04 Apr 2023

April Market Outlook: Perfectly imbalanced

Market Wrap Up

In Short

At current levels, I’m neither a seller nor a buyer and intentionally neutral. Unlocked supply points toward downside in April, whereas a more accommodative macro environment on the backdrop of bank failures could represent fruitful conditions for BTC.


  • I brace for a bumpy ride in April with a neutral market view
  • Signs point to increased probability of recession or stagflationary environment
  • A great macro environment for bitcoin
  • The major net buyers of late have less capital available to push prices higher
  • Increased supply in the order books points in the direction of a slowdown in April
April – A great macro environment for BTC
Q1, 2023 ended with a massive 72% gain in BTC after BTC ended March with 23% gains. In my March outlook, I stated that I believed $28k would happen sooner rather than later. I based the argument on technical support and resistance and the illiquid state of the crypto market. While I was correct in my call, I did not envision that I would look back at March as a month of massive bank turmoil and clear signals of a moderating FED, but here we are. The poor Fed found itself stuck between a rock and a hard place in March as inflation remains far from tamed while banks felt the consequences of aggressive interest rate hikes. Bank duration mismatches have been followed by quasi-bailouts and expectations of lower interest rates. Signs now point to an increased probability of a recession or stagflationary environment. This will, in case, be a first for bitcoin, as BTC has never traded in a typical recession or a stagflationary environment.In a correlation deep-dive published last week, I outlined my thoughts on the impact of a long-term high interest rates scenario for BTC. In short, a cowboy crypto industry built around short-termism was heavily impacted by the aggressive hikes, leading prices to plunge. Most cowboys have vanished, and interest rate effects should be far less present if rates were to reign higher for longer amidst a stagflation scenario. If the Fed’s hands were to be forced into more active grooming of distressed banks, I believe the liquidity effects would benefit BTC very positively. If conditions normalize, I still view the recent instabilities as constructive for BTC’s momentum.
Liquidity – Sellers receiving gunpowder, while buyers are nearing exhaustion?
The current market depth is low, and Signature and Silvergate’s downfalls have constrained liquidity further. As a result, the net buyer and net seller matter more. Two distinct net buyers in MicroStrategy and Binance contributed significantly to the late March strength in BTC. MicroStrategy made its biggest BTC purchase since November 2021, and we estimate that the company has $114m left of its $500m Sales Agreement to spend on increasing its BTC treasuries. Binance converted its $1bn BUSD “Industry Recovery Fund” to BTC, ETH, and BNB. It’s not announced whether Binance has finished its conversion, but $900m worth of BUSD was sent to Binance Hot Wallet 14 after the announcement, and now, the wallet holds $114m BUSD, and around $400m worth of BUSD has been sent to Paxos’ redemption address from Binance.In sum, the major net buyers of late have less capital available to push prices higher. Amidst the end of March buoyancy, the collective goldfish memory of crypto market participants was exposed. Keep in mind that March started off with fears of enhanced supply hijacking the order books with selling from Voyager, Celsius, the U.S. Government (Silk Road), ETH (Shanghai), and Mt. Gox, all spiking fears. The U.S. government sold 9,800 Silk Road BTC on March 14 and intends to sell the remaining 41,500 BTC in four batches over the year. It’s quite unlikely that the U.S. government will aim to time its exits, and I expect selling to occur approximately every second month. In other words, the U.S. gov could sell its next batch of ~10,000 BTC in Mid-May, thus not being a key theme in April. The two relevant addresses to follow related to the Silk Road bitcoins are bc1qfand bc1qe. Shanghai, on the other hand, will likely increase supply (selling). 1.1m ETH related to partial reward withdrawals could face the market, while Celsius is likely to sell its 158k staked balance as part of its bankruptcy process. These two numbers represent nearly 1.3m ETH or approximately $2.4bn worth of potential sell-side pressure to face the market. Increased supply in the order books points in the direction of a slowdown in April.
Still – I am not selling
Frankly, looking beyond the massive 69% gain in Q1, 2023, $28k is not an area where I am remotely interested in reducing my long-term exposure. I am comforted by good signals from derivatives and the macro environment. The potential near-term increased sell-side liquidity, Wells Notices, and other regulatory developments discomfort me. I brace for a bumpy ride in April with a neutral market view.
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