Transcription
Welcome back to my 10 favorite people. Hope you're doing well.
I'm incredibly excited for today's video because it's finally time to update the Bitcoin cycle scenarios chart. And right now, there's so many people out there that are convinced that the cycle is 100% over and have sold their entire portfolios. While there's also some people that are convinced that it's 100% not over and are still fully allocated to this market. And I believe both of those mindsets are incredibly dangerous for this phase of the cycle.
Because if you are 100% convinced that it's over and have sold everything, you run a major risk of the market not going as low as you expect and feeling immense FOMO being sidelined from an asset that you believe is going up in the long term and piling into a local top or bare market rally. But if you're someone that's 100% convinced that we're heading higher and alt season is going to start next week, you run a major risk of having to hold through a big correction or even have to hold through a big bare market draw down with the no cash on the sidelines to take advantage of better prices.
So, I believe the best approach to navigate this market is to have a base case that you think is the most likely and position accordingly, but also remain open-minded to the other outcomes and have a plan in case price action and data start to point towards those scenarios instead. And the reason why your favorite crypto influencer only focuses on one potential outcome is because it's way more profitable to be a permable asking everybody to use your leverage exchange referral link and get rich or to be a perma bear that gets a ton of views with clickbait doomer videos that take advantage of people's tendency towards fear.
As for me, I feel well positioned no matter what the market decides to do. I have a decent cash position in case of downside from small profits I've taken along the course of this bull market. And my holdings are more focused on the larger, more established assets, so I don't have to worry about them disappearing overnight or hoping and praying that alt season is going to start next week so I can finally get back to break even and sell my useless bags to somebody else who joins late into the cycle.
And as always, if you'd like to learn more about my portfolio automation system or mental models I use to navigate this market or common mistakes I see so many investors making, you can check out the Crypto Enjoyers program and community in the video description. I'm hoping to release the final module for the common mistakes course on Friday. And then once that has been released, we're going to be moving from a onetime fee to access the community and program to a monthly subscription.
And now, just to be clear, I completely understand why so many investors are so fearful. And there are some good reasons to be cautious here, especially if you got absolutely wrecked on the biggest liquidation event in crypto history where so many crypto investors lost everything because they gambled with their entire portfolio on leverage. We also see a ton of fear out there right now surrounding the Bitcoin 4-year cycle and how this bull market has been the exact same length as the previous two in terms of the cycle bottom to the cycle top if we do end up seeing a top in October. So, it's no surprise that we're seeing quite a bit of profit taking from long-term holders now at about $2.9 billion per day, which is less than what we saw in the December 2024 top, but it's still some decent profit taking nonetheless. and that's putting downward pressure on price. We also have big Bitcoin whales shorting the market and that's spooking a lot of investors. We also have a bearish divergence on the RSI as the RSI has been making lower highs while Bitcoin has been making higher highs and that's been spooking a lot of investors as well. And last but certainly not least, Micro Strategy continues to look pretty terrible and that wasn't a great sign in the previous cycle. So, there is plenty to be concerned about.
And there are some signs pointing to the cycle being over. And that's why it makes sense to be cautious and not be all in on the market having to go higher or you end up getting liquidated or losing 90% on altcoins. But there are also a ton of data points and variables pointing to the cycle not being over and telling us that Bitcoin still has higher to go. And that's why the full reset scenario is still my base case and why I called Monday's free weekly report the full reset.
Number one, Bitcoin is still above its 50week moving average, which is our major line in the sand and an important support level this entire bull market and price is sitting right above it right now. So, we have a very clear invalidation right below us. We also still have seasonality in our favor because risk assets tend to do well in Q4. And we have some bullish catalysts on the horizon like the US making a trade deal with China and the US government shutdown coming to an end and ending all of the uncertainty surrounding it. We still have higher highs and higher lows on the Bitcoin weekly chart. So, our trend still remains fully intact and I would rather stick with the trend until the market tells me otherwise. Bitcoin isn't that overheated in terms of how extended it is from its 200E moving average, which means our downside risk is pretty minimal compared to previous cycles where Bitcoin was way further from the 200E and investors were sitting on a ton of unrealized profit. Spot ETFs are still taking a ton of supply off the market and bringing in a bunch of inflows and we haven't seen any major outflows yet. Corporate treasuries are still taking a ton of supply off the market as well. And even though the rate of accumulation has slowed down, it is still taking more and more supply off the market for assets like Bitcoin, Ethereum, and Salana. And Bitcoin is still holding our major support level and previous range high. So until it breaks, I don't want to try and guess whether or not it is going to.
And it's really not surprising that so many investors are saying that they're tired and upset because this range over the past few months has been diabolical. Bitcoin broke into price discovery, then set a high, pulled back and retested it, made a new high that ended up being a false breakout. Made a new low that ended up being a false breakdown just to make another new high that ended up being a false breakout once again. And we've now taken out that previous low. So, leverage traders got absolutely destroyed in both directions over and over and over again over the past few months. So, it's no surprise that so many are capitulating and throwing in the towel, but that's usually the sentiment you tend to see at local bottoms.
We're also seeing more and more regulatory clarity for crypto in the US and globally, which is the exact opposite of what we've had over the past few years. And this is allowing major asset managers like Black Rockck to launch more and more ETFs and ETPs globally and open up to a bigger investor base. And we're still seeing an insane amount of growth and adoption for stablecoin as Tether announces that they just had their 500 millionth user. And when you take a look at this trend over the past 5 years, how can you bet against this adoption curve and all the users that it's going to bring to blockchain and crypto?
And if we take a look at macro, it's hard for me to assume that the cycle is over for Bitcoin when the GLI is still in the middle of a macro breakout. And I do understand that Bitcoin has topped before the GLI historically. But what that observation completely ignores is each and every one of those times Bitcoin had a euphoric blowoff top and completely deviated away from its trend and mean reverted back to it because of alt season and extreme greed causing Bitcoin to divert away from its fundamentals. And you don't have to take my word for it. Just take a look at what happened this cycle and how Bitcoin has been in a nice slow and steady uptrend alongside global liquidity and has not had any parabolic blowoff top that results in it having to mean revert back to where global liquidity is. And speaking of the GLI, it says that Bitcoin should be in the clear until about the end of November and then we're going to see if it ends up breaking lower or higher between now and then. The US dollar index is still chopping sideways. The market is still expecting five rate cuts over the next 12 months. This is what that current projection looks like. And based on history, I believe we're going to need a lot more rate cuts than that to keep this economy afloat. And it's also nice to see gold selling off a little since it is the more uncertaintybased debasement trade that investors are piling into because of China and US tensions or because of the US government shutdown or because of US bonds becoming riskier and riskier on a long-term basis. And that's what made me notice this inverse correlation between the two assets. And just to be clear, I don't think all the money coming out of gold is going to rotate into Bitcoin. I just think this correlation is a great representation of how both assets serve different purposes in investor portfolios. And gold is what investors flock to when they're scared and Bitcoin is what investors buy when they are feeling optimistic and want to speculate more aggressively on liquidity and currency debasement trends. And just to be clear, I only expect this to be a local top for gold and consolidation, giving Bitcoin room to rally and not a major cycle top for gold. I still believe gold is in a macro uptrend and will be for quite a while because of the US debt issue and more and more investors being uncomfortable with the US's fiscal situation and deficit.
So, we'll see what happens, but as of right now, I don't see any major warning signs for the S&P 500. It's above all major moving averages and consolidating sideways as media outlets continue to scare investors regarding an AI bubble. And as long as the S&P 500 maintains its uptrend, I don't know why we would expect Bitcoin to do any different because they have been correlated this entire cycle. The S&P 500 rallies and Bitcoin catches up. The S&P 500 rallies, Bitcoin catches up. When there's a major sell-off, they sell off together and they've had a recent recovery together. But as long as we're not seeing a downtrend in the S&P 500, I'm quite comfortable holding Bitcoin. And we know that alongside rate cuts, the Fed is also going to have to restart QE to help out the bond market and help the Treasury fund the US government. And they're going to be doing that even though real GDP is still positive. And the expectation for real GDP for Q3 is still quite positive as well. And inflation is slowly but surely getting closer to the Fed's target even though it's remaining a bit elevated. But we will be getting an update to CPI on Friday. So I'm expecting markets to react to that. And we know the labor market is slowly weakening, giving the Fed room to ease. Whether you take a look at the unemployment rate or continuing jobless claims or initial jobless claims, it's clear the Fed needs to be lowering rates, and I expect them to continue doing so.
So, yes, there are a bunch of strong arguments pointing to more downside and the cycle being over, but I believe there's more pointing to the cycle not being over, especially if you're a more long-term oriented investor. And we have a very nice invalidation level at 102K where the 50 moving average is where we can change up our plan if we see a clear loss of that level. So as of right now, I'm mainly positioned for the full reset. I would be pleasantly surprised with the final push, but it's not my base case based on recent price action, and I still have some protection in case the cycle is over, and I will be happy to buy Bitcoin at much lower prices if it is.
As for Ethereum, it's still struggling to hold above 4,000. I'm not going to jump to any conclusions until we see the weekly close, but as of right now, we really don't want to see it stay at 3,800 by the time the weekly candle closes, because that will start to look like one major deviation above 4K, the range high, and could result in a much longer consolidation and chop period. ETF inflows are still pretty quiet. We also are not seeing a huge amount of buying from corporate treasuries. Bit mine is buying a bunch of Ethereum, but PulseChain and the Ethereum Foundation are selling into their purchases. So, it's remaining pretty flat in terms of how much Ethereum these treasuries are holding.
As for Ethereum, Bitcoin, it's still consolidating below our major pivot level and above the 20week moving average. And I do eventually expect it to break to the upside, but until it does, I don't expect much for altcoins because we still haven't seen a breakout on the Russell 2000 as it just continues to chop around the all-time high. And until we get a price discovery breakout on the Russell 2000 and Ethereum, I don't expect alt season or much outperformance from altcoins. So, it's no surprise that Salana just keeps chopping around near its major moving averages. It was nice to see Salana get in some major inflows into its ETPs about 156 million when Ethereum brought in only 200 million in inflows last week and Bitcoin actually lost a billion. So it does seem like Salana is getting a decent amount of inflows compared to the other assets in the space as investors position for the spot ETF. We just got one in Hong Kong. And if we do see an end to this government shutdown soon, we could see the Salana ETFs within the next week. And we really want to see Salana put in a higher low here on its Bitcoin pair and reclaim the 50we and 200E moving averages if we are going to see Salana get back above Bitcoin and Ethereum in terms of performance. And the main catalyst I can see for that happening is those ETFs that are around the corner.
But as we look forward, the federal government is still running huge deficits. That trend seems to be worsening year after year. Exponential debt growth means exponential money supply growth as the currency gets debased. And that's bullish for risk assets. We price in that debasing fiat currency like the S&P 500 and fixed supply risk assets like Bitcoin.
But as always, let me know what you expect. Thank you so much for the support on the recent videos. Thank you so much for watching and I'll talk to you.