TFTC: A Bitcoin Podcast - Tales from the Crypt #89: BitcoinTINA & Alpha Zeta

Episode Date: August 14, 2019

Join Marty and Matt as they sit down with BitcoinTINA & Alpha Zeta to talk about the current market conditions, where Bitcoin sits, whether or not Bitcoin is a risk-on or risk-off trade, and the fact that Bitcoin is a fundamental financial tech innovation. Check out Alpha Zeta's portfolio tracker: http://www.thewarden.io/index.html Follow BitcoinTINA on Twitter: https://twitter.com/BitcoinTINA Follow Alpha Zeta on Twitter: https://twitter.com/alphaazeta Shoutout to our sponsor: Cash App. Head over to the App Store or Google Play Store, download cash.app and start #stackingsats today. Use the promo code: "stackingsats" to receive $5 and contribute $5 to OWLS Lacrosse you download the app.

Well, hey there, freaks. It's your boy Marty here to introduce this flash episode of Tales from the Crypt that Matt and I recorded with Bitcoin Tina and AlphaZeta about this morning's inversion of the U.S. yield curve, the 10-year and the 2-year. We're trading in an inverted fashion at some point earlier this morning. As of this recording, they are no longer inverted, but that tends to be signs of a recession on the horizon when it's happened in the past, particularly here in the u.s so we wanted to hop on a quick call with these two gentlemen who have been through a few market cycles and have paid attention to these metrics for for a long time and and get their views and how bitcoin may play into a recession if if one is on their horizon

this will be bitcoin's first market downturn if there is one and it'll be interested to see how markets react to that asset in particular so if you guys enjoy this is brought to you by the cash app you freaks already know use the code stacking sats go to the cat your local app store whether it be google play or the apple app store use the code stacking sats you're going to get five dollars we're going to get five dollars to owls lacrosse a charity very near and dear to our heart and then on top of that you're going to get access to the ability to stack sats via the cash app you can buy bitcoin you can sell bitcoin you can send bitcoin to the cash app you can deposit it from the app to a hardware wallet if you like and on top of that they have the incredible boost program

i used it this morning to buy coffee at blue bottle again i'm sorry it's very high in time preference i was in a rush don't worry i'm working on getting a coffee machine but for when i do need to go to the local coffee shop to get some coffee i make sure i put on that coffee boost and save that dollar while i'm being high time preference so again stacking sats one word you're going to get $5. $5 is going to go to Al's Lacrosse. Go to your local app store and download the Cash App today. Hope you enjoy.

Picker! What is up, freaks? Welcome back to Tales from the Crypt. It's your boy Marty back here on a special edition of tails from the practice of the rabbit hole recap um the markets are pretty crazy this week sitting with the yield curves across the world and uh today earlier in the united states uh the 10-year yield curve and the two-year curve inverted um so the 10-year uh was below the

two-year one point early trading hours so matt and i have been joined by a couple of uh gentlemen who have been through a few market cycles and we wanted to sit down with them and sort of get their opinions on where we are in this current macro landscape, how it compares to market structure as they've seen in the past, and how Bitcoin may come into play this time around. So I'd like to introduce you freaks to Bitcoin Tina, who's been on the podcast before, to Alpha Zeta, who's making his first appearance. Welcome, guys. Thanks for joining us, guys.

Yeah, we're recording remotely, and we can't really gesture to who's up next, So we'll call on you guys individually throughout this. But, yeah, thanks again for joining. Pumped to talk to Quintina. This is the first time we're recording since our episode in January. How are you feeling? I'm feeling good. Thank you, Marty.

Thank you, Matt. And thank you, Alpaceta. I wanted to make some comments because, you know, I've been hearing people talk about things, and it kind of feels like January felt like a good time to talk, which is why i was glad we had a chance to talk in january and now it feels like it's a good time to talk and i'll be honest i've gotten a lot of requests from people to do some pods which i've been reluctant to do because i tweet a lot and i talk too much so i don't need to talk that much

you can follow my tweets i think tweeting is like a job for me but watching what's been going on I've been watching the 210 spread. The 210 is the Treasury yield spread. I've been watching the U.S. Treasury yield curve for quite a while now. And historically, the yield curve tends to invert pre-recessions, pre-downturns. What typically occurs is the Federal Reserve hikes and it creates a slowdown, which causes the yield curve to invert. banks are supposed to pull back on their lending get more conservative which they didn't do in

2008 and 9 they actually increased their lending and and lent to bad credits to keep a positively sloped yield curve which caused everything to just it went like it went until you went over a cliff what happens now is not clear to me but finally the twos and tens have been reluctant to invert they inverted now they've popped so we're positive right now on the 210 spread to the tune of about four basis points and i would not be surprised to see this bounce just a little bit here because markets tend to surprise people and don't do exactly what you think they're going to do we've been waiting for this to happen so just so catch people up to speed on this if they don't know what I'm talking about. So you've got a yield curve, which goes from Fed funds out to the 30-year.

And then there are different maturities along the way. The two-year is, of course, the two-year. The 10-year is the 10-year. And currently, the yields on each of those on the two-year is approximately 1.581%. The 10-year is approximately 1.584%. So you take the 10, you subtract the two, and that gives you the spread. So right now, the spread is approximately 3.3 basis points. A negative yield curve is two things. One, it tends to be a signal to markets telling you what's going on. As market participants buy or sell market instruments, and we can always determine information from markets based on, you know, the markets are important signaling mechanisms. One of the things that happened post-2008 and on is the Federal Reserve inserted itself into many different markets, dampening the signal effect that occurs with markets.

As we know, pricing is really critical for determining what happens for market participants. Consumers and producers respond to market prices, which send signaling throughout the economy so that players know what to do. I mean, this is simple economics. the core to the capitalist system is the interest rate structure and the interest rate markets across the world some of the most important markets are the u.s treasury market and the treasury market as i said is a yield curve a normal shape of the curve if there is such a thing as normal is positively slowed so rates tend to be lower at the front end think of front end as Fed funds, one month, two months, three months, and so on. Think of the long end as

10-year, 30-year. Currently, the 10-year is considered the most important long-rated instrument. It used to be the 30-year, but I don't know what's happened. I can't remember. Al-Fazadeh, do you remember? Are they issuing 30-year still, or have they stopped issuing those? I don't remember where that is right now. I don't think they're issuing it anymore. yeah i think one important point there uh searching for just to add something is that people talk about interest rates and they usually miss the time frame right because interest rates you have overnight uh interest rates and you have one year 10 year and so on right so you have an interest rate curve and the fed when we talk about fed fund rates right we're talking about

short-term rates we're talking about overnight rates right and that's where they have the most control of the curve they can control other parts of the curve through other instruments it's a little bit more complicated but when people are talking about interest rates and fed fund rates you're talking about pretty much overnight rates just to simplify it that's right however what we have to remember is that quantitative easing in its various forms influenced the longer end of the curve that was the whole purpose of quantitative easing to influence the long-run curve so the federal reserve acted to purchase uh treasuries the they purchased mortgage instruments uh and they got involved in doing all sorts of things all across the curve so whereas historically the fed

primarily operated at the front end of the curve i.e fed funds they got involved in many aspects of the curve although historically there were times uh that they had operated i remember years ago, something called Operation Twist, which I think is before I was born, but I'm not sure. But the Fed has been intervening across the curve and post the great financial crisis GFC in 2008, nine, they intervened in all kinds of credit markets in an attempt to get the economy restarted. And the net effect of that is to dampen the signal. So what we're seeing now is we're seeing an inversion, or we did, we're not seeing it as we speak at this moment, it's slightly positive to the tune of about three basis points,

seeing an inversion of the 210 spread. The 210 has been the most reluctant to invert. I think Fed funds is approximately two and a quarter percent right now. And you're inverted out to the 30 year versus Fed funds, which means in my opinion, and in the opinion of many, although not all people, that the Federal Reserve needs to cut and cut pretty dramatically, pretty quickly. I think that what we saw, I forget how long we were inverted for in 2006 and 2007, but we're inverted for a pretty long time. And that caused a pretty sizable problem in 2008 and 2009. There's an enormous amount of debt in the system. And unfortunately, there's not a lot of good answers to this but the reason i like bitcoin as much as i do is that i my guess is that the fed

is going to do as they like to say whatever it takes which includes the other global central banks so you're talking about the boe the snb the boj the ecb one more who i can't think of they're like five or six of them and they're going to pretty much do everything which means ultimately the japanese are buying stock etfs the swiss are buying stocks they're going to do pretty much everything which ultimately benefits uh bitcoin as well and because you're going to have ultimately some deterioration of what we like to call money in the system with all of this quote unquote printing which it really isn't but that's what we call it and regardless if they drag their feet although we're already starting to see some action although i don't remember exactly what's

been done so far. If we do hit a wall and crack, then you're kind of not going to want to have money in places that you have money. And it'll be really nice to have physical Bitcoin, which means private keys that you control. It won't be pretty, but you'll be a lot happier than lots of other people or physical gold, which you have control of. But that's pretty hard to transact with. So that's kind of my broad stroke take at this point, that regardless, you want to own Bitcoin. And people who are selling it here, I think they didn't get the memo that Bitcoin to me is neither risk on nor risk off asset, but actually what I like to call an emerging economic paradigm. And that's where I think a lot of people get this wrong. You have a lot of traders who

don't really understand what Bitcoin is. There are a lot of newcomers to the system, macro players who we've heard a lot from lately, who I'm not sure fully really understand what Bitcoin is. It's not clear to me whether or not they control their own private keys or they store their private keys with some kind of institution. I heard a commentator on CNBC the other day comment that he didn't think Bitcoin was in a bull market here because there aren't a lot of new addresses uh being seen but the problem with that is if you're new to bitcoin and you're not storing your own private keys and instead you're storing them at coinbase or wherever then there aren't going to be a lot of new addresses there'll be a lot of new money in

bitcoin but it's not going to be a lot of new addresses so that metric of trying to judge new addresses as a viable metric for whether or not you're in a bull market it's kind of a meaningless metric and I thought it was kind of a meaningless take on the part of the CNBC commentator. None of these guys are storing their own keys. There's no way whatsoever. None of these big macro guys. You don't think Kevin O'Leary has

his Bitcoin on a Trezor? Kevin O'Leary owns no Bitcoin and that makes me happy. Makes me happy too. Most of the managers I know have their Bitcoin in Coinbase or whatever it is. They have no ideas of

how to buy their harder wallets or anything like that yet. Well, just to add something to the current version, right? People have to remember also that the fixed income market, it's mostly an institutional market, right? While when we talk about equity markets, equity markets are mostly a retail market, right? So whenever you have a very strong signal from the fixed income market, the Fed and all the other players tend to listen, right?

And most of the times when you see diversions between active markets, fixed income markets, everybody usually tries to believe that the fixed income markets are the ones that probably rise, right? And the signal that the fixed income market is sending out to the market is very bad, right? We haven't seen long-term rates going down this quickly and the curve inverting like this fast as we are seeing right now. And the Fed is listening to that. So if the Fed is going to act before the meeting, I think nobody knows at this point. I think that they are discussing this every single day. They're trying to decide what to do.

They probably don't know. If you read the books about the financial crisis in 2007, you see that the decisions that these guys made, they are completely random, completely arbitrary. And it depends on who is in the meeting. It's a bunch of three, four guys in a meeting, right? They're going to make a decision. So it's impossible to trade that. But the signal that we're getting from the market right now, it's very bad and very negative for financial instruments across the globe. Alvarez, we were talking about this before we hit record and you were saying you were a market participant for a big player in the banking world in 07-08.

And you were doing a lot of research about how hard it was to get into gold. Can you touch on that a little bit? Yeah, so let me actually step back, and I'll tell you what happened in 2007, because it was actually, there are a lot of parallels with what we're seeing right now. So in 2006, everybody talked about the housing bubble, right? It's not that the housing bubble occurred very quickly, and, you know, everybody off guard, and then we didn't know that the balance sheets of the banks were in trouble, right?

Everybody knew about this since the beginning of 2006, and even before that, everybody talked about that. timing was completely uncertain right so start end of 2006 beginning of 2007 um you know as part of what i i did in the bank that i worked off we talked to a lot of institutional clients large family offices mainly and they were looking for options to hedge portfolios because everybody was very worried very similar to what we're seeing right now so we did some research looking at

different asset classes looking at different ways to hedge portfolios and we're talking about investors that had private equity and public equity right so we had to find something that in the event of distress would protect both portfolios at the same time very hard to do so we researched different things we looked at i think the first one that people throw around so i would just buy puts on the s&p right i'll buy options to sell the s&p if it drops you know i have the options i can exercise them and i'll make money if the market goes down which works really well uh but there's a huge problem which is you have to pay for that you have to pay premium uh then you have to buy options these some of the clients who were doing

this they were buying one month options and rolling so they will do that for three months and then they look at the cost and go i'm paying for all of these insurance that i'm not using it's really expensive i don't want to do this right and there's a problem with options which is you know whenever the market starts to go down volatility goes up and then the price of insurance also goes up. So if you do this systematically, it's actually a very poor way to hedge your portfolio. You actually end up losing a lot of money in the long term. So we scratched that out of the way right away. We looked at different alternatives. We actually looked into selling volatility as an alternative, which is something that

works well, but has also some flaws. And then we looked into other asset classes. We looked at oil. We looked at correlations between oil and different markets in periods of distress. I think people confuse correlation a lot when they talk about, oh, Bitcoin is negatively correlated to X, Y, Z. And most of the times, Bitcoin is not negatively correlated. It just doesn't have correlation, which is actually, you know, and most of the time, it's actually even better, right? So, we couldn't find, and the other thing with correlation is that they have to look at correlation on the upside and correlation versus correlation on the downside.

You don't care so much about correlation on the upside because if your asset is going up, you don't need protection, right? What you really need to worry about is correlation on the downside. So when your asset goes down, what can you find that actually has zero or negative correlation through your portfolio?

And oil didn't satisfy that. There was actually a lack of correlation, some actually some positive correlation which is what you don't want in periods of distress um and you know one of the interesting things that we saw and we actually this happened after the crisis that there was a correlate which is something you wouldn't expect but the liquid assets on the downside they tended to have a very high correlation to you know equity markets why because equity markets go down very fast you need money you're going to sell what's liquid first And I think the good example is to look at what happened with MLPs in the U.S. right after the collapse of Lehman.

Fundamentally, nothing changed with the MLPs, but they were liquid, and people needed to raise collateral to pay for the margin. Because they sell as liquid first, MLPs went down, correlation went up. So then gold, we looked at gold as another asset. And it actually, if you just look at the numbers, it performed fairly well as a portfolio protection. But then when we started talking to some of the investors, then they started raising questions like, okay, so I get it that, you know, gold is probably a good asset, but what is the investment vehicle? What do I do? And initially we went, oh, you just do a swap with us. And like, yeah, but if your bank goes bankrupt, you guys are not going to pay me the swap.

It doesn't matter, right? So I want to own physical gold. So we looked actually at ETFs also, but they couldn't get around. Some of these investors just couldn't get around in the fact that there was a distress if the ETFs actually held the gold. So they wanted something that actually gave physical delivery. But then you start going into all these questions like where I'm going to take the gold, how I'm going to insure it, how do I make sure that the gold that they say is in the vault is actually my gold. And if it is my gold, if it's only my gold, then, you know, they're not sharing that gold with other people.

So as you start to have all of these discussions, we abandon that as well. It's like, okay, gold is probably going to be extremely complicated to use as a hedge. So what we found out at the end, which is ultimately something that, you know, is in the big short, it's pretty much what John Paulson did and other guys did as well, just buying protection on credit default swaps, right? So how does that work? Think about the capital structure of a company, right? So a company, when a company starts going down and going bankrupt,

the first thing that gets eaten on the balance sheet is the equity piece, right? So the equity piece goes to zero very quickly, but then eventually the rest of the company or the debt part of the company also starts suffering. So when you talk about buying protection on debt on companies, which is basically what you're doing with CDS protection, you're buying kind of like really really out of the money protection in companies so there's this thing called the investment grade cds index which is think about it as being a basket of different

investment grade companies right you buy protection or sell protection on this basket so it's very simple to build very liquid instrument and it's kind of like the old at that point at least was the ultimate protection because it was really cheap at the time that we started looking at this was trading at like you paid something like 22 basis points or 0.22 percent per year to protect a portfolio and if it's really things really got bad as they did right you had potential to make 10x 20x even more uh if you're right so ultimately that's what we did to some investors, but the interesting thing is that we went through this exercise of looking at different asset classes. Of course, Bitcoin didn't exist at the time, and then fast forward

to 2015, which was the first time I heard about Bitcoin. I looked at it, and immediately it clicked me. I'm like, okay, this is the asset that we're looking for. This actually has you know potential to have no correlation to everything else and i think more important is i think the first form uh of really strong money that in in limited supply that we we we see we see in the world right i i grew up in a country where you know growing up we experienced massive inflation um so i know what you know very loose monetary policy can can do to a country and currency. So when I saw Bitcoin, I immediately, you know, identified with it as something that I could use as a long term store of value for assets.

Fascinating. And so this time around, like as the yield curve is inverting right now and they inverted this morning, obviously it's not inverted right now, but inverted this morning, like this time around, are there similar assets outside of Bitcoin that would That would be a safe haven that this puts on CDSs where like the big short traders were making in 2007, 2008. Is there a trade on Wall Street you think similar to that this time around? Or do you think Bitcoin is one of the few lifeboats out there outside of gold? I think CDS is always a good, good protection in the event of distress.

I haven't looked recently where it's priced, but after 2007, 2008, you actually look at the charts of investment-grade CPS, and you had the massive dislocation, and spreads took a long time to come back to where they were before. So I would doubt if they are still as cheap as they were at that point. There's another thing. I mean, they worked really well because it was kind of unexpected. Now it's not as unexpected. So I don't know how well it will perform in a period of distress again.

Everything that I look, Bitcoin is by far the best asset right now to protect it against something. And the other thing is that I think the problem we had in 2007 was more contained in the sense that it was U.S. only, housing market only. It was much easier to address, right? I think, and I'm not trying to make it small, but it wasn't, right? We almost saw the collapse of the financial system, but now we're experiencing something that I think is much wider. We're talking about excess liquidity in the market globally by different central banks. As soon as people realize what's happening and how losing monetary policy is going to impact their pockets at the end of the day their purchasing value, the rush to the exits could be much worse than what we've seen before.

And I think the first thing we start seeing, which we've already seen, is people tend to fly to the higher quality fiat, right? And they're flying right into the U.S., right? This morning, we see somebody was asking, I don't understand, because with everything that's going, the dollar is getting stronger. Yes, and it's all relative, right? Currencies are all relative. So the dollar in comparison to other currencies, you know, it's still in a better situation, but that's going to change and there's not going to be an alternative. We're not going to go to yen, we're not going to go to, you know, to British pounds or whatever. There's nowhere to run in this scenario other than a new currency that doesn't have the flaws that, you know, the other currencies that we don't have.

so hey marty in in 2006 or 7 i don't remember exactly you had a lot of debt markets breaking and so i didn't completely catch what uh oppositor was saying about the mlps but here's what you have to understand about that period so there was something called there were these preferred securities which rolled like every week i think and i think those preferred securities provided leverage for uh uh closed and closed-end muni funds i can't remember exactly what these preferred money money market funds right so they broke the barracks yeah these these broke you had a lot of debt markets which were breaking. And it was broader than just the housing market. Because of the leverage in the system and the structure, the euro dollar market broke. I think the euro

dollar market broke in either August of 2007 or August of 2008. I don't remember. A guy named Jeff Snyder from Alhambra writes a lot about this, and he's very smart on it, and he understands it very well. But here's what's important to think about and understand. So you had all of these markets that were breaking, which added to the symptomatic contagion. Now, I don't really know where we are now. My guess is that it's different in so many ways from 2007. I don't expect that. I see in broad strokes, you had the TMT, tech media telecom bubble in the late 90s, early 2000s, that market broke. Then you had a housing credit market bubble, which spread out and affected other debt markets, and they all broke. Now, the way I see it in broad strokes, and I could be

wrong. This might not be the right analysis. So let me give you that caveat. Now the symptom is in the global sovereign debt market. Global sovereign debt, I think I might have mentioned this to you in the original pod that we did. Sovereign debt is treated as a riskless asset on bank balance sheets. From what I understand, and maybe AlphaZeta can correct me on this, but from what I understand, as a riskless asset, the haircut requirements on this stuff is extraordinary low, if not zero. So you have a lot of debt sitting on financial institutions all around the world that is not heavily reserved for maybe not reserved for at all because it's it's treated as sovereign debt and i don't know if all sovereign debt is treated as equal

so that's why i say i'm really getting on a limb because there's a lot i don't know here um and so yes you have the mlp market break but here's a critical factor that you have to remember bitcoin's not a company bitcoin doesn't have debt bitcoin doesn't fit this model of risk on risk off So when people like to say, oh, well, Bitcoin's a risk-off asset. Well, I see that as an attack vector. Calling Bitcoin a risk-off asset, to me, is an attack vector. It means that, well, stocks are going up. We should sell the hell out of Bitcoin.

Well, no, that's not right. Bitcoin is core to an emerging economic paradigm. Bitcoin is an exponential Bitcoin and its ecosystem. So Bitcoin, Lightning, associated technologies are exponential technologies. And so you have something which is very different from anything in the legacy markets and cannot be judged by or compared to in the sense that it's entirely different. It's an emerging paradigm which is developing. And so it doesn't have the risk of a – Bitcoin doesn't go bankrupt. Bitcoin doesn't have debt.

So its risk is completely different. we're subject to the risk of other players who hold it on their balance sheets and are watching assets go down who may want to sell those assets because um they're getting killed in another asset and their and their accounts are going down and they're getting hit by margin calls but bitcoin is independent of that so liquidity comes into a system bitcoin can explode higher and in fact that's what i would expect i expect at some point that people who are playing around trading Bitcoin are going to wind up without a position because they are going to wind up with these giant green candles. And this thing is going to get ugly for somebody who is either short

or unexposed. Now, Marty, what do I call that? Going to get your nads ripped off. Yeah, there you go. So let me interject here. Do you think the market is wise enough not to sell off Bitcoin? Do you think hands are strong enough, if you will, to like that's one theory that's been floating around a lot, especially if we go into a deep recession or something like that? A lot of people are saying Bitcoin is going to be one of the first assets to go. Do you think maybe I don't dare I say this time is different? I mean, not even this time is different.

This is the first time Bitcoin will be entering into reception. Bitcoin was born out of the depths of the last recession. So as we make Bitcoin's first market downturn here, do you think there's going to be a lot of strong hands out there? I think there are strong hands. I think that you have a core of hardcore hodlers who have a view on this. I think you have people in this who really have no clue what they're involved with. I can't make a prediction because I don't know.

So prepare for rough seas. I don't know. One guy who I was talking to who owns some Bitcoin, he is, you know, in my age range, he said to me, look, I have a greater exposure to the legacy economy and the legacy markets. He's got pretty substantial exposure to that. He says, I'm not selling my Bitcoin. But that's an unanswerable question. I think when the tide goes out, you know, as the tsunami is coming in, that water just pulls out, it's going to pull everything with it before it comes raging back. And I think that what I will be very surprised if the global central banks do not get extraordinarily aggressive. I think they've backed themselves into a corner over many, many, many years. I don't think they really have much of a choice. Are they going to just let the global economy crash? Are they going to watch the stock market go down 60%, 70%, 80%?

I don't think we can handle that. You already have yellow vest movements in Europe. You want to see the yellow vest movements here in the States? You already have riots in Hong Kong. You want to see riots in New York? I mean, what do you want to actually see? So sure, can the Fed do something? It's going to be really ugly if the Fed decides they're going to get religious.

going to see, ah, we'll see what happens here. Great. Watch what happens when they decide to protest in Washington, D.C. It's not going to look too pretty. So no, I don't think they're really going to let that happen because they don't work that way. So I think you're going to see a lot of liquidity. I think you may see UBI. I mean, it depends. You're going to see a lot of very aggressive things. If this economy rolls over into something pretty ugly, which it could, they're playing very dangerous games you got guys who are playing chicken and it's not really smart we're you know we're aiming for a cliff here and it's going to be really ugly there's a lot of debt in the system you know as much debt as they claim is cleaned up i think the average person is scared

i think the average person hasn't done that well in the last 10 years i think the average person um worries about their job i think the average person is concerned i think you've got a lot of people who got fat and rich and happy from the stock market and from real estate, well, that can evaporate very quickly. And then you're going to have a lot of really unhappy people. I don't happen to believe they're going to go that route. I think they're going to cut. I think we'll be at 0% rates. I think we'll be at negative rates. I don't know how long it takes. I agree with Max Kaiser. You're going to see negative rates. You're going to see negative rates everywhere. I think the central banks are wildly irresponsible, but that's what it is.

And, you know, I own Bitcoin. I would suggest to anybody, you ought to own some Bitcoin. You know, the advice Satoshi gave you, you know, good if you own some. I think that if you have a position, if you're a rich guy today, you have $20 million and you're sitting in bonds, I put one or 2% of my money into Bitcoin. It's going to save your backside. i am an extraordinary bitcoin bull and i think we're going to see very high numbers and i think there are a lot of really really stupid people doing some really really stupid things trying

to time this market and i'm really pretty opposed to that but hey they're gonna get caught without bitcoin because if i'm right and you see some giant green candles well so you know i've seen many traders i don't think anybody can trade this market it's impossible to trade this market so we were talking about this earlier bitcoin has you know bitcoin price action has this thing that you always feel bad because it moves quickly up right so you establish this mental frame that you know okay now 12 000 is my new it's my new level i think it drops from 12 thousand to ten thousand and you forget that in january if i told you that we were going to be at ten thousand right now nobody would have believed it right uh and the other thing and i actually

wrote a script to look at this if you look back and if you take out you know these quick bursts up in price um of your returns you end up with nothing right so look back from 2014 for example until today right so um the last five years roughly there and you look at uh you take out the best 10 three-day blocks so you get you know the three days the the best 10 movements of three days like for example uh december 2007 we had three days where bitcoin went from 11 000 to $17,000. So that's a 45% return, right? And you take out these blocks, which is roughly you're talking about less than 2% of the time, right? But you end up with 50% of the returns because it took out, you know, just these very large moves that happen very quickly, right? And because they

happen very quickly, as I said, you kind of establish that model in your mind that, okay, this is the new the new prize right and then most of the time you're suffering because it's either flat or going down uh and people tend to get out of their positions and you know and then again that kind of feeds feeds the animal again because the next time such a world like oh my god i sold it at 10 000 i should have sold it and it's very very hard market to trade and i don't think anybody you know i i doubt that on average people are making money uh trading people are losing they are by definition right because the exchanges are making a lot of money and Arthur Hayes

and BitMEX are making or killing with liquidations but it's worse than I think any other market that we've seen stay humble StackSats exactly so this has been a great I think we're going

like 35-40 minutes so far let's like break out of the u.s market in particular because i feel like there's been like a u.s heavy conversation up to this point and that's another thing about this time around yes we did have a global financial crisis post 2007 post 2008 but now uh it feels like everybody's getting dragged into the mix that we have what's going on in hong kong like it seems like the hong kong dollar is losing its uh its peg against the u.s dollar it's it's trading at the high end of

that uh range that hong kong is designated that they need to peg the hong kong dollar at which i believe is like 7.85 i believe it was trading towards like 7.86 earlier this morning on the upper brown there uh and then on top of that we obviously have the trade war with china and the yuan's been a little finicky lately you have trump designating china as a currency manipulator And then you go beyond there. We had basically a 25% plus plummet of the Argentine peso against the dollar out of the blue earlier this week. And then you couple that with things like in Europe, Europe's banking system seems to be on the ropes. deutsche banks nearing all-time lows you have the whole german yield curve trading negatively right now i believe um so it seems to be like these problems are not only bubbling up in the

u.s yield curve but also in europe and even the east which i don't know i've only been around for one major market downturn but it seems like this is the most interconnected it's ever been and the most fickle it's ever been up to this point anybody can hop in same exact to that I think that you know what's different this time is that this is

going to be something that we haven't seen before because it's global and it affects different countries in different ways and there's I think only

one more obvious place to run to which is in a bit to climb I think we have stresses that exist globally in the system, and I think we see symptoms of it like, and I can't pronounce the French, the yellow vest movement. We see stresses happening. You've got Brexit. You've got Hong Kong. You've got things going on in lots of places. I don't really feel particularly competent to make many intelligent comments with this regard. but everywhere i look i find that i'm comfortable holding bitcoin i mean i i bitcoin is an asset

that i'm really comfortable holding um the better you understand bitcoin the more comfortable you get with it and i think what you're going to have happen in the course of the next several years is more and more people are going to gradually come to understanding there is a large group of people who really understand this pretty well you've got this pod and and this pod is a form of education and as more and more people come to understand that they're going to start to own some you know one of the things that i wanted to comment on and this is this is really unique i i tweeted about this and it's not it's not a big tweet i had but it's a it's a something that i observed i remember years ago when microsoft and intel were producing the software and hardware that

was used primarily for most things. They referred to that as Wintel, Windows and Intel. And so whenever a software company wrote software which used the platform of Wintel, it benefited Microsoft and Intel. Well, the interesting thing about Bitcoin and its ecosystem is anytime somebody builds something in Bitcoin, you as a Bitcoin holder benefit from that. So if you're building a project which is using Bitcoin, that benefits you and it benefits Bitcoin. The protocol developers are building in Bitcoin. The lightning protocol developers are building in Bitcoin. Anybody who builds whatever project they're building in that is building in Bitcoin benefits Bitcoin. That's very special. And I don't know that there's anything currently in the legacy system that

is like that and i think you're going to see like a giant snowball growing as more and more people continue to build in bitcoin in its ecosystem this benefits holders of bitcoin it attracts more people when you solve problems abra is solving problems using bitcoin as collateral for being able to buy stocks globally bitcoin holders benefit from people having to buy bitcoin to get the collateral to get the synthetic position that they hold in the Abra app. I as a holder of Bitcoin, you as holders of Bitcoin benefit as people buy Bitcoin to use that Abra app. This is very special and this is a very big deal. And as more and more people come to understand this, the value of Bitcoin is going to explode to levels that people can't imagine because I can't see

anything else that's like this anywhere. And what you're going to see is this snowball gets larger and larger and larger and as it acquires more mass it's like a giant black hole sucking in all the value of the world it's gonna get pretty damn big well i would i would tend to agree there and i think uh an important uh sort of piggyback on that comment there is there was some some uh economic journalists and economic bloggers uh earlier on twitter today in particular uh saying that the legacy fintech system has uh has made all this has made a lot of improvements on on sort of payments and settlement and stuff like that but uh and i've been saying this on this podcast for a while the like what is quote unquote fintech is just ui and ux uh improvements

on top of the fintech that is already exist bitcoin is a true new financial technology And like you said, Tina, it allows anybody to build on it. And it's the first fintech, it's the first financial technology that has the token attached to it that, like you said, creates this feedback loop of if you're contributing to it, if you're helping build it out, making it more useful. We all have equity in this ecosystem, right? It's kind of like diluted equity. We all have equity. You know, another example, I wrote a portfolio tracking tool for my own personal use, and, you know, then I thought, well, why not just open source this to everybody else? I would never do this, you know, if it was working for a company or a corporation somewhere, but the interests here are aligned.

I want to put this out there so that people have a better way to track their portfolios. They can see, you know, the benefit of adding Bitcoins to a portfolio. They can track it better. and again that's going to make Bitcoin go do well and that's going to you know I'm going to do well because I have a Bitcoin position and you know nobody is paying just like you guys you guys are here

you know we have a podcast educating everybody right your interests are aligned because you have equity on this right so we're all equity holders on this huge thing globally so I mean I have three things I'd like to add here the first thing is I think we

i think we all agree that bitcoin is designed to pump forever uh the second thing i'd like to say is alpha zeta that is a really dope uh portfolio tracker you built as we will definitely link it in the podcast notes and then the third thing i'd like to say is this is all very confusing um it's part of the reason that i love bitcoin is the simplicity of bitcoin you know it's like all this nonsense you can just kind of forget about it sats are my safe haven i can just stack stats and not worry about it but i think the listeners kind of want some like actionable like like what to do in this type of situation so my question to you would be to both of you uh would be do you think like the s&p is going to hit all-time highs again this year because like

a lot of people are saying um a lot of the macro guys we follow on twitter and stuff like that are saying like this is the big one it's about to happen and like i feel like i've been thinking that for like the last five years and we just keep hitting new all-time highs so like is it like are we imminently about to crash or is this just a precursor you know like we have a lot more room to pump in global markets nobody knows that's the answer this could happen tomorrow this could take another three years nobody knows and if somebody tells you that they know they're blind there's absolutely no way to know when the stock markets are going to

correct. I think they're going to correct and I'm pretty sure they will correct but I've been wrong this whole year because from the beginning of the year I've been very bearish on the stock market, right? I don't care also at the end of the day and I think we're also missing

one thing. Even if none of these things were happening globally, even the economies around the globe were doing really well, We didn't have this problem with central banks yet. Bitcoin would still be a great thing long-term, right? So I think all of these things just kind of add fire to the fuel and it may accelerate adoption, but it doesn't matter long-term.

Long-term, we're in front of something that I think has the potential to be the global onion. We've never seen this before. Okay, I have a point of view. I know that surprises you that I have a point of view, but I do have a point of view. and it's an out of consensus view. And I differ from most people in this regard. And I told Marty in January, if I recall correctly, and I stand by what I said in January, pretty much what I think

I said, and this is what I think. So if I didn't say it, I'm saying it now. I think the stock market will essentially be flat plus or minus five or 10% for the next decade. I think we'll pretty much go nowhere. I don't think the stock markets will crash. I don't think the system will crash. I think the stock markets will be kind of unched, plus or minus. And I think we will be sitting with negative rates across the board in practically everything, at least in the sovereign debt markets, maybe not the corporates and other markets. That's actually not a very pretty scenario. That's actually a pretty hard and bad scenario for an awful lot of people. A lot of people are highly dependent on getting return from equities. Pensioners have suffered greatly in the last decade on declining rates. A negative rate environment will be very, very painful for retirees, for pensions, for a very large swath of the population.

it is a slow painful grinding into the dust and your expenses gradually eat away at you think about that chocolate cake sitting in the refrigerator and taking a small slice of it and another small slice and another small slice and another small slice and after a while there's no more cake and that's what happens expenses eat away at capital that's not getting returns and I think you're going to see a returnless decade in equities. I think you're going to see worse than that in fixed income instruments across the board, across lots of places where you're going to see negative rates. I think negative rates will be very, very, very painful. I expect to see more attacks on cash. I expect to see more attacks on Bitcoin. I expect to see more attacks,

broadly speaking cryptocurrency uh you've got guys who wrote a guy named ken rogoff who wrote a book called the curse of cash he is an enemy of cash i think he is an enemy of freedom i'm very unhappy with books like this i'm very unhappy with policies like this the imf put out a paper i have it somewhere um maybe you can link to it i i skimmed it i don't even have the strength to how they can enforce dealing with negative rates. People are working on and making plans for negative rates. I will be shocked if you don't see negative rates across the board. I understand from what other people have said, there's currently $15 trillion in negative rates. I expect this number to grow. This is very, very painful. Ask people who are in their

late 60s and retired and on up what it's going to be like for them not getting returns. And these people are important to people's families because they usually are in a position to help out younger generations, their kids and their grandkids. And that means that there isn't going to be that little bit of extra helping hand that's there for them. That puts a lot of pressure on society. I think you'll see it express itself in social anger. I think you're starting to see that. I think you'll see it in more political anger. I don't think that is the correct source. I think you have a lot of distraction from that. I think the real source is having bad money. I think bad money is the core of many of these problems. And I think Bitcoin

will grow in size. I think there are threats from regulation, but I think as Bitcoin grows in size, those threats will not be so significant. And I expect to see Bitcoin in the hundreds of thousands of dollars. Timing, I don't know. And ultimately, I would not be surprised to see Bitcoin anywhere from $1 to $3 million 10 years out. Bitcoin is going to grow very, very, very large in size, and it doesn't stop there. And I think you want to own Bitcoin, you want to have a position. I think people will be hard to convince because people only understand price. Price is 99.5, 99.9% of adoption. Once we get over 20,000 and start moving higher, many people who were skeptical will I'm very, very, very interested. I don't know when we go over 20,000. I don't know how this

scenario plays out. You know, we're in, you know, we're in some rough waters, but I expect to see rough waters. But I, as I said, I'll be very surprised to not see the Fed respond. I think I had read somewhere that a guy named John Hussman commented that we're at peak margins in this economy. I expect to see margin contraction going on for several years to come. Margin contraction is a problem because that will affect PEs. So net-net between actions taken by governments, taken by central banks, you'll see that working to pump the value of equities. And I think the natural forces that exist will be working on pressing those things down, which includes the large debt loads, includes margin contraction. The net effect of that is my

view that you're going to see a flattish market, plus or minus, for years to come. And that's not the pretty picture. Actually, having markets crash and work your way back is in many ways much better and much healthier. I don't think we'll be that lucky. You can actually trade for that. And all these guys who love to trade, I think they're going to find themselves in a position where trading gets to be very, very difficult somewhere in those out years for equities. And I think we're going to see flows into Bitcoin that you can't imagine because people will look for yield. And Bitcoin has the benefit of being an exponential technology. So you're going to see more and more people get involved in using Bitcoin, as well as it being a fixed

supply with a known issuance. And so I think you're going to see prices go to levels that you can't imagine. Bitcoin will become the favorite asset. It will go from being mocked on CNBC to being the thing that they love to talk about every day and say, did you buy your Bitcoin today? And they will. Well, CNBC already loves Bitcoin now. We got Joe in the hot seat. Do you guys think there's going to be like are we going to see more rounds of qe before any kind of collapse i think so i think i think the fed can help they can they can help it right they would in some sort of way they they will signal that they're going to do some intervention i don't know if it's going to be qe or whatever it is but that's their motives of rent that's what they've always done

right so why would they change it right now you know they should be online in the relationship but we don't know how they can do it. There are no buyers out there to pretty much anything, right? And they're going to be even less when the market's getting distressed. But, I mean, last time the QE happened after the crash, right? They could presumably here preempt it, right? Do the QE to try and stave off a crash. It's what I expect.

But the marginal effect of, you know, doing another QE, it's, you know, lower every time that they do it. the balance sheet is already so inflated. The first time was easy to do because there are assets out there and they have a huge balance sheet to buy things. I don't know if they have enough power right now

as people believe. They can do anything. They have plenty of power. They're going to buy stocks. The Swiss National Bank is already buying stocks. The Japanese are buying stocks. They're going to do anything. There are no rules.

There are no rules. just remember, there are no rules. Rules don't matter anymore. They make it up as they go. There are no rules. They can do anything, and they will do anything. They're not going to let riots happen in Washington, D.C., in New York. They're not going to have people rioting in the street. They're not going to let things fall apart. And I didn't say it's going to be pretty. It's going to be painful. You're not going to like the answer that you get. And the answer that you get is going to be pain through negative rates. It's going to be pain through flat stock markets but um but you're not gonna i don't think you're gonna see i think the paint they like to

draw out and extend it you know it's this it's this awful situation sitting in the back seat asking are we there yet no you gotta wait and hold it in before you go to the bathroom it's gonna be it's gonna be a long drawn out thing and uh i see that as actually really bad I think it affects your generation. I think it affects the kids who are graduating college now. I don't think it's a good thing. I think it's a bad thing. But it is.

I mean, it just, it is. And I think there are huge opportunities. You want to learn to program. You want to get involved in the Bitcoin ecosystem. You want to own Bitcoin. You can earn your money in Bitcoin. I think there's some terrific opportunities for people I think it's wide open

I think you're watching an emerging economy happen and it's going to be huge and it's going to take the place of this thing that exists now and I think the opportunities are enormous you just have to open your eyes to it Yeah, it's still very early endings in all this and that's why we're here trying to educate people about the state of the world

the state of Bitcoin before I thank you guys. Matt, do you have any more questions before we leave? No, I'm satiated. This was a great conversation. That's what I want to say. Thank you Tina and AlphaZeta for coming on and speaking with us. The vernacular around the traditional financial system, whether it be yield curves, inverted yield curves, and everything we just discussed is

something that a lot of people reach out to me and want further depth on and I think we did a very good job of taking a deep dive into the current situation what it all means and how Bitcoin plays out so thank you gentlemen for joining us thank you guys thanks Marty

alright peace and love freaks not yet thank you guys hey Matt we're not up yet but hey how's it going recording I'll pick up the official. Thank you.