Weakness ahead of bullish H2 2024 catalysts

Friends and associates,

Last month, we mentioned that we could be set up for further market strength, which proved incorrect. We noted the positive regulatory shift, and while this remains important, it doesn't necessarily imply a short-term positive impact on price. In reality, the fundamental conditions haven't changed significantly over the past month. Continued profit-taking from long-term holders has been the most significant impact on price. After testing support at $60K, price has broken through that level.

We've seen evidence of this dynamic by examining stand-alone net profits from long-term holders (LTH).

LTH net profits have also been strong relative to short-term holders (STH), which is an unfavourable market development.

The recent release of Mt. Gox bitcoins, which have been locked up since the exchange's collapse in 2014, is contributing to this trend. Furthermore, the German government has been selling confiscated bitcoins.

Despite these negative signals, long-term holders continue to dominate supply, which bodes well for the outlook over the next 12-18 months. We just haven't seen enough new entrants to absorb the selling from long-term holders at all-time highs, leading to a negative impact on price.

Three powerful bullish catalysts in H2 2024

Weakness to $50K is a reasonable probability event after the breakdown below $60K. We still favor market strength into yearend, looking ahead towards 3 bullish catalysts:

1. The Fed is getting ready to cut interest rates

2. A Donald Trump presidency could turn the regulatory pendulum firmly positive in the US

3. Ethereum ETFs are around the corner

Return to Sound Money Principles at STS

I recently had the pleasure of presenting at the Sovereign Tech Summit (STS) in Santa Monica. This was an opportunity to pull back from markets and return to our guiding principle: "Sound Money is THE Challenge & Opportunity of our Lifetime." I will share the video recording when it is available, but in the meantime, here are the key conclusions:

1. Popular narratives around money, monetary policy, and the financial system are filled with lies and misconceptions.

2. Money is a tool or technology, created by the market to facilitate trade and investment.

3. Various items have been used as money, each with different degrees of scarcity, portability, fungibility, and divisibility.

4. Many powerful innovations in money (such as coinage, the telegraph, and the internet) have contributed to centralization.

5. Centralization makes inflation inevitable.

6. Inflation is the biggest challenge in the world, causing inequality, overconsumption, war, and eventually monetary regime change.

7. Crypto is inevitable due to three major trends:

1. Monetary regime change likely within a 10-20 year time horizon.

2. Digitization makes digital money likely, with Bitcoin being the first digital money.

3. Demographic power over money, finance, culture, politics, etc., is shifting from Baby Boomers, who generally dislike Bitcoin, to Millennials, who are more favorable towards it.

   

8. Bitcoin and the crypto ecosystem significantly enhances sovereignty and freedom, with numerous practical use-cases despite its shortcomings:

• Bitcoin miners harnessing stranded energy to create power availability.

• Banking the unbanked and building communities in underdeveloped areas.

• Protecting against hyperinflation.

• Avoiding asset confiscation during war.

• Providing greater access to USDs outside of the US through stablecoins, which are more useful because they are truly global.

If you have any questions about the presentation, please reach out.

Personal Update

On a personal note, it's hot here in Los Angeles. We enjoyed a relaxing 4th of July weekend with much-needed rest. I have been reading about the history and culture of the indigenous people of America in recent months. If anyone has any resources or threads to pull on regarding this topic, please let me know. It's fascinating, and I sense there is more to uncover. 

Rob Price, CFA

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