December Outlook: Staying long and strong
Price action has been wild since the election. Still aggressive allocation remains attractive given fruitful conditions due to the Trump trade, reflexivity, MicroStrategy hoarding, and ETF momentum. How many chairs are you sitting on right now? Are you all-in on the chair?
Since the election, Bitcoin ETPs have added 99,570 BTC. In comparison, Saylor and a handful of other public companies have added 158,474 BTC – moving the grand total of BTC absorption by known public entities in November to a gargantuan 258,044 BTC. No wonder November ended the month with 37.3% gains.Saylor still has the capacity to properly dilute his shareholders, and his November activity reeks of urgency to acquire as much BTC as possible below $100,000. With the current sales agreement, MicroStrategy retains the capacity to issue an additional $11.3 billion in equity and $18 billion in debt, positioning itself to sustain its aggressive expansion strategy as MSTR still trades at robust premiums to its NAV. I expect MicroStrategy bids to remain a potent source of demand throughout December and a key contributor to pushing BTC into the six-digits amidst tapering profit realization from medium-term holders. Froth factors
You don’t have to look closely to find froth factors in the market. A few worth mentioning are the MicroStrategy premiums amid a truckload of dilution, pumpdotfun hitting TikTok—moving the Phantom wallet to leaderboard positions in the AppStore, and the recent Dino coin resurgence. While heated, none of these factors are inherently tampering with BTC’s ability to thrive in the near term. MicroStrategy premiums allow the company to dilute faster and buy BTC faster, which is great for price appreciation in BTC. The memecoin mania has shown evidence of happening in silos. Retail traders without BTC exposure go straight to the SOL ecosystem to fish for the next ten-bagger. The dino coin mania is an extension of the memecoin mania, sprinkled with nostalgia. Dino coins don’t carry the same weight as shiny new popular ideas from the 2020-2021 era (LUNA, FTT, centralized lending platforms). It is also not met with the same skepticism as new coins launched between the past and current bull markets. To retail traders, household low-unit vapourware coins such as XRP are compelling and “safe” alternatives alongside BTC and ETH, and recent moves might reflect that.In addition to these froth factors, funding rates and leverage are high, suggesting a relatively one-sided market. Risk appetite has grown, traders are positioned for a $100k breakout, with it the risk of the notorious liquidation cascades witnessed throughout 2021 increases.Six-digit coin?
Bitcoin has spent 11 days in consolidation after its first failed attempt at $100k. Trading volumes have trended lower in the past few days, increasing the market’s sensitivity to absorb either a substantial bid or sell. This sets the stage for imminent volatility after a solid endurance tug-of-war between sellers and buyers. Elevated funding rates and frothy flashes from all corners of the market make a near-term directional call challenging. A myriad of employment data at the start of the month and conflicted FOMC expectations further suggest heightened directional ambiguity in the first half of December. Mid-January top?
Crypto traders like to trade news with amplitude and vigor. Trump’s victory was a big win for the crypto market through regulatory lenses and the potential BTC reserve strategy. However, governmental processes are typically somewhat slow-moving, a factor an overeager market may ignore until the date is due, as overreactions to positive events in BTC are typical with plenty of examples. The average distance between BTC’s first cycle ATH and its last ATH during its past three cycles is 318 days. Under the assumption that average trajectories hold, a peak would occur on January 17. This is not unlikely, given that Trump’s inauguration will take place on January 20.In December, dips are for buying
That said, BTC is well positioned to end the year well into the $100,000s. Reflexivity, Saylor bids, and Trump’s January 20 inauguration are all actively present bullish factors attracting traders and capital into the market. The underlying momentum is not to be messed with. I view hypothetical adverse reactions to surprising employment data or unchanged interest rates at the FOMC as opportunities for aggression. The market is well poised to peak near Trump’s inauguration, where I’ll look to de-risk properly. Until then, my allocation reigns long and strong.
