The Breakdown - Dylan LeClair on Bitcoin Data Where Macro Meets Micro

Episode Date: November 24, 2021

This episode is sponsored by NYDIG. Today, NLW kicks off his “Gratitude for Bitcoin” three-part miniseries with Bitcoin Magazine and UTXO Management bitcoin analyst Dylan LeClair.  Find Dylan on Twitter: @DylanLeClair_ NYDIG, the institutional-grade platform for bitcoin, is making it possible for thousands of banks who have trusted relationships with hundreds of millions of customers, to offer Bitcoin. Learn more at NYDIG.com/NLW. Enjoying this content?   SUBSCRIBE to the Podcast Apple:  https://podcasts.apple.com/podcast/id1438693620?at=1000lSDb Spotify: https://open.spotify.com/show/538vuul1PuorUDwgkC8JWF?si=ddSvD-HST2e_E7wgxcjtfQ Google: https://podcasts.google.com/feed/aHR0cHM6Ly9ubHdjcnlwdG8ubGlic3luLmNvbS9yc3M=   Join the discussion: https://discord.gg/VrKRrfKCz8   Follow on Twitter: NLW: https://twitter.com/nlw Breakdown: https://twitter.com/BreakdownNLW “The Breakdown” is written, produced by and features Nathaniel Whittemore aka NLW, with editing by Rob Mitchell, research by Scott Hill and additional production support by Eleanor Pahl. Adam B. Levine is our executive producer and our theme music is “Countdown” by Neon Beach. The music you heard today behind our sponsor is “Dark Crazed Cap” by Isaac Joel. Image credit: Iryna Ustenko/iStock/Getty Images Plus, modified by CoinDesk.

Like, even Michael Gurry doesn't understand McLean derivatives. He's like, do you have to collateralize crypto shorts? That was like a pretty aha moment for me. I was like, oh my God, this isn't just misunderstood by just, you know, newbies. Like, one of the greatest speculators ever doesn't understand a clue. Like, he has no idea. Digging into that is kind of its own rabbit hole in itself. Welcome back to The Breakdown with me, NLW.

It's a daily podcast on macro, Bitcoin, and the Big Picture PowerSys. shifts remaking our world. The breakdown is sponsored by Nidig and produced and distributed by CoinDesk. What's going on, guys? It is Wednesday, November 24th, and today we are starting something a little bit different. For the next few days, I'm going to be doing something I'm calling a gratitude for Bitcoin miniseries. It is, of course, a Thanksgiving-themed show, and it will take place on Wednesday, Friday, and Saturday. That means that on Thursday, which is, of course, Thanksgiving in the U.S., there will not be a show. Now, it's been more than 500 days since last there wasn't a show, but it was time to break the streak,

and Thanksgiving a day for quiet and gratitude and contemplation seemed like an okay day. I'll be back on Friday, like I said, and then Saturday and Sunday, and then on and on forever and ever, Amen. The idea of this gratitude for Bitcoin miniseries is to explore things that are shaping the Bitcoin ecosystem right now with some of the folks who are most involved in both shaping that ecosystem as well as chronicling it. The first up is Dylan Leclair. And if you listen regularly, you've heard me quote Dylan. He works at Bitcoin Magazine and UTXO management and has quickly become one of the most listened to Bitcoin analysts out there.

So without any further ado, let's welcome Dylan to the show. I am here with the man, the myth, the legend himself, Dylan Lecler. Dude, I was just saying this to you before, but I feel like I have to quote your analysis or tweet of yours, like, you know, probably every other, every third show at this point. You've come out of, you know, relative nowhere really fast to be one of one of the most valuable and consistent Bitcoin analysts. So thank you for your work, A and B, let's start by just, you know, tell everyone what your story is, how you got into this space, what attracted you to it and what you spend your time on. Yeah, so I mean, I really appreciate you having me on and always shouting me out. It means a lot and it's pretty cool to see. I guess like a little of my background, you know, a lot of people may have heard before, but I'm 20 years old, kind of joined Bitcoin magazine earlier in 2021. Before that, I was attending university and business school, always love numbers, like a finance, economics, kind of like, you know, niche, I guess. Like, I didn't really know what I, what I wanted, but I was just always kind of fascinated with problem solving. We got sent home from COVID early in 2020, and that was at

the same time, like, I had dabbled in Bitcoin and just kind of learning passively about it for the last, like, I don't know, 18 months, 24 months since like, you know, late years of high school. I was just, like, I was aware of the ICO bubble, didn't really, didn't have any skin in the game. I was like a 16-year-old. But, you know, and then from there, I guess I dropped out of school because the COVID kind of woke me up to like, well, what's the value prop of this Zoom university that I'm paying for when like I'm literally, I can tune into your podcast every day and like learn real time what's happening. Not what theory like theory says about a textbook 30 years ago, right? And so like it just wasn't worth it. And I, you know, worked manual labor honestly for like months on end while I was just listening. to podcasts, but I really just knew that, one, I got recently orange pills. It was like, I need to accumulate Bitcoin. So the opportunity got to college for me was like with Satoshi, it's not just the debt I paid, but the productivity that I couldn't, like, you know, the work I couldn't do.

And so just kind of stumbled into a, you know, I guess through Twitter, you know, better to be lucky than good, but maybe we create our own luck into a job, a Bitcoin job, where really, like, I feel at home and I can just, like, my job is essentially, to like hang out on Twitter and interact with people and look at the markets every day now. I produce a thing called the deep dive every day. I help put that on with Sam Ruhl, who's another awesome analyst. And we just basically cover on-chain stuff, derivative stuff, market structure, macroeconomics. And we try to tie it all together with this long-term thesis we have about Bitcoin as a monetary asset.

So that's, you know, that's a quick background. But, you know, I don't know if I raised over anything there. No, it's awesome, man. And so I guess one thing, the only other piece that I want to kind of share, because I think a lot of people, you know, I hear from listeners all the time who are like trying to figure out how to get into Bitcoin and what they want to do. Like they have a sort of similar passion. How did you go from being orange-pilled and getting excited to actually diving into the data, right? Because I think one of the things that's really interesting, I think you made have, it might

have been today that you tweeted when, when we're recording was just reading Bitcoin on-chain data or understanding Bitcoin is like having cheat codes, right, for the world. Like, how did you start actually looking at on-chain data? And maybe let's move from that into what are the things that you, you know, not for articles, not for kind of like Twitter analysis, but just because you want to understand like every day, what are you looking at? What do you check out? What are your favorite indicators?

Yeah. So I guess I would start by saying more so I think my like, the cheat code is, is understanding that Bitcoin is going to store your time and labor better than anything. the world has ever seen. And then, you know, maybe a couple months, a couple years of, of, you know, putting into that and, and, like, believing in that and acting on it. And then, you know, you wake up one day and you're in a better position than you would have been otherwise, I guess. And it's different for everybody, but it, Bitcoin changes a lot of things in terms of time preference. I mean, I've seen it. I've seen it a million times. When someone, like, you know, GROX Bitcoin

and it comes to understand it, I think fundamentally your, it sounds cheesy, but, like, your life changes in a way. At least, you know, maybe how you allocate capital, how you, you know, how many hours you work, what you spend your time on, et cetera. So that's kind of what I meant more by by understanding it. But I guess recently at this past year, I became pretty fascinated with on-chain analytics. And luckily, like, being in the spot I was at Bitcoin Magazine, they were like able to help me out with like all of all of that stuff, all of that data that that isn't available to everyone, unfortunately. And just kind of, it's so fascinating because the Bitcoin ledger has, like it has transparent property rights,

immutably recorded forever for its entire history. It's unlike any asset we've ever seen. So, you know, while Bitcoin has these seemingly random bowl and bear markets, a lot of this stuff you can actually see like basically, you know, build up under the surface, right? It's like, you know, Hodler set the floor for three years. And eventually any new capital that wants to come into the Bitcoin market is competing for like this really small,

free flow to supply, and we go parabolic. And then those kind of long-term holders distribute out, and we see the cyclicality that some people may be like, oh, this is completely random, and it's exacerbated by derivatives. But really, like, the most fascinating thing is, like, a lot of this stuff is not so random. And it's actually, like, we can see it in the data every day, week, month, and a year. And it's pretty fascinating, block by block. Nidig sponsors this podcast, and they're helping CFOs, traders, and risk managers, safely and securely integrate Bitcoin into their operations. Learn more about what NIDIG does and how they do it at NIDIG.com slash NLW.

That's NYDIIG.com slash NLW. One of the things that I've liked about your analysis, you kind of almost hinted at it when you were discussing the way that you guys think at Epicoy magazine was trying to align a 10-year kind of vision or horizon with what the data is telling you now. And I think that that's what you see a lot in sort of the analysis you share. How do you think about where kind of macro, events and Bitcoin in the world ends and market structure takes over. I mean, a lot of the things that people want to know about on any given day are, why did a number go up or why did number go

down, which is something you cover a lot. How much do you come out this from kind of a macro or math perspective? Where do you combine them? Yeah. So, I mean, I guess I would say, you know, that 10 year, I mean, far longer than 10 years, the hyper-bitquinization thesis is that Bitcoin is going to obsolete, you know, $500 trillion or, you know, even if you want to say conservatively, 100, which may not sound conservative to some, but, you know, a few hundred trillion dollars of assets and it's going to demonetize that, dematerialize that. And so that's my belief. That's most people at Bitcoin Magazine's belief. And increasingly around the world, more and more people's institutions and maybe even some government's beliefs. And so a lot of

the analysis I do, how I allocate capital on a personal basis, as well as, I'm recently joining UTXO management and they're basically trying to outperform actively outperform Bitcoin, which I should say is no tough task, is no easy task. You know, like I basically, my interest is inquire as much Bitcoin as possible. So a lot of this stuff that I'm looking at, I'm using it like on a personal level and I'm not selling. Like I'm not going out and selling my Bitcoin here and buying it here and selling it here. It's rather just choosing when to allocate capital, potentially choosing when to speculate,

speculatively attack the dollar and lever up in a way that, you know, is advantageous from a risk-reward standpoint. And so, you know, a lot of the daily stuff, even weekly, it's often driven by derivatives, you know, like you'll see these huge dislocations and perps, like in the bear market in 2018, you saw basically like with Bitmex dominating every spot exchange volume. you saw like the constant Bart Simpson candle, right? Like you're like up and then, you know, huge vertical green candle consolidation, then huge red one, like all that stuff. That's not like, you know, that's basically all just derivative driven.

And so like for most of the market, like what we're seeing now even, it's kind of just like a reduction in leverage since the 69K all time high. It was just a bunch of people got overzealous and greedy. And essentially, you know, the market's kind of flushing them out. It's like volatility and price discovery are going to kind of. throw anyone that's trying to get a free lunch off before what we're going through all-time high. So, you know, most of that daily stuff, it's, you know, I like watching it. I like, you know, acting on it. But for the average person, it honestly is like, you can find it fascinating,

but it really doesn't affect Bitcoin over the long term. Yeah, I think this is, so this is a really salient point, which seems kind of obvious, but also is not said that frequently, which is that there's a lot to be derived from understanding short-term movements without letting them really overly concern you in the context of long-term thesis, right? Like, it is super useful to understand, for example, where Bitcoin is in relation to its correlation to traditional finance markets. It's sort of the impact of macro events on it on a kind of short-term level. and you can have that sort of intrigue without really being concerned about,

without it changing your long-term thesis, right? And so maybe just to ask that question. So we saw a really interesting thing happen last Wednesday, or I guess it'll be a couple Wednesdays ago by the time that people hear this. But the day that the CPI report came out from the Bureau of Labor Statistics, higher than expected numbers, 6.2% inflation, highest in 31 years. And you actually saw Bitcoin hit its new all-time high, you know, right as that happened. only to get washed out hours later.

And it seemed to a lot of folks that part of what was going on on the flip side is it was just the markets going risk off because there was at the same time, basically, almost at exactly the same time, huge rumors coming out of China that Evergrand was actually defaulting. And so, you know, the kind of the stock market

went risk off and blah, blah, blah, blah. You were obviously watching that whole thing. What was your take as that was happening? What were you noticing, you know, maybe sort of from that, from the derivative side, from the market structure side. Yeah. So, I mean, I think everyone, including myself, was a little excited or, you know, please to see Bitcoin just absolutely rip following the CPI print. And honestly, I mean, I know for a fact that there are like institutions that are allocating and not like, you know, market buying a

billion dollars of Bitcoin, but like a lot of the funds that previously like couldn't, wouldn't touch Bitcoin, wouldn't even think about it or say anything about it, call it a, you know, a Ponzi scheme or for criminals in maybe 2016, 2017, 2018, 2019. Now in 2021 are actively establishing very minimal sized allocations, right? But like a hundred billion dollar insurance fund buys a 20 basis point allocation or like, you know, just something really small that they're going to average in and not sell for the next decade. And they're going to, you know, they're going to be in the market, you know, just passively and with very small, small numbers for their portfolio, but like, you know, huge numbers at like securing allocations, Bitcoin

allocations. But, you know, at the same time, we saw derivative markets skyrocket up. It was, it wasn't like a, you know, a bunch of spot buying the second the CPI hit, unfortunately. But I think, I think the bullish thing is, you know, the floor essentially like, you know, Bitcoin's, I think I like looking at realized price, which is like an on-chain cost basis. You can see like basically with every UTXL, with every Bitcoin, like what's the average price that these coins were required for? That continues to just creep up. You're seeing, because you're seeing like marginally like old, old hands will sell.

And you're not seeing that on a big scale, a large scale right now. But just passively, you're seeing as Bitcoin kind of is just floating around. 60,000, that like for almost, that on-chain cost basis of every single coin continues to just kind of rise up a little bit. And so like, you know, when it's raining around like this, like, you know, it's a good thing. I know there's passive allocators. I'm one of them. And most people I know in the Bitcoin space are passively allocating. So I just think of that as the free flow is getting smaller every single day. And the big money is just starting to dabble in it, which is, you know, why, I mean, besides like, you know, I'm fundamentally like, like I said,

the 10-year bullish thesis. But even over the next weeks, months, quarter, six months, like, we're not at a double top at $68,000. I just, that's just not, at least fundamentally, that's what I believe. Perfect segue. I was going to ask you next kind of around your thoughts on market cycle. So it's always an interesting question to ask market cycle because that question even comes with presumption. It's like, it used to mean if you asked most people even a year ago, it would be like, where in the four-year historic market cycle of bull and bear organized around halvings do you think we are? But now the question is kind of like, well, one, what is your perception of where we are

in the market cycle? And two, what is your perception of the market cycle in general? Have we broken out of that four-year pattern? Is that pattern still intact? But it's going to be exert less influence or something else entirely. I find this question fascinating for almost everyone, but certainly you think about it a lot more than most people. Yeah, I think the notion of the four-year.

cycle is, I mean, it may coincidentally top in December, but I just don't think having, you know, that 210,000 block cycle. I don't think that's the primary driver of this market anymore, just because of, I mean, the inflation is like 1.8% annualized, you know, minors for the most part are actually not even, like, because for increasingly miners are entering public capital markets, you know, they're not even selling their Bitcoin, right? So, so for the most part, it's, It's other forces that are driving this. And really what I think drives the cycle is under the surface, you'll see, like, hodler set the floor.

And so you see, like, with the data I look at, you have, like, long-term and short-term holders. And the quantification of that, there's a pretty strong statistical relationship between the longer a UTXO is held, the less likely it is to be spent into the future, the less likely it is to be spent again. And so 155 days is, like, this pretty significant statistical threshold. And so when you're looking at, like, relationships between long-term and short-term

holders, you see during bear markets and during consolidation periods, long-term holders are scaling into positions. They're just, you're not selling. You're seeing this long-term holder supply just continue to up and to the right. And during bull markets, you see the players that established, that basically established allocations, positions during the bear, during consolidation, will just take a little bit off the top. And so that long-term holder supply distributes into new participants that are fomowing and buying

the parabola, right? during a reflexive bull market. And so we actually didn't even see any sort of profit taking, but more so accumulation, basically all the way up into October when we, like, Bickwin first kind of hit that 60K threshold. Like, no profit taking, no classic bull market, you know, distribution dynamics. Like, we can see the data and it didn't happen. And so that's just starting to take effect, but like barely even, like, anything significant. And so I kind of believe that the spring is still coiled in the sense that,

any new money that comes in, they're going to have to competitively bid up the price. And so we will see profit taking increasingly as price goes higher. The incentive to sell goes up with the price. I mean, that's pretty obvious. But most people are just like my friend Pete Rizzo, Bitcoin Magazine, he calls Bitcoin Tops with psychological attack on hodlers. You just hit mind-blowing numbers that you're like, oh my God, like, how could I not just shave a little bit off the top?

And so you see that, you know, collectively, the marginal buyer, It's exhausted and new supply it's the market and price goes down and finds a new equilibrium that's often a lot lower. But I still think that we haven't even hit that like reflexive stage of the bull market where we see a parabola and we see new money just flooding in and a bunch of old coin taking profits. Like we haven't seen that at all. So I kind of think that the fundamental driver is that dynamic and it's completely

human psychology as well as, you know, the macro environment and how crazy the central banks are and forcing people into this asset. But I don't think that, you know, the having cycle, the original four years is, is what at play anymore. I think it's more of like we could just see what we saw in 2020. It's like rounded top, rounded bottom, chug higher, like a new floor is established. Like I wouldn't be surprised. But I also wouldn't be surprised to see Bitcoin go absolutely parapolic. Like I think it's something that you can't say three months out.

You just have to, you know, wait and see how it all plays. Yeah, it's super interesting. I mean, one of the things that I've been kind of watching a lot, too, is, almost contributing that like contributing to that sort of vision that you're explaining is if you, if you believe that obviously there are more, there's more overlap with traditional markets in terms of like the body of holders now includes that set of people, right, who have come in over the course of the last 18 months. I think we should probably expect to see more short-term correlation around risk-on,

risk-off movements just because some of those people come with mandates, part of what makes Bitcoin so much more attractive than something like gold is that it's liquid. So it's very easy to move in and out really quickly, even if you haven't lost conviction. And one of the things that I find really fascinating is, you know, you almost have to assume like, so again, going back to that kind of day where we hit the highs of the inflation print and then we're quickly, quickly went risk off. It's like, why not shave a little off a position if you've just hit a new all-time high? That's actually a non-scary, like, doesn't reduce conviction in the asset.

kind of position or a move for a traditional manager to make. And so it wouldn't surprise me if we start to see more of those kind of like rapid mini cycles, you know, where it's like just hit a new all time high. Something comes in that, you know, calls into question the state of the macro or where Bitcoin's going to fit in there. And so there's kind of a shaving, you know, exacerbated by leverage, but then it sort of cycles right back. And in the meantime, to your point, there's a lot of different things that are kind of marching progressively higher on the flip side. Yeah, I think it's really fascinating. Basically, like, What makes Bitcoin so attractive, why Bitcoin is trading at 60,000, 559,000, whatever it is right now, it's because of, I mean, I think, and you cover this all the time on your show is, is the macroeconomic environment. It's the everything bubble, right? Nominal yields have been basically crushed over the last 40 years. And now the only way to get out of this global debt to GDP spiral we're in, whether it's public debt, you know, public and private debt, it's basically, it's just financial.

repression and, you know, high inflation readings while keeping yields pinned. I mean, that's the only way out of this is they just have to erode the real value of debts away. And so in that sense, like the fiat is the error in that, you know, is the error term. My friend Greg Foss likes to say that. And so bondholders, everyone else is guaranteed to lose even equity holders when you're buying at these valuations. I mean, personally, I use Bitcoin as my unit of account. And I think, think that's the winning strategy over the next decade. And it has been over the last. But I think as Bitcoin grows from a, you know, one trillion dollar asset to a five trillion dollar asset, I mean, and I know that's a little bit away, you know, maybe maybe closer than some think, but it'll eventually

get there. And I think as it gets, gets to these bigger and bigger levels, what you'll see is like Bitcoin is the most pure form of credit expansion or contraction in the legacy system. It's the most pure form of like the reading on the everything bubble and just how crazy things have become. Because essentially like, you know, no, if the Fed and these other central banks just stopped, if they stopped printing, if they raised rates or whatever, like the bond market went no bid in last March of 2020. So like, so how much, how much of this like, we'd see the biggest deflationary depression ever as all fiat currency in a fractional reserve system collapsed to nothing.

And so they have to step in and print. And I think that's where Bitcoin essentially just as this like global monetary asset increasingly becomes like the most pure form. I mean, we also have to remember like the Dixie's at 95, right? With with the, you know, the global macro environment with the dollar as the world reserve currency, even if there's like high CPI prints and like, you know, asset and consumer inflation is really high. At the same time, like everyone else is in dollar denominated debt around the globe. And so if their currency is weaking against the dollar, well, like, you know, there's some, there's some variables there for like a de-leveraging. So I don't think like, you know, I think that plays into effect as well.

But I think just like broadly, like over the next decade, Bitcoin becomes like the definition of like the macro asset. It's almost like a pure like check or like gut call on central banks. Could not agree more. And I want to maybe just close with one related a little bit to this and to cycle tops. you mentioned recently or were tweeting about this marathon. Marathon's kind of, let's call it, their sailor strategy of issuing more debt to buy Bitcoin. And part of what you were discussing is how this is different than minor behavior we've seen in the past and suggests a different

attitude. And I think this is really important because it feels to me like there's a, I don't know what the right word for it is. It's not like there's a skepticism that there's more go. It's more just like, I think a lot of folks in Bitcoin have PTSD from calling, you know, calling tops or seeing, you know, too many top signals or something like that. And so I don't know that everyone wants to believe that there's like a lot more to go and they're like kind of bracing themselves for some extended winter because they've been through it before. But, you know, looking at the behavior of companies in the space, it's a little bit different. So just talk to us, I guess, about what, what marathon did and kind of why it's different relative to what we've seen

before. Yeah, so marathon and a lot of these publicly traded miners, and this is kind of like a recent phenomenon in 2020, 2021, this trend started is that these public miners are acquiring Bitcoin for super, super cheap. I mean, I think like Marathon or like HUDAid or some of these riot, they're like marginal production costs is like 10K, sometimes lower, sometimes little higher, depending on the facility and where they're mining. But, you know, mining has become super profitable, especially over the last year as hash rate hasn't been able to keep up. And so they're all this Bitcoin and they're rapidly expanding their operations, but they don't have to sell any Bitcoin because they can take that Bitcoin and keep it with a custodian who will extend them a credit

line off of that. And for the custodian, for the bank, for the lender, it's far better than just lending unsecured with claims on their business and having to liquidate everything traditionally. They're over-collateralized. So like for banks, lending against over-collateralized Bitcoin, I mean, yes, there's, I guess, some sort of counterparty risk or maybe liquidity risk or whatever, But in terms of alternatives, like Bitcoin is the best form of collateral the world has ever seen. And it's volatile, but you can account for that with the over collateralization. Like it literally is a no lost business for banks. And so we're kind of seeing over the last, I would say 12 months, especially with Sailor championing the strategy, loud and clear for everyone to see, saying, hey, the cost of capital is a lie.

And so I'm going to do, I'm going to lever up. I'm going to speculative attack the dollar in a way where I'm five years out, six years out, seven years out, paying six percent coupon on this debt. And so it's secured against my Bitcoin, but my Bitcoin's depreciating by an order of magnitude. So it doesn't really matter. And so these miners, they don't even have to sell at current levels. I think eventually hash rate will continue to, you know, and difficulty will continue to ratchet up and it'll pressure on their margins. but in terms of what the supply chains are looking like and all that, you know, these miners are going to be deep in the money for a while.

And now they can expand and, you know, grow their operations without even selling a single Satoshi, which is, you know, far different than the dynamic in the first, you know, seven, eight years of Bitcoin, 10 years of Bitcoin because, you know, they were forced sellers. And no one would lend to a Bitcoin miner. I mean, that sounded ridiculous. So the game has changed and it's pretty big. Last question for you for now. And this is awesome. We should do this more often.

But what is something that not enough people are paying attention to you that seems just blaring or clear, you know, in your day to day? Huh. That's a good question. I think. And that could be positive or negative. That's not like a, what warning signs are people missing or anything like that. It could be the exact opposite, too. Yeah, I think, I guess just like, you know, and this is.

more like I said earlier kind of day to day, but I think the derivatives markets like often like very misunderstood. I'm in terms of like, like, you know, people say it's like really bad or maybe it's good, but you see, you know, we need to get the leverage out of these markets or like how do, you know, these DGens hold us back every single time? But I think derivatives are just like the most natural. We have, it's the most free market the world has ever seen. Like not derivative but Bitcoin, the Bitcoin price action. And so like, yes, derivatives, you know, exacerbate volatility at times. But. you know, the most, it's the most, you know, kind of beautiful, capitalistic thing we've ever seen.

And if you're, and if you're kind of, you know, over leveraged or go too far out on the risk curve, well, you're going to lose your holdings. And so I think just in terms of like market cycle of derivatives is often very misunderstood. I mean, the derivatives market was extremely long at the top of April and extremely short at the bottom in July. So people looking at that like, why is the price action still going down? And it was like all derivative driven, right? Well, everyone is stacking in the bottom of the summer. Just stuff like that, I think, you know, a little more understanding because it's not, like, even Michael Burry doesn't understand McLean derivatives.

He's like, he's like, do you have to collateralize Bitcoin crypto shorts? And I was like, that was like a pretty aha moment for me. I was like, oh my God. Like, this isn't just misunderstood by like, by just, you know, newbies. Like, one of the greatest speculators ever doesn't understand a clue. Like he has no idea. So I think just kind of, you know, digging into that is kind of its own. rabbit hole in itself. And I'm not encouraging people to go speculate with leverage, but just

like understanding that effect, what what effect these markets have on the Bitcoin price and the day-to-day kind of seemingly random chop and volatility is something that I think is probably pretty misunderstood. Cheers to that, man. Well, listen, thank you so much for hanging out. Happy Thanksgiving. Appreciate you spending your time here and look forward to our next conversation. Thank you. This is really fun, man. Let's do it again. The thing that stands out to me reflecting on that conversation is Dylan's idea of Bitcoin as a cheat code. He had such a crisp summation of what that meant. And even when I saw the concept on Twitter, I thought it was fascinating.

As I mentioned in the interview, one of the things that I think that's so powerful about the way that Dylan engages with the world is his ability to do micro-level on-chain analysis in the context of a macro world that he's also actively trying to understand. That combination of macro and micro gives him superpowers, and I hope the show can bring you a bit of that on the daily. So with that, guys, that's the end of our first of a three-part mini-series gratitude for Bitcoin. I hope you are headed to a wonderful Thanksgiving, and even if that's not a holiday that you celebrate, that you have much context for gratitude. Until Friday, guys, be safe and take care of each other. Peace.