What Bitcoin Did - IS THE BITCOIN BULL MARKET OVER? W/ Rational Root

Episode Date: February 6, 2025

Rational Root is a Bitcoin on-chain & cycle analyst. In this episode, we discuss the current state of the Bitcoin market, why institutional adoption remains in its early stages, and how on-chain metrics suggest there’s still room for upside. We also get into the impact of Trump's policies, why Bitcoin is still considered a risk asset, the role of ETFs and the likelihood of a Bitcoin strategic reserve, and Root’s outlook for the rest of the cycle. MASSIVE THANKS TO OUR SPONSORS: IREN: https://www.iren.com/ RIVER: https://river.com/wbd CASA: https://casa.io/ LEDGER: https://www.ledger.com/

Based on the data as I see it now, it looks very likely that we could peak in the second quarter, for example, of 2025. And yeah, my prediction remains still relatively conservative. I actually am more bullish and my conviction of Bitcoin keeps growing every day, but we need to give it time. Yeah, nice. It's much easier. But I miss seeing your face, man. How are you doing? Yeah, pretty good. Yeah, but I'm a little late now. Sorry for that, man.

It was a struggle to get the charts together. I was running late with the charts. I actually wanted to have something special, but in the end, I was working on some new data, like among the 13F filings, you know, like institutional data. So we've been trying to gather that data. And I have all the data now. It's just like I haven't been really put, I haven't been able to put together a chart yet. But in the last chart,

so are you saying that we're getting nothing special here today? Well, yeah, I think we're still going to get some really cool stuff. But I wanted to get that in there as well, just because it's again something new that nobody's done before or that I have not seen yet in the community at least. But that will come. But yeah, I'm just going to slightly talk about it maybe at the end a little bit. It's going to be just a small primer.

It's not, it's not, I put the ETF chart in there. It's just about institutional holdings, a little bit of extra info, since, you know, there's such a special cohort going into the cycle. And so that's why I've been interested in analyzing them. But, but yeah, we'll get to it. Yeah. We're recorded, by the way. We're in route.

We're here. Yeah, yeah. I saw that. Isn't it amazing to see that everyone's panicking. about a crash to $97,000. Yeah, yeah. I mean, we haven't even touched the short term holder cost bases, you know, like I've been practically I was waiting for a crash like to the reset, like I would have

love to have a reset to the short term holder cost basis before Trump, you know, but and then I was, it was the timing was kind of difficult because there, there wasn't much time with like I knew with Trump there, again, it was going to be bullish. And so there was little time to have this reset. And so we only got like a little bit of a reset, but we never touched the short-termolar cost basis. And we still haven't really, not on a daily basis. I mean, we touched 92K slightly or a bit below,

but the short-term holder cost basis is at 92,000. And yeah, we still haven't like on the daily closed data. We have not been there. And so, you know, I think that would be a healthy reset going forward. so we'll see. It's funny to see, the sentiment has been so bearish on Twitter. Like,

it's actually shocked me how quickly it flipped. And I was trying to think of why. And I wonder if part of the reason is, because in that sort of 2020, 2020, 2021 ball market, it was like up only. We didn't really have any pullbacks.

So I wonder if anyone who came in then is not used to seeing this. Because this seems, feels very similar to 2017 to me. Like, we had a lot of these bigger pullbacks. Yeah, a sentiment has been all. over the place. But indeed, we haven't even, we had a 15% pullback. That's nothing for a bull market in Bitcoin's history, right? And indeed, everyone is bears at 100K, and we have, like,

actual institutional adoption. We have people talking about nation state adoption or strategic Bitcoin reserves. Like, we have a pro-bitcoin administration. There's so many bullish factors. Yeah. But I guess everyone is disappointed that Price is still not really doing anything, you know, again and so there are many catalyst over the past months and so now there's like you know just for a few weeks there's no catalyst and everyone is kind of panicking but but yeah i i'm i'm i'm quite still i'm really optimistic to be honest oh me too i'm i'm i'm like permable to a fault though like because i have no intention of selling bitcoin and like spare cash that i have just always goes into bitcoin so i don't really care what's happening in the market i end up being just

like a permable to a fall. Once you really understand Bitcoin, I mean, and you're basically all in as well because of your conviction, like, yeah, permable is like the normal state that one is in, you know, like, and it kind of is boring to sit through the whole bear market because you know what's going to happen and you know it's going to take time to build up again. And, you know, hype comes in faces. And so, you know, we go through these cycles. But yeah, living through many of these cycles.

indeed, like you really become immune to the volatility. Like I sleep like a baby, you know, Bitcoin crashing. Everyone was panicking. You know, I saw, okay, there's some future liquidations, you know, typical, you know, volatility like these days happens, you know, like I slept like a baby and the next day we're up again, you know, and all because of, I mean, the Trump tariffs this time. There's always some news event, obviously. But it's a build-up of leverage and it needs to get flushed.

And so we need these healthy resets. And, you know, we're in one now, perhaps. And I've been talking about this in my newsletters. You know, actually, I was wondering and I was doubting that we were going to get there. But there was a gap, if you look at on, I don't have that chart today. But there is a gap in the on-chain supply. We went really fast from, you know, from 85. to basically between 85 and and 92K, there is like almost no supply changed hands there.

So we literally just jumped there. And so it's quite a bit of a gap. And so it would be really normal to revisit that and to fill that gap. But so far we didn't. And I was hoping that we were going to do before actually the inauguration of Trump, but we never got to it. And so perhaps that will still come. in the next week or next weeks.

But to be honest, I don't think the poolback is going to be too severe either. It seems to me a bit more of a distributed pullback. It's just a bit of a slower pace. And that's why everyone is just impatience. So maybe we should actually do that because last time you were on the show in its old version, it was when Bitcoin had just broken its previous all-time highs. I think price was like 65K-ish. and then we had kind of six months of just sideways

and now obviously we're at 100K or thereabouts. Do you want to kind of give a quick recap of what's happening in the market so we have good context going forward? Yeah, maybe let me add maybe the spiral chart and so it's maybe useful for just going through where we're at in the cycle. Let me just pull up the screen.

I don't know if you can see this, right? Yeah, I can see that, yeah. So this is actually the chart I shared on, my Amsterdam presentation and then we were still, so we're here in the top now. So just to really quickly explain. So this is the spiral chart. Each ring is times 10. So once, you know, the line moves outward, Bitcoin increases in price and a full rotation in the chart is a four year period. So here we start in the top 2009 and then we move actually here. Then we are in 2013 and we move. We get to 2017.

We move. We get to 2021. And then we move in here. Here we are now in 2025 in the top. And so the Amsterdam presentation was right here in this zone. And in Amsterdam, you know, the kind of message of my presentation was like, okay, there's be times to in and out of the market. But this is a time you don't like considering all these green dots like here in this area,

you know, in the next quadrant. So this is all of 2025, basically. Green dots being all-time highs. Yeah, those dark green dots are the ultimate highs, but the green colors are like bullish price action, basically. And so like overvalued price levels. And so here in that first quadrant, you know, you don't want to be out of the market because, you know,

Bitcoin can jump. We don't know how high it will go. You know, maybe it will just be 200K. Maybe it will be 500K. Like, you know, we don't know. But that happens, you know, traditionally in the cycles, it happens in this period. So this is not a time to be out of the market.

And so let's turn the chart a bit. So the Amsterdam presentation was somewhere here in October, I think, 2024. Yeah, so right about here. And then we moved into this green zone now. So now we're above 100K. And so the surface of this chart here, that is actually like that would be a fair price. for Bitcoin based on on chain data.

And then, you know, the further we are above the surface. So you see typically all these green dots at higher levels above the surface. That's when we get to overvalued levels. And the same for, you know, these red dots are all the bottoms that we made in the cycle. And how are you deriving fair price? Like what is the metric in that? Yeah. So the metrics I use is actually, so we look at, so we use realized cap.

So that's actually a way to measure actual dollar inflow into Bitcoin. So actual money and flow into Bitcoin. We look at available supply. So the amount of supply that is available for trade, which we can measure, you know, because there's a lot of supply, like if you have the circulating supply, so that you're 19.5 million or something, a bit more. But, you know, take all the supply that belongs to like hardcore, hotler, out there and you are left with supply that is a lot more active, that is a lot more traded.

So if we look at that tradable supply, because the tradeable supply is actually the supply that matters for determining price, you know, that actually affects the market. And so I use that metric. And I also use like a custom metric of coin value days destroyed. That is basically we look at how, how. how much coins are getting active into the market? Like how many days, like, so once a call, once there is a transaction of a Bitcoin, it starts building up coin days.

You know, for, for each day that it doesn't move, it builds up coin days. And so the amount of coin days that get destroyed, you know, they actually reflect how much supply is getting into the market from like the, basically the, the, the, hotler cohort. And so based on those metrics, you know, I've been able to make a value map, which is another chart, which I'll share as well. But here I kind of color code the spiral chart based on that value map. And I also show the price above and below the surface so it becomes more visual in 3D. And so you can actually see, you know, this time of the cycle, you know, we're all in these overvalue levels. And then we move, you know, the year after we tend to move into this bear market.

all the bottoms, the align more or less in the same place below the surface here. Can I just ask a very quick question? Right now, what is that fair price that you've calculated? The fair price currently at the surface is around 75K. So we're not very far above that at the moment? We're not very far. We're, you know, reasonably, I mean, we're still at 98K, 20K above it, let's say, you know, like it's still reasonably above it, but it's not highly overvalued.

And we can see that actually because, you know, if we, again, if we look at, so it's maybe a bit difficult to see. So we have to look at these dots here. You know, this is, it was the last all-time high here. And so this is the current price. And so if we then put the surface, well, it becomes a bit less visible, but it's the dot here. So it's not that high. It's not as high as. It's been far more overvalued in the past.

It's been far more overvalued in the past. And so we're currently not that match overvalued. So we have still a lot of time like the entire year. And we still have like a lot of margin to go a lot higher. Like, you know, if you look at if you compare to previous bull markets. So yeah, that's a reason to not panic at all, right? But just to continue. So here in the bottoms, so these bottoms detent all to fall together in the same place, as you see.

And now we get like a two-year recovery phase. and you know here this was for example the 2019 we had a bit of a run-up some some early hype in the market that was a bit of an outlier here there's an outlier that was the COVID crash you know so we got like quite below the surface and and here this is actually the ETF approval here so that is also quite a bit you know relatively early so before the halvings the havings are those blue dots here that you see so so so this is a bit of an outlier, you know, but we had a very good reason, why the ETAF approval. And so now, let me pull up all the price action again. So now we are in the middle of the bull market, right?

And we haven't had a reset yet to the short-term holder cost basis. So, yeah, I think it's very normal to have a reset, and I still think there's room for a continuation. Can we talk just briefly before we carry on the charts about the sort of macro environment right now. Because obviously Trump's implemented these tariffs, which seems to surprise the markets, which makes no sense to me because he's been talking about it for months.

And on the back of that, the dollar's been very strong. How much of an impact on Bitcoin? Do you think that's the reason we've seen this negative price action in Bitcoin? Yeah. You know, Bitcoin has become more and more intertwined with all the geopolitical stuff that's going on in the world. And, you know, especially now with institutional adoption, you know, we literally have presidents talking about, you know, strategic digital asset stockpile, I should say. But, but, I mean, Bitcoin is really getting in a picture of, you know, all the geopolitical madness that's going on in the world. And Trump is causing quite a bit of panic in the markets. I mean, everyone is kind of a bit of an unknown. Is he going to put tariffs? Is he not going to put tariffs? You know, uncertainty for Europe, it looks pretty bad as well. And so they're not really even happy with

Trump and Elon. So it's not that strange that the stock prices are affected by it as well and Bitcoin is as well. And so, yeah, of course, Bitcoin trades 24-7. And so, yeah, there was a bit of panic on the weekend and then you got, you know, a bit of a flash crash. Yeah, I think. it's normal. But so far, as I said, we haven't even reached the short-term holder cost basis. And so like there's no worry for me unless we are significantly below the short-term or other cost basis for an extended period of time that we move into a sort of a bear market. How long do you think the market is going to consider Bitcoin a risk asset? Because it, to me, I don't see it as a risk asset. And obviously during this like dollar

strength and the kind of little bit of turmoil in sort of broader markets. Gold's done really well. I would expect Bitcoin's trade more like gold, but it doesn't. Yeah, I think, you know, Bitcoin, obviously volatility always gets in the way, right? Everyone thinks volatility means risk. And so that is just the general confusion, even within institutions. And so that just takes time. But I think people are learning, you know, like Larry Fink is starting to get it more and more. He sees it as a hatch and so, you know, literally as digital gold and so and even more valuable. So that's that's a great start, you know. And I think we just need to be patient.

I mean, institutions are people. People come to Bitcoin. They're new. You know, they need to learn the basics. And so institutions are doing that now. that usually takes a full cycle. And yeah, so therefore also, yeah, many people are calling all these high targets like, oh, Bitcoin is going to go to 500K,000, a million.

But I think it's also reasonable, even if we get to 200K, I'm pretty satisfied. I think the most important is that institutional adoption is there, that we can actually measure that it's growing, the same for nation-state adoption. And, you know, for me, I'm patient to wait a full cycle. You know, people need to learn. Usually that takes a cycle. So, so, yeah, I'm just maybe more patient than average. Yeah, no, I can see that happening.

And do you think that kind of we'll see diminishing returns of Bitcoin now? And what do you think that really means? Yeah, let's maybe, let me pull up the charts. Wait, just a second. because I don't believe in this idea of a super cycle yet. I think cycles will definitely change at some point, but I don't think they're over. People are talking about during bull markets,

people start talking about, you know, this is the D cycle, super cycles all the time. You know, like that, that has happened the previous cycle and even the cycle before. So it's very tempting and it could happen, But actually, yeah, I also think, as I said, like, I think it's better to be patient and maybe, you know, let's wait five years. Let's give these institutions at least a full cycle. You know, I see now, it's because I'm analyzing institutional data. So I'm actually, you know, I gathered all the 13F filing data and I'm actually now looking into institutional holdings. And we're going to get to that chart as well. But, you know, what I see still is just to give a primer. Like, it is very. small allocations. There is like, and these are, Turkey NF filings are all institutions that have at least a hundred million in assets

under management. And so they have allocations from point one, even from point zero zero one. You know, there's, there's a few that have a bit more, but, but, you know, I think the average, and I just had a quick look at, I'm still, I'm, I want to put this into charts as well, but and to also be able to measure these things. But it's still, there's a lot of room for growth. Yeah, they're just tipping their toe in for now. Exactly, yeah. And so that's why I believe, yeah, we need more time.

So I think this is what you're saying. You think institutions are going to get scared out of their position in the same way retail does? Institutions, yeah, maybe they are not as, they're all susceptible to hype. I mean, you know, we're all people and, you know, institutions are made out of people. and they don't understand Bitcoin yet.

And so, yes, some will, some won't, you know, just as people. And we see the same thing actually happening in now the politics. I mean, look at Trump, see all the shit coins or the alt coins. You know, people are talking about XRP, eat, like is going to be added to the digital stockpile. You get all the shit coin. Why do we get the shit coiner at that level? obviously because they're also new to Bitcoin and just as everyone knew to Bitcoin,

they start with shit-coining. And so, you know, it's just also at, it's no different at those levels. What Bitcoin did is brought to you by our lead sponsor and Massive Legends, Iron, the largest Nasdaq listed Bitcoin miner using 100% renewable energy. Iron are not just powering the Bitcoin network.

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This episode is brought to you by River. There are many places to buy Bitcoin, but there's no exchange like River. They have innovative products, phone support, and a dedication to security that you just don't get elsewhere. With River, buying Bitcoin is easy. You can set up zero few recurring buys to automatically stack Sats, and River also lets you earn daily Bitcoin interest on your cash balance that outperforms most high-yield savings accounts.

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Trump. And so because the dollar has been moving up, actually, I was expecting that it was going to move down already. I put that arrow here. I was hoping that it would start to go down because we see historically when dollar is getting weaker that we get actually the most strong bull markets. And because there's more liquidity that moves into the market. And so there's more of that liquidity can find Bitcoin as well.

People tend to take more risk in those situations. But since Trump placed tariffs, actually, we got. this pullback. You know, we went back up. DXY is moving up again. And so we don't know, are we going to get a higher high there or are, you know, is just temporary. And there's just a lot of confusion about, you know, about Trump and what he's going to do.

And so I think, yeah, for that reason as well, we're currently seeing a bit of more, you know, consolidation within Bitcoin. But we actually only recently had an all-time high. And so it's literally been a week or I stopped counting, but it's not been that long since the last autumn high. And so, but indeed everyone is suddenly bearish because everyone is just influenced by the current, you know, the current thing that's been discussed on Twitter or, you know, that's going on with Trump tariffs. And this is bigger than Bitcoin. I mean, this affects the stock market as well. And so it affects Bitcoin as well.

And so, yeah, I think once there's more clarity around these things, which we'll get. in the next weeks or so, I think the market will also readjust. And if in the meantime, we can get a reset to the shorter molar cost spaces, that would actually be fantastic. It also shouldn't take too long all these things, but it will get into that in a little bit as well. But maybe to talk about the presidency, you know, like so, because here in this chart,

we're actually looking at the market cap growth per presidential term. And it's actually the cumulative market. gap growth. And just what I wanted to highlight is that I think it's important to understand because people are indeed bearish currently because Bitcoin price isn't doing yet much. But, you know, if we think about the past, we had like extreme market gap growth in those in the first half, the second having, or in the first Obama term in the Trump, in the first Trump term. But in the Biden term, we had this choke point two point O. We had a lot of restrictions and they're actually all coming out now, right? There was so much going on.

that was anti-crypto, anti-Bitcoin, that, you know, it's not strange banks. You know, all that hindrance is gone now. And so, you know, for the next, that's why, again, for the next four or five years, I'm extremely bullish for Bitcoin. Also in the coming months, I'm bullish for Bitcoin. But we could see, you know, a typical bear market, maybe not as severe this time. Because, you know, it depends also on how high we go, you know, what we do. And it also depends on macro, what's happening there.

But, you know, I don't expect, you know, to your question, you know, to surpass market gap growth of the first and the second cycle. You know, like that, that would be ridiculous. You know, those were early days. The market was a lot smaller. You could move price up a lot faster. There was a lot less capital needed. But if we look at, you know, the Biden term, yeah, I think it's actually possible because, you know, we, we, Indeed, we have diminishing returns, but since that, you know, that top here, the 69K,

it felt muted at the time. And we also know now, like, okay, there's many reasons why it was muted. I'll get to some more in a little bit. But, yeah, so I don't think it would be strange to at least equal the previous cycle in terms of market gap growth. But it's, of course, we will have to see over the next years. which would get us to what? About $6 trillion is that on your chart?

Yeah, I think, let's see. So 3x from here, indeed, we're at $2 trillion. So $6 trillion. You know, I think that's in, you know, it's possible. I'm not saying it has to happen or it will happen. We will see. We'll have to give the institutions a bit of time as well. It's interesting that you have choke point two as the main driver of this

because obviously a lot of stuff happened last cycle. Do you think that played like an outsized role in the... Yeah, I put a choke point two point O here to kind of highlight, you know, the problems with the Biden term. But there were many reasons why the last cycle was, you know, while we had a muted top. And some of those reasons, for example, we can get to the next chart as well, available supply. So if we look at the supply that's available for tricks, rate, you know, because Bitcoin had a high inflation rate in the beginning, you know, actually Bitcoin was becoming more abundant until the third having. And then we started to flatten out.

And that's why also I like to call these first three cycles of Bitcoin that was more of like an initialization phase, where we're actually now getting more to the point where digital scarcity is materializing. And, you know, the pace of that, I mean, it's still like, I don't know. So I've been trying to model this. This is what the hoddle model is. And so we have, I have two models like the S version, which is more optimistic and the normal hoddle model. But if we look at the current levels of supply, for example, we're still more or less similar to what we were in the third having. So still Bitcoin is relatively abundant. And so, but because we were more or less abundant in a moment in Bitcoin's history around that bull market, yeah, it's not so strange to see a muted top,

especially combined with, you know, no ETAF approval, so no gateway for institutional money that has to have to flow in. Chokepoint 2.0, like debanking of crypto or focus, Bitcoin focus companies, you know, all of that happened in this cycle. And so many reasons why, you know, this top was slightly muted. And, you know, the positive thing is that now all of those hindrances are gone. And, you know, we're still at really like fairly high supply levels. But, but of course. Which is just about five million coins, roughly.

Yeah, yeah. According to this measurement. And what's the difference here between your huddle model and your hoddle model S? And just for anyone listening, the hoddle model S shows a more severe drawdown in available supply. There is another chart where the S curves becomes more visible with the Hodel Model S, but they're practically, they're very similar in what they do. One is just a lot more conservative.

And there's more ways to model supply, right? And so I actually started with the conservative model first, but since supply was going down, like rather steeply, I also created a more optimistic model. but it's more, I don't think also extremely predictive in a way, these models, but it's more of like a macro trend within Bitcoin that I think is necessary to understand because, you know, so on one hand we have diminishing returns with like a growing market cap, you know, no matter how you measure, if you measure from bottom to the top or from peak to peak,

you know, you get less returns and due to growth of market gap. But on the other hand, we're now getting into a situation where actually Bitcoin, Bitcoin's scarcity start materializing. And so that is an upward pressure. Now, it still goes combined with the diminishing returns. And so, you know, I don't know which force is the stronger force. You know, if we see the US creating a strategic Bitcoin reserve tomorrow and they're going to start buying, you know, loads of coins, it can go very fast. And similarly, With micro strategy, obviously they play into this Model S version. And if we have a lot of companies going to follow their playbook.

Exactly. Yeah. There's a lot of like, it's going to be kind of like passive demand almost for Bitcoin. You know, like with now these gateways open from institutions. We have all these ETF products and derivative products. You know, at some point, you know, some employee is just part of his salary that is safe for expansion. is there's going to be some, suddenly some allocation to Bitcoin due to some ETF that that pension fund has. And so there's all of these, you know, and micro strategy indeed, you know, if countries start adopting and really start competing to buy Bitcoin, it can go a lot faster.

And so there's the as model, which is the fast variant and the more conservative model. But to me, even it doesn't really matter that much which model. you look at currently at least, it's more the idea, like, to understand the trend. Like, because we always say Bitcoin is digital scarcity, but, you know, in the first three having, that wasn't the case. We actually had a lot of high inflation rate in Bitcoin, you know, similar to, for example, the inflation we had in COVID, you know, like suddenly the supermarket is twice as expensive. Why? Yeah, well, because they added 40% of new money. Well, that actually also happened in the early days of Bitcoin, and so supply was getting more abundant.

I guess to add one more thing to that as well. If we do see sort of large banks offering Bitcoin collateralized loans, that's another thing that takes sort of sell pressure off the market. Yeah, yeah, yeah. I wish that was here already, personally. But I think in the US, there's a very big chance that will happen in the coming years. In Europe, it's going to take probably a little longer, unfortunately. I hope they can change their mind as well. And so, yeah, I'm very optimistic to, because the US is always a bit of an example to Europe.

I hope they can stay an example for the next four years regarding Bitcoin. Completely agree. All right, let's see the next chart. Yeah, so maybe we can get a bit more into current price action. So, yeah, we're just saying, so the short-term world of cost basis is at 92K, you know, Bitcoin, 98K or a bit or a bit,

or a bit less, I guess, current price. Is this almost the most important metric to look at because the short-term holders are the ones most likely to sell? Obviously, many metrics, like, many metrics. Like, if you want to look into current price action, all short-term holder metrics come into play, like short-term-holder costs prices, short-domholder supply in general.

And so I have some more short-term-holder momentum. I'm going to have another chart in a little bit. But indeed, yeah, the short-term holder coins are more susceptible to price action. and therefore that those are, that's the metrics you want to look at for short-term price action. So see here we look at it,

the shorter cost basis in standard deviation, so how price fluctuates above it. And so, as I said, this is actually the ETF approval. So we had these ultim highs here. And that was actually, you know, an ultim high before it having. That never happened in, you know, Bitcoin's history,

an autumn high before they having. Obviously, it was due to a catalyst and we were quite overextended here. And therefore, we got also a bit of more fierce pullback that took, you know, just the higher you go, the bit of a longer consolidation you have. And currently, yeah, we reach those levels again. So we could get this consolidation like this, but also it's very common to see to just, you know,

bounce off the short-term holder cost basis during bull markets. And because, you know, during bear markets, short-term-holder cost basis is resistance. So you can see that price kind of, touches it and then falls below, but then once we move into a bull market, we start bouncing off it. And yeah, with some, some consolidations are slightly more severe that, you know, I blame in this case, for example, on a bit of the early hype that wasn't sustainable due to the ETF approval. But now it seems to me like, yeah, we're just healthy on track.

Actually, I hope we would get a proper reset of the shorter motor cost bases and pounds off. that would be quite bullish because if again, if we don't, you know, the longer we don't touch it, the longer there hasn't been like a proper flush of the market of weak hands. And so to move significantly higher, it's always, you know, healthy to get these resets. When you, like I'm sure we've probably got this in the chart, so I might be jumping ahead here. But when you compare this cycle to previous cycles, the one it's most similar to is 2017, which was before we had loads of derivatives and things like that on Bitcoin, it was much more spot-driven. do you think this time is the same because of like

ETF buying pressure and do you think that's another reason we won't see big sort of drops below that short term holder cost basis because there's less leverage or am I over my skis there? Yeah, no. So actually for example, with as for a sailor also buying all these Bitcoin, you know, there was I think significant like price got also muted to the downside. We haven't seen a severe pullback.

You know, everything got bought. bought up constantly. And so I indeed think with institutional adoption, the amount of Bitcoin we have seen flowing into Micro Strategy is reducing so far downward price action. Now, I don't know, for example, there was now one week that Microstrategic didn't buy and we got this more of a reset, like suddenly, you know, like, so, so it's, it shows that, yeah, you know, these significant amounts of Bitcoin should be bought constantly to keep up with these price levels.

Yeah, maybe we can switch to more of the momentum. So this is a metric I've also shared with my subscribers where we also try to identify this short term holder momentum that's going on and have these rat lines.

Those are like the bigger pool bags that you would see during a typical bull market. And you can see these green spikes. So actually what I look for is when, when, you know, this green line starts moving down at a certain fast pace, then I'll draw one of those red bars. And so, so far we had two of those as well. And so we see in 2017, you were just comparing it to 2017. I think there's a lot of similarities to 2017. But so we also had two of those pullbacks before we made an actual top. the same actually in the in 21 cycle although I think the actual top of 21 was more this autumn high

than than the last one due to like you know being a lot more hype in this part of the market than here this was actually based on conviction this autumn high which is also very very bullish because you know even if we would just all be have like conviction and no one would sell we could still make autumn highs even though if no new entrants are coming into the space so so to me this this is actually exceptionally bullish that that can happen. And so with institutional demand, growing and all these things, I think that might be more reasonable to expect also here at some point. The interesting thing to me there is that in the previous cycles,

it seems like those red bars you've got in there, the pullback signal, are quite late in a cycle. I could, this could age like milk, but it doesn't seem like we're that late in the cycle this time. Have we had those earlier than normal? Yeah, so actually for me this red bar around the fort having

was a bit of an exception you know and so we see also because we had such a spike here of hype you know we it was this was the ETF approval again we also got this downside which I showed in the previous chart as well

just because we you know there was too much hype momentum went up too strong and so we got a bit of a fiercer pullback then we would usually get. So, you know, if the, if that, yeah, if that ETF approval wouldn't have been there, it would have probably been a more gradual upgrind. And so we wouldn't have had this extension here.

And we probably wouldn't have had the downside here as well. So, so take, if you, you know, think this, if you would think that this is a little, you know, not as low as it hits here and, you know, think away this spike for a little bit, then, yeah, it starts to look a lot more like 2017 of course. But yeah, there's all of these, you know, there's always catalysts that cause this hype and every bull market. So I, you know, I still want to take it like, I don't want to just

consider that this one doesn't exist. But, but yeah, I think there's still room for, for more upside. You know, there's two poolbacks, but, and we had two of them here, but it doesn't mean that the bull market is over. What is worrying me a little bit, though, is that on this down word price action, we've been kind of, you know, we went down, then we had a bit of resistance, we went down, we had a bit of resistance. And so it's starting to move back down, which that to me looks more typical like the like a distribution phase. So like maybe some more similar to the top we had here in 2021, which could indicate like a bit of a longer consolidation. I don't know why that is. Maybe that is also because like Sailor were buying the dips, you know.

So there was a lot of institutional BTC flowing in that was buying the dip. And so we get a bit of a slower pullback than we would usually get. But presumably a longer consolidation here wouldn't necessarily be a bad thing. That might actually be pretty bullish, right? Yeah, but it depends, though. So let's now look at short and molar supply, which I think is a very important matter. in regards to making a cycle peak. So if we look at the levels of short-to-mole supply,

we've been moving up quite fiercely. And the reason why I don't want this consideration to start taking too long is because this could start like falling over, right? And so once we start to move back down, it's very hard. Once hype starts fading away, it's very hard for hype to come back. typically it stakes a full cycle. And we kind of see a similar pattern here in terms of short moral supply.

We have a bit of an early hype in the market, for example, here and around the second halving. Then we get here a year of uptrend. So 2017 was actually exceptional, a gradual bull market up that took very long time. Here in 2019, we had a very early hype in the market during the 2019 peak. and then it took some time to recover from that and then we had a seven month, you know, up period which was most of the bull market.

And that's, again, this metric shows also that the first peak here. That was actually the real all-time high of the, the real cycle peak, even though we made all-time highs here. Yeah, there was no hype then. There was no hype then that was more based on long-term older conviction. Now, the same thing we have here, here we have actually the ETF hype, so early hype in the market due to ETFs. And now so far we have been four months into this.

So it depends like, okay, is this going to take seven months? Then we only have three more months to go or is it going to take a full year? You know, we have a little longer eight months. But it starts to be reasonable to assume looking at this chart that perhaps a top could also form, you know, within the first two quarters of the year. And so I'm not entirely convinced yet that it has to be Q3 or C. Q4 of 2025. That's interesting because typically in Bitcoin, Q1 is generally not great and towards the end of the year tends to be better. So do you think that that kind of thing could break?

Yes, we actually saw a bit of that as well in the previous cycle. So we had very early hype. And, you know, if we look here at this peak here from the distance from the having, that was quite similar to what we're currently at. And so in 2021, we actually had, it was Q2 of 2021, that was the peak where Q4 was like a higher high that we made, but hype was gone. And so the same thing could happen here. And since we're moving up now, it's likely to continue to move up. And we don't have to make, as I said, we discussed with the Biden term.

So in a way, this perhaps was also muted, you know, the muted top. So it could be that this, you know, outpaces or, you know, goes up far above the peak of 21. I don't know. That's, that's yet to see. But this is a very important metric I continue to track. It tells me when hype is gone. And when hype is gone, usually that is the end of the real bull market. We can still make like all them highs, as we saw here.

But it's not going to be probably significant. significantly higher anymore. Like the exponential price action will likely be gone then. So this is interesting because we're talking about this short-term holder supply as hype, but the price going up will always make that chart turnover, right? That metric turnover because as price gets higher, short-term holders can't buy as much Bitcoin with the same amount of money. So the only way that could continue going up is if bigger money was coming into the space

constantly. Is that right? Yes. More money needs to come into the, into the space. That's why also we get to overvalue levels, you know, and those become unsustainable. That's why you get a peak.

But indeed, short-term holders cannot buy as much. That is true, but also the amount of short-term holders usually increases, right? So there's more and more hype. So more and more people get excited until you got like a blow off top. And so indeed, more money needs to come into the space. But each new Altum High also, is an incentive for long-term holders to sell. So it's basically what this tracks is also, the supply that gets bought up here is that basically the short-term holder supply, it's new

entrants coming into the space. They buy supply because of all-term highs. Long-term holders are willing to sell some of their coins and they get into the hands of these new short-term holders. This episode is brought to you by CASA. For those of you out there who want to protect your Bitcoin, I want to tell you about CASA, the leading Bitcoin self-custody solution. If you're serious about protecting your Bitcoin, then you need a rock-solid security plan, and CASA gives you just that. With their multi-signiture security and key management services, CASA makes it easier than ever to take control of your Bitcoin without the risk of a single point of failure. CASA also now has a private client option, which gives you a purpose-built security program

with ongoing advisory, advanced verification inheritance, a 24-7 security emergency line, and lots more. To find out more about CASA's private client solution, go to CASA.io, which is c-a-s-a-i-o. This episode is brought to you by Ledger. If you're serious about protecting your Bitcoin, Ledger has the solution you need. Their hardware wallets give you complete control over your private keys, ensuring that your Bitcoin stays safe from hacks, fishing and malware. With Ledger's easy-to-use devices and the Ledger Live app,

managing your Bitcoin has never been more convenient. Whether you're a long-time holder or new to the world of Bitcoin, Ledger makes it simple to keep your assets protected. If you want to find out more, visit Ledger.com and secure your Bitcoin today. That is L-E-D-G-R.com. What if we got next route? Yeah, so this is the value map that was talking about earlier. So this is, it basically shows the same as in that spiral chart where I said the surface is at 75K currently.

And like these highly overvalued levels are currently at 175K. And we're now a bit in between, you know, so we're a bit less than overvalued. But we're, you know, we're higher than fair value. currently according to this metric. And so what I just want to show here, I think, yeah, there's more room for upside. As we already concluded as well in the spiral chart in the beginning, we haven't seen really these extreme high extensions to highly overvalued levels.

And so I still expect that to happen. And that could happen in the next months to, you know, basically we have till the end of the year according to the four year cycle. And so I'm still patient until that one. happen. Now, if we would really start falling below, you know, fair value, that that would be worrisome. But so far, there is no real reason to expect that, except if, you know, macro environment turns, you know, really wild with a recession. And, you know, even then Bitcoin could be the hatch. But, you know, it depends. I don't know how the market is at the state. you know, there is institutional adoption of Bitcoin going on, but I don't know at what stage they're in.

You know, do they really believe, you know, Bitcoin is the hatch or will they still be scared out due to volatility, you know, that is to see in such a scenario? Yeah, that will be really interesting to me whenever that happens. Because obviously, we all talk about Bitcoin as like the store of value thing. I think it's more than that, but store of value. But the market still treats it like a risk asset. And when sort of macro headwinds are going against every. risk asset, it'll be interesting to see how the market reacts. Yeah, in a way, it would be an

extremely cool experience. Maybe it's not as fun in terms of volatility for the Bitcoin holders, but I think what is likely in case of a recession, perhaps initially Bitcoin will drop, you know, due to fear and due to volatility. And so, but then I think, expect actually weak hands to get flushed fairly fast and then Bitcoin to come out as the actual hatch. And so, I guess similar to COVID in that sense. Yeah, similar to COVID in a way. And so another chart to see that why we still have upside, yes, just the classical MVRV, so market value against realized value.

So the blue dotted line that you see is actually the realized price here. And the pink line is the actual Bitcoin price. And so we look at how far does price extend above its realized price? So Realized price is the average purchase price of all Bitcoin. And, you know, I see, so if we look in terms of standard deviations, so I drew here these green zones, those are, if we are like three standard deviations above that, above realized price. And we see like fairly large amounts of those green zones in bull markets where, as

currently we have seen very little. And so again, that is one of those charts that shows like, okay, there's still a lot of room for upside. Very cool. Yeah, then actually the last chart to finish with, I wanted to, you know, come with like even more cool data, but I haven't been able to. You kind of, you, yeah, I sprung this one on you. You contact me relatively fast and we went on a call right away.

And so there was a little time to prepare for like proper charts. But I wanted to talk a bit more about institutional adoption because I've been analyzing for the past days a bit. I've been gathering better said, like 13F filing. data from institutions and I've been, you know, trying to estimate what are the Bitcoin holdings from these institutions if we look at the ETF holdings, for example, since 2024, we have now the ETFs live. And so there's a, you know, how much is retail, how much is institutional adoption? Because institutional adoption is an extremely important driver for the continuation of this

bull market. And so that's why I was interested in it, of course. Now, we started, um, we started, um, with the ETF approval with around 600,000 Bitcoin in holdings. And that was mainly due to Grayscale. And so we see the part of Grayscale here. But then BlackRock, since BlackRock has now overtaken, gray scale fidelity is even larger than Grace scale at the moment. And so gray scale is currently the third largest. But we basically went from the beginning of the ETF approval from 600K to 1175K,000.

Let's round it to 1200K. So we went up nearly 600K during that year. Basically doubled. Basically doubled. Yeah. But we went up 600K. And if I look at institutional adoptions from 13F filings, and I calculated all the holdings that they have and I converted it to Bitcoin,

I got around only 170, thousand coins. And this is data that goes actually only until 2024. So, uh, because Q, Q1, uh, oh, no, it's still until Q3, I think, uh, if I remember correctly. Yeah, I believe it was Q3. So Q4, because, um, these institutions actually have a 45, uh, day, time span to, uh, file these holdings. And so on February 15, there's we could expect the holdings to come in, the latest for, they can also be faster, but many of them wait until those last days to file those holdings. And so on February 15, we will know also the data for Q4, which I expect to be more bullish

than Q3 of 2024. But measured from Q3, 2024, so that's actually only the first three quarters of 2024. we had about 170,000 coins of inflow into actual institutions. And these are institutions that are at least, that at least have 100 million plus of assets under management. So this does not include smaller. There's probably many institutions that are smaller than that, that also have a Bitcoin allocation that they're not obligated to file. And so that's a, it's, you know, it's the data we have. But at least this gives us conservative estimates of institutional holdings.

And so like in so, so if we think that those holdings are conservative, then it's about, in my opinion, 30% of the supply that has been bought since the beginning of DTF approval was institutional adoption. And, you know, two thirds is probably still retail. So, so yeah, as I said, there's a lot of room steel, institutions are only tipping. their toes and they have, you know, I've, I've not made a chart on this. I want to make a chart on this as well. And, you know, to track actually the average allocation that they have, because that's very interesting to me, because BlackRock is now, you know, advising a 2% allocation to Bitcoin. But actually in the data, I see that many of them only have like 0.1 or 0.001 or, you know, amounts like that. And so there's a very small part of their portfolio.

And so I would like to start tracking that data and more and more of those charts are going to come out soon as well on my platform. And yeah, I think that will give additional views on institutional adoption, which I think is a key driver for the continuation of this bull market. Have you been surprised to see how few net outflow days we've had on the ETF? Because that's something that I didn't expect. Yeah, we've, yeah, indeed. But yeah, we're also, of course, in a bull market. So there's less outflows. But you see that also ETFs are also susceptible to price action because if there's a

consolidation a bit of more reset, even now, today, these days, the inflows are minimal. And so, yeah, institutions and retail that is in these ETFs are susceptible to price action as well. But in a bull market, yeah, there are less down days than up days, right? Most of the days are up and we see that as well in the ETFs. And do you think they're going to behave similarly to retail when it does come to the next bear market? Well, yeah. So I think they're going to be more of a passive demand for Bitcoin because, you know, it's often someone else's money that you're, you know, so you're not as. It's a bit easier.

You're not as a bit easier. You're not as fearful, right? So I think institutions will have more patience, but it's yet to see. I mean, we have seen examples like Elon Musk, you know, who sold actually a big part of his holdings, which would have now been worth a lot of money if you, you know. He was just testing liquidity route. Yeah, exactly. What I'm really curious about is what this demand looks like going into a bear market,

because I know you're saying they're still going to be susceptible to prize. but if we see this really drop off, do you think that that could kind of break the idea that we don't have as much downside in the following bear markets? Well, I think there's going to be part of the supply that is slowly going to be really passive demand. As I said, like I gave the example of the employee that's, you know, suddenly some of his pension funds

are like allocated to Bitcoin. That is not going to be sold. And so there's going to be more and more of that, you know, those allocations are going to build up, and that's going to be quite a big amount of, you know, it's going to be illiquid supply, basically, and it's not going to be, so it will make available supply go down. And so we're actually seeing available supply move down and also according to the hoddle model theory, let's say, you know, available supply looks like it's going to move down, like that digital scarcity is going to materialize. And so actually these kind of trans, like passive

demand from Bitcoin will help with that. But I don't know, if available supply starts moving down, it can also start increasing volatility again, you know, because we have less supply available for trade. And so, you know, I don't know. But I think volatility is here to stay for Bitcoin for quite a bit longer. As I said, like, I prefer to be patient. I think we need to give institutions a four-year time window as well. They're only tipping their toes, as we've said a few times now. Let's see how we are in four or five years, especially with the current administration.

So I think, yeah, that's an extremely bullish outlook for Bitcoin because we actually have three back, we even have three pathways to a strategic Bitcoin reserve. We have the, and so that could be, by the way, that could be a major catalyst for maybe, having a top in Q3 or Q4 still because, you know, Trump in his executive order gave 180-day time window for research about, you know, this digital asset stockpile, which should be somewhere at the end of June, no, at the end of July, I think even. So that's the end of July.

And so, yeah, that could be, you know, if there's really then going to be a strategic or a Bitcoin stockpile or digital asset stockpile, which hopefully then they conclude that Bitcoin is the best to put in there, that could be a major catalyst for the second half of this year. So that is something to look out for. But at the same time, Cynthia Lomas's bill is another way to create a strategic Bitcoin reserve because, You know, Trump's plan of this digital asset stockpile is an executive order, but that is not put into law as I understood it. And so the bill has actually has to go move through Congress and all these difficult paths. But once it gets accepted, that would really be written into law. And so that, and besides that, we also still have a sovereign wealth fund that Trump put up. And it looks like a good fund to put Bitcoin in as well.

So there's actually three ways for them to add Bitcoin, you know, as a strategic reserve asset. And so, yeah, that is very optimistic to me. And so probably that will have a big effect as well on what happens there for the continuation of the bull market in the second half of this year. Yeah. With David Sachs are crypto, or the US's cryptos are, I'm less bullish than ever that it's going to be Bitcoin only, but we'll see, hopefully. Yeah, as I said, they're new. Bitcoin, you know, 40%, you know, Bitcoin's dominance is around 60% or so. So still 40% of the people are like, yeah, are pro-cropto or they are still into crypto and the thousands of

cryptos that there are. And so unfortunately, some of them also are into politics, but yeah. So to close out, if we, if we looked into root crystal ball, what do you think is going to happen this year? Yeah. Of course, it's very difficult to protect the future, you know, like so to me also, I've always said this on chains, strength basically is to look at what is currently going on, you know, understanding the dynamics of the cycle, what are the macro trans, what are, what is, you know, short-term trance, what, you know, what can we expect of short-term price action. But, you know, in the next couple of months, based on the data, as I see it now, looking, considering the charts that we looked at today, so a bit of a summary of what we've seen here, like thinking of, for example, short-term roller supply. it looks very likely that we could peak in the second quarter, for example, of 2025. May there be a catalyst, as I said, it could continue into Q3 or Q4, basically have the time until that.

And yeah, my prediction remains still relatively conservative. I know there's people calling, you know, people get excited when it's a boom market. And I'm excited. I actually am more bullish and my conviction of Bitcoin keeps growing every day. and especially with the trends that we're currently seeing, to me, they're amazing. And so, but we need to give a time, like a four, five year period. You know, institutions are only just starting. They need a full cycle to understand Bitcoin better.

We've seen it with El Salvador as well. You know, they have, they started stacking in the previous bull market. And then they were blamed in, you know, in the bear market for like all their, you know, the bad things that they did. And now they come out as kings, right? So, so that also will happen within. institutions. We need a full cycle of that for institutions to understand this as well. And so I remain relatively conservative. I think, yeah, a 200k Bitcoin price, like I would be satisfied with that, to be

honest, but it very much depends on the indicator. So I'll continue to look at things like the value map, how over-extended are we in MVRV and all those kind of metrics, also short to molar supply. Like, you know, how is the momentum going there? And so we will have to continue that and that we can only do on a day-to-day basis. I love it. I think I'm more bullish in you, but we will see. I'd take the over on that bet. I hope you win. I mean, I'm also not saying it's impossible, but yeah, it's just based on the current data that I see. But it very much depends. I mean, if we get a catalyst, like, you know, imagine it's the end of Q2 or beginning of Q3, and we indeed get the digital asset stockpile and it's going to be 80% Bitcoin or something.

you know, Bitcoin price will, you know, move up enormously on that news. And so, you know, those things can change the dynamics. And it's usually hype that makes like a peak, right? But I'm more interested in gradual growth because even that won't be as sustainable. We'll get a peak and we will crash and that we will start moving gradually up. But, but I think, you know, all the ingredients are there. You know, we have institutional adoption. We've been talking about institutional adoption since 2013, but it's here, it's measurable. You know, they're only tipping their toes. It's true.

They're small allocations, but it's growing, which is important. And so we have even nation-stays adoption, which to me is even a cycle early, but it's already here, you know, partly to blame on El Salvador. You know, they started early. And so now the US is talking about it because it's game theory, right? And so, yeah, I think all the ingredients are here for Bitcoin to succeed. but yeah little patience is needed in my opinion. All right.

Well, thank you for that. We appreciate you going through those charts with us. Is there any way you want to send anyone before we close out? Well, yeah, everyone can check out, of course, my newsletter. It's Bitcoinstrategy.substack.com and my platform, Bitcoinstrategyplatform.com where I've been sharing my newsletter on a weekly basis. We've been actually discussing all these topics each week. And yeah, so far I've been pretty much on point.

I don't want to, you know, brag about it. But, you know, based on the data that I've seen, we've kind of been on track and it's been a comfortable ride so far. And so, yeah, if you want to also see the institutional data that I'm going to put out a lot of charts, yeah, please check out my platform or my newsletter. Perfect. Well, let's catch up at the end of Q2 and see where we're at then. Thank you so much for having me. Danny, it's really cool to see you continue what Bitcoin did. It was my favorite podcast always.

Thank you. I appreciate that. Hopefully it's still your favorite podcast. I've watched a Lynn Allen show and it was great. So yeah, I'll continue to watch your shows. Love it. Thank you, Rue. I'll speak to you soon.

Thank you, Danny.