Ignore Sentiment: More Sideways Action Likely Ahead

by Juan Villaverde
By Juan Villaverde

Being a contrarian may not always make you popular. But when it comes to popular sentiment, playing devil’s advocate can help you avoid getting caught in the hype.

And that is particularly true when it comes to crypto.

Consider that in just the past few days …

  • A record $2 billion poured into crypto markets and the new Bitcoin (BTC, “A”) ETFs, as investors looked forward to higher crypto prices.
  • Open interest on Bitcoin derivatives contracts soared to fresh all-time highs as bullish traders voted with their feet.
  • The Bank of Canada and the European Central Bank cut interest rates. Expectations are the Federal Reserve will be next, which should boost crypto further.
  • These rate cuts are coming even though inflation is still stubbornly above central banks’ 2% target. Which suggests the war on inflation may no longer be a top concern.
  • A new consensus across the blogsphere and social media seems to be emerging that today’s macro climate could hardly be more favorable for crypto.

All of this is quite constructive and should lead to massive breakouts for crypto assets … in due course.

After all, we are in a bull market.

There’s just one problem. For far too many investors and traders, Bitcoin’s imminent break out to new all-time highs is practically a given. And that’s what I take issue with.

One timeless truth about markets is that the majority opinion is often wrong.

When I see virtually everyone — even crypto skeptics — agree that Bitcoin and crypto are about to go parabolic, I worry.

So many folks are taking crypto’s grand four-year cycle for granted. They think they have it all figured out. And they’re not a bit shy about declaring exactly when Bitcoin will break out, and how high it will go.

That’s fantasy land. In real life, markets are not so easy.

Now, let me be extremely clear: I agree that it is only a matter of time before Bitcoin hits a new all-time high in this cycle.

I just think it’s going to take a lot longer to get there than most people expect.

The cycles bear this out. Bitcoin has generally topped out in the second quarter of any given year, consolidating through the third quarter, only to break out in quarter four. 

This wasn’t always the case. But it has been so since the last four-year cycle that started in early 2019.

  • Back then, we saw Bitcoin top out in June and corrected for months before breaking out.
  • The same thing happened in 2020. Bitcoin topped out in May and essentially went nowhere until late September.
  • In 2021, BTC saw a dramatic top in April with a correction that ended in early August.
  • Then, 2022 was a bear market year, and Bitcoin fell into a June low and went nowhere until October.
  • Last year, Bitcoin made an April top, and it wasn’t until early September that a low was made. The breakout was in October.

All these corrections have a common pattern. With the exception of 2020, Bitcoin made a 320-day cycle high in quarter two, and a 320-day cycle low in quarter three.

Which brings us to 2024.

This year, we’ve seen Bitcoin top out in March. Even though we did see a strong rebound in May, the rally fell short of a new all-time high.

As things stand today, we have a 320-day-cycle high confirmed for March 13. But the low remains nowhere in sight.

There’s a chance this critical 320-day-cycle low was made on May 1, Bitcoin’s last key cycle low. But, this remains in doubt and unconfirmed. That’s because Bitcoin’s ensuing recovery was neither strong nor long-lasting.

This brings me back to where I began. 

The bullish developments on the ETF front, the record-high positioning in crypto derivatives, an accommodative macroeconomic climate … all should spell upside action for Bitcoin, right? 

Well, the price of BTC isn’t playing along just yet.

We could potentially see a repeat of what we’ve seen since 2019: a few quiet weeks of sideways consolidation, followed by a third-quarter breakout.

Only time will tell.

But in the meantime, there’s no reason you can’t make your crypto work harder for you … even while the market remains sluggish.

That’s where the world of DeFi yield hunting can help. 

In TradFi, yields are underwhelming … even before your account for inflation. But in DeFi you can target yields of up to 17% on saving funds and up to 169% on investment funds.

My colleague and DeFi expert Marija Matic just recorded a briefing walking Dr. Martin Weiss through the process of how she finds these incredible opportunities … and how he can benefit.

And now, that briefing is available for you, as well.

Just click here to learn more about DeFi yields and how you can get the most out of cryptos you may already own. 

Best,

Juan Villaverde

About the Editor

When econometrician and pro trader Juan M. Villaverde first applied his algorithms to Bitcoin years ago, he discovered a regular cyclical pattern. And he has since used it to build the world’s first crypto timing model based on cycles. Thanks to his analysis, the Weiss Ratings team has accurately picked the top and bottom of major crypto booms and busts.

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