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May 13 โ€ข 13 tweets โ€ข 4 min read โ€ข Read on X
This Bitcoin indicator is flashing!

And it's only happened 2 times in its history. On both occasions, BTC rallied by over 775% in less than a year...

So, will it happen again?

Let's dive in ๐Ÿ‘‡
Firstly, this indicator was featured in a recent report on volatility by Fidelity Digital Assets.

To understand the indicator itself, we need a bit of a primer on BTC volatility.

It's often misunderstood and as a result - mispriced. Image
When viewed in the context of many other large, listed tech stocks, Bitcoin's volatility isn't out of the norm.

In fact, BTC has exhibited lower volatility than 33 companies in the S&P 500. Image
And it's quite clear that this trend of declining volatility is likely to continue.

That's because historically, volatility decreases as an asset progresses from a nascent speculative one into a staple in portfolios.

Gold went through similar declines in volatility. Image
Volatility โ‰  Bad.

It should be viewed in the context of *risk adjusted* returns.

BTC has had a higher Sharpe ratio than stocks & an even higher Sortino ratio (downside risk only).

Much of the BTC volatility has been to the upside. Image
Falling vol โ‰  less interest

In fact, the historically low volatility levels is coming at a time when BTC market cap is reaching ATHs.

In 2023, price was up 150% whereas volatility was down 20%.

BTC was also half as volatile at $60k in 2024 as it was at $60k in 2021. Image
Historically low volatility can also be a precursor to potential upward price movements.

The below charts show historically low levels of volatility and the 1 year returns from that point.

But, why does this happen? ๐Ÿค” Image
Low volatility has occurred at the end of long bear markets as all selling has been exhausted.

This is when investors are apathetic to the price & when many have sold & left the market all together.

"Seller energy" can be quantified with a simple yet unique metric.
That's the ratio of % of addresses in profit to 1 year realised vol.

This places volatility in the context of the individual investor.

So, what does this ratio show us?

Historically, the beginning of bull markets has been marked when it was close to or above the 95th %ile Image
This is even better illuminated when seller energy is overlaid with the number of days spent below the All-time-high.

Long stretches of BTC below ATH are more likely to see seller energy breaching the 95th %ile.

But, there's something even more interesting than that. Image
There have only been 2 times in Bitcoin's history where seller energy got to such an elevated level prior to reaching ATHs.

This was in 2013 & 2017.

These are termed a "Green Cross" & the 1 year and peak returns from these events were quite incredible. Image
We had a Green Cross on the 4th of March.

Will history repeat itself?

Well of course, past performance isn't indicative of future returns - but it does rhyme.

If we do see more liquidity flood into the markets in Q4, this could coincide with the 1 year timeframe.
TLDR: BTC volatility has been trending down and is near historical lows.

When viewed in conjunction with holder metrics, one can back out a rare indicator which is flashing GREEN ๐ŸŸข

DYOR. NFA & all that ๐Ÿซก

โ€ข โ€ข โ€ข

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More from @nicrypto

Jun 22
Things have changed in crypto.

The past week has brought about some very important realisations. Some things will not work anymore.

Here are 3 of the biggest realisations so far ๐Ÿ‘‡
1) The returns from investing in early stage funding rounds is shrinking.

And, in some cases, there aren't even returns.

Case & Point: Layer Zero completed their Series B raise in April last year at a $3bn valuation. However, it's currently trading below a $3bn FDV.

If the VCs who invested in that round bought Bitcoin instead, they would be up 120% and it would be fully liquid. Remember, these investors are likely to be locked up in token vests for up to 2 years. The opportunity cost is massive.

LayerZero isn't the only example here. There were many projects that were heavily VC backed which have been underperforming since TGE.

Retail is a lot wiser to the low float / high FDV game and are way less likely to bid a token just because it has hype with big backers.

There needs to be a way to include retail investors & users earlier on that gives them a fair crack of the whip. Airdrops were the main meta & an attempt to include them early on.

However, that brings us to the second realisation.Image
2) Airdrops in their current form are dead. They have lost their allure.

The collapse of $STRK post launch is testament to that. The recent release of $ZK & $ZRO should reinforce that.

Teams have tried new & novel techniques to reward genuine users. But, in doing so, they have also enraged users who were expecting certain criteria to make them eligible.

The only airdrops that have resulted in praise from the community are those that had been generally unexpected. But, how can you incentivise use without an implicit promise of some form?

Then, one has to question whether the airdrops are net positive for protocols. What happens once they have been distributed? Either they continue with various seasons or they watch users drop off like flies (see Starknet).

It will be interesting to see how projects re-engineer their incentive mechanisms from here. But part of it will be protocols that users will want to use irrespective of potential rewards.Image
Read 5 tweets
May 1
Sell in May & go away...

Over the past 5 years:

- Buying BTC in October & selling in April had 1,449% cumulative returns.

- However, buying in May & selling in September had -29%

Will we see the same this year? Let's dig in ๐Ÿ‘‡
"Sell in May, Go Away" is an old adage from TradFi which generally refers to the effect of seasonality.

It's statistically significant and studies have been done that have shown as much.

I talked about it in a recent vid
However, according to a report by K33 research, the effect is just as strong in the crypto markets.

The below chart shows the cumulative return if you had followed that strategy.

It's quite stark Image
Read 10 tweets
Mar 27
What are the forces driving the #Bitcoin price? And how do you assess them to make the most of your trading this cycle?

That was covered in a recent K33 report released to PRO subscribers yesterday.

I picked up some of the most insightful charts from the report

Is retail here yet? Well, traffic stats to top crypto websites and exchanges is definitely trending up.

The period Dec-Feb 2024 is up from the lows in in Aug-Oct 2024.

However, it's still off previous highs in 2022 and considerably off traffic in previous bull markets Image
Further evidence of how far off we are from previous bull market frenzies is the trading volume stats on Coinbase.

Q4 2023 volumes are still 83% down from ATHs (although Coinbase Q1 numbers are likely to be much higher). Image
Read 12 tweets

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