'If Bitcoin breaks $65K, next stop will be $100K!' | Interview with Gareth Soloway

All right, we have Gareth Soloway, and he has been a avid swing and day trader since his days at Binghamton University, where he studied economics. After college, Gareth quickly excelled as a financial advisor, helping others gain financial independence. In 2007, Gareth decided to partner with his friend and colleague Nicholas Santiago to form the inmoneystocks.com with the sole purpose of helping the average investor beat the best hedge funds and traders on Wall Street. Garrett, thank you for joining us today. How are you?

Hey. I'm doing really well. Thank you guys for having me.

Excellent.

Yeah.

We were super excited to dive into some of your insights about what's going on with the markets right now. And so bitcoin seems to be moving in tandem with the stock markets following the crypto ban in China. I'm curious to hear, like, what are your thoughts on Bitcoin's correlation with stocks right now, and what does that look like?

Yeah, so there's definitely a correlation, and the correlation happens to be liquidity and margin. Right. So what you're seeing now is a market in terms of the stock market that's been overinflated, increased by the Federal Reserve exponentially in terms of valuations, and just so much money flow. And part of that has gone into cryptocurrencies. So what ends up happening is that when you have a pullback in the stock market, there's a certain amount of margin contraction, meaning that people are borrowing X amount of dollars. When they lose it in their stock portfolios, they have to cover it via another avenue. And that avenue can oftentimes be cryptocurrency. So you'll see usually a connected move here where, in my opinion, the deleveraging that will continue in this market will actually drive Bitcoin down a decent amount in the coming months. Wow.

So let's check your worst case scenario. We had the deadline on government the ceiling raise on October 18th. Let's imagine that they failed to raise it by October 18th. There's a huge crash on S and P markets. What are the odds that you think this will happen, and what should happen to bitcoin and cryptos in this case?

Yeah. So in general, almost every couple years, we see kind of this. This issue with the debt ceiling where Republicans versus Democrats go back and forth. And what ends up happening is generally at the 11th hour, there's a deal struck to at least extend the amount prior to the default. So I'd be very surprised if we did default as a country in the US what usually goes on again, and this is kind of Common sense. But it's like no political party wants to be the party that collapsed the US and, and caused a default, right? So right now the prior administration was Trump and the Democrats were kind of saying, oh, we don't wanna let you inflate the budget anymore. And now it's the other way around with Biden and the Republicans are saying it. But again, neither side wants to be known as the one that collapsed the whole country via a default. So I think that overall that's gonna turn out to be somewhat of a non event. But I do think that there are issues out there that will continue to trickle through. Like we're seeing the stock market beginning rollover. Now for a lot of people in crypto, that may not seem like a big deal. But if you go back to my prior statement in regards to how much liquidity and margin is in the system right now, any sort of contraction in the stock market inevitably will cause a contraction in cryptocurrency. Now let's, let's frame this, right? So I'm a huge long term bull on cryptocurrency. I see 100,000, then 500,000, eventually rivaling the market cap of gold. But you do have to flush out a lot of this kind of weak money that's been just slowly accumulating, thinking the markets can never go down. It's always going to be new all time highs. And that's what I'm concerned with. And in fact, if you guys don't mind, I'd love to show the chart here. Let me bring up my chart on bitcoin. So bitcoin, the chart of bitcoin is an absolute thing of beauty. It actually is behaving exactly like a technical chart should. So you had this head and shoulders over here, right? Beautiful head and shoulders. There's your $65,000 high. Here was your neckline. You can see this high pivot connects perfectly through this low, through this low. When this broke, this was a breakdown, right? And we saw a major collapse to the 30,000 marker. Then Bitcoin started to trade between 30 and 40,000. You could see up and down here, up and down, eventually breaking through this 40,000 level and going back to this same trend line, which we refer to as the neckline. And retesting it, that's very normal for a chart to do. The problem is that's epic resistance. That is like the, a league of resistance levels. And sure enough, instantaneously we saw bitcoin hit and collapse down to about 43,000 from 53,000 you've then come back to this level, Right? So over here it was resistance, right here, resistance. Resistance finally broke through. Now it's support. So in the very short term, Bitcoin, it's imperative that bitcoin holds this 40,000 level. If it doesn't hold 40,000, then you're going to start trading in this 30 to 40 range which it was in prior. And I do worry that again at some point you will see a breakdown below 30,000. My ultimate downside target is 18 to 20,000. And again I think that coincides with deleveraging. And again, just to remind everyone, I have a huge long term upside target on bitcoin. I just think you have to wash out a lot of this kind of weak handed money.

So you say you're more short term bearish, long term bullish, then yeah, short.

Term bearish again, it's one of those things where you've created so much. The Fed has been pumping in $120 billion a month into the system. Inevitably some of that goes into cryptocurrencies. Banks have been so lenient on giving loans, margin rates have fallen. I mean, I think at Interactive brokers you pay 1% on margin on loans, more than a million dollars now that stocks again. I don't know what the margin rates are in cryptocurrency, but there's this kind of excess liquidity in the overall system that you need to flush out. It's kind of what happened in 2007 going into the financial collapse where these banks were just making ridiculous loans. And then you had this credit contraction where all of a sudden the collapse occurred and it washed a lot of that money out of the system. It kind of reset, if you will. And then of course the Fed comes in and just prints trillions of dollars again. That's their deal. They just want to reinflate the system. But I do worry that you have to go through this type of thing in the near future.

So with that in mind, where do you see the markets right now? Are we still in this bullish cycle? What are you kind of seeing?

So according to the charts, right, we technically made the cycle high at the 65,000 marker. And again, one of the cool charts I want to show you guys here is a chart from 2013, right? So if we bring up the 2013 Bitcoin move now, there's a lot of debate whether or not this is the high pivot. And I understand that, but based on what I do is strictly charts, right? So it's all probabilities. And what we can see here is that in 2013 we ran up to 1250, then we corrected to approximately 500. You then had this mega sized bounce back to 1100 before collapsing down to 100. So now compare that to what we've seen recently. We saw a run up to 65,000, which would be approximately this 1250 high equivalent. Then the collapse to 30,000, we'll call that the 500. Then the move back to 53,000, which in 2013 was 1100, which leads me to believe that we're on the verge of this flush down in cryptocurrency to this Again, it would probably be the 20,000 retrace to the 2017 highs, give or take. Going to the 2017 cycle. Here you have the same pattern replicating, right? So the big run up to 20,000, a massive correction. Again, the 30,000 drop that we saw off of that breakdown, then a retrace to 17 and then a move down to three to 5,000, give or take. Now one of the reasons why to me this kind of speaks to being a cycle is because if you look at the cycles, all the bitcoin cycles are in four years, right? So Bitcoin came to market in 2009, right? So then you have four years until the tie in 2013, then four more years until the high in 2017, and then where do we, if we add four years, it brings us to 2021, which is where we currently are. Which if the cycles will repeat in terms of four year cycles, that should be the high. Now, could we technically make a higher high later this year? Yeah, it's still 2021, so it is a possibility. But again, you know, that seems a little far fetched as we start to see the stock market decline and some of the liquidity kind of dry up.

You'd mentioned that you don't think that the debt ceiling thing is going to be a big issue. What about interest rates? Is that ever going to, are we ever going to be able to raise interest rates? And what do you think will happen when that does happen?

That's a great question. I mean, so interest rates are a tricky scenario. The global picture wants to push them up and then they have the Fed fighting against them. Right. Right now the Fed is okay with interest rates going up a little. But the problem is as the U AT debt expands, we literally as a country cannot allow interest rates to get too high or we can't service our debt and we will be forced to default anyways. And that's kind of my long Term bull case for bitcoin, where I actually see that at some point the global picture is going to. The countries around the world are going to say, hey, listen, we're not going to lend you any more money because we don't think you're ever going to pay us back unless you pay us x high amount of interest. Obviously, we can't do that as a country. Eventually you have this kind of meteoric dollar collapse. And from the dust, I think that cryptocurrency side of things really rises. I actually think the Federal Reserve will no longer be around when that happens. They'll be the scapegoat for what's going to come on. So it's a really interesting period we're coming into. Cryptocurrency was born out of the financial crisis in 2009. And it really has a huge place in the future because the people will demand that. You can't allow a government to just run up crazy debt, which, remember, it's our tax dollars. In reality, it's me and you and everyone, we owe that money. You know, eventually it's either our taxes go up or we default and the economy crumbles one or the other. And the same thing for the Federal Reserve. How do we allow a body to just say, hey, you know, we're just going to save the day every time a little hiccup comes in and we're going to just print and throw trillions of dollars into the system? Inevitably that can't survive. Right. We can't be the outcome that lasts forever and there has to be a reset. And that's again where crypto comes in.

Garrett, I know that you've been analyzing gold charts for a long time, but over the past 10 years, gold performed very poorly. It's like down 5% or 8%, I think, in a decade. So how do you think that gold is going to react if a generalized crisis comes up, will still hold its value or it's shifting already to other investments?

Yeah. So, I mean, there's no doubt that gold has been a poor performer over the last really 20 plus years. I mean, it has had periods where it's. Where it's done well. But one of the things that's interesting, over the last 20 years, we've been in this period in the U.S. where inflation has been basically zero. Right. Maybe 1%, 0%. And so there hasn't been a bull case for gold in a long, long time. One of the interesting things to do is go back to the last time we had, you know, 8 to 10% inflation, which is what we're seeing in the US now. And, and what the Fed is even saying next year will be, and that was in the mid-70s to mid-80s. And with interest rates up because of inflation, you actually saw a really big move to the upside in gold. So I'm kind of in the camp that I think cryptocurrency and bitcoin has taken a portion of that. I think assets will continue to kind of go into cryptocurrency as an alternate to the dollar. But I think that considering the massive printing of fiat currencies out there that has occurred over the last, you know, 10, 20 years, and we're talking about Japan, Europe, I mean, it's not just the U.S. let's be clear that there's easily enough room for both gold and for cryptocurrencies to thrive.

And one thing I wanted to bring up is like, you've brought that up. You brought up these historical price action charts of bitcoin. How important is that in a lot of your trading strategies and how you like to look at the markets?

It's really number one. And the reason it's number one and why charts are so important is because a chart represents human emotion, right? So people are either bullish, you know, they don't want to miss out, they're chasing stocks, or they're extra bearish, or they could be just neutral, right? And the charts and the price action is determined or is basically shown by that. Now the key is to understand that human emotion never changes, right? So there's always going to be greed, there's always going to be fear. And that's why the historic charts can be so helpful to us, to tell us where the next move is coming. Because again, you know, you might have different. Like a lot of people are saying, well, there's, it's different things going on in cryptocurrency right now, defy all this other stuff. But bottom line, it's still ruled by greed and fear. And therefore the charts really should be the arbiter of what ends up happening. And I'll tell you one thing. So my prediction on bitcoin of going down to 18 to 20 before making a big move up to 100, then 500 the way you. And again, everything I do is probability. So there's always a chance of failure. What you watch for is if this market can take out that 65,000 high, then it takes away any comparisons to the previous cycle. So for me as a trader, I have to look at both the Bull case and the bear case, and that's your trigger. Right. So if you go out and take that up, that never happened in 2013, that never happened in 2017. It would change everything. And then you could absolutely say, okay, we're going straight to 100k. And then maybe beyond like that.

I've seen you use the term senior the crime before. Can you explain a little bit about what that means?

Yeah, absolutely. So it's just kind of a coin term that we use here in trading. But I'll show my chart again on that bitcoin chart, so we can kind of gather it. But basically, you have a trend line, and it could be a trend line at any point. Right. But the key is that the scene of the crime breakdown occurred when Price went below that line. So here's your trend line. That head and shoulders again. Shoulder. Head and shoulder. The neckline here. So this was the trigger of the collapse down to 30,000. I mean, it happened within three days. Basically, we went from 50,000 down to 30,000. And there was a reason for that drop, and that was the fact that the trend line broke. So technically, the algorithms that the funds are trading with, technically, sentiment is going to shift at that point, and it caused this exodus. So this trend line was the breakdown point here. When price goes back to it, we refer to that same line as the scene of the crime. It was the scene of the crime right here where that collapse occurred. And therefore, that's a retrace to the scene of the crime right here as well. And again, you can see. I mean, it's really amazing how charts work. How just off of that chart, I mean, that drop was almost instantaneous from where it kissed that level.

Garrett, I see that you guys also have some option products that you offer to the clients. So do you think that the average. The retail investor should be trading options? And if yes, what is the most recommended strategy that you often use?

Yeah, so that's a great question. It's something I run into in our business quite a bit, is people. You know, you often see people with the least amount of money wanting to do options because you can get a lot, essentially, you're getting extra leverage and you get a bigger bang for the buck. To be honest, I always steer people away from that that have small amounts of money, because options can expire worthless. Like, you could be long a stock and be down in a stock, and you could technically hold it for 10 years, and eventually you'll make money on it. Right. Assuming the company doesn't go out of Business with options, they will expire at a certain point, and you will lose 100% if you did not make the call in that amount of time. Correct. So in general, people that have small accounts generally want to make a lot of money very quickly. I can speak from personal experience. I was one of those people when I started, folks, and I lost my money so many times. Like. Like, I literally was trading. When I first started trading on my own, I had $10,000, right. That was it. And I went to a fund that gave me 50,000, and anytime I took a loss, it was out of that. That 10,000. So if I lost a thousand bucks, I was down to 9,000. And I kept on screwing up because I was trying to hit a home run every single time, just like you do in options, like you want to make 100% or something like that. And. And I had to just work my butt off to replenish that account. And it was. It was a struggle. Finally I started to say, all right, I want to hit singles and doubles like I want to. I want to take it slow and steady. Slow and steady wins the race. That term is very, very important, and it's true for trading. Don't be so concerned about doubling your account. I always recommend this. Use a calculator and punch in. Let's say you start with $10,000 and then punch in a return of like 20% a year and just keep on doing 20%, 20, and it compounds. And you'll be amazed in how quickly that 20, that 10,000 turns into 100, into 500, and even a million dollars versus what I did, which was trying to hit home runs, which a lot of people do with options, and I end up losing it three or four times and have to work my butt off to replenish it. So options are a great area to have fun with, but I use my fun money for options. So I usually take about 10% of my portfolio, and I say, all right, I'm going to protect myself here with this option. I like this gold right now, so I'm going to buy some gold calls, et cetera, stuff like that.

So what's your take on the billion dollar plus futures, liquidations on cryptos, and will that continue to be buyers worst nightmare forever?

Yeah. So I liked what I think Marcel said earlier about how there's some. You're having these buyers, but then you're also having sellers. To me, it's kind of a market that. As long as. If you can see. So if you have big sellers and the market's absorbing it. That's actually very good to see. It shows you that there's a lot of demand there. What you don't like to see is where a seller comes out and price just collapses because no one's willing to buy it. So I think that for the most part, it's an okay thing you want to see. For me, the best case scenario is that a lot of the whales get out of some of their positions so that it's a more distributed bitcoin system where there's more people owning it, that'll make it more secure and safe. And eventually I think it becomes more mainstream because of that. What I don't like to see is, you know, you don't want to see 10 people in the world owning 90% of all the bitcoins. I mean, that just creates so much risk for an investor like me, where one of them could decide to sell and I lose 20% in a split second on my investment.

And how do you feel about, like the regulatory front on cryptocurrencies, what's going on in China and the US and the possibility of a bitcoin ETF possibly coming in the future and what that might do to the price?

Yeah, so. So first of all, I think. I think China's banning, there's. There's a couple things. Number one, I think it was the best thing for bitcoin and the United States, right? So when China banned bitcoin and they've done multiple segments of banning, they banned, you know, this and holding it and all this type of stuff. But. But basically you saw a lot of the mining operations shift shifted to Texas. All right? Now you might say, well, what's the big deal about that? Well, on a political side, that's amazingly good for bitcoin because now you have politicians that know that there's a huge amount of jobs reliant, especially in Texas, a very big state, mining. And it's going to make it harder for the government to really enact any sort of negative regulatory action against bitcoin or cryptocurrency. So that's actually a positive. Now, the reason why bitcoin was banned in China is because China has the digital yuan, and China wants that to be the premier digital currency. Now, for me, I would never go near the digital yuan because it's still controlled by the government. As far as I'm concerned, it's just a digital fiat currency. They can still print as much as they want. I would much rather be in something that can't be printed by a Government and controlled by a government, but that's really why they're doing this. They want the digital yuan to eventually replace the dollar as the reserve currency, which again will create a major issue and be another positive for Bitcoin. Now your other question was in terms of an ETF and regulation. So for me, regulation in bitcoin is very important. All right, if you're like me and you see 500k on Bitcoin in the future, whether it's five years out or whatnot, the only way I can figure out how to get there is by the US creating regulation that makes funds like pension funds that have trillions of dollars say, okay, we need to now diversify and put 5% of our assets in cryptocurrency in bitcoin and ether. Same thing with other funds. Other companies out there, we've seen some adoption like MicroStrategy, Michael Saylor being all for it, but you're not, unless you get some more regulatory action on it, you're not going to become really, you're not going to allow these companies and these individuals to really feel comfortable about getting in on them. Having said that, I do think a Bitcoin ETF comes, maybe even announced by year end, but I do think the Bitcoin ETF will kind of help it go more mainstream. But you need that regulation. And again, the key here is you want regulation, that's smart, you want transparency, you want certain things that if you're someone that believes in bitcoin is going to be a long term positive. In fact, it could be a negative short term because people get panicky about regulation. But I would use that as a buying opportunity at the right levels.

So Garrett, you said that if we break the 65,000 all time high this year, which I think is going to happen because of potential ETF approval next month, what is your year end target? How easy is it to break 100,000 if the ETF gets approved?

Wow. So if the 65,000 level gets taken out, then I think you have a pretty straight shot to 100. And I would say again, it's so hard to figure out the timing on it, but let's say that 65k gets broken in October at some point, like some people are projecting, then I think you have November and December to get to that 100k. And I do think that that is a possibility. So Yeah, I think 100,000 would be a reasonable year end target if that 65,000 is broken. But again, keep in mind, as long as that 65k isn't broken, then the cycle matches the 2013 and 17 cycles in the short term.

Excellent insights and we greatly appreciate you sharing your time and knowledge about the markets today. This was Gareth Soloway, the expert swing and day trader. Thank you for joining us today.

Gareth. Hey. So, so fun to be here. Thank you. Guys. Take.