WEEKLY ALPHA - Did we bottom out or not? Part2

A wonderful pump well aligned with a new risk-on trend initiated by Gensler dovish at the FOMC + Yellen, is driving us out of the 60/50k range rather quickly. Are we're so back or are we gifting another round of exit liquidity to the bears ?

This weeklyalpha will be very short because I don't have a clear view of the market..!

The main question today is: does this rally have the legs to last or not?

I am frankly stunned by the buy strength that has manifested (or has the sell pressure around 57k disappeared?), and I still can't get a clear idea of whether this is a pump scam or something real akin to the restart from January's 38k:

The scenarios are quite similar: 13 days in January and 23 days in April/May of downtrend that led to the local bottom from which the restart originated. The market sentiment and psychology is very similar indeed, and in both cases we find:

• A prolonged rally for months showing all kinds of capital rotations, and reaching the peak of euphoria (memeseason, endless product launches, skyrocketing funding rates), ending in multiple leveraged long liquidations, leading to death of bullish sentiment;
• The market begins to call lower levels as possible outcomes, such as the 52/48k I personally mentioned in the last weeklyalpha, creating a bearish atmosphere where each rally is progressively shorted more and more decisively, developing an overall idea that a downtrend is a must. The market's looking for the 52k, in a certain sense, looks remarkably like when it was looking for 32k in January.
• Funding rates completely knocked down and brought to even negative, which did not happen in January. Ethena's influence (dominance in BTC open interest: 4.1%) in shorting bitcoin is increasingly invasive and tedious: on the one hand it helps the market to support more leverage, and of the other hand it does not allow to understand the health of the market properly:

Besides bitcoin, we experienced a phase of very low or even negative fundings in altcoins as well, for a period almost as long as January:

But unlike back then, I think it is much easier today to see funding rising again, because the underlying sentiment remains extremely bullish, and so it is very easy for the market to return to the orderbook to long euphorically. This is one of the few cases where it makes sense to look at the fear and greed index, which shows that fear was really short-lived in the $57k dump, unlike the January trend that took weeks to recover:

• In this correction from 74k to 57k, btc lost 23.5%, quite coherent with the -21.3% decline in January. Total3, on the other hand, due to the particular dynamics of this cycle (huge supply decelerating price discovery), lost much more: -26% compared to -16.2% in January. This is the deepest downtrend we have had in bitcoin since the new cycle originated from the November 11, 2022 bottom. And it is very little when we consider that in the past bullruns, the path was full of dumps from -30 to -40%

• This Friday, the US bitcoin spot ETFs made a very solid bid (+$378m netflow) after a negative period, exactly as in January (they were being knocked down by GBTC's outflows), even resulting in GBTC's first positive netflow, and this could be the beginning of a new accumulation trend. In the case it happens, we can make 2 very clear observations: 
  1) tradfi clearly sees bitcoin as a risk-on asset, and therefore tends to treat it like nasdaq or a beta-tech instead of as a safe haven asset;
  2) tradfi may have wanted to wait for consolidation, to see if bitcoin is smoke or truly worth the price at which it trades, before showing up again to buy:

An important difference between the two is that Bitcoin at 57k is an interesting support: it may be more than enough support to bottom...as well as not. 

BTC at 38k corresponded to bounce off very good support in the short term and a critical point in the HTF structure.
Bottoming at 57k is equally important on HTF, but less so in the short term:

However, in the end, do we really care that much whether we bottomed or not?

I am honestly and sincerely very hesitant and careful in writing about buying or selling in the channel, for so many reasons: I am not a trader and I can be quite wrong, my goal in the channel is to bring thoughtful content, to help those who read me to look at the market in its entirety, or to understand market phases... but when I am really bullish and confident, I write it with conviction and from there I base all my future speeches and theses that I call back several times in the channel or weeklyalphas (as I am about to do now).

Looking back over all the zones where I have advised buying in this downtrend from 74k, there have been 3 occasions:

1) April 12, first phase of the altcoins giga dump: TOTAL3 at $628b

Such a beautiful falling knife is really hard to resist, and price actions like this tend to coincide 99.9% with a black swan offering huge historical buy opportunities. I was rushing to buy and suggested doing the same:

On the night of April 12-13, I waited for the ETFs data to make some final reflections on the purchases made: at that time we were entering the phase of ETFs outflows, and the fear of huge outflows at that time was quite solid (they later proved to be a nothingburger because we did not see any particular outflows -- until a few days ago). Along with a collective market attempt to long the bottom in leverage, completely avoiding buying spot, I preferred to sell a good portion (about 50%) of the purchases made at that time. 

So within about an hour after the ETFs data release, I made my considerations and trades, and then updated the post and left a memo at the bottom to inform you about my “going back” from the “slurping of the dipperino”, probably something I made too recklessly in the previous hours:

2) April 13, second phase of the altcoins giga dump: TOTAL3 at $575b

Here, as I wrote in that week's weeklyalpha, I pretty much went all-in, . Desperation echoed everywhere, and then Lisan at Gaib (GCR) appeared to tweet bullish, boosting morale and leading to a sharp recovery. I was very caught up in the emotions too, I could have used better language, but I think “bottom signal” + “max bidding” had been clear enough. Total3 has never seen that value again to this day, even with BTC at $57k.

3) May 02, BTC dump to $57k: 

With a tiny bit of delay (BTC already approaching 58k when I published), I communicated my third buy zone (I had sold a few altcoins higher around $65k just before + borrowed new capital from AAVE to fund myself)

So, lets try to summarize them in a chart: 

The entry zones where I have been a buyer and that I have shared in the channel are fantastic for the long term in my opinion, and they represent a very good averaging of the downtrend. I rarely increase exposure to bitcoin because that one I've actually accumulated in 2023. At the same time I try to be cautious about rotating portions of it slowly over time into altcoins. It really has to be worth it! Rather, I strive to mortgage BTC on AAVE in order to have more capital to invest in altcoins, while always staying extremely far away from minimal liquidation risk.

Bitcoin remains the foundation of my wallet that allows me to hold up very well in downtrends and I still can't do without it. later in the cycle, when we get closer to the final bullrun, I will open up more to more solid rotations in altcoins.

So, back to the original question: do we really care that much whether we bottomed or not?

Honestly no! We are here for the long term, and with these entries, I personally have no reason to sell, even if we are destined to end up at 52k! Having bought in such great areas, and not knowing if another opportunity will happen to bottom maybe at 55 or 52k, I would rather just hold, be happy with the entries, and avoid the stress of having to make 500 trades to be able to.. what? carve out tiny profits? No thanks! I am already satisfied with how I have taken these opportunities! And in case the chart keeps going up, I am as perfectly exposed as I would like to be.

On Saturday I may have been “overly bearish,” forcibly looking for behavior in the market that may have already happened, and I am the first to have represented it in these words: "The real bottom is the one during the rebound, the market assumes it is a failed rally, destined to come back down. In that mindset, long leverage does not develop, and fundings remain sustainable for healthy growth."

Will be happy to be wrong, given the entries I summarized above! Just trying to stay sharp in an environment where it is easy to get carried away! Have a great week everyone