Hey everyone and thanks for jumping back Into the cryptiverse today we're going To talk about Bitcoin and we're going to Be making comparisons between price Action and rate hiking and cutting Cycles by the Federal Reserve if you Guys like the content make sure you Subscribe to the channel give the video A thumbs up and also check out into the Cryptoverse premium at into the Cryptoverse.com there's obviously been a Lot of discussion over the last year as To how Bitcoin will behave in a high Interest rate environment and one of the Things that I've mentioned many times is That Bitcoin is likely going to be much More resilient than the altcoin market During this phase okay and this is Something we've talked about many many Times we've suggested that the dominance Should ultimately had much higher for Bitcoin and it and it helped sort of Cleanse the market but one of the things That I wanted to talk about in this Video specifically is what has price Action historically done during rate Hiking and rate cutting Cycles by the FED now on 4 fortunately we don't really Have a whole lot of data to look at Right we just don't and you know we Could try to pretend like there's a lot Of data and hope there's a lot of data But the truth is we really have more or Less one data point okay well maybe
Maybe two depends on how you look at it When interest rates are are low like Zero a quarter of a percent Bitcoin does Really well right that's clear as day When interest rates are low and we have Loose monetary policy Bitcoin does Exceptionally well it's clear in the Data okay There's an argument that Bitcoin is a Measure of excess liquidity in our System so if there's Excel liquidity Where does it go right it goes to the Higher risk things and obviously crypto Would probably be considered by most People to be amongst the most highest Risk things but that's why people like It because it has the most you know it Has essentially the most volatility and The further you go out into crypto right If you get into the altcoin market you Get even more volatility that's why We're all here right we We crave that Volatility we like that volatility and And that's what brings us all together I Mean as much as we might all like to say That it's only the technology let's be Real with ourselves right it's the Volatility that that brings us all Um and it makes it keeps us interested In in crypto right so one of the things That you'll notice again Low interest rates great for Bitcoin But let's take a look at another period And it might be somewhat surprising to
You what happened when the FED raised Interest rates They started raising interest rates in December of 2015. Huh When did the interest rate Peak December Of 2018 so during this rate hiking cycle By the Federal Reserve that essentially Lasted three years what you'll notice is That the terminal rate Corresponded to the bottom on bitcoin When they hit the terminal rate That corresponded to the bottom Now is it as simple as that Unfortunately no it's not and the reason Is because we are in a period of high Inflation you might say well you know Are you suggesting that this time is Different I'm not suggesting necessarily Anything what I'm saying is if you look At history when normally when the fed's Raising interest rates Market's going up You see that over here in 2015 2016 2017. look at it in in you know 2004 2005 2006 when the Fed was Raising Interest rates Market was doing quite Well even over here in 93 and 94 right Market was doing great So then why this time is it different And this is this goes back to that Policy mistake that we've talked about Before and you might think well has been Saying that last year's interest rate Hikes was a policy mistake no I'm not
Last year's interest rate hikes I don't Think was a policy mistake they were Making up for the policy mistake they Made the year before On the policies mistake they made the Year before is when the economy was Stronger I'm not going to say it was Strong I mean loose monetary policy sort Of has this intrinsic assumption that The the economy is not that strong if it Can't really sustain High interest rates But when the market is turning higher And unemployment is at historic lows That's normally the time you would be Raising interest rates especially if They're really low one of the reasons is Because if you don't do it you can see Periods of high inflation like we're Getting right now It's no surprise that if you go back to The 1970s it also corresponded to Historic lows with regards to the Unemployment level And look what happened I mean you know The unemployment level was very very low In 1969 and then it just shot up like a Rock over the next year or should I shut Up like a rocket shot up very quickly Over the next year to around six percent Or so so it can move up quickly If the Fed does too much damage Now again the interesting part of all of This is that normally The FED raises rates and the markets are
Going higher but the reason they do that Is because once the economy looks weak Once the stock market looks I mean They're not going to say they're doing It because the stock market is just Because the unemployment rate is going Higher or you're seeing weak data Somewhere normally when the FED sees Weak data they pivot and they say all Right we've gone too far we've raised Rates too much we've you know we've Rolled off too many assets from our Balance sheet we we know the market Cannot handle it anymore so they go back Into quantitative easing right me myself A quantity QE sounds good it's like the Uh the drug for all the all the Investors But normally when they go back to QE It's because they broke something in the Economy right so if you go look at Bitcoin's price chart They are raising rates Fed was raising rates economy was strong The s p was doing well Bitcoin was doing Well So don't say that Bitcoin can't survive A high trade environment it has before Right it has before But the problem is that if the Federal Reserve pushes us too far Then what happens We go into a you know a downturn right And and sometimes it's been a recession
Sometimes it's not 2018 was not a Recession right it was not it was just a Bear Market What else do you notice okay there's so There's a few things to notice here So the price the Bitcoin bottomed when The FED reached the terminal right but Also it hit a local top right before QE Started right before the FED started Lowering interest rates So this is why I've said before and I'll Continue to reiterate this you know a Lot of people have been calling for a Pivot for a long time but remember If and when the FED pivots it's because They have to because they broke Something usually So what happened they started to cut Rates the FED cut rates but guess what During the period that the Federal Reserve was cutting rates Bitcoin was still going down Which brings us to the point and you'll See this in the stock market typically As well is that The bottom that occurred over here Occurred after the last rate cut Not the First Rate cut It's a key point right It happened after it and if you go take A look at the s p so I'm going to go Take a look here at the Um the S P 500 really quick so if you go Take a look let me pull it up
If you take a look at the S P 500 one of The things you'll notice is that this Bottom in 2018 marked a pretty Interesting bottom but it wasn't Actually the ultimate low before the Fed Was done with that cycle right so take a Look at this the Fed was Raising through Here Um and and they they are sorry they were Raising through here through through I Mean they're essentially raised from What like zero all the way up to two and A half I believe it was in a fairly a Fairly short amount of time it was over A few years zero to two and a half And then during that period we had that Period in December 2018 where the market Hit a local low and then about you know 14 15 months later it went to a lower Low When the Fed was going through Quantitative easing or they were cutting Rates very very quickly because they had Damaged the economy So if you go take a look at Bitcoin What's interesting about this is that And this is is it should it should not Be overlooked is that the s p Put in a lower low right so I put in a Lower low from December 2018 to March of 2020 Bitcoin put in a higher low So there was some relative strength There by Bitcoin compared to the S P 500
Now certainly didn't feel like it at the Time and Bitcoin dropped like 60 very Very quickly but that's ultimately what Happened so you had sort of a local You had a macro low in December 2018 Right a fairly important low that Occurred at the terminal rate We had this period here where the Fed Was just holding interest rates at a Fairly high level for the time not Raising them but also not cutting them Either This sort of led to a a transitory Period where markets did quite well for Several months I mean Bitcoin rallied Um had a really great Rally from like April until June or July I mean it Started before that but really the real Rally that started didn't really start Till April I still remember watching Bitcoin and I I you know I've I've told You guys about my experiences with Bitcoin and just to provide another Um sort of anecdote you know as I've Said before I thought 6K was the bottom Back in 2018 I I did not think we'd go Any lower and and then we did and I Still remember buying down there even Though I already bought it 6K as well What's funny is I still remember you Know I had my finger on the buy order at Like 3 500 or something and I was like Ah just wait you know I'll wait another Week and get it I mean I I basically
Just dc8 but every once in a while I Would I would try to get queued and time It a little bit more I still remember watching the price and And it was it rallied up to four Thousand I was like all right it's gonna Pull back here any minute it's going to Pull back and it'll go back down and Then I'll I'll continue I'll continue to DCA and then it shot up to like five Thousand dollars like like that and I Remember just you know doing my my Weekly DCA at the time being like I Should have just done it a few hours ago Before it rallied up to 5K Um but what's interesting about this Time is that it sort of marked a Transitory period in monetary policy by The Federal Reserve because it was sort Of at the terminal rate it was at the Terminal rate Marked the bottom And then before QE started it marked the Next local top right so you have to pay Attention to that this marked the bottom And this marks the local top This marked the next macro Bottom now This bottom here in March 2020 did not Go as low as it did in December 2018. Now we could argue all we want about What would have happened had the FED not Printed you know six trillion dollars Right I imagine things would have gone Somewhat differently okay if the FED
Just said you guys are on your own I I Imagine the charts would look somewhat Different but when the FED prints six Trillion dollars in a relatively short Period of time Of course it's going to have a an effect On on asset markets we have to Understand this that I mean you put a Lot of money it's going to have that Effect and the other thing to consider Too is that the FED will eventually go Back to printing money like I mean we Will go back to QB eventually it's just That it might take longer than people Think simply because we are we're in a Period of high inflation so the next Question I suppose is and I you know I'm Just trying to get to the questions that I think would naturally pop up from some Of this stuff the next thing I suppose That you would ask yourself is well Bitcoin bottomed at the terminal rate But are we even at the terminal rate yet The first thing I'll say is that this Comparison it's not a it's not a perfect Comparison the Fed was raising rates During the bull market back in 2016 and 2017. they didn't start raising rates Until we were already well in the bear Market during this cycle so Unfortunately it's not a perfect Comparison as much as we'd like it to be You know had the FED been raising rates Back over here
Then perhaps it would be a bit more of a Better comparison to make but the Problem with this cycle uh by the fed The rate hiking cycle is that they just Waited too long to really get started And so it's it sort of thrown everything Out of whack with high inflation and and The economy looks like it's getting sick And you have the inversion of the yield Curve but the FED doesn't care and They're just saying you know what we're Going to keep on going we're going to Keep raising rates if you go take a look At at what the markets expect they're Calling for a 25 basis point increase in In February furthermore they're calling For another 25 basis point increase in March beyond that They're saying that the fed's gonna stop At five percent I've said before I think You know back in 2022 I said I think the Fed the terminal rate somewhere between Four to five percent now that seems Obvious today but back then was it one Percent or something and most people Were calling for it to not get nearly This high now we're already sitting at Four and a half percent and and we're Likely going to make it to five percent Unless something breaks first right if Something breaks then they might not but It looks like we're gonna make it to Five percent by March at the latest so The market is saying 88.5 chance as of
Today that we're going to have an Interest rate hike of another 25 basis Points in March the end of March To get the FED funds rate up to five Percent if you go take a look at the May Meeting you'll notice that they still Think it'll be at five percent and they Think it'll be at five percent in June And I think it'll be at five percent in July and then in September Still five percent November For 4.75 December 4.75 and even the four and a half is Outweighing the five percent so what Does that mean The market is essentially saying the FED Will cut rates by the end of this year They'll start cutting rates which goes Against what the FED is saying right now Now I want to address two two things Here first of all there's the idea that You should you know there's a group of People that say don't believe the FED There's a group of people that say well If you had listened to them last year Think about how much pain you would have Avoided okay Think two years ago first right Inflation is transitory is what they Said right well not even quite two years Ago right a year and a half ago or so They they came out and said inflation Was transitory
Now how do you believe them then you Would have probably thought that Inflation would come back down quite Quickly and they have no business Raising interest rates to five percent And if you thought they had no business Raising interest rates of five percent Then it would still be risk on if you Believed inflation was transitory right So clearly that was where the FED got it Wrong then we get to 2022 and the FED Says they're going to raise interest Rates very very quickly and most people Didn't believe them why did most people Not believe them Because normally when the market starts To go over or the economy looks weak at All the FED pivots so this is Essentially all people have known for Like the last 20 or 30 years is that When something starts to break the FED Pivots And they go back to QE the mistake I Think that a lot of people made was Saying well you know just because they Did that over the last 20 years doesn't Mean they're going to do it when you Have a period of high inflation and you Have to go back and say well you know What was going on during periods of high Inflation in the past and the fed the Fed was Raising interest rates during That time despite You know despite Um
You know what people you know what People really wanted them to do if you Go take a look at at the FED funds rate During those times what you'll notice is That the Fed was raising rates and then Even once the market started to roll Over but then when they started to cut Rates the market continued down With Bitcoin all we have is like one Data point here you know There's all sorts of theories out there Right I mean you you ask anyone everyone Has a theory they're and they feel very Convicted Um they're they're you know they have a Strong convicted conviction sorry they Have strong conviction in in that theory Because they have data to back it up you Know no matter what it no matter what it Might be but that conviction is based on You know on various things if if you're A bull it's because you know this is Around the time that things start moving Again if you're a bear it's because you Know you're you're looking at this and Saying well how do we get out of this Mess without having another major Sell-off at some point before another Bull market what's interesting is Bitcoin does this many many times right Like It it has more than one capitulation Typically Even after the bear Market's over right
I mean you had capitulation here and Then another capitulation here right Over here you had a capitulation here And then a capitulation here So One thing here to consider and and I and I'm not going to have this go on too Much longer but Here This period right here is what I want to Draw your attention to I've heard some people refer to similar Conditions today as sort of like the Transitory Goldilocks period I'm not Really sure where it originated from but I have seen that those words sort of Pass around Twitter and and and and Another social media platforms right a Transitory Goldilocks period where Inflation's coming down which is a good Thing because it means the FED doesn't Have to you know doesn't mean it you can Sort of see the light at the end of the Tunnel because inflation's coming back Down but why is it transitory as well There's this idea that what happens if We still go into a recession at some Point right what happens if that occurs You might argue that we're at a similar Phase like that today now Someone might say well the FED hasn't Reached their terminal rate yet that's True right and I mean it's it's a risk Right there's always a risk that the
Bitcoin that Bitcoin has another Downturn Um during you know and and the FED Eventually reaches their terminal rate But the thing that I I think is Important to to remember with you know With all this with Bitcoin price action And whatnot is what is the lag time Between the phase that we're in right Now and when the FED feels compelled to Pivot to go to QE Because by the time the FED goes to QE Again they've likely broken something And so from that point Bitcoin will Likely have you know some type of of a Sell-off I mean that's just that's just What we've seen right I mean there's Only really one example of it but when The FED pivoted before it was not good For Bitcoin it went down and we had About a nine month bear Market that Started in the summer of 2019 and lasted Until you know until like March of 2020. And it was a very difficult time for a Lot of people it was a very uncertain Time we didn't know what was going to Happen I mean it seems obvious in Hindsight but I mean a lot of us were Calling for a bull market we had no idea Exactly how it was going to transpire I Don't really think anyone did but the Thing is is the bull market The actual the real bull market that Took us to new highs when did it occur
After the last rate cut after the last Rate cut So If we were to sort of go through an Exercise you know the FED is likely Going to keep raising rates a little bit Longer you know and it certainly is Possible that market participants are Sort of just front running this because They see it coming right and then it's Going to level off for a while so let's Suppose that you know you see this Continue to go up for just a bit longer And it and it levels off somewhere Around five to five and a quarter Percent you know The length of this time here will be Very important It'll be very important into into you Know bitcoin's price behavior Um before I would consider you know to see a new Sustained bull market to new highs this Period will be interesting because it Would be somewhat similar to this period Over here right between the December 2018 low and and the you know summer of 2019 high of this sort of like this Transitory period where As me as discussed today right Inflation's coming down but the Unemployment rate isn't yet going up and The the U.S economy still seems somewhat Resilient
What was going on what happened in in Summer of 2019 What happened then Why did markets go why did the fed you Know why did the FED pivot well one Thing that's actually interesting and You might actually be surprised to know This we've talked about treasury yield Spreads before if you look at the spread On the 10-year and the two-year we Actually signaled an inversion In August of 2019 is when it bottomed But the inversion first occurred If we sort of zoom in here August 23rd That's when the inversion occurred we're In a Bitcoin hit a local top June July of 2019 right June and July of 2019. so basically right when it Inverted again rate hiking cycle Occurred over here during a period of Strong economic activity Um unemployment rate You know wasn't wasn't going up or Anything like that what's going on today Fed's still raising rates At some point we're going to reach this Area where the where where the interest Rates are Hitler terminal rate and we Just go sideways for a while When when it rolls back over right so I Mean again increase for a little bit Goes sideways for a little bit And then at some point so the FED is Basically saying higher for longer so
Markets are saying okay you're going to Get up here and then by the end of 2023 You're going to have to start cutting is That's what the market is saying the FED Is saying no we're going to keep going All right it's going to keep going like This The reason the market disagrees with the FED is because the market is saying After such a strong rate hiking cycle There's no way you can hold interest Rates up here for very long before you Break something and if you break Something you're not going to keep Interest rates higher for longer you're Going to go back to QE so it's sort of Like a game of cat and mouse you have The FED saying one thing you have Investors saying another and and I mean We'll see what happens my guess I mean Honest honestly my my guess uh for the Next Um for the next year or so is it's going To wreck both the Bulls and the Bears is My honest guess is is that you and That's what 2019 did that's what 2015 Did it wrecks both it wrecks both sides And that's sort of like a necessary Component I think to to gearing up for Another bull market is to sort of wreck Both sides for a while You chop them up for a while right you Go up you go down you get the Bulls Excited they make fun of the Bears then
You make the Bears excited they make fun Of the bulls and you just sort of chop Everyone up for a year right you chop up Their portfolios they get absolutely Wrecked and then by the time you get Through all this mess and you get to the Rate cutting cycle Everyone's everyone's portfolios have Been chopped up okay we go back to QE Because the FED breaks something you see Some type of final sell-off And then a sustainable Market can begin Okay so My thought is that this rally that we're In right now That we know where bitcoin's at 22k I don't think this rally is the rally That takes us to new highs now it might Seem obvious right but there's a lot of People calling for like Um you know crazy Echo Bubbles and then Some people calling for new highs this Year I don't think it's a majority of People but it is it is a theory and one Thing we've also learned too though is That it's kind of silly to just sort of Dismiss any Theory because any Theory Could be right just because we don't Just because I don't agree with it or You don't agree with it doesn't mean we Shouldn't talk about it there is a Theory that just says that we're going To have sort of like some type of bubble Echo bubble that's just simply going to
Take us back up and and this is going to Get Um everyone to fomo back in and then Maybe we'll we'll see an early top well You know well before we normally do so That's a theory uh that's out there I'm not saying you know I'm not saying That it can't happen I just I I struggle To see it being the most likely scenario Um to see new all-time highs that soon Mainly because Bitcoin shows us that Again by the time the FED Cuts Bitcoin Gets that final sell-off Whether it's a lower high a lower low or A sort of a double bottom that's where The final sell-off occurs historically Before the next bull market occurs and That's just I mean that's just going Based on on what we've seen in the past And you know I wish that we had more Data to look at Because the problem with this type of Analysis is that you're only really Looking at at one cycle here and and It's a very different cycle of interest Rate hikes during a period where the Market was going up and now we're Getting interest rate hikes while the Market has been going down so Unfortunately we don't really have a Whole lot of data we can sort of Speculate all we want but you can kind Of see Where Bitcoin sits right now this period
Here will be quite a very interesting Period for Bitcoin we should see that Period sometime the next few months I Think the federal raised in February Probably raised again in March and Markets are not priced to get in right Now and I I kind of understand why you Know the FED reserves the right to go to Five and a quarter as well they've even Talked about going to five and a quarter Market doesn't really believe that right Now if the FED goes to five and a Quarter I imagine they would hit that by May okay but the market just simply does Not believe that the FED is going to Five and a quarter I mean a small Majority to maybe a third a third Probability or so but a majority of the Market thinks that it'll be you know Somewhere between four and three Quarters to five percent is where the FED will actually stop So that means that that interest rates Will likely hit some type of a Short-term top By March or may okay so the terminal Rate is likely going to be reached by March or may of 2023. from that point The FED will likely hold interest rates At that level for majority of this year If not the entire year and then they'll Either start cutting late this year if The market is right Or next year if the FED is right right
Place your bets place your bets on who You think is right last year the Fed was Right the market was wrong the year Before that the Fed was wrong because They said inflation was transitory so Again it's a market place your bets on What you think is actually going to Happen so I will be really interested to See what Bitcoin does here over the next Couple of months you know as by the time We get to March or may where does Bitcoin price sit uh because at that Point could be an interesting spot if if The unemployment rate hasn't started to Deteriorate still the main question that I I constantly remind myself of is how Long does this phase last because this Phase over here When it went sideways That was also you know when when Bitcoin Was sort of in this transitory phase of It was doing quite well despite the fact That that you know you still had the Inversion of the yield curve occur in The summer of of 2019 and when that Occurred and the FED went to QE again That's when Bitcoin sold off by the last Rate cut that's when bitcoin's real bull Market began Okay so you you always have some type of Of a low and and then you you kind of Can see another sell-off that occurs Later on as well so something to Consider I am kind of rambling at this
Point but Um I did think it would it would be Useful for us to sort of look at it in This in this context to sort of see you Know can Bitcoin survive high interest Rate environment well it has before okay What happens when we go to QE ah it's Usually not a good thing what happens When you get to the to the last rate cut Is usually a great thing where are we Right now we're not even at this part Yet we're not even at the terminal rate Okay we got a long way to go this year We're going to get to the terminal rate We're gonna go sideways for a while the FED will cut by their last rate cut is Is when I would guess that you know that A sustained bull market will likely Occur I mean and At that point at that point I think we Can actually start talking about rallies To to new highs and stuff you know we're We're 60k 70k actually becomes a real Possibility again and not just some you Know move back up to 25 or even 30k Right and you know some people call for 30k and and and I've seen people call For you know 35k that sort of stuff and People say it can't happen look I mean As bad as the as bad as everything looks Right now You also know too that I mean if Bitcoin can rally 4X over here And if it can rally you know 2x right
Here so It's not unheard of right it's not Unheard of for that stuff to happen Whether it happens now or whether Whether we go down again into the last Rate hike and then it happens it can Happen we've seen it happen many times The the strength of that move will Likely just be dependent on the amount Of time spent at the terminal rate Before the FED actually has to start Coming again again a lot of stuff to Take in hopefully you guys enjoy the Content make sure you subscribe give the Video a thumbs up check out into the Cryptographers premium I'll see you guys Next time bye
