Crypto Bull Market Ushers in a Joyous New Year for All

Liquid Fund Metrics Ventures Market Insight Summary:

1/ Following the formal approval of the ETF, Bitcoin has seen modest fluctuations. The mid-to-long term bullish structure remains solid, indicating the potential for a new bull market. Any price below $40,000 is seen as an opportunity for strategic buying.

2/ Ethereum has successfully broken through the resistance zone that lasted 18 months, initiating a bullish market pattern. With sentiment fully released, its future performance looks promising. $2,855 is the next target.

3/ The biggest takeaway from 2023: "Don't overthink, just go with the flow." The 2024 bull market is here. Focus on the market sentiment and continue to align closely with the market through social experiments.

This report was published relatively late, as we only started writing after the ETF approval.

Before the ETF decision was finalized, even though it was widely anticipated that the ETF would likely be approved, the market expectations were quite different. There were speculations about a large sell-off following the positive news, as well as expectations of new capital rushing in. Opinions varied, and we preferred not to predict the outcome before the ETF's decision. Anything was possible, and we didn't want to write a report only to potentially tear it up and start over (haha). It seemed more prudent to wait until the dust had settled and then respond based on the market's actual reaction.

This report focuses on market trends and trading, and will not delve into the significance of the ETF approval. We will primarily discuss our insights on the market's overall trend in the upcoming period.

After the ETF approval, BTC experienced two days of substantial trading volume with relatively small fluctuations, not fitting the typical prediction of dramatic rises or falls. Instead, ETH exhibited a strong uptrend. This wasn't unexpected but represented one of the least likely scenarios anticipated by the market. Even with our understanding of the reflexivity in the crypto market, these interesting and contrarian trends often come as a surprise.

Regardless, compared to the haphazard guessing before the ETF approval, from a trading perspective, we now see a clearer mid-term market trend and have developed more confident strategies in response.

As we often emphasize in our reports, rather than trying to predict price movements, it's more crucial to identify the current phase of the market cycle and the distribution of accumulations.

Regarding the current phase of the cycle, we believe the market is progressing rapidly, positioning us close to where we were around September 2020 – just before the start of the primary uptrend.

In terms of the accumulation struture, the market's long-term main cost area has been around $30,000, with the short-to-mid term cost rising to approximately $39,000-$40,000. As clearly seen in the chart below, since November 21, 2022, BTC has followed a very distinct ascending channel for over a year. This channel has significant amplitude but a gentle slope, indicating that over the past year, BTC's accumulation structure has been very stable, with major funds staying firmly bullish. This has resulted in a stronger long-term upward trend than what was observed during 2019-2020. This decisive movement is also closely linked to the strong expectations surrounding the ETF approval.

The reason I refrained from making early predictions about a potential surge or plunge following the ETF approval is as follows:

The BTC price has approached the critical level of $48,000, which not only represents the upper boundary of the long-term upward trend but also the range of heavy trading activity from 2021 to April 2022. Facing these dual resistances, even with significant positive news, the difficulty of a direct breakout is inherently high. Moreover, in channels characterized by long-term, wide-range fluctuations, without sufficient (spanning several months) consolidation, breakouts are typically fake and likely to retract back towards the middle of the channel (currently around $40,600). After the commencement of ETF trading, we observed a brief spike in BTC price, breaching the $48,000 upper limit, but it was quickly pushed back into this trading range by intense selling pressure, due to the aforementioned accumulation structure.

Conversely, I was hesitant to predict a sharp decline, primarily because in early January, the market aggressively liquidated leverage, causing sentiment indicators like funding rates, borrowing interest rates, and holding volumes to quickly drop. This cooled off the overheated market sentiment before the major positive news hit, and the extensive liquidation of long positions reduced the potential fuel for a significant downturn.

Now that the biggest uncertainty has settled, forecasting and strategizing for future trends becomes even more crucial. I maintain that the bullish trend from late 2022 to the present has proven to be very strong. Even the realization of positive news won't change this. The confidence in the bull market trend is undeniable and set to continue.

From the perspective of accumulation structure, the resistance at the $48,000 level is considerable, with substantial profiting positions, making a corrective pullback a logical expectation. But the fluctuations or pullbacks over the next one to two months may be the final consolidation phase before the main uptrend. This scenario is akin to the restorative phase after the DeFi sentiment collapse after September 2020 – there's no need for panic.

Regarding the specific trajectory, it might follow the converging triangle pattern as shown by the yellow line in the chart above, or retreat to the middle of the large parallel channel (indicated by the green dashed line), with the price range around $38,000-$40,000. Regardless of the specific path it takes, as long as the BTC price approaches close to the weekly MA30, it will present an optimal buying opportunity. Once BTC breaks through the $48,000-$49,000 range, there will be no significant resistance until its historical high of $67,000, which will mark the beginning of a robust upward momentum. It seems likely to occur after the BTC halving.

Since ETH has shown impressive momentum, let's focus on it specifically. ETH's long-term cost is around $2,140, formed jointly in June 2021, January 2022, and April 2023, which was breached in mid-December 2023, signaling that ETH's bull market had already commenced. This breakout, overcoming resistance lasting nearly one year and seven months, is substantial enough to be considered the launch for a comprehensive bull market.

In August 2020, ETH also broke through a peak held for eighteen months, starting a bull market from a price of $385. However, it faced adjustments following the DeFi sentiment collapse in October. The current position of ETH is closely aligned with that of BTC, without any significant misalignment.

Given that ETH seemingly initiated a comprehensive bull market in December 2023, its inability to gain ground in the following month primarily boils down to one reason. As seen in the chart below, there was significant selling pressure around $2,450, necessitating ongoing fluctuations for assimilation. There were also rumors about Celsius selling off ETH, but who is selling or how much is being sold is not a significant concern. The market trend will naturally provide the answer. After a month of settling, ETH finally broke through to new highs on January 10th.

I believe that even without the BTC ETF approval or any other events, ETH was on track to break out on its own. However, the ETF approval expedited this breakout with rapid capital inflow, serving as a favorable opportunity. Therefore, this breaktout for ETH is very authentic and strong. It's unlikely that we'll see ETH fall below $2,450 again.

As evident from the chart, ETH is currently in an ascending channel. I anticipate ETH will oscillate within this channel for a while, facing strong resistance around $2,855. Therefore, even though ETH currently stands out and can attract inflows, I expect continued fluctuations and consolidation below $2,855. Once it breaks through $2,855, we could quickly see ETH reaching the $3,500 level. ETH holders, you are likely to experience the smooth uptrend similar to last year's Sol holders.

We didn't review 2023 in our report. At the turn of 2023-2024, we saw many friends feeling lost, struggling with the unexpected market pace, the difficulty of shedding bear market mindset, arrogance and prejudice towards new things, regret of missing out, including the surge of memes during each cycle transition and the disillusionment of value investing. All of these are not of paramount importance; everything is still early. However, as a fund focused on secondary market investments and trading, the most important lesson we learned in 2023 was "don't overthink." Price is the output of a series of factors like accumulation structure, themes, narratives, and sentiment. Last year, we missed several opportunities because of thoughts like "this team is not good enough," "poor fundamentals," "this is for IQ 50 groups," etc. The year 2023 taught us to let it ride, and we hope to invest even more smoothly in 2024.

There should be some predictions for 2024, but as a fund adhering to the "Bayesian Principle," we base our investment actions on posterior probability distributions and don't put much stock in predictions. Many might look back at their 2023 and find them wildly off the mark. We believe that by the end of 2024, many will find them even more astonishingly inaccurate. Yes, AI, multi-chain, the BTC ecosystem, gaming, and so on, are themes we acknowledge. Is it important? Predictions for 100x coins in 2024? Those labeled as potential 100x coins usually aren't. Our focus should continue to be on managing the inputs and outputs of multiple factors like accumulation structure, themes, narratives, and sentiments. This is also the most interesting part of our "Return-to-Zero Fund" social experiment.