Chart Dump

Despite poor price action over the last 8 months, the setup is not ripe for a V reversal. Recency bias has many betting on a March 2020 outcome, when $4 trillion was pumped into the market with rates at 0. The reality is that if we want a V reversal, it will have to happen at far lower prices because that may create a market distortion and trigger a Fed pivot. In 2018-2019, Bitcoin was accumulated in a low range for around 130 days. Absent an aggressive Fed pivot and a subsequent reversal of risk appetite, it’s prudent to let a bottom form.

Source: TradingView

It’s also important to see Bitcoin dominance increase as an indication that froth has been cleared from the market. The opposite has happened in the last three weeks, indicative of a short squeeze rather than a long-term trend change.

Source: TradingView

That said, many signals are in rare territory both in crypto and in the traditional markets. Lower prices present greater opportunity.


June was the worst month on record for Bitcoin. There are likely to be lingering effects from such a deleveraging in the coming weeks.

Source: Coinglass

Bitcoin’s weekly RSI has never been lower, which is saying something given the exceptional volatility over the years. These prices may be attractive to anyone with a multi-year perspective.

Source: TradingView

The chart below estimates the cost of production for a Bitcoin. When Bitcoin breaches the cost-of-production range, it has historically been a good long-term buying opportunity.

Source: TradingView, @caprioleio

Miners are indeed in trouble as supported by the chart below indicating that they have now begun to sell their Bitcoin to cover mining costs.

Source: Arcane Research

As miners scramble to cover costs, they shut off their machines as mining is no longer profitable. A sharp decline in hash rate has historically been a marker of bottoms as the operations are taken over by stronger entities. Note the hash rate decline has been tame so far.

Source: Glassnode

Over the last month large, over-leveraged entities have been wiped out. This can be observed in the 30% decline in Bitcoin open interest. This is once again a sign of wealth transfer from weak hands and over-leveraged entities to well-capitalized, strong hands.

Source: Laevitas


Bank of America’s Net Tab indicator reached its most sold-off point. The indicator is an aggregate of “NYSE Stocks > 200-day MA, 5-week A/D Diffusion and 30-day Arms Index) and sentiment (Investors Intelligence % Bears, BofA Short-term Sentiment, and 25-day CBOE Put/Call ratio)”.

Source: MacroOps, Bank of America

The below table compares forward returns when the indicator reaches the current oversold levels relative to all-period forward performance for the S&P 500. Given the poor sentiment of late, it’s interesting to note 1) how positive general forward performance is on average and 2) how much more positive forward performance is when the reading is this oversold.

Source: MacroOps, Bank of America

Markets are forward-looking, and as poor economic data becomes known, the less likely it is to negatively affect markets (priced in). The below chart illustrates this point well. Markets are currently pricing in earnings revisions although earnings have barely shown any decline. As indicators of a recession become clearer, it may also be an indication that we’re nearing a turning point in public markets.  

Source: RENMAC

According to Bank of America’s Fund Manager Survey, cash balances are at historically high levels. As soon as investors are given a reason to buy, we may see a rush back to risk.

Source: Bank of America


Leverage in crypto has thoroughly been wiped from the ecosystem, leaving in its wake Celsius, 3AC, Luna, and many others. Bitcoin miners are capitulating after the price has gone under their cost of production, often a healthy bottom signal. If earnings revisions are already priced in, the historically high levels of sidelined cash may look for the opportunity to rejoin the market. Yet there’s little reason to assume a long-term trend reversal until the Fed changes tune or we see CPI drop aggressively. If the equity market continues down, expect crypto to follow. Selling in the equity market has been controlled — watch for the VIX to blow out as a sign of panic and a potential local bottom. The next two months may be critical.


Phil Bonello