Research from Adamant Capital: Bitcoin in Heavy Accumulation

There are lots of scammers and bullshit artists in Bitcoin and the crypto-economy. There are also many great people, brilliant people, and deep thinkers. One that's in this latter category is Tuur Demeester, a Belgian long-time Bitcoiner and founder of Adamant Capital. Tuur is @TuurDemeester on Twitter.

His firm Adamant came out with a research report indicating that whales and institutions now are going long Bitcoin and are in a 'heavy accumulation' stage. You can get a copy of this report from their website or at this link: 

Here is the tweet with the issue of the report on Bitcoin Accumulation and the places around the world that have downloaded it already.

Let's look at the report in more detail.

New Metric for Sentiment

In markets, sentiment is important. It's how people think about an asset at a point in time and how that reflects in the charts. Adamant is trying to measure sentiment in this report and they decided on a new metric called Unrealized P&L (Report, p.3). This unrealized profit or loss is measured by the dollar value of Bitcoin from the last time it moved. In other words, if you keep your Bitcoin in a wallet for a year and don't move it, then they are using last year's price. This number represents what Adamant calls 'Realized Capitalization' (p.3). Subtracting the realized from the market cap (price x # of BTC available) then this number is the Unrealized P&L.

At the moment, this Unrealized P&L is a profit of $13 billion (p.3), leaving people feeling hopeful about Bitcoin.  It also means they've ridden out the period where they might have sold and taken their losses. Perhaps more interesting is to see the chart of this Unrealized P&L over time to see times of excessive greed or fear, what the report calls capitulation (p.4). The last time capitulation was as low as in Q1 of 2019 was in early 2015 during a bear market then too. Capitulation is the point where selling is dominant and it seems like there are no buyers.

But now we have moved up the chart to Hope as people are buying.

Drawdown Matches Previous Bear Markets

This is probably my favorite chart in the report. On page 6, it shows how drawdown (or reduction in your investment) of this bear market at -84% matches previous drawdowns of -92% in 2011 and -85% in 2014-15.

I like seeing the contrast from peak to the trough (hi to low) of 50921% to -85%. What a roller coaster ride sometimes. But the crazy thing is while prices are declining so much (it looks like November 2018 was the low of this bear market) volatility was dropping too. 60-day volatility dropped to its lowest point in 3 years, leading Adamant to declare that most retail investors (guys and gals like us) are out of the market and only 'agnostic traders and long term value investors' remain in the market (p.8).

In other words, speculators are out and HODLers are in. Are you a HODLer?

Read the Risk Analysis

The risk analysis of what could cut this market short of being a full-blown bull market is very good and is something you should read to understand the current risks in the market today (p.8-11). These risks are:

  1. Bitcoin exchange hacks or failures (still a primary point of entry into Bitcoin for most people)
  2. Macro-economic downturn (since we don't really know yet if these assets will drop with a recession or not)
  3. Secondary Bitcoin mining capitulation (miners could use their influence and ability to sell lots of BTC that they mine to halt a bull market. The report has more in-depth analysis here)
  4. Other factors (sure that's a catch-all but they specifically mention the risks of litigation and compliance and regulatory)

Other Bullish Fundamental Drivers

A few other things they list in the report that will help Bitcoin's price are its financialization, which means it's gaining acceptance as a financial tool for institutions as futures markets, CNBC reporting, and custody for institutions starts happening. Another is demographic: Millennials. Millennials love Bitcoin and they hate banks. Adamant expects, and I agree, that more millennials will buy more Bitcoin now and in the future.

So the bottom line of Adamant's research report here is that:

  • The bottom is already in on this market
  • 'Weak hand' speculators are out and 'Strong hand' hodlers and institutions are in or are buying more
  • Millennials will help the market grow
  • People will ride their Unrealized gains for a while now that the worst of this bear market is over
  • after a breakout above $6500, we will be in a full-scale bull market

So how about you? are you hodling? buying? selling in this current market?

About the author

Stu Stu Lustman, the author of this post, is a Credit Analyst by trade trying to bring Commercial Credit Analysis techniques to the world of Peer to Peer Lending. Check me out on Twitter, LinkedIn and Google+

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