Bitcoin Target Upgraded

Daily Plan 1.12.23

Hey folks-

What an interesting session! The levels from last night were 4830/4850 and this was coincidentally high of the day before a pretty severe sell off.

The sell off did stop and reverse. Any guess where it stopped?

At the weekly support level.

This is why its key to mark these levels down on the DOM or chart and see the market action around it.

Ultimately the market did overpower the 4790 level and that was the support for rest of the session to close the day near 4815.

The highlight of the day was the master dud that Bitcoin turned out to be. It did briefly rally but then gave up its gains to close near the levels seen yesterday, before the ETF announcement.

Overnight there were wild levels being bandied around for this BTC, anywhere ranging from a modest 250K to a fairly optimistic 1.5 million dollars, a few years out.

Are these targets plausible? Let us for a second assume the Bitcoin came out of age around 2018-2020 and let us use the base line as 10000 dollars. I am using this as the baseline, to compare this with similar names, like TSLA, which was near 0 for a long time and then just exploded on the scene. For reference, let us take $50 as a TSLA baseline level.

Both are up about 5X from their bases. That is about 500% gain. TSLA and Bitcoin are now mainstream, which means most of the investing public is aware of their existence.

Both TSLA and Bitcoin have very high beta, which basically means they are very correlated to each other as well as the general market. With these assumptions, I am proposing a fairly linear gains (and losses) in both of them, when compared with the general market.

In other words for Bitcoin to trade 250K by 2030, I would think the SPX index needs to trade about 25000 by 2030. These are possible but unlikely.

I frankly do not know where SPX will trade by 2030, however, I believe if it were to trade down to 3400-3500, that could be a very good support. A long term support.

Based on the close today, that represents about a 30-35% shave.

Last few days to get 4% off before rate hikes. Discount never ends as long as you don’t resubscribe.

By that extension, I think 27-30K could be a very good level in Bitcoin as support, in this particular cycle. Can it double from that base? I think so. That probably puts a 70K or so target in Bitcoin for me personally, I am assuming that the BETA correlation remains the same, with all else being equal.

If you are making a bet of 100K sometime this year or the next, then you are also making a bet that the SPX can trade 7500-8000 in next year or two. Merits of such thinking are beyond the scope of this blog.

My best case for Bitcoin in next year or two will be about 52000-54000. It is around 47K at time of this post. I would not say all this, if the Bitcoin BETA was very low. The fact that it is extremely high, and there are other negative factors for the general index itself present in the now moment, makes me think this way.

While Bitcoin really did not go anywhere, the brunt of the crypto carnage today was felt by the mining stocks like MARA and RIOT.

I have shared in my weekly plan how a Bitcoin ETF could be very negative for these miners. And today showed just how much. At one point this stock was down about 35% from its intraday peak.

Note that I have not always been bearish on MARA. Recently I have been a MARA bull at $3, $10 and $20. I have recently shared resistance on MARA at around 30, which has held every time we approach this level.

TM

I shared a bullish case on TM around 130 levels last year. It is now pushing up above 190. Toyota had an excellent strategy of developing more hybrid cars last few years rather than go all in on the EV bandwagon. GM, F, Stellantis and even European car makers went all in on the EV and are now not able to do well. Ford is barely selling any EV at all.

I think TM could push higher above 200 into 220 as technicals look quite strong on Toyota.

AVGO

AVGO pushed higher into 1090 today and this is a top order flow stock which I shared here around 600 last year. I like this action in AVGO and can see it push past into 1150-1200 as shared in weekly plan. I do think this stock could remain supported on dips in general market.

MARA

With MARA, I think there is some value in the 18 level if it trades. I think if this level trades on weakness, this could be supported for a move back into 24-25. It is 22 now.

My levels for tomorrow

The main context despite a bad CPI and auction is that the mega caps like NVDA are in driver’s seat. I need to see some meaningful weakness in NVDA before I think it becomes a contagion for SPX.

Right now yes the rates are high, yes there is some drama about rate decision in March, but I think these mega caps do not have any debt and this is one reason why they are quite well robust.

With this said, the key level tomorrow remains 4790-4800.

Scenario 1: I expect 4790 level to be support, for a move back into 4815-4820.

Scenario 2: The bears need to break the weekly support at 4770 to see another bout of volatility. These closes above 4770-4790 are not helping at the moment.

Scenario 3: On the upside, this level around 4850 remains an important resistance which needs to be overcome. This is an important level I shared in my annual plan, before we sold down into 4600s.

~ tic toc

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