Hi YXI friends,

Until Sunday, Crypto endured a brutal week of selloffs last week.

While Bitcoin initially held onto its well-tested support of $91k on Monday February 24, it fell through the $90k mark on Tuesday and again the $80k mark on Friday. There was a very real sense of panic during the week, with $1 billion of liquidation almost everyday for five days.

Then everything changed with a single, or rather, two posts from President Trump on Truth Social on Sunday.

The first post greenlit a US Crypto Reserve, and specifically announced the inclusion of XRP, SOL, and ADA. Within seconds, SOL was up 10%, XRP 20%, and ADA 30%.

BTC and ETH initially only moved 2%, because strangely, Trump’s first post did not mention them.

However, 2 hours later, likely prompted by his kids, Trump followed up with the mention of BTC, ETH and “Other valuable” cryptos. BTC and ETH did move up into double digit territory overnight, before retracing some.

To settle the scores 12 hours since Trump’s posts, ADA is the runaway winner at +63% due to the slightly surprising nature of its inclusion. XRP is up 24%. SOL is up 20%. ETH moved up 10%, while BTC is up 8%.

Table of Contents

• 1. Something For Both Bulls And Bears

• 2. A Critical Lesson From The Latest Crash

• 3. Bitcoin Flows & Technical Analysis

• 4. Ether, Solana, Ripple

  • Ether ETH

  • Solana SOL

  • Ripple XRP

• Coinbase (COIN) and Strategy (MSTR)

  • Coinbase COIN

  • Strategy (MSTR)

DISCLAIMER: This newsletter is strictly educational. Any information or analysis in this note is not an offer to sell or the solicitation of an offer to buy any securities. Nothing in this note is intended to be investment advice and nor should it be relied upon to make investment decisions. Any opinions, analyses, or probabilities expressed in this note are those of the author as of the note's date of publication and are subject to change without notice.

1. Something For Both Bulls And Bears

There is something for both the crypto bulls and bears to chew on in this move. Why?

Crypto antagonists will point out that the crypto bear market is only being saved by the US President “pumping” it, otherwise BTC et al would continue their free fall to zero. My rebuttal is that Gold prices have been rocketing because of the aggressive purchases by the emerging market central banks, which is conceptually no different. Is it better that China’s central bank says that they want to buy more Gold and Trump saying the US wants to buy more crypto?

Bitcoin maximalists have long argued that Bitcoin is the only “property” or “hard money” in crypto. They may be disappointed that other cryptocurrencies somehow managed to make the list. I think over time, the market will trend towards a consensus on this topic regardless of the ongoing “intellectual” debate. Whichever crypto takes the winning spot, it needs to ride out multiple market cycles with a global appeal, something that requires the test of time (multiple decades).

Finally, while the crypto bulls can breathe a sigh of relief, they should not get too carried away just yet. The technicalities and finer details are yet to be decided - there are lots of political and legal hurdles before we get to the actual establishment of the Strategic Reserve. We still have no idea the size, proportions, and timelines of the strategic allocations at this stage.

2. A Critical Lesson From The Latest Crash

BTCUSD vs G5 M2 Money Supply (11-week lag)

We use the G5 (US, China, EU, Japan, UK) M2 Money Supply to approximate the changing dynamics of global liquidity. The true comprehensive set of measures is broader, including other countries M2s, high quality bond collaterals, and FX swaps, but what we track already is a great proxy without overcomplicating the picture.

We observe that Bitcoin moves directionally in line with the rise and fall of the G5 M2 Money Supply denominated in US Dollars, but with an 11-week lag. The rise in G5 M2 between July and October drove a big rally for Bitcoin between October and December, from $60k to $107k.

The subsequent decline in G5 M2 caused by a stronger USD has put a pause on Bitcoin’s advance, seeing it moving more or less sideways in the $90k-$105k band.

Here comes the important mistake and therefore lesson from the latest crash.

Because Bitcoin had held up quite well in the liquidity decline prior to last week, my previous expectation was for Bitcoin to continue holding the $91k support and possibly taking off in late February, as the first wave of liquidity decline came to an end 11 weeks ago.

This expectation proved to be naive. This is something I must admit in order to move forward.

While G5 M2 provides great insights into the general directional moves of Bitcoin, the the relationship between the magnitudes of their moves is dynamic. At times, Bitcoin is less sensitive to the changes in liquidity, but at other times, its sensitivity may increase due to the wider macro context in investors’ preferences towards bonds or risk assets.

Moreover, the 11-week lag is not exact. As more investors become aware of this relationship, there is a greater probability of front running, which will eventually shorten this lag or even squeeze out the relationship.

What now?

For subsequent next 6 weeks, G5 M2 levels dropped again after a brief rebound. Directionally, this remains a headwind for Bitcoin likely until mid-April.

3. Bitcoin Flows & Technical Analysis

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