Bitcoin: Damage Report

0:00 Hey everyone and thanks for jumping back into the cryptoverse. Today we're going to talk about Bitcoin and we're going to pro be providing a damage report on the recent drop. If you guys like the content, make sure you subscribe to the channel, give the video a thumbs up, and also check out into the cryptoverse premium at into the cryptoverse.com. Link is in the description below. We also did launch uh the direct access option just a few weeks ago as well for anyone interested. Let's go ahead and jump in. So, this has been a fairly sizable drop by Bitcoin. And this is one of the things I was I was mentioning a few days ago was that when metals find a top, usually when they drop,

0:46 it then leads to an immediate drop by risk assets, right? Which is why I said don't expect this like immediate rotation into crypto whenever metals drop. Now there there is an idea that a lot of people have expressed that there would be a rotation. But I think what what a lot of people might be missing is when you look at say like the value um when you look at like the value of of say the S&P against gold and you see where it previously broke down from these levels in 1973 and uh 2008. You know when it happens it usually then leads to a correction in risk assets. it

1:32 doesn't really lead to a rotation. If you overlay the S&P 500 onto this chart, you can pretty clearly see what I'm talking about, right? You have a you have the S&P breaking down against gold in 1973 that ended up marking the top for the S&P 500, right? And then you look at 2008 when it broke down. I mean, it wasn't the top uh but you know, it wasn't wasn't the top right here, but it did lead to um a fairly sizable correction. So the reason I was saying there would likely not be a rotation is because of these charts because this doesn't really exist for when Bitcoin, you know, since Bitcoin has been around. I mean, like the this the S&P has never broken down from these levels since Bitcoin has been

2:18 around because Bitcoin was created out of the financial crisis, right? it was created over here. And so it's only ever been like down in these areas and then kind of coming back up here and then holding it as support several times. And now it's kind of struggling to hold it as support. And so you can't really learn about this macro regime by crypto when when the S&P and gold are doing what they're doing if you don't look back to before Bitcoin's existence. And so that was the argument for why we would likely see um you know Bitcoin continue to drop. Now, the interesting thing, and I I've said this for a while, is that when you have a I hate saying it now cuz now everyone just laughs at me,

3:04 but when you have a non-uporic top, when you top on apathy, for the people sitting in the back of the classroom who didn't hear me say it the first 20,000 times, when you top on apathy, the the sort of the draw downs tend to be a lot slower. you don't get as drastic of a draw down immediately, right? So, what I mean by that is when you look at say the silver chart, when you top on euphoria, you get a a pretty sizable drop, right? 30 to 50% drop. And um this ended up being at least about a 40% drop so far. So, that that is fairly normal when you have a top on euphoria. When you have a top on apathy,

3:52 it's more of like a slower drop, right? Because even from the highs, Bitcoin dropped about 40%. Right? So, Bitcoin from the highs has dropped about 40%. Which is essentially the same thing that silver dropped on Friday, right? Not a huge difference there, but it should be remembered, right? And I I think this detail is lost on a lot of people. It should be remembered that when you look at the valuation of Bitcoin against silver, it is down even with the drop that that silver had. Bitcoin is down 74% against silver over the last year. So, you know, it's easy to to sort of frame narratives

4:39 and say, well, you know, look at that, you know, store of value, blah, blah, blah. You know, make fun of metals just like the metal guy people make make fun of the crypto guys. But the reality is that silver has been a better investment than Bitcoin for the last year. It just has been, right? I don't control the chart. It just has been. Um, and so, so one of the things that I think we have to look at here is, you know, what does this low tell us right here, right? Is it a sweep of the prior low? Is it kind of testing it? You can see that, you know, more or less it has gone down to these levels, right? Like it's it's gone down into the zone that it hit in April of 2025.

5:25 I think technically it would have to go a little bit lower to actually go below it. Uh the lowest price 7 7441. Yeah. So it looks like the lowest price back then was 74441. But it did sweep this low from March of 2025, right? So it did sweep that one because that one was at 7672 and Bitcoin just went down to 75632. So we talked about kind of the way this plays out. usually. Again, is it going to be different this time? Maybe. But it's not my base case. And the way that it plays out is like this. You have the 50, 100, and 200E moving averages, right? And so, historically, the way it

6:11 works is Bitcoin first falls through the 50, consolidates at the 100, and then goes to the 200. That was in 2014. 2018, no different, right? 50, 100, 200. Same thing in 2022, right? You break through the 50, you break through the 100, you eventually go to the 200. So, we already broke through the 50 and then we consolidated for a little while at the 100. Kind of like we did in 2022 and kind of like we did in, you know, 2014. Very similar idea. And then eventually it just goes to the 200E moving average. Now, where it gets tricky are trying to time counter trend rallies. Okay? Now, I'm going to be

6:59 honest with you guys. I always am, but to be brutally honest, I'm not trying to time a counter trend rally, right? Like, I've done it before in prior bare markets and with varying degrees of success. Sometimes it it works and you get lucky and you can time the counter trend rally and then other times you can't and then you just kind of get wrecked. Okay, so I'm not going to sit here and pretend to know if and when there might be a counterturn rally. Like yes, does it make sense that there could be one given that Bitcoin is is sweeping the lows from it from April? Yeah. Like absolutely. I mean, anyone

7:47 would say that and it and it seems like the the reasonable thing to say that when you sweep a low from a while ago, Bitcoin then likes to have a counter trend rally. But and you can see that Bitcoin has done that many many times, right? It's done it a lot where it'll sweep a low and then get a nice rally on the other side of it. You can see it's happened many times throughout the entire the entire bull market, right? But here's the thing, right? Here's the thing. I have to ask myself, what what am I trying to accomplish here, right? Am I trying to accomplish a short-term trade that may or may not work out, or am I trying to accomplish just getting a good macro entry into Bitcoin

8:32 when I think the bare market is over? And my answer to that is the second option, right? I'm I'm more so interested in trying to time a more macrobottom, even though I don't think I'm going to be able to perfectly, but I'm more interested in trying to time that than trying to trade counter trend rallies all the way down. You know, in 2022 when Bitcoin broke through the 100 week, there wasn't really a counter trend rally. I mean, it just kind of just kept going. had a long wick down, had a little bit of a rally, but I mean, it just kept going. If you go back to 2018, once we fell through the 100 week, we just went straight to the two. And in 2014, when we fell through the 100, we went straight to the two. So, like, I

9:19 don't want to sit here and tell people that you have to have a counter. You might not. You might not, but I'm sure there are going to be a lot of people that are betting on one, and I'm not. It makes sense, right? Like it makes sense for some people to take that view because when you look I if you didn't know anything about Bitcoin, right? If if you were just looking at a chart like this, what would you think? What would you notice? You'd say, "Okay, we have a slightly higher high and we're pretty close to sweeping low." And then what I would do, again, if I didn't know it was Bitcoin, knowing that it's Bitcoin, I feel somewhat deterministic about where it eventually ends up. but because of the

10:05 cyclical nature of it. But if I didn't know, if you just said, "Hey, Ben, this is some random stock." How would you view this? Well, the first chart that would come to mind would be the uh the Nvidia chart, right? Because I mean, Nvidia had this exact same pattern and, you know, it basically had a slightly higher high and then it swept a low and then it went to a new all-time high, right? You can see that pretty clearly, right? A low, sweep the low, new all-time high after a slightly higher higher high here, right? So, you have a high, a low, higher high, lower low, new all-time high. Now, if you look at Google, similar pattern, right? Similar pattern

10:50 where you had a slightly higher high, you swept the prior low, and then you had this massive rally. You can see it pretty clearly. Okay. So, if you told me if you if you if you had me look at this chart and you just simply told me, "Hey, Ben, this is a stock, what pattern are we looking at here?" I would draw comparisons to the Nvidia and Google chart and say, "Well, you know, I mean, it seems like if you break below that low and you sweep it, uh, then perhaps you could have a nice rally and maybe it would go to all-time highs. But the problem that I have is that it seems to me like there's this

11:35 cyclical nature to Bitcoin. And so if there is a counter trend rally, right, if there is a counter trend rally out of this sort of the hole that Bitcoin has dug here, I think it is more likely to form a lower high than to go to a new all-time high. That is what I think. Now eventually I think Bitcoin will go to a new all-time high. I just don't think it's going to happen this year, right? At least not I mean I I I I think Bitcoin will likely continue to sort of slowly go lower for at least a few more months. And one of the reasons for that is if you look at this QT ending bare market chart, we talked about this a while. I mean this is tracking perfectly. I mean if you exclude the pandemic, it's tracking perfectly. In fact, in 2019, as a function of time,

12:21 the ROI of Bitcoin today and back then, as measured from the peak is nearly identical. Now, what you will notice is that Bitcoin found a low within a few days and then had a nice rally back up, but then it just formed a lower high and then a little bit later, it then put in another slightly lower low. The reason why nonuporic tops are so hard is because it takes so long to get the same thing that you would get in another asset class on a euphoric top. So if you go look at silver and you have a euphoric top, it dropped almost 40% in a day. Whereas it

13:09 took Bitcoin months to drop that same amount. Months. That's the difference between a euphoric top and a non-uporic top. That's the main difference. The way that it typically plays out for non-uporic tops. You go back through history is it's a slower bleed. It looks something like this. It's a slower bleed and then eventually you get a breakout, right? You get a breakout. Now, in the 2019 in the 2019 breakout, it led to the pandemic. It led to the pandemic. I don't know what would have happened without the pandemic. maybe we would not have had a deep correction. The problem

13:56 is we'll never know. But, you know, we also had an inverted yield curve back then. Inverted yield curves when they uninvert, they almost always lead to recessions within a year or two. So, you could argue that it we would have had a a crash eventually. It just might have been for a different reason. So, what usually happens is you get a draw down. It looks something like this. a slow drop. At some point you get a breakout and then at some point you get a final drop into a low and then a lot of times you can kind of build out of that. Now that's what happened with Bitcoin during the last one, right? During the last

14:42 one. So, I can't make a ton of conclusions for this cycle based on the pandemic because I'm certainly not calling for a repeat of the pandemic. I do not expect the unemployment rate to go to 15% overnight. So, I don't think you're going to have that same type of move. With that said, there is a lot of underlying weakness in the labor market. Like, hires are down, quits are down. You can go look at at the macro stuff. Look at hires. They're really low. Really low. People aren't really hiring. Job openings, they're also really low. There's not a lot of people uh um with a lot of job openings. The job quits rate is really low as well.

15:28 The unemployment rate is trending higher, but it has not entered into a nonlinear phase because despite everything being weak, layoffs remain low. So, there's a lot of underlying weakness in the labor market, but it's just not obvious because layoffs are low. The problem is that if and when layoffs start to increase, that's how the unemployment rate can go into that nonlinear phase where it goes up quickly. And the reason it would go up quickly is because if people get laid off, but also people aren't getting hired and there's no job openings and people aren't quitting, that's what can lead to an unemployment rate that starts

16:13 to move up very, very quickly. So, what I could see happening in general, what I I I I could see a scenario playing out like this where, you know, Bitcoin does this thing where it just puts in like slightly lower lows, slightly lower highs kind of going into the summer, maybe even a little before this summer if if this chart is any indication. Um, but I would say end of the summer because usually when the unemployment rate trends up, it kind of starts going up kind of into the summer. Um, and if you look at the last several years, the main weak times for Bitcoin were kind of going into the summer, right? Going into the summertime. Um, I guess

16:59 last last year it was a little bit different, but that was when we had a drop into March and April. So, I think that one of the things to consider here and the way that I think this could play out would be just a series of lower lows and lower highs. It's going to get really quiet would be my guess uh later this summer, maybe after a counter trend rally or something. Um, and then I think there's going to be some type of like final drop that could be as late as October. If you go to the the ROI from the low chart, which I think you guys have seen me show several times, we usually show it like this and and I kind of keep it like this and I don't show anything else. But if you extend the cycles here to then show

17:45 the bare markets, what you'll notice, what you'll notice is that Bitcoin topped when it always does plus or minus a few days and then it just goes into a bare market for a while. Now, if you look at where we are now and then look to see when the last two bare markets ended and you you kind of push that out, it would suggest that the bare market low would occur in the first two weeks of October. I think it was like October 3rd to this the 10th or the 11th, something like that. But I let's just say within the first half of October is when this chart would suggest the low would be, right? First half of October. that doesn't but the problem with saying

18:30 that is like I'm not suggesting that it's down only until then. It probably isn't. Um there's going to be times where it goes up and but in general I I think that the low will likely be later this year, probably Q4. Probably Q4 of this year. It's always difficult at the beginning of midterm years kind of talking about that because it it just seems like it takes a long time. There's usually like two or three counter trend rallies along the way that that draw people back in and and kind of like call into question that thesis. And you know, if you're wondering about the dollar, I mean, you might be like, "Well, Ben, hold on a second. The dollar is capitulating. What about these narratives surrounding the dollar?" The the one push back I would have about the dollar is that in 2017 it topped in

19:18 January and then bottomed in Q1 of 2018. And then this cycle, it topped in January 2025 right there. What if it just ends up bottoming a year later, right? What if it's just the same thing about a year bare market for the dollar? The narrative gets the loudest and then the dollar starts to go up. So there's a lot of people calling for the sort of the continued devaluation of the dollar. I'm not as married to this idea, by the way. like if if the dollar does drop, I I don't know if it would even affect my other views on the market, but I could certainly see a scenario where the dollar sort of comes back out of this and goes up for for a good part of uh of 2026. Even though it's capitulated early on, it also capitulated early on in

20:05 2018. Additionally, what if the blowoff top by metals is suggesting that the dollar's about to rebound? Perhaps the dollar was just simply sweeping the lows itself before getting a nice rally back up. So, that's a consideration I I think that's worth thinking about. But my thought process generally is this, right? When you have a non-uporic top, you don't get as deep of a correction as quickly. And you can you can see that pretty clearly when you look at the ROI after the peak and you look at like this bare market compared to the last few bare markets, it hasn't had as deep of a

20:50 draw down. So if you go one by one and you compare say this bare market to the last one, Bitcoin at at had already dropped almost 50% earlier than this before getting a counterturn rally. In the cycle before that, it had already dropped over 50%, over 60% by this point. And then the cycle before that, it had dropped by this point. It had already dropped over 50%. So, you can see when you come off of that apathetic top, Bitcoin just doesn't really seem to drop as quickly in general. So, it makes it difficult when making videos because like when you don't have these catastrophic drops. I think one of the things about having catastrophic drops is that it allows

21:35 people to be more confident in counter trend rallies. Like if if Bitcoin drops 50% usually then rallies regardless whether the highs in or not. When it's just slowly dropping, it makes it a lot more painful to know, right? because it's like, you know, just a slow drop. People are giving up. It's timebased capitulation, right? People are just tired of watching Bitcoin trade at the same price essentially for the last year. I mean, Bitcoin was at the same price in October 2024, November 2024, like the same price. So, over a year ago. So, anyone who's bought Bitcoin since then is underwater. The other thing I would like to draw your attention to is that normally the bare market for for Bitcoin is over when the

22:21 two metrics here, the supply and profit and loss when they cross. So that's when the bare markets usually end or they're getting closer to ending. And you can see that those have not even crossed yet. They will cross. I mean, if Bitcoin were to drop into the 60s, uh, maybe the between mid or around maybe 60 to 70K, you might start to see those things cross. That would also roughly correspond to that 200E moving average, which is approaching 60K as we speak. Um, those are my views, right? Those are my views. I I don't want to spend a lot of time speculating on exactly where a counter trend rally will go if we get one. I wanted to show you guys the Google and Nvidia trends just because I

23:07 know there are some bullish people out there. That's your bull case. I'm not a big believer in it. Just being honest, right? I'm not a big believer in it. Um I think it's more likely that if there is a counter trend rally, it would still be a lower high. There's also been a lot of people talking about the RSI for a while and how it's everything's oversold and whatnot, but you can see that all the lows for all the prior bare market bottoms on the weekly RSI were at lower levels than where Bitcoin currently is, right? Lower levels than where Bitcoin currently is. Last cycle, the weekly RSI bottom to 25 and even that wasn't the low for Bitcoin. Like you had a divergence. So, I'm not convinced that you should be using the RSI to make

23:54 macro trades. Um, because I I remember with like Bitcoin dominance, people talked about the RSI for years as to like why Bitcoin dominance was bearish. But then like dominance kept going higher even though the weekly RSI topped in October of 2023, right? Bitcoin dominance continued to go up even though the weekly RSI was putting in lower highs. So, I don't think it makes sense to put a lot of confidence in the RSI. I occasionally talk about it, but I think that we the RSI should more so be used for confluence with a lot of other indicators. I don't think it should be used in a vacuum by itself. So that's essentially the damage report. As far as Bitcoin dominance goes, one of the things I've noticed is that every time dominance like gets back above 60, the market tends to do something bad.

24:40 Um, and while I do expect dominance to eventually come back up and sweep these highs, the time frame on that is is really hard to know because it it certainly does feel like we're kind of in this range over here where where dominance is it's struggling to go up because every time it starts to break out, Bitcoin then gets a big drop and then Bitcoin will then drop more than the altcoins. So, I'm wondering I'm wondering if we're kind of in this phase where like, you know, it's after the top, right? Like, it's after the top and it's kind of a slow drop, but then eventually I would expect it to come back up. Now, you could argue that we front ran

25:28 some of this already. Like, it's possible that, you know, like if you look at the percentage drop here, that was only like a 7% drop. But dominance already dropped 12 13%. Which is more akin to the second drop that we had where it then like went up, it dropped again and then it went up again and then it dropped and then after that Bitcoin dominance drop then you had a a much larger rally up. So there are some scenarios, right? There are some scenarios where ultimately I think that dominance will come back up to the highs base case. I just don't know the path to get there. I don't know if it's going to go like this and go back up or if it's going to come down here maybe on a deep Bitcoin correction to the 200E moving average and then spike up. That's the hard part

26:15 to figure out. But the point is given enough time I think it will come back up to the highs before you get any type of durable move by altcoins. Okay. And that's the point is that, you know, while Bitcoin dominance isn't as bullish as it used to be, it still likely will go back up to the highs at some point before any type of good moves happen in the altcoin market. And then also with espec especially durably related to Bitcoin, but also even if it goes down, it's likely just going down because Bitcoin is dropping more than altcoins. Remember, altcoins drop against Bitcoin first, then they drop against the US dollar second. And the reason they drop against the US dollar second is because they drop then when Bitcoin transitions from the bull market during QT to the bare market

27:02 during the early stages of QE. So those are my thoughts about the market. Bitcoin from the highs currently down about 40%. The last chart I want to show you the advanced decline index. I have a feeling not the advanced decline index. I have a feeling if you look at the number of days is what I want to look at. Number no days since percentage decline that's what I want look at. If you look I keep not clicking on the right thing. If you look at this chart the number of days since Bitcoin had a 50% drop is now at 1180. the only other time in history that it

27:48 reached the levels this high 27 2018 right and then and then it dropped it had that 50% drop to the high from the highs on February 2nd and that's when it hit that 50% draw down February 2nd. So, keep this chart in mind. There's a lot of similarities between like this chart here and then the dollar. The dollar, see, like everyone's fading the dollar just like they faded it in 2018 here. Um, and so, you know, I've said this before, like there is a chance that, and I I

28:33 mean, I've been really clear that we're in a bare market for months now, right? Like for for months I've said that Bitcoin's in a bare market, that crypto is in a bare market. Obviously, just being in cash has been a much better place to be than in crypto. Being in metals has been better than being in cash. With the recent drop by silver, that starts to change the game. Gold still looks potentially okay. Like it could still go on to put in new all-time highs sooner rather than later. I'm not sure about silver. I mean, there's of course always scenarios where gold does not, but there's two examples 1973 and then 2011 where gold topped after silver, not before and not during the same time it topped after silver. So, do keep that in mind. But I mean the reality is is that altcoins this year,

29:21 sorry, altcoins already this year, if you look at just the yearly candles, they're already down 7%. Already down 7%. My guess is that this trend will continue, meaning that cash is going to be better than crypto more than likely when you look at 2026 as a whole. Yes, counter trend rallies will happen, but when you look at 2026 as a whole, that's the most likely outcome. There will likely be some things that outperform cash. Uh maybe some energy things, energy stocks, maybe some riskoff assets. Like there could be a scenario where gold outperforms cash in 2026. I could see that. Um but I think cash might outperform a lot

30:07 of risk assets. And I think that's something that you have to think about because it is hated right now. So those are my views. That's your damage report. Uh that's kind of my thought process going into into February. Thank you guys for tuning in. Subscribe. Give the video a thumbs up. Again, check out into the cryptoverse premium at into the cryptoverse.com. And if you like reading reports, you can go to uh Benjamin Cowan.com and you can read the report there that I put out a few weeks ago when Bitcoin was at 97K. So, make sure you check that out. It's at benjaminc.com. You can even check it out right here. Right. So, if you just go to that website, you go to reports, get report. You can then read it. You can put in your email if you want to get the PDF mailed to you or you can just scroll down and read the report. And I

30:53 published it when Bitcoin was at 97K. And we talked about like what Bitcoin is facing and the macro regime that we're up against right now and why, you know, rallies would be tactical and not, you know, not the start of a new bull market. more just likely lower highs, which is essentially what we got, right? Just another lower high. So, those are my views, guys. I'll see you guys next time. Thank you for tuning in.