Bitcoin: Heikin-Ashi Candles

Key Concepts

Heikin-Ashi Candles: A technical analysis tool that modifies standard candlestick charts by using averaged price data to filter out market noise and highlight trends.
Midterm Year Bear Market: A recurring historical pattern in Bitcoin cycles where the second year after a halving (midterm year) typically exhibits bearish behavior with temporary counter-trend rallies.
Counter-Trend Rally: A temporary price increase that occurs within a larger, established downtrend.
Seasonality: The tendency for financial assets to exhibit predictable patterns during specific times of the year.
FOMC (Federal Open Market Committee): The body responsible for U.S. monetary policy, whose meetings often influence market volatility.

1. Heikin-Ashi Methodology

The speaker emphasizes using monthly Heikin-Ashi candles to reduce market noise and identify the true underlying trend. Unlike standard candles, Heikin-Ashi formulas are interdependent:

Close: $\frac{1}{4} \times (\text{Open} + \text{Close} + \text{High} + \text{Low})$
Open: $\frac{1}{2} \times (\text{Previous Heikin-Ashi Open} + \text{Previous Heikin-Ashi Close})$
High: $\max(\text{High}, \text{Heikin-Ashi Open}, \text{Heikin-Ashi Close})$
Low: $\min(\text{Low}, \text{Heikin-Ashi Open}, \text{Heikin-Ashi Close})$

Key Insight: Because these candles are calculated using averages and prior data, they remain red during bear markets even when standard charts show counter-trend rallies. This helps investors avoid "FOMOing" into temporary price spikes.

2. Historical Analysis and Patterns

The speaker compares the current market to previous midterm years (2014, 2018, 2022):

2018 & 2022: In both years, Heikin-Ashi candles remained red throughout the entire bear market, despite significant counter-trend rallies.
2018 Specifics: Bitcoin saw a 33–34% rally in April 2018, yet the Heikin-Ashi candles did not flip green, signaling the bear market was still in effect.
Current Rally: The speaker notes that while Bitcoin has rallied ~13.5% this April, it mirrors the 2018 pattern where a local top was formed in late April/early May before a subsequent decline.

3. Market Perspectives and Arguments

"Most Hated Rally" Myth: The speaker pushes back against the narrative that the current rally is the "most hated ever." He argues that emotions are high because pullbacks have been shallow, but the price action is consistent with historical bear market behavior.
Stock Market Correlation: The speaker refutes the idea that Bitcoin must rise because the stock market is hitting all-time highs. He points out that in 2014 and 2018, the stock market reached new highs while Bitcoin remained in a bear market.
The Role of FOMC and Bank of Japan: The speaker highlights that historical lows often occur shortly after major central bank policy shifts (e.g., Bank of Japan rate hikes). He suggests monitoring the upcoming FOMC meeting as a potential catalyst for a local top, followed by a potential low in June.

4. Notable Quotes

"If you wait for that confirmation [of a trend change], the low will already be in. But I just want to draw your attention to this way of looking at the market."
"I would push back on the idea that this is the most hated rally ever. If this is the most hated rally ever, then we have the most hated rally ever bear market when we have a counter-trend rally."
"Seasonality isn't everything... it works out about 70% of the time."

5. Synthesis and Conclusion

The main takeaway is that current market conditions are not an anomaly but rather a repetition of historical midterm year patterns. While standard charts may show a convincing rally, the Heikin-Ashi perspective suggests the broader trend remains bearish. The speaker advises caution, noting that the most likely scenario is a local top within the next few weeks, followed by a decline into June. Investors are encouraged to look past the "noise" of short-term price action and recognize that bear markets often include deceptive counter-trend rallies that do not signal a new bull market.