A Crypto Christmas Special With Material Indicators: Past, Present, And Future
27 December 2023 - 6:00AM
NEWSBTC
Another year, another Crypto Christmas special for our team at
NewsBTC. In the coming week, we’ll be unpacking 2023, its downs and
ups, to reveal what the next months could bring for crypto and DeFi
investors. Related Reading: A Crypto Christmas Special With Jlabs
Digital: Past, Present, And Future Like last year, we paid homage
to Charles Dicke’s classic “A Christmas Carol” and gathered a group
of experts to discuss the crypto market’s past, present, and
future. In that way, our readers might discover clues that will
allow them to transverse 2024 and its potential trends. Crypto
Christmas: A Deep Look Into The Bull Market And A Secret Pattern
Once again, the crypto analytics firm Material Indicators joined us
to discuss the current market structure. This year, we spoke with
Keith Alan, one of the co-founders and analysts at the firm. Alan
gave us his perspective on the bull market or what looks like the
beginning of a bullish trend. Material Indicators is well known for
their reliance on hard data, and for sharing views that often
questioned the general beliefs in the crypto market. This time was
no difference as Alan pointed to the evidence favoring both sides,
bulls and bears. This is what he told us. Q: In light of the
prolonged bearish trends observed in 2022 and 2023, how do these
periods compare to previous downturns in severity and impact? With
Bitcoin now crossing the $40,000 threshold, does this signify a
conclusive end to the bear market, or are there potential market
twists investors should brace for? MI: Nobody could argue that 2022
was anything but a bear market. After Bitcoin reached an ATH in
November of 2021 we saw the bear market develop in classic fashion
by losing support at key technical levels. While the bear was
playing out in somewhat predictable fashion, the market was caught
off guard by the events that led to the FTX crash in November 2022.
Because the contagion from FTX had a devastating ripple effect that
was felt by the largest institutions with crypto exposure as well
as banks, I actually expected prices to fall even lower. At
the time, fear and fighting among institutional players like
Galaxy, Gemini and Grayscale (under DCG) who were among SBF’s
largest institutional victims added to the concern that price would
grind down towards the lower teens, yet somewhat remarkably and
perhaps not so coincidentally on January 1, 2023 Bitcoin started to
rally. What was first considered weekend whale games evolved long
past the weekend, and in fact, through Q1/2023 I identified an
entity on FireCharts which I nicknamed “Notorious B.I.D.” that was
double stacking large blocks of bid liquidity to push price higher.
There was a pattern to the behavior that made it somewhat
predictable and tradable. Those moves were well documented in my X
feed during that period of time. Once price reached $25k that
entity disappeared. Even without the help of that manipulation
pushing price up, and despite the fact that the macroeconomic
situation was horrible, the geopolitical situation went from bad to
worse and the US political situation evolved from a dysfunctional
sh*t show to a full blown circus, the market continued to
rally. Now, nearly 12 months and > 150% from the day the
rally began, the debate between bulls and bears over whether this
is a confirmed bull market or a sequence of bear market
distribution rallies literally continues today. While it’s
understandable that someone could look at 150% and immediately
assume bull market, it does require a deeper understanding of what
distribution and accumulation look like. From my view, that still
isn’t as clear as one would expect. Historically, the Purple Class
of Whales with orders in the $100k – $1M range have had the most
influence over BTC price direction. The order flow data I’ve been
monitoring on Binance shows that through most of the year they
(along with larger MegaWhales) have been buying dips and
distributing significantly more than they bought on those dips on
the uptrends that followed. Only recently have we seen an uptick
that could be an indication that the trend is shifting. Parallel to
that, some on-chain data providers are showing an increase in the
number of wallets holding BTC which is also an indication that we
could be transitioning from a distribution phase to an accumulation
phase and I’m looking for more clear evidence of that. One of the
things I look for to get a sense of that is bid liquidity. I
believe that “Liquidity = Sentiment,” and it’s no secret that order
books have been thin on both sides of price through most of the
year, however in the last 3 weeks or so, we’ve started seeing more
institutional sized bid ladders coming into the order book and that
fact supports a bullish thesis, as long as they don’t dump through
the next pump. With all of the above in mind, there are most
certainly turns and twists that investors should look out for. Sure
we are starting to see some improvements on the U.S. inflation and
unemployment numbers, but something in those reports doesn’t jive
with reality. For most middle and lower income Americans, credit
card debt is climbing to new highs, rents have soared, home
ownership is unattainable, grocery prices are high and a Metallica
“Standing Room Only” Field ticket is $575. So in my mind, we
still have a percolating macroeconomic problem and the geopolitical
and U.S. political issues seem to get worse by the day. Aside from
that, the RSI has been over cooked for an extended period of time
and we just had 8 consecutive green weekly candles. Both of those
factors have historically led to corrections. I could give you the
“History doesn’t have to repeat itself…” spiel or I can show you
what historically happens after moves like this and let you
decide. Another potential twist to consider is that the
current PA has a striking resemblance to the first leg of the 2019
rally that turned out to be a Fib retracement, that ultimately got
rejected from the top of the Golden Pocket at .618 Fib. That led to
a 53% correction before the Covid Crash took it down more than 70%
from the .618 Fib. At this stage, I’d be surprised to see a
downside move that deep without the aid of a Black Swan, but we are
currently having some interaction with the Golden Pocket that seems
familiar. While it is reasonable to expect some resistance entering
and exiting the Golden Pocket, there is one very weird twist to
what we are seeing and that is a strange pattern I’ve noticed
occurring on or around December 17th. Every year since 2017 there
has been a move on December 17th that had Macro implications. The
only exception to that is last year when it happened on December
20th. On each occasion the price action led to a macro breakout or
breakdown. It’s too soon to tell if this move will validate the
pattern on the day of writing (Dec 19th), but on the 17th we saw
BTC get rejected from the lower end of the Golden Pocket and also
lose the 21-Day moving average. Price has been flirting with both
of those levels ever since so we’ll have to wait to see how it
plays out over time. Aside from those things I’m watching the
upcoming ETF window very closely. I think that the market is numb
to SEC delays on these decisions, but there is so much anticipation
that this time we’ll see an approval, that a flat out rejection has
the potential to be the catalyst that triggers a correction.
Regardless of where you side on whether we are or are not in a
confirmed bull market, we’re seeing a lot of evidence that if we
are not in it, we’re close to it. If you’re a long term investor
and you haven’t already started building a position, it’s a good
time to identify some targets to start scaling into one. This of
course depends on your time horizon and risk appetite, but if you
have a long term outlook and 6 figure targets for BTC it’s still
early enough to get in, but it’s also a good idea to save some dry
powder for a correction because in my opinion, it’s not a matter of
if it will come, but when. Q: Right now, we are seeing Bitcoin
reach new highs. Do you think we are in the early days of a full
bull run? What has changed in the market that enabled the current
price action; is it the Bitcoin spot ETF or the US Fed hinting at a
loser policy or the upcoming Halving? What is the big narrative
that will go on in 2024? MI: Despite the ongoing debate between
bulls and bears over whether or not we’ve been in a bull market, I
can say that despite the uptrend, there has been no clear
confirmation that we’ve been in a bull market through most of the
year. However, the fact that we’ve recently started to see more
institutional sized bid ladders coming into the order book along
with the on-chain data that indicates more wallets holding for
longer and the recent buying after the R/S flip at $40k are
indications that we may be on the verge of a breakout. There’s no
doubt in my mind that a lot of the momentum we’ve been seeing is
related to the next ETF decision window opening January 5-10 and
the April 2024 Halving. The FED’s recent decision to pause rate
hikes and hint at a pivot to cuts in 2024 certainly added fuel to
that momentum that pushed price above $40k. In typical crypto form,
we also had some help in late October through early December when I
noticed some familiar patterns in the order book. I can’t confirm
with absolute certainty if it was the Notorious B.I.D. spoofer we
saw in Q1 returned, but it was the same game I identified through
Q1 being executed and there is no question that it helped push
price up through the $35k – $40k range before it disappeared. (…)
As much as I’d like to see a correction come before we get there
(the Bitcoin spot ETF decision), the market doesn’t care what I
want. I would expect it to come before the Halving. Whether it
comes before or after the ETF decision window closes remains to be
seen. In the meantime, I’ll continue to watch order book and order
flow data and trade what’s in front of me. Q: Last year, we spoke
about the most resilient sectors during the Crypto Winter. Which
sectors and coins will likely benefit from a new Bull Run? We are
seeing the Solana ecosystem bloom along with the NFT market; what
trends could benefit in the coming months? MI: The vast majority of
my focus is on Bitcoin and to be honest, after seeing so many
ponzi’s in the space, it’s the only digital asset I truly trust.
There are certainly some great opportunities with certain alts, but
with that comes increased risk. As for sectors, it’s no secret that
AI and Gaming have been hot. According to some research I’ve been
reviewing Memes, DePin and GambleFi are dominant narratives right
now. The fact that Memes are more dominant than something that’s
actually physical like DePin speaks to the immaturity of this
market. Perhaps a better way of stating that is, “We are still
early.” That said, if I’ve learned anything in crypto there is an
opportunity cost associated with having high standards and
principles for projects you invest in. As ridiculous as that may
sound, the biggest upside potential seems to come from some of the
most meaningless projects because they have large communities of
“Crypto Bros” pumping them and thin liquidity makes them easy to
pump. Just know that they also come with a huge risk and like every
other ponzi, you don’t want to be the last guy holding the bag. I
personally tend to avoid memes for all the reasons I mentioned
above, but I do trade DOGE on occasion because it’s been a
relatively easy scalp lately. Elon Musk playing kingmaker with that
coin doesn’t make me like it any more or less (okay maybe less),
but the results have been predictable. The fact he has
obtained a money transfer license for X (Twitter) and that he has a
DOGE logo on his X profile has me considering taking a flier on
DOGE, but that’s not something I’m recommending to anyone who isn’t
willing to lose that money. The fact he has SpaceX launching a DOGE
sponsored satellite next month should at the very least bring a
short term pump. Of the leading narratives mentioned, Memes may be
the most dominant, but DePin is the most interesting to me, because
it’s associated with something very real and very hot right now.
For those who may not be familiar, DePin stands for Decentralized
Physical Infrastructure Networks which are blockchain protocols
that build, maintain and operate infrastructure for the AI
industry. (Do Your Own Research). The fact that you mentioned
Solana is proof that nothing changes sentiment like price. Solana
has been through the ringer since falling from it’s ATH in November
2021 and the FTX crash of 2022 delivered another 80% correction
that took it to single digit levels. There is no denying that it
has been on an epic run recently. It’s somewhat puzzling to me how
that is happening at the exact same time FTX liquidators have
started the long process of distributing over $1B worth of $SOL
back into the market. Related Reading: Shiba Inu Climbs 12% On
Christmas Day – Brewing Bull Run Or False Dawn? Rather than
speculate on what may be behind that, I’ll say that it is apparent
that they have a very strong community and despite the network
issues they’ve had in the past, they seem to be growing in
popularity in staking pools. Then again, nothing influences
sentiment like price, so I expect we’ll see a number of coins
filter their way in and out of the leading narratives through the
year. I’m just hoping more of them do so for legitimate reasons
rather than fake news or P&D groups. IMO, until we see the
projects with real teams, real use cases, real adoption and real
revenue establishing themselves as the best projects to invest in
for their fundamentals, “We’re still early.” Keith Alan is
President at Keith Alan Productions, Inc., Co-Founder at Blacknox,
LLC and Material Indicators, LLC. Nothing written should be taken
as financial advice. For more insight and analysis follow
@KAProductions and @MI_Algos. Find premium tools for traders at
Material Indicators. Cover image from Unsplash, chart from
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