Bitcoin Is Grinding Lower – 10 Catalysts Traders Are Watching

👇1-13) Some argue that ‘time in the market’ is more important than ‘timing the market.’ This has undoubtedly been the case if you have been early in the Bitcoin game. When assets mature, looking for catalysts becomes more important for new investors.

👇2-13) Consider this: By the end of 2012, nearly 50% of all Bitcoins had been mined, giving everybody a huge advantage early on. By the end of 2017, almost 80% had been mined, and this was when prices were still low. Now, 93.8% of Bitcoin has been mined.

👇3-13) Conversely, those who entered the Bitcoin market during the last few years faced a much higher entry price with diminishing cycle returns. Companies (and assets) often experience a period of waning returns themselves. Whereas young companies thrive, mature companies grow slower. The same principle applies to Bitcoin, and it's crucial to be aware of this when considering your investment strategy - hence the importance of identifying and reacting to catalysts.

👇4-13) Bitcoin cycle returns have also diminished over time. The bull market in 2013 had a 560x return, the 2017 bull market had a 108x return, the 2021 bull market had a 21x return, and so far, the 2024 bull market has had a 4-5x return. Roughly, each bull market cycle return declined by a factor of 5 (560x/5=108x). Outsized returns might no longer be easily achievable with a buy-and-hold strategy.

Bitcoin Diminishing Cycle Returns

👇5-13) The number of days with> +10 % returns has also steadily declined over time: from 15 days with >+10% returns in 2017 to 11 in 2018, 8 in 2021, 4 in 2022, and just 1 in 2023. Most understand that Bitcoin returns come in waves (or cycles), and therefore, timing the market has become the only viable investment process for making outsized returns.

👇6-13) Although the crypto asset class will not go away, instead of having a long-only portfolio, we should focus on catalysts, events, and data points that indicate a period of solid returns. Concentrate on capital preservation during other periods – waiting in the bushes like a hunter until a catalyst walks by.

👇7-13) We have previously pointed out how macro factors have impacted the Bitcoin market. It is no coincidence that Bitcoin ETF inflows stopped when US CPI and PPI started to surprise on the upside in March. Bitcoin, perpetual futures leverage, was taken off when those two inflation data points printed even higher in April.

👇8-13) Last month, Bitcoin rallied after the FOMC Press Conference, when Fed Chair Powell held onto three rate cuts and indicated a QT slowdown. May 1 (1) is the next Fed meeting ‘catalyst’, where Powell could walk back on three rate cuts, a hawkish scenario. US employment data will be released on May 3 (2), which could signal stagflation if NFP is weak. PPI will be released on May 14 (3), while CPI will be released a day later on May 15 (4).

👇9-13) Although the DTCC listed Franklin’s Ethereum ETF on its website, which caused a +6-8% Ethereum rally over the weekend, the probability that the SEC would approve an Ethereum ETF is low. The DTCC listed Bitcoin almost three months before the SEC approved BTC ETFs. The SEC must decide on the nine applications received with the VanEck and ARK filings by May 23 (5) and May 24 (6), respectively.

👇10-13) Two bullish catalysts that ran off at the end of last week were the options expiry on Friday, April 26, when $9.4bn expired, the majority ($6.4bn) being Bitcoin options. Positioning had initially supported Bitcoin and kept prices relatively stable. Still, with the expiry out of the way, Bitcoin might start to trade more volatile as the next two expiries with significant open interest are far away on May 31 (7) and June 28 (8).

👇11-13) The other bullish catalyst that ran off was MicroStrategy’s Saylor, who finished his $400m stock sales from January 2 to April 25. During this time, the company was able to push its overvaluation to nearly +100% based on its Bitcoin holdings as the announcements of $1.5bn of capital raising for Bitcoin purchases in February and early March coincided with Bitcoin ramp-up during that time.

MicroStrategy Regression Model still sees +26% overvaluation vs. BTC

👇12-13) MicroStrategy will announce Q1 earnings after the close on April 29 (9). MicroStrategy has recorded a $2.3bn impairment loss before, based on FASB accounting standards. Still, as new FASB accounting guidance was issued in December 2023 (effective Jan 1, 2025) that allows companies to value digital assets at fair value instead of their purchase price, MicroStrategy could surprise with a massive earnings beat if they adopt these accounting rules early.

👇13-13) If the company changes its accounting standards, it could also be eligible for the quarterly index inclusion by SP500 on June 1 (10). The other two requirements—a $15.8bn market cap and 50% of its outstanding shares available for trading—are fulfilled. As the stock is still relatively overvalued, the company could announce more stock issuance to raise fiat for Bitcoins—even though we think this is unlikely and assume that the market is currently saturated with MicroStrategy shares.

MicroStrategy Regression Model History