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Jurrien Timmer

@TimmerFidelity

13 Jan

A few days ago I made the case that 40k could be the new 30k for Bitcoin, based on the rising intrinsic value from my S-curve model. I just came across an indicator that further suggests this: Dormancy flow. It has reached the kind of oversold levels seen at past bottoms.🧵

My understanding is that “entity-adjusted dormancy flow” measures the accumulation/distribution between hot wallets and cold wallets, i.e. HODLers vs speculators, i.e. smart money vs dumb money. /2

According to Glassnode, dormancy flow is the ratio of market cap to the annualized dormancy value—the latter measures the average # of days destroyed per coin transacted. And coin days destroyed is measured as the # of coins in a transaction multiplied by the # of days held. /3

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Jurrien Timmer

@TimmerFidelity

13 Jan

Is neutral the new restrictive? The economy has become so levered to low rates, perhaps a return to 2% is all that the Fed can do, or needs to do. Take a look at this chart, and I'll explain. (THREAD)

In the past, the monetary policy pendulum would swing all the way from 2-3% below R-Star to 2-3% above. That was the full Fed cycle. But in 2018 it only made it back to neutral, before the markets started to seize up. /2

So maybe neutral is the new-restrictive. Indeed, my bond model above suggests as much, with 2% as the upper bound of a rising range. /3

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Jurrien Timmer

@TimmerFidelity

11 Jan

is $40k the new $30k? The Fed’s hawkish stance on inflation has had broad impact. With the liquidity-driven momentum plays under pressure, it’s not a total shock that crypto has corrected. So what’s next for bitcoin? (THREAD)

Bitcoin has reached a line in the sand at $40k and is now technically oversold. Like $30k, the $40k level seems to be a pivotal support area. /2

The $30k level in 2021 provided support based on my demand model (S-curve model). That same level looks to have moved up to $40k, providing fundamental support once again. It’s a moving target which generally provides a fundamental anchor for price. /3

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Jurrien Timmer

@TimmerFidelity

17 Dec 21

Despite the choppy price action this year, Bitcoin’s network continues to grow unabated. Per Metcalfe’s Law, I expect that this growth will continue to underpin bitcoin’s valuation. (THREAD)

We tend to look at price, but for me valuation is the more relevant metric. Here we see bitcoin’s “price-to-network” ratio. Bitcoin’s fundamentals explain a lot of its meteoric price gains. Metcalfe’s Law at work. It’s not just about S2F. /2

While bitcoin’s network is growing steadily, Ethereum’s network is growing rapidly. Scale vs Scarcity. /3

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Jurrien Timmer

@TimmerFidelity

16 Dec 21

Curb your enthusiasm? The CAPE model for stocks, and its equivalent for bonds, don't suggest a stellar 2022. In fact, the trailing 10-year P/E ratio for the S&P 500 (37x) bodes poorly for the return expectations over the next 10 years. But there's more to consider. (THREAD)

Here is the relationship shown in a different way. The actual 10-year CAGR has diverged quite a bit from the model in recent months (i.e. it is stronger than the model predicted 10 years ago). So maybe that model is not the best way of looking at things. /2

The bond equivalent of CAPE (which holds that the current yield-to-maturity is what an investor will earn if holding the bonds to maturity) hints at low nominal returns and negative real returns from bonds. /3

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Jurrien Timmer

@TimmerFidelity

16 Dec 21

How have nominal yields remained so low? It's one of the true conundrums of 2021. (THREAD)

If you told me a year ago that the economy would be running at beyond capacity (measured by the spread between the U3 unemployment rate and “full employment”), and that inflation would be near 7%, a one-handle would not have been my base case for the 10yr. /2

Maybe the answer lies in the four Ds: debt, demographics, disruption & digitization (hat tip to Eric Peters of One River Asset Management). Perhaps those secular forces override any cyclical concerns about supply chain bottlenecks. /3

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