Bitcoin: The Beauty of Mathematics (Part 38)

Hey everyone and thanks for jumping back Into the cryptiverse today we're going To talk about Bitcoin the beauty of Mathematics part 38. if you guys like The content make sure you subscribe to The channel give the video a thumbs up And also check out the sale on into the Cryptiverse premium at into the you can of course get Access to the chart that you see as well As thousands of other charts not only For cryptocurrency but also equities and Macro economics related as well We do this video on the first of every Month to help keep us in line with the General direction of the cryptocurrency Asset class while I spend most of the Month looking into smaller details about Ultimate directionality by taking a step Back every month I think it can always Help provide a somewhat fresh Perspective on the asset class as a Whole Now as always I know the title of the Video is Bitcoin but it's actually on The entire cryptocurrency market Capitalization and as of August 1st 2023 The total cryptocurrency market Capitalization is coming in At a modest 1.163 trillion the fair value Logarithmic regression trend line is now At 2.074 trillion this represents an

Approximate undervaluation Of 43.94 percent Now we often spend many years in Undervaluation territory in fact going Into this year one of the things we Often stated was that we would likely Spend the duration of this year below The red fair value logarithmic Regression trend line but above the Lower green logarithmic regression trend Line Now we have admitted that it is possible For us to deviate outside of those Bounds throughout the course of this Year but any deviations would likely be Short-lived just like we saw in previous Cycles So far this cycle continues to emulate More so 2015 Then 2019 you can see that in 2019 Crypto went into the overvaluation Territory for a few months before Ultimately coming back down and more or Less tagging the lower logarithmic Regression trend line however in 2015 You can see that more or less we went Sideways until we hit that trend line Now the definition of sideways is often Disputed in in crypto for me this is the Definition of sideways however when you Live through it it often does not feel Like sideways price action right again

If you were to look at 2015 and you were To go back and look at say the Q3 Correction that occurred right before The having year we know that Bitcoin Dropped about 50 percent and put in a Double bottom To me this is still a sideways year now The reason it does the reason it looks Like a sideways Here's to Us now is Because you know what came after it and It makes it seem like whatever happened Over here Was pointless right it didn't really Matter But at the time when you don't know what Comes after it this certainly doesn't Feel like sideways when you watch the Price of Bitcoin go up 90 percent So Bitcoin went up 90 and it still had a 50 correction to me in crypto that is The definition of sideways right now Some people might look at that and say Well you know 100 rally isn't really Sideways it's crypto guys okay I mean You're here not because of the Occasional 2x move you are here because Crypto can often give oversized gains Like 10x and 20x and even higher over Longer time frames so if we accept the Premise that crypto can go up Significantly in bull runs that tend to Happen after the having And also happen to correspond to

Higher liquidity in the system then we Must also be willing to admit to Ourselves that a 100 rally followed by a 50 correction should be characterized as Sideways I would put forth the same idea today That 2023 has and I said back then too Should it it has been characterized as Sideways over half a year ago when I Said we were going into 2023 we're Likely going to go half up and half down And today I say the same thing that this Year is most likely half up and half Down and we've already spent about half The year going up we should spend some Of the time going down at some point And therefore even a correction backed Down to to the lows or near the lows Whether it's a high or low or low or low That should still be characterized to me As sideways Because if in the future we get another Bull run out in the say like the 2025 Time frame way over here we're all going To look back at this and just say it was Sideways even if in the moment it Doesn't feel like that right now Why is this sideways why does it look Like the market cap has barely changed Well my friends it's because the market Cap has barely changed Bitcoin has gone up The altcoin market has not If you were to take a look at total

Which again this is the this is the Total market cap of cryptocurrency if You're to look at what it's essentially Accomplished between Last August And this August Not a whole lot right The valuation of the market total market Cap is the same As it was basically a year ago But how can that be Bitcoin's gone up since then If you look at Bitcoin USD you can see That Bitcoin has gone up significantly Since then The reason is because the altcoin market Total three Has not And total three is well below where it Was last August You are living through the Bitcoin Dominance rally and the thesis of the Bitcoin dominance rally is that the Dominance of Bitcoin should go up no Matter the direction of Bitcoin USD it Doesn't matter if it goes higher it Doesn't matter if it goes lower Liquidity from the altcoin market Is going To bitcoin now some of it has gone to Ease but I would argue that ultimately Even ethereum will see a devaluation Against Bitcoin before the rotation of Alts into Bitcoin is complete

And so total market cap Looks relatively unchanged over the last Year but everything has changed the Composition of the asset class has Changed in August of 2022 the dominance Of Bitcoin was much lower than it is Today You can see that it was actually about 39 Today it is at 49 percent I would argue that within a year we will See the dominance at 60 and it could Happen well before that I wouldn't be Surprised to see the dominance break up To 60 much earlier than a year from now You could see a break to 60 dominance Followed by a retrace and then another Break to 60 dominance sometime after the Having that's actually what we saw last Cycle except last cycle it was 70 Dominance If you look closely you can see that we Had one rally here to 70 dominance and Then another rally to 70 dominance so You could see something like that again Right but maybe maybe 60 percent is is The thing to look at So while total market cap Has gone sideways Bitcoin has gone up the altcoin market Has gone down this is a rotation of Money from higher risk assets like all Coins to lower risk assets like Bitcoin Now anyone in the equity Market would

Scoff at the idea that Bitcoin is low Risk asset and I would tend to agree It's I mean there is a lot of risk Associated with Bitcoin especially Considering that it can drop 80 percent At times But when we talk about a low risk asset We're talking about it within the Context of the asset class that it's That it's a constituent of right like That it belongs to okay so when we say The Bitcoin is a little bit disgusted It's not that it's low risk against Something else right it's low risk Against basically everything else in Crypto And even ethereum is higher risk than Crypto than than Bitcoin so Bitcoin is The safest it's been around the longest It has the highest market cap it is Stood the test of time the altcoin Market has not and there are some that Will likely survive and go on to put in New highs in a future cycle but many of Them will not and I I only tell you this Because I have lived through it multiple Times you don't want to be the guy that That bought every altcoin you could Think of Before the having in 2024 only for you To somehow pick out every single law Coin that didn't budge an inch in a Future bull market Okay

The way you compensate for that is by Ensuring your portfolio is Bitcoin heavy Whatever you know not to say that it has To be the entire thing again this is not Financial advice this is just based on Historical results Historical results Even ethereum Would fall to Bitcoin in any type of More traditional classical Portfolio analysis like modern portfolio Theory Two maybe deviate for a second to go Look at modern portfolio theory for an Asset or a portfolio of just considering Just consisting of Bitcoin and Eve the Portfolio that maximizes your sortino Ratio is still 76 Bitcoin 24 percent Each the portfolio that maximizes your Sharp ratio is 72 Bitcoin and 28 percent But these These valuations are likely Going to change in favor of Bitcoin For the next several months in a few Months when we look at this tool it Could show that it'll be 80 Bitcoin and 20 each especially if eth continues to Underperform bitcoin for the duration of This year which it has been so far and I Think it will continue to do so So when we go look at total market cap If you only looked at this you would Think that everything is fine in the Altcoin market however many of those all Coins have gone on to put in new lows

Many of them struggle to find a bid at All and many of them will fade Into the depths of the cryptoverse never To be heard from again Bitcoin will likely not fade ethereum Will likely not fade I do think eth will underperform Bitcoin I do think the USD evaluation of eth Will likely get hit pretty hard Um later on as we get further into the Year and before the having just like it Did last cycle But it should recover in you know Especially further out into into the the Post having years so when I look at this Chart and people tell me all over Twitter that this time is different Perhaps I need to get my eyes checked Because I can't for you know the life of Me figure out how this time is different In fact this time is a much more Tempered version of 2019 and in 2019 People were people were shouting from The rooftops that this time was Different and even in that case we still Came back down to ultimately tag the low On the regression band the lower green Regression van We also tagged the low in late 2015. in Q3 of 2015. When we also had A recession scare We had a recession scare in 2015 and we Tagged the lower green regression band

We had a recession in 2020 and we tagged The lower green regression band We had an inverted yield curve in 2019 Telling us the economy was going to be Weak we haven't Inc back then we have an Inverted yield curve today That tells us that the economy is weak So If and when The asset class tags the lower part of This regression band That could very well correspond to the Accumulation phase of a lifetime videos That everyone wants to see But That hasn't happened yet It doesn't mean that it has to happen There's always a chance that it won't There's no such thing as a sure thing When it comes to investing there are Likelihoods or you know there's Probabilities that certain assets will Outperform others right there's no there Was no there was never any guarantee That the dominance rally had to be Correct okay You know and I I still go back to this Idea that most of the you know most of The the narratives that you see running Around today for you know for for off Season and all that sort of stuff those Same narratives were pushed forth here And here and here and here And here

Narrative is one thing But Bitcoin tends to stay the same As it navigates each market cycle And remember I did a video on this Recently In Q3 of the prehabbing year you Typically get a pretty substantial Correction Ranging from like 48 49 all the way up To around 80 percent the one we had last Cycle Was about a 72 correction So when I look at this in the context of What we previously seen in Q3 of the Prehabbing Year where Bitcoin has always Gotten weekly closes multiple below the 20-week SMA I can't help but feel That the asset class as a whole could Very well tag the lower part Of these regression lines down here I also can't help but feel that The dominance will continue to go higher Much higher in fact I'm probably on the back of of The Ether Bitcoin valuation collapsing And likely some of the altcoin market Dropping against Bitcoin too but a lot Of that a lot of that dominance I think Needs to come from from ethereum and I've said before in the end even the Giants will fall and that that means The Ether Bitcoin valuation So this is where we are today

We are 44 or so below the fair value Logarithmic regression trend line History shows us that if you take the Percent difference between the fair Value logarithmic aggression trend line And the market cap We go to 60 65 under valuation Before the next move to potential new Highs can begin you can see that it Happened last cycle And it happened to cycle before that In 2013 it didn't happen but I know you Know some people would make the argument That this was all just one cycle this Was sort of like the pre-halving year Pump followed by the the bull market After the having And if you look at this what you'll see Is that Just sort of drawing the line across the Page there's a way in which or there's This tendency of Bitcoin to come down to About 65 60 to 65 percent under Valuation Before kickstarting the real move That people want normally that move does Not occur until after the having And my start right just before the Having but it normally doesn't really Get underway until after the having Which will likely correspond to the FED Cutting rates into going back to QE now We must understand something here and That is that the reference point of this

Is a monotonically increasing function So if we were to just simply go sideways Until we hit the green logarithmic Regression trend line it would take Until September of 2024. If the market cap of crypto in September Of 2024 is the same as it is today it Would basically be at 65 percent under Valuation I would argue that it's likely to go to The to the lower green regression line Before September of 2024. therefore It could correspond to a market cap Lower well lower than where we are today Okay so this Is my road map for the cryptoverse okay I look at it I say Market cap has gone sideways a lot of People will tell you that this has not Been a sideways year Let them say it let them say it but I'm Telling you the context of History will Show That this was a sideways year for the Asset class and that can include another 40 to 50 correction and it would still Look like a sideways year It would still look like a sideways year Even with another 40 to 50 correction Which is remarkable to think about How much how much volatility exists Within the cryptocurrency asset class to Say that a 50 correction is more or less Sideways but that is what the context of

History shows us the context of History Shows us that Bitcoin often Falls below Its bull market support ban in August or September of the prehabbing year the Context of History shows us that the Dominance typically goes up the minute Bitcoin starts getting weekly closes Below the 20-week SMA I understand that At the time of this video the dominance Is down slightly below 50 percent but From what I've seen many many times When you get weekly closes below the 20-week SMA That's where the altcoin market can Quickly sell off against Bitcoin A way to visualize this is to look at Your trusty total three minus usdt Divided by Bitcoin chart The height of bull markets brings the Market cap of all coins to parity with Bitcoin you can see this ratio up here Is one One The bottom of bear markets for all Bitcoin pairs brings the market cap of The altcoin market to approximately 25 Of bitcoin's market cap This still suggests that the altcoin Market will likely drop against Bitcoin To the tune of approximately 46 percent Now you could always have an example Where Bitcoin puts in a double bottom or A higher low and total puts in a double Bottom or lower low you could have an

Example where Bitcoin puts in a lower Low Um but the point is is we are likely Entering the phase of the cycle where we Get that seasonal flush in all the scams And garbage that has been promoted this Year so that we can more or less start Fresh going into the having So I would be looking for that the Devaluation of all Bitcoin pairs that Continued rotation of alts into Bitcoin The rotation of eth into Bitcoin at some Point there's no longer sufficient Liquidity in the altcoin market to prop Up the price of Bitcoin USD in the Prehabbing year And that's where you get that secondary Scare that we've talked about by Bitcoin USD and again last cycle the secondary Scare was a higher low Right last cycle it was a higher low The cycle before that It was a double bottom We should be open-minded to you know to What ultimately if we do get a secondary Scare what it could ultimately be but That is what we have seen Bitcoin do Throughout these Cycles I imagine that this time won't be any Different So I know this you know this the last Couple of years has been really Difficult for a lot of people especially

Those that have You know been been focusing mostly on The all coin markup And I mean unfortunately many all coins Will not ever come back but sometimes These are lessons that you just learned The hard way and then you move on Um To the next cycle and and you're more Well-versed in how the cryptiverse Operates I'm still looking for Bitcoin To get that secondary scare to flush out More of these meme coins and the scams And then to start fresh as we go into Into the having in in 2024. that is my View I will you know there's there's Plenty of other views out there there's Many views there's a lot of people Calling for new highs this year I have Fallen into those traps before and and It we didn't happen it didn't happen Right I mean Bitcoin just came back down It flushed the altcoin market out again And and those those calls for new highs Were quickly withdrawn you know and and Taken back so I do eventually think that The asset class is heading to 10 Trillion that has not changed you know I Mean we're about a 1 trillion today It's very likely that we could be going To 10 trillion here in just a few years So try not to lose sight of the bigger Picture Within this some of you would honestly

Just be better off tuning out of the Cryptiverse and coming up with some type Of DCA strategy for the for the coins That you want to have and then there's Forgetting about crypto for for a year Or two but this is my view on the crypto Market I hope I've articulated it well Even though I know that doesn't always Come across as well as I wanted to but That's where we currently sit I think That we will likely go to 10 trillion it Could happen in the next cycle Plus or minus a few trillion And as we go to sleep at night we cannot Help but wonder what's a few trillion Dollars among friends


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