Bear Market Rallies

Last week's letter addressed the asymmetric opportunity being presented to long-term crypto investors.

By most measures, the crypto capital markets are in extreme oversold conditions. Using on-chain data, we demonstrated how Bitcoin market participants are closely approaching their maximum pain thresholds.

For long-term holders, periods such as these represent advantageous places to more aggressively average into spot positions.

Over this time frame, we strongly believe that we'll look upon this period as a great time to have accumulated Bitcoin and other major cryptocurrencies.

But this raises yet another question: What does the short-term outlook look like?

As any technical analyst would be quick to announce, long-duration assets and cryptocurrencies have been in an assertive downtrend as central banks have moved into a tightening regime following inflationary pressures.

But these bear markets often see swift and aggressive counter-trend rallies.

For short-term active traders, these moves are a nice way to capture a quick buck provided you're nimble in your profit-taking ability.

In today's note, we want to explore some of the more short-term developments at work grounding our anticipation of an upcoming bear-market rally.