The question on everyone’s mind is IS THE BOTTOM IN with Bitcoin, and if not - where
will the bottom be?
Because if we’re able to identify and buy the bottom, we’ll see the highest possible
returns as Bitcoin appreciates in the future.
But at the same time, trying to time the bottom might be greedy when prices have already gotten
so cheap.
Not to mention it’s near impossible to perfectly time the bottom, unless you use the strategy
I’ll discuss in this video.
So first I want to take a look at some simple on-chain metrics that could help us identify
where the bottom will be, or if we’ve already seen it.
Then we’ll zoom out and consider the greater macro environment for some more context.
With this information, I’ve developed a strategy for myself that will guarantee that
I buy the bottom on Bitcoin, whenever it comes.
I’ll walk you through everything you need to know to pull off this strategy yourself
and wrap up with some important tax considerations.
Let’s take a look.
When it comes to identifying the bottom in Bitcoin prices, we have years of on-chain
metrics to analyze for insight.
I’ve never looked much into these metrics in the past, but I’ve recently discovered
how accurate and telling this data can be.
Plus, when combined with things like technical analysis, it can tell a much clearer story
about market cycles.
Now you can get super deep with this stuff if you want to, but I’ve found Glassnode
to be a great resource for breaking down some of the more complicated stuff into digestible
charts.
I’ll leave a link to them below if you’d like to explore it for yourself.
The first one I want to look at is a series of bear market floor models.
This is a combination of metrics that have been used to map out where Bitcoin price bottoms
have previously occurred.
Most of these lines are some form of moving average, which is a metric that averages and
smooths out price data.
This includes the Mayer multiple, which is based on the discount off of a 200-day moving
average.
It also includes the 200 week moving average.
It also includes the realized price and the balance price which consider the cost basis
holders have paid for their coins.
The last metric charted is the Delta price, which has notably never been reached.
However, I don’t want to focus as much on these metrics themselves, as much as the percentage
of time where these metrics are in play.
Bitcoin has only traded beneath a Mayer multiple of .6 about 3% of the time, beneath the 200
week moving average 1% of the time, and beneath the balance price 3% of the time.
When Bitcoin broke beneath $18k, it touched or traded beneath all 3 of these metrics - something
that has only happened 13 days in Bitcoin’s history, or just 0.2% of the time.
So based on Bitcoin’s history, this is about the cheapest Bitcoin has ever been based on
on-chain metrics.
You’ve only been able to buy Bitcoin at this type of discount 13 days out of the last
4,000 days.
This means we are definitely seeing prices comparable to previous bottoms.
If these metrics hold true, we would expect the Delta price indicator to continue serving
as an unbroken floor model, which currently sits at $15,750.
By these metrics, the bottom could be very close or could have already happened.
Next I want to look at something called the pi cycle bottom indicator.
This indicator identifies market bottoms by charting two different moving averages - the
150-day exponential moving average and the 471 day simple moving average, multiplied
by .745.
Note that this multiple was randomly selected because it fit the back tested data the best,
so there’s room for it to be proven wrong.
However, this indicator has pinpointed previous cycle bottoms at most only 3 days off.
This happens every time the upper line - the exponential moving average - crosses over
the simple moving average.
While this has only been used twice, if it continues to hold true, we are expected to
see this pi cycle bottom occur again soon.
According to The Real Plan C on Twitter, approximately July 9th, which has already passed if you’re
seeing this video.
It could be a longshot that this metric pinpoints the bottom again, but this is another indicator
that could suggest the bottom is closer than we think.
The last chart I want to look at is also from the real plan C, and it’s called the Bitcoin
gutter accumulation channel.
This chart highlights the time periods where Bitcoin crosses into a zone that is between
35% and 60% below the 2-year exponential moving average.
While this may not predict a bottom, it shows the times in history where Bitcoin can be
purchased at a massive discount.
If you were to buy in any of these ranges, you would be very happy with your cost basis
just a few years later.
It’s also worth noting that these ranges typically don’t last very long, perhaps
3 to 4 months.
All of these charts suggest that the bottom is either already in, or very close to occurring.
However, it’s hugely important to keep in mind that none of these indicators consider
the greater macroeconomic environment.
We still have increasing inflation, mounting fears of a recession - even globally - and
all other markets looking uncertain.
Previous Bitcoin cycles have not happened in this type of environment, so as long as
things look uncertain for the greater economy, it’s probably safe to assume things could
get worse for Bitcoin, even if that invalidates all of the indicators we just saw.
So in my non-professional, not-financial advice opinion, I would say the bottom is probably
not in due to the macro environment.
But on the other hand, nothing is certain, and why waste one of the best buying opportunities
in Bitcoin’s history waiting for slightly lower prices, after Bitcoin has already fallen
75% from its high?
I don’t want to get greedy and sit on the sidelines waiting for the absolute bottom
that may never come.
And when it does come, we probably won’t know until it’s behind us.
But what I can say for sure is that buying within the ranges of the indicators we just
looked at has always worked out well in the past.
So if we’re talking about asymmetric risk, I feel like I’m risking less by accumulating
now than if I were to save all my cash and try to go all in at the bottom that may never
look cheap enough for me to officially hit the buy button.
With that in mind, here’s the strategy I’m using to take advantage of this historic opportunity
while also guaranteeing that I buy the absolute bottom of this Bitcoin cycle.
For starters, based on what we’ve seen, it seems probable that we’ll retest the
recent lows on Bitcoin or perhaps go even lower.
So, I have some limit orders set from the mid $16,000s to the low $18,000s - perhaps
some of them have already been filled by the time you’re watching this video.
This is betting on Bitcoin going lower, because I will benefit by picking some up at these
cheaper prices that I believe to be probable.
While this price range may not be the absolute bottom, I think I have a likelihood of getting
filled at these prices and I’ll be happy to buy there long-term instead of placing
limit orders at a potential bottom that may never come.
But because no one knows for sure that this will happen, and I want to make sure I accumulate
some Bitcoin at these historic prices if these orders don’t get filled, I’m also using
a new dollar cost average strategy.
I have recently started using the Strike app to purchase small amounts of Bitcoin every
single hour.
This means that every 60 minutes I am buying Bitcoin no matter what the price is.
And the best part is that Strike charges absolutely no fees on these orders, so every cent goes
into stacking sats.
By doing this, I know I can slowly buy Bitcoin every day, and if it never retests the lows,
I will still have accumulated at great prices for the long-term.
But, if Bitcoin does test the lows or even sets new ones, I’m virtually guaranteed
to buy the cycle bottom, assuming it occurs after I started these DCA purchases.
I may only get a few dollars at the absolute bottom with this approach, but I know at l
the very least I will have timed it perfectly thanks to this hourly DCA strategy.
If you want to try this yourself, I’ll leave a link for Strike below that gives you $10
just for signing up - you don’t even have to deposit any cash to get that bonus, so
you can just snag $10 in free cash or Bitcoin if you want.
Do keep in mind that the minimum purchase requirement for these hourly purchases is
50¢, which comes out to $12 per day or $360 per month.
If you don’t feel like investing that much, you can simply use the function for a few
days or weeks at a time when you feel like it's the most opportune time to do so.
For all of you responsible taxpayers out there, you’re probably thinking that this hourly
DCA would be a tax nightmare.
After all, each purchase is a new cost basis for your investment, and a separate tax lot
to keep track of for future capital gains or losses.
24 transactions a day can be a huge headache to go through, especially if you’re doing
it manually.
And this is definitely an important thing to consider with this strategy.
However, Strike will supply you with a CSV file of your Bitcoin trade history if you
make a request through their support team.
It’s a little annoying that you can’t just download it from your account on your
own, but having the CSV file is what really matters.
Using that CSV document, you can upload your transaction data to an automated cryptocurrency
tax software and let it handle all of the math for you and/or your accountant.
I personally use Koinly for this, as it works with all of my different wallets and exchanges,
and even has functions for NFTs, DeFi and manual transactions if you need to make any
corrections.
I used Koinly for my 2021 taxes and it made my cryptocurrency tax filing a breeze, so
I will definitely be using it again next year and can’t recommend it enough.
I did a full review and walkthrough of the platform in a previous video if you’d like
a more detailed look at it, or I’ll leave a link to their website below.
But with all that, I’d be curious how you’re approaching the current Bitcoin prices, so
leave a comment and let me know whether you’re buying big, dollar cost averaging or waiting
for lower prices.
For more on Bitcoin bottom signals, I’d recommend Glassnode’s recent video here
which covers some of the charts we looked at in more detail, and I’ll also put the
Koinly video here if you need a tax solution.
Thanks for watching and I’ll see you in the next one.