‘Watch Out 2026’: What Bitcoin's Meltdown Means For Stocks, Warns Trader | Gareth Soloway

Bitcoin's Leading Indicator Role [00:00]

• Bitcoin has a history of leading the stock market, with its bull market highs preceding stock market collapses by 4 to 6 weeks.
• Examples cited include the 2017 Bitcoin high preceding a stock market collapse in January 2018, and the November 2021 Bitcoin high preceding the 2022 bear market for stocks.
• Current data shows Bitcoin topping in October 2025, with a subsequent fall, suggesting the stock market may weaken.
• This historical correlation points to further downside for the S&P 500 in 2026.

  "Bitcoin has a history of leading the stock market and you can easily see that by just taking a look at the data, right?"

AI Trade Bubble and Chip Depreciation [03:10]

• Factors contributing to a potential deflation of the AI bubble include the rapid depreciation of AI chips.
• Hyperscalers are currently depreciating chips over 7 years, but due to fast technological advancement, these chips could be worth zero within 2 to 3 years, artificially inflating earnings.
• The market is beginning to see through this artificial inflation.
• Concerns also exist about companies like OpenAI’s ability to raise capital for massive deals, and Oracle's significant debt load.
• This has caused investors to step back from the AI trade, with stocks like Oracle down 50% from recent highs.

  "And so, they're really increasing artificially their earnings. And I think the markets are starting to see through that."

Federal Reserve Policy and Economic Outlook [07:50]

• Market indicators like the Fed Watch tool and prediction markets suggest the Fed is unlikely to cut rates in January, with a high probability of rates remaining unchanged.
• This is partly because the economy is not showing signs of a significant cliff-fall, and the Fed wants to observe the labor market.
• Some Fed presidents are cautious about lowering rates too quickly, especially if the economy is expected to gain steam in 2026.
• Lower CPI numbers might set the stage for future rate cuts by a new Fed chair in May.

  "So, again, number one is you can we can debate till we're blue in the face whether we believe these numbers or not."

2025 Year-End and 2026 Market Forecast [10:28]

• A year-end float is anticipated due to factors like Micron's earnings, CPI data, and the holiday season leading to reduced institutional trading.
• However, 2026 is not looking good on the charts, with technical analysis indicating limited upside and a higher probability of downside.
• Parallel trend lines on S&P 500 and NASDAQ 100 charts suggest major resistance at current highs, likely leading to rejection and sell-offs.
• The primary risk factor is seen as being towards the downside in 2026.

  "But then watch out 2026 is not looking good on the charts."

Bitcoin vs. Stocks: Institutional vs. Retail [13:45]

• Historically, stock market trading was dominated by institutions, but now retail investors play a larger role.
• In contrast, the crypto space has seen increasing institutional involvement, with retail capital flowing in less relative to previous cycles.
• This shift suggests stocks are becoming more of a retail play, while crypto is more institutional-driven.
• This dynamic could imply greater volatility and a larger decline for stocks, while institutional money in crypto might cushion Bitcoin's downside.

  "So we're looking at the stock market being more and more of a play for retail investors and crypto more and more of a play for institutional investors."

Bitcoin Drawdown and Institutional Accumulation [17:16]

• Bitcoin is expected to see a drawdown of 40-50%, less severe than previous cycles (75%), due to institutional money accumulating.
• The peak to trough drawdown for Bitcoin has already reached 36%.
• The projected range for a significant pullback is between $69,000 and $74,000, which would represent a 40-45% drawdown.
• If the stock market experiences a major collapse, Bitcoin could fall lower, but a normal pullback is expected to lead to stabilization.
• Bitcoin is increasingly viewed as "digital gold," offering a cushion against risk assets.

  "Instead, look for somewhere in the 40 to 50% draw down and then look for a base with institutional money accumulating."

Gold and Silver Bullishness [24:31]

• The outlook for gold is bullish, with the chart structure indicating a potential move higher.
• A breakout from a bull flag pattern suggests further upside, with a target of $5,000 per ounce by Q1 2026 if all-time highs are broken.
• Mid to long-term sentiment for gold remains bullish, despite expected pullbacks.
• Central bank buying, particularly from China, is a significant factor supporting gold prices.
• While gold and stocks have moved together recently, gold's rise is attributed to a lack of trust in government fiscal responsibility and its safe-haven appeal.

  "So near-term my it is bullish. As long as we break the all-time high here."

The Psychological Shift and Market Invincibility [27:59]

• A key driver of the current market rally is a psychological shift, creating a sense of invincibility among investors.
• Frequent V-shaped recoveries have led many, especially newer retail investors, to believe they can't lose.
• This mentality, coupled with potential expansion of margin and borrowing, is seen as a precursor to significant market falls.
• The market has a tendency to push investors to their emotional extremes.

  "And that again is setting up for disaster."

Trading Philosophy: Logic and Chart-Based Decisions [30:51]

• A core trading philosophy involves being cautious, employing smaller position sizes, and diversifying to avoid portfolio blow-ups.
• Taking profits strategically (e.g., pocketing a quarter to half of a position at 10% gains) allows for playing with "house money" and re-entering at better dollar-cost averages.
• This approach reduces emotion and enables more logical trading decisions, which is crucial for long-term success.
• Smart trades are based on probabilities derived from chart analysis, not hype or personal affection for a company.

  "It's when I let my emotion get control, I usually lose."

Favorite Assets for 2026 [32:02]

• Favorite assets for 2026 include metals, specifically platinum and palladium, which are showing signs of an uptrend.
• Defensive stocks with higher dividends, like Pfizer, are also favored for capital preservation.
• Bitcoin accumulation will begin if it drops to $70,000 or below, expected to be a strong performer in late 2026.
• A significant downside correction in the S&P 500, potentially to the 5,400-5,500 range (the COVID lows), would represent a major buying opportunity.

  "I'm going to be looking at metals but I'm going to be looking at more the platinum and palladium area which has just started to run as being some of the key ones here."