The Great Reversal: Why & When?
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In this article, we talk about the intricate process of how a bear market evolves into a bull market, how we see this process unfolding in the coming months, and what makes a crypto bull market so special.
1. Deciphering the Phases of a Bear Market.
To model a bear market in a simple way, we like to split it in 2 phases.
End of phase 1:
This phase concludes when the market prices in the most pessimistic future expectations, culminating in the macro-bottom — the lowest price point.
End of phase 2:
This marks a pivotal moment when the market anticipates an improvement, guided by the principle that 'it won't get worse before it gets better'. This transition generally occurs when the market recognizes potential drivers for a recovery in value over the medium to short-term horizon, signaling the end of the bear market.
Why we may be nearing the end of phase 2:
The potential approval of Exchange-Traded Funds (ETFs) is a pivotal factor in driving demand, and the most challenging component of the supply/demand equation to evaluate. While it might not be as early as speculated and claimed by many, we anticipate ETF approvals likely in 2024.
- Simultaneously, the supply aspect remains exceptionally constrained (read more):
- - Reduced issuance rates.
- - Historically high levels of illiquid supply.
- - Increased accumulation at market value troughs.
- Demand resurgence is likely to be stimulated by two main catalysts:
- - The approval of ETFs.
- - A FED pivot.
With these two factors visible on the horizon, we may well be positioned at the terminal stage of Phase 2.
2. Redistribution of Ownership.
In the latter stages of a bear market, capitulation events are critical in purging unsustainable positions, thereby enabling 'smart money' investors to build solid positions at values that reflect deep market discounts. Such events consolidate supply, making it less prone to being offloaded at depressed prices.
Are we done with capitulation events?
For the past six months, we have consistently mentioned the likelihood of altcoins hitting new lows before the bull market emerges.
A common pattern emerges as markets near the end of Phase 2: an influx of speculative, leveraged long positions enters the market. These positions are typically driven by over-optimism and carry significant risk, increasing the potential for a widespread liquidation event.
Does the recent Bitcoin rally invalidate our thesis or does it enable it?
If anything, this BTC rally triggered greed on derivatives & whale distribution. Our AI system is now indicating strong relative bearishness. Given everything, here is the two main scenarios that we foresee (Anaideia is currently net short BTC):
- BTC retreats to $30-31k and:
- a) consolidates and holds, altcoins retest their lows. The bull market starts here.
- b) much further (23k target), altcoins go to a new low. The bull market starts here.
In both scenarios, we get a fantastic opportunity to enter the altcoin market near the lows, just as we anticipate the commencement of a historic bull run—a prospect we have diligently prepared for with a strategically curated portfolio.
3. Unparalleled wealth creation.
The cryptocurrency bull market stands out as one of the century's most significant wealth creation phenomena. Promising projects have the potential to soar from market valuations in the tens of millions to billions—a hundredfold increase—while established giants like Bitcoin and Ethereum may grow several-fold.
At Anaideia, we prioritize not only market timing, but also in-depth fundamental analysis to identify promising projects ahead of wider market recognition. All together, we are poised to facilitate investor returns ranging 15-25x throughout the anticipated bull market of 2024-25, while prioritizing capital protection.
