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You Should Buy This Bitcoin Dip

Nikolai Galozi profile picture
Nikolai Galozi
1.78K Followers

Summary

  • Bitcoin is still in a secular bull market, and I expect higher prices in the following months.
  • The transaction volumes suggest that the accumulation phase ended.
  • Short-term Holders are starting to buy from long-term Holders.
  • Market participants are not willing to sell their coins for a loss.
  • There are enough stablecoins to fuel a second speculation mania.

Innovation - Ausderaton aus der Masse

Eoneren/E+ via Getty Images

Setting the Framework

Bitcoin (BTC-USD) is still in a secular bull market, and I expect higher prices in the following months.

In my last article about Bitcoin, published on September 7, I highlighted bearish and bullish signals. The duration

This article was written by

Nikolai Galozi profile picture
1.78K Followers
Tax & Audit Consultant from Germany with interests in philosophy and finance.

Analyst’s Disclosure: I/we have a beneficial long position in the shares of BTC-USD, ETH-USD, BABA either through stock ownership, options, or other derivatives. I wrote this article myself, and it expresses my own opinions. I am not receiving compensation for it (other than from Seeking Alpha). I have no business relationship with any company whose stock is mentioned in this article.

Portfolio Allocation: BTC: 13,9 % / ETH: 10,1 % / BABA: 7,1 %

Seeking Alpha's Disclosure: Past performance is no guarantee of future results. No recommendation or advice is being given as to whether any investment is suitable for a particular investor. Any views or opinions expressed above may not reflect those of Seeking Alpha as a whole. Seeking Alpha is not a licensed securities dealer, broker or US investment adviser or investment bank. Our analysts are third party authors that include both professional investors and individual investors who may not be licensed or certified by any institute or regulatory body.

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Comments (109)

a
Bitcoin can go as low as $24k, for all I know. No one knows the bottom. But I don't care. In next 5 years it will be above $250k!
Rich779 profile picture
@adaveinus2 I would take my profits and leave the rest in Bitcoin- problem is $200 million was STOLEN from Coin exchange by Hackers- 3 months before that $600 million was Hacked from Bitcoin & FBI convinced hacker to give back
Bitcoin has NO Insurance & No value so GOOD Luck if the bit-Con continues to get hacked
Nikolai Galozi profile picture
@Rich779 Bitcoin did not get hacked, but the platforms. Big difference.
Rich779 profile picture
@Nikolai Galozi
Bitcoin Hacker Who Breached Elon Musk & Bill Gates Gets 3 Years

Hacker Breaches Elon Musk, Bill Gates, and Other Celebrities’ Twitter Accounts

Last summer, we saw one of the most visible hacks of all-time. Some of the most famous people in the world were hacked in a comically wide-ranging Bitcoin scam.

People like Elon Musk, Bill Gates, Jeff Bezos, Barack Obama, Joe Biden, Kanye West, and Michael Bloomberg were infiltrated via Twitter. Even companies like Apple, Coinbase, and Uber were attacked.

The hacker, 17-year-old Graham Ivan Clark, breached each of their accounts and tweeted about a Bitcoin scam. The scam basically promised to send back double the Bitcoin amount that a user sends to his address.
H
(Everyone thinking) “I will buy the dip once I see an uptrend”.
b
I wouldnt be worried with big drops like this with BTC which is also prone to big ups later.

With every drops, more people join and invest
SBau profile picture
@billionaireinvestor It's not an investment to buy a useless digital token, it's a pyramid scheme with no underlying value creation
gohabsgo70 profile picture
fair price? impossible as its a greater fool investment. It has zero value
Rich779 profile picture
@gohabsgo70 fool investment NOT Backed or insured - such a sacm
E
@Rich779 Don't forget about risk of theft. Is it even possible for my MSFT ABBV UNP to get stolen from the transfer agents or my mutual funds stolen from my retirement accounts?
SBau profile picture
Impossible to value something like this because it has no value, it’s just some made up tokens.
SBau profile picture
BTC isn’t an investment - it doesn’t have FCF or really do anything. It’s operating tokens on a made up system. Great for criminals and greedy libertarian bros, not much else
s
Great article and very well thought out. Thank you for sharing your analysis!!!!
S
I would say fair price is about $12,000. That leaves a reasonable margin covering those people who will refuse to believe it is worth nothing and keep hanging in there.
Nikolai Galozi profile picture
@StaryStaryNights Looking at your comment history. ctrl c & ctrl v?
S
@Nikolai Galozi no. I have spent a lot of time explaining to people why Bitcoin is a lost cause. They generally hang their hat on all sorts of things whilst wilfully overlooking its flaws. But go for it. You are committed now. Why not bet the house?
Nikolai Galozi profile picture
@StaryStaryNights Sure, you think nothing of Crypto. I don't care about that and I don't have a problem with your opinion. But why are you spending your time trying to convince others? You have nothing to gain here, assuming you are not short BTC.

I don't spam post comments in articles about Tesla because I think its valuation is extremely bloated. I don't really get the motives of you guys.
TSP_NYC profile picture
fred.stlouisfed.org/...

This is why crypto and meme stocks and all other bubble assets are where they are. Now the Fed can’t ignore inflation anymore and this will reverse in coming years. The fundamentals are changing dramatically. This is a time to sell crypto and growth stocks and get to the sidelines.
Tredwise profile picture
at 15K when all the financial institutions have dumped their crypto to try and save what's left of their over-leveraged positions.
Then we talk.
Nikolai Galozi profile picture
@Tredwise SeekingAlpha really needs a !remindme bot function.
c4dancer profile picture
@Nikolai Galozi How did you get that by the editors? My only censored post on SA was when I accused someone of being a bot. (Hint: he shamelessly promotes Diem, claiming it will destroy bitcoin.)
Tredwise profile picture
@c4dancer It just gives you an idea of the level of insight of the original poster.
TSP_NYC profile picture
The Fed is finally forced to remove liquidity from the market because they can no longer ignore rampant inflation. So the cost of leverage is going to go up massively over the next year or two. So the party is over for Bitcoin, other crypto, hyper growth stocks, meme stocks and a lot of other bubble assets. Smart money will sell now and sell rallies, not buy dips.
Nikolai Galozi profile picture
@TSP_NYC The fed is not removing liquidity from the market. It is slowing the expansion of the money supply.
TSP_NYC profile picture
@Nikolai Galozi correct, thanks for the economics lesson. QE ends by March and the rate hikes begin. Markets are forward looking and correctly anticipating much tighter monetary conditions.
Nikolai Galozi profile picture
@TSP_NYC Even if QE ends by March, I don't believe significant rate hikes are possible. Debt loads of the government and the private sector are too high. To offset Inflation, the FED would have to increase the FED funds rate by > 5%. Don't tell me they will do it - ever. They simply can't.

Meanwhile, if we get any kind of Covid restrictions, lockdowns, etc. the government will provide fiscal stimulus, and the Federal Reserve will finance it.
H
At which price should I start my position? Looks like it dived down to $42k from 52k in a matter of an hour..
Nikolai Galozi profile picture
@Hanamogera I guess my daily timing was stunningly bad this time. ha!

We had some whale inflows at exchanges. And now it seems like the leverage will flush out with a rather big long squeeze.

I would suggest building up a position slowly and Dollar-Cost-Average into Btc.

Let's see where we will be in a few months.
c4dancer profile picture
Bitcoin's MACD profile is just awful. It wasn't good at 57K either. Sold some but not enough because the on-chain data looked good. Now there's tax loss selling to worry about. I don't think there's a 30 day wash sale rule for BTC.
naples profile picture
@c4dancer ask me how much i made short BTC
c4dancer profile picture
@naples I'm pretty sure you made more than twenty times my net worth. Since my top salary was $40K, I will never deal with the type of money that you do.

Just curious, how did you determine that you should short it, given that the on-chain data was bullish and the Elliott Wave people were bullish?
d
If money supply is getting tighter per J Powell isn’t that a bad sign for speculative assets and stocks?
Nikolai Galozi profile picture
@dili80 Yes, less liquidity could be a bad sign. Let me share some thoughts:

I believe the stock market is overreacting a bit right now. We are not talking about a proper "taper", we are talking about a slower expansion of the FED balance sheet. I'm pretty sure, it will at least hit 9 trillion US-Dollar. A real liquidity crisis will only prevail if rates rise significantly above inflation, making bonds a reasonable alternative again.

Currently, there are divergences between macro outlooks. Some believe deflation is still prevalent (demographics argument), some believe the 2020s will be rather inflationary (my view: seekingalpha.com/... ). Your position size should be d'accord with your macro outlook.

In my opinion, even if the FED stops expanding its balance sheet, it cannot sustain a rates hike, because of the enormous debt loads of the state. Therefore I don't expect major headwinds because of missing liquidity. Short-term moves are unpredictable obviously.
naples profile picture
@Nikolai Galozi you should take a good look at the monthly chart of SPY QQQ XLF n any of your favorite ETFs in relation to their 20 ma n 200ma
d
@Nikolai Galozi
You are right about the major fed funds rate increases however less or no new money flowing in the system will be destructive for the price of speculative assets because that is what is feeding beasts like Bitcoin or doge coin or GME
a
"Short-term Holders are starting to buy from long-term Holders."

How is this positive? We need long term holders to HODL. Unless we have institutions putting in 5% of their money in Bitcoin and/or number if wallets increase we are not going to see moves like previous cycles. Quick rich schemes are over in Bitcoin. You need to HODL at least up to 2024 to earn decent returns. I expect bitcoin to be above $100k by then. Depending on network growth bitcoin can reach $500k(conservatively). Based on first principles Bitcoin should do better than most assets like SPY,QQQ,Real Estate, Gold, Silver, Art by 2024. To HODL investors need to go through bout of volatility because of occasional setbacks in adoption curve.
b
@adaveinus2

At least you understand that short-term holders buying from long-term holders is NOT a positive.
Nikolai Galozi profile picture
@adaveinus2 & @bondsmoker

I knew that these comments were coming because I could not provide the chart in this article, but only the link. Take a quick look at it again and compare the 2020 turning point with the 2021 turning point:
insights.glassnode.com/...

Usually, long-term holder selling is as bearish as every selling is. However, you have to keep some aspects in mind:

a) Long-term holders have only STARTED selling. That's after a big accumulation phase in mid-2021. The last time an accumulation phase of long-term holders has ended was in November 2020. Throughout November 2020 until April 2021 long-term holders have been huge sellers.

b) If the distribution of long-term holders gets in any way significant, I would recommend trimming one's Bitcoin position. This is not the case - the trend has just reversed. Selling volumes of long-term holders are not in any way significant. Especially compared to the previous accumulation phase.

c) Long-term holders typically sell into strength. If prices would continue to decline significantly, it's very likely that long-term holders would not sell any more Bitcoin but rather accumulate.

Long-term holders purchasing more Bitcoin is bearish. Long-term holders purchasing less Bitcoin is bullish. Long-term holders selling more Bitcoin is bullish. Long-term holders selling less Bitcoin is bearish.

At first sight, a trend-reversal towards selling always seems negative. However, that isn't the case because this is smart money only STARTING to sell Bitcoin to smaller fishes.

I hope my argument is understandable now.
a
@Nikolai Galozi ,
I think all you said is short term technical play. Unless Institutions start putting their money any rally in Bitcoin is not sustainable. We now have many derivatives and wall street is playing short term games. This cycle is different from previous ones and it seems we are seeing lengthening of cycles as initial enthusiasm of making quick buck is fading. I don't know the future but predicting short term move is impossible.
Seeking AIpha profile picture
You Should Not Buy This Bitcoin Dip 🔻🔻🔻
N
BTC might test 52k where there is strong support. If it holds, I would expect a large run up from there to about 75-80k.
Nikolai Galozi profile picture
@Navy Fightin' Blue Ha! We got our answer today. Havent we?
N
@Nikolai Galozi Yes we did. It was nice to shake out the leveraged bag holders who took on too much risk. I think there is a path to get back to 55k by year's end. Fib retracement is looking good.
Nikolai Galozi profile picture
@Navy Fightin' Blue We'll see about that. I don't care about weekly moves tbh. But obviously, the article looks foolish given the recent sell off.
b
"Short-term Holders are starting to buy from long-term Holders"

And you are seeing this as Bullish?
Nikolai Galozi profile picture
@bondsmoker Yes, I am seeing this as bullish. I provided reasoning in the other reply to the same comment from @adaveinus2
T
Bitcoin will hit $100m, it’s inevitable. After that, who knows where it goes. But I am certain we hit the $100k mark within the next 6x months.
T
@Tdog88 $100k*
Nikolai Galozi profile picture
@Tdog88 Thinking the same about the 100k US-Dollar mark. However, we needed some negative sentiment, because broad consensus is rarely right. I believe the recent correction provided that.
B
The tldr it's basically the market is somewhat mirroring a year ago. Well suspend the past 6 months accumulating And the price is starting to challenge significantly breaking through the all-time high just like a year ago. The next 6 months should see a yoyo bullish months and corrective months but in general the price should be a lot higher this winter and spring that it is now.

Personally I expect to see Bitcoin breach 100k in the spring and then have a similar dip mid-year as we did this year, maybe finding a bottom around 60k, double this year's bottom, one year later. That should set up six digit prices to become the norm in 2023, and a bit longer term get Bitcoin ready to move over $300k during the next halving boom of 2024 and 2025.
naples profile picture
@Bitit that's a good plan... If only investing worked that way...
Nikolai Galozi profile picture
@Bitit Yes, in my opinion, you're spot on with your tldr.

I'm not sure about the next halving boom, however. I believe with lengthening cycles we won't get these clear-cut halving booms anymore.
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