DAiM Issue 12 - No Pain, No Gain

July 1, 2022

1. Forecast
2. Stable Coin Dry Powder?
3. I Don’t Want To Wait
4. Whale Watching

1. Forecast
   As the crypto market engages in a costly game of limbo with traditional markets, retail participants are left to wonder when some relief will come. Last issue we projected a range of $25k-$35k which was invalidated by the negative events surrounding Celsius, BlockFi, 3AC, and sector related layoffs. These along with macro flight to safety drove BTC through $20k. And just recently the SEC denied Grayscale’s GBTC conversion to an ETF (as we’ve said regularly wouldn't be approved). As the technicals try to find new boundaries and the narrative remains bearish with anything possible in the $20k down to $10k range. But max pain in Bitcoin generally means max opportunity. There will be a time when the negative news runs out.
2. Stable Coin Dry Powder?
   If you listen to market prognosticators you would be hard pressed to be excited about anything crypto related. They want you to believe that capital has fled the space and is not coming back. That's not entirely true. The amount of money sitting on the digital sideline has never been greater and points to an abundance of patient investors ready to pounce on discounted digital assets. Since April 2020 the market cap of the 4 largest stablecoins (USDT, USDC, BUSD, and DAI) has increased more than 20x. The figure went from $7B in April 2020 to $147B today.That means the ecosystem has an additional $140B ready to be deployed into Bitcoin and altcoins. To put it in perspective the market cap of Bitcoin and Ethereum in March 2020 was $140B combined ($124B and $16B respectively)! When markets are crashing everyone wants dry powder in order to cash in on discounted assets. The most efficient way to do this is through stablecoins. Funds need to be ready to be deployed by being on the crypto side. Remember we trade 24/7 and if the market sells off at 9pm on Saturday it creates a great buying opportunity. Your deposit sitting at Bank of America or Wells Fargo does you no good. Assets can’t move until Monday then could take a day more to clear. Those who remain in “crypto cash” reap the biggest reward. If people were genuinely risk-off, this money would be back in TradFi and timing drawdowns would not be important. But these stablecoin holders see the importance of buying the dip in a volatile market. Furthermore as the total crypto market cap drops, stablecoins become a larger percentage of the market and can exert more influence, and cause massive upswings, when they are swapped for other digital assets. It may seem bleak now but the digital asset space is primed to put its liquidity to use.
3. I Don’t Want To Wait
   Bitcoin to this point has shown itself to be cyclical. No matter how many articles are written declaring it “dead,” it always comes back with a vengeance. We’re back in the “Bitcoin is dead” part of the cycle and people want to know how long we have to wait for the good times to roll again. We looked back at the last 3 cycles to see when we could expect to bottom out. Check it out below.Going back to 2013 we have two completed cycles and are currently in the third. It took about a year for Bitcoin to bottom out. Applying those timelines to the most recent cycle peak of $67,567 we would expect a bottom in November/December of this year. The fact that this projects 6 more months of turbulent prices may be sobering to new crypto investors but we think that this is an exciting time to accumulate Digital Assets. Bear markets make millionaires and that is especially true in crypto. Forward returns from cycle lows are orders of magnitude greater than traditional markets. Let's take the pandemic as a recent example. All markets tanked in the beginning of March 2020 as fear and uncertainty gripped the world. From their March lows (using adjusted closing price) to their respective highs, stocks greatly lagged Bitcoin.It may seem counterintuitive but this is a great investing environment for Digital Assets. Don’t let previous trends trick you into thinking you can perfectly time the bottom, this cycle could be shorter causing you to miss the opportunity to add units. Buying into a trough will be less painful than watching the recovery from the sidelines. History has shown that those who DCA and accumulate will be greatly rewarded down the road.
4. Whale Watching
   A benefit of Bitcoin’s public ledger is that we can see the behaviors of market participants, in this case a Bitcoin Whale, in real time. Click this link to see the activity of the third largest Bitcoin wallet. We suggest scrolling to the bottom and reading up from there noticing the buys and sells and prices associated. To us it looks like an entity unfazed by the market volatility as they continue to accumulate. What conclusion do you draw? Email us your conclusion [email protected]