Wednesday, May 19, 2021

The bitcoin (and therefore our favorite stock) bull run is not over.

This post will largely be about bitcoin, since I have already previously posted about the great outlook of RIOTs fundamentals and that has not changed. They posted good earnings at the earnings call so the only remaining variable is what will bitcoin do. Today's flash crash brought bitcoin all the way down to as low as 30k (a whopping 54% correction from the ATH). This has been by far the largest correction of this cycle and has a lot of people/media outlets screaming bitcoin dead. For a bit of humor before we get started, here is a link that outlines all of the hundreds of times bitcoin has been declared dead, the first one beginning when bitcoin was $0.23 per coin.
https://99bitcoins.com/bitcoin-obituaries/

So the first thing I hear is that bitcoin dropping over 50% means the end of the run and that's that. Too much of a drop to recover from. Lets look at the bitcoin corrections over the years.

https://preview.redd.it/ljq1s0nu56071.png?width=850&format=png&auto=webp&s=04769faa9d6f1a4f90b1f6d87239bebd347f3cd2

Would you look at that, we had a 57% drop in only 3 days post 2012 halvening, another one at an insane 83% in also 3 days, then one more for 50% in a single day. None of those corrections stopped the bull cycle. For comparison, the 54% correction we've had took an entire month to play out and is about equal to (or in the case of the 83%) much smaller than those. Bitcoin has been more resilient this cycle overall as well so there's no reason to believe this automatically signals the end.

Lets look at another comparison between the cycles.

https://preview.redd.it/gtygq00h66071.png?width=2064&format=png&auto=webp&s=bbb03b597a63a31d0f2ca6866d0705ced1aff190

This correction looks eerily similar to the correction at the same time in the halvening cycle as the 2017 run. That one happened from mid June to mid July over 35 days while ours took from mid April to mid May and 36 days to play out. One other thing to note: 2020 halvening event took place 2 months earlier than the 2016 halvening event, so at points in time from halvening event these corrections happened within only a few days of eachother. One thing to note, the X axis of this graph is days since the previous bull runs ATH was reclaimed, not since the halvening event started. We got a new ATH relatively early into this cycle so the graph starts a bit earlier for this cycle too, which is why we see the gap there.

Now this is great and all but the past doesn't necessarily reflect the future. What does the on chain data have to say. One of the best indicators we have seen thus far of plans to Buy/HODL vs plans to sell has been whether or not bitcoin has been flowing in or out of major exchanges. Usually when it's flowing in it's because people are planning to sell for Fiat currencies. When it's flowing out, people are stashing their bitcoin for the long haul.

https://preview.redd.it/cf8kxvtn76071.png?width=680&format=png&auto=webp&s=8252126ec3490f8030136c2399f7183cfcb9e864

Well looks like leading up to the big drops in both April and May we see bitcoin outflow bottom out. People were transferring bitcoins in to prepare to sell off. After the flash crash this morning we see the line go nearly vertical. It has now also set a new high for outflow volume, the last time this happened was on 01Feb which we all know was right before a huge leg up. This is blockchain data showing that bitcoin is being stored for the long haul in droves.

Based on this data, my prediction (take it for what it's worth which is not much) is that BTC will consolidate around the 35-38k range for a little bit before starting an uptrend that leads to a large leg upward. When this happens, I think we will also see RIOT slingshot into the $80-$100 range if bitcoin sets a new ATH.

TLDR: Bitcoin bull run is not over, on chain data shows bitcoin moving out of exchanges to be held in storage (historically a big bullish flag). RIOT will moon if bitcoin uptrends into a new leg up for a new ATH.


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