The Pomp Podcast - #1033 - Dylan LeClair On Why Crypto Companies Are Failing Right Now?

Episode Date: July 6, 2022

Dylan LeClair is the Senior Market Analyst at UTXO Management, a digital asset fund investing in the analog to digital transformation of money and the emergent financial system.    In this conversation, we discuss why miners are selling their Bitcoin, how the fed is destroying demand, and where the Bitcoin & Crypto industry currently stands after weeks of market crashes and failing Crypto companies. Dylan joins us every Tuesday on "The Best Business Show." To see the video with the corresponding charts that Dylan references throughout the interview, go to "The Best Business Show: LIVE" YouTube Channel  ======================== BCB Group is the leading payment services partner for the digital assets industry. BCB Group provides payment services in 30+ currencies, FX, cryptocurrency liquidity, digital asset custody and BLINC, which is BCB’s free, instant settlements network for the BCB client ecosystem. Find out more by visiting bcbgroup.com/pomp ======================= Coinchange is an automated wealth management platform that earns daily compounded yield for you. Earn up to 10% APY on a risk-mitigated basis – your payout doesn’t depend on the volatility of the market and there are no lockups or minimums. Register now at coinchange.io/pomp and get a welcome bonus of 40 USDC when you fund your account.

What's up, everyone? This is Anthony Pompliano. Most of you know me as Pomp. You're listening to the Pomp Podcast, simply the best podcast out there. Now let's kick this thing off. Dylan LeClaire is the Senior Market Analyst at UTXO Management. He also writes a newsletter with Bitcoin Magazine. In this conversation, we talk about Bitcoin, on-chain metrics. We talk about Bitcoin's price, the market structure, and what to expect in the coming weeks. I really enjoyed this conversation with Dylan, and I hope you do as well. Before we get into this episode, though, I want to quickly talk about our sponsors. This episode is brought to you by FTX US. FTX.US is the safe, regulated way to buy and sell Bitcoin and other digital assets. You can

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free real-time transactions across fiat and digital currencies. BCB's vision is to empower the global financial revolution through sustainable and innovative banking. You can find out more by visiting bcbgroup.com slash pomp today. Again, if you want to learn more, go to bcbgroup.com slash pomp today. This episode is brought to you by CoinChange. CoinChange is an automated wealth management platform that earns daily compounded yield for you. They've got sophisticated algorithms that automatically analyze and allocate liquidity to more than 25 DeFi protocols, where you can earn very high rates of return on a risk-mitigated basis when you hold your crypto. Earn while you sleep, exercise, or listen to this podcast.

Your payout doesn't depend on the volatility of the market, and there are no lockups or minimums. They don't lend, trade, or rehypothecate your assets. This means that by becoming a CoinChange client, you start earning yield from day one, and you can withdraw your funds at any time. Register now at coinchange.io and get a welcome bonus of $40 USDC when you fund your account. Again, coinchange.io slash Pomp. Don't just hold your crypto assets, but earn smart DeFi yield with CoinChange. purposes only. All right, we've got Dylan joining us now. Dylan, what's going on, man? What's up, Tom? How are we doing? I'm doing fantastic. There's a lot to talk about. I feel

like we could sit here and talk for maybe days at this point to understand what's going on in the market. Let's start with miners. I saw that miners are now starting to put out their June reports. And a couple of miners have reported that they've sold not just a little bit of the Bitcoin on their balance sheet, but quite a bit. Explain what's going on here and why exactly are they doing this? Yeah. So for regular listeners of the show, people that have subscribed to some of my work, whether it's on Twitter or just what we cover at Bitcoin Magazine Pro, we've talked about the cyclicality of the Bitcoin mining industry and these kind of hash price bull and bear cycles. So you can think of hash price, it's minor revenue divided by hash rate. So when price,

a good kind of basic gauge or kind of a mental framework to operate on is when price is increasing faster than hash rate. Miners, their valuations, their margins are all increasing. And when hash rate is increasing faster than price or price is just decreasing and hash rate steady or hash rate, you know, the pain trade is hash rates increasing, price is decreasing. These minor margins really, really get squeezed, and the ASIC values, and it leads to some of this kind of forced selling. And we see it every single cycle. And this cycle, I think, was even exacerbated by the fact that we have these new kind of public markets and the financing around that. So these miners like HUD-8, a lot of these publicly traded firms, we have a graphic up here. This is the performance

of all these publicly traded miners since the all-time high of Bitcoin. And they've all underperformed Bitcoin itself. And there's a reason for that. Post-China miner ban, a bunch of hashrate got wiped out. A lot of these companies scooped up a ton of rigs and they did it with financing, did it with leverage. So now that the price of Bitcoin has gone down, hashrate has subsequently recovered, meaning that the difficulty has adjusted upwards. For anyone that's kind of not familiar with the term difficulty, Bitcoin mining has this kind of, it's like this oscillator. And if more and more people are mining Bitcoin, more and more operations are turning on, it gets harder and harder to mine a block of Bitcoin. So, you know, the other way is that if the hash rate is going down, difficulty just downwards to kind of ease up a little bit.

And so since, you know, all that difficulty has just continued to ratchet up, it's getting harder and harder to mine Bitcoin, more costly rather, at the same time the price is falling. So you're seeing a lot of these operations start to puke up and cover their loans. And that's leading to just kind of cratering valuations and equity market performance. So when you see this happening, is this something that we'll understand when it's over? And like, we'll be like, okay, like that's probably they've sold everything that they're going to sell. Is there like a percentage of their balance sheet? Is there some way to evaluate it in real time?

And the thought process being with liquidations, we know of some because of on-chain analytics or were able to understand, you know, from past maybe company announcements, hey, what is the general price point at which some of these liquidations will happen? And also, what is the size of it? Now, we don't understand all of them, but these are publicly traded companies. And so how do you evaluate, like, how much Bitcoin is there available for them to sell? And how do you know when they're kind of done selling? Or is it just all after the fact we'll be able to understand that?

Yeah, so there is some pretty good data out there about kind of approximate break-even levels. A lot of these publicly traded miners, they still have break-even prices below $10,000, but those numbers actually ratchet up as hash rate continues to ratchet up and difficulty continues to increase. So my kind of base case is that we see a new all-time low in hash price, right? So that miner revenue divided by hash rate. And basically, the all-time history, the trend in Bitcoin is hash price is going lower forever, essentially. And what you see are during these bull markets, there's these kind of these gold rush periods where price dramatically outperforms hash rate. And it's just it's so hard to actually source and kind of engineer these new ASIC machines and get them out and get them plugged in. The infrastructure takes a lot of time. So there is a lag between kind of that bull market, that golden period of profitability and, you know, where these miners really get squeezed.

We've seen it cycle after cycle. I think what you're really, you know, what to look for is you can monitor the hash rate. you can monitor the kind of the moving averages or the rate of change of that hash rate. When you see a lot of that's really starting to fall off, that basically means that a lot of these miners, these operations are seeing kind of immense pressure. But the beauty of Bitcoin is these machines don't just turn off forever. They're sold, they're liquidated. The inefficient miners have to sell their holdings. And what happens? Someone else with a cheaper power source, cheaper energy, and better, more well-capitalized, they scoop up the miners, they plug them in, and they continue to hash. And they also get the benefit of difficulty ratcheting down, right? So

I think there is still, you know, a period ahead of us where these miners are really going to get squeezed. They're going to have to be selling a majority of their stack. There's no longer a period where miner margins, you know, their profit margins were 80, 90% in the bull market. And because of that, they had just absolutely tremendously outrageous valuations. That period is over. And it's kind of really just every man for themselves at this point. Some publicly traded miners, I believe, probably won't make it to the other side or they'll be acquired. And some will continue to thrive, they'll continue to build, and they'll be tremendous performers during the next bull cycle. But I think that takes time. When you take a look at something like hash

price, explain what hash price is to everyone. And then we can pull up this hash price percent from cycle low? And you can explain what this is showing us. Yeah, so hash price, it's minor revenue, daily minor revenue. So we can see, you know, around approximately 900 Bitcoin per day, our mind. And then we can just multiply that out by the current price, and then divided by just average hash rate. So using a daily hash rate isn't really useful, because it's there's so much variance. But just say, you know, take a seven day moving average hash rate. It's a pretty it's a pretty reliable indicator of where the you know what that rate is and because of that we can come up with this hash price uh this this kind of calculation and it's a rough estimate and obviously

every miner is different but this is basically kind of showing you uh minor profitability and this is in logarithmic scale so if you want to zoom in on that chart a little bit uh hash prices is basically going down forever in a tremendous fashion it's almost like the opposite or inverse of a Bitcoin chart as hash rate continues to just increase and that block subsidy continues to get cut, right? First, there was 50 Bitcoin mined every block, then 25, then 12 and a half. In May of 2020, that went to 6.25. Somewhere in 2024, that'll go to 3.125.

And obviously, there's a variable amount of fees that are being paid to compensate miners as well. But we can see here that these bull markets, right? if we look at the hash price kind of increase from its all-time low during bull markets, this is kind of that gold rush visualized, right? So any miners, any capitalized miners that make it through the bear, they rough it out. They're barely profitable. They squeak by, but they're still, they're still hashing during that next bull cycle. That's where they're kind of, you know, that's where you reap the rewards. And so now we're, we're kind of in one of those periods

where hash prices is just flirting with an all-time low. It's all-time lows around 7 cents per terahash. Right now, it's about $0.086 per terahash. So we're going to see another low. It's going to get even kind of squeezier for these miners and their margins, and the strong will survive, but the weak, you know, probably get wiped. When you look at something like the U.S. dollar, which obviously is a part of some of these price movements and equations, the U.S. dollar continues to go higher and higher. It's at a 20-year high now. What is happening? Is it just that the dollar strengthened against other fiat currencies on a relative basis? Or is there something else driving a lot of this? Yeah, it's somewhat paradoxical,

right? Because you're feeling all this inflation, you know, it's like the dollar, the purchasing power of the dollar is less and less. But how is the dollar at, you know, 20 year highs? And what's happening is it's kind of this Max Payne scenario of super high consumer price inflation, kind of due to a shortage of commodities, obviously the Russia-Ukraine conflict, a bunch of different variables, and a lot of it has to do with energy, right? At the same time, the Fed is coming in and saying,

hey, we need to tighten to stamp down this inflation. But they may not have the right tools because it's more of a supply shortage that's causing the inflation. But because of the dollar, because of the USD as the world reserve currency, and because there's so much dollar denominated debt out there, What we're seeing is just this huge move higher in the dollar against other fiat.

So the ECB, they're having to support the weaker countries in the European Union by stamping down spreads in the bond markets. The Bank of Japan is embarking on yield curve control. These are, I believe, the second and third biggest currencies in the world, and they're still easing. And the dollar, the Fed is tightening. So you're seeing the Dixie, the dollar currency index, screaming to new highs. And on a shorter term timeframe, you can see Bitcoin, the NASDAQ, risk assets, they trade almost tick for tick with dollar strength and actually are inversely correlated. And so this is kind of a barometer of just how risk off everything is.

And that probably ends with the dollar a lot higher than it is before the Fed has to come in and really kind of bail out the world, which is kind of what's happened with every recession over the last two decades or so. When we zoom out a little bit more, the next chart we have here is the US dollar index, but it goes all the way back to early or late 90s. And you can see that, again, since the early 2000s, we haven't seen these levels. Is it something that we can take as a lesson from the late 90s to today with the dollar currency index? Yeah, I just wanted to kind of give a more zoomed out view. Obviously, 2021 to 2022, it's a rapid move up, but we're seeing on a long-term timeframe, the same kind of thing happened. It's higher than it was during the great financial crisis, and it's approaching kind of the top that it reached just before the dot-com bubble and all that pain as the dollar kind of soared higher as risk was also selling off. And so, you know, no like TA here, I think is really all that useful, but just understanding that the big picture and that the dollar is this kind of like Brent Johnson refers to it as this global wrecking ball for risk assets. And the higher this goes, the more that the global economy just gets kind of thrown into a recession and the more that risk assets crash in price. And ultimately, it leads to kind of a credit contagion event.

It's essentially a short squeeze is occurring on the dollar. And the short position that everyone has is dollar denominated debt. So what do they do? They liquidate their assets to pay the debts. And that's why risk assets fall in tandem with the dollar going higher. And so this is kind of big, big picture. But really, it's, you know, the end game is somewhat binary in the sense that all this debt can't be serviced without perpetual monetary easing. It sounds very oversimplistic, but that's kind of the game we're in. And so Fed tighten, Fed loosen.

They really don't have a choice over the long term. the entire monetary system around the globe is basically necessitate on perpetual credit expansion. But we're just kind of in one of those deflationary periods of credit contraction where everybody's kind of scrambling for a chair. And so this leads us to kind of these triple B credit spreads obviously are increasing, which I know you've been spending a bunch of time taking a look at. What do you expect to happen next? Like what turns this over? Is it just going to continue to increase higher and higher over time? Until there's something that breaks until the Fed pivots? Like what pulls this back down? Yeah, so I mean, I'm not a I'm not a corporate bond

expert by any means, and not really diving into the specifics of of what companies need to refinance. But really, you know, US equities have been the best performing equity market since the great financial crisis, and it hasn't really been close. And it's been a lot a lot of it has had to do with the cheap capital that was available and these corporations levering up and buying back their stock. And, you know, that was a huge, huge driver, right? So you're seeing BBB credit spreads. There's, you know, trillions of dollars of BBB debt, corporate debt out there. This is the corporate credit spread is essentially the yield on top of the treasury market. It's kind of like a risk barometer, a risk gauge. And so when credit spreads blow out, it means that,

there's some trouble in the bond market. And so I think, honestly, the Fed is purposefully embarking on this. They want risk to sell off. They want inflation to come down. And they're doing that by destroying demand. And they're doing that by crashing asset prices. It's somewhat crazy that we're living through this. But ultimately, I think this goes a lot higher. And we're seeing whether it's, I don't think it's the banks or subprime this cycle. I don't really think anyone knows what the kind of canary in the coal mine might be. It might even be somewhere in the crypto contagion that kind of breaks this wealth effect. It's certainly $3 trillion or under $1 trillion today is meaningful. But I think ultimately, we're

going to see credit spreads continue to soar higher, volatility in the bond market and equity markets until that demand destruction really comes in. And I think the Fed is going to have to respond in a powerful way because there's really no way this train crashes in a soft landing type of way. When you see the euro dollar futures, the Fed funds rate implied for December 2022, starting to come down. And you've got the difference between December 2022 and December 2023. Also dropping. What is this telling us? Yeah, so euro dollar futures, it's it's not has nothing to do with the euro, it's it's more so euro dollars originated because it was time deposits offshore. So not U.S. banks, not domestic U.S. banks, but actually European banks

that had dollar deposits. So this Eurodollar futures market essentially arose as kind of a Fed funds rate futures market. So this is a CME product. It's onshore, but it's really just a Fed funds futures market. That's what Eurodollars stand for. And so we can see there's live traded and there's real big time liquidity here. Some of the biggest funds and risk managers in the world are hedging their interest rate bets, hedging on the Eurodollar futures market, we can kind of get an implied Fed funds rate for future dates. So December 2022 is at 360 bps, 3.6%. That's down from the high of around 4.14%. So it's calmed down almost 45 bps. But the real key, and I think the most interesting thing about this, is if you monitor the difference between the December 2023

and the December 2022 Fed funds rate, that implied rate. And for all of 2021, for all of 2022, up until, you know, I think the middle of June, we saw it was a positive spread. So the market's expectations, again, like one of the bigger markets in the world for hedging interest rate bets, or just speculating in general, expected that Fed funds rate would be much higher in 2023 than it was in 2022 at the end of year. now that's fallen dramatically and is now 74 bps lower and in the at the end of 2023 so this is

you know everybody's saying when fed pivot when fed pivot uh not calling it and certainly this could reverse but this is the market the lower that the equity markets go the higher that the dollar goes the more that you see kind of trouble in emerging markets around the globe and the more that you see you know kind of currencies crashing against the dollar i think there's gonna be more and more pressure on the Fed to ease up a little bit. And hey, you know, tightening to 400 bps in the Fed funds rate is going to cause a whole lot of trouble. I think the market's just starting to realize that. And, you know, this will be one of the things that I monitor in the future. When you start to think about how this affects kind of the Bitcoin and crypto market,

there's obviously a macro impact for sure. But there's also some things around the nuances of the industry itself. We've seen contagion throughout the market. We've seen asset prices crashing. We've seen a ton of kind of chain reactions. What's your general feel for where we are right now? Should we still be worried about some of this contagion? Should we be worried about future failures of businesses or of assets? Is there a little bit of a lull and relief and everyone can kind of take a deep breath, which may be in contrast to what happened over the last three or four weeks? Like, how are you feeling about it? And what are you thinking at the moment? Yeah, so I mean, certainly, we've seen a lot of pain. It's there's been almost no relief for the

longest time, just just consolidation straight down. And actually, one of the more kind of worrying things from just analyzing trends is that, you know, NASDAQ, S&P 500, Bitcoin correlations have been very positive for all of 2022, to the downside and upside. And in recent weeks, we've seen that correlation, that beta really intensify on downside moves and an upside moves, Bitcoin is just kind of laid flat. It hasn't really responded too well. I think because of all of the kind of contagion, because of all of the risk off, because of all the off balance sheet debt that no one really knew existed, you're seeing a lot of risk managers from the legacy world that even if they think, hey, this is really, really cheap, Bitcoin is

here to stay. They're getting a tap on their shoulder from their risk managers, from their senior guys, at the funds they work at, they're saying, hey, we can't touch this right now. The market's very, very illiquid. It's moving up 5% or down 5% just on a $500 million in the futures market. It's too illiquid for us to take a sizable position here, and we need to cut risk in general. So I think that's one. The second is that miners are going to continue to face some pressure. There will be kind of a full-style capitulation and transfer of coins and ASICs from weak to strong hands. That's in the process of occurring. It's obviously started today with, say, a core scientific selling 86% of their Bitcoin holdings over the course of June. And I think the next is

that there's a big lesson here in the crypto world broadly. And one, not your keys, not your coins. That's been repeated ad nauseum. And I think a bunch of people understand that. But two is, I think, some of the marketing from these lending and yield desks and companies around the space in terms of like advertising it as a savings account, when really, you know, they were taking deposits, rehypothecating and chasing yield through kind of various ARB strategies, various funds, you know, giving their funds to hedge funds, etc. I think that in terms of having a lasting and effective business strategy, I think that needs to change. And obviously, you know, yield and financial services aren't going anywhere,

but it needs to be advertised more clearly to consumers other than just fine print because a lot of people thought they were just saving their Bitcoin and getting an interest rate like they do at a bank. But ultimately the risk-free rate of Bitcoin is 0%. And any other yield on top of that requires some risk premium

and then ultimately there's risk being taken. So I guess that's my three main takeaways here. I expect Bitcoin to kind of chop around in kind of an accumulation phase for a while. And if we do see kind of everything correlation to one event, which I suspect is still to come in the legacy market, Bitcoin will see some downside pressure. But really, all the historical indicators that I see from capitulation or from miners to macro conditions to just, you know, price action and trends previous to all time highs. Bitcoin's a deep value here, but that doesn't mean it's going to send it to all time highs tomorrow. So patience is the name of the game. Learn best practices, self-custody, and just understand that in the end, there is no escaping the perpetual credit expansion of the fiat system.

So when you start to look at maybe what the fallout is or how the industry will mature over time, I'm going to throw out two or three ideas. You tell me whether you agree or disagree with each one of them. The first is around disclosures. Do you think that we will see more requirements around disclosures or it will continue the way that it has been over the next five years or so from a regulatory standpoint? I think regulation is definitely coming. I mean, I'm not a huge fan of everything the SEC does. I'm not one that calls for, you know, regulation or, you know, people to be, you know, like the SEC to get involved in every such, you know, little project or thing. I'm more of a kind of a libertarian or kind of an anarcho-capitalist, but I think there were a lot of people that got hurt and didn't understand risks they were taking this cycle in crypto broadly. So regulation is definitely coming. Gary Gensler wants to get in and kind of regulate all these crypto exchanges before Spot ETF is launched. That's very clear.

that's also kind of the market overhang here is that great gbtc has uh 650 000 bitcoin approximately uh and those gbtc shares are trading at a 30 discount uh on the kind of the otc markets so that's a very big overhang for the spot bitcoin market uh and it's one of those kind of things that probably needs to be cleared before before next cycle um so regulation is coming i think disclosures are good um especially in kind of the altcoin world it's it's very clear to me and very clear to regulators that Bitcoin is a commodity. It's, you know, I don't know about all these other altcoins or projects, and I'm not really here to say, but I think, you know, Bitcoin is far and away, it's separated itself from the field there. And I think, you know, that clarification and

that regulatory kind of clarity is something that's ultimately a good thing over the, you know, over the course of the next five years. Next topic, Bitcoin mining will hit a death spiral. Agree or disagree? I completely disagree there. Anybody that's studied the protocol in depth understands the cyclical nature of this market, understands the difficulty adjustment and understands basic economic incentives. There's a bunch of people in the world that hold Bitcoin and have a vested interest in acquiring more as well as sending it around. Because there is a fee market, there will be a fee market. It's not completely robust now, but because Bitcoin as an asset is in demand, there will be people that want to pay to transfer it

around and there will be an economic incentive to mine it. What's hash rate in 10 years? No one has any idea, but there will be somewhere in the world that has wasted energy with probably a marginal cost of zero or negative right you can sometimes you can get paid to take it off people's hands and so those ASICs will will transfer to wherever jurisdiction or location they can find the cheapest energy the wasted energy and mine Bitcoin profitably because some inefficient miners have to unplug and have to sell their holdings changes absolutely nothing about the fundamentals of the protocol or how it operates or the you know the genius economic incentive kind of feedback loop that satoshi engineered so uh yeah bitcoin is is mining is

not going to be in a death spiral and and people that champion that idea are are a little bit confused i believe grayscale will win their lawsuit against the sec and gbtc will be converted to an etf before the end of the year agree or disagree no no law experience whatsoever here but I disagree. I think we have a little bit of time ahead of us. You know, wish Barry the best of luck. You know, wish GBTC holders the best of luck. But it seems like there's, especially with everything that's transpired over the last, you know, two months or so, I think there's definitely some more regulatory, more regulation coming. And because of that, any GBTC ETF conversion will be halted. Whether I think that's a right move or not is another kind of question or story. But

yeah, I'm not too optimistic about an ETF in 2023. I'm sorry, 2022. At the moment, Grayscale's GBTC is trading at a 30 plus percent discount to NAV. Is it a better idea if you want Bitcoin exposure? Do you buy Bitcoin or do you buy GBTC? And not so much from a financial recommendation standpoint, but in terms of how you think through the pros and cons of direct Bitcoin exposure versus maybe a 30, 35% discount, uh, in the GBTC structure. Yeah. I think for anyone that has, has funds, um, in a kind of a brokerage account, uh, or, you know, not, not something like everybody should have a cold storage Bitcoin stack in my, in my opinion. Uh, it's, you know, there's an ultimate sovereignty to having Bitcoin in your

control that no one else can touch that's secured by cryptography. But I do think that there's some pretty tremendous opportunities that are present with GBTC and it could potentially get even better. One thing to understand, and this is kind of just some basic math, and I don't have the exact numbers off the top of my head, but with a 30% discount to net asset value, if that returns a net asset value, and I guess you could subtract a 2% annual fee. So if it takes a year or two years or three years, worst case scenario, you know, you're going to have that fee that you'll pay your, your kind of your Bitcoin that you, that you own in the trust will diminish ever so slightly, but at a 30% discount, if it returns to net asset value, it's like 70 cents going to a

hundred or to a dollar you get around, like say, you know, ballpark 40% increase against Bitcoin itself at around a 40% discount, it would be, I think around a 54% increase. Right. And so at a 50% discount, it gets really crazy where, you know, you're buying 50 cents and it goes to a dollar. It's like almost like you're getting a huge, huge increase relative to Bitcoin itself. And so I think it's an interesting opportunity. I certainly wouldn't go all in on GBTC because I, again, like that from a non-financial perspective, I like owning Bitcoin in cold storage, but, you know, at a 30% discount with Bitcoin trading at $20,000, you're buying Bitcoin at $14,000, Right. Imagine if Bitcoin goes even lower, you could buy Bitcoin for 10,000 or below.

And so for any hedge funds or anyone that's looking to get Bitcoin exposure, it's certainly a huge value move. And I think it's probably one of the best buys this bear market. When you look forward to the rest of this year, is there anything that people aren't talking about that you're going to be watching for the next six months? We're kind of right at the half year point. What else are you paying attention to? Yeah, I think, you know, I'm still sitting on some cash waiting for kind of an ultimate capitulation move at $20,000 or, you know, I think $17,500 is the ultimate macro bottom. Fantastic. but really from what I'm looking at from an analysis perspective is whenever the brunt of the spot selling has taken place and we can't really know that with certainty but you're going to see kind of whether it's funds redeeming or more miners selling or you know whether we see

you know Celsius have to you know file for bankruptcy and liquidate their WBTC or whatever it may be I think ultimately at the bottom of the market just like we've seen in every single bear market, whether it's a huge last leg down or we steadily grind to say 15,000 or 12,000 or whatever it may be, you're going to see the derivative markets, which is pretty significant in size. The collateral, the open interest of Bitcoin futures is like, I think off the top of my head, 300 or 400,000 Bitcoin. You're going to see that market get extremely bearish. And the bears who have been right, the bears in this derivative market have been right since November of 2021, some of them are going to continue to try to drive BTC into the dirt. And you're going

to see that reflected in funding rates. And you're going to see that reflected in kind of the futures premium or discount. So say spots at 15,000 and the futures market is trading at 14.8, right? That's just an example. But that's what you see at the Bitcoin bottoms is that contango that exists in the bull market turns into a backwardation. And you see futures traders and speculators really try to drag the price of Bitcoin into the dirt. And so that's for me a clear signal that the brunt of all the spot selling is done. And now you have a bunch of futures traders that are short BTC and need to cover. And that's when you see Bitcoin hit an all-time bottom, a cycle bottom. And so we're not there yet today, in my opinion, but that's one of

the things that I'll probably be looking for from an investor and somewhat of a trader's perspective. I love it, man. Where can we send people to find you on the internet or sign up for the newsletter that you guys put out? Yeah. You can find me at Dylan LeClaire underscore on Twitter. We mapped out a lot of the craziness that's happened over the last couple of months in our contagion report for Bitcoin Magazine Pro. So you can find that at bitcoinmagazinepro.com. It's a PDF. We put a bunch of work into it. It's pretty beautiful in our opinion. So check that out and appreciate you guys giving me the platform as always to come here and chat listen you can come whenever you want if you keep teaching us things you're you're

welcome whenever we should be thanking you now you thanking us so uh all right man you have a great rest of your week and we'll see you again next tuesday cheers guys all right later thanks so much for listening to today's episode i really hope you guys enjoyed this one make sure you're subscribed on apple spotify or your favorite podcast player and if you're looking to try to transition to get a new job in the bitcoin or crypto industry we've got you covered head over to palmscryptocourse.com we've developed a curriculum with the top teams across the industry it's a three-week intensive training program with over 50 events packed into that three-week time period go to palmscryptocourse.com to learn more and i'll meet you guys for the next episode