Bitcoin: The Beauty of Mathematics (Part 74) — Transcript

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1. 0:00Hey everyone and thanks for jumping back
2. 0:02into the cryptoverse.
3. 0:04Today we're going to talk about Bitcoin,
4. 0:06the beauty of mathematics, part 74. If
5. 0:09you guys like the content, make sure you
6. 0:11subscribe to the channel, give the video
7. 0:13a thumbs up, and also check out the
8. 0:14upcoming ITC conference taking place in
9. 0:17less than 3 weeks. That might be hard to
10. 0:20believe. Uh it is for me, too, but it's
11. 0:22coming up relatively soon. And as we
12. 0:24mentioned yesterday, we did in fact
13. 0:27release the agenda. So, if you are
14. 0:30curious what the agenda is going to be,
15. 0:32you can go over to the website, click on
16. 0:33November 20th. Just scroll down, click
17. 0:35on November 20th and then the 21st and
18. 0:37you can see what the agenda is. Or you
19. 0:39can just pause the video here uh and
20. 0:40look in in case you're curious. I meant
21. 0:42to mention this like a couple of days
22. 0:44ago, but I keep forgetting. I announced
23. 0:46it on uh on sort of the community tab
24. 0:48and whatnot. But I did release a the
25. 0:51October memo on on Bitcoin. So, if you
26. 0:55are curious to kind of hear some of my
27. 0:56thoughts um in written form and perhaps
28. 1:00a little bit more uh scrutiny, go check
29. 1:03out the recent uh macro risk memo where
30. 1:07we've talked about Bitcoin and the cycle
31. 1:09clock. Okay, so with that said, it is
32. 1:13the first of the month and on the first
33. 1:15of the month, you know, I normally do an
34. 1:17update to Bitcoin and beauty of
35. 1:19mathematics and you can see that we are
36. 1:21continuing to spend a lot of time just
37. 1:23kind of down in the dumps, well below
38. 1:25the quote unquote fair value, still
39. 1:27above the lower logic regression trend
40. 1:29line. My guess is that we will continue
41. 1:31to spend the rest of the year down here,
42. 1:33probably closer to the green line to the
43. 1:35downside than the red line. And when you
44. 1:38look at this, um, it's not like it's
45. 1:40never happened before. I mean, in 2016
46. 1:42or 2015, 2016, we kind of spent a lot of
47. 1:44time in this area before finally going
48. 1:46above it in 2017. Last cycle, we never
49. 1:50even durably went overvalued. And the
50. 1:52reason is because in order to go durably
51. 1:54overvalued, Bitcoin needs to have a
52. 1:56euphoric rally that then gets the the
53. 1:58rest of the market involved. We didn't
54. 2:00have that last cycle, right? The rest of
55. 2:02the market never really got that
56. 2:03involved. And so when you have that, you
57. 2:06have more of like a 2019 rally. And the
58. 2:10same thing happened here in 2024 and
59. 2:122025 where Bitcoin just kind of barely
60. 2:15went above that fair value and really
61. 2:18struggled to, you know, to really
62. 2:19durably stay above it. And that's kind
63. 2:21of a hallmark of a more apathetic top
64. 2:23like we had back in 2019. So because of
65. 2:27this, right, because we've had a whole
66. 2:28cycle where you didn't really get that
67. 2:32more durable rally above the fair value,
68. 2:35when you take the percent difference
69. 2:36between the, you know, the price and the
70. 2:39total market cap, you can see we are way
71. 2:41below where we normally are, right? So
72. 2:44something has shifted. We have been at
73. 2:46these levels before, but it hasn't been
74. 2:47since Bitcoin was basically created back
75. 2:50in 2010. Now that doesn't these models
76. 2:53do not mean that means Bitcoin has to
77. 2:55immediately go up, right? Obviously I
78. 2:57have been more so in the camp of it
79. 2:59dropping in Q4 than anything else. Um
80. 3:03but it is proof that just because
81. 3:04something is undervalued uh by by you
82. 3:07know certain models doesn't mean it
83. 3:08can't become more undervalued. And then
84. 3:10the same thing can be true to the
85. 3:11upside, right? Sometimes just because
86. 3:13something's overvalued doesn't mean it
87. 3:15can't continue to be overvalued for
88. 3:16years before more rational minds
89. 3:19prevail. So, it's just a reminder that
90. 3:23in the markets, what can seem like such
91. 3:27a sure thing often, you know, can often
92. 3:30not play out. You know, just uh a few
93. 3:32weeks ago, a lot of people were
94. 3:35convinced that this was, you know, you
95. 3:40know, back when we were at 87K were
96. 3:41absolutely convinced that there was no
97. 3:43way we would go back down to these
98. 3:44levels because you had your golden
99. 3:46cross, you had your MACD, right? you had
100. 3:48your RSI, you had everything that that a
101. 3:52lot of the more traditional technicians
102. 3:55for for the markets would look at, but
103. 3:58you also have the macro and you also
104. 4:00have sort of seasonality. And while I
105. 4:02know they're not necessarily popular
106. 4:03things because they don't always play
107. 4:04out, they do more often play out than
108. 4:06not. And in this case, it looks like the
109. 4:09that stuff has brought Bitcoin back
110. 4:11down. And one of the things we've said
111. 4:12for years is that in Q4 of a midterm
112. 4:16year, what brings Bitcoin down usually
113. 4:19is not just Bitcoin itself, but it's the
114. 4:22stock market dropping, right? And if you
115. 4:24look at the NASDAQ, we said expect a 10
116. 4:26to 20% drop in Q4. It's already dropped
117. 4:3010%. Right? So, I mean, it's here,
118. 4:34right? It's here and it's taken Bitcoin
119. 4:36down. Now, some people might say this is
120. 4:37due to e due to the uh exchange hack.
121. 4:42And while that might be true, you should
122. 4:44know that Bitcoin was already trending
123. 4:47down for well before the exchange hack
124. 4:50occurred, right? Like, if you're going
125. 4:52to blame this candle right there on the
126. 4:54exchange hack, what do you blame the
127. 4:55other ones for, right? I mean, yes,
128. 4:58there's always a narrative, but I gotta
129. 5:00be honest with you guys, a crypto
130. 5:01exchange getting hacked is not a black
131. 5:03swan event. in crypto. That's just a
132. 5:05Tuesday, right? These things happen a
133. 5:08lot. Obviously, this one was bigger, but
134. 5:11it's not really a black swan event,
135. 5:13unfortunately. It's sad that that's kind
136. 5:16of where we are, but I don't think
137. 5:18anyone reads that headline anymore, and
138. 5:20they're like, "Oh, like they're not like
139. 5:22they're not that shocked anymore." I
140. 5:23know I'm not. It almost seems par for
141. 5:25the course at this point that an
142. 5:28exchange will get hacked every so often
143. 5:29and then we have to deal with the
144. 5:31fallout of it. So, and I think there's a
145. 5:34lot of things that you can really think
146. 5:35about as it relates to that. And and the
147. 5:38other thing we mentioned too is that
148. 5:39after you get two weekly closes below
149. 5:41the prior range high, you then typically
150. 5:45go down very quickly to the bull market
151. 5:46support band. You might bounce there a
152. 5:48little bit and then continue. And you
153. 5:49can see right after dropping two weekly
154. 5:51closes below the May high, we
155. 5:54immediately dropped then to that 21week
156. 5:56EMA. So yes, you could have you could
157. 5:59blame the exchange hack, but we were
158. 6:02arguably we were already heading in that
159. 6:03direction anyways, right? I mean, yes,
160. 6:06there was a news event that
161. 6:10arguably continued it. And some people
162. 6:12have said, well, the fact that it only
163. 6:14dropped a few% is bullish given the
164. 6:16exchange hack. And I I could see some of
165. 6:18that, right? I I think there is some
166. 6:19resilience there for sure. Um I'm not
167. 6:22completely blind to that. But there's
168. 6:25also, you know, maybe a mistake of
169. 6:27assuming that these other things won't
170. 6:28simply continue. I mean, yes, that hack
171. 6:31is over. Uh, but what if the NASDAQ
172. 6:34drops another 5 or 10% before the end of
173. 6:36the year, right? That'll likely take
174. 6:38Bitcoin down if that were in fact to
175. 6:40happen. So, let's just see if it
176. 6:42happens. I know right now Bitcoin's back
177. 6:44up to the upside. But one of the things
178. 6:46I've I've mentioned um is you can see
179. 6:49how Bitcoin has started this pattern
180. 6:51where it sort of bottoms out over the
181. 6:53weekend and then heads up into the
182. 6:54beginning of the week and then drops
183. 6:55near the end of the week, right? And
184. 6:57it's been doing it a number of times
185. 6:59now. So I imagine now it looks like
186. 7:01we're kind of heading up into the
187. 7:02midterms. Perhaps on the other side of
188. 7:04the midterms, we'll go deeper into that
189. 7:05bull market support band. But anyways,
190. 7:07those are my thoughts. That's the
191. 7:09update. the um for the bitcoin to be
192. 7:12mathematics obviously over the macro
193. 7:14scale the long term I do think crypto is
194. 7:16going to go to 10 trillion plus or minus
195. 7:17a few trillion and as we go to sleep at
196. 7:19night we cannot help but wonder what's a
197. 7:21few trillion dollars among