TFTC: A Bitcoin Podcast - #576: Bitcoin Outpaces Everything with James Check

Episode Date: January 27, 2025

Marty sits down with James Check to discuss bitcoin's position in the new year. James on Twitter: https://x.com/_Checkmatey_ James's newsletter: https://newsletter.checkonchain.com/ _checkonchain charts: https://charts.checkonchain.com/ 0:00 - Intro 0:36 - SBR isn't Trump's top priority 7:05 - A hard market to predict 13:36 - Fold & Bitkey 15:31 - What’s next? 18:21 - Tariffs and revaluing gold 21:28 - Unchained 22:29 - Yield curve/rate cut discrepancy 28:57 - Bull and bear scenarios 35:47 - Long and short hodlers 39:47 - Bitcoin collateral and leverage risks 44:14 - Ethereum and the golden age of grift 57:31 - Crypto is barely a footnote to bitcoin’s scale 1:10:16 - Wrap up Shoutout to our sponsors: Fold https://foldapp.com/marty/ Bitkey https://bitkey.world/ Unchained https://unchained.com/tftc/ Join the TFTC Movement: Main YT Channel https://www.youtube.com/c/TFTC21/videos Clips YT Channel https://www.youtube.com/channel/UCUQcW3jxfQfEUS8kqR5pJtQ Website https://tftc.io/ Twitter https://twitter.com/tftc21 Instagram https://www.instagram.com/tftc.io/ Nostr https://primal.net/tftc Follow Marty Bent: Twitter https://twitter.com/martybent Nostr https://primal.net/martybent Newsletter https://tftc.io/martys-bent/ Podcast https://www.tftc.io/tag/podcasts/

You've had a dynamic where money's become freer than free. When you talk about a Fed just gone nuts, all the central banks going nuts. So it's all acting like safe haven. I believe that in a world where central bankers are tripping over themselves to devalue their currency, Bitcoin wins. In the world of fiat currencies, Bitcoin is the victor. I mean, that's part of the bull case for Bitcoin. If you're not paying attention, you probably should be. Sell the news, sell the news.

The United States Strategic Shitcoin Reserve is here. Bitcoin is down $828 in the last 24 hours. James Check is here to join us. What a time to be alive, sir. Yeah, it's a strange time to be alive. But, you know, what do you expect? chaos we should all have expected chaos got a meme a president who won his first election on memes and arguably a second election on memes as well getting into meme coins and shit coinery

are you shocked on that surprise i mean this this was always the expected result right you wade into the dirty waters of politics you know financial incentives this is what crypto is built on right so you know it's kind of a match made in heaven surprise surprise yeah you roll with the pigs you're gonna get dirty you're gonna get dirty freaks that's it yeah no it's funny because like i mean we're talking in the morning where they've just announced the uh the executive order he's just signed it um it's funny like i didn't read the wording uh word for word but it's like a announcement of announcement they're gonna think about maybe having a committee where they sit down and talk about what's going to go into the stockpile and if i understand correctly it's

probably in the stockpile realm where it's hang on to those that they've seized, not actively going and buying more, which is, to be honest, I think was always the expected result. And in my view, probably better. I'm not hugely on board with the go out there and buy the Bitcoin side of the equation. It's obviously hard to reason about, but it just doesn't sit well with me yet. I think Nick Carter did a good job writing up on why that is, but it's strange dynamics nonetheless. this yes are you saying you agree with nick in the sense that actively going out to the market signaling that you prefer bitcoin or maybe not even prefer but would like to have bitcoin as a strategic reserve asset would signal externally that treasuries are not worth holding and therefore

there would be a dump and that would attack the the reserves of the the banking system essentially I think so. And look, there's a few layers to it, right? Because markets are a combination and markets are a process. And there's a process of the market coming to the end state reality. And then there's the perception in the immediate term. And we all know that we're going through a sovereign debt crisis of growing magnitude. and I can't help but think, you know, a lot of people assign a lot of weight to the gold reserves and say, well, they've already got gold, they may as well hold Bitcoin. But my take on it is like the gold's valued at $42. And that's kind of symbolic that it really is a relic of the past. It's something that has been, you know, the US is not actively trading gold to maintain its reserves. Nick rightly points out that the US dollars are fully floating currency. They're not backed with anything aside from the full faith and credit of the US. And I can't imagine

Imagine that them starting to actively buy Bitcoin. And it's funny because I can reason about it from both sides. Me as an individual, why do I stack Bitcoin? Because it makes all the sense in the world. We as a company, why do we stack Bitcoin? Because it makes all the sense in the world. So doesn't that logic apply for countries? And I do think we're going to see countries with surpluses.

The Gulf states, I think we're also going to see Russia and China. It makes sense. They run a massive surplus. It makes sense to put some of that into an uncensorable hard asset. But does the U.S. need to go through with this? I don't know. And there's a few layers. Does it signal to the treasury market that you are, in fact, dog shit?

Is it kind of like taking the veil completely off? How do bond markets, the bond market actually deal with that? What does it mean for the U.S. dollar? But then I also look at the other side, which is, you know, they're doing all this stuff via executive order. In order for any of this stuff to really stick, it's got to go through Congress, which is a whole different animal. And, you know, as Bitcoin is, we're low time preference.

you don't really want these kind of sticky band-aids it's basically a political win you want something that's going to last and be well thought out and well considered so you really have to go through the full political spectrum and then if i look at that equation would if you go outside and ask the average american and again as an australian i'm just speculating here but i would imagine this is true go out and ask the average american hey we've got 500 billion dollars would you like us to buy bitcoin with it and they might be like bro i don't have a job like no please like fix fix my life or you know i've got whatever hardships and pain is going on in my world i couldn't give a rat's ass about this bitcoin thing is that still around i just think

the average person is going to look at those dollars and go but why are you spending them on me and in many ways that's kind of what trump was elected on you're spending all this money on not me time to spend it on me and i think you know bitcoiners aren't really the me that people really care that much about no i had another podcast i recorded this morning and that was one of the messages i sent out to everybody's been convention for the last day and a half where's the executive order on the strategic bitcoin reserve when's it going to happen it's like you just got elected on a massive campaign of change domestically economically and as you mentioned for being objectively clear-eyed here uh the bitcoin reserve is not in the top three probably not in the top

10 of the priorities of an overwhelming majority of the united united states citizens it's just absolutely i mean perfectly i mean for me frame ross that was the big thing that was that was ultimately that was the main win um and it was funny actually because i didn't expect i mean obviously i've been an advocate for ross for a while but like to kind of actually feel that hey he kept that promise that was actually quite uh quite positive it was actually a good morning when i when i saw that news so i think that's in many ways that's really the only thing that i really wanted to happen um everything else you know fix the world the money's a part of it but you gotta you gotta fix all sorts of other things as well right it's not just a single single shot and just

just putting bitcoin in the balance sheet it's not going to fix the money fix the world it's going to take a long long time for that process to happen so you know low time preference take it take it a step back you know the slower and steady this grows the better yeah and turn your perceived losses into wins the price isn't pumping the u.s government did not go out there and signal that it's going to market by bitcoin every day the price is is down you get to stack more sats we're approaching a thousand sats we're crashing to 102k these days it's it's pretty wild stuff yeah but right before we hit record you said this is one of the harder markets to read that you've observed in recent months?

Yeah, it's a strange one. So I did a slide deck for our subscribers back in December. And part of that thesis was, I think it's going to be a choppy Q1. There's a whole lot of things going on, but bond yields are trading higher on the long end, which all things being equal should be a drain on liquidity because if your bond yields are going up,

the price is going down. And if the price of the foundation of your financial system is going down, that's going to be a drain on liquidity. Plus, it lifts the benchmark interest rate for everything. So the long-end selling off should be a constraint. The dollar has been really strong, which also should be a constraint because the rest of the world is going to have a harder time paying back their debts. And it's effectively devaluing the Australian dollar.

If you want to look at a shitcoin chart, go and look at the Australian dollar. It's getting absolutely pummeled. So all of this is a net drain on liquidity. And yet, gold and Bitcoin are doing really well. And, I mean, rarely do I say go down and look at the Bitcoin price on the hourly chart. But look at the last like two weeks on the hourly chart. It's chaos. It's up, down, left, right.

It's all over the place. So that's very political, right? So my thesis was I think Q1 is going to be very choppy. And the reason is the world's got to adjust to a new presidency. It's very different to the old presidency. And the policies are going to be quite significant. Are tariffs going to happen? Are they not going to happen?

How much of these things is he going to follow through? And they're fairly big changes. And, you know, right out the gate, he's made some pretty significant moves. So we're getting a bit of a flavor, but it just feels like the market's going to take time to adjust to this and actually work out which direction it wants to go. So I still expect a really choppy Q1. I'm quite positive for Bitcoin long term, right? When I say long term for 2025, I think this year is going to be a good year. But I do think that people are going to have to get very used to gut checks.

I think it's going to be a positive year, but it's not going to be a straight line. I think that's across all markets. So I think there's going to be some pretty wild swings, and it just won't be smooth sailing. Yeah, it feels, I mean, we're day three, so it doesn't feel like it's a pure fact. We're in the honeymoon phase, the honeymoon period of this administration. And while everybody, or not everybody, but many people, myself included, are very happy with many of the executive orders that have been signed and the signal that the Trump admin is sending to the market about what it wants to do from an economic perspective.

We're in the honeymoon period, and I do think regardless of the positive economic changes that may be on the horizon, you do have this immovable, undeniable, impossible-to-ignore sovereign debt crisis bubbling up. And as you mentioned, Dixie's around 110, 10-year yield approaching 5%, 6 trillion of debt that we need to roll over this year, interest expense on the debt already surpassed defense spending. And so whether it's waiting for Trump to sign more executive orders and really set economic policy or a potential liquidity crisis, which I wouldn't be shocked if it materialized at some point in the Q1, Q2 of this year, I completely agree. You have to prepare for gut checks with the Bitcoin price.

Yeah. And I think I was talking about this the other day. It's really important to not mistake, like take all the big information, right? We obviously, as Bitcoiners, we're looking long-term. You take all these, you know, we know they're going to have to print the money. But don't apply that knowledge to the next daily candle because these things take macro time.

They glace you all in speed. Sometimes they go through periods where they just explode, right? They gradually then suddenly. But don't take all the big information and apply it to the next daily candle because you'll get confused. And likewise, don't take the next daily candle and apply it to the macro thesis.

Lots of people are going to get lost by basically looking at the hourly price chart. They'll see a bunch of red candles. they'll say oh shit it's all over and then i'll extrapolate that into a macro trend take a zoom out and look at the bitcoin price it is just this beautiful stair-stepping pattern to the upside it's fantastic this cycle um if you can believe it we're actually if you measure it from the cycle low which i prefer to do and i was talking to my analyst at a glass node the other day and we're like what's our favorite stupid chart that like we don't put any stock in whatsoever

but we like looking at and mine's that one where you look at like the index price you put everything from the cycle low, this current cycle is word for word doing exactly the same thing that 2016 and 17 did. And there's a lot of parallels actually between those two cycles, very spot driven with the ETFs. And back then we didn't really have derivatives. There's a lot of similarities. It's amazing to me that we're following that path. I don't know if we will follow that path on the right-hand side of the chart, but we certainly have on the left-hand side. And if you just kind of frame it up from that perspective, really stable, really healthy, don't get caught up in the noise because it's it's a really really robust uptrend it i mean

we've barely had a 25 correction this whole whole time right we went down 32 back in august last year and it was for three hours you know like that's that's the worst it's been go back to any previous bull market you're down 35 down 40 down 50 on a regular basis yeah what was it a couple weeks ago we dumped to 89 000 or something like that temporarily yeah for like 20 minutes yeah that is and that's historically that's when people make the biggest mistakes is when the market lulls them into this state of complacency or state of it's weird because it's two-sided you either get complacent you're not paying attention or you're paying too much attention you make stupid moves and it just jumps the other way yeah and understanding time frames right we're

in a monthly scale uptrend you can have weekly scale corrections and consolidations within that right that doesn't necessarily disrupt the macro scale and likewise you can have a like every monthly uptrend is a sequence of weekly bulls and bears right you've got to kind of envision people like what is it a bull market is a bear market like what time frame are you on if you're looking at the hourly chart there's bull markets and bear markets three times a day you know what i mean like it depends how the market cycle actually plays out what time frame you're looking at things and try not to extrapolate the wrong time frame to the to a different one because quite often they just you know, the hourly charts kind of irrelevant when you look at it in a monthly scale.

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for 20 off your order that's bitkey.world code tftc20 so what um what do you think about the honeymoon period how long does it last what is the next catalyst you're looking for to move the market one way or the other because i saw you tweeted that yesterday um we're sort of at this this point where volatility is it's pretty low and the market could break one way or the other i forget the exact indicator yeah the choppy dicks yeah yeah no it is interesting so um when you come to the end of the year because we had a soft december and this is because bitcoin did really well last year i forget the numbers like 120 or whatever it is and a lot of these like now that we're institutional in scale a lot of these funds they've got a balance sheet they've

got a p and l statement they don't really want to give back 10 20 at the end of the year they want to have a nice green number that they can give to their investors and say this is why you put your money with us look how well we did so we saw a lot of closing out of positions we actually saw a lot of the cash and carry trade coming out of the market, open interest declined on CME. So December very much was like a clearing of the books, lock it all in, here's our fresh balance sheet. And then they go into the next year.

And in January, obviously, we've got a new president coming in on the 20th or the 21st. There's this process of we want to reallocate money. We've cleared the books in December. Now we want to reallocate at the start of the year. But we've also got this like big variable that's coming that we're currently in that process of seeing what shape it looks like now at the start of years all these desks like not only do

they reallocate capital and rebalance portfolios and all that stuff they re-lever so because they've got a fresh income statement they can essentially re-lever up their assets work out what they do and don't want to hold and you know bitcoin's gonna be a part of that mix again it's amazing that we haven't had deeper correction so i think there is a genuine spot demand for this thing but after that's happened everyone's allocated everyone's re-levered what next and the whole this happens all the time, right? So February and March is generally actually a softer period in all markets because everyone's kind of put that capital flow in and then they're all

like, all right, so now what happens? And, you know, the market's got to find some new catalyst. Now, I don't know. This is what I think makes the environment so difficult is that it's a political one. Do they go ahead with tax cuts? Because tax cuts are going to be positive for, you know, generally speaking for business.

Do they go ahead with tariffs? That's probably not going to be so good for risk assets. So really, because we're in this political arena, we just don't know. And it really depends on the shape of these things. And one thing you can say about Trump is that he seems to be sticking to his guns. He said certain things that he's going to do. And as far as it looks, he seems to be doing them. So he's been talking about tariffs.

He's been talking about tax cuts. I would probably factor in that we've got tax cuts and tariffs coming. And that's going to impact markets in both directions. yeah i was listening to luke roman he was on a podcast yesterday talking about tariffs specifically and he was actually warning it was weird because it was one side it was a warning the other side it was like inevitably or ultimately this will be good for the u.s but if you do the tariffs you can see that pushing dixie even higher tenure even higher and creating that liquidity crunch in the banking system.

And so there is a needle to thread, and I think that's the consensus among many who've been paying close attention to his administration picks, particularly it's like if you need somebody to thread a needle, I think he placed the Treasury Secretary very well with Scott Bassett, who's managed a lot of currency trades throughout his career. Yeah, and I think that's really a lot of people like, oh, look, he's a crypto basis and a crypto focus.

It's like, guys, he's there to protect the bond market and just sort out the dollar and the treasuries. That's it. That's the job. Sort out the dollar and the treasuries because that is a much bigger issue than anything else, right? And that's why, back to Nick's point, I don't think that the gold plays an overly relevant role.

Now, what would be very interesting, and I know Groman's talked about this as well, is if they revalue the gold from $42 spot price because that would be a very interesting, it would almost break that previous thesis that Nick was talking about I was talking about, where if they revalue the gold in a way that's bringing it back into the financial system, if that happens, now the Bitcoin reserve idea has a lot more weight to it because they're now saying, hey, we actually do have these assets on the balance sheet. And if you imagine

that you had a Bitcoin stockpile slash Bitcoin reserve, maybe that's something that once it's gone through Congress could also be mark to market and that deposits funds into the TGA, right? There's all these different dynamics. What do you do with that money once it gets deposited? That's then a political game. Then you could argue there's a case for, well, we actually want the price of gold and Bitcoin to rise because that's going to deposit more money into the government's treasury account, right?

And then you can start to get those dynamics. It's not there yet, but that's definitely something to pay attention to because they need to weaken the dollar. The cure for a high dollar is a high dollar, right? Once you get the dollar high, the rest of the world just can't deal with it, right? I mean, again, the Australian dollar is just getting absolutely crushed. Fortunately, right, we price in U.S. dollars. But at some point in time, I know that's going to flip.

I know it's going to flip where the U.S. dollar is going to have to be weakened because the whole world gets wrecked, right? They can't pay their debts. They have to sell dollar assets. And when they're going to sell dollar assets, that just depresses everything. So there's this interesting dynamic where a strong dollar is technically good for inflation internally in the U.S. because you can obviously buy more stuff. You don't import inflation. but at the same time, a strong dollar makes the US less competitive. And if Trump's and he has

really run on reinvigorating American industry, a weaker dollar is really an important part of that factor. And if you don't weaken it, the rest of the world is going to catch a cold and then eventually the US will get the sniffles. This rep was brought to you by our great friends at Unchained. As Bitcoin's role in the global financial landscape evolves, understanding its potential impact on your wealth becomes increasingly crucial. Whether we see measured adoption or accelerated hyper Bitcoinization being prepared for various scenarios can make the difference between merely participating and truly optimizing your position. This is important, freaks. This is why Unchained developed the Bitcoin Calculator, a sophisticated modeling

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And we last recorded in October, you've had this dynamic with the Fed raising rates, or excuse me, cutting rates, and the 10-year and 30-year not playing ball inversely correlated almost perfectly with the rate cuts that the Fed has been making, which there's another variable that probably, I have to imagine it was unexpected. I have to imagine that caught Jerome Powell off guard, or maybe he knew they didn't really tame inflation, so the markets are going to call bullshit. But that's another weird dynamic at play. It is. And again, I haven't been around in markets long enough to have the firsthand experience.

But as far as I'm aware, this doesn't happen often, where you have the Fed cutting rates. Usually, the whole treasury curve should come down in rates. But we're actually seeing the bond market just go nuts. So this is like bond vigilante type material where they're like, no, we're calling bullshit. Whether it's inflation, whether it's just the knowledge that they, at the moment, the U.S. has been basically issuing short-term debt. Yellen kind of pulled this trick where if you issue all this short-term debt, you can get money out of the reverse repo facility. So post-COVID, there's what, two and a half trillion or something in there. By issuing short-term treasury bills, you could essentially extract that money back out into the economy.

Now, that's more or less drained. The reverse repo has more or less been depleted. And if you think about what short-term treasuries are, I mean, it's kind of payday lending in a way for governments. You can't do that forever, right? Because interest rates are going to be higher and eventually they've got to turn this stuff out. So therefore, I think the market is now recognizing, and I believe Scott Persentz also said this,

they have to start getting more issuance on the long end. So not only are the bond vigilantes saying, well, we're not sure that you've tamed inflation. there's probably a whole lot of reasons why they expect inflation to start coming back but then they're also saying there's also a lot of issuance coming so because there's a lot of issuance it's like well that's sell pressure i may as well get out before and buy these things later and when they sell bonds the yield goes up and it's also interesting that gold i mean as bitcoin as well but i think gold gold i think is a really important price chart to pay attention to generally speaking in terms of like what i look at day to day bitcoin because i think bitcoin's

a global index 24-7. Gold is my baseline. When I'm talking about inflation expectations, sovereign debt crisis, I think gold is a really important price. And I think Bitcoin should keep an eye on it because it's telling you the story. Rates going up, why would you hold a 0% yielding? We know why you buy Bitcoin, because it's got this adoption and growth pathway ahead of it. For gold, it's reached that maturity. Why would you buy a zero yielding forever bond when you could buy a treasury for four and a half percent because you think the treasuries are going to get worse right so at the end of the day gold is a bit of an index on i use it as my denominator for a lot of things it's kind of my benchmark is an asset beating gold if not it's probably not going

to beat the inflationary environment that we're in that's how i like to frame these things up so i think the bitcoin obviously gold the dxy i think just understanding where the dollar is at oil because oil is obviously the input and then bonds right that's really my like core framework because they're the most important prices and just getting a bit of a gauge on how those things are trading relative to each other is really important and you're right you know they've got this big divergence between gold performance and treasuries you've got this big divergence in terms of like why is the dollar going up usually that's bad for metal usually that's bad for bitcoin but the dollar is extremely high and sound money keeps going up so what signal is that telling us

Yeah. I have to imagine market participants are forward-looking to this $6 trillion that needs to be rolled over, like you said, and just dumping, waiting for it to happen. But going back to the interest expense on the debt, outpacing defense military spending, I can imagine if they can't control the yield curve and bring it down a bit lower. And Scott Besson is explicitly saying we need to issue out on the longer end, and you're turning over $6 trillion worth of long-end bonds, that slope on the interest expense on the debt is going to go way higher. And that's the thing, right? So if the bond market has a spasm, right, has some kind of, you know, last time we got to 5% in 23, things started to get pretty hairy. if you get to those levels and we saw this in the uk with the guilt crisis and their bonds are trading worse than they were during that guilt crisis granted it's been a gradual slope higher it puts immense amounts of stress on the system and it's one of those things where the bond market

calls time you know as and as groman would say long term this is great for bitcoin and great for gold because they're gonna have to print the money to control this thing because financial stability is super important but it's really important to remember that there's going to be these gut checks the bond market is likely to call time on all of this stuff at some point and there's that initial shock wave something happens yes we eventually are going to have to print money to solve this problem but it usually doesn't come just off the back of you know oh we may as well just start now it's like no it comes off the back of some kind of an event i did listen to lynn the other day which i thought was an interesting perspective and i think it's probably it makes sense to me

which is that it's probably going to be a slower more gradual process rather than like a shock wave that's like another framework rather than like a march 2020 or some kind of bond crisis it's this like gradual process of like persistently printing money whether they go back to qe or they give it some other name write some alphabet suit program that kind of keeps things stable but i i think that these are two different scenarios and i really do think thinking in scenarios is super important being and that's why whenever i write my newsletter the whole idea of it i'm not going to predict the future i got no idea none of us do and it's a fool's errand to try But I want to know exactly what does the downside risk look like and what am I going to do?

If I wake up tomorrow and Bitcoin's got an eight handle, right, so in the 80,000s, I've already made my decision of what I'm going to do. If Bitcoin is up at 120 or 150k, I've also already made my decision for what I'm going to do. Even if I don't need one of those tools, I've thought about it in advance because the only thing you can control is your decisions. You can't control the market. You can't control what politicians do.

All you can just choose is what are you going to do? if that scenario plays out yeah and are those the two scenarios you're preparing for right now an eight handle or yeah well look so i'll go through both of those right let's talk about the upside first because most people are excited about that uh when i look at you know people ask me when's the top it's like i don't know which and again which top if you're a day trader the top is the one that just liquidated you right the top is the one that matters to you if you're a retiree. The top is the one that gives you three years of runway so you can live your life happily. If you're a sat stacker like me, then the top is probably much, much, much higher,

the one that you care about, or the one that starts like a four-year bear market. I also think about, could we have an 80% correction from here? That's 20 grand. I just don't see this as being the case. We've proven that we're a trillion-dollar asset now. We tried it twice in 2021 we finally broke through in and held it for seven months back in mid last year and then we just teleported to two trillion right we flipped silver silver didn't even try and fight back and we've just been chopping around up here which i think is really really stable but if we get to 120 and then 150 they're the two levels that i've got in my mind at the moment 120 is when we hit the bottom of what i've got this model i call like a topping cloud it's basically when

the average bitcoiner is pretty up on their position right modestly profitable pretty pretty happy we usually start to see quite a bit of sell side at that point if we get to 150 every single metric that i look at is going to be lit up like a christmas tree right four percent of all trading days have been higher than that that level now that doesn't mean we can't keep going because four percent is not zero but there's a four percent chance right so if you think about things in terms of probabilities i don't think we i think we clear 120 i don't think we go above 150 without some kind of process i think there's gonna be a process in there now to the downside the downside when we teleported in november we basically went from 73 straight to 100 right well 99.8 because it took us

a couple of weeks to get to 100 but we basically just ripped through the 80,000s and i talk about like i call it an air pocket when we look at where all the supply changed hands and transacted very little supply, transacted between 73K and 86. That zone is a bit of a gap. We don't actually know how much demand is down there. Now, for whatever reason, markets like to test these things. So if you've ever done TA, you've probably seen the volume profile. We can kind of see where the trade volume has happened

at different price levels. There's basically nothing between 73 and 86. So that becomes a bit of a magnet. we want to find the market may want to find out how much demand have you got so if we get some kind of downside that's a zone of interest uh short-term holder cost basis is about 90k at the moment that's the tipping point at 90 000 level that short-term cost base it's a zone it's not a perfect price but the idea is that once you get down to that level all the guys who bought recently are suddenly either at their cost basis or underwater starting to feel a little bit of stress

the further you go below that the more they start to look at their portfolio and go oh man i bought all those coins at 106 and 108 now i'm feeling pretty shitty about it they're the kind of people who start to capitulate out and you can kind of generate this cascade so that's an area of interest it's kind of interesting that we've got this support level which should hold at around 90k but below it there's just not much yeah so you said 73 to 86 that level yeah yeah i mean that's the thing, right? Could I imagine, and again, thinking in scenarios, could I imagine that we rip to 150 and then we bear market back down to 73? I can absolutely construct a story for how that could play out, right? And suddenly we're not talking about an 80% correction, but we're

talking about a pretty decent, decent pullback, about a 50% or thereabouts. I can see that happening. I'm not saying that will happen, but I can definitely see that as a potential scenario if let's say these tariffs go really pear-shaped and suddenly we get a bit of a breakdown of you know, how these countries are communicating with each other. I don't think that's my base case. What's my base case? We probably get above 120. I don't think we clear 150. My base case is that we actually lose sight of what a bear market is. Let's say we go to 150 and we pull back to 90 or 80. What is that? Is that a bear market? What if it takes nine months or 12 months to resolve? Are we still in a super cycle if we then go to 300? Is that all part of one cycle or do we just

have a bear right then and i think people are going to start losing track of what what is a cycle because if there's ever a time for it to break it's probably now just a cycle theory in general yeah i think so i mean and i say that full well knowing that we're following the last two cycles like to the dot so you know i say that i don't know what the right hand side looks like and none of us do what i do think is that our previous models um one of the the concepts that I play with. A lot of people have heard of the realized price. It's the average cost basis for all Bitcoin. Now, there's actually a real problem with the realized price. And that is that if Satoshi, and back in when FTX blew up, when we're at breakeven, right? So in theory, the average

investor is at their breakeven level. Satoshi's got $38 billion of unrealized profit that he probably can't take. So that means it's $38 billion of losses that some guy who's active today is holding and is probably feeling really bad about his decisions so that realized price level which has historically been the floor it's about 46k i think at the moment that's actually i think that model stops working and therefore i think mvrv stops working which is one of the most popular on-chain metrics i think we have to start rethinking some of these different models because in a way you need the damage to be so bad and i actually didn't think we would get down there last cycle, but it required Luna plus three arrows plus the GBTC unwind plus FTX. That's

the kind of damage that it took to get us down to that level. Unless we get something similar, I'm struggling to see that we're going to get down that far. So I've got some other models which tries to remove Satoshi and all the early miners. And it basically time weights coins. It looks at where is the average active investor, gets rid of all the lost stuff and just looks of active investors. And that price is currently, from memory, it's about $70K. So we're kind of right in the middle of our chop consolidation range. Maybe it's like $65K. It's in that chop consolidation range. I could imagine us pulling back and having some kind of a bear market that tests that chop consolidation range. And everyone goes, oh, it's gone to the realized price.

What if it doesn't? What if we actually have this kind of phase shift where the market doesn't have as big upside, doesn't have as big downside, still takes about the same amount of time, but people lose sense of the amplitude so these are some of the interesting ideas i'm playing around with just try and you know have these plans and ideas before they happen that's fascinating because as you're describing that in explaining this new metric that's always been something i've thought about like how much do the metrics drive like do people look at mvrv and look at that potential low 46 000 and just psychologically say all right that's the limit and what is the production of a new indicator with, like,

a higher that takes out all the Satoshi coins and lost coins and take that into consideration, then that drifts it higher. Like, is the market reacting to the indicator? Or is the indicator describing the psychological cost base? I think it's the latter. I think the indicators, and that's what I like about Onchendata. First things first, having been in this industry for a long time, nobody knows what's going on there are so few people who've spent any amount of time to do

the proof of work to understand this stuff so no i don't think that people are looking at the realized price and saying oh well that's my level but i think human beings respond to their cost basis they make their own individual decisions based on where their levels are and we also that's why we look at things like long-term holder short-term holder because they do have very different behavior patterns and this every time i raise this right long-term holders people like oh, but six months is not a long-term holder. You've got to be here for four cycles. It's like, it doesn't matter what you think the long-term holder is. At that tipping point of about six months, the probability of every UTXO in any year, there's been many people who've studied this,

the change in behavior is very similar. So people after six months all have a very similar probability of spending their coins. Before six months, they have a massive, like it's a massive decay. Most of the coins moving around were moved yesterday. The next largest amount of coins were moved in the last week. The next largest were moved in the last month. And this is like an exponential decay. So when we look at short-term holders, the reason why we look at this balance between long and short-term holders is when you've got a market that's saturated with new buyers, they're people who are buying their first Bitcoin or they have an experience of volatility. You've got these new buyers with a very high cost basis. They are highly sensitive to vol.

long-term holders they don't care they sell they wait they wait they wait and they sell on the way up so that's why we look at all these different dynamics to say well where's their cost basis where's that inflection point when people go from having a really fun time to having a really shit time and that's a i think that's an interesting dynamic the one thing i think will cloud some of this is actually the likes of micro strategy and potentially this whole meme coin phenomena I'm seeing more and more, and I don't know about you, but I'm amazed at how quickly the Bitcoin, not crypto, is happening. That has been a really big shift to the point where I'm seeing a lot of analysts

who've been bearish on Bitcoin forever saying, oh, Bitcoin's okay, but microstrategy is the scam, right? So they're now kind of flipping around where Bitcoin is, it's crossed that Rubicon now for many people. And I can't help but imagine a lot of the leverage and the sensitive buyers probably going to end up in the likes of micro strategy where people are going to find out that call options mostly expire worthless and it's going to just like that's a zero right if you buy these call options if mstr doesn't rip and it doesn't rip and you don't sell those options

they're going to go to zero so i think a lot of people are going to learn that lesson and i also think in these meme coins i mean we know they're going to go to zero but like where's the speculative fever in bitcoin itself we haven't even seen in futures markets it get overly like crazy in terms of funding rates like it's been very very tame so i can't help but feel that a lot of the speculative momentum has moved elsewhere which is actually kind of favoring bitcoin having a much more stable steady climb which in many ways it has yeah just isolate all the degeneracy to pretty much the options world the the paper world outside of bitcoin right um to these equities and and mentioning microstrategy so that's one thing i've been wondering as we head into

or continue in we're in the cycle already but as we move forward through time mentioned satoshi's coins all this older actors that likely aren't going to move it i think microstrategy is a new class of that type of hodler at least that's what they're signaling publicly and the way they're they're terming out their convertible notes the durations are such that they're likely going to catch the upside of a four-year cycle if they continue but if it's just a persistent constant bid up and we just go up into the right and steady fashion that's beneficial for them as well and then i'm sure you've seen it but this i think this trend of bitcoin collateralized debt making a strong comeback but not only that but with more legitimate players if

you read ross stevens's annual letter from stone ridge it was terrific by the way if you haven't read it a terrific letter yeah really leaned into the to the um it seems like nidig is going to get into bitcoin back collateral or bitcoin back lending in a big way uh you have products like battery finance that are coming to market and they're bull collateralizing traditional assets with bitcoin on a longer duration so you're thinking 10 12 15 years maybe that we may have discussed this last time you were on but i don't believe we did but i think that's another interesting factor who knows how much of an overall impact we'll have this cycle but i think over time as these types of demand drivers come to market and take supply off for a longer period

of time that's got to change the dynamic of the historical volatility as well not the historical volatility the volatility moving forward as well yes no i fully agree and actually i was answering this question the other day uh someone was like what happens what happens with all on-chain data i get this all the time what happens with all these metrics when people start you know putting collateral in and just borrowing and doing stuff in their life it's like well technically isn't that the perfect example of long-term hold of supply if it remains dormant in some multi-sig where people can now borrow money with some reputable institution they can live their life they can buy their house they have made a conscious decision to not sell the corn right

they're hanging on to the bitcoin so in a way that is almost by definition what you want to see in terms of how many coins are locked up there what you got to balance that by is there could be a buildup of leverage. Let's say a bunch of people are borrowing against their Bitcoin and suddenly the price goes in or bear and they start getting tested. You have to have that extra data point of saying how sensitive are people to actually selling those coins as a result or having to clear some of that collateral. So it's one of those things where it makes perfect sense in an on-chain world. You just have to add that extra data point of understanding what does the leverage profile look like? How do we frame that up? How do we think about all these different

sectors of the bitcoin economy yeah yeah and how many bitcoiners with large amount which i imagine would be a lot are actually privy to the concept of buy borrow die um and would be able and willing to put that into into practice yeah don't put your whole stack in there freaks price goes down you need to add collateral you're going to want some bitcoin to do that and that's the thing right like leverage leverage is it cuts both ways it's you've got to be so careful with it because it can you know what you think can't happen can absolutely happen you can certainly frame up probabilities for these things but you know i've been there i've been i've had very improbable events that i'd put levered bets on most of the time they actually came true and it's usually

because my perception of what could happen was clouded by my desire to take on leverage to do whatever it was, buy more Bitcoin or whatever that trade was, my perception of risk changes because you like the result when it's going up. You may not like the result when it's coming down. And just like if you can't sleep at night, you've got too much of a position on it in some way. So just be really careful with leverage because we are in a political environment. Things are going to chop around and change. Even though I think we have net tailwinds, I do think that there's going to be a choppy road. And this is for all markets. I think if equities pull back, I think Bitcoin probably pulls back as well, right?

All these things tend to be correlated during these periods. So just be really, really careful. Yeah. Switching gears a little bit. I wanted to touch on this with you because you called the shot years ago before Ethereum embarked on the merge. Ethereum 2.0. That's another interesting story in the industry right now. Ethereum is looking a bit anemic right now.

A lot of chaos over in the Ethereum quote unquote community. It's like Vitalik Buterin has his wartime CEO hat on, is explicitly signaling to the market that he's in charge and he's going to figure things out. And meanwhile, the ETH to BTC ratio is below where it was when it officially got added to Coinbase many years ago. What a painful stat. You freaks haven't seen it. many of you who are new probably haven't but you made an incredible youtube video years ago at this point two or three years whatever it was a month before the merge so that was 2020 august 2022 or something 2022 yeah almost two and a half years ago uh and you called it this was the biggest mistake

ever for them going from proof of work to proof of stake hard forking changing the foundation of the system that they were expecting people to build on and the asset that flows through that system has suffered immensely. It has. And look, this is the thing, right? I used to use Ethereum way back in the day, like pre-2020. So I've tested all the DeFi stuff. I'm an engineer. I like to tinker with things and find out how things work. And like everybody, you come in, you don't fully understand Bitcoin. Eventually you recognize it and it all clicks. I find the Ethereum thing, I find like the crypto world in general, I'm a fascinated observer because we have watched them rebuild Wall Street bug for bug, time and time again. I mean, I've heard people calling this the golden age of grift, right, with all these meme coins.

And like it is a fascinating experiment to see how human beings and social creatures that we are, they talk about communities and it's all about community. It is. That's really all it is. It's a shared belief that this shit coin is going to go up. but for years and years the shitcoin cycles have always been driven by a new distribution mechanism it was the icos back in 2017 crowdfunding crowdsourcing then we had defi yield farming and then we have the meme coin cycle at the moment there's all the nfts right mints and all that stuff all these are different distribution mechanisms that's really what's powered and

fired off the the last cycle right whatever the shitcoin cycle is this cycle has been very interesting. And if I just kind of frame up why I think, and Murad's done a good job, I think, of framing this up, but this is my take on it. If you go and look at the 2017 cycle, there weren't really no stable coins. I think Tether existed, but not at any size. BTC was the pair. You bought Bitcoin, you sent it to Binance or Coinbase or whatever, and you traded shit coins. So BTC was the thing you had to buy. It was the casino chip to go and bet on other stuff. Now, Bitcoin being special has left that realm where it actually doesn't need that demand anymore it doesn't need to be the quote pair for the casino to achieve its value proposition in the 2021-22 cycle that was

ethereum you had to buy eth the casino chip to go and play in the defi yield farming you get your 55 000 percent apy which rugged you the next day you needed to buy the casino chip and hold it to do stuff whenever an opportunity came up you can't send your money to binance buy the eth send it to your wallet and then go and do the thing because the thing's already pumped you needed to have the eth in your wallet now we're seeing that with solana and in this whole process ethereans got very cocky they thought we're going to flip bitcoin they went after the ultrasound money meme they did the merge now i know the merge was something that they'd planned since the beginning but i was looking at this state of play and i said and i made this video i think it's called

the merge is a monumental blunder and the reason why i said there's like and there's many reasons right my big picture take is ethereum is actually too decentralized and that's going to be contrary to what a lot of bitcoiners say but i think it's too decentralized because they have credit to them gone to a whole lot of angle it's still more centralized than bitcoin but they've done a lot of work to be more decentralized than the trons and the solanas and all this stuff however what if the main thing that your protocol does is move stable coins around which could be frozen that really the weakest link in your chain is tether and circle that's that's kind of it so they've gone down this path of like building all these like decentralized cannons and they've

forgotten that they're securing something which can be stolen by the issuer so at the end of the day if they freeze stable coins the whole thing falls apart defy goes to zero because that's what people borrow so they've kind of over designed the machine and they also went after the ultrasound money meme which there was a war they were never going to win and then once they flipped to proof for stake, that was really the last thing they had that was an edge. And if you go back, I mean, in fact, I've checked, the Ethereum.org website has been since updated, but the two reasons, the two listed reasons for the merge, and this video was made a month before the merge, the two listed reasons were to enable sharding, which is scaling. That got scrapped very soon

after the merge, and they already had layer twos and roll-ups and all that stuff going. So technically speaking, you kind of had already made the roll-up centric roadmap decision. So you didn't really need sharding in the first place. And the second one was to be environmentally friendly. And it's like, guys, proof of work is the most environmentally friendly consensus mechanism. It's the only thing you have that is different to Solana, that is different to Tron. They're all proof of stake. And by the way, just if they stayed proof of work, I don't actually think the result would have been any different.

But it was the only competitive advantages they had, the only differentiator. Once you go proof of stake, you've just got technical debt. You don't actually have any advantage. You're not faster. You're not slower. Oh, we're more decentralized, but your stablecoins aren't. So that kind of a moot point. Doesn't really matter that you're more decentralized because I can move stablecoins around on Solana too with the exact same risk profile, right? It's the same shit. So they've really just made a lot of decisions along the way. And I think they're coming to a head as we speak. Obviously, the decline in the ETH BTC price, it's a brutal ride for them, the poor buggers. I do feel for them because even as a Bitcoiner, I still think it's all going to zero. But I don't particularly want to see a $400 billion asset go to zero. I don't think that's a net positive. It's better if it happens slowly because people can slowly exit.

But, you know, you don't want to see value destroyed in the world. But even if you go to the ETH Maxi websites, the PE ratio, at least to their calculation, if you look at it, and this is the thing, institutional investors, they come in, be careful what you wish for. one of my friends told me the other day, because when you actually value the tokens or ETH or anything on any typical valuation mechanism, you're not going to like the result because it's like the PE ratio is 780 or 675 or something like that. If you take it down to a more sensible PE of 20 or 21, it's a hundred dollar ETH price. And like 20 is like on the upper bound of equity. So be careful what you wish for because there's a large monetary premium so to speak gap between the current valuation where it probably wants to go now this is all going to happen to solana as well but i

think the the trump meme coin is i'm still kind of processing what what happened there and what the implications are but my big picture take is if you had a done what wind back the clock 12 months 24 months there's no question that if trump was going to launch a meme coin i think everyone would agree it would have been on ethereum there's no question it happened on solana right so the ethereums have now recognized and by the way the amount of trade volume i think credit to solana by the way the amount of trade volume and load that that thing took on that day is unbelievable from just a technological standpoint you got to give it credit that was quite impressive there's no chance any ethereum l2 none of it none of that system could handle what happened on that

trump mean coin so i think the ethereans are now they've hit this brick wall of recognition that they haven't moved forward they didn't win on the money front in the time they spent trying to win the money front they forgot to win on the thing they're supercomputering at right trying to be the world computer and solana's come up behind them and it handled something that at the end of the day if it's all about a casino then it's a better casino so now people are buying the soul to trade in that casino and why do you hold the eath you know and i think they're really coming and there's no value capture either what's the value capture mechanism from usage of l2s they're supposed to pay a tax to the eth main chain again pe ratio 675 i wouldn't want to i would not

recommend getting institutional investors to value on your cash flows because it's about 100 eth price so it's just it's a tough scenario for them yeah and then isn't the largest eth l2 coinbase's base and aren't they not contributing back it's basically like saying that you know by saying that base is scaling ethereum is like saying that binance is scaling bitcoin they're both exactly the same that's the same thing you know and here's the other one that's going to kill them there's no question right i'll put money on this that base will swap their gas fees for usdc so the claim is that you've got to move eth over there and use it as gas again be careful what you wish for if you move your eth over there what happens if they swap to usd because at the

end of the day base base may very well want to bring on institutional actors and you know what institutions are going to fall for this thing and buy real world assets and tokenized stocks and all that shit that's all going to happen right i'm very confident that will happen coinbase is positioning base for the place to do that they're going to trust that because it's a regulated company which means they're also not going to take the wheels off and if ethereum is literally just a chain that you just like post some hash data to every so often that's a painful experience and these institutions they don't want to hold eth inventory they just want dollars so they'd rather pay their gas fee and be like oh it's going to cost me two dollars to do this great

cool it's like a brokerage fee problem solved it's there's just so few reasons why here's my final take on this ethereum the evm the blockchain the l2s the networks i think they can and i would argue, have been very successful. Ethereum has been very successful. There's no reason why ETH has to win. The asset has to benefit from Ethereum winning. And this is where I think a lot of Etherians get this wrong. Same for Solana. Sol doesn't have to do well for Solana, the blockchain, to work very well. For Bitcoin, that's different because all of these chains, the network is the more important thing and the asset is kind of something that enables the network. Bitcoin is the complete opposite where btc is the important thing the blockchain is just there to support the

asset it's it's complete polarity shift where it's all about the asset it's not about the network it's not about the defi it's not about the tokens not at the stable coins it's about bitcoin bitcoin the chain supports btc eth supports ethereum and i think that's a it's a really really big difference and it's ultimately playing out in the price yeah and you mentioned it'll play out similarly for solana how do you see that happening that's what you just described same thing yeah it's the exact same mechanic i mean like at the end of the day if you want to value this thing based on cash flows um i haven't checked solana's pe but i i'm pretty sure it's not going to be high right if you've got this highly scaling blockchain it's like in many ways it's

more like the tcp ip id it's you know i don't pay for tcp ip it just just does its thing right in many ways i think by building these networks they've kind of built that protocol so to speak where it transfers value around but what's the value it's the billion dollars of stable coins i'm moving around and i'm paying a three dollar fee to make it happen because if i start paying a thousand dollar fee i'm going to move to a chain where i don't need that and that's ultimately how it happens right the cure for high prices is high prices ethereum gas price goes up because people are using it you better believe all those l2s are going to look and go well i can just plug into this chain which cost me 15 cents that makes a hell of a lot of an idea so i just i can't see a

sustainable revenue source here and john pfeffer wrote about this way back in 2017 yeah this paper is like utility tokens will always trend towards their utility value which is not much um it's the same reason that gold bugs when they're like oh but gold has industrial use cases like okay price it based on dental fillings and tell me what the market cap should be because i'll tell you what's a hell of a lot lower than 18 trillion yeah maybe tron's had it right this whole time justin sun just just like we're gonna keep it centralized we're gonna keep it ironically enough i think so right i mean tron is the number one place for tether tether is it's in emerging markets they're adopting tether on tron that's and that is a use case that is a genuine use case

for emerging markets right it's hard to get dollars for them they can get it on digital rail and they can move it anywhere fantastic and move it around for cent on the dollar at the end of the day what a good product market fit yeah it's so fun and it is um i don't know if i've have uh as much um i do have some grace but not as much grace as you towards the ethereans because i think they um went on this years long decade long propaganda campaign against Bitcoin and mismarketed both

networks to the public and I think they many people, not everybody, but many particularly the early Ethereans hoodwinked a lot of people and completely, maybe they misunderstood or it's probably a combination of misunderstanding and

misconstruing reality and it is I thought it was i thought it was going to be more of an epic blow up something that was structural to some technical change they made during the merge or something like that but it's just a slow fade into irrelevance is far worse yeah just this great and and that's the thing like it's amazing i didn't actually expect to see it happen the way it is but and look this is the thing you've got all these dot eats just proclaiming i'm done i'm out i'm finished i'm selling everything this is

ironically enough what bottoms look like but i saw this great tweet which i thought was it perfectly summarizes this thing this is what bottoms look like if there is one and i thought that was just such a great way to encapsulate because if there is one is such a painful thing because it could it may not have a bottom it may just keep deteriorating because someone's got to make me a case as to why ethereum is going to beat bitcoin which good luck with that and why Solana is not going to eat its lunch. And on this concept, one of the top signals, I'm always looking for these anecdotal,

I'm trying to formulate what a top might look like at some point, a cyclical top. I also have a suspicion that the tops may be different for Bitcoin versus crypto. I think this divergence is very real. And one piece of evidence for that, when we hit the all-time high the other day, we got to 109K, Bitcoin's, that 10% daily candle

was 40% of Ethereum's market cap. right in one candle holy crap bitcoin did 40 of ethereum's market cap it's irrelevant in scale right it's just it's a footnote so we've we've already got this divergence but let's imagine this cycle plays out and we get this whole crypto casino and blah blah blah whether ethereum declines and others rally or they ethereum just doesn't rally as much as the others whatever it looks like just imagine the speculative fever that will be happening when there's a possibility that ethereum is going to get flipped when the nearest rival is within plus or minus 10 20 percent of it just imagine the speculation that's going to be going wild or no it's gonna be ripple no it's

gonna be slow it's gonna be this that is going to be i think one of the topping signals if we get this kind of cycle i think that's what it's going to look like maybe it's trump coin who knows maybe it's dogecoin something trying to flip everyone's gonna be bidding on their coin to try and get it to be number two first. Maybe there's this kind of like rolling into change. But we've all, you know, Bitcoin is often talked about. If you flip Bitcoin, the industry goes to zero because suddenly there's no faith or trust in any of it.

And I actually do agree with that because I just think Bitcoin, it has such a divergence now. And if you want to see the divergence, plot Bitcoin's market cap minus Ethereum's market cap. It basically looks like the Bitcoin price chart because Ethereum is so irrelevant now that it just keeps growing, right? We're over $1.6 trillion in difference.

It's just not even the same ballpark. The same is not true for all these other assets. Once you get that flipping over and they're like trying to work at which one's which, I think that's going to be a speculative mania. That probably is going to look like the top. Ultimately, the flipping will be the top. Look, it's a coin market cap. Let's see what the pecking order is right now.

Somehow, Ripple. Oh, actually, I should tell you my Ripple story. So we went to the Bitcoin Bush Bash, which is basically three times a year. I think it's four times now. um here in australia we move around different parts of like rural um new south wales queensland no we pump the bitcoin bush bash on rabbit hole recap whenever there is one oh yeah no the bitcoin bush bash is great so anyway the most recent one was in parks which is like a five and a half hour drive inland from sydney it's in the middle of absolutely nowhere if you keep driving half an

hour the earth turns red that's kind of you know real desert type material uh we're at the pub and um we're sitting there just you know obviously talking about bitcoin and whatever and this guy leans over he's sitting there having uh having dinner with his girlfriend at the pub and he goes oh you guys into ripple and i was like no mate we're not into ripple and he goes oh you should it's going to eight bucks and his girlfriend's just sitting there like doesn't know what's going on i was like mate if you think ripple's going to eight bucks i mean good luck anyway so we turned away and i turned back like 10 minutes later and one of our crew is basically sitting there having dinner with him and the girlfriend's just sitting there just

eating her pastas no it doesn't want to talk about bloody coins and these two were just riffing on ripple i was like i mean that's that's a bad sign in the middle in the middle of the bush talking about ripple in the middle of nowhere yep what's ripple at right now is that 178 million is that what i'm reading billion yeah billion billion yeah yep solana's at go figure one is that 42 or 22 22 ethereum 441 if i can read correctly 440 but yeah there you go 1.6 trillion dollar difference between bitcoin and its next competitor i mean good luck yeah the flippening that was a fun meme while it lasted yes it was well i mean i've got this man that the flippening is coming it's just not going to be for bitcoin

uh it was not that i was ever wary but it was frustrating when it's going on from like 2017 to probably stopped in 2021 i think the variable the variable right and we're partly seeing that today the confusion that exists amongst you know we've obviously spent a lot of time thinking about this and we've eventually come to the realization that bitcoin is the one that makes sense the rest of the world takes a lot longer to do this right the average bell curve right i think bitcoin is probably sit on the two left side left side tails of the bell curve the whole middle takes time to work out that real but what about real world assets it's like okay you put a house on the blockchain house burns down what's the token worth you know like but

people can't reason about why this they're like but it makes so much sense like does it when you really play through the game theory so i think the problem with the flippening and lynn alden raised this point way back i think i talked about in that merge video is there's this idea that like maybe ethereum just goes so super centralized and so like we are the bonds and blah blah blah and TradFi completely falls for it. And you actually get this like seeding of their, they see the decentralization component, but they fully give over to TradFi.

But ironically enough, Base is doing that on top of Ethereum. So in a way, Base is kind of doing what they probably should have done in order to capture that attention. But Coinbase is just dipping in and be like, oh, cool, new business line. So, you know, it's just tough.

Yeah, it's real tough. Not unexpected though. I mean, that's the thing. These things weren't hard to see. No, people were calling this. Oh, yeah. And it is somewhat surreal to watch it play out. I mean, that stat, the candle up to 109, 40%.

That magnitude, I didn't realize we were in that magnitude of a difference. $160 billion in one day. Yeah, that's powerful. It is. And I used it in one of my reports to kind of explain, like, first of all, recognize how big Bitcoin is. And actually, I was talking about this this morning. You know, when you think about Bitcoin at $2 trillion, right? I mean, for most people like us, something like $10 million, that's like a sizable chunk of money.

If you look at $1 billion, right, that's 100 times more or 1,000 millions. If you then look at a trillion, it's 1,000 billions. You've got 1,000, 1,000 millions. and then bitcoin is two trillion and yet it's a footnote on the rest of the world so we're in this amazing concept where it's so big that it moves 160 billion dollars a day 160 billion dollars is a top 100 company in the world top 100 asset it moves that in one day and yet it's insignificant relative to the size of bonds and derivatives and you know everything else well that's why i was a bit short of words right there i was lost in thought thinking it seems like we're phase

shifting away from this perceived competition with Ethereum, Solana, Ripple, whatever it may be, into this sort of awkward, pubescent stage where we're bigger than these guys and still working our way up to the big boy markets, bonds, real estate, whatever it may be? And what does that transition look like? I think that's exactly the right way to think about it. That's why, in many ways, that's why I've been kind of talking about this stuff now, because it is a divergence. It is massive in scale.

And I mean, the fact that Bitcoin is still just shy of 60% dominance, and that includes with stablecoins in the mix, right? So if you take stablecoins out, it's like it's 65 odd percent or thereabouts. Just the fact that Bitcoin is still that big relative to everything else is astounding, right? So I think we are seeing this divergence. The kids are going to remain down there and fight amongst themselves and try and work out who's worth less than the other. but i think bitcoin really has just it is broken free not only in terms of its just sheer size and

market capitalization but look how it's trading stair step sideways stair steps up we've been trading above 100k for several weeks now it's it's amazing that we're just holding here again silver didn't even put up a fight whatever silver's market cap is we just ripped straight through it that was the end of it didn't even try so you kind of look at this thing it's like it really is a winner-take-all scenario the kids can fight downstairs and try and work out which one's bigger but bitcoin is just it's beyond that on a narrative and a market size which i think is really really quite incredible yeah and i think going back to what we were saying earlier this maturation of the market particularly credit products around bitcoin where you're locking

it up and hopefully many participants in the market are taking responsible amounts of leverage but i think part of the pubescent stage is just stuffing the collateral and all these different credit products with varying durations from anywhere from one to maybe 30 years we get residential mortgage mortgages with some bitcoin collateral in them and then because i've had an oil gas analyst on the show quite a few times throughout the years and i'll sell haji and i've always asked him like what's it going to take to get bitcoin used as a settlement layer for international oil trades and he's like liquidity and it's got to be hundreds of trillions of dollars it's not going to happen i think started the conversation when bitcoin was

in the mid to high hundred billions and we've had it during the trillions and i feel like i ask him every time he's like more liquidity more liquidity um to the market which is just i mean that's just your target right bitcoin the bigger it gets i know jack mallows has made this point a lot the bigger bitcoin gets the more money you can move through it the more useful it gets it's the perfect veblen good in the sense that the bigger it gets the more desirable it is the more useful it is therefore it gets bigger it's again the simplicity of the design just one final thing on ethereum if anyone's ever heard of i can't remember where i first came across this but second system syndrome this idea that you have to keep it's too simple it can't be i must iterate it

must be better i must have more things and they just eventually realize that they got it right first time that was it yeah exactly like ethereum's the perfect case study in seconds system syndrome and the application of gauss law a system that starts from a point of complexity is never gonna never gonna scale again a crazy amount of adoption because it's simply too complex you need to start simple that's what bitcoin did that's it and yeah the for those who are unaware second system syndrome go look it up it's a the original case study was some software program that ibm launched in the 80s i believe and they decided to scrap it and rebuild it from scratch and the second system they built never came to market because uh that's not how systems actually work

functional systems yep keep it nice simple and elegant yeah james that's what you do here you Keep it nice, simple, elegant. Take the emotion out of it. And I really appreciate you coming back on to give an update. Mention our DMs. I'd like to do this more frequently because I think everybody listening and watching at home gets a lot of value out of this. And I do think as we head into 2025 with all the chaos going on in Bitcoin markets, outside of Bitcoin markets, it's going to be important to get some sober analysis from the man checking the chain. That's it.

Yeah. And that's the thing, right? I mean, don't try and predict stuff. No one can predict anything. And it's funny because, like, I still get a lot of people say, but I'm just a DCA hodler. It's like, yeah, but that's the whole point. Like, my audience is hodlers.

And actually, we did a survey because, you know, I love to get feedback and find out who people are. And I was expecting there to be, like, a decent mix of, like, traders and professional investors and hedge fund managers. There may be, but the survey came back 96.5% self-identify as a hodler. and my thesis was there's a bunch of hodlers out there they've gone through probably the same journey that i have they come in they tried to trade they lost a bunch of money they realized i don't want to trade this shit i just want to buy and hold but i want to know why the market does

what it does and that's what i like to do right i just i love analyzing bitcoin and just understanding why it does what it does and if you can just frame up why you can prepare for these things you don't predict you just prepare and if you can just shift that framework to preparing for what might happen, not pretending you're ever going to work out what will happen, puts you in a way better position. If you spend an hour thinking about, hey, what happens if Bitcoin sells off? You just put that in your back pocket. If you need it, you pull it out and you've got your plan. If you haven't, if it doesn't sell off, that's fine. You just worry about it later on, right? You'll use that same framework that next time it might sell off. You're like, oh, I remember I

thought about that before. How is this scenario much the same? And that's what I try to help people do just think through the scenarios if they happen not because they're gonna happen yeah check it out check on shane i'm gonna charge that check on shane.com to check out some of the charts and newsletter that check on shane.com we will link to both of those in the show notes and we will catch up with you in a few months james thank you good on you mate and uh yeah folks stay frosty out there because we're in a political world and shit's gonna be weird it's gonna be weird peace and love freaks Thank you.