A Brewing Storm

As-salamu alaykum everyone, I hope you are doing well. Today is Wednesday, May 22nd. Bitcoin is hovering around 70,000. And today we're going to check on the vitals for Bitcoin. It has been moving sideways for a while. However, I do think it is setting up for the next leg up. And we're going to look at the data that leads me to believe this, as well as some of the headwinds that could be facing Bitcoin in the short term. So without further ado, let's get started. Not financial advice as always, so be sure to do your own due diligence before making any investing decisions. And before I forget, I do leave a like if you like these types of videos. So looking at the supply last active, so this is basically looking at the supply of Bitcoin that has not moved for at least one year, and that's in the yellow line. The black line is the price of Bitcoin. So you can see that there has been profit taking. And typically, the supply of last active will start falling before the fall in the price of Bitcoin. So it can act as a pretty good leading indicator for what the price of Bitcoin is going to do. And we saw that people started taking profits as Bitcoin was on its run, reaching its recent all time high. And since since its fall, basically the 60,000 and briefly into the 50s, we've seen the supply of last active basically hold steady. And so this tells us that the people who wanted to take profits have taken profits. And so it's likely that you're going to see supply last active start to build again, which will be a or at least historically has been a leading indicator for the price of Bitcoin. Now, if we look at unrealized profit, it remains at an elevated level. So currently, 95% plus of holders are in profit. So just looking at this chart, the black line is in as the price of Bitcoin, the red and orange and yellow are the percentage of holders that are in loss. Green is the percentage of everything green and blue is our holders that are in profit. And you can see that we basically peak that, you know, almost all holders were in profit when we reached the all time high by definition, I suppose. And then we had this period of orange, if you're looking at the top right corner, and that's when things started to pull back a bit. And it's been so recent, but there's a sort of a sliver of green towards the right of this graph, indicating that we've gone up again. So we are currently at 95% plus of holders having that are in profit. Now, what's so normally one would say, okay, this is a pretty bad sign, because it means that there's a lot of temptation to start taking profits. But as we saw, the people who were going to take profits have likely already taken profits at those higher levels. And now the holders who are held on to the recovery and the 70,000 level that we're on right now have already seen this price before. So if they were going to sell, they probably would have sold already. That being said, this is something to I would categorize as neither bullish and perhaps sort of bearish the percentage of holders that are actually in profit, but I would actually categorize it more as neutral than bearish. Now, if you look at the net realized profit or loss, you can see that it peaked in March, and then really the selling subsided rather quickly and the green line, which basically signifies how much profits traders have taken. The green line has really fallen dramatically since that peak in March, which is very bullish. So people are not selling for profit anymore. By the way, if you'd like to follow our trades move for move, then do consider becoming a PIF member. The sell side risk, which basically indicates how much, how likely people are to sell their holdings. And this is a ratio, actually, it's a sell side risk ratio. And it basically takes the amount of profit or loss and it compares it to the market cap, the total market cap of the underlying asset. If you have high realization, so people are realizing profit or loss at a high level, that means there's a really strong tendency for people to sell their holdings. If you have low realization, there's a very strong tendency for people to huddle and hold on to what they have. And we can see that high realization peaked close to the high in the price of Bitcoin. But now we're close to low realization levels. So people are really opting to huddle what they have. So all of these data points are telling us the same thing, which is that the people who wanted to take profits have likely already taken profits. The people who are huddling right now have seen previous prices before and haven't sold for a profit yet. So they're likely longer term huddlers or even the short term holders that came in are probably looking for prices above what we've already experienced. And so we're likely not see sell pressure pick up again until we've reached new all time highs and new all time highs that I think are materially higher than our previous all time highs. We've also seen the assets under management for ETFs pick up. This has been a big driver of BTC's price since their launch at the beginning of the year. And you can see actually the assets under management has corresponded quite nicely to the price of Bitcoin. So when the total assets under management were rising for the Bitcoin ETFs, so was the price of Bitcoin. And then when it plateaued since March, the price of Bitcoin did mimic that behavior. And so now with the upturn towards the right end of this graph, we've seen an upturn in the price of Bitcoin. So this is bullish in terms of the trend. Now with the 13F filings, we got a lot of information about the Bitcoin ETFs and the composition of the buyers of those ETFs. And it turns out that the majority of the buying of these Bitcoin ETFs has been by retail traders, not by institutional investors, not by investment advisors, but by retail traders. And this has reflected itself in the average trade size for Bitcoin ETFs. So whereas the SPY ETF, which follows the S&P 500 or the QQQ ETF, which follows the NASDAQ 100, their average trade size is 183,000 and 154,000 respectively. The average trade size for the 10 spot BTC ETFs is that line at the very bottom, the blue line at the very bottom, and it was 15,300. So you can see it's an order of magnitude less than those major ETFs. And that is a reflection of the nature of the buyer of these ETFs. As I mentioned, it turns out that the majority of the buying was retail investors, not institutional investors and not investment advisors. And so you can look at this one of two ways. You can say, oh, well, that means, you know, there isn't institutional adoption. So that's bearish. I would actually say the opposite. There were some institutional investors, investment advisors that did buy into these BTC ETFs. And what's going to happen, I think, is when they review their performance and see that these Bitcoin ETFs outperformed a lot of other holdings, they're going to allocate more. And what this is telling us is that so far, these institutions and investment advisors have been rather hesitant to add in any real large quantity BTC ETFs. And so there's a lot of room to increase their exposure to these ETFs. So in my mind, this is bullish because what it's telling us is that the price action we've experienced so far is prior to institutional adoption and prior to investment advisor adoption, which will come, I think. Now, something that is not really bullish for Bitcoin and maybe bullish for crypto generally, but I think in the short term will act as a headwind for Bitcoin ETFs specifically and by extension Bitcoin's price, is the potential approval of an Ethereum ETF. Now, why do I think this? Well, so the investment advisors who are advising their clients on their portfolio allocations, the average investment advisor doesn't really understand crypto. They understand that Ethereum and Bitcoin are both considered crypto, put them in the same category, and they were taught in their master's degree programs the virtues of diversification. And so if they are allowed to allocate a certain percentage of client portfolios to crypto, they're going to diversify that exposure into the crypto that they have access to. And an Ethereum ETF approval will mean that some exposure that would have went to Bitcoin, being it's the only game in town as far as crypto available in these brokerage accounts, now that exposure is going to be diluted with Ethereum exposure. And so some of that money that would have went to Bitcoin ETFs will go to Ethereum ETFs. So I think that now what percentage actually is diverted from Bitcoin ETFs to Ethereum ETFs, it's hard to tell. My personal opinion is that Ethereum is just a terrible, terrible engineering feat that is hard to use. It's costly. It's slow. You have to add on a bunch of technologies in order to use it. And I really think that I think that Occam's razor will prevail as it relates to crypto, the simplest structures, the simplest projects are the ones that are going to survive. The most complex ones are the most brittle and they will likely they're the quickest to go and to become obsolete. And they are at the highest risk of going bust. It's something that I wouldn't really touch. I've never had a positive experience with Ethereum, but it does have sort of first mover advantage in terms of layer one smart contract blockchain solution. A lot of people are staking their Ethereum earning yield. So I hate to say this, but it doesn't have any utility to speak of that's serious that people actually use for something useful, as is the case with a crypto where it's just, you know, a gambling casino with derivatives trading and high leverage trading. Very little actual utility has been extracted by the average user from crypto. So Ethereum falls into that bucket of things that have kept people busy that are without any use. And all this to say, I'm not really a fan of Ethereum, but I do think that some people will people who don't understand how these technologies work for sure, positively people who have never used Ethereum to to try and do something useful, they will put their money into these Ethereum ETFs and it will take some volume out of Bitcoin ETFs. Now, keep in mind, if you're new to watching, I am not a Bitcoin maxi. I do think that there are other uses to blockchains and crypto, but I am also a realist and I like to say things how they are. And I haven't really seen any, you know, consumer facing applications that have captured my imagination in the realm of crypto and blockchains, aside from the use case of sending value to someone, which is something that I've done. So sending, so paying someone overseas with crypto, that is a use case that I think is real that people use. But aside from that, I really haven't seen anything or I should say anything that couldn't have been done with a simpler solution. There are some solutions out there with blockchain and crypto that are technically useful, but they could have been done with a simpler engineering solution in many cases. So let's summarize here how I view Bitcoin's state today. So the vast majority of holders are in profit, but have seen these prices before. The bleed from profit taking has largely subsided and unlikely to pick up before new highs. And the Ethereum ETF approval, it's bullish for crypto generally, but it may be short term headwind for BTC ETFs until people catch on to the fact that, you know, Ethereum is a dying chain. And the market is in relative equilibrium with lower volatility. And that typically precedes an aggressive move, typically upwards or downwards, but I think in the case of a bit upwards, inshallah. So with that being said, if you're not a member already, do become a PIF member. You can follow the growth, dividend and crypto portfolios. And we're working on adding another portfolio as well. Do leave a like if you haven't already. Let's take a few questions. As-salamu alaykum. Wa alaykum as-salam, Lubna. Nice to see you. ScreenSpark stock worth to hold long time. Lubna, I think you're a member, so just check our watch list and see the sell above price and buy below price. And if it's above the sell above price, then I would probably, so you can take your sort of, you can understand my position on it from those prices. If it's between the buy and sell, I would just hold. If it's above the sell, I would definitely take profits. Below our buy, it may be a good buy. As-salamu alaykum. Do you think if the house or president signed the pro crypto bill will pump the price? Yeah, of course. I do think that this will be bullish for crypto generally. And it will be yet another confirmation that this is an asset class that is going to be with us for a long time. You know, in the beginning, when crypto was in its infancy, the main argument against something like Bitcoin was that the government was going to ban it. But with the Bitcoin ETFs, the approval of this proposed crypto bill, additional regulation for crypto, it becomes less and less likely that this would be the case. Will Bitcoin, Amir asks, will Bitcoin reach 80k in coming weeks? Yes, I do think so. Is it worth investing in AI companies now? It does depend on, you know, which AI company, but I think AI is, you know, it's as big a technological change as the Internet. So, you know, there were a lot of, I'm sure you've heard of the dotcom bubble in 2000. There were a lot of Internet companies that formed that were not being valued based on cash flows, being valued based on eyeballs and clicks and all these other things. And they actually crashed in the dotcom bubble. Most of them didn't survive. But there were a few like Amazon that ended up being behemoths. So it's very important that we remain fundamentally sound in our investing, even if there is a trend that is taking everything up in the short term, which I think is what is happening with AI. Anything related to AI is pumping. But we have to be selective in order to, you know, not to get caught when the tide dies down. That being said, I think this analogy, the dotcom bubble applies very aptly to crypto generally. So if you try to value any cryptocurrency, and I was actually talking with someone I work with about crypto, and we were talking about the valuation of crypto. And I mentioned that I really didn't think that, you know, the valuations of most of these cryptocurrencies made any sense. And a lot of these cryptocurrencies are going to go to zero eventually. Right now, they're being pumped by, you know, financial nihilism, gambling and liquidity rising. But as the Quran teaches us that which is beneficial will stay. And then you have a sale which is swept away. So that's a very important investing lesson that's in the Quran that not many people pay attention to. If you want to protect your wealth, if you want to invest in a fundamentally sound way, really the top question to ask is what is beneficial? What is providing the most benefit to the most amount of people? So either a lot of benefit to a small number of people or a little benefit to a large number of people and or optimally a lot benefit to a lot of people, what products are doing that just look in your daily life, what products are providing the most benefit and the companies that make those products and services are the safest place to put your money. Because those are the companies that will have staying power and everything else that perhaps it's prices pumping, but you've never used them aka crypto or you've heard good things about some talking head told you about, but you've actually never experienced or you're not convinced with or you haven't seen anyone have any useful interaction with those things will be swept away. And that's really what kills capital and kills people's savings. I know you don't have a crystal ball, but when do you think the bull run will end for crypto? It's tough to say. Historically speaking, typically 12 months after the having is when you should be out basically almost entirely. And so I think that's one of the best things to go off of, even though, you know, history is no guarantee of future returns, but it's one of the best things that we can look at. So I'd say within 12 months, I plan to be out of crypto. That is no, I don't think it's a bubble for most, for actually a lot of companies and AI. In fact, I think some of them are still undervalued. Could the Ethereum ETS be the trigger for this bull run, meaning this bull happens much quicker after the having compared to previous ones? I actually think we're in the third or fourth inning of the bull run. I think the bull run is already ongoing. The every bull run has pullbacks in it, but the bull run has already started. I mean, we've already reached an all time high in Bitcoin, so we're very much in the thick of it. Do you think Solana will eventually get an ETF? I think if Ethereum does, then it's much more likely that Solana will as well. I personally see Ethereum as, I'm surprised that now the probability of an Ethereum ETF is so high because I do see it as a security. I don't see how it's not a security. I don't think you can argue that it's a commodity. So if it's not a commodity, what is it? It does seem like a security. I think Solana is a security. So I think they should be registered with the SEC if they want to have an ETF. I'm surprised that the Ethereum ETF is, you know, it seems likely that it will be approved based on the chatter that I've heard. But if an Ethereum ETF is approved, then likelihood is that Solana ETF will be approved as well. And then the impacts of, you know, every subsequent ETF will be, I think, less and less as more ETFs become available, as more crypto ETFs become available. The biggest impact was for Bitcoin when it had its ETFs, because it's the only game in town at the time. But as more and more ETFs become available, I think their impact on price will become less and less. All right, guys, if you enjoyed this, be sure to leave a like, subscribe and hit the notification bell so you know when we go live. And until next time, take care of yourself. As-salamu alaykum and peace be upon you all.