Transcription
Hey everyone, and thanks for jumping back into the cryptoverse. Today, we're going to talk about Bitcoin, and we're going to be discussing monthly Heiken Ashi candles. If you guys like the content, make sure you subscribe to the channel, give the video a thumbs up, and also check out the sale on Into the Cryptoverse Premium at into the cryptoverse.com. Let's go ahead and jump in.
Now, it's probably been about four years since we talked about these monthly candlestick patterns. And one of the reasons why I like to use them in midterm years specifically is because I think that it helps people to stay more or less on the right side of the trend. Now, there's been a lot of discussion recently as to how the recent rally by Bitcoin, I've the most hated rally ever. I've seen all sorts of stuff about how this is so different than what we've previously seen. But I want to draw your attention to a different way of looking at the chart so that it can help reduce noise and, and, and hopefully have you look at what the actual larger trend is is telling us.
So, before we get to Heiken Ashi candles, I just want you to look at the chart here and, and just generally note that what we are seeing is not that different from prior bear markets, right? Like, like mid in midterm years, there are counter-trend rallies. That doesn't mean the bear market is over. It also doesn't mean that the market can't go higher. But it's important to recognize that this is something that happens in mid-term years. And so, how can we distinguish the difference between just a counter-trend rally and the start of a new bull market? Well, if you're relying on candles like Heiken Ashi candles, there is going to be a bit of a lag, right? So, if you wait for that confirmation, the low will already be in. But I just want to draw your attention to this way of looking at the market.
All right. So, and you can do this too on TradingView if you're not familiar with it. You can just go up to, uh, let me move my video here so you can see what I'm talking about. If you go here, right here, these cand, this candlestick right here, and you just click on that, and then you just go click on Heiken Ashi, it'll change what you're looking at to be this. Right? So, we've we've transitioned away from the old candles, uh, where, you know, price is calculated in a fairly typical fashion, and we're now looking at it like this. So, on the normal candlestick patterns, the high for the month is just the high for the month. The low for the month is the low for the month. And, and the open is just where we open the price, and the close is where we close the price. Now, that might seem obvious, but with Heiken Ashi candles, it's different. And so, I just want to put down the formulas for it. And I know this is a little bit tedious and, and a lot of people might not really care, but I do think there's some people that that will care. And this is for those people that that care because I care.
Um, in in this case, rather than just looking at a candlestick and being like, "Okay, let's, let's, let's actually understand what it's showing us." All right. So, in this case, the close is not just where the price closes at the end of the month. The close is actually 1/4th. So, 0.25. You take 0.25 and you multiply 0.25, 25 by the open plus the close plus the high plus the low. So, the close for the month is dependent on the open, the close, the high, and the low. The average of those. That's why the candlesticks are able to stay red for most of the bear markets despite the fact that you have counter-trend rallies. Okay, so that's the close.
Now, the open is 1/4th, or sorry, 1/2 times the previous, previous Heiken Ashi open plus the previous Heiken Ashi close. See that? So, now you're just taking the average of the prior open and the prior close. That is how the open is defined. So, when you define it like this, it, I mean, it makes the current candlesticks dependent on the prior ones, but it also gives you a smoother trend that can, maybe can help tune out the noise some of the time.
Now, the high is not just the high. It's actually equal to the max of the high. So, it could be the high, but it could also be the Heiken Ashi open or the Heiken Ashi close. Now, the reason why the high could be different than the actual high is because the Heiken Ashi actually open and the Heiken Ashi close are dependent on other things, right? They're dependent on other things. And then the last thing is the low is, you probably get it at this point, is just equal to the minimum. Could be the low, right? It could be the low, but it could also be the Heiken Ashi open or the Heiken Ashi close. There you have it. All right. So, that is the way that these are defined. And what I would encourage you to do is to actually think through each of these formulas. Think through each of them because if you do, it'll give you a little bit more intuition in further understanding the chart that we're going to talk about. All right? So, we'll leave that there, uh, for now.
Now, I want you to look back at at least the last two midterm year bear markets. Okay? Just look back at them. In both of them, right? So, in the one in 2018 and in the one in 2022, the Heiken Ashi candles actually stayed red for the entire bear market, even though we had counter-trend rallies. So, let's suppose, and we talked about this in the last bear market, right? In in 2022, we we made many, many videos on these candlesticks, these, these this pattern. Imagine back then if you just bought Bitcoin in January of 2023. Would you have missed the bottom? Yeah, by a few thousand, right? But you know what you also would have missed? You would have missed FOMOing in on that counter-trend rally right there. Doesn't really look like a counter-trend rally when you view it through the lens of Heiken Ashi candles. But if you switch it back, you can see that counter-trend rally, just like you can see the counter-trend rally right now. Could I be wrong? Maybe it's not a counter-trend rally. Maybe it's something different. But the point is, is so far, it's not. If you switch this over to Heiken Ashi candles again, that counter-trend rally disappears.
So, I would push back on the idea that this is the most hated rally ever. I mean, if this is the most hated rally ever, then we have the most hated rally ever bear market when we have a counter-trend rally. And what you'll notice is how in the bear market, the wicks down, you see the wicks down, they kind of trend up a little for that counter-trend rally, but they didn't actually turn green. Maybe they flipped green briefly, but none of them actually closed green. Same thing happened in 2018. Do you see any counter-trend rallies? You can see that the, the candlesticks, the lows generally were trending up, but the candles were the Heiken Ashi candles showed you that the bear market was still very much in full swing. Very much in full swing. Now, when you switch it back, you can see the counter-trend rallies, right? Like you can see that in April of 2018, Bitcoin rallied 33%. Almost 34%. This year, this April, it's rallied 13.5%. Guess what? Still eventually went down.
The other thing that I've pointed out is that when you look at seasonality and you compare, say, 2026 to 2018, there are still similarities. You have an early February low in both cases. You have higher lows print in, in early April, late March, early April. You then rally on up into late April, early May, and then the market turns around. Now, if the rally fails within the next couple of weeks and starts to go back down, then what will happen is the monthly Heiken Ashi candles will keep staying red. The way that they would turn green is if the rally persists, say, into June. It's not completely unprecedented. In 2014, the rally persisted into June. Right? Right? If we flip back to the normal candles, you can see that the counter-trend rally actually lasted into, into June. But they're also April was red, right? April was red, whereas this April has been green. And you can see the rally, the counter-turn, you know, two to three months, but ultimately it yielded a lower high that went lower.
So, you have a situation where in 2022, the Heiken Ashi candles stayed red for the entire bear market. In 2018, they stayed red for the entire bear market, and they flipped green in April of 2029. Would you have missed the bottom? Yeah. But in the grand scheme of things, buying Bitcoin at 4K or even if you waited till the end of the month and you bought at 5K, it still would have been better than FOMOing in on all these counter-trend rallies, right? So, there's benefits of Heiken Ashi candles, but there's also drawbacks as well. Like, it's not, they're not perfect as an investment strategy. I mean, nothing really is.
Now, I want to draw your attention to two other scenarios. You have the 2014 and also the 2019. Now, I think that there are a lot of similarities between this bear market and the 2019 bear market. But I would push back on the idea that we're at that point right now. We might get to that point. I'm just not sure if we're ready for it just yet. Now, to put that own assumption under some scrutiny. What I should do, just for completeness, so that I'm not pretending like there's no similarities. If you look at the 2019 bear market and compare it to the current one, we had the same type of drawdown, and then you can see how the rally lasted for a little bit longer, and then of course, we had the pandemic. I don't think that this analog will hold. It's always possible that it does, right? But I don't think it's going to hold. I would say that if we do durably break out of the downtrend and we get, and not, not maybe not durably, but just for a few months, and we get something like looks like this, I think it would likely be just sort of a fake out like what we had in 2014 and like we had in 2020, where it would not lead to all-time highs.
There are a lot of people that think Bitcoin will experience all-time highs in 2026. And one of the reasons they say is because the stock market is going to all-time highs. And what they remember is how Bitcoin went down in 2022, but so did the stock market. So, if the stock market goes up, why can't Bitcoin? Well, the reality is that the stock market, as you might know, actually did put in all-time highs in 2018. And in 2014, you can see it pretty clearly at the end of 2018, the stock market was still pushing into new all-time highs. 2014, the stock market was pushing to all-time highs. It did not stop Bitcoin from continuing a bear market.
So, one of the things to remind yourself of with Heiken Ashi candles is if you have candle bodies where you don't have wicks to the upside, but you have like long wicks to the downside, then it's a pretty strong downward. It's, it's a pretty strong, uh, bear market, right? Like that the signal, the momentum is still pretty strong. What you look for is when that starts to change, and you can see that the momentum had been pretty strong recently. There's some hesitation. Often times there is hesitation at some point in the bear market. You can see we had that hesitation right there in about the same time period, March to April of 2022. We also had similar hesitations in the same area, April, May of 2018. Same idea back in 2014. The problem is that in all cases, you started off with a convincing bear market. In every case, you start off with a convincing bear market. You then get that counter-trend rally, and then eventually goes down. Now, again, it doesn't look like a counter-trend rally in 2022 and 2018 with the Heiken Ashi candles, but when you flip back, you can see where those counter-trend rallies happened.
So, I just want to say that it's easy to sit around and pretend like it's the most hated rally ever and, and, and think about all that stuff and, and, you know, do these mental gymnastics as to why this time is different. But I, I, I don't think it is. You know, I really don't. And when you look at some of the other metrics that we've talked about, like stablecoin dominance, UST dominance plus USDC dominance, you know, I mean, it, it, it doesn't look that different from how we drew it out three or four months ago, right? Basically just the same pattern that we had with Bitcoin dominance where it eventually breaks out, backtests the bull market support band, and then gets another move higher, and then tests it again. There are patterns where it goes slightly below it before going back up. But I do think this will likely hold in the event of, sort of like a, a longer-term view. I think we're going to look back at this and see that, you know what, these were higher lows, even if it does go a little bit lower.
And with Bitcoin, you know, the way it played out in 2018, and I'm just going to say it, just in case it happens. I just want people to to be aware of this is how it happened in 2018. So, in 2018, Bitcoin rallied, um, and then right before FOMC, it dropped a little, and then right after FOMC, it rallied back up again, and then it found a top in early May, and then spent the rest of May going down. So, we have the FOMC meeting later this week. So, you can see it's actually on April 29th. So, it's not too, too many days from now. So, we'll see if it plays out in a similar manner. Back then, we actually made it to the 200-day moving average back in 2018. So, if you look at at 2018, back in, um, April, you can see we made it to the 200-day. So, we first found a top in late April, April 24th or so. We got a correction before FOMC. FOMC back then was, I think, on May 1st to May 2nd. Right after FOMC, we rallied back up, swept the high, and then we spent the rest of May going down, and then we found a low sometime in June, which could make sense considering that the Bank of Japan is potentially poised to raise rates, um, in June at the next FOMC meeting, and that would be, you know, sometime about mid-June. And historically, we've seen Bitcoin, um, not after everyone, but there is some precedent for Bitcoin finding some type of a low shortly after the Bank of Japan raises rates. Sometimes the, the trend continues after initially putting in a low. Sometimes that is the low for a little while, but often times, like shortly after the Bank of Japan raises rates, you do get some type of drop in the crypto market, and maybe that would actually correspond to a, a future low in the month of June. So, we'll see if Bitcoin has enough energy juice to get back up to the 200-day moving average, but I don't know. I mean, I, I think the timeframe for it to do so would be over the next like week or two if it's going to happen. Obviously, if this plays out like 2014, you could always see it extend until June, but I would say for now, I, I would argue that the more base case scenario would be a sort of a local top in, in within the next week or so, followed by, um, a drop back down as we go into June.
Seasonality isn't everything. And, you know, I'll talk about seasonality a lot. I'd say it works out about 70% of the time, right? So, 70% of the time I talk about it, things play out like that, and no one really cares. And then 30% of the time it doesn't play out. People like lose their minds. Uh, but seasonality historically has dictated that Bitcoin tends to find a bottom in the month of June. Um, the only exception I believe in, in prior midterm years was 2014, where the next low after the April low didn't occur until October. So, those are my thoughts on the market. Hopefully, these Heiken Ashi candles give you a new way to to think about how the market is is playing out. Um, and, and, and remember, I mean, I, no one knows what's going to happen, but I would look at the monthly Heiken Ashi candles and think about this, right? Think about this. And I, I remind myself of this on a, on a somewhat daily basis. You, you essentially have the, the people that were extremely bullish back at 120K, they're dunking on the bears right now. And I'm looking at the chart and I'm like, "Yeah, that's, that's what they're excited about." You know, look, I want Bitcoin to be successful long-term, but midterm years tend to be bearish. And I cannot look at the, like, if, if I had been bullish going into, you know, if, if I had been bullish back in December, going into the new year, there were a lot of guys that were, I would not be out there dunking on the bears, right? I'd be like, "No, the bears were right." And, and now the bulls are, are basically wrestling for any scrap the market will give them. But this still looks like a pretty healthy drop in the market. If we do not see weakness come back in either May or June, then I will have to reassess on the market. But for now, my thoughts stay the same. I think the idea that this is the most hated rally ever is somewhat absurd because no one looks back at 2022 and says that the March to April rally back then was the most hated rally ever. No one looks back to 2018 and says those were the most hated rallies ever. You don't look back at any of that stuff, right? I would argue if you want to say what is the most hated rally ever, um, in this last cycle, you could argue that it was the last one because it only marginally went above the prior high, and altcoins basically just bled out anyways, right? Like they, they didn't really do anything because Bitcoin's bull market ended in October before alts could even catch any type of a bid. So, that would have been the most hated rally ever for a lot of people because a lot of people were actually in altcoins and not Bitcoin. And while Bitcoin went up, it didn't actually drag the rest of the market with it in, in a lot of ways. Some things went to new all-time highs like Ethereum, which we thought it would, but a lot of things did not. And a lot of things just basically completely sold off the minute the bull market ended. So, I, I don't think this is the most hated rally ever. I, I think it's doing what it always does. And I, I just think emotions are running really high right now. Um, because, you know, you've had this, this rally off the lows. The interesting thing is the rally off the lows hasn't even been that much. But the reason why emotions are starting to run wild is because there's no, like, the pullbacks are all shallow. So, if you look at like the weekly candles, this is now four green weeks in a row, basically since April started. But again, in 2018, we had the same thing, right? In 2018. Look at this. The minute April started, we, we put in that higher low right there at the end of March, early April. We trended up throughout all of April, and then the market rolled over as we got into May. And I remember that rally, but it wasn't the most hated rally ever. Just, just like this one's not.
If you guys like the content, make sure you subscribe to the channel, give the video a thumbs up, and again, check out the sale on Into the Cryptoverse Premium at into the cryptoverse.com. I'll see you guys next time. Bye.