Highlights

  • BTC ETFs are approved
  • Hedge funds are frontrunning the ETF news & halving narrative

Positions

  • 50% Cash, 35% Crypto, 15% BTC Options

Topic 1: Bitcoin Market Maturity

  • We believe there is an 80% possibility that we won’t have another bull market “leg up” for the next 3-5 years, unlikely we’ve had previously - instead, we believe we could range between 10k and 100k, with hedge funds using this range indefinitely and artificially create bearishness or bullishness depending on relevant narratives
  • BTC has arguably reached its max. audience. Retail is no longer the primary audience since banks and regulatory agencies have heavily restricted access to BTC. Institutions are currently in the process of allocating via ETFs; however, after a few months, everyone who wants to access BTC will have accessed it
  • Institutions or hedge funds/market makers will not drive up the BTC price >2x from here, which would be around 100k (this would put BTC at 1/5th of the Gold market cap). We give this a 10% chance. Retail wishes for this, but we believe it’s unlikely with all the looming FUD narratives (QC threat and bad BTC economics, most notably)
  • We argue that BTC is a mature market now, and we will see a bull market only with natural adoption/innovation (which we do think will happen eventually, but is heavily dependant on potential crackdowns/imposed regulations)

Topic 2: Bitcoin Halving

  • With the ETFs being approved, the next big upcoming event is the BTC halving
  • The most recent BTC halvings led to bull runs - many investors use this as an argument why the price would increase again after the halving in 2024 - we believe there is no foundation behind this argument; the sample size for this “rule” is too small
  • The BTC halving leads to a 50% reduction of sales by miners, which are negligible (compared with hedge fund/market maker/institutional demand/supply)
  • Assuming 150 blocks per day and a 6.25 block reward, we assume there are 1000 BTC per day. Assuming 50% are sold, this would mean a selling pressure of 25m daily, which is not much compared with volumes from spot/futures markets
  • After the halving, we will see a reduction of 50% in sales by miners - the question is, will miners remain profitable? As long as the price is >30k, mining is considered profitable with good energy conditions
  • With the halving, the BTC price has to be approx. >50k for miners to remain profitable at the current hash rate - if price falls drastically, for example <30k, it will lead to a sharp decline in hash rate and many miner bankruptcies (the BTC economics narrative/FUD)
  • All previous halvings didn’t have as much of an effect on miner economics as this one

Topic 3: 24k and 69k

  • There are two critical levels of interest for Bitcoin, which are 24k (strong support with liquidations/fear below) and 69k (all-time high, with a lot of demand above)
  • 24k
    • There is no reason for market makers to move the price back to 24k unless they would want to bring it way lower than that (everyone will “buy the dip” - and the MM strategy is generally to have a never-ending dip until there is absolute panic and everyone is selling again)
    • We have outlined two panic scenarios that we believe are most likely: 1. Quantum Computing threats, 2. Unsustainable BTC economics & miner capitulation
    • The QC threat is not predictable; it can happen next week, next year, or in 5 years (we believe the chance increases by approx. 20% per year until we reach an 80% probability in 4 years)
    • The “unsustainable BTC economics” narrative FUD is predictable, and we hypothesize that it will happen after April 2024. It might take a few months to realize, but it’s a beautiful narrative for anyone who wants to move the price much lower
  • 69k
    • We give this target a 40% probability of happening, so it is quite likely
    • Billions would enter if we reach 69k, 1. From liquidations, and 2. From breakout investors, 3. From investors assuming the market is entering a new bull run - this is an ideal scenario for anyone who wants to exit longs/fill shorts
    • Reaching 69k would cause a bull hype for a few months (until the distribution phase completes), with new players entering the markets, most likely via ETFs

Outlook

  • The Bitcoin Halving is coming up in around two months; we expect a slightly bullish “halving narrative” to dominate during this time
  • We also expect a sell-off starting around the halving date. As explained previously, this halving is likely a bearish event due to adverse effects on miner/BTC economics, unlike all previous halvings.
  • We are playing it safe by keeping most of our positions as they are, not adding any long exposure, taking profit on some bets (Cellframe did a 5x), and buying more BTC puts targeting <24k (28k puts with Q3/Q4 expiry)
  • With the price being around 50k, we do believe there is a ~40% chance of the price reaching >69k before the halving to tap into the liquidity above this level
  • We believe the most likely scenario at this point is to reach into 69k liquidity, distribute for a few weeks or months, fill shorts, and then orchestrate mass panic through either the QC or BTC economics/miner narratives