Bitcoin All Time High: Has the Cycle Broken? | Rational Root

30:30And so, you know, we had so after a huge buildup of unrealized profit, we get like also a prolonged bear market. And in 2021 or in the 2019, we had a bit of an early run up, which then also caused the results of the COVID crash still, which was a bit of an outlier. So it was, but after that 2019 run up, we had a bit of a correction. Was that the Chinese Ponzi, that one in 2019? Exactly. Yeah, it was that one. Yeah. It caused the market to go up like actually early in the cycle. But then we had a heavy correction because again, it wasn't sustainable. It was not yet time really to move up, you know, like significantly.

31:07Then we had the COVID crash here right before the third halving, which caused again, one of those signals to, you know, that was a bit of an outlier in a way, because then actually, we started to have buildup again of that unrealized profit for short-term holders. And then that was again followed by a long, prolonged bear market. But this time, we've had actually limited buildup of that profit. And we've had a reset ever since. And to me, it seems like this is exactly what's going to happen again. What are those pink lines on here? What do they represent? So they actually are a reset of profit.

31:42So all the unrealized profit that's in the market, gets completely evaporated. And so it's actually, in a way, a reset of the severity of bear markets. And so to me, what that means is that we just had it in April. And so in a way, we start with a clean slate again. And so that's why I also think we could potentially get a prolonged bull market and why there's no real basis for a prolonged bear market at this stage because we just had a reset And we're again moving up in the structural pattern with more passive demand for Bitcoin. And so, yeah, that's what I think is likely to happen. I see. Compared to 2017, there was none of those.

32:28Like we had, I don't know how long that is, two years without a single reset. Exactly. Yeah, it was just build up. And then, yeah, of course, unsustainable and prolonged bear market. And so this time is very different in that sense. you know we haven't had we haven't had as much retail hype you know it's just been more the structural demand and so yeah indeed it is a change in in in in the dynamic of the cycle and we're still human so we're still in the four-year cycle and we're still approaching the thrill and euphoria phase and so i don't know how much influence will that have like you know it depends also if we start to get this build up now in the next five months like to peak like similar to maybe 2020 or 2021, you know, maybe then indeed we do get a prolonged bear market.

33:13But if we kind of just keep hoovering at these levels, I think it's fairly likely that we just continue to structure channel up. It looks far more sustainable. You're making me bullish here, Root. Yeah. And if we then look at actually the realized profit and loss, and in particular, realized loss, that is also very interesting because these red spikes actually represent realized losses, where people actually capitulate. And so there's this dotted line that you can see in the bear market bottom, for example, of 2018, you have this huge spike, which even reaches that dotted line. And so this really could be seen as a capitulation event.

33:54And so far for two years, we have hardly had a spike. And so to me, like that means there has been very limited down, like muted downside. And I think it's because of like Bitcoin treasury companies, structural buying from institutions, ETFs, like these passive demands into Bitcoin, which have just caused limited downside. Now we also haven't seen like the heights of realized profit as we have during previous bull markets. That might still come. Maybe we still get a spike like that. But it depends, of course, like the higher price moves up. more profit will be taken by long term. I still think many haulers are not very interesting in selling at these prices.

34:31Maybe if we get to 140 or 200 again, of course there was some selling around that 100K zone. But I still think people have been waiting for 100K Bitcoin for more than a cycle. And so 100K just doesn't feel high anymore to most people. It just feels like we should have been here a long time ago. So, yeah, it's totally true, but it's a wild thing to say. Do you think the part of the reason that these we might not be having the same sort of capitulation spikes is down to sort of education on people understanding what Bitcoin actually is? And it's not going to die. It's not going to go away. So it stops the kind of panic selling.

35:10I think there's definitely conviction, you know, in long term holders that has been true. But but indeed, the pattern is just more obvious now. You know, we have the natural, the power law that Bitcoin is following. It's just unlikely to stop, you know, like, you know, a bit like if you think Bitcoin goes either to a million or to zero, I think it's so much more likely that it goes to a million. Right. And so, so I think, you know, people in general, maybe, I mean, some people want to take profit. Maybe they want to buy a house or a car or whatever, you know, at a certain price level for everyone that is a bit different.

35:44But I think in general, yeah, there's a large group of haultlers that use Bitcoin as a savings vehicle, instead of real estate, which used to be the savings vehicle for the boomer generation. Do you think there could also be another thing that's going to prevent people from profit taking in the same way as previously, in the sense that the sort of financial services around Bitcoin have got so much better, taking loans out against your Bitcoin and things like that? Yeah, and that is still in the making. I mean, using Bitcoin as collateral for a loan with your own bank, that would be amazing. And that seems to be coming as well in the US, at least.

36:24Europe is still, you know, far away from that point at this moment in time. But in the US, that seems very likely that that's going to happen. And that will again be one of those steps for Bitcoin to become more mature as a, you know, as the reserve asset. This episode is brought to you by Anchor Watch. Now, one of the things that keeps us Bitcoiners up at night is an idea of a critical error in your Bitcoin cold storage. And this is where Anchor Watch comes in. With Anchor Watch, you're protected by two things. You have their time-locked multi-sig vault and you have your own A-plus rated Lloyds of London backed insurance policy.

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39:22Things are looking good, Ru. Okay, let's get on to the next chart. Yeah, so we just looked at signals for local bottoms by ways of short-term holder profit. But I've also built a short-term holder momentum indicator, which helps us actually more identify these local tops. And so again, you see these red vertical lines. Those are actually pullback signals. And so this cycle we have had two so far. and so what i'm also waiting again for is like you know i think there's still room uh for and like in this lag up because we haven't had a spike here yet you know so someone's kind of waiting for this spike to happen of course if there's like going to be more buildup of hype so for example by looking at short molar supply like a peak there then it's also more likely that that you know this will start to spike and you know as soon as it it starts to drop we get you you know, we got a pullback signal fired.

40:21And that might, again, indicate like a local top or potentially a cycle peak, you know, like depending on how much of that buildup has been there from profit, you know, unrealized profit. So if we kind of get mild unrealized profit buildup and we got like a pullback signal, then again, I think, you know, we could just continue in the structural pattern. But if we get like a large buildup of, you know, if we got more hype in the market and we get a large buildup, you know, that like one of these signals could potentially indicate the start of a next bear market. And so I don't want to put you on the spot here, but I also do want to put you on the spot in a way.

41:00Like, what do you think the top of this bull market is going to look like? Yeah, that's a good. I mean, I've been kind of consistent. I think 240K has always been kind of my estimate. So I'm not, to be honest, that would kind of be my maximum estimate. But yeah, it depends much. Like, as I said, like, do we get really hype still in the next coming months? And do we continue in the four-year cycle? Or do we continue like a structural pattern? Because then we just have a more gradual move up. And then, you know, that means basically lower for longer instead of like having a huge overextension to some random price, which could be$1.80.

41:43I mean, it could be$1.60,$1.80. It could be$2.40. You know, like that depends on how much hype or how crazy the market will go. But so far, it looks more structural. And so I think that that might prolong the bull market. And, you know, there's actually some evidence, which I just showed. like you know because we had a proper cleans of the market with like a reset recently in april and we kind of start with a clean slate like maybe if we just like continue this gradual pattern we could move into 2026 and still continue gradually up with like longer sideways price action you know it might be boring for people and people will again be confused like oh is this the top is the top end uh but i i think yeah much is also going to depend on macro with bitcoin being at a two trillion market cap.

42:29It's now like really a mature asset. And so I think macro events might be even, you know, have more influence on Bitcoin's behavior to move into a bear market than Bitcoin price action itself. Because within Bitcoin, actually, everything is fairly well. Actually, from a regulation standpoint of view, like in the US at least, it's going great. And, you know, we've actually had like a proper reset of crypto in 2022. Dominance is going up. Bitcoin treasury companies kind of took the stage of altcoins. You know, for me, technologically, Bitcoin is developing. We have like, you know, eCash, Lightning.

43:11It's all getting more integrated. And so there's really limited like within Bitcoin itself, like on a protocol level, you know, everything looks actually fantastic. but it's the macro uncertainty that probably might cause some damage. In terms of Bitcoin dominance, it's obviously been crushing. I think Ethereum is still way below its previous all-time high, which I'm sorry to anyone listening who holds Ethereum, but I'd love to see it. Sell your Ethereum and buy Bitcoin. Do you think that's going to continue? Yeah. I mean, so again, so if we really get like a hype phase still in the market, like into in this next uh five months let's say uh i also think there's still some potential for altcoins to outperform bitcoin temporarily you know like because you know they're just smaller market caps or more easily to move and or or like whatever there can be again a meme coin that does very well suddenly you know for a short amount of time obviously but uh i think yeah i think 2022 in general was very damaging to the crypto narrative in general and hopefully permanent to be honest.

44:19And I actually, I also like to see how Bitcoin treasury companies are kind of taking the stage of what used to be altcoins, you know, like you actually can use leverage Bitcoin with Bitcoin treasury companies. And so you can, you know, the gambling can continue there, but at least it's based on Bitcoin and it's kind of a speculative attack on fiat. So, so I much rather see that than some random entrepreneurs trying to scam people. I totally agree with that. And when we've talked here, a lot of this demand is structural, institutional demand for Bitcoin. And we've really not seen retail come back in the same way that we have in previous bull markets.

44:57Do you think at some point, if we do get into that hype stage, retail will come back? Or do things like just the unit bias, the fact that Bitcoin is now$120 ,000, is that just putting off the retail investors? Yeah, in a way it is. Of course, with Bitcoin treasury companies, they have different prices. And so there's the unit buys problem is a bit solved. So that's actually nice to see. But indeed, it's becoming harder and harder to become a whole coiner, right? So there's unit buys when Bitcoin, that is a bit of a problem. I also think it's the market gap. I mean, we are at the two trillion market gap.

45:33And so retail as a whole doesn't have as much impact as it used to do. You know, like on a market cap that was 500 billion or so, and now it's four times bigger. You know, it has less impact. And so, you know, I think institutional demand therefore is needed. And so I'd love to see, you know, the S &P 500 inclusion of strategy that would again put like, you know, like a lot of passive demand for Bitcoin. and there's, as you said, you called it already like if interest rates will be cut that would also be really a trigger for a bull market and so maybe we're just waiting for that moment to get a hype phase as we saw in 2020, 2021 and based on human psychology, that's actually the more likely outcome because people are not good at structural moves and gradual increases you know like it's it that is more like a a phase that happens before the explosion and and so uh you know i think uh although i mean passive demand definitely causes limited downside so that is true but uh but yeah from a psychology standpoint of view uh you know if we're now in a trail phase and people actually start recommending everyone again to buy you know maybe we will get like a retail hype wave still in the next months yeah i'll be interested to see what happens there um all right let's move on to the next one yeah so we're getting to the to the end i just wanted to kind of close down with like the on-chain value map um and i still have a 3d spiral version of this as well but in the on-chain value map i tried to use on-chain data to uh you know to have like a a heavy undervalue level and a heavy overvalue levels and all the levels in between of where price can go so actually we have a fair price which is currently at 80k and we can see here also actually it coincides with that upper part of the channel we have the the 180k as the heavy overvalue level and so to reach like those heavy overvalue levels we of course need like hype in the market like a bit of actually unsustainable height you know because if we reach those levels, that's usually unsustainable.

47:57But what we can see now is currently we have kind of been hoovering in that overvalued zone, like to the upper part of the overvalued zone, to the bottom of that overvalued zone. And we're now more or less at that overvalued level price at 120K. And so, yeah, I don't know if we will get to have overvalued. As I said, that depends very much if we really get like hype back in the market, which we should probably know soon by looking at short molar supply like is that continue to move up or are we just going to go sideways there you know like if there starts to be a build up that would mean for me like okay actually those price ranges are possible but if we start sideways it's more likely that we'll continue just around that overvalued range which these levels are all moving up generally as well so if we're in five months where like fair price is not going to be 80k it might be 95k or so you you know, and so that starts to move up as well.

48:53But yeah, so I think this has been pretty spot on and this is based on on-chain data. So we actually look at coin days destroyed. So the amount of coins that, you know, if a coin moves, a coin builds up days as it actually sits silent. And as soon as there's a transaction, like each coin has an age. And so the age measured in days gets destroyed. And actually based on that information, we can kind of have this bottom indicator here of this chart. So the heavy overvalued level is actually based on that information. If a lot of long-term holders start selling, then a lot of coin days gets destroyed.

49:35And then so that kind of marks that we use that information to calculate that undervalued level. and for the top level i actually have a different approach so there actually i look at tradable supply so actually supply that's quite active uh because a lot of supply is kind of liquid because you know it just sits in long-term uh holder wallets or cold storage and and it doesn't move but uh the the actual tradable supply so it's that's all of the circulating supply and minus that illiquid supply uh that is actually the the supply that has much more impact on price action. And so what I use there is actually by looking at capital inflows, because we can actually see how much capital is flowing into the market, at least on chain.

50:19And so we use that information to calculate that top. And this has been spot on. I made this value map years ago, and it's called perfectly the bottom of the 2022 bear market. And now it seems to be doing fairly well as well with those overvalue levels based on, for example, if we look at the channel that we're in and it kind of coincides with that overvalued zone, which to me is kind of interesting. Even the top of the channel is the 180k price. So there's some confluence there as well again. So before I brought up the mempools being pretty much empty at the moment, is that actually bullish when it comes to on-chain data because there's less transactions that are destroying the coin days?

51:03True. Yeah, there's indeed less transactions happening on chain. A lot of that has moved to secondary markets and therefore I also look at ETF flows and actually I have an ETF tracker where I look at those flows. I look at the institutional data from the SEC to actually know, okay how much of this of dtf flows are institutional then we have the the treasury data you know which uh because but you know like some of the for example i i gave example already bitwise okay they are they're actually their supply is actually classified correctly but there's also some treasury companies like bitcoin based which is actually quite quite a big part they are they are um likely classified as a long-term holder supply where some of it should be short-term holder as well and so there yeah indeed you get a disconnect and and so uh that is contacts that should be taken into consideration as well but so far um yeah i think the on-chain data still has done really well and um you know i try to take those things into consideration of course the context is important uh and as i said also the the absolute values of uh like supply or or like they don't matter it's also the direction that matters and i still think in the direction there's still like you know you know only if there's a few etfs that are classified correctly you will see like the direction of of of that flow in the right direction and so so uh more so than in absolute terms and so so i yeah i think on chain of course you know the bigger the market and more complex the market gets uh the more we need to look at you know a whole range of things like, you know, futures and options data as well, you know, and so the ETFs, that's a whole separate part, but I still think on-chain plays a vital part and has so much information.

53:07You know, if we think of the Bitcoin blockchain, like we think of Bitcoin as like the most valuable ledger, right? But so that ledger also includes super valuable data, right? And so that's basically what we're using. So if you think that Bitcoin is valuable, then all the data in those transactions is valuable. And so, yes, but over time, indeed, with Lightning as well. I mean, so if we get a lot of more secondary markets and it will become more difficult with on-chain to measure these things correctly over time, I think, in the future. But we're still pretty early. I think there's still, yeah, a lot of insights that we can get from on-chain.

53:50Yeah, I think so too. Help me understand the Coin Days Destroyed thing, because every transaction isn't a transaction to an exchange to sell. So how do you sort of trade those two things off against each other? Yeah, you don't. So it's just, again, a proxy. You know, you try to get an estimate. And so what you do, as soon as there's a transaction, nobody knows if that is. Well, we can actually classify some exchanges. And so we do know some supply that is moving to exchanges and will be sold. But we don't know all information 100 % correct every time. What you try to do is just to have something that is more or less correct and at least significant for terms of indicators.

54:35And in general, I think that's still the case with on-chain transactions. And even though there's not that many on-chain transactions currently, that is also because actually hype is It's more or less gone. And it's like institutional adoption through treasury companies and ETFs, which is taking part. And that just happens on secondary markets. But yeah, so CoinZay destroys. You just look at all transactions. Every transaction is just included. And you look at the days that have been destroyed since it last moved. And so the accumulation of all those together determine how many days in total are destroyed on an average day.

55:18And that information, again, we can use. Can you filter out things like transactions that people just consolidating coins or do you not even bother doing that? We don't. Well, for some indicators you do. So for example, I've also made a multiplier. The multiplier has been a bit of a hype around the multiplier. How much capital inflow do we have on chain and then you know how does it reflect into the price of bitcoin uh like what is the multiplier you know for each dollar that i put in how much you know upward pressure on price does it put um but yeah so there actually for example with indicators like that i've tried to really separate um on chain data because you can look at inflow and days of outflow and you try to like filter bad data out but it doesn't happen for example for the realized price which is the average purchase price of all Bitcoin, you just look at all transactions, whether either it moves or not.

56:18So there's some error margin there. But I think over time, that error margin is relatively small. And so that doesn't matter for the direction of that indicator. Yeah, that makes sense. Okay, cool. So just to close out, can we get a bit speculative, do some guesswork? When I spoke to Joe Carlos-Eri on the podcast a few months ago, and he was saying, oh yeah we've got this the uh 3d chart as well but so when i was speaking to joe calisari he was saying he thinks bitcoin is just gonna bore everyone to a million dollars um i would like you if you don't mind to close out with like what you think this cycle looks like both in terms of price and in terms of are we in for another four-year cycle or is this going to be different and i know this is speculative this is guesswork yeah this is very difficult well currently um you know based Based on the data I've actually showed here, the charts we went through, I think there's a fair reason indeed that we can get a prolonged bull market and get this structural way up.

57:17But I'm still careful and I'm skeptical because every cycle, people have been calling for extended cycles. And so I want to give the disclaimer. And it depends very much on how we end the year because if we look at the 3D spiral, so uh so the end of the year is actually around that 100k uh text mark and so there's still like the five months of like green bullish upside so this this this 3d spiral chart is actually uh the same as the on-chain value map that we just looked at and the fair price is actually the surface of the spiral so the over extensions which is about 80k yeah it's 80k currently you know like so it changes uh of course through the cycles but uh uh so so the heavy overvalue level currently again is 180k that would give us to like these top prices you know and and so we still like historically i mean this quadrant has been the one of bull markets where you know we we never found ourselves below that fair price and we actually reached that heavy uh overvalued level at some point and so so i still think there's room here for like more of that green uh price to continue and it depends a bit so if we get to those over heavy overvalued levels it depends on how much hype will come into the market.

58:31If resale starts taking part, which could, because we actually start, you know, 120K price starts sounding attractive again. People are getting trilled, you know, we're literally in that phase. And so where people are starting to tell like people to buy. And so I still think that, yeah, a retail hype can come towards the end of this year. And so depending on how overvalued we get there depends on also if we stay within the four-year cycle because if retail doesn't really come in and we just continue this kind of gradual path as we have been which we can keep measuring uh then i actually think a prolonged bull market is possible and we won't because then there's no basis to really go into the bear market which is what i've been trying to tell uh you know the the whole podcast kind of that currently there isn't because we just had like a kind of healthy cleans of the market and uh and i don't think we're We're not even at like insane levels that we were.

59:25Like if you think of the previous bull market where we had so much built up of FTX exchange with paper Bitcoin and so much altcoin craze, like none of that has happened so far. And so yes, there's leverage, you know, true Bitcoin treasury companies, but I think actually they're fairly sustainable companies. And so I don't think we're in any of those crazy times yet. And so we just had a cleanse of the market. So, yeah, I mean, I need to see how this turns out to the end of the year. So if we get like overextended to heavy overvalue levels by the end of the year, I actually think there's a fair chance we stick within the four-year cycle.

1:00:05But if we just continue like the gradual channel up, I think we can get prolonged and actually break the four-year cycle. I think like we've mentioned it already in the pod, but I do think one of the things that may break the four-year cycle is what happens in sort of the broader macro world. Trump is going to want to run things really hot into the midterms next year. If he brings in someone to replace Jerome Powell, I think things will work pretty crazy. Indeed, I agree. The cutting interest rates will be a catalyst, but potentially also a catalyst to reach those heavier overvalue levels. I mean, if we would get them in January next year and then get to heavier overvalue levels here, maybe that is not sustainable and we get a bear market after.

1:00:50So I would say if we get to heavy overvalued, it's more likely to continue maybe four-year cycle. If we just stay at overvalued levels, which we're currently at, and just continue the gradual path with a reset, as we've seen, like another local bottom, then there's lower for longer. So we'll have to see how this plays out. I don't pretend to – I cannot know the future. We're in wait and see mode, but things are looking good. Ru, I've really enjoyed this. Things are looking pretty good, man. We're making it. I agree, man. Bitcoin is just the best performing asset for the last 16 years or so. So I think it will continue for the next 16 years.

1:01:35Me too. All right, I appreciate that, Ru. Where do you want to send everyone? Where can they kind of check out your work and follow you? Yeah, of course. I have my Substack newsletter. It's called bitcoinstrategy.substack.com. and you can go to the Bitcoin strategy platform.com where you get like access to also these, you know, local bottom, local top indicators. And what I try to do is not to give an overload of charts to people. I kind of like try to guide them with each week through like the most important charts that kind of cover what's happening in Bitcoin, the story, like what is likely to happen, what to watch next.

1:02:10And so, yeah, so that is, so please sign up. and there's over 20 ,000 subscribers now, so it's going fairly well. That's amazing. Well, we've got 36 hours or so until this show goes out, so I'm just praying that Bitcoin doesn't crash back down under 100k or go to 150k in the meantime. But hopefully it stays pretty flat before the show goes out. That could happen. I mean, either way, I think a consolidation is possible. We just reached this highly overvalued, or not the highly overvalued, but the overvalued level and that middle part of the channel. And so a bit of consolidation is fine. But indeed, there might be room for the next lag as well.

1:02:55So I'm excited to see what happens by two days. Me too. All right. Thanks, Ru. I appreciate the time and I will speak to you very soon. Thanks, Danny.