Welcome 2023 - The Year of Crypto Resurgence

Wed, 04 Jan 2023 14:08:02 +1100

Armed with learnings from a brutal 2022, we head into 2023 with cautious optimism. Whilst we will temper our enthusiasm, we anticipate a resurgence in crypto assets and renewed interest in blockchain applications.

The information contained here is for general information only. It should not be taken as constituting financial advice. Stormrake is not a financial adviser. You should consider seeking independent financial advice prior to making any personal investments.

Bitcoin: Net Unrealized Profit/Loss

Source: CryptoQuant

According to CryptoQuant, "Net Unrealized Profit and Loss (NUPL) is the difference between market cap and realized cap divided by market cap. Assuming that the latest coin movement is the result of a purchase, NUPL indicates the total amount of profit/loss in all the coins represented as a ratio. It could be interpreted as the ratio of investors who are in profit."

We're now in a period where the NUPL has been in a sustained period of loss. This has not been seen since the 2018 bear market and indicates selling exhaustion. What's also important to note is sustained periods of drawdown precedes bull markets, as coins change hands to new holders who are now in profit and the timeline lines up with a new Bitcoin halvening cycle.

Ethereum Supply Imbalance

Source: CryptoQuant

Ethereum post merge continues to hold up astonishingly well when compared to its competition (the so-called "ETH killers" such as Solana and Avalanche). Now a slightly controversial take that might rile up the Bitcoin maxi community. There is a structural imbalance between the Bitcoin and Ethereum supply structures. Without subscribing to the "ultra sound money" meme circulated by the ETH community, we can look at the last 6 months of price action performance to form our hypothesis. Whilst Bitcoin has shed approx. 22.5% of its value, Ethereum held strong and only shed 0.8% of its value over the same time period. Bitcoin had also set new lows in 2022 following the FTX collapse, whilst ETH still trades nearly 40% over its 2022 low. This will be one of the most interesting dynamics to watch as 2023 unfolds.

BTC/USD Key Levels

Interactive chart: click on image for higher resolution

Bitcoin has remained perfectly locked for the last two weeks. Looks like everyone is actually taking a holiday and putting the charts away this holiday season. Whilst we remain between $16,500 and $17,300 USD the range will continue and there will be very little volatility to extract value from. A breakdown below $16,500, we will watch for a sharp move towards $15,588 before major support kicks in at the 2022 lows. To the upside, if we close above $17,300 we will look for a continuation towards $18,217 before major resistance comes in to slow momentum.

ETH/USD Key Levels

Interactive chart: click on image for higher resolution

Ethereum remains rangebound between $1,190 and $1,230 USD. If we can get a clean break and daily close above $1,230 then a sharp move towards the $1,300 - $1,341 pocket would be expected. With enough momentum, we can see a retest of $1,472. To the downside, a break and close below $1,190, could see a move towards $1,130. If the downside move is particularly strong, we can anticipate a retest of $1,071.

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The information in this newsletter is general only. It should not be taken as constituting professional advice from the author - Stormrake PTY LTD.

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Stormrake - Insights #NUPL