Cryptocurrencies and crypto stocks are reacting negatively to some of the most positive news they’ve had in years.
It all just speaks to the recent mood shift for Bitcoin and friends. Since the election rally, it hasn’t gone well.
And just think of the news cycle. The first crypto president. A strategic BTC reserve. A non-predatory SEC. Crypto fund approvals.
The headlines couldn’t be more bullish.
Yet, the average altcoin has suffered a 60% drawdown, and there are literally no cryptos holding up outside of Bitcoin.
I think the next leg for Bitcoin will be lower, as it gets in line with the rest of its asset class.
In this post, I’ll explain why and what I’m doing about it.
When I think of Bitcoin, I also think of Solana, Ethereum, Coinbase, and Microstrategy… the whole group should work together. It always has. When it comes to the primary trends, don’t bet on that changing.
But in recent months, it has changed. BTC is staying strong while everything else falls apart.
And the sentiment has also been alarming.
For example, on Friday Coinbase announced incredible news… and instead of gapping higher, the stock broke down and completed a tactical top:
After years of feuding with the SEC, the securities regulator dismissed their case against COIN with zero enforcement actions or fines. It was a huge victory for the company and the American crypto industry at large.
But the market didn’t treat it that way. COIN broke down on the news. That’s a problem. It’s a change in character. It’s not bull market behavior.
My line in the sand has been the VWAP off the Q3 lows. It’s acted as support a handful of times already, but not this time.
After being long for more than 2 years, I’ve closed my entire COIN position.
But I’m not going to hang out too long and give my money back. I’m already getting long term cap gains treatment. I’m out.
I’ll get back in if this is just a shake. I’m ready for it. I hope it happens. Because if I’m right on this I’m going to have a whole lot of other crypto positions to sell too.
But I was right when I sold my Solana a few months back, and I’m taking that as information.
Here’s what it looks like now.
A tactical top for the cycle leader. If SOL breaks below 120, it will mark the completion of a long-term top, and the primary trend will shift lower.
To me, that would be the nail in the coffin for the whole space. Crypto can’t carry on without SOL.
Now how about one of the major BTC miners. This is Mara Holdings $MARA threatening to complete a massive top.
And even the strongest ones are catching lower. Here’s APLD failing after attempting a breakout last week.
Another one of my favorite crypto vehicles has been Galaxy Digital. To me, this is the preferred crypto hedge fund or asset manager:
Here it is, completing a textbook top, violating its August VWAP, and heading back to pre-election levels.
Even HOOD is down over 25% since last week. This is the best crypto stock there is right now. It’s getting hosed.
I just don’t see how BTC holds up when the intermarket picture for crypto continues to deteriorate. I used the same analysis whenI was bullish in October. These crypto assets we’re discussing were all making new highs back then.
It’s one of those situations where I’m making a list. It has two columns: bullish and bearish.
BTC is getting increasingly lonely on the bullish side as a growing number of tokens and crypto stocks complete bearish patterns. In fact, it’s the only thing left at this point.
How about the best altcoins?
Here’s Hedera Hashgraph, which is one of the recent leaders, rallying 10x in a single month off its November lows.
HBAR appears to be completing a top as price coils just beneath short-term support at the election VWAP. All the best ones look this way.
To be clear, all these bearish patterns are just things I would want to sell for now. But I am interested in adding exposure on the short side.
When it comes to betting against crypto, there is only one stock I’m interested in. MSTR is hands down the best vehicle if and when BTC enters a new bear market. This stock is a zero eventually.
Notice how Michael Saylor has gone from a laughing stock to a god in a few short years?
No one is putting out short reports, and the mainstream media isn’t running stories on how it’s all just a Ponzi scheme. However, the market has stopped rewarding MSTR for good news. The bottom line is there has been a major shift in sentiment.
Saylor just met with the SEC, a headline that would have sent the stock ripping last year. But instead of gapping higher, MSTR completed a top today. That’s the kind of reaction I would expect in a bear market, not a healthy bull.
And as for Strategy’s strategy and the whole BTC yield thing… It's nothing special. It’s called “gearing” and it is unsustainable with an asset as volatile as BTC.
I won’t get into it here. I discussed it on the Morning Show today and I’m sure we’ll talk a bunch more about it in the future. This kind of thing works until it doesn’t. And the unwind will be ugly because the company poses a systemic risk to the entire BTC market now due to its size.
As they sell to cover collateral calls, they will only cause more collateral calls. I think MSTR will be the big story of the next crypto bear market. And I think they will teach chapters on financial leverage about it in business schools for many years to come.
I want to short MSTR all day against these pivot lows and the August VWAP.
As for my broader crypto thesis, I will hold on to a certain level of exposure in my long-term accounts, but I’m preparing for the end of the bull run here.
It’s been a good one. Don’t overstay your welcome.
