📺 The State of the Charts with Benjamin Cowen

hey bankless nation welcome to another episode of state of the nation this is the episode where david and i get into the charts well not just david and i we brought a special guest who did we bring on today's state of the nation david yeah benjamin cowan from into the cryptoverse who is my favorite charter when i go and decide this time to look at the charts and kind of just want to get myself grounded as to where we are in the world and charting it's this interesting word right charting as in like you know the the candles that you see on on a chart but charting is also like

charting a course and like navigating a course and so uh on the inevitable uh metaphor of going westward we're bringing in our cartographer to help us map out where we are in the world of the markets where are we in this markets market cycle are there cycles even more at all uh so we're gonna ask some pretty broad questions uh to ben our our resident cartographer as to where we are in the world of these charts yeah and i i don't look at charts very often it's kind of but it's i do enjoy it it's kind of like candy to me david

so it's like i you know i i touch it sparingly or else i'll over indulge myself um but what i love about ben's work is that he looks at the uh kind of the macro market cycle as well so it's not just like what are we doing on the daily or what's the weekly looking but like big picture where are we in this long-term trend so i know we're going to talk about that i know we're going to talk about cycles i know we're going to talk about the dip that we have experienced just like right now as we're recording this and then i know we're going to talk about the close of 2021 because this is almost a year wrapped up

and then what 2022 will bring everyone is curious about that um david we've also got some news in the bankless nation so we dropped an episode with former cftc chair crypto dad chris john carlo the guy who brought us bitcoin futures made a lot of this possible just a fantastic episode it was uh i i think you said the most dad episode ever that we've done on bankless and that's because chris has all of this fantastic fatherly advice that he was uh imbuing on the bankless nation on crypto and you

know and um also he had some great insights from being in the trenches being a regulator so make sure you catch that episode also david you did an episode with g money who's a traitor kind of a chartist himself i listened to that this morning it was fantastic what's the the preview of that episode yeah gmoney is this guy that's just exploded onto this nft scene he's the famous knitted cap ape on crypto twitter uh and really got left uh left crypto after 2017 2018 unlike unlike a lot of people that stuck

it through the bear market he was like nah this is this is too crazy i'm gonna leave it's too long he's coming he comes right back right at the start of defy summer the perfect time to just get back into it uh and then ends up going through d5 and then down the nft rabbit hole and overall i think it's a story of a guy who was focused on trad five markets and then got into crypto and then into nfts and it's also a story of like culture progression where there was zero culture in tradify a decent amount of culture and defy and a ton of culture in nf2 nft so while this guy's

story is progressing along different markets it's also closer and closer towards culture and of course that is always where we finish off with every layer zero yeah we'll talk about a guy always being at the right place at the right time too his timing is just impeccable it's really a really cool story um also guys we want to tell you about our friends at opla so they've sponsored this message and want us to let you know that if you are thinking about going full-time in a dallas particularly if you're in the u.s you've got some considerations okay it's like

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yeah check that out at bankless.cc slash opolis that's i o-p-o-l-i-s uh all right david i'm gonna ask you the question what is the state of the nation this week friend yeah i already leaked it a little bit but we are charting we are charting a course the charts always go to the right so when we keep on going right what is out there are there monsters out there would that be lurking in the seas like i said ben is a is a cartographer uh and he's a the actual title is the technical

analysis uh quant um but in the world of crypto where we have a frontiers to explore he is our cartographer that's going to hopefully illustrate what might might be ahead of us as we wrap up 2021 and what might be in store for us with 2022. uh we shall see well guys i'm really excited to hear what ben has to say about this because i don't know what's in store for the next month or the next three months i have a fairly good picture of where we're gonna head in the end destination but not sure uh you know apart from that so uh we will be right back with ben but before

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can also use wallet connect inside of ledger live to connect to all the other defy apps that keep coming online defy never stops growing and the ledger live app grows alongside with it so click the link in the show notes to see all of the defy apps that ledger live has and stay tuned as more apps come online and if you don't have a ledger hardware wallet what are you even waiting for go to ledger.com grab a ledger download ledger live and get all of your defy apps all in one space all right guys we are back with ben

cowan from into the cryptoverse ben is a prolific charter he's a prolific youtuber and also a prolific live streamer which is perfect because that is exactly what we are doing today ben welcome to the show it's a pleasure to be here thanks for inviting me on excited to dive into the charts with you guys yeah yeah but before we get in there let's can we talk about what it's like to to become knowledgeable in charting what's the what's the background that you have that uh makes you so good at this so i don't i mean i don't even necessarily know that i would say that i

have a background in in like your traditional technical analysis like a lot of that stuff i honestly don't even really know or put too much meridian in the first place especially on the shorter time frames um but so yeah my background i have a bachelor's in mathematics a phd in engineering nuclear engineering and i you know after that i worked as a postdoc and a staff scientist at a national lab and i started doing this stuff you know in 2019 in fact uh one year

after i'd started my postdoc and i i thought it'd be interesting to sort of navigate the cryptoverse in a more quantitative perspective uh not not your typical like head and shoulders or um that kind of stuff which i don't really put too much weight in the first place and i i thought it might be cool to try to more like look at it from a sense of like data science right and you're sort of mining long-term trends in the market that kind of stuff and and then yeah like it it the channel took off and then i ended up quitting my job

um and yeah i've just been doing this full-time since january actually of this year so congrats on that ben you've got a fantastic channel uh 600 over 600 000 subscribers at this point in time so some absolutely massive growth um congrats on all the success and i'm curious like why crypto of course you could apply these skills in other industries why did crypto draw you in yeah so crypto drew me in because when i was back in 2010 i i was getting my

undergrad in mathematics and in the spring semester of my junior year i believe um i i took a a class in cryptography actually and uh in the because i was doing a math major and it was one of the electives and i they didn't i mean it's not like they taught us about bitcoin back in 2010 but naturally if you're if you're learning about cryptography i i saw bitcoin um and then i started to follow it some i didn't invest in it at the time unfortunately um

uh but then i followed it a lot and then i really was following it while i was in grad school uh just because i thought it was a really cool alternative to you know to to the traditional banking system that we have and and thinking that bitcoin is basically the soundest money and then you also have ethereum which i i'd more or less just consider them to be the blue chip cryptocurrencies bitcoin and ethereum um and i i saw a lot of people get burned in in 2017 2018 um and i was like all right well you know

there's got to be a better way for people to navigate this stuff than just blindly blindly throw their money in uh in a in a bubble mania phase and then basically cash out at the worst possible time and then only to return again at the worst possible time to get um so that was sort of the goal was to say all right well let's let's come up with a method to the madness uh which actually i guess at the end of the day will will probably help reduce volatility in the crypto space but um yeah that's sort of the back story before one more question before we dive

in into the charts ben would you say that you kind of have developed your own style of looking at the charts or have you followed in the footsteps of you know experts that have come before you or is there some sort of um actual like you know history to your style or did you kind of make it up yourself i mean i i i think some of it i made up myself but it's not like everything i do is it's not like i'm the first person to do all the different types of analysis you see i mean i imagine you know you're going to have clients on wall street that are probably doing you know they're

probably mining data as well and trying to look at long-term trends some of the stuff we looked at are like sharp ratios ortina ratios that kind of stuff which is basically looking at your risk adjusted returns of course people are going to do that that's been you know that's that's just sort of classical theory and developed decades ago uh i mean i'm certainly not the first person to look at a logarithmic regression but i i think you know i i think when you when you look at all this stuff and you put it all together and and you mine the data and you look at say the trends

between one crypto like bitcoin and then another one like ethereum you can sort of tell you can kind of tell a cohesive story that makes a lot more sense than than trying to say you know what's going to happen today or tomorrow because i don't i mean i don't know what's going to happen no one does uh i mean not only does no one know what's going to happen tomorrow we don't know what's going to happen next year either but at least we can try to come up with a plan on how to navigate the crypto space uh really no matter what happens is i mean that's the ideal goal well you you said it and i'll say it

again no one knows what's happening all these things are just models or predictive models uh but now that that is out of the way ben let's go into the charts so we can try and figure out what actually happened what's going to happen next yeah what's going to happen what's going to happen so yeah so the first question i have is like uh the concept of market cycles where are we in this current market cycle does the concept of a cycle still exist uh and if it does still exist how do we know where we're at in the cycle

are these all fair questions to ask i think it is a fair question and i i think the definition of market cycle is somewhat ambiguous and i think this is it's basically one of those things where the longer we go you know the longer the cryptocurrency asset class is around the harder it's going to be to discern from one market cycle to another um and then you can start questioning well what even is a market cycle what constitutes the market cycle does it have to be an 80 drop is it you know is if the definition is just all right well if if the asset class drops by 80 then you

have a new cycle some people prefer to measure it by the habit right and a lot of people like to measure it by the bitcoin having the problem i have with measuring it from the having is that you know like a lot of times bitcoin can rally significantly ahead of the having and so then you kind of miss out on what happened before then you can also measure it from potentially like a market cycle bottom but you know if you measure if you measure the the roi of bitcoin from the market cycle bottom you get a nice chart that looks like this um of course one of the issues is again

there is some ambiguity and what constitutes a cycle because if you just said it's an 80 drop then you could argue that 2013 is two separate cycles you know you could say well this is a this is a one cycle and then this is another cycle uh so there i think there is some subjectivity there so again it's not something i think you can take to the bank or anything but if you were to allow yourself some subjectivity in what you would constitute a market cycle and say well the first one is more or less the 2011 cycle where we basically just went straight up and then we came straight back down uh then we had the 2013 double

peak cycle the 2017 cycle which i'm sure a lot of people are are familiar with at this point and then um and then we also have the uh the most recent cycle and sorry if there's a lot of background noise right now there's someone blowing leaves right outside my my window um but we're currently in the in the 2020 2021 2019 cycle it and one of the things we've discussed is well how do you know where you are in a cycle and one thing you know there are a lot of people that are calling for these crazy

moonshot predictions for bitcoin you know right now right like literally like as we as we speak they're calling for these crazy media moves to begin and take us into the very end of the year followed by a year-long bear market and and i think the problem with that is it's it's very deterministic it also gives people i think people are giving themselves too much credit and thinking that they know exactly what's going to happen in the market um to say that everyone thinks that you know it's going to just go to 100k or 300k by the

end of the year that's really not how markets work you know if if a lot of people are expecting something then people are going to front run that and then there's going to be more people that try to front run the people that front run it and then therefore it sort of doesn't really happen it's sort of the same thing that happened in april you know i i was looking at this chart back in april and i i thought look guys this is great and and krypto is doing really well but we're also in terms of the cycle roi we're ahead of schedule and it would make sense for us to have a cool down phase that should last at least three to six months at the very least now the

other interesting thing is when you look at these cycles a lot of people assume again they have to happen every four years a lot of that's built around the bitcoin having but i would argue that if you if you really mind the data and look at it from say market cycle bottom you could easily argue that look the cycles link them right and i think it makes sense that they linked it because every cycle there's more to speculate on right 2011 and 2013 there wasn't really a whole lot to speculate on other than those you know initial sort of

narratives about about what bitcoin was and and and you know it's ultimately going to be you know the the it's going to overtake gold and whatnot but then in 2017 you had more to speculate on right you had the ico craze that ethereum brought us and and unfortunately 99 of those were were outright scams uh and and i think therefore you know people wised up to that and then by the end of 2017 early 2018 you know i think people sort of realize they're throwing all their money into these icos that are essentially just

false promises you know some someone with with some basic experience on how to spin up a wordpress site and mint an erc20 token we're promising the the next best thing and it became abundantly clear that a lot of these people were just blowing smoke right and we were we were nowhere close to where they wanted us to be and then you fast forward to this cycle and this cycle is even more it's different in the sense that you you actually have something to speculate on right you have you have decentralized finance right you have all these centralized platforms

that that a lot of people like to use and i mean i get that a lot of people are are anti-centralized stuff but look a lot of people in the world don't want the responsibility of managing their own crypto and that's just the way it is and so there's going to be some centralized platforms and whatnot um but you also have institutions coming into the space not that there weren't any institutions back then necessarily but the narrative this time is certainly stronger than it was last time so i think from a fundamental perspective it makes sense that the cycles should lengthen and then technically speaking from a market capitalization perspective

it's going to be hard to push the price of bitcoin another 10x right everyone wants to promise it's going to go up another 10x or another 100x but the truth is is every cycle so far we've seen diminishing returns and and that's sort of a buzzword that that people don't really like to hear but again even in crypto the returns that you're going to see with you know with assets like bitcoin and ethereum and all coins while while even though even though they may be technically diminished from what was possible in prior cycles you're still

likely experiencing returns far greater than you can find in most other asset classes if you take ethereum it was at 80 bucks what 18 months ago and today it's trading for over 4 thousand dollars and technically speaking we are nowhere i mean we're still very much in diminished territory right i mean a one thousand dollar investment into ethereum back in november of 2015 would have been worth two or three million dollars by january of 2018. so that gives you an idea of you know ethereum can still go up a lot and still experience diminishing returns so i i

think it makes sense from a lot of a lot you know from a fundamental perspective from a technical perspective it just seems like it's going to take more time a lot more capital to push you know to continue pushing the price further and further up the curve and therefore you know you look at the chart and i know a lot of people think that we have to end the cycle now a lot of people thought it was over in april a lot of people thought it was over in september um you know because of some various metrics but i look at the chart and say i think we still have a long way to go

and i don't think there's any reason it has to end this year the only reason i think it would end this year is if is if bitcoin went parabolic in the next six weeks right and and i don't think it's going to go to you know 200 000 or something in the next six weeks um therefore i think it's likely that we we still have a ways to go so ben when i see this chart two questions pop up for me because let me ask the first one uh first so what we're seeing is a chart with uh four cycles here we are in the fourth cycle you are

you are maybe predicting or contemplating longer cycles for each and indeed this is getting close to the longest cycle and maybe it doesn't peak at um the the place that the other three cycles did but this is um also a chart i believe is this just uh bitcoin is this just plotting bitcoin is this okay so this is a bitcoin let me ask about that assumption so obviously that was the assumption in the first cycle in the second cycle it was heavy bitcoin maybe in the third cycle in the fourth cycle

do we still think bitcoin is the only crypto asset to watch or the primary one to watch why chart bitcoin rather than total market cap of all crypto for instance yeah that's a great question and i i think i think it's important to do both i do think that bitcoin controls the market um you know i know people don't like that and it's not it doesn't mean that if bitcoin goes up everything else has to go up it just means that if bitcoin is healthy then the rest of the market is free to fly right like look at

the last few weeks with bitcoin more or less i mean bitcoin's gone sideways for the last month aetherium has been trending higher we know that if bitcoin is going sideways above its 20-week moving average then a lot of a lot of other cryptocurrencies are are free to run they don't have to stay stagnant just because bitcoin is staying stagnant but if bitcoin is say below the 20 week moving average or you know if it's trending down then what happens is a lot of the off value of the altcoin bitcoin pairs they trend down as well um so not only are you losing money

in terms of your your usd valuation of your off points but you're you're losing valuation in terms of what it's what it's worth in bitcoin is if you had converted it all to bitcoin how much bitcoin would it be worth and i i like to say that that you know it's important to to sort of know where bitcoin is because if we think bitcoin is getting to the end of a cycle and it's going to go down 70 or something over the course of a year then it's going to very likely drag you know 99.9 of the market with it right there's always going to be a

couple coins that that do well during the bear market uh but for the most part that's where where a lot of assets go down but you know you ask a good question and and we can look at the total cryptocurrency market capitalization as well so you know this is the the total crypto market count and you can see that last cycle we made it to just below one trillion in terms of the market capitalization so far this cycle we've been able to break around three trillion right so this one i believe it was around 840 850 i don't remember

exactly what it was but and it depends on what what what website you use but we were somewhere over 800 billion so far this cycle we've reached around 3 trillion you know i would argue that we still have a ways to go i'd like to see us hit the top of this you know this logarithmic regression channel and i i think this is sort of one of those things that can help try to provide some guidance to say look you know even though bitcoin you know there could be some evidence that as as the bears have pointed out back in in august when they said all right this is just going to be

a dead cat bounce and we're going to go back down i i think that you can look at the total crypto market cap and say well it still seems like we have a lot of juice left in us but we're not going to we're not going to expend all that energy and say the next two months it's going to take a lot of time for us to really get to the top of that curve and so it it sort of brings in the idea again lengthening cycles and if you if you take the percent difference between the the total crypto market cap which is the white line and then the fair value

logarithmic regression trend line which is the red line note again this is a key concept i think that i i really fail i i fail in my end to explain it properly a lot of times the red line monotonically increases right so it only goes up it doesn't go down so what that means is that the fair value of the asset class as a whole is trending higher and and the only thing changing is how far are we overvalued from the fair value or how far are we undervalued from the fair value and the bear markets

are when we're below the line right when we're below the red line that's really where the bear markets are and and that's honestly that's the best time to accumulate crypto you know i mean are people accumulating crypto now of course they are i'm even accumulating you know various cryptocurrencies right now but right now is not the best time to accumulate it might be the best time you know for you know over a certain time period depending on what your time preference is but the best time is always in the bear market and that was back over here uh you know one to two years ago this was the best time to sort

of load up and then now we're sort of in this overvaluation territory but i wouldn't say that just because we're overvalued it means we have to go back down there there's been plenty of examples in the past where we stayed overvalued for for years before going back down to the undervaluation um area and so if you take the percent difference between the white line and the red line and then we shift it by 100 just so we get the undervaluation right here this is what it looks like and so you can kind of see that all right well as as time goes on we you know the the extension from the

fair value is diminished okay so like if you were to go over here and measure the percent difference between the white line at the peak to the red line it's further than this one to here or this one to here and so the argument then becomes well it's likely that the final market cycle peak extension from the fair value it's probably higher than where we currently are but it's probably going to be technically diminished from the fair value compared to the prior market cycle peaks okay now one more interesting

observation on this chart is that despite the fact that we are at a higher market capitalization now than we were back in april we're not as overvalued now as we were back in april and the reason is because our reference point is the red line and the red line used to be you know the the fair value used to be 700 or 800 billion but now the fair value is 1.09 trillion so it's all in reference to what the fair value is and again the fair value is turning higher and you can see you know in in several more years the fair

value will be five trillion right the fight for the entire asset class and so it just slowly trims up with time so i i think the question about do you just look at bitcoin it's a good question i think you really should look more than just at bitcoin there's there's a lot of other assets that that are going to grow i think ethereum is is one of the the biggest ones that's going to do very very well and so i do think it would be a mistake to sort of just look at bitcoin and that's it with that said i think it is important to have charts where you do look at bitcoin so that you can kind of figure out where it is in

its life cycle or in its market cycle it's fantastic information ben so my my second question on that cycles chart is is just a question about the concept of cycles okay so some people and i think people maybe say this every cycle like this is this cycle is the end of all cycles this cycle is the the super cycle and we might have dips but we're never going to see the sorts of cycles we we did uh in the past what's what's your i guess reply to people who believe in the super cycle and you're

thinking in terms of a fourth cycle here do you do you lend any merit to that any credence to that well i think a lot of it is sort of like what's the definition of a super cycle i a lot of people say things like well you know to assume that the cycle is going to go in 20 into 2022 is assuming that this time is different right and and a lot of times you know the the the implication of anyone ever saying this time is different is usually they get it doesn't work out so so well for them because a lot of times it's not like this time is not different right it it tends to

repeat but i i my retort to the statement this time is different is to say this time would be different if the peak occurred in december because the prior peaks as we can see have technically lengthened from market cycle bottom right there's several hundred days longer for cycle two than cycle one and and even even cycle three was a couple hundred days longer than cycle two so to assume that the peak has to occur

in say december that would actually be assuming that this time is different there and i know that that a lot of people are probably not going to agree with that but that's what i think i think the obvious trend is that the cycles are lengthening and so that's my that's what i think is going to happen i think ultimately the cycles are going to lengthen and and we're going to go much further out so i i think the question though going back to super cycle is what constitutes a super cycle you know if the if the if the cycle were to extend another year