Three narratives to drive the next bull run

Opinion Piece by CryptoJelleNL

If you have been reading crypto twitter over the past year, you will probably have seen one or two of my bullish-biased tweets pop up on your timeline. In the 3 years I have been sharing my thoughts on the markets, I have only once before been as vocal about my bias – when I sold out of the market in April of 2021.

I waited on the sidelines for 18 months, only taking the odd trade here and there, until the infamous collapse of FTX. The perfect capitulation event. In the days that followed, I started buying Bitcoin again, to prepare my portfolio for the next bull market.

In this opinion article, I will outline the reasons why I believe we have made it to the early stages of the next bull market. Keep in mind these are just my views, and I could very well be wrong. Do your proper research, or consult a financial advisor before making your own investment decisions.

Technical arguments for a looming bull market

First things first, let's look at the chart. Over the past years, the crypto markets have moved in a cyclical fashion, repeating similar patterns over and over again. With the exception of a pandemic-induced detour, I see bitcoin cycles following this approximate rhythm:

Bull Market → Bear Market → Bottoming Phase → A Reset → Bull Market

Be it a meme or not, this rhythm matches the popular Wall street cheat sheet, where the rythm is something similar to the following:

Positive Emotions → Negative Emotions → Bottoming Phase → Disbelief → Positive Emotions

Going back to the rhythm of cycles, here is what this looks like on the current Bitcoin chart:

As you can see, bull markets are followed by bear markets, which are followed by periods of consolidation around the bear market lows (the bottoming phase, if you will). To complete the puzzle, each bull market is announced by a period of consolidation, where the RSI consolidates slightly below the overbought levels. I believe this is a crystal clear sign of accumulation in the markets.

During the latest bottoming phase, the collapse of FTX pushed prices deeper than comfortable – below the previous cycle highs. An unforeseen black swan event, resulting in a high-volume capitulation candle. Definitely something out of the ordinary, but history has shown that generally speaking, buying such capitulation events is fruitful.

This time has been no different, as the market has rallied approximately 85% from my initial buys, pushing out of the bottoming phase and flipping the market structure to bullish. The price action we've seen over the past months is typical for accumulation, where we consolidate below a key level (30k), and the RSI consolidates below overbought levels (>70).

All things considered, Bitcoin went through an extended bear market, spent ample times consolidating around the lows, and since then flipped market structure to bullish.

Now of course, a major caveat to this theory of mine is that the halving is still approximately 8 months away, and the halving has historically lined up well with the cyclical pattern I described. However, the halving is just one piece of the puzzle, while the cyclical pattern is still clearly present. I’m not throwing away the theory, just because of the halving event.

In fact, let’s look at some fundamentals - as I see them pointing north as well.

Fundamental arguments for a looming bull market

Strength in the face of FUD

Over the past year, the market has faced a boatload of bad news. Luna, Celsius, 3 Arrows Capital, FTX, BlockFi, and Genesis ALL collapsed, US Crypto Banks went bust, and now the SEC is coming after crypto by suing the likes of Binance and Coinbase, while still being tied up in a fight with Ripple.

In spite of all this headwind, the market has made its way back to 30,000 dollars, the level where Bitcoin bottomed in the summer of 2021, and the level we eventually lost in late spring of 2022. This shows clear strength and intent to leave the past behind.

The return of the money printer

But there's more. Over the past years, we have seen that markets closely follow the global liquidity. Governments across the world turned on the money printers (quantitative easing) in 2020, in order to alleviate the economic challenges induced by covid lockdowns. After a period of strong contraction (quantitative tightening), it seems that we are entering another stage of expansionary policy.

The Chinese government seems to be leading this shift to new expansionary policy, as they continue to ship new stimulus packages to prevent further economic slowdown - even though I agree with Michael Howell (Managing Director at Crossborder Capital and author of 'Capital Wars: The Rise of Global Liquidity) when he points at the budget debacle that made Liz Truss the shortest-lived UK PM ever, as the turning point in global liquidity trends. Since then, governments around the world have pivoted to more expansionary policies, although you have to read between the lines to see it happen.

For example, while the US Fed has significantly decreased their direct bond-buying programmes, this decrease in liquidity is compensated by short-term lending to commercial banks and a drain of the Treasury General Account (TGA). At the same time, the US government has once again increased their debt ceiling to alleviate the growing budget deficit – and the interest burden climbs accordingly.

Essentially, governments have found themselves in a situation where there is no good way out. Unless they wish to default on their debt (ruining the credit-worthiness of the country), they will have to find money from somewhere, and my best bet is they will once again turn to the QE, leading to more inflation, and higher asset prices.

Serious ETF candidates

It would have been hard to miss the recent news that asset managers BlackRock and Fidelity have filed for Bitcoin Spot ETFs in the past weeks, and many other asset managers following suit.

While all previous attempts at putting out ANY Bitcoin ETF failed, the SEC recently approved the first ever Leveraged Bitcoin Futures ETF, which launched at the Chicago Board Options Exchange (CBOE) on June 27th, boosting the markets' confidence that the SEC may be more likely to approve these ETFs.

Furthermore, with their strong lobbying network, BlackRock has an impressive track record of getting ETFs approved, winning 575 of their applications, and losing just one.

In the meantime, Grayscale's bid to convert the GBTC Trust into an ETF has seen its chances of success skyrocket as well, after judges on the panel appeared to side with Grayscale.

All in all, it feels to me that the first approval of a spot bitcoin ETF is a matter of time. Grayscale's case is expected to reach a decision in the fall of 2023, while the SEC has a similar amount of time to respond to BlackRock's filing. While they can choose to postpone a final decision in the case of BlackRock, Fidelity and others - the signs point to spot bitcoin ETFs being a reality, sometime in the not too distant future.

If this materialises, and the SEC opens the doors to Bitcoin ETFs, trillions of dollars in assets under management will now have access to crypto markets. Only a marginal share of that capital has to actually make its way into the industry to push prices higher by a wide margin.

My current positioning, and next steps from here

All in all, these narratives form the basis of why I am so bullish on Bitcoin for the foreseeable future. It may take months for these narratives to materialise, even though the charts look strong.

So long as we stay below $30,000, I will trade the range, and use these proceeds to further grow my spot bags. I am confident that we will eventually break out, and head on towards fresh all time highs.

Until then, I am im preparation mode.

Author's Disclaimer: This article is based on my limited knowledge and experience. It has been written for informational purposes only. It should not be construed as trading or investment advice in any shape or form.

Editor's note: CryptoJelleNL provides insights into the cryptocurrency industry. He has been actively participating in financial markets for over 5 years, primarily focusing on long-term investments in both the stock market and crypto. While he watches the returns of those investments roll in, he writes articles for multiple platforms. From now on, he will be contributing his insights for Alpha Circle as well.

Check out his twitter: twitter.com/cryptojellenl

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