@ Bergman

Welcome to the first Situation Report from The First Bastion. Before we begin, please make sure you’ve read the disclaimer, which applies to all our content. You can find it here: [Disclaimer](https://primal.net/bergman/Disclaimer-or2cwd) In short: **Not Financial Advice**. ## Price Study Starting with the three-day (3D) chart—this is my favorite timeframe for gauging Bitcoin’s movements and identifying potential future trends. The 3D chart is high enough to filter out noise, making it easier to see the bigger picture. For instance, this week, Bitcoin dipped to $92,000 before ripping back to $102,000, all within 24 hours. However, the timeframe is also low enough to extract signals early, rather than receiving the party invitation when the party is already over—something that often happens with higher timeframes. https://blossom.primal.net/6f940d0cbb23f92f790e5cf03ae4685485336da27785ae6a7568614a41add7f0.png The chart presents a clear picture of Bitcoin consolidating between $92,000 and $106,000. Although there have been wicks above and below these levels, we haven’t seen a definitive close beyond this range. Statistically, trends are more likely to continue than to break. This means that when the price consolidates, it tends to reverse at the extremes—declining from the range high and rising from the range low. However, emotions often interfere, leading traders to get greedy at resistance (range high) and fearful at support (range low). Two key indicators I watch on this chart are the RSI and its Moving Average (MA), as well as the Returns indicator. While not perfect, when the RSI is above its MA and the MA crosses above 50, Bitcoin typically enters a new leg up, and vice versa. Recently, Bitcoin attempted to push above but lacked the momentum to sustain it, keeping it in a downtrend toward consolidation around the 50 mark. The other key indicator is the Returns indicator, which, in this instance, tracks a 90-day rolling return. Historically, when Bitcoin’s returns exceeded 200% within 90 days, it marked a cycle top. The yellow line represents a one-standard-deviation return, currently around 57%. While the indicator hit an 80% return recently, the ongoing consolidation has allowed it to revert toward the mean. This could provide more room for further gains if Bitcoin manages to push higher. ## Tariffs This week’s Situation Report wouldn’t be complete without addressing the impact of the newly imposed [tariffs](https://www.whitehouse.gov/fact-sheets/2025/02/fact-sheet-president-donald-j-trump-imposes-tariffs-on-imports-from-canada-mexico-and-china/) on imports from Canada, Mexico, and China. For two consecutive weekends, market-moving news has emerged, sending prices lower. First, it was the DeepSeek AI news, and this weekend, the tariffs. While President Trump had previously announced his intent to impose tariffs, the market was uncertain about the specifics. Would they be implemented gradually, with an effective date further in the future, or would high tariffs be imposed abruptly? It turned out to be the latter. This raised another question: was this a bargaining strategy or a long-term policy shift? On camera, Donald J. Trump stated that Canada and Mexico could do nothing to prevent the tariffs from taking effect. With a strengthening dollar and growing market uncertainty, many risk assets sold off, including Bitcoin— which is the most liquid asset, tradable 24/7. However, after calls with Mexican and Canadian leaders on monday, during which they pledged to reinforce border security, Trump delayed the tariff’s effective date by 30 days, leading to a market rebound. ## DXY Let’s take a look at how the DXY has been behaving lately. Since early October 2024, the DXY has risen from 100 to 110, a level it reached in early January. However, after Trump took office, the DXY began to decline, ultimately leading to a breakdown of the uptrend. https://blossom.primal.net/0792ea022d78637290860b2f59e0bd95567a55ceb4f93a493df878e5db782b1e.png A stronger dollar generally signals contracting global liquidity. Since a significant portion of global debt is denominated in dollars, a stronger dollar (relative to other fiat currencies) makes it harder for corporations earning revenue in other fiat currencies to service their debt. This, in turn, slows down—or even reverses—their ability to invest. Take note of the sharp spike at the beginning of this week, which briefly pushed the DXY back to nearly 110. This move followed the tariff news but was fully retraced after the announcement that tariffs would be delayed by 30 days. ## US10Y This brings us to another highly impactful factor in financial markets: the yield on the 10-Year Treasury Note. There has been extensive discussion about this yield, with crypto OG Arthur Hayes predicting in his [blog](https://cryptohayes.substack.com/p/the-ugly) that it would rise due to a confrontation between the Trump administration and Federal Reserve Chairman Jerome Powell. He argued that this temporary spike in bond yields could trigger a mini-financial crisis, sending all markets lower and pushing Bitcoin back to the $70,000 mark. https://blossom.primal.net/e3b3c4247d876f986464f033c11c87f29f1b393504c7bd8076bab93892d996b3.png President Trump has long been vocal about his demand for lower interest rates. To achieve this, he needs the Federal Reserve to ease policy and bring rates down. However, the Fed operates under a dual mandate: maintaining a healthy labor market while keeping inflation under control. If the Fed lowers the central bank funds rate too aggressively, bond vigilantes may step in and demand higher yields to compensate for rising inflation expectations. This would backfire on Trump’s demands and put the Fed in a difficult position, as it would no longer be acting in the best interest of the American people in terms of inflation control. On the other hand, @nostr:npub1a2cww4kn9wqte4ry70vyfwqyqvpswksna27rtxd8vty6c74era8sdcw83a wrote a piece on [Fiscal Dominance](https://www.lynalden.com/full-steam-ahead-all-aboard-fiscal-dominance), explaining that when government debt levels become too high, the Federal Reserve’s traditional tools lose their effectiveness. A rise in interest rates would only inject more cash into the system, as higher interest costs flow to bondholders, potentially exacerbating inflationary pressures rather than containing them. That being said, for now, rates are coming down. Recently, the newly appointed Crypto Czar addressed the media, discussing plans to regulate stablecoins to reinforce U.S. dollar dominance in the global economy. This move could increase demand for U.S. Treasuries, potentially leading to lower rates due to a higher bid for these assets. To monitor whether the trend is truly reversing, I use an inverse 180-day exponential Hull moving average. While I wouldn’t say you can apply traditional technical analysis to yields, this approach could help identify when rates are rolling over. ## Economic data This week, some important economic data was released. Inflation in the EU came in 0.1% higher than expected. Meanwhile, ISM Manufacturing in the U.S. exceeded expectations with a reading of 50.9—anything above 50 indicates expansion. https://blossom.primal.net/3fe144e2921ca919e4c7428fbfbcbf2ab0aaaf8d61ee85dba87ec5fc1af24128.png JOLTs data came in slightly lower than expected. While this might seem like negative news, stocks rallied slightly in response. The reason? A weaker labor market could encourage the Federal Reserve to ease policy, aligning with its mandate. ISM Services also came in slightly below expectations, which has a dual impact. On one hand, it helps prevent inflation from overheating. On the other, it signals slightly lower revenue for companies providing these services. On Friday, the Non-Farm Payrolls report and Unemployment Rate will provide further insights into the state of the labor market. ## Short Term Holder Behaviour To start, I want to give a shoutout to [Kibo Money](https://kibo.money/chart-date-to-market-price-to-short-term-holders-realized-price-ratio?) @nostr:npub1jagmm3x39lmwfnrtvxcs9ac7g300y3dusv9lgzhk2e4x5frpxlrqa73v44 I use some of the on-chain data provided by Kibo Money, who is developing an open-source on-chain analysis software that you can run on your own server. Check it out and send him some sats! There’s a lot of alpha to be gained from analyzing the behavior of Short-Term Holders (STHs)—those holding coins that have moved recently (within the last 155 days). A study by Glassnode found that after 155 days, holders are more likely to keep their Bitcoin for the long term, making them less likely to sell. https://blossom.primal.net/bdc6dd57317079c5cc1b05c04ed610a5765e9002f81471648863109f3286bc32.png The Cost Basis (CB) for Short-Term Holders is currently around $92,000. When STHs have significant unrealized gains, they tend to sell for profit, adding selling pressure to the market. However, they also tend to sell at a loss, lacking the conviction of seasoned hodlers. While these are assumptions, the data shows a correlation, leading me to infer causation. It’s also possible that some of these coins belong to high-conviction Bitcoiners who are simply swing trading a portion of their holdings—taking profits when the price surges or cutting losses when the price drops. Either way, recently moved Bitcoin tends to move again in the near future. https://blossom.primal.net/d762b5629858c21a45e23a35f2d1d4a806699466bab2d2449172e3dee82f1c32.png The Short-Term Holder Spent Output Profit Ratio (STH SOPR) chart provides insight into when profit-taking occurs, as well as when investors capitulate and sell at a loss. It may seem straightforward, but when there’s a significant amount of unrealized profit—meaning the market price is well above the cost basis—one could take some chips off the table. Conversely, if one believes the long-term uptrend is still intact, while Short-Term Holders are panic-selling at a loss, it may be an opportunity to be greedy when others are fearful. In a bull market, the Short-Term Holder Cost Basis (STH-CB) often acts as support during pullbacks. This makes sense because as portfolios grow, investors feel confident buying more on dips in anticipation of the next leg up. The reverse is also true in a bear market—the STH-CB acts as resistance. When the price crashes and later recovers near their cost basis, many traders view it as a “Get Out of Jail Free” moment and sell at breakeven. One could use the STH-CB as a risk-on/risk-off indicator, but it isn’t foolproof. For example, during the consolidation period in the summer of ’24, the price dipped below the STH-CB, yet the broader uptrend remained intact. This highlights the importance of understanding where we are in the larger market cycle—which brings us to the next topic. ## Golden skies I like gold. Here at The First Bastion, it’s all about sound money, and gold has always been the ultimate embodiment of it. Due to its unique properties, gold is the best proxy for money that we have. However, it isn’t perfect and comes with its disadvantages—its weight makes it difficult to transport, and it cannot be used for instant settlement. Despite these limitations, gold remains one of the most important assets in today’s financial system, serving as a neutral store of value and an insurance policy against defaults. Gold recently hit new all-time highs amid growing uncertainty surrounding tariffs, wars, policy shifts, and escalating trade tensions. Many investors see two possible outcomes: 1. The structural issues at hand cannot be resolved, leading to defaults by corporations and nation-states—prompting investors to buy gold as insurance against these defaults. 2. Policymakers will intervene with short-term fixes, likely in the form of quantitative easing. While this may temporarily stabilize the system, it will also erode purchasing power, making gold a hedge against monetary inflation. So gold is ripping once again, and at this pace, it looks poised to reach $3,000 per ounce in the near future. https://blossom.primal.net/74d6b51658d24c80e6ed9d25483921bfacf4ce8080d8ccc5534541bd1db40a19.png ## BTC / GOLD I love Bitcoin. It has the potential to become an even better proxy for money than gold. While gold is not easily verifiable—a key reason why it is inferior to Bitcoin as a form of money—it still has a market cap that is ten times larger than Bitcoin’s. Since gold cannot be easily manipulated (aside from physically mining it), its inflation rate remains around 2% per year. This makes it a solid benchmark for comparing Bitcoin’s real value growth, rather than just its dollar-denominated appreciation. https://blossom.primal.net/5628178a098df954f59b6415b61c3cb810ad89a3f410b26be9267849334a8063.png Behold the BTC/GOLD Power Trend. This power trend is based on calculations by [Stephen Perrenod](https://stephenperrenod.substack.com/p/bitcoin-power-law-vs-gold-mid-2024). The BTC/GOLD price follows a statistically significant power trend, which, according to historical data, currently sits at approximately 49.21 ounces of gold per Bitcoin. At today’s gold price, this translates to a staggering $140,000 per Bitcoin. To be clear, this doesn’t provide certainty. All models are wrong, but some are useful. Many factors could shift this trend, and it will only hold if Bitcoin’s adoption rate continues at the same pace as in previous years. That said, it can serve as a valuable directional compass. Remember when I mentioned the Short-Term Holder Cost Basis (STH-CB) as a risk-on/risk-off indicator? You could refine that approach by only applying it when Bitcoin’s price is above the BTC/GOLD power trend as a potential topping signal—or below it as a bottoming signal. As of today, Bitcoin is valued at 34 ounces of gold per BTC—which is below the first cycle top of 2021 ($63,000) and near the March ‘24 local top ($73,000). The BTC/USD price currently sits around $98,500. You see where I’m going with this, right? ## Expected Outcome I approach the market with probabilities. I try to imagine what is possible and then assess what is probable. Moving forward, I’ll include my probability-based assessments in every SitRep. The goal isn’t to convince you of my opinion (on the contrary—remember my disclaimer), but rather to practice forming an informed perspective so that you can position yourself in alignment with your own assessment. Arthur Hayes recently estimated a 30% Bitcoin drawdown to be 60% likely. However, he made that assessment a few weeks ago, so his view may have evolved. After Monday’s events, I think it’s clear that Bitcoin is significantly impacted by policy changes—so one should prepare for volatility. But at the same time, Bitcoin’s rapid recovery, driven by strong buying pressure from Coinbase users, was almost unmatched by any other asset. Bitcoin is playing in the Champions League now, which means even greater [correlation](https://capriole.com/update-58/) with macroeconomic factors. A breakdown toward $70,000 is possible, but not probable. That would be a minus-one-sigma move on the BTC/GOLD Power Trend—a level previously seen during the COVID crash and the Terra Luna collapse. The recent grey swan events, like the DeepSeek AI news and tariffs announcement, only pushed Bitcoin down to $92,000. Based on this, it seems like it would take a mini-financial crisis—along with the US 10-Year Treasury Yield (US10Y) hitting 6%, as Hayes suggested—to drive Bitcoin significantly lower. Meanwhile, gold is surging into price discovery with no signs of slowing down. Bitcoin has followed gold’s trajectory—just with a slight delay. Bullish Catalysts for Bitcoin I didn’t cover them in this SitRep, but there are several bullish developments for Bitcoin, including: * The creation of an American Sovereign Wealth Fund * New and favorable SEC guidelines on crypto in the making * A possible Bitcoin Strategic Reserve * An increasing number of corporations adding Bitcoin to their balance sheets as a Treasury asset * Potential favorable policy on stablecoins, strengthening the digital asset environment * A push for lower US10Y yields, as discussed by [Jeff Park](https://x.com/dgt10011/status/1887316068189733259) The market is likely to remain messy, with ongoing discussions about tariffs and policy changes. But there’s one thing that keeps me thinking. Despite a bullish outlook, the price isn’t moving higher on good news—a signal that shouldn’t be ignored. It suggests that investors who want exposure to Bitcoin already have their positions. In other words, there’s a lack of new money flowing in. Without fresh demand, any negative news could tip the scales toward selling, exacerbated by momentum traders and liquidations. Demand for neutral, scarce, and highly desirable assets—like gold—is clearly increasing. Bitcoin needs to capture some of that demand, too. That’s why I’m watching the DXY, US10Y, and GOLD like a hawk. Stay sound, J.M. Bergman