In our previous update (see here), we showed that a 98- to 112-day forward offset in Global M2 Money Supply (GMS) aligned well with Bitcoin’s (BTC) price movement and foresees a rally from May to at least August, aligning with our Elliott Wave (EW) Principle, count for BTC. See Figure 1 below.
Figure 1. Bitcoin’s price since May 2021 (black), with our preferred Elliott Wave count, and the Global M2 Money Supply forward offset by 108 days (blue).
Continuing with our weight-of-the-evidence approach, which makes our work unique and robust, unlike using the EW in a vacuum, as that leads to too many outcomes, we would like to assess the Commitment of Traders (COT) reports published every Friday by the Commodity Futures Trading Commission (CFTC). Namely, COT can reveal how “smart money” is positioning itself.
“Smart money” is perceived as invested by those with a fuller understanding of the markets, often due to information that a regular investor cannot access. Smart money is considered experienced, well-informed, and “in the know.” Smart money also refers to the collective force of big money, think commercial traders, that can move markets.
A recent article by Tom McClellan from “McClellan Financial Publications” showed that non-commercial traders were the most net-long Bitcoin since September 2023. See Figure 2 below*. Interestingly, McClellan points out that “…it works differently in Bitcoin, where the commercial category is not much of a factor. In Bitcoin futures, the non-commercials [trader (NCT)] are usually the smart money, especially when they move to a large, skewed position as a group, either net long or net short.”
Figure 2. Bitcoin Future’s price (black) and Non-commercial Traders Positioning (red) since May 2021.
Like GMS, we find good alignment with non-commercial traders’ Bitcoin Futures positioning and our EW count, which increases our confidence in Bitcoin’s next move. Back in September 2023, NCTs were just a little bit more long than currently, but it marked a great low and the start of a powerful rally: the 3rd of a 3rd wave. Besides, it is worth noting that the NCT had acquired a significant net short position just before the November 2024 elections, which played out well given the current three-month-long ~33% correction.
However, it took over two months before they were proven right, and thus, this data does not tell us when a move will happen or how far and long it will take. We need the EW and, for example, a forward offset GMS for that. Besides, we now have an additional line of evidence pointing towards a rally instead of a crash contingent on Bitcoin holding above at least $69,000.
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Used with permission from McClellan Financial Publications