Cryptocurrencies - Has the top been reached?
This is a taboo question in the cryptocurrency community (CT).
However, ignoring it can be costly (which is why most people go through full up and down cycles).
“The reality is, when you stop believing in something, it doesn’t go away.” - P. Dick
Here’s why the top may have already occurred and how you can still thrive in this situation.
Disruption of market structure
The first major point of focus is the recent loss of $BTC out of its 4 month range.
While the long-term trend remains intact, the medium-term trend has turned bearish.
Andrew Kang believes this is similar to the price action in May 2021.
Potential double top?
With the loss of key support levels, a double top pattern is hard to ignore on the weekly chart.
While I am no technical analysis expert, this looks like a classic Complacency Shoulder pattern.
“Spot markets are comfortable, crypto is safe as liquidity will rise again” = consensus view
From a "wall of worry" to a "river of hope"
Bull markets are climbing the "wall of worry"; bear markets are sliding down the "river of hope."
This shift occurs gradually, and the top is usually confirmed only after the fact.
To assess this shift, the following points can be analyzed:
Price reaction to positive/negative news
The psychology of idle capital
Market reaction to news
In a weak market, good news falls on deaf ears while bad news causes great fear.
Recent examples:
Good news: Trump talks Bitcoin ($BTC) as a corporate asset + Ethereum ($ETH) ETF coming soon.
Bad News: Mt. Gox/Germany Sells Bitcoin ($BTC)
Idle capital and bargain hunting
Blind bargain hunting by retail investors without clear catalysts is a cause for concern.
Markets slide down this river of hope as complacency and denial turn to panic.
A technical rebound in 2022
The market experienced several technical rebounds in 2022, but there was no trend reversal.
Ideally, you want to see a major catalyst ahead while idle capital is hesitant to buy the dip.
The opposite scenario portends danger, as recent price action in the Ethereum ($ETH) ETF shows.
Bitcoin Super Cycle Theory
Many altcoins may have peaked, but Bitcoin ($BTC) could be entering a supercycle.
While global liquidity may be surging, this challenges the assumption that altcoins are the fastest horse.
A paradigm shift may be underway, with its effects lagging.
Bitcoin and S&P 500 divergence
Bitcoin ($BTC)’s weakening correlation with stocks (lowest in 4.5 years) could be a cause for concern.
Large oversupply (Germany/US etc) could push this decoupling to its limits.
Similar to 2019
The divergence between Bitcoin ($BTC) and the S&P 500 ($SPX) is similar to 2019, when Bitcoin peaked in June.
It took more than 12 months to reach a new high.
Big AI companies overshadow cryptocurrencies
Maybe the market peaked not because cryptocurrencies are bad, but because AI is more attractive.
We are seeing the thinnest stock rally in history (led by large AI companies).
While access to Bitcoin ($BTC) has never been better, retail demand is slow to grow. Why?
Is the greatest craze over?
The biggest frenzy may be over. This cycle may be short-lived.
Evidence: memecoin peaked in the first quarter of 2024 and has been trending downward since then.
Bitcoin ($BTC) Peaks in Q1 2024 (Coincidence?)
