Happy Thursday!

I don’t know if this latest crash is finished yet, we’ll have to see how it plays out over the next week or two. This is normal volatility, the market will sort this out as either a brief drop on the way to a market cycle peak or the start of a much larger crash.

Today’s update looks at something much more significant for the overall trajectory of bitcoin and the immediate investment opportunity. Watch this 42-minute video or catch the TL;DW below. I’m trying a new format after hearing feedback from readers.

TL;DW—

When I refer to “market cycles” I’m talking about the rotation of bitcoins from people who care about it to people just trying to make money from it. That shift drives the market to its peak, after which the market crashes a lot, relatively quickly.

My market cycles are not related to data models, projections, or other cycles (e.g., 4-year, halving, S2F, etc). They’re based on certain patterns in the way people use bitcoins. Looking at those patterns, we can anticipate the market cycle peaks.

In two or three years, you’ll feel silly about ever worrying about bitcoin at $50,000. You’ll think about it the same way you were worried about bitcoin at $5,000. But today, the market is very dangerous.

Whatever institutions are doing, it will show up in the data I look at. My data imputes the actions of institutional investors regardless of how they move or HODL their bitcoins or whether they do it through exchanges, direct transfers, or OTC desks. More than that, it takes everything into account, not just the small portion of the market that sits in the hands of investment funds and corporate accounts, but also the actions of the other 90% of people in the market.

I hear a lot about this idea that the market can't crash, it won't go back into a bear market, we won't get more than 30% crashes because institutions will buy the dips and HODL their bitcoin. At this pace, that would mean we’ll see bitcoin’s price go to $1 million in July.

That's possible but I'm sure you've seen and heard all those OGs and influencers and people who are now tweeting and posting about how they took profits, sold some bitcoin and altcoins. We saw some of that at $40,000 and again at $57,000.

If they're doing it, why would you think institutions aren't? If the biggest believers take money out of the market as prices go up, what makes you think institutions won’t?

I also hear people saying there’s a wall of institutional money waiting to enter. I heard the same thing about Wall Street in 2017. Guess what? Wall Street did enter. En masse.

But they did it in 2018 and 2019, after the market cycle peak.

Maybe institutions will put their money into bitcoin instead of income- and growth-producing activities. We’ll see.

Suffice to say, their bitcoins total probably $50-100 billion at most, which is only 5-10% of the overall market. Is that enough to make a difference in the overall trajectory?

Based on the previous market cycles, we are now seeing the same things we have always seen as bitcoin approaches its market cycle peak.

The data shows long-time hodlers, OGs, and big accounts are shipping off their bitcoin at an accelerating pace. HODL waves show bitcoins moving from strong hands to newcomers. MVRV Z-Score and Puell Multiple are getting close to danger zones.

The number of wallets with more than 10,000, 1,000, 100, and 10 bitcoins dropped this month. In the case of 10 and 10,000 BTC holders, those numbers have gone down since November. Meanwhile, the number of wallets with small amounts of bitcoin went up during that time.

There could be a few reasons for this, but with the same result: bitcoins are moving from big accounts to small accounts. Whales, miners, OGs, and some institutions are shipping off their bitcoin to wallets held by new or small hodlers.

Can new buyers buy enough to overcome the miners, whales, and true believers who keep selling? What about the people who sell on PayPal and cash out? Who will buy their bitcoins?

Grayscale’s February data show a drop in total inflows. Either lots more people sold their shares OR less money’s coming in now than before. Possibly both. That drop-off did not get picked up by the new Canadian ETF.

This signals diminishing interest among accredited investors and investment accounts. Take a look:

Since you can’t move Grayscale’s bitcoins to private wallets, we know these changes do not come from investors moving bitcoins from GBTC to their HODL wallets.

Keep in mind, hodlers don't drive prices up, they only set the floor for how far prices fall. Eventually, you run out of sellers. But you still need buyers. We could shoot up to a big “blow-off” top and still crash 80% or more afterwards.

We see lots of coincidences in today’s data compared to what we saw as the market approached its previous market cycle peaks.

Some of that data is not compelling or useful and I don’t make decisions based on it, but it’s interesting to see the similarities so I shared them in the video (not in this summary).

For actual decision-making, I only focus on Realized Cap HODL waves, Puell Multiple, MVRV Z-Score, along with aSOPR and Percent Supply in Profit to confirm my bias.

MVRV Z-Score, the most accurate measure of market cycle peaks, has crept into the grey zone, getting very close to the level where we start thinking about exiting the market. It’s not there yet.

Puell Multiple, the second-most accurate measure of market cycle peaks, has gotten closer to the grey zone, getting very close to the level where we start thinking about exiting the market. It’s not there yet.

HODL waves show many long-term hodlers have left the market over the past few months. From November to today, they’ve gone from holding 40% of bitcoin’s value to only 15% of that value. These are the strong hands getting rid of their bitcoins.

If those new buyers start hodling, we will see that action reflected in the HODL waves. The lower waves will smooth out as bitcoins flow to the middle waves. Gradually, the middle waves will widen, then the upper waves will, too. We saw a little of that towards the end of January, but that pattern has now reversed.

Altseason’s in full effect but it can only continue if bitcoin’s price goes up. Once bitcoin has a serious crash, altseason will end. A 20% drop over two days is not a serious crash, just normal volatility.

I’ll soon publish a special issue with tips for exiting the market. Hopefully, we won’t need it for a while but I don’t want to wait for the market cycle peak. I explain my reasons briefly at 39 minutes into the video and I will talk about that in more depth once we see actual signs that the market’s heading to its peak.

Also, watch this video for a sense of how professional investors view MicroStrategy and bitcoin. You can stop after the first 8 minutes. The rest of it’s really interesting, too, and maybe good food for thought.

Watch the Video

This market can go a lot higher from here. The problem is, strong hands are leaving and bitcoins are moving in ways that ONLY happen as we approach the market cycle peaks and NEVER at any other time.

To get a hyperbitcoinized super-cycle, you’re betting on businesses and institutions sitting on massive gains for a long time or pulling money out of productive, business-growing activities and putting it into bitcoin forever.

If that happens, bitcoin’s price will keep going up forever. Hodling the tiniest amount of bitcoin will make you rich—you don’t need to put another penny into the market.

We’ve never seen humans or institutions do that with any asset. As a result, it might not be a bad idea to keep some fresh cash handy and start thinking about what you’ll do if we don’t get a permanent rise in bitcoin’s price forever, and instead get the same outcome we’ve always gotten: a big, strong run-up to a cycle-ending crash.

And what if we get an extended +50% decline that lasts for months, as we did in 2020 and 2019? THAT is when you will want to buy bitcoin, not now.

I’m chilling and waiting to see what happens. Today, this market could crash 80% before my portfolio goes into the red. If you followed my plan, you’re in the same situation.

My Plan for Bitcoin's Bull Market

I’m not taking money out until I see the “sell” signals in my plan. Likewise, I’m not buying until the market settles down.

We’re not near the market cycle peak yet, but we’re getting closer with every passing day. Bitcoins are flowing out of the strong hands. Grayscale’s bitcoin trust is barely growing. Warning signs are flashing everywhere. If institutions are moving massive amounts of money into the market, it’s not showing up in any of the metrics.

Nobody knows when the market will peak or what bitcoin’s price will be when it does, but we will know when we’re getting close. I will update you way before we have to act, whether that means buying into a massive crash or selling out of a parabolic boom. Until we get one of those extremes, my plan is not actionable.

If you expect to spend the rest of the year (or forever) in a super-cycle that sends bitcoin to $1 million or more and never reach a market cycle peak, you don’t want my data to hold true. You want it to be different this time.

Maybe it will be—but what if it’s not?

Relax and enjoy the ride!

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