Bottom Formation 1.0 - Intro

Written By Christopher Keshian

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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To determine when to begin spot positioning in crypto assets, I look for bottom formation by watching signals from four key areas:  Macro, Capital Inflows, Sentiment, and Technical Analysis. While each of these taken in isolation can be misleading, the confluence of all four help me identify an approximate high time frame accumulation range, and therefore an appropriate time to begin buying spot crypto in between market cycles. 

While I do think we are currently in the midst of a bear market rally, I believe we are in the early stages of this bottoming process. As such, I plan to track these signals more closely over the coming six months, and add to my spot positions as more of my conditions are met.

As discussed in my post Models, I used a simple linear regression model to help identify which variables have the most significant impact on the change in price of a given cryptoasset. The results of this model showed that the below independent variables had the greatest significance. I have since added a few variables that were not present in past cycles, but are relevant for risk assets more broadly, in order to generate my final list.

Macro

  1. Interest Rates

  2. Correlation to the M2 money supply 

  3. Correlation to Risk Assets (e.g. QQQ, NQX)

  4. DXY Weakness

  5. Correlation to Inverted 10-year Real Rates

  6. Bottoming Process of the US10Y-US2Y

Capital Inflows

  1. Amount of USDC and USDT in the System

  2. Unrealized Net Profit/Loss

  3. Market Value to Realized Value (MVRV)

  4. Accumulation Trend Score

  5. Adjusted Dormancy Score

  6. Ratio Reset for GBTC/BTC and ETHE/ETH

Sentiment

  1. Bearish news surrounding crypto, with market pundits declaring the asset class “dead”

  2. Significant drop off in crypto-related google search terms

  3. Depressed sentiment levels across bespoke sentiment analysis model

Technical Analysis 

  1. HTF Wyckoff Accumulation Pattern

  2. 21-week Moving Average

  3. Interaction Between HTF Exponential Moving Averages

  4. Total 2 Market Cap retracement to -80% Range

  5. Stock RSI Cycling to the Lows on the HTF

  6. MACD Cross

  7. HTF Bullish Divergences Present using both AO and RSI

  8. BTC Log Chart Cycling to the Low of the Range

  9. Price Above the HTF Ichimoku Cloud

  10. Backwardation After a Horrific Down Candle

Over the course of the next four posts, I will describe each of the above items in detail, and explain their relevance to crypto asset spot positioning. I plan to increase my spot exposure over the course of this year as I see confluence across all of these signals.

Links to each of these articles can be found here:



Christopher Keshian
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Bottom Formation 1.1 - Macro
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