This is just one of the many conclusions that Philip Swift, the well-known on-chain analyst, has drawn. LookIntoBitcoin’s data resource, LookIntoBitcoin tracks many of the most popular indicators in the Bitcoin market.
Swift, along with analyst Filbfilb, is also co-founders of trading suite Decentrader. He believes that, despite current price pressures, it is only a matter of time before Bitcoin ends its current macro downtrend.
Swift shared insights with Cointelegraph about what data is telling analysts and what traders should be paying attention to.
How long will it take for the average hodler to wait before the tide turns, and bitcoin storms back from its two-year lows.
Cointelegraph (CT), You have pointed out that certain on-chain metrics like HODL Waves or RHODL Ratio hint at a BTC top. Can you elaborate on this? Do you believe history will repeat this cycle again?
Philip Swift (PS).: I believe that we have reached the maximum potential for Bitcoin. LookIntoBitcoin shows that we are at major lows in the cycle.
The percentage of long-term holder peak (1yr HoDL Wave), which is typically seen in bear markets as long-term holders are reluctant to profit from higher prices.
This can lead to a reduction in supply on the market. If demand is eventually met, prices may rise.
RHODL Ratio is also dropping into its accumulation zones. This shows how much euphoria has been removed from the market. For BTC to reach its bottom range, it is essential that positive sentiment is removed.
RHODL Ratio highlights that Bitcoin’s cost basis is much lower than the prices paid for it 1-2 years ago, when Bitcoin was still in its prime and people were expecting to pay +$100k. It can tell us when the market is ready to reset and prepare for the next cycle.
CT: What makes this bear market different than previous BTC cycles. Is there a silver lining?
PS. I was there for the 2018/19 bear markets and it feels very similar. The only remaining crypto enthusiasts are the dedicated and passionate ones. These people will reap the greatest benefits in the next bull market, provided they don’t trade with leverage or go insane trading.
There are a few silver linings. We are actually quite far through the current market cycle and have likely passed the majority of the bear market. Below is a chart that shows Bitcoin’s performance over the last two cycles since the halvening. We are now close to the capitulation points for the previous two cycles.
Second, the macro environment is quite different. Although it was difficult for bulls to see Bitcoin/crypto so strongly correlated with struggling traditional markets, I believe that we will soon see a bid on Bitcoin when confidence in (majority) governments crosses below a point where there is no return.
This lack of trust in governments and their currencies is likely to lead to a rush toward private “hard” assets. Bitcoin will be a major beneficiary in 2023.
CT – What other important on-chain metrics do you recommend keeping an eye on in order to spot the bottom of the chain?
Be cautious of Twitter personalities that show Bitcoin on-chain charts with exotic/ strange variables. These data rarely add any real value to the story as shown by the key metrics. They are simply doing it to get attention, rather than trying to help people.
These two metrics are especially useful in current market conditions:
The MVRV Z-Score is an important and widely-used metric to Bitcoin. It displays the extremes in Bitcoin’s price movement above and below its realized price. The average cost basis for all Bitcoins purchased is called the real price. It can also be considered an approximate break-even point for the market. In extreme bear market situations, the price will only drop below this level.
This chart shows the indicator dip into the “accumulation” area when it does. This zone is currently being monitored, suggesting that it may be a good place for long-term strategic investors to accumulate more Bitcoin.
The Puell Multiple A comparison of historical norms and miner revenues. The indicator drops into the green accumulation band as it is now. This indicates that many miners are in significant stress. This happens often at major lows in Bitcoin’s cycle. If we haven’t reached a bottom, this indicator indicates that we are near a major Bitcoin cycle low.
CT: Filbfilb, your fellow analyst, expects BTC’s course to change in Q1 2023. Are you in agreement?
PS : Yes, I do. Traditional markets will likely experience a little more turmoil in early 2023, I believe. At the worst, I think crypto will have a difficult time before then. That would be about another 2-3 months. However, I believe that the majority of fear will shift to governments and their currencies soon — which is right. Private assets such as Bitcoin will outperform in 2023, which I believe will surprise many doomers who claim that Bitcoin is dead and gone.
CT: October has been a bad month historically for stocks, but not for Bitcoin. What catalyst will it take for Bitcoin to keep pace with risk-on assets? How long do they expect BTC not to be there?
PS Bitcoin has been an effective forward-looking indicator of risk for markets through much of 2022. In 2023, market participants will realize that most of the risk lies with governments and not with traditional “risk” assets. This will result in a narrative shift that I believe will be beneficial to Bitcoin next year.
The United Kingdom’s actions around its mini-budget two week ago was a pivotal turning point in that potential narrative shift. Markets were ready to express their disapproval for poor policies and incompetence. This trend is expected to continue in the U.K. and other countries.
CT: Surprised by Ethereum’s poor performance after the Merge? Do you think ETH is worth investing in long-term with its supply-burning mechanism?
PS [Ether] ( ETH) had a strong, short-term narrative about the Merge but it was in the context of a global bearish market. It is therefore not surprising that the price performance of Ether has been poor. The overall market conditions prevailed, which was to be expected.
Ethereum has the potential to be a long-term success. It is an essential component in Web3 which is growing exponentially. Over the next few years, I’m very bullish about Ethereum.
CT – Which jurisdiction is best for crypto traders?
PS – A place that is crypto-friendly and low-tax. Personally, I think Singapore is fantastic. There is also a growing crypto scene in Singapore which is great fun. Friends of mine are currently in Bali, which sounds amazing and is also more affordable.
CT: Any suggestions?
PS – Resist the temptation to sell crypto at the bottom of the bear markets. Be patient and make use of some great tools to manage your emotions.
These views and opinions are the author’s and do not necessarily reflect those of Cointelegraph.com. You should do your research before making any investment or trading decision.