Bitcoin’s Spring Bottom?

The current market environment is characterized by a resilient US economy, despite concerns about a potential global event stemming from escalating tensions in the Strait of Hormuz and rising oil prices. Oil is currently just under $100 a barrel, with the potential to reach $120 or higher if the situation with Iran escalates further, especially given the rejection of Iran's recent proposal by the US administration. A key observation is the inverse relationship between gold and Bitcoin in past cycles. Historically, a significant bull run in gold has often preceded a Bitcoin bull run. This pattern has been observed in previous bear markets, where gold putting in a high coincided with Bitcoin putting in a low against gold, followed by a retest and then Bitcoin outperforming gold. The current situation shows this pattern recurring, but in an extremely elongated fashion, which could signal a slower, longer march upwards for Bitcoin once a breakout is confirmed. Unlike past breakouts, such as in July 2020, the current environment does not feature outright quantitative easing (QE), suggesting a less sharp but potentially more sustained upward trend. Looking at Bitcoin's performance against the US dollar, there has been a 52% pullback this cycle from its high, indicating reduced volatility compared to the 65% pullback seen in late 2019. While many are focused on the near-term 55% dive from the highs and the potential for a continued bear channel, there's a strong possibility of a breakout. A decisive break above the $80,000 mark would invalidate the bear flag/channel, attracting significant interest towards Bitcoin. Conversely, a breakdown below $80,000 could lead to a sharp move down towards $87,000, significantly impacting market sentiment. The discussion highlights the concept of "monetary base total" and its influence on Bitcoin. When the monetary base total experienced a hard run-out, Bitcoin was under massive pressure. Now that it's ticking up, Bitcoin is attempting to find its bottom. The Fed's balance sheet continues to expand due to ongoing reserve management purchases, reminiscent of 2019. A structural analysis of Bitcoin's price movements reveals some worrying trends. While previous lows, such as those during the global lockdowns, were eventually taken out, the current situation shows structurally lower lows being put in. This is exemplified by the Japanese Yen carry trade unwind and the "fake out" around the launch of spot ETFs, which led to a major structural breakdown that will take a long time to repair, requiring a move well above $110,000. Comparing the current cycle to past periods, particularly the last time the Fed began raising its balance sheet, shows similarities. In the past, Bitcoin ticked up slightly, made a lower low, and then another lower low. Currently, Bitcoin has ticked up and made one lower low, but not yet a second. This weekend could be pivotal, with potential for drastic changes if geopolitical tensions escalate. Despite these uncertainties, there is a prevailing belief that liquidity is expanding in the system. However, this could change if the 10-year Treasury yield breaks higher, likely triggered by oil prices surging above $120. The ongoing "AI war" and the US's strategic advantage with higher energy prices putting pressure on China are also noted as significant macro factors. Many market participants remain on the sidelines, anticipating a correction. However, if the current upward trend continues, the recent low could be reevaluated as a "mid-cycle low," challenging the widespread expectation of a bear market in 2026. While a bear market scenario is still absolutely in play, current price action is testing important levels. The risk of rejection at resistance, similar to past instances that led to sharp downturns, remains a significant concern. The conversation also touches on specific trading strategies and upcoming market events. The imminent re-entry of Bitcoin spot ETFs into the market is highlighted as a significant development. The discussion then shifts to midterm elections and their historical impact on markets, noting an average 10% correction between May and October in midterm years. However, the speaker leans towards seasonalities as a stronger influence than presidential cycles, with October often being a favorable period for markets. Looking at the S&P 500, a structurally higher low was observed during the "max fear" situation, which is seen as bullish. However, there's still a gap of about 4% to a pivotal resistance point, raising questions about potential future movements. The speaker also mentions positioning into Tesla and spot ETFs, while holding existing profitable trades in Nvidia and MicroStrategy. The overall sentiment is one of caution and adaptability, emphasizing that while liquidity is currently expanding, many volatile components could quickly change the market trajectory. The importance of navigating these complex markets by staying on the right side, rather than predicting the future, is underscored.