Three reasons for the Bitcoin crash and how it compares with past pullbacks

Transcript

GM GM good morning welcome to the milk Road show The Daily crypto show that's Potter than the hot sauce you accidentally overdid on Taco Tuesday I'm your host Jay Hamilton and today we're going to help you clearly understand what the f is going on in the markets and why are they dumping Bitcoin is crashing is the bull market over or is this just a tasty by low opportunity here to tell us the three reasons why Bitcoin crashed over the weekend and what you should do about it is milk Road co-owner and head of research Kyle rehead Kai welcome back to the show what's up guys I feel like during pullbacks we need weekly therapy

sessions where we come in and talk some senseon to everybody well there's no better to talk sense into us than Kyle himself so we're so grateful to have you let's start Kai why are markets dumping right now Bitcoin crashing in particular first of all to be fair we never know why markets are crashing people love to ask that question and the answer is nobody has a clue uh but there are three sort of big things that are happening right now in the Bitcoin World which are sort of telling us what might be happening here the first was the news today that the mount goau refunds that they're doing which is somewhere up around like8 billion dollar it was supposed to happen around October news came out today this morning that it was

going to actually start in July so they're going to start giving back the the Lost funds from those that were using mount gaau back in whatever it was 2011 or 2012 um and they' be giving them back a tune of about 8 billion do worth of bitcoin of course these people haven't had this Bitcoin in more than 10 years what do you think they're going to deal with it probably sell so people are trying to front run that selling no one has sold anything yet because they haven't received it yet um but people are very scared that when this ever happens which we've had rumors for years uh that when this happens it's going to be obviously bring a lot of selling pressure to bitcoin so um that was the big thing today that I think really started to get the markets moving uh at

least this morning then there's sort of like two other things that are going along with this the first is miners are selling so this tends to happen every cycle after the Bitcoin having um the minor Revenue gets cut in half essentially and so they generally need to sell a lot more Bitcoin to pay for their um their Assets Now when the price of Bitcoin goes up enough then they don't have to do this as much they can sell less Bitcoin because the bitcoin's worth more but in the very early stages of it having um they have to sell more Bitcoin and so there's more sell pressure this happens every single time so you can see up on the chart um that over the last few months it's just been down only for bit for for Miners and um when price goes back up so by the way if

you look at previous Cycles you'll always see this like few months of just like kind of choppy markets after the having which is basically what we're in this is a big reason why is people get scared because the miners are selling and also the miners are selling quite a bit of Bitcoin um so it's it's just again added sell pressure so you have mount mount gox no sell pressure there yet but coming and people more just kind of front running it you have the miners and the third thing is the Germans the Germans are selling uh and they had about 50,000 Bitcoin in their wallet they're down to 47,000 I guess over the last week or so they have been selling um we don't know if they're going to be selling more or what but this is I think Bitcoin that they've confiscated um anyway they

appear to be selling it now how much of this will they sell we we don't really know but obviously we're at a point in the market right now where there's not so much demand part of this is because of the macro environment and then just you have a bunch of the selling pressure whether it's real selling pressure or rumored selling pressure doesn't really matter the result is they're selling and um and whether it's the Germans selling 3,000 Bitcoin or it's people selling because the Germans are selling 3,000 Bitcoin either way there's just a lot of sell news and sell pressure right now and that obviously makes the markets go down um so that's the main thing that's kind of putting this pressure on the markets right now when you say it like that it makes it sound so simple the question then becomes where does it end

is this the end of the bull market I'm being a bit exaggeratory when I say that but it's it's you know you said we need a therapy lesson because we freak out and we have short-term memory uh where has anything changed on your current Outlook of this bow Market from a macro perspective outside of these sell factors that we just discussed no not not at all I mean I think we are as I've been saying for a while we're kind of just in the beginning of the bull market not the bull market but we're just in the beginning of the macro side of this bull market central banks all around the world are just starting their rate cut and their liquidity Cycles right we're just getting that started we're just

seeing Canada just started to lower rates Europe just started lowering rates the US is on pause but eventually going to be lowering rates liquidity is starting to tick up in so many different countries it's just happening and we talked about this a few weeks ago um and I mean even since then it's gotten even better right back when we talked about this I think the episode was um now is the time to be bullish on crypto there was no rate Cuts in Europe or Canada and now that's happening um and so I think the macro continues to get better but it's still confusing for a lot of people because inflation is still high um rates are technically still high even though it's all about the rate of change not what they're actually at so it doesn't matter what level rates are at it matters which

direction are they going and which rate of change in that direction right and right now the rate of change is going the other way where it's heading down uh and so that's a time to be bullish same with liquidity is going the opposite way um and so macro is sort of just reaching its point where it's going to start to be a Tailwind for us instead of a headwind which it's been for the last few years and so I mean we've managed to get Bitcoin to all-time highs with I wouldn't say macro headwinds at that point but like you could I mean if you were paying attention to the data you could tell it was coming but a lot of people were not at that point we still had rates really high we were still quantitative tightening um all that stuff's loosing up and it's just getting

started so in my opinion when you look at macro the sort of next phase of the bull run the 2021 stage that we remember from back last cycle or the 2017 from the cycle before that again I'm talking liquidity Cycles um we're sort of just entering that now so on the macro side I'm actually super bullish it's just the onchain side where you can be a little bit more bearish because they're just happens to be all these entities selling Bitcoin now FYI that's just Bitcoin govern the Germany doesn't hold any eth or at least they're not selling any eth mount goau isn't selling any eth so and I don't just mean eth I mean anything else it's just Bitcoin so of course Bitcoin kind of leads the market so we got to look at what's going to happen there um but this is a structural issue

on bitcoin um that is more probably short-term than anything okay so that episode from two weeks ago which if you guys didn't listen to that you're going to want to go back and listen to that because it all still holds true that all those charts and that setup that we looked at nothing has changed uh so then why the Panic everybody's freaking out let's look at this pullback right now is this pullback abnormal Is this different than we've seen in the past or is this just the pullback that we all expected and we knew was going to come well this is the problem and this is why there's so much Panic is no one was

expecting this because everyone started saying that we're going to have the accelerated cycle I think we had to do an episode on it last month or two months ago whatever it was the crypto influencers or crypto Twitter got in this like narrative that hey this is going to be an accelerated cycle the ETFs are so bullish there's so much inflows we're just you know we went up so fast in Q4 of 2023 and q1 of 2024 and so re's like that's it we're just going to keep rocketing up to 100K and then it's over and it's G to happen by the end of this year and we tried to tell everyone like guys that's not going to happen we will get a pullback this is very normal we always get pullbacks in Bull markets like I don't know what this accelerated cycle narrative is and of

course what happened well in March a pullback started and this pullback has been going for 100 days I think it's 103 days starting today uh and people forgot about this accelerated thing and now just think like the whole game is over and it's expectations it's perspective it's all these things that we always talk about it's like guys this is completely normal and in fact uh We've pulled up a chart where we've looked at the 2015 2017 cycle and there was I think 12 pullbacks during that cycle but what's interesting is in the middle of the cycle and again this is the when I say the middle of the cycle this is again the point of which macro starts to really lead it and rates go down and liquidity really starts to kick up that second stage of the bull market where

things get a bit crazy well before that happened in 2015 2017 we had two pullbacks that were over that were 133 days uh in length interestingly that they were both exactly 133 days which is kind of weird but what I mean by that is it took 133 days to get back to the high that we were at previously it happened twice but interestingly in these pullbacks one was a 25% pullback one was a 42% pullback guys we're only at 24% right now that's all that Bitcoin has pulled back and everyone thinks the whole thing's over it's not even close to the size of the ones we had in 2015 2017 after those two long like extended pullbacks it was game on and that's when things just went absolutely ballistic for the rest of 2016 and and most of

2017 and things were crazy we still had pullbacks but they were fast and we were just doubling and getting multiples on our on our assets and that's also when you have like eth dominance and altcoins really take off that's your altcoin season previous to that the first part of that cycle was when Bitcoin did really well and then if you look at last cycle the exact same thing happened guys if you look at in 2020 which was the middle of the Bull Run we had this long 100 I think it 166 day um yeah 163 day pullback and this was 62.3% pullback 62 three times bigger than the pullback we have today if you weren't in the in the market back then you do not understand what we had to go through through uh but anyway once we

finally got through this remember 163 days is like what I don't know four five months six months whatever that is um once we got through that it was game on and again this was the time where liquidity was picking up like crazy Bitcoin dominance started to go down and we just went you know eth and Al just went through the roof this is the thing that we've been talking about the show so many times that we think the second part of the Bull Run we always say we're about 50% of the way through we think that that's coming and so if we look at today where are we at well in my opinion opinion we're about halfway through the bull market which we've been saying a bunch we're at about a 24% pullback and it's lasted for 103 days it seems pretty normal if you look at all the past

Cycles as well and so I don't know why there is so much panic and there's so much fear in the market um I mean I guess I do why this do know why this will always happen right people forget to zoom out uh a lot of people here are probably new weren't here for those other Cycles they don't understand the history of how this all works um but in in reality it's just pretty normal it's not a thing to be afraid of yet this thing could continue on for another I mean if we look at last cycle I said 166 that's 60 more days that's two more months I can't handle it man I can't handle it what are people gonna do what are people going to do if it's two more months but this is again the expectations from this accelerated cycle I think that are kind of messing people

up so not unusual to have these type of pullbacks if anything this pullback is actually short compared to past pullbacks could go longer so far and it's on the low end at 24% we've seen pullbacks in the past much higher than that 40% 45% usually see them higher than this usually one more point in this before you continue There is look just because I said the longest was 163 days last cycle it doesn't mean we won't have this one go longer it could go 200 days right it's not it's not going to be the exact match from before we're not going to have two at 133 days like we had in 2015 2017 I mean maybe we will but that would be very weird right so the story

to take from this is it could be a long pullback and that's just an extended pullback again we have macro that's on our side we're at all-time highs on like everything on chain right now uh Innovation is going through the roof like everything is bullish crypto everything is getting bullish macro um and so like do I know when the pullback ends absolutely not I have no freaking idea and I don't pretend to um but again just Market structure it looks similar to before will it be the exact same absolutely not so don't like give up at 163 days because we've never had one go that long uh we've had many pullbacks go longer than that just what I'm saying is we generally have extended pullbacks in the middle of the cycle because this is where we sort of like Get rid of the weak hands and and move Capital which we

talked about this I think maybe last week Capital moves into the whales who are not selling at this point and the retail or whoever's buying right now maybe people that you know get their Mount gox refunds uh maybe they sell people who got their Celsius and their whatever else um they those weak hands move to strong hands we build a strong foundation and then when liquidity makes its way back in prices have that sort of like Foundation to jump and move you know double or triple or whatever it is um so again I think this is just very normal Market structure in my opinion if we look at past Cycles because you mentioned the past Cycles already uh what is the standard expectation because expectations are a dangerous thing here around pullbacks we talked about the the

size of them what about H how many should we expect is this just a one-time thing don't expect a certain number I hate to say it so if you look back in 2015 2017 you can see we had I think 12 pullbacks in that bull run uh if you look in the last cycle it was nine so will it be 12 or nine this cycle I have no idea will it be less will it be more I have no idea again don't care the only thing you need to know is in a bull market you're going to have pullbacks and when I say A pullback these are 20% or more we are going to have many of them we've already had I think five cycle um and so we're probably going to have at least another five maybe more maybe less I don't know um but they just

should be expected again don't look at the price to tell you which direction we're going look at the onchain metrics look at the macro like what's going on in liquidity cycle these are the things that tell you the direction that we're going in markets but then price won't just linearly follow that right we think that Bitcoin goes to 200k this cycle it's not going to just go straight up and to the right that never happens right but the is in crypto is no other asset is going from what are we at 60k to 200k in the next 12 to 18 months that's actually insane maybe maybe Tesla or Nvidia or whatever will but a small amount of assets are going to go up 3x in the next 12 to 18 months and so if you want that reward if you want the benefit of this much um upside you need

to accept that there's going to be volatility you don't get an asset that goes three four 5x in 12 to 18 months without volatility like crazy volatility even like if you look at the S&P 500 this is what most like financial advisers they they tell you just buy the S&P 500 and just like dollar cost average and that's like your pension fund that most people are told to do and it gets you like eight to 10% per year great that was like the standard before crypto came along people loved that but even if you look at that every year the S&P goes either up 40% or down 40% or up and it's like it's overtime there's insane volatility but over time the long term you end up with an average 8 10% per year crypto's the same thing you're going to get these massive huge

pullbacks these massive huge moves to the upside um and sometimes those are very shortterm sometimes they're very longterm like our big bare markets but over time it's kind of up and to the right if you're in the right assets and so you can either play it long term and don't even worry about the Cycles these four-year liquidity Cycles we always talk about and just hold right if you've been holding since 2010 well you've done a hell of a job or you can try to play it through these Cycles maybe you don't want to hold it through the bare Market but exp in that bull market you're going to have probably 10 20% pullbacks maybe it becomes less this cycle because I don't know we have institutions we have these like ETF flows that should be just kind of automated and passive but we're not at that yet we haven't turned on

those passive flows of Pension funds and endowments just like auto bidding Bitcoin ETF every single month is not there we already said that most of the inflows into the Bitcoin ETFs are just retail or are these like hedge funds and so it's the same sort of Market structure as we've had always before right it's going to be these wild ups and downs um but if you can stomach that volatility that's how you end up getting these two three four x's in a year um so you got to pay the price so you're not afraid of Mount GA coming because we don't know exactly how that will go Germany you know having 50,000 Bitcoin showing that they are going to sell some when are they going to sell the rest

nobody knows you don't you don't have concerns over these things not at all I think um they're they're all noise and you just need to put it aside like does it have a short-term impact sure we just saw it probably today was a short-term impact because of the mount gawk stuff is it going to matter long term no I mean when FTX blew up if you sold at that moment you sold the very Pico bottom of this entire market and that was the worst thing to happened to crypto in the last five years maybe ever right and if you sold on that news you literally sold the worst time you could have sold in the last four years so like do these things matter hell no they don't matter they matter in the short term but unless you're trading daily then it's completely irrelevant just

close your laptop don't look at the prices or look whatever you want to do I look because then I just I buy you know and I've been buying the dip for three months now and it just keeps dipping more but that's okay you know I don't really care now if things this isn't to say like you should just stupidly always buy assets just all the time you got to buy the right assets number one so like Bitcoin is one I'm not too worried about eth so the majors right which we've been saying you should hold most of your assets in Majors because they're not as impacted as much but also you know that once whenever things go back into sort of bullish mode um those things are going to continue upwards are they going to go a THX no but they're not going to go to zero I tell you that for sure and

so as long as you have a strong portfolio uh and you're not holding a bunch of shitty celebrity meme coins uh then you're probably going to be completely fine you shouldn't worry if you've been holding 80% of your bag in MOG and dog with hav in the other 20% in in mother in daddy like yeah you should be very scared and you should Panic the hell out of that because that makes zero sense so again it depends on your portfolio but overall um these kind of short-term noises I don't think they really matter unless you're like a shortterm Trader but that's not me and that shouldn't be most of the world you need to be 40 50 60 hours a week if you want to be trading this market and even those people don't succeed very often just just over 50% typically and that's

and that's most stressful job in the world so do not go down that path uh I'm glad you brought up portfolio allocation and not being uh 50% in meme coins uh because we're going to talk about that in tomorrow's episode we're going to break down this is the exact method or the playbook for how you capitalize on the rest of this bull market we believe we have somewhere around 12 18 months left there is still massive opportunity to come but a lot of people are going to [ __ ] it up and we want to make sure you guys don't [ __ ] it up so make sure you guys listen in tomorrow's episode to learn about that is that with me am I coming on for that next episode too am I gonna teach that's you that's you man yeah portfolio allocation all right here

we go I got some good I got a lot brewing in this head today whenever markets dump I always think okay what should I be getting rid of how can I be optimizing P my portfolio what do I need to do to just like make it even better than it was yesterday and so this is all I do in these moments I don't do much I don't move much um and I definitely don't sell out of the market but do I want to add to a certain position do I want to get rid of some of the things that I was like why am I holding on to this um I want to consolidate in these moments so I got lots of ideas we'll talk about all those in the next episode Kai as always thanks so much for your time thanks for joining us in case you

missed it here's what else happened in news today Marathon digital Holdings the world's largest Bitcoin mining company has found an Innovative way to utilize excess heat from their operations in a pilot project launched in Finland the company is using a 2 megawatt system to provide warmth to 11,000 homes the district heating system works by Distributing centrally heated water through underground pipes now Marathon believes that selling this excess heat could provide a significant financial boost contribute to achieving zero cost power for their operations the company currently operates 11 mining sites globally and controls 4.8% of the bitcoin's network hash rate also metap Planet the Tokyo list investment firm

will issue 1 billion yen which is approximately $6.3 million Us in bonds to purchase more Bitcoin this moves follows metap planet's declaration in May that it would adopt Bitcoin as a strategic treasury Reserve asset the company cited economic pressures in Japan including High government debt negative interest rates and a weakening Yen as reasons for its Bitcoin adoption strategy this Bond issuance follows an earlier purchase of 250 million yen worth of bitcoin by metap Planet earlier in June metap Planet stock price surged over 12% following the announcement that's all we got for you today thanks so much for listening in everybody have yourselves a wicked awesome day thank

you for listening to milk Road radio the easiest path to get smarter about crypto if you like this episode share it and hit subscribe or follow so you don't miss out on the next one there's also a link in the description to our free 5minute daily newsletter where we simplify crypto for you while making you laugh and if you're willing to step up your crypto investing game then we'll leave a link to milk Road Pro as well your number one resource to help you invest successfully in crypto one final note this podcast is for educational purposes only and nothing we say is financial advice crypto is risky so you should never invest more than you're willing to lose thank you friends and we'll see you in the next one