Will 2024 be another stellar year for Bitcoin and the crypto market?

I thought for my Christmas Blog I would examine whether the 125 million or so wallet holders of BTC should be expecting a merry Christmas or not come this time next year.? ?

As an observation, and one that I can’t quite fully diagnose in relation to its longer term implications is that the current rally basically began when the conflict in Israel began.? This is exactly by the way, the opposite of what happened when the Russian/Ukraine conflict began, and when efforts to impose sanctions on all Russian assets led to billions of core crypto assets being moved outside of custody banks by whales located in Switzerland, Lithuania and elsewhere into the Middle East region to purchase real estate, art and other hard assets that could be acquired only in this operating centre. ?The natural implication on this occasion is for the increased demand for crypto to relate to a flight from hard assets and US$ holdings into crypto by citizens that are based in the area of conflict, as well as by those that anticipate funding options for their activities only being accessible through the advantages that a Layer 1 protocol offers.? If this shift in asset flows has been a major fundamental factor in shifting the supply/demand balance than any final ceasefire would have an adverse impact on bullish sentiment for example.

Stepping away from this consideration for a second, the current rally has not been accompanied yet by a surge in volume, and while it has meant that in a broader sense, we now have a crypto market as a whole that is worth roughly 1.7tr or more than 50% of the value that was achieved at its peak, the reality is that the market rally has been quite uneven, and has primarily been focused on foundational network protocols rather than on broad themes involving NFTs, Altcoins, and Defiapps. Thus, in some ways it bears more resemblance to the “big tech” rally masking a relatively flat S&P 500, then was witnessed in the 2021 surge.? This means that broadly speaking that the market continues to recognize value creation through foundational networks that support the broader decentralized finance proposition, this is as far as the general “investor” is willing to travel in their portfolio diversification strategy.? This implies less new speculation, and more activity from experienced investors has been behind much of the rally to date, esp. as the number of economically viable wallets is less than 2 in 5 at present.

Moving on to the technical picture, the most important observations that I have been able to determine are as follows:

1.????? There has been significant foundational support around US$16-18,000 for Bitcoin, and that long term holders.

2.????? That wallet positions indicate that most recent buyers have established positions in the US$30-32k range.? These players are sitting on profits of around 30-40% now on their holdings as speculators as we approach the end of this calendar yet. Profit taking risk will be starting to rear its head starting now and extending up to about US$48,000.

3.????? That we have not yet reached a point in the rally, and this is even more relevant for almost all of the other Level 1 protocols where we can start to reclassify this rally as one that will be seen as the start of the last and final leg of a 20x rally toward US$300 to US$330,000.? While we have seen BTC now correct beyond the first bear market point at around US$35,000, it still needs to clear US$48,000 to start to bring long term technical buyers into the bullish camp.

These points suggest more caution than optimism on the long-term picture, but with one caveat of course to offer that relates to the halving process. The cycle for the halving process has been occurring about every 4yrs or so, and thus would be expected to be occurring in about 4 to 6mths time. ?If history were to repeat itself, the halving process will be accompanied by a rally in BTC. The past rallies have lasted for approximately 1.5yrs after halving occurred and led to the peaks that we have observed.

Halving is a phenomenon that effectively continues to limit the actual future supply of bitcoin, while also decreasing the miner incentive, and thus increases its “stored value” potential, while at the same time potentially reducing the volume of transactions, thus building more utility value in other Layer 1 protocols.

What does all of this mean for “yule tide”??

Crystal gazing is of course fraught with risk, but the overall picture would suggest that “long term” money that believes in the overall stored value and scarcity principles of BTC will most probably look for an opportunity to take some profits in the next month or so, and then start to look toward opportunities to build positions on weakness back toward the US$30k level. ?ù

During this pullback, we will likely get a final picture start to emerge on the broader situation in the world of digital assets and particularly whether the combination of reserve like stable coins, combined with faster and cheaper Layer 1 networks offers a real future for Web 3.0 and decentralized finance. Thus, at the very least, the next 24 months are likely to be far more significant than any others to date.

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