Bearish Signal#1- Gold Breakout
In 2019, when gold was breaking out again, Bitcoin hit its highs.
This pattern repeats itself in March 2024.
Will the market cool off for 6-9 months until 2025?
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(i) Why is a breakout in gold bearish?
As a safe haven, gold tends to outperform other risky assets in risk-averse markets.
Currently, macro uncertainty is high due to geopolitical conflicts, an uncertain US election, and the yen carry trade.
While Bitcoin may follow gold, riskier altcoins may not.
Bearish Signal#2- Rate Cutting Environment
Rate cuts can be bullish in the long run, but their immediate impact tends to be negative for risk assets.
During the last rate cut cycle (2019), the ALT/BTC trading pair took a big hit.
As oscillators, these trading pairs could face more pain if the market remains risk-off.
(i) Parallel to 2019 - The bull run has not started yet?
Key thought leaders like Cobie and Chris Burniske also see similarities in 2019. Here are their core takeaways:
Bitcoin dominance rises ahead of liquidity recovery
We are not yet in a bull market (2023/2024 is an echo bubble)
March 2024 is the mid-cycle high
Bearish Signal#3- Sahm's Rule
Sahm's rule predicts a US recession (based on unemployment data).
(Note from Shenchao: The Sahm rule is an indicator used to identify economic recessions, which mainly judges economic conditions by observing changes in the unemployment rate. This rule was proposed by economist Claudia Sahm and aims to provide a simple and effective method to help policymakers and economic analysts identify the risks of economic downturns in a timely manner.)
Since 1950, every time the index exceeds 0.5, a recession has followed.
Last week it flickered again.
(i) Beyond Sahm’s Rules:
Note that the triggering of Sahm’s rule is not the end of the story.
The key will be how global banks respond through monetary policy and liquidity provision.
The next few months will be critical in shaping the market’s 2025 trajectory.
Bullish Signal#1- Stablecoin Inflows
Despite the slump in cryptocurrency prices, stablecoin supply is approaching new all-time highs (ATH).
Stablecoin supply has grown by more than 25% this year.
As capital continues to flow into the crypto market, a long-term bearish outlook is difficult to sustain.
(i) Why is rising stablecoin supply bullish?
The increase in stablecoin supply indicates that more liquidity is flowing into the crypto market.
Stablecoins are capital that can be invested in crypto assets.
Historically, rising supply has typically foreshadowed rising cryptocurrency prices.
(ii) Interest rate cuts and the rise of stablecoins:
While rate cuts may have a negative impact on riskier assets in the short term, they are bullish for stablecoins in the long term.
As yields on traditional assets decline, on-chain returns become more attractive.
This could boost the expansion of stablecoins in the coming months.
Bullish Signal#2- US Regime Supporting Cryptocurrency
Positive regulatory adoption of cryptocurrencies is growing.
Key evidence is the growing likelihood of a crypto-friendly U.S. regime. Several notable developments include:
Bitcoin holdings by U.S. companies increase
Democrats and Republicans Supporting Cryptocurrency
Bitcoin fair accounting rules will come into effect in 2025.
While there may be some short-term hurdles, the overall trend remains positive and strong.
Bullish Signal#3- Global Debt at Record Highs
Global debt hit an all-time high of $315 trillion earlier this year. With elections in more than 50 countries in 2024, governments may be inclined to:
Tax cuts
Cash stimulus policy
(i) Why is rising debt bullish?
Bitcoin is a hedge against currency debasement and geopolitical uncertainty.
“I believe that if the world is fearful, Bitcoin will go up” — Larry Fink (CEO of Blackstone Group)
(ii) Central Bank Liquidity and Stimulus:
In the medium to long term, altcoins may benefit from liquidity injections targeting debt issues.
Central banks may stimulate economic activity to mitigate recessions.
Interest rate cuts have already begun, and fiscal policy may soon follow.
(iii) Macro Summer in the Four-Year Liquidity Cycle:
Finally, you can look at the “debt problem” through the four-year liquidity cycle.
Since 2008, this cycle has been based on governments refinancing debt.
We are currently in the “macro summer” and earnings are expected to gradually rise.
This phase usually leads to a "risky" macro fall.
