Analysis Summary

After the capitulation move down in early November 2022, typical of the late stages of a bear market and alluded to in our last report, Bitcoin has accumulated slowly then regained bullish momentum, courtesy of the 18 month nominal low. Anticipated for several months, this 18 month component low is now a fascinating element for us to study and trade as we examine the status of the underlying trend. The first move up doesn’t tell us too much, aside from the fact the 18 month low has most probably occurred and amplitude has returned to the shorter components. What will be more telling is the move from the next 20 week nominal low (due late Feb / early March) and the peak of the 40 week component, due in April.

Price is near our interim target of 25000, specified in the last report and close to the 18 month FLD (shown on long term Sentient Trader chart below) in terms of time. Time frequency analysis and Sentient Trader point to a peak of the 80 day component and perhaps the 20 week component over the next week or two. During this peaking process, which should be relatively sideways given the underlying trend from the recently troughed 18 month component, price will likely cross the 18 month FLD and establish a target to the upside. That target is likely to be around the 30-35k mark at this stage. The 18 month component wave is due to peak in June 2023, at the current wavelength. The peak of price may well be earlier. The discrepancy between the notional peak of the detected periodic component wave and the actual price peak gives us information about the underlying trend.

We explored more into the underlying trend of Bitcoin in our 18th October Report, which is well worth a read:

Sigma-L

Bitcoin: Hurst Cycles - 18th October 2022

Tools required: Nominal Model | FLD | FLD Trading Strategy | FLD Trading Strategy (Advanced) | Principle of Nominality | Underlying Trend Analysis Summary Our risk buy target of 24000 specified in the last report into Bitcoin was approached but not met, resistance at the 80 day FLD proved to be fleeting if at all, such is the nature of a bear market rally. What was consistent, however, was the accuracy of the trough timing, likely to be the 80 day nominal low anticipated in the late August report and shown below at the short term chart. The low likely occurred 7th September and was almost certaintly a low of at least 40 day magnitude…

5 months ago · 2 likes · David F

A peak in price that is early relative to the wave peak indicates a bearish underlying trend is present.

A much stronger move up from the 20 week nominal component trough, due late February / early March, will indicate the recent low was possibly of larger magnitude. This is the outlier scenario.

There is a FLD target projection for the 40 week wave at 26684 which has not yet been met. Both 80 day and 20 week FLD cross projection targets have been easily met and exceeded.

At the shorter term amplitude has made a welcome return to the component around 60 days in wavelength, notionally the 80 day ‘nominal’ wave. This modulation should be maintained as we progress into the peak of the 40 week component and will help us time decisions more precisely.

Phasing Analysis

Long Term

Components including and longer than the 18 month nominal wave

The 18 month component back in mid October, running around 15 month average wavelength.

Price will cross the 18 month FLD in due course and set the upside target for the component. It is likely to be in the region of 30-35k on initial impressions from this first 20 week component.

Medium Term

Components between the 20 week to 18 month nominal wave

The peak of the 40 week component is one to keep an eye on. Shown here to be peaking in early April, the *actual* *price* peak will betray the underlying trend status.

Short Term

Components shorter than the 20 week nominal wave

The 80 day ‘nominal’ component in BTCUSD, starting to once again gain clarity through renewed amplitude.

The 80 day ‘nominal’ component in a composite of BTCUSD, ETHUSD and LTCUSD further clarifies this component. A candidate for the 40 day ‘nominal’ wave is also detected and shown by the slightly fainter green area on the time frequency analysis plot around 37 days.

Trading Strategy

Interaction Status

Interactions and price in the FLD Trading Strategy (Advanced). This looks at an idealised 40 week cycle and an array of 3 FLD signal cycles. We apply the instrument’s phasing to the model and arrive at an overall summary for the interactions with the 20 day FLD, current and forthcoming.

Sigma-L recommendation: No Trade
Entry: n/a
Stop: n/a
Target: n/a
Reference 20 Day FLD Interaction: n/a
Underlying 40 Day FLD Status: n/a
Underlying 80 Day FLD Status: n/a

Traders that held long from the 18 month FLD entry may wish to take some profits here given a peak of the 20 week component may be near. The interim price target of 25000 has been approached to a good degree and time targets are indicating a top of at least 40 day magnitude.

The next low in late February/early March, phased to be a 20 week nominal low, may well be quite bullish and approach the 30k-35k mark to finish off the first stage of the current 18 month component. The 40 week component is due to peak in April, assuming a neutral underlying trend.

FLD Settings

If you do not have the use of Sentient Trader use these settings to plot common FLDs in your trading software (daily scale) to more easily follow trading signals and strategy from Sigma-L.
Make sure to account for non-trading days if your broker omits them in the data feed (weekends, for example). The below offsets are given with no added calculation for non-trading days.
80 day nominal: 60.5 days | 30 day FLD offset
40 day nominal: 30 days | 15 day FLD offset
20 day nominal: 15 days | 8 day FLD offset
10 day nominal: 7.5 days | 4 day FLD offset

Correlated Exposure

A non exhaustive list of correlated instruments for consideration

ProShares Bitcoin Strategy ETF
Valkyrie Bitcoin Strategy ETF
VanEck Bitcoin Strategy ETF
Global X Blockchain & Bitcoin Strategy ETF
Global X Blockchain ETF
Siren Nasdaq NexGen Economy ETF
Bitwise Crypto Industry Innovators ETF
First Trust SkyBridge Crypto Industry and Digital Economy ETF

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DISCLAIMER: This website/newsletter and the charts/projections contained within it are intended for educational purposes only. Results and projections are hypothetical. We accept no liability for any losses incurred as a result of assertions made due to the information contained within Sigma-L. This report is not intended to instruct investment or purchase of any financial instrument, derivative or asset connected to the information conveyed in the report. Trade and invest at your own risk.

Bitcoin Market Cycles - 30th January 2023