TFTC: A Bitcoin Podcast - #596: Q4 2024 Monetary Base Update with Matthew Mežinskis

Episode Date: March 12, 2025

Marty sits down with Matthew Mežinskis to discuss the state of bitcoin's growth. Matty on Twitter: https://x.com/1basemoney Porkopolis Econ: https://www.porkopolis.io/ 0:00 - Intro 0:36 - SBR 10:01 - Self custody 20:45 - Fold & Bitkey 22:27 - Bitcoin % of monetary base 27:54 - Good ol' power trendline 34:25 - Unchained announcement 34:56 - Adoption S curve is misleading 52:50 - Fun with charts 56:46 - Monetary base growth comparison 1:00:46 - How the power curve reflects psychology 1:05:04 - Exponential decay 1:12:17 - Monetary base, repo markets and Luongo theory 1:31:37 - Money market funds 1:41:15 - Bitcoin price models Shoutout to our sponsors: Fold https://tftc.io/fold 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. My daughter just got home from school, but she'll be all right.

Well, it's a Friday afternoon in Latvia. Children are coming home from school. It's the weekend. We've got an executive order in the United States officially signed designating Bitcoin as a strategic reserve asset. of the united states federal government very fitting morning to be speaking with you mr because of the executive order i don't know yeah you gotta congratulations marty uh i always enjoy these quarterly chats mostly to come on and talk about my love for bitcoin and also my love for ukraine and lose you a few subscribers in the process

people love it it's uh do they do they love ukraine it is split down the middle and if you i don't know if you read the comments i think it's just disproportionately unlove in uh in bitcoin land or just in general center right uh or not even center let's say more right-leaning uh politics but we can talk about some things obviously it's been crazy uh a little bit disturbing for us in eastern eastern europe the world order is uh i think watching history right now i think it's being with uh redrawn the maps and the spheres of influence and we'll see how that goes but bitcoin is obviously the focus for when we chat so we can we can start there or you know whatever you're the host you tell me

let's start let's start with bitcoin and we'll get to because i've got some thoughts too about europe europe generally not even ukraine russia um um besides taking holidays there and nice wine i assume you are glad that they're spending more on defense which i am as well yeah i am on that but like i'll say like they're completely maybe we're gonna start with it fuck it uh no no no no no no let's table it let's table it okay let's table it let's table it the all right the strategic bitcoin reserve significant in your mind and significant uh yeah it's definitely significant legitimizing and uh setting the table for other nations to do the same you and i this is no surprise um obviously everybody knew

he's going to do something but to have the strategic bitcoin reserve and the sovereign wealth fund which is a good idea by the way for those that don't know social security is not a sovereign wealth fund it is a more or less legitimized ponzi uh yeah that's been running cash flow negative since 2011 but regardless you know having the united states has a lot of debt as people know 36 37 trillion dollars worth of debt uh the states that typically have sovereign wealth funds have like no debt low debt and extremely uh high liquidity high uh income producing assets usually from oil all right right so the saudis the emirates and of course the norwegians the most famous with the sovereign wealth fund alas so yeah yeah so so state funds

as well of course the united states has states that have in their pension funds uh in this in the state pension fund system. Those are sovereign wealth funds within the state level. So, yeah, I think it's totally good to do. And I know that we're talking about the strategic Bitcoin reserve, which is different than the sovereign wealth fund. The fact that there are two hanging out there, basically, where Bitcoin is going to be a part of is, I think, pretty fantastic for Bitcoin, for adoption. And no one is going to argue with those points. Of course, the people that think you know it's just for criminals and money laundering which they've been saying that for as long as it's been around they're always going to continue to say that but as we know

this is better than gold and it's legitimizing what we've been saying for you know you and i since since we've been publicly talking about it and i think equally as importantly the executive order successfully de-alienated between Bitcoin and broader crypto, which I think was very important. Did they? Yes. Were you getting worried?

Were you getting worried? Did you see the tweet on Sunday? The social post? No, to be honest, I haven't. I mean, I think Sachs is a joker and I don't respect him at all for a lot of things. but his uh as as boris johnson said his sort of bro bro-ish love for putin you know we're not going to go there yet but it is uh very disturbing to me and i don't respect him at all and it's not

it's not everybody knows that these jokers from the all-in podcast and the silicon valley people with their shit coins they are specifically of the soul variety they are trying to cash out as america is supposedly cashing in to crypto so that was that didn't surprise me you know last week with those announcements uh of the of those coins coming in and i think that people should pay attention to that like that's that's part of the picture it's fine that there are statements made and new uh sort of signals sent that bitcoin is different uh but you still got to understand what we're dealing with here agreed there are plenty of jokers it was codified in the executive order though and it's like bitcoin yeah is this digital

reserve asset this digital gold if you will to separate it is distributed and then all this other i think the way i understand it less than 24 hours post executive order been very busy haven't had time to sit down and read through it through it all but um the parts that i have seen basically bitcoin is one thing and we're gonna basically take accumulate yeah no start with the bitcoin that we already have and say we're not selling it anymore and sax and letnick have the ability to accumulate more bitcoin as long as it's not a net cost for taxpayers budget neutral yeah and then they put ripple solana east all the crap in another bucket and said we're not going to buy more of this but we're gonna basically convert what we've seized into um the reserve as well

separate from bitcoin though that's a question too i think they owe bitfinex some bitcoin backs i think like half the reserve technically is bitfinex's bitcoin well it's very likely that uh there's some shenanigans there with tether as well still to this day uh the assets on tether's balance sheet have to do with bitfinex loans what do you mean there loans from the original hack for or did they actually pay that back they might have paid it back officially i can't remember because they had leo but you never remember you never know what the tether uh balance sheet's still right the quality of the tether assets are not just sovereign u.s treasuries owned by whichever entity it's now

domiciled in for tether i think now it might be going into el salvador i haven't paid so much attention to this uh for the listener at the recent weeks but regardless there are not it's still far from clear as far as i know the actual quality of the reserve so you can you can have you know i can give you a loan you can give a loan to someone else we can all have a loan granted that's an asset but the quality of that asset is important to understand right so that's why gold is nice because it's just uh when you hold it it's an asset that you understand why bitcoin is nice when you hold it it's an asset you can understand um any that is actually why treasuries are nice that's why it has been in the past because treasuries even though

the uh debtor is the united states government which traditionally has had a pretty strong credit obviously as things could be changing now but still i think the united states is the best looking horse in the glue factory as i've often said uh the treasury bond was a great form of collateral for worldwide finance for you know 50 years so the point is tether's balance sheet still i'm not sure if that's been proven that it's like you know the actual tethers that are issued are one-to-one uh with u.s government bonds i'm not saying it's so important i'm not at all saying that this is like a big problem and obviously with letnick's uh position he set himself up in in that uh enterprise to be in just a fine place right for the next yeah few years

i think your point is i think you're misunderstanding what i was saying though the u.s government recovered 94 000 bitcoin from the 2016 bitfenix hack remember rasul khan the best rapper in the world that chick and her boyfriend right and so literally like half the nyc reserve sting that's a reserve is from there and from that hack that was recovered by the u.s government that i think technically should be given back to bitfinex i see no i was talking about something completely different i was talking about prior bitfinex hacks with tether that were supposedly papered over yeah that's a whole different thing yeah so you're talking about the actual like their account with bitfinex when the you know the bitcoins that they had in

Bitfinex. Those two. Well, they stole in 2016. They were the ones who basically hacked Bitfinex for 116,000 Bitcoin. Right, right, right. Two years ago, the US government found them

and recovered 94,000 of that 116,000 that was stolen. That's actually a good point. It now sits in the strategic reserve in the US. What percentage? What percentage of the strategic reserve is it? It's like 50%. Yeah, that's... that's a problem and they're going to keep it there i don't know i've been saying this

this uh this shows who we're dealing with here and uh this is why caveat mtor withdraw your coins uh they're a real world you know speaking of not getting hacked but opsec and security i say this often on shows that i'm on in my own show but and again we're not going to jump here yet but with the uncertainty in the world even in eastern europe at the moment it is coming down to what we've talked about for years like i need to be in the position and i am thankfully because of bitcoin in the position that i can literally walk across the border if something happens um in eastern europe and we would have to flee that uh of course you know it's never good to divulge uh all your security but i've said many times that multi-sig in multi-jurisdiction

even if you're comfortable as well if you're worried about some five dollar wrench or if you're worried about someone that's been stalking you it might even be a good idea to have some keys in a place where you would have to even do some KYC like a bank, or at least you would have to have a key for safe deposit box. If you have multi-sig, if you're in multi-jurisdiction, if you're backed up in multiple places, all those things are on the table. And yeah, you have to do it that way, in my opinion. Obviously, we've been talking about this for many years, but the world is, I think a lot of people are getting a little bit of a false sense of security with this. And that's a perfect example that you just said of where it's not

your keys, not your coins. If you log into Coinbase, if you log into Kraken and you think that you have those Bitcoins, all you have is a claim on those Bitcoins. It's the exact same thing as a bank account. So anyway, that's a typical soapbox tirade that probably every listener of this show understands but never heard saying it again hey hey there's a lot of new people coming to bitcoin there's some people hearing this for the first time it's a very popular show people people they hear from their friends they go to swing dancing classes like logan did last night and they they meet people listen to the show well like i said what you know you can get me the only ukraine supporter on and then i can cost you a few of these subscribers so i'm happy

to do that we are we are well-rounded all sides heard show i like that marty i like it my friend you want me to show you some charts we can look at charts yeah i think digging back to the strategic reserve it was like maybe stepping back from the strategic reserve looking where bitcoin is now we're at the end of the year i guess we're a little bit below when we end at q4 2024 right now as far as a size of the monetary base yes or and bitcoin's relation to it yeah yeah wearing the silk road hat today just remind people make sure that you're thinking about p2p bitcoin building on on what matthew just said get your get your bitcoin off the exchange

set up your security right multi-sig preferable and particularly with the strategic reserve if you read I mean pros and cons pros Bitcoin separated

they're holding it Bitcoin validated con the main avenue for acquiring Bitcoin in the strategic reserve is asset seizure

so much easier to go to exchange and say hey I don't like that person give me their Bitcoin I'm going to put it in the reserve as opposed to

having to go door to door and get you to unearth your keys and sign a transaction, sending it to the strategic reserve. Do I think that's going to happen right out of the gate? No, but there are technicalities in the law that you should be aware of. Well, what do you think regarding the little tangent that I went on, people actually holding real Bitcoin and then people continuing to hold Bitcoin and Revolut or their broker accounts?

obviously i'm sure you have this discussion often with guests this is a uh this is not going away if we look at the gold industry for example uh it's a sizable portion of the gold market that is in you know tradable transparent etfs um how do you think that the bitcoin self-custody versus custody breakdown continues with this right now it's about 50 50 right 50 how are you 50 50 50 and self-custody 50 you mean from like a bitcoin treasuries sort of uh no just in the free floating supply i think river just released a report i believe i didn't see the latest of that but yeah i believe that's what they said 50 of bitcoin it's been dispersed the market is in self-custody and 50 is in etfs on exchanges blah blah minors you count minors as as being a

custody obviously so on and so forth yeah yeah i think ux needs to improve and i think it is improving i think products like bitkey disclaimer sponsor the show are a great exploration of the design space of bitcoin self-custody that makes it easier and at the very least enables people to interact with a somewhat easy to use and straightforward product to begin their journey to um more secure or maybe not more secure more private multi-sig it's probably the way to put that um there is some privacy trade-offs with the bitkey because block holds a key with their servers they can see how much bitcoin you have what addresses is it it is in but it's still self-sovereign it's a two or three multi-sig and you hold two of the keys one on your mobile app

and one on the hardware device obviously so i'm positive and i and parker lewis and i recorded earlier this week and we're just talking about the flow here at tftc on the business side for our bitcoin treasury we send invoices out except bitcoin on chain um beginning to accept it over the lightning network as well i have an exchange account for the business um and i'll let that build up to a certain amount and i use that to pay contractors and other invoices but then i also have multi-sig cold storage where if the exchange account gets too big i sweep it into cold storage and so personally i guess i'm playing in both worlds but strategically and mindfully of how much bitcoin is where at any given point

in time and i think i'm pretty confident that p2p usage of bitcoin as a payments network is going to increase pretty significantly in the coming years i'm already seeing it that's what parker and i were discussing i've received just in the last week alone four or five invoices from zap right that enable me to pay for goods and services necessary to run this business in fiat or Bitcoin. And I've been trending towards paying in Bitcoin. So yeah, I think I'm going to be optimistic. I think UX is getting better.

A lot of work to do. I wrote a newsletter this morning. I wrote it last night, published this morning, saying strategic reserve, big moment, obviously, a lot of gravity. a lot of validation for bitcoin but don't get complacent everybody's saying we've won we won we haven't won yet there's a lot of work to do to ensure that people can use bitcoin in a self-sovereign fashion not that they can't today but it could certainly be easier and

more intuitive for people especially as adoption waves continue to to hit the shores here well said i uh i can't add too much to that and i think that um like i said everybody's got everybody's got uh their own security needs but i could tell you for me having the ability to be fully in control no matter who's in the white house no matter how safe your family might be is actually really important and it might surprise some people you know being a American Latvian white European but yeah it's a dangerous world right now and I do think that people really really need to think about security because things aren't necessarily they're going to get any better in my opinion so freaks do you have a credit card are you getting

cash back or airline points or points for some other service guess what those are shit coins you want to be stacking bitcoin i have some groundbreaking news for you the team at fold has finally released the bitcoin rewards credit card they have a wait list i'm going to be distributing the cards later this year so you want to get on the wait list full plus members are going to get unlimited 2% Bitcoin back on this credit card. If you get on the wait list, they're up to $200,000 in prizes.

They're going to be given out. So get on it as quickly as possible. Go to tftc.io slash fold and get on the wait list there. If you're on the wait list, you have the potential to win some of the prizes. Check it out. So freaks, this rip of TFTC

was brought to you by our good friends at BitKey. BitKey makes Bitcoin easy to use and hard to lose. It is a hardware wallet that natively embeds into a two or three multi-sig. You have one key on the hardware wallet, one key on your mobile device, and Block stores a key in the cloud for you. This is an incredible hardware device for your friends and family, or maybe yourself who have Bitcoin on exchanges and have for a long time, but haven't taken a step to self custody because they're worried about the complications of setting up a private public

key pair, securing that seed phrase, setting up a pin, setting up a passphrase. again, BitKey makes it easy to use, hard to lose. It's the easiest zero to one step, your first step to self-custody. If you have friends and family on the exchanges who haven't moved it off, tell them to pick up a BitKey. Go to bitkey.world. Use the key TFTC20 at checkout for 20% off your order. That's bitkey.world, code TFTC20. One of the things I wanted to address with this update and for the new listeners, I've been tracking this for over six years now, actually. So since about here in the summer of 2018. The monetary base is basically central bank money. So it's the liability side of the central bank's balance sheet. And like Bitcoin, on-chain UTXOs is the

core of the system. So that's why they call it base money, monetary base. There's nothing that can be derived further from it. And when I told you this before, Marty, we first started to track this was about $20 trillion. COVID, it went up to $30 trillion. Now it's down to about $25.5 trillion. But there are a couple things to think about here. First of all, they're still printing a little bit. Yes, they're printing less than they were before. And actually, to be super clear, in the last year, they are actually pulling on the brakes still globally because of all the covid stimulus and money printing but generally if you would look let me even take off this if you just look at this line here it was monetary base and you see 30

trillion three years ago and then now three years later you see 25 and a half trillion you would think that's something like you know 17 drop right like five trillion dollar drop in money printing this is the challenge with measuring fiat money is that we have 50 different currencies and though the dollar exchange rate of those currencies might be falling and it is because the dollar remains the best looking horse in the glue factory does not necessarily mean that they are printing less or let's say drastically less they definitely are printing less and in the last year they indeed have gone to a negative print like actually trying to contract balance sheets but this looks more drastic. So that's just one point. Okay. And then the next thing is if we

look at Bitcoin, so since Bitcoin is base money as well, this is a percentage. I'm not showing you the value, but this is a percentage. Okay. So you see here in 2018, we started to look at this end of 2017, 2018, that top we're at 1% of the total. And then in the COVID tops went to about four percent and now as this monetary base is coming down bitcoin is still high relatively going up i know it's down from the 106 000 or whatever 107 000 we're at eight percent as of the end of last month okay and it's it's fairly similar uh at the moment uh but i'm stopping this i should have pulled this out till today but i'm not anyway the monetary base data is a little bit slow it updates every quarter the question is when we talk about bitcoin is a lot of people

and i was talking to some of my friends uh that are doing from the best bitcoin data group really a bunch of good guys that are doing this power curve which we've talked a lot about marty but a lot of people want to put the thesis that it's the money print that adds to the value of Bitcoin. And though I've been tracking the money print for, you know, six years, literally the exact same amount of time, six, seven years now, I've been tracking the power curve, all right, which is just basically, it's an observed trend that Bitcoin is following. And the relationship of the price of Bitcoin on a power curve or power regression seems to still be stronger than the relationship of, say, Bitcoin to money print. For sure, as you can see here,

we're just using our eyes. I'm not doing any fancy numbers here. In 2017, money is generally still printing around the world. We're 10 years out of a financial crisis, Bitcoin hits a percent in 2021. $30 trillion of base money, Bitcoin hits an all time high at the time, 4%. But now notice, we've actually bucked the trend a little bit. It's counter cyclical. I'm not saying that the cycle is over. You and I both know the cycle is probably not over. We assume it based on at least the four-year cycles. But regardless, at the very moment, central banks are still trying to cool off from the COVID craziness from the pandemic. And Bitcoin is still going up. Okay, so that's a little bit of a counter cyclical

trend. And that's probably what I would continue to drill home the most is that I don't, I look at this as sort of the backdrop of what's happening. And it is the best, most comparable money supply but if we look at things like global liquidity or how much money is floating around in the system a lot of people like to do that in global liquidity by the way a lot of people measure a different way i don't call this global liquidity it's just the monetary base it's base money this this uh purple line global liquidity you know you can throw in a lot of different things you can throw in stable coins money market funds you can throw in your bank accounts euro dollars a lot of different things right you can get to you know hundreds of trillions of dollars

so that is still rising global liquidity so from that side it's still rising but i actually don't think at the moment any of that is uh is a high is the most important driver of bitcoin's price really what i think it comes down to is just going back and looking at the price itself and then asking asking what do we think that we're looking at when we look at price and if you look at this trend line let's take off the bands we can talk about those in a second but if you look at this trend line 96 r squared uh i was not the first person to observe this this uh that goes to our italian friend giovanni it's a very uh excited character on twitter i was gonna say you're much more level-headed than giovanni he um he's a smart guy uh but we both

posted about it in 2018, a couple months before me on Reddit, actually, coincidentally. But if you look at this trend line from 2018, and actually, if you go back and back test it from 2016, it's almost the same. It's almost identical. And so then one would need to ask themselves the question, if this line has not really changed from 2016, can we really put so much stock or faith in this line, which is also what I've been tracking since 2018. I know I said 2016 for the trend has been solid, but both of them I've actually been tracking since 2018, this monetary base and the power trend. And I think what you see is that, and look, you and I both know they're going to print more, right? Stuff's going to happen. Even Trump's going to want lower interest rates.

They're going to print more. It's not over. It's the only thing central banks know how to do. And then when they print, that's going to be gas on the fire for Bitcoin. We all know that, right? But if you really want to notice what's happening to Bitcoin, like as the main driver, not just now, but in the past, not just now, but in the future, in my opinion, this is more of a story. It's more of a backdrop. But this right here is showing something like scientifically amazing. And I would submit to you. I've said this before. I said this like a thousand times.

But I think that people need to just think that what you see here, when you see the price curve, it's not necessarily just price or interest. It's it's adoption. It's literal adoption of the network. And I think that that adoption is way stronger than central bank money printing. You know what Donald Trump says, strategic reserve. I think it is the adoption that puts Bitcoin on this this really unbelievable curve. curve and like i said if you go back to 2016 and back test it the curve itself is basically the exact same curve that you're looking at here this is all time data but if you go back to 2016 it's basically the same we've i've shown you that chart before right all the different lines you know the

2015 line the 2014 line yeah it was a little bit wilder in the early days but this this power relationship and we can talk about more what power means uh it's just amazingly strong and i like it So I actually keep coming back to it. You know, we can draw these trend lines. I've tightened them up a little bit. We don't need to talk about this, but I've shown kind of how they're evolving now. And you can see again, if you look at the, like the future is obviously unknown. It's just a projection based on the trend.

It's a smooth, they look like smooth. Now I've made the back lines, the bands not smooth, but you can see that from, you know, from about 20, the end of 2016, it's a pretty, it's pretty close. to how the future trend looks. And so anyway, that's just what I am observing and thinking about now with this base money update, because for a few quarters now, since 2022, we've seen global base money fall by $5 trillion, but Bitcoin still as a trend. Bitcoin also fell, by the way, as we know, that's the green, the green price and everything else, a lot of a lot of scams right as we know in 2022 got liquidated people got hurt but it comes back

and it's around the trend and right now if you just want to know the actual all-time trend as of when i loaded this chart which was a couple minutes ago seventh of march eighty nine thousand dollar two hundred eighty nine thousand two hundred dollar price the trend itself ninety four thousand dollars ninety four thousand six hundred dollars seven So a little bit slightly below trend, but basically right on trend. And it almost sounds too simplistic to say it, like not groundbreaking enough, even though you see like wonderful charts and you see that the price itself fits it so nicely. But I think that the probabilities, to me, the probabilities are higher than ever that what we are seeing here is that this price curve is simply showing the adoption of a new technology that we've never seen before. And it's that adoption that continues to be this virtuous cycle that gives the price this fit to this curve.

Does that make sense, what I'm trying to say? I'm trying to say that it's not necessarily all about global liquidity or central banks. It's just about the network itself. Yes. As information disperses to the market over time and individuals receive that information, regardless of where the central banks are in a particular policy regime, whether that's expanding the monetary base, lowering rates or contracting monetary base, increasing interest rates individuals receiving information about bitcoin that is separate from that policy and

making individual decisions that they think bitcoin is something worth holding and no matter what the fed is doing at any given point in time those individuals making those decisions is what is affecting this trend precisely well put my friend and uh yeah i'm i'm i don't want say like more convinced than ever because it sounds a little bit pollyannish and you know try to be measured with this stuff but uh it's pretty it's pretty amazing to see i think what we're seeing is something we just never could have seen with gold we never could have seen it sup freaks bitcoin is the ultimate scarce asset join bitcoin macro expert nick batia at a live online event on march 17th for death taxes and 21 million learn how to shield your wealth

Leverage tax-advantaged accounts and secure your Bitcoin for future generations. Your financial advisor, accountant, or attorney might not be up to speed on Bitcoin, so invite them to join too. Register now at unchained.com slash TFTC. That's unchained.com slash TFTC. March 17th, be there. Does this power trend factor in the concept of S-curve adoption? That's a big meme right now is people looking at S-curve adoption

and saying we're right at the cusp of the hockey stick of the S? Would that factor this in? No, because S-curve adoption usually overall fits something that's kind of like exponential growth. When that S starts to take off, that's exponential. And power is power, so it's a bit different. And I can remind users just quickly here on the site, you can go to, still only have this chart up on this redesigned site, but just to explain what

the power is precisely. Okay. So I know this is a lot of numbers and you can't see this probably even the, you just can't see it because I'm on site, but it's on my site, porkopolis.io slash the chart. And it's all about the power curve. It's purely mathematical and it's just one variable. Okay. So it does not have to do that. The thing about the S curve is the S curve assumes exponential growth of an industry or a product and indeed we could probably find it if we search for it but let's not distract from talking if you look at you know you've seen those charts where like the washer and dryer the telephone the cell phone all these inventions they kind of go exponential uh like this s curve of adoption right it's slow at the beginning

early adopters expensive and then it goes exponential and then it levels off right it's that s s curve right you you know the the chart that i'm talking about right they have all these different inventions and they they draw it out of the chart so usually typically and this is my understanding i'm not a statistician more of an applied stats guy but those are for specific products that specific companies usually pioneer. It's not necessarily the development of networks or other things in nature that work in power, which is like a city. Bitcoin is kind of like a city, the growth of a city. So even though if I showed you a chart of a global population, you know it's typically a little under two percent a year now it's even we're trending even well like

not well but close to one percent a year but regardless if you pull that on a chart it's a straight line on log scale you can tell it's exponential growth cities don't grow like that they grow a little bit because of the infrastructure of cities you have you know you don't need parking spots for everybody you can go vertical you do all these different things cities actually grow they don't explode into the sun exponentially. Cities actually grow in power. And networks tend to grow in power as well. Another way to say that is in networks, there are few large nodes with many connections, and there are many small nodes with few connections. That's a power relationship. So, these types of things, those things are not like explosive exponential growth.

that's you know that's been my understanding again i'm not a statistician but i i read a lot about power there's a guy that wrote a really good book about scale it's called named jeffrey west it's called scale the book is called scale by jeffrey west if you want to check it out uh so power is more for like networks and and and cities and and things like this and bitcoin seems to be exhibiting that you know this i said like i said i was one of the first in 2018 to observe it. But it's an amazing trend, like I said, and like you just eloquently said, that is presumably unrelated to the broader things that are happening in the economy. It's more about adoption. But just to explain exactly

what it means, the power of Bitcoin in this equation is six. And if it's six, usually it works to about 40% of the, uh, an increase in 40% of the time means that the price will go up by six, but that's a little bit hard to understand. So it's not exponential. So exponential is constant growth, right? So rule of 72, 10% is the best example. How long does it take 10% a 10% return to double? Is it 10 years? If it's compounded question to you, Marty? No. How long? Um, 10% return. Three and a half.

7.2 years. Rule of 72. Duh. Yeah. So just drop the percent sign. Take 72 divided by the number 10, and you'll get the year's time to double. It's just the basic back of the envelope thing, right? So with exponential growth, things grow faster than they seem.

A 10% return will not double every 10 years. It will double every 7.2 years. So it's different. And a lot of things do grow in exponentials, the stock market, GDP, population on a global level, like I said, the bond market, that's all exponential. Interest rates, it's exponential. But with Bitcoin, again, it's not. So another way to say this, just to wrap it up with the power curve for today, maybe, is if you want to find a doubling point, we can do it with Bitcoin. I show it in this chart here in this table.

You can find this on my website again. but that it's not the percentage is not fixed there is a proportionate increase though and what it what it's it's saying you just have to calculate it and i have it here at this last column it's it's about 13 12.8 but it's not like per year it's per it's it's uh increase in the the time of the network okay so it's kind of like a lindy effect idea so for it's related let's say so so if you have right here about a thousand days of bitcoin's network occurred on uh november 2011 it was a thousand days of bitcoin if you increased the life of the network by about 13 all right you would get to here 11 066 uh that the price would double again you increase it by

It's less than 13%, 12.7%. Here from 11,066 to you get to 13, sorry, 1,166 to 1,300, another 12.7% increase, the price will double. So bottom line, that's what the power curve represents is a 12.5% to 13% increase in the network's time. Usually the price or IE, the adoption doubles. that's the idea with what we see with the price of bitcoin that's that's what the power curve means it's different than exponential well let's dig into this too because i think bitcoin's unique people everybody's been posting the s cart s curve chart saying here we are words but beginning the s curve and and correct me if i may be wrong i'm assuming i'm wrong but could you have

exponential adoption in the sense of the number of individuals that are exposed to bitcoin in one way or another however that that s curve doesn't materialize in the price chart because as the network grows from a market cap perspective it gets harder to move the price up significantly like you could have exponential adoption in terms of the number of users however the amount of capital necessary to create an s-curve adoption like chart and price is enormous uh i would say theoretically not because what we observe with bitcoin is this power curve that i showed on price it holds for a variety of other indicators like hash rate the best fit is power uh address growth the best fit is power even transactions the best fit is power um so it seems to be that

if you look at all the metrics of bitcoin it follows this network type adoption of power not s curve yeah and not an s curve now if the s curve is true and for whatever reason for sovereign wealth fund or strategic reserve whatever it might be war uh and bitcoin goes exponential then we would just have to say goodbye to the theory that it's tracking something like a growth of a power curve uh but we haven't observed that yet is the point and in fact as i have been trying to say i think it's actually becoming even stronger quarter by quarter because it's still pretty close to the price the market cap works in power like i said address growth hash rate and it's that's actually a more of a divergence uh from the way that global flows are going

and it's i don't have the chart up it's not uh i don't i can't pull it up at the moment but if we a relationship between that percentage say bitcoin versus the monetary base and market cap terms like i said we're about seven percent now we used to be one percent obviously used to be zero percent 15 years ago that itself is a power curve as well so no no matter how many different things you draw the relationship seems to be power which suggests that what you are looking at is adoption and uh adoption of a network so i don't i actually don't subscribe to the exponential theory of bitcoin or the s curve theory of bitcoin and so far it's proven correct but you know of course never say never and i'm not going to be complaining if hyper bitcoinization

looks like you know blow off everybody's faces uh adoption but you got to think about other things too like even exponential growth which is faster and like i said the stock market is exponential uh unicorns are exponential growth of unicorn companies uh this s curve is exponential on the on the explosive part of the curve all of that is exponential but even there it takes time you know it's like facebook facebook stock like any stock over the long run is going to follow exponential curve okay that's just one company it's one stock and that's actually how they grow and it's it's amazing that this this rule holds but you know even there with like lower level exponential growth rates you know like yes not so it's not even that shallow like you know the s p

is maybe over the long run nine percent with dividends seven percent without dividends you know at seven percent takes 10 years to double uh that's just it's just how it is it takes time right facebook started before bitcoin now there's another that's another interesting example i haven't done the numbers i don't know about all facebook because facebook also is a social network but again it's a company so it's constrained it grows differently but think about that facebook started in 2003 uh and now bitcoin is the value of facebook market cap wise bitcoin started in 2008 so bitcoin actually has shown to grown faster than facebook okay but again that fast trajectory is not exponential it looks like this it's just like slowly declining curve and

unless uh you dear listener are not excited by this curve or some people again wanting that face ripping blow off exponential growth this right here right now is a 45 percent compounded growth rate per year right now so it's not a low return uh you know and of course if you if you caught it here at the dip in november december 20 22 when peter zion was on joe rogan saying bitcoin at $16,000, $17,000 overvalued, you would have well in excess of a 45% compound annual growth. If you buy below this line, you're going to have way higher or potentially way higher than 45%. If you buy above this line, you'll have a bit lower than 45%. But that is the trend of Bitcoin right now. So I can translate things into compound growth. And again,

I've done that on my website. It is a declining compound growth. That's how it looks like. So right now, here we go right now. By the end of this year, it's going to be 42%. Last year, it was 45%. By the end of this year, it's going to be 42%. By the end of 2026, 39%. 2027, 36%. These are still enormous numbers.

And I've actually measured it out until the end of, well, I wanted to see when it would go to 10%. do you want to take a take a guess at when this goes to 10 per year the power curve of bitcoin when does the you know annualized return of bitcoin fall to about the level of the s p with dividends reinvested 2045. it's past 2160. yeah yeah let's go so think about that holy shit think about that think about that now again i have no idea if that's going to hold i have no idea if the trend's going to hold but think about what that actually is saying the growth is more explosive than you can realize it's just your impatience for that face ripping exponential blow off top 2160 yeah over 100 years and of course i hasten to say i hasten to say

i'm not saying that we're still going to be using dollars 100 years from now and that's going to be the price increase whatever obviously we all know we're going to have some change probably within the next 20 years at least maybe sooner where we're going to go on some sort of a bitcoin standard whatever but this trend is extremely strong extremely strong and uh that's what i'm i'm just trying to point out to people and while i also wouldn't mind an exponential face ripping hyper bitcoinization god candle whatever the hell you want to call it i actually i think from a social cohesion perspective this is what you would want and again this this more controlled power trend growth as opposed to exponential s curve particularly as it pertains to the value of

bitcoin and who has exposure to it and who doesn't over the course of time like this this power law adoption at least intuitively to me makes it seem like it can also facilitate a transition to a bitcoin standard much more orderly and i never say law by the way never have never will that triggers a lot of people. Power trend. Yeah. When you say it's just a trend line, there are linear trends. There are exponential trends.

There are logarithmic trends. There are polynomial trends. There are a lot of different trends and power trend is one type of trend. So that's the, in my view, that's the big picture. That's the exciting thing about Bitcoin is that it's exhibiting something that is indeed as the word suggests extremely powerful but it's just not as face ripping as you see and to follow your point marty usually when we see exponential trends in the world they're very slow exponential trends for some time you might get like uh you know again some unicorns going pretty fast

but uh exponential growth usually is is a lower percentage term and if it does seem to explode for a couple years that it will low it will cool off and that's the s-curve effect but again the s-curve effect we typically don't observe with networks we more observe it with companies and inventions of by a company that's an important point here so you know or by a by an individual like the telephone like the washer and dryer these types of things there are you know of course they are eventually ubiquitous and eventually other companies copycat this but that's not what bitcoin is bitcoin is a totally different thing it's a network uh it's a you have plenty of people on your pod by now that have described

bitcoins in many different ways but at the end of the day it's a network it's a protocol you plug in you plug out if you want um so that's that's that's that's how i describe it yeah what should we say to all the people putting out s-curve charts it's a big meme yeah see as you can see or as perhaps you can tell i'm not i don't even have twitter on my phone uh so i'm trying to i didn't even know it was a big meme and i don't really care that's that's probably what i would say uh i'm gonna keep doing my numbers uh this is a pretty strong trend i do think that we can have well you know you want to have fun with the numbers here like like here's the percentiles over the over the years the the 97 and a half percentile which turns out

to be about a 3.6 x i made this a little bit more conservative by the way it's not worth talking about from prior ones we've talked about uh because i've evolved it that's not worth going into anyway it's a little bit more conservative so the end of the year you just want to have fun with it you go out uh december 2025 presumably right we're on the four-year cycle presumably by the end of this year we could have some more excitement from trumpistan or whatever on bitcoin and we get to end of 2025, the trend itself, 125,000, 97.5 percentile, 450,000. That's my number. There are a lot of different people. Look at the quantile regression analysis. Some friends of mine are doing that. Plan C and Sina and these

guys are really smart some really smart quants and physicists and economists are doing this now this is mine is very simple i just taken a multiple running percentiles on the multiple just to keep it simple so if the trend basically is 125 000 by the end of the year my simple way to look at is 3.6 times the trend is is pretty indicative of a high number and you could see that right you can see how it evolves here we didn't quite hit it in 2021 but it's a it's a decent it's a decent way to look at it yeah on the um subject of this data group that you were alluding to earlier and the physicist and statisticians coming in to observe this line who i'm assuming are coming from external bubbles if you will maybe not bitcoiners first or

i'm curious what their observations are if that's true that character similar observations to what i've shown you and uh i think mostly it's just is it shocking to them is it fascinating yeah it's yeah yeah yes it's curiosity and it's uh it's it's curiosity with that that r squared in particular that 96 r squared is something impressive and you just don't see it too often in nature of course do with certain things and again like i said i'm not a statistician so i can't rattle all these things off but uh what it's saying is you know this price moves around in its basic level price is moving around this black line 96 better or with 96 less variance than if you just drew the average and of course average price wouldn't make any sense of course it's going to look better but

you know you can you can draw this with hash rate and it would also be a similar r squared with market cap similar r squared with addresses similar r squared so it's a really amazing uh fit and that's what i'm hearing when i talk to these guys is just how fun it is to model this compared to other things like you know the inflation rate or gold price or something like that and what you find when you do that i mentioned it a little bit before with the uh let's measure bitcoin's market cap with the monetary base what you find is those things fall away and what remains is the power curve relationship so here's another way to put it um the monetary base trend itself i don't know if i can pull this up quick enough you need to add monetary search search

Yeah. Told you this last time. You're going to keep telling me because I don't have time to program it in. I can just do Control-F on the browser, by the way. It would be fine. Give this a second. It's a monetary base just on dollar terms. Very interesting, by the way.

Way low in dollar terms. And again, they're printing a little bit less, but really this is dollar hegemony returning. this is dollar strength is why this looks that's the main point since 2020 so way low way below this 2.5 you know we're outside the range of normal behavior which again should give most people comfort because if we assume on the i know i just we we spent a whole like 20 minutes saying it's not related but of course if liquidity really gets roaring on a central bank level and they start printing more again of course that will affect in the short term as well bitcoin well uh and go ahead go ahead on that point like maybe that's what we're in that that's

what i wanted to dive into is like the psychology behind this adoption and how the power trend what it what it tells you about the psychology and maybe like as you said like we're low below the lower band here so you can assume that money printing going to go up maybe it's not a function of the creation of new monetary units distributing to the market and flowing into bitcoin but that expansion the monetary base sends a signal it's a piece of information that individuals digest and say wait a second they're printing money is that good for me is that bad for me what are the alternatives and it's not the it's not the mechanics of the expansion that maybe to a degree it's driving the bitcoin price but maybe it's the

information that is distributed to market that leads people to begin to wonder should i adopt bitcoin yes i think all of that is true what you said and all that adds to the network effect of bitcoin but here's another way to say it this is what i was what i was getting at you see here this is monetary base this is just like stocks just like bonds just like population growth on a worldwide level not on a city level uh just like gdp you put it on log scale the trend becomes a straight line okay it's obvious it's a straight line and by the way look at that 99 are squared so this is pretty a pretty beautiful trend line as well uh exponentially exponentially for uh for the monetary base for base money this is how the system grows it grows exponentially

so people copy paste that word to bitcoin all the time you no doubt if i'm sure you've had i've used it i've definitely used it sure sure and i probably have to at some point as well but the actual actually if you look at bitcoin's dollar growth go back to this curve whoops sorry this curve it's this slow asymptotic sort of decline but very very slow you have to measure it out to understand how slow it is actually. And if you compare then this curve with this curve, and you put them together, you can do a market cap, you can do a lot of different relationships there, right? What you would find is the curve is still bent. It's still power. It's not exponential. So what you find is what we could conclude there is what I conclude is the regular world sort of

falls away it melts away the regular the the traditional exponential growth it's not it doesn't come nearly as close to exhibiting the type of growth that this is with bitcoin does that make sense it it remains you can you can do this many different ways you can look at bitcoin as a percent of the monetary base or bitcoin as a percent of gdp or certain money supplies all those things grow exponentially and when you make that conversion when you look at things in a percent term you still have that power curve growth like this yes so this dominates this dominates the the relationship and that's what i'm trying to get out here obviously is the price chart power trend i think i'm really fascinated curious right now

about what that says about the psychology of the overall market and individuals and like how they come to adopt bitcoin and because you have a i think what is true is you have an exponential amount of information about bitcoin where that's price data transaction data hash but then beyond that podcasts like this information people mentioning the word bitcoin um like going up exponentially but despite that you have this somewhat controlled adoption curve as descriptive in this this power trend chart that you're showing right now yeah i i mean does that make sense to you no it does i i i think we're we're trying to reinforce the loop and i think it is loop um there are you know when it's it's not false to say that when

adoption increases liquidity in the bitcoin network increases of course it increases right it's not a false thing to say that when the price of bitcoin increases there are more active addresses on the bitcoin network or the hash rate will increase all those things are true i would just say and it's sort of a cautious sober uh perhaps maybe be a little bit patient reminder is that the relationship that that dominates there is this this sort of uh this power relationship which which i i hasten to say every time like don't don't get discouraged with that or don't don't think that it's not an exciting relationship because it's super fast and again price 45 per year right now slowly declining there's nothing else like that in the

financial world trump coin is not going to get you that over the long run that is the best meme coin in the world are you talking about i should have tuned into your show when uh when that was released i'd be curious to hear what you guys have to say about that but i haven't heard any of your thoughts on it so you're gonna have to sorry to be the bearer of that news but Yeah. It's insane. It's insane to think about, actually. I'm trying to boil it down to brass tacks as I see it. And look, GDP, 3%, 4% growth per year. Exponential, that's what it is. That's the slope of the trend. Bonds, 4%, 5%, 6%. Depends on the market. Depends on wherever you are in the world. S&P 500, 7%. With dividends reinvested, 9% long-term.

These are all exponential curves. That's a fixed percentage, fixed percentage. With Bitcoin, you throw on this power curve relationship, you do any multiple divisia sort of different relationship that you could do, the power curve dominates. And so that, that shows me that we're looking at something here, which is, it's just like, you know, it's, it's, it's astounding. It's, it's gotta be, you know, that it's, it's certainly the first time in history that we've seen a monetary network like this come ad hoc, but certainly for economic relationships as well. it's just like the data the amount of data that we have it's incredible to see so i i get more encouraged like i said every quarter where you may you may get the monetary base that's falling a little bit you may get whatever donald trump farting and and the curve remains the same it's been the same since 2016 so anyway i get back to the same point sometime so we can move on from that it's like the ninth wonder of the world you got compounding interest and then bitcoin's power trend adoption curve so you're adding compound compounding is the eighth and then yeah yeah

i think that's uh that's not a bad way to put it my friend yeah not a bad way to put it at all and i mean and it's terminally online person you're talking to right here and it's easy to get caught up in the day-to-day headlines and drama and bullishness and bearishness and that's love talking to you every quarter because this trend specifically it's like that is literally all noise if you just look at the trend it's happening wait till we get to ukraine my friend no uh one more thing actually to say about this and just very briefly another thing that i think is confusing to people and i put this in my report you can find it on twitter uh it's the last monetary base update i i don't think i've spelled it out before as clearly but again just measuring

the trends, looking at the trends. As I just said, stocks, bonds, GDP, population growth worldwide, all these things. Exponential growth is a very established, constant thing in finance and in nature and in the world. Straight line on log scale. Bitcoin has a couple different curves, actually. So in dollar terms and hash rate, all these things, it's power. But there are others that make people perhaps throw in that word exponential. So one thing that is exponential is the decay of the coins, right? So as we know, every four years, that halves, okay?

If you plotted that out, I think I have it. Let me find it for you. If you plot that out on a chart, that's something like 16% per year, right, down. It's exponential decay. I hope it is this one. I'm not sure if this is actually gonna be right. but it better be yeah it is it is so here there it is look at that look at that straight line on

log scale what are we looking at here let me take all this nonsense off this makes sense though this is something that's programmed into the protocol yeah but this this uh can confuse people they can see this and maybe think what you have here with the emission of coins is exponential decay all right so just the monthly i'm doing it by monthly issuance obviously we can do you know back 50 coins per block at the beginning. But here, where we are right now, 2025, zoom in to me. Here we are. $13,000 a month. All right. Last year, before the halving, $27,000 a month. Okay. But if you plot that out, log scale, straight line, you get it with 100% R squared. So it's for sure exponential decay. Let me give you the compound annual growth rate. Lifetime, there it is. It's negative 16% per year. I got this going all the way out to 2140.

so without a doubt this is exponential there and that i think actually might i'm not really sure people think about it as deeply as i just explained to you but they might have heard okay they might have somehow intuited that when you have something and it halves every four years that sounds like you know there's some math function there it is actually exponential it's exponential decay but then also with bitcoin something that's different and it's different than gold silver is when you take this exponential decay and you map it out as a supply curve that is a different function still that is a logarithmic trend so uh let me it's an asymptote isn't it it is an asymptote but it's a logarithmic i mean that the

the form of it is logarithmic i don't know if i'm going to find this one uh too much dude just too much you'll find it how many goddamn charts do you have too many too many uh so if you put if you put this out and you did the same charts right so we don't have then power we don't have exponential but bitcoin actually has a third trend line and that is just the the good old supply curve itself you We looked at 50 bitcoins on January 3rd, 2009 to 21 million in 2140 or 2141. You know, it might be a little bit off, but by and large, that's that's by and large, that's actually pretty explosive growth at the beginning. And then a real, very, very gentle decline from there.

But it's not exponential. If I drew a curve there, if I could find the thing for you, you would see something that most closely, it's something like a 90% R squared would do a logarithmic growth. So having said all that, Marty, unlike most of the financial world, most of the natural world in economics or whatever, population growth, GDP growth, unlike gold and silver, all those things are exponential. It doesn't matter if you're looking at the emission, the increase of gold coins per year, or gold ounces, I should say, the increase of silver ounces per year, whether it's industrial or not, all that stuff. I've measured a lot of it. It's all exponential. It's turtles all the way down, exponential. With Bitcoin, there are three different curves.

You have exponential decay. You have logarithmic, the actual form of the Bitcoin supply curve. and then when you put market data to it you get power so bitcoin actually has three not to confuse the picture and maybe i uh i did there but it's you know bitcoin is complicated it's different well as you're describing this too it's made me wonder and just think of satoshi design is incredibly beautiful because the first two trends that you describe the exponential decay of the subsidy distribution the havings and then the logarithmic of the total number of coins at any given point in time like those are fixed variables that were set out when the protocol

launched and just thinking of like systems design like was just setting those two variables as fixed what enables this uncontrollable unfixed variable of the power trend and this is sort of like the ingredients that lead to this type of yeah controlled adoption right yeah yeah compared and maybe some statisticians could comment on that if uh i've i've i think i've asked gpt some of those things or maybe i haven't actually i'm just thinking about it now if you multiply a like you said if you multiply an exponential by a logarithmic and you get a power someone asked gpt that and say see what it thinks i i'm blanking off the top of my head but um it seems to me it seems like something pretty wild pretty different uh but the most

how would i say this the most natural thing in bitcoin that we can see from a market perspective is the price price is the best signal in the market as we know from uh from misis and that turns out to be a pretty strong power curve so you've been doing this for seven years now almost actually the same year yeah the same year uh that i started the monetary base research was in 2018 so that's like are you beginning is the is your enthusiasm over the monetary base research waning as you no no succumb to the power trend inevitability it's like into the matrix yeah no not at all uh i think it's an amazing backdrop to look at uh here's another one on monetary base um we have the monetary base here

just showed you talked about it a lot right 30 trillion now it's been down down sort of this weird jaggedy down as interest rates have been rising up and down svb bank collapse whatever in 2023, all that stuff. Monetary base is interesting and it puts a backdrop. I was just having a discussion with this actually with one of the guys, but I think it puts a backdrop on how things grow. Here's that 12.7%. By the way, it's a weirdly same 12.7% as if you might remember that number i said 12.7 percent is is the amount of time but it's different there's a different 12.7 percent so to even take it to a whole nother weird level of uh numerology this is days since launch right yeah increase yeah increase and if you increase in time by 12.7 percent the price

doubles that's the power relationship that we're observing with bitcoin uh this is just straight up exponential growth of the global monetary base has nothing to do with bitcoin it's just the top 50 currencies in the world, dollar, euro, yen, yuan, all are inside this dollar figure. Something obviously looks bad here. If exponential trends are to continue, and as we just talked about, we're at the low end, and this is now in native. So you can kind of forget the dollar, but I've talked about this many times. I don't want to bore people with the numbers too much, but this is now in native, these big mountains, these peaks. uh you know see the covet stimulus we got to 32.8 okay it was the peak in february 2021

uh qe1 worldwide is a worldwide it's a worldwide weighted figure if you're curious how i got that and and this is not like looking at the dollar change just looking at the change in euros changing yuan changing yen so it's a it's a huge spreadsheet to get to this but the The 33% was the high in 2009, 27, 28% in 2011, and then 33% here in 2021. So QE1, QE2, QE3 is actually quite a dampened effect. Can't see it as much on the global figure. Anyway, point is, you can see, as we know, we've talked about this many times, Marty, leading up to the repo crisis in September 2019, they really tried to normalize the balance

sheet globally, major central banks in the world. had the repo spike and then we had COVID. So we certainly were not on a healthy level. We weren't on a sort of sound base. And I'm just waiting for that to happen again, as I'm sure you are. This is now a record. It's like three years where we've been at pretty much flat or no growth. If you read the tooltip, I'm not showing the negative bars, but this is the weighted average. So that... Let me take the line off so you know exactly on the tooltip what I'm looking at. You got here negative 1.6%, negative 0.7%. This is just trailing 12 months, 0%.

This is what I mean when I keep saying it's roughly flat, even though the dollars are decreasing the dollar value. And now you can see in the trailing 12 months, it's actually one of the low ones, negative 3%. So they really are trying to rein in a monetary inflation. But you and I both know how long can that last. yeah it doesn't seem doing research yeah it's a record three years shout out to perplexity deep research i wrote a newsletter about i think last week or the week before but

the looking at repo markets specifically and thinking about september of 2019 like yeah the repo markets dry up overnight rates went to 14 and that necessitated the fed to create new facilities inject liquidity temporarily papered over and then covet happened and you had the excuse to print trillions of dollars and so we're approaching that again like i'm not sure if you've been following the reverse repo market liquidity in that market's been drying up pretty rapidly i mean it's been going uh it's been drying up in the sense that central banks are are releasing it they're releasing it back into the market it's yeah the question is if the market can absorb it but the central banks with that yeah go ahead well that and that's what i was

doing research i'm like is it going to be can we use 2019 as a predictive sort of pattern recognition to time when there could be an emergent liquidity crisis in the system and it seems like in parallel of all the policy decisions that were made uh post-covid in terms of monetary expansion lowering rates and then in 2022 beginning to hike them they really they i think one thing the the fed has changed behind the scenes is the reference rate has moved from liber to sofr and i think the intent was that was to avoid the 2019 2019 like spasm repo markets because they have more control over SOFR than it did LIBR. And I was doing deep research who knows how accurate

the deep research of these AI tools is yet, but I think it's pretty good. I was checking the sources. And so I think the idea is they've really changed the reference rate behind the scenes to enable reverse repo to drain without having a spasm, at which point they'll begin going to the balance sheets of commercial banks and trying to unwind them basically just extending the amount of time that

they can try to tighten the balance sheet right and that's where i imagine based off the research i did that the liquidity crisis will emerge is once they move from overnight repo markets to trying to unwind the exposure they have to the commercial banking system so many people are saying reverse repo is going to drain and then we're going to have this liquidity crisis based off the research that i did who knows how good it was and how good my understanding of it was but i think that's one thing like reverse repo could drain the liquidity crisis may not emerge and it may not emerge until they begin trying to unwind their exposure to the commercial bank balance sheets but when the crisis happens did they say what what gets uh flooded again with

liquidity is it uh the reserves or the repos i think that's dependent on what's needed at what type of crisis it is yeah exactly so here is uh i have a united states m3 money supply um uh remember most people quote m2 okay m2 is not the money supply if you want to talk about global liquidity obviously global you can do other things but m2 is not the highest money supply federal reserve likes to tell you that it is now but remember they had an m3 uh stopped publishing it in 2006 at 10.3 trillion dollars can you hear my daughter in the background I just sent a text a little bit, yeah. No, you're fine.

So $10.2 trillion was M3. M2 was 6.7. And then they stopped publishing it. This was obviously, have we talked about this before? No. So this is obviously very interesting. Looking back in hindsight, two years before the global financial crisis, the Fed obviously knew something was awry.

And they stopped publishing something where there are there are two things in this M3, which are very much had to do with the global financial crisis. And one is repose repurchase agreements. The second is euro dollars. They don't have control of either of them anymore. In my understanding, repose somewhat. But euro dollars, no, no one knows how many euro dollars there are in the world. No, but that again, going back to the changing of the have you read Tom Luongo or clued in on Tom Luongo's theory? yeah but not lately i mean that's his theory is that again going back to the 2019 to 2021 era

the fed realized the euro dollar market was unbounded and they really had no control over it because the library was the reference rate so by tom's theory is that by transitioning the reference rate from library to sofer which the fed has more control over they are able to drain euro dollar markets because they control the reference rate which dictates the expansion and contraction of that market yeah yeah uh i have heard of that theory actually and it's i mean that they can't control it like it's interesting to see also what's happening with the uh stable coins because they're they're maybe trying to you know if you can direct some of this dollar interest worldwide back into a separate asset that you can still collateralize

and trade separately i.e a stable coin but you can somehow bring it back into the fold where those you know for sure that those stable coins are actually buying actual us treasuries and then the federal reserve can somehow get a control of that um you know there's a lot of then that would make it easier for them basically to control that liquidity but of course even there there's questions because yes you know we have letnick now uh closely with the trump team but that's not the only stable coin is sure they are the biggest and we got a long way to go also it shows you i think how again if we want to go back to our put our liquidity hats on and say that dominates the situation like there's a lot you know stable coins are very small market right

now they can they could dump trillions into their trillions uh which get which will get them more as long as somehow the new york fed is you know managing this regulating this more that that will give them more control of those uh short-term rates for those liquid instruments but anyway The point is, if you look back in time, Euro dollars repurchase agreements way, way actually higher than I think. Hold on. Might have to mute here. Hear my daughter crying. Just say something really quick for the dead time.

Okay. Children are awesome. You know, you're out there. Yes, they are. You've got a partner. You haven't put a ring on it. Gentlemen. Just pull the trigger, okay?

Start having babies. I love it. Nicely done, my friend, for the dead time there. Sorry, guys. I had to paper thin walls here in Eastern Europe. So back to the M3. Two very conspicuous items that are part of M3. Euro dollars and repurchase agreements.

Fed lost control of, for sure, euro dollars by 2006. Repurchase agreements, not great. Now, I've done an M3, it's a little bit more, it's less exciting. It's also, you can only do it with quarterly data from what the Federal Reserve does, but you can put it back with repos and with repos that the Fed data has added since then. Look at this. What are you talking about? It's more exciting.

Yeah. Well, they never, they would never publish this like as a one number. If you actually go through the data, they look at all the repos, they're publishing now in this this happened after dodd frank and stuff they had to put more data out if you add it up it's even higher than what they were publishing in their own m3 so they had to print retrospective data too yeah they did and some of they didn't uh i have a separate repo exhibit we don't have to go into that too much right now but like i have because in repos you know you have repos in the commercial banks repos in the shadow banks money market funds

repos at the fed there's a lot of different repos out there but anyway some there were gaps in the data some of the data i had to regress linearly all the rest but this is this is actually a little bit higher because i think it's a little bit more detailed but shadow stats was doing this you know for 10 years i don't even know if that john williams he's a little bit older i don't know if he's even publishing anymore but you know this is kind of like you can think of the shadow stats and three data there was there was that back in the day it's very much looked like this you know we we peaked at the global financial crisis then we liquidated um you know 16 trillion went down to 15 trillion but that should have been liquidated way more way more you know this this the

the expansion of the monetary base all that stuff that happened here uh so they were bailing out hedge funds money market funds all the rest we know that story but here's the interesting thing m3 this m3 which which that is the you know people that are showing m2 that's just it's not the broadest money supply you got to look at m3 that includes time deposits in large accounts that includes repos and this doesn't even include euro dollars i have taken out euro dollars because it's a black i can't find a proxy i can't i can't find a proxy for it and it's probably huge it It could be $10 trillion, it could be $50 trillion, who even knows? But what we see right now, if you notice, just look at the...

You see the difference between number two and number three there, how it's number three is kind of... Yeah, there's a divergence. And what did you see before the global financial crisis? A little divergence. A little divergence. So, you know, I'm not predicting a crisis in the next, you know, around the corner, but we are clearly seeing here a an increase in broad money while base money is staying the same slightly contracting and to your point about the repos so here was the with so this is basically

monetary base is the black and that's what i kind of in my exhibit and then with this gray with fed repos that's that's the other main liability the fed ads are on the balance sheet it's basically base money for non-banks base money for money market funds and for other market players that are too scared to play with each other so to speak in the sandbox that they want to go to the fed and get like the safest liquidity and the fed says sure we don't trust our own economy either we'll give it to you so now look the fed is the fed is giving some back so notice let me take off m2 you see how m3 is basically it almost looks like it's moving up in the same like almost at the same slope as that fed money which is in the negative side of the you see how they're basically

just like basically what's happening is the fed is letting that liquidity go back into the system and that's to me that looks dangerous i mean that's that's that could be why you know stock market's ripping although it's not ripping now from trump but you know is that the fed or the treasury though have you did you read rubini's paper on yellen's treasury policy like over no No, this is the Fed. This is the Fed. This is the Fed's balance sheet. So this is bank reserves, right?

It's in black. This is just base money, as we always talk about. This is what the banks hold as an asset and what they lend off of. And notice how, look, in a quote-unquote normal economy, bank reserves were like nothing. Banks wouldn't hold them because they traditionally yielded no interest. And they would put money into the economy. That's what you had here. But obviously, the divergence was happening long ago.

And we don't need to get all that into that on this podcast. once they did the major bailouts once they blew out their balance sheet qe1 qe3 you know they have not recovered from that they say they're going to try to recover they want to try to draw a trend line from say here in 2008 to out here and like try to normalize it in my opinion they're way i've drawn these trend lines as well like they're they're way above it it's going to take a long time to normalize anything pre-global uh financial crisis anyway what i'm trying to say is And they are doing a major, not from a bank reserve perspective, as you were referencing in this paper that you talked about. Bank reserves, you can see, is relatively flat still.

But they are putting these repos back into the system. And when they go back into the system, money supply goes up, broad money supply. And you can see M3 going up almost at the same rate that those repos are coming back in. So that is, again, more liquidity chasing, okay, some decent economic activity. we haven't even talked about trumpistan and tariffs and trade wars and uh you know global partners yet but again i'm not i'm not hoping for a crisis i'm not hoping trump uh does not succeed i i certainly am in favor of cutting government spending i know the liberals are all running around with their hair on fire but uh well on this note there like there are there are issues

under in the economy that are not stable that's what i'm trying to say but like let's get down to the mechanics of how this growth in m3 this divergence and i think you're saying it's because of repo activity how that actually materializes in new dollars entering the system so like with the growth of the repo markets does that give the banks more confidence to issue loans which leads to dollar creation is that theoretically has no theoretically has nothing to do with the banks most of the repos are held by non-bank entities money market funds um so it's just not a it's it's just a separate it's a separate entity it's a separate group of individuals that are playing in the market and let me see if i can find this breakdown more dead time than i usually like to do

for for the show i'll just cut it oh okay we're not live no we're not live oh i was speaking like we were even live so that's great now i can just waste your time and enjoy it sorry logan but i don't mind wasting marty's time that's fine i love when you god damn it keep this in logan keep this in you tricked me you tricked me dirty bastard you want to restart this what did you ask me about the repo market we talked about if it's uh so so what you're looking at here how do new dollars enter the system if they're going to like money market funds like right so these are new dollars uh and and and repos kind of similar to money market funds money market let's start with

money market funds it's not been on this chart but money market funds are also part of m3 so uh entities that issue money market funds they're not banks they can be related to banks you know sister companies or whatever hedge funds but um money market funds are basically like a stable coin and when they issue those tokens or those dollar balances like when you have when you sell stock and you have money with your broker right that's a money market fund it's not a fdic insured bank account deposit um on the other side of that trade for you holding those dollar-like instruments in your brokerage account the money market fund is holding treasuries all right and they take a spread so they take a spread on the interest basically what you see here is so

okay so that's that's money market funds now money market funds are also a huge player in the repo market so what money market funds will say is they say okay mr hedge fund come to me i have like a huge pool liquidity here i have all these treasuries but you know what um you can take the treasury if you need it for shorting or taking to your other broker and do something else with that take uh my treasury and or did i say this backwards take my dollar balance it should be actually. You give me some of your treasuries and you pay me an even higher balance than I have with my own dollar balance. I don't know if I decided to correct the way I've said it, but it's more or less like that. It's basically you have a stable coin and then you just re-hypothecated

the stable coin into another loan to make more money than just what the US government would pay you. So you have a third party that's entered the transaction. That's what a repo is. So this is the repo market and they do have this stuff actually charted out at the federal reserve took a lot of time to do it and the repo so the repo market has a lot of different players involved and it's still just like regular deposit money but it's pure pure rehypothecated money and you can see before the global financial crisis yeah this is better this is a better way to look at it look at this see this green this is what the federal reserve was quoting in their m3 was the dark green it was only repos at the commercial banks but there were a whole other set of repos in the shadow banks or

basically non-bank you know entities that were you know money market funds hedge funds pension funds all playing around with this stuff just re-hypothecating cash that's doesn't even exist but whatever that's fine i'm not even opposed to doing it just caveat emptor don't get don't don't ask for a bailout when you when it happens that's that's actually the funny thing and this is getting to the point that i was asking that so like the it's monetary expansion via credit creation which every monetary expansion is that that's what a bank account is as well monetary expansion the only thing that is not monetary expansion via credit creation and it's still printed out of thin air is monetary base that's why i keep saying monetary base is the most analogous money

supply to bitcoin because it's core of the system money only the central bank can increase that as we all know there are plenty of cascading effects that always happen down the system a lot of unintended consequences we can talk about mises and hike and all that stuff but still you can graph what is core of the system money and that is that is that is this money monetary base and this is a global figure. All right. So 25 trillion. Anyway, US is about 5 trillion, five and change. Let's go back to this. This is just M3 money, as you see here. Repo market, part of M3 money. We don't even have to look at interest rates. I like to look at money supplies more. Look at what happened before the global financial crisis. The repo market, the Fed wasn't even reporting this. I

should have had the repo section on here as well, just to show you. Remember, they stopped publishing it in 2006, the Fed was only reporting the green, all right? And look, I had to do a regression here because when they retroactively provided more data, they didn't even provide it. So it's just crazy the amount of different information that you have to do to put this together. Anyway, I have it for you, Marty. So we have the repo market here. This was not reported ever. This was not, the Federal Reserve knew, of course, but they weren't reporting it and they stopped publishing M3 in 2006. We see what happened. This eventually blew up the market. This is mortgage-backed securities are all in here. All sorts of just crazy schemes where you

say, hey, I got an asset. You take it. Hold it for a little bit. I'll pay you more interest than you're getting from the federal government. And everybody will be happy. But of course, if more and more people do that, the more and more of these claims you pile up, the bigger the money supply is that you get and you know we can measure this against other things against gold or stable you know stable uh assets to try to get a multiple we can talk about that in a second but you just look in raw figures we exploded here from mid-80s to the financial crisis four trillion dollar repo market huge crash relative to the repo market we went down So that trillion that I showed you a part of M3 was basically all the repo market crashing, right?

And then we went back up, 2012, big spike here during COVID, and then flat, and then now we're up again. But during this period, post-GFC, there is now another huge player in the market, and I have to show them in a negative to make it make sense because it's central bank money, and that is the Federal Reserve. So here, you can see that there was more demand or more need for a trading partner, more uncertainty, and the Fed stepped in in a big way during COVID. And that's what, this is basically like a bailout for money market funds, saying, don't you worry, we're going to buy all your risky assets, don't you worry. And that's a lot of, it's a lot of liquidity they poured in, right? We were at, the Federal Reserve had only been playing in the repo market to the tune

200 billion still a lot but not nearly as much as what it became to and then it came to do two and a half trillion in a matter of months during covet and now as you were referring to in this article they've tried to drain that and as you see when they drain that the m3 flows out sorry yeah the repo in in the system starts to increase so yeah uh extra liquidity chasing the same amount assets, relatively speaking, could be fodder for a crisis. And we have, everybody knows that we have people that are willing to act on all sides. We have Trump that wants more lower interest rates and is ready for this money printing. And we have a Fed that, you know, no matter how hawkish they say, they're going to act. If something happens, they're going to act and they're going to print

Bernanke proved that from the global financial crisis If we had just let this This was a big part of the bailouts It wasn't the only part Because again this is just the repo market And this is actually non-bank stuff But if we had just let this Completely collapse

And not bailed Out the banks And their sister Companies, their hedge funds Pension funds then whoops losing my mojo here with this uh refresh buttons the point is if we had let that stuff collapse we would obviously you know like a forest fire you would be in much better position today if you let all the the crazy stuff burn but we stopped it we went only back to 2010 levels

in the repo market when we probably needed to go back. Sorry, 2004 levels when we probably needed to go back, you know, to 1990 levels. And we're at all-time highs again. So I don't know if it's answering your question one way or another, but the point is, it's going back into the market. It is extra liquidity.

Extra liquidity and broad money will have a rise in prices. And basically, I mean, it's... very small time scale but it looks like because of tariffs doge whatever it's flooding back into treasury markets right now as yields are coming down yeah yeah this can go all over the place um it doesn't have to be a treasury actually that's repoed but my understanding is that by and large the majority is like there are mortgage-backed securities that were repoed they have the same credit rating and theoretically the same interest rate as treasuries so they are part of this as well um the u.s housing market is as secure as a u.s treasury right right right that's that's

what they're saying to us basically so anyway man that's uh that's that that's repos we did bitcoin we did repos you want to look at a couple different bitcoin price models yeah this one i had ready for you now that i wasted a bunch of time finding charts that i couldn't find with ctrl f uh here's putting two different trends in bitcoin together power and exponential this is another reason why bitcoin is not exponential just you know again s curve is another idea but i don't think that's going to happen either but you see if you just straight up power or straight up exponential, you can draw one of these two lines. Power is a 96% R squared exponential, 86. Exponential, obviously, straight line on log scale. It just doesn't fit as well

early days. And we haven't hit that trend line since 2022. And another thing, look at how fast exponential grows, assuming we have the same sort of growth that we've had in the past. exponential growth even though i actually don't know the slope of this curve off the top of my head but uh it's it it's regardless of how it's growing the trend it's in dollar terms is obviously fast so this is why exponential another reason why i think exponential is not in bitcoin because the curve or i should say bitcoin is not exhibiting an exponential growth because the curve as of right now this is based on real data as of you know march 7 2025 power curve sorry the trend the price is 89 000 the exponential trend is telling you that bitcoin should be 400 000

whereas the power trend is telling you bitcoin should be 94 000 you tell me which one looks better power trend but everybody's manipulating the market it should be on the exponential curve we're just we're just being price suppressed by the cme don't you know that sir is that those other memes that i'm missing right now i don't that's i can hear somebody screaming that in the comment section yeah look i mean i'm taking the same amount of data it's the same bitcoin pricing data over 5 800 days or whatever it is you got a power curve beautifully fits it you got an exponential curve that's It's by definition going to be a straight line on log scale.

Let's go out to the end of 2025 on this curve. Power is the same trend, 125,000 as we just talked about. Exponential, 770,000. I would love it. I'm not going to complain if Bitcoin goes to 770,000. The question is probabilities, right? It's all about probabilities. It's a lower probability because it's 86 versus 90.

What was it, 97? 96.5? 96% R-squared for power, 86% for exponential. Yeah. I got Plan Bs here as well. His 2019 stock to flow is here. God bless him. God bless him. God bless him. His 2020 is even higher.

We're fully off that one. and so let me let me let me take like make this net less noisy the 2020 was uh all the rage during covid you remember the plan b stock the flow of uh his 2020 model obviously we never hit that we're not going to hit it just waiting for one more green dot you know you're not reading this wrong dear uh viewer his 2020 model by now is predicting 5.7 million dollars per bitcoin that's his 2020 model it's one more green dot right so then you move back to the 2019 model which is his first model uh this looks better it's closer but again here's my question why would you rely on why wouldn't you just use all the data why would you just rely on 2019 as a random date

so i have it here you can do a running a running uh stock to flow model as well now i i hasten to sage people i've said this a thousand times but we're on a roll here marty um let me know how much time you have by the way if we need to cut this we got some time as in like five minutes or 10 minutes we got 10 minutes at least all right oh shit if we no i've got five minutes 10 i've got a 10 30 all right three three minutes let's do it uh all the dear listeners have been hearing my daughter's ready to play anyway so uh we can see the divergence of the stock to flow model when based on his uh 2019 model okay it's this blue line but if you again if you just use all the data it will just change the model it's not it's nothing magical uh so you can you can make

a stock to flow model based on all the current data and it will just make the stock to flow more shallow so that's the problem that's why i always would you know models are not like something special, but if you can adapt it and look back in time and the model still predicts something valuable, i.e. the power curve, then there could be something to it. So like I said, this green power curve line has basically been the same since the entire time that I've shown this. I know I'm not showing that to you, but the stock-to-flow you've had to revise many times and you have to keep revising it down basically as more data is occurred. I think the conclusion is...

power turn why do people get so triggered about the power trend and giovanni i mean giovanni is obviously a very uh eccentric character that people he gets excited yeah he gets excited i i honestly um it's just like everybody's like everybody's like don't it's descriptive of what's happened yeah i'm not engaged in uh a lot of the twitter fights about it but my i've always called it a power curve i'm not gonna call it a power law and it's just a trend that's all that it is my friends the trend line uh it updates unlike some stock to flow predictions uh you can easily just update this every day and more or less the line stays the same that should be the lesson of the show here so from 2016 this line has more or less been exactly the same

and so from that zoom all the way over imagine let's just give people the price prediction i want to see all right so 2025 125k let's go out to the end of the decade 600k uh after the next you know two having 700k and then we have by 2050 23 million dollar bitcoin and again i hasten to say i don't not saying i'm predicting this i'm just saying it's the model of course we know probably by the next two having something significant will happen in the monetary system with bitcoin and will probably change the game but that is that is what the trend tells us it's adoption it's adoption by the way plan b if you want to get back to that he's saying uh 851 billion dollars per bitcoin billion by 2050 yeah so we have 851 billion plan b 2019 model versus

23 million power curve you know what i'm going to start doing quarterly updates with plan b is more bullish it's uh it's probabilities my friends it's probabilities all right man we didn't get to ukraine i couldn't piss off over half of your listeners well we can come back tomorrow and do that if you want to no it's it's fine we can do it uh another time it's crazy days pray for the people in ukraine uh donate if you can like i can just plenty of uh i mean like i sorry like i can like uh any bitcoin or can uh all sorts of great charities blue yellow is a good one it's a baltic one that donates anyway that's all i'll say thank you marty i'm praying for everybody involved

we'll get into it if we if we thank you we'll be back next quarter and we'll talk more about that there's definitely a bunch of shit that's happening between now and then too so always a pleasure never a chore thank you marty go enjoy your weekend sir peace and love freaks take care