⚠️ Bitcoin May Fall to $40,000

Added: 2026-05-11

[00:00:00]Here is an indicator that used to work very well to find the bear market bottom. [music] If you want to buy Bitcoin for the cheap, why don't we use the monthly relative strength index?

[00:00:13]Every time we hit a level below 30 is when we also tended to bottom out in the Bitcoin price. It's not necessarily the perfect bottom every single time, and yes, it might take a few more months until we really see a sustained bull market. But the reason why this indicator is so interesting is because it has already fired this year, and that was in February. Now, have a look at the curved line of Bitcoin. So, here the support that also predicted the bear market bottom quite well. However, we haven't yet reached that price level.

[00:00:51]According to that approach, Bitcoin has the risk of potentially falling another 50% or so until we get closer to $40,000 per Bitcoin. Note how in the past, when we got that RSI signal, when we did go below 30, that subsequently we might have still fallen a little bit. So, we were also quite a bit extended in 2025, and we could have seen a 50% drop over here. That did not happen. Instead, we just continued to go sideways. And maybe that's the same thing we will see yet one more time. If we get a black swan event, maybe we sell off a bit more, like over here, 25%, or we just go sideways for a while. Now, since the curvature of this line is going down over time, since we appreciate less and less, that sideways movement might take longer. Or again, we might have more downside risk. The reality might be somewhere in the middle. So, a bit of a sell-off and then a recovery later on.

[00:01:57]Now, in the past, when we just look at the cycles, it was always Q4 where we bottomed out in the market. That would thus imply that maybe this is the most likely scenario. Now, let's have a look at a regression analysis. So, how well does the RSI actually work? What we've got here on the x-axis, that's the RSI value. What we've got on the y-axis, that's the forward-looking 34 a day return. Why 34 days? Because that historically had the highest r-squared.

[00:02:30]But notice how low that r-squared is.

[00:02:33]So, we're looking at the weekly RSI. So, just looking at this regression, there seems to be not that much connection between forward returns and the RSI value. This year looks very convincing, but especially at the upper end, it's not very convincing, right? If we use the RSI for selling signals, we might sell way too early. It was only useful for potential buying signals. If we were to dollar cost average using the RSI, again on the weekly time frame, 14 is the default setting for the RSI, there is a slight alpha to be made. So, if you do dynamic dollar cost averaging based on the weekly RSI, and let's say we buy with a thousand dollars per month, and we do this every single month, and we do this since 2018, then we would have $515,000 today. But with dynamic dollar cost averaging, so we buy a bit more when the weekly RSI is low, and we buy a bit less when the weekly RSI is high, when we do this dynamic dollar cost averaging, when we buy monthly, and we buy based on the indicator, we can have a slight edge, but it's not as significant as one might expect. It's only an additional 9% return or 9% more units, more Bitcoins being accumulated over all of those years. An indicator that's slightly stronger is autocorrelation. So, we just look at past performance, how it correlates to future performance. And that worked for Bitcoin relatively well on the longer time frame. So, that's over here. We just look at past return versus future return. There's negative correlation. So, when past return was bad, we tend to have higher future return. When past return was good, we tend to have lower future return based on that. And here the highest R squared is much, much higher. It's 0.8 roughly.

[00:04:30]We are looking forward by 1 year and 46 weeks. If you use that approach for dollar cost averaging, for buying into the market regularly, we get slightly better outperformance. So, this time it's plus 11% instead of just plus 9% with the RSI. But fundamentally, the takeaway from all of this analysis is that we should really mainly be focused on regularly investing. And while timing the market can give us a bit of a boost by buying more at the bottoms, the boost isn't as big as people make it to be.

[00:05:01]The effect of contributing regularly to the markets is way stronger of an effect for wealth building compared to timing the market exactly. Yes, we get a bit of a boost by trying to find a bit more capital to buy when we have crashed. But in the very long term, it doesn't matter too much. But if you want to go more risk on and you're willing to actually sell at the top and buy very heavily at the bottom, you can use something like the CBBI. So, this is not just for dollar cost averaging, but for actually timing tops and bottoms. It combines various cycle indicators, and that then leads to this oscillator. So, it oscillates between 0 and 100. It's a long-term chart. It starts in 2011. And just have a look at how well this predicted cycle tops and cycle bottoms.

[00:05:47]Now, this also predicts that we haven't yet seen the cycle bottom. The lowest level so far was at 35 and we are currently at 51. So, really, according to this analysis, it does not yet make sense to be all in. But, that's always the problem with approaches like this, right? No model is perfect and while this is combining several models and while this did work very well in the past, nobody knows if it will continue to work in the future. We can already see that the cycle top over here was not perfectly aligned with the cycle tops in the past. As in, we tended to top out really at 100 or at 97 and this time we topped out at 94. So, if you waited until 100, you would have not sold on time. But, if you already [clears throat] sold at 90, you might have missed the rally from 73K all the way to 123K.

[00:06:37]So, no indicator is perfect and that's why we have to look at the market less deterministic and that's why going fully risk on or going fully risk off is probably not the best approach. Dollar cost averaging or contributing a bit to the market every month might be very risk averse, but going 100% deployed versus cash, that's probably also not the right long-term approach. By the way, if you want to get access to this backtesting tool, right? Bitcoin strategy analytics, then feel free to check out the premium membership. You can backtest all kinds of assets. You can also add new assets over here. Below this video, you probably will also find a link to the automated copy trading.

[00:07:15]So, there is an explainer video over here. It also shows the historical performance. So, that's here my personal track record over the last 5 years. And we have got also the copy trading results of last year, July to December.

[00:07:28]That's when we first started the copy trading. So, feel free to check that out. Feel free to check out everything risk-free for the first 7 days. If you got some value out of this video, feel free to subscribe. I publish these regularly. A like would be very much appreciated as well. Helps the channel grow. See you next time and thanks for watching. Cheers.