2019 Market Update 005 - April In Review
Major Market News:
Binance launches in Singapore
Bitstamp granted Bitlicense
Coinbase launches crypto debit card
Coinbase launches in 11 new countries
Traditional Online Securities Brokers such as TD Ameritrade, eTrade, Rakuten, and eToro launch Bitcoin trading
SeedInvest secures ATS license for security token trading
NY Attorney General investigating Tether and Bitfinex (a short term price shock, but a much needed last minute clean up before the Bull Run)
More than 40 central banks are evaluating blockchain tech
French Banking Giant issues $112 million worth of Bonds on the Ethereum Blockchain
Harvard University is the first university endowment to directly participate in a token sale, investing over 11 million USD into Blockstack's $50M raise.
EY (Ernst & Young) launches Nightfall, a software allowing their corporate clients to easily build on the Ethereum Blockchain. This took them over a year and over 200 full time software developers.
Andreessen Horowitz is planning to invest 1 billion USD into crypto
Decentralized Finance (DeFi) platform Dharma live on Ethereum
Gemini adds full SegWit support, speeding up the Bitcoin network
Samsung creating their own token
Jaguar partners with IOTA
"Bitcoin" Google searches triple
SEC publishes token guidance
#1 YouTuber PewDiePie signs an exclusive live streaming deal with decentralized platform DLive
Decentralized Finance Platforms such as Celsius, BlockFi, and the Maker DAO are all taking off with billions committed, providing more lucrative financing options than traditional banks
After Bitcoin rallied from $3,900 to $5,200, several companies opened their treasure chests of announcements and releases. This is something we expected. A lot of amazing developments have happened over the past year, but nobody wants to launch a great new feature or partnership into a bear market when no-one cares. As the attention suddenly rose on crypto assets, we saw nearly every major online stock exchange announce that they are launching Bitcoin trading. This is something that they had prepared for a while and had readily waiting up their sleeves. We expect a lot of high potential news to emerge in the coming months and year as we warm up for the next bull market cycle. We believe we have one more retest of low prices ahead of us (which our strategy is prepared for), and in perhaps no more than 100 days, we will begin our next 3-4 year Bull Market cycle. We highly recommend to consider a further investment for June 1st or July 1st. It is wise to be bold when prices are low.
Our Past Predictions
Prediction from Market Update 001 "Mid Term (6-12 months): This is the ideal time to start looking for the projects that are still working hard despite the financial pressure. At this time we will start strategically buying into quality projects whose prices got decimated during the market sell-off, but are still progressing fundamentally. We will also continue day trading taking advantage of side-ways market strategies, as well as keeping a lookout for breakouts."
Result: Mid and Small cap Alt coins suffered significant loses this month, mostly at the expense of Bitcoin's growth. We set this off by mixing in some shorts into our strategy putting us at a month to date profit. We recognize this as a market inefficiency and are carefully buying up high quality alt coin projects at significant discounts. One favorable example of such is IOTA, which we bought as low as 26 cents which upon the Jaguar news jumped to 32 cents. Historically small caps outperform large cap coins such as Bitcoin during bull markets, and we are therefore looking forward to some of our most profitable months to date.
Our Macro Prognostic for the coming months:
Short Term (till August):
Markets are likely to be range-bound between $3,400 and $6,000. As we are sitting at the upper end of this range, we expect Bitcoin to do it's final pull back to the 3700 range, which will likely be the final best buying opportunity before we enter the bull market. We do expect that this pull back will take approximately 100 days, as there will be sideways phases on the way down, and especially at the bottom as the price meets the weekly 200 MA. We will keep accumulating daily, as we have been, and hedge against these drops with strategic shorts as we did in April.
Mid Term (August onward):
The return of the bull market. Based on past similar market cycles, from the Bitcoin bubble in 2014 to the Tech Bubble in 2000, and the recession in 2008, most of these markets return to their next bull run after 600-800 days. Since we are over 500 days into the bitcoin bear market now, this timeline is closer than we think. Hence we believe by year end things are very likely to start going up, and when things go up in the Crypto space, they go up dramatically.
Long Term (2020-2023):
We expect Bitcoin to hit between $200,000-$500,000 in this coming bull market. We based this on nearly a dozen modes of analysis, from UTXO, to NVTS, to RSI, to Stock-to-Flow, to price action and market cycle analysis, which all line up with similar valuations. Some of these we share below. The global macro-economic backdrop is supportive of this as well as central banks are pushing off the next coming recession by artificially lowering interest rates to the extent that the IMF is considering negative interest rates. An economic environment where the bank charges you money to keep your savings, is one that we find extremely supportive of a crypto future.
Few markets are as cyclical as the Bitcoin market, and by association, the crypto markets at large.
A few things to notice from the graphic we put together below:
1. 80%+ price drops are not just common but they are standard.
2. We already dropped 80%, and structurally are at the blue lines in the previous cycles. These were at the peak of the last bear rally before the bull market took off. So don't be alarmed if you see prices drop in May or June.
3. Every Bull Market and Bear Market has been parabolic. Meaning 1000's of % worth of gains, and 80% in price drops following it.
4. Every Bull Market has lasted longer than the last. The first lasted a year, the second lasted two years, the third lasted three years, and based on other analysis we estimate this fourth to last four years.
5. The RSI has been at the exact same spot each of the past market cycles. Another reason to expect a small sell off this coming month.
6. The yellow line is the day of the bitcoin halving. The final bottom was in previously 42-46 weeks prior to halving. We are currently only 51 weeks from he next halving, giving us another reason to believe that the next drop will be the last, and that the bull market is imminent.
But where is this value coming from? How can a bitcoin be worth nearly half a million dollars?
The latest finding is that when you apply traditional commodity valuation models, such as the Stock-to-flow valuation method it actually lines up with Bitcoin's past 10 years of pricing eerily perfectly.
Not only does Bitcoin follow this model to a T, but so has Gold and Silver.
The model works by dividing circulating supply by annual supply added. In 2020, with the next Bitcoin halvening, Bitcoin's "true" value according to this model jumps to the level that Gold is at. And historically, Bitcoin overshoots this target, and then the 80% retracement is Bitcoin returning to its true price according to the model.
If you want to learn more about this paradigm shifting new valuation model read more here.
The next bull market will likely start in 2019 and complete in 2022, before we head into another parabolic correction. That said there is no better time than now to allocate and accumulate.
Management Strategy Update:
Our 200 day accumulation has worked extraordinarily well, as we posted our third profitable month, while still having 60%-70% of our capital ready to deploy on this very likely coming drop back to the 200 MA. As this accumulation will wrap up by August, we are preparing our Bull Market strategy based on quantitative metrics from previous crypto bull runs to maximize returns. Beyond pure returns we also consider other optimizations such as security of tokens and tax-efficiency, so that our model does not have any vulnerabilities. We are excited to share this with you in the coming months as we roll it out.
These positions will of course adapt over time, but they are based on taking a deeper look into similar market cycles and taking a lot of predictable catalysts into account.
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