Bitcoin’s Wild Ride: What You Need to Know

Are you feeling the crypto rollercoaster? Let’s break down what’s happening and what it means for you.

The Google Crystal Ball: When Searches Soar, Prices Plunge

You might think Google search trends could predict the crypto market. Think again! Here’s what really happened:

• In March 2024, “Crypto Bull Run” searches hit an all-time high on Google.
• What came next? Bitcoin dropped about 30%.

But this isn’t the first time we’ve seen this pattern:

• November 2021: Big spike in Google interest, followed by a 50% crypto market cap drop.
• May 2021: Another spike → 80% market decline.

See the pattern? When the crowd gets excited, smart money often heads for the exits.

Why does this happen?

1. FOMO frenzy: New investors pile in, driving prices up temporarily.
2. Profit-taking: Experienced traders sell into the hype.
3. Market saturation: With everyone already invested, there’s no one left to buy.

The takeaway?

Be the chess player, not the checkers piece. When everyone’s shouting “To the moon!”, it’s time to look for the escape pod.

Remember: The market loves to hurt the maximum number of investors. Don’t be one of them.

The Hidden Link: Bitcoin and the Stock Market

You might think Bitcoin moves to its own beat, but here’s a secret: it’s actually following the US stock market.

Let’s break it down:

• When stocks go up, so does Bitcoin. When stocks fall… you guessed it.
• Look at the chart: periods where the S&P 500 rises correspond to Bitcoin rising too.
• And when the S&P 500 falls, Bitcoin follows suit.

Many people don’t like to admit this, but Bitcoin is influenced by the same forces as stocks

1. Liquidity
2. Risk Appetite
3. Investor Optimism (Sentiment)

When investors feel good about financial markets and the economy, stocks generally go up.

And Bitcoin? It moves in the same direction…

Here’s a recent example:

• In August, the stock market had a rapid 6% drop in just 3 days due to recession fears.
• Bitcoin? It tumbled about 30% in a short period.

…but here’s where it gets interesting:

• The stock market has now fully recovered, trading just below its all-time high.
• Bitcoin, however, is still lagging:
  • About 20% below where it was in July
  • About 30% below its March 2024 levels

Could this gap close soon? Maybe. But to understand that, we need to look at what’s really driving the market.

What’s Driving the Market?

Instead of just looking at the S&P 500 (which is heavily influenced by large cap tech stocks), let’s check out something called the RSP:

• The RSP is an equal-weighted version of the S&P 500
• It removes the outsized impact of big tech giants

Here’s what the RSP is showing:

1. It’s broken above a short-term downtrend line dating back to April
2. It’s recently hit a new all-time high
3. It’s consistently staying above all its key moving averages
4. Those moving averages? They’re all pointing upwards

In plain English: This is a very healthy price structure.

Remember how Bitcoin follows the stock market? Well, if the RSP is likely to move higher (and it looks that way), Bitcoin could be in for a significant boost.

• Right now, there’s a big gap between where Bitcoin is trading and where the RSP sits at all-time highs
• This setup looks similar to early 2024 when the RSP was making new highs while Bitcoin lagged behind
• Eventually, Bitcoin caught up

The Big Picture: Inflation and Interest Rates

On July 11th, a key US inflation number was released:

• It showed inflation is continuing to slow down
• As a result, financial markets are pricing in lower interest rates

Look at the 2-year yield:

• It’s moved from 5% at the beginning of June to 4% now
• This drop came after both the inflation print in mid-July and a weak unemployment number

What does this mean? The market thinks the Federal Reserve will be cutting interest rates soon.

Why This Matters for Bitcoin

These shifts in expectations can have massive impacts on Bitcoin:

• Throughout 2022, rising interest rates drove Bitcoin down by 80%
• As soon as rates stopped rising aggressively, Bitcoin bottomed out and began to rise
• Every time we’ve seen a decline in interest rates, it’s coincided with a substantial move up for Bitcoin

We saw similar behavior back in 2018:

• Rising rates led to an 80% bear market for Bitcoin
• When rates finally peaked, Bitcoin bottomed shortly after and began a substantial move up

What’s Next for Bitcoin?

Want to know if Bitcoin’s ready to run? Keep your eye on the stock market.

Here’s why:

• Right now, an impressive 75% of stocks in the S&P 500 are trending higher
• Historically, when this many stocks are trending up, Bitcoin has almost always rallied

It’s all about investor sentiment:

• When 75% of S&P 500 stocks are rising, it signals broad-based optimism in financial markets and the economy
• A good chunk of that 75% are risky stocks
• This means investors are willing to take on risk – a positive sign for Bitcoin

Remember, Bitcoin’s market cap is about $1.3 trillion – similar in size to a large stock. It’s about 1/3 the size of giants like Apple, Microsoft, or Nvidia. That means it’s influenced by the same forces as these tech giants.

The Technical Picture:

While the broader market looks strong, Bitcoin’s chart isn’t all sunshine just yet:

• The moving averages on Bitcoin are curling downwards
• Price is still trading below these moving averages

This doesn’t make the technical structure very compelling today.

But here’s the thing: if Bitcoin can climb back above these moving averages, it could be a game-changer.

Our Current Stance:

• We haven’t flipped bearish on Bitcoin
• The current price action could prove to be a false breakdown
• If Bitcoin moves above its moving averages, it could open the door for another large move up

But remember, crypto can be volatile. While a strong stock market is generally good for Bitcoin, there are scenarios where they could diverge:

• If the US economy enters a recession, you could see interest rates fall and Bitcoin fall together
• This happened during COVID, for example

But as of now, financial markets don’t seem worried about a recession.

Ready to Ride the Waves?

We’ve been actively scanning the crypto market for opportunities throughout 2024

• You can check out all of our closed trades on our website homepage
• These are real trades we’ve made in the crypto market this year

Why are we sharing this? Because we want you to see the potential in this market.

You might think market swings are scary, but here’s a secret: large volatility means massive potential returns.

Here’s what it takes to succeed in this market:

1. Manage your risk effectively
2. Cut your losses and keep them as small as possible
3. Take advantage of the market’s big moves

We believe the crypto market is a great place to be right now. Here’s why:

• The large price swings create opportunities for significant profits
• If you can manage risk effectively, you can potentially benefit from both upward and downward movements
• The market’s volatility allows for more frequent trading opportunities compared to more stable markets

Navigating this market alone can be challenging. That’s where we come in:

• Our service is designed to help you spot and take advantage of these market opportunities
• We provide real-time market analysis and trade ideas
• Our goal is to help you turn market volatility into potential profits

Ready to dive deeper? Here’s what you can do:

• Grab a subscription to our service if you haven’t already
• Get access to our real-time market analysis and trade alerts
• Join our community of traders navigating these crypto waves together

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