Update to Crypto cycle indicator
Updated
A couple days ago, I published this idea.
It's an idea taken from a setup Will Clemente published on Twitter last year as the crypto space was bottoming, more specifically, as Ethereum hit bottom.
He was using total market cap of USDT + USDC divided by total crypto market cap.
I've revised this to add the next two largest stable coins, DAI and BUSD, by marketcap. Log scale, draw parallel lines and see how it lines up with Bitcoin and Ethereum cycle highs.
It now shows more effectively tops and bottoms intracycle, meaning the summer 2021 selloff now touches the top line, which it did not do previously. The pump prior to the COVID low that coincided with bitcoin halving also gets much closer to the top line, providing a solid indication of another trade opportunity for the following months.
Now, what is interesting is when you plot Ethereum vs. this chart. You do start to notice some differences. Where Bitcoin tops in April 2021, Ethereum rocketed to wild new highs in May while BTC set a lower high, then the entire space sells off together.
They both bottom the same time in the summer, then the next top in November also happens at virtually the same time. So, "alt coin season" seemed to only apply to the April-May '21 timeframe, where after that they moved much more in tandem.
The bottom indicator in the 2022 selloff pinned the Ethereum bottom (it actually goes outside of the top parallel in this setup), but Bitcoin took longer to find bottom. But, unlike the original USDT+USDC/TOTAL chart, we still get a touch on the top line as Bitcoin does its first test below $16,000 in November. The ultimate bottom was only minimally lower in December, at which point the indicator had moved off the upper line, pointing to a bullish divergence despite the ultimate bottom price of the cycle.
Right now, we just set the BTC high coming off the 2022 lows, but Ethereum did not retest its highs at the same time. It set a lower high, which I take as yet one more indication that this is not the most bullish upwards move for the crypto space, combine that with the indicator crossing over that bottom line indicating a market top again, this makes me feel like this is not the place to buy Bitcoin or Eth. I'll wait for the next large dip, likely towards the end of this year, before finding another spot to go long for the big bull run setting up for the post halving bull run, 2024-2025.
Here is a chart of the indicator by itself without the double pane with BTC or ETH:
The 'formula' can be copied and pasted as follows: (CRYPTOCAP:USDT+CRYPTOCAP:USDC+CRYPTOCAP:DAI+GLASSNODE:BUSD_MARKETCAP)/CRYPTOCAP:TOTAL
Then draw a parallel hitting the approximate tops and bottoms, using the logarithmic scale, though I'm more than happy letting the kind of extreme Ethereum '22 bottom be anomalously outside of the top parallel here in order to keep other indications of market bottoms more obvious.
It's an idea taken from a setup Will Clemente published on Twitter last year as the crypto space was bottoming, more specifically, as Ethereum hit bottom.
He was using total market cap of USDT + USDC divided by total crypto market cap.
I've revised this to add the next two largest stable coins, DAI and BUSD, by marketcap. Log scale, draw parallel lines and see how it lines up with Bitcoin and Ethereum cycle highs.
It now shows more effectively tops and bottoms intracycle, meaning the summer 2021 selloff now touches the top line, which it did not do previously. The pump prior to the COVID low that coincided with bitcoin halving also gets much closer to the top line, providing a solid indication of another trade opportunity for the following months.
Now, what is interesting is when you plot Ethereum vs. this chart. You do start to notice some differences. Where Bitcoin tops in April 2021, Ethereum rocketed to wild new highs in May while BTC set a lower high, then the entire space sells off together.
They both bottom the same time in the summer, then the next top in November also happens at virtually the same time. So, "alt coin season" seemed to only apply to the April-May '21 timeframe, where after that they moved much more in tandem.
The bottom indicator in the 2022 selloff pinned the Ethereum bottom (it actually goes outside of the top parallel in this setup), but Bitcoin took longer to find bottom. But, unlike the original USDT+USDC/TOTAL chart, we still get a touch on the top line as Bitcoin does its first test below $16,000 in November. The ultimate bottom was only minimally lower in December, at which point the indicator had moved off the upper line, pointing to a bullish divergence despite the ultimate bottom price of the cycle.
Right now, we just set the BTC high coming off the 2022 lows, but Ethereum did not retest its highs at the same time. It set a lower high, which I take as yet one more indication that this is not the most bullish upwards move for the crypto space, combine that with the indicator crossing over that bottom line indicating a market top again, this makes me feel like this is not the place to buy Bitcoin or Eth. I'll wait for the next large dip, likely towards the end of this year, before finding another spot to go long for the big bull run setting up for the post halving bull run, 2024-2025.
Here is a chart of the indicator by itself without the double pane with BTC or ETH:
The 'formula' can be copied and pasted as follows: (CRYPTOCAP:USDT+CRYPTOCAP:USDC+CRYPTOCAP:DAI+GLASSNODE:BUSD_MARKETCAP)/CRYPTOCAP:TOTAL
Then draw a parallel hitting the approximate tops and bottoms, using the logarithmic scale, though I'm more than happy letting the kind of extreme Ethereum '22 bottom be anomalously outside of the top parallel here in order to keep other indications of market bottoms more obvious.
Comment
I think I like it more if I exclude BUSD. It at least goes back a little further to the 2018 market bottom and includes the top of the 2019 mini bull.
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