August Bear Rally
Disclaimer: This is not financial advice. Anything stated in this article is for informational purposes only, and should not be relied upon as a basis for investment decisions. Chris Keshian may maintain positions in any of the assets or projects discussed on this website.
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My base case is that we are in a bear market rally (70% probability), and that we will likely have a much longer consolidation period ahead of us before the next cycle (see Total Market Cap image below). As such, investors should wait to buy spot positions. I think upside will be capped either in the $1,800-2,000 region on ETH, which we can use as a proxy for the overall market since ETH has led this bear market rally, given the current merge narrative. I expect ETH to sell off leading up to, or shortly after, the merge, as the market will no longer have a narrative to rally around.
The below chart shows the bear market rally parallel between 2018 and 2022. I think we are nearing the top of this current bear rally.
Likely the bear market rally top will form before between now and mid-September, followed by a more substantive correction. The ETH merge (Sept 19), along with the equities rally, has been the primary driver behind this crypto rally, and without that catalyst fueling buy pressure, the market will likely follow the path of previous cycles - extended consolidation and low volatility for 6 months to 1 year. At this point, long term investors should begin spot positioning.
My base case is a longer consolidation period throughout late fall and through the winter (at least). I don’t expect the next cycle to start until late 2023, at the earliest. This should give investors significant time to position without feeling rushed.
NOTE: The caveat to the above is that there is much more interest in crypto, and much more capital on the sidelines waiting to buy into this asset class. If crypto has evolved into a macro risk asset, then the above timeline could be truncated. Though even if this is true, I do not think one month is not enough time to form a true bottom. For reference, crypto behaved like a macro risk asset last year, and even in a crypto bull market (with a much more favorable macro backdrop) crypto took about 2 months (end of May through end of July) to form an interim bottom.
