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The lack or absence of symmetry, or a state where two halves, sides, or parts are not equal or balanced.
Understanding asymmetric opportunities is one of the most important concepts for investors to grasp.
We want the potential reward to outweigh the risk, ideally with a high probability of the trade working out. Such opportunities are scarce. Sometimes the risk is hidden, which makes the apparent reward less attractive in hindsight. Sometimes the upside is enormous, but the chance of getting there is small.
At The Bitcoin Layer, we think bitcoin offers a unique opportunity. Our thesis is that people and machines will adopt a superior form of money over time, drawing capital toward it. Gold’s above-ground stock is worth roughly $30 trillion. If bitcoin reached a comparable valuation, that would put it around $1.5 million per coin, against roughly $74,000 today.
The ultimate downside is that bitcoin fails and goes to zero. The upside is that it succeeds and becomes larger than gold. The gold comparison alone represents roughly 20 times today’s price. That is the asymmetry we see.
With the growing debt burdens of governments that issue fiat money, and gold unable to upgrade its own monetary properties, we think that adoption is likely over time.
“Fiat dilution is bound to the discretionary spending by misaligned, incentivized politicians. Gold dilution is bound by how far it’s been hidden in the ground; Bitcoin dilution is bound by time.”
Men can influence politicians, men can influence the speed and efficiency of which ground is being dug up, but men can’t influence time.
Nik has kept us up to date with his flash updates and videos on last week’s financial markets, so there’s little need for me to cover the same ground. Let’s look at how bitcoin is behaving through it all.
One-Minute Summary of Johan’s View with TL;DR...
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Each week, we analyze the three most critical market signals impacting Bitcoin and macro assets, delivering institutional-grade insights through data-driven charts and analysis.
Today we’ll cover:
Bitcoin ETF Flows Have Shifted to Strong Outflows
Corporate Bitcoin Buying Rebounds
Bitcoin Is Approaching a Critical Test
Bitcoin’s rebound above $80K was short-lived. With U.S. technology stocks selling off sharply and investors reducing their exposure to risk, Bitcoin is once again under pressure.
This latest selloff comes at a particularly vulnerable moment for Bitcoin, with its recovery already struggling to maintain momentum.
In case you missed it, here are the other topics we covered this week:
Bitcoin ETFs have entered a strong-outflow regime while price sits just 7% above its 200-day moving average. Can corporate buying cushion the decline, or is the recovery approaching its decisive test? Upgrade to paid to see our decision.
Should we be surprised that Bitcoin’s rebound above $80K didn’t hold? Not really.
Thursday’s selloff started on Wall Street, where the Nasdaq plunged 5.5%, led by AI stocks. The Democrats’ victory in the midterm elections has raised concerns that tighter regulations could slow the expansion of AI infrastructure, adding to existing worries about the returns on all that investment.
And when investors start reducing their exposure to risk, Bitcoin tends to get caught in the selling. Historically, when the Nasdaq falls more than 1.5% in a day, Bitcoin also declines roughly 75% of the time.
But Bitcoin was already vulnerable before Thursday’s selloff.
As we pointed out earlier this week, ETF flows had shifted from a neutral regime into strong outflows. Over the last five trading sessions, US spot Bitcoin ETFs have recorded approximately $1.5 billion in net outflows.
Historically, this strong-outflow regime has been associated with a higher probability of negative daily returns for Bitcoin.
And that’s the concern. Even when the immediate pressure from the equity market subsides, Bitcoin will still have to contend with weakening ETF demand. As long as those outflows persist, the market is going to have a hard time sustaining a recovery.
After strong ETF inflows supported Bitcoin’s recovery in August and September, the market has returned to an outflow regime. Historically, these conditions have been associated with a higher probability of negative daily returns, leaving Bitcoin exposed to further downside pressure.
Corporate Bitcoin Buying Rebounds, but Overall Demand Weakens
With ETF investors pulling money out of Bitcoin, can we at least find some comfort in the fact that public companies are buying again?
After a very quiet summer, corporate Bitcoin purchases picked up considerably in October. Public companies added roughly 20K BTC to their treasuries, more than enough to compensate for the approximately 6K BTC withdrawn from spot ETFs during the month.
But there’s a catch.
In September, ETFs and public companies together accumulated roughly 36,000 BTC. In October, that figure dropped to around 14,000 BTC. So even with the recovery in corporate purchases, net accumulation across these two channels fell by about 60%.
And there’s another reason why this matters. Historically, ETF flows have had a stronger relationship with Bitcoin’s price changes per BTC than public-company accumulation. That means we can’t simply assume that one BTC purchased by a company provides the same price support as one BTC flowing into an ETF.
Corporate buying is helping absorb some of the selling, but it hasn’t restored the demand we had just a month earlier. With ETF outflows accelerating again in November, that leaves Bitcoin in a vulnerable position.
Public companies added roughly 20K BTC in October, more than offsetting the month’s ETF outflows. However, combined net accumulation across ETFs and corporate treasuries was still about 60% lower than in September. Corporate buying is providing some support, but the loss of ETF demand remains significant.
Bitcoin Is Approaching a Critical Test of Its 200-Day Average
The third warning sign is that Bitcoin is getting uncomfortably close to its 200-day moving average.
After losing $80K, Bitcoin is now trading just 7% above that level. And as we’ve seen repeatedly, that’s the kind of distance Bitcoin can cover in just one or two particularly volatile trading sessions.
The 200-day moving average is an important reference for Bitcoin’s longer-term trend. We spent much of this year trading below it before finally reclaiming it during the recovery in August.
Now that recovery is facing another serious test.
A brief move below the average wouldn’t necessarily be decisive. But if Bitcoin breaks below it and fails to recover, we would have to call a complete failure of the recovery.
And given the deterioration in ETF demand and the pressure coming from broader financial markets, we think the risk of that happening is high.
Bitcoin is trading at roughly 1.07 times its 200-day moving average, leaving only a 7% cushion before another test of its long-term trend. A sustained break below that level would put the recovery that began in August into question and increase the risk of a return to the previous downtrend.
That’s it for today. Thanks for reading.
Cheers,
Nick
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