Transcription
Welcome back to my 10 favorite people. Hope you're doing well.
I'm incredibly excited for today's video because even though there's a bunch of fear and uncertainty out there right now, these are the facts. The Federal Reserve is cutting interest rates even with the Bitcoin and the S&P 500 near all-time highs, quantitative tightening is ending on December 1st, and the US government is issuing more debt than ever.
And I know the past few months of chop have been difficult for many, but it's really not surprising when you take a look at the fact that the global liquidity index has been at the same level for 4 months now. But when we take a look at what's happening over the next few months, it's hard to envision a scenario where the global liquidity index doesn't increase over the medium-term and take Bitcoin higher with it. We just have to survive the volatility along the way.
Now, the market was quite unhappy with Powell's comments at the FOMC meeting. Going into the meeting, the market was pricing in four rate cuts over the next 12 months and a 91% chance of a rate cut in December. But after Powell's comments, the market is now pricing in only three rate cuts over the next 12 months and have reduced the likelihood of a rate cut in December down to 63%. And we know that pricing in less rate cuts strengthens the US dollar index, which seems to be heading higher here in the short term before rolling over and heading lower in 2026. And a strengthening US dollar puts downward pressure on the global liquidity index because it is the global reserve currency.
And I believe Powell and the Fed are bluffing here. This is what the current rate cut projections look like. They expect to reduce rates to around 3 1/2% and then keep them there for the foreseeable future. But that is nearly impossible when you have an economy that got used to a decade of nearly 0% interest rates. They're trying to be as hawkish as they can be to keep animal spirits under control, but there's no way the economy can handle these elevated interest rates for that long. And I believe interest rates are going a lot lower than the rate cut expectations currently assume in 2026, especially if we get a new Fed chair.
But rate cuts aside, quantitative tightening ending on December 1st is also a huge tailwind for global liquidity. We know the Fed has been reducing their balance sheet over the past few years and it slowed down the rate of QT as much as they could to keep it going for longer, but cracks in the repo market are forcing them to finally stop it. Powell and the Fed can talk tough and delay QE as much as they want, but the bond market is going to need them to step in to keep yields under control and help the US government manage their fiscal situation. With all the deficits and debt growth that we're seeing, these federal deficits are getting larger and larger. And for years now, we've talked about how exponential debt growth results in exponential money supply growth. As that debt has to get monetized, and what's the best way to monetize that debt, have the Fed put it on their balance sheet via QE?
So although we can have a bit of uncertainty and volatility in the short term as the Fed tries to talk tough and delay quantitative easing and try to delay rate cuts, we know where this is headed. I expect this global liquidity index macro breakout to continue deep into 2026 as all of these things come to fruition.
So how am I positioning for this short-term gloom, long-term boom situation we find ourselves in? I didn't make any changes to my portfolio this week. I have this cash position to take advantage of that short-term opportunity and perhaps even accumulate at lower prices, but the majority of my portfolio is still in spot holdings because I believe the medium-term trend for global liquidity and risk assets is clear.
And as always, if you'd like to learn more about my portfolio automation system or mental models I use to navigate this market or common mistakes I see so many investors making, you can check out the Cryptoenjoyers program and community in the video description. The lifetime access offer will be ending in two days now that the common mistakes course is complete. If you'd like to see the first module of each of the courses or read some testimonials and reviews, you can check that out in the video description.
But for now, as long as this global liquidity index macro breakout continues, I have to remain bullish on Bitcoin. We've seen the same pattern over and over again. Quick rally, long chop and consolidation period that makes everybody upset. Quick rally, long consolidation period. Quick rally, long consolidation period, quick rally, and here we are once again in a long chop and consolidation period, which is making so many investors throw in the towel.
And this isn't even unique to Bitcoin. We saw a ton of euphoria recently with the gold rally into that local top. But this entire cycle for gold has been rally, consolidate, rally, consolidate, rally, consolidate, rally, consolidate, rally. And now we are once again consolidating. And gold and Bitcoin have had this interesting relationship where they take turns rallying and taking investor attention. And then while gold is consolidating, Bitcoin has its chance to head higher. And I don't think this time is going to be any different. And that's why I called Monday's free weekly report the great rotation. Not because I believe central banks are going to be taking profits on gold and rotating them into Bitcoin, but because investor attention can really only focus on one asset at a time as one asset rallies aggressively and takes all of the liquidity into its move. And then once it has a chance to cool off, especially a huge asset like gold, that gives Bitcoin a chance to shine once again.
And we've seen a very interesting relationship with Bitcoin and the S&P 500 as well. The S&P 500 tends to rally first and then Bitcoin investors tend to whine and complain until Bitcoin catches up. S&P 500 rallies first, Bitcoin catches up. S&P 500 rallies first, Bitcoin holders get made fun of until it catches up. S&P 500 rallies, Bitcoin chops forever and then catches up. And what are we seeing today? The S&P 500 keeps making new highs and Bitcoin holders are capitulating left and right because they're so tired of watching Bitcoin chop around and consolidate. And it wouldn't surprise me if Bitcoin caught up in just a few weeks of upward price action.
And the move we've seen from the S&P 500 since April has been absolutely incredible. And it wouldn't surprise me if we saw a short-term correction before heading higher, scaring a lot of investors and making them think that the AI bubble is popping. And it's not surprising that the Fed is being really cautious here with ending quantitative tightening and forecasting future rate cuts because the stock market is already so elevated.
But I really can't be bearish on the S&P 500 or Bitcoin here when you have real GDP at 2% and the expected real GDP number for Q3 to be closer to 4% and the Fed getting ready to embark on rate cuts and end quantitative tightening with a labor market that is slowly weakening but not falling apart and an inflation that is remaining stubborn but remains below 3% and still remains a lot lower than where it was a few years ago. And this is why the full reset scenario remains my base case.
Bitcoin is still maintaining structure even though there has been a lot of chop recently and a lot of reset in sentiment with so many investors being fearful here. But if we lose that pivotal level, we can talk about the cycle being over and downside targets and opportunities. But as long as we maintain above it, I believe this is just short-term volatility before our medium-term thesis plays out.
And I don't blame investors for being fearful here. Bitcoin has been chopping around and altcoins have continued to struggle. There's still so many people calling for a big bare market correction here because of the 4-year cycle being over. And there's a lot of nervousness surrounding the fact this bull market was the exact same length as the previous two. So, if we did top here, it would be a similar pattern. And we're starting to see that fear manifest itself in these ETF outflows as investors start to pull a little bit of money out of the Bitcoin ETFs because they're fed up with the choppy price action or they are tired of Bitcoin being flat for 10 months while other assets like stocks and commodities rally.
But because I'm bullish on Bitcoin long-term, I like to take a different approach using the 200-day moving average as my guideline. I want to be sitting on my hands and not doing much in the fair value region. I want to be taking profits in the expensive and very expensive regions, and I want to be buying in the cheap and very cheap regions as long as I remain long-term bullish on this asset. And it's hard not to be because I'm having a hard time envisioning a future where central banks become responsible and stop printing money.
And even though price action has been choppy recently, there's still a lot to look forward to in the future. We still have the crypto market structure bill passing through Congress even though it's being delayed by the US government shutdown. We still have a trade deal between the US and China looming in the very near future. And we also have a new pro crypto head of the CFTC. So, in my opinion, the future looks bright for this asset class. We just need to keep an eye on market structure and make sure that Bitcoin maintains its macro uptrend and make sure that we're always open to multiple outcomes.
And speaking of multiple outcomes, we were expecting October to be green going into the month because it is Bitcoin's best month historically, but it ended up being a relatively flat month at minus 3%. I see a lot of people saying November is Bitcoin's best month and not October. But that average is being lifted heavily by a 450% monthly return in November of 2023. I can only imagine what that must have felt like for the investors that were around at that time. But that's heavily lifting the average. So I prefer to look at the median return, which is around 9%. So seasonalitywise, I expect it to be a good month, but maybe not as good as that average return would have you believe.
As for Micro Strategy, still struggling and still underperforming Bitcoin. Their purchases are getting smaller and smaller. Even Sailor's price targets have gotten more reasonable. He's now only calling for 150k by the end of the year. This may be the lowest price target I've ever seen sailor give. And because strategy is struggling, that's also impacting the NAV premium of all of these other corporate treasuries as well. Metanet continues to struggle. And it looks like Coinbase is the only treasury company alongside Bitine that actually has some profits to buy Bitcoin and Ethereum. But we'll see what happens.
I expect a ton of volatility in November. Bitcoin is still holding our major pivot at 109K that goes all the way back to December of 2024. As long as we are above that level on a weekly closing basis, I have to remain bullish in the short term. If we do lose it, we can talk about other outcomes and other probabilities that we'll have to position for. But as of right now, I expect support to continue acting as support until it breaks.
And speaking of support continuing to act as support, the battle for 4K Ethereum continues. Once again, we find ourselves on a Saturday where Ethereum is trading below that level. It's been able to save it going into the weekly close the past 3 weeks. Is it going to be able to do it again? We're going to have to wait and see. As of right now, similar to Bitcoin, we're seeing some ETF outflows. Corporate treasuries aren't really doing much. But although we're not seeing much in terms of ETF inflows and corporate treasury buying, the fundamentals continue to get better and better for Ethereum as its on-chain stable coin volume got close to $3 trillion in October with the previous record being the month before at just 2 trillion. This stable coin trend is absolutely insane and I just can't bet against it and be bearish in the medium-term on Ethereum.
You see something very similar when you look at DeFi value locked by blockchain. Ethereum makes up more than 2/3 of the TVL. So I have to imagine that this dominant player is going to remain dominant for the foreseeable future and I believe that makes the investment case very easy for institutional investors and I believe that Ethereum Bitcoin is still consolidating here before its next break higher.
As for altcoins, they're continuing to struggle as we can see here with the altcoin season index still sitting at a 43 because we still haven't gotten that clear breakout and continuation out of the Russell 2000. As long as the Fed keeps talking tough and delaying rate cuts and QE, I expect the Russell 2000 to continue to chop around because these smaller 2000 companies are a lot more rate sensitive than the larger, more established companies in the S&P 500. So until we see clear price discovery on the Russell 2000 and on Ethereum, I'm not expecting much from altcoins.
And that brings us to Solana. Not surprising that it's been chopping sideways here given the price action we're seeing from Bitcoin and Ethereum. But the ETFs finally went live and we've seen four consecutive days of inflows. This is the exact type of trend we want to be seeing. And even though it doesn't mean that price is going to skyrocket immediately, I do believe it is great for Solana long-term because it has one of the clearest use cases alongside Bitcoin and Ethereum.
I do want to kind of dispel the rumors with this chart though that I'm seeing a lot of people talking about and that's that without BlackRock, the Bitcoin ETFs would only have 1.14 billion in AUM and the Ethereum ETFs would actually be negative thanks to the grayscale outflows. But the elephant in the room that this chart completely ignores is that this money that ended up going into BlackRock likely would have went into the other ETF issuers if the BlackRock ETFs weren't available and weren't the most liquid. Now, BlackRock definitely helped with their promotion. And I'm sure they brought in quite a few inflows that wouldn't have come in otherwise, but this chart is really misleading in my opinion because it assumes that the tens of billions of dollars that came in via BlackRock wouldn't have just flowed into an ETF from another issuer. And I believe that's not the case. So I remain bullish on Solana and expect it to put in a higher low and then a higher high on its Bitcoin pair here.
I believe the investment thesis for Solana is very simple here. All you have to do is look at stable coins and tokenization. We're seeing huge growth in RWAs as more and more assets get tokenized and brought on chain. And you don't even have to get me started on the exponential growth we're seeing in stable coins as it feels like every single day now there's a major player like Western Union or Visa or Mastercard getting in on the stable coin action and I expect the growth to remain exponential for quite a while. So we'll see what happens.
The performance versus benchmark over the past year chart is going to start looking pretty bad here because we're going to be comparing to November and December of 2024. But after so much sideways consolidation and so much time capitulation as investors have thrown in the towel, it's hard for me to imagine that this was just one big distribution when we've seen such a big reset. We never saw euphoria and the fundamentals just keep getting better and better. And that's why I'm leaning more towards this being a reaccumulation period and not a distribution period.
And one of the main reasons why I believe we still have higher to go is because the federal government is still running huge deficits. That trend seems to be worsening year after year. And we know that exponential debt growth results in exponential money supply growth as that debt has to get monetized and the fiat currency gets debased. And because we price our risk assets in that devaluing fiat currency, we can expect more upside for risk assets like the S&P 500 and fixed supply risk assets like Bitcoin.
But as always, let me know what you expect. Thank you so much for the support on the recent videos. Thank you so much for watching and I'll talk to you.