Alex Thorn: 50-Week Signal Says Bitcoin's Bottom is In

Now, with Bitcoin up around $81,000 today following the Fed rates decision, uh that's after largely moving sideways the last month. The price action has Bitcoin investors looking for the next catalyst higher and whether or not the bottom is truly in for Bitcoin. Joining us now to help answer those questions, it's Alex Thorne, Galaxy's head of firmwide research. Welcome in, Alex. >> Yeah. Hey, Grace. Hey Sean, thanks for having me on. Congrats on the show. >> Oh, thank you. And we appreciate you joining us today. So, let's talk about Galaxy's new note. It opens with a pretty blunt call. We believe the bottom is in. Uh, which piece of evidence carries the most weight for you? >> I mean, there's a lot, but I think in terms of the bottom, really, you're looking at the cyclicality and and I pointed specifically to the 200E moving average as a historic floor during bare markets and the 50we as the typical ceiling. There's never been a re uh test of a new lower bottom um of a 20we long or more uh time below the 50we um after it's been retaken. So saying it again, regaining the 50we average after 20 plus weeks below it has never preceded a red draw down. So true, we only have 17 years of data here, but um you know, we're going to look at the whole history of Bitcoin and and so just from a pure, you know, cyclical standpoint, technically speaking, we're now five or six weeks closed above the 50WE. We've never seen a new low in a bare market when that's happened. So that's I think the simplest uh and uh way of saying that there's the bottom is in. >> Absolutely. and and we tend to agree that 50week moving average being a a really key level. Um do you believe that uh we have a date with destiny maybe retesting that level soon? Um you know the strength by which we we passed that level you know previous cycles notably uh the past three uh we closed at least 20% above it before coming back to touch it. This time we've only uh at most been about 8% above it. Um what does that strength um on the upside on that continuation past the moving average tell you about where we might be? I'm not sure if it tells you that much, but I you know I could we the 50we today is like probably 75k or so 76k and we could absolutely go to that right I mean it's it's wouldn't be that surprising but I would say one thing that has surprised some people and is the resilience around 80k while you know the last month has seen one of our sort of every six month AI anxiety freakouts at the market right like you've had incredible anxiety in the AI wall of worry over the last month. Yet, you've not had Bitcoin break down back to the 50WE or lower than 80 really at all. I mean, we've seen wicks, you know, into the 79 range. But so, what is the cause of that resilience, I think, has been a question people are asking. And one answer is positioning in Bitcoin is very light right now. Basically, none of the macro hedge funds and traders own it. the people selling uh assets in you know response to their fears of AI buildout slowdown and credit uh that we've been seeing over the last month in traditional markets they don't own Bitcoin right and so that this is one of the reasons that I am bullish here specifically it's not just cyclicality uh or or the fundamental case which I think is only getting stronger it's also the fact that it's underowned the crowd is not here right so you have a chance uh if the bottom's in we're not saying you should knife catch, right? The we're not saying come in at 58 and hope it's the bottom. Bottom's probably in, yet the crowd has not yet returned. And I think that's part of the reason we've seen it resilient uh over the last month or so as well because the people selling assets right now, they don't really own Bitcoin. >> And we we've seen some reports from some of the ETF providers at Wells saying those that the few that do hold it aren't selling. Which brings me to the idea of um the the 13F filings, which you mentioned in your report. Um, you know, you're saying that the the recent ETF selling sits almost entirely with the multistrategy and macro funds, the basis desks, the banks just trading books. Um, you know, while wealth managers and sovereign funds just keep being a net buyer, uh, the next 13F filings are due by November 16th, I believe. What do you expect them to show? And what do you think would bring that fast money back in addition to the current buyers we're seeing? Yeah, I think like it was not the fast money that took Bitcoin in August from the 60K range to the 80k range, right? It was long-term believers. And you know, if you look at the Q2 13Fs, it's Brevin, Millennium, DH Shaw, Tudtor, all exiting fully or declining their holdings substantially, while Mubadala and Abu Dhabi Investment like Sovereign Wealth and then Morgan Stanley were the largest adders. You know, financial adviserss aren't like trading on a weekly move, right? This is maybe they rebalance quarterly. they even less than that, right? So [clears throat] they're they're much longer term hands. So this was a move from the uh you know the faster money, the macro, the multistrats, the guys that you know are trading 5% tacticals and you know over weekly time frames uh to to much stronger longer term hands. That's what we saw in Q2. Yeah. November 16th will be 45 days after the close of Q3 and that's when the 13F filings are due. Right. These are reports from institutional investors disclosing to the market what they own. Of course, Bitcoin spot ETFs have to be reported in those. Unfortunately, all the biggest historically report on the very last day. So, we're waiting for November 16th to get a good look. I think you're going to see the same. I think you're going to see substantial net adding in Q3 of Bitcoin spot ETF exposure by wealth managers pensions endowments and sovereigns. Um, and I don't think you'll probably have seen the return of the faster money hedge funds yet um in Q3. Um, we anecdotally don't think they're here either from our own experience in the market. Um, but I I I think they'll come back. You know, they like to chase the momentum. I don't know when they'll come back. I think it's a perfectly good question. Is it at 100 110? Do we have to get back to the prior all-time high before the crowd starts to pour in? You know, in Bitcoin land, the narrative often follows the price. You know, people right now aren't looking at Bitcoin. Like every panel at every conference is like 300 panels on tokenization, right? And we've seen that story before, the blockchain not Bitcoin story. And it usually marks a bottom and is a good time to actually be buying Bitcoin. And you know whether the pendulum has like what will cause that the narrative pendulum to swing back in Bitcoin's favor like at what price will that happen? I don't know. It certainly hasn't happened yet. Um and I'm certain it will happen. So somewhere higher than here you'll see them chase again. I think the return of a basis trade would would also um you know bring them back. Right now you you know when you factor in margin and roll cost and ETF fees like the basis is really not there at all. So you know you'd be better off parking cash in a money market fund than performing the basis trade. I think if that comes back you'll you know obviously Millennium and Brevin they they weren't necessarily net super long. They were doing the basis. um that will see some comeback too. But right now, you can't sell what you don't own. And I think that's why with the the fears that you know these it's about every six months. Remember last year was like deep sea and everybody had a freak out. Oh wait, what if AI like doesn't need as much energy, right? We we we we're going to go through that wall of worry on the AI trade. And it's just been striking to me how Bitcoin's trading at the same place it was, you know, before the freakout, right? It it really hasn't been affected by this at all. I mean, we're down from I guess we near-term peaked around 87, but like, you know, 80, 81, 82, like we're still in the same exact area. And it's it's really because of light positioning. Um, nobody owns it. So, this is one of the reasons we say it's a good time to accumulate. Like there's a variety of factors, technical, fundamental, sentiment. I mentioned the blockchain, not Bitcoin. Pendulum swinging, but I think positioning is probably the most compelling reason, which is just that the crowd is not here yet. So, you you you don't have to buy the bottom. we're 20k above the bottom and yet we're before all the you know fast money uh has come back. So um that that gives you an edge on the market. You know it's contrarian right now to be saying it's a time to buy Bitcoin. >> And before we move on from the 13Fs you know you mentioned the basis trade and obviously the CME premium has really um compressed. Is is it safe to assume that these 13F filings are are largely just spot bitcoin exposure? Uh yeah well I mean they mostly I think in in my data that I share in the report I'm only looking at spot bitcoin ETF 13F filings to be clear but they can buy like the futures ETFs there are other products there but yes I mean this is effectively spot even if you're doing the basis and putting on a short in the futures market you'd be delta neutral right so you're the filer doesn't necessarily uh need to be net long bitcoin when they show that trade like the firms like Millennium and bre were very likely mostly flat at doing the basis trade, right? So, they were long >> just to clarify like their their net long spot and they're not hedging. Like, is that safe to assume? >> Uh, no. I I don't think it is safe. I think a lot of those macro funds are going to be delta neutral or at least partially hedged because they're performing like a a b an arbitrage between the futures and the spot market, right? So, like those big guys that reduce the multistrat funds are were probably short futures and long spot through the ETFs, right? So, their net delta position was probably somewhat flat, but you can there's another chart I have in here too of CFTC data. The shorts are also substantially declined. It's not so much that they're not long, it's they're not in the trade at all. Like, no one's looking at it, right? The at scale, they're just not even following the asset at the moment. And I it's that lack of attention. And and there were obviously macro funds who were who were net long, right? who are bullish on it or treated it like a, you know, macro asset in in a in a long exposure, but a lot of it was flat, right? A lot of them were were net flat because they were um hedged in futures markets. >> Kind of a two-part question for you here, Alex, on strategy. It skipped Bitcoin purchases last week and then we just saw shareholders back the the daily dividends on its preferred stock. It was a 99% vote in favor. Um, what does first what does the daily dividends do for Strategy and then do you see treasury companies like Strategy still being a major source of Bitcoin buying through 2027? >> Well, I think it's partially a reaction the daily dividends to what Strive has been doing and and they've been having a lot of success. I think it's one of the under reportported stories is is Strive success over the last quarter and a half, two quarters. Um and maybe you know Micro Strategy shareholders are reacting to that and and by the way seeing that it's I think been working for Strive um you know like functionally operationally but also it's generated good interest for them. So not surprised to see them you know to tinker with their digital credit offering such as by giving more granular dividend payments. Um you know I I'm excited for strategies earnings call. It's tonight. I'm uh asking some questions on the call. So, um, I'm interested to see. I mean, I think the big key question is when will substantial Bitcoin purchases resume. I mean, they started the year with absolutely monster buys of Bitcoin, mostly funded by the premium in Stretch, right? And, you know, Stretch went down well below its target earlier this year. They initiated this buyback program and they've been stacking fiat now for several months. Stretch is back at the target. They've got a pile of cash, right? I'm saying now is a good time to buy and hold. Michael Sailor retweeted my article. When do they plan or can they give us any guidance on when uh the market can expect substantial Bitcoin purchases again or their target levels? I don't know the answer to that. I think it's it's that that's one of the biggest questions I think for this uh bull market is when will strategy in particular strategy um since they're a huge portion you know probably like n 95% of all treasury company purchasing has been strategy when will they resume I I don't quite know the answer to that obviously I mean we we know empirically that a premium in MSTR or premium and stretch is when they feel they can buy um when do they expect that premium to come is it at 100 is it at 110 is 125. I mean, I I don't know the answer. Um, we we I'm going to ask tonight. >> Tech stocks uh have taken a hit recently, but they are ahead of Bitcoin this year with money pouring into AI and data centers. One of Galaxy's note, it calls the AI buildout itself, a debasement machine. So, if that spending ends up helping Bitcoin, why does the money keep choosing AI stocks? >> Well, I mean, look, we're we've been in a cyclical downturn this year, right? I mean, we had our own idiosyncratic secular reasons for being down. And, you know, it takes a lot of conviction to buy an asset that's down 50% from its all-time high, which some people have, obviously. It's why we've been rising over the last few months, but you know, not everyone does. And and this even Doomberg said this for, you know, he pegged it as a generational thing, your prior guest, but that, you know, it's volatile. You know, people want to make money. They don't want to lose money. They want it to be volatile only to the upside, right? Well, you don't usually get that. That that that would be too good to be true. But um you know, the AI trade, I think, is um it's extremely compelling. It touches every part of the economy. It's enormous. The numbers are a lot bigger. You can plow a lot more money into AI investments than even Bitcoin. You know, Bitcoin at over a trillion dollars market cap is a big asset, but you know, there's literal companies that trade that are bigger than Bitcoin still. Several of whom combined are key parts of the AI trade. So I don't view I I I think that there is a little bit of competition for capital no doubt like Bitcoin's not the sentiment has shifted right it is not the sexy investment AI is you know much hotter on people's minds right now um but that will come back that also creates an opportunity Bitcoin has a demonstrated capability of going to at least 125k so it looks like it can be due to a reversion I mean you're going to be selling you know would you sell Bitcoin to buy the top in stocks it doesn't sound as compelling to me as taking some gain gains from equity markets and buying an asset that's 50% below its all-time high but has a demonstrated capability to go there that's cycllically in a nice setup and you know is light positioning I think is a compelling argument for you know considering Bitcoin as an alternative to the AI trade at this moment from from a debasement perspective right I mean enorm this this buildout is being funded by an enormant amount enormous amount of credit right it's not just of course not credit from the government so although a lot of tax incentives as well that do come from the government but like credit expansion is occurring to fund this and that is effectively debasement and then you know if it doesn't go well the AI trade and buildout is so important it's important from a national security standpoint it's important to literally every single person's retirement is so intertwined so deeply in the market it's hard to believe the government doesn't ultimately backs stop it if if it encounters its own problems which of course also means debasement So to me the bullc case for AI and the bare case for AI both result in debasement and that can you know again it's not necessarily a fundamental thing that Bitcoin does but a big portion of the world views Bitcoin as a digital gold uh anti-debasement hedge and that case only gets stronger >> and and do you think that that belief in the market that the government is going to ultimately have to come in and backs stop this should something go wrong for the reasons you mentioned right whether it's bow warfare with China, better weapons technology, economic uh incentives. Um that that knowledge that we are in this space race and it's in the government's best interest to make sure this goes well. Does that start to put the debt complex closer on the risk curve with T bills? And then is it actually becoming a a real competitor adding stress to the Treasury market of the US sovereign uh you know Treasury bonds? >> I don't know. Well, that's that's a good and tough question, Sean. I mean, I I think you know, the the debt situation is frankly out of control and the bond market knows this, right? I mean, that's why you've got yields where they are. It's just And it's not just the US. I mean, I guess in our defense, it's actually every sovereign basically on Earth has a huge fiscal problem and is in a fiscal dominance sort of era. Um, but I mean, just since 2020, like the national debt has effectively doubled. I don't think people just realize how how bad the situation is and and how these big numbers when the interest rates as the numbers get bigger it accelerates. It doesn't it's not a linear path like right you know if you're at with debt you know that has to be financed and above [clears throat] 5% and now you're at 40 trillion it's going to start to look like a blowoff top and it it basically already does if you zoom out. Um I think it's just really hard to see how this problem ever gets solved without debasement and and you know the other option of course is like crippling austerity but that will never be politically feasible uh for any any government anywhere right and so instead the you know the slow bleed of of inflation is is one path to slow or even reverse it and just like you know as shocks occur with the debt at these levels like the intervention is and you need bigger interventions every time It's like the Fed's, you know, cannon that it has to, you know, print a bunch of money and, you know, the more they use it, the less effective it becomes. And so they they get bigger and bigger and and there's just not only is there no hint, you know, we had a brief hiccup with the Department of Government Efficiency where for about a month or two, we wondered, well, maybe they really will try to get this under under control. You know, I mean, they tried. I I respect what effort was put there but of course it hasn't worked and the debt has absolutely continued to moon but like you know not only is it not slowing it's accelerating right and so the same case that led Satoshi to write in 2009 that the root problem with traditional currency is all the trust that's required to make it work or even the same case that existed a year ago at the prior all-time high if you buy the digital gold thesis and the fact that neverending debates been in government debt is bullish for Bitcoin. Those facts are only bigger today, right? So the the the fundamental case of a digital gold, you know, gold like uh hedging alternative that Bitcoin is and that many of you Bitcoin has, that's only getting stronger. So again, fundamental looks good, cyclical looks good, positioning is light, sentiment has gone away. This is this looks like a great time for an entry or a or a hold from, you know, basically everything I can see based on Bitcoin's historicals. And I love this because nobody's looking at it. I can't believe that it's contrarian right now to say long Bitcoin. >> Well, the midterms are November 3rd and the people we send to Congress will decide how crypto is regulated in this country. Stand with Crypto's Voter Hub helps you vote informed. Look up candidates on your ballot and see their crypto grade based on what they've said and how they voted. Then check your registration and make your plan to vote. Head to standwithcrypto.org/vote and get to know your candidates. Well, you know, we certainly agree on uh Bitcoin Magazine television, but um you know, you don't just cover Bitcoin, you don't just cover markets. You you've also uh been on the pulse of a lot of development uh in the AI security landscape, Alex. Um, and and what comes to mind for me is, you know, it's not just software anymore with these kind of swarm attacks, uh, and finding these old bugs like what happened to apparently the whole internet the other day. Uh, but it's also hardware level attacks. AI is is becoming so sophisticated, it's able to find bugs in hardware and leverage those attack uh, I guess surface areas of attack. Help us make sense of this. um you know what's really going on and and should this be a concern to Bitcoiners, right? Obviously, there's a lot of products built around Bitcoin that isn't necessarily Bitcoin itself. So, so how should the audience be thinking about these these new attack vectors? >> It's a serious risk to be clear, not just to Bitcoin, but to everything as we're seeing. I mean, I I don't know what to make of it, but I think both Japan and the UK have officially told their citizens to hoard water. Um, I don't know if that's because they're worried of a crippling cyber attack, but it's very clear that the the cyber threat environment has gotten very dangerous and sophisticated. Now, I I happen to think we're in a particularly aggressive front in the ongoing clanker wars, which we're going to look back on this time period as, you know, the AI the you're good at your bad AI versus my good AI. But look, the good thing is we're going around patching this stuff and so we're you're going to get these fits and starts. We're obviously in an accelerating period now. If you think of it like a chart, we're obviously ripping higher in AI cyber related risk. Um, but as they're uncovered, we're going and patching them. I mean, the PHP vulnerabilities have been around for years, just nobody found them. Well, now we have found them, right? And so they're going to be patched and and similar things, you know, in in crypto and in Bitcoin, whether it's hardware or software. But yes, it's a scary time and I think but I think we're going to come out stronger. Um and this is we're going to look back on this as one of the most um in you know sort of it's [snorts] not AGI. They're not doing it autonomously the agents here. They're being directed by bad actors to or good actors to they're white hating and disclosing these vulnerabilities. But it's it should plateau as the defenders get a hold of the models and the better cyber capabilities. they're patching these bugs and you know eventually we're going to be living in a world where basically every software is written by AI and it will have been audited by AI. So I I think you're going to plateau at some point where um you know as the models sort of um they they themselves may plateau a little in terms of cyber capabilities but as the defenders go ahead and patch I would say like in Bitcoin it's it's absolutely something to worry about right I mean we've seen it at the uh related level right hardware wallets you guys talked about um you know obviously ledgers and cold cards and there was this other one keystone they have one right like there's you know I I think as I have been said plenty um in August while covering the cold card uh you know not one Satoshi was taken from a multisig setup and the cold card vulnerability I I continue to recommend multisig I know there's variety of opinions on this the fellas Wicked and Mr. huddle and people working on the entropy lab. They prefer a dice rolled single sig. There's obviously you got to look into this and make your own decision, but I like a multi-IG setup for this because you diversify risk around multiple devices or multiple setups. Um, and it's proven to be pretty strong and obviously there's providers of, you know, um, collaborative custody, you know, Anchorwatch Lyanna Aasa Unchained etc. that I can make it really easy. So, I and big key also uses a multi-IG setup as well. So, I I like that as the solution. One last thing that I think was just posted today by Coinbase's chief security officer. They ran uh multiple top cyber models against Bitcoin Core, including through Glass Wing and Daybreak and found only two minor vulnerabilities which were responsibly disclosed to the Bitcoin core. They just posted about that today. So Bitcoin Core marks safe from, you know, the top tier frontier cyber model uh vulnerability. That's not a surprise to me. It's the most, you know, audited code in human history probably. But, um, just worth noting that like we're not I'm not particularly concerned about Bitcoin's consensus code, right? Or Libac P256K1, which is its elliptic curve. It's the all the stuff built around it, right? If you're using a vendor that that doesn't happen to be the Bitcoin core is most audited repo in human history, you know, then every every person's software that you use, whether it's firmware on a hardware device or software on a computer, like you know, the software is dangerous right now, right? And but it's getting better. It's getting patched. So I I think and I flagged this in the report by the way AI related risks um meaning like vulnerabilities cyber uh vulnerabilities that perhaps are discovered or exploited with help from AI remains a risk. It remains a risk to all parts of the economy too. >> Alex Thorne, head of firm research at Galaxy, it was so great having you. Thanks for joining us. Thanks for being having on