Where’s the ETH Bottom? | Ben Cowen

Yeah, I mean I I think that the I think Ethereum will start to outperform Bitcoin in 2025. I I feel pretty confident about that. Again, I could be wrong. You know, I mean, again, it wouldn't be the first time, but I I do think absolutely that it it will start to turn around as we get closer to 2025. My my base case right now is that it it just bottoms out sometime between now and and the end of the year.

Welcome to Banklist, where we explore the frontier of internet money and internet finance. And today on the show, we ask: when will ETH turn itself around? The ETH BTC ratio has been down for over 700 days. ETH versus the altcoin markets also not doing so great either. When is all of this going to reverse? We got Ben Cowan on the pod today, famous charter who does fantastic technical analysis and also cross references all of his work with macro forces, monetary policy, the presidential election, QE and QT. And he's got some ideas about when ETH will turn itself around, and he thinks it's actually pretty soon.

This is an episode you're definitely gonna wanna like catch the visuals for, okay, because we're talking charts the entire time and Ben is like busy marking up charts uh on screen. So uh

Charts.

fluence and charts.

You can check this out on YouTube. You get the video, uh, or actually Spotify video is a fantastic place to check this out because you're gonna want the visuals that accompany it. I would say uh Ben is a chart maximalist. In fact, we we we labeled him as such in the episode, in that that's his lens on the world. It's basically what are these assets going to do in the future? Well, we can look at what they've done previously and kind of extrapolate for it. It's a different lens than uh you and I, David, bring to uh the table in Bankless podcast, which is mostly about fundamentals and thesis and this kind of thing. But there's a certain purity to just like looking at the charts and just like logarithmically extra like uh extrapolating them forward and combining with the macro data. I think Ben is one of the best in the biz at actually doing this. So it's valuable to hear what he has to say. In particular, a question that I wanted to ask him at the very beginning, where I feel like we got a good answer from him, is the four year cycle. Is it dead? Like, have we even entered uh a bull market yet? Or like what is going on? So stay tuned for that. Guys, we're gonna get right to the episode. But before we do, we want to thank the sponsors that made this episode possible.

Bankless Nation, Ben Cowan is the founder of Into the Cryptoverse, most known for his analysis of various crypto charts looking at long-term trends across crypto market cycles. Ben, welcome back to Bankless.

Thanks for having me back. Pleasure to be here.

I think we are coming up to some sort of inflection point in the market. Um, maybe I can kind of get that take corroborated by you, Ben, with some of the charts here. But the first question I just want to ask is the bull market over? Or did it just start? Or has it not even started yet? Uh, I'm wondering if you have just from uh the ways that you interpret all the data that's available to you, how do you interpret that question?

I like to look at what happened in previous cycles, but I tend to sort of veer off from just looking at, you know, what everyone knows is the four-year cycle, but I look to see how monetary policy affects the crypto markets. So what I think that Bitcoin has just experienced, and overall, you know, the overall market is sort of a quantitative tightening, sort of high interest rate

bull market, right? That's what Bitcoin and and even Ethereum saw for the last couple of years. And and the trend, it looks a lot like what happened in 2019, in fact, right? I mean, a very similar move. The only difference really between this

You know, this bull market we had here and the one from 2019 is the the time it took to to play out. But in terms of the percent gains, they were about the same in terms of what led the market. It was Bitcoin that generally led the market. So that seemed very similar. So I would argue that the quantitative tightening phase of the bull market is is over. Okay. That there still could be a QE phase of it that occurs later on. But my guess is if that occurs, it won't be until next year, is what I would, I would, I would generally guess. And so that is where I think we are right now. And the main difference, I think, and I think it's worthwhile to really understand how the two different right. So in the QT high interest rate bull market, Bitcoin leads where Bitcoin dominance goes up. Same thing happened in 2019. In a QE bull market, like you got in late 20, you know, 2020, 2021, that's where.

The the lower market cap plays start to lead. And so that transition might occur sometime, you know, between now and early next year.

Ben, I just have a general question about kind of like bull markets and crypto and as you see them. So this is a conversation David and I uh had last uh week. And um I don't know that we came to a definitive conclusion for like for our own perspectives. We might have different hypotheses on this, but like the four-year cycles, that's been a thing that has been in crypto since everybody's been in crypto. And the like the market uh kind of expects another four year cycle. Do you think we are still living in the era of four year cycles, whether that's driven by the happening or whether it's driven by like, you know, liquidity, you know, as Raoul Popel says. But the four year cycle, is that a thing or is that broken this time around?

I mean, it's honestly hard to argue against it. I think it it's easy to dismiss it, but the reality is, you know, Bitcoin topped into 2013,

into 2017,

into 2021, right? And it wasn't much more complicated than that. And it bottomed.

you know, after the midterm year here,

after the you know the midterm here you the midterm year there and then the same thing, right? So it seems like there is some

Cyclical component to these market cycles. And actually, if you measure out, you know, Bitcoin's ROI, and we could even look at the uh the same thing for Ethereum as well. But if you look at Bitcoin's ROI from the low, and we just look at the last couple of cycles, I mean, this is where Bitcoin always is at this point in the cycle as measured from the low, right? So to some degree, this time really hasn't been that different. I think the the thing that I think is throwing people off this cycle is the timing of rate cuts. So last cycle, rate cuts occurred in the pre having year, right? They occurred in, they started in in July 31st of 2019.

And that corresponded to this cycle right here, where you had this QT high interest rate bull market, where you know Bitcoin USD went up, and then Bitcoin dominance also went up.

We've seen the same thing, and you can see how it got ahead of the cycle that came before it. And then eventually it sort of bled back down until it got in line with the prior cycle. I think you're seeing the same thing happen again where we had another QT bull market, and then it's basically just sort of faded, and now it's getting back in line.

With the prior cycle. So to a large extent,

this does look awfully familiar, right? I mean, it seems like some things are relatively predictable in terms of in terms of the four-year cycle. But I also think there is another component, right? It's not just the four-year cycle. I think monetary policy also plays an important role in exactly how the cycle plays out. And at what point in the cycle do, you know, some of the other cryptocurrencies like Ethereum, at what point do they start to take over? And we just haven't seen that happen yet, this cycle. But I think there's, you know, there's plenty of reasons why, right? We have not yet seen the Fed lower interest rates, although that's coming up relatively soon. And we also have not seen the pivot from quantitative tightening to quantitative easing, and that could also be coming up.

relatively soon, theoretically. So I think the cycle is playing out how it typically does. It's just that the timing of of rate cuts this cycle is coming much later than it did the prior cycle. And I think that's throwing people off.

So so Ben, your base case is uh the four-year cycle, we're having it again, and we're basically right on schedule uh as compared to to previous cycles. So like people should wait. I I will make a note in every free four-year cycle that I've been a part in uh of, around this time when things get flat, people start to doubt the four year cycle. Always happens right on schedule. So we're on schedule in the four year cycle to be in the the period of time where people doubt the four year cycle. Would that be an accurate sum of your uh your base case here?

Yeah, um I do think that,

you know, I do think that it's it's good to see that the cycle has sort of gotten back back on track where it normally was. It, you know, was somewhat uncomfortable when it was back over here. If you measure it from other ways, though, like if you measure the cycle from the peak, which is probably not the best way to measure it, because you know, the way I think, I mean, I we we're gonna look at it regardless, but the one of the reasons I I like to look at it from the low is because it's hard to really.

Take into huge consideration what happens during a manic blow off top, right? The markets are just irrational. So measuring returns from that level, not always the best. But with that disclaimer, if you look at the ROI from the cycle peak, so you go peak to peak for Bitcoin, we are still slightly ahead of where we would normally be at this point in the cycle. What's fascinating is this is really the first cycle where Bitcoin put in new all-time highs before the halving. Um, and and that's actually reflected here on the chart. I mean, you can see that this is the green line. We're still ahead of where we were at this point in the last two cycles. So even if Bitcoin were to sell off uh after rate cuts, like it did last cycle, even if it were, it could still pick back up in 2025. I mean, it it might just correspond to it getting back in line as measured from the peak. So, I mean, I do think every cycle is gonna throw us a curveball. Last cycle, right? It was a pandemic. Uh, you know, everyone got annihilated. I think you guys, I mean, you guys were there too. I mean, we we woke up and and the price of Ethereum was back at like a hundred bucks. And then I think we had gone to sleep and it was $200, and we woke up the next day, it was like $100. Like, what just happened? So, yeah, I do think that there's something every cycle.

that that does try to throw people off and and this cycle has certainly been no exception.

Yeah, can I try and be a four-year cycle bear for a moment? Uh, because I'm I'm still skeptical uh that the four-year cycle is intact, and and maybe at the end of the day we fast forward in six months and and we're totally right, and like the four-year cycle is intact. But like there's some just some things that happened. Uh the ETFs, I think, pulled forward a lot of price action, a lot, a lot of demand. Uh, and Bitcoin especially has been experienced the benefactor of that demand. We like it's weird that Bitcoin reached an all-new high, but just a little bit, and momentum didn't follow. And in all previous four-year cycles, breaking all-time highs meant following into like price discovery. And we have not had price discovery right uh in this current uh in this current market sector right now. Like right now, Bitcoin touched like $74,000 ahead of like the $69,000 previous all-time high. And it's the only one. Like Ether got the ETF, but not the previous all-time high. And now we're in like a long, a prolonged crab market. And maybe I'm just in like recency bias of being here in this present market and rather than the last four year cycle that I was a part of. But this crab market feels real long. Feels real long. And there's also like no new users and no new uh like things to do. And so maybe that's just contributing more to the idiosyncratic nature here, but like.

What what would it take to truly invalidate this four-year cycle? Because we've got the pulled for the one-year accelerated like upswing. I'm not gonna call a bull market because we haven't had price discovery uh because of the ETFs. And then we've had this extra prolonged crab market that has like is too too long for what I would call like pattern matching into previous cycles. That's kind of my vibe. How how do you take that then?

No, I mean, absolutely. I think you're asking the right questions. I think that once everyone becomes comfortable with one particular outcome, it's probably time for that outcome to change. It's difficult because as always, normally when Bitcoin hits all-time highs, it continues to accelerate from there. I think you're absolutely right. I mean, I think that you could argue that the ETFs helped hold forward some of those returns. And so in 2020, around this time, the market was generally trending up, right? I mean, we had the we had the pandemic crash, and then the market basically exploded up into the summer, a brief pullback in August and September, and then it kept going up into Q4.

We're not really seeing that this time, right? The summer has been relatively boring. August, September haven't been that great. But I think what's really happening is, and it goes back to what I mentioned a few minutes ago, it's the effects of monetary policy. So for instance, if if we were to take a look, and by the way, I mean, I will be completely honest with you guys. I don't, I really think Ethereum could eventually go lower from here uh before it really gets back on track. And the the reason I say that is because what I think, what I think has happened is every cycle, there's this thing that happens with Ethereum. I don't know why exactly, and I always find it fascinating. I I do actually, I mean, I do consider Ethereum to be a blue chip. I only consider two blue chips in the industry Bitcoin and Ethereum.

And there's this thing that happens every cycle with Ethereum. And it's fascinating. And it's basically the ETH Bitcoin pair,

right? It's the ETH Bitcoin pair. And I think we could learn a lot, honestly, from the ETH Bitcoin pair. And basically what happens? And this is why I think going back to your sort of your observation, which is absolutely valid, is like what's going on with this market? It just keeps on crabbing. And frankly, it's been going sideways with a slightly bearish bias, right? I mean, Ethereum has been putting in lower highs and lower lows, same with Bitcoin ever since March. But I think the reasoning, the reason for it, and I think why people might be losing their way on this is like every cycle, ETH Bitcoin goes through this pattern right here. And essentially what it is, is it sets a top.

And then it sets a low.

And and you can see that after it does that, it it puts in sort of like a lower high, right? And same thing here, right? A top,

and then in between these, this bottom, lower high, and then sort of slowly bleed back down.

This time has not been different, right? This lower high right here, that was actually going into the merge, which I'm sure you guys remember was a pretty crazy, a pretty big event for Ethereum. I mean, it had been something that they had been working up to for years and years and years. It finally happened. But what's fascinating is every cycle we go through this process where ETH Bitcoin,

you know, it it tries to go up,

it comes back down to Earth.

Goes back up again, lower high. And then it gets into this phase right here, right? Where it's just above the range low that it set in between the two peaks, but it's not enough to really turn it back around.

And then what happens is after it sort of crabs in that range for a number of months, it eventually breaks down, right? It eventually breaks down. So you can see that the first time it broke down in 2016, it had a fake out. It was actually in June, right? So it was actually in June of 2016, it broke that prior range low. The cycle after that, it occurred in July.

Right. The cycle after that, you can see it first started to break down really, you know, right around January. There was a wick below it. And then it really started to go below it in March, around the time that Bitcoin topped out.

Now, what's fascinating about this chart is if you look at it through the lens of Ethereum, right? So look at it through the lens of Ethereum. And you can see precisely how it has played out every single time. So look at ETH and remember.

The first time it broke support in 2016 was in June, right? And then if you look at Ethereum in 2016, it topped in June.

And from there, ETH bled about 70% before getting back on track. And then it went up in the post-halving year, right? It went up in the post-halving year, which is normally the one year of the cycle where Bitcoin dominance goes down, right? Every other year, Bitcoin dominance tends to go up is the post halving year where Bitcoin dominance goes down. So that was the first, that was the first cycle, right? That was the 2016 cycle. And then if you look at what happened next, right? ETH Bitcoin in 2019. When did it break down? It broke down in the summer, right? June, July is when ETH Bitcoin broke down. In 2019, ETH USD topped out.

in you know June, July, right? So you can see that both prior cycles,

ETH USD followed that pattern. And after finding that top, it bled about 70%.

Now it's easy to get sidetracked on that and say, well, why include the pandemic? But I'm not, right? I mean, I'm I'm I'm purposely excluding this pandemic crash. Like we're just looking at what happened going into the end of this year. So because of that, right? Because of that, when I'm looking at ETH Bitcoin, I'm like, all right, well, we saw a fake out here in March and April below the range low, kind of like 2016. And if you go look at what ETH did, that's exactly when it topped out, right? March, right before the Bitcoin halving. And so far, it's already dropped 54%, right? So to a large extent, this time has not been different, right? It actually is playing out in a very similar manner. And what's fascinating is if you look at ETH Bitcoin, the breakdown 2016, 2019, after that, right? Right after that, that's when Ethereum.

Bled 70%.

And then it went, it started to pick back up the following year. Right. The following year. And it and it bottomed out in both 2016, ETH USD.

Bled until December, right? So December 2016,

December 2019. And then it picked back up the following year. And you could argue that it was picking back up right here in 2020, and then the pandemic happened, right? And it kind of threw everything off course. What's fascinating? If you fit

the data points, these data points with these data points, sort of like the non bubble data points, if you want to call them that, if you fit those data points together,

you get a curve that looks like this.

Right. So this is the uh the logarithmic regression ban. And what's fascinating is every time ETH Bitcoin has broken down,

2016, 2019, and now 2024, every time

ETH USD bled into Q4,