Why Bitcoin’s Bull Market Isn’t Over | Rational Root

30:03This is the go-to metric for macro in terms of where's the business cycle going. And Bitcoin obviously came forward out of the 2008 financial crisis. And since then, we've kind of had this four-year cycle period in that PMI metric. but currently we're actually not respecting that four-year period and so so we've moved up a lot slower in terms of like the business cycle and so is bitcoin you know and so is the stock market and so macro analysts and and uh here i'm actually referring to raul powell which i'm not a fan of him because he did a lot of shit coining in the beginning no like a bit unethical uh behavior he showed but he has actually quite a good reasoning um which i think like the with regards to bitcoin being part of the business cycle i i agree i've always agreed on this so the havings were always a contribution uh there's many factors but the business cycle and and global liquidity in general which bitcoin has like a rough correlation to which is actually not respecting currently because global liquidity is moving up but bitcoin is actually moving down so we're having this bit of like a moment within Bitcoin itself.

31:15But the ISM, like, so the business cycle has actually not reached high levels yet. We're not even above 50. So the macro analysts in general, they still expect this to start moving up to those higher levels. And so that would mean actually also more favorable conditions for Bitcoin, which could mean like a continuation of the bull market. So all this to get to, so Bitcoin came forward out of the 2008 financial crisis we we kind of naturally went into that four-year cycle which was the business cycle as well um and but but if we look further for example if we look at the the dot-com crash to the 2008 market we had actually an eight-year uh cycle you know and so it looks now also the cycle structure is changing so so we just had like four four-year cycles in in the business cycle but now with the business cycle we're also uh lengthening at least that's what it what it what it starts to look like and so it's very likely that bitcoin might you know move with this and so therefore i think there's a big increase in probability that bitcoin will still continue its bull market further down the road even though we have a correction now uh you know this healthy distribution or ipo phase that we're in call it an ipo phase i still think there's like more uh continuation of that bull market uh and we probably continue a bit of like that gradual channel all of obviously we now broke that three-year structure which i just showed so maybe we'll move into like an even slower structure uh you know a new channel uh but but looking at the macro uh like unless we got like a recession like in the next weeks or months uh you know it looks more likely that the cycle will extend and so i think the impact of macro is actually more important especially since institutions came in uh and and so so that is something to uh to keep in mind this episode is brought to you by AnchorWatch.

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36:04So just on that, you said that you think the business cycle may be lengthening. Do you have any idea of why that could be happening? Yeah, so there are some forward-looking indicators, as well as global liquidity that seem to indicate that the business... But I'm no macro expert. You know, I'm just looking at what they're doing here. So it's hard to create a forward-looking indicator, in my opinion. So I also am still skeptical about this. But in general, you know, the ISAM moves, you know, it has bottomed here in 2022, 2023, actually. And it has been moving up since. And so it's likely that it, again, reaches like those higher levels, like the 60s, and then starts moving down because it always has like this cyclical behavior, the business cycle.

37:01Now, if we move to a recession from here, it's possible, you know, suddenly we could have like a drop even like to the 40s or so in that metric. But as far as I can look, the indicators, people have been waiting for a recession for a long time, like the inversion of the yield curve and all kinds of metrics. But it just hasn't come. Now, it might suddenly come now. But to be fair, I actually think we might even have more of a melt up than melt down. So in my opinion, looking now also that there's going to be a continuation of rate cuts. and a restart of QE, it actually, you know, the conditions are actually more favorable for the business cycle to pick up instead of a slowdown.

37:49Yeah, I did see just before we started this call, I saw a tweet that Luke Groman put out saying that Bitcoin is sort of the last functioning smoke alarm for liquidity. And I know you say you're not a macro expert, so maybe this is a conversation to have with someone else, but it is interesting to think of maybe Bitcoin is signaling something to the market here. And I don't know where that liquidity will come from, whether it's through QE or something similar, but perhaps liquidity is drying up in the system. It could be. It could be. I'm not sure if Bitcoin is a big enough asset to really be that leading indicator.

38:26But of course, we have also gold at autumn highs, which is also a telling story. I mean, there's a loss of trust in the US dollar. And so there's definitely a lot going on in the macro world. But in my opinion, I mean, there have been calls for a recession for over a year now. And to me, it seems like it can go on a lot longer still, especially with the conditions that are common with regards to QE that I mentioned. So in my opinion, it's more likely to continue to move up. But indeed, maybe Bitcoin is that leading signal. But I actually think that's giving too much credit to Bitcoin yet for the stage that we're in.

39:11Okay, fair enough. All right, let's get on to the next chart. Yeah, so as I was saying, Bitcoin is very correlated to risk assets. So the S &P, Nasdaq. So here is actually a chart where I just look at the performance. So percentage gains. Since I took not, I mean, a lot of times you will just do year to date performance, but I took actually the moment in time late last year where all three assets had like an ultimate high. So that seemed like a better starting point than just a random, like the first of the year. And since then we've, and I've been tracking this chart for a long time. we bought it bottomed at an like Bitcoin was more volatile but actually had very similar performance sometimes we you know we overextend a little bit and then we we revert we had a reversion to the mean or in this case like the the S &P and Nasdaq and currently we're we're actually undervalued so either you know Nasdaq and the S &P will come down or Bitcoin will make a bottom soon and move back up this is funny because like this is obviously for the vast majority of the year, it's been incredibly correlated.

40:26Seems to have broken a little in October. I think when everyone talks about Bitcoin decoupling from the Nasdaq, they expect it to go the other way, but we're dropping as they're still going up. Exactly. Yeah. And now we have moved down earlier in other parts of the site. If we look here, also there were autumn highs, for example, in the Nasdaq S &P and Bitcoin already started dropping. uh so so in in that sense yeah bitcoin is indeed like because it's such a liquid asset it it might be a leading signal but um but yeah correlations is also different than than like performance right here we're looking at the performance and we actually have very similar performance you can also see that it's correlated but bitcoin has been like slightly more volatile sometimes it will yeah like move down move up and so so like even if the like some people are saying like yeah bitcoin has a less correlation now to the nasdaq or whatever um but but if you look at this chart you can actually see why i mean we've just been like kind of hovering around and and that is also to me shows again a bit of that distribution right we have suddenly like some distribution and so bitcoin will just kind of like be like more volatile move around uh but but in In terms of gains, we have actually tracked the S &P and Nasdaq, you know, almost identical.

41:44And so currently we're actually like, you know, looking at this chart, you could say like, okay, Bitcoin is really undervalued. And so it also becomes actually attractive to invest in again. So I guess the question really that I would have on this is that it's always like I can see that it's been more volatile, but it's always been following the same trend until October. do you think that could be a sign of something else like is this bitcoin decoupling from these markets i actually i don't think so i think bitcoin is indeed having just like a a temporarily like you could call it a temporarily decoupling which we've had like several times you know bitcoin would move up here for example and kind of overextend and then move move back down now we're like underperforming i think i think these will again uh you know move more in tandem in the future like either the nasdaq and s &p will come down and bitcoin is a bit of a leading signal for like something that's coming up or uh you know bitcoin just bottoms because there's a lot of fear currently like there's so much fun i was going currently it feels like we might bottom soon actually and then uh you know we're probably ready to move back up again towards the the performance that the S &P and Nasdaq has.

43:02Is gold correlated to these charts at all? No, not at all. No, so gold is really doing its own thing. And no, it's, well, gold obviously had very good performance, like, especially if we would add in this chart, it would be, you know, up a lot because gold has been performing very well. But yeah, so Bitcoin really is a risk asset currently. Like, it's seen as a risk asset. It's not, you know, we're not near the stage at all to be seen as a hatch against uncertainty like gold is and in my opinion that is really something for like the next cycle or so if it ever will be because i i always think bitcoin will be different will behave different than gold does gold is like you know about fear in the world and about destruction and like you you know uncertainty you want to invest in gold if you're in a really uncertain times um where bitcoin i i see it like as a new invention you It's like a tech stock.

43:59It adds value to the world. And actually, I see it as a very positive thing that Bitcoin currently is trading as a risk on assets. It's just the stage that we're in, where in the early stages still of institutional adoption to Bitcoin, and Bitcoin is trading as an asset similar to stocks, which to me makes total sense. So I think that's a phase that we have to go through. And at some point, we will start to decouple. but i think it's still way too early for that so you don't see the correlation as necessarily a bad thing no not at all i think uh it's actually uh it shows that institutional interest is here and and uh and so and i think that is needed if we want to get bitcoin to like a world reserve asset we need to to go through these phases right we need institutions to adopt it uh because they have the most value to to store actually and and with bitcoin being a sore value that makes total sense.

44:58All right, let's go on to the next one. Yeah, so in terms of like, so we broke that three-year structure, which is a worrying signal. But if we look at terms of like overvaluation, undervaluation, and so there's a bit of a change in structure. Like if you look at previous bull markets, we had a lot more hype. And you see like in terms of standard deviations above that short and older cost basis, you know, we had like extensions up to four, for example, in the previous cycle, and also with, you know, heavier corrections like this, like an 80 % bear market. Now, currently, we've like only had like mild overvaluations, mild undervaluations, and especially the last peak is relatively low, you know, like if we look at the short molar cost basis.

45:46And so my reasoning here is always that like, like the more overvalued you get the the the more fierce the correction will be and yeah and and you can actually see that like we moved to the top of the channel uh we moved back to the bottom of the channel but that took us to like a 1.3 standard deviations from uh from the short molar cost basis and and then move to a minus six uh correction uh which a minus 0.6 uh correction now currently you know we only got to like a 0.72 on that last uh run up and and so the correction like that looks more similar to like the the one in 2023 so so actually i think we're you know looking at this you could like say that we're near a bottom like i i don't know what exactly the bottom will be but it looks like we're not far off like i don't think like we're gonna suddenly move into a bear market here, like considering the overvaluation, the mild overvaluation that we had.

46:49So it's more likely to just get a correction similar to the one we had in 2023 than to move like suddenly all the way, have a correction like similar to, for example, a bear market like in 2021, which was like two standard deviations below the short and older cost basis. This is something that Checkmate said to me a few times. He says that the bull market authors the bear that follows. And like, if we just put our bearish hat on for a second, let's say we were all wrong. The four-year cycle is alive and well. This is, we've had the top, it was 126k. How low do you think a bear market would go now?

47:26Do you have a kind of idea of where the floor might be? Yeah, it's still difficult to say. So the realized price is currently at like 55k on the top of my head. So it's already reasonably high. Like usually we drop slightly below realized price, but before we get there, it might even be in the 60, 70 range. If we look at supply distribution, there's a bit of a gap in that 70K area, like 73K or so, I believe. So like a correction to 73K would still be in the cards if we would get like a bear market. But actually, I don't think we'll go much lower than that, given the mild overvaluations that we've had.

48:14And we've also had already stronger corrections. There's been a lot of distribution. Plus, also, institutional buying is more gradual. There's more passive demand for Bitcoin. So even though there's some more sell pressure, but I think also OGs, like the Holler Group, is a bit of a special type of investor, right? Like they believe in Bitcoin. They just want to take some profits when prices are reasonable. But once Bitcoin start dropping, like below 100K, I don't think many people will like love to sell their Bitcoin. Like they're going to do minimal selling below 100K unless they really believe like, oh, the bear market is in.

48:53So we might have a bit of that now. Some people that think like, oh, the four year cycle will play out. The bear market will come. I should take some profit while still can near that 100K level. but i think in general like most uh you know hotlers they're below 100k they're not going to be that interested into selling that's why also i think like where will all that sell pressure come to go to 70k i i you know um i i i think there's still uh you know room for a continuation of this bull market yeah me too i mean what i i is do you watch the derivative markets at all because it It would be interesting to see if a load of shorts end up opening like down here at 100k, that would seem like a good potential bottom of watching those shorts get blown out.

49:36I checked the futures market today, like for, you know, if there were like liquidations, but it was very mild, like not near levels, for example, that we saw recently, like when we had the drop from the cycle peak, obviously that was like a bit of a mental like historical occasion. Like we had the most liquidations ever like in the crypto market in general, like moving down from the so-called cycle peak then that we have now. But the liquidations were very minimal now around that 100K level. Actually, I expected more of that. So I think there was already such a big flush recently, like the biggest flush actually in the futures market.

50:15so I think there's less leverage now in play for that to have an effect. That was already flushed a couple of weeks ago. Okay, what have we got next? Yeah, so an interesting indicator is actually short-term holder supply. So in general, that means like an increase in hype in the market and you can see like in previous markets, it got up pretty high. Like this market, we have not. like for only for ddf pump and election pump we had an increase in that short-term holder supply metric and but for now like even though bitcoin is dropping uh you know short-term wall supply keeps rising which is actually people are in the debt no so so also that is an indication like okay there's still potential for a continuation of of uh of that bull market now if this starts to roll over for some reason that would be uh you know a less positive sign but for now uh you know there's a bit of a bullish diversion because price is going down but uh short more supply is moving up so that's just people buying the dip seeing some cheap sats and buying them yeah but they have uh there yeah so there's still an enough demand in the market you know like for for each seller of course there's a buyer as well and and and so short more supply shows in general a bit of like new people moving into the space right so it's a uh supply first get actually supply gets classified as short-term holder in general if it's like a new entity but if it's an existing entity which already has long-term holder supply it will immediately be classified as long-term holder supply so if uh you know if haulers are buying here it will not show up as much in short to molder supply metric it's it's more like new entities coming into the space uh and and and so like it's a positive sign that that that this is rising that's interesting um one of the things that Checkmate has been bringing up recently is that under 105K, over 50 % of all the dollars that have ever entered Bitcoin are underwater.

52:16And I think the reason that he uses that and he's sort of cautious around that number is because basically like sentiment, what does that do if 50 % of all dollars that have ever come into Bitcoin are now underwater? Is that something that you pay any attention to yeah i think if you look in if you measure in btc terms i think like 30 of the supply or like nearly like it's like 27 of the supply i think is currently underwater which is a fairly big amount indeed and so this can you know this is why sentiment is so bad you know so and and when sentiment is bad people start selling out of fear and and but that that indeed causes like to reach a bottom right like people will kind of capitulate uh at those levels now indeed like if if such a high percentage is underwater it uh it's not a good thing in general for a continuation uh it means like that actually some distribution probably needs to happen and uh you know people uh some of that some of those losses needs to be taken and uh and so we got like a more healthy base to build up from again.

53:26It's going to be interesting to watch the next few weeks play out. Okay, have we got any more charts before we close out? Yeah, so the last one that I had was actually, so I think this chart illustrates very well the difference in structure that we had at this bull market. This is actually short to molar profit, so supply and profit, and that reaches like near zero levels like in bear markets. So there's a lot of like of these profit reset signals during a bear market. But this bull market, unlike previous cycles, we actually have seen three corrections that where we had a complete reset of short holder profit, which is kind of unseen, like in a previous cycle that never happened.

54:16And so this actually became like a signal to watch for potentially forming a bottom. So currently we're right about here. Actually, that doesn't include today yet. So today's data is not included. So I'm looking forward tomorrow to see how this evolves. But hopefully, actually, we get soon to the bottom and we get this reset signal so we can actually start moving up again. So this is a chart I watch. I follow closely. Because this bull market, it has shown near perfect resets. And so that's very interesting in terms of the structure of the bull market. Because when you get a complete reset of short molar profit, you kind of start with a clean slate again.

55:04And so the bull market can continue to move up. And so that's why, of course, you see a lot of these signals. If we got like an 80 % bear market, a lot of these signals will start firing. Like if you look at previous bear markets. But in bull markets, there was never such a reset signal. And this time we've had it three times. And so to me, that shows there's been more consolidation. We've had this more gradual move up. Also, the downtrends here were pretty heavy. After ETFs, we had like a six-month downtrend or after the election. And so, you know, people are dissatisfied with the upside of Bitcoin, but actually, you know, we've had a much more consolidation happening than in previous bull markets, which to me is, again, a reason to believe that we can continue for much longer.

55:55And I guess that's just signs that the market is maturing. Also, the volatility is down, more liquid market, you know, more participants distributing. and as I said, this IPO moment, it kind of shows there's a lot of distribution happening. So to me, this is a good chart to watch. I would love to see a reset soon in this metric because that will be a bit of a defining moment. If we get a reset and we get a pullback or we kind of start to recover, we get we get a rally after that would be in my opinion a very bullish sign i mean i wouldn't be too mad at a drop to the 70s again another chance to stack some cheap sats but if anyone is sort of panicking what's your kind of message from all this is it just remain cautious but bullish um yeah so indeed like if we look at bitcoin uh all the developments that have been happening in Bitcoin.

57:02It's really only price that's been maybe a bit disappointing. All the other developments are actually playing out in front of our eyes. We have institutional adoptions. We have the biggest ETF approval in terms of gains. The institutions are here. BlackRock is behind Bitcoin. We have a strategic Bitcoin reserve. All these things are happening that actually one could wish to happen for Bitcoin to become like a a royal reserve currency and so uh price is still disappointing but in my opinion that is because of 90 of the supply that's been mined in the hands of the ogs which is compounding cell pressure that is kind of converging now and and bitcoin is now slowly like more gradually adopted by institutions and we're getting like there's a lot of change happening for bitcoin in terms of maturity as an asset class.

57:58And we're in this distribution phase now. And so patience is needed, but it's a good time to accumulate with this long-term vision. I still think the long-term vision of Bitcoin is very promising. I truly believe it will go to a million dollars, but the timeframe might be slightly off. No, we might not be in this four-year cyclical pattern and that it's just like within 48 years, where a million, you know, the cycles can change. It might start to move up more gradually. So can we just go back to your spiral chart very quickly? I have a question on that. Because I'm curious whether you think end of 25, early 26 might be the first time that this spiral chart has ever been broken.

58:43I imagine, I think we started last year just over 100K. Do you think these lines could overlap for the first time at some point soon? I don't think so, because if we look, we're now in Q4. So historically, that means that the bear market starts. So we have like this 80 % drop in the previous cycles. And so unless Bitcoin starts dropping even more, which we just kind of explained that is unlikely to happen because we have not reached those overvaluation levels. And if we get an extension of the cycle, then we actually start moving up. So it's even more unlikely to cross. So I think in the next year or so, it's very unlikely to cross, but it might become visible like if we get another ultimate high in the next year or so, that would clearly point to like the four-year cycle breaking or that we're moving, trending away from the four-year cycle.

59:41But I don't think the lines will cross anytime soon. All right, Ru, this has been amazing. Do you think this will be the last time I ever record a show under 100K? We dipped to, I think, 99 during this call. It would be cool if we hit the exact bottom. Yeah, so we're in the process of bottoming, in my opinion, like looking at short and more profit, but we're not there yet. So, you know, we might still hoover around a bit at these level tests. I'm not sure. Like, we could test it a few more times. But I do think in the next couple of weeks, we might form a bottom. And then, indeed. So I hope the next time when you interview me that we're well above 100k again.

1:00:21Me too. I'm hoping this is the last time I'll ever do a show where it's not over 100k. But we will see. Bitcoin will do what Bitcoin does. Thank you, Roo. I really appreciate it. As always, this has been a lot of fun. Tell everyone where they can go and get your newsletter and find out more about you. Yeah, so you can find me on Twitter and NOSER as at TheRationalRoot. But if you go to my profile, you can also click on the link to go to the Bitcoin strategy platform or I have Bitcoin strategy dot sub stack dot com where I write a weak knee loose letter and provide access to live access to these charts and indicators.

1:00:57Awesome. Thank you, Ru. I appreciate you, man. I will speak to you soon when we're well above all time highs, hopefully. Thanks so much, Danny. Thanks.

1:01:15Thank you.