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Crypto Currency Explained

My Base Case for BTC in 2021 As the cryptocurrency market continues to develop and grow, we’re getting a better idea of the fundamental drivers behind Bitcoin’s meteoric rise in price with each bull cycle. In my opinion, without a doubt, the most dominant tailwind for BTC bull runs is the pre-programmed supply flow halving every 4 years.



Back to the Basics

Back to simple economics, with supply flow cut in ½ every 4 years and demand remaining consistent/growing, price goes up. Couple that with investors wanting to get on board with momentum trading, long-term HODLers who absolutely believe in Bitcoin becoming a widely-adopted currency, overtaking gold as a store of value (neither of which I 100% agree with), etc. and we get a nice recipe for big moves up.



Tip:

The volatility is this Bitcoin bull run is normal. So far, we’ve seen a very similar price history this time around as we did in the 2016-2017 bull run. The 2017 cycle had multiple 30%+ corrections and would then continue to go on to make new all-time high after new all-time high after new all-time high, etc…. You get the picture, we saw that a lot in 2017 and were amazed with how far and how fast the price went up each time. This year, the question is how much more gas does BTC have left in the tank? Well, the various fundamental indicators I keep an eye on (stock to flow model, Z-score, HODL wave, SOPR, etc.) suggest there’s still more upside for Bitcoin in 2021. It looks like we’re mid/later stages of the bull run currently.



SUSTAINABILITY 

Currencies are defined by sustainability and Bitcoin is anything but stable. This instrument is unlike anything in the financial sector hands down. Trading 24 hours a day, on holidays, you name it, BTC is evolving. What is Bitcoin? Is it a store a value? Is it a hedge against inflation? Is it way to cut out expensive intermediary services? It is simple, it is all the above. It is state of the art technology that connects peer to peer with users, simultaneously transferring funds from wallet to wallet that automatically traces all transactions inside the blockchain that is impossible to forge.



FUNDAMENTALS

Going into detail on one of the fundamental indicators to shed more light on my bullish bias, I’ll explain the HODL wave indicator. Essentially, this chart represents whether the profits in Bitcoin have been sufficient enough to get long-term cold storage holders (i.e. investors using Trezor, Ledger, etc.) to sell their coins. Based on this chart’s correlation with tops in previous bull cycles, the outlook for BTC still looks solid.


INSTITUTIONAL OWNERSHIP

We also saw much more institutional demand and cold-storage buyers in 2020 with entities like Paypal, Cash App, Tesla, etc. getting into the game, buying up Bitcoin, and removing it from exchanges. Couple these cold-storage buyers with the stock-to-flow model suggesting 6-figure Bitcoin this year and my base case is we continue to see Bitcoin generate profits for investors in 2021, albeit with a much less ideal asymmetric risk/reward than 2020.


TECHNICAL ANALYSIS

BTC chart looks great as well. Structurally, we continue to see higher highs and higher lows suggesting a bullish trend. The most recent 25%+ correction was merely a deviation and stop run of January’s monthly close and a common bear trap that BTC was commonly known for in the 2017 bull run. We’ve now made a new ATH today! I will continue to margin trade this chart on the way up using price action discovery technical analysis while holding long-term spot positions off the exchanges (avoid counterparty risk) until I see some of the key fundamental indicators suggest a top.








The party will end at some point and there are definitely some headwinds for BTC moving forward in this cycle (maybe I’ll share my view on those in another article) but for now, let’s enjoy the ride. When the time comes and the run is over and the chart flips to a bearish trend, we’ll flip to short positions in the market and will make money on the downside.


Here’s what to do in a down market:

  1. Convert to Stable Coins - designed for unstable markets

  2. Trading - chances to accumulate more BTC or other currency

  3. Yeilding ETF'S



Creighton Chaney & Cameron Cole

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