Avoid the bear trap: Expect the next rally in the second half of 2024

Ultimately, I think we have another 4-8 weeks of range-bound price action. Realistically, in H2 (the second half of 2024), we can see crypto begin to make a really nice move higher. We will likely see BTC north of $100k by the time of the U.S. election and potentially north of $150k in Q1/Q2 2025. 

Don't fumble the opportunity over the next 12 months. 

 LFG!!!!

TLDR

• Geopolitical tensions in the Middle East appear to have stabilised, reducing short-term risks for the markets.
• Strong economic data, including robust retail sales and employment, has reduced the chances of Fed interest rate cuts in 2024.
• Massive fiscal stimulus from the Treasury and potential changes to the Fed's QT program set the stage for a crypto bull run in the second half of 2024 leading up to the U.S. election.
• Bitcoin is in a major bullish flag pattern and could break out to reach$80,000 by June/July 2024, potentially reaching over $150,000 by early 2025.
• We are cautiously adding to our Solana (SOL) position, seeing it as a good buying opportunity.
• Despite the recent volatility, we continue to maintain our meme coin holdings.

Disclaimer: This is not financial or investment advice. You are responsible for any capital-related decisions you make, and only you are accountable for the results. "One Glance" by Cryptonary sometimes uses the RR trading tool to help you quickly understand our analysis. These are not signals, and they are not financial advice.

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Geopolitical situation 

Monday was our prior update, which was coming off the back of the Iranian missiles hitting Israeli military sites last Saturday. 

Since then, we've had a lot of posing from both sides, saying they have new missiles and are ready to strike at any moment. It seems to me (Tom) that both sides have done their respective strikes; they've been able to flex their muscles and save face, and now they're showing off their armoury as a deterrent for the other not to strike. 

Alongside this, there is likely to be huge political pressure, particularly from Biden, on Netanyahu not to escalate the situation. We may still see further escalation, but in the short and medium term, I see the most likely outcome as a stand-off. This should be more positive for the markets, although we're unlikely to see a full risk-on environment while caution over this situation remains. 

Strong Data and its Inflationary Effects: 

Over the past two weeks, we've seen Retail Sales and Inflation data come in hotter than expected. Alongside this, the Employment data has shown considerable strength. 

These developments have priced a June Interest Rate cut out of the market, and now a July cut also looks highly unlikely, although the market is pricing in a 90% chance that there will be a rate cut in September. 

Since the end of last year, I (Tom) have thought that we would get 1-2 rate cuts this year despite the market initially pricing in 7. I now think we get one at a maximum, and it's 50/50 whether we get one this year or not—it could be September or December. 

How can you cut interest rates in a growing economy with a strong labour market and inflation showing signs of bottoming and beginning to rise? You can't. 

But, as I've said above, the economy is growing, the labour market is strong, and as long as inflation can be somewhat contained, the crypto market and equities can continue to do well. This is especially true if a huge fiscal stimulus is to come in the coming month or two, going into the election. 

Let's dive into that some more.

Fiscal dominance to potentially drive risk assets higher in H2 

Over the last two years, the Treasury and Treasury Secretary, Janet Yellen, has drawn down on the Reverse Repo Facility. The move has resulted in a huge inflow of liquidity into the markets. The RRP was at $2.3tn, now at $350b. So, it's approximately $1.9tn drawn down, which has inflowed to markets. 

This is a huge liquidity inflow. Remember, Yellen is a Democrat and wants to give Biden the best chance possible of being re-elected, and an upwards-moving stock market (and other markets) is positive for Biden and the Democrats. 

So, Yellen will now look to use the Treasury General Account to draw down on as the RRP depletes to 0. The TGA currently has $950b in it. The outflow of $950b from the TGA and into markets would be hugely stimulative and massively positive for liquidity running into the election. 

Alongside this, the Fed can try to cut Interest Rates once before the election, maybe in July, but most likely in September—assuming the data allows it to. 

But, if not, the Fed can also help in other ways. They can announce the beginning of a tapering in QT - running off fewer assets from their Balance Sheet each month. Currently, the Fed runs off approximately $80b of assets each month, which is an $80b drain on liquidity. 

However, if the Fed announce a tapering of QT, this may reduce the run-off in Balance Sheet assets to only $50b-$60b a month. So, $20b is better off on the liquidity front for markets. 

Overall, the above sets up what's likely to be a positive second half of 2024 for risk assets, assuming inflation doesn't rise significantly.

Portfolio actions

We will deliver on-chain analysis in another update, but from that perspective; we do look to be very mid-cycle here - as I stated in the Monthly Update - please give that a read; there is huge alpha in there. 

BTC

From a macro perspective, we may be in for a rocky next six weeks or so, although I expect prices to remain somewhat range-bound. I don't expect Bitcoin to lose the mid $ 50k's and think even something like $56k/$57k can hold, although we have filled a Yellow Buy Box on Bitcoin at $59k, which I wouldn't be surprised to see be the local bottom. 

Ultimately, I (Tom) think we'll look back on this current period as a good buying opportunity. This is not the time to go gun-ho with leverage, but I think we're seeing some good buying opportunities, particularly when I look at plays like Solana. 

For this reason, I am lightly adding to my SOL bags at these prices, and I am not looking to sell anything. I am holding fully. Bitcoin remains in its major bull flag pattern, and we could see a breakout in 4-6 weeks, which would likely send us to $80k in June/July. 

We were one of the first to call BTC as being in a larger bull flag, and it seems to be playing out that way so far. It's all sweet.

Memes 

A quick one on memes. 

Yes, in a risk-off period, they're going to take a hit. But we know this because their orderbooks are thin, so there isn't much liquidity, so we shouldn't be surprised. It's probably relatively futile to do TA on the meme plays as, again, it's mostly down to the risk-on/risk-off environment and liquidity in the orderbooks. 

Even though some are down substantially, I continue to be fine with holding memes. I will continue to hold them, and I have no plans to sell them anytime soon, although I appreciate that they may take longer to recover. 

But I still expect a major upside in the coming 1-2 quarters.