Latest Thoughts: Tom Still Believes that Crypto Winter is Over, but note he is waiting for the for Bitcoin Misery Index to fall to 50 before becoming aggressive
Bitcoin is up 179% YTD (10X the return of S&P 500), but the bulk of the Bitcoin rise this year took place in the 3 months between March and June. Since late June, Bitcoin has been rangebound and oscillating around $10,000. The rise in 2019 is welcome, particularly after the brutal declines of 2018 and because Bitcoin has moved decisively above its 200D moving average, the rise YTD has also validated the start of a new bull market. And we believe Bitcoin is on track to make all-time highs in late 2019. That said, we are not necessarily in a rush to buy Bitcoin at these levels, but a few things are converging that will likely serve as positive catalysts.
Our Bitcoin Misery Index (BMI) continues to tell us the risk/reward for Bitcoin is not favorable at the moment. Six weeks ago, we pointed out that breakdown of our BMI to below 66 was a tactical short-term risk off signal (see “Take the summer off”… dated 7/30/19) and we were waiting for the BMI to fall to 50 before getting re-engaged. Currently, the BMI is 56. Since 2010, when the best Bitcoin 6M returns have been seen when the BMI is between 40-53 (and rising BMI even better). Thus, we need to see BMI fall to at least 50 or so to gain conviction. See slides 49-50.
The team at Fundstrat Global Advisors continues to produce research for investors from New York to Zurich to Tokyo. We will continue to post samples from Tom and his team on our platform with references to strong trends and directional moves in Bitcoin as well as related digital index research. Tom has made some fantastic calls in US equity and Bitcoin in 2019, so you may want to reach out to his team.