Transcription
Hey everyone, and thanks for jumping back into the cryptoverse. Today, we're going to talk about Bitcoin dominance. 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.
So, Bitcoin dominance has continued to go up for the last few days, and we did a video on this, uh, a few days ago. But there's a lot of like misconceptions that, you know, that the Bitcoin dominance would have to go down the minute that QT ends. But as I said in a video a couple of days ago, if you look at like some of the nuances of what actually happened in 2019, and and you see like when Bitcoin dominance topped, and I know a lot of people are like, "Why do you keep comparing it to 2019?" Because like, it's not 2019, it's it's a post-halving year. But one of the reasons is because there's a couple of reasons.
One reason is because back then, if you look at Bitcoin USD and you overlay the balance sheet of the Fed, what you'll notice is that Bitcoin found that top, and it was a non-euphoric top, a few months before the balance sheet of the Fed started to go up. Right? Bitcoin topped in June, and then the balance sheet of the Fed started to go up in September. And what's interesting is that something similar has happened so far this time, where Bitcoin found this top in October, and the balance sheet of the Fed has not yet started to go up.
Now, with QT officially ending on December 1st, it might make you believe that that means that the balance sheet has to immediately explode to the upside. But there's actually, you know, you're still going to likely have that last batch of Treasury maturities settled. And that's one of the reasons why if you look closely at 2019, what happened back then, you might look at this and say, "Oh, well, the balance sheet of the Fed started to go up in September. Therefore, that is when QT ended." But in reality, the Fed announced that QT was ending. They announced it on July 31st, I believe, and they announced that it would be ending on August 1st. So, the Fed ended QT on August 1st. When that happened, Bitcoin dominance was actually around, you know, like 66% or so. But despite the fact that QT was officially over back then, Bitcoin dominance then went back up all the way to 73%. And then when the balance sheet of the Fed actually started to go up, then Bitcoin dominance started to drop.
So, and again, another piece of evidence to suggest that this is similar to the 2019 style top is that when you look at, um, the way in which that top occurred, it was a top on apathy rather than euphoria. So, what I mean by that is the tops that we had in 2017 and 2021 were actually tops on euphoria. You can look at the social interest and see that there was a lot of new retail investors in the space at the end of 2017 and at the end of 2021. However, in 2025, retail, new retail investors are actually largely absent. And you can see that we're still in the blue territory, meaning there's not a lot of new retail investors actually showing a lot of interest, despite it sometimes seeming like there should be, right? There's just not. And it's not a reflection on Bitcoin per se, right? Like it's just a reflection on, hey, we've had higher-for-longer interest rates for many years. We've had quantitative tightening for many years. This exact pattern that Bitcoin is showing over here is what it did in 2019, right? It's the same thing. It's just that the whole process lasted longer. You know, back then, quantitative tightening just lasted, you know, a year, a year and a half or so. But this time, it, it obviously lasted several years. And so it's had a very similar effect, but it feels different because the top, the theoretical top, is occurring where the normal four-year cycle top would occur.
Now, when you think about Bitcoin dominance, what did it do back then? Well, what it immediately did was it shot up in the short term. So, what I think is going to happen is if you look at like total two minus USDT divided by Bitcoin, it's been dropping almost every single week since mid-September. If you guys remember, I said back in September that Bitcoin dominance normally reverses course in the month of September. Like, whatever direction it's going, it then tends to reverse course. And then you can see the dominance actually found a higher low in the month of September. And a lot of September, it will reverse course from whatever direction it is going. We've seen that happen, um, many, many times, right? You can look at, um, uh, September of 2017, right? And then here's, um, September of 2018. There was, let's see if we can zoom in here. In 2018, it was a high. So, it then came down from that. 2019, the same thing, right? But if you go, if you look at at some of the other years, um, it was dropping into September. So, whatever it normally does before September and then reverses course out of it. And so you can see that dominance started to move back up in September. And now when you look at total two minus USDT divided by Bitcoin, you can see that that's been dropping, right? And you can even connect the dots here and see like it's been following a a fairly, uh, I guess it has been a somewhat predictable pattern.
Now, what I think is going to happen is the same thing that happened, uh, back then. And and back then, if you go back to look at at what happened when the Fed ended quantitative tightening back on August 1st, 2019, total two minus USDT divided by Bitcoin then dropped about almost 30% before the actual low occurred. And then the low of total two minus USDT divided by Bitcoin that occurred when the balance sheet actually started to go up. Now, back then, it took several weeks. It took about a month for the balance sheet to start to go up. So, what if it happens the same way where it takes about a month for us to actually recognize the balance sheet going up? If that is the case, then we won't even recognize it until January of 2026. But normally, midterm years are in fact bare markets, unfortunately. And normally, Bitcoin puts in the top in Q4 of the post-halving year. If you look at the ROI from the low for Bitcoin and you compare this cycle to the last two, it's hard to be that upset with how things turned out, right? Like you would expect, uh, a four-year cycle and you would expect diminishing returns. And oh, by the way, it played out exactly how it always does. If you measure it from the cycle peak, what you'll notice is that this cycle from the peak looks pretty similar to the last couple of bare markets as well.
So, if if the bare market for Bitcoin has already started, then how could Bitcoin dominance go up? Well, in 2019, remember, total two minus USDT divided by Bitcoin dropped, but Bitcoin actually topped in June, right? So, on this chart, the Bitcoin top for in during the end of quantitative, or before QT ended, was actually over here. That was where Bitcoin USD topped, but alt continued to bleed against Bitcoin even after Bitcoin USD topped in mid-2019 on apathy. So, it's just something to remember that you can have dominance going up a number of different ways. The silver lining is that after QT ended back then in 2019, um, you know, you could say it ended here on August 1st, there was a short-term rally, right? There was a short-term rally back up again. It led to a lower high, but ultimately, um, you know, eventually the market broke down and it ultimately swept this low right here. So, it'd be kind of interesting if if we are kind of repeating this where we're just kind of hovering above that low. And now compare that to 2025, right? It's it's a very similar pattern where you have like over here, we were hovering above that low. Right now, we're kind of hovering above this one. You know, could it play out in a similar fashion where it just kind of grinds here for a little bit longer, maybe capitulates after the Bank of Japan theoretically raises rates in December? Especially if the Fed lowers rates, you might get the further unwind of the carry trade. Bitcoin can drop down, sweep the low, and then run back up to that 50-week moving average, which remember, every single post-halving year after the top was in, going into the midterm year, there was, except for I guess 2014, there was a return to that 50-week moving average. Even in 20, um, well, in 2019, we actually bounced off of it. We kind of went below it a little bit, but we kind of bounced around it for a little, and then we got the recession, right? But usually, that's how it how it plays out. And so I wouldn't be that surprised to see it, uh, play out in a similar fashion.
But again, the argument here is that Bitcoin is a better hold than essentially everything else in crypto because there does still theoretically exist a future. Even though the bare, the bare market might be here, there still exists a future where even if the bare market is here, Bitcoin could still find itself back above 100K. The problem is that if Bitcoin does find itself back above 100K on a Bitcoin dominance rally, that still leaves altcoins lagging the king. Okay, you have to remember that, you know, when total three minus USDT divided by Bitcoin actually bottomed last cycle on apathy, alt season did not immediately start, right? It took a year and a half, and then it started. Um, so, just something to keep in mind, like it doesn't, it doesn't have to play out, uh, like like a lot of people want it to. It could take some time. Again, normally when you do get alt seasons, it's when you're witnessing the social risk climbing steadily. Like, if you look at the social risk in 2017 and in 2021, it was putting in higher lows and higher highs. We're not seeing that right now. Like, we're not really seeing an influx of new retail investors. So, I'm not saying you can't have rallies by altcoins. I would even argue there does exist a potential future where Ethereum could even go to a new all-time high, even if Bitcoin doesn't. But I do think it would be a divergent high. Like, if, if, if Bitcoin were to go back up to 100K and and we can see the balance sheet of the Fed starting to go up, maybe ETH Bitcoin puts in a higher low and it goes up, and that that's kind of how it could play out. But in the short term, I still think dominance looks pretty bullish.
And the other thing to remember is when you look at charts like total two minus USDT divided by Bitcoin, there's a lot of times where altcoins will put in a low in the summer and then they'll put in like a double bottom in Q4, right? Um, and like, there's plenty of charts that look like that. Doesn't, it's not always summer and then December. Sometimes it could be December and then the summer. But like, if you look at like Solana, the Solana Bitcoin pair, um, what, what you'll notice there is back in in sort of the bare market, there was a low in, um, December and then a low in the summer. You see that? Um, XRP, Bitcoin, very similar type of thing where you had, um, a low in the summer and then a low in Q4. And then I believe ETH Bitcoin last cycle did something very similar as well, right? So, you look at ETH Bitcoin last cycle, you'll see a low kind of in the summer and then a low in December. So, a lot of times you'll see altcoins do that where they'll drop down in the summer or December and then they'll drop back down, you know, kind of like six months later, approximately. So, that's why I think that you're going to see alts drop again against Bitcoin and then potentially find a low down there just in time for for the balance sheet of the Fed to start to kick in. That doesn't mean you, you immediately have an alt season, but it just means that you might start to finally see the end of the bleed of alts, um, against Bitcoin. So, uh, at least for this cycle. So, it's just something to think about.
I mean, I, I know this trend has gone on a long time, and maybe I'm getting a little too greedy at this point by remaining bullish on Bitcoin dominance for this long. But the other, the last reason why I still think there's a case to be made for dominance to go higher is because it's more than just quantitative tightening, right? If you look at interest rates, interest rates are still pretty high. And back when Bitcoin dominance did top out last cycle, um, it was when, you know, interest rates had already dropped back down to like 2%. Right? Right now they're at 4%. Now, I think what you have to do is you have to overlay the two-year yield. I think you have to overlay the two-year yield because you could argue that that's essentially an approximation of the neutral rate. But you could say, look, I, if, if, if the Fed funds rate is too far above the two-year yield, it's hard for, you know, it's hard for those riskier assets to do well because they're screaming that they need help. And and, you know, you can see that the Fed is still chasing that two-year yield. And so maybe what we should do is we should look at the delta, right? The difference. So, interest rates minus the two-year yield. So, if you like interest rates minus the two-year yield and you look at, we put a zero line, or you put a line, I guess, just like right at, um, right at at zero and then we go back to 2019, right? August 1st. A little bit further back, I guess, August 1st. So, you can see back on August 1st, the two-year yield was still below the Fed funds rate, but by the time we got into September, that two-year yield was getting a lot closer to it. And then when, when the two-year yield and the Fed funds rate are more or less in sync, and especially when you get moves like that, that's where you get, you know, much larger moves by the altcoin market against Bitcoin. The entire 2017 alt season occurred with the Fed funds rate below the two-year yield, basically. Um, so you could argue that like this entire thing we see up here is just the same thing over here in 2019. It's just a larger version of it. Okay? It doesn't mean you're never going to have an alt season again. It just means that in order to have it, you have to have things align. Like monetary policy has to align, interest rates have to align, a lot of things. You have to have people coming back to the table. You can't have an alt season when no one cares, right? When there's just dozens of us left and you're just having liquidity sort of slosh around from, you know, from one altcoin to another.
So, I think in the short term, like I will remain bullish on on Bitcoin dominance. Surprise, surprise. Um, honestly, if you had asked me six months ago, I think I would have, I think I would have said I would have been bearish on it by this point. But given where things are right now, um, I think I have to stay bullish on it at least for at least for a few more weeks. That that'll probably change before too long. Uh, but I think in the short term, it still makes sense to be bullish on Bitcoin dominance. I'm, I'm looking hopefully for another move here above 60%. If you look at the bull market on Bitcoin dominance, it got rejected on the first attempt. Uh, but I think the second attempt hopefully will be will be successful. So, look for Bitcoin to take liquidity from the altcoin market. Hopefully, it does it on a Bitcoin rally. It could do it on a Bitcoin dump. Um, but hope for the best, plan for the worst. Thank you guys for tuning in. Make sure you subscribe, 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.