Transcription
This video is going to be extremely important. So, watch it until the end. We will appreciate what has happened with gold in recent years, even the last decades, to appreciate what has happened at the same time with the dollar, the stock market, and therefore the reactions we can expect for Bitcoin and cryptocurrencies thereafter.
Of course, and we can never say it enough, past performance is not indicative of future results. But what is super interesting, and it is indeed the only tool we really have at our disposal, is to understand history, to understand the economic mechanisms that lead to consequences. If we can isolate causes that repeat over time, we can isolate that the same causes generally lead to the same effects. And if statistically speaking, in terms of probability, we see that a certain thing always happens, then we can expect that this thing will happen again in the future under the same macroeconomic conditions.
So, you will see, we will take several leaps into history. The economic conditions were not all the same as today, of course, but we will limit ourselves to an appreciation of what happened each time gold reached a parabolic phase and the stock market and the risk market in its broad scope were also pushing to new highs at the same time that gold reached an extreme parabolic phase and began a retracement. And the last time this happened was in 2011, and you will be able to see that a central element that allows for a real parabolic rise is the loss of confidence in the dollar.
Here, I have just added the dollar chart, which is in blue right here. And you can see that the gold hyper-acceleration phase most often occurs when we have decreases. On the dollar, we went from 118 points to almost 72 points. So, there was a significant devaluation of the dollar. I don't want to go back over the economic mechanisms that led to this significant decline, but there was, as today, geopolitical instability regarding the belief, regarding the confidence that countries and banking and financial institutions, whether American or foreign, had in the main global currency. And this allowed for a significant appreciation until the dollar reached a bottom zone where, as you can see, we formed a double bottom, the dollar began to regain strength, and from then on, the gold chart reversed.
What is interesting is that if we take the main industrial index in the United States, which is the Dow Jones, we can see that, excluding the subprime crisis here, we had an appreciation at the same time as gold, the industrial stock market, with, and this is notable, an acceleration if we put it on the same time scale, a Dow Jones acceleration once gold had calmed down and reached a bottom. We had what appears to be an asset rotation. This is a term we use a lot now. Towards the stock market. We see that gold reached a peak and a parabolic phase well before the traditional stock market, and then, while gold was retracing, the stock market continued to perform.
If we move past the Dow Jones but look at the S&P 500, it is also striking. We clearly see the acceleration, and once gold calmed down and even reached bottom levels, we had a hyper-acceleration of the stock market right here. At the same time, we must take into account economic components such as inflation, unemployment rate, Fed interest rates, and so on, to appreciate the similarities and differences. And we will start with inflation. Inflation was at almost the same level as it is now. We were at 5.5% when we were here at the level of the subprime crisis in 2008. And once we were in a gold hyper-acceleration phase at the gold top, we were around 3% inflation and it dropped very quickly to 2%. Knowing that today we are rather around 2.9%. So, regarding inflation, we find a situation that is what we know today: inflation that is controlled, that is stable at the time gold reaches its peaks.
A notable difference compared to what we are experiencing today is that the Fed had set rates at 0%. This is not the case today. We are in a full rate cut, in full monetary stimulus, but we can see that this rate cut, right after the crisis, led, and we know this, to a way to print money, to create money in abundance, and this was directly reflected in the market. We had ups, we had downs, but we were going higher and higher, even as the Fed began to raise rates right here. This is where I would like to point out a difference compared to what we experienced in 2022: we know the principle. Normally, a rate cut is bullish for risk markets. Rate cuts, we have seen this amplified, but once the Fed announces it will raise rates, we find a narrative that is rather bearish, and we see that this time it did not happen. Despite the fact that we are seeing a gradual but steady rise in rates, the markets continued to appreciate strongly until Covid. Covid brought rates back to zero, and we started to rise. But what is appreciable is to see that this context of rising rates did not lead to a small crash in gold here in 2018, nor did it lead to a very deep retracement in the stock market.
Regarding the Fed's behavior, what was interesting to note is that since the subprime crisis, there has been a period of very strong quantitative easing (QE). But what is super interesting is to observe that even during periods of quantitative tightening (QT), particularly from July 2011 to November 2012, despite QT, financial markets continued to rise, and despite a halt in QE, or even a massive QT announced from 2015 to 2019, markets did not stop appreciating. And so, we find this component that we have today: that yes, we have had QT for a while, but markets are still appreciating, and generally, when we enter an economy that is tightening rates, either after a major crisis, as happened in 2008, or in a soft landing context, this rate tightening and the resumption of QE or the halt of QT remains bullish. It does not lead to an immediate crisis in the markets.
If you don't know what a soft landing and a hard landing are, I refer you to my latest videos where I discuss them. In summary, what is a hard landing? A rate hike and a reversal of monetary policy that comes too late when we are already in a bubble burst. We experienced this in 2008. The Fed started cutting rates. If we look at the S&P 500, the Fed started cutting rates when we were already entering a bear market. And so, this was a hard landing. The Fed's intervention was too late. On the other hand, every time we had a soft landing, meaning the Fed was able to recognize that the banking system lacked liquidity, that the economy was starting to slow down a bit, and that it lowered rates in advance to combat this, we had a soft landing period, meaning a gentle landing. Prices did not fall directly to the ground. We certainly had some unexpected movements, a bit like this, for example, but the general trend remained upward. We did not have economic flash crashes, and therefore, currently, we are clearly in a soft landing period for the past year, and thus, despite a continuation of rate cuts, this context here, for now at the end of 2025, is not the one to appreciate. It will likely happen sometime in 2026. For now, we don't know. You know the theory, it's the big debate right now. Will the cycle end this year with, yes, some stagnation in the stock market but no stagnation in the crypto market, or are we too early in the cycle? The cycle has been shifted to 2026. It could be the end of Q1, Q2, Q3, Q4, we don't know yet. But basically, there is a delay for crypto.
My opinion, you know it, it has evolved because you have to look at the data we have. If you deal with people on social media who never question their views, who remain maximally bullish, maximally bearish, whatever, be wary. You need the intelligence to see the data in front of you and question your own biases. And my bias has been somewhat challenged by everything we've had, namely the shift in the debt cycle which shifts the liquidity cycle, and so on. Everything that suggests that the top should be at the end of 2025 is a fact, the one we've always had in the crypto market: 4-year cycles, 3 years up, 3 years down. This is the only idea right now that allows us to say we will have a top at the end of this year. But if you follow my videos, you know, a 4-year market cycle doesn't exist anywhere. Not in the stock market, not in commodities, not in forex. It's specific to crypto, which is a nascent market that follows the stock market, which has cycles between 5 and 8 years. And so, the double theory, mine, and I've already proven this in several videos, is that the crypto cycle will tend to change over time. This means it can be shorter or longer, with a higher probability that it will be longer. Why? Because it follows its big brother, the traditional stock market, the Nasdaq and S&P 500, which have market cycles of 5 to 8 years. And since the crypto market is highly correlated, there will be more and more chances that as institutions enter the crypto market with their behavior, their habits, they will bring this same temporality to the crypto market. And we could start to see this lengthening precisely now in the more institutionalized cycle we've ever had in cryptocurrency.
If we go back to gold, the last time we had a similar parabolic phase to the one we just saw and to 2025, it was here in the years 1979-1980, and the same narrative began to emerge: a dollar decline, loss of confidence in the currency, a refuge in precious metals, and gold has been the most favored for a very, very long time. Gold hyper-acceleration until the dollar's near bottom. And once the dollar reached a bottom, then, we started to retrace gently. Because once the dollar regains strength, then, of course, the same investors who lose confidence in the dollar look at the charts, look at the news, and say, "Okay, the currency is regaining value, I might take my profits here because there are still speculative investors. I'll take my profits here and I'll go back to an asset that is at a bottom, not a top, here the dollar."
If we look at what the stock market did, it did not stop rising. It did not stop rising, and despite a flash crash here between February and March 1980 because there was a Black Swan event at that time which was unforeseen and caused markets to crash directly for 4 weeks, the recovery was very bullish as soon as gold calmed down. Even with a dollar recovery, as we saw here, the stock market pumped very well for several more months, and this despite the dollar regaining strength. We experienced this configuration also in 2021 because, it is true, there is a basic idea that two markets face each other: the non-risk market and the risk market. And in the non-risk market, we find currencies entirely, and in the risk markets, the S&P 500, Nasdaq, cryptocurrency. There is a basic principle that if the dollar loses value, all assets traded against the dollar will appreciate. This is a natural mechanism that is true. However, the natural mechanism that is also true is that at the end of each bull run, these assets rise at the same time. You can see that here, we are in the 2020-2021 bull run. We will even add Bitcoin to the chart. So, you have Bitcoin here in yellow, S&P 500 with normal candles, and the dollar here in blue. And what is interesting is that we see, yes, as soon as the dollar crashed, assets traded against the dollar naturally gained value. However, it is also true to note that from May-June 2021 until the end of the bull run, i.e., December for the stock market and November for the crypto market, we had a dollar strength that arrived, that recovered, with risk markets that continued to climb again and again, with Bitcoin going from $32,000 to $65,000. We still had a doubling of the riskiest asset in the world at the time, along with altcoins, at the same time as the dollar was regaining value. And this is typical of the end of bull runs.
At the end of a bear market and at the end of a bull run, the same thing happens: assets generally follow the same trend. This means that some of them are "lying." When I say lying, it means that some are following a trend that is not in line with the correct trend they should be following. And when we are at the end of a bear market, it is the risk assets that are falling too much compared to their expected behavior. And this is where we need to have the anticipatory behavior to say that there is an unnatural mechanism, and this unnatural mechanism will imply a catch-up. This is something all assets do. They are sometimes delayed or ahead, they perform a catch-up, which leads to a very strong bull market suddenly or a very strong bear market suddenly in the other direction. And at the end of a bull run, it is precisely the risk assets that are lying. We have the dollar bottoming out and starting to retrace because, precisely, the market anticipates that there will be a recovery, an upward dynamic in non-risk markets. We are starting to enter a macroeconomy that is bad for risk assets, and therefore we see non-risk assets rising in correlation with macroeconomic news. And what we also see at the end of a speculative bubble, as here in 2021 and generally at every end of a bull run, we also see speculative assets rising enormously while the macroeconomy becomes really bad for them, and so they are the ones lying at the end of a bull run.
And in the same spirit as for the end of a bear market where we take positions on a market that is falling too much and will perform a bullish catch-up, it is at this moment that we must withdraw from risk markets because the bearish catch-up will be enormous, will arrive. We never know if it will happen in the following days, the following weeks. The most important thing is to appreciate what we will have ahead of us, not to absolutely want to sell at the absolute top, not necessarily to want to buy at the absolute bottom, but to say, "Okay, we are entering a good configuration, we have made good gains, and therefore we need to get out of here."
What I am going to do is my own opinion, but I will look at how long it took from the dollar bottom to reach the top in the crypto market. We had about 25 weeks, 175 days. Why am I doing this? Because currently, we see that the dollar seems, I repeat, seems to be regaining a bottom structure, seems to be regaining a bottom structure. And what could be interesting is to say, of course, and this is pure drawing, pure hypothesis, we don't know anything, will we have the same timeframe or not before reaching a top in Bitcoin? And if that is the case, we should have, if we follow the 2021 mechanism, a top in March 2026, end of Q1 2026. Even if we put a bottom here for the dollar, no panic, there is still a delay, this is proven, it has always happened. We had a delay of several months, the number of months varied, but in any case, this delay does exist, and this is what we should remember from this video.
Last points, where are we today? We see that gold seems to have finished its parabolic ascent. We have had all the classic elements of a gold bubble. This happened in a context where the dollar has been depreciating since 2022, with an acceleration since Trump arrived and a hyper-bullish policy for the dollar. Gold seems to be currently in its topping phase. I told you last week that here, going down in hourly timeframe, that here, we had already had the signal that from there, we could become bearish on gold. We had a very small rally on Monday which formed a double top phase, a very well-known phase of a bull run ending. We retraced, and we are currently having a hyper-bearish structure on gold. And for now, this bearish pattern and this top are precise up to the 4-hour timeframe. And what has always happened until now is an asset rotation that occurs in a period of uncertainty in risk markets. And this rotation, we are also beginning to appreciate it with various indicators that do not lie in the stock market. And the best of these indicators is the SPX on RTY chart. What does that mean? The S&P 500 on the Russell 2000. For those who don't know the Russell 2000, it's the equivalent of altcoins for the traditional market in terms of listed companies. So, these are the low-cap listed companies. And so, here, I have put the market cap, or rather the evolution of the market cap of the S&P 500 against the evolution of the market cap of the Russell 2000. And what we can observe is that when we have an upward dynamic here on the price, it means that the S&P 500 is growing faster than the Russell 2000. This means that the S&P 500, which is in the large basket of risk assets, the least risky asset, means that it is attracting the most capital. However, once an asset rotation occurs from this least risky asset towards the most risky assets, i.e., the Russell 2000. And if we look at our large basket, the Russell 2000 and the drawer just above Bitcoin, then every time this chart goes down, it means that the Russell 2000 is attracting more capital than the S&P 500. And so, we can observe this asset rotation that is happening right before our eyes. And if we put the total crypto market on the S&P 500 on the R 2000 chart, we observe that hyper-acceleration phases in the crypto market occur once this chart is either flat or in a bear market. And this is normal because we first have an asset rotation in the most traditional risk market, i.e., the Russell 2000, and then we have this influx of liquidity that arrives on the crypto market, which is the most risky asset, immediately after, with Bitcoin first, then altcoins in the order we know, i.e., large cap, mid cap, low cap.
So, I repeat once again, it is not now that you should panic and make impulsive decisions that you will regret in just a few weeks. If there is a time to be invested in the crypto market, it is now. Because all the zones we are currently in are buying zones and not selling zones. I will stop here for today. I hope you enjoyed the video. Subscribe to the channel, join the Discord group which is in the description, and I will see you on Friday for the next video. Have a great day. Bye bye.