Summary of "This Is A Bear Market! Why We Could Be Heading Lower | Markus Thielen"
This Is A Bear Market! Why We Could Be Heading Lower | Markus Thielen
Market Context & Macroeconomic Overview
- Current Market: The crypto market, especially Bitcoin, is confirmed to be in a bear market.
- Capital Inflows: Lack of new capital inflows is preventing Bitcoin price rallies. Selling pressure from early holders (OGs) and ETFs is keeping the market balanced or pushing it lower.
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Federal Reserve Influence: Hawkish Fed meetings lead to ETF selling, dragging Bitcoin prices down. The October FOMC meeting was hawkish, causing ETF outflows and market decline.
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Rate Cuts & Liquidity:
- The Fed has cut rates three times recently, but historically the third cut is followed by a pause or even Bitcoin price declines.
- Only two rate cuts are priced in over the next two years, limiting bullish monetary tailwinds.
- Global liquidity increases (e.g., M2 money supply) are often cited as bullish for risk assets, but the relationship with Bitcoin is cyclical and non-linear (power regression). Traditional macro liquidity metrics often don’t translate directly into crypto market inflows.
- Real crypto-native liquidity (stablecoin inflows, on-chain flows) is a more relevant indicator.
- Unemployment Rate: Rising unemployment above its 12-month moving average historically signals upcoming recessions and risk asset pain before any stimulus helps.
Bitcoin Specifics
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Price & Drawdowns: Bitcoin has already experienced a ~30% drop year-to-date, with a potential 60% drawdown possible next year, especially around the US midterm elections. Technical support around $70,000 is noted as a potential lower bound.
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ETF Flows:
- Bitcoin ETFs attracted approximately $22 billion inflows in 2023, down ~30% from $33 billion in 2022.
- ETF inflows have been at a loss because Bitcoin prices declined after purchases.
- After the October FOMC, ETFs turned net sellers (~$5 billion outflows), exacerbating price weakness.
- Futures & Options:
- Futures leverage has mostly been unwound; the futures market is neutral.
- Options open interest has increased, with significant call selling (covered calls), which caps upside and reduces volatility.
- Bitcoin implied volatility (~40-60%) remains higher than the S&P 500 (~20%), but volatility has declined over the last two years due to institutional options selling.
- Market Structure:
- Retail participation is very low, especially in key markets like Korea.
- Funding rates remain muted, indicating low leverage and retail momentum.
- Bitcoin dominance has risen steadily since late 2022, indicating altcoins are underperforming.
- Institutional vs Retail Dynamics:
- Institutional investors dominate current cycles, driven by macro and Fed outlooks.
- Retail is largely absent, limiting altcoin rallies and overall market breadth.
- Wall Street players have been poor allocators this year, buying high and now underwater.
- Technical Indicator Preference: The 21-week moving average is the preferred single chart to track Bitcoin’s trend.
Altcoins & Sector Outlook
- Altcoins Underperformance:
- Altcoins continue to underperform Bitcoin; Bitcoin dominance is expected to rise further in 2024.
- $59 billion per year in token unlocks (from VCs and early investors) creates natural selling pressure.
- Lack of compelling narratives or exciting new protocols is hurting altcoin demand.
- DeFi and NFT activity is subdued compared to prior cycles despite lower gas fees.
- Yield on staking (e.g., Ethereum) is low (~3%) compared to 10-year US Treasury yields (~4.1-4.2%), reducing incentives to move capital into crypto.
- Selective Opportunities:
- Binance Smart Chain (BSC) ecosystem (e.g., BNB token) is favored for generating yield and launchpad participation, offering ~10% annual yield.
- Narrative Importance: Historically, bull markets were driven by strong narratives or use cases (e.g., Chinese adoption in 2013, DeFi in 2020). The current cycle lacks a strong, exciting story to attract retail or institutional money. New narratives or innovative protocols are needed to trigger the next altcoin bull market.
Election Cycle & Political Risks
- US Midterm Elections (2024):
- Historically, Bitcoin peaks about 12 months before US midterm elections.
- Midterm election years tend to have sideways or negative stock market performance.
- There is a high chance Democrats will win, potentially reversing some Trump-era expansionary policies, which could reduce bullish catalysts for Bitcoin.
- This political uncertainty could cause Bitcoin to trade in a range (~$80,000–$100,000) or drift lower.
Crypto Market Influencers
- Who Influences Crypto More Today? Markus argues institutional players like BlackRock have more influence now than retail figures like CZ (Binance CEO). Each cycle has different promoters; the current cycle is dominated by institutional voices (Larry Fink, Tom Lee). Retail influencers (Vitalik Buterin, CZ) are less prominent, which may contribute to lower retail engagement.
Methodologies / Frameworks Highlighted
- Bitcoin Valuation & Market Analysis:
- Analyze capital inflows/outflows via ETF flows, futures, and options open interest.
- Track retail activity through spot volumes (e.g., Korea) and funding rates.
- Use on-chain data to measure real money moving into Bitcoin and stablecoins.
- Consider macroeconomic factors: Fed policy, rate cuts, unemployment, inflation.
- Understand historical election cycles and their impact on market timing.
- Use technical indicators such as the 21-week moving average to confirm trends.
- Macro Liquidity Assessment:
- Distinguish between nominal money supply growth (M2) and actual liquidity hitting crypto.
- Recognize non-linear (power regression) relationships between liquidity and Bitcoin price.
- Monitor Treasury General Account (TGA) balances for liquidity injections.
- Options Market Impact:
- Recognize that call selling (covered calls) suppresses upside and reduces volatility.
- Understand volatility harvesting strategies by institutional players.
Key Numbers & Timelines
- Bitcoin drawdown: ~30% year-to-date; potential 60% drawdown next year.
- Bitcoin ETF inflows: $33.6B in 2022; $22B in 2023 (down ~30%).
- Stablecoin inflows to crypto: dropped from $100B (Dec 2022) to $60B (summer 2023) to $4B (last 30 days).
- US 10-year Treasury yield: ~4.1–4.2%
- Bitcoin implied volatility: 40–60%; S&P 500 volatility: ~20%
- Rate cuts priced in: 1 cut in 2024, 1 in 2025; Fed funds rate ~3.75%, inflation ~3%
- Election cycle: Bitcoin peaks ~12 months before midterms; midterms in Nov 2024.
- Altcoin unlocks: $59B per year from VC and early investors.
Explicit Recommendations / Cautions
Disclaimer: Nothing in the video is financial or investment advice; viewers should consult their financial advisers.
- Bearish Outlook: Bitcoin and altcoins are likely to remain under pressure in the near term.
- Need for Capital: Without new capital inflows (retail or institutional), markets will struggle to rally.
- Altcoins: Suggested hedging Bitcoin exposure with diversified altcoin portfolios but remain cautious due to selling pressure and weak narratives.
- Watch Macro Data: Pay attention to Fed meetings, unemployment data, and real crypto-native liquidity rather than just headline money supply numbers.
- Narrative Development: The market needs compelling stories and innovative use cases to reignite retail interest and altcoin rallies.
Mentioned Assets, Sectors, Instruments, and Tickers
- Cryptocurrencies: Bitcoin (BTC), Ethereum (ETH), Altcoins (general), Solana (SOL - described as overhyped).
- Tokens: Binance Coin (BNB), BNB ecosystem tokens.
- Instruments: Bitcoin ETFs, futures, options (call selling/covered calls), stablecoins.
- Macro: US Treasury General Account (TGA), M2 money supply, US 10-year Treasury yields.
- Equities: Goldman Sachs, JP Morgan, Vanguard, Schwab (institutional players involved in Bitcoin ETFs).
- Other: Circle IPO, Gemini, DeFi protocols, NFTs.
Presenters / Sources
- Markus Thielen: CEO and Head of Research at 10X Research (crypto research firm).
- Nick (Host): Coin Bureau podcast host.
- Other Mentioned Experts: Matt Hogan (Bitwise), Larry Fink (BlackRock), Tom Lee (Fundstrat).
Summary
Markus Thielen provides a comprehensive bearish outlook on the crypto market, emphasizing that Bitcoin and altcoins face downward pressure due to weak capital inflows, institutional selling post-Fed hawkishness, and lack of retail participation. Macro factors like limited Fed rate cuts, rising unemployment, and unclear liquidity impact further constrain upside. Altcoins are expected to underperform Bitcoin, with no compelling narratives driving retail interest. The 2024 US midterm election cycle adds political risk that historically coincides with market peaks and corrections. Institutional players like BlackRock now dominate crypto influence, overshadowing retail figures. The market awaits new narratives and stronger capital flows to break out of the current bear market.
Note: This summary is for informational purposes only and does not constitute financial advice.
Category
Finance
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