: | The primary driver for the recent Bitcoin price rally was the inflow of funds into Bitcoin ETFs, which has now dried up over the past 4-5 weeks. The market internals have become weaker, with funding rates decreasing significantly, indicating a lack of speculative demand. The upside drivers for Bitcoin are no longer present, and the market is facing a risk-off environment, leading to a potential correction to the mid-50,000s. The impact of the Bitcoin halving event may not be as bullish as previously expected, as the miners are likely to sell their inventory after the halving, offsetting the reduced supply. | Macro factors, such as high inflation and interest rate hikes, have a more significant impact on Bitcoin's price than the halving event itself. Bitcoin has not performed as a hedge against inflation and geopolitical risks, as it has sold off during these events, suggesting a more significant overhanging issue. The drying up of ETF inflows is a crucial signal, as it indicates a lack of demand from retail investors, who are typically the target audience for these products. | 10x Research has taken a cautious stance, selling their tech stock positions and remaining on the side-lines with Bitcoin, waiting for the market to stabilize before potentially re-entering. A potential correlation exists between the Bitcoin futures funding rate compression and the reduced ETF inflows, suggesting a potential offset of margin trading positions. The speculative bubble in the altcoin market, particularly in Korea, has also deflated, with trading volumes returning to average volumes. | 👇2-7) March 19, 2024: Is Korea's Upcoming Election Behind the Meme Coin Frenzy? | (Video link) | Summary: | The meme coin rally started around February 28th and coincided with political developments in Korea, a market known for its active meme coin trading. Shiba Inu (SHIB) was the top-traded token on the Korean exchange Upbit for seven consecutive days, with over $1.3 billion in trading volume. The performance of meme coins is heavily skewed towards Asian trading hours, with 80% of the gains occurring during this time. This is attributed to the large retail investor base in Korea. | The ruling party in Korea initially indicated they would approve a Bitcoin spot ETF but then backtracked on February 28th, leaving the status quote in place, which may have sparked the meme coin buying frenzy. Trading volumes in Korea have surged, reaching up to 16 billion dollars, equivalent to twice the entire stock market's daily trading volume. | The meme coin rally may lose some steam after the Korean elections in April, as the political catalyst driving the trend could dissipate. The Bitcoin story is expected to continue for the rest of the year, while other catalysts like the Ethereum upgrade and the potential Ethereum ETF approval are less certain. | 👇3-7) February 17, 2024: This Bull Market Might Last another 12 to 18 Months | (Video link) | Summary: | Capturing the bull market cycles in Bitcoin is critical. Bitcoin has experienced significant bull markets in 2011, 2013, 2017, and 2021. The timing of entry and exit points is crucial for maximizing gains in the Bitcoin market. Bitcoin has rebounded above $50,000 after a dip following the approval of Bitcoin ETFs. Positive investor sentiment and inflows into Bitcoin ETFs are driving the current rally. | Historically, Bitcoin has tended to perform well during Chinese New Year and in U.S. presidential election years. Bitcoin has generated positive returns in the years following the halving events. Upcoming earnings reports from crypto companies like Coinbase may not be as crucial as their outlook for the future. The focus will be on management's assessment of trading activity and growth prospects. Earnings reports can be backward-looking, reflecting the previous quarter's performance. The market is more interested in the companies' plans and ability to adapt to the changing market conditions. MicroStrategy, a primary corporate holder of Bitcoin, is rebranding itself as a Bitcoin development company. | The company has been issuing additional shares to fund its Bitcoin purchases, which has led to its stock price becoming overvalued compared to the underlying Bitcoin holdings. Based on regression analysis, MicroStrategy's stock price is currently overvalued compared to the price of Bitcoin. The company has historically issued more shares when its stock price was overvalued, using the proceeds to buy more Bitcoin. MicroStrategy's stock price has been volatile, dropping from $700 to $500 and rebounding to $700. The company's share issuance and Bitcoin purchases have been timed to coincide with periods when its stock was overvalued. MicroStrategy's recent stock price increase suggests it may issue more shares and use the proceeds to buy more Bitcoin, leveraging up ahead of the upcoming halving event. | Traditional equity investors seeking exposure to Bitcoin have turned to MicroStrategy's stock as a proxy, contributing to its overvaluation. This dynamic has allowed MicroStrategy to issue more shares and increase its Bitcoin holdings. Investors seeking exposure to the upcoming Bitcoin halving event may turn to mining stocks or MicroStrategy as a proxy. Historically, Bitcoin has experienced substantial price rallies in the 300-400 days leading up to and following the halving events. | The halving event indicates a reduction in the supply of new bitcoins, which has historically led to miners restricting the flow of bitcoins onto exchanges, contributing to price increases. The current imbalance between Bitcoin demand (e.g., from ETFs) and supply (from mining) is expected to become more pronounced after the halving event, potentially driving a parabolic price increase. | The participation of traditional investors in the Bitcoin market through vehicles like ETFs is a new dynamic that could amplify the price impact of the halving event. Ethereum's price action is also closely watched, with the potential for an Ethereum ETF as a catalyst for further price appreciation. Technical analysis suggests that a breakout above the $2,750 level could lead to a relatively quick move toward $3,400 for Ethereum. The successful launch and operation of Bitcoin ETFs has increased the likelihood of an Ethereum ETF being approved, which could further boost Ethereum's price. | Bitcoin's current price of around $50,000 is lower than the previous $80,000 year-end target, but 10x Research's updated $70,000 target for 2024 is still considered achievable. 10x Research Bitcoin price predictions are based on models incorporating factors like the "January effect" and the "Halving effect," which have historically been accurate in predicting Bitcoin's performance. | 10x Research's more conservative $70,000 target for 2024 is due to the relatively mediocre performance of Bitcoin in January, which is a crucial input for the "January effect" model. 10x Research remains confident that Bitcoin can reach $70,000 in 2024, as the market continues to be driven by the upcoming halving event and the increasing participation of traditional investors. | 👇4-7) December 18, 2023: The cryptocurrency market will probably rally further | (Video link) | Summary: | Macroeconomic factors significantly influence the cryptocurrency market. The downturn in November 2021 and the subsequent recovery are attributed to these larger economic trends. The potential entry of major institutional investors, like BlackRock, is expected to impact the market positively. The approval of a Bitcoin spot ETF could catalyze further rallies. | Historical precedents suggest significant price increases leading up to regulatory approvals of cryptocurrency products. The emergence of central bank digital currencies (CBDCs) could influence cryptocurrencies, potentially increasing general adoption as public comfort with digital assets grows. However, there's a noted preference for non-government-associated digital currencies. As the cryptocurrency market matures, the presence of big players and institutions may lead to more regulated and compliant market conditions, which could attract substantial institutional flows into the market. | 👇5-7) December 7, 2023: Analyst Who Predicted Bitcoin Reaching $45K Explains Key Drivers Behind Latest Bull Run | (Video link) | Summary: | A reduction in inflation rates began in January. Bitcoin positively reacted to the closure of three crypto-related US banks. Movements by Blackrock regarding a potential Bitcoin ETF in June sparked the rally, and a dovish shift in stance by Federal Reserve Chair Jerome Powell in October caused prices to rally further. Speculation about large institutional inflows into crypto through Tether shows institutional demand, which sparked market confidence in cryptocurrencies. The influence of global economic factors on digital asset markets remains a key driver, and the potential for regulatory changes to further drive or inhibit market growth. 10x Research predicts a possible surge in the price of Bitcoin, suggesting it could reach $57,000 upon approval of a Bitcoin ETF. This news is a highly anticipated development among crypto enthusiasts and investors, as the approval could potentially eliminate the overhang that has been predominant in the sector. A Bitcoin ETF would allow increased accessibility for individual and institutional investors who have been cautious about direct investments in cryptocurrency due to its high volatility and the intricacy of its underlying technology. Moreover, such approval would signify a landmark evolution in regulatory authorities' perception of cryptocurrencies, creating a sense of legitimacy and credibility for the asset class. The transition from a relatively niche investment to a mainstream asset can be expected to drive additional capital inflows, likely heightening Bitcoin's price. However, the impact of potential approval remains speculative and relies on various market factors. The Bitcoin market's reaction to the news and the extent to which this approval could differentiate from previous situations are significant considerations for investors. | | 👇6-7) November 28, 2023: Bitcoin price could go to $57,000 pending ETF approval | (Video link) | Summary: | The recent sell-off was triggered by a significant event in the cryptocurrency industry involving Binance's CEO pleading guilty to money laundering charges. The final settlement with the DOJ of $4 billion, significantly lower than the speculated amounts, helped stabilize and lift Bitcoin prices. Bitcoin tends to rally at the end of the year. 10x Research suggests that the market can overlook negative news, like the Binance incident, due to its resilience and the recurring seasonal uptrends. | Despite the uncertainties concerning the SEC, the market's historical resilience and potential for recovery and growth amidst these challenges. Periods following a pause in rate hikes historically create conducive conditions for Bitcoin to rally, comparing it to similar past financial cycles. The potential approval of a U.S. Bitcoin ETF based on spot prices is a critical catalyst for Bitcoin's price increase. Significant capital inflows from institutional investors could follow such an approval, given the significant capital base and strong ETF culture in the U.S. | Even a modest reallocation from traditional assets managed by investment advisors could lead to substantial capital inflows into Bitcoin. 10x Research predicts that Bitcoin could reach $57,000 in the medium term. Trends in tech stocks often mirror or predict movements in the cryptocurrency market, especially among emerging altcoins. | | 👇7-7) September 29, 2023: Bitcoin Mining Companies as a Big Bet for 2024 | (Video link) | Summary: | Bitcoin has recently broken out of a triangle formation, reaching the $27,000 mark. Historically, Bitcoin has performed well in October, with an average gain of 22% in 8 out of the last 10 October. Macro factors such as oil prices, equity markets, interest rates, and the perceived hawkishness of the Federal Reserve are influencing the recent Bitcoin price movement. Despite the recent inflation data being spun as an improvement, the inflation rate is still above the 2% target, and interest rates have risen significantly. | 10x Research believes that the Federal Reserve's hawkish stance is not entirely justified, and a more dovish approach could lead to a more aggressive Bitcoin breakout. 10x Research has conducted a regression analysis to determine the potential upside for Bitcoin miners' stock prices in the event of a Bitcoin price rally to new all-time highs. The analysis considers equipment efficiency, operational costs, and the upcoming Bitcoin halving event. 10x Research has identified miners, such as Marathon Digital, with competitive advantages in mining costs and efficiency. | 10x Research recommends a basket of 10 Bitcoin mining companies trading at a steep discount to the current Bitcoin price, providing a margin of safety. The upcoming Bitcoin halving event, where the block reward will be reduced from 6.5 BTC to just over 3.125 BTC, is a significant headwind for miners, and the analysts have factored this into their analysis. 10x Research has divided the miners into two groups: those with mining costs above $30,000 per BTC, which they would avoid, and those with lower costs, which they believe are good investment opportunities. | 10x Research believes that the launch of an Ethereum Futures ETF is less significant than the potential approval of a Bitcoin spot ETF. If approved, 10x Research expects that a Bitcoin spot ETF could attract significant inflows, potentially around $20-30 billion, which would be an important catalyst for the Bitcoin price. 10x Research is not a big fan of Bitcoin Futures ETFs, as they tend to underperform due to the roll costs and other higher expenses. | |
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