Transcription
Will the Bitcoin bare market ever end? Sentiment is horrible. The price is down and people are wondering, are they now just bag holders with a dream but no reality?
Well, we can see in this chart right here that Bitcoin has almost roundt the entire 2024-2025 cycle. That doesn't feel good because there's a couple of years now where you've basically got no return if you didn't capture profits at the top of the last bull market.
But Michael Saylor says that this capital rotation is really more of an AI story than it is of Bitcoin. Take a listen to Michael talking to Natalie Brunell about why so much capital is chasing the AI trade.
"I think that right now we've got this AI summer and you've got you've got SpaceX as an AI company raising a bunch of money and Anthropic and OpenAI and Google and Meta and every one of them. You know, we're talking about 500 billion dollars of capital they're working to raise in order to power up their AI data centers. That's creating a hot set of deals that Wall Street is marketing. Everybody wants to get into the deal. They want to flip the deal. Then and so so while those deals are coming, they're creating a suction and they're sucking capital out of every other asset class. And one or 2% of that capital is coming from Bitcoin. Once the deals have gone through, then the lock, you know, then the early hedge funds and traders, they'll flip it and they'll rotate back the other way. So, the hot money will come back and then eventually the lockups will expire and everybody that got rich off of those things, they will go and diversify and they'll come back into Bitcoin. So, I think it's like a a 12 to 24 week cycle. Like you know I I don't I don't know if it'll fix itself in four weeks but I think by the end of the year we'll have gotten uh through that uh AI summer you know uh suction activity and you know just like Austrian economists would say you know if if if the price of Bitcoin falls that makes Bitcoin more appealing right and so it's with our credit as the credit falls it's more appealing to buy it. As the equity and the Bitcoin fall, there's more reason to buy it. And so, at some point, the market will adjust and the capital will first go to the AI trade and then it will come back to digital assets and and come back to the Bitcoin ecosystem. Uh because at the end of the day, the people with the capital, they're capitalists. They're not they're not in love with any of this. They're like, 'I was in that. Now I'll do this. Now I'll go back to that.' And and that they're moving them the capital around. And so I I think toward the end of the year, we should see a reversal of the trend."
Now, it's not just Michael who believes that the AI trade is taking away some of the enthusiasm and excitement from Bitcoin. Jordy Visser also believes something similar. Take a listen to Jord's explanation.
"What's your take as to what's going on with Bitcoin?"
"First of all, it's in a bare market. I'm going to say it every single day until it's not in a bare market. When we break above the 200-day moving average, it will change. Until that happens, it is a bare market. Every single time it runs into any moving average, the most recent one was the 20-moving average, it falls back down. You mentioned the money going into AI. When SpaceX happened this week, it became obvious SpaceX and Bitcoin are basically to me the same thing. SpaceX is a future."
"They're both going to the moon?"
"Well, they're both based on a belief that people have in the future. They're they're not about anything fundamental right now. Like it's very hard to make an argument as to the fundamentals behind this. I love when people send me things and they're going, 'You're wrong. Space S is overvalued.' I'm like, 'No.' When something doesn't have a valuation, it can't be overvalued or undervalued. It has no valuation. It's a complete guess. We're talking about flying to the Mars. We're talking about flying to the moon and building space stations. Like, this is a this is a dream. So, Bitcoin has no energy because it is a vehicle meant for two things. One is for people to hide their money from the government, but that is always going to be a small portion of it because the wealthiest people on the planet, which is where it draws its money from, aren't hiding their money from anyone at this point because they're not taking it. On the other side is the energy that comes from retail and the energy that comes from momentum. It has no momentum last right now. It every week there's more people now. You've got uh strategy has brought people's attention. They're looking at the way STRC is trading and it's down to every everybody has a viewpoint on it. I'm going to keep saying the same thing. It is very difficult for Bitcoin to be traveling higher if all the money is going into stuff that is based on earnings."
"Mhm."
"We need and we're running into the second quarter. I believe the second quarter will be more of a disappointment for earnings than the first quarter. Not that it won't grow, but now the expectations are so high."
"22% earnings."
"Exactly. So if if the stock market is unchanged from now until September, well, that's a better environment for Bitcoin than one where AI continues to go at 50% a month or 50% a quarter because if it keeps doing that, I do believe like you said six weeks ago, you're talking to people in Korea. It's like they used to be a big player in Bitcoin, not there. Retail will migrate to what's working and right now Bitcoin is in a bare market. We need to see it change."
So now that we understand some of what's driving the Bitcoin bare market, the big question becomes, will it ever end? What is the timeline on which investors will be happy once again?
Well, we can listen to Quinton Farquhar who looks and says the 2018 bare market was 364 days in length. The 2022 bare market was 367 days and then the 2026 we are just 200 days into the bare market. Now that would suggest that we have about 160 days left before we're going to get the bottom of the bare market. But there's some data points that maybe are telling us a very different story. Maybe this time is different. Maybe the Bitcoin bare market is not going to be as long as it's been in the past.
First, we can look at the Coinbase Bitcoin premium that has been negative for 47 consecutive days. That is the longest streak in more than four years. Anytime you see that negative premium, that means that people may start getting excited again.
Then we can look at the Bitcoin rainbow chart. This what started out as almost a joke has been deadly accurate over the years. And now it is showing that Bitcoin is in fire sale territory. It's usually a good idea to buy an asset when everyone else has left it for dead. And that's what this chart is showing here.
Then we can go and look at Bitcoin's PuL multiple. We can look at Lark Davis's explanation and he says that the PuL multiple is signaling that we're near or already at the cycle bottom. He claims that the PuL multiple tracks daily miner revenues versus their 365-day average. And when miners stop profiting, they sell Bitcoin to cover costs. He writes that historically that capitulation marks cycle lows. The indicator hasn't hit the green band yet. But like price action this cycle, maybe the signals are more muted. Miner distress is still showing and that historically marks the beginning of the end of a bare market. We'll know within months if $59,000 holds as the low, but the signs are there.
Now, I don't disagree with this. Miners have long been one of the big signals when it comes to bull markets and bare markets. If you're a miner and you're plugged into electricity and you are mining Bitcoin, but it costs you more to mine it than what it's actually worth, it's a huge problem. If you add in your operating cost, now you become a net seller of Bitcoin that provides pressure into the market. And it historically has been a great sign to look for miner capitulation to mark the end of these bare markets.
But it's not just the miner capitulation that we're looking for here. We can also see that mining difficulty has dropped 20% from its all-time high. That is the largest decline since China banned mining back in 2021. And that is also another sign of miner capitulation. If miners are shutting off their machines, then obviously there is less competition to win that Bitcoin.
Now, part of it may be cost issues, but there's also a lot of miners who are saying, I can make more money if I take my facilities and my power and I simply go into the high-performance computing sector. There are Bitcoin miners who are converting to the AI trade. They are starting to create data centers and go and try to work with the hyperscalers rather than simply mine Bitcoin. As we see more of these companies and more of these operators move over onto the AI side, we're going to see miner difficulty continue to drop and at some point it will become attractive again for people to step in and mine Bitcoin. And at that point, that will likely mark the end of the Bitcoin bare market.
Now, along these lines, Leon finishes up his writing by saying, "With sell pressure from miners potentially easing, I think we're getting closer to the bottom."
These data points are suggesting that the Bitcoin bare market may be closer to the end than the beginning. But there's investors like Grant Cardone who continue to talk about the fact that they're acquiring Bitcoin all the time. They simply want to own as much Bitcoin as possible. Take a listen to Grant right here.
"Dude, I'd buy it right here. I believe it's underpriced right now. I think it should be $150,000 today. Maybe 180, 190. And it's just a matter of when it goes there. Same thing for our real estate. Okay. The real estate I bought, I didn't buy it for 235 million because I thought it was worth 235. I bought it because I think it's worth 400. It's just when does it become worth 400?"
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Now, I'm not claiming that the Bitcoin bare market is over, nor am I claiming that it's going to happen in the next week or two. But what I am saying is if we look at the historical trends, it suggests that in the second half of this year, we will reach the Bitcoin bare market end. On top of that, if we look at current data points, we are closer to the end of the Bitcoin bare market than we were just a couple of months ago.
And so ultimately, the question becomes, if you are somebody who has been dollar cost averaging into Bitcoin, or you're somebody who never heard of Bitcoin and simply started to buy into Bitcoin at higher levels, are you willing to part with your Bitcoin when Bitcoin is down 50% plus off its all-time high? Or do you have the conviction that Bitcoin is going to recover and eventually go back to that all-time high?
From my perspective, I've lived through many of these different cycles. And what I know is the closer we get to the end of the bare market, the more that people turn on each other, the more that sentiment drops, the more that people start to capitulate and say, "I don't care about Bitcoin anymore." That's usually the most attractive time to be accumulating Bitcoin.
And so, ultimately, that's the question posed to every single investor. If we are closer to the end than we were a few months ago, then you also believe that Bitcoin is going to go back to all-time high prices, that is a huge gain that is baked into the price. The question is, how long will that take? How fast will it go back to the all-time high? Those questions I don't have answers to. I'm no different than you. I don't have a crystal ball.
But what I do know is that if you are looking for the end of the Bitcoin bare market, it is closer than you probably think. And if history repeats, it's about 160 days away. But if all of a sudden these cycles are much more muted, there's less volatility, then maybe $59,000 was the bottom, and maybe we actually will get the end of the bare market in the next couple of weeks.
Regardless, if you're a long-term investor, you're dollar cost averaging into this asset. Who cares when the bare market ends? You simply get to acquire more Bitcoin at cheaper prices. And if you continue to do that over long periods of time, Bitcoin's going to go up, Bitcoin's going to go down, and you're going to be able to accumulate it more and more and more throughout all of that volatility.
Now, if there's one other data point that maybe will suggest that Bitcoiners, they just need to go ahead and hold the faith, that Peter Schiff, one of the most famous critics of Bitcoin. He recently was on national television with me and he says he no longer believes that Bitcoin is going to zero. I tried to make a bet with him on TV and he wouldn't do it. So, take a watch right here.
"Let me ask you this. Over the next decade, do you think that Bitcoin or gold is going to outperform each other? If you had to pick between gold and Bitcoin, which one do you think?"
"I don't even know if Bitcoin is going to be around in another decade."
"You want to make a bet on it?"
"Bet what?"
"If Bitcoin is going to be around in a decade of gold."
"Oh, holy Elsa got very quiet."
"Who wants to bet me? You know, I got I got..."
"That's easy bet. If you think it's going to go away, let's make a little bet."
"Well, I can't. It's not going to go to zero, maybe."
"Okay, so Bitcoin is not going to zero for gold. I'll make you."
So, there you have it, folks. The AI trade has become much more attractive. People are rotating their capital from Bitcoin and crypto into AI. It seems like every stock that they touch continues to just grow to the moon. And that's what investors want. They want to chase the momentum.
On top of that, we have the Bitcoin miners. A lot of them have been converting into AI and HPC type computational centers. They're taking their facilities and their power and they're going to play a different game. Miner difficulty is falling. And that's why we see so many data points in this Bitcoin bare market that's starting to suggest things are getting interesting.
And so if you're somebody who's been looking to acquire Bitcoin, if you're somebody who's holding Bitcoin, you can't deny the historical trend or the current data. Both of these things are suggesting that these things are now interesting. Bitcoin's reaching a price level that you got to pay attention.
And so ultimately, when will the Bitcoin bare market end? I'm not sure exactly, but my best guess is sometime in the second half of this year. And from there, Bitcoin goes back up and all of a sudden, Bitcoin will rise all the way back to that all-time high. And the people who are able to hold through all the volatility, they're the ones who end up benefiting the most.