1. Bitcoin's Position Above May High Shifts Market Dynamics [1]

thumbnail Bitcoin's recent surge above its May high has shifted the market's burden of proof from bulls to bears, making a well-defined investment plan crucial for navigating potential volatility.

1.1. Bitcoin's Breakout and the Shifting Burden of Proof [5]

  1. Bitcoin is currently trading above its May high, which was around $82,800. [5]
    1. The speaker did not expect Bitcoin to move above the May high. [7]
    2. Bitcoin not only surpassed the May high but also closed above it. [11]
  2. The burden of proof has shifted from bulls to bears. [12]
    1. For the past nine months, the burden was on the bulls to prove that the rally was different from previous rallies, which were just rallies to lower highs. [13]
    2. With Bitcoin making a higher high and closing above the previous high on a weekly basis, the burden of proof is now on the bears to show why the rally won't continue. [16]
  3. Being "rich and wrong" is preferable to being "poor and right" in investing. [18]
    1. There is a significant difference between being correct in predictions and actually making money. [18]
    2. The Dollar-Cost Averaging (DCA) strategy has been effective for those who invested in the second half of the midterm year, which the speaker considers the correct strategy. [26]
  4. Investors must have a plan for when their predictions are wrong. [30]
    1. Everyone will face challenges as an investor when they are wrong about an asset. [31]
    2. Having an investment plan is critical for navigating these situations. [32]
  5. The speaker's S&P 500 strategy involves consistent DCA. [34]
    1. The speaker buys low-cost index funds every month, regardless of market conditions. [34]
    2. Attempts to time the market by waiting for corrections have yielded mixed results, often leading to missed gains. [35]
    3. The speaker found it easier to buy earlier in the month to avoid overthinking and potential missed opportunities. [39]
    4. This strategy acknowledges occasional market drawdowns but does not typically involve selling based on market predictions. [44]
  6. A clear strategy is essential for Bitcoin, especially heading into Q4. [47]
    1. Investors should define their actions if Bitcoin goes up or drops, rather than just wishing for outcomes. [47]
    2. A plan is needed for both scenarios: if Bitcoin continues to trend up above the May high or if it falls back below it. [48]

1.2. Navigating Potential Q4 Volatility and Historical Context [50]

  1. Historical patterns suggest potential Q4 drops in midterm years, but investors must be prepared to act. [50]
    1. The speaker anticipated a drop in 2022 based on similar drops in 2018 and 2014, which were also midterm years. [50]
    2. While Q4 drops can occur, investors often fail to take advantage of them because they expect prices to go even lower. [54]
    3. DCA in the second half of midterm years is a sensible strategy, as buying at higher lows (e.g., $18K-$19K) can be more beneficial than waiting for extreme lows (e.g., $15K) and missing out entirely. [55]
  2. Having a plan reduces anxiety and helps navigate market uncertainty. [59]
    1. In 2018, the speaker bought Bitcoin at $6,000 and bought more when it dropped, while others missed opportunities by waiting. [59]
    2. It is challenging to make rational decisions during volatile market moments. [61]
    3. A well-defined plan helps reduce stress and anxiety, allowing investors to enjoy life without constantly monitoring charts. [63]
    4. The speaker admits to experiencing anxiety due to not fully anticipating the recent move and not acquiring as much Bitcoin as desired at the lows. [69]
    5. Sharing personal experiences helps others who might be facing similar situations, especially when an asset behaves unexpectedly. [71]
  3. Bitcoin's current behavior above the 50-week moving average is less extended than in previous bull markets. [74]
    1. In 2019, Bitcoin was about 40% above the 50-week moving average within two weeks of crossing it. [74]
    2. In 2023, it was about 24% above within two weeks. [75]
    3. Currently, Bitcoin is only about 10% above the 50-week moving average, suggesting a less significant extension. [76]
    4. Possible reasons for this include it being a midterm year, rising long-term yield curves, or geopolitical concerns, though these could also be irrelevant narratives. [78]
  4. A drop back below the May high would be a bearish sign, especially if it tests the 50-week moving average. [81]
    1. Bitcoin is currently less than 1% above the May high. [81]
    2. If Bitcoin falls back below the May high, it would be considered bearish, even if some interpret it as a bullish retest. [84]
    3. Historically, Bitcoin does not typically retest the 50-week moving average shortly after breaking above it in a true bull market. [86]
      1. In 2019, it took six months to retest the 50-week moving average after crossing it in May. [87]
      2. In 2023, it took over a year to retest after crossing it in March. [89]
    4. The only exception was in 2020, when it tested the 50-week moving average in early March after crossing it in January. [92]
    5. Therefore, a quick retest of the 50-week moving average would likely be a bearish sign, indicating acceptance back below the May high and a deviation from typical bull market behavior. [93]
  5. The burden of proof remains with the bears as long as Bitcoin continues to extend above the May high. [96]
    1. The speaker, who previously leaned bearish, acknowledges the need to re-evaluate views when the market breaks prior highs. [99]
    2. It is important to consider other perspectives and avoid echo chambers. [117]
  6. Developing a Q4 plan is crucial, as historical midterm years haven't been the best for Bitcoin. [106]
    1. A plan should outline actions for both upward and downward movements to reduce anxiety. [106]
    2. Even a significant drop, like the FTX crash (26% from the high), would not necessarily lead to a new low, only a retest of previous levels around the low $60,000s. [115]
    3. Investors should be less deterministic and consider diverse theories from various sources. [117]