State of the Bitcoin Bear Market with Beimnet Abebe

14:06Alex Thorn:Yeah, and I know we're not experts on Kevin Warsh, who's the, I guess, I don't know if he's been formally submitted by the White House to Congress to be nominated to be the next Fed Chair, but he's been named to be. And you saw the dollar rally a bit after his, because he's seen not as actually a money printing bonanza guy. He's a very credible. He's credible. member of... He's thought, it appears by markets, to be a pretty credible choice, actually, for a prudent Fed. Probably still cuts a little bit in the near term, we think.

14:39Beimnet Abebe:Maybe, but again, I think a prudent member is data dependent.

14:44Alex Thorn:Yeah, it's not an obvious

14:46Beimnet Abebe:money-printing bonanza mandate. I think we're headed to cuts for other reasons that aren't because the administration wants them. So, labor? Labor market. It is showing... It has been showing signs of cracking, but But, like, ADP today came out at, like, 25 ,000. The employment section of ISM services was a bit soft. And ISM manufacturing has been, like, you know, in contraction territory for, like, a really long period of time. And then when you dig a little bit deeper in terms of, like, where there's job growth, right, it's in, like, healthcare and not in, like, professional services as much.

15:25Beimnet Abebe:and if you look at recent college graduates, a lot of them are not employed in areas where they actually got their degrees. And there's a huge degree of underemployment.

15:35Alex Thorn:For the youth, it's not good. Is the youth unemployment as a baseline number also high? Correct.

15:43Beimnet Abebe:It is north of 10%.

15:45Alex Thorn:And you're saying they're not getting the jobs they thought they would get, so they're possibly underemployed as well. Correct.

15:51Beimnet Abebe:And so there are material signs that labor market's cracking. And then sentiment on top of that, if you look at the consumer confidence numbers, they're bad. Like objectively bad, right? And so sentiment's bad. Employment's turning a little bit. And, you know, inflation is still reasonably above the Fed's target. But it's a two-sided mandate. And we know and we think, not we know, but we are reasonably confident that the labor market probably weighs more on their decision-making process at this point in the cycle. Yeah. And so I think the market probability of cuts is probably a little underpriced at the moment.

16:33Beimnet Abebe:You know, making the case for being long, you know, front-end U.S. fixed income as like a place to park capital for the time being, actually pretty reasonable. because you might get that kicker of like, oh, rates are actually going lower.

16:45Alex Thorn:Yeah, interesting. And also, just to boo your point, the way I think about the dual mandate is the Fed would like to make inflation its only sole mandate. They'd like to theoretically. But the people losing jobs is something that will be down their door, right? Like they might want to keep it high to get back down to their mostly made-up target of target 2 % inflation. but if Americans are losing their jobs en masse, they're going to be forced politically to act. The same way they would be to tighten if inflation was 10%, they would absolutely have to raise rates no matter what employment said.

17:22Alex Thorn:When you're down at the 3E area, it's low enough that the labor would overwhelm probably any lingering...

17:29Beimnet Abebe:In theory, if labor market is actually cracking in terms of what that means for inflation on a forward basis, it probably means...

17:38Alex Thorn:It would help inflation go down as well. Correct. And then do you see, you know, we talk about software as a service in particular, or even just subscription-based software tools, literally like Microsoft Office is one of them, right, being affected by AI. Like, are we seeing signs yet that the labor market is affected by AI? A lot of people obviously have talked about a future where, like, a universal basic income might even be needed if we have AI-powered robots doing all the jobs what's going to be left for are we seeing any of that yet that you know of in the labor market it's been slow so not quite yet not quite yet um but you know amazon has had

18:18Beimnet Abebe:huge layoffs i mean i think washington post today laid off like 600 people i don't know if that's ai improvements uh but you're seeing uh like massive corporate efforts to get better on ai yeah and you

18:31Alex Thorn:know one market is are they sniffing though that at some point in the future there will also be

18:36Beimnet Abebe:more ai driven layoffs i i i don't think it's not top of mind yet it's not quite but most people do think that at some point that's coming that's 100 coming yeah um but it might lead to like lower wages first because like you don't need that much specialized knowledge as much anymore it's true like we don't quite have i'm pretty sure i'm stupider than the ai models uh but anyway yeah Yeah. But, you know, not to be like so doom and gloom. I do think that the market, I view this as more as an opportunity for those folks that can kind of go both ways in markets. If you're long only, obviously, this is a hard environment.

19:17Alex Thorn:Yeah.

19:18Beimnet Abebe:But it's definitely like, you know, if you've had a really good run, like, please take some chips off the table.

19:24Alex Thorn:Yeah.

19:25Beimnet Abebe:And if you're tactical, like you can play for for downside in certain things. I think just one last note on crypto. Yeah. Given how far we've moved so quickly, you know, and the lack of liquidity in the market, like the swings in both directions are going to be violent.

19:45Alex Thorn:Yeah.

19:46Beimnet Abebe:But the thesis still holds that you will test 60 at some point. I think 70 is a good first stopping point for like a period of like consolidation.

19:55Alex Thorn:You still think the price will try to converge on that long-term 200-week moving average? Correct. Yeah, that's still even now.

20:02Beimnet Abebe:And it might be in a couple months. It might be in like a couple weeks at this rate. But I do think that pretty much every cycle in Bitcoin has had a move to the 200-week moving average. And I don't think this instance is any different.

20:17Alex Thorn:What is different is that the 200-week moving average in like 2013, 2014, and 2015 was like$100 or something. and now it's 60k. I mean, think about it. It feels, I know it's, you know, 60k would be a 50 % plus drawdown. That would still be less magnitude than the prior drawdowns, which were all like 70 % plus from all time high during prior cycles. And just, you know, we joked when it was crashing to 100k that that's like a funny thing to say after all these years in Bitcoin. Oh no, Bitcoin crashes to 100k. Well, honestly, oh no, Bitcoin crashes to 60. Doesn't actually feel that bad. That's so much higher than we'd previously crashed obviously if you bought 120 as your only position you don't

20:57Beimnet Abebe:well you know you don't like the feeling of that yeah but i think is that what it would take for you to flip bullish i mean when you say target yeah i think once you're around there i i think you like the entry there i like the entry and i and i you know i will say that there is risk you go a little bit lower and so i think the game plan is to start averaging in around there um because Because realistically, what's going to happen and what will take Bitcoin higher again is there's a lot of folks that believe in the asset, but that also believe in the four year cycle. And so the people that took profits will be recycling their money back into Bitcoin once it gets to a value area.

21:37Beimnet Abebe:Yeah. And that value area historically has been around the 200 week moving average. and the way i put it is it's going to be really easy to pitch somebody bitcoin at 60k because you'll be like oh it was at 120k six months ago you know it can go there you know it can go there it's proven that it can go there yeah and you know realistically if it's down there you know you're gonna be talking what point in the fed easing cycle are we yeah is the money printer turning on soon like there's so many other things but it's just like it becomes a much better risk reward trade from the standpoint of like what are you really risking at 60k maybe it goes to 50 45 right like so you're risking you know 10 to 15k so call it 20 ish percent of your position to have a potential double right that's a you know a five to one risk reward ratio it's not bad yeah so so i you know that's kind of my you know reason why i think that area will kind of hold yeah that makes

22:37Alex Thorn:a lot of sense. And do you think that that's what other people are thinking? Do you think is it the type of thing where like, it doesn't feel that, here's the thing too, because we've gone to the 200 week in these prior ones. It doesn't feel yet that, but it might when we get there, that there is a mad rush to go buy that dip. Actually, most of these prior bear market bottoms, we really grinded low for a while around the average.

23:03Beimnet Abebe:Yeah. And that's probably what's going to happen again. I mean, you're going to have like a consolidation.

23:08Alex Thorn:Well, and that's why you are a more you've got long term views, but you're also professionally and personally a tactical. You got to wait and also see what the other things are. You know, the 200 week might look like a goodbye. But if we're, you know, also everything else is crashing, if we're going to then maybe it does go lower. Yeah. And so you got to evaluate at that moment. But it does make me think, too, that. Well, actually, let's go to this question about the debasement trade, because one of the things that I think has been so disappointing. in the last, call it six months, really fewer, like four or five, four months now maybe, has been watching the divergence between physical gold and digital gold and Bitcoin's empirical failure to trade recently as a hedge.

23:47Alex Thorn:Now, there's caveats. Of course, it was up even at 72K. It's up four and a half X or four X from its FTX bottom. And that's still more than gold ultimately was up in percentage terms. But that's kind of nitpicking. It is, I think, fair to complain that Bitcoin has not performed like gold right when gold was needed most or whatever, right, in its mind. Do you think there's a chance that the world starts to treat it like gold? Maybe if we can get those better value entries? Because it has fundamental reasons.

24:21Beimnet Abebe:The fundamentals are always there. I think they're, you know, bigger societal things like wealth taxes and transferability. for ability and, you know, like you tried like taking, you know, a couple million bucks of gold on a plane or silver. Yeah. It is incredibly painful. Yeah.

24:38Alex Thorn:And I can tell you, like, you will get seized by the TSA if you try that.

24:42Beimnet Abebe:But I can move a billion dollars worth of Bitcoin in my head.

24:46Alex Thorn:Yeah. Very easily. Yeah.

24:47Beimnet Abebe:Right. And so I, you know, I think ultimately that value proposition will be clear to the market. One day. One day. And to be honest with you, it's such a momentum-driven market. The moment price starts rallying and people are like, oh, shit, it went from, you know, 60 to 70 in like a week. Oh, my God, is it going back up again? People will FOMO back in.

25:09Alex Thorn:Yeah.

25:09Beimnet Abebe:And especially those that it sold.

25:11Alex Thorn:All these lack of, even as you pointed out, the lack of clear catalysts in the near term, all of a sudden people will come up with a bunch of good reasons to own it. It is true that, like, it's so easy to be negative on it when it's down a lot. When it's going down. As soon as it starts to go higher, everyone will come out of the woodwork and be like, I always loved Bitcoin.

25:27Beimnet Abebe:Right. And, you know, the main idea is like it's reflexive. Right. Right. This market is reflexive both to the downside and to the upside. And so once that reflexive cycle to the upside begins, it will go a lot higher.

25:41Alex Thorn:Yep. And you get more liquidity coming in and everything. Well, I just want to say, you know, I was upset. I'm upset with our audience. Okay. because when you enunciated this near-term bearish thesis, well, you've been saying it, but at least initially, certainly after the November 22nd episode we did with just you. Yeah, I mean, I was bearish in October, probably September as well. Yeah, you haven't, and we've got receipts to show that. But also, at least on that episode, I think it was, I behooved our audience. I said I would do our part to make BIMNet wrong. And I don't know, maybe our audience didn't have enough cash.

26:14Alex Thorn:I didn't have enough cash to turn this thing around. You know, I've been buying, to be clear, Bitcoin. I always have been buying.

26:20Beimnet Abebe:Yeah.

26:21Alex Thorn:But again, unfortunately, BIMNet has been right. So, but I would say those key levels. I did put out a report this week. Yes, yeah. Which was... Making a lot of the same arguments now that you've been making to me. And because it's just... You've been right since you put it out. Well, yes, even just in a few days. Yes. Yes, I mean, but still, I think there's, you know, there's a lot of evidence for what you're saying. And I think you can be long-term bullish and love Bitcoin but still want to be tactical with how you think about it. And to be clear, I always want to buy Bitcoin. I think it's going a lot higher in life.

26:57Alex Thorn:Completely. Yeah. Absolutely. So I like a cheaper sense.

26:59Beimnet Abebe:I mean, I genuinely think that the bottom of this cycle is a generational buy. Or, sorry, four-year cycle buy.

27:06Alex Thorn:Well, yeah. Make sure to sell. The funny thing about the four-year cycle, I've been saying over the last couple of years that I think it's degraded, if not dead entirely. And I guess it is kind of the four-year cycle if we look at 22 to 26. But actually, it had been green, green, green, red, green, green, green, red. Like, the cycle was materially altered because of the all-time high before the halving. Technically, this year is supposed to be a green year in the four-year cycle, not a red year. But it's undoubtedly empirically proven to at least be cyclical still. It's not no cycle. But yeah, I relish the opportunity to buy it cheaper.

27:45Alex Thorn:Fantastic. I don't find it depressing, I guess is what I'm saying. Although, you know, I would say it's not euphoric. Yeah. It was nearly, you know, two months ago, it was at$100 over our shoulder. I mean, we're over 25 % below$100 now. You're materially below$100. We were at$98K three weeks ago.

28:04Beimnet Abebe:Yeah.

28:05Alex Thorn:So, all right, we'll leave it there, my friend. and Bimnet Abibi from Galaxy Trading. My friend, thank you so much. Thanks for having me. That's it for this week's episode of Galaxy Brains. Thank you to our friend and guest, Bimnet Abibi from Galaxy Trading. Everyone have a safe and happy weekend. We will see you next week.

28:35Alex Thorn:Thank you for listening to Galaxy Brains, the weekly podcast from Galaxy Research. I'm Alex Thorne, head of firmwide research at Galaxy. Follow me on X at Intangible Coins. Follow Galaxy Research on X at GLXY Research. Read our written reports at galaxy.com slash research. And don't forget, if you like Galaxy Brands, to like and subscribe on your favorite podcast platforms like YouTube, Spotify, Apple Podcasts, and more. We'll see you next time.