Transcription
Welcome back to my 10 favorite people. Hope you're doing well.
I'm incredibly excited for today's video because contrary to popular belief, Bitcoin does not lag behind gold. It rallies when gold is consolidating and corrects when gold is rallying. And this becomes very apparent when we overlay the two assets.
In March of 2024, gold broke out of a 5-year consolidation period. And what do you know, that exact same week, Bitcoin found a local top and entered a prolonged correction. And it wasn't until gold completed its price discovery rally and entered another consolidation that Bitcoin was able to break out and re-enter price discovery once again. But then as soon as gold broke out into new highs, Bitcoin entered another correction. And it wasn't until gold entered another consolidation period that Bitcoin broke out into new all-time highs again. So it shouldn't be surprising that when gold re-entered price discovery recently, Bitcoin topped and has been chopping around and selling off ever since.
So, to me, this chart makes it clear that if we do want to see Bitcoin re-enter price discovery once again and make new all-time highs, we need a local top here for gold and another consolidation period because right now all of the investor speculation is chasing gold. And in case that wasn't enough evidence, we also saw the exact same thing play out in 2020. Gold had an incredible rally until about August of 2020 where it found a local top and entered a consolidation period. And what do you know? Right when it found its local top, Bitcoin broke out and took off.
Now, we are deeper into a bull market this time around. So, I don't expect Bitcoin to go to 200K by the end of the year. But if gold does find a local top here at a nice round number like 4200, which is exactly double where it topped in 2020, I do think that would provide a strong tailwind for Bitcoin.
And if you're one of the many investors whining and complaining that Bitcoin is dead and that you were better off just buying gold, 5 years ago gold was trading at about $2,000 and today it's double that price when 5 years ago Bitcoin was trading at under $10,000 and today it's trading near 100K. So if you expand your time horizon, it becomes pretty clear which asset is the better hold. But I do believe both can have a place in a portfolio for different purposes.
And I think this chart paints a very clear picture as to why Bitcoin should start outperforming gold soon. This is Bitcoin priced in gold. And right now it is more than two standard deviations oversold. We've only been this oversold four times in the past. And each and every time we saw Bitcoin put in a major macro bottom against gold.
We're also seeing quite a bit of investor euphoria surrounding gold right now. And Bitcoin has kind of become the laughing stock because it's underperforming a much larger asset. Gold just crossed a major market cap milestone of $30 trillion. And we saw the price per ounce hit a major milestone as well at 4,200, which is exactly double the all-time high from 2020. So, it wouldn't surprise me if investors started taking profits here. And if you take a look at the weekly RSI, the last three times we were this overbought, gold entered a consolidation period. And just to be clear, I'm not calling a macro top on gold. I'm just saying it's very overdue for some consolidation. And historically, those consolidation periods have been very good for Bitcoin and risk assets as that rotation occurs.
And for those reasons, I feel quite well positioned with my current portfolio. I have this cash position in case this time is different and it's over or we're about to face a black swan event. But the majority of my portfolio still has upside exposure because I do expect gold to consolidate soon and for Bitcoin to find a local bottom.
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 Crypto Enjoyers program and community in the video description. I've had to delay the release of this final module. So lifetime access is still available until it's published. Then we'll be moving to a monthly subscription.
But now I do also want to go over why gold has been on such a tear recently because I think it can tell us a lot about what we can expect for Bitcoin's future as it becomes larger, more adopted, and more trusted. The main reason why gold has been doing so well over the past few years is very clear when you take a look at this chart. This looks at US Treasury holdings in blue and gold in yellow. And as you can see, foreign central banks are holding a lot more gold than US treasuries recently because they're nervous about the US fiscal situation and growing national deficit. And they know that exponential debt growth means exponential money supply growth and fiat currency debasement.
A lot of investors have also been buying gold because of the recent sell-off we've seen with the US regional banks, which usually tends to be a pretty concerning sign. And regional banks are struggling because the Fed is keeping rates elevated and continuing to do quantitative tightening even though the economy can't really handle it. So, gold is likely pricing in the debasement that's around the corner when these rates come down and QE begins.
And last, but certainly not least, I'm sure a bunch of investors are buying gold because of the uncertainty surrounding the US government shutdown, which is getting quite extended here. And because of this shutdown, investors are kind of flying blind here. We're not getting any updated labor market data with the unemployment rate, continuing jobless claims or initial jobless claims. We're also not getting any updated inflation data with PCE or CPI or core PCE or core CPI. And we're also not getting any updated GDP data to see how the economy is doing, whether we look at just US real GDP or the forecast presented to us from the Atlanta Fed. So, it makes sense that with all this uncertainty, investors are buying gold because they don't feel comfortable buying US bonds with the current US fiscal situation.
And I believe it's clear that if we do want to see Bitcoin rally, we have to see gold enter a local top and consolidation here so that we can see investors go further out on the risk curve. And just to be clear, I do believe the main driver for both Bitcoin and gold is the global liquidity index and currency debasement. But investors tend to flock to gold when there's uncertainty and fear and they play the debasement trade that way. But investors buy Bitcoin and go further out on the risk curve when times are good and when they want a higher beta play to take advantage of liquidity growth and currency debasement.
But recently the GLI has just been going sideways because the US dollar index has been going sideways because rate cut expectations haven't been moving much thanks to the lack of economic data. So, it's no surprise that the S&P 500 has been chopping sideways, too. And it tends to have a very strong correlation with Bitcoin. So, it isn't that surprising that investors don't want to take huge risks when there's this much uncertainty. And even though we're still in the middle of a global liquidity index macro breakout, that doesn't mean there can't be consolidations and corrections along the way during our macro uptrend.
And that brings up a very good question. How low will Bitcoin go? As of right now, I am keeping an eye on the 100K psychological level alongside that 50WE moving average, which has been support this entire cycle and even the cycle before it. Until we get a break below that level, my base case has to be that the cycle isn't over yet.
We know that October is off to a rough start at minus 5%, but I still believe Bitcoin can turn it around. We just need to maintain major support levels and close above 109K. We know we had that huge liquidation event last week and investors and traders alike are still recovering from that crazy day. We have to remember that this was the biggest liquidation event in crypto history. So, it will take investor psychology some time to recover. And I'll be keeping a very close eye on tonight's weekly close to see if Bitcoin can maintain its current trading range and close above 109K.
We know investors are incredibly fearful right now and I don't blame them given recent price action. But fear is usually an opportunity in this market as long as the cycle isn't over. So we have to try and best position ourselves for multiple outcomes. Understanding the fact that there is a small risk that the cycle could be over, but it's not the most likely outcome in my opinion quite yet. Investors keep buying the dip whenever Bitcoin enters the fair value region. So, I haven't gotten a chance to buy any at those prices quite yet, but I will be happy to if we do end up seeing that price region in terms of more longerterm holdings.
We also saw just over a billion dollars in ETF outflows last week, but compared to the inflows that came in before it, those outflows are pretty negligible, and I do believe these ETF holders will end up being more long-term oriented, and these ETFs will continue taking supply off the market. And these are still the main three outcomes I'm watching out for and positioning for. If we get that weekly close below the 20we, I'll adjust my views to the full reset scenario being my base case. If we lose the 50we on a closing basis, I'll have to start to entertain the scenario where the cycle is likely over for the time being.
And I will never come on this channel and pretend there are no bearish arguments or that everything is sunshine and rainbows. We've been covering the triple bearish divergence on the Bitcoin weekly chart as well as the bottom to current top being the exact same length as the previous two cycles at 152 weeks. Not to mention, we also have the MicroStrategy chart closing below its 50week moving average and looking absolutely horrendous, which did call the top in the previous cycle for Bitcoin. But I have to keep these bearish arguments in consideration alongside the bullish ones. And until Bitcoin breaks structure, my base case has to remain that it isn't over yet. But we'll keep an eye on the data and adjust our views as needed.
And speaking of keeping our eye on the data, the battle for the 4K Ethereum weekly close continues. We really want to see it maintain weekly closes above this level if we're going to see continuation into price discovery. Wicks below it are fine, but closes are what I really like to keep my eye on. We know that 4K is the most important pivot level for Ethereum by far going all the way back to 2021 where it acted as resistance twice and then it was the breakdown level going into the 2022 bare market. It was resistance three times in 2024, briefly again in 2025 and now we're trying to retest it as support.
As for Ethereum spot ETF inflows, really not much going on. Most of the action is happening with the Ethereum treasuries. Bitmine bought another 1.5 billion in Ethereum since the crash, but they're not really getting a lot of help from the other treasury companies, and Tom Lee is trying to get Wall Street excited, saying that Bitcoin is going to be flipped by Ethereum, which I personally don't see happening, but it's still a narrative that could bring in some excitement.
But the good news is that in the long term, we're still seeing a lot of developers coming to Ethereum. 16,000 new developers just this year. Second is Solana at about 11,500. and after that is Bitcoin. So, it's great to see that the three assets we talk about most on this channel are the ones that have the most developers and users.
This continues to look like a bull flag for Ethereum Bitcoin at a major pivot level. So, I do expect it to break to the upside and that should provide a good tailwind for altcoins eventually which continue to struggle because we still haven't seen a breakout on the Russell 2000 and we still haven't seen price discovery for Ethereum and every single alt season in the past has required those two variables. So, it's no surprise that Solana is kind of chopping around because the ETFs are getting delayed by the government shutdown. Hopefully, the government shutdown ends soon and those ETFs are approved. That way we can see Solana Bitcoin break higher out of its bull flag as well and see Ethereum and Solana get back to outperforming Bitcoin on a yearly rolling basis.
But as we look forward, the federal government is still running huge deficits. That trend seems to be worsening year after year. Even though 2025 does look better than 2024 here, that's only because the shutdown is moving a bunch of that debt into 2026 instead of having it happen this year, which is making 2025 look better than it is. But we know that exponential debt growth results in exponential money supply growth and fiat currency debasement, which is a bullish tailwind for our risk assets like the S&P 500 that we price in the fiat currency and bullish for fixed supply risk assets that benefit from currency debasement 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.