Crypto - New Paradigm VS. Harsh Regulation
On the left, I have drawn two different speculative scenarios for Bitcoin, using the log curve and the log channel to guide price action. Both scenarios are pretty optimistic, as they show Bitcoin breaking the bounds of the log curve and heading towards the top of the channel. In the blue scenario, Bitcoin becomes a more widespread antidote to inflation and adopted as a global reserve currency. In this situation, I would be in complete disbelief and probably have a hard time holding all my crypto, since I got in so "early." After all, we're only now starting to see true crypto adoption. In the yellow, the speculative bubble pops along with legacy markets and spends years going sideways, much like Gold.
On the right, you can see TOTAL2, which shows the total crypto market cap without Bitcoin. I think this is important, because much of this is Ethereum, stablecoins, and DeFi. DeFi with stablecoins may prove to be a very important use-case for crypto, particularly if inflation continues to get worse. Even if the blue scenario occurs for Bitcoin, I think we can see a very large rebound for Bitcoin dominance, and disproportionate losses for Ethereum and others. This is because there are multiple bubbles involved on Ethereum. It would be interesting to see if ETH can actually avoid significant losses of 80%+.
Where we stand
I have done a lot of analysis on M2, DXY, and markets, and I'm still leaning towards an enormous financial market meltdown in the near future. Here is a writeup on this subject:
The stock market seems to be in the middle of a blow-off phase. There is usually some accompanying event. For instance, I doubt Evergrande will be the only firm to approach default. In this case, I think it would make sense to see TOTAL2 return to its previous all-time high, even if it continues up first. I also think the yellow scenario on the left is slightly more realistic. A lot of it depends on regulation. If lawmakers see crypto as a threat rather than a solution, it's possible Bitcoin even returns briefly to the 20k level.
I am not buying any more crypto at these prices, since I'm already comfortable with my exposure. If I had no exposure, I'd perhaps allocate a little bit now, but not plan to buy more until sometime late next year, or even in 2023. At that point, I think it would be more clear which way things are headed. I do not plan on buying more crypto until I see another bearish period (even if Bitcoin simply dumps back to $48-65k) However, we can still see some coins hit some pretty ridiculous market action before the market finally unwinds. And I see this as an opportunity to take profit and wait to accumulate more inventory.
For instance, the crypto TOTAL market cap is also pushing all-time highs. I think it's possible to see crypto reach Gold's market cap by the end of the cycle. That's my highest estimate. That puts us around $11-12 Trillion.
I do also still think Bitcoin dominance may reach a new low by the cycle peak. This could easily put the altcoin market at 88B, with Bitcoin $3-4B. That would mean $180-250k Bitcoin, although it can also shoot higher than that.
Now for some coins with cycle-end targets and long term support areas where I'd eventually buy. These are all completely speculative, and there is no guarantee any of these will hit. These are purely estimations based on where I believe we are with regard to global markets. All of these scenarios involve a longer than normal bear market, and a potential restructuring of the space.
Ethereum
Stellar Lumens (XLM)
Ripple XRP
Litecoin (LTC)
Chainlink (LINK)
NANO
Cardano (ADA)
Polkadot (DOT)
Binance Coin (BNB)
DOGE
VeChain (VET)
NEO
Solana (SOL)
The scenario this analysis does not account for is the scenario where there is actually limited further upside. Structurally this doesn't seem to make so much sense, given the trends for TOTAL and TOTAL2. However, it's best to be prepared for something like this as well and exercise appropriate risk. This is why I am not adding more at these levels, but looking to take profit instead.
This is not meant as financial advice - this is for personal use, speculation, and entertainment.
-Victor Cobra
On the right, you can see TOTAL2, which shows the total crypto market cap without Bitcoin. I think this is important, because much of this is Ethereum, stablecoins, and DeFi. DeFi with stablecoins may prove to be a very important use-case for crypto, particularly if inflation continues to get worse. Even if the blue scenario occurs for Bitcoin, I think we can see a very large rebound for Bitcoin dominance, and disproportionate losses for Ethereum and others. This is because there are multiple bubbles involved on Ethereum. It would be interesting to see if ETH can actually avoid significant losses of 80%+.
Where we stand
I have done a lot of analysis on M2, DXY, and markets, and I'm still leaning towards an enormous financial market meltdown in the near future. Here is a writeup on this subject:
The stock market seems to be in the middle of a blow-off phase. There is usually some accompanying event. For instance, I doubt Evergrande will be the only firm to approach default. In this case, I think it would make sense to see TOTAL2 return to its previous all-time high, even if it continues up first. I also think the yellow scenario on the left is slightly more realistic. A lot of it depends on regulation. If lawmakers see crypto as a threat rather than a solution, it's possible Bitcoin even returns briefly to the 20k level.
I am not buying any more crypto at these prices, since I'm already comfortable with my exposure. If I had no exposure, I'd perhaps allocate a little bit now, but not plan to buy more until sometime late next year, or even in 2023. At that point, I think it would be more clear which way things are headed. I do not plan on buying more crypto until I see another bearish period (even if Bitcoin simply dumps back to $48-65k) However, we can still see some coins hit some pretty ridiculous market action before the market finally unwinds. And I see this as an opportunity to take profit and wait to accumulate more inventory.
For instance, the crypto TOTAL market cap is also pushing all-time highs. I think it's possible to see crypto reach Gold's market cap by the end of the cycle. That's my highest estimate. That puts us around $11-12 Trillion.
I do also still think Bitcoin dominance may reach a new low by the cycle peak. This could easily put the altcoin market at 88B, with Bitcoin $3-4B. That would mean $180-250k Bitcoin, although it can also shoot higher than that.
Now for some coins with cycle-end targets and long term support areas where I'd eventually buy. These are all completely speculative, and there is no guarantee any of these will hit. These are purely estimations based on where I believe we are with regard to global markets. All of these scenarios involve a longer than normal bear market, and a potential restructuring of the space.
Ethereum
Stellar Lumens (XLM)
Ripple XRP
Litecoin (LTC)
Chainlink (LINK)
NANO
Cardano (ADA)
Polkadot (DOT)
Binance Coin (BNB)
DOGE
VeChain (VET)
NEO
Solana (SOL)
The scenario this analysis does not account for is the scenario where there is actually limited further upside. Structurally this doesn't seem to make so much sense, given the trends for TOTAL and TOTAL2. However, it's best to be prepared for something like this as well and exercise appropriate risk. This is why I am not adding more at these levels, but looking to take profit instead.
This is not meant as financial advice - this is for personal use, speculation, and entertainment.
-Victor Cobra
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