Bitcoin Taking a BreakWe have had a large surge from $8k to almost $14k, followed by a 30% retrace - the largest we have had during this bull market and the first in the retracement range we saw during the 2015-2017 run.Keep in mind that Bitcoins run since April 1st has been massive, with 300% gains in 3 months. This is an unusual high return for the beginning of a bull run. We usually see growth of this magnitude at the parabolic stage during the end phase.Based on these two factors, I think we will have no more upside action for some time. I don't see us going far below $8k either because we haven't seen corrections of that size during the last run either. Consequently, I believe it's finally time for Bitcoin to get some rest and sideways movement, which I see absolutely necessary after the recent run.Alt Season?If this turns out to be the case, it will be highly interesting to see what impact that would have on the altmarket. Historically, Bitcoin going sideways in a bull market resulted in alt seasons. Considering that Bitcoin dominance sits above 62%, a level Bitcoin could not sustain for more than a week since the surge of altcoins in May 2017, altcoins are quite low compared to Bitcoin. Alts could easily surge massively, if some capital flows back into these markets.Those who still have a significant part of their portfolio in alts are, aside from day-traders, are mostly HODLers holding on to their bags from late 2017 or early 2018. But many people have shorted their alt positions to ride the Bitcoin run. Expectations for Bitcoin are high while currently nobody is expecting high returns from their alts in the near future.If Bitcoin fails to meet these high expectations and shows no growth for as short as a period of only two months, many people would lose their euphoria and get flashbacks to the very recent bear market of 2018, which is still in everybody's mind. People will try to realize profits, either by cashing out to fiat or to alts. It doesn't need many doing the latter to cause massive alt surges. In a market where Bitcoin is stagnant but massive returns are seen on the alt-side, an alt-season would be a self-fulfilling prophecy. This would be further supported by our low expectations for alts where even 10% gains trigger dopamine rushes.If this is truly about to unfold, it would be the first real alt season since the beginning of 2018 and beshadow the previous surges which would be better refered to as "corrections". But please let me also outline an alternative model where we won't see an alt season any time soon even if Bitcoin goes sideways...The Global Recession has BegunWhat many people are not aware of yet, we are already knee-deep into a recession caused by global trade slowing down. Trump's "America first" policy, manifesting in a trade war with China and Europe (import restrictions, blacklisted companies, tariffs and other sanctions) has destroyed global trade infrastructure. German car manufacturers are already cutting jobs. Additionally, Brexit is triggering migration of banks, insurers, asset managers and other companies from Europe's center of finance, London, to the continent, shaking up the markets. Tensions between the US, China, the EU and Russia are growing.In the EU parliament election, it became apparent that the right and green parties are emerging, pushing out the industry-lobbied center parties. Right parties try to isolate their nations from global markets by leaving the EU and its trade zone and replacing the EURO with a national currency. Green parties are heavily pushing for sustainability - a necessary yet very costly step.Bitcoin in a RecessionThe current surge has been driven to major parts by institutional interest. Institutions have had their eyes on it since 2017 but were waiting for the bubble to burst to chop up cheaply. An emerging asset class having an accumulated market cap of $100B at the bottom of the bear market was a wet dream coming true for these financial giants who are used operating in highly liquid, traditional and well adopted markets where market caps are usually denoted in trillions. And that at a time where real estate and stocks are highly oversold and the bubble about to burst.While in these markets performance is measured in base points (0.01%), Bitcoin has historically delivered on the promise of gains in the multiple thousands of percentages within a time frames as short as 3 years. Looking for safe markets to park their investments for the recession, Bitcoin - although highly speculative - is still an attractive opportunity. Putting 1-5% of a portfolio into Bitcoin "just in case", is becoming increasingly trendy among professional investors. Now this certainly explains why we have been going up so fast since April 1st - where Bitcoin's downward trend has been broken, signalling institutions to FOMO onto the train as quickly as possible.Institutions and AltsSo what about alts? In this scenario, there is a strong divide between Bitcoin and alts. Institutions care little about the tech. Those making the investing decisions do not have any technical skills but rely on the estimate of professionals. These professionals point out that Bitcoin is the most liquid, safest and well-proven crypto asset while other projects are still in the development phase, many likely to fail, some sketchy and intransparent, some vaporware, almost all centralized - at least by a developing team. That Bitcoin has fees in the dollar range matters little when you are transfering in the multiple millions. The slowness of even waiting a day for settlement is a joke for those seeking a longterm store of value, those used to transfer physical assets, those day-trading and those trading in certificates of ownership.Having a long history, a recognizable brand, high liquidity and the first mover advantage, Bitcoin turns out to be the preferable crypto bag for institutions. Alts are too premature and not yet on the menu. They might be bought by highly speculative risk-seeking investors. But Bitcoin is already providing more than necessary volatility for almost anyone, including those being used to trading medium- to small-cap tech-stocks. Ignoring the tech, it makes sense to buy alts low and sell them high to the masses. But these masses are still far away from jumping onto Bitcoin. Alts will surely appreciate from this bull cycle, but likely at its later stage - just like during the last bull market.
Submitted July 07, 2019 at 11:31PM
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