Bitcoin bear market will last ‘2–3 months max’ — Interview with BTC analyst Philip Swift

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Bit­coin (BTC) may see more pain in the near future, but the bulk of the bear mar­ket is already “like­ly” behind it.

That is one of many con­clu­sions from Philip Swift, the pop­u­lar on-chain ana­lyst whose data resource, Look­In­to­Bit­coin, tracks many of the best-known Bit­coin mar­ket indicators.

Swift, who togeth­er with ana­lyst Filb­filb is also a co-founder of trad­ing suite Decen­trad­er, believes that despite cur­rent price pres­sure, there is not long to go until Bit­coin exits its lat­est macro downtrend.

In a fresh inter­view with Coin­tele­graph, Swift revealed insights into what the data is telling ana­lysts — and what traders should pay atten­tion to as a result.

How long will the aver­age hodler need to wait until the tide turns and Bit­coin comes storm­ing back from two-year lows?

Coin­tele­graph (CT): You’ve point­ed out that some on-chain met­rics such as HODL Waves and RHODL Ratio are hint­ing at a BTC bot­tom. Could you expand on this? Are you con­fi­dent that his­to­ry will repeat this cycle?

Philip Swift (PS): I believe we are now at the point of max­i­mum oppor­tu­ni­ty for Bit­coin. There are numer­ous key met­rics on Look­In­to­Bit­coin that indi­cate we are at major cycle lows. 

We are see­ing the per­cent­age of long-term hold­ers peak (1yr HODL Wave), which typ­i­cal­ly hap­pens in the depths of bear mar­ket as these long-term hold­ers don’t want to take prof­it until price moves higher. 

This has the effect of restrict­ing avail­able sup­ply in the mar­ket, which can cause price to increase when demand does even­tu­al­ly kick back in. 

Bit­coin HODL Waves chart. Source: LookIntoBitcoin

We are also see­ing met­rics like RHODL Ratio dip into their accu­mu­la­tion zones, which shows the extent to which eupho­ria has now been drained from the mar­ket. This removal of pos­i­tive sen­ti­ment is nec­es­sary for a bot­tom range to form for BTC. 

RHODL Ratio is high­light­ing that the cost basis of recent Bit­coin pur­chas­es is sig­nif­i­cant­ly low­er than prices paid 1–2 years ago when the mar­ket was clear­ly euphor­ic and expect­ing +$100k for Bit­coin. So it is able to tell us when the mar­ket has reset in prepa­ra­tion for the next cycle to start.

Bit­coin RHODL ratio chart. Source: LookIntoBitcoin

CT: How is this bear mar­ket dif­fer­ent from pre­vi­ous BTC cycles? Is there any sil­ver lining?

PS: I was around for the 2018/19 bear mar­ket and it actu­al­ly feels pret­ty sim­i­lar. All the tourists have left and you just have the com­mit­ted pas­sion­ate cryp­to peo­ple remain­ing in the space. These peo­ple will ben­e­fit the most in the next bull run — as long as they don’t go crazy trad­ing with leverage.

In terms of sil­ver lin­ings, I have a cou­ple! First, we are actu­al­ly a fair way through the mar­ket cycle, and like­ly through the major­i­ty of this bear mar­ket already. The chart below shows Bit­coin per­for­mance each cycle since the hal­ven­ing, and we are already around the capit­u­la­tion points of the pre­vi­ous two cycles. 

Bit­coin bull mar­ket com­par­i­son chart. Source: Philip Swift/ Decentrader

Sec­ond, the macro con­text is very dif­fer­ent now. While it has been painful for bulls to see Bit­coin and cryp­to so heav­i­ly cor­re­lat­ed to strug­gling tra­di­tion­al mar­kets, I believe we are soon going to see a bid on Bit­coin as con­fi­dence in (major) gov­ern­ments cross­es down­wards beyond a point of no return. 

I believe this lack of con­fi­dence in gov­ern­ments and their cur­ren­cies will cre­ate a rush towards pri­vate “hard” assets, with Bit­coin being a major ben­e­fi­cia­ry of that trend in 2023. 

CT: What oth­er key on-chain met­rics would you also rec­om­mend to keep an eye on to spot the bottom?

PS: Be wary of Twit­ter per­son­al­i­ties show­ing Bit­coin on-chain charts cut by exotic/ weird vari­ables. Such data very rarely adds any gen­uine val­ue to the sto­ry shown by the major key met­rics and these per­son­al­i­ties just do it as a way to grab atten­tion rather than gen­uine­ly try­ing to help people. 

Two met­rics that are par­tic­u­lar­ly use­ful in the cur­rent mar­ket conditions:

The MVRV Z‑Score is an impor­tant and wide­ly used met­ric for Bit­coin. It shows the extremes of Bit­coin price mov­ing above or below its real­ized price. Real­ized price is the aver­age cost basis of all Bit­coin pur­chased. So it can be thought of as an approx­i­mate break-even lev­el for the mar­ket. Price only ever dips below that lev­el in extreme bear mar­ket conditions. 

When it does, the indi­ca­tor on this chart dips into the green “accu­mu­la­tion” zone. We are cur­rent­ly in that zone, which sug­gests that these may be very good lev­els for the strate­gic long-term investor to accu­mu­late more Bitcoin.

Bit­coin MVRV Z‑Score chart. Source: LookIntoBitcoin

The Puell Mul­ti­ple Looks at min­er rev­enues ver­sus their his­tor­i­cal norms. When the indi­ca­tor dips into the green accu­mu­la­tion band, like it is now, it shows many min­ers are under sig­nif­i­cant stress. This often occurs at major cycle lows for Bit­coin. This indi­ca­tor sug­gests we are close to a major cycle low for Bit­coin if we have not already bottomed.

Bit­coin Puell Mul­ti­ple chart. Source: LookIntoBitcoin

CT: Your fel­low ana­lyst Filb­filb expects BTC to reverse course in Q1 2023. Do you agree?

PS: Yes, I do. I think tra­di­tion­al mar­kets prob­a­bly have a bit more down­turn going into ear­ly 2023. At worst, I see cryp­to hav­ing a tough time until then, so prob­a­bly anoth­er 2–3 months max. But I think the major­i­ty of fear will soon switch toward gov­ern­ments and their cur­ren­cies — right­ly so. There­fore I do expect pri­vate assets like Bit­coin to out­per­form in 2023 and sur­prise many of the doomers who are say­ing Bit­coin has failed and is going to zero. 

Relat­ed: Bit­coin ana­lyst who called 2018 bot­tom warns ‘bad win­ter’ may see $10K BTC

CT: Octo­ber is a his­tor­i­cal­ly bad month for stocks — not so much for Bit­coin. How long do you expect BTC to be in lock­step with risk-on assets and what will be the catalyst?

PS: Bit­coin has been a use­ful for­ward-look­ing risk indi­ca­tor for the mar­kets through­out much of 2022. What will change in 2023 is that mar­ket par­tic­i­pants will appre­ci­ate [that] most of the risk in fact lies with gov­ern­ments, not with tra­di­tion­al­ly defined “risk” assets. As a result, I expect a nar­ra­tive shift that will ben­e­fit Bit­coin next year. 

The actions of the Unit­ed King­dom’s gov­ern­ment around their mini-bud­get two weeks ago were a key turn­ing point for that poten­tial nar­ra­tive shift. Mar­kets showed they were pre­pared to show their dis­ap­proval of poor pol­i­cy and incom­pe­tence. I expect that trend to accel­er­ate not only for the U.K. but in oth­er coun­tries also.

CT: Are you sur­prised at Ethereum’s poor per­for­mance post-Merge? Are you bull­ish on ETH longer term with its sup­ply-burn­ing mechanisms?

PS: [Ether] (ETH) had a strong short-term nar­ra­tive with the Merge, but it was with­in the con­text of a glob­al bear mar­ket. So it is not sur­pris­ing that its price per­for­mance has been lack­lus­ter. Ulti­mate­ly, the over­all mar­ket con­di­tions dom­i­nat­ed, which was to be expected. 

Long term, though, Ethereum is set up to do excep­tion­al­ly well. It is a crit­i­cal com­po­nent of Web3, which is grow­ing expo­nen­tial­ly. So I am very bull­ish on Ethereum over the next cou­ple of years.

CT: What is the best juris­dic­tion for a Bitcoin/ cryp­to trad­er today?

PS: Some­where that is low-tax and cryp­to-friend­ly. I per­son­al­ly think Sin­ga­pore is great and there is a grow­ing cryp­to scene here, which is good fun too. I have friends who are in Bali, which also sounds great and is more affordable.

CT: Any­thing you would like to add?

PS: Resist any temp­ta­tion to quit cryp­to near the bot­tom of the bear mar­ket. Just be patient and use some good tools to help man­age your emotions.

The views and opin­ions expressed here are sole­ly those of the author and do not nec­es­sar­i­ly reflect the views of Cointelegraph.com. Every invest­ment and trad­ing move involves risk, you should con­duct your own research when mak­ing a decision. 

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