It’s always the same thing with the markets. We anticipate something and when it starts materialising as expected, we load up, we see people doing the same, we get excited, things start becoming fun and then at some point, the excitement slows, the doubts start rising and we start doubting ourselves and pondering if everything is going to be over.
We have advocated that it made sense to position yourself long on crypto since early 2023. We were early and saw things finally materialising in Q4 of 2023 and Q1 of 2024. There was confirmation of our anticipation and we thought we had it right and that the bull market had started and Bitcoin would go parabolic. We believed the SwissBorg token (BORG) would go to an all-time high (ATH) before summer and that retail would rush back into the space, understanding that it’s not too late to buy and ride the wave this time. Unfortunately, like often in life and especially in markets, things have not unfolded that way and we have been taught a new lesson of humility.
Let’s dig it out. This is a little reminder about what is happening in the crypto space and where we are at as we just experienced a nasty bear trap and a long boring sideways market. Once again let’s remember :
A) The secular (long-term) trend we are in for crypto:
B) For the cycle phase (learn more about cyclical trends here ):
We know that many liquidity events will continue to arrive. We need to look for global liquidity. Global liquidity is the necessary component to be able to overcome the debt in the system and avoid defaulting and getting into a debt refinancing crisis.
There’s 72% of total debt that is coming to maturity by 2026. This is 250 trillion worldwide to be refinanced between public and private. There’s no way the world can refinance without having sufficient liquidity in the system to roll over these amounts. What are the global events likely to increase liquidity? Among others here as some of them :
All this is starting to materialise as we speak with the DXY (The US Dollar Index), an index representing the value of the US Dollar against a basket of currencies (EUR, CHF, JPY etc). The index decline is very positive for equities and crypto (as illustrated below on the chart for Bitcoin).
Indeed, a weaker dollar (usually following a looser monetary policy) allows emerging economies to be able to ease as they can start stimulating without putting their currency rate at risk. This creates the perfect environment for new liquidity to be added to the system and a stimulus on economic growth that triggers earning revisions, that push valuation ups in the market etc..
In the same way that we got caught up in the anticipation of the bull market euphoria, we easily forget how previous cycles unfolded and that these had boring, sideways, indecisive zones. Bitcoin on average has a sideways sequence during 170 days and peaks 418 days after the halving. We are sitting at 124 days when writing this article.
As illustrated in the charts below and citing Winston Churchill, we can maybe rightfully say that now is not the end. It is not even the beginning of the end. But it is, perhaps, the end of the beginning. Remember that in today’s economic and financial reality, there’s no other option than being invested. Each of us has to determine our goals, and risk tolerance and adjust the strategy accordingly. We have repeated this many times in various articles like, The Bull Market has started, so what’s in front of us? or “Why interest rates count (and don’t anymore) , staying on the sidelines is not an option. The longer you wait, the wider the gap becomes. If you're still in the habit of saying "I'll do it tomorrow," it's time to break that cycle.