As you may be aware, July 13th brought an end to the
long running SEC vs Ripple lawsuit, with Ripple coming out as big winners. I’m not going to go into the details of the case, but if you'd like to read more about it you can do so
here. Essentially Ripple won, when it was decided that XRP (The token issued by Ripple) was not a security.
We saw XRP spike up 75% following the news, but most of crypto world was surprisingly little changed on the day.
How have traders reacted?
The commitments of traders’ data released on July 21st was the
first time we could see exactly what traders thought of the ruling. Would it completely change the landscape (as many thought it would) or would it just continue on as normal. The data below gives us the answer. The
chart shows the positioning for commercial and non-commercial traders in Bitcoin futures over the last 12 months, and if we look at the last data points, we can see that long and short positions held by both sets of traders actually declined last week following the ruling. Not what you would expect to see if you believed a positive outcome for Ripple would be a bullish driver for the industry.
If it were a bullish driver
then there would be a sharp increase in buying but instead we see positions drop. Traders leaving a market like this
typically gives the market a bearish bias, and if we look at the price action of Bitcoin and others since July 13th, we have indeed been moving lower. This is why I love the commitments of traders' it shows me what’s really going on. It would have been easy to get sucked into thinking this ruling would trigger a rally, but the numbers never lie,
professional traders did not buy into the hype we saw afterwards, so I won’t either.
Where do we go from here?
The simple answer is
lower, but not for long. Now is the time to start making a plan of how you’re going to approach the next phase of the cycle we’re currently in, and this is my plan. You will no doubt know that I love patterns in markets, particularly seasonal patterns, and while we don’t see seasonal patterns in the traditional sense in Bitcoin (not yet at least), we do have something very similar to what we know as the election cycle in financial markets, that run on the 4-year US presidential election cycle.
Bitcoin also has a 4-year cycle (N.B. the cycle is not fixed and to date, keeps expanding by around 60 days for each cycle), but
driven by its ‘halving cycle’ rather than an election. Want to know more about why the halving exists,
click here.
This cycle is important as it's
been the driver for each major bull run we have seen, in 2013, 2017 and 2021. What’s more, we’re approaching the next bull run, or should I say we’ve already started, but we’re taking a pause. Below is a chart showing a weekly chart of Bitcoin, extended into the future to
where I believe the next peak will occur in the blue box in the top right hand corner, on Tuesday 11th November 2025 at around $80,000.
This may be
a very low estimate to what many ‘experts’ are calling for out there, and I will be delighted if price massively overshoots this target as I will be holding Bitcoin, but
the dates and prices are based on what Bitcoin has done in the past and its halving cycle has been very consistent to date, so unless something changes in its pattern that is where I see price headed.
Starting with the dates, the methodology I lay out below allowed me to pick the date of the low on November 21th 2022, to within 3 days, so I’m on the right track.
The current halving cycle is on an expanding 1445-day cycle from the last halving in May 2020, to the next halving which at this point is estimated to take place on April 17th, 2024. That would give us 512 days from the low to the halving date, which is in line with the 510 days we saw on the previous cycle. From the halving to the peak has expanded by around 25 days in each of the last 2 cycles which would see a peak 575 days following the halving,
taking us to November 2025, as stated above.
Moving on to the price. While the cycles are expanding in duration, the amount they are moving in percentage terms is contracting, both on the way down and in particular, on the way up. The first halving in 2012 saw a massive 61,500% return from low to high,
but each subsequent halving run has seen returns diminish by around 5.4x each time. This would mean a move from the current low to the next peak of around 390%. Not too shabby, but nowhere near the levels many are calling for. If we do see a 390% gain, then
a move from the low of $15,500 would see price hit around $76,000.
How to get ready?
We have an estimate for when the peak will occur and we have the low, so when are the best times to get in again?
Well there are two dates that stand out. The first is that we typically see a plunge lower around
160 days before the halving, where price usually recovers and stabilizes, and then price should
start to run higher about 70 days before the halving. These two dates take us to around
November 8th 2023 and February 7th 2024, respectively.
What is my plan?
I want to see price drift slowly lower from now through to October,
when I will then be on the look out for a swift dump, where I can be a buyer, (between 20,000 - 23,000 would be a good zone for this). If we don’t dump but simply consolidate, I will be on the look out for a breakout as we move towards the end of January and into February next year.
That means we have a 2 to 3 month window now to prepare. Don’t wait until its breaking through $50k again and its all over the news.
If you’ve already got a plan or if you’re following a different plan (I know there are lots of different models out there), I’m OK with that.
The key thing in any trade/investment is to have a plan and be prepared. If the plan is wrong, then I’ll update and evolve. I’d rather have a plan A and be forced to move to plan B, than to not have any plan at all and miss out.
One point to remember is
the halving date is not fixed so if this date changes significantly, then all other dates will need to be shifted. I will talk about this on
MMCtv live streams as we get nearer to the date, so be sure to tune in for that.
The other dates on November 8th and February 7th will also be important markers as they will tell us if we are still following this path.
All we have to do now is be patient.