The Global Wealth Rotation Just Started

All right. So, there is a battle for the new monetary order between gold and Bitcoin. Right now, it's not really looking good for Bitcoin.

If >> if Bitcoin falls 90% for the next four years, we'll refinance the debt. >> You refinance where, Michael? >> We'll just roll it forward.

I mean, again, >> but you you you think banks would lend to you at that point? Yeah, because because >> Okay, so let me explain what's happening. For the past several decades, the world worked with a very specific monetary structure.

In order to grow the economy and expand something called the GDP, we had to expand the debt. And in order to expand the debt, we had to grow the money. And as that system got bigger and bigger, most of the world's capital flowed through the US dollar and into financial assets like the US stock market.

That's also why stocks have outperformed almost every other investment. And Bitcoin was born into this world during this expansionary period of time, all this endless money printing. And now that system is sort of coming to a breaking point because debt isn't just growing, it is now exploded and it's starting to outgrow the economies that are supposed to support it.

And so something called the global old rules-based order is coming to an end. >> The international order based on rights and rules >> no longer exists. Now, throughout history, when this happens, money looks for something called the safest neutral asset.

And what does that mean? A neutral asset is something that's not tied to a specific country or a government. It's outside the system.

And historically, those have been assets with a finite supply. And for thousands of years, that was mostly gold. And in the modern era, a lot of people believed that Bitcoin, it was supposed to be the digital equivalent, right?

So the world thought, okay, well, if we don't know what's going to happen and we don't know what the new system is going to look like, then the hardest asset is usually the safest bet. And because Bitcoin is digital and portable and finite, a lot of people also thought it would outperform everything else, including gold. Except that's not what's happening right now.

Gold is breaking out to new highs. Central banks are buying physical gold at the fastest pace in decades. And at the same time, Bitcoin has actually lost value relative to gold.

So the question is, well, if we're really going into this new multi-olar world, and if countries and people are really losing confidence in US treasuries and the dollar, and maybe even the stock markets, then why is gold leading right now? Why is it that the asset that was to represent the future monetary standard getting left behind? And if this keeps going, how low is Bitcoin going to go?

Maybe the most important question, is this temporary or is this the start of what some people call a capital rotation event which could last for more than a decade? Now, these are all very interesting questions and I'm going to try to answer some of them using the latest data and analytics and hopefully at the end you'll be able to better understand what's happening in this crazy world. So with that said, let's get into it.

Hi, my name is Enri Jick. Hope you're doing well. Come for the finance and stay for the gold and for the bitcoins.

So I want to explain what's happening to gold and bitcoin through the lens of two big forces. This will get extra nerdy, but we're going to use the macro force and something called the technical force. And the easiest way to understand what they are is to compare them and give you an analogy to physics.

Now in physics you have something called the theory of general relativity which explains gravity and the curvature of space and time. Basically it explains the movements of big objects like planets and galaxies. I think of this as sort of like the macro force.

It's very slow and it sort of guides the general direction of things over a long period of time. Well then you have something called quantum mechanics which explains the movements of tiny particles and atoms. It's very chaotic and it doesn't make any sense when you compare it to how the big things move.

And when I think of quantum mechanics, I think of how investment markets sometimes work. Like they're completely unpredictable in the short term and they don't make any sense at all to me. So the macro is the big picture stuff like the monetary order, sovereign debt levels, geopolitical changes, right?

All those kinds of things that Ray Dalio talks about when he explains economics. Now on the other side of that though is the technical side of the force which is what people like Benjamin Cowan and Northstar charts show us. That's the moving averages, the support levels, the ratio of Bitcoin versus gold, right?

That's the particle physics inside the system. Now in this nerdy framework of ours, gold can be explained using the macro force, the big picture stuff. What's happening to gold right now?

It's gone up significantly. And what is the macro evidence of that? Well, we know that government debt relative to the GDP is now higher than almost any point in US history outside of World War II.

and global sovereign debt at the same time has exploded faster than economic growth itself. Now also thanks to the changing world order, central banks around the world have been buying physical gold at the fastest pace in modern history. In a lot of countries, gold also now makes up a bigger share of official reserves than it has in years, which means the sovereigns or tier one nations with nuclear weapons are choosing gold over other assets like US treasuries.

So there's a lot of structural gravity that's pulling money toward gold, which is this neutral hard asset. It's outside of any government or currency. That gravity says gold should be strong, and it is.

But based on this force, Bitcoin should be going up as well, but it's not. So, Bitcoin, I think, is better explained using the technical side of the force. Now, either some of that made sense or none of it did.

So, let me explain it a little easier. One force is saying hard assets should be winning in this environment, and one of them is gold is winning. The other force, the technical one, is saying Bitcoin might not be done correcting yet.

And that leaves us with a couple of different outcomes. Either Bitcoin is about to go onto a super cycle and form a new high and follow gold to go way higher, or we're seeing the early stages of a much bigger capital rotation event that I think most people are probably not ready for. And this is where it gets extra nerdy.

And let me start with gold. But it's important to remember that when you look at all this stuff, it's not exact science. One chart that I show you is not going to show you what's going to happen to any one asset.

Instead, it's better to look at as much information as we can to get a more accurate understanding of what might be happening. And a really good example of what I'm talking about is this chart I came across from Northstar Charts. By the way, credit to Natalie Bernell and her podcast with Northstar Charts.

I'll leave all the links down below for you to go to the source material and check this out yourself. But the chart you're looking at right now measures a concept called CRA or capital rotation evidence. What does that mean?

It's in the name. It's a time of money rotating from one thing into another. Now, capital rotation is this idea that money goes through different cycles and phases of how and where it gets invested.

And where it goes depends on a couple different things. Now, this specific chart measures the capital rotation evidence for gold. So, it compares a lot of economic metrics to the price of gold.

And on this chart, everything is in a bare market relative to gold. It's all in red, which means this is favorable or really good for gold. So, for example, the S&P 500, aka the stock market versus gold.

Gold is winning right now. The NASDAQ versus gold, gold is also winning. The dollar versus gold, gold is winning.

M2 money supply versus gold, the consumer price index, aka inflation versus gold. Even market indexes like the Russell or the Wilshshire versus gold. You get the idea.

Gold is going up faster than any of these indexes. Now, by themselves, any one of these squares turning red, not that big of a deal. Doesn't tell us much.

But Northstar argues that when we have a lot of these coincidences, in this case, all the squares have gone red against gold, that means we are now most likely in the middle of a major capital rotation event. In this case, this is when stock markets go down and potentially spend 10 or more years trying to get back to the level they were at before this event started. Now, there have been a couple times throughout history when this has happened before.

And here's a few examples. During the early 1930s, when the stock market collapsed and the dollar wasn't stable, the US went through a gold re-evaluation thanks to FDR confiscating it. Gold repriced higher and outperformed just about everything.

Gold dominated for about 5 to 7 years and the stock market didn't recover to its all-time high of 1929 until 1954. That's a capital rotation event. Now, it happened again in the 1970s.

That was the big one, which is when the US had huge amounts of inflation. The stock market was basically flat for a decade in what's called real terms, right? Aka relative to inflation.

And during that time, gold went up over 2,000%. That lasted from 1971 to about 1980. So gold dominated for about 9 years.

That was a capital rotation event. It happened again in 2002 when the US went through the. com bust.

Gold went from the mid200s in 2001 to over $1,900 by 2011. That lasted more than a decade. And commodities went on to what people call the super cycle.

So that's a capital rotation event. Now these rotations typically last between 5 to 10 years. And during those times, the stock market can either collapse or go sideways in real terms.

while hard assets got the real returns. Now, what Northstar is suggesting right now is that just about every major financial metric is going down relative to gold all at the same time. And when money starts rotating like that, it shows us that there might be a really big change in investor confidence.

And when these investors prefer neutrality over financial productive assets aka stocks, that usually means the system is absorbing the stress somewhere else, right? Like the debt levels, inflation, currency debasement, geopolitical fragmentation, all these things are going somewhere. Now, in those times of uncertainty, markets can still go up and what economists call nominally, meaning the overall number goes up, but they can also have a hard time with getting what's called a real return, right?

The real purchasing power gains. And I know it sounds kind of complicated, but for example, if you get a 10% raise in your income this year, that is your nominal number. But oops, life is now 11% more expensive this year, which means your real income is actually -1%.

It's a loss. Same thing in the markets. Markets can go up 10%, no problem.

But they can still lose purchasing power in real terms. So anyway, this chart says if this rotation continues, that doesn't mean there's going to be a stock market crash necessarily. It just means that real returns get compressed relative to hard or scarce assets.

So the takeaway is that investors go through different periods of how they like to invest their money. Like for example, some eras the stocks might win and in other eras hard assets might win and they tend to alternate. Okay, so that's gold.

But then the question is what about Bitcoin? And before I show you that, I want to talk about something that doesn't get enough attention in personal finance, which is building your credit. It determines the interest rate you qualify for, which directly affects how much money you keep in your own pocket long term.

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Thank you to Kickoff for sponsoring this segment, and now let's get back to it. All right. So, if gold is strong right now and the big macro force says that Bitcoin should also be strong, then why isn't it?

And this is where the technical force I think is more useful in explaining it. A lot of this framework comes from Benjamin Cowan. I'll link his work down below for Into the Cryptoverse where you can see all of this yourself.

But what really helps explain where Bitcoin is at right now are a couple things. Historically, Bitcoin has reached the top or the peak sometime in Q4 of the posth having year, meaning the year after the having, which happens every four years. So, for example, the 2013 cycle reached a peak in November.

The 2017 cycle reached a peak in December. The 2021 cycle reached a peak in November. that Q4 timing has been super consistent.

Now, what's also interesting is that the year following the Q4 price peak a lot of times overlaps with the US midterm election cycle. It's historically been the start of a bare market. Now, here's where it really does start to look like we're living in some kind of a simulation because the pattern kind of repeats.

In the last two full cycles, Bitcoin took roughly 1,50 to 1,60 days to go from major cycle lows to the next high. For example, from the 2015 low to the 2017 high, it took Bitcoin about 1,50 days. From the 2018 low to the 2021 high, it took Bitcoin about 1,60 days.

And on the way down, the bare market has historically lasted about 1 year. For example, from the 2017 high to the 2018 low was exactly 364 days. from the 2021 high to the 2022 low was about 371 days.

So, Bitcoinists tended to spend about 3 years going up and then roughly one year going down in a bare market. Now, let me show you something that's also interesting. There's two specific indicators that technical analysts like to look at, which are the 50week moving averages and the 200week moving averages.

and they're exactly what they sound like. They're a rolling average price over the last 50 weeks and last 200 weeks. Now, historically, Bitcoin has been in a bull market when the price holds above the 50week moving average price.

But once it closes a few weeks below that level several times in a row, that is marked the end of the bull market and the beginning of the bare market. Now, for us this cycle, we peaked at around $126,000. After that peak, the most important price point to have maintained was the 50we moving average, which was sitting at around 102 to $13,000.

Now, once Bitcoin went below that level for a few weeks, that's when we started the bare market. But wait, there's more. Once Bitcoin historically goes below that 50week moving average, this is where Benjamin Cowan says, quote, "A date with destiny starts to happen.

" Right? That's when we inevitably go toward the 200E moving average, which is much lower than the 50week moving average. The 200 week represents roughly four years of price history, and it's always been Bitcoin's kind of long-term baseline, so to speak.

It's not an exact science, but it's been very close every single time. So, historically, once Bitcoin loses that 50week moving average, which again for us was about $13,000, the price compresses toward the 200E moving average. That means for us around $58,000.

However, we could go as low as the 40s or depending on what happens maybe even the high30s. Now, if we use what we learned from the prior cycles, which is that it takes Bitcoin about 1 year to go from peak to bottom, that would put us at around October of this year to reach our bottom. But it could also happen as early as May.

Now, if none of what I said made any sense, here's an easier way to understand all of this. This right here shows how far Bitcoin has dropped at the end of every peak. Right?

You can see every cycle we go down a little bit less each time. So, let's say this cycle we go down 7% less than the previous. So, let's say we go down 70% from our all-time high, which is about $126,000.

That would put us at roughly $37,800, which also kind of lines up with everything else that we just looked at. Now, again, none of this is guaranteed science, but I think it's something really important to keep in mind. Okay, so if you made it this far, let me sort of put it all together.

Also, don't forget to subscribe because a lot of people that watch my videos are not subscribed, which is kind of crazy. So, if you like this kind of content, let me know by subscribing and hitting that bell notification. Now, in this capital rotation theory we talked about, I think that's a very real possibility that hard assets like gold and eventually commodities like oil could outperform the stock market and that could last a while.

What if we are actually in one of those 5 to 10 year scenarios where this capital rotation happens like the 1970s or the early 2000s where hard assets structurally outperform the rest of the financial market. That's a very real possibility. And maybe even Bitcoin falls behind because Bitcoin today is way more financialized or securitized than it was in 2015 or 2018, right?

because now it's inside an ETF. It's used as a collateral, right? It's tied to these crazy derivatives markets.

There's products built on top of these ETFs. There's companies borrowing against them. There's miners financing their operations against it, right?

That just means Bitcoin doesn't necessarily trade on scarcity. The price discovery happens because of all these paper products. So in the short term, the price of Bitcoin can be suppressed and it probably is to some degree right now.

Now what's interesting is gold was also securitized but in 2004 and after 2004 you could buy paper gold through the ETFs. So it was also suppressed but remember that in the long term price suppression using derivatives can only last so long. Eventually, the asset breaks out and it goes up.

Now, for gold, the macro reasons were there's a lot of them, right? There's geopolitical uncertainty, banks accumulating, technical analysis. Maybe now it's gold's turn to dominate the markets.

I think the same thing will happen to Bitcoin someday, but I don't know how long we'll have to wait to get there. Hopefully, the next cycle takes us to those new highs, but it's not a guarantee. And so there's also something to be said about Bitcoin's technical analysis.

It seems like, at least for now, the bull cycle is over and we're now in the part of the cycle where all this leverage is getting flushed out, right? And we might just go sideways for a while, maybe for the rest of the year. One thing that I'm going to keep in mind is the wisdom in what Ben said in one of his videos, which is that bull markets make everyone a genius.

Bare markets make fools of both bears and bulls. Meaning there could be a point in time this year when Bitcoin might go up, maybe even close to that 50week moving average, close to six figures. That's when the bears are going to look silly.

But then there could be a reversal and by Q4 we get a huge move down and the bulls are going to look silly. So bare markets can make everyone look foolish. That is a very possible scenario.

Now, at this point, you might be like, "Okay, well, Andre, if gold is breaking out, and if Bitcoin is going to go lower, and if there's a capital rotation in the markets, then why don't you just sell everything and put it in gold or something, right? " I think it's a very fair question. And here's how I think about it.

I think there's a difference between recognizing there's probably a rotation happening and then trying to perfectly time it because [snorts] capital rotations are not happening in a straight line even in the 1970s or the early 2000s. There were violent counter rallies. There were fake breakdowns.

There was massive whipsaws. Right? And if Bitcoin is still in its long-term adoption phase, if ETFs and sovereign interest and bank custody is still expanding, then selling everything into this technical weakness could be the same mistake that people made in the last few cycles.

So for me, the better question is not should I sell everything, the better question for me is how do I invest this money so that I survive no matter what the outcome is. Like if Bitcoin goes up, I don't want to be left behind if gold continues to outperform. I don't I don't want to be blind to it.

I want to know why it's happening. Maybe I'll own some of it. That's why instead of selling everything I have, I've been diversified.

I hold Bitcoin. I've got my S&P 500. I've got my dividend stocks, which could do really well in a sideways market.

I'd love to own more tech stocks than I currently do. Now, I've also sold my rental because I don't want any debt. I don't want the headache and the liability.

So, I have more cash than I'm usually comfortable with, but I'll keep dollar cost averaging across the assets that I think could be undervalued and then reinvesting all my dividends back into the market. Now, if you want to see my full portfolio, you can go to funvest. com.

I'll leave a link down below where you can see all of it and track your own investments. But, I don't think there's a right answer. So, I'll leave all the sources down below for you to look at as well.

And I'd love to hear your thoughts. As always, I hope you have a wonderful rest of your day. Smash the like button, subscribe if you haven't already.

I'd love to see you back here next week. I'll see you soon.