← Coin Stories with Natalie Brunell
Coin Stories with Natalie Brunell
Northstar Charts: Bitcoin To Go Lower ($40k?) and Capital Rotation Event Explained
01:02:35
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- [00:00]
Kevin Wadsworth
If bitcoin repeats previous behavior, Bitcoin should probably bottom in Q3 or Q4 of this year. If it falls over 70% like it did last time, then it's probably going to be in the region of 40,000. Could be a little bit above, could be a little bit below.
- [00:21]
Natalie
Hey everyone, welcome back to the show. Joining me this week is Kevin Wadsworth. He is the co founder of Northstar Bad charts. He's gone viral for several of his charts especially analyzing the macro volat you we've seen. I got to know his work a little bit through Luke Grohman's newsletter. So Kevin, thank you so much for joining me.
- [00:38]
Kevin Wadsworth
Hey Natalie, thanks for, thanks for having me. It's great to be here and it's exciting times to have a catch up.
- [00:43]
Natalie
Isn't it a lot happening? I don't know how to look at the charts, they're kind of scaring me and actually I would love your help because I'm not a technical trader. Sometimes I see these charts and for me they just look like a heart monitor. I don't even know how to read them. So first, can you just kind of share your background? Because I found it interesting that your background's really a mix of military training and also a little bit of meteorology. Right. Atmosphere predictions?
- [01:10]
Kevin Wadsworth
Yeah, sure. I mean I've, I've sort of been spent most of my career as a military meteorologist so providing forecasts for the Royal Air Force in their missions across the uk But I've done some broadcasting and broadcasting for the BBC and radio broadcasting, TV broadcasting, that kind of thing as well. So it's funny you should mention the charts and the fact that it looks a bit like a heart monitor to you because having a forecast, whether it's a weather forecast or a forecast for the markets, if you've got an accurate forecast, that's one thing. But getting your audience to understand that, that's really critical because that communication part, it's no good having great information. If you try and get that across to your audience and they misinterpret it, you might as well be speaking Chinese to them because it's just not going to get you anywhere. So I'm glad you kind of mentioned.
- [01:58]
Natalie
That really well, how does your background in meteorology help you apply those skills to the markets? Because one thing that I found is it's so hard to predict human behavior but you guys seem to be able to find patterns. And like I said, I mean I look at these charts and I don't understand a lot of the lines and like where you see things falling off a cliff and you're able to sort of predict it. I would love to really unpack that. But how are you able to apply your skills to the markets?
- [02:27]
Kevin Wadsworth
Yeah, think of it this way. The chart is just a physical representation of people like you and me. The market participants are carving out that chart. It's a bit like that heartbeat that you talked about a moment ago. You know, you look at a heartbeat monitor and it shows you whether you've got a high heart rate or a low heart rate. A doctor has to bring together all of the information when they're, you know, trying to diagnose what it is that you've got wrong with you. They don't just look at, you know, they don't stick a thermometer in your mouth and take your temperature and say, you know, you got some terrible illness. They need a lot more information. So bring all of that information together. And it's that weight of evidence that is what helps us to discern what is most likely to happen in the future. With a weather forecast or with a diagnosis for a patient. You're sort of saying, what is the most likely cause? What's the most likely? Is it going to rain in a couple of days time? What's the weather most likely to be? It's never a case of it is 100% certain to do this, it is 100% certain to do that. It's a case of gradually sort of working out the, and kind of ignoring the stuff that isn't relevant and focusing on the stuff that is relevant. So predicting the future is about that. And I think that's where my background comes in, because it's a. It's a weird kind of mixture of science and art, kind of a dark, dark science kind of, you know, so it's. Predicting the future is never easy, but there is a way to do it and there is a technique to it. And I think, you know, I think hopefully your audience will appreciate what we're going to say today.
- [03:58]
Natalie
I find it fascinating. You just made me think of something that Morgan Housel wrote about in the Psychology of Money, which is that markets and finance, it's this very unique industry and world where you could have someone who's like a PhD and have an MBA, multiple degrees, all this experience, and actually get outperformed by a janitor or someone that's just really good at timing or trading the market. So it's super, super crazy. But let's bring up this first chart because I believe you have it pinned on your Twitt profile. The capital rotation event everything looks like is going into a bear market versus Gold, including Bitcoin, which is what a lot of my audience members are passionate about. Can you explain this chart and what it means? Coin Stories is proudly brought to you by Gemini. Start your Bitcoin savings account today. Plus Investing in Bitcoin has never been easier thanks to Gemini's orange Bitcoin credit card. I've got mine right here. Earn up to 4% back in Bitcoin on everyday purchases like gas, dining, groceries and more. No annual fee, no foreign transaction fees and no exchange fees on your rewards. Plus sign up today and get a $200 Bitcoin bonus when you spend 3,000 in your first 90 days. Head to gemini.com Natalie make sure to get your copy of my new Bitcoin 101 book Bitcoin is for Everyone. It explains why life has become so unaffordable and how Bitcoin can help you build lasting wealth and freedom. It makes the perfect gift for those new to Bitcoin. Just visit the link in my show notes. Coin Stories is also brought to you by ledn. Need cash but don't want to sell your Bitcoin? Leden is the global leader in Bitcoin backed loans, issuing over $9 billion in loans since 2018 and they were the first to offer proof of reserves. With LEDN, you get custody loans, no monthly payments and more. Visit Leden IO Natalie to learn more and get a quarter percentage point off your first loan. I'll be sharing my LEDN Bitcoin loan journey soon, so stay stay tuned and Abundant Minds One thing I appreciate about Abundant Minds is how straightforward they make bitcoin mining. You own the machines, they host them in the US and the pricing is clear up front. It's built for people who want exposure to mining without running operations themselves and the equipment may qualify for 100% first year bonus depreciation. Learn why so many real estate investors are turning to Bitcoin mining. Head to abundantminds.com Natalie yeah, sure.
- [06:24]
Kevin Wadsworth
Well, we'll get onto the bitcoin side of things in a little while, no doubt, but this is a chart. Or as I said, look, having good information is just part of the picture here, but getting the audience to understand that. So I came up with this graphic just so that people can have a quick look at it and get a good idea within a minute or two of what's going on here. Look at what it says on the chart. Okay, start with a Red matrix there. This is capital rotation evidence. And all of these things are in a bear market priced in gold. So USM2 money supply is in a bear market priced in gold. DXY, that's the relative strength of the US dollar is now in a bear market versus gold. CPI and PPI, consumer prices and producer prices, currency in circulation, the equal weighted S and P, the New York composite, the Dow Jones, the Wilshire, the Russell, the S and P, the Nasdaq, they're all in clearly defined technical bear markets priced in gold below long term moving averages, below support lines, technical indicators, all aligning to say that they're in a bear market priced in gold. And they've all fallen 30, 40, 50% versus gold. So in clear bear markets priced in gold, that's important, Natalie, because any one of those can go into bear market priced in gold. And on its own it doesn't mean very much. It's just one piece of a, a big jigsaw puzzle. But when you get 2, 3, 4, 5, 8, 10, 12 of these things all happening at the same time, you can look at the last times in history when this happened. And it tells you on the, on the image there when that happened, 1930, 1972, 2002, and what happened in those events? Well, you know, I can tell you what happened. Precious metals, commodities, energy, oil, all had their bull era runs and the stock markets suffered major problems. In 1929, 1930, it fell by whatever it was, 80%, 70, 80%. In one massive drop in the 1970s, we saw three stock market rollovers of, you know, might have been 25, 35 and 45%. Each one got larger. In fact, I think the final Rollover in the 1970s was around about 50% on the S and P. And then in the early 2000s we had a drop of 50, and then in 2008 we had another drop of 50%. But all of those occasions, all those three examples have one thing in common. The stock market kind of went nowhere for 10 or 15 years from its peak. It had suffered a drop or two drops or three drops, but it took 10 to 15 years for the stock market to make nominal new highs. And that, Natalie, is critical because it's that 10 to 15 year time frame when gold, silver, energy, oil, commodities, all go bonkers. Now this is where we start looking at correlations with cryptocurrencies and Bitcoin, because Bitcoin has only sort of been with us for a limited period of time. I mean, we're talking here about history that goes back 100 years. So we can have a high degree of confidence for what the charts are telling us because we've got a lot of evidence. But bitcoin and cryptocurrencies have only existed in one type of environment. They've only existed in a stock market friendly environment. So the capital rotation that took place towards stock Markets was in 2012. That's when the last gold bull era finished. And that's when cryptocurrencies and bitcoin hit the scene. So they arrived on the scene in a risk on friendly environment. And throughout that entire period from then until now, we've seen obviously bitcoin outperforming gold. Well, bitcoin's cryptocurrencies have outperformed everything. Bitcoins outperform gold by a zillion percent. But what happened in the very early stages of bitcoin, of course it started from a standing start. It started from near zero. So it's much easier to make thousands and thousands of percent gains when you're a very low cap stock, whether it's a mining company or whatever it is. If you start off with a market cap of, you know, $10,000, it's much easier to go from 10,000 to a million than it goes is to go from a million to 10 million and then from 10 million to 100. So you get this loss of momentum taking place is kind of what I'm sort of getting to here. And then your asset will then stabilize and find its place in the market. Okay. It takes, you know, years and years for an asset to find its place in the market and to find what it's correlated with. You know, is bitcoin correlated with gold or is it correlated with stock markets? Well, all we can say so far is that thus far, bitcoin has been correlated with, with tech stocks in particular. And if you look at the NASDAQ times two or NASDAQ times three, that's where you find the correlation with bitcoin. This chart here is demonstrating that gradual loss of momentum. Now, I'm not saying that the bitcoin to gold ratio is going to drop all the way to the bottom right hand corner there and drop to whatever it is, two or one or less. I'm not saying bitcoin is going to go down to five, $10,000 or less. What I'm saying, I'm using a technical chart here just to identify strength and weakness. And when we cross that major support line, the sort of yellow, orange and red lines there, I've got three different colors there because one of those support lines is based on the weekly ones, is based on the monthly time frame, and I think one is based on a quarterly time frame. But the net result is you end up with a zone of support there, and it goes all the way back to 2014, 15. So we've broken below that, and it's a way of identifying, you know, developing weakness in a chart. And in this particular chart, it's bitcoin versus gold. So when we cross through that latest sort of little circle on the chart and started breaking down, it was further confirmation of something that we've already been watching, we're already suspecting, is that bitcoin is going to suffer a period of weakness versus gold. And it is also important to note that in this cycle, in this bitcoin cycle, the high point that it reached was approximately the same height that it reached in the previous cycle. So for whatever reason, you know, bitcoin wasn't able to make new highs versus gold. If you look at crypto, total market cap versus gold, it certainly didn't make new highs that, you know, the high in this cycle was lower than the high in the last cycle. So, you know, as a technician, as a chart technician, or if you're a doctor or if, you know, looking at a patient or if you, you know, whatever it is that you're trying to, you know, it's sending a signal and it's, it's giving you information that you need to sit up and take notice and be aware of. You know, we can use this type of analysis to tell us when to be bullish on an asset and when not to be bullish on an asset. Because cast your mind back to what I said a minute ago. Gold is in a bull era versus the stock market. There's a rosetta stone to investing, and that is gold in the S P. Because you're either in a gold favored environment or you're in an S P favored environment. A stock market favoring environment. There's nothing else. Either you're either favoring gold or you're favoring the stock market. And if you know which of those two phases you're in, then that is going to guide your investing for a decade long period. Because you should be measuring your stuff in either gold or S and P. So in an S and P bull era, you price everything in spx. In a gold bull era, you price everything in gold. And if your asset is outperforming gold, brilliant, whoopee. Go right ahead and buy it. So silver, for example, recently broke out versus gold and went on a massive run where it went up 300%. So you can use the silver priced in gold ratio to know when to buy silver. And the same is going to be the case for a whole range of assets. And this is helping us to identify when we can next get bullish for bitcoin. Because bitcoin going up versus the US dollar isn't really what I'm personally interested in as an investor. I want to know, is bitcoin outperforming gold now? Because we're in a gold bull era and when bitcoin breaks out versus gold, I'm going to be right in there rotating back into bitcoin again. So as this drop develops, what happens on a technical chart is you start to develop resistance levels. There's that arc shaped pattern at the top which is a perfect geometric arc and it's the opposite of a cup and handle pattern. You'll often hear chart technicians talking about these cup and handle patterns. Well, gold and silver just broke out of a cup and handle and that's why we just saw that enormous move for gold and silver. Well, the opposite kind of thing is happening with this chart. And the upside down cup is guiding the price or the ratio downwards. So as soon as we break out above that inverted arc, we know that something massive is happening and something that's likely to last for a long period of time. This is a macro monthly chart. So that's how we, you know, it's like diagnosing, diagnosing a patient. I'll go back to that analogy. We're diagnosing a patient here and in this case the patient is bitcoin.
- [15:54]
Natalie
I mean it's a very interesting chart and I think it did surprise a lot of people how much bitcoin has underperformed gold and didn't hit a new high. I mean in nominal terms we didn't go that high either. 126. I think people were expecting some kind of a blow off top 200k, 300k, 400k and. And I think a lot of people are disappointed this cycle. However, we have seen a precedent of gold sort of moving first especially around some macro weakness, geopolitical conflicts. And even BlackRock has put this in some of its research that bitcoin tends to outperform in the, say three to six months after something like that. So you do it sounds like expect a bit of a turnaround. You're going to be adding bitcoin. I know a lot of my audience members are waiting to see when Luke Grohman is going to add back Bitcoin. But for the average person, isn't it very risky to try to time it? Because you could end up really missing out and you could lose a lot of money.
- [16:56]
Kevin Wadsworth
Okay, I'll try and frame this in a way that will cover all markets. Because hodling bitcoin is like, stuck in gold and silver. So, you know, people of a certain generation a little bit older than me, you know, they're sort of wizened old stackers who have been stuck in gold and silver since day dot. Well, you know, if you're a stacker, then you don't care about the price fluctuation. You just keep stacking in the knowledge that you're going to be preserving your purchasing power. With bitcoin and cryptocurrencies, of course, recent history has enabled you to massively outperform inflation and massively increase your purchasing power. So hodling, stacking, it's the same kind of thing for two different markets, really. So it depends on your mindset. It depends on the time frame. If you've got a long time frame and you don't mind sitting through the 60, 70% drawdowns that Bitcoin goes through, then fine, go for it. If you've got the mental stamina and the stomach to go through that, then fine. And it's also a question of not putting your entire nav into any one asset. I'm not a financial advisor, but I think it's pretty well accepted that putting your entire nav into one asset is not really to be recommended. So you hedge your positions with stuff that is on opposite sides of the coin. And at the moment, you know, you've got gold on one side of the coin, you've got bitcoin and stock markets on the other side of the coin. So we know that they, or we at least know that when gold is in its bully era, it's massively outperforming the stock market and vice versa. So you can use that information to hedge your position and make sure that you're not just seeing having to sit through an 80% or 70% drawdown. You don't need to do that. But I take your point. You know, they're. Unless you really know what you're doing then, and you've got a technical chart in front of you or you're following someone who's got a technical chart that you trust, then I do take your point. Knowing when to exit and when to enter is not something that a lot of people would necessarily understand.
- [18:58]
Natalie
Do you believe that there's been some manipulation related to all the derivatives that were created on top of Bitcoin that essentially artificially inflate the supply beyond the 21 million in terms of these kind of paper, paper products that they then kind of push the leverage to the limit and then you get these massive crashes and it wipes a lot of people out in one moment.
- [19:21]
Kevin Wadsworth
It's entirely possible. And the same sort of manipulation occurs across all markets, really. I mean, you'll hear gold and silver bugs talking about massive manipulation in paper, silver. It's a, it's a, it's a feature that is common to multiple markets. And yes, on smaller timescales, huge amounts of manipulation take place. Huge amounts of, you know, leveraged plays and huge amounts. The whales in the market, whether it's in the crypto space or whether it's the bullion banks in the precious metal space, they are able to move the markets to an extent over a short time frame in the direction they want to. But my observation is that over a time frame of years, that ability is lessened. So the markets will win out one way or the other. Market forces win out one way or the other. So gold, silver, oil, commodities and energy, they track each other, they follow each other. So if you're thinking that silver is manipulated. Yeah, okay, I can, I can understand your point of view and the same with your point on Bitcoin. But longer term, the long term market forces will come to bear. And you know, the technical. And something else I want to mention here, fundamentals and technicals. You know, talking to Luke Grohman the other day, we mentioned earlier on, well, you know, he's fantastic at what he does and you know, if you're going to be following someone with, who's able to sort of untangle all of those fundamentals and the narratives, then, then he's your man. I'm looking at it from a technical point of view, he's looking at it from a fundamental point of view. I find it a lot of hard work to go through all those fundamentals. And my view is that all of the fundamentals, all of the market participants are what's moving that price chart. And when that price chart moves through a particular technical level, that's what causes the buying to come in. Because all the algos, all the human traders, all of the ETFs, the hedge funds, whatever, they're looking at the same levels that we're looking at. So when price pushes through resistance or falls through support, as it has done with Bitcoin recently, you can see the result when the support level on that chart you just shown broke down. You can see exactly what happens when that takes place. So the fundamentals are the chart and the chart is the fundamentals. It's the same thing. It's one and the same thing. I'll tell you a story. The uranium space is a little bit like meme coins. There are uranium mining stocks that go up thousands of percent in a uranium bull market. And I was looking at the uranium stocks several years ago and the fundamentals for uranium were brilliant in 2014, 2015, 2016. So the fundamental analysis was telling us buy uranium, buy uranium. Okay, the fundamentals were great and they continued to be great. But the chart kept carving out lower lows and lower lows year after year after year. Wasn't until 2019, 2020 when those fundamentals started to shift the chart. And it's the chart that I'm buying. It's the chart that I'm going to make my money on when the breakout takes place. That's where I'm going to make my money. I don't try to guess where the bottom is going to be or figure out where the bottom is going to be. It's not, I know, it's where the clicks come from. It's where the likes come from when you call the top and you call the bottom. But if most traders and investors are honest with themselves, that's a bit of a mugs game really. You know, I, I don't really recommend that. You know, I, I want to catch the meaty part of the move from the breakout and I'm not, I don't care if I don't catch the top. I just want to catch that reliable bit in the middle where you've got strong confidence levels. Because it's all about confidence. You know, when you're building a picture, when you start to get a clear picture, that's where you've got the confidence. If you haven't got the full picture in front of you, you're kind of guessing. You know, if you make a, if you've got a jigsaw puzzle in front of you and you've only got quarter of the pieces in there, you're kind of guessing what the, the end picture is going to be. You need a few more pieces, then you get a good idea what the picture is going to be, then you can place your bets and then you catch that chunk there. You get out before the top. Worry about the top. You know, I'm not, I'm not bothered by the top's going to be. I just want to get those gains.
- [23:38]
Natalie
Yeah, no, that's a really good analogy. So it sounds to me though when you, when you look at the capital rotation chart that you expect a lot of things to remain in a bear market versus Gold. So do you see that for Bitcoin as well? Because for those in the audience who are really, you know, wondering where that bottom is going to be and wondering when Bitcoin will start to once again outperform Gold like it has in the past, sounds like they might be waiting for a while. Want to accept Bitcoin and Stablecoin payments? Speed makes it simple. Customers can pay via QR codes in App online or pos. Speed helped Steak and Shake accept Bitcoin nationwide. As CEO Dan Edwards says, customers choose.
- [24:20]
Kevin Wadsworth
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- [24:26]
Natalie
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- [25:57]
Kevin Wadsworth
Yeah, okay, so let's tackle this one thing one, one stage at a time. So if bitcoin repeats previous behavior then, you know, I think probably everyone you speak to will, will know that bitcoin should probably bottom in Q3 or Q4 of this year. So sometime in the second half of this year and you know, if it falls over 70% like it did last time, then it's probably going to be in the region of 40,000. Could be a little bit above, could be a little bit below. I'm not focusing on what the low is going to be. What I'm focusing on is, is the chart pattern that builds out at the bottom there and then breaks out from. Because you can use a technical chart to identify when bitcoin's back above, let's say the 50 week moving average. Bull markets occur above the 50 week moving average. They do not occur below it. So if we're falling a long way below the 50 week moving average at the moment, just be patient, wait. If you're new to all of this, wait until we break out above the 50 week moving average. Wait until Bitcoin starts showing strength versus gold. And here we've got the bitcoin chart here. There's reasons to be worried here because what you just said a moment ago, Natalie, is bitcoin going to be in a bear market priced in gold for a longer period of time? I'll tell you what I want to see and I'm completely open minded. I'm not particularly pro gold or pro bitcoin. I'm pro increasing my purchasing power by using instruments like gold and bitcoin. So what I want to see is relative strength for bitcoin versus gold. So on that ratio chart. But here, this chart tells us why we've got some reasons to be, you know, a little bit more concerned than perhaps we have in previous years. I've already said to you that we're, we're in a capital rotation event taking place capital rotation process and that's changing the environment. And it's just a little bit of a coincidence perhaps that we've got this changing environment, this capital rotation process. And look at what the bitcoin chart has done there. You know, that is a long term trend line that it's breaking down from whether this was gold doing it or whether it's the stock market doing it or whether it's bitcoin doing it. I don't really care what the label says in the top left hand corner of the chart. I'm just looking at the chart. I'm agnostic as to what it is, but it's sending a signal. It's sending a signal that is a long term trend change. So something I want to say here that the bitcoin community probably going to hate me for, but it is a true fact, is that four year cycles can occur in a 10, 15, 20 year downtrend. A four year cycle doesn't mean that each time you get a new cycle you make higher highs. So the cycle, all this four year cycle is, is measured from low to low is roughly four years. So you get a major low and then four years later you get another major low. It doesn't tell you whether that major low is going to be higher or lower than the previous one. And it tells you absolutely nothing about how high it's going to go either. If you look at cycle theory, it's to do with how left or right translated the cycle is. In other words, does it make its high early in the four year cycle or late in the four year cycle? If it makes its high late in the four year cycle, then that's a good thing. That's bullish. It means you spent most of the four years going up. But you can also have a four year cycle where you put in your low and then six months later you put in your high and then spend three and a half years going down and then put in another low that's much lower than the previous low. So you know, I just want to throw that out there because that is a fact about, you know, about cycles. And I'm not saying for a moment that bitcoin isn't going to get above 126,000 in its next bull cycle. All I'm saying is it's not a zero probability. It is not a zero probability that bitcoin will not get above 126 in its next cycle. Whether you, whether you assign a 5% probability to that or a higher probability to that occurrence is, you know, we don't really have the data yet to be sure, but this chart that we're looking at here tells us that it is very much a possibility. And I'll just leave that there. I don't want to, I don't want to scare people, but anything.
- [30:14]
Natalie
Yeah, let me ask something about this chart because when I look at it, what's concerning is you have that critical support line that all of us can see. And it seems like bitcoin has always just kind of tapped it, tapped it, you know, made a new high, came down, but now we've gone below it and a lot of people are concerned that we're going to go even lower. I mean this, this seems to break the entire trend and I think that worries some folks, even those who have been investing for a very long time. So what, what should people know when they see something like this completely breaking down from the critical support and they're worried about how low it could potentially go. And again, I do want to remind people that in the last, if you look at it by four year cycles, which that's a theory that a lot of people say is actually dead now, but if you look back at the four year cycles, the all time high down to the, to the bottom, it's been on average like 75 to 80% and that would put us from our 126000 all time high in October 2025 down to like the 30K range, which I know makes some people a little uneasy.
- [31:26]
Kevin Wadsworth
It does. And it'll probably break a lot of the models that people are following, whether it's, you know, rainbow charts or whatever. You know, I don't really pay too much attention to some of these exotic models that people apply, but there's an s cur where people are sort of explaining Bitcoin's loss of momentum by saying it's going to turn back up and form this kind of S curve where it starts going parabolic again. Well, that's a possibility. Yes it is. But whilst it's broken below critical support, that possibility is completely off the table. It's not going to even have a chance of doing that until it now repairs the damage that it's done to this chart. And in order to repair the damage to this chart, the very first thing it needs to do is get back above the 50 week moving average, which I think is somewhere around 100,000 if memory serves me. So that's the very first thing. I'm not going to be personally longer term bullish until we get above that 50 week moving average. But this trend change is a concern. It doesn't automatically mean that Bitcoin's going to suffer some complete and utter disaster. But it does make it a possibility that something much more serious might occur this time than in, in previous cycles.
- [32:41]
Natalie
I want to bring back up your capital rotation chart one more time to clarify something, because when I first saw this I thought that this was the event. But when you read your paragraph, it says that in time this leads to the capital rotation event. It seems like the event is not here yet, it's on the way.
- [33:00]
Kevin Wadsworth
What does that mean, yeah, well spotted. Yeah, yeah, I'm impressed you spotted that. It's important as well. You're, you're pointing out a very important point here because this is a process. So this is a capital rotation process. And the first part of the process is gold moving into a bull market versus all of these instruments, or in other words, all these instruments being in a bear market priced in gold. That's happened. So that part of the process is done. The event is really only certain with hindsight because the event, part of the capital rotation is when the stock market falls far enough that you can have confidence that you can have confidence that this, this kind of process has resulted in a major shockwave running through the stock markets. What you need to happen, going on previous examples, is for the stock market, as I said before, to kind of go nowhere over a 10 or 15 year period. So we need to put in a high on the S P and break major support. We have to do enough damage on the chart, on the nominal price chart for the S and P to cause it to then struggle to recover and then fall further at a later point in time. So that over a 10 year time frame, the stock market doesn't really go anywhere. Now some people said to me recently, and I think Luke might have mentioned it actually, that it's possible that this capital rotation event is slightly different to previous ones where stock markets don't really have a major downside event, maybe 10 or 20%, but nothing comparable to 1930, 1970s and 2002. So it's possible that the stock market kind of just weakens if you like, but doesn't suffer a major event. But gold continues to massively outperform in silver and commodities and energy and oil, as they're all already starting to show signs of doing. So we have to continue to monitor this. But currently the expectation is still for an event. And when I look at the S P chart, there are some very sort of clear support levels that if we break down below them, then you know, we need to start getting much more concerned. I think we're talking about drops of around about 20 or 25% are just about okay, but any more than that, then we'll be breaking some major support levels of a rising wedge pattern that the S P has just broken out of. That's probably mumbo jumbo to a lot of people watching this. But a rising wedge pattern on a chart is usually a bad thing to see. It's normally sort of, sort of the chart is, yeah, well, like that you've got A rising wedge there for the Dow to gold ratio. And when you break below it, that black support line there, that's, you know, that's a sort of, a, sort of a rising support line. When you break below them, then that's sending a trend change signal. So casting mind back to that chart that we just looked at where bitcoin's just starting to break down. You can see what happens on this ratio chart when it breaks down. The Dow to gold ratio, it gave a signal in 1930. It gave the signal that we were going to see a huge stock market drop. It gave the signal in the late 1960s and early 1970s that we were moving into an era where gold was going to outsource, outperform the stock market for a decade. It gave that signal in 2001, 2002. And we know that gold went on to peak in 2011, 12, having moved up from $250 to $1,900. So we've got signal number four. You know, we sat up, we took notice, we took positions in gold and silver when we got the signal. And the fact that it's given that signal is problematic for, for anything that's correlated to the stock market. And thus far, the correlation between so the bitcoin versus gold is behaving in the same way as NASDAQ versus Gold. If you overlay those two charts, they track each other. Bitcoin gold ratio and the NASDAQ gold ratio. So we're getting all these signals from the charts. It's multiple pieces of evidence where it's like giving a patient putting a thermometer in the mouth and taking the temperature. You test the blood, you give them a scan, you give them an X ray and they're all building a picture. As a weather forecaster, I wouldn't just, you know, do that, stick my finger in the air and say it's going to rain in three days time. You know, I need satellite pictures, I need upper air readings, I need, you know, humidity readings, wind speed, wind direction, all that kind of stuff. You bring it all together and you can make a weather forecast. You can't get a weather forecast. You can't do that and get a weather forecast and the same thing. You can't do that with charts either. So all of this discussion has been about weight of evidence and what it's enabled us to anticipate, which we have done effectively so far, and what is continuing to allow us to anticipate and be aware may be coming our way and position accordingly. And that's what it's all about.
- [38:02]
Natalie
Yeah, I mean, when I hear event, I just think crash. Like you're, you're waiting for that next big crash. I feel like a lot of people are in this holding pattern waiting for that. And then what we know will come after it, which is the big print. Although there's a debate as to whether the print will work in the way that it has in the past. Right. Because I think for my audience that's been following macro so closely as well as Bitcoin, it's like the underpinnings of the system are starting to change and unravel. And I know Luke mentioned this on your show as well as mine, the primary reserve asset. Not talking about the reserve currency, but I make a distinction between asset and currency here. The primary reserve asset appears to be gold again now. So we're shifting back in time and a lot of the previous crashes that have happened happened in a system that was in some way at least partially tied to gold still. And then we started to really unravel in 1970s. We broke ties completely and then it went off the rails. Right. And we just, we print our way out of everything. And in 08 09, I feel like we just, we showed the world that, that we might impose austerity measures on others, especially the IMF will if another country has a currency crisis. But we can always print our way out of it. And then what Luke mentioned also 2022, weaponizing the dollar during the Russia Ukraine war. It's like we've highly incentivized everyone to say, why would we hold US Treasuries as the primary reserve asset? We have to find alternatives. Maybe we take a step back and go to gold going back to stocks. I mean, what do you expect to happen when this, the crash comes? But we need tax receipts to essentially back our currency. And that's something Luke talks about as well, not to mention him a hundred times. But it's like we can't afford for tax receipts to fall, so they're always going to prop up the stock market. So we might go into a little bit of a correction or a reversal, but they always manage to just paper it over just like they did with COVID and 0809 and everything else. Won't it be the same this time? And then everything will make a new all time high.
- [40:11]
Kevin Wadsworth
Yeah. And you have to, you have to remember, of course, Natalie, that everything's being priced in depreciating currency, fiat currencies. So if you zoom out on any chart for, well, I was going to say the stock market, but pretty much anything. It could be house prices or the, the price of a tin of beans. Whatever, whatever it is, you know, the price goes from bottom left to top right. So the stock market is no different. So decline comes from the stock market. You can be confident that it's going to be recovered and it'll be going on to make new all time highs. This is all about just trying to avoid being in assets that are underperforming for significant periods of time. And if the S and P is Underperforming for a 10 year time frame, then that's something that we need to know about. Your stocks are going to be paying dividends and they're in everyone's 401k or over here in the UK and your retirement pension plans. So it depends at what stage you're at in your life as well. Because if you're about to want to access your retirement funds, then the last thing you want to see happening is the stock market falling by even 20 or 30%. It's not what you want to see happening. So longer term, the stock market I'm quite confident will recover, but over a 10 year timeframe and with money printing, that's something that I haven't mentioned. Actually. The 10 year yield is kind of at the heart of all of this. The 10 year yield chart broke out post World War II and there's a line on that chart, two lines on that chart that I've labeled the pain line. Okay? And the pain line is a resistance line on the chart. And I called it that because just to me, sort of trying to rationalize it, the reason the 10 year yields were continually going down. From 1980 to recently a 40 year time frame, the 10 year yields were just trending down. Look at what's happening to debt to GDP. It was rising from 31% to 129%. So if the United States wants to keep its repayment on debts manageable, then that interest rate has to keep going down and down and down and down and down. Now look back at the 1960s and 70s, we've got the 10 year yields going up. But that was okay because the debt to GDP was dropping. The burden that was being carried, as that 10 year yield went up, the burden was decreasing. So the 10 year yield, interest rates and inflation, they could go up because it wasn't making it unpayable. Okay? The debt mountain wasn't unpayable. The United States could still meet its debt obligations because debt to GDP was dropping so fast forward to today, debt to GDP actually peaks at about 129 or 130%. Today it's closer I think to 120%. It has actually come down. So it's going to be fascinating to see if the process that was taking place in the 1970s starts to take hold here. And something a lot of people don't realize, gdp, we think of it as, you know, the sum total of all of a country's, you know, production. It's all your productivity or your profitability. It's how well a country is doing. If you pull up a chart for GDP and you can do that on trading, view easily US GDP and overlay money supply times money velocity. It's the same chart. It's absolutely identical. It's the same chart. So if you know that GDP is actually money supply multiplied by money velocity and you understand that increase in money velocity is much harder then the easy way to make GDP go up is to increase money supply. And what's happening with M2 at the moment, M2 is starting to go steeply upwards again after a pause. So I think it's quite. And people are trying to work out how can the 10 year yield go up? How can it be allowed to go up when you've got debt to GDP of 120%? Simple answer. Massively increase your money supply just like happened in that period in the 1970s. That will get your debt to GDP down and that will allow interest rates to rise. The market there is telling us that the 10 year yield wants to go up. I'm not, I'm not an economist, but that's what it's telling us.
- [44:36]
Natalie
Right. And I think that what you're touching on is really the bigger picture. What does this all mean? They have to run the economy hot and they have to sort of inflate away some of this debt. Right. And what does that mean for the average person? Things are going to get more expensive. The majority of people don't own assets. This is one of the reasons why I feel like I, I have a mission to do what I do in terms of financial education. Because the average person needs to start to acquire assets. Assets in any way that they can because those assets benefit from money printing and inflation. Everything else, it's like your purchasing power is getting destroyed on a daily basis. And you know, the average person, you can pull them wherever you are, whichever country, they don't understand nominal versus real terms. They probably wouldn't even be able to name, you know, the, the central bank president in their country or chair. And, and these are the things that actually matter because they're making the decisions that directly correlate to the purchasing power and value of our money. I wanted to bring up your gold chart just because I know I have a lot of gold investors in my audience in addition to bitcoin investors. So I want to see what you have to say about the gold price and where you think that's going to go. Because obviously we kind of collapsed recently. But we have analysts that are predicting that eventually over the next few years, we're going to see over 10,000, 15,000 as they maybe look to revalue gold to pay down some of our debt.
- [46:00]
Kevin Wadsworth
Yeah, sure. Well, this a little bit like that bitcoin chart that we looked at a moment ago, which was going below a critical support level. The gold chart has gone above critical resistance. So the point to note here with both the gold and silver chart is that they have turned that previous resistance into support. So if you don't understand, you know, very much about technical charts, just, just focus on what I've labeled there as the critical resistance. And we've broken out of it with. I'm sorry, for a moment I'm just going to go into technical jargon. It's a cup and handle pattern. That red kind of cup and handle there. That's what technically projected the and catapulted the price of gold upwards. It's a. Something that technical analysts will recognize in charts. And there's all sorts of, of geeky language that you can use to describe it. In a cup and handle, there's an inverted head and shoulders, whatever, whatever you want to call it. The chart was signaling that the most likely move was going to be to the upside. And it's broken through that critical resistance level. So it's not resistance anymore, it's support. Now given that we've just moved up as far as we have, you know, at least five and a half thousand dollars, we're going to pull back until we find a support level. Now there is a support level somewhere around $3,500 to $3,700. And that could be where the price of gold ends up resting. But if it comes all the way down to test that critical. What was resistant is now support. It could come down to meet a rising three year moving average somewhere around about the 3,000 level. Just above 3,000. That wouldn't surprise me. And it would be an absolute gift Given that we're in a capital rotation process. Given everything that's going on, bringing together the weight of evidence that should enable us to have another low risk entry point for anybody that's not yet into the gold and silver markets. But look, silver just pulled back 30, 40%. You can gradually start to build a position, if that's what you want to do in precious metals, on those sorts of pullbacks. Whenever you see pullbacks of 20, 30, 40%, even if it's going to take a while, even if this correction takes several months to play out, which it may very well do, you know, gradually building a position is something that you can do. But my eventual target here for the time being is around $16,000 in around about eight years time. I might end up having to adjust that target box to the upside. But for the time being, I think 16K is a conservative realistic target based on the percentage moves that we've seen previously on major breakouts. And silver somewhere in excess of probably 4 or $500 sounds bonkers. But when silver was $30, you know, 18 months ago, you know, mentioning 120 would have sounded bonkers as well.
- [48:51]
Natalie
No, I mean it doesn't sound bonkers. And especially going back to just what is a dollar worth, right? I mean these numbers don't sound crazy. When you really start to zoom out and see what's happening to the system. What, what would it mean for, I mean, if gold is 16,000 and they use it to revalue the, the gold that's not marked to market in the United States, to me that's the equivalent of like the Nixon shock, but in reverse, like we are basically announcing to the world that the dollar, the dollar is always going to be devalued compared to gold. And so you should own gold.
- [49:29]
Kevin Wadsworth
It is over a long enough time frame, but we don't all live long enough to sort of benefit from that. So 1980 to 2000 was a 20 year downtrend. And I'm of the view that these things are secular and cyclical and the markets will rotate in favor of gold and then rotate in favor of stock markets. And if gold goes up to $20,000, it'll probably come back down to 10 and it'll form a new plateau, a new base at that kind of level. Unless of course there's some kind of intervention, some kind of reval valuation, the government steps in and that kind of artificially affects the price of gold. But left to the market, then somewhere in that sort of 20,000 area is entirely reasonable. But it's cyclical and thus far it's been cyclical. There are secular trends that take place, and they're clearly identifiable on those technical charts. But any kind of artificial intervention, then of course, anything can happen. All we can do is play it on the basis of probability.
- [50:29]
Natalie
Some of us bitcoiners have been chuckling at the volatility in gold because a lot of the gold bugs have said bitcoin's not a store of value because look how volatile it is. And the volatility has been crazy on the gold side. And I do believe that the upside is tremendous in gold as well, just because so few people are allocated. I mean, when you look at portfolios and financial advisors, rarely do they have their clients have a position in gold. I mean, they're starting to now. But it wasn't. That wasn't a thing. It was the 60, 40 all the way. There was no bitcoin and gold in it.
- [51:01]
Kevin Wadsworth
Absolutely. I mean, the 6040 is one way of kind of guaranteeing that you're going to have to ride those downtrends whether you like it or not. Okay, it balances out one versus the other, but you're not fully benefiting from either side. You're not capturing the potential upside with a 60, 40. And it's funny you mentioned that, but we, we very much. We prefer to allocate much more to gold and much more to precious metals than traditional sort of financial advisors would ever recommend. But identifying those trends, it's quite clear and quite obvious where the money is to be made and whether it's gold, whether it's bitcoin, whether it's the stock market. They're all great vehicles for exactly what you said. I'm in this for the same reason that you are. I want to spread education across the, you know, the general public so that whether they've got a thousand dollars or $100,000 or whatever they've got, they can use that to increase their purchasing power. If you're saving up for a car or a holiday, you know, why not put it into an investment? There's going to see that going up by 30, 40, 50% instead of sticking in the bank and watching it grow at 2%, which is eroding with inflation anyway. So that kind of education, I'm fully on board with that. And bitcoin's been a fantastic vehicle for that, and I'm sure it will be again. And gold and silver have recently and will continue to be, and the stock market will. So it's a case of identifying from those big sectors, precious metals, the stock market, bitcoin, kind of using those to your advantage. And for most people, I would not. I know this might sound a bit weird, but for most people, I wouldn't advise trading. I wouldn't advise buying a portfolio of 30 or 40 stocks. I would advise. You know, this isn't financial advice. It's just my, my take on it is that keeping it simple, if you can, is the way to go. Because all of these stocks, they all kind of track the same capital flows. So if you're buying mining stocks, they all track, you know, gdx. If you're buying cryptocurrencies, the vast majority of them will track each other. Of course, they go up and down to varying degrees. And stable coins, you know, you start getting conversation about coins like Monero or whatever that are bucking the trend to some extent. But you know, there are asset classes, which is what I'm trying to say. Precious metals is an asset class. Energy and oil is another, and cryptocurrency. So. So you can use those asset classes and just keep it simple. Keeping it simple for most people allows you to sleep at night and not worrying about if you're going to be wiped out overnight.
- [53:43]
Natalie
Well, I think it's an important message that everyone does need to be investing in a world where they just print money. You have to be, because compounding makes such a huge difference whether you do have just a little bit to invest or a lot. You need to be thinking about assets. So as we start to wrap up, you said that you think bitcoin will bottom in Q3Q for it just sounds so painful. I don't think we've actually ever had two down years in a row. And we ended last year negative, I think 6%. But do you expect us to actually be lower again this year? Which would be sort of a new. It would be historic in the sense that we've never had two red years in a row for bitcoin.
- [54:24]
Kevin Wadsworth
Yeah, I think that's just a sort of feature of kind of timing. You know, the time just caught both years in that way. But overall, when you look at the decline, the percentage decline and the period of time that it takes to decline, you know, I think it's going to be comparable. There's no reason why it shouldn't be comparable to previous declines. I know there's. Each decline has been slightly less than the previous one. So okay, let's go on a 70% decline rather than 77% or whatever it was last time. So, you know, set your expectations and if it's less than 70%, then, then great. And it could Bottom much sooner. It could bottom in Q1 before the end of March. It could do that. It's not impossible. But for it to do that, as I said before, I want to be back above that 50 week moving average. I'm not going to be on board that we're in a new trending bull market until we meet the criteria that have defined all previous trending bull markets. And one of those criteria, and there are several I'm not going to name, go through them because it's, it's technical and it's going to send your audience to sleep. But one of Those is the 50 week moving average. And getting above that 50 week moving average is a strong indicator for a new bull market. So I don't care if it has to rise $20,000 to get to the 50 week moving average. I'm not bothered about that bit. I'm going to accept that I don't catch that bit. I'm going to be in the more confident bit above the 50 week moving average because of course it could just move up to the 50 week moving average and then plunge lower. And I don't want to be a back holder. I don't want to get caught in that.
- [55:59]
Natalie
Right. And so basically you're kind of looking for, for a signal that there's going to be some sustainable momentum for capitals to flow back in. And right now I just don't think we have that. Even when we make a little, little bit of a new. I don't know, we're moving in the positive direction right now as we head into the weekend. But that of course could change again and we could hit another downturn because bitcoin always tends to recover a little bit.
- [56:25]
Kevin Wadsworth
And then it was, what just happened was a measured move. So the initial downdraft, the initial move down stopped and formed a consolidation pattern on the chart. And then the move down that's just occurred is a repetition of the initial move. It's called a measured move. And in technical analysis you can often get a very good guide as to where the price is next going to bottom. And that was in the low 60s, thousands around about 63, 64,000. Of course the price hit that kind of area and then bounced. So we're now sitting seeing a rel bounce or relief rally. And it's forming a chart pattern now that we can start to identify. That looks like another bearish rising wedge type of pattern. And if it breaks below the support on that, then down we go further. So it's being patient, waiting for that weight of Evidence and you know, you can jump in now and end up regretting it or you can just have that patience and wait for the evidence and that. Yeah, keep going back to that because it is a worry. You know, keep this in your mind. If you don't remember anything else, just remember this. And also remember that what we had this year, we've had a crypto friendly president, we've had, you know, we've had ETFs, we've had M2 exploding. We've had. Right. You know, a lot of narratives have come and gone and a lot of talking heads, I'm not going to name and shame them, but we all know, know who they are. These people with massive accounts with millions of followers that say we're going to be at 200,000 before Christmas. Oh, okay, that didn't happen. So we're going to be at 150,000 by the end of February. Okay, that didn't happen. So, you know, understand and realize who is, who's trying to help you and who's just, you know, talking their book and who's just kind of a perma bull. It doesn't help anybody being a perma bull. You have to recognize evidence when it's in front of your face. If you don't recognize a simple bear market when you're breaking down into a bear market, then there's something wrong with, with what you're doing. Either you don't know what you're doing and you just genuinely haven't got a clue or you're deliberately misleading the audience. Below the 50 week moving average, below critical support, you're in a bear market. As simple as that.
- [58:42]
Natalie
I know it's here. A lot of us didn't want to believe it because again, we thought we'd go higher. But I totally understand. I've had some of these perma bulls on my show. I want to be one, but I, I think I come from this immigrant background. My audience who knows my story, I know what it's like to lose everything. And there's always a sense of like what you know, when's the rug going to be pulled out from under me. So I tend to be a little more bearish when I probably should be bullish. But that's always kind of helped me too at the same time because I never want to be over myself. Skis and a lot of people have been with leverage. I warn people, don't do it, it's not worth it. Especially for the average person. Don't trade it. Dollar cost average. I know for some people, they want to feel more diversified, especially over different time horizons. Like that's okay for me, you know, I, I'm the product of not just an immigrant background, but that great financial crisis, you know, that just put terror into me for, for financial security. And sometimes if you don't bet big, you're, you're gonna lose out, right? Sometimes over diversifying into something that just goes up like 5% a year. You're basically just tracking inflation. So calculated risk is good, but you don't want to be in over your skis with too much risk, too much debt, too much leverage. Any final thoughts?
- [59:59]
Kevin Wadsworth
Yeah, control your risk. Risk management is really important when you're entering a position. It's, you have to have in your mind how much you prepare to lose. You know, the trading is all about that. It's about how much of your nav you'll lose if it goes against you. So over a long period. How about play the long game? It's my advice anyway is try to play the long game. Grow your purchasing power at a significantly greater rate than inflation. Don't, don't. Getting into this mindset where you're going to make 100% in, in a couple of months, it's, you know, it's dangerous. You know, you learn with time that that's a bit of a dangerous mindset. Yeah, it's great when you hear people have done that, but trying to achieve that is, you know, it can be a little bit kamikaze style, can't it?
- [60:46]
Natalie
It's true. I, I tried to experiment once with options years ago and I got, I got too. I guess greedy would be the word. I thought I was, I thought I was going to keep going higher. I was making, making so much and then boom, it crashed and I ended up those expired, worthless as I didn't sell it.
- [61:06]
Kevin Wadsworth
There's a lesson right there, isn't there?
- [61:08]
Natalie
A huge lesson. Sometimes we need the lessons, right, to teach us to be better investors. And my dollar cost averaging bitcoin has been the best performing asset that I, that I could have done without professional experience and technicals. Well, Kevin, it's been so great to have you. Where can people find your work?
- [61:25]
Kevin Wadsworth
Work? Yeah, sure. We can find me on X at North Star Charts on X. Lots of free information on there, of course. And if you want a lot more detailed stuff including all sort of buy and sell signals and that kind of thing, it's northstar badcharts.com you've got to blame my friend and business partner, Patrick Corinne. There for the bad charts part of it, but I think he was being ironic. At least I hope he was.
- [61:49]
Natalie
Great. Well, I will link your work. Thank you so much. Hopefully we'll chat with you again about this capital rotation process as it turns into an event. Thanks. Thanks Natalie, thank you so much for checking out this episode of Coin Stories. Make sure you're subscribed to the show so you don't miss any new episodes. If you can, turn on those notifications and leave us a positive review, they really help the show grow organically with new listeners. We have a free weekly newsletter. You can sign up@thenewsblock.substack.com this show is for educational and entertainment purposes only. Nothing should constitute as financial investment advice, and you should always do your own research. I'm always open to feedback and guest suggestions, so please feel free to reach my team@infoalkingbitcoin.com I'll see you next time.