Inflation Just Flipped. Bitcoin Is Next.

[00:00:00]What if I told you there is one indicator that is called every major Bitcoin top and every major Bitcoin bottom over the last 12 years, not the 4-year cycle or the having one chart, four steps fired in the exact same sequence before every cycle turn since 2014. Now, I know how that sounds, but if you're holding Bitcoin right now and you're scared, if you've already gotten shaken out and sold somewhere on the way down, if you're sitting there thinking about selling as we speak, or if you've been standing on the sidelines for years waiting for a real signal to finally get in, then what this indicator just did is the most important thing that will cross your screen this year. Because the first two steps just fired. And the last time that happened, Bitcoin ran from just four figures to $69,000.

[00:00:43]So, in today's video, I'm going to walk you through all four steps. I'm going to show you exactly where we are in the sequence and what history says comes next, and I'm going to show you the one thing that could still break this entire setup and cause Bitcoin to crash one more time before the next bull market begins. Let's get into it. So, here is the sequence. I want you to hold these four steps in your head for the next 15 minutes because everything in this video hangs off of them. Domino number one is the US business cycle turning higher.

[00:01:09]Domino number two is the copper to gold ratio breaking out. Domino number three is Bitcoin's volatility expanding and dominant number four is Bitcoin topping [snorts] in that order every single time. Stay with me. Let's go through it one by one. So take a look at this chart right here. On the top you could see Bitcoin. Below it is the ISM PMI which is the single best realtime read on the US business cycle that exists. Below that is the copper to gold ratio and at the bottom is Bitcoin's volatility. Now watch the order of operations here. In the middle of the decade, the PMI bottoms and turns higher. Then copper breaks its downtrend against gold and then Bitcoin volatility expands and Bitcoin goes on the run that ends at the 2017 top. Then it happens again. PMI turns up in 2020. Copper to gold ratio breaks out right behind it and volatility expands off the floor.

[00:01:58]Bitcoin runs from four figures to $69,000 in tops in 2021. The same four dominoes, the same order. every top on that chart and every bottom sits exactly where the sequence says it should. Now, here's why I'm showing you this today.

[00:02:13]Domino number one just fell. As you can see right here, the ISM PMI is sitting at 53.3 and anything above 50 means that the US economy is moved from contraction to expansion and it just broke above the 50 level for the first time since 2022.

[00:02:28]The copper to gold ratio just broke a multi-year downtrend. Again, you could see on this chart the same kind of break that preceded the last two bull markets.

[00:02:37]And dominant number three, volatility, is sitting at one of the lowest readings in Bitcoin's entire history, and we'll talk a little bit more about that later.

[00:02:43]That number is not what most people think it is. And I'll show you why in a few minutes. But first, why does Bitcoin even care about the US business cycle at all? Well, the mechanism is simple. When the PMI crosses back above 50, it means that new orders at US companies are rising, production is rising, companies are restocking inventory. Restocking takes credit. And of course, as you guys know, credit expansion means newly printed money. And Bitcoin is the most sensitive asset to newly printed money on the planet. It doesn't follow other assets, which is obviously why Bitcoin has been doing so poorly while the stock market has done well. It follows the money. The Bitcoin 4-year cycle is a reliable indicator and it's worked for the last decade, but partly because it overlaps with this global liquidity cycle. But the business cycle is the actual engine underneath. And that's why what I'm talking about is so important and has been the single most reliable indicator of Bitcoin starting a new bull market over the last decade and a half.

[00:03:39]And here is why it's so important for you watching at home. The price of copper relative to gold is the real economy voting with its wallet. Think about it this way. Copper represents growth, but gold represents fear. Copper obviously is an input to US manufacturing and plenty of the products and services that you use every single day. Whereas gold is the hedge that people purchase during times of uncertainty. So when that ratio breaks out, when copper rises relative to gold, it means that the industrial economy is outbidding the fear. That is the regime where capital comes off of the sidelines, moves out on the risk curve, and out into assets like Bitcoin. By the way, real quick before we go any further, comment the word domino down below. So, I know how many of you are tracking this sequence with me. And while you're down there, 84% of you watching right now aren't subscribed yet. So, if you're getting value out of this, hit subscribe, tap the like button, hit the bell, and turn on notifications. It genuinely helps the channel a ton. Now, domino number one does not fall in a vacuum. The reason that the business cycle can keep expanding from here is a chain that I've been walking through on this channel for months. Inflation falls, rates fall, Bitcoin goes up. And this week, that chain got three separate confirmations.

[00:04:48]First, the inflation data itself.

[00:04:50]Mon-over-month CPI came in at.4% against expectations of.1%. Now, the direction is unmistakable, and the panic scenario where the Fed has to hike into an economic slowdown has evaporated in real time. Another indicator of the fact that the Fed probably isn't going to raise interest rates, which will be great for Bitcoin, is Walmart of all things, the largest retailer in America, just cut prices on thousands of items, including Coke and Pepsi. Think about what that actually tells you. The entire inflation scare rested on one assumption, that companies have pricing power because consumers can absorb higher costs. Well, Walmart cutting prices says the opposite. They're already one of the most budget-friendly stores in the country. And when Walmart moves, every supplier, every grocery chain, every discounter gets dragged into the same price war. Inflation expectations continue to decline across the country. And the third piece of the puzzle is that the Fed just blinked. The moment that the inflation print hit last Tuesday, the odds of a rate hike completely evaporated. Poly market was pricing the odds of no rate change at the July 29th Fed meeting at about 60% prior to the inflation reading, and it rose all the way up to 93% after inflation came in cool. And if you've been here since the sprint, you know that this was the whole thesis of one of my most popular videos. I have been calling for rate cuts for a very long time, and a lot of people were calling me stupid, but that call is now playing out right in front of your very eyes.

[00:06:13]So, the macro fuel is loading. Monetary policy is only going to get easier over the next several months, which brings us to Bitcoin itself, because the market is quietly telling you the exact same thing that the economy is. By the way, I just launched a community for serious Bitcoin investors called the Hard Money Room.

[00:06:29]Weekly live discussions with me and people who actually understand this at a high level. The link for that is at the top of the description. Bitcoin just got declared dead for what is probably the 10,000th time. It has lived through a shooting war in the Middle East and the wreckage across the global memory and AI trade, which is popping, and I've talked about that in the last couple of videos, and a draw down from $126,000 all the way down to 59K. and it's currently sitting at $65,000, holding rock steady. Last week, it defended the $64,100 level, reclaimed it, and has managed to hold above it for almost a week. That is not what a market full of eager sellers looks like. That is what seller exhaustion looks like. And under the surface, the sellers are literally running out of Bitcoin to sell.

[00:07:13]Long-term holders now control 16.34 million Bitcoin. That is an all-time record. And they absorbed 371,000 coins in the last 30 days alone. Meaning while the panicked sellers sold, the long-term holders bought all of it up. And the accumulation streak has now run 186 consecutive days. Meaning the smart money who has been here for ages has now bought Bitcoin on net for more than half a year. Meanwhile, Coin Days destroyed, which is the measure of old Bitcoin actually moving is at 313 million versus 900 million a year ago. Meaning the old hands are not selling. The weak hands already did on the way down from $126,000. All of which points to a Bitcoin cycle bottom that is well in the process of forming. Now, here's the part I really want you to internalize because I've been talking about the bottom forming for weeks now. And this is one of the most important signals. The average cost basis of short-term holders is rising. Smart money stepped in and bought the lows. And that pulls the cost basis, so the average purchase price of recent buyers up toward Bitcoin's price, which basically means that every dip hurts less than the one before it. Fewer people are underwater, less panic per dollar of downside. So the market slowly stops treating dips as emergencies and starts treating them as entries. That is what a cycle bottom looks like while it's forming. Ultimately, nobody rings a bell at the bottom. Particularly with Bitcoin, bottoming is a process and the process is visibly underway and probably very close to ending. The flows into the Bitcoin ETFs confirm this. You can see right here the relentless outflow streak that crushed this market over the last few months is completely gone. Flows have settled into a more balanced regime and the inflow streaks are starting to reappear. So the structural buyer of Bitcoin is back at the table. Now stack domino number three on top of all of it.

[00:08:59]Bitcoin's implied volatility is at 36.5%. And as you can see right here, the 90-day realized volatility of Bitcoin is at the same level that it hit at the last cycle bottom. And this is why that's so important. Volatility.

[00:09:12]This low does not mean there is calm in the market. It means there is a loaded sprint and the sequence tells you what happens next. Volatility doesn't live at the third percentile forever. It expands. The only question is what direction it goes. And direction has historically followed the business cycle. And the business cycle just turned up. Now, I know exactly what some of you are thinking because I'm thinking about it, too. What about the war? I'm not going to wave this one away because it is the one thing on the board that genuinely breaks this entire bullish setup. Iran has declared the straight of Hormuse closed until further notice yet again. And the tape backs it up. As you can see on this chart right here, only 11 commercial crossings have occurred in the last 24 hours. That's compared to 57 at the June rebound high, nearly 10% of the normal run rate. And as a result, oil has spiked massively higher. You could see right here, it's now at $82, up 10% just this week. And here is the chain that matters. If oil keeps rising, inflation ticks back up. And if inflation ticks back up, rate hikes come back on the table. And if hikes come back on the table, every macro tailwind that I just described disappears in an instant and we probably get one more massive leg down for Bitcoin. That's the honest risk. So watch the price of oil, not the headlines, because that is going to give you the biggest indication about what happens to Bitcoin next. But here's why the base case still points higher for Bitcoin after perhaps one more leg down. The disinflation underneath this economy is broad and demanddriven. When I say disinflation, I mean falling inflation, not falling prices. Walmart is not cutting prices because of the straight of hormuse. And inflation expectations are not falling because of $82 crude. The market is still refusing to price an inflationary spiral. For the war to break this sequence, oil doesn't just need to spike. It needs to stay elevated long enough to reverse the disinflation trend that took a year to build. That is possible. It's not my base case, but it's certainly possible.

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[00:11:42]That's saltending.com/jo. Link in the description. Special thanks to salt lending for sponsoring this video. Now, back to it. So, where does the sequence end? When does Bitcoin bottom? And when are we moving higher? Well, three independent forces are converging on the exact same destination. Force number one is the cycle itself. You have the business cycle expanding plus a Fed that is now more likely to cut than hike. And that is the exact regime that produced the last two bull markets. And both of those started for moments that felt exactly this hopeless. Force number two is supply. A record 16.34 million coins locked up with long-term holders, old coins dormant, and ETFs flipping back to net buyers. So demand is returning into the tightest available float in Bitcoin's history. And force number three is access. In 2020, the marginal Bitcoin buyer was retail with an exchange account. But today, it is ETFs in every brokerage, corporate, treasury, and sovereign all plugged in at exactly the same moment the cycle turns. The buyer base has never been this large at the start of an expansion. And before anyone says Bitcoin is too big now for a real cycle, gold would like a word with you. Gold is the largest and oldest monetary asset on Earth, a 20 plus trillion dollar market, and it still ran well over 200% over the past 2 years.

[00:12:56]Its size did not stop it. Now run Bitcoin's math. Last cycle, it ran from a low of roughly $16,000 to a top of $126,000. So call it an 8x. That would put an exact percentage repeat of last cycle from the $58,000 low at a cycle top north of $450,000.

[00:13:16]Now, I'm not predicting that number. or diminishing returns may be real, but even half of the prior cycles move from here is a life-changing outcome that would put Bitcoin well over $275,000.

[00:13:27]And right now, the market is pricing in exactly none of it. Which brings me to the psychology. And this is one of the final threads that I want to pull together for you because this is the part that the chart doesn't show you.

[00:13:37]Most of this market chased the euphoric leg up from $83,000 and it got carried out on the retrace all the way down to $57,000 and it's now sitting at the lows frozen anchored to the downside at waiting permission. That is the same reflexive pattern at every cycle turn.

[00:13:52]Think about it this way. The losses that Bitcoin creates for some investors create paralysis at the exact moment that the setup completely flips, which is right now. Peak uncertainty ultimately is peak opportunity. Not because it's a nice phrase, but because the sequence that is called every turn for the last 12 years just started firing again, and almost nobody is positioned for it. So, let me bring this home. We have four dominoes. The business cycle turns higher, and it just did with the PMI at 53.3. Copper breaks out against gold, and it just did, snapping a multi-year downtrend.

[00:14:25]Volatility expands, and it is coiled at the third percentile of its entire history. A loaded spring waiting on a direction that history says follows the US economy. and the fourth domino which is the top and that sits somewhere far above the level where this market is currently frozen in fear. The four-year cycle somewhat called this but the business cycle has called this the exact same way every single time. Last video I broke down why June's inflation surprise might be temporary now that oil is spiking again and how they're planning to change the way that inflation is calculated to print a ton of money.

[00:14:57]That's the other half of this exact video. So if you haven't watched it yet, that's your next stop and I'll see you over there. Channel members also got this video early, so hit the join button down below to support the channel and become a member. And if you haven't already, subscribe to the channel and hit the bell to get notified whenever a new video goes live. And check out the hard money room at the link in the video description. I'll see you in the next one.