Has the Crypto Market Bottomed?

And why that’s actually the wrong question for long-term investors to ask.

Over the past two weeks, three of my favorite crypto research teams (outside of Bitwise) wrote in-depth pieces on the same topic: Has crypto bottomed?

• Galaxy Digital: Bitcoin May Not Have Bottomed Yet. Here’s Where the Data Says It Could

• NYDIG: What’s Weighing on Bitcoin?

• Standard Chartered: The Low Is In¹

They are great pieces, full of in-depth statistics and detailed analysis. I recommend you read them all.

But if you’re looking for an easy answer to the question, I’ve got bad news for you: These three great research teams disagree.

Has crypto bottomed?

• Galaxy Digital: No

• NYDIG: Maybe (although probably not)

• Standard Chartered: Yes

Let’s look deeper at what each one says.

Three Firms, Three Views

Galaxy Digital

Galaxy examines bitcoin’s 17-year history and finds 13 different conditions that have always been present when crypto markets bottom. These include measures related to valuation, profit-taking, miner stress, market trends, historical cycles, and sentiment. Many of these statistics will be familiar to long-term followers of bitcoin, including things like the 200-week moving average, the Fear and Greed Index, and the Mayer Multiple.

Galaxy finds that four of these conditions are fully met, two are partially met, and seven are not met. It concludes that the bottom in bitcoin will be somewhere between $30k and $54k, with $40k-$46k being their “base case.”

NYDIG

NYDIG takes a similar multi-statistic approach, evaluating bitcoin versus prior cycles and comparing the current pullback to prior pullbacks in terms of “length of drawdown,” holder profit/loss (what Bitcoiners call “MVRV,” or Market Value to Realized Value), and other measures. The metrics NYDIG is watching are close to levels of past cycle lows—but not yet at the point of maximum pain.

The report concludes that the current pullback “exhibits many of the characteristics of a cyclical low, but fewer signs of the outright capitulation that has historically accompanied major bitcoin bottoms.” However, it notes that the current market cycle may have been fundamentally altered by institutional demand, meaning this pullback could well be shallower than those in the past. If so, the bottom may already be in.

Standard Chartered

Standard Chartered is no Pollyanna on bitcoin. In February, when bitcoin was trading at $67k, it lowered its year-end forecasts and said prices could tumble to $50k. It cited a deteriorating macro environment and concerns about ETF selling.

But this past Friday, it said the bottom was in at $59k. Some of the reasons were the prospect of a U.S.-Iran deal and the long-awaited SpaceX IPO (it believes ETF holders had been selling bitcoin to raise cash for the offering, and that selling pressure will begin to ease).

Standard Chartered now expects bitcoin to reach $100k by year-end.

What These Three Reports Have in Common

You might be wondering why I’m sharing three reports that say different things. One is bullish, one is neutral, one is bearish. What are you supposed to take away from that?

Here’s the thing: The three reports actually share more in common than it first appears. And for long-term investors, there is more signal in what they agree on than where they differ:

1. They all agree the bottom will come this year.

2. They all agree we are closer to the bottom than the top.

3. They all agree bitcoin will go on to have another bull cycle.

Bitcoin trades around $67k as I write this. One report says the bottom is already in at $59k, another thinks we may trade to $50k, and a third thinks we’ll likely bottom around $43k. But it bears repeating: All three believe we’ll bottom.

And that is what matters. If you’re a long-term investor, it doesn’t matter much if bitcoin bottoms at $40k, $50k, or $60k. What matters is whether it then trades to $100k, $200k, and $1 million. If it hits any of those, it’s a great return from here.

That’s the irony of the current moment. We’re all asking if the bottom is in, when what matters is whether the top is in. As I see it, as long as the top is not in, bitcoin is screaming buy.

So is the top in?

I don’t think so. The long-term drivers of bitcoin haven’t gone away; in fact, they’re stronger than ever. Government debt keeps compounding with no plan to stop it. Inflation keeps changing the measuring stick for what counts as wealth.  Faith in centralized institutions like governments and banks is waning. The world is getting more digital by the day. Access to bitcoin is improving. Bitcoin natives are getting older, wealthier, and more powerful by the day.

There are some threats worth worrying about, including quantum risk and regulatory retrenchment. But as I see it, the setup feels better than it did during any other crypto winter.

Note:

(1) The full Standard Chartered research piece is only available to clients, but the linked news article captures the gist of the piece.

Risks and Important Information

No Advice on Investment; Risk of Loss: Prior to making any investment decision, each investor must undertake its own independent examination and investigation, including the merits and risks involved in an investment, and must base its investment decision—including a determination whether the investment would be a suitable investment for the investor—on such examination and investigation.

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