My 2023 Bitcoin Short
Updated
Since September 2023 Bitcoin has been in a rally predicated on the Bitcoin ETF launch. The chart has setup in accordance with my technical rules to finally short (bet against) the price action. I am also going to use this post to expand upon my broader bearish outlook on Bitcoin at present and into the future.
I was definitively Bullish on Bitcoin in Q1 if 2023 (see linked past Bitcoin posts here on Tradingview) but I am now of the opinion this rally has stalled and will reverse.
-The Trade:-
Bitcoin has hit a MAJOR Resistance of the 50% Retracement from the All Time High to the November 2021 low at 42235 (see chart below) which I have been noting in my Weekly Livestream all year. Price overshot the level but as we go into this weekend price will close above or below it to reject or confirm it as Resistance. This Sunday night Weekly bar close will affect my outlook.
Within the "impulse" move off the recent high the 50% level is 42457 and is remarkably aligned with the wider 50% level. The first profit objective of my short it the 50% of the September onward bullish trend at 34800 but will be a partial take profit with some left on for more bearish action.
If price closes back above the 50% Retracements this weekend and/or a new recent high is made then it is likely I will close my short and re-evaluate.
To express this trade I am not "shorting Bitcoin" proper but rather buying Puts on
BITO with expirations in June 2024.
Weekly 50% Retracement view:
-Bitcoin ETF: "Buy the Rumor, Sell the News"-
I remain of the opinion that the Bitcoin ETF Launch will be a "Buy the Rumor, Sell the News" type event.
Much optimistic speculation has been placed upon the prospect of "Boomers Buying Bitcoin" because now they (retirees and institutions) can purchase Bitcoin in their retirement accounts. As I noted, I am expressing my trade using BITO which is a Bitcoin Trust instrument. There are already plenty of Bitcoin derivative products available for typical investors to use. Ergo, it is not obvious to me how an ETF launching will change the landscape significantly.
Furthermore, I am reminded of a similar event in the past; the launching of CBOE Bitcoin Futures. Futures on Bitcoin launched on December 17th, 2017 literally marking that high and the end of that rally.
-Price Outlook: Things are Different Now?-
The bullish case for Bitcoin now even after the ETF launches is the coming Halving Cycle. Everyone note that it has created loosely bullish price action 3 out of 3 past times and will likely do so again. First, I do not thins 3/3 is statistically significant. Second, causation or correlation? Was it the Halving Cycle that made Bitcoin bullish or just the fact that it has been going up all this time anyway?
One must acknowledge that Bitcoin was born and grew in a 0% interest rate environment which no longer exists. That fundamentally changes the amount of capital that is being infused into Bitcoin which created the 2021 rally.
People like to share historical charts and then superimpose them to current price action. Most social media posts you will see are bullish because those are the ones that get the most engagement. No where else have I seen this glaringly obvious (to me) comparison of the current rally in context of the 2019 price action (below). I recall distinctly at that time that everyone was convinced the months prior were just a small hiccup and the new ATH rally was underway. Instead, we had a major economic event (COVID) to come that would push Bitcoin back down to close to the bear market lows again.
2019 versus 2023
-Future Outlook: What is Bitcoin?-
The question, "what is Bitcoin?" has been asked for over a decade. I myself became interested in Bitcoin as a "tool for human freedom" that made sense to me from my Information Technology background and Libertarian political leanings. However, I have sadly watched as Bitcoin has been "normalized" in favor of "mainstream adoption" to the point we have reached now where large institutions buying Bitcoin is heralded as an accomplishment. That was never the point... as I see it nor as Satoshi's whitepaper wrote.
Over the last few months I have consumed the mainstream (of Bitcoin Maximalist) social media posts and derived that the opinion of Bitcoin is NOT one of replacing the fiat dollar nor disrupting the traditional financial system. Instead the memes have been centered around some flavor or "Buy it now before the price goes higher!" Lost are the memes of yesteryear about Bitcoin combating inflation (due in part likely to the fact that the Fed's actions are actually yielding desired results).
The memes around Bitcoin during this rally are frankly reminiscent of Dogecoin
DOGEUSD TO THE MOON!!!
When I attended the first Bitcoin conference in New York in 2011, we were all excited to do something never done before: buy lunch with Bitcoin. A shop down the street from the hotel venue (which at that time could only hold about 250 people) had setup a terminal to accept Bitcoin as payment. This was revolutionary at the time (there were no online payment apps such as Venmo, Zelle, or Apple pay yet invented).
Two things happened:
What I learned in 2011 about Bitcoin was:
Nothing has fundamentally changed on those points in 12 years despite the smartest of technical and economic experts' best efforts. If we look at the average confirmation time for Bitcoin it stands at 64 minutes and the average transaction fee is $25.11. That latter number has been increasing dramatically since the start of November. It is not because of the bullish rally (which began in September). It is because of the failure of Lightning Network.
Lightning network was supposed to fix these technical limitations of speed and fees with Bitcoin by adding a layer on top of Bitcoin. Unfortunately, in late October experts discovered a major vulnerability in Lightning Network's programming that would allow nefarious actors to steal Lightning Network Bitcoin. Since then, over half a decade of work and hopes put into Lightning Network have been dashed as the developers now begin to look at a new implementation.
The failure of Lightning Network in no way means "Bitcoin is dead." The Layer 1 Bitcoin network is robust as ever. Bitcoin just remains terribly unsuited to be the replacement for global currency. But as I noted above, it was never going to be because no will spend money today that they believe can buy more stuff tomorrow. It is great for the buyer to wait and buy two hamburgers next week for the price today... but bad for businesses that make hamburgers who will go out of business next week if no one buys hamburgers this week.
So what is the "use case" of Bitcoin? If we cite that Al Gore invented the Internet in 1985, when the Internet was 13 years old (like Bitcoin) people were using it to send email, host databases, and order goods and services. We were unaware of the true future use cases of the Internet but many of these uses were already underway and people and businesses were using it to save money and/or sell more goods and services. The Internet was a wealth generation machine: it created value.
So it pains me to acknowledge now that Bitcoin has settled on a single use case: "personal wealth generation" and rather than generate new wealth it instead acts as a vacuum of capital.
TL;DR: The ETF launch will be a "Sell the News" event. I am now of the opinion that Bitcoin has lost its way to being a disruptive technology. I am of the opinion that this rally will not make a new All Time High.
I was definitively Bullish on Bitcoin in Q1 if 2023 (see linked past Bitcoin posts here on Tradingview) but I am now of the opinion this rally has stalled and will reverse.
-The Trade:-
Bitcoin has hit a MAJOR Resistance of the 50% Retracement from the All Time High to the November 2021 low at 42235 (see chart below) which I have been noting in my Weekly Livestream all year. Price overshot the level but as we go into this weekend price will close above or below it to reject or confirm it as Resistance. This Sunday night Weekly bar close will affect my outlook.
Within the "impulse" move off the recent high the 50% level is 42457 and is remarkably aligned with the wider 50% level. The first profit objective of my short it the 50% of the September onward bullish trend at 34800 but will be a partial take profit with some left on for more bearish action.
If price closes back above the 50% Retracements this weekend and/or a new recent high is made then it is likely I will close my short and re-evaluate.
To express this trade I am not "shorting Bitcoin" proper but rather buying Puts on
BITO with expirations in June 2024.Weekly 50% Retracement view:
-Bitcoin ETF: "Buy the Rumor, Sell the News"-
I remain of the opinion that the Bitcoin ETF Launch will be a "Buy the Rumor, Sell the News" type event.
Much optimistic speculation has been placed upon the prospect of "Boomers Buying Bitcoin" because now they (retirees and institutions) can purchase Bitcoin in their retirement accounts. As I noted, I am expressing my trade using BITO which is a Bitcoin Trust instrument. There are already plenty of Bitcoin derivative products available for typical investors to use. Ergo, it is not obvious to me how an ETF launching will change the landscape significantly.
Furthermore, I am reminded of a similar event in the past; the launching of CBOE Bitcoin Futures. Futures on Bitcoin launched on December 17th, 2017 literally marking that high and the end of that rally.
-Price Outlook: Things are Different Now?-
The bullish case for Bitcoin now even after the ETF launches is the coming Halving Cycle. Everyone note that it has created loosely bullish price action 3 out of 3 past times and will likely do so again. First, I do not thins 3/3 is statistically significant. Second, causation or correlation? Was it the Halving Cycle that made Bitcoin bullish or just the fact that it has been going up all this time anyway?
One must acknowledge that Bitcoin was born and grew in a 0% interest rate environment which no longer exists. That fundamentally changes the amount of capital that is being infused into Bitcoin which created the 2021 rally.
People like to share historical charts and then superimpose them to current price action. Most social media posts you will see are bullish because those are the ones that get the most engagement. No where else have I seen this glaringly obvious (to me) comparison of the current rally in context of the 2019 price action (below). I recall distinctly at that time that everyone was convinced the months prior were just a small hiccup and the new ATH rally was underway. Instead, we had a major economic event (COVID) to come that would push Bitcoin back down to close to the bear market lows again.
2019 versus 2023
-Future Outlook: What is Bitcoin?-
The question, "what is Bitcoin?" has been asked for over a decade. I myself became interested in Bitcoin as a "tool for human freedom" that made sense to me from my Information Technology background and Libertarian political leanings. However, I have sadly watched as Bitcoin has been "normalized" in favor of "mainstream adoption" to the point we have reached now where large institutions buying Bitcoin is heralded as an accomplishment. That was never the point... as I see it nor as Satoshi's whitepaper wrote.
Over the last few months I have consumed the mainstream (of Bitcoin Maximalist) social media posts and derived that the opinion of Bitcoin is NOT one of replacing the fiat dollar nor disrupting the traditional financial system. Instead the memes have been centered around some flavor or "Buy it now before the price goes higher!" Lost are the memes of yesteryear about Bitcoin combating inflation (due in part likely to the fact that the Fed's actions are actually yielding desired results).
The memes around Bitcoin during this rally are frankly reminiscent of Dogecoin
DOGEUSD TO THE MOON!!!When I attended the first Bitcoin conference in New York in 2011, we were all excited to do something never done before: buy lunch with Bitcoin. A shop down the street from the hotel venue (which at that time could only hold about 250 people) had setup a terminal to accept Bitcoin as payment. This was revolutionary at the time (there were no online payment apps such as Venmo, Zelle, or Apple pay yet invented).
Two things happened:
- Confirmations were slow. A long queue began to develop as people waited for payments to go through. We got hungry.
- I sat at a table with Jesse Powell, the hitherto future founder of Kraken, who I estimated was sitting on 10s of thousands of Bitcoin... who paid for his lunch with US Dollars.
What I learned in 2011 about Bitcoin was:
- The technology is slow and cumbersome for transaction volume
- People that own Bitcoin will not spend it
Nothing has fundamentally changed on those points in 12 years despite the smartest of technical and economic experts' best efforts. If we look at the average confirmation time for Bitcoin it stands at 64 minutes and the average transaction fee is $25.11. That latter number has been increasing dramatically since the start of November. It is not because of the bullish rally (which began in September). It is because of the failure of Lightning Network.
Lightning network was supposed to fix these technical limitations of speed and fees with Bitcoin by adding a layer on top of Bitcoin. Unfortunately, in late October experts discovered a major vulnerability in Lightning Network's programming that would allow nefarious actors to steal Lightning Network Bitcoin. Since then, over half a decade of work and hopes put into Lightning Network have been dashed as the developers now begin to look at a new implementation.
The failure of Lightning Network in no way means "Bitcoin is dead." The Layer 1 Bitcoin network is robust as ever. Bitcoin just remains terribly unsuited to be the replacement for global currency. But as I noted above, it was never going to be because no will spend money today that they believe can buy more stuff tomorrow. It is great for the buyer to wait and buy two hamburgers next week for the price today... but bad for businesses that make hamburgers who will go out of business next week if no one buys hamburgers this week.
So what is the "use case" of Bitcoin? If we cite that Al Gore invented the Internet in 1985, when the Internet was 13 years old (like Bitcoin) people were using it to send email, host databases, and order goods and services. We were unaware of the true future use cases of the Internet but many of these uses were already underway and people and businesses were using it to save money and/or sell more goods and services. The Internet was a wealth generation machine: it created value.
So it pains me to acknowledge now that Bitcoin has settled on a single use case: "personal wealth generation" and rather than generate new wealth it instead acts as a vacuum of capital.
TL;DR: The ETF launch will be a "Sell the News" event. I am now of the opinion that Bitcoin has lost its way to being a disruptive technology. I am of the opinion that this rally will not make a new All Time High.
Trade active
The Weekly bar closed to hold the major 50% Retracement so the trade and sentiment remains live.
Trade active
Bitcoin price had significant action this week with a bearish Spike (false breakout). I have composed a post explaining this concept:
Note
I will update this post with how the trade is going.
With today's push down price has hit the Support of the Daily Ichimoku cloud. Bitcoin does not become "bearish" trending until price breaches the cloud AND momentum (the lagging span) clears it bearish as well. That is at least 2 weeks away. Giving up 40k support is a very scary thing for people that are long... but it's just one of those fake outs as I suspect.
All that being said... this presents an opportunity to adjust my options positions by selling shorter dated Puts against my longer dated Puts in MSTR and BITO. I do not want to buy calls because ultimately I want to offset the theta decay while still betting on a snap back up in Bitcoin price.
What I am looking for now is a pullback up to 44k to add to my Bitcoin short with BITI shares. My long term thesis is: "The Halvening pump, which all are betting on, will not materialize... thus presenting the highest reward scenario"
"Be to others the person you needed to meet 10 years ago"
Discord Trading Community: discord.gg/eDfhKvS5AC
Youtube: youtube.com/c/NoroksNotepad
Twitter: twitter.com/noroktrade
Discord Trading Community: discord.gg/eDfhKvS5AC
Youtube: youtube.com/c/NoroksNotepad
Twitter: twitter.com/noroktrade
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