Empire Newsletter: Market madness arrives just in time for summer

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Not over until it is

The trouble with markets is that you never quite know when they’ve peaked.

It’s all so easy in retrospect. Looking back, bitcoin’s all-time high in December 2017 was clearly the top for the next three years, even if altcoins continued to rally for another few weeks.

And in March 2021, when bitcoin cleared $61,000 for the first time, it wasn’t set in stone that bitcoin would smash that by another 13% by November — only eight months later — after retracing by nearly half.

At some point, it became obvious that the bull market had run its course. Bears may have called it earlier than the bulls, but either way, the Terra implosion in the following May, and the cascading liquidations and bankruptcies that followed were really the nails.

For all we know, bitcoin’s all-time high of nearly $73,740 in March was the peak of our current cycle. That would mean the bull market is over.

It certainly feels like that today, with practically everything except stablecoins in the red.

When it comes to prices, all we can really do is look backward. It’s been 585 days (~20 months) since bitcoin bottomed out in November 2022, which for convenience’s sake, we’ll call the start of our current bull market.

Using that very basic definition, the previous two bull markets hit their peaks after ~840 and 1,060 days. So, if we’re destined to repeat those periods — a big if — then we’re solidly in the second half of our cycle. Here’s what the market looks like compared to previous years.

This chart plots bull markets against each other. So far, so good.

Bitcoin had, at this point, gone 6x and 3x in the past two seasons. Bitcoin has so far gone 4x, even after the recent dip, placing it in the middle of its most recent bull markets.

That’s if bitcoin is still in a bull market. If bitcoin actually topped out in March, then this would’ve been the shortest bull cycle on record, not counting its first year of price discovery

It goes without saying, but if you believe in big fractal energy, all this makes the next few months totally decisive for bitcoin’s price.

In the past two bull markets, most of bitcoin’s gains occurred over the following 200 days, going as much as 20x and 100x on their respective bottoms.

We know that returns are diminishing every cycle — so whatever bitcoin does from here may not be quite as explosive. That might have crypto investors itching for big profits elsewhere. Historically, altcoin seasons have helped bridge the gap.

But as is now well-documented, there has been no altcoin season so far this cycle, at least not in the same sense as previous periods.

Building on the definition outlined in a past edition of this column, there have been three distinct altcoin seasons over the past seven years. Two coincided with bitcoin halvings, with each of those running for around a year and a half and finishing up when BTC topped out.

Bitcoin halvings are marked with dotted lines and altcoin seasons by blue

A smaller altcoin season ran for almost seven months from the end of 2018 and halfway through the following year.

Altcoin season either could be late — or just not coming — depending on how bullish or bearish you are.

Either way, this bull market has turned out very different from the others so far. Let’s hope it’s not too different and there’s still more room to run.

— David Canellis

Data Center

BTC and ETH are down 5% over the past day, sitting at $61,100 and $3,310 respectively.
ORDI, NOT and BRETT are the hardest hit, each losing 10%, followed closely by UNI.
There are 3,745 validators in the Ethereum queue right now, while there’s only one in the exit queue.
DEX weekly volumes have fallen 10% to $35.4 billion but are still up year to date.
Ethereum and Polygon weekly NFT volumes are up 16%, reaching $38.9 million and $18.2 million respectively. Bitcoin NFT volume dropped 30% to $16.8 million.

Dog days of summer

What’s the vibe?

I posed the question to Hashkey OTC’s head of trading, Mark Wong, to see what traders are watching as the pullback continues.

Obviously, there’s been a sea of red out there, and that’s become a focal point for Wong.

“What’s interesting is that there’s been no significant technology as of yet to build a catalyst. We do feel that sentiment has been basically revolving around most of the same players,” he told me.

I don’t think I have to explain that bitcoin ETFs sucked the air out of the room for months. They’ve also added to the so-called vibe — or at least did — earlier this year. We’ll have to see if that momentum can continue.

But we’ve spent enough time chatting about the ETFs, so let’s talk about some other things, like memecoins…

“I think memecoins have resulted in quite a decent amount of dilution of value all around in terms, but there will be some that are there to stay,” Wong said. The ones that build a good community and also provide “significant entertainment value” are the ones that show the most promise for a long, lasting run.

Whether Iggy Azalea’s $MOTHER will join the ranks of Dogecoin isn’t yet clear though.

Ah, it’s Monday morning and we’ve already chatted about memecoins and bitcoin ETFs, all in one go. Still with me?

Let’s zoom out. Wong thinks we’re in the “eye of the storm” right now, and that this isn’t exactly the start of a more volatile period despite bitcoin losing momentum over the weekend and tumbling to $61,000.

To be fair, we hadn’t seen that leg down when I sat down with Wong. But we did discuss whether bitcoin and ETH were maturing this cycle and how that might impact volatility.

Wong’s currently seeing some profit-taking from early bitcoin adopters but also buying interest from institutions, such as family offices and asset managers. Outside of bitcoin, he’s noticed a trend buying into thematic coins, including real-world assets and DePIN.

“All around, I believe that the volatility may not have begun yet,” he added. “We haven’t quite seen the 2021 levels of excitement.”

Maybe that’s par for the course. And, stop me if you’ve heard this before, but we’re in the throes of summer at this point. Wong pointed out that the classic Wall Street saying, “sell in May and go away,” may really be relevant right now.

“I think bitcoin does show better performance within the fourth quarter, so the market may be looking forward to that,” he told me.

His view is in line with others, as we’ve previously discussed. Despite the lower levels, I’m told there’s still a pathway to bitcoin near or at $100,000 by the end of the year.

While the vibes are bearish right now, it may just be cyclical.

Keep calm and crypto on, I guess, as we await more catalysts. Better just try to ride out the summer.

— Katherine Ross

The Works

The Mt Gox estate said that repayments will begin in July.
Over the weekend, a video clip circulated of Ark Invest CEO Cathie Wood saying that she’d vote for Trump, though content creator Kevin Paffrath has since deleted the video.
CoinStats “temporarily” shut down its app after 1,590 wallets were drained in a hack.
A Nomura survey focused on Japanese institutional investors found that 54% plan to invest in crypto within the next three years.
A slew of updated registration statements from potential spot ether ETF issuers disclosed seed funding and fees late Friday.

The Riff

Q: What can we do when markets turn red that isn’t bearposting or doomscrolling?

Tanking prices can really complicate things for the avid crypto user. Perhaps there are times when users may find themselves holding more stablecoins than they otherwise would.

In those cases, finding the most trustless ways to farm yield on stablecoin balances could make for a fun hobby that still satisfies the number-go-up urge. At least it’s more relaxing than catching falling knives, if you don’t count the paranoia that comes with DeFi.

Though this isn’t investment advice (and you should never do something just because you read it in a newsletter). Otherwise, market corrections are historically great times to start dabbling in non-financial crypto apps, like gaming and social media.

Branch out. If bears are for building, then middle-to-late bull markets are for dabbling.

— David Canellis

It’s such a cliche but no pain, no gain is applicable. And I know that’s not ideal to hear after the last couple of years, but that’s the way the cookie’s currently crumbling.

Instead — and I want to emphasize that this isn’t investing advice — focus on the themes or narratives that can pave the way forward this cycle.

Focusing on negativity isn’t going to change the outcome and, as someone who deals with diagnosed anxiety, it’ll only wear on your mental health.

Don’t let the doom and gloom suck you in. Keep digging into whatever interests you right now, and block out some of this more macro-based noise.

— Katherine Ross

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