Bitcoin Risk Metric

hey everyone and thanks for jumping back into the cryptoverse today we're going to talk about Bitcoin and we're going to be discussing the risk metric if you guys like the content make sure you subscribe to the channel give the video a thumbs up and also check out the sale on intothe cryptoverse premium at intothe cryptoverse decom let's go ahead and jump in so it's probably been a few months since I last provided an update to the Bitcoin risk metric it just didn't seem that useful to keep saying the same thing because the price of Bitcoin was essentially range Bound for about seven to eight months so not a whole lot was really going on in that regard but the risk metric I think is a pretty useful way to navigate Bitcoin now again nothing's perfect and at the end of the day all models are wrong some are useful and I just happen to find this model more useful than a lot of the other models and the reason why is because as an investor it's easy to look around and and you know buy when there's a lot of greed and it's easy to sell when there's a lot of fear but the way to be successful in the crypto verse is to have a plan and stick to it no matter what right whatever you see in the news whatever you think is going to to happen right none of that ultimately matters in my view it's all about what is the risk associated with the current bitcoin price and if you give me that number then I can do something with it right for instance the risk metric goes from 0 to one right so when it's zero or let's say when it's close to zero between say zero to 0. 2 it tends to be a pretty good accumulation opportunity whenever it happens right 0o to 0. 2 and that's sort of the blue dots right so we could isolate just 0 to 0.

2 it tends to be a a pretty good accumulation opportunity whenever it arises now throughout the years you can see that historically it arises sort of near the end of the midterm year the midterms that's when it normally goes into that into those levels and often the early phase of the post or the the prehab year right the early phase of the prehab Year you'll see it'll also be around those levels last cycle we actually went into that level into that zone in the having year because we had you know we had the the pandemic induced recession so this is one of those things where no one really knows exactly when it's going to happen there's certainly precedent to say Well it tends to at least happen at the end of midterm years but there's also some evidence to show that can happen at other times as well so it's one of those things where no one knows exactly when the risk of Bitcoin will go below 02 but whenever it does it tends to be a good time to accumulate Bitcoin as long as you have a multi-year time frame in mind um so for instance this last cycle you know just to you know just to tell you what I did first of all I sold basically you know all of my altcoins to bitcoin back up here in q1 of 2022 by that point I had come to terms with with the fact that we were entering into a bare market and I didn't know exactly how low we would go but I thought that you know eventually Bitcoin would get to New alltime highs before most of the altcoin market and I also thought that Bitcoin dominance would go on a pretty uh a pretty long journey to the 60% Milestone which today it's at and of course it could go potentially above 60% but then I did not start buying Bitcoin with US Dollars until July of 2022 when Bitcoin collapsed to less than the 0. 2 risk level right and you know I put in a few buys few limit orders they got filled and then it went lower again in November and then those got filled too now sometimes I look back at this stuff and you know there's always two feelings you get in the cryptoverse it's either I wish I had bought more or crap I bought too much right and the I wish I bought more normally happens eventually when you look back at the 0 to point2 risk range right the zero to point2 RIS bands and I look back and I bought right and I published those buys to ITC premium but I always look back and say yeah of course I could have could have bought more it's that's a better feeling honestly than buying tops and then looking back and be like crap like you know I wish I hadn't bought so much um which that brings us to sort of the next point is when Bitcoin goes to the 08 to one risk bands so whenever Bitcoin goes to those risk bands it tends to be a pretty good idea to scale out of the market now that doesn't mean that Bitcoin can't eventually go higher as you can see in 2013 we went to the 08 to point to to one wristbands we cooled off and then we went up there again but when the market cooled off it might not look like it but the price to bitcoin during that drop was like 80% or something it might have even been more than that and essentially every single time that the risk of Bitcoin goes to the 08 to one wristbands within the next say 6 to 12 months months Bitcoin tends to drop somewhere between like 70 to 85 to 90% in you know when Bitcoin was younger it was more so dropping 90% And then here it was like 87 and then here it was 84 and then I think last cycle it was 77 so you know in the same way that you get diminishing returns you also see diminishing losses which is a good thing I mean you you know as as it goes on the volatility does start to to shrink which in some ways is not good for people that want to get cheaper valuations but in other ways for hodlers that just want to keep DCA right you don't want to see your portfolio drop 80% every four years so perhaps it would be a good thing if if that didn't have to happen every four years but there will likely be drops like that in the future um and so it's important to recognize that whenever that happens it's probably time to start running for the Hills right um now the risk on bitcoin right now is right around 0 6 okay so it's in kind of that that intermediate Zone where you know it's you know it's hard to say right it's sort of like it could go you know it could do either right I mean there's there's times where like in 2019 where Bitcoin only goes up to sort of the 6 risk level I think it actually went up to like 685 if you look at at some of the the intraday wicks um and if you look at where where Bitcoin went in March of this year it actually went up to the 7 to 08 wristban and and back then I remember telling people that this would likely be a midcycle top not because and I didn't say a market cycle top I said a midcycle top because gold was breaking out usdt dominance was hitting its long-term trend line and I got your guys' messages I know it's there again I don't need 100 more I got 100 today and 100 yesterday I don't need to keep hearing it I understand right um but that was the reason right I mean we looked at it and said all right well you know it's hit 7 to point8 risk Gold's breaking out USD dominance is at its trend line it's probably going to be a midcycle top so not every rally by Bitcoin goes to the 08 to one rbans right not every rally does and and that's the reason why sometimes it can make sense to sort of dynamically sell out as the risk bands go up right so what a lot of people would want to do if we go look at the risk levels like this where we take sort of the color code out of it and just look at the single metric what a lot of people want to do which is not necessarily a bad strategy as long as you have a long enough time frame in mind is that they only sell whenever Bitcoin goes to the8 to one wristbands everything that happens in between this Spike and this spike is completely irrelevant right it does not matter whenever this Spike occurs you wait until it goes back to lower risk levels and then you buy and um and and you just wait for it to go back up to that wristband eventually and eventually it typically does um but if you want to take advant AG of some of sort of the market sort of the moves within the cycle you do occasionally get tops like this where it looks like it might go up to the 08 to one wristband it's rallying a lot but then it just kind of Fades before it gets there and so what I did in 2019 was I sold some when it went to the 6 to 7 wristband but it wasn't a lot right it was only approxim I think like one tenth of my Bitcoin position back then and and it might have been a little bit more I can't remember exactly it was around that amount and I remember thinking when I sold it I was like you know why why am I doing this you know I mean it it just seems like Bitcoin should be able to go a lot higher but then nine months later I felt like genius when Bitcoin was trading at $3,800 and then I was able to you know that 10% that I sold was then able to get just that 10% was able to get you know three time three to four four times the amount of Bitcoin by just sitting and and waiting for for for that move now the reality is I didn't wait until $3,800 to sort of redeploy I started redeploying after it went back below the 0. 5 risk level right so that's essentially what I did um and and that works out pretty well right you know dcing below the 0.

5 risk level if you're more conservative you could say DCA below the 04 risk level if you're even more conservative you could DCA below say like the0 2 risk level or lump sum if you will right so lump some anytime that's below 0. 2 and then forget about it go enjoy your life and then check back in whenever it's you know back above 08 if we are being honest that's probably one of the better strategies right whenever it goes down to those risk levels lump some and then forget about it but practically speaking you know you bring in money every single month you know you don't have you don't always have the luxury to just lump some everything at the market cycle bottom but that also doesn't mean that you should miss out on every move after that because you didn't buy at those risk levels and so it can make sense to sort of DCA up to higher risk levels right you know you could say up to 0 four up to 0. five some people DCA up to 6 a common question I get from people is well what if you're new and you don't have a Bitcoin position and you know the risk is already high my sort of go-to response to that is that you can always DCA if you don't have any Bitcoin um even if the risk level is higher than what you otherwise would and then in in subsequent years you then only start to DCA you sort of lower your your range that you're willing to DCA in so you know and also I would I would think you know if you're going to use a strategy like this it makes sense to DCA up to a certain level and then sort of have a a gray region where you neither buy nor sell right so that way you're not like flip-flopping every couple of weeks because you don't really want to necessarily deal with the tax implications of something like that so let's say you only bought Bitcoin up to 04 risk and then you only sold it above 6 or something that way you know when it's between these levels you're not doing anything but just sitting on your hands and waiting for the next move so what I've learned with Bitcoin and you've probably noticed this if you followed me long enough is that I I certainly can't predict where the Market's going to go um the you know my best predictions are are typically related to sort of things like um the Satoshi valuation of altcoins where Bitcoin dominance is going to go that stuff seems a lot more predictable to me the altcoin USD valuations are a lot more difficult to predict ICT because they're more dependent on bitcoin and a lot of them even when Bitcoin goes up altcoin USD pairs can go down so altcoin USD pairs alt USD pairs are really difficult to predict but all Bitcoin pairs are a lot easier to predict a lot of times you know the the real alt season that people want doesn't begin until Bitcoin reaches some of the higher risk levels that doesn't mean alts can't go up on their USD pairs it just means that they're likely bleeding on their Bitcoin Pairs and because Bitcoin is a lower risk cryptocurrency than the other ones it makes a lot of sense to just remain Bitcoin heavy until Bitcoin hits some of those higher risk levels that doesn't mean you shouldn't be Diversified at all it doesn't mean that you know it doesn't mean that you're a Bitcoin Maxi by just staying Bitcoin heavy doesn't mean that you're not but it just means that you you receive expect what the market is telling you and the market tells you to be Bitcoin heavy until certain conditions are met and some of those conditions could just be the risk levels I talk a lot about sort of the transition from quantitative tightening to quantitative easing being something that you know that that could have you know that could play a role but there's a lot of things you know in that that that affect the market I think for me while I talk about this stuff on a daily basis and I I talk about dubious speculation and I talk about you know what I think might happen right I think there might be a like in March when I said I think there might be sort of a six to n month Lull in the market where not a lot of stuff happens it's all just dubious speculation at the end of the day right I'm not I'm not trading those ideas because I recognize that I could be wrong um and I'm not willing to sort of risk the health of my portfolio just based on what I think based on du a speculation from the charts right I'd rather stick to something a little bit more concrete right a little bit more quantitative that takes the emotions out of it and that's what I think a risk metric like this accomplishes so we do have this on the ITC website there is a sale on ITC premium if you want it but I will say this again and I I I don't just say it for the sake of saying it I mean it there is a free tier on ITC I don't think it has this but it's got a lot of other things um you know there's plenty of rist metrics you can use right you don't have to use this one it's not that difficult to create sort of approximations of stuff like this okay so I would encourage you to to to you know to look around for for things that you could use it doesn't have to be this this is just what I use right but it's it's not perfect either it's not perfect it's what I use and furthermore if it it's it's really only meant for for larger portfolios in general it's like if if the uh if the subscription amount significantly eats into what you're dcing into the market you're probably just better off DCA anyways than ignoring the risk metrics so that is you know that that's sort of my long-term view of of how to navigate Bitcoin this is just what I use and it's not perfect but it it's done a good enough a good enough job for me last cycle I I bought down here I so like one0 up here I bought again down here I went really in in March of 2020 I was not expecting that drop you know I think I went to sleep and the price of Bitcoin was like seven or 8K and I woke up and it was at like 3,800 and I I mean I literally didn't even believe it I really I thought something was wrong with my with my app that I was using to track the price like there's no way I mean Bitcoin was $8,000 when I was to sleep how how the hell could it be $4,000 it didn't make sense but that's the beauty of stuff like this it does not require you to predict where the Market's going to go right I don't have to know where the Market's going to go to have a strategy to navigate said Market all I have to know is when it goes below a certain risk level I buy and when it goes above a certain risk level I sell so if it goes low enough I'm dcing if it goes high enough I'm selling and that's it that's it earlier this year I did sell some because it went to the 7 to point8 wristband right I sell I sold some and I don't apologize for it because you can see that the price of Bitcoin then sold off right to 49k right it had a pretty big drop and and this doesn't even completely reflect the the drop that it had because this just shows you sort of the um the daily close but the risk actually went a lot lower than 045 when you look at the intraday Wick so this is one of those things where at the end of the day I think it's better to have a plan and stick with it than try to time the market based on what the news is suggesting is going to happen or furthermore what I suggest is going to happen because I'm not perfect I get a lot of things wrong and what I've said and I I I really do mean it I'm not just saying it I would rather be rich and wrong than poor and right right I'd rather make predictions that don't come true and get rich because the market is going up further than I thought it was then to not have a position and be right right I'd ra rather be rich and wrong than poor and right there's this sort of you know toxicity that that exists in in the cryptoverse where there's a lot of different analysts and everyone's sort of jockeying to to claim who's the most right about stuff right and and when someone gets something wrong everyone wants to go dunk on that person right everyone wants to go dunk and for instance like recently I I thought that eth was GNA go home and it didn't right I mean it it rallied instead and you know I I hedged and I I I bought some eth uh you know a few weeks ago before the rally and of course I I tell people that I bought but I did have a theory that I thought it was going to go home and which is the lower loger my congression TR line and then it didn't so I appe people dunking on me which is fine that's that's just part of the game and you you sort of learn to accept it but it's also one of those things where like I don't mind all the time being dunked on when I'm wrong as long as I hedged myself and made money along the way right so it's fine to be rich and wrong that's a lot better it's a lot better to sort of put your dignity aside because at the end of the day we're here to make money we're not here to be right you know if you want to be right you know go to grad school or something I did that right I did that for for five years and um and here I am right so you know being right is one thing and and being right about this kind of stuff at the end of the day is not going to matter it's more about you know how do you manage your portfolio are you throwing all your money and stuff that's just bleeding against Bitcoin or are you sticking with the the king in a Bitcoin Dominus uptrend that doesn't mean Bitcoin can't go down it just means that whenever it does go down it generally presents a good opportunity right there's nothing wrong with that I mean you know if you think about if you go to store you like it when things are on sale I you're more likely to buy it if if it's on sale um if it's not on sale maybe you wouldn't but if it is then you're more likely to buy but in the crypto verse if things are on sale people freak out right they freak out they get they get really worried about what's going on in the market and and they don't want to buy when things are on sale so what I would say in general is that the RIS metric I think is is really useful for helping to take emotions out of it and it's not the only thing that you can use to do it there's other things you can use as well but it is really helpful the one thing I will say is that you know while it does tend to go to the 08 to1 wristband every few years it doesn't spend a lot of time there so if you were to go look at the time in the wristbands right so you remember earlier this year when we went to the 7 to point8 wristband if you go to time in wristbands you can see for all the for all cycles that in terms of percentage of the time Bitcoin only spends about 2.

77% % of the time in the 7 to point8 wristband so that was another reason why back in March I I offloaded some a little bit because like well I mean you know it's not going to spend that much time these wristbands before it goes back down and you know it gets even less for the 08 to 0. 9 only one one and a half% of the time 0. 9 to one only.

35% of the time so in terms of days out of all the number of days that Bitcoin has been around Bitcoin has been in the 0. N to1 wristband exactly 8 18 days 18 days so it's one of those things that whenever it does happen it makes sense to take action because it's not going to be around forever now I don't know when the next time Bitcoin will go to the 08 to one rbans right I don't know I mean it it could be as early as this month it could be as as as early as January or December it might take until April there's a chance it takes until a year from now right no one actually knows but you don't have to know you don't have to know right it's just when it happens you make your move right and when it goes down here you make your move and what happens in between is somewhat irrelevant and more so based on your own risk tolerance most people in the cryptoverse even the more conservative people are going to be buying at below . 2 risk and probably selling above 08 what happens in between there is more subject to your own risk tolerance right and there's not a right or wrong answer there's not you know sometimes I'll see people say like they sold at um I remember like last cycle some people sold at like 40K and and 50k and and then people were dunking on them and laughing at them and saying oh you you know you're you're you're missing out bitcoin's going to go to 300K and you just sold everything at 50k I remember selling a lot of mine at 58k because that's when it hit the 091 wristband last cycle at 58k back in like February 2021 and then it went slightly higher in March and April but only a few thousand higher and every time it went higher I was getting dunked on because like well you know you you sold at like 58k and now it's going to go to 300K but then you look back and you're like you know selling at 58k when the when that April top ended up being 64 K wasn't really that bad because within a few months it was back at 29k so there's not a right or wrong answer there's just what is your risk tolerance and remembering that crypto is a personal Journey it's not a journey that we're all doing you know and following the same strategy together it's a personal Journey what is right for you is not going to be right for someone else sometimes I see people say they sold their Bitcoin to go pay off you know their house or you know to sort of pay off a bad debt that they have or something like that um and and you know hopefully it's not because they're paying off one but like a 2 and a half% mortgage rate right but you know it's it's one of those things where the what's right for them is not what's right for you you know and and often times when people do that it it gives them more freedom so that in the future they can allocate more Capital towards it right as their as their cash flow comes in so that's the beauty of the cryptoverse over over the long term right over the long term so that is the Bitcoin risk metric um again current risk is is right around 6 I mean it's right now it's 0.