Cryptocurrency – Is the Top Already Already in Place?
This is a taboo question in the cryptocurrency community.
However, ignoring it can be costly (which is why most people go through full cycles of ups and downs).
"The reality is, it doesn't go away when you stop believing in it." - P. Dick
Here's why a top may have occurred and how you can still thrive despite the situation.
Image source: Shenchao TechFlow
Disruption of market structure
The first major concern is Bitcoin’s recent loss of a 4-month range.
While the long-term trend remains intact, the medium-term trend has turned bearish.
Andrew Kang believes this is similar to May 2021 price action. (Thanks @Rewkang)
Image source: Shenchao TechFlow
Potential double top?
With the loss of key support levels, the double top pattern on the weekly chart is difficult to ignore.
While I'm not a technical analysis expert, this looks like a classic Complacency Shoulder pattern.
"Spot markets are comfortable, cryptocurrencies are safe as liquidity will rise again" = Consensus View
Image source: Shenchao TechFlow
From "Wall of Worry" to "River of Hope"
The bull market is climbing the "Wall of Worry"; the bear market is sliding down the "River of Hope." This shift happens gradually and the top is usually confirmed only after the fact.
To assess this shift, one can analyze the following points:
Price reaction to positive and negative news
The psychology of idle capital
Market reaction to news
In a weak market, good news falls on deaf ears, while bad news creates massive fear. Recent example:
Good News: Trump Talks Bitcoin as a Corporate Asset + Ethereum Spot ETF Launching Soon.
Bad News: Mt. Gox/Germany Sells Bitcoin (Thanks @CryptoDonAlt)
Image source: Shenchao TechFlow
Idle capital and bargain hunting
Retail investors blindly buying the bottom without a clear catalyst is a concern.
Markets slid down this river of hope as complacency and denial turned to panic. (Thanks to T. Livingston)
Image source: Shenchao TechFlow
Technical rebound in 2022
The market experienced several technical rallies in 2022, but no trend reversal.
Ideally, you want to see significant catalysts ahead, with spare capital hesitant to buy the dip.
The opposite signals danger, as the recent price action of the Ethereum spot ETF has shown.
Image source: Shenchao TechFlow
Bitcoin Super Cycle Theory
Many altcoins may have peaked, but Bitcoin could be entering a supercycle.
While global liquidity may be surging, this challenges the assumption that altcoins are the fastest horses.
A paradigm shift may be underway, its effects lagging. (Thanks @Rewkang)
Image source: Shenchao TechFlow
Bitcoin and S&P 500 Divergence
Bitcoin’s weakening correlation with stocks (lowest in 4.5 years) could be a cause for concern.
A massive supply glut (Germany, US, etc.) could push this decoupling to its limits. (Thanks @WClementeIII)
Image source: Shenchao TechFlow
Similar to 2019
Bitcoin’s divergence from the S&P 500 (SPX) is similar to 2019, when Bitcoin peaked in June. It took more than 12 months to hit a new high. (Thanks @intocryptoverse)
Image source: Shenchao TechFlow
Big AI companies overshadow cryptocurrencies
Maybe the market peaked not because cryptocurrencies were bad, but because AI was more attractive.
We are seeing the thinnest stock rally in history (led by large AI companies).
Although access to Bitcoin has never been better, retail demand has been slow to grow. Why? (Thanks @TXMCtrades)
Image source: Shenchao TechFlow
Is the greatest craze over?
The biggest craze may be over. This cycle may be short-lived.
Evidence: Meme coins peaked in the first quarter of 2024 and have trended downwards since then.
Bitcoin peaks in Q1 2024 (coincidence?) (Thanks @ki_young_ju)
Image source: Shenchao TechFlow
Meme Coin Super Cycle = Top Signal
The concept of a “memecoin super cycle” could be the ultimate top signal.
A similar top signal occurred in 2021, when some predicted that Bitcoin would enter a supercycle ($250,000 on Bitcoin).
Since there was less disillusionment this cycle, perhaps we entered meme coin mania more quickly.
Image source: Shenchao TechFlow
Meme Coin Industry Dominance
For the first time, meme coins have become the most popular category on CoinMarketCap (CMC).
How long can altcoins run in a speculative bubble without real-world applications driving organic demand? (Thanks @coinmarketcap)
Image source: Shenchao TechFlow
Profit from hedging
Even though we may have reached the top, that doesn't mean all hope is lost.
Hedging a strong altcoin by shorting a weak altcoin can be very profitable.
This allows you to profit from declines while still remaining involved in the market. (Thanks to @GiganticRebirth)
Image source: Shenchao TechFlow
Bitcoin dominance rises
In risk-averse markets, investors selling altcoins for Bitcoin tend to increase Bitcoin’s dominance.
Shorting the weak ALT/BTC trading pair to capture this trend could be very profitable.
@intocryptoverse believes Bitcoin dominance (BTC.D) could reach 60% by Q4 2024.
Image source: Shenchao TechFlow
Profiting from VC greed
Identify coins with excess supply and huge unrealized VC profits.
Image source: Shenchao TechFlow
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 this cycle, it's reasonable to expect fewer downsides as well.
Because of short cycle + low volatility.
Image source: Shenchao TechFlow
The top of the overall economy has not yet appeared?
Although there are some potential signals, the top of the cycle may not be reached yet (personal opinion, for reference only).
Liquidity is the most critical factor, and there is strong evidence that the peak may occur in 2025.
While liquidity is currently low, we appear to be on the verge of a major shift (thanks @zerohedge)
Image source: Shenchao TechFlow
[Disclaimer] There are risks in the market, so investment needs to be cautious. This article does not constitute investment advice, and users should consider whether any opinions, views or conclusions contained in this article are appropriate for their particular circumstances. Invest accordingly and do so at your own risk.
This article is reprinted with permission from: "Deep Wave TechFlow"
Original author: Crypto, Distilled
