1st April 2025 > > Drawdowns are real, cycles are not.

tl;dr

A focus on short-term price movements – of which I am as guilty as anyone else – is not the healthy way to invest.

Market Snap

Market Wrap

Tomorrow has been marked as “Liberation Day” by Trump for which he has threatened to ramp up his personal Tariff Wars against as yet unspecified countries on as yet unspecified goods. Risk assets don’t like it, and neither do bonds.

Having normalised just three months ago, the yield curve is inverting again, suggesting that markets are pricing an ever-higher risk of recession six months and out. Such an outcome would be fatal to Trump’s personal ambitions for the next nearly four years, but at what point does he take notice? Probably not this week, so expect more blood on the streets.

Curious Cryptos’ Commentary – More blood on the streets?

Fidelity Digital Assets released a report addressing the question as to whether this BTC cycle is done and dusted or not. Since the invention of BTC, prices have generally followed a four-year cycle matching the halving cycle, but with a delay.

For those who have been following crypto markets for more than just one of these so-called cycles, there is one repeating narrative that stands out, and that is that speculators (who tend to the noisiest commentators) always proclaim on the way up that there is no end in sight, and always shout despair during any of the subsequent drawdowns. This is to be expected – speculators have zero interest in the application of crypto technology, they are simply interested in making a fast buck. Which is a legitimate interest, but please note that most of them lose a fast buck, and then some. That is not what the CCC is all about.

Fidelity have provided this useful graphic which shows the periodic sell-offs that punctuate crypto bull markets:

We are currently down 24% or so from the ATH of $109k we enjoyed back in January this year. If past performance is any guide, then a drop to even a 50-handle would not be unprecedented. That would likely be the trigger for the mother of all rallies, especially as it would be accompanied by huge leverage on the short side with some players confusing speculative technical analysis with the real world.

We do not know how economies are going to shape up in 2025, but on that front, you would be hard pushed to be anything but negative. The doom-loop of excessive government debt, over-taxation, and the partial closing down of economic borders (sounds familiar to anyone?) will be met with the only tool available that does not involve a massive reduction in government spending – quantitative easing, making the rich richer, and the poor poorer.

Curious Cryptos’ Commentary – There are no cycles anymore

This is a fact that seems to have escaped most people.

The first BTC halving took place on 28th November 2012. The reward was reduced from 50 BTC per block to 25. It can come as no surprise to anyone that a reduction in the supply of a commodity, in the face of increasing demand, leads to a price rise.

At this time, 10.5mm BTC, approximately 50% of the total supply, had been mined. Simple maths shows that at the time of the first halving, the DAILY issuance of BTC reduced from 0.07% of the total in circulation to 0.035%.

At the last halving on 20th April 2024 the reward was reduced from 6.25 BTC to 3.125 BTC. Set against issued coins totalling 19.9mm BTC, representing 94% of all supply, the WEEKLY issuance of BTC reduced from 0.03% to 0.015%.

The story of the halving impact, which drove the historical pattern of four-year cycles is well and truly over.

…

Outside of macroeconomic news, driven by political decisions made by democratically elected governments in the West, or threats of war and terrorism from undemocratic nations, the key price driver for BTC, and by extension the entire crypto market, will be the adoption (or otherwise) by TradFi of crypto technology, embedding (or otherwise) the crypto revolution in our daily lives.

If you believe in that story – and how could you not after diligently reading the CCC almost every day – the only sensible option is to ignore price volatility, use DCA if you want BTC exposure within your investment portfolio, and come back to look at it again a few years hence.

For BTC anyway, alt exposure is an entirely different beast, and a topic we will return to.