Premium Market Update: Hanging In There

Good day, folks, and welcome to a check-in on Chain Update for the 17th of April. And this one's a pretty special one for me, in particular. Uh, this is actually our one-year anniversary of the newsletter.

And for those who've been around for the full time, you'll remember that the report we talked about on the 16th of April last year was, "Is the Bitcoin market top-heavy?" I've certainly learned a lot just analyzing this thing every single day, uh, trying to get a read on what's going on, you know, testing the boundaries of what on-chain data can do, uh, expanding the, the scope, right? Looking at ETFs, looking at all, all these different dynamics come together. It really is—this is honestly the best job I've ever had.

Uh, and the first thing I want to do is give a huge shout-out to everybody, both new and old subscribers. Thank you so much for the support. I mean, getting to one year is an amazing milestone for us. Um, it really is the best job that Alec and I have ever had, um, and you guys are all to thank for that. So a huge thanks there. And, uh, I tried to go back and really review what we were writing about 12 months ago, and strangely enough, there's a lot of similarities. But in this particular environment, I mean, it's a headline-driven market. It depends on what Trump's mood is; it depends on what the latest headline is. Markets are selling off because JPow said something. It's a strange world, right? A lot has changed in 12 months—quite a significant margin, right—when you actually think back and see where we were 12 months ago. The ETFs have just gone live, active for about 3-4 months. You know, we've traded up to a new all-time high of 73K, and we had just entered the chop-solidation range. And I think chop-solidation was a term that was coined about probably a month after our first edition, um, somewhere in, in late May.

And, uh, you know, in many ways, Bitcoin is showing a lot of relative strength. We've seen the NASDAQ down 3% on the day, um, S&P had a pretty crappy day. And again, you got to remember that 3% down on the equity market—that's trillions of dollars. They're just much, much larger than Bitcoin. Uh, we get used to 3% moves. And look, whilst I'm not going to call some kind of decoupling or any kind of dynamics there, I think it's going to take some time for this to play out. What I am very surprised about and quite impressed to be honest is how well Bitcoin is hanging in. You know, we're getting—sometimes it's less, right? Bitcoin's down 0.05% on the day or even up on the day where the S&P is down 3%. These are, you know, they're just these early signs. And you got to think about every single trader with a Bloomberg terminal is going to be seeing Bitcoin not selling off as much as the MAGA 7, not selling off as much as the equity market. And then we also have gold, which is just absolutely ripping—3,200 bucks per ounce. Um, gold is having a tremendous year, and we'll talk about that in just a second. And I think it's just one of those things we should be aware that all of these traders and investors, they're just going to be seeing Bitcoin's relative performance. And I think a lot of people are going to be surprised by that. It's doing a whole lot better than most people expected. And whilst I don't think we're going to be blasting off to all-time high anytime soon, I still think there's a lot of positive signs under the surface, even if we are at a bit of a decision point.

So today, what I want to look at is this relative strength and how Bitcoin is performing on a, on a relative gauge. Uh, we'll do a bit of a top-heaviness assessment and just look at some of the dynamics there. I've obviously learned a lot as we explore this top-heaviness dynamic, um, over the last 12 months, 18 months. And, uh, in terms of like the structure of support and resistance, we're at an interesting juncture where long-term holder—the threshold of 5 months—is currently up above 90K. So we're now looking at pretty much everyone who has bought above is now going to be a short-term holder. And we got to always keep these dynamics in mind. Something that this cycle has been a little bit unique for is chop-consolidation—more periods of sideways, the market not going anywhere over an extended period of several months. And as a result, we've just got to think about where these metrics are, what they describe, how we really assess them within the broader picture, um, and generally speaking, the, the overall outcomes and how we read these tools doesn't change the probabilities and the statistics that creates that five-month threshold for long-term, short-term—that doesn't change. But we just have to think about these things in the background because as the cycle seems to elongate, for one of a better term, it goes slower, it takes longer for things to happen. Some of these moving averages and some of these benchmarks that we usually look at will start to catch up with the price in a way that they haven't in previous cycles. And I think this is just part of the maturation of the asset as a whole, as it gets bigger. We always have to be looking for how things start to shift and change.

So anyway, today is going to be a bit of an assessment—just a broad scope, mostly using on-chain data, a bit of relative performance, and just get a bit of a read of what's going on. And honestly, the TL;DR is that nothing has really changed. Bitcoin is still chopping around 85K. Um, nothing really has changed in a great deal for my, my base case assessment. Um, this is more of just, let's get a clean update and have a look at where we sit across a whole suite of metrics. Let's get stuck into it, right? So I want to start with about a one-year view, and what I've taken here—we've got three different traces. Um, the purple one you can see is diverging—that is gold priced in BTC. So all of these are going to be priced in BTC terms. And we've got the S&P and the NASDAQ in the white and the red, and you can see that they're more or less trading the same, so we can just talk about the equity market. This is a very clear divergence, and it's really been since around March onwards. We've seen gold just outperforming—it's outperforming Bitcoin on a relative basis, um, not over a longer period of time, but still, the observation that gold is doing so well—up 7% versus BTC over that 12-month period—whereas if we look at the equity market, it's actually performing really quite poorly—down 20% uh, over the last 12 months. So this divergence is quite interesting. Now, obviously, we're using Bitcoin in the denominator here, here, so we're not actually seeing Bitcoin's relative performance, but we looked at that in a, in a previous report a couple of weeks ago where I looked at all the tariffs and the macro implica—implications, and what we saw is that Bitcoin, over that—since the 1st of January 2024—Bitcoin's up 80%, gold's up something—it's going to be more than that, but 40-something percent now, and equities were more or less flat over that 15-odd month period. So, uh, you know, whilst it's not the perfect measure here, we're just starting to see that Bitcoin isn't doing as badly as some of the biggest assets in the world, and gold doing so well. In a way, you'll probably find—and I've certainly got this view—that Bitcoin sits somewhere in between equities as a risk asset, but gold is a safe haven, and gold is most certainly performing as a safe haven right now.

Um, you know, it's this is actually one of the main reasons that I hold gold, because it's the same trade, but it doesn't have all the adoption phase that Bitcoin has. Um, it's going to be less volatile, but in many ways, it's me expressing the exact same trade with a different volatility tolerance, and that's why I hold gold in my portfolio. Um, it's not a major part, and I'm sure that over any meaningful timeframe, Bitcoin is going to continue to do what it does and, you know, go from 90% of the portfolio, and it always tends to want to go back towards 100%, but at this point in time, this is one of those times where you look at gold and you go, "That's—it's pretty remarkable," because it, too, right? We're a 10 times bigger asset. We talk about gold—for it to be outperforming everything, every trader and investor is looking at this, and we're probably going to start seeing that sentiment shifting, saying, "Well, what about sound money?" And obviously, Bitcoin is a key player and really the only other asset that can serve as that neutral reserve—reserve currency or reserve asset. And, uh, you know, it's going to take time. Bitcoin's far too small to be the reserve asset. Gold really is the de facto and the default. Um, but at the same time, I've always viewed gold as being the ultimate settlement layer between nation-states, and I can very easily construct a case where Bitcoin is just this layer that sits on top. If you need to settle a billion dollars here or $5 billion here or there, it's a perfect asset to do that because it, you know, resolves in 10 minutes, whereas gold, you've got to send a warship with bars.

So sticking with this view—I mean, this is the best performance that gold has ever had in the, in the years that I'm looking at here—really quite tremendous. And we'll, we'll look at a couple of these charts. So I'll just run through what these traces are once again. Um, what I've basically looked at is all the different years of whatever the asset is, how it's been trading, um, so it's basically indexed from the start of the year at one, and then where it trades from there. We've got green and red being up and down years. So this is the geometric mean or the average—um, for, for simple, simple speak—that is the average of what a good year looks like, what a bad year looks like. And gold is absolutely blitzing a good year—really, really tremendous performance. Um, it tends to—even on these really, really good years that it has—tends to then start to go choppy. So I honestly wouldn't be surprised if gold is getting towards the zenith of this rally, and it will probably need something on the order of—I mean, it could be a year, could be 18 months—it really depends what the world does. I still think the trade for gold is there, but I would not be surprised if it's starting to get towards the upper limits of where it's going to go in this particular move. Um, like anything, it doesn't matter how good the backdrop is; things will have to go into a period of chop-consolidation to just consolidate those gains. There'll probably be pullbacks; there'll probably be chopping around, and that could, in fact, be a period where Bitcoin steps in and goes, "Well, maybe it's my turn." Um, we'll have to wait and see.

Now, on the other side of the equation, here's the S&P 500, uh, having a below-average, on a bad year, right? So it's actually doing quite poorly relatively speaking—down 10% since the start of the year—um, and to be honest, I would not be surprised if the S&P 500 is in a fairly structural bear market now. Something that's probably worth just noting and something I've learned a long time ago and I continue to see—some of the most powerful rallies tend to be counter-trend rallies in a bear market. So what that means—that people are always trying to be long in any asset—that's the default behavior for most investors. What we tend to see in a bear market—you'll get the most powerful rallies. So these are the kind of things that you can call them a bull trap if you want—they're the kind of events that gets everybody excited and hyped up that we could be on the precipice of another run higher. "Oh, no, I missed the bottom; I guess I should buy in here." So I think be really careful in this environment—these really big, powerful upswings, particularly for equities—there is a high chance, in my view, that we actually are in an environment where those rallies could be bear market rallies. I don't think that the equity market has kind of hit its bottom yet. Again, I don't have any edge when it comes to equities; I don't spend a lot of time thinking about them, but just as I absorb all the macro information, I try to formulate my own view. My base case for now is equities probably aren't going anywhere anytime soon. I think there's probably a period of significant chop. I'm not sure whether we're going to get a, like, a 50%, 2008 draw-down. I don't think that's where it goes. I do think that the powers that be will step in before that happens, but at the same time, they've had such a tremendous run over such a long period of time—almost uninterrupted, right? You could argue that COVID was an interruption, but you know, it was kind of a bit of a freak occurrence there. The stimulus came in. My, my base case is maybe along the lines of, you know, lost decade type concept. If we go back and look at the 1970s—more people are talking about stagflation—and if you look at the 1970s, the equity market just chopped sideways in a very volatile manner. That is my base case for how I—my instinct is telling me that I think equities perform. Um, gold performs really well in that environment; Bitcoin probably will perform very well in that environment. So I do think those kind of murmurings of stagflation are starting to creep into the narrative. Um, we'll see how it plays out.

And another interesting one—here's the DXY—same, same chart. The dollar is having a shocking year, right? One of the worst that it's had on record at this point in time—90 days or 100 days into the, into the year—um, well and truly below a bad year on the downside, on average. So, uh, interesting that the dollar is starting to weaken. Um, this is something that the Trump administration has talked quite a bit about—they do want the dollar to be weaker—um, and in many ways, as the dollar gets weaker, it creates liquidity relief elsewhere in the world because the rest of the world has dollar-denominated debts. They can't print dollars, uh, so in many ways, it is a hard currency relative to the fact they can't just produce it out of nowhere. So in a way, if your debt is denominated in the dollars, if the dollar gets weaker relative to your home currency, it actually makes your ability to service your debts and increase the liquidity profile, broadly speaking. So, uh, certainly an interesting trend here. Um, I still do agree with, with Brent Johnson's view that the net impact, if left to its own devices, the dollar will go higher. Um, so we'll see how this plays out, but I think the gravity is to the upside, but perhaps the managed result by the administration is they do want to get the dollar weaker to make the US more competitive.

Okay, so now let's bring in and look at—again, we're going since 2024. I think that during these types of environments, it's very hard to look at, you know, a 90-day window. If, if we think about what the Magnificent Seven stocks are—even the equity market—they're really long-duration assets. You know, the idea is that you invest in a stock; you don't buy it for the next week. Um, traders obviously do, but there, there's generally speaking, investors are looking at that longer-term time horizon. Technology stocks are usually going to be that long, long-duration asset. Bitcoin is the longest-duration asset; gold as well—long-duration assets. Since 2024, and you can measure this on pretty much any timeframe, um, Nvidia has been the best-performing asset. Bitcoin is almost always number two over this period of time, um, you know, really over the last—well, since COVID—let's just, uh, simplify there—it's really been Nvidia and Bitcoin. Tesla was a star performer back in 2021, um, now not doing so great. And in fact, all of the Magnificent 7 have pretty much given back all of their gains, right? Up Amazon, up 14%, um, Meta up 40%, so doing kind of third best, and here's Bitcoin at 90%, and if we look at Nvidia at 211% relative to that starting point. So like, you know, Bitcoin is holding up pretty well, right? Given the, the circumstances, it has not given back the same degree of gains, um, over that longer period of time. Again, we can pick any arbitrary starting point we want, and we generally come to the same conclusion that the MAGA 7 has given back quite a bit, and Bitcoin is doing pretty well, all things considered.

Okay, so let's shift in, look at some on-chain data, um, the top-heaviness framework. Now, this is one that we started our first report with back in, in 2024. And the idea here—I mean, what is top-heaviness? My general simplified framework for looking for bear markets, and we're trying to distinguish between bears and corrections. The idea is when too many people buy too many coins at too high of a price, it creates that incentive, I guess, to capitulate. You get lots and lots of people who buy the top—it's always the most exciting near the top—everybody's saying there's no ceiling, and they pile in a much larger amount than they should have. And as the market sells off below their cost basis, their coins go into loss; their unrealized losses increase, and just generally speaking, it makes for a much more sensitive market. Now, there's a couple of—let's call them, uh, maybe anecdotal is probably the right word—softer data, not quite hard data, that we have to factor in here. If we go back and look at the 2017 top, most people would agree that this was a straight-up adoption-driven, retail-driven, um, instinct—like people didn't have trading charts, right? TradingView barely had a Bitcoin price chart. Um, most people are just operating off their gut feel. We didn't have anywhere near the same kind of data; we didn't have quants; we didn't have all this dynamics. So when Bitcoin is going through one of these very retail-driven, human-driven adoption cycles, the people who buy at the top—which was me at the time—are the least sophisticated actors. And I know I was not sophisticated because it was literally the first thing I've ever bought in my life in terms of an asset. I didn't own stocks; I didn't own property; I didn't own anything. The first thing I ever bought was Bitcoin at the pico top, and you couldn't have bought higher than me. So what we're looking at here—there's a couple of traces, and I've broken it down into market cycles by color. The bottom oscillator is the percent of the Bitcoin supply in profit. So obviously, the higher it is in bull markets—this is telling us when we've got a whole lot of people, you know, everyone's having a good time, and we get these corrections. So when this chart is dipping, it's showing us that coins are going from an in-profit state to an in-loss state. So let's just use this 2017 as an example—every time we get these corrections, we expect coins to go into loss—this is a normal behavior—but notice the depth of the bear market—it just looks very, very different; it keeps getting worse; the dip keeps going, and things just deteriorate from there. Now, this chart at the top here—you've probably seen this in the context of draw-downs from the cycle high—it's the exact same concept applied to this oscillator down the bottom here. So whereas this chart is oscillating around percent of coins in profit, this one is showing us how many coins just fell into loss. So it's showing us that top-heaviness dynamic—too many coins at too high of a price—and you can see that corrections have these kind of short, sharp events. You'll hear me talk about this all the time—short and sharp—they're more event-driven moments. The bulls come in; they find support, and we rally higher again. The 2017 bear—it clearly looks very different; it was a very—this is the shot across the bow in February—the first major seller from 20K to 6K wiped out a lot of people. Suddenly, everyone goes, "Oh, that didn't feel very good." And the smart money are then looking for those relief bounces—those powerful relief bounces in bears to take the exit. Liquidity creates more supply, and this becomes a cascading bear market. 2019, we can see we had these slight dips and then a really nasty event—percent supply and profit deteriorates quite significantly here—75%—we got down to that level, right?—and then COVID was a weird event. 2021, mid—that mid-selloff in May—really, really nasty stuff. I believe this broke the spirit of the bulls. So we're getting up to, you know, 30%, 35% of the supply in loss—these are those kind of tipping-point triggers—how much is too much? Because we expect people to go into loss, but there's a threshold at which people go, "Oh, that was, that was shocking; that was just such a bad event." And you can feel it in your bones when the sell-off was so bad—you've got so much of your supply that's underwater, and it breaks your sentiment. 2021 bear—just a really nasty event. Now, obviously, it's hard to tell at the moment, right? Because when this is occurring, you know, is it a correction? Is it a bear? Is it the start of a bear? These are all those hard dynamics of being on the right edge of the chart—we just don't know what the future holds. But let's look at our current cycle, and here's where I want to introduce another piece of just anecdotal stuff that I think about on the regular—who is in this market? Do we have a pool of people like myself back in 2017 or 2021? I'm sure a lot of you—in fact, the last survey we did—about half of subscribers are from the 2020-21 cycle. How many of you feel like you just put your entire net worth into Bitcoin at the top—at 90K, 100K—and now that it's sold off below, you're feeling a bit sensitive? Now, there's—I'm sure there's going to be some folks in the audience who are there, but I also think that Bitcoin—this whole period—this 2017, 2021, 2022, 23—this whole period of the chart—I think a lot of us have been accumulating long enough that even if we did buy some coins at a high price—90K, 95, 100—I would hazard a guess that it's probably not the majority of your portfolio. You probably haven't gone all in at that price. There will be some folks, but generally speaking, most people have been around for a cycle or two. This particular cycle, I don't think we've brought in the a mass pool of unsophisticated investors. I think it's a little bit more controlled at this point in time. Now, again, that's a bit of an anecdotal thing, but I just think it's in the way that I'm seeing the market trade. I think a lot of those folks would have gone to memecoins; they might have gone to MicroStrategy call options; they've gone to the levered plays because the narrative for Bitcoin has been, "Well, I'm never going to get rich from this." So I think that we have a pool of Bitcoiners who just understand a bit more what they own. And we covered this in a report earlier. So if we look at where our supply and loss or profit is, depending on which one we want to do, it's no worse than the chop-consolidation range. And honestly, it feels to me like—if I was to just gut feel it—it actually feels a lot more like that chop-solidation range in terms of the pain—the financial pain that we're under—it's there, but I don't think that we have this shot across the bow—really, really nasty stuff—everyone knows it's over. I think people aren't sure if it's over, and generally speaking, when everyone's calling that it's over, it's, it's rarely actually over. So again, this is a bit of gut feel combined with data. You know, I spend a lot of time with these charts, and it—I've, I've learned to trust my own instinct in many ways, um, and at this point in time, I just don't, I don't feel like we've hit that kind of maximum pain. Maybe that means we have to go lower to find that threshold, but I'm just not sure that we're there yet. So if I was to frame up a lot of the, the charts we're about to talk about, I think we're at a decision point. This is about as bad as it got in the chop-consolidation range, and we did recover from there. Um, it kind of

Has a lot of the same dynamics. I certainly feel that instinct, and they're in a similar level. So, in terms of financial pain, it's not too dissimilar. Now, this is the wider market, all coins, and we have to remember that all coins and short-term holders, they're two different buckets. Really important to just think about those two separately. They both have an important dynamic, but we'll break these down in the next couple of charts. Okay, so um, if we look at uh the realized loss—are people responding to the incentive of being underwater? Right? We've got something on the order of about 20% of the supply being underwater. Are we seeing a huge uptick in losses? Let's look at our previous shot across the bow, bear market starting events. This was really nasty. We can see we do get losses; we do get losses over the course of corrections, but this was a really nasty event—capitulation bottoms. Right? The shot across the bow, that first sell-off that starts a bear, is actually often worse than the final capitulation event. Here's March 2020; this was worse than that final capitulation event. Here's our mid-2021 selloff, which I refer to quite a lot because this was a sell-off that I believe broke the spirit of the bulls. We're just not there yet. All right, these were all similar to the 2022 capitulation, so it gives you a bit of a sense of scale. So, yes, we've got some losses; yes, they're trending higher. So all of these things are just describing there's going to be people out there who are sensitive, but I'm not yet seeing that just complete and total "it's over, it's done, I'm getting out, get me out at any price." Uh, I'm not seeing that yet. Maybe if we get a sell-off from here, we'll start to see that kick in, but at this point in time, it's it's kind of getting towards that—my base-case bias of I think we just have a more sophisticated audience, people who know why they own Bitcoin, why they hold it in the first place, and they're looking around the world and saying, "Well, this is kind of the exact reason why I started accumulating. This is why what we're seeing happen in the in the macro world today is more or less why I made the decision back here in 2019 that I had to stack as much of this weird internet money as I possibly can because uh it's one of the few things that makes sense." Right? So it's uh I'm seeing myself in the data down here. So uh in terms of that top-heaviness framework, supply being in loss or in profit isn't the perfect measure. It is certainly a measure that we should pay attention to, and it is important, but remember if your coin is underwater or in profit, it's a binary thing; it can be above water or below water by 1 cent, and it will be classified as in profit or loss. But then there's the second level, which is how bad is it? How far has the price deviated below your cost basis? Being down 5% is very different to being down 30%; one of them feels a whole lot worse; another one's another day in the office. So, from that perspective, this is looking at unrealized losses, and again, this is market-wide; we're not looking at short-term or long-term holders here, the whole market. We are up at the cautious level. Right? So that means about 8–12% of the uh at at the peak, right at the 70—what was it?—74K, at 74K we got up to 8 and a half percent of the market cap being underwater. We are much lower than they're now down here, about 5.3. And if we just take a big picture, zoom out, we can see that the losses in mid-21 were far worse; the shot across the bow in 2017 was far worse. All of these bear markets—I mean, we get up to at the bear market floor, half of the market cap is underwater. Really, really nasty stuff. We're just not there yet, which is one of those interesting dynamics—like the damage; we didn't really go high enough to create that bear market sentiment. Let's just think about as a as a mental model here: imagine if the price had got to 200K and we got all the same people buying, and then we came back down to 85; this metric would be bear market potential because we have that delta between the 200K level or 250K down to 85. If you've got all those coins trapped up at that level—too many people, too many coins, too high of a price. So I think the the element here—we've got too many people because and too many people, too many coins, but too high of a price. This is that missing component that I think we don't quite have in my simplified top-heaviness framework. Too high of a price implies people have to buy at a very high level and then be completely wiped out and wrecked to destroy sentiment, and then you get this cascading effect. I'm just not seeing it in the uh in the data just yet. So uh just I want to frame this up: so what we've just looked at is the whole market. Where is the average coin, average Bitcoiner, average supply? What I now want to do is just zoom in on the short-term holders, and then we'll get into some mechanics on long-term holders and those dynamics. I wanted to introduce this chart just very quickly. I've broken down the price here um which is capturing short-term holders in red, and that is everything from November—right, late November where price is about 90K. You can see that all the short-term holders are the ones in loss; long-term holders is everybody else. So it's a nice kind of dynamic. We'll probably only have this for a couple more weeks um before we're starting to get long-term holders who will be in loss. This is going to start kicking in over the next couple of weeks um but again the idea of a long-term holder is they're probably not that phased; they're holding on long enough. Yes, we do get people who buy the top and then they eventually sell the bottom of the bear, but you know, are we in that environment? We're going to get a bear market TBC. So long-term supply is starting to tick higher; that's that dynamic we were just talking about. So it's one of those interesting concepts here that short-term holders—everyone from the first time we got to 90K onwards—just so we can think about where these people started buying and kind of scope out what the uh what their dynamics will be. Okay, so we're going to run through the same analysis but looking at short-term holders. So this is the supply in loss um in red, and then in the orange we've got total short-term hold of supply, and we've got our mean and mean plus one standard deviation. These are our top-heaviness thresholds. Again, let's look at shot across the bow sellers. Let me just pull up 2017. Actually, let me go a little bit further out here, and I'll pull the price up here. Okay, so if we look at corrections in the 2017 bull, we expect short-term holders to buy the top, go into loss, and we get these short, sharp spikes. Shot across the bow was a whole different animal; just about every short-term holder supply coin was suddenly in a loss, and notice we were also seeing short-term supply increasing because long-term holders were selling; they were the ones selling into the top. We get a bulge of unsophisticated, brand new investors. This is me right at the top here, buying my first coin, and then bang—plunged right into a loss. I had no idea there was a bear market at that point in time, and I kept buying—not at the lows, always at the highs when it felt great during those powerful relief rallies. I'm certainly switching around my bias these days. So, from this perspective, uh let's pull this back a bit. Mid-2021, really nasty stuff, but this is where this cycle has been quite interesting. We've seen two significant bursts of long-term holder selling, aka short-term holder supply increasing, when the ETFs went live and then our recent rally to 100K plus. Both of those events we actually got top-heav signals on the supply metric; we cracked above the mean plus 1 SD, and yet we recovered. We actually had another one down here in August 2023; we broke above, and we recovered. Something about this cycle—we're in that environment right now. It feels to me like we have a more educated, more sophisticated, more Bitcoiner type environment where people kind of know what they own and why they own it. So, in a way, yes, we've got this top-heaviness signal, but we have to balance that. I've always got to look at all these metrics in combination—say, well, where do we think the most likely point of breaking that sentiment is? In theory, for short-term holders, pretty much 100% of them are currently in loss; we would actually expect this to be a top-heaviness signal, and we should read it as such. We've broken below the short-term cost base at 93K; almost 100% of their supplies in loss; their unrealized losses, as we'll look at in this chart, um are pretty much 100%. It would make sense; this is a clear top-heaviness signal. Now there's nothing wrong with short-term holder threshold; that five-mon zone. What is different about this cycle is how long things are taking. I would argue we've had three periods of chop consolidation—all their own unique characteristics. We had this period in 2023; we went sideways for most of 2023, and then we rallied into the ETF peak, and then we went sideways for 8 months, and then we rallied into the Trump administration peak, and now yes, we're correcting, but all chop consolidations have a downwards trend; it's a consolidation period. We have many of the same dynamics. So this August 23 period, this chop consolidation period—September, August, se—um, October 24, and then here we are in April uh 2023, sorry, 25, and we have all of the same dynamics. Yes, we've now tested them three times, and the more that we do this, the more likely we do start to break because people get tired; bull markets eventually run into exhaustion. So there is a real risk that we're in that environment, but at the same time, I'm going to balance that by saying we've actually recovered from this twice before, and given the way this cycle is trading with more of these sideways consolidations, and going back to the first couple of charts where Bitcoin is starting to show a little bit of relative strength, which is observable, right, and it's observable over a couple of data points. We've seen Bitcoin hold up better in a couple of instances just over the last couple of weeks. This is not the decoupling, but all decouplings are going to start with a couple of "Oh, that was interesting," and it feels like that's the type of environment that we're in. So again, it all TBC, but uh we're just trying to stitch together this big picture story. Okay, so this is looking at unrealized profit and loss again for long and short-term holders, and we're clocking this in against the market cap—how much of the market cap is underwater? In a way, this chart's going to stitch together many of the charts that we just looked at, and what I'm trying to get my head around here is what is that threshold for pain? Here's that shot across the bow—right, like 30% of the market cap suddenly plunged underwater. Really, really nasty stuff; too many people, too many coins, too high of a price. Mid-21, we got to 20%; in my view, that was enough to break the sentiment of the bull. So, you know, 30% definitely; 20%, yeah, pretty bad. Um, the start of the 2022 bear—similar level—bear market that followed, and look, there's all sorts of macro environment things that happened, right? We had rate hikes here; we had the China mining ban here; we had, you know, FTX blowing out; we had all sorts of stuff. Every cycle's got its own unique dynamics, but there's a threshold where people just go, "That's it; I'm done; I'm throwing in the towel; it's over." We are in the same position as the chop-consolidation range, which we have recovered from. Right? It wasn't anywhere near as bad in uh in August 2023. Where were we? Uh, let me get rid of short, long-term holders. On the short-term holder front, this is the worst, right? So, in terms of people who have bought the top, this is the worst environment, but if we look at it on the scale of 2021, the start of these bear markets, it got substantially worse. Now, this is where we have to think about things from the long-term holder perspective as well, because remember, you can't be a long-term holder in loss until you bought 5 months ago, and then the price or that threshold catches up to your initial buys. So we're not there yet, but we're going to start seeing this metric ticking higher in the very near future. We saw it get up to about, you know, 2–3% of the market cap held by long-term holders at the bottom of the chop consolidation range. We'd been in there for 5 months; long-term supply was able to kick up over here, but those people, they tend to hodle, and we can see that we've got this—I mean, this is just a whole different animal. You can see that at the bottom of bear markets, long-term holders are carrying like 60% of the market cap underwater on their position. Um, you know, this is this is ultimately the bottom, the ultimate bottom signal when you've got this kind of damage, and all the losses are held by people who just aren't going anywhere. But at this point in time, there's basically no long-term holder losses. This will start ticking higher um later on—I I assume in the next couple of weeks—but for now, the aggregate damage is approximately the same as the chop consolidation period, and you know, barely half—less than half—of the kind of bear market creating shot across the bow sell-offs. Now we can look at that in terms of the overall distribution of losses. So here we are at a price about 85K; these are all the unrealized losses that people holding, and obviously the more the price declines, the larger these are going to get. So this guy here is going to be underwater from 100K down to 85, raised down what—15%? If we go down lower, he's going to be down 20, down 25, down 30. But also remember, we don't have that many coins that have transacted between 75 and 85, so the bottom range of the um the air pocket there aren't that many coins down there. So as we stand at the moment, we've got about 5% or thereabouts of the coins held in loss, and this orange curve is going to show us that as price declines. Let's just jump back one level. Let's just say, for example, we've got up here to about 7% of the market cap of seven or eight percent being underwater. Let's just say, for easy math, that we need to get to 20%, right? 20–15 to 20% is that area of of maximum pain where we can probably break the spirit of the bulls. So if we go down to 15%, we have to get to 60K to get to 15% unrealized losses, assuming no coins change hands; we have to get down to 61K. The true market mean is here at 65; we can see there's a lot of supply down here, and we'll look at that in just a second in the long-term holder chart; there's a lot of support. I I just view that 2024 chop consolidation range as a zone where we're going to get significant support come in. So, in order to get to like sentiment-breaking levels, we probably have to get down to the low 60s um to get down to 20%, which is bad, as 2021. We have to get down to 56K, right? The lower bound of the chop consolidation range. Can it happen? Yes. Is it a high-probability event for me? Not really. So, at this point in time, you know, if we're going to call something a bear, I just think we're missing—we've got the too many people; we've got the too many coins, but I don't think we have the too high of a price. That's the main dynamic that I want to highlight here; I just don't think we went high enough, and even the people who did buy, they're concentrated around 90 to 95; they're not concentrated around 110. If all of this buying happened at 110, this would be a different picture, but most of that buying was around 90 to 95. I think most Bitcoiners are pretty used to this kind of draw down, which is an interesting dynamic. So, talking about support levels and just where we kind of sit in the grand scheme of things, this is our long-term holder supply heat map. Here's that that area, right? All of these coins between I mean 50 and 60 and even 70K. Here's our true market mean at 65. We've got to break through all of these guys—demand zone. Now I know for me personally, I consider myself a long-term holder; we get back down into this chop-solidation range, and I am stacking sats like you wouldn't believe. This is the zone where I'm like, "Thank you very much for the gift; I will take it," um and I suspect there's a lot of Bitcoiners out there who are going to have much the same view, and I would say even institutions are going to be—they're going to understand these dynamics, whether they look at um through on-chain data, volume profiles, deviations, whatever it is; there's going to be quants, traders, investors, all sorts of folks who are familiar with markets who are probably going to come to a very similar conclusion that getting down into this chop-solidation range is highly likely to be robust support and therefore probably makes it a pretty viable level, all things considered, um especially when other things are melting down and people are saying, "Well, what about sound money?" Suddenly it makes a whole lot of sense in that dynamic. And again, sticking with a little bit of anecdotal—this is a bit of my gut feel and my gut read what's going on. This is the same chart, but short-term holders—look how many short-term holder coins are just not moving; they're just huddling, right? You can see all of these guys; they basically just accumulated and huddled through this zone, and it the supply just got bigger and bigger and bigger, and it was only when we started moving higher that profits started getting taken. So at this point in time, there's just a lot of people who've bought high but don't seem to be phased by the fact that price is lower, and we're starting to get that building up of the supply down in this zone. So you can see why the short-term holder cost basis—it pretty much cuts the short-term supply in the middle; it is the average of where their cost basis is. And if we just jump back one level, the true market mean here in blue—notice that it tends to sit at the last zone that we had strong support. Here's the pre-ETF rally; lots and lots of supply was accumulated in that zone, and it's maturing into that bucket, and the true market mean is really floating around the area where we last had significant confidence that Bitcoin belonged there—down here in the 20–30K region. Same story; true market mean almost lags by one support zone; it's kind of showing us where we previously had that uh that confidence that Bitcoin belongs at that area. And in many ways, that chop-solidation range just looks to me like if we're going to form some kind of a serious floor—if things really deteriorate—this is this is the target, and this is the area where I think people are going to step in and say, "Thank you very much; I'll take those coins off your hands." Now, two last things I just want to flag. Um, as you can probably hear from my voice, I'm I remain optimistic, and I think my my gut feel is to remain optimistic with one side—one caveat here: I do not think we're going to all-time high anytime soon. This is the fee uh fee market—just looking on a Z-score across a couple of different rolling windows; the market's pretty quiet, folks. Uh, we do not have really any fee pressure whatsoever. I think I checked me.space the other day; um, we've got two, three, four blocks, um and some of those are partially full; we just don't have a huge amount of transaction activity right now; um and just as a high level, I consider this a soft signal but an important signal um because, you know, yes, blocks don't have to be full, and people can be buying on exchanges and all those types of things, but generally speaking, if the blocks are full and people are transacting, it's a good thing; if they're not, probably not a good thing. So right now, we just don't have a long—you know, it's been pretty quiet for some time now. You can see this is t characteristic and typical of bearish markets; we just don't have a lot of transaction activity. So at the moment, I just remain skeptical that we're going to all-time high anytime soon. I think we're going to take some uh yeah, a bit of—bit of work to recover. And similar for transaction volume. So in terms of volume moving around the chain, the 30-day is now, you know, at below—near the one-year moving average. I just consider this a very simple momentum chart, and let me turn off the raw trace cuz that's a bit noisy. You can see that when we come back down and touch these levels, right, it's usually telling us we need to kind of kick up a gear; the market needs to refind its legs. Um, it's pretty soft. So we just don't have a lot of volume moving around the chain; we don't have a lot of uh profit-taking either. Um, we'll look at that in just a second; there's just not a lot happening. All things being equal, that would be a more bearish observation than uh than if we were seeing lots and lots of activity and things were booming. So uh softer around the edges for sure. And uh to close out—long-term holders—this is the other thing: the chain is so quiet. This is revived supply; we have very, very little transactions going on, right? Overall, it's come back down to this typical base range—very few coins that are older than 6 months are on the move right now—you know, 10,000 a day, which, if you can believe it, is actually very normal, very typical—typical of bearish markets, actually. So we're certainly not seeing these bursts of like massive profit-taking; it's cooled down quite a bit, but we're also not going anywhere anytime soon. And to close out—kind of wrapping all of those observations together about spending behavior and activity on chain—the sell-side risk ratio—quick reminder of what this is: high values mean that all the coins that are moving on chain are locking in large profit, large loss, signaling that the market is not at equilibrium. If people are taking profit, they think it's overvalued; if people are capitulating, they think it's going lower—that they're sending a signal to the market; something isn't at equilibrium. Low values are the opposite; coins moving are not locking in large profit; they're not locking in large loss; we're not seeing people from previous cycles taking chips off the table; we're not seeing people who are bought at the top capitulating in large volumes. Very, very quiet, approaching equilibrium. And this chart looks exactly the same as options implied volatility. When options implied volatility is low, when sell-side risk is low, it's telling us we're getting towards equilibrium, and as we know, Bitcoin is not a stable coin; when it goes quiet for too long, it usually wants to get moving again. So I don't think we're quite there in terms of that like winding up of the spring; I think there's a bit more winding that needs to happen, but for uh for the time being, all of these metrics are much closer to some kind of equilibrium level um and that usually means volatility is just starting to build into the system, and eventually it's going to want to move. Uh, so we'll have to wait and see, folks. Um, at the moment, we're in a bit of a holding pattern; we're hanging in there. I think a lot of people are looking at their Bloomberg terminal saying, "Bitcoin's doing surprisingly well." They probably don't like that it's doing surprisingly well if they're a trad, but at the same time, I think there's just the more data points that come in—they go, "That's kind of interesting how well Bitcoin's holding up." I think it's just going to slowly sink in. So anyway, folks, um again, thank you so much for people who've been around for the for the full year, um even people who subscribed recently—honestly, this is the best job that Alec and I have ever had. Um, we can't thank you enough; your support is just hugely appreciated, and uh looking forward to

Another year with you all. As always, you got any questions or comments? You can always reach me in the comment sections, or DMs, or any other way. And uh, I'll catch you in the next one. Cheers.