Five important reasons why 17k is not the bottom and we are going lower

One can only assess what the likelihood is of the bottom being in after exploring the question of whether the botton is not in. Counterarguments are important, and there are definitely arguments for why the bottom is not yet in. In this post, I will detail what I perceive to be the key reasons why the June bottom might not not be in yet.

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1) The macro environment

This is an obvious inclusion and #1 on the list at the moment. We are in essence in a worldwide economic recession. Inflation is incredibly high and so far has not come down (much). In Europe it only seems to be getting worse (e.g., more than 12% inflation in the Netherlands) and even in the United States today's CPI reading showed a very small improvement only. Moreover, the cost of almost everything important (e.g. Food, Energy) has soared. The war in Europe between Ukraine and Russia definitely does not help and Europe is in a particularly bad spot. And it is still pretty warm over in Europe. Yet as the Starks say: Winter is Coming.

This is also what everyone here shouts for as we have all become macro economic experts of late ;-)

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2) Stock indices are not down that much yet and the DXY is still soaring

There is a strong relationship between the value of the cryptocurrency market and stocks (a positive relationship, stocks up = crypto up) and the DXY (a negative relationship, DXY up = crypto down). The DXY has been soaring and is showing some bearish divergence but hasnt broken down yet so there could very well be room for upside. The DXY went up quite a bit again today due to the CPI news.

Moreover, Bitcoin was already down over 70% while the stock market has not seen that much of a downturn yet. Let me illustrate using the NASDAQ and the SPX (S&P 500), which are large American indices:

• The SPX was recently down about 25% from all time high to the recent low
• The NASDAQ was recently down about 34% from all time high to the recent low

These are significant downturns but still rookie numbers compared to major recessions in the past. For instance:

• 2000-2002: NASDAQ 83% drop and SPX: 50% drop
• 2008: NASDAQ: 55% drop and SPX: 58% drop

Just imagine what happens to crypto if we drop 50% on these stock indices from all time high. The situation would be even more dire because the SPX and the NASDAQ bounced a lot more than BTC.

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A comparison by Ben Cowen on Bitcoin (green/red bars) vs. DXY (yellow line) - they have a strong inverse correlation

3) Every bear market we drop about 85%, yet so far we only dropped about 74%

As the title says, prior bear markets in crypto were (far) worse than what we have seen so far. If the global situation does not improve at all, then it is difficult to imagine why we should not drop as much or more relative to previous bear markets. This is why many expect $10-13K to be the bottom. That said, crypto has become much more established and adoption has never been so high, so we do have a shield against such a hard drop. Moreover, the peak was not nearly as high relative to previous cycles, so why would the bear be as high as before then?

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4) Are we a bubble?

The bitcoin chart certainly looks like we are in a bubble and that the bubble might have popped. This becomes apparent in the comparison to the Amazon.com bubble burst. On a positive note, this offered a unique possibility for 200x because Amazon recovered and set new all time highs.

A comparison between BTC and the Amazon Bubble burst (Source: God of Distroyer)

5) Not enough time has passed since the November 2021 all time high

The cycle top in 2013 to the bottom of the bear took 59 weeks. The cycle top in 2017 to the bottom of the bear took 52 weeks. These are rather similar timeframes. Currently, 44 weeks have passed since the November all time high. Based on previous estimates, we would expect the bottom to be in a couple of months, during or just after winter. One could build an argument that the "true" top was in April 2021 because then RSI and hype were highest, and then it took 60 weeks to the June bottom - but that is very speculative at best.

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Conclusion

To conclude, the case for the bottom not being in yet is still strong. Personally, because almost every technical indicator suggests that the bottom is in + from a 70% bear drop in past cycles we always had a 100% rally first, I have started to DCA heavily around these levels. A significant part of my paycheck goes to crypto every month, albeit less than I would hope because it is important save up for the insane energy prices in Europe. That said, because of these five reasons, I remain cautious and keep funds available to buy a bigger dip if it would present itself. Importantly, I would never sell at these levels because we are down so much the risk to reward is terrible.

Im curious what you think and what your main arguments would be for 17k not being the bottom yet.