Has BTC's pullback completed?
Bitcoin has been in a pullback since the 21st February 2021, after a full 30 days of bullish momentum from the previous correction. We have seen price retrace from highs of c$58,600 to a low of c$43,400, a total of c26%. When looking back on previous price action this is pretty typical in a BTC bull run and nothing to be worried about. The last correction that occurred lasted two weeks, starting on 8th January 2021, retracing 30% before continuing its bullish frenzy. The question we hear you asking- has this pullback finished?
We have kicked off the week, and March, with bullish momentum across the crypto industry; however, it doesn't mean the pullback is necessarily over. At the time of writing, the price of BTC has broken above the 4H 50EMA on the intraday charts. We would like to see this indicator retested and hold as support to be fully confident in continuing this bullish momentum. On Sunday, we held the previous daily low as support, and the 1H formed a beautiful descending wedge. I (Jonny) took a discretionary IBO long position after breaking out of the wedge and 1H 50EMA and retesting them as now support. I am looking initially to target recent daily highs as a soft target, but leaving my target off in case BTC goes parabolic, and a much larger bullish move occurs.
An indicator that supports the bullish continuation is looking at what institutions are doing during these pullbacks, buying or selling. We shared last week that Michael Saylor from MicroStrategy purchased another $1bn of additional BTC at an average buy-in of $52,765 per coin. They haven't stopped there and today confirmed another $15m purchase, bringing their total to 90,859 BTC. To further support that institutions were purchasing throughout the pullback, looking to snap BTC up at a lower price in the expectation of another bullish run, we can look at BTC outflows from Coinbase. Coinbase's custody wallets are linked with its over-the-counter trading desk. Institutions usually transact over-the-counter to avoid influencing spot markets with large orders, and outflows from Coinbase going to cold wallets for custody are interpreted as institutional activity. It is being speculated institutional investors have seemingly purchased the dip, with c$650 million leaving cryptocurrency exchange Coinbase potentially signaling a large buy.
We saw a similar theme play out during the last 30% correction, and many are claiming institutions buying during a dip is one of the most bullish signs the crypto markets can give. If the price did continue to correct deeper, pay attention to around c$40,000 where we have previous structural high and the daily 50EMA aligning.
I also took trades on several altcoins that I will cover in tonight's Market Update, so make sure you do not miss it! (navigate to the announcements channel within the TMC Club to register)
Are US equities reaching dangerous levels?
Investors have pushed US equity indexes to all-time highs, levels that have never been seen before. After a short pullback across major indexes last week, they have opened up this week with bullish momentum. This is primarily due to President Joe Biden's $1.9trillion emergency stimulus package being passed by the house over the weekend. The stimulus would provide taxpayers with $1,400 stimulus cheques and much more legislation to distribute new federal dollars to hard-hit individuals, businesses, and other parts of the US economy. This leads us to question- are investors in the euphoria stage and is a bubble soon to follow?
Founder of Bridge Water Associates, Ray Dalio, one of the world's largest and most successful hedge funds, recently released a research paper supporting a thesis that although the US market is looking a little 'frothy,' it isn't 'yet' indicating an outright bubble being imminent. What it does highlight is emerging tech stocks are currently reminiscent of the 2000 dotcom bubble.
The calculations are based on six primary questions, referencing different statistics. The chart below shows the aggregate reading of all six gauges into one reading for the stock market dating back to 1910. It then compares the current data to previous bubbles that have occurred.
In short, the aggregate bubble gauge is around the 77th percentile today for the US stock market. In comparison to the bubble of 2000 and 1929, this aggregate gauge had a 100th percentile read.
Market timing is arguably impossible and a dangerous game to play; however, Ray Dalio's bubble indicator has proved to be a good indicator when looking at historical data. For all gauges and statistics that provide this outcome, make sure to check out the full research report. What should we do with this information? Suppose you are heavily exposed to emerging tech stocks, running incredible profits from the last 11 months of bullish momentum. In that case, this could be an indication to decrease your exposure and bank some of those profits/diversify into other areas of the market.
Currencies: The end of last week saw some of the daily pullbacks that we have been waiting for. However, on the stimulus news from Saturday, markets opened, and momentum has largely continued with the already overextended runs most currency pairs have been on. We are remaining patient waiting for further daily deceleration to play the deeper weekly corrections when they present themselves.
Commodities: Oil looks to be starting a pullback after a 115-day bull run finally. We await a deeper correction to get exposed long. For now, our focus is on capturing any quick in and out pullback moves that present.
TMC CLUB - Meet full-time trader Yeifry
TMC Club member, Yeifry, was first exposed to the trading industry in 2017 when Bitcoin went on its bullish frenzy. After investing with expectations of all of his wildest dreams soon to come true, he was swiftly met with BTC crashing, forcing him to sell in a loss, like many others. This left him hungry for knowledge to understand why it happened. Yeifry joined us in April 2019 and hasn't looked back since.
This was the catalyst that made him question if there was a different way to achieve his desires. Another way to the limited perception we're traditionally programmed to believe are the only route. A critical reminder for us all that even a negative short-term outcome can result in life-changing long-term change.
There's a vast amount of value to be taken from his story and experiences. Go and check out the full interview here.
What's happening this week?
Monday, March 1st, 2021 @ 1pm PT
Market Update with Jonny Godfrey
Wednesday, March 3rd, 2021 @ 1pm PT
Market Update with Irek Piekarski
Friday, March 5th, 2021 @ 9am PT
Insights with Jonny Godfrey
All the best for the week ahead and we'll see you in the club!
Jonny Godfrey & the TMC Team