Here’s Why Hedgeye’s CEO Sold All His Bitcoin

Keith McCullough, CEO of a large risk management firm, explains why he’s sold off all his Bitcoin. And why it’s your fault if you don’t agree with him.

In brief

  • Hedgeye CEO Keith McCullough has sold his Bitcoin.
  • This is because the crypto market is decelerating, he says.
  • But he’ll buy again if it picks back up.

This week, Keith McCullough, CEO of risk management firm Hedgeye sold off all of his Bitcoin. Today, he explained why. “It’s not personal,” he said in a blog post. It’s just “RoC Empirics.” Duh! (RoC means return on capital. Empirics mean math).

He said it’s a combination of…who knows. McCullough’s answer as to why he claims to have sold his Bitcoin—how much is unclear—is difficult to parse and appears as vague as any YouTube crypto trader who searches for “Bart Simpson haircuts” and “Golden Triangles” in price charts.

(McCullough’s firm, however, claims to advise risk managers with over $1 trillion of assets under management. It is unclear in what capacity and whether this simply refers to subscribers of his newsletter.)

But here’s a rough translation. He says he sold his Bitcoin for a combinations of “A bearish @Hedgeye TRADE breakdown” and “Rising probability of #Quad4 in Q4.” A breakdown is an explanation and Quad4 is a term invented by Hedgeye. It means that economic growth and inflation are slowing down. Quad4 is bad, and Bitcoin’s price is Quad 4.

Bitcoin in Quad 4!
Step one: Buy Bitcoin. Step two: Sell Bitcoin. Step three: Profit? Image: Hedgeye

This “makes it an easy A/B Tested decision,” or a decision, “to sell some, then sell all.” He says, “Other than Hedgeye Equity, my Real Estate, Wine, and Venture Capital investments, I am not a buy-and-HODLer.” This means that apart from the things Mccullough holds onto, McCullough doesn’t hold onto things. And Bitcoin isn’t on the list.

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McCullough continues, “If that empirical fact or my decision to de-gross and/or sell affects you emotionally, you should really consider why that’s happening to you. When I sell something for a big gain, the only feeling I have is that I am going to pay taxes.” This means that if McCullough has upset you, it’s your fault and he’s rich and doesn’t care.


Then, “if Gold and Bitcoin continue to correct in price (they’re already in motion on that since I made my sales), there are no rules in my Full Cycle Investing accounts that say I can’t buy them back.” This means that if Bitcoin’s price increases, McCullough will buy it again.



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BTC Price


Of course, only “when my dynamic rate-of-change model signals to do so in the right Quad.” We have no idea what this means, but it all sounds exciting. Meanwhile, Bitcoin’s price shot up by 3% today and is close to breaking $11,000 per coin again.


What Is Quad 4?

When inflation and GDP growth are slowing, the U.S. economy is in Quad 4, according to Hedgeye Risk Management

There is a term flying around Wall Street that should scare anyone with money in the market.

“Quad 4.” While it is used to describe the state of the economy, it also has implications for investing.

The term—originated by Darius Dale, co-head of macro strategy at investment-research firm Hedgeye Risk Management in Stamford, Conn.—comes from an investing framework that looks at the trend of two vital economic metrics: GDP growth and inflation. The former measures how fast the overall economy is growing. The latter tells us the rate at which the prices of goods and services are moving.

Keith McCullough, Hedgeye’s founder, says he and his team aren’t focused on whether GDP growth and inflation are good or bad, per se. Rather, they look at whether those metrics are heating up or cooling down.

At any point, inflation can be rising or falling. The same is true of economic growth. When the two get combined, you get a four-quadrant matrix that can be used to analyze where the economy is in the business cycle. That, in turn, can offer insights into which assets may perform best at that time.

When falling inflation coincides with slowing economic growth, the U.S. economy is in Quad 4. Hedgeye sees that commencing in the second quarter of the year. The consumer-price index measure of inflation has slowed over the past three months, according to Mr. McCullough. And the team sees weakness ahead in the U.S. economy, based partly on the component parts of a recent GDP report.

Avoid the 4

This chart grades the state of the economy through two metrics: GDP growth and inflation. Quad 4 is when both growth and inflation are slowing.

“Quad four is the lowest point of the economic cycle,” says Mr. McCullough. When both economic metrics are slowing, then the economy is headed for its cyclical bottom. The last two troughs were seen in 2008 and 2001.

When the economy is in Quad 4, stocks of technology companies and other growth-oriented businesses tend to perform poorly, Mr. McCullough says. U.S. Treasury bonds, gold bullion and utility stocks tend to be better bets.

“Our entire macro research business is based around the idea that you don’t get run over by Quad 4,” says Mr. McCullough.