This week Gerbz & Brian Russ dove into dozens of charts spanning everything from high level global finance to new altcoins you never knew existed. In Part 1, we zoom out to the macro environment and discuss global finance heading into crypto’s inevitable bull market breakout.
Show Notes
Gerbz: Boom. What up crew? Welcome to the BitLift Podcast. Where we don't just stack crypto, we use it. And we chart it, too. We charted it a lot. Today I'm here with my buddy, Brian Russ. We talk charts, we talk crypto all the time. I thought I'd bring him on here to go through some of our favorite charts today. We're going to kick it off with macro, get into crypto itself. We'll talk Bitcoin, ETH, as well as the global economy, global liquidity, world money. And maybe we'll talk alts and what's happening down all the different sectors and different rabbit holes as a part two.
We're going to throw up so many charts. If you're just listening on audio, we do our absolute best to describe exactly what we're looking at. But if you want to see what we're looking at, fire up YouTube, go check out the charts over there. Brian, welcome back to the BitLift pod.
Brian: Awesome to be back, man. Hey, we're chatting and the markets are ripping. So, no surprise there.
Gerbz: I know, we've noticed that every time we say we're gonna record, like, everything's blowing up while we're recording. That's always fun.
Brian: I was gonna message you last night that we should have bought some call options on the market before we started recording. But, maybe next time.
Gerbz: It's true. Remind the people a little bit of your background. Like, why is it that I come to you for all this charting stuff all the time?
Brian: Well, yeah. Briefly 20 years in finance banking, macro world. Spent most of that time in traditional finance as a banker. I've worked for a hedge fund. I've started investing in crypto back in 2013, was really just Bitcoin back then. So I've got 11 years of investing experience. Yeah, I cross over all categories.
So fundamentals, technicals, sentiment and psychology, put it all together. And I try to come up with kind of a top down, macro view, allocate my portfolio accordingly. And this is how I spend most of my time today. A lot of that work has led me just deeper and deeper down the crypto rabbit hole as macro kind of started out like this wide, and as it narrowed crypto was just the best trade on the board year after year after year. So, it sucks up the vast majority of my time now. So it's always fun to hop on with you and talk macro, talk crypto, talk charts.
[00:02:06] Macro: DXY
Gerbz: Sure is. And hey, gold's breaking out too. So Bitcoin's not the only macro trade on the table these days. But we'll get to that. Let's start there, let's start with macro because that's kind of like the foundation, I feel like, that the whole world is built on. That's kind of the point.
So let's start macro. if you want to throw your chart up where do you want to start us?
Brian: Yeah, cool. Let's dive in and get a chart up here. So what I wanted to do actually was kind of start out high level with a window into financial conditions broadly. I think this is the big macro theme right now. So what are financial conditions? Financial conditions are a confluence of things.
So it's, it has some complexity to it, but essentially it involves how much liquidity is there broadly speaking, and is the amount of liquidity increasing or is it decreasing? And there are a number of factors that drive this. The most important factor is the U. S. dollar. Interest rates are a big driver as well.
Of course, if rates are low, there's more propensity to borrow. And then it becomes a bit self referential where risk assets can become part of liquidity and financial conditions as well. So if the S&P 500 is ripping, people tend to feel wealthier. They will spend more, this boosts the economy.
And that has a reflexive effect because of course, higher earnings, higher stock prices. And so you get these kind of cyclical periods where financial conditions improve. And then we might get out ahead of ourselves like we did in late '21, early 2022, right? Where inflation is running hot financial conditions are too loose, and policymakers will come in and kind of tighten financial conditions. Try to put a stop to it.
So that's what we saw with, you know, the increase in interest rates over the 2022 to 2023 period. Now we're kind of coming out of that on the other side. So it's a really interesting macro setup. So I pulled up here just as a starting point for this a chart of the U S dollar, and I'm just going to zoom out. These are weekly bars.
Gerbz: What does that mean? A chart of the U S dollar? What's the dollar compared against if it's being charted? I don't even...
Brian: Yeah.
Gerbz: What does that mean?
Brian: Yeah, good question. And there's a bunch of different ways to look at this. You know, this particular index is the DXY index, which is a trade weighted dollar. So it essentially attempts to capture the percentage of global trade that is occurring in dollars versus other currencies. And it creates basket of dollars versus fill in the blank currency.
Now, the reality is there's really two other currencies that are used globally, principally the euro and second the yen. So this is principally a dollar euro chart. It's going to look very similar to the dollar Euro. You can do a broad trade weighted dollar index where you can pick up a lot more currencies, including emerging markets.
But I like the DXY because it is the most conservative look. And so if you get a breakout or a breakdown on the DXY it's probably occurring with even more volatility on the other charts. And this is also one that just a lot of people keep their eye on. So I like the one that most traders are watching, that's why I use it.
So this DXY chart goes back to roughly 1967. So it's a really long look back. These are weekly bars.
Gerbz: Wait, look at 1971, by the way. So that's when we de pegged from gold and it just like mooned super hard right there. But that was the dollar stabilizing? Cause you said it was going up means it's like, less volatile.
Brian: Yeah, so from '70, you couldn't see '71 on my original chart but I can get it in here. So yeah.
Gerbz: Oh, there it is. Oh, sorry. I was looking at '81.
Brian: Yep. And that was August of '71 when we broke the peg to gold. So I've got that in here now. So you did see a pretty substantial devaluation. Now the Euro didn't even exist back then, right? So it's like Trading View calculates this based on, it goes back to the Deutschmark and the Lira, the Italian Lira.
And so this isn't a perfect look, but yeah, you saw it, call it DXY, approximated at $117 when we broke the peg and it sold off pretty quickly down to mid eighties. So that was a pretty big depreciation in the dollar. And then you had this massive appreciation in the early 1980s that I think you were referencing. That appreciation was driven by high inflation.
And Paul Volcker was the chairman of the fed at that time, and he was jacking up interest rates to try and fight inflation or break the back of inflation. And then roundabouts 1985, there was something called the Plaza Accord that you may have heard of. That was where basically the U S and Japan and the other major currency players in the world agreed to systematically weaken the dollar.
So policymakers actually will manipulate currencies, even majors. And after that you had this huge decline in the value of the dollar all the way through the mid nineties. So that's what kind of drove a lot of that volatility in the early years.
Gerbz: It's their money. They can do whatever they want with it. we're just along for the ride.
Brian: That's right. Yeah, I guess we've got at least Bitcoin now as an alternative.
Gerbz: Thank Jesus.
Brian: So, back to the current look. So, I've kind of noticed this channel. You can see I drew it in red here, dating back to, call it March of '08. So we've had this kind of uptrend in the dollar that's here shown by my channel in red.
And I just thought that was interesting that the dollar has been, if you go back, you can see these major kind of macro cyclical periods where the dollar is either strengthening or weakening and we're in a dollar strengthening period right now. Particularly so when we talk about relative to other fiat currencies, right?
We know that a dollar is not strengthening relative to gold. We know it's not strengthening relative to Bitcoin, but it is strengthening relative to its fiat competitors. And so that's a good starting point just to understand what is the trend. The trend is a stronger dollar.
Gerbz: That's a really long trend too, even compared to just looking at some of the past trends like when you scroll back. Like, they're not that long. It's kind of pretty volatile. This is like a pretty, what is this? 12, 15 years of up into the right.
Brian: Exactly. Yeah, so when I see that I want to just operate under the assumption that the trend is going to hold. And that that channel represents the current trend. And so my default expectation is the market, the chart is kind of telling me the broad trend. So dollars in a strengthening trend compared to euros, compared to yen, compared to Chinese yuan.
Okay, that's interesting. But within that broad channel, you can see there's quite a bit of volatility. And that has significant Implications for asset prices. So here what you can see is there's this demarcation of support and resistance. I drew a white line to represent that, and that really dates back to 2015.
That's been a pretty key horizontal demarcation within the channel. And you can see we touched the top of this channel, interestingly, in October of 2022, which was kind of peak fears about fed rate hikes. That was when the fed was hiking most aggressively. And since then, we've come off pretty hard. And now we're kind of sitting right on support.
I'll call it mid channel. It's kind of just below mid channel, but it's a super interesting spot, right? Because the dollar has been weakening over the last couple of months. It's sitting right on that intermediate support and resistance represented by that white horizontal line. And it's sitting right on it's 200 week moving average, which is that blue line.
So it's just an interesting technical spot. And if it breaks down here, my expectation would be that we'd get a retest down to the bottom of that channel. And that type of sell off in the dollar, which would be going from about $100 down to call it $95, which is a 5 percent decrease in the dollar.
But because of how significant it is as a global macro variable, that could drive a massive move in risk assets. And I think we're starting to see some of that, especially when you look at the prices of markets today.
Gerbz: And is that because people are like, getting out of the dollar and into risk assets?
Brian: That's part of it, yeah. Yeah, I mean, part of it is the numerator denominator effect that I mentioned, right? It's the other side of asset prices. And then, yes, of course. So, there's plenty of money that's sitting either on the sidelines or it's sitting in bonds or sitting in T bills or money market funds or bank savings accounts.
And as those rates start to come down, And as the dollar starts to weaken, you'll see a rotation where some of those dollars will flow into risk assets, and that becomes a driver as well.
Gerbz: Cool, okay. So that's where we're at with the dollar. Lines up nice and perfectly with the halving and the cycle and, what we know about how crypto operates. Which, you know, there's always this discussion around "Is the four year cycle in crypto a thing, or is this just like a global liquidity thing that happens every four years?" That just so happens to line up with the election, and the Bitcoin halving.
None of us know, but it's happening again. Here we are. Anyway, what do you got? What's next on your global macro rabbit hole?
[00:10:18] Macro: Rate Markets
Brian: Yeah, so TradingView doesn't have a great, like there is a Philly and Chicago Fed financial condition index charts, but they're not great for charting. So I didn't want to pull them up. So when I think about liquidity, I mentioned number one, the dollar, and number two, rates. As being kind of one and two, somewhat self referential.
So we looked at the dollar, so let's take a look at rate markets. You know, I touched on my background, but frankly, I've traded a lot of crypto, but I have infinitely more experience trading fixed income. So I spent a lot of time in the bond market, and I can tell you I've seen this chart before. And, there's a pretty high likelihood looking at it, that interest rates are going to continue to come lower.
And that is positive for liquidity, positive for financial conditions, and of course, positive for risk assets because we had touched on that. What we're looking at here is a chart of the two year treasury. So this is if you lent money to the U.S. federal government on a two year duration.
If you do that today, you're going to earn about three and a half percent for loaning money to the U.S. federal government. This is a look at the two year futures contract, which is just the best look on TradingView. And what you can see is just this massive sell off as the fed was hiking rates, which you would expect. Because the two year and the fed funds rate are highly correlated.
And then we've got this really messy, it looks like a W. The letter W is a common bottoming pattern, and in fact you can see a W in a lot of charts. We'll see a lot of them today.
Gerbz: I see it right there in 2007, too.
Brian: Yep, exactly. Yep, yep. Good catch. Bitcoin's got a W going on right now as well. So a W can be an interesting kind of messy bottom, almost like a messier version of an inverted head and shoulders representing a turning point. In this case, a bottom.
So you can see that bottomed out here in September, October of '23. That would be the high in interest rates. And then we made a higher low around May. And now we've just ripped higher. So lower in interest rates, higher in bond value. And so we're retesting the March of '23 level here, and to me this looks like I can put a lot of confidence in the bottom here.
Now, how low rates go and how quickly is anyone's guess. But the odds favor a further reduction in interest rates. And the two year note tends to lead the fed funds rate. So if we expect that the fed is going to cut, the interest rate on the two year notes going to come down ahead of that.
Typically, it's a leading indicator of fed funds because the market kind of tells the fed where to go, even though we feel like they set policy. So this is another really just bullish chart. Again, lower interest rates have important implications for risk assets. And so when I look at this, I expect that six months from now, 12 months from now, interest rates will be lower than where they are today. And that's positive again for risk assets.
Gerbz: Which includes all of crypto except stable coins, maybe.
[00:12:51] Macro: Gold
Gerbz: Okay, cool. Where do we go next?
Brian: Sticking with this macro financial conditions theme, I wanted to pull up the chart of gold. Gold is kind of like the old...
Gerbz: It's just ripping so hard.
Brian: Ripping. Yeah, this is like the OG anti dollar trade. This is again, we'll stick with the weekly bars. So I've got a pretty long look back here. We had this massive bull market in gold that went from, kind of when China joined the world trade organization back in 2000 all the way through 2011.
That was a commodities super cycle. That was a massively bullish period globally in terms of infrastructure, development, manufacturing, export, globalization. And so this drove a huge cycle in commodities, kind of all commodities charts, just look up into the right from that decade, the first decade in the 2000s. And gold was no different.
Then you got, kind of a 50 percent correction off the highs and a bottoming out in about December of 2015 here. And you can see a really clear bottoming pattern. We call this a complex head and shoulders because it's got one head, but multiple shoulders. But it kind of follows the same inverse head and shoulders pattern that would suggest we've put a bottom in.
Broke out in June of '19, actually ahead of COVID, which is interesting. And then as the stimulus got going, we ripped and made a new all time high in gold.
Gerbz: Barely. A barely new all time high is a big flag for you. I've never, until you told me that, I didn't think it was a big deal, but you love that.
Brian: Yeah, we saw the same thing in Bitcoin interestingly, right? Earlier this year, Bitcoin made a new all time high. $73K or so. I think you and I might have been recording when it was happening, which was higher than the November of '21 $69K high. But since then it rolled over, the market didn't confirm it.
So we saw the same thing in gold. It didn't get confirmed, and we get this messy sideways chop. I traded a lot of this. It was terrible, I'll tell you, August of '20. Until we finally broke out again, February of '24. And that was really the market anticipating that liquidity conditions were going to improve.
So usually the market's about six months ahead of that. So we broke out in kind of February, March. And then sure enough, In September we got the first rate cut. So the market was about six months ahead of the fed in terms of gold kind of sniffing out that financial conditions were going to start easing, and that interest rates were going to come down.
And so since then we've had this huge move in gold. I mean, off the lows, the 2015 lows from $1600, we've gone to $2600. Just a massive move. I mean, that's a over 50 percent move. But even from the breakout at roughly $2000 to today $2600, a 30 percent move in gold is no joke. That is a huge movement.
It's happened very, very fast. And I've got a couple of things drawn here. The red line was just the demarcation of the breakout, which we already discussed. And then the green upsloping line I borrowed from Peter Brandt. This is a parabola. So gold has entered a parabolic phase, and here you can see that it's rising at an increasing rate. And it just looks like an extremely strong chart. Probably a bit overbought here at 26, $2700 as we're talking today. But nonetheless, this is an extremely strong message from the market coming from gold.
Kind of confirming the other look, right? We've got weakness in the dollar. We've got the expectation of lower interest rates. We've got gold sniffing all that out and ripping higher. And now we have risk assets moving higher as well. So it all kind of lines up with the typical pattern around a loosening of financial conditions.
Gerbz: I have so many questions for you after that. Is it odd to see...I would never consider gold to be a risk on asset. But like right now we're talking about how all these risky assets are like on deck to moon while gold is doing it at the same time. Is that an odd scenario?
Brian: No, it's actually more common. It's a good such a good question. It's more common, actually. So gold is more of a risk on asset. And frankly, Bitcoin is as well. People struggle with this a bit. So sometimes you get gold rallies in the face of geopolitical events, but oftentimes it's in the expectation that it's not necessarily that a geopolitical event will be bad for risk assets, but more so that it will require a lot of fiscal stimulus or monetary stimulus.
And so gold is kind of just the other side of the dollar. And it tends to be a lot more risk on. It will oftentimes rip in front of inflationary periods. So just like gold kind of sniffed out the fact that the fed was going to cut rates in September about six months early.
This is really interesting because how could the gold market have known about COVID and the stimulus, right? But if you go back to June of '19, that was roughly six months before the massive bazooka of stimulus around COVID, right? And gold started out right before that. So some of that, it might just be cyclical. And some of it, of course, was driven by that once in a hundred year event, so...
Gerbz: Or global conspiracy, right? I mean, the insiders knew COVID was coming.
Brian: Yeah, and just to drive home this point about gold being a risk on asset, you'll see gold sell off in crises because people, when there's margin calls and there's panic, people need dollars and they will oftentimes just sell whatever they can. Not what they necessarily want to.
We can look at like, 2008 is a good example. So here, gold made a high in March of '08, and at roughly a thousand bucks an ounce. And then it just completely collapsed and sold off as we got into the great financial crisis. So here in October of '08, it had lost 30, 40 percent of its value. So as we were going into the great financial crisis, which was great for gold, if you zoom out a bit in the very short term, it drove a pretty big sell off.
Gerbz: For anyone who struggles with charting and thinks that it's like this technical, difficult concept, just look at how simple Brian's charts are. And I was just going to point out, like the resistance levels that you drew in red there, that's all you need to know that gold was breaking out.
Like the day we got a green bar that broke above that red horizontal line you drew, it was game on. Anyone can see that, anyone can draw that line. This really isn't rocket science, and I think a simple breakout of an all time high is like the most obvious buy point for me. I use it all the time.
Brian: Yeah, no, that's exactly right. I mean, I use classical charting principles. I think you and I spoke about that last time. And honestly, my favorite patterns to draw are just horizontal demarcations of support and resistance. So if you have just a flat horizontal zero degree line that shows a demarcation of support and or resistance, when you get to move above that, it's usually a pretty good signal to put a position on or take it off.
Gerbz: The last thing I want to bring up on chart was if you scroll back to November 2004, you were mentioning about how that was a big commodities bull market and how commodities were ripping for what, over a decade there, basically. November 2004, that is when the gold ETF launched.
You mentioned just before that, maybe 2002, you said that's when China kind of joined the global commodities game. But also, I just think it's so interesting that we just had this, the Bitcoin ETF launch. And like, is Bitcoin digital gold? I don't know. I think so. And look what happened to gold when the gold ETF launched. So that's a pretty big deal.
Brian: Yeah, it's a great point. I mean, gold more than doubled after the launch, right? It was trading at 400 bucks and it eventually went to over $2000. Yeah, so it almost 4x'd. And frankly, there were a confluence of factors. Like we talked about China, we talked about cyclical components, the ETF. So a lot of times you see that as well, where it's not just one factor. It's a confluence of of factors.
Gerbz: Definitely. Yeah, but making it easier for everyone on earth to access the gold trade, like, that helps.
Brian: Yep.
[00:20:10] Macro: Miners
Brian: Moving on, yeah. I want to, just sticking with the gold theme and precious metals, I'm just gonna show more. There's of course gold, the commodity, and then there are stocks or equities that you can buy that produce gold. They're called gold miners. So those companies are involved with extracting gold out of the ground, typically from mines that they own, and selling it into the free market.
So when the price of gold goes higher, it's typically good for the miners. They can sometimes lead gold, they can sometimes lag gold. That relationship isn't totally clear. Right now, they're lagging. So I think a very interesting trade setup, and so I just wanted to touch on a couple of miners.
And instead of talking about any one in particular, even though there are a few I like, it's just single miners are very risky positions. So I would caution people on that. Instead, I just wanted to look at a couple ETFs. There are ETFs that track a basket of gold miners. The two most popular are GDX and GDXJ, and I'll talk about the difference.
But GDX is the first one, this is the major. So these are, basically, this is a basket of all the largest reputable gold miners that are publicly listed. And that's what this basket represents. And the only thing I really wanted to point out in this chart is gold's had this huge move higher. Whereas GDX, the basket of miners is still actually below its August of 2020 level. So remember looking at the gold chart, if we go back to the August '20, July '20 period, here was the $2000 mark.
Now gold's ripped to 26, $2700. Miners are lagging that, so maybe they won't catch up. My bet is that they will. Again, I like horizontal demarcations of support and resistance. I don't love upsloping or downsloping lines, but in this case, I just thought this was particularly interesting.
If you draw a downsloping line connecting the top in 2011 that we talked about to the August of '20 high, there was a retest in April of '22. We have just broken out of that downtrend. So I think there could be quite a bit of upside left here in the miners. That's GDX.
And if we look at GDXJ, it's showing basically the exact same thing. GDXJ, the only difference is the J stands for juniors. So this is the junior miner, so these are smaller miners. They tend to do better in a bull market because what happens is they'll get bought out. So the big miners will buy the miners, and so you'll get more juice, you'll get better returns.
And so this chart at a really interesting spot because again, same horizontal downtrend that it broke out of. Found a lot of support on its 200 week moving average, and now it's actually retesting that April '22 level. And so if it can get some momentum above that it's got a lot of room to run.
I think that's probably a really quick move back to these August of '20 highs. And from there, it's anyone's guess how high it can go. But there's a lot of upside. I mean, this thing traded at $180 bucks back in the prior major gold bull market, we're down at 50 bucks. So that's a 4x, which is pretty good for markets.
Gerbz: Cool, yeah. So the gold alt miners are poised to rip here. I like that.
[00:22:58] Macro: Silver
Brian: And then last chart on precious metals, is silver. So silver is kind of like the alt coin to gold, if you will. It behaves very similarly, so it tends to be really high beta. So you'll see, if gold goes up 1%, silver might go up 3% or 4%.
And so a lot of trad fi DGNs like to trade silver, if you will. It was kind of the original, degen alt coin. So there's a super interesting chart here. So again, I've got weekly bars. You see this massive move in the early 1980s. The Hunt brothers famously got prosecuted for cornering and manipulating the silver market, which drove this short squeeze up to 50 bucks an ounce.
And we've actually never really reclaimed that level going back to 1980, is pretty fascinating. We did see a retest of that level. We talked about the precious metals and commodities bull market through the early 2000s. So we saw a retest that level in 2011, and then silver has been kind of a dog since then.
I mean it, from 50 bucks, it went all the way down to $11, $12. It behaves like an altcoin, right? Just down in the dumps. It ripped here on the COVID stimulus. So you can see the 2020 move, right? And then after that rip, it's been just consolidating, right? So it's been in this messy, choppy sideways.
I've been trading that, it's been tough and painful. We got a breakout again, the anticipation of an easing in financial conditions about six months before the fed first rate cut here. We broke out in kind of March, April timeframe, broke out of this triangle that I have drawn representing the consolidation in red. And then a quick back test or retest of it.
And now, we're retesting those breakout highs. And it's a super interesting chart to me, because you can kind of see that retest. So here you can see the consolidation, the breakout in April of '24, the retest which was last month in August, and now we're retesting those breakout highs.
So to me, if we can get above that May '24 level, which we're testing like, literally today, there's almost no resistance. Like, when I look back in this chart, there's really almost nothing in the way. Nothing significant in the way from silver retesting its all time high back at $50 bucks.
So I think, my call is if we continue to get the macro variables lining up, we could see silver retest its all time high at $50 bucks. And call it six months or 12 months from now, it wouldn't surprise me.
Gerbz: Obviously, it's not gonna blow through 50 there. Maybe chop around a little bit. If it wants to keep going, sky's the limit there too, which is nice.
Brian: Yeah, and you would see this, massive pattern, you get this huge base from 1980 to 2011. And then you get the second base from 2011 to 2024, 2025 assuming we get that move. And it takes the shape of a giant cup and handle, like you can see the teacup here and then the handle. So that's just an ascending pattern.
Gerbz: It's a generational cup and handle.
Brian: Yeah. So sky's kind of the limit if we can get above $50. But let's get to $50 first, and see how the market responds. I think if we're lucky enough to get there, we would probably pause and see some resistance before we see any, big move higher.
Gerbz: Cool. The silver trade, something I've never even thrown up on my screen. That's why I love going through this stuff with you. You've got some cool insights into things that I'm not paying attention to that are all impacting the crypto markets. Like, maybe silver and Litecoin are correlated. I've never looked at that.
We always joke about how Litecoin is the silver to Bitcoin's gold. So yeah, that's just fun stuff to poke around at, doodle on, draw some lines on it and see what you think. Place some bets. Like, that's kind of what we're doing here with charting.
Or better yet, we have a thesis about where we think the market's heading and we can either decide what price levels to buy at, where to sell at, and how to place our positions by using the charts. And that's I know how I use them, that's how I know you use it.
Really cool and really insightful. Man, we're I want to throw out right now we're a half hour in, I might break this episode up into a global macro episode, and then crypto episode. Because we've got so much to go through here and we're just getting cracking.