Bitcoin, Asset Class performance and Absolute Momentum.

I want to first point out that at a certain point in time, Bitcoin will have a 35-50% correction. Likely several major corrections in the coming months and years, perhaps sooner than I currently imagine, perhaps later. The current chart structure does not show significant loss of momentum, which historically is a better predictor of future returns than any other indicator. Momentum is foundational to our understanding of motion, as described by Newtonian physics. Momentum is also supported by behavioral finance, and is even now considered a factor unto itself that drives return.

"The premier market anomaly is momentum. Stocks with low returns over the past year tend to have low returns for the next few months, and stocks with high past returns tend to have high future returns."

–Fama & French

As such, when looking at Bitcoin, traders should examine relative momentum and absolute momentum to help reveal the strength or weakness of a trend. This year, Bitcoin is again the best performing store of value (I believe the market is currently coalescing on this notion, Paul Tudor Jones, Stan Druckenmiller, and Bill Miller are notable thought leaders on this point, if you are interested in exploring it for yourself.)

By comparison to itself, Bitcoin is in the early stage of a parabolic trend. On the 1M chart, we see that RSI is still climbing in conjunction with On Balance Volume. These support the chart structure, which is accelerating upward as we head into 2021.

Relative performance with Bitcoin is also interesting to consider. I often look at price relative to Gold or Central Bank Balance Sheet size, or the S&P 500. Please see PlanB's recent post on the relative performance of Bitcoin vs CBAs - twitter.com/100trillionUSD/status/1335529711217373184/photo/1

Bitcoin is a remarkable buying opportunity for the long haul. I remain Long Bitcoin.

Thank you for reading my thoughts, please post your ideas and comments here. Stay safe.

註釋

Bitcoin's parabolic advance continues. As Peter Brandt pointed out earlier this week, we have arrived at the midpoint of the parabolic trend curve. We will soon know how price interacts with the midpoint and have a better sense for future price action.

I remain Long Bitcoin.