BTC Sessions - Massive Hedge Fund Buys Bitcoin, $1M Possible: Raoul Pal, Alts Failing EP055

Episode Date: May 8, 2020

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Wasabi wallet and fairly private. What's up everyone? I'm Ben with the BTC sessions and this is your daily session. Before we dive in, I just want to give a quick shout out to sponsors of the show, leaden.io. This is where you can use your Bitcoin for a few different things. They've got Bitcoin savings accounts where you can earn an interest on your Bitcoin. They've got Bitcoin backed loans, which is the first thing I ever used. It's where you can use your Bitcoin as collateral to get a Canadian or US dollar loan. So for me, I was in a pinch. I needed some dollars. I didn't want to sell my

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Yeah, be sure to check them out. With that, let's dive into the news. So, there are, I mean, people are getting bullish right now because we are up in and around the $10,000 range. It did peak over it for a little bit. Now it's back into the 9900s somewhere in there. Now, whether or not we stay in this range and go above 10K immediately, it's, really. to be seen, but still nice to kind of see those levels once again. It's been a little while. We did see them earlier in the year, but before that last time would have been October of last year.

And I mean, we've just come back from a massive sell-off alongside the stock markets in the midst of this pandemic. So to see Bitcoin not only recover from the drop from 8K to 4K, but then go beyond that by even further, if you bought that dip, then you've already more than doubled your money. You two and a half times if you bought that 4K dip. So you have a lot of obviously bullish sentiment. Now, I will say before I get into this episode, it's very, very bullish, but also try to keep a level head because when you do make irrational, emotional decisions around investments and buying and selling assets, they can often be not the best timing.

And so if the only reason you're going to buy is because you watch an episode like this, then maybe a better approach is something like dollar cost averaging if you think that Bitcoin is even for you. So with that said, let's get into some of this news. So Rao Paul, we've been talking about him. He is a global macro investor. sorry, the CEO at Global Macro Investor. And on May 8th, he released some charts where he argued that present, basically that the Bitcoin price could go vastly higher.

So his quote here says, whatever plays out after a key technical break like today, the probability of vastly higher prices has risen dramatically. Pal, who last month released a seminal report into Bitcoin's benefit, Bitcoin's benefits against fiat currency said that using classical charting techniques, 40 grand becomes reality. He added, well, that gives you a price object for this run, potentially, keyword potentially, of $1 million. He said using a log chart, Powell continued, likewise produces a one standard deviation move to 40 grand,

and a two standard potential to one million. The last time I covered Powell, he said along the lines of boomers are fucked. And what he meant by that is sitting in traditional markets and traditional assets because we have not potentially have not seen the full implications of these shutdowns and what it means for the markets as a whole. And because of consequences around what the Fed and other central banks have done with massive money printing and quantitative easing measures, that the worst is yet to come in his eyes in those markets. And the only way in his eyes to stay safe is either being in

the U.S. dollar because it's the only reserve, it's the only fiat currency that is in high enough demand to potentially see some deflation or in Bitcoin because it's set up to be the inverse of everything that has happened. It's set up to be an alternative to the system that we're living on now. Now, he's not the only bullish person that controls. a lot of wealth and is piling into Bitcoin, billionaire investor Paul Tudor Jones says he's loading up on Bitcoin. And so I'll just read, I'm just going to read this article here from Markets Insider. Billionaire Paul Tudor Jones is buying Bitcoin.

Bloomberg reported on Thursday. The hedge fund manager said his fund may hold as much as low single digit percentage of its assets in Bitcoin futures to help protect against a rise in inflation, according to the report. Paul Tudor Jones is the founder and CEO of Tudor Investment Corp, which managed $38.4 billion as of March 30th of this year, according to data from the SEC. Yeah, he said that it reminds him of the role gold played in the 1970s, and he said the best profit maximizing strategy is to own the fastest horse.

I am forced to forecast, and my bet is that it will be Bitcoin, which is, wow, it's crazy to see that coming from a guy who manages tens of billions of dollars for his fund. Now, I wanted to point out this tweet from American Hoddle, or I guess wartime huddle, on Twitter, if you don't follow him, you should. But anyways, he said this, you were stacking stats at the same time as Paul Tudor Jones. Never forget that. You're not a D-Gen who dropped out of community college and got fired from the vape store. You're a savvy tech investor trading alongside a Wall Street legend. I love it. Now, on the inverse side of this, somebody who was very bearish Bitcoin,

there was a huge whale of a trader on BitFinex, and he was famously short Bitcoin a lot of the time. And at one point, he was very up on shorting Bitcoin. Well, again, he now has as of when was this? Not too long ago a few days back. He had an unrealized loss of $21 million. So he was betting that Bitcoin would go down. It kept on going up. And he kept losing money because of that.

And because of that, he's now been ridiculed and forced off Twitter. He deleted his Twitter handle. and he also deleted his BitFinex account. So, again, play stupid games, win stupid prizes. We'll get to more of that in a moment. But Plan B, the guy who put together what's known as the stock to flow model, trying to project some of Bitcoin's future price movements if it holds up its trajectory based on the amount of existing Bitcoin in the market

versus the flow of new coins onto the market. and Bitcoin, that measure tapers over time. So we're going to see that in three days here. We have the halving where right now every 10 minutes, 12.5 Bitcoin are created. And in a few days, that's going to be dropped to six and a quarter. And that happens every four years, as I said. So plan B said here, take note, trader at Joe 007 is just one example of someone that is against the stock to flow model. Not because he really thinks stock to flow is wrong, but because he is short Bitcoin.

Now he's wrecked $20 million with a loss on his short position. And here's Joe talking his own book on Bitcoinist, which there was an article covering him saying how he thinks that the halving is a sham and that it won't go up for the halving. But yeah, at one point for shorting Bitcoin, he was up about $10 million, but he lost all of that and then lost a further 20 because he would have had to go down 10 and then down a further 20 from there. So pretty unbelievable.

Things can change very quickly if you're playing around a lot with money and betting against Bitcoin, especially in the long run. Now, I did want to touch on this because when things get crazy during the markets, during bull markets and everything's on the way up, a lot of people think they're buying the next Bitcoin. And we'll get to that in a second. but we're looking at the market right now. And again, Bitcoin is up around the $10,000 range.

It's just about $20 shy as I record this now. So it's up on the day in dollar terms and up over the past couple of days. And, I mean, past month or so, even more, even when you go a year back, it's done pretty well other than a few spikes where it would have been higher than it is now last year. but if you look across the space at all of the top alt coins, you start to look and I've plotted this here on my screen versus Bitcoin and you can see how the price has performed in relation to Bitcoin. So I guess what it's showing here is if you had bought these coins with Bitcoin, what percentage would you be up or down in terms of Bitcoin? And when you start looking and holding this up as your standard and your goal is to obtain more Bitcoin over time, it paints a pretty bleak picture if you're in altcoins.

Like looking across the board, essentially Ethereum, any time in the last year, you're down. In some cases, double digits. When you start to dive into some of the other altcoins, when you get into basically a week, you're pretty. probably down double digits, like around 10%. When you start looking out 30 days, 90 days, one year, you potentially lost a third, 50%, sometimes 60% or more of your Bitcoin. Now, yes, there are some points where you may have gained a little bit.

But the problem with this is, on a lot of these, it's just on specific time frame. So that would mean that the alt coin was down so much in relation to Bitcoin at that point in time that it's, you know, it probably had some sort of catastrophic dump at that time. And so had you picked up, maybe you just locked out and you made some money. Now, some of them are up a fair amount. But when you look at this and you see a sea of red with the occasional bit of green, you've got to think to yourself, do, am I? going to roll those dice? Am I going to make that decision? Am I going to put my sats at risk to dump it into some random shit coin that may or may not pump? I mean, it's your call, but that's

definitely, you know, when I first got started, I made those mistakes and I lost Bitcoin. And I think a lot of early people to the space do the same until you kind of start to realize that a lot of this is smoke and mirrors and Bitcoin is really the only thing in the long. term that holds up. Now this is interesting here, this article from CoinDest that I'm looking at and this is BitFinex now has a derivatives contract offering exposure to Bitcoin dominance and so what Bitcoin dominance means is what percentage of capital in the cryptocurrency space is allocated specifically to Bitcoin versus all of the other alt coins. And right now Bitcoin is in and around the 60 mid 60

percentage range, 65, 66. I'm not sure the exact amount. Early on, it was most of all of it. But that number has gone down over time. Now, you may think that that means, oh, well, Bitcoin is losing, basically losing ground against all coins. In a way, yes, but you're looking at a single asset and you're saying, how is it holding up against every single other cryptocurrency when anyone anywhere can create a currency and hope and try to build a market cap out of it. You have large companies that are having ICOs. You're having other all coins that pop up. And in aggregate, they are growing.

But as we just saw when we looked at performance versus Bitcoin, over time, they're all losing ground versus Bitcoin. It's just that more and more coins are coming out of the woodwork. And so, yes, there's always going to be new alt coins. And Bitcoin dominance, honestly, I think over time, will continue to drop at least in the short to midterm because people like to gamble and people like to buy shiny new things. But, you know, my guess is that over time, the charts will continue to look like this, where every other random shit coin that gets made loses value in terms of Bitcoin. Everything will trend towards zero, not necessarily necessarily. hit zero because it's very difficult to have a zero value for something, but you can try.

But I think Bitcoin dominance will definitely continue to go down. And so when I look at a derivatives contract, which means you can bet on the trajectory of Bitcoin dominance, I look at that and I think, well, why would you necessarily bet that dominance would go up unless you think that all of these altcoins are going to just disappear overnight, which I kind of doubt. I again, as I said, I think they'll trend downwards in terms of Bitcoin value, but there's going to be more and more of them. And so you're trying to bet that all coins will disappear, that new ones will not arise, that those ones won't have any value or people

won't speculate on them, and that Bitcoin will rise and no new, no new entries will come to the market cap to outweigh that. And I just don't think that's a good, bet to make in my eyes. Now, again, to tag on to the idea that historically everything is devalued versus Bitcoin, I wanted to show this historical snapshot from coinmarketcap.com, and it's pretty fucking eye-opening. So this was from November of 2017, the 26th of November. So Coin Market Cap takes historical screenshots once a week, and you can look all of them up

on the website, but it shows the price of these assets at that particular point in time. And so back then, I chose the snapshot because Bitcoin was in and around the same range. It's when it was on its way to 20K. So around this time, Bitcoin was $9,330. Now, obviously, we're above that by about $600, but we're pretty close in that range. But when you look comparatively at the price of these alt coins now, it's insane. So here you see Ethereum was $471. Bitcoin Cash was $1,700.

You have things like Bitcoin gold that were $366, Dash was $600. Lightcoin was $85. Manaro was 163. Neo was 38. Iota was 84 cents. So, I mean, some of these look quite expensive. That's because they were. And let's just hop back to that previous.

when we were looking at, Bitcoin cash is $263 right now. When Bitcoin was around the same price in 2017, Bitcoin Cash was $1,700. That is a catastrophic drop and a non-recovery. Same thing. When you're looking at Ethereum, it's $213 right now down from $471 when Bitcoin was the same price three years ago. So more than, more than a half, like it's dropped more than 50% since then. And that's with going up this year.

Same with Bitcoin Cash. That's with it going up this year. You know, and then there's even more insanity. Things like Dash. Dash was $620. And I'm just going to, I just, I have to look at it live while I'm recording this. Dash from $600 something dollars, because I know this one is bad. Yeah, it's 79 right now.

And the, oh, okay, the really bad one, the worst one. I'm sorry, this is just too fun to look at. The worst one, come on, load for me, please. Okay, yeah, Bitcoin gold, Bitcoin gold was, sorry, guys, you just, you really have to see this. It's really bad. Okay, Bitcoin gold was $366 at the time of the snapshot. It was the number five cryptocurrency. Bitcoin gold now is $10.

$10 from $360, I think I said it was. Good God. And people thought they were like, oh, yeah, this is like just going to be the new Bitcoin. And that's what a lot of people think. And it's just, it's easy to get pulled into that, especially as a newcomer. But I'm just, I'm trying to frame the picture of, If you play stupid games, you win stupid prizes. So please, please do be careful out there.

And again, I guess I'll just, I'll want to further tag on. I know I'm beating a dead horse at this point, but looking at Bitcoin price, where it is right now, Bitcoin has now been profitable for 95% of its entire existence, meaning that only 5% of all days in Bitcoin's entire existence would you still be at a loss. So a very slim number of days. And so if you had been dollar cost averaging, which means having a set amount of money going into a set amount of Bitcoin and at a set interval rather. So say you're doing like 10 bucks a week or something like that, you would not be in the red at this point. It would be statistically impossible for you to do that if you spaced it out that way at the current time. Now, in contrast, alt coins have been unprofitable for as much as two-thirds of their entire existence.

So two out of three times, if you bought an alt-coin, you're probably down right now. And that's pretty staggering when Bitcoin has been up basically 95% of the time. It just further drives home the point that a lot of this trash that's being pumped out and waved in front of your eyes. it's literally just a way to get your dollars and to get your Bitcoin more importantly. So don't fall for it. Now, I did want to touch on a couple other things here. Cash app in the States is one of the main ways that you can get Bitcoin or one of the easier ways that you can get Bitcoin. And their revenue is massive comparatively for Bitcoin this year.

So Cash App, the profit that they made off of selling Bitcoin, for the first quarter of this year was $7 million, whereas it earned $8 million in profit from Bitcoin for all of 2019. Now, the revenue, the actual revenue going through the platform has dwarved that. So Bitcoin revenue for the three months for the first quarter of 2020 increased $240 million, or 367% compared to the first quarter of 2019. And so they just continued to grow. They also just up their limits from, I think, 10 grand to 100 grand per month that you can

buy through Cash App. Now, I also wanted to point to some of the traditional markets and how Bitcoin is starting to distance itself from those fluctuations because Bitcoin had been kind of following the S&P for most of the year, including the massive drop in mid-March. So I'll just read here. This is from Bitcoinist. In late February, just as Bitcoin was once again trading above the key level of 10,000, the outbreak had reached pandemic levels and the world economy braced for the worst.

A historic sell-off followed, taking Bitcoin price down by over 60% in a matter of days, and instantly wiped out all stock market gains. during the year. The two assets have remained in lock and key since, with each recent peak and trough lining up in sync. The correlation has lasted now two full months, but this week suddenly saw a strong divergence that may have put an end to the correlation for good. And this is where we see Bitcoin breaking far above that of the S&P 500, where the S&P has just kind of stagnated over the last number of days, whereas Bitcoin has continued to rise. Now, this could be because of the upcoming having or it could not.

It could be, it could just be a blip. It could be a, you know, a temporary thing. Or we could be just fully diverging from the S&P finally after a few months of tracking it pretty closely. And if so, and if what Rao Paul is alluding to in that the markets have more pain, then the fact that we're diverging from the S&P now could be a very favorable thing and could draw a lot more eyeballs if the stocks end up getting hurt a lot more

and Bitcoin is sheltered from that. In a crisis, things tend to correlate to one because when you're trying to get your hands on dollars and you're totally screwed, you're just going to sell everything you need to get on dollars and feed yourself. But we might be breaking away from that now.

and I guess we'll have to see. We are three days out from the Bitcoin block reward happening. As I said, we're going from 12.5 Bitcoin every 10 minutes to 6 and a quarter. And that's going to have some very interesting effects over the next year to a year and a half. Now, I wanted to finish with this tweet here from Andrew Bentley on Twitter. He said, Bitcoin has outperformed any other investment over the last 10 years, any other investment over the last 10 years. It is no longer my responsibility to convince traders that Bitcoin is the best investment.

Instead, they must convince me why there is a better investment than Bitcoin. Welcome to the new normal. Yeah, it's pretty wild. Again, I love the hyperbole in this tweet, and we've got some interesting times ahead of us. Anyways, guys, I'm going to wrap up there. Thank you so much for watching and or listening. If you're on YouTube, please do hit like, subscribe. and share, but also do check out the other platforms I'm on so I can kind of spread on my audience.

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