Fidelity Favors Fundamentals
Hi Everyone,
I’m on the road today, so unfortunately no audio.
I want to point you toward a thread (below) from Jurrien Timmer, who is director of global macro at Fidelity.
Timmer, consistently shares some of the most interesting charts and perspectives and this one is no different.
It has been a bad trip for crypto. The GS Bitcoin-sensitive equity basket already took out its 2021 lows—not a great sign. I thought $40k would be a bottom, based on my demand model and on-chain dynamics (via the dormancy flow indicator), but here we are at $35k. 🧵
Bitcoin often overshoots the upside and downside, though, so maybe that’s all that is happening here. Here is the “entity-adjusted dormancy flow,” which measures the transfer from weak hands to strong hands. It is in the range that has stopped every previous decline. /2
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And here is Bitcoin relative to my demand model. It has overshot many times in the past, sometimes by a little and sometimes by a lot. Based on these fundamentals, the lower Bitcoin falls, the more undervalued it will become on a fundamental basis. /3
The Bitcoin-to-gold ratio is now back in the support zone and is 1.51 standard deviations from its trend-line. /4
Bitcoin clearly got caught in the liquidity storm that is now sweeping the more-speculative side of the stock market. But unlike non-profitable tech stocks, Bitcoin has a fundamental underpinning that will likely get more compelling over time. /6
Now that the liquidity tide is going back out, the fundamentals should matter more than ever in 2022. /END
Hope you’re having a great day, and i will speak with you tomorrow.
AK