hey everyone and thanks for jumping back into the cryptoverse today we're going to talk about Bitcoin and we're going to be discussing the social risk if you guys like the content make sure you subscribe to the channel give the video a thumbs up and check out into the cryptoverse premium at intothe cryptoverse decom let's go ahead and jump in so I thought it would be timely to talk about the social risk because the social risk gives us insight into parts of the market that you might not get just simply by looking at a price chart for instance if you were only looking at a price chart for an altcoin you might not be aware that over the last 3 years Bitcoin has been reclaiming market share and it's been taking altcoin liquidity and Bitcoin dominance has been going up in order for Bitcoin dominance to durably go down which is what I think will happen in 2025 five in order for Bitcoin dominance to go down you need retail investors to actually come back to the table now the first thing you're probably thinking is well aren't we retail yes right absolutely if you're watching this we we all represent retail investors to some degree um but when we think about retail investors it's not just you know the few that's stuck around right I think the issue is that a lot lot of the people that are here now were also here in 2021 and there's not a lot of people here right now that just joined crypto this year I'm not saying that there's no one it's just that there's not nearly as much and one of the ways we can visualize that is by looking at viewership to various crypto YouTube channels and you can actually see back in 2021 all these crypto YouTube channels were averaging at some point where averaging about 3 to 4 million views per day when you combine all the channels there but now these channels are only averaging 745,000 views per day okay and you know rather than pick on anyone else it's best to just pick on yourself so let's just isolate this channel okay so if you look at viewership to this channel you can see that it was relatively low even as we got into the latter part of of 2020 but it wasn't until 2021 right the post having year where retail really returned um and you can see that you know my viewership on my channel went from essentially averaging you know 10 to 15,000 views a day to averaging at the at the top here over 300,000 views per day so you can see the influx of retail and investors here right it's pretty obvious it's it's clear that that is when retail came one of the things I have said though and I think why which is why this is timely is that last cycle we know that retail did not start to trickle back in until after rate Cuts began right so for instance if you were to look at all the viewership of these channels right viewership was still relatively low but after rate Cuts continued to to to Pile in then viewership started to really increase right so you can see here this is back in in in 2019 viewership was relatively low overall but for for back then it was it was you know not so bad but then the First Rate cut was right here right the First Rate cut was right here Bitcoin went up for a couple of weeks it then came back down retail interest still waned for a while but after the third r cut retail interest started to come back now listen I know what you're thinking you're like well hold on a second Ben there's a pandemic crash in there let's pretend for a minute if we can that the Bitcoin price is irrelevant to the study here of social it's not entirely true obviously if the price goes up more people will tune in but let's just say all we know is that rate Cuts started here and there were three rate cuts by by the end of the year 7 or 75 basis points but the terminal rate back then was was 250 but 75 basis points and then after approximately 75 basis points of rate Cuts interest in the social the social interest in crypto started to go back up now if you only looked at this chart you would have no idea that the price of Bitcoin crashed in here right all you see is that retail interest slowly came back and and while there was a pretty catastrophic crash we know what happened after it right the FED turned on the money printers and and then we were stuck with with n you know 9% headline inflation but it took approximately three rate cuts to bring retail back and I don't know if it you know if it matters the magnitude again back in it with 75 basis points this cycle the FED is already cut 50 but the Counterpoint is that last cycle right I mean let's just go over here to the to the Bitcoin chart for a minute right last cycle when the FED cut 75 through here 75 basis points of Rus right it was 75 but the 75 was out of 250 basis points right because the FED fund the terminal rate last cycle was just simply 2 and a half% right so this time you have the terminal rate as 550 basis points and so far right so far they've cut 50 so you could even argue that even if they cut another 25 it's not going to necessarily have the same impact that it had last cycle but the counterargument to that is that perhaps the neutral rate is higher right if the neutral rate is higher then it doesn't really matter what you know what the terminal rate was right imagine the neutral rate over here was say 175 basis points right 1. 75% if the neutral rate this time is say you know 4. 75% then it might only take one more rate cut to have the same effect that 75 did last cycle but if it takes an equivalent amount in terms of a ratio if you solve for x I believe and I'm just going based on the last time I solved this I believe that X would equal 165 basis points of rate Cuts right 165 basis points which is interesting because we already had a 50 basis point rate cut in July right so 50 basis point rate cut or sorry not July what I'm I thinking September right in September um July was was last cycle right in September the Fed was gracious enough to give us a 50 basis point rate cut but guess what we have two more fed meetings this year we have one in November and then one in December so if the FED Cuts another 50 basis points in November then you're getting up to a 100 basis points of cuts and then if they go 25 or if they go 50 in December well that's 150 and that's pretty close to the 165 right if they go another 50 in December now will they go 50 in November and December well let's go check in on on current market expect right now the Market's actually saying there's higher odds that the FED actually Cuts another 50 basis points and to be honest I feel like I kind of agree with that you know and I I I said this about a week ago too I mean I wouldn't be surprised right if they go 25 or 50 but the FED is kind of shown their hand here right they kicked off the rate cutting cycle with a 50 basis point rate cut and the reason why there may be some pressure although I still would admit that 25 basis points is still absolutely on the table and honestly you know given where given where core inflation is it might be more prudent to proceed cautiously than to cut too aggressively but again you know I think the point here is that the FED already showed their hand they cut 50 basis points already and if again this is a a absolutely a a big if right but if the unemployment rate Contin continues to go up how do they not cut another 50 basis points right again I'm not suggesting it has any necessary effect on the market right now again markets can ignore things for as long as they want but if you were to Simply right if you were to simply just say all right well if monetary policy does operate with long and variable lags like they keep telling us and if you were to take a a bar pattern over the last three times not including the pandemic right but just the last three times that the unemployment rate really started to move up up there's not really a great reason to believe that the unemployment rate can't just keep on going up for a little while right again it's going to stop somewhere especially if an aggressive easing cycle begins but you can kind of see the fed's dilemma here right I mean all three prior rate cutting Cycles where you know the unemployment rate started to really move up when the unemployment rate was at this level it still continued to go up so if the UN employment rate does continue to go up like let's say who knows what it's going to come in at next month but the problem for the FED is that they got two more meetings or sorry they got two more unemployment rate prints before the next meeting no on November 7th so you know if the unemployment rate is at like 4.
4 4. 5 4. 6% by November how do they not cut another 50 basis points when they already showed their hand and said that they're willing to cut 50 basis points and that now they think the higher risk I think is to the labor market and not upward pressure on inflation so if that is the case and they cut another 50 basis points in November and then they follow it up with another 25 basis point rate cut in December or there's still a one-third chance here according to the market they go 50 again in December then I wonder at that point would it be enough to durably cause the social risk to go back up okay now if you're not famili wow what an intro right if you're not familiar with the social risk It's a combination of viewers to YouTube crypto channels crypto YouTube channels subscribers to those channels followers on Twitter or x uh I feel like I'm just going to always call it Twitter but um exchanges on X are on Twitter and layer ones on Twitter that's was a combination of so far it has just been putting in lower highs now I mean it might take out this prior high but you can see that last cycle the social risk really started to bottom out here and and and start to move back up after three rate Cuts right after the third rate cut that year 2019 social risk started to go back up now absolutely there was a crash in the market following that but this is you know sort of a discussing about you know how can or when can alts start to outperform bitcoin because that's what everyone wants to know right all the calls for all season over the last three years have been premature which is what I suspected they would be like they always are and it's because I think people just assume that retail is going to come back immediately and and and pump the market but that just hasn't been the case yet right again if you go to viewers to you know to these various crypto YouTube channels that we were looking at earlier I mean this is zoomed in on on uh 2019 but let me um yeah you can see that that viewership really hasn't arrived yet now there could be definite different explanations for that for instance maybe people just don't care about crypto YouTube anymore and I could get on board with that idea it's not the worst idea after all over a longer a period of time you're probably better off just coming up with a strategy sticking to that than caring too much about what anyone else has to say but there is some element of when re when new retail investors come they will flock to social media to try to get some commentary on what's going on and again they have not arrived right they have not arrived yet so then when when could they arrive my argument is that they could start to arrive by 2025 If the Fed has not done too much damage right so if the unemployment rate can you know doesn't have to go too much higher let's just say it tops out around 5% or something for the cycle then you know there's a chance that the Fed can get things back under control before they get out of hand there's always a chance right there are examples of soft Landings so far this cycle is not really following the script of a soft Landing for anything but stock prices um but if you were to look at just the unemployment rate and compare it to say some of the other soft Landings of 1995 you know the unemployment rate was going down or 1967 you know the unemployment rate got a little bit of a move up but then it came right back down this doesn't really look like either of those two times but it also doesn't mean that you have to have some type of crazy thing like the financial crisis or the dotom crash right so when I look at this chart what I think is that all right a decent chance the unemployment rate will continue to go higher therefore there's a DEC decent chance that the fed's going to start cutting and if the fed's going to start or start cutting they already started cutting but cut even more and the more that they cut the more likely it is that retail investors come back right that the cheaper that money gets there's more a higher likelihood that retail investors come back now again there does exist a scenario that I think everyone here has to consider again hope for the best plan for the worst right there does exist a scenario where retail just simply doesn't come back right away because the FED stayed too too high for too long and and you know people are St to become more worried about their jobs than they are about crypto right there is that scenario but there's also a world where that scenario still exists but it doesn't unfold until say 2026 or something where maybe retail returns in 2025 and then we have to face the music in 2026 right there's also a chance that that happens as well so right now what I would look for is do we see retail investors start to come back is this just another like lower high on the social risk because again you know one of the main reasons this has been going up recently is because of exchanges right and some of that is a little fluffy because I think sometimes they just get a lot of followers because they're running marketing campaigns um like some of them were I think back over here around the time of of right after the having and then that marketing effort sort of died off a little bit um but if you look at like layer ones on on Twitter rate that's still relatively low right so I would say that might be a little bit more insightful than what's going on over the exchanges if you look at followers to Twitter analysts still relatively low right there's not a lot of the larger accounts that you might be following aren't really getting that many new followers right now and we can actually go visualize that as well right if we go over here to Twitter and we just look at followers new followers to different people on Twitter and here you can see the legend down below if you want to figure out who I'm talking about right there's obviously Yours Truly right here um and because it's better to pick on myself than anyone else this is what it looks like right this is what followers to my own Twitter looks like right relatively boring um in terms of what it was doing back over here in 2021 where I was averaging like 3 to 4,000 new followers per day right now I'm averaging you know I mean I guess right now it's a few hundred per day but it's nowhere near what it was in in 2021 so when you look at at this this still does not look like retail has returned right and again I know what everyone's thinking like well yeah but they will return and absolutely they could and here's the point right I've been adamant for the last three years that they would not turn until looser monetary policy arrived at the very earliest which is why I've been saying for a long time that Bitcoin dominance would continue higher last cycle Bitcoin dominance did continue higher even after the First Rate cut right Bitcoin dominance still went up for several weeks about one or two months after the First Rate cut Bitcoin dominant still went up and it actually topped out when QE began which still hasn't occurred this cycle so in this case right in this case it's clear that retail has not yet returned right it's clear that they have not yet returned and the thing to consider as I was talking about earlier is that last cycle when they returned right when they returned it was after three rate Cuts totaling 75 basis points comparable to this cycle with a similar with a with a you know ratio where you take the FED funds rate and look at it this cycle that would correspond to 16 165 basis points of rate Cuts 165 basis points of rate Cuts would be possible approximately by the end of the year now probably not 165 but I don't think it would be that surprising to any of us if the FED funds rate were back at 4% by December right I mean you know if the unemployment rate continues as nonlinear trajectory then are is any are any is anyone going to be surprised that the FED funds rate is at you know 4% by December or maybe January you know maybe January that that actually is the most the most likely scenario now right now by January is that it's at 3.
75% so I don't really think it would be that surprising If the Fed funds rate were at 4% after another two to three fed meetings meaning that would get you to the comparable right that would get you to something comparable as to what we had last cycle before the social risk started to go up right cuz again last cycle the social was start to go up after the third rate cut which led us to this ratio 75 over 250 this time that would be 165 over 550 but I'm saying right now you know 150 basis points is close enough to 165 and so if you get 150 150 basis points of rate Cuts between now and the end of the year that might be enough to start to really send the social risk higher right now it's still a higher it's still a lower high right but if it comes back down perhaps it will form a base and then start to go up in the post having year just like it did last time okay now again I don't know if that's going to happen but one of the things to remember is that you know when the social risk is going down or flat Bitcoin dominance without stable coin is the blue line is is generally going up right but when the social risk is going up Bitcoin dominance is generally going down okay so this is why you know it it absolutely makes sense to say look if Bitcoin dominance is going up there's a pretty good chance that retail interest still hasn't arrived yet because when a lot of retail investors arrive they don't buy Bitcoin they go throw their money in all the shiny alts okay and the reason is because by the time that retail arrives normally the majority of the parabolic move by Bitcoin has already occurred and so by the time they come bitcoin's already made the move that they wish they had been on and so they just throw their money at alts hoping they can make some money that way okay now for the last several years I have said my own crypto portfolio is just Bitcoin heavy because I don't know exactly where the price of Bitcoin is going to go but I would say that being Bitcoin heavy during a a tight in cycle and during Quant and and during High interest rates being heavy Bitcoin over say altcoins does tend to do well and it has done well this cycle is again I mean you can see the Bitcoin dominance has gone from 38% to 58% so absolutely this time has not been different okay so there is a chance where something like that happens again where retail arrives only after only after um you know Bitcoin has made majority of the move that it's going to make so you know I I do think that I mean it certainly looks like this cycle is is shaping up in a very similar way as it relates to monetary policy right you you know you last cycle basically what happened is social risk got a little bit of a a bump uh sort of your midcycle correction by Bitcoin social RIS came back down same thing happens you know has happened again and then you can see that I mean this this top for social risk occurred in May and then it really bottomed out about 7 months later or so and then started to go up after the third rate cut and you could argue that if the social risk does come back down right if it does come back down perhaps it'll just bottom out here it'll just sort of put in like a higher low around 0. 1 to point2 risk and then start to go up in 2025 just like it did last cycle I say all this basically because you know there there does exist a a real scenario where in 2025 Bitcoin dominance durably starts to go down okay um it's hard to say for sure if if that's what's going to happen but I would say that my base case right now is that Bitcoin dominance goes down in 2025 because I think that there's going to be enough rate Cuts between now and the end of the year that's going to lead to sufficiently new retail interest to make it so that Bitcoin dominance doesn't go that much higher now there's still a chance here that Bitcoin dominance goes to 60% absolutely you know and and the way that that could happen is the same way it happened last cycle right I mean it could happen the exact same way um for instance if you look at Bitcoin dominance last cycle we saw Bitcoin dominance top out right it topped out when QE began right so if you look at at balance sheet of the fed you know it was when QE began right here in September 2019 that's when Bitcoin dominance topped that hasn't happened yet this cycle right so there's still a good chance you know a really high chance that that Bitcoin dominance just goes higher until QB actually returns right I think that's you know it it it very well in my opinion should be the base case until proven otherwise I know recently Bitcoin dominance has taken a little bit of a hit but all in all I mean this is the fourth green month in a row so far so I don't really think it's fair to say that Bitcoin dominance is doing poorly right now I think that it it might actually just simply be repeating what it did over here where it had five Greens in a row and then the red one after the five greens is what marked the top for Bitcoin dominance interestingly the fourth green right so 1 two 3 four the fourth green monthly candle for Bitcoin dominance back then was when the FED cut July 2019 here the fourth green month in a row was also win the FED cut September of 2024 so to me what seems like the most likely outcome is that Bitcoin dominance could still inch a little bit higher to perhaps 60% where I ultimately think it will Top out sometime by the end of the year the second week of January potentially at the latest right last cycle you can see that dominance actually went a little bit higher that very first couple of weeks of January so I I would say by the end of the year but is a chance that it goes a little bit into 2025 making people think that alts won't run against Bitcoin only for them to do the same thing they always done so I think that the blueprint seems like it's still playing out to me right it seems like the social risk is still relatively subdued right if you look at at you know YouTube Subs it did get a big pop recently one of the reasons for that is because some of the channels have over a million subscribers not mine but some of them do and whenever they get you know it's only discretized on their channels by 10,000 so that always has a big impact um and so it'll sort of like it'll pop up and then kind of fade for a little while so I would say if this you know a lot of these metrics could easily fall back down a little bit before the end of the year if you see the social risk kind of doing what it did last time at the end here this was you know as as those rate Cuts were really getting underway by the end of 2019 after the third rate cut if you see the social risk kind of coming back down again that could very well be the bottom for the social risk or at least the higher low before retail interest finally starts to come back you know there's there's one more piece of evidence to suggest that this view is not entirely ridiculous right and one of that one of the pieces of evidences is actually ethereum you know and I I've said this quite a lot is that once you know once Cuts occur you have to at least start to Pivot the view um on on eth bitcoin right and and eth Bitcoin is one of these things i' I've been saying for a long time I think it would bottom out between . 3 to 04 and guess what that's where it just went it would just went below 04 and there's a chance that eth Bitcoin has already bottomed what I would say is that if eth Bitcoin gets above its 50 daysa on several daily closes in a row then the odds that the bottom is in go up quite a bit because the last two times after eth Bitcoin broke down in 2016 and 2019 once it got above the 50-day moving average the bottom was in right that was 2019 and then and then here it is in 2016 right so once it was above the 50-day SMA after the breakdown so after it broke down not before but after you had sort of a durable breakdown once the 50-day SMA was reclaimed the bottom was in so if eth Bitcoin does reclaim the 50-day SMA it might suggest the bottom is in for E Bitcoin but here's the thing I I've also talked about a lot you can see that I mean right after that First Rate cut you know one of the things that has gone up and that's activity on ethereum right I mean look at gas look at the gas right now um yeah it's still not it's still not what it was you know a year ago or whatever um and and the supply of ethereum is is you know only 161,000 below where it was before the merge but if you look on some of the smaller time frames right like on the hourly time frame it's actually deflationary right now if you look on the daily time frame it's still infl and I think the reason is because you know in the United States around you know normal business hours it seems like activity on ethereum picks up and then in the evenings it kind of dies off a little bit and so still right now it is still acting somewhat inflationary over the last seven days for instance the supply of eth is up 7,000 eth um so it is still uh you know it hasn't really resumed its deflationary path just yet but imagine imagine you know a few more weeks go by and then this start starts to go back down right the the gas fees start to go back down because retail it's not enough right the 50 base Point rate cut is not really enough to bring people back but then imagine in November you get another 50 okay think about the effect that might have and then imagine in December if you get another 50 basis point rate cut that could absolutely be enough to turn the tide here on the eth Bitcoin valuation so you know my base case right now for eth Bitcoin is that it's probably just going to go through you know forming a bottom between you know September and December and it it's possible the Bottom's already in right but what my point here is that in 2019 eth Bitcoin bottomed in September and then it it it went up and then it put in a higher low in December it was almost a double bottom right so you could see something like that happen right where it it it it goes up and then it comes back down in December and then goes up in 2025 I think that that might be my Bas case almost I think I don't I can't really think of a case that is more compelling it's possible that if the low is not in right if the low is not in and E Bitcoin has not bottomed at 0038 then perhaps it'll go to 0036 one interesting thing as it relates to that is if you put a price label um you put a price label here the low before that may pump in 2019 was 0.
024 and then the final low ended up being 016 this time it's basically just been um you know 0. 02 above that right the P the the low there before the pump was 0. 44 so far it's gone to 0038 is it possible that it goes a little bit lower yeah it is right and as long as it's below the 50-day it makes sense to be open to a lower low you know like if if you know it had a little bit of consolidation there and then there and then the final and then it was the bottom right so it had a little bit of consolidation there I mean is this just another consolidation before it goes and puts in a slightly lower low it's possible right I you know Don't Judge Me based on what it happens this week it's absolutely possible that eth Bitcoin could go just a bit lower and last cycle it didn't even bottom until QE returned anyways so there's always a chance that it it does go a little bit lower you could even Connect the Dots here and and and come up with a reason why it might go lower but then you know I mean is it really that different from just connecting it like that so for me it it does not make sense to be you know bearish on E Bitcoin after it gone it's gone to my target range of 03 to 0 I'll admit that certainly it could go a little bit lower but it at this point I don't really think in 2025 it's going to matter is my point um so you know thinking about about Bitcoin and and thinking about social risk and all that stuff my guess is that the social risk will try to form a a you know support like it did over here at the end of 2019 right kind of like also near the end of 2016 um I I think it'll form some type of Support over here and then hopefully in 2025 it goes up now again there is always a chance that it doesn't If the Fed did too much damage but if we are thinking positively uh then that is how it would play out is that retail would theoretically return after you know 150 basis points of rate Cuts if they're going to right now if the FED Cuts 150 basis points in retail doesn't return then that's probably a sign that they've done too much damage and then they need to keep on cutting but you know there still a lot of while the unemployment rate doesn't really look that great initial claims are still relatively low uh continued claims are still relatively low um so you know there's there's definitely Silver Linings out there but those are my views right now that is the social risk I think the fed's going to keep cutting at the next several meetings and it should help bring retail back right it should help bring retail back doesn't mean you're going to see them all come just after the First Rate cut it might take a few rate Cuts just like it took a few rate Cuts last cycle so it may in my mind it still makes sense to say you know what Bitcoin dominance could go a little bit higher before this is all said and done in fact I mean you know all things considered last cycle Bitcoin dominance topped you know basically at the very end of the having year and the early part of the post having year right Bitcoin dominance topped January of 2021 so I I still think it makes sense to to to be open-minded to bitcoin dominance going to 60% despite the fact that they've already cut interest rates because last cycle when they cut interest rates Bitcoin dominance still went up for another month or two and if Bitcoin dominance still goes up for another month or two that could put Bitcoin dominance topping out you know sometime before the end of the year and then going down in 2025 there does exist a scenario where Bitcoin dominance has topped here in September in fact a lot of times Bitcoin dominance will sort of reverse paths in September um for instance this is a September where Bitcoin dominance was going down and then it started to go up um here's another example where Bitcoin dominance was going down into September and then it went up after it uh here's an example where Bitcoin dominance was going up into September and then it went down after it and the list goes on and on right I could find plenty of examples um you know here's a here's an example where Bitcoin dominance was going down into September and then it went up after it and then here's an example where Bitcoin dominance was going up into September and then it went down after it but there are cases like in 2022 where Bitcoin dominance reverses in September but then it just kind of reverses again in October and then sweeps the September low right so it it put in a low in September and then it swept that low a few months later right December January so if it does the same thing again right this could be sort of a high a short-term high but then perhaps it'll sweep that high sometime between now and the end of the year and and perhaps get Bitcoin dominance to that final Milestone of approximately 60% but anyways those are my views on on the social risk if you guys like the content make sure you subscribe give the video a thumbs up and again check out intothe Crypt premium at 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