Transcription
So what has been the biggest bugaboo in as it relates to Bitcoin or the worry that we've heard about more than anything else in the last few weeks? Institutions have been waiting for this 4-year uh down cycle, which is just ridiculous. I think we're going to see a pretty serious drop.
This market analysis features a major update from Kathy Wood, who has just shared her latest outlook on the current state of the Bitcoin market. After the massive draw down over the past few days, she's taken a close look at what's really happening, breaking down why this drop is occurring, what forces are pushing prices lower, what may be suppressing momentum, and what to expect in the coming months as conditions continue to shift. She'll also present charts to support her thesis and explain the bigger picture. So, let's take a moment to hear what she has to say and understand where this market could be heading next.
The last few weeks have been uh you know lots of stories about quantum computing and I would say uh the the large shift in Bitcoin uh the OGs selling uh or just shifting uh wallets to more quantum resistant wallets. Um, so I think that's really uh caused a lot of concern and uh here's Michael Sailor's uh answer or I mean he was very reasonable last night in his discussion around quantum. He doesn't think it's going to be an issue for 10 years or more. Uh but he said, "Here's what we're doing uh in terms of our commitment to Bitcoin security." Um and and so you can see some of those um those moves.
Now, I don't want to make light of it. Uh I do think it has caused movement uh uh among of Bitcoin uh between wallets, between and among wallets. Are they leaving the crypto ecosystem? Some say yes, maybe they're diversifying into other crypto assets, as um as the DeFi ecosystem evolves here. Uh I don't know how likely that is because these are Bitcoin OGs. They've been there uh forever and um so we'll see. Uh maybe they're diversifying because they were hodddlers and now they're 10 15 years older and they have families and you know their risk profiles have gone down. Um they should they should diversify. Any financial advisor would say so. Um we'll find out.
So, uh, I don't think our bull price should change all that much. And I probably should have been quicker to say all things equal. Um, we are very bullish on crypto assets, but we know that they are they are the most susceptible to liquidity drawdowns. And I described earlier, we have a number of reasons for liquidity drawdowns now. But we think that they will be cleared.
So here you can see the liquidity index. Uh this is Dan Rodriguez's chart and you'll can you'll see liquidity dropped to uh uh dropped to a low level in November. Why was that? It was the government shutdown and we thought okay this is going to be shortterm. liquidity will pick back up and the market uh will will take off again and uh that is what happened. Uh but recently you can see that it is back down and what's happening there? Well, we had the threat of the shutdown and now we actually have the shutdown, partial shutdown. Uh and in midFebruary, I think it's I think it might be February 14th, there's going to be a vote around uh the Department of Homeland Security's budgeting and you know it may shut down more completely then. So I do think there is somewhat of a liquidity drain.
And then the other thing that's happening is the the Fed was supposed to stop quantitative tightening in early December and it and it did for the most part. Um but its provision of liquidity to the system is lower than many analysts expected. Um in recent days in recent days it has started to pick up. You're seeing some of that now. Uh and I do think the Fed and the Treasury are beginning to respond to what has happened to the financial markets. This administration u does think does believe that the financial markets provide important signals and so they are probably assessing the liquidity liquidity uh conditions out there and moving accordingly. So I do think this one is probably moving in the other direction.
Here you go. Uh you've seen this chart many times. Metals to gold. Uh uh we've learned something very important and I'll spend more time on this in uh next week. Um but what surprised me and this is up to date up to date is with the fall off in gold recently that the metals to gold ratio has not picked up. That is really surprising to us. Um we've learned in recent weeks uh why the Treasury yield uh has been levitated. This very tight correlation between the metals to gold ratio and the Treasury yield broke down starting with the Fed tightening. And you know it's still gaping wide. Um we're learning and believing more and more that this is the yen carry trade unwind. What are they doing? Selling treasuries and buying Japanese bonds. Why? Because Japanese interest rates have gone up. And so the the uh US Treasury bill is less of a uh less less interesting. It's still above the short-term rates in Japan, but less so, much less so actually, and could continue in that direction if uh the current uh prime minister I is uh uh she just called a snap election. I think it's for this weekend. And um if she gets a a large majority, larger majority, she will amp fiscal spending even higher. and that will probably take their interest rates higher. Uh, nonetheless, the purple side is puzzling. I think it has to do with uh deflation uh coming out of China uh and impacting the global ecosystem. Sure, we've seen some metals go up, but this ratio going down uh even further as gold goes down is most surprising.
Kathy Wood continued to remind people that what's happening in the Bitcoin market right now doesn't feel entirely normal. There are likely many forces behind the scenes putting pressure on price and keeping momentum suppressed. Large entities and institutions may be waiting for better entries, and that often creates periods where the market drifts lower or moves sideways. See it for what it is. In the long term, Bitcoin's trajectory has still been upward. For now, it may just be a slow, boring phase with some downside and consolidation, but it won't stay there forever. This can be viewed as an opportunity to accumulate and gradually increase exposure. Don't panic sell. Doing so is usually the worst move in volatile conditions. Stay calm, stay patient, and everything is going to be all right long term.
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