1. Speaker's Incorrect Bitcoin Prediction and Market Divergence [1]

thumbnail The speaker acknowledges his incorrect prediction about Bitcoin's price movement, which diverged from his accurate forecasts for energy, yields, and the dollar.

1.1. Initial Prediction and Correct Macroeconomic Forecasts [1]

  1. The speaker admits being wrong about Bitcoin not surpassing its May high, as it has now gone above it [4].
  2. The speaker's initial prediction for the end of the year involved several interconnected economic factors [11]:
    1. Energy prices were expected to increase [13].
    2. Rising energy prices would lead to higher yields because the Fed would initially be unwilling to hike rates [15].
    3. The Fed would then raise rates in September to combat higher yields [18].
    4. A Fed rate hike would cause the dollar to go up [19].
  3. The speaker correctly predicted the movements of these macroeconomic factors [21]:
    1. Energy prices, specifically XLE, had a significant upward move [25].
    2. The 10-year yield reached about 5%, and the 30-year yield also set new highs [28].
    3. These rising yields forced the Fed to raise rates, which in turn strengthened the dollar [30].
  4. The speaker anticipated that as the dollar showed strength, Bitcoin would begin to show weakness [33].

1.2. Bitcoin's Divergent Behavior [36]

  1. The speaker's prediction for Bitcoin was incorrect, as Bitcoin went up with the dollar instead of going down [24].
    1. Previously, when the dollar formed a double bottom pattern in May, Bitcoin's price dropped [39].
    2. This time, the dollar again formed a double bottom and went up, but Bitcoin followed suit and also went up, indicating a clear change in market behavior [37].
  2. Bitcoin's rally from its low has been 50%, which is a larger move than seen in the last two midterm years after a summer low [56].
  3. Bitcoin also set a higher high, unlike the summer rallies of 2018 and 2022, which resulted in lower highs [58].
  4. This divergence suggests that something fundamental has changed in the markets, possibly due to increased correlation with traditional markets because of ETFs and other influences [59].

1.3. Historical Midterm Year Patterns and Market Reassessment [61]

  1. Midterm years can remain bullish into late September, as observed in past instances [61].
    1. In September 2018, the stock market peaked on September 21st before a 20% drop [63].
    2. In September 2014, the stock market peaked on September 19th before a 10% drop [64].
    3. However, a correction is not guaranteed, as seen in 2010, when the stock market found a low in early July and rallied into the year-end without a correction [67].
    4. The 2010 scenario occurred after the financial crisis, where the market had already dropped over 50% [71].
  2. The speaker acknowledges the need to be more open-minded about Bitcoin's direction due to these unexpected movements [73].
  3. The speaker compares this current misjudgment to a similar one in October 2023, when he incorrectly predicted Bitcoin would not exceed $35,000 [76].
    1. In both instances, the speaker made a video admitting the error and reassessed his strategy [81].
  4. The speaker emphasizes respecting the new market structure, which shows a higher high, and refrains from predicting a retracement without authority, as he did not predict the breakout [84].
  5. He advises listening to others who correctly predicted the current market move, as he is currently trying to understand what he missed [88].

2. Re-evaluating the Impact of Fed Rate Hikes on Bitcoin [94]

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The speaker identifies his main mistake as assuming that a Federal Reserve rate hike would immediately cause Bitcoin to drop, a belief not supported by historical data.

2.1. Misconception About Rate Hikes and Bitcoin's Reaction [94]

  1. The speaker's core mistake was assuming that Bitcoin would react negatively and immediately reprice lower when the Federal Reserve raised rates, especially with the dollar going up [94].
  2. This assumption was not supported by historical data [95].
    1. Since Bitcoin's existence, there have been two main rate-hiking cycles: December 2015 and March 2022 [95].
    2. In the December 2015 cycle, Bitcoin did not immediately go down after the first rate hike; in fact, the bottom was already in, and Bitcoin continued higher [97].
    3. In the March 2022 cycle, Bitcoin initially went up after the first rate hike [107].
  3. The speaker initially thought a rate hike would be bearish in the short term but bullish in the long term, signaling a healthy economy, but he expected an immediate repricing that didn't occur [101].

2.2. Bitcoin's Performance After Rate Hikes [109]

  1. In the current rate-hiking cycle, Bitcoin has also gone up after the first rate hike [108].
  2. Bitcoin is currently outperforming the average of its performance after the last two rate-hiking cycles [114].
  3. The speaker notes that if he had been more rigorous in his analysis of the March 2022 rate hike, especially coupled with a golden cross, he might have foreseen Bitcoin's breakout [115].
    1. A golden cross typically leads to a dump, then a rally, and in this case, it resulted in a higher high [118].
  4. Even in the 2015 cycle, where Bitcoin did go lower after the rate hike, it was only about a 30% drop from the rate hike point, which was not a new market low [121].
  5. The speaker also examined rate hikes specifically in September of midterm years [126]:
    1. In September 2018, the Fed raised rates, and Bitcoin did not immediately drop; it later put in lower highs, but not an immediate drop [127].
    2. In September 2022, Bitcoin also did not immediately drop after the rate hike; it actually went up [132].
    3. In September 2016, Bitcoin went up even more after the rate hike [134].
  6. Historically, Bitcoin tends to perform well for about the first month after rate hikes in midterm years or after the first rate-hiking cycle [135].
  7. Even with events like the FTX collapse in 2022, the subsequent 15% drop from the rate hike point would not have constituted a new low [136].

3. Shifting Market Perspective and Future Outlook [140]

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The speaker advises deferring to those who correctly predicted Bitcoin's recent surge and maintaining an open mind about future price movements, especially regarding potential higher lows.

3.1. Deferring to Other Market Perspectives [140]

  1. The speaker advises viewers to consult those who correctly predicted Bitcoin's recent upward move, especially in the short term, as he did not foresee it [140].
  2. He suggests that if Bitcoin shows weakness in a month or two, then it would be appropriate to revisit historical charts to assess potential higher lows [143].
  3. The dollar's recent pattern, which involved a big drop, consolidation, another drop, and then testing prior highs before heading back up, resembles USDT dominance [144].
    1. This pattern suggests that a brief correction in October might see USDT dominance go up, but it doesn't guarantee a sustained upward trend [151].

3.2. Reassessing Future Bitcoin Movements [158]

  1. If weakness appears later in the year, the speaker will not automatically assume it will be a lower low; instead, he is open to the possibility of a macro higher low [158].
  2. Historically, the final weakness in midterm years for Bitcoin has occurred after the midterms, not before [161].
    1. This pattern was observed in 2022, 2018, and 2014 [161].
    2. Therefore, a macro higher low might potentially print after the midterms [162].
  3. The speaker acknowledges that he must be a student of the market and respect the current market structure, which shows a higher high, unless a quick retrace occurs [167].

3.3. Learning from Past Mistakes and Adapting Strategy [170]

  1. The speaker reiterates that his mistake was assuming a rate hike would immediately be bearish for Bitcoin, a belief not supported by historical data [170].
    1. In September of the last two midterm years, Bitcoin performed well for a month or two after rate hikes [172].
    2. In past rate-hiking cycles, Bitcoin was either okay initially or had already put in its low [173].
    3. Historically, if weakness occurs after rate hikes, it typically happens a month or two later, not immediately [176].
  2. The speaker advises being open-minded about where any future low might land, not assuming it has to be a lower low [180].
  3. He also drew a comparison to gold's pattern, where he incorrectly assumed Bitcoin would follow gold's lower high, but silver set a higher high without taking out its prior low [183].
  4. Historically, the strategy of dollar-cost averaging (DCA) throughout the second half of a midterm year has been common, though it led to losses in 2018 and 2022 [192].
    1. In 2022, the mistake was assuming Bitcoin would go slightly lower [194].
    2. In 2026, the speaker DCA'd below $30,000 but stopped after five days when Bitcoin moved up, as he expected it to come back down, which it never did [195].
  5. The burden of proof has now shifted to the bears, as the bulls have established a higher high [199].
  6. Any future weakness in Bitcoin would likely need to correspond with a significant correction in the stock market [201].
    1. A 10% drop in the S&P might not be enough to push Bitcoin to a new low; a much larger drop would likely be required [203].
    2. The NASDAQ is currently at new highs, which is not uncommon for September in midterm years [205].
  7. The speaker concludes by stating he will now defer to Bitcoin's market structure, which shows a higher high, rather than being deterministic [216].