To The Moon

We have seen Bitcoin pushing its price above the $26,000 mark. The co-founder of the popular cryptocurrency exchange BitMEX has recently suggested that the price of the flagship cryptocurrency Bitcoin BTCUSDT could surge if central banks keep on raising interest rates.

Currently we are seeing Bitcoin above $26,000 mark, with the CPI and PPI coming in strong, market is still holding onto expectations that Fed would stay the course in the rate hike.

But I personally think that it is the time to look at how Bitcoin would move if there is a rate hike coming.

In this article I would like to share what I have looked at in terms of Bitcoin, the long/short ratio for exchanges Bitcoin, the recent rise in crypto stocks and the “Dead Cross” that just appear for Bitcoin (Do note that Bitcoin is currently trading below 50-day period).

Exchange Accounts Long/Short Ratio

It is important to understand that the long positions and short positions on all exchanges are equal, maintaining a 1:1 ratio.

I am more interested to look at the exchange accounts long/short ratio, to put it in simple term, it is referring to the number of long accounts versus short accounts, which can be simply understood as the number of participants on the long and short side.

This represents the proportion of net long and net short accounts to total accounts with positions, with each account counted once. Why is this important? because it will reveal the tendencies of retail investors and institutional investors.

If we know the tendencies, we would be able to know whether the retail investors is bullish or bearish, similar applied to institutional investors.

The total position value of long and short positions in the market is equal. When the total position value is equal but the number of holders is different, it indicates that the average position value of the side with more holders is smaller, primarily consisting of retail investors, while the other side is dominated by institutional investors and large traders.

When the long/short position ratio reaches a certain level, it indicates that retail investors tend to be bullish, while institutions and large traders tend to be bearish.

From what we see below, this could mean that the total position value on both sides is almost equal. This suggests that there are more individuals on the long side, but the average position size per individual is smaller, possibly indicating a higher proportion of retail traders.

Conversely, there are fewer individuals on the short side, but the average position size per individual is larger, possibly indicating a higher proportion of institutional or larger traders.

This could mean retail traders are bullish on BTC. Let us examine the “Dead Cross” which just appear for BTCUSD.

“Death Cross” on BTC-USD

We have seen Bitcoin gathering the deadly formation “Death Cross” which has send the price into a downward spiral for more than one year ago. It has not appeared since.

Let us take a look at what happen the last time, the last time the 50-day moving average for Bitcoin had crossed below the 200-day moving average was back in January 2022. Following this formation, the price of the digital asset plunged rapidly, and by the time it was done in June, the BTC price had already lost over 60% of its value.

What Happens To BTC If This Death Cross Follows 2022?

Bitcoin price is currently trending low from its current level, if Bitcoin were to follow the January 2022 death cross, we could see devastating downside for its price.

If BTC drop by 60% as of the price $26,603 (as of 15 Sep 11am SGD), we could see a brand-new bottom cycle.

Why It Might Be Different This Time

However, this death cross might not be valid if BTC hold its price above $25,000. This might explain why BTC price is trading well above $26,000 as of Thursday and we could see the demand for Bitcoin did fall.

This can be also seen in the crypto stocks as most of the crypto stocks actually performed much better on Thursday (14 Sep 2023).

This might explain the theory that Bitcoin does not immediately start falling with the appearance of the death cross, we could be still seeing some rally for BTC, maybe before seeing BTC falling below $25,000.

There have been past occurrences in April 2014 where we see Bitcoin go upside when death cross appear, only to see significant downside afterwards. Yet in September 2015, Bitcoin did not see any major downside when death cross appear.

I think it is important that we examine the relationship of crypto stocks which could thrive despite the death cross.

$Riot Blockchain, Inc.(RIOT)$

As we can see from the pattern of this chart, Riot does follow the trend of bitcoin price movement, so if there is a rally when death cross followed by a downside later.

Riot could be one crypto stock we will need to watch out.

$Coinbase Global, Inc.(COIN)$

Similar to Riot, Coinbase also does trade with the rise in Bitcoin price, if there is any Bitcoin price adjustment, we can see that it does follow.

But if compared to Riot, it does not seem to have a clear following, hence, we might see some opportunities despite a potential downside for Bitcoin price if what we have earlier assessed for “Death cross” stands.

Hut 8 Mining Corp

Hut seem to be the least among the 3 stocks to follow Bitcoin price movement, this could be due to the number of bitcoins they have in their reserves.

$MicroStrategy(MSTR)$

MicroStrategy seem to have a clear pattern following how Bitcoin prices move, so if the price for Bitcoin really trend downside after this short rally after the “Death Cross”.

We might see impact on MicroStrategy prices as well.

Marathon Digital Holdings Inc

Marathon prices does not seem to follow the price pattern of Bitcoin after June 2023, this might be due to the way they are managing their reserves.

So they might not be so affected by the Bitcoin downside if death cross effect of a rally followed by a downside really take place.

Summary

While we might be concerned of the “Death Cross” which has occurred in 2014, 2015 and latest in 2022, every time, we are seeing a different market behavior in terms of Bitcoin prices and the crypto stocks.

Hence, I believe there are other factors which might affect the price of crypto stocks, but the key is still demand of crypto asset (BTC).

It is important that we understand the demand for BTC, because retail investors demand might be deemed as bullish, but institutional investors might indicate otherwise.

I would like to plan out my trading based on the price action for both BTC and crypto stocks. This might be a better way to monitor and see if the effect of “Death Cross’ this time would take place.

Appreciate if you could share your thoughts in the comment section whether you think “Death Cross” appearing for BTC would mean downside coming for both Bitcoin and the crypto stocks or it would be an opportunity not to be missed?

@TigerStars @Daily_Discussion @TigerWire appreciate if you could feature this article so that fellow tiger would benefit from my investing and trading thoughts.

Disclaimer: The analysis and result presented does not recommend or suggest any investing in the said stock. This is purely for Analysis.