Why central banks and onchain metrics point to a crypto upswing

Transcript

the next big move in crypto prices is near today we're going to walk you through about a dozen key indicators that explain why there's an inflection point happening right now in both macro and crypto and it's setting up a perfect storm for crypto prices to go up when crypto moves it moves big and fast and we think that moment is coming similar to Q4 2023 and earlier this year we're going to break it all day down in today's episode and help you understand how you can capitalize on it GM good morning welcome to milroad radio the easiest path to get smarter about crypto I'm Jay Hamilton joined by Kyle reidhead

and we believe that onchain is the next online and we're here to help you capitalize Kai let's start with can you give us an overview of the current economic situation and tie that into what it means for crypto yeah absolutely there's a lot to cover in a question like that so I'm going to try and do this in as simple uh a form as possible this week there's some important economic data that we'll talk about that really matters and it's around interest rates but not the us we often talk about what's happening in the US with global Equity with rates but actually in Europe so what's happening right now is it's likely and I think it's on June 6 this is going to happen but Europe will be saying if they're going to lower their interest rates or

not it's expected that they're actually going to lower and that's because their inflation has actually been much lower than the us it's been under 3% for many months now and so they're expected that they're going to be lowering rates Canada might also be lowering rates soon which is great because I have mortgage here in Canada and then the question is does the US follow now why does this matter for the listeners that's because macro is what controls crypto crypto is macro macro is crypto we've say this a lot and what this means is uh Global liquidity so the amount of liquidity or dollars or Fiat currencies let's call it that are in the system this is what moves crypto markets we have written and talked on this podcast tons about how Global liquidity is what makes these crypto Cycles happen every four years it's not the Bitcoin happening although

that has some to do with it it is all about liquidity what is the cost of money our interest rates high and are governments printing money if governments are printing money it means risk assets are going up because they're debasing currency if governments are not printing money and interest rates are high then usually crypto and other risk assets aren't doing so well and so if we look at what happened in 2020 2021 this was the co days we were printing money interest rates were zero and so crypto and Tech and basically everything was skyrocketing your house was skyrocketing in price your tech stocks your crypto Everything Gold and then they raised interest rates because inflation was high in about the end of 2021 they stopped printing money they stopped giving us stimulus checks and what happened all of our beloved assets went

down and down and down and now we are in a turning point where it looks like interest rates are starting to go down in many countries and Global Equity is is soon about to go up and we'll talk about why we believe that's happening here in this episode but the first chart I just want to show you as I mentioned Europe is likely going to lower rates whether they do or not I'm not quite sure but it looks like they're going to but anyway the chart we have up on the screen here is the percent of central banks around the world that have already started cutting rates we focus so much on the US well they haven't cut rates so maybe it's not going to happen but if you look in Brazil and many other countries they already have it in fact more than 25% of countries around the

world have already started cutting rates which they raised rates um back in like 2021 same time as the US did and so we can see where the trend is going and it's going that these banks are going to be cutting rates Europe Canada and eventually the us is going to follow now let's talk about why we think us is going to follow because just over this last week we've started to see a lot of change in the US data which is showing that the US economy is weakening and what we need for the US to lower interest rates into to print money is for the economy to slow down because what happens is when the economy slows down meaning people don't have any money people stop buying things the government or the FED they need to print money or they need to make the interest rates

lower so that we can as a society start to buy more things and help to improve the economy and so if we look at the FED basically these the chart we have up now is the Atlanta fed's expectations or estimates of GDP which is basically gross domestic product so how much is the US making in terms of Revenue on a quarterly basis let's just say it's that and it was actually looking pretty good about a month ago which was why a lot of people like H I don't know if they will decrease rates but in the last couple days the Atlanta fed their predictions went from a GDP of 4.2% just a few weeks ago down to 1.9% so an absolute massive drop in the

US economy and so in order to get the US economy back to sort of running where the government wants it to they typically need to stimulate or they need to lower interest rates now that's just GDP that's just a prediction just an estimate it's not a perfect science by any means so let's look a little bit further the next chart we have up that just came out today full but this is basically looking at job openings so one way to tell how the economy is doing is how many companies in the economy are hiring and right now that number is going down and down and down while the unemployment rate is also going up and up and up now it's not going at a massive rate like what we saw in 2020 when Co happened but it's going up enough that it's worrisome and right now

what we're seeing is the amount of job openings are going down that is an indicator that unemployment is going to go up even more which is another indicator that the US government or the FED sorry is going to have to lower interest rates and ease the liquidity conditions so that the economy can sort of be stimulated a little bit further one other important chart that's just been happening over the last couple days is oil if we think about demand for an economy when an economy is doing really well what are we using a lot of energy we use energy to produce Goods to produce services to travel to do so much every single product we buy in the world is priced around how much gas or oil costs right because we need it to manufacture things we need it to transport things and right now typically

what happens is when demand in an economy goes down less things are being produced and thus the demand for oil goes down and we've just seen that in the last 5 days oil prices have gone down 10% that's a pretty big move one that helps with inflation which is really nice but also it just shows that the economy is slowing down now this is I'm talking the us but this is globally this isn't just happening in the US this is why I'm saying that Europe is likely to lower interest rates because again their economy is slowing and it's not just Europe it's all around the world right now and so this is really really important to understand because what this means is if the economies are getting worse and they're not like terrible it's not like we're going to have this like 2007 you know Global

recession whatever it's not that bad but the numbers are softer and what that means is it's an excuse for the FED to lower rates and to start stimulating the economies this chart we have up here is an amazing one from GMI which looks at the global liquidity so this is like all the central banks around the world and how much liquidity they are creating since the top of 2021 which is when we went into the bare Market in crypto liquidity has gone backwards we've tightened liquidity is what this would be called this happens when you of course increase interest rates or when you do quantity of tightening so you actually don't print but you do the opposite you take money out of the system and so they've been doing that for the last like three three and a half years and this is pretty normal again we

go through Cycles you can see that we did this when was the last top we had in crypto 2017 we had a big bull market and at the end of 2017 we had a big bare Market why was that because again we started quantitative tightening so they've been doing that the last few years and now we're reaching this sort of like wedge in terms of global liquidity if you want to chart it you can do some technical analysis on global liquidity which is kind kind of funny but we're at a point now where it looks like we're about to break through that wedge and Global equid is going to go through the roof and the reason is not just it's these technical indicators but again because the economies are slowing and so when economies is slow we print money we lower interest rates and I

think that is what's coming next for most countries including the US now one telling sign of if that's going to happen is the US dollar so you can look at what's called the Dixie which is basically comparing the dollar to a basket of other Fiat currencies and when the us is going to lower interest rates print a bunch of money it means the dollar is going to be weaker and people are already starting to sniff that out markets are seeing that this is going to happen and so the dollar is already starting to drop when the dollar is really strong compared to other currencies most people just hold the dollar and you can get a good yield on the dollar there's no reason to be in Risk assets when the dollar becomes weak people leave the dollar and they go into risk assets could be gold could be

crypto could be tech stocks and we've just seen that we've had a for this year anyway we've just had a a support line break for the dollar which looks like the dollar is about to dive and it doesn't mean the dollar is going to zero where this isn't the end of the dollar like people will tell you this is just again a cycle we go through these dollar Cycles all the time if this chart was zoomed out right now you would see that we go through UPS in the dollar it becomes very strong and sometimes becomes very weak and right now we're about to go through a phase probably for the next year or two where the dollar weakens versus other currencies and thus risk assets tend to do very very well in those moments in time and there's one more major event that's happening this

year which is the election how does the election play into this macro environment that you're sharing with us yeah so one other people are like well you know maybe it's not now maybe it's later maybe it's next year that this all happens and I think the one sort of hook to that is well we're in election year and when you look at election years so the chart we have up on the screen right now is looking at all the election years since 19 and it is a very very bullish year for markets we're looking at the S&P 500 in this instance and the reason why it's a very bullish year for markets is because it's usually a very bullish year for Global liquidity and the reason is the government that is in power at the moment they want their citizens to be very happy and so what do they do

during election years they forgive debt they print money they give stimulus checks they do a bunch of things to make people happy they hand out candy and this happens all the time and so when you're trying to figure out is the Macer going to change now or later it's pretty obvious at least historically looking that it's going to be now because this is just what happens in election years so there's a lot of things all accumulating together at the same time showing hey it's time that macro is about to be a Tailwind for crypto and not a headwind at this point so to summarize the macro situation Kai to really simplify it down we've got interest rates are being reduced we're seeing it likely already happening and expected to happen more we've got jobs

data is bad which is going to lead to a need to stimulate the economy again we've got oil prices that are coming down very quickly as you said recently we've got liquidity cycle that's looking like we're going into a period of printing more money we've got the dollar the US dollar that is dropping which always is an indication that hey it's time to move out of the US dollar and move into high-risk assets and to top it off cherry on top is it's also an election year did I summarize that well anything that we missed there perfect and the clear the key word you said was the jobs numbers and the other numbers look bad but not terrible it's not 20

2007 it's not 2000 right we're not going into a big depression it's a soft numbers meaning they look bad but not terrible and that is the key because if they were really bad okay then you might want to get out and actually you'd probably see the Dollar Rising because you'd actually just want to hold safe assets which is the dollar but in this instance it's bad but it's not that bad it's just a typical cycle it looks like here and that is super bullish fantastic okay so that's the macroeconomic situation but in crypto we are also seeing some very interesting data that is also very bullish and pointing to the reason that we think that we are lined up for prices to go up so let's dive into what is going on on

the crypto side and look at some on chain metrics yes so here's why this is so important and I think the two coming at the same time is such a big deal so when Global liquidity increases think about what that means just in reality people have more money and when people have more money and not just people but governments institutions Etc money is cheaper to borrow what do people do with it they want to invest it now where are they going to put it well they want to put it usually these days is in Technologies but they want to put it in technologies that are actually growing that have adoption that show really good potential and so when you look over at the crypto world right now there is some really really good signs and the first is what Jay has up on the screen here

which is active addresses in crypto at all-time highs ever we are currently sitting about 43 million onchain users that is incredible and this number is skyrocketing right now so at a moment where hey it's been a little bit bearish in the macro for a while but that's changing and people are going hey where should I park my money now well look it you have this newer technology that is at all-time highs in active addresses that is a really big deal now users is important but what's even more important to me is applications developers actually building in this technology because that is your obviously you can have a bunch of users but if there's no applications there's nothing to do those users are going to leave pretty quickly right um and so what we need to see is

are people building in this space and what we can see right now if we look at the verified smart contracts in crypto at the moment we hit alltime highs two months ago last month we were still really high an alltime high but a little bit behind the previous month but either way this is just a trend upwards and it has been up up up we had a bit of a dip over the last year while we were in sort of like the the bare market and now we're sort of Skyrock upwards again so this is a very bullish signal that hey more applications more developers are coming and they're improving this technology and that is super super important to understand okay so it's great to see the conditions that are happening on chain in terms of users and applic ations that's super exciting points to a lot of bullish signals

that's not the only thing that we're looking at when we look at Key indicators on chain what else are you seeing on chain that makes you bullish right now yeah so we see we've got the Tailwinds of macro we've got the activity in the ecosystem of crypto that is is basically at all-time highs everywhere but the other thing you need to look at is the asset itself right so crypto assets are they also setting up for a a bullish pattern or a bullish Trend and one of the best ways to to do that is just to look at the supply demand side we've talked a lot about this uh I guess on the podcast but mainly in our Pro reports um but one thing you can look at right now is a very popular metric to look at is how much Bitcoin or eth is on exchanges so

centralized exchanges generally what happens is in a very bullish time what you see is whales are accumulating and they're pulling Bitcoin or eth off exchanges and they're just like holding it in their I know their Ledger their treasure whatever they're holding it on chain not in exchanges when these assets move to centralized exchanges in especially when it happens there's a lot of it that generally means that they're going to sell into Fiat and so that's a time where you should be scared and you want to get out you'll often see at the tops of Cycles a lot of crypto will move on to centralized exchanges right now what we're seeing is one of the fastest removal of Bitcoin in eth off exchanges that we've seen in a really long time so on bitcoin it's really picking up we haven't been this low on exchanges since

I think around like 2018 which is pretty good but eth is the one here um that just recently especially with the eth ETF approval that we heard was it last week or the week before we have actually seen the biggest removal of eth off exchanges that we've seen in I don't know I think a couple years so it's a massive amount I think we had 800,000 eth in just one week which is pretty incredible and so that is just falling off a cliff which really helps on the supply side of of these assets and so again the demand side comes from the liquidity that we just talked about the supply side is looking really good and I'm not even getting into the details of how much eth is being staked or used in Def by I'm not going to get into all that but there is a really bullish setup

happening right now in crypto okay so zoom out given all of this bullish setup all these indicators coming together what is going to happen next and when yeah it's a good question it's tough to it's tough to figure out exactly when what I would say is don't try to time the exact moment the key thing and you said at the very beginning which is when crypto moves it moves fast and it moves really big so if you look at the chart of crypto it's like there's a few days out of the Year where this thing just rips and it goes up 10 20% we just had one with eth when the ETF was approved it went up 20% in one freaking day right if you missed that day if you

were not allocated for whatever reason you were trying to time the market or something and you missed that one piece of news you missed a massive move right so it's very important with crypto when you see these moments coming these inflection points and we actually called this back in I think it was October of 2023 where we saw the same sort of inflection point happening we said look guys this is coming we don't know if it's today if it's tomorrow if it's a week if it's a month we're not actually sure but now's the time to be allocated it's the lowest risk reward or the highest risk reward I guess you can find right now and I think we're at that moment now does it happen today does it happen next week in a month I'm not sure the one thing I do know is the eth ETFs

are getting are likely to be approved and and to go live in some point in June probably the end of June let's say maybe even before and so that's likely to drive a lot of demand and if that happens at the same time as interest rates get cut or like macro really starts to break and and everyone's sort of realizing what's going on here it's going to move and it's gon to move really fast just looking we've been talking about this for the last week of doing an episode of like is this inflection point happening just today on Twitter everyone seems to be catching up onto this price have already moved a lot as we're recording right now and so maybe we're catching on it doesn't look like in the technicals we haven't like broken through anything yet so it's not like it's confirmed so it could still be

weeks could even be months sometimes Summers tend to be slow times for for for assets however again remind you this is an election year and so anything can happen in election year and so don't try to get too pretty with us and time it I think Now's the Time to be fully allocated and when I say fully allocated I don't mean go all in you should have a rain day fund of some some dollars with you as well you never know if your AC breaks or your car breaks down you don't want to be for seller um but you definitely want to be fully allocated in terms of your Investment Portfolio uh at this moment I think we're going to see some some fireworks take off in the next few weeks here and if you want to know what you should be fully allocated in

you can go listen to a previous episode where we talk about the milk Road Pro portfolio and where we are allocating our assets right now or you could subscribe to milro Pro by hitting the link in the show notes and get access to our full portfolio with a full breakdown of the 12 assets that we are holding on to and percentage of each in our portfolio Kyle thanks so much for breaking this all down for us today and leading it through it it's a it's a good time to be in crypto that's for sure excited and very much pumped up by all your bullish spirit for all of us before we uh head over to the in case you missed it in today's news uh I want to know which of

these key indicators you want us to talk about more on this podcast this podcast is for you our listeners so in today's poll you're going to see a list of all these key indicators that we talked about curious which ones you want us to dive into more so let us know on YouTube or on Spotify wherever you're listening which key indicator you want to hear more about and kind going to let you go but stick around for the in case you missed it of today's top news in case you missed it Australia welcomes its first spot Bitcoin ETF ibtc launching on the sibo Australia exchange on June 4th this ETF managed by monochrome Asset Management allows direct Bitcoin holding with offline

storage adhering to Australian custody regulations now this is the interesting part unlike us counterparts ibtc allows in kind redemptions and signals a growing acceptance of crypto Investments within Australia also today Black Rock and Fidelity's spot Bitcoin ETFs have been a significant contributor to their total ETF inflows in 2024 they shared data showing that black rock their Bitcoin ETF accounted for 26% of all of their ETF flows so far this year and Fidelity's Bitcoin ETF

accounted for 56% of their ETF flows now the largest ETF company in the US is Vanguard which still does not have a Bitcoin ETF but we know that they have recently brought on a new CEO who is crypto-friendly so you can bet that that might be coming and the Bitcoin ETF inflows should be continuing another bullish setup for all of us thanks so much for listening in everybody we'll see you tomorrow 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 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 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 see you in the next one