On 8 January 2024, Jamie Coutts, a freelance blockchain strategist, and former crypto market analyst at Bloomberg Intelligence, shared insights on social media platform X (formerly known as Twitter) regarding Bitcoin’s price movements and the broader cryptocurrency market. Coutts dives into Bitcoin’s fundamentals and draws historical parallels between today’s crypto market and the early 20th-century U.S. stock market.
Coutts addressed the common perception that Bitcoin’s 150% price increase over the past year is solely due to pre-spot ETF launch positioning. He suggests looking at various components of Bitcoin network activity to gauge its ‘fundamentals.’ According to Coutts, a custom index incorporating several network adoption metrics is at an all-time high, yet Bitcoin’s price remains 40% below its peak. This discrepancy suggests that Bitcoin might be undervalued.
Coutts notes that unlike the last cycle, the network activity index has made significant new highs, bolstered by novel use cases like inscriptions. He asserts that Bitcoin’s network fundamentals appear the strongest since the 2016-2017 cycle.
In a post dated 18 December 2023, Coutts draws a parallel between today’s crypto market and the U.S. stock market of the early 1900s. He likens the current state of the crypto ecosystem, or ‘network state,’ to the ascendant U.S. economy of that era, predicting that ETFs will trigger a massive, decades-long inflow of capital into crypto.
Coutts compares the pre-1933 and 1934 Securities Act era of the U.S. stock market – characterized by a ‘loose’ regulatory environment, fragmentation, dominance by large whales, and information asymmetry – to the current state of crypto markets. He points out that this environment in the early U.S. stock market gave rise to some of the greatest technical analysts like Dow, Elliot, and Wyckoff, and with them, trend and momentum strategies.
Coutts foresees a similar development in the crypto market, which he describes as momentum-driven and ideal for technical trend strategy exploitation. He anticipates a rapid rise in alternative weighting, factor-based, and market-timing strategies in the coming years, given the prevailing market inefficiencies, which he believes could persist for several years. Coutts predicts significant potential for alpha extraction in the crypto market during this period.
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