Navigating the Bitcoin Bear Market with Beimnet Abebe

11:51Alex Thorn:You pack for the long haul. For the long haul, right. Very interesting. But so that just to clarify though, this then is a thesis from you. We're in the early stages of establishing a full-on bear market then.

12:04Beimnet Abebe:I mean technically speaking, you are in a bear market. Which is what, a 20 % correction? 20 % correction.

12:08Alex Thorn:But in prior bull runs, there have been many – well, not quite – what are we at, 35%, 40 % now? It's about 30%. 30 % off all-time high. That would be at the top range of the bullish corrections that historically have happened, but not unprecedented. I think there's a lot of people who still think that, you know, one more wick to 85 and then a new shape recovery and the trend continues.

12:33Beimnet Abebe:To caveat this view, I will say that risks are a little bit more balanced, like short term. There are a bunch of shorts that have piled into the market, and the open interest is super elevated, and you've just come 30 % pretty quickly. And so I do think that there is a little bit of two-way risk, particularly going into something like NVIDIA earnings.

12:56Alex Thorn:Which could be good. Which could be good. I think we're recording this on Wednesday, what, the 20th? The 19th?

13:02Beimnet Abebe:Yeah.

13:02Alex Thorn:If you listen to this right when it comes out, it'll be Thursday the 20th, and NVIDIA reports after close today. Correct. Obviously the largest equity in the world and so key to where equity markets go.

13:13Beimnet Abebe:And sentiment around AI, which has really driven this market this year. And so I think folks will be pretty glued in terms of what they say and what they kind of forecast on a go forward. But there are some developments in equity markets that are concerning as well. What are you looking at? We've had the S &P trade and close below its 50-day moving average. So that's, you know, one point of alarm. So another point is, you know, the VIX is trading on a 22, 23 handle. It's reasonably elevated. You've seen names like Meta perform, you know, pretty poorly. You've had, you know, hot momentum names like Palantir go from like 206 to 170.

13:58Beimnet Abebe:So some retracing has happened. Retracing and rare earths, quantum computing. And, you know, if you look at like Amazon as well, you know, that looks like it's breaking down a bit. And there's a lot of charts in kind of these big large cap tech names that are a little concerning. And then globally as well, you know, I think the DAX, you know, traded down to its 200-day moving average. You've got Nikkei, Kospi, FTSE, also all like having like bearish technical developments at range highs after good years. And so it does feel a little bit shaky. Now, the question is, can NVIDIA beat by enough and change sentiment enough to kind of trigger the next leg higher?

14:39Beimnet Abebe:It's totally possible. You also have U.S. data out later this week. Oh, we're getting data again. We're starting to get data again. So the September payroll print comes out Thursday morning at 830. That's tomorrow. When were we supposed to get that? It's the first Friday of the month. So the first Friday of October, we were supposed to get it. We are now in November. Got it.

15:00Alex Thorn:And didn't they say also that, just as an aside, that we would never see the October unemployment numbers?

15:04Beimnet Abebe:No, they're actually going to dual report it in the November meeting. So they'll come out twice with no – correct.

15:09Alex Thorn:Okay. So you'll get the October and November jobs printed. And where are you in your mind on the sort of economic macro, the jobs, the inflation?

15:16Beimnet Abebe:So the main narrative in the marketplace is kind of like a K-shaped economy at this point in time. And what that really signals is kind of just, you know, the folks that are really wealthy versus the folks that aren't as wealthy and, you know, kind of middle class to lower class folks and kind of the disparities in their economic conditions.

15:36Alex Thorn:So K meaning the higher part is going up and the middle to lower is going down. Yeah. So increasing inequality. Correct. Key theme in the market.

15:46Beimnet Abebe:Key theme in the market. And you see it in the data, right? Right. So if you look at, you know, student loan default rates, if you look at subprime auto default rates, if you look at small business sentiment surveys, if you look at other broader, you know, consumer confidence surveys, et cetera. All of them breaking down a bit? They're showing signs of stress, right? You know, if you look at like the leading indicator of like economic stuff, like it's also started to trend down. And then, you know, in terms of what you're actually hearing from companies, right, is that lower income consumers are actually spending less.

16:26Beimnet Abebe:Like McDonald's literally said lower income consumers are actually eating at home more. Yeah. And like McDonald's is like, you know, probably one of the cheaper fast foods. And it's the mass market, too. That's correct. And so and same thing like with the Chipotles of the world. And so from the consumer side of the large U.S. corporates, you know, they're definitely signaling weakness in the lower income cohorts. versus like if you're an asset owner, like, you know, property values are still fine. Asset prices are still fine with the exception of crypto, obviously. And so, you know, there are some concerns.

16:59Beimnet Abebe:And then, you know, you had Fed minutes come out today and you've had a bunch of Fed speak over the past couple of weeks. And, you know, the Fed's basically saying that they're probably not going to go in December. And the market pricing is down to 11 basis points for that meeting.

17:12Alex Thorn:And it came to, or the probability of a 25 % cut went from like over 80 to less than 50, closer to 40%. So now it's more likely than not that there isn't a 25 basis point cut.

17:23Beimnet Abebe:Correct. And get this, even for the January meeting, there's only 22 basis points priced in. So not even quite a full cut. Correct. And so you don't have that Fed coming to the rescue kind of sentiment in the marketplace right now. um and so uh you know it's a very interesting uh backdrop but you do know that you know in 2026 you have a ton of capex coming you've got the fiscal impulse from the big beautiful bill right and so you know i think that's enough to kind of keep things um steady um and you're not going to have like you know a huge cratering of the economy but i do think that the probability of like a recession is probably mispriced.

18:04Alex Thorn:It's more elevated than people think. Correct. Yeah.

18:08Beimnet Abebe:And, you know, there's a, you know, like the market's not like people used to say the market's not the economy. Right. But more and more, I think it has gotten kind of ingrained in kind of like people's habits. Right.

18:21Alex Thorn:People like to trade the market based on how they know. As if the market

18:26Beimnet Abebe:goes down, it has a pretty strong feedback loop into like the real economy.

18:30Alex Thorn:Do you think is that because of the democratization of investing you know fintech apps stuff like that that like yeah absolutely there's just a really big wealth effect yeah and even though there is you know a large portion of the economy that doesn't own assets there are like maybe hangover from the era like a lot of people have robin hood and yeah things like that but but it's also like if you're

18:49Beimnet Abebe:corporate right are you going to lay people off when with your stock at all-time highs are you going to lay off as many people now everybody's doing it because it's acceptable ai and improvements but you're probably going to be more likely to cut down on employment if your stocks move down by 20%. You're probably not going to be as likely to buy a house if your 401K has gone down by 20%. And so I do think that there's some risks out there that are kind of underappreciated. But ultimately, if we do see a correction in equity markets, which I am a little concerned about, you know, I do think that that dip will get bought.

19:32Beimnet Abebe:And so I don't really think it's like, you know, a 10 to 20 percent correction. It might be more on the order of like 5 to 10 percent if you get it. But, you know, what's really troubling, though, is that I think you're in an environment where risk assets can trend higher and it might not. Crypto might actually not follow. Right. And that decoupling is kind of what's been concerning.

19:56Alex Thorn:And that's what we've been seeing so far. Obviously, a little bit of squishiness in equity markets in aggregate, like the indices and stuff. But crypto trading, I mean, Bitcoin specifically as the example, trading well lower than this mini dip that we've gotten in equities over the last couple weeks.

20:14Beimnet Abebe:Yeah.

20:14Alex Thorn:And so I think one question had been, well, is it sniffing out the weakness in equity markets? Is it leading?

20:21Beimnet Abebe:Potentially.

20:22Alex Thorn:Yes, story's still yet to be told. Correct. Or is it something more crypto-native, right? Like, is this just like high beta on equity risk, or is it something more? I mean, I just— It feels like something a little different and more. It's possible. Fatigue with Bitcoin and crypto and the DAT reflexivity and those things. Not purely just high beta on a—you know, we're 2.5%, 3 % off all-time highs in S &P. not just like that high beta, like, you know, 2.5 % off S &P equals 30 % on Bitcoin. It doesn't feel, it feels like there's something crypto native happening.

20:56Beimnet Abebe:No, I completely agree. And, you know, what I tell people is, you know, folks that have been on the crypto journey, we were sitting here in 2023, 2022.

21:07Alex Thorn:I think like January 23 was like our first video episode or like our second. Yeah. Yeah, it was 16.5 to open the year.

21:13Beimnet Abebe:16.5, right? Right. 2023, 16, 5. Basically, in the span of like a little over two years, you have gone to 120K.

21:21Alex Thorn:It was like an 8X.

21:22Beimnet Abebe:Right. And so like that's a phenomenal trade. Yeah. Anytime you hit a 5X, a 6X, you know, you're going to have a lot of profit taking.

21:32Alex Thorn:Yeah.

21:32Beimnet Abebe:Even no matter how strong the fundamentals.

21:35Alex Thorn:Right.

21:35Beimnet Abebe:Right. And so I think there's an element of that. is an element of a lot of folks believing in the cyclicality of Bitcoin and crypto over time. And so, you know, I think that's kind of what you're seeing. Now, I will say that, you know, it was probably a lot easier to, you know, take risk off at above 100K. And doing so at 89 is a little bit more dangerous. Right.

22:00Alex Thorn:You're talking about a more balanced risk now. Right. And you're talking about the enormous amount of short interest. Yes. In Bitcoin, and that can cause short squeezes too. So you're thinking about a volatile trend lower to the 200-week moving average. That's basically your base case now. That is my base case. Yeah. But again, that means be careful with leverage because there's – I mean, it's not a nice straight line. Be very careful. But you're – is your – and if you're talking about packing your bags for the long haul at a target you have in your mind, then I think I know the answer to this.

22:34Alex Thorn:But to what extent does this price action, whether it's the, I don't know if it's a decoupling or the from equities or anything else sentiment, the dats that, you know, where there were way too many and presumably they'll ultimately probably be fewer of them. Have any or just the price action itself, is that dented your longer term fundamental thesis about Bitcoin? No.

23:00Beimnet Abebe:Long-term thesis is still strong, robust, as it's ever been. I think the math on it actually increases every day if you look at the national debt and, you know, how things are governed. And so, no, like, it has not dented. I'm still a Bitcoiner. And, you know, I do think that I will see, you know, 200K within the next couple years.

23:24Alex Thorn:Yeah, and you're also a trader. Yes. You don't like – so for example, I gave up trying to trade Bitcoin a long time ago. I think Phineas was saying this before we started recording. We sort of just look for good buying opportunities. Your day job is to trade markets among whatever else it is you do here and podcasting. Yeah. So you do also need a short-term view. I just want to make that clear for people on the podcast. I think anyone who's watched the show knows that.

23:52Beimnet Abebe:Yeah.

23:52Alex Thorn:But yes, you're looking at this – in that sense, it's – you're hoping to get lower prices. I would love – And I think there's a similar sentiment from a lot of Bitcoiners like online that, you know, long-time true believers that like, I mean, you know –

24:06Beimnet Abebe:Yeah, and I will tell you –

24:07Alex Thorn:You're getting better prices.

24:08Beimnet Abebe:Yeah, and that's the flip side.

24:09Alex Thorn:It's cheaper for you if you're a long-term bull. That's good.

24:11Beimnet Abebe:Yeah, and here's the flip side. Like all the, you know, quote-unquote whale selling that you've seen, right? These guys are also whale buyers. They were whale buyers at some point or whale miners. And they're people that believe in Bitcoin. They're just like, oh, you know, I'm going to wait for better entry levels. A lot of them, yeah. A lot of them. And we've talked, we know a lot of this. We've seen folks reenter the market at value areas.

24:35Alex Thorn:Yeah, so now it's kind of like that sort of like game theory, like because this is where it could get out of hand to the upside again, is like if the market tries to sniff out a bottom, whether it's all the way at the 200-week moving average or somewhere, whether it's here or lower than here, wherever it is, some people who are waiting to buy lower might start to feel off sides. And then they –

24:54Beimnet Abebe:Yeah, there's going to be reflexive back to the upside. Yeah, because there's a point where it's like, wait a second, are we meant to buy again now?

24:59Alex Thorn:And usually when – if you're asking that question, you've already missed the bottom. And by the way, most people shouldn't try to time like crazy. Because that's the one thing that I know a lot of people are wondering, my friends, people that we talk to that are long-term bulls as well. Well, OK, when – like where's the bottom so we know when to pack our bags, right? And no one knows the answer to that. I think you've been very transparent and thoughtful about explaining your thinking on this. I see very little of that in the market of people explaining truly like what they're – I mean honestly, even bearishness.

25:36Alex Thorn:I lowered my end of year bull target, not the only target. I mean, that's a little bit of parsing Harris here because I did say that like if you were bullish, then a more reasonable target than 185 would be 120 by end of year. In retrospect, it's like – I mean – and I was called a dirty bear for that. Obviously, like I mean I'm going to look excessively bullish most likely unless something crazy to the upside happens in the next month. It just makes me wonder. People are – people – that's what I'm hearing. I'm not hearing a long-term breakdown in the fundamental belief in Bitcoin. It's a malaise about trading and buying it here.

26:12Alex Thorn:Correct. But that also –

26:14Beimnet Abebe:It's technical.

26:15Alex Thorn:It is technical. And it also tells me that we haven't bottomed because people aren't backing up the truck to buy yet that I can see. And like that's – it's not that those people time the bottom perfectly. They create the bottom by backing up the truck to buy, right? And it just doesn't feel like we've gotten that yet.

26:34Beimnet Abebe:I think you need to kind of see mass capitulation.

26:38Alex Thorn:We don't. It doesn't feel that way. I think this week, I think yesterday's number reported by IBIT was the, which I believe means. $560 million. Which is the single largest day outflow of IBIT in its almost two-year history. So that's a signal. And then the other thing is that, but that means it's Monday, right? I forget. There are whole things a day. So Monday, IBIT redeemed in the biggest amount ever. So maybe we're getting there, but I agree. It still feels like a slow bleed down. Yeah. And usually I feel like these bottoms are characterized by like an aggressive wick lower. Yes. That then gets people back up the truck.

27:19Alex Thorn:Some liquidations. Yes. Some liquidations, but then some high volume rebound usually. And we haven't quite seen that.

27:23Beimnet Abebe:Yeah. And we've just been going down a straight line. Like I haven't seen like sizable short licks in a while. I know.

27:29Alex Thorn:And it was like, no, we haven't. We rebounded off 100 to like 103. Yeah. Then we got to, oh, we saw 98.8, I think, was after that first break of 100. And then just right back down. And then right back up to 103. But then it just bled. Then we pretty easily just drifted down to 95. And then that was briefly some support, but it wasn't like it wicked, you know? Like it's just kind of trending lower pretty steadily.

27:56Beimnet Abebe:Yeah.

27:56Alex Thorn:It's actually not staircase up, elevator down, really. It's really been kind of like staircase down for seven weeks. Like the weeklies are, I think, we had one where we were just barely a green candle. We were nearly seven weekly red candles in a row. And I haven't gone back to look, but I've been watching this price for more than, for about 10 years, more than 10 years. I don't think we've ever seen seven red weekly candles. Even four, which we have had now locked in, four red weekly candles, I think is like very, very, very rare. So it's been pretty consistent drift lower. It just doesn't, to me, feel like the aggressive sharp wick down that creates the V-shaped bottom that bottoms typically have been characterized.

28:38Beimnet Abebe:I haven't seen enough to characterize us as being bottomed yet. I haven't seen enough. Yeah. And as a long-term buyer, you're looking for that. Yeah, absolutely. And again, you don't, like, you know, the big thing about, like, bottoms and tops is that you can be a fast follow. Right. You don't actually have to try to top tick or bottom tick. Especially if you have a long view. Correct. Right. And so once you start to see, like, if you buy within 5%, 10 % of the bottom, you're going to be fine. Yeah. Right? If you sell within 5 % of the top or 10 % of the top, once you get that sense or whatever that development is that triggers you, you'll end up being okay.

29:18Alex Thorn:Yeah, definitely. Don't try to. And that's the other thing, too. I know a lot of Bitcoiners who like to DCA and stack. I mean, you're just automatically getting better prices. Yeah, you're improving your average. So I would say, yeah, and just to put a fine point on it, we talk to a lot of people interested in Bitcoin and crypto investing. I don't hear a lot. In fact, on x.com, there's a, frankly, an almost played out conversation about the institutional versus retail divergence. I mean, institutions seem more bulled up on Bitcoin and blockchain technologies and tokenization than ever before. Yeah.

29:55Alex Thorn:Meanwhile –

29:56Beimnet Abebe:I mean, you had like what Abu Dhabi report buying the other day.

29:59Alex Thorn:And they said they were buying it as part of a long-term position. Yeah. I mean, this is like a – This is fundamentally bullish. Yeah, over the long run. The Czech National Bank last week bought a million dollars. Test transaction. That's what they said though. But keep in mind that they also said back in January that they were exploring putting 5 % of their reserves into it. Oh, yeah. And that caused Christine Lagarde to have a conniption because they're like a member of, I forget what it's called, but like the Council of Central Banks in Europe, the CNB is. So now it's kind of like, and they did take pains to say it was just a test transaction.

30:27Alex Thorn:But to me, it's like, well, first you hate it. First you ignore it. Then maybe you hate it. Then you acknowledge it. Then you test it. I think we know what comes after that. So important first step for, that's the first central bank in history, I think, to have purchased Bitcoin. So, yes, they didn't say it was – unlike the Abu Dhabi fund, they didn't say it was due to a long-term bullish view. But they were – they weren't saying it was, but they were asking themselves publicly in a report they put out in January whether it should be part of a long-term view. And now it almost seems like they're sort of calling it a test transaction so that the ECB doesn't get mad at them basically.

31:04Alex Thorn:And it is small. But, yeah, I think there are signs though at the institutional levels that this is still – everyone's still – It doesn't look like a true breakdown in confidence long term.

31:16Beimnet Abebe:Yeah. I think it would take a lot. I think there have been too many people that have been orange-pelled for you to get like an ultimate breakdown. I mean I was just in a meeting. That's just not possible.

31:25Alex Thorn:I was just in a meeting at a large bank and both from our side and their side, it's long-time financial professionals that love Bitcoin. Yeah. I mean, when I first started getting interested in this at Fidelity, it was like me and three other dudes at Fidelity. And to her credit, Abigail Johnson herself, yes. But like, I mean, the scope and breadth and depth of people that are interested in Bitcoin now is just like orders of magnitude higher and wider than it has ever been. So I agree. I mean, I think if you're a long-term bull like you are, you're looking for an entry.

32:04Beimnet Abebe:Yeah.

32:04Alex Thorn:And so, but my gosh, what a strange year, right? I mean, Bitcoiners got - Rollercoaster, yeah. I guess aside from an announcement or the actual action of the government buying Bitcoin for a strategic Bitcoin reserve, I think they've pretty much gotten almost everything else they've ever wanted. Yeah, everything else got priced in. I mean, I think if a central bank had bought Bitcoin in like 2018, dude, that would have been like a 40 % candle or 30 % candle. Now it's just like, yeah, well, everyone's buying Bitcoin. Yeah. That's almost part of the story is the malaise is sort of like, well, it's not like it's not really contrarian to like Bitcoin anymore.

32:41Alex Thorn:Not quite. It is, I guess, just a little bit maybe. It's very mainstream. It also means you're not early. Yeah. I mean, what are we? We're not quite, you're not quite late, I don't believe at all. But, I mean, let's face it, you're not early.

32:51Beimnet Abebe:I've personally worked in the industry for five years.

32:53Alex Thorn:Right. Right. And you were new at one point. Yes. This used to happen when I would interview researchers to join the team. They'd be like, oh, man, like I just joined, you know, I got interested in 2022. And I'm like, ah, dude, you're brand new. And I was like, wait a sec, it's 25. That's three years ago. Yeah. Like, that's actually a fairly long time to have been interested at this point. I guess I'm also saying that we're getting old. Yeah, I got the gray hairs to prove it. Yep. Awesome. Well, Bimnet Abibi from Galaxy Trading, the bear who was right. We'll see if he continues to be right. I told you, if you want Bimnet to not be able to stack at his level, then bulls need to defend these levels to prevent Bimnet from being right, okay?

33:32Alex Thorn:Awesome. But congrats and thank you, my friend, as always. Pleasure. That's it for this week's episode of Galaxy Brains. Thank you to our guest and friend, Bimnetta Beebe, and my friend, Phineas Ellis, from Studio Friends. Everyone have a safe and happy weekend, and we will see you next week.

34:02Alex Thorn:research, sign up for our weekly newsletter at gdr.email, read our content at galaxy.com slash research, and follow us on Twitter at glxyresearch. See you next week.