What Bitcoin Did - THE BITCOIN SHAKEOUT w/ Checkmate

Episode Date: February 27, 2025

Checkmate is an on-chain analyst and founder of Checkonchain. In this episode, we break down the recent Bitcoin correction, what’s driving sentiment, and whether this is just a shakeout. We discuss the role of long-term holders in market cycles, how ETFs are reshaping Bitcoin’s liquidity flows, and why Bitcoin dominance has caught many off guard. We also get into the macro forces influencing Bitcoin’s price action and explore how its market structure mirrors natural systems like earthquakes. MASSIVE THANKS TO OUR SPONSORS: IREN: https://www.iren.com/ RIVER: https://river.com/wbd CASA: https://casa.io/ LEDGER: https://www.ledger.com/

How bad could it go? If we go back to 40K, that's been the ETFs launch. Do we deserve to go to 40K? I don't think so. I think that's an unlikely scenario. Okay, so the next level is do we go back down to the chop consolidation range? If we go to 75, that's still well within the bounds of a typical bull market correction. It's actually not even the worst one.

The yen carry trade would have been worse. And by my general checks, the unrealized losses won't be bad enough to break the sentiment of the bulls. It might, but I don't think it will be. The true market means about 65. That's also micro-stratage cost basis, and that is the average for anyone. You take active investors, that's the average cost basis. That to me, if we were to get there, it would just be an absolute hellscape of capitulation, and I will not have a single dollar in my bank account if that happens.

All right, checkmate. How are you doing? Good to see you again. Good, mate. It's good to be back on the show. We were meant to be doing this in person next week in Sydney, but the market didn't let us wait. what the fuck is going on? Everyone's panicking, Bitcoin's crashing,

I'm sure your phone has been ringing nonstop. Give us the update. I love it. The sentiment is complete dog shit. We're at, what, 84,000. I think we touched 83 this morning. But it is so interesting. This cycle has been somewhat different

because the sentiment off like a 5%, 10%, 20% move, you know, like, yes, the market's down, but like if you look at it in the context of the fact that we've had such a tremendous rally, it looks no worse than any other correction, any other bull market. It's been really interesting to me. I've been thinking about this a lot. Why does sentiment get so just handstrung off what seemingly kind of normal, simple moves?

So it's a really interesting dynamic. Like you say, Twitter has been an absolute meltdown. And a 30% drop in a ball market is a very path for the course of Bitcoin. What do you think is driving that sentiment? Yeah, look, I've been thinking about this quite a bit. I think there's a couple of things. I saw a poll, I can't remember if I did it or someone else did it. In fact, I think I did for our subscribers.

I asked what class are you from? Like 2017 and before that metal choppy period, 2018, 19, that was my class, 2021 or this recent cycle. And the vast majority, I think like 50% of people came from the last cycle, the 2020-21 cycle. 35% or something were from the previous classes. So there's a much smaller cohort of new people. but still non-trivial. They're obviously going through their first cycle. That's a new thing that everyone kind of has to deal with.

But I also think the people who are coming in this cycle probably are, they're a bit more sophisticated, I would think. You've got more big money managers, more capital allocators. They probably understand markets, generally speaking, and they've finally just got the access to Bitcoin and ETS and all the rest of it. What I've actually come to the main conclusion of is this interesting divergence between Bitcoin and crypto, where I think people have just not held enough Bitcoin.

And I don't think people expected a Bitcoin dominant cycle the way that it has been, massively over-allocated to everything else. Probably what's even worse about that is that a lot of volts actually haven't performed. So people just were kind of allocated in the wrong way. And I also have a very strong suspicion that micro-strategy has done a lot of people dirty. Because just think a lot of people, some people rode the wave. So if you're listening to this and you own micro-strategy, you're going to be in one of two camps. you've been around for long enough and you're, you know, you're down off the highs,

but you're still got a fat green number in your portfolio. You had the foresight. The vast vast majority of people bought it 400, 500. That's just where all the, we had $40 billion of trade volume at the all-time high tick, and it's down 50% from there. There's also access to options. People would have bought call options. I saw them in the irresponsibly long micro strategy channel,

which, by the way, every time you hear irresponsibly long X, in this industry, X ain't in a good place, right? It's not a good sign. So anyway, I've seen a lot of people went long call options and they go to zero, right? If you had February call options for a thousand bucks, they are a big fat zero. There's no like that shit coin's going to come back. Maybe it's gone. That's money is destroyed. So I think a lot of people just held the wrong thing and they didn't expect a spot driven, just sit and do nothing, hoddle only. It's a simple strategy. It's not an easy strategy, but I think a lot of people tried to juice it, and it's just, it's bitchy in the ass. It really has. And I think also a lot of people expected when Trump came in that to be

like a massive catalyst to move higher. And really, we hit the all-time high like pretty much before Trump came in. That's it. And I think that that's another thing a lot of people get confused with is it like generally speaking, the headline is not what moves the market. Right. So as a good example of this, yes, Trump got elected and yes, the market went from 70 to 100 following that. But the seven months of chop consolidation that came before that is what allowed that to happen. If you didn't have that reaccumulation period, you don't get the rally higher. So I think a lot of people confuse the headline for the reason. Sometimes there's events where the headline has like some short-term action, but in my experience, very, very rarely does a headline flash across and it changes a

bull market to a bear market. Very, very rarely does this happen? It's usually a short-term move that if you close your eyes, come back in a month's time, come back in two weeks' time, come back in three days, it's usually gone. You will never ever look at that candle ever again and say that was the pivot point. So generally speaking, news doesn't change markets. It's usually just the final straw that makes the market kick into gear. Good example of this. The China mining ban, I know a lot of people think that's what killed the bull back in 2021. The sell-off in May was what killed the bull, but GBTC going into a discount was actually what killed the bull because you've got to realize all the leverage and damage and the spot bid just evaporated. The China mining ban was the final excuse,

just that last straw that broke it. Headlines very, very rarely change trend. Yeah, for sure. Right. So we're going to get into all the data of what's happened in the last few days. But before we do, just before we jumped on this call, you were saying that you think there's a lot of people out there that don't fully understand what it is that you actually do. So do you want to start there? Yes. And on the first one, right? I don't understand what I do. The first thing is that this is a The world of studying Bitcoin's on-chain data is a, it's new. Very, very few people have gone down this rabbit hole. That's fascinating.

I love it, right? So my background is tunnel engineering. I used to design very, very large holes in the ground, essentially. Lots of risk, lots of probability, lots of big numbers. On-chain data is, and markets in general are full of uncertainty. You never have a complete picture of any market at any time ever. But on-chain data is really interesting because you can see the UTXO. set, you can see how the UTXOTSate changes. Most of that information is useless, right? And I

say it all the time, whale data, stop looking at it. Exchange data, unless you're doing algorithmic trading, stop looking at it. It's just not useful. It's so noisy. But there are sectors of on-chain data that are super, super useful. For example, at the end of the day, what is the UTXO set? It's us. It's every single bitcoiner who's listening to this. If you have ever transacted on-chain, you have imprinted information into that UTXO. What the price was that you acquired it, it doesn't matter if you bought it at this price and withdrew it two days later.

It doesn't matter. What's your cost basis? How long have you held it for? How much profit are you in? How much loss are you in? How many of your coins are in profit or loss? It's looking at this big thing in aggregate. And people are heard behavior, right?

Even though we're all Bitcoiners and we're all thinking about world differently, a lot of us still sell when the market goes up and a lot of us still buy when the market goes down. That's the Bitcoin a behavior pattern. Speculators do the opposite. They buy on the way up, right? And they sell on the way down because they panic.

So what we're doing with on-chain data, we're trying to just look at the human behavior patterns which are extremely relatable. They happen across time and space. They've been happening forever. So long as human beings trade markets and we're greedy, which is going to always be true, we continue to have the same behavior patterns.

And I also think a lot of people get what I do confused with the likes of chain analysis. So there's two worlds of on-chain analysis. The first one is what you'll generally hear when we say on-chain analysis is we're going to look at the behavior patterns. We're looking at mean reversion models. We're using cost basis to understand points of concentration. When too many people have bought too many coins are too high for price, then there's forensics.

This is what the chain analysis do. And a lot of people recently have been like, why didn't you see FTX blowing up? It's like, because it's not my job to look for fraud, mate. Like, that's why I didn't see FDX because I wasn't looking for. It's not my job. But chain aliasus, who I believe was an investor or was associated with FTX or were FDX invested in them, their job is to look for fraud. That's their job, right? So the two different buckets.

You know, in many ways it's like being a behavioral economist. And then you've got the forensics who get all their contracts from governments to chase individuals around the internet. Two separate fields. Really important to just make that distinction. Yeah, very separate. I'm bullish check-on chain. I'm very bearish chain analysis. Yeah, me too.

Me too. And the other thing that's kind of important is that on-chan analysis is only a fraction of what I use, right? What's really interesting about Bitcoin, just markets in general, is how transparent they are. And actually, I was talking to my colleague at Glasnow the other day. And he was basically stitching together. How do you tell this story of what this data is? If you are trading Tesla or whatever on the NASDAQ, the exchange can see everyone's cost basis. the exchange can see the buying and the selling and the profit and the loss, but they never aggregate and actually use that data. And then behind the scenes, there's a clearinghouse, right, as stocks change and move and settle and money moves between different accounts.

The Bitcoin blockchain is that settlement account. When people buy and DCA and sell and, you know, 80% of all on-chain volume is usually associated with coins going in or out of exchange, right? So you're basically looking at 80% of all movement is probably holding some kind of information. And what we're basically doing is taking that information, taking the spot data, taking the derivatives data, futures and options, the ETFs. We've got all these different subsets of the market. And my job is to look at the patterns in each

one. And more often than not, the ETFs tell me the same story as the on chain. The on chain tells me the same story as the futures. I've got various metrics that are completely separate markets, but they tell the exact same story just from a different perspective. So it's like a survey. I'm surveying populations and forming a, you know, relatively cohesive story. to get a decent read on what's going on. And before we actually get into your analysis, how much attention do you pay to like the macro outlook as well? Yeah, so I don't write too much.

Occasionally I'll write about the macro, but I think there's a lot of people who cover that quite well. But what I do do, I mean, you know, it showed my podcast, like my weekly podcast list to any of my friends are like, you listen to that. Like it's the driest shit you've ever heard. But I'll listen to. What Bitcoin did.

Who the hell wants to listen to this? But basically, like in my spare time, right, my podcast diet is macro, macro, macro, macro, because it's the biggest puzzle that there is, right, how the world ticks over. And so for me, that's personally fascinating. So whilst I don't explicitly write about it that often, sometimes I'll include it because it's sometimes really important. But generally speaking, I kind of process that in the background. But we were talking before we hit record that the Bitcoin is the index.

So much of this information is being baked into this fire alarm. And it tells us the story of what's going on in macro more often than it doesn't. So in a way, I study macro in the background and then Bitcoin is how I express that view because I think it expresses that view as well. 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. They're also providing cutting edge computing resources for AI, all backed by renewable energy.

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That's r-I-V-E-R-com forward-slash WBD. Do you want to kind of walk us through what's happened over the last few days? Because with Bitcoin, the volatility had fallen to basically nothing. Like we'd trade in a really tight range for a long time. And the kind of analysis was, are we going to break up or down? Obviously we broke down. So walk us through that. What happened?

Yeah. So I think, oh, it's price suppression, of course, right? Oh, we should talk about that too. Oh, God, let's go down that rabbit hole. So yeah, look, one of the things is, I mean, price suppression has been the narrative on Twitter, and I think a lot of people also get my views on that mistaken. Price suppression manipulation happens in every market all the time. What I do not believe you need is a core thesis and saying the reason Bitcoin didn't go up is

price suppression because there's something even more obvious staring you in the face. It explains it perfectly, and that is the amount of just unbelievable sell side that's happened. So for a bit of a sense of scale, Bitcoin since the Trump pump, right, since we've went from whatever it is, 50 to 100, we've had about $200 billion of sell side pressure just from long-term holders, right? People who held their coins for six months or more, 200 billion just from them. 52% of every dollar, if you price every UTXO based on the time when it last moved, 52% of every dollar that's ever been invested in Bitcoin has a cost basis above 90K, right?

think about how significant that is. For every seller, there's a buy. So when we measure sell side, and this is what I think the price suppression guys don't understand, yet there's price suppression and manipulation happening on all timeframes. But my first question to you is, what are you going to do about it? Because it happens on every market, everywhere, always. Is that not just markets? Like, if you have a lot of money, you can control price to a degree. If you want to put a billion dollar position on, long or short, you want to offload or you want to buy, you need a billion dollars worth of people to be wrong and sell to you all buy from you, right? So these big entities, they simply have to generate wrong people. That's just the nature

of the beast. And yeah, I think this chart tells a great story. We've had two massive waves of long-term holder sell side. In 2017, which was the all-time, like, largest sell side event we've ever seen, 3.1 million Bitcoin that reached six months of age were then transacted. Now, some people will say, oh, but not all of that is sell side. That's true. It doesn't really matter because see how they seem to sell in bull markets. It's good enough. Not everyone consolidates the UTXOs on the same day at the all-time high.

It's just not how the world works. But we've had two waves of this sell side. 3.25 million. Now, you could probably say that in each cycle in 2017, some of those coins were moving because they were. trying to take advantage of the Bitcoin Cash Fork. True. Some of those coins in 2021 were remargining and putting collateral into their position. True. Some of those coins may have been sell spot by ETF. True. But see how you've got these dynamics in every single cycle. And therefore,

if you took an average, it's probably the same. Every cycle has got its own characteristics, but long-term holders, buy in bears, they sell in bulls. And this chart just tells that story. So in my view, you actually don't need a price suppression narrative to explain why the market didn't go higher. You just have to look at the 10,000 Bitcoin per day. It was up to 40,000 at the peak being sold by these guys, right? And take a, you know, take a knife to it, cut it in half. That's 20,000 Bitcoin. Compare that to the ETFs. The ETFs just disappear in scale, right? So I don't think you need price suppression at a macro scale to explain this. But every sold Bitcoin, is a buyer, right? There's someone else on the other side of that equation, and this is what I think

these people are missing. We've just seen 52% of all dollars ever invested in Bitcoin willing to buy above 90K. That's the bullish, that's the most bullish shit in the world. Yes, short term, we've got a deal with some chopping around. That's an incredible stat, right? That's the demand profile that we're dealing with. It's unreal. Yeah. Now, this kind of sell-off is something you predicted a little bit. So last month in your newsletter, you basically wrote two possible scenarios. And I think you favoured the idea that we'd probably sell off before we end up going higher. What did you see that made you think that? This is just how markets work.

I've just seen this play out so often. Markets, I call it a slingshot. Basically what happens is everybody accumulates up in this zone. And by the way, I've got plenty of coins that I've accumulated up in that 90K zone. When we look at the supply profile, the vast majority of people who've bought above 90K have bought between 90 and 95. These are people buying the lower bound of the range, not FOMO buyers at 108, the sum of those, but not most. Most are buying at 90 to 95. But more often than not, markets have to go countertrend sometimes.

And what it does, it gets all the speculators in the weak hands to flush out. If you were a sophisticated institutional investor, these are the moments when they actually go, thank you very much, Mr. $1 billion of being wrong. This is where they start to accumulate, right? Some people will say that's price suppression to market manipulation. I would say that's markets. sometimes the market has to go lower. You get all the speculators washed out.

And then the next level is, as the market sells off, the speculators go, oh, now Bitcoin's going to zero. I'm going to go levered short. And they always do this on the final leg. And they create this like, they become byside pressure when the market goes against them and you get the short squeeze. So this is just how markets tend to work. Similarly, when we had that second rally to 108K when Trump launched his meme coin,

very often, a very clean just like, oh, it's chopping sideways, let's just break higher. Very rarely does it do that and stick the landing. It usually goes up, says, oh shit, maximum disappointment, maximum pain, nobody was expecting this, how could you see it? And then it does go higher. And what happens is all the people who were correct to be going long, they sell at the bottom, we see all their losses happen, they're the signals I look for. I want the dumb money to be selling at a massive loss in panic, in fear to me, so I can then ride that wave higher. It's just how markets work. Yeah.

So if the long-term holders were kind of offloading at 100K, when this is now broken down, who is it that's selling now? Is it the short-term holders or is this like leverage clearing out? What's happening? Yeah. So generally speaking in these kind of events, it's usually short people who bought at the top, generally speaking. There is one phase in every Bitcoin cycle so far where long-term holders are all

the ones who capitulate, and that's almost always the bottom, the absolute bottom. And it's interesting because there's two types of long-term holders that sell at those macro lows. Long-term holders who board at the top of the bear, of the bull, they rode the whole way down, and then they finally go, that's it, and they chuck in their toys, and they walk away, and they take a big fat loss, and that's the bottom. But you actually also see long-term holders in profit, who take their profits at the bottom, because they're terrified, it's going to go lower. maximum complete pain. Generally in scenarios like this, it's going to be short-term holders and speculators.

You'll see a lot of leverage get washed out. You'll see a lot of short-term holders get washed out. Look, there's a case to be made that we go into a bear market. I don't think that's true, right? When we actually look at the chop consolidation range, and I think that's really important to just keep in mind, that was chopping around, I think, for round numbers, 60K is 1.2 trillion market cap. 50K is a trillion, 70K is 1.4.

In 2021, we tried to get above $1.2 trillion twice, and we got horrendously rejected both times. We then spent seven months where every single dip below $1.2 trillion was swiftly bought up. So if I just kind of think about this from a how bad could it go? If we go back to $40K, that's been the ETS launched. Do we deserve to go to $40K? I don't think so. I think that's an unlikely scenario. Okay, so the next level is do we go back down to the chop consolidation range?

If we go to 75, that's still well within the bounds of a typical bull market correction. It's actually not even the worst one. The yen carry trade would have been worse. And by my general checks, the unrealised losses won't be bad enough to break the sentiment of the bulls. It might, but I don't think it will be. So now we're starting to say, look, the lowest I expect it to go would be back down to like 75 level. And then there's a model that I use called the true market mean about 65. I think that's going to replace the realized price. A lot of people look at the realized price.

price and say that's the floor model. I think the realized price is defunct now. I think it doesn't actually cap for a whole variety of reasons. The true market means about 65. That's also micro-stratage cost basis, and that is the average for anyone. You take active investors, that's the average cost basis. That to me, if we were to get there, would just be an absolute hellscape of capitulation, and I will not have a single dollar in my bank account if that happens. I already don't have a single dollar in my bank account. I know. I'm I'm getting close. But so when Bitcoin went from that kind of chop consolidation range to like 50K to 100K,

it basically went straight up. And there was very few coins actually changed hands in between that, then 50 and 100. So when you look at the chart, I'm no trader, but it looks like there's a, like what you call the air pocket that we've now got below us. Where do you think it will actually find some support? That's a good question. Because the thing is that the reason that we have these air pockets, as you said, the market just went straight up. So between 75 and 86, there was basically no coins that changed hands.

Now, I've actually had a few people ask me this recently on the substack saying, why does the market want to go there? And I'm like, it just does. This is just the market trying to find maximum pain. We don't know what the demand profile is there, right? And you'll see this quite often in markets. Nothing goes up in a straight line. When it rallies, it usually corrects or consolidates or has to come and back test some level. So think about markets as a confidence machine. We've gone from 50 to 100, which is a $1 trillion to a $2 trillion market cap. The market's now going, okay, we've hit the $2 trillion. Do we belong here?

And the question is, if we go lower, do the bulls come in and say, yeah, we do. I want it to go back to 100K. Because the more that happens, let's say, for example, we go down, we get to 83 is the bottom, or we get to 75, it's the bottom. And then in six months' time, we're back at 100K. How confident are you going to be that if it goes back down to 80K, people are going to step in once again? I would be, and that's what markets are all about. It's about building confidence.

And we just don't know what the demand profile is. So if we get a really nice bounce from here, right, or form some kind of chop consolidation range down in the air pocket, your backfill all that supply, people who bought high, sell low, smart money come in. Markets are just looking for that equilibrium point at all times. in your newsletter that you dropped yesterday or today, you had a table which was like key support levels. I'm going to pull that up. You talk us through that because I thought that was really interesting. Yeah. So the framework of this, I mean, this is me just trying to structure out what I think are reasonable levels. And what I think is super important and something that if I can offer any advice to anybody, think in scenarios.

You have to think in scenarios. The sooner you can let go of I know what the future is going to do or I've got this tool that's going to predict the future, the soon as you're you let go of that, the better off you're going to be, because I'm going to be very frank, I have absolutely no idea where we're going to bottom, where we're going to top, what the market does tomorrow, no clue, right? Over longer term time horizons, I think Lynn Alden does a good job of talking about this. Over the long term, you can have a much more confident view because you can see the macro trends and they're allowed to play out. On the short term, nobody knows. And actually, for some simple stats, 40% of the time, if you look on a daily basis, 40% of the time Bitcoin does nothing, literally doesn't go a plus or minus 1%.

30% of the time it goes up, 30% of the time it goes down. It's a coin flip. No one knows. So the idea of this table was me just trying to think through, what does 2025, in my view, generally look like? I think that the market probably still wants to go higher. All things being considered, if I close my eyes for 12 months, I think we probably go up to about 120.

I wouldn't be surprised at all. I also think that the filling in that air gap was a 50-odd percent chance, right? I think it was a pretty decent chance. And I think I made this table when we were up in the, I don't know, 95 or something like that. My base case is I am very, very prepared and expecting to revisit that air pocket. And what I think is really important is if we don't go down to the air pocket, that's fine. I thought about it. I had a plan for it.

I know what I was going to do. I didn't need it. Cool. I'll use that tooling next time we have a sell-off if we just go higher. But now that I've got a plan for both sides, it doesn't matter what happens. I know exactly what my plan is going to be in both scenarios. So the soon you can stop trying to predict things, the better off you're going to be. And with this drop, have you been following the ETF flows?

Because they've had some pretty big outflows the last couple of days. And the other question I've got about that is, do they behave the same as the people who are transacting on chain? Yes, almost to the T, right? When we look at the inflows and outflows, let's go back to the 2024 chop consolidation range. what would happen is you'd get one of those sell-offs. The first one we got down to, I don't know, what was it, 56, I think. 56, 53 and 49, because I wrote a report. One of the benefits, by the way, of being an Australian is that the market usually sells off

late in the afternoon or at night for the US folks. So I can be like at the point of the bottom tick and make a piece of video and then everyone wakes up and they're like, oh, cool, that was convenient. So I remember writing a piece at 56, 53, and 49, which both were fairly significant dips. and basically my story was this looks like either the start of a bear market or exactly what it looks like at the bottom of a dip. It's terrifying at the time. It's terrifying when it happens, but I would much rather buy my coins at 56, 53, 49, and then it goes to 30, if that's our destiny, then at the top. So ETFs, we see a period of outflows and then a larger flow of inflows, right?

That's what we saw throughout those dips. On the on-chain world, we saw short-term hold of losses get really large, but I call it short and sharp. You see a big capitulation and then it goes back into profit territory, right? Market bounces. You don't get this like sustained pain. If you get sustained losses and like a month of just people just get me out at any price, that means your sentiment has probably shifted. So to date, we've seen the ETS perform almost identically to funding rates, identically to on-chain markets. We don't know how this is going to perform. We had about a billion dollars come out. It's like 930 million. These are big numbers. We also had half billion dollar days going in every day for like two months. So, you know,

it's a bit of tit for tat. And so the other thing to talk about here is the kind of macro outlook. So Trump's tariffs are kind of spook in the market, it seems. How much of an impact do you think that has had on Bitcoin's price movement? And I really like the idea of Bitcoin being this. obviously it trades 24-7 all across the world, it's highly liquid. And so it's always the first and the fastest thing to move. So it always sells off first and it sells off the most. Do you think that's played a big part in this? I think so. I mean, it's the last functioning fire alarm, right? So when you look at, let's do a good podcast recently where they were basically saying there's so many headlines coming out from Trump that how do you price any of it? How do you

gauge any of this stuff? My base case, and I was talking to most of my subscribers about this, Q1, I think my opening report for this year, I was like, Q1, I am expecting this to be choppy as anything. There's a lot of people who are saying, but no, bro, it's the second year of a halving cycle and it's going on a parable and blah, blah, blah, maybe, probably not, right? Because the world has to go through all these changes. What do the tariffs mean? What does that mean in terms of a relationship between these different adversaries and friends, right? Trump's putting tariffs on all sorts of things. How does that impact all of these economic components?

There's internal policy, there's external policy. Scott Bissent's trying to work out how they get the 10 year down. The dollar's too strong. So you've got to, these are really, really big puzzle pieces. And I was talking to Travis Kling the other day. And, you know, all these, they're kind of competing issues, right? If you've got a strong dollar, that's going to go against onshoreing all the, you know, industry back to America. But then you also have to manage the treasury market, which we know that some other countries may or may not want to buy as many bonds as they previously have.

There's ideas floating around of like century bonds. Like these are really big problems to solve. It's just not going to be clean sailing. So I'm generally with the view that 2025 is going to be a good year. That's why in that table I think that Bitcoin is going to have, I think we get to 120. I think 150 is still well and truly on the table. And actually, when the price comes down like this, you can start to lift those. levels because at the end of the day, you've now got more coins held by stronger hands at lower

prices. But it's just not going to be a straight shot. It's just not going to go straight up forever. And too many people, I think that's actually the, you asked at the beginning, why is sentiment so cooked? Because people's expectations were just vastly wrong, vastly misaligned with reality. That is always, when you look at why people get angry at the market, the market just is, price is just an information source. What do you do? relative to that information. If your expectations are completely misaligned with reality or your time frame, and they're kind of one of the same thing,

all the Bitcoin's going to go up. Yes, it's a great asset. It's going to go up forever. However is a long time, right? The journey from here to there is a process. And I think that's what a lot of people, they compress their macro views. The big print is coming, right?

It is coming. But it's probably not going to happen tomorrow. So just getting those like time. frames and expectations right is what catches so many people off guard, but it's super, super important to get your expectations alarm with what is realistically possible. This episode is brought to you by CASA, the leading Bitcoin self-custody solution. I've been using CASA for a few years at this point, and I can't recommend them enough. Kasa have options for all Bitcoiners from a two of three multisig to a three of five, and a

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has never been more convenient. Whether you're a long-time holder or new to the world of Bitcoin, Leger makes it simple to keep your assets protected. If you want to find out more, visit ledger.com and secure your Bitcoin today. That's L-E-D-G-R.com. Yeah, that's interesting, actually, on the expectation side, because just thinking, a lot of people have been comparing the cycle to 2017. I actually want to talk about that because I feel like that's changing. Yes. But in 2017, I was very new then, so I may be misremembering this,

but it felt like it was surprising everyone all the time and there wasn't like an expectation of getting to 20K. It felt like a surprise. Whereas this time, it's like everyone has it baked in that Bitcoin's going to be 200K by the end of the year. Do you think that's what's played into this? I think, yes. And strangely enough, there's been a bit of a character shift in how Bitcoin has traded.

that 2017 cycle, if I kind of frame it up as like a single idea, it was just a phase of adoption. True new people discovering Bitcoin, very optimistic and very uncertain. Where is this thing going to go? I got no idea. And I think that's what made that cycle very, very organic. It was just the most, I wasn't there, unfortunately. I bought the top of that rally. But the parabola that we had, I don't think you'll ever see a parable that beautiful ever again.

just the most incredible chart of all time. The 2018 through to 2022, really, really choppy, right? Bitcoin was, I called it like Schroding as Bitcoin, where it was both alive and dead. The critics are out, like, it could have died. Bitcoin could have died many ways, but also the believers like, no, this thing's going to make it.

Oh, wait, no, this thing's going to flip it. Wait, no, it's not going to flip it. There's this like, and by the way, retail got access to leverage. So suddenly the market's just all over the place. You've got the nasty bear of 2018, the mini bull of 2019, the bear market, COVID, the leverage mess that was 2021 and then the unwind that was 22. The market has changed significantly. The moment FTX blew up, volatility has been very, very compressed, pullbacks are shallow,

serious money is coming in, the ETFs are here. This cycle is much more like 2017 in terms of it's a spot-driven market, but we don't have all the, we don't have like that crazy, what is this thing? People kind of know what it is. And now it's how does that thing that we kind of understand, right? No one knows what Bitcoin really is. It's that journey you constantly go through. But we have a pretty decent idea now. How does that fit into the rest of the world? And I think it's responding more to the world rather than people responding to Bitcoin, kind of a bit of a changing character. So they're similar bit different in that regard. Yeah. And people should also remember that even though that 2017 market

was amazing. There was plenty of 30% pullbacks during that year. The pullbacks this cycle have been far less than 2017. 30% was the norm. For us, it's been like 25. That's kind of as deep as they've been getting. There's the occasional 32 at the Yen-carry trade. You know, if we go down to 75, that would be a 30%. But back in 2017, the standard dip was much, much deeper. If you look at the drawdown profile of 2018, 19, 21, chaos, right? Regular 60%, 50%, like just nasty stuff. Really, really hard to huddle through. Yeah. So a little earlier, you said that this is a really, this is a healthy thing and actually allows you to raise your price targets. Do you want to expand on that? Yeah, so a lot of the

models that I look at for ceiling prices, my general framework is that hodlers are pretty reliable, human beings generally speaking, are predictable, right? Our behavior patterns are predictable. all. When people are in a lot of profit, they take them. And we see this time and time again. This is why long-term holders sell, because it may not be, like for me, for example, 150K is where things start to get really overheated from a lot of my models. It's not my price. I'm not a seller at 150. I'm probably not going to buy, but I'm not a seller there either. There's going to be some dude who's been around since $200 Bitcoin who just wants to finance his life, right? For him, he's going to take 5% of his stack. It makes perfect sense. A lot of people are going to be.

do this and that's fine. So just understanding that people do sell. That's kind of like my first axiom. And the second thing is, when do they sell? Well, they usually sell when they're in enough profit and they're usually in enough profit when the market's run pretty hard. So you can look at all these different tools and say, well, show me what price level we need to get to for the average guy to be statistically in profit. What about if they're really in profit? And you can define what those thresholds are, but on a probability standpoint, at about 150K, just about every average hodler is going to be like two standard deviations in profit. 4% of all trading history is higher than that.

4% is not zero, but it's also not 94%, right? I'd rather it be 94. So the odds are it probably doesn't want to go through that in one go. Now, why you can raise those price targets if you get demand. So when someone takes profit, if someone else absorbs that coin, right, and the price keeps going up, you'll seeing new demand coming in. So at 90K to 100K, we've seen 52% of all dollars come in. People want to buy Bitcoin at 90,000. It's an incredible statistic. So therefore, some of those levels are going to climb because the average cost basis is higher. You've got to go higher

to get the average guy in a lot of profit. That's the way that I like to think about these things. Can the models break? Absolutely. I expect a lot of them to break. I'm waiting for them to break. they haven't broken yet, but I'm always looking for stuff to break because the world changes, right? Some of these models will and won't work over time. But that's my job to try and pay attention, say, well, what is evolving? How does the market change? Okay, ETS have come live? Good. I'm going to look at ETF data as well. Add that to my toolbox. So how long do you think this dip is going to last? Because I assume you're not thinking of this as like a six-month consolidation period like we had last year. Do you think this is going to be more flash crash style like COVID?

It could be. It could be both. I got no idea, right? I can't predict the future. I think if we were to go to 75, I really would prefer it. I think it would be a very good sign to see it really like, you know, touching a hot stove. Off it goes. That would be the preferred scenario. The deeper it goes, the sharper you usually want it to be. We will see over the coming weeks how this thing consolidates. As I said before, my like, break glass, everything is a disaster, bare market, 65K is kind of where I would expect that to find its level. So therefore I can at least now frame that up and say, well, where are we now? What are my general frameworks for where I think it's going to go?

If it goes to 65 and I was to buy here, would I be angry at myself? Right. And that's how I like to think as a hodler. I've got my framework for where I think we're going to form some kind of a low. Therefore, I go, well, how long do we have here? If we go to 65, will I be mad? If we don't go to 65 and it just goes higher from here, will I be mad? and I make my decisions based on that framework.

And in terms of like the data that you can analyze, what are you kind of waiting to see now? Yeah, I basically want to see short-term holders taking a really fat L. Right. So there's a tool that we use called SOPA, SOPR, stands for spent output profit ratio. Super powerful tool. Next to that, an MVRV, they are just the, they are my bread and butter metrics. Short-term MVR-V, short-term SOPA.

one of them mvrv tells you about how in-profit the unrealized profit or loss of short-term holders soapa tells you about how much they're locking in profit or loss so my perfect scenario i want to see short-term mvrv below one which on my charts would be nice and red because and we are there at the moment that means the price is below their average cost basis which means all the people who bought up above 90k probably feeling a little bit sensitive right now right their incentive is going oh God, what if it goes lower? I want to see the 2018 me. And that's what I talked about at the Miami conference. I showed the 2018 cycle. I've bought the 2017 top and I showed what happened and then what SOPA was doing. And every time I was like, oh cool, bull market's back. Sopa was ripping

higher telling me that, well, now I know that the smart money was dumping on my head, right? And then every time I sold my coins and I said, don't worry. I'll buy it back later. I know I'm down. I'm but I'll buy back lower. I was locking in a fat loss at the exact time that the smart money was coming in and buying that dip. So I want to see Short-Im NVRV below one, which is, I'm a very happy sat stacker down here

because that's condition one. Condition two is I want to see the people who did buy high start panic selling low and taking the loss. That is currently happening. The deeper and the sharper and the nastier they look, the less likely I'm buying the top. That's how I think about these things.

I hate buying the top. Because when I buy the top, I could have bought more sets if I waited like 10 minutes more. The more that this goes down, the more pain people are in, the more losses people lock in, the more likely, in my view, I'm not buying high. So therefore, over any kind of meaningful timeframe, I'm probably going to be just fine. It's kind of that simple. Do you have a chart in that slide deck that we can pull up to show that? No, I don't, but you can jump some of the charting website and you'll see it.

Actually, we'll have a nice red print, I think, at the moment. If you go to charts. CheckinChain.com, you'll be able to pull that one up. I haven't actually seen today's print, but I'm going to assume it's a nice fat red candle to the downside, given yesterday's price action. Okay, there we go. There it is.

So this is basically looking at the average profit locked in by short-term holders that are spending. So if a coin doesn't move, this chart has no idea about it, doesn't look at it. Only looks at coins that are moving. And you can see that at the $100,000 or $18,000 all-time high and in March, when we had the ETF peak, this thing was super high.

Means that people are selling and taking fat profit. That's my, I'm not buying here. I'm going to wait. I'm going to wait. And once that thing goes red, that means that the people who did buy those coins. They are now capitulating and taking a nice fat loss. There's plenty of times where this thing also tells you, by the way, you're in a bear market.

It's going to be red forever. Enjoy. See you in four years. But, you know, the start of a bare market often looks just the same as the bottom of a dip in a bull. Around all the other things I look at, I would be very surprised if we're in a two-year bare market from here. I'd be amazed.

Can it happen? Of course. Right. I'd love to be wrong in that instance because now I can learn from what I got wrong. My base case is we're probably going to bounce higher at some point in this year. Therefore, I'm a very happy stacker below the short-term cost basis, which is 92. It's interesting to hear your kind of price targets change a little, because when we spoke on the previous what Bitcoin did and me, you and Pete all had a bet on the price. I think, did you say

150 then? I said 250. I said, 250 is the highest we would get to this year. Okay, so I think I said then 280 probably and Pete was way up at 350. And then Pete was up in the space, yeah. But then, so it's gone from 250 to kind of 150 and now you're talking about 120 to 150. So what's bringing that level down? No, so nothing's bringing that level down. Um, where we're, we're, we're going to, were we when we did that podcast? I think it would have been in the chop solidation phase. So it'd been, let's say, 50, no, that would have been like, I think we would have made that podcast with Pete like 30K or something. Oh, really? Okay. I can look. Yeah, yeah, no, that was a long time ago. It would have been early 2024, I think. Um, that's my gut

feel. I don't think we were in the chop consolidation range. This was seven months ago. Yeah, okay. No, no, I stand corrected. Um, so yeah, look, uh, for 250, right? 250 is where I think like if you go full moon mission, that's where it could happen. And to be fair, I actually probably hadn't done a lot of the work thinking about ceilings at that point in time. And to frame up the 120, 150, 120 is like the lower, let's just, I call it like a topping cloud. That's the zone where the average guy is in enough profit that they're probably going to start taking it. All of this depends on demand. And this is another framework or principle that I use in in bulls and bears. in bare markets, we have a pretty good idea of the demand profile. We know that hodlers come in

and we know how much pain they can take. We've seen them hold coins that go down 80% and not sell. So we've got a pretty good read on the demand. What we don't know is what the supply looks like. Who is going to capitulate and sell? Are we going to have a three arrows blow up? Is there going to be an FTX? Who knows who's going to blow up? In bull markets, it's the opposite. We have a pretty good idea of supply. We can see when old hands sell, we can see realized profit, which is very, very reliable. They start selling when we get to the previous cycle all time high and on every sequential rally. What we don't know is who's going to hit the big green button and when and in what size.

So we don't know about demand. So the reason these targets, by definition, have to change because the demand profile is completely unknown, right? So we have to wait and see how this demand profile builds in. And I have a report that I call Moving Target, which tries to explain how these models come to be, the more coins that get sold at a high level, the more demand you've got coming in at that level, the higher the average cost basis, the more people have confidence that we belong up here. And therefore, you can start to lift price targets. Are we going to get there?

It's not a prediction. Who knows? But if we get to 120, I expect people to be selling quite a substantial chunk. If we get to 150, just about everyone's going to look at their portfolio and say, God, that's a big number. And then you've got to think about, like, are they selling? And then you compare it to your selling metrics. It's like, yes, now I've got a cohesive picture. The incentive is strong. They're actually selling. Demand keeps going, but we've now got 4% odds. You know, you start to think in probabilities. Yeah, that makes sense. Although I would bet a hell of a lot that we go a decent bit higher than 120. That would feel like the most disappointing bull market of all time. Your expectations, mate. You've got to hear expectations in light. And this is the thing,

right? If we did, we absolutely could. We could just zip right through to 300. If we were to zip through to 300, I can expect the bear market will probably be much nasty than people want. So the more that we have this like slow grinding price higher, the more stable it is, the more confidence you build over time. And actually, the higher the market can go, because that demand continues to come in at different plateaus. So over the last few days, I've been getting quite a few messages from people panicking. I'm sure your phone has been absolutely blowing up. What is your message to the people that are panicking right now? Chill out. Chill out. I mean, stay humble, stack At the end of the day, right, I think my, the thing that's helped me personally a lot,

let go of pretending you can predict the future. The moment you let go of that, the better off you are. Once you let go of predicting the future, you can then say, well, where do I think the market might go and just have a plan for both of those scenarios? And quite often, like, and I think that's the other thing, everybody's different. You know, a lot of my subscribers are retirees, professional traders, hodlers, primarily hodlers there's like 96% of the audience, self-identifies as a hoddler, so do I. They've all got different goals.

Some people are still in accumulation mode. Some people, you know, and for each of those different folks, whoever you are, your top, what is the top? Which one matters to you? Because if you're a retiree, it's the one that's going to give you a nice runway for the next three years of your life where you're not going to be stressed about money. That's the top that matters for you. If you're a leverage trader, it's the top that just happened.

Right. So it's all these different dynamics of who are you, where are you in your journey? for me, if we get to 150, I'm just not a buyer. I will allow the market to find its level. If it starts to look really good, now I start to become a buyer because I'm like there's that confidence starting to come back in. I don't want to be the first guy running into the, you know, out of the trenches. I want to see how the lay the land is before that happens and then make a decision.

When everything's overheated, it's just not, not. I've never had good success. And actually, you've got to work on this yourself. I finally got my retirement money to move across in my old account into the one that I could actually buy Bitcoin with. And I didn't listen to my own advice, right? I know I preach his shit all the time, but I looked at the chart, SOPA was high, MVRV was high, and I was like, yeah, but it's taken me two months. They finally got my money and I can finally buy it. What if it goes high?

I bought it, bang, immediately down, right? So you've got to constantly work on this. For whatever reason, human beings, our like natural instincts are designed. to lose in markets. I don't know why it's just true. This is why the odds are like, what, 98% or 99% of traders walk home with empty pockets. Something about our brain just makes us want to lose money in markets. You've got to fight it. It's like an active challenge to say no. Put that brain aside and you've just got to look at things more objectively and say everyone's very excited, irresponsibly long MSTRA is booming, funding rates are blowing out the roof, people are taking

lots of profit. If you tell that story to yourself and you come to the conclusion, it's a good idea to like go all in. You know, I've never had good success doing this. Yeah. I've actually not got a retirement account because I've always been self-employed since I've lived in Australia. But everyone in Australia should realize that you can do a self-managed super fund and self-custody Bitcoin in your retirement account. It's amazing. They'll turn it off at some point, so I do it soon. Have to. So one, I want to change gears a little bit. Why have you been going down the earthquake rabbit hole? Oh, yeah, well, I used to be an earthquake engineer.

I did three, yeah, two and a half years working in seismic work, which is fascinating, by the way. So the idea of earthquakes is just all probability, right? So, and the reason you bring this up in my slide deck, I've got this chart that shows Bitcoin's price action, and it looks exactly the same as the frequency curves of an earthquake. Is this checkmate's power law? Yeah, no, yeah, this is the true power law. So anyway, the reason that I'm looking at this is I'm actually reading a book at the moment called How Nature Works. I was very fortunate to have a phone call with Peter Dunworth and David Dredge, which was

tremendous. We just spent an hour and a half just talking stuff. And I asked David, if there's anything you would recommend reading, what would it be? And he said, we went through a whole list of things and then he said, oh, and you should read How Nature Works by Per Bark. And then I was like, okay, he goes, no, actually, you know what? everything I've just told you to read, put that at the top of the list. So immediately after the call went and bought it. And it's basically talking about this idea of self-organized criticality.

And I'm very early into the book, but there's all these complex systems out there, whether it's earthquakes or weather patterns or whatever. And the idea is that no matter which one of these complex systems you look at, they all seem to exhibit this pattern. Now, what we're looking at is in log scale on the X axis is the percent change of Bitcoin. 's price. Yeah, you've got to explain this chart to me because I've never seen a chart that looks like this and I don't know how to read it. Yes. So when I first saw this, I was like, damn, that looks like earthquake curves. So X-axis is the magnitude of the event. How big is Bitcoin's price movement? On the Y axis, how often do price movements of that magnitude happen, right? Both in log scale.

Now, if you think about this from earthquake engineering, on the Y axis, how often does a, on the X axis, mag seven, mags eight, mag nine earthquake happen? Now, just so people can understand, a magnitude nine earthquake is ten times larger than a magnitude 10. It's an order of magnitude larger than seven than six. So a magnitude five or a magnitude four, I forget the exact, is a heavy truck driving past your window. A magnitude nine will collapse. most cities, right? Really, really devastating stuff. So the concept here is that very, very large things, events happen very rarely.

Large price moves in Bitcoin, whether it's on a one hour, a one day or a seven-day rolling window, they happen very infrequently. So the lower down the chart you are, it's like one, two, three, five times. Bitcoin has gone up 200% in a seven-day period, like, once. But if you look at it on the left-hand side, we have so, like tens of thousands, thousands of times where the Bitcoin market goes up by 0.001%. Right. It happens all the time. So that's the idea of this thing is that the complex world of markets, this chart looks exactly the same as the cotton prices in the 1970, earthquakes, right?

There's so many distributions of things that are just the world organizes itself, all the complexity out there. Imagine all the shit that's going under the earth crust, right? Where there's fault planes and there's magma and there's, you know, oceanic and crustal plates all pushing against each other. I did some work in the Philippines. And that's like in the middle of like five or six different tectonic plates all squeezing from different directions.

And yet the frequency of earthquakes by magnitude looks exactly like this. So it's one of these really interesting dynamics that. All the complexity in the world boils down to this beautiful power law where it's not predictable, right? A one in 2,500 year earthquake. If you haven't seen one for 2,499 years, that doesn't mean it's going to happen this year. It's same as Bitcoin's next block time. Once every 10 minutes at all times. When's the next one? 10 minutes away. It's always 10 minutes. This is just how probabilities work, but it's interesting that over a long enough time frame, everything collapses down to these funky-looking power laws.

So I guess the point of this chart is to say, stop being stupid and trying to trade Bitcoin, just hold it. Pretty much. I mean, pretty much. I just thought this was one of those interesting dynamics about how the world actually works, how complex systems actually work. Couldn't recommend the book highly enough.

I'm like, only 60 pages in. And it's just fantastic. You're reading this thing, you're like, wow, the world is such a strange, weird place. and then this just looks like a law of nature. It just is what the world collapses towards. And the moment I read it, I had to just jump.

I've jumped in my charting suite, and I was like, let me just see how Bitcoin's price looks. Bob's your uncle, looks like an earthquake curve, looks like the cotton prices in the 1970s, super strange stuff. Love it.

Well, thank you very much for this checkmate. Hopefully it's going to mean some people can stop panicking. And we're going to see you in Bedford. Yes, I'll be over for Cheatko, which sounds like it's going to be a fantastic crew, I can't wait. I'm very excited. It's going to be good.

This will be your, have you been to a football game before? I've been to one when I was over in London. I think it was Arsenal versus somebody. So what's that Arsenal stadium, which was amazing actually because it was like right as Christmas was kicking in and it started snowing. So you're sitting up there in the nosebleeds.

Snow's coming in over all the players. It was fantastic. That's the only football I've seen in the UK. Love it. Well, Rail Bedford will be a little bit different to Arsenal, but it's going to be a lot of fun. Well, I appreciate the time, mate. and I will speak to you very soon.

Good on you, mate. Real pleasure. Thanks.