Special Bitcoin Report

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Dear subscribers,

This is Jordan from Bitbo and The Bitcoin Minimalist.

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Summary for August 4th, 2024 (current price ~$59.0k):

• Short Term: The price has been consolidating in the $55k to $70k range since the March highs. Bitcoin has flashed both buy and sell signals on short-term charts. Despite recent drops, BTC appears to be gearing up for an imminent breakout to new all-time highs.

• Long Term: The Bitcoin price continues to consolidate at the 2021 highs. A cup and handle pattern is showing on the weekly chart, with potential rate cuts and US government buying on the horizon. A longer term extended up-move appears imminent.

Recent Price Recap

Bitcoin dipped to the low $50,000 range at the beginning of July, which the Mayer Multiple (green bars) caught as a good time to buy the dip:

The Trump Bitcoin conference appearance was confirmed a sell-the-news event, and the price has continued to drop since his announcement:

Current Price analysis

Although the halving combined with ETF launch brought much hype, the Bitcoin price has simply consolidated post-halving.

However, looking at this period compared to previous halvings, this is very normal:

As can be seen above, consolidation after the halving has usually led to explosive moves up as the supply shock settles into the market.

Stock to flow’s projected price (blue line) has generally tracked the price fairly well.

While many don’t like stock to flow’s price projection, it has at minimum tracked the timing of moves up very well:

The price has yet to follow the stock to flow price up in this halving cycle, although it seems like it may be right once again.

Technical Analysis (Short & Long Term)

On the weekly chart, a cup and handle pattern is clear, with a target of $125,000 USD.

Today’s drop to the low $59,000 range is not significant, when zooming out since the beginning of the year:

What’s next?

Bitcoin’s recent price fall seems to have been very correlated to the recent drop in the US stock market.

There are two key levels we’ll be watching closely.

A drop back to the $55k range would mark a double bottom, meaning a good chance Bitcoin drops to new lows.

A return back to the $70k range would mark the 6th or 7th time Bitcoin has been at that range since March, and be a strong indicator of new highs to come.

On-Chain Analysis

Despite all-time highs in March, Bitcoin holders have held strong:

With ~19.7 million bitcoin in existence, only around 6 million bitcoins have actually moved on the network in the last year.

Despite the March highs, we have still not seen the 1YR HODL Wave hit 40% or even 50%.

This indicates that most current holders are not ready to sell in this $55,000 to $70,000 range.

Below you can see the price run up from 2017, where the 1YR HODL Wave dropped as the price increased, indicating that holders were selling coins:

On-chain data further helps confirm the consolidation before new highs thesis, as MVRV-Z score is also in a middle, consolidation zone:

Realized price is also in a “no man’s land” middle ground, at 1.61.

A realized price multiple under 1 would generally mean over-sold conditions, while a score above 2.5 usually means the market might be starting to over-heat.

Macro Analysis

Like it or not, the Federal Reserve’s control over interest rates has a significant impact on the Bitcoin price.

The fed cutting rates during COVID was the start of Bitcoin’s rise from the $3,500 range to $69,000:

In 2022, the Fed raised rates in March and that pretty much ended any hope of a continued Bitcoin bull run:

Fed Chair Jerome Powell recently said that a September 2024 rate cut is on the table.

Some speculate that this may be a political move, as lowering interest rates before the election will give the economy, Bitcoin, and most markets a boost.

The market is currently assigning a 78% chance of a small rate cut, and a 22% chance of a larger one:

We’ll continue to monitor this, as this has been a big mover of Bitcoin prices in the past.

US Bitcoin Reserve

Two of the three current US presidential candidates have proposed establishing a US Bitcoin Reserve.

• RFK Jr. proposed a 4 million BTC reserve

• Donald Trump proposed build a 1 million BTC reserve.

Senator Cynthia Lummis’s bill was also officially proposed in the Senate:

Implement a 1-million-unit Bitcoin purchase program over a set period of time to acquire a total stake of approximately 5% of total Bitcoin supply, mirroring the size and scope of gold reserves held by the United States.

The prospect of the US government buying bitcoins is a big deal, for two reasons:

1. A large percent of bitcoin will be taken off the market.

2. Other countries may follow.

Above, we mentioned that only around 33% of the total BTC have moved in the last year (around 6 million BTC).

For the government to buy 1 million BTC, they’d need to purchase around 17% of the circulating bitcoin.

The only way for the US government to buy this many bitcoins is to push the price extremely high in the process, as taking coins off the market will reduce supply.

One would hope the US government would be smart about buying, and buy in bulk and not on exchanges, in order to get a better price.

However, we recently saw the German government send its 50,000 BTC holdings directly to exchanges like Kraken and Coinbase to sell.

The market tracked these movements, and the direct sell pressure plus market concern appeared to have put large sell pressure on the Bitcoin price.

It remains to be seen if the Bitcoin Reserve happens, but if it does it will likely change the entire Bitcoin market dynamic, by:

1. Putting large demand into the market for a period of time

2. Taking a large percent of BTC off the market for good