Transcription
Hey everyone, and thanks for jumping back into the cryptoverse. Today, we're going to talk about altcoins and expectations when quantitative tightening, or QT, ends. 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.
If you have followed me throughout this entire cycle, um, one of the things you will know that we've probably talked about more times than I care to count was how easy it was to stay on the right side of Bitcoin dominance, right? And to always call for it to go higher. One of the reasons for that was always because Bitcoin leads the bull market. And so anytime you want the bull market to continue, we need to see liquidity flow back to Bitcoin so that the market can continue on, so the cycle can ultimately continue on.
But one of the things that we really started focusing on near the end of 2021, going into early 2022, was quantitative tightening. And the reason for that was, if you overlay total assets held by the Federal Reserve, what you'll notice is that last cycle, altcoins collectively bottomed against Bitcoin when quantitative tightening ended. Now, it is true that while they did form a low, it's also true to say that that low was swept a couple of times over the next year and a half. But for the most part, the low for all Bitcoin pairs was in when quantitative tightening was over. We saw this trend last cycle. We saw alts be devalued against Bitcoin while quantitative tightening was going on. Last cycle, this ended in the pre-halving year. So, last cycle in 2019, we saw quantitative tightening end, and then that's when altcoins started showing some strength against Bitcoin.
This cycle, we also made this comparison to 2019. We talked about this comparison to 2019 in 2022 and 2023 and 2024 and in 2025. And a lot of people were like, "No, you can't compare it to the pre-halving year. You can't compare it to what happened last cycle because this is, you know, it was the halving year last year, and this year it was the post-halving year. So, how can you possibly compare it?" But the main reason we were looking at it was to keep us on the right side of Bitcoin dominance and to just simply say, look, as long as QT continues, we know from last cycle that all Bitcoin pairs dropped into the end of quantitative tightening. We saw that last cycle. So, we speculated dubiously, of course, what if it happens again?
And a lot of people gave up on this idea back in 2023 because they're like, "Well, it's the pre-halving year. That's when all Bitcoin pairs have to bottom because that's when they found this low last time and then they swept it a little bit later." This time, that's not what happened. And the reason you could argue it's not what happened is because QT continued. You notice the angle of attack, or in this case, the angle of descent, was steep for the entire time, and then they stopped it. You could argue that if quantitative tightening had continued at the pace it was at, perhaps we would have found the range lows a lot sooner. But Powell, as he said many times, wanted to extend the runway. And what that did by continuing to slow QT down, what that did is it allowed all Bitcoin pairs to stay off the range lows longer.
Now, obviously, you're going to you're going to roll your eyes at the idea, but at the end of the day, that's what they were trying to do, right? They were trying to extend the runway. And the way you extend the runway for the blue chips to continue to do well, for the economy to continue to go on without any major issues, is to slow the pace of quantitative tightening. We've still been going, altcoins have still been going down, but because they weren't going down quickly, a lot of people kept thinking it was alt season. You see that? But they were always still going down. The wind was always blowing in the wrong direction.
The reason I'm making this video is because Jerome Powell just came out and said today, "We may be approaching the end of our balance sheet contraction in the coming months." What that means is that in the coming months, assuming what he said is true, quantitative tightening will be ending. Now, that would lead to a lot of questions. The first question is, when quantitative tightening ends, does that mean that altcoins could bottom out against Bitcoin? It could mean that. It could absolutely mean that. That's what it meant last cycle, except for a couple of sweeps below it over the next year and a half, but it ultimately marked a low that was worked off of for a while. So, it could mean that again.
The hard part about it is, right now, we don't we cannot be promised the nature of what Bitcoin will do in order between now and then. Okay, if Bitcoin were to rally in Q4 more than it already has, and if all Bitcoin pairs were to slowly bleed down, and then quantitative tightening ends, then it's possible that you get a big rally by all Bitcoin pairs after a big Bitcoin rally. The problem is, we can't know that for sure because when quantitative tightening ended in 2019, Bitcoin actually topped out a few months before the end of quantitative tightening in the 2019 pre-halving year.
Now, we're obviously not in the pre-halving year. We're in the post-halving year. But if you completely forgot about what year it is and you just said, "Hey, what happened last cycle when the Fed ended quantitative tightening?" We know that Bitcoin found a top in June, and then quantitative tightening ended in September. So, three months, right? Three months. Bitcoin topped out three months before quantitative tightening ended. We don't know exactly what month quantitative tightening ended, or what month it will end this cycle. What you'll notice back then is that even though the top was in for Bitcoin in June, it was still around the highs until September, right? Until right before quantitative tightening kicked in.
So, what I'm trying to say is that a lot of people want there to be an alt season before the cycle is over. And what I am saying is that there's two outcomes here for all Bitcoin pairs, as we've talked about before, for the nature of them. Bitcoin goes up, Bitcoin goes down. If Bitcoin goes up into the end of the year, and then quantitative tightening ends, and all Bitcoin pairs are at the range lows, and we get all these rate cuts, it might lead to a nice bounce by alt Bitcoin pairs. In fact, you can see that over the last couple of years, the big bounces by alt Bitcoin pairs were started in November. This is November of 2024, or in December, December of 2023. But you can see there was an initial bounce in November. In 2017, you had an initial bounce in November and then a higher low in December. So, it's not unheard of to think that we might see a bounce by all Bitcoin pairs sometime in early November to the early December timeframe. And that might correspond to the end of quantitative tightening, and it might correspond to interest rates getting closer to the neutral rate. So, the monetary policy stuff could provide a narrative that supports that idea.
If Bitcoin does not cooperate and Bitcoin goes down instead of up, then that's when you would want to actually take note of what happened in 2019. Because what happened in 2019 is Bitcoin went down after a few months before QT started, and then Bitcoin dominance, sorry, all Bitcoin pairs went up. What essentially happened is that Bitcoin went down, and then altcoins just went down less. Now, that doesn't really sound like alt season either, right? If Bitcoin dominance goes up, it's not alt season. And so we normally say if Bitcoin dominance drops aggressively, it can be alt season. But it has to be while alts go up on their USD pairs, or Bitcoin goes sideways. If Bitcoin dominance is dropping because Bitcoin USD is going down quicker than everything else, that's also not alt season.
So, all this comes down to, how do you navigate that? Like, how do you navigate something where you cannot possibly know for sure, you know, if the top is in or not? I don't think there's many people watching that want the top to be in, right? I mean, everyone wants the party to go on for as long as possible. As they say, you know, "Make hay while the sun shines." When the sun's not shining, you know, you'll deal with that when we get to it. But the way you navigate it without knowing the outcome for Bitcoin is to just figure out what, what would you want your money to be in in crypto while we wait to figure out if we get that final rally or not, right? And it has to be a majority Bitcoin. It has to be, in my mind, because as I said in the last video, the only way you're going to get alt season is if Bitcoin goes back up to new all-time highs. And during that process of Bitcoin going up, if alt Bitcoin pairs capitulate, because in 2017, during this devaluation of alt Bitcoin pairs, Bitcoin was going parabolic. It was, and every week basically Bitcoin was going higher, and alts were going lower on their Bitcoin pairs. And the reason they were going lower on their Bitcoin pairs is because they were staying flat, right? Ethereum didn't go anywhere from basically August until mid-November. It didn't go anywhere. Bitcoin was going up. So, Bitcoin dominance soared, and all Bitcoin pairs crashed.
So, what I'm saying is this. At this point, you're faced with a dilemma. You want a lot of people want alt season, but you can't get it if Bitcoin doesn't go to new all-time highs, right? But if Bitcoin goes to new all-time highs, that means all Bitcoin pairs go down. So, as we said yesterday, option one is Bitcoin goes to a new high. That means Bitcoin dominance goes up. That's option one. Option two, Bitcoin drops to the 50-week SMA, but that also historically makes Bitcoin dominance go up.
Let's go take a look, make sure. If you look at the weekly candles for Bitcoin, you overlay the 50-week moving average, and then you overlay Bitcoin dominance. What you'll see is that during these periods where Bitcoin is falling to the 50-week moving average, you see that as it falls down, Bitcoin dominance goes up during that process. You see every single time. So, you only have two outcomes here, right? We have two outcomes. Outcome one, Bitcoin goes to new highs. In that case, Bitcoin dominance goes up. In option one, it would lead, under the right conditions, to a possible alt season at the end of the year. That's what it would lead to. Option two, no alt season this cycle, right? Or at least not yet, right? It would it would at least get delayed. There does exist a scenario where we go to the 50-week and then rally, and then you still get that final rally by alt Bitcoin pairs, but it would just mean that alt season calls are premature again, right?
What's one more time? So, the great thing about this scenario is that the same thing we've said all cycle, right? Bitcoin dominance goes up either way. Doesn't matter. Now, with investing, there's risk associated with it, right? There is no free lunch. If you buy something, you are taking on the idiosyncratic risk of that asset, right? If you buy Bitcoin, you're taking on the risk and all the risks that come with it. Whether you want to call it the macro risks or liquidity risks, or the, you know, the quantum computing fears that I've heard about since 2017 or before, right? Whatever risks you can think of, there's a risk associated when you buy an asset. It's called the idiosyncratic risk. A lot of the reasons why people just recommend index funds is because the idiosyncratic risk of every individual asset within the fund cancels out, so you're only left with the market risk. And when you're only left with market risk, you basically are exposed to an asset or a collection of assets that generally trend up over time. You're not going to see like a crazy return in a year. You might get 15%, 20% in a really good year. You're not going to be seeing like, you know, 80% returns by the S&P. The only reason, the only way you're going to get that is if you're buying individual stocks. But the problem with individual stocks is you're exposed to the idiosyncratic risk. Maybe there's a bad headline that comes out and the stock goes bankrupt or whatever. So, a lot of times people just buy the market. They get comfortable with lower returns but less volatility. They'd rather have, you know, a 10 to 20% average return than risking it all to make a lot of money or nothing.
So, in this case, you have the idiosyncratic risk of Bitcoin. But the point is, is you could just hold Bitcoin while we figure out which one of these two things is going to happen. If it's option one, then after a parabolic Bitcoin rally, then you could convert some of those, some of that to other cryptocurrencies if you want to take the risk of those altcoins and you want to bet on an alt season at the end of the cycle. But if you don't get that and Bitcoin drops to the 50-week SMA instead, you're going to get wrecked, right? I mean, like, Bitcoin would drop 10% or whatever, whatever it is. But if Bitcoin drops 10%, like we saw last week, alts are probably dropping 40. So, like, it it would suck. No one wants to lose 10%. It's going to suck, but it's a hell of a lot better than watching alts drop another 40 or 50%. Am I right? So, there's no free lunch.
The point is, is there's a lot of investors that are just piled up into altcoins, and they're betting that it's option one. There's nothing wrong with that. But the problem that I have with that view is that in order for everyone else's altcoin to go up, not yours. I'm not talking about yours. But in order for everyone else's altcoin to go up, Bitcoin has to first go up. And Bitcoin dominance, meaning everyone else's alt has to bleed against Bitcoin. So, what's the point of holding all these altcoins if they're just going to bleed against Bitcoin no matter what Bitcoin does? So, why not just hold the king? Why not just hold the king until it proves itself? And if you hold the king and it drops below the 50-week moving average, confirming the cycle is over, then you cut your losses and you get out, and you're only down 10%. But if you buy altcoins and you load up on altcoins, and Bitcoin drops to the 50-week SMA, by the time you cut your losses, you're already down another 40 or 50% like last week. So, the point is, liquidity should flow to the king. Quantitative tightening is likely going to end soon. Interest rates are going to come down soon. There's a good chance that could be a great scenario for the altcoin market under the right conditions.
But if you look at 2019 and see what happened before quantitative tightening ended, we saw Bitcoin top, and altcoins went nowhere. They topped before Bitcoin did, and they just started going down, and then Bitcoin eventually kind of dropped and caught up to them, and that's how Bitcoin dominance went up. So, we don't know if we're going to get option one or two, but the point is, is whatever option we go with, you're better off with Bitcoin in the short term than a basket of altcoins. That's my point.
Now, I'm not necessarily talking about every altcoin, right? I've said that before. I think certain assets like Ethereum, I think the the low for ETH/Bitcoin, I think, is in for the cycle, but it doesn't mean ETH/Bitcoin can't go lower where it is right now. It just means I think the low was in April for this cycle. So, ultimately, I think it will form a higher low and go higher. But my main point again is that I don't have a crystal ball. You don't have a crystal ball. No one knows where Bitcoin's going to go. We hope it goes higher, but we don't know. My my point, the point I'm trying to really drive home is that there's no free lunch. If you're going to be in crypto, you're always taking a risk. Where do you want to take your risk? You have the opportunity cost. Every dime you put in an altcoin is a dime you're not putting in Bitcoin.
In order for the cycle to not be over, Bitcoin has to go to new all-time highs. In order for it to go to new all-time highs, liquidity has to flow back to the king. If liquidity flows back to the king in a dump, you're definitely not going to want to be holding alts. And if liquidity flows back to the king on a rally, you're going to be FOMOing into Bitcoin. And if Bitcoin's going up every week, and altcoins are staying flat like they did for like all of October and half of November in 2017. So, Bitcoin protects you from the downside risk. It, let me say this, it minimizes your downside risk and it gives you exposure to the upside. And what I mean by that is, look at last week. You know, last week was a great example of a week where a lot of people were like, "What about Bitcoin?" You know, "What about it?" "What about it?" I mean, yeah, it dropped 7% from open to close. So what? That's Bitcoin. Does that all the time. But altcoins dropped a hell of a lot more than that. From the open, from the weekly open to the to the wick close, it was it was more. It was 15%. And from the wick high to the close, it was 17%. But the problem is, altcoins went down 40 to 50%. Bitcoin gave you exposure to the upside, but it also minimized your downside risk. When I say for the last four years that my crypto portfolio has been Bitcoin heavy, I'm not saying Bitcoin can't go down. I'm just saying that I choose that one over everything else because it gives me exposure to the upside. And anytime we get these these, you know, sharp moves down that are unexpected by a lot, alts get wrecked, but Bitcoin holds up a lot better. That's the point.
So, quantitative tightening coming to an end in a few months. We're going to get a few rate cuts. It could be a great environment if Bitcoin can go parabolic. It could be a great environment for altcoins and Ethereum if Bitcoin can rally to new all-time highs. The future is not promised. There's always a chance that it doesn't, and that we get weekly closes below the 50-week SMA. If that happens, you can minimize your risk with Bitcoin because it's only 10% down from here to the 50-week moving average. And if we hold the 50-week, we still might get one more chance. If you go below the 50-week, the cycle's likely over. On two weekly closes, every cycle, two weekly closes below the 50-week, the cycle's over, right? So, on that point, I would just cut my losses and get out from, you know, if you if if you're still in, it's not even that much lower, right? It's it's 8% lower. So, that's basically your your downside risk if if Bitcoin is not able to hold the bull market support, the bull market support band as support. And if it does hold it as support and we rally on up, you're going to be a hell of a lot, you're going to be a hell of a lot better better holding Bitcoin doing that than alts because alts will not likely move until Bitcoin confirms that the cycle is not over. That's when alts usually move, right? When Bitcoin, when Bitcoin hits a new cycle high, that is when alts move. And you can see it clear as day. Look at Bitcoin dominance, overlay it, and see where Bitcoin dominance fell off. Bitcoin dominance drops after Bitcoin makes these all-time highs. You see that? Or the new cycle highs right here, that purple line, that's where Bitcoin dominance dropped after Bitcoin made new highs. Where did it where did Bitcoin dominance drop? Over here, right when Bitcoin made new highs. And then over here again, when Bitcoin made new highs, that's when that's when Bitcoin dominance fell off, fell off the cliff, right?
So, those are my views, right? Those are my views. Bitcoin is the way. And if if you get a weekly close below the 50-week SMA or two, we wrap it up. We pack it up. We call it a we call it a day, and we'll see you in a year. And if we keep on partying for the next two months, then you rot you then you could rotate into altcoins. At least a small percentage of your Bitcoin, you rotate that into altcoins, um, in a few weeks after Bitcoin makes a move up. It's an if-then statement, right? You hold Bitcoin. If Bitcoin goes up into a parabolic rally, then you make some exchanges for riskier assets and bet on alt season. So, you hold Bitcoin in option one. In option two, you hold Bitcoin. If Bitcoin goes down, then you just cut your losses and you wait a year, and then you and then you jump back in. So, either way, Bitcoin is a better play for now until we either get weekly closes below the 50-week SMA or we get new all-time highs. Majority portfolio Bitcoin is, in fact, the way to go. In fact, it's always the way to go, even with either of these two outcomes. But at certain points, it does make sense to take a little bit extra risk under the right conditions. We're just not there yet with respect to Bitcoin. Bitcoin dominance should go up.
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.