- Passionate Income
- Posts
- Now the Time to Buy Crypto?
Now the Time to Buy Crypto?
How we're thinking about investing right now.
1,271 Words | 5 Min 18 Sec Read
Today we’ll be discussing the current status of crypto and what hypothetical scenarios could play out following this week's Bitcoin crash.
Let’s dive in.
**As is the case with all our crypto issues, this is not financial advice. We are not financial advisors in general and we are definitely not YOUR financial advisor .This information is entertainment purposes only. Crypto is risky and you can literally lose 100% of of your investment.
It's been a month and half since our last crypto check-in so I thought we'd revisit the topic.
Getting straight down to business, things look ugly.
Between January of 2023 and March of 2024 Bitcoin climbed an astounding 321%, from ~$16,500 to the most recent All Time High of ~$73,500.
Since March, however, $BTC has been rangebound, hovering between ~$71,500 on the high side and $61,500 on the low side.
A pattern that - because it lacks clear direction - drives people crazy.
And the longer it persists, the more impatient, pessimistic and flat out angry crypto participants become. A trend that's become increasingly obvious over the past few weeks, with users on Twitters flat out fighting in the comments.
Ignoring the hype, the real question is:
"Is this cycle over? Are we going to see aggressive upwards price action and a parabolic blow off top again?"
While we at Passionate Income are not psychics or fortune tellers, what we can tell you is that many people are making this market way too complicated.
So here's the "How to Play Crypto in Q2" 101 class.
First, one of the most common sayings in the world of trading is that:
"The trend is your friend until the end when it bends."
As of now, a variety of indicators (from the Daily 200 EMA to a clear diagonal trend line on the weekly) show we are still in an uptrend.
Admittedly, that uptrend looks a lot more shaky today than it did three short months ago. But one way or another, up is up.
In addition, while diagonal lines can be manipulated to get most any point across, horizontal lines cannot. And if you look closely, we're well above:
The early May close of ~$61,350
The Iran missile attack wick low of ~$56,350
*On the weekly timeframe for both.
Last, while sentiment on Crypto Twitter is horrific right now - with some veterans proclaiming things are worse than they were during the actual collapse of 2022 - in reality BTC is only down 12% from it's recent daily high.
To put that in perspective, $META - parent company of Facebook, Instagram and WhatsApp - fell 20% in the month of April and no one batted an eye.
So the question is: Are crypto investors overreacting?
In our opinion: Yes.
What you have to understand is that the people who interact with crypto content on social media represent a small minority of the industry.
From venture capitalists to developers, most people - and in particular most wealthy people - are not replying to tweets and Instagram videos about every minute movement in the market.
Yes, relative to the explosive upward price movement we saw from November to March, it's much harder to generate profits in crypto right now.
And yes, many alt coins are down 40% or more, resting at levels not seen since Bitcoin was in the $25K to $35K region.
The question you have to ask yourself is:
"Is the cycle over, with March marking the local top? Or is this a normal correction, with more upside on the horizon later this year?"
Historically speaking, trends point to more upside.
In past bull markets, Bitcoin has dropped anywhere from 20% to 50% or more on it's way to new all-time highs. Examples include:
Bitcoin dropping from $60,000 in April of 2021 to $30,000 in June of the same year, at which point it more than doubled on its way to $71,000 that November
In September of 2017, $BTC dropped 40% - from $5K to $3K - before increasing nearly 700% to the then All Time High of $20K in December
Multiple 15-19% corrections during the current bull run, which started in January of 2023
Long story short, a measly 12% drop is peanuts compared to the level of corrections we've seen during previous bull runs.
What has people scared, however, is the macroeconomic backdrop.
From jobs to inflation, the macro picture in the US is losing steam every week that goes by. And with no real catalyst on the horizon to spark an upturn, consumer sentiment (across the country, not just as it relates to crypto) is turning sour.
So what will crypto do next?
Generally speaking, the likely catalysts for a shift in direction / clear trend break are as follows.
First, if the US stock market (S&P 500 and/or Nasdaq) start to crash, Bitcoin and crypto in general will crash even harder.
Should that happen, you should assume crypto is dead for the time being.
Second, if the stock market keeps crabbing sideways, but Bitcoin drops below its current weekly support of $61,350 (or $60,000 in general), most experts agree crypto won't start heating up again until Q4 at the earliest.
On the flip side, if jobs data continues to weaken, the Federal Reserve could cut interest rates earlier than expected.
What happens from there is anyone's guess.
On the positive side, fed rate cuts signal a massive pivot in monetary policy (from the current, recession inducing tightness to a more relaxed, economic softening stance).
The problem?
The only reason the Fed would cut rates at its September meeting is because the job market starts collapsing. Which as you can imagine, is bearish for the US economy as a whole.*
*And could trigger both scenarios above with regards to stock market drops / Bitcoin losing support.
Further, history shows the six months after the Fed starts cutting rates are typically bearish (given cuts usually happen in response to a crisis).
If, however, consumer spending continues to buoy the economy - and we don't get a bank meltdown - the market could respond positively.
In which case both stocks and crypto could explode in anticipation of the election (which, historically, is bullish for risk-on assets).
Last, with the exception of a stock market crash, there are few catalysts that could/should lead to crypto dropping through the floor.
In fact, history shows there's little precedent for a large market drop with the election coming up. Instead, years where the incumbent is up for re-election are even more bullish than regular election years.
Admittedly, it's possible we're already in a recession or will enter one during Q3. But given quarterly GDP data isn't released until six weeks after the fact, we likely won't know we're in a recession until well after the election.
So, while anything (including a black swan) is possible, most factors that can be accounted for point to brighter times ahead.
💡 Takeaway: With few catalysts on the horizon, it's unlikely Bitcoin will explode anytime soon. However, if it can manage to avoid a disastrous break down over the coming weeks, the second half of 2024 could be profitable.
On the flip side, if Bitcoin starts closing below $60,000 (and $57,000 especially) on a prolonged basis, most experts agree those kind of numbers would mark an end to the current bull market.
🎁 Resources:
FREE COURSE: Build a Faceless IG Page (from a guy with 10M+ followers)
