WEN BAGS PUMP?!
Thoughts & Stats On September's Rough Start
IN TODAY’S REPORT
What’s inside: STATS EDITION. September arrives in a hurry. Bitcoin’s latest technicals. Altcoins down 11 of last 13 days. Fear to Extreme Fear. Trading vs. investing.
TODAY’S STATS
It’s Called Fall for a Reason
September volatility not only arrived on schedule, but in one hell of a hurry. It’s called Fall for a reason, and apparently it’s about more than just leaves.
In the last report, I said…
“September will bring cooler weather and changing leaves. It will also bring a long-awaited rate cut, post-Labor Day portfolio shuffling, and — while I could easily be wrong — I suspect it will bring newfound ETH volatility.”
— Dissecting ETH's Rout, 8/28/24
While the last report focused on Ether, the post-Labor Day portfolio shuffling hit crypto across the board, and hard.
Bitcoin has closed down >= 15%, in just two weeks and at a 30-day low, all while still above its 365-day moving average. Ooof.
BITCOIN (BTC/USD). Daily Chart with 365-Day MA.
To take a closer look at the future implications of this recent price action, I’ve run a query over all of Bitcoin reliable history from 2011 to the present. The simpler the “query conditions” the more data points we get to consider (three conditions is the typical max, though occasionally I include more when required).
Today’s query conditions with a 90-day hold:
//QUERY CONDITIONS// "Down >= 15% in 14 days, at 30-day low, above 365MA"
CONDITION 1: Bitcoin closes down >=15% in 14 days
CONDITION 2: Bitcoin closes at a 30-day low
CONDITION 3: Bitcoin closes above its 365-day moving average
EXIT CONDITION: Exit ("sell") 90-days later
Here are the hypothetical trade results produced for the query conditions:
BITCOIN (BTC/USD). All Trades w/ 90-day Hold, EXCLUDING 2011 Outlier. 2011-Now.
First, I’ve tossed out the 2011 outlier of +2000%. Yes, a single result of a 2000% gain in just 90 days! Would I love to see it happen again? Yes. Has it? No. Could it? Maybe, but let’s take a more conservative approach and count it as the byproduct of bygone Bitcoin era.
What’s immediately interesting about these trades is the clustering of gains and losses. From 2012 to 2017, all gains. From 2018 to 2021, all losses with the exception of a fractional +0.70% gain. 2021 to now, only gains. The streakiness of these results can be primarily attributed to bull vs bear market states, but not entirely.
The largest gains under these conditions occurred in 2017 — two back-to-back bull market trades of +157.3% and +186.34% respectively — while the largest loss of -66.09% occurred in 2011, also potentially of a bygone era, but of course in financial markets, anything can happen at any time.
The average trade after tossing the outlier is +24.4% in 90 days — a more than respectable gain, though in the context of crypto, certainly not earth-shattering.
Looking at the market more broadly, I ran a query on TOTAL3, which represents the total crypto market cap excluding Bitcoin and Ethereum. While it still includes stablecoins, it’s essentially an altcoin index.
//TOTAL3 QUERY CONDITIONS// "Down 11 of 13 days"
CONDITION 1: TOTAL3 closes down 11 out of the last 13 days
EXIT CONDITION: Exit ("sell") 15-days later
Here are the two hypothetical trade results produced for the query conditions:
TOTAL CRYPTO MARKET CAP excl Bitcoin & Ether (TOTAL3). All Trades w/ 15-day Hold.
The average trade for this obviously rare and highly specific condition is +6.2% in 15 days, suggesting a slight albeit statistically insignificant upside bias after the recent weakness.
Lastly, while not yet integrated into my testing architecture, the Crypto Fear & Greed Index once again fell from Fear into Extreme Fear. As a sentiment gauge, this appears to be bullish, though perhaps eventually bullish would be a more apt description.
Crypto Fear & Greed Index. Source: Alternative.me
The mood among the crypto faithful has markedly soured, with traders and HODLers alike exhibiting growing impatience. Depressed interior monologues of WEN BAGS PUMP? can be felt — nearly heard, even — among degens everywhere.
More pain may be ahead, in defiance of the stats, as September’s financial deck-shuffling may not be over quite yet.
But alas, do you want to hold fiat, young doves? A Lannister always pay his debts, and the USG does the same. But not without the inevitable money printing and steady dilution of supply. It takes the irreversable expenditure of energy to create Bitcoin. It takes mere keystrokes to create USD.
The stats inform my trading — massively. The hardness of an asset informs my investing. However turbulent the ascent, I’ll stick with the hardest money ever created.
Until next time…
peace_love_crypto-DB
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