8DC Monthly Market Update — April 2024

Another month gone by — let’s check in on the markets.

Bitcoin Halving — Why Should I Care?

Bitcoin just completed its fourth ever halving. Despite all the ups and downs of markets, global political and macro instability, hacks, fraud, and wars… the Bitcoin network keeps steadily rolling, producing blocks every 10 minutes and executing code flawlessly.

As we mentioned in our last email, the Bitcoin Halving is an event that halves the reward for mining new blocks (now halved to 3.125 bitcoins per block) on the Bitcoin blockchain. This reduction in block reward effectively decreases the rate at which new bitcoins are generated. This event is significant as it increases the scarcity of Bitcoin.

You can see this cut in issuance in the following chart:

With decreased supply and consistent or increased demand, simple Econ 101 shows that price moves higher. Michael Saylor highlighted this phenomenon through a thought exercise showing essentially the inverse of the halving:

Bitcoin Halvings and Price

Lots of people expect price to move the day after halving. But that’s really never been the case. The market takes some time to absorb it for the first few months, and then we see Phase 2 of the bull market. Here’s an example from last cycle:

If we zoom in a little bit, here’s what we see — the first 3 to 5 months we see pretty slow and sideways price action. Months 6–8 post halving, phase 2 of the bull market begins, and then after 8 months you can see explosions to the upside.

On a monthly chart (zooming out now), you can see what the price looks like post halving for previous cycles. As you can see by the orange circled areas, price often spends weeks to months in a sideways re-accumulation zone before continuing with the bullish trend. In 2016 we even saw a couple down months before the move up.

April Price Action

My — how quickly everyone can turn bearish and start to worry! April hasn’t been a pretty month across the board for markets. But this was to be expected. This from our Q1 Update Email:

“All that said, we’ve just seen two very strong quarters in markets across the board. Nothing goes up in a straight line, so we wouldn’t be at all surprised to see some further consolidation and re-accumulation during Q2. This could result in more modest or flat performance on the quarter before we continue with phase two of the bull market later this year.”

Overall, this reset is healthy and allows the parabolic bull trend to persist for longer. Previous bull runs have seen 20–30% dips along the way, especially around previous cycle highs. Funding rates reset, leverage was wiped, and just when everyone is afraid the bull market is over, we’ll continue higher. As Chris Burniske said:

Essentially, what feels like doom and gloom in the short term ends up being just noise in the long term. Here’s a look at some of these barely noticeable wicks (price drops) circled in green when price hits the speed bump of previous ATHs:

War talks in mid-April accelerated some of the expected price action we mentioned above. This likely scared a lot of risk-on asset holders in general, and this shakeout most likely helped form a bottom and a rough range of ~$60–70K (with some deviations) for the next few months.

Zooming Out

When we experience pullbacks such as the one we’re currently in, it’s important to revisit some of the core fundamentals of your thesis and see if anything has changed:

• Are crypto users joining networks and growing at a faster rate than internet users in the ‘90s? ✅
• Are global central banks still printing money at a scale never seen before? ✅
• Does Bitcoin continue to become an increasingly scarce resource akin to Digital Gold? ✅

A couple of other charts to help us see the bigger picture. Here’s a look at this cycle compared to previous cycles:

You’ll see we’re approaching what has previously been coined the “Banana Zone”… the truly parabolic phase of the bull market.

Bitcoin as a ~$1T asset is still quite small in the global landscape of total assets which is around $900T. From nothing to even making it on this chart in just 15 years is impressive. The larger Bitcoin is as an asset class, the more useful it becomes especially to larger institutions. For example, Switzerland is currently entertaining the idea of adding Bitcoin to its National Reserves. Bitcoin’s slice of the Global Asset pie is going to continue to get bigger.

ETFs & Market Adoption

We’ve seen net inflows/outflows slow a bit since their staggering pace out of the gate. This is to be expected. But as we’ve said before, if we would have achieved the trading volumes in the first year of ETF Trading that we saw in the first quarter, everyone would have deemed it a successful launch. Here’s some interesting research from Bitwise to add a bit of context:

“BTC ETF inflows have been slowing:

• Jan: $1.5B, Feb: $6B, Mar: $4.6B, Apr: $170M

BUT…there are two important driving forces underway

1. A second wave of inflows is coming:

• BTC & ETH ETFs about to launch in Hong Kong
• Morgan Stanley, Merrill Lynch, Wells Fargo, UBS and others doing due diligence on approving BTC ETFs
• Retirement consulting firm GRP revealed exposure to BTC ETFs in their latest 13F filings (more pensions will follow)

2. Innovation is ramping up:

• Tether announced new initiatives to drive innovation in stablecoins, DeFi, AI, tokenization, BTC mining, blockchain education. With $2.85B in Q4 profits, they are well capitalized to drive these initiatives forward.
• Block announced a 3 nanometer BTC mining chip and is developing a comprehensive BTC mining system.
• Bitcoin ecosystem is being invigorated by Ordinals, Runes, L2s • ETH ecosystem is being invigorated by Dencun upgrade driving L2 fees down to effectively $0
• BlackRock recently announced its first tokenized fund (BUIDL) and more TradFi firms will follow
• VC capital deployed to crypto startups has been increasing over the past two quarters

The effects won’t be felt in the next few days or weeks, but will rather compound over the next 6–12 months.”

Since this research, we’ve already seen movement on some of the bullet points above:

New International Crypto ETFs

This week saw the launch of several new BTC and ETH ETFs in Hong Kong. Three issuers for each asset to start (China Asset Management, Harvest Global, Bosera and HashKey). As we saw in the US, this leads to Fee Wars and increased marketing to clients — TradFi continues to “orange pill” new users for us.

China Asset Management is the largest of the three issuers with more than $55 Billion in assets under management in mainland China, $3.6 billion in Hong Kong and a total of nearly 100 ETFs across both regions, according to Bloomberg analysts. Australia is the next stop, and it certainly won’t be the last:

Again, we don’t expect these events to cause an immediate spike or to send price soaring on the day they occur. But, this is all part of the long term process of unlocking new users and new floods of capital to steadily enter this space.

TradFi Crypto Marketing

Morgan Stanley — We recently saw news that Morgan Stanley is looking to allow 15,000 brokers to recommend Bitcoin ETFs to their customers. The bank previously has only allowed ETF buying if the customer requested directly, but this would be a move to allow full solicitation and selling of the product, which could push substantial inflow into the ETFs in the 2nd half of the year.

A week later, Morgan Stanley filed with the SEC to obtain Bitcoin ETF exposure for twelve of its funds.

HSBC — The HSBC Research team published a report on how crypto exposure can enhance a portfolio. They state:

“After re-running millions of portfolio simulations using a recent data sample, we find that a small allocation of 1–5% to crypto can enhance portfolio diversification.”

This is how slowly and steadily the mind virus of Bitcoin continues to spread.

In Conclusion — We’re Only Halfway There!

April was, and historically has been a slow month, especially with US Tax Deadlines. But when you take a bigger perspective, based on our indicators, we believe we are about halfway into this bull market. This is not the time to get shaken out of any conviction and positions! If you’ve been sidelined on the previous move up, this is the time to get your money back to work in crypto. We believe that in the long-run, this will have been a great time to deploy new capital into crypto.

Here’s a glimpse at some high level BTC indicators that we’re tracking regularly. (This is from our soon to launch CoPilot app! Sign up for our waitlist to get even more indicators and content from the 8DC Team: https://www.copilot8dc.com/).

Bitcoin continues to lead the way, which will likely continue in the short term. However, we’re approaching Phase 2 of the bull market where we will start to see altcoins have their time to shine. Popular sentiment is writing Ethereum off as dead — this is a big mistake. While currently ETH and altcoins are lagging BTC, ETH as an early indicator of altcoin season, is starting to show green shoots and we expect ETH to outperform beginning sometime later this year.

Technical Indicators RSI and MACD are showing signs of Bullish Divergence, and we’re starting to see some strength as ETH comes off its range low relative to BTC. The chart below is a bit complex, but these same indicators are translated in the image above in our soon to launch CoPilot app. Removing some of the complexity of charts, and providing some long time frame, easy-to-digest indicators on the market.

HODL Strong.

~ 8DC Team