The Penalyst - February Market Outlook

One must once again wonder if Pennings CIO, Timothy Hellberg, has cracked out the good ol’ crystal ball as the price of Bitcoin follows an already highlighted path into the mid of Q1. On the 30th of January, we outlined in that edition of The Penalyst how we saw the 9th of February as the potential ideal entry point for longs, with the target of 52k for BTC. Although the rally started a couple of days earlier than anticipated, BTC went on to rally over +14% from the 9th, currently at the time of writing putting in a high just below 52k.

As predicted in the last report, ETF inflows are seeing an extensive ramp-up in inflows, especially after the Google ads approvals and the subsequent Super Bowl, although to our surprise the rumors proved to be wrong, with zero ETF ads showcased during the big NFL event.

We have a new market dynamic that is making BTC an easier asset to trade at the moment than ETH, and that is the fact that the futures funding rate is indicating that the majority of BTC volume is going through spot, rather than derivatives (although we do have couple chunky option expiries into the end of Q1 and into April), and a such one can conclude it is currently the ETF flows that seem to be the largest catalyst of BTC price movement. And these flows are currently moving in the same direction as BTC, up.

BTC OR ETH#

There is still room for BTC to run. Although greed/fear readings are moving well into overbought territories (greed), other supporting indicators are still suggesting further upside is possible.If you’ve been in the financial markets for a long time, you know that these types of greed and fear readings can take time to materialize and are not worth much by themselves. So we can conclude that we need to see some significant downturn in BTC price for this bull rally to prove over. The 48500 are providing the line in the sand.

Last report we gave our readers a direct insight into PCMs approach to the current levels, highlighting the breach of the 43k level as an area of interest to start building into longs, targeting the 50k area. Something we did, with great success.

However, we currently don’t hold any short-term BTC exposure in our options portfolio, whilst keeping in-the-money exposure in ETH, and here is why:

As we highlighted in the previous report, there was a case, although not as strong but still possible, for BTC to move lower into mid-Q1. As a potential hedge for this, we bought calls in ETH, expiry end Feb, with the reasoning that if BTC interest would cool down, and ETFs would struggle with flows in Q1, we could very well see the market shift focus to ETH, trying to front run the inevitable future approval of Ethereum ETFs.

This did however work out well in the other direction too, with ETH benefiting generally from the current bull markets, following BTC higher.

So as the headline entails, BTC or ETH? At PCM we wouldn’t want to enter new BTC positions at these levels, but on a pullback, it is back on the cards. ETH however is knocking right on the door of a major level at the time of writing this. A break of 2750 is significant for ETH, and if done with conviction, we would expect ETH to make a rather violent push into the 3400 mark in a short period of time.

It’s a high-risk, high-reward play, as the level is key and needs to be pushed through with conviction but since we already have long exposure to the level, it makes sense for PCM to keep holding for the time being.

Furthermore, one of our mathematical models currently in RnD, generated a long signal on the 7th of February for ETH. This model has an average win rate of 87.5% historically, so it can be of great guidance for PCM's work.

CONCLUSION#

Our models are working out very, very well so far in 2024 making these reports undisputed evidence of our accuracy in managing the digital asset markets. The one thing of note we would like to highlight though, is the same area of some degree of hesitance is the fact that everything seems to be moving at a faster pace than we anticipated. And it is still too early to determine if our complete 2024 roadmap needs to be compressed or if this is an isolated occurrence for Q1.

Time will tell.

*Disclaimer: This article is not financial or investment advice, nor should it be perceived as such. Penning Group, it's subsidiary Penning Capital Management A/S, and the author (Timothy Hellberg) shall not be held accountable for any misinterpreted information by the reader. If you are interested in learning more about investing in the DeFi space, please get in touch with us.