Charles Edwards, the founding father of hedge fund Capriole Investments, supplied an in-depth analysis of the Bitcoin market yesterday. His assessment provides a granular perspective on the aftermath of the historic ETF launches, the pivotal position of main gamers like Grayscale, and the interaction of market mechanics shaping Bitcoin’s trajectory.
Bitcoin Market Summary: ETF Launch
Edwards acknowledged the ETF launches as a pivotal second, characterizing it as “ETF Mania.” He emphasised the hindsight realization that the ETF launch triggered a short-term “sell the news event.” Edwards elucidated, “A portion of this can be attributed to the Grayscale outflows of over $4B, approximately half of which was forced selling by the FTX bankruptcy estate and another couple billion likely to cover Grayscale’s debt obligations.”
However, he initiatives a shift within the outflow price from Grayscale, stating, “I expect the current rate of outflow will drop to a more sustainable trickle over the next few weeks (after another few billion out).” Edwards additionally highlighted the top of Grayscale’s multi-year lock-up interval, permitting long-term traders to lastly shut their GBTC positions at market costs.
Regarding Blackrock and Fidelity ETFs, Edwards famous their significance, saying, “The brand names of these two behemoths in the traditional asset management space means every billion they bring in, adds an order of magnitude more credibility (and therefore flows) into Bitcoin and crypto as a whole.”
BTC Technical Analysis
In his excessive timeframe technicals (HTF) evaluation, Edwards noticed a powerful rejection at mid-range resistance in the course of the ETF launch. He identified, “The nearest HTF support at $35K would likely represent a great opportunity to get long for the 2024 Halving year (if we are lucky enough to get there).” Edwards additionally talked about, “Alternatively, a strong close above $44K will likely see the trend continue to range highs ($60K).”
For low timeframe technicals (LTF), he dissected the December/January consolidation and the $44K “fakeout” in the course of the ETF launch. Edwards defined, “Fakeouts often resolve in price movements to the other side of the range, as we saw.” He added:
Therefore, probably the most fascinating value level domestically is $41K. A day by day shut above $41K would doubtless signify a downtrend fakeout and a swift return to vary excessive at $44K (+). If we merely wick into $41K and begin trending again down, that may be a fantastic risk-off set off for a possible transfer decrease towards $35K HTF assist.
Fundamentals: The Role Of On-Chain Data
Edwards underscored the significance of fundamentals and on-chain information in understanding market dynamics. He launched Capriole’s Bitcoin Macro Index, stating, “This Index includes over 50 of the most powerful Bitcoin on-chain, macro market and equities metrics combined into a single machine learning model. This is a pure fundamentals-only value investing approach to Bitcoin. Price isn’t an input.”
According to him, fundamentals have entered a interval of slowdown which aligned with the close to prime on the ETF launch. “That fundamental slowdown continues today with price down -20% from the highs in January so far,” Edwards remarked.
Chart Of The Week
The hedge fund supervisor additionally launched the Advance-Decline (AD) Line as a chart of the week. He defined, “The AD Line is calculated as the cumulative sum through time of each day’s count of advances less declines.” Edwards highlighted its relevance, stating, “Today we are seeing the first such breakout since 2016.”
He drew parallels between the AD Line’s breakout and Bitcoin’s historic efficiency, noting, “During these periods in 2013 and 2016, Bitcoin was also in a drawdown from all-time-highs (like today) and began two of its largest cyclical rallies in history.”
The Opportunity Of The Year
In conclusion, Edwards supplied a nuanced outlook. He cautioned, “Bitcoin at $39-40K is not a screaming buy today.” However, he projected, “The opportunity of the year likely awaits in the $32-35K region, which if we are lucky enough to see, will probably be the last time we ever see it.”
Edwards concluded with a forward-looking perspective, stating, “Pending that, we await patiently for a momentum breakout of $41K (aggressive) and $44K (conservative) for resumption of the meat of the primary 2024 trend. Up.”
At press time, BTC traded at $40,003.
Featured picture created with DALL·E, chart from TradingView.com
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