Author: Crypto, Distilled
Compiled by: TechFlow
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 concern is the recent loss of $BTC out of its 4 month range.
While the long-term trend remains intact, the medium-term trend has turned bearish.
Andrew Kang believes this is similar to the price action in May 2021.
(Thanks @Rewkang)
Potential double top?
With the loss of key support levels, a double top pattern is hard to ignore on the weekly chart.
While I am no technical analysis expert, this looks like a classic Complacency Shoulder pattern.
“Spot markets are comfortable, crypto is safe as liquidity will rise again” = consensus view
From "Wall of Worry" to "River of Hope":
Bull markets are climbing the "wall of worry"; bear markets are sliding down the "river of hope."
This shift occurs gradually, and the top is usually confirmed only after the fact.
To assess this shift, the following points can be analyzed:
Price reaction to positive/negative news
The psychology of idle capital
Market reaction to the news:
In a weak market, good news falls on deaf ears, while bad news causes great fear.
Recent examples:
Good news: Trump talks Bitcoin ($BTC) as a corporate asset + Ethereum ($ETH) ETF coming soon.
Bad News: Mt. Gox/Germany Sells Bitcoin ($BTC)
(Thanks @CryptoDonAlt)
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.
(Thanks to T. Livingston)
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.
(Thanks @Rewkang)
Bitcoin and S&P 500 divergence:
Bitcoin ($BTC)’s weakening correlation with stocks (lowest in 4.5 years) could be a cause for concern.
Large oversupply (Germany/US etc) could push this decoupling to its limits.
(Thanks @WClementeIII)
Similar to 2019:
The divergence between Bitcoin ($BTC) and the S&P 500 ($SPX) is similar to 2019, when Bitcoin peaked in June.
It took more than 12 months to reach a new high.
(Thanks @intocryptoverse)
Big AI companies overshadow cryptocurrencies:
Maybe the market peaked not because cryptocurrencies are bad, but because AI is more attractive.
We are seeing the thinnest stock rally in history (led by large AI companies).
While access to Bitcoin ($BTC) has never been better, retail demand is slow to grow. Why?
(Thanks @TXMCtrades)
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 ($BTC) Peaks in Q1 2024 (Coincidence?)
(Thanks @ki_young_ju)
Memecoin Super Cycle = Top Signal
The concept of a “memecoin supercycle” could be the ultimate top signal.
A similar top signal was seen in 2021, when some predicted that Bitcoin ($BTC) would enter a super cycle ($250k+ $BTC).
Since there was less disillusionment in this cycle, perhaps we entered the memecoin craze more quickly.
Memecoin’s Dominance in the Sector:
For the first time, memecoin has become the most popular category on CoinMarketCap (CMC).
Without real applications driving organic demand, how long can altcoins operate in a speculative bubble?
(Thanks @coinmarketcap)
Profit from hedging:
Even though we may have reached the top, it doesn’t mean all hope is lost.
Hedging against strong altcoins by shorting weak altcoins can be very profitable.
This enables you to profit from declines while still staying involved in the market.
(Thanks @GiganticRebirth)
Bitcoin dominance rises:
In risk-averse markets, investors selling altcoins for Bitcoin ($BTC) tends to increase Bitcoin’s dominance.
Capturing this trend by shorting the weak ALT/BTC pair could be very profitable.
@intocryptoverse believes Bitcoin dominance ($BTC.D) could reach 60% by Q4 2024.
Profiting from VC greed:
Identify coins that have excess supply and huge unrealized VC profits.
What if the four-year cycle is broken?
Imagine if March 2024 was just the peak for the next 6-12 months?
Is this still the top of the cycle?
Given the limited upside so far in this cycle, it is reasonable to expect the downside will also be less.
Because of short cycles + low volatility.
The macro top has not yet appeared?
Despite some potential signals, the top of the cycle may not have arrived yet (personal opinion, for reference only).
Liquidity is the most critical factor, with strong evidence suggesting the peak could occur by 2025.
While liquidity is currently low, we appear to be on the verge of a major shift
(Thanks @zerohedge)
