The Wolf Of All Streets - $1 Million Bitcoin Will Happen | Alex Krüger

Episode Date: November 4, 2021

Alex Krüger is a well-known crypto economist, famous for his hot takes and insightful thinking regarding all markets. He has a knack for putting crypto in context of global markets, and shared his thoughts on various topics in this whirlwind episode. He also made the case for million dollar Bitcoin. You don’t want to miss this. -- Arculus: Arculus is the new crypto cold storage wallet that combines the world’s strongest security protocols with an easy-to-manage app. Store, swap, and send your crypto all with a simple tap of your Arculus Key™ card. Order the safer, simpler, smarter crypto cold storage solution today at: https://thewolfofallstreets.link/arculus -- Kava: Kava connects the world's largest cryptocurrencies, ecosystems and financial applications on DeFi’s most trusted, scalable and secure earning platform. Kava lets you mint stablecoins, lend, borrow, earn and swap safely and efficiently across the world’s biggest crypto assets. To learn more visit https://thewolfofallstreets.link/kava -- If you enjoyed this conversation, share it with your colleagues & friends, rate, review, and subscribe. This podcast is presented by Blockworks. For exclusive content and events that provide insights into the crypto and blockchain space, visit them at: https://www.blockworks.co ーーー Join the Wolf Den newsletter: ►►https://www.getrevue.co/profile/TheWolfDen/members

This podcast is sponsored by Kava and Arculus. Stay tuned for more information about both of them later in this episode. What's up, everybody? I'm Scott Melker, and this is the Wolf of Wall Street's podcast, where two times every single week we talk to your favorite personalities from the worlds of Bitcoin, finance, music, art, sports, politics, basically anyone with a good story to tell. Now, today's guest is a well-known economist and trader who's beloved by the crypto Twitter space and beyond. He has a knack for

predicting what's happening in the future and putting crypto into the context of what's happening in global markets. I'm really excited to hear his thoughts on what's coming next. Alex Kruger, man, thank you so much for taking the time to do this. Hi, Scott. Thank you very much. Hi, everyone. And great to be here. Yeah. So listen, talk to me about dog coin madness. What do you make of the Doge, SHIB, Flocky, et cetera, craze that we're seeing in the markets right now? I think we need to just accept that the market has an appreciation for things, for memes, basically. And in a way, what we're saying in Dogecoins and Mipcoins is, how to put it, is like, you could even say that they are honest coins

because they don't really promise anything. It's just a meme. So if you want to buy it, great. If you don't want to buy it, don't buy it. I get and understand that people that come from traditional finance, they get quite triggered by the fact that the market is beating up these coins. And I understand it, but the world changed and I just have to accept it. And if you're a trader, trade it or watch. To me, the issue, obviously, I agree 100% with you. The issue comes when people, I guess, who are new to the market

view it as an investment rather than a trade. I think that it's a trader's dream, to be quite frank, right? I mean, SHIB, Shiba Inu has had more volume than Bitcoin in certain times in the last few weeks. But there are people who really believe that these coins have genuine utility and will be around for another decade and that they're going to retire on those investments. So what do you make of that? Well, to be honest, there's a lot of people that are retiring on those investments. So what do you make of that? Well, to be honest, there's a lot of people that are retiring on those investments. So in a way, I mean, I used to think the same way, exactly what you, what you just said. And I was wrong. I mean, I think we are wrong. I think that actually if you get these,

these coins at early stage and are patient enough to actually, you have to get them early sheep right now, that's not an investment. That's a trade. You can put size on it. But if you put a small amount of money on SHIB a while ago, it's a known fact that would have been an extremely good investment, not necessarily a trade. The thing is most of the people getting in are not really that informed. And they just, actually, most people is interesting. They just buy without looking at the chart. Right.

People just goes and clicks buy. And that's an issue. Yeah, it is an issue. And the other issue is obviously that we tend to see the coins go down as fast as they come up and very few people sell near the top, right? I mean, it's human nature to ride it all the way back to the bottom. Yeah, very much so. Yeah. I mean, it's human nature to ride it all the way back to the bottom. Yeah, very much so. So where do you think that that fits in context of the greater crypto market right now?

You know, a lot of people who've been here a long time hate it. They say, you know, people should be focused on Bitcoin and Ethereum. Do you think it's a reflection of the crypto market in general to the mainstream? Or do you think that it's sort of its unique lane? No, I think it's become mainstream by now. In a way, it's interesting. There's quite a few things on this thing. One is that much of it is an entirely different market

than actually most tokens. So we have basically the tokens that we're talking about and trading the most, the known ones with good names, et cetera. The meme coin category, I mean, it's mainstream by now because of adoption, but at the same time, it's independent, it moves on the sides and it has different players, mostly.

You could say the same with NFTs. I mean, if you look at NFT influencers and the overlap between the different areas, there's very little overlap between Dogecoins, NFTs and Bitcoin and Solana, right? True. A lot of it, I think, has to do with the fact that the market has just matured and changed.

You sort of see people seeking this mythical alt season that seems to never come across the board like it used to in 2017. And then you point out last summer, it was DeFi summer, then it was NFTs, then it was dog coins. There's always something that's tradable and going up in this market at this point. Yeah, 100%. I mean, for those who can actually, I mean, we actually been joking a lot about the rotator, right? But the people that actually can rotate fast enough and change between narrative to narrative, which basically every week to three weeks, we have a new main narrative and that really

drives flows. And at the end, it's about catching these flows and trying to get in somewhat early. And if you get in actually, you know, halfway past the, in the second half of the narrative and hold quite likely going to get, you know, done. Absolutely. So listen, you have a great pinned tweet I love, and this is what it says. Bitcoin current macro drivers,

loss of faith in governments, lower rates push speculators out the risk curve, negative real interest rates, inflation. These are all interconnected, the faces of a four-sided dice. Can you talk a bit more about that tweet? I still believe it's 100% accurate and basically what drives Bitcoin

and as an extension, crypto, because in a way, crypto is, I mean, it's changing and maturing at present, but crypto is still basically most crypto assets are high beta Bitcoin assets. So you put a multiplier and in a way, it's like whatever drives Bitcoin drives the rest. Now we have the metaverse, et cetera.

But going back to the Bitcoin thing, it's the key component, I think there is interest rates, which are real interest rates, which are negative at present, which means basically that, well, what that means is that cash is trash, as Ray Dalio likes to say. Cash actually, that's a really good line he put out. It means that basically if you hold cash in your bank account or in bonds or any fixed income product, you're going to actually be losing money. That happens because of high inflation or

higher inflation and low nominal interest rates, which are the interest rates that we see in the market. And adjusting nominals by inflation, you get reals. And reals, when they're negative, is that make cash being trash. And the other thing that that does is basically at the same time, it pushes a great number of speculators out the risk curve to basically try to increase their profitability or hit their return targets. All of this happening in an environment of massive liquidity where everybody is awash with cash. And on top of that, we get the COVID impact of basically everybody getting really, really upset at governments because of what happened, either because of lockups,

I mean, lockdowns or vaccines, or just getting done, you know, by governments shutting down your small businesses while, you know, the Amazons of the world, they keep on operating and they take your market share and they bankrupt you. And people are not coming back to work. And in a way, I mean, we've been privileged, all of us in crypto, that we are at the peak of this wealth redistribution that is happening, where pretty much everybody who is middle class

and not invested in the market, either crypto or stocks, middle classes and everybody on lower classes, they got destroyed by COVID. And the few on the other side, we profited, fortunately. And it's good for us, but it's really sad and people are pissed

and the bitcoin in a way is it's an alternative you know yeah it is it is good for us but uh in march 2020 not people not many people thought it would be right so i think you know crypto obviously crashed 10 12 days before the the stock market uh bottomed And there was a lot of this is dead sentiment. It's going away. I mean, even I, you know, I didn't expect to do as well coming out of that as I did. I was a bit surprised. But I think at that time, people didn't really see it recovering and driving this hard coming out of that. So I mean, are you at all surprised that, you know, it pulled a 17x from the bottom while stock market doubled? Or is that actually sort of along your expectations of what you thought would potentially happen?

It's along my expectations on the Bitcoin side. What actually I did not expect was the rest of the market to blow up the way it did. I mean, the other things going up 100x, 200x, okay, that, I mean, I expected this thing and everything in the same direction, but not to this magnitude. And that's where actually comes into play something that I go by when I trade or, yeah, what I go by when I trade, which is basically try to, unless trading short term where you want to have a really ideally well-defined risk reward, do not put price targets.

Especially in crypto, you're going to get run over, you're going to sell, you're going to exit, you're going to turn around, you're going to say, fuck. And then you reenter 3X higher, you buy the top and you get dumped on

and you end up with nothing. Yeah, I mean, the FOMO trade is definitely the trade in crypto. And very few people have the, I think, discipline to exit and watch it continue ripping and not jump back in. Right. But that's sort of a rare talent. There's also the other side, right? There's a lot of people who believe that you should or should not use stop losses. What are your opinion on that, the crypto space?

I think it depends on the time frame you're trading. If you're trading at short time frames, you need to have stop losses. What are your opinion on that, the crypto space? I think it depends on the time frame you're trading. If you're trading at short time frames, you need to have stop losses. If you're trading leverage, you must have stop losses. If you're trading a leverage, illiquid cryptos, you are insane and you're about to basically, or maybe not necessarily insane, maybe you're just not well informed and you're bound to basically lose it all um i think for positional trading and uh yeah for positional trading uh one should not have any stop losses whatsoever uh anything that is short term yeah you want to have well-defined stops um it's stop placement this is another so many ways to do it right uh but uh something i wanted to say there is that uh like like when entering positions like right now when when funding is getting a little

bit hot uh i think one has to enter if deploying fresh capital use stops if not deploying fresh capital you're that's different because you're basically just redistributing from rotating from one to another, right? But fresh capital in hot markets, yeah, you need those stops. So you mentioned obviously earlier that interest rates and real negative rates were a huge part of the macro equation that's forcing Bitcoin in the crypto market up. And I think the narrative across the board, or at least the fear, is the meetings coming up and the possibility of the Fed finally beginning to taper or rates rising. What do you make of that and its role? I guess specifically for our audience, how that could affect the crypto market after the global market.

I think it's mostly priced in. I agree. There's two kind of things there when talking about something being priced in. We have basically pricing in around the event itself. So basically some things can run a little bit too hard or basically not being reflecting of market expectations around that. And that can cause very sharp corrections. And I think that is priced in. On the other side is the longer term impact on flows, right?

Like the example is the halving. So the halving itself, the event of the Bitcoin halving was priced in. But then you have the flows that actually you get half as many minor rewards and basically minor flows going to diminish continuously throughout time. So there's two kinds of things. One can be a price hit or not. The other one is real.

So what I think is basically the Fed tapering, the expectation, my expectation is it's going to be announced tomorrow. And this is going to be basically to be implemented in a couple of weeks, goes through all through June 2022. My view is that that's going to impact the slope of appreciation in financial markets. But it doesn't really change the trend. And one more thing I wanted to say is, why do I think it's priced in? Well, first of all, we already had a very big correction a month, five to four weeks ago. That was driven, I think half of it was Evergrande, this Chinese credit real estate company.

The other half was tapering. So we already went through the tapering motions. And then if you look at markets, for example, what would make me concerned? If I were to be seeing, for example, EM, emerging market currencies selling off, I would be thinking, for example, okay, there is somebody here that knows. That's a highly correlated asset to the FOMC. Somebody here knows something I don't know. I may want to hedge into the event some. Now, EMFX is not selling off at all. It's actually quite stable. Price action across asset classes is rather stable. FX is stable. Rates are right now rather stable, VIX is stable, the curve is

flattening, the rates, the treasury's curve is flattening. Something very interesting is happening there. Basically, for the first time, the 30-year rate is lower than the 20. Basically, we get a curve inversion in the long end. What does that tell you? It tells you that the market is not really that concerned on the long end about inflation. It's more like a shorter term thing.

Do you believe that it's shorter term, that inflation is transitory? I fully do. I fully 100% do. I think the long-term effects on inflation are basically technology and different ways that technology advances impact inflation are going to dominate entirely this. I was thinking six months from here, it may be two, hopefully six months and not two, but it's a matter of timing.

It will happen. I'm very positive very positive on that. Very confident. That's an interesting take and something that I've discussed with quite a few guests. The idea that no matter how much they print, you can't fight the deflationary pressures of technology and what's happening. So you eventually, I mean, they can literally just keep printing because they can't go hyperinflationary because of these other things. But what's the flip side of that? Right? Eventually you print, you print, you print, you can't even fightinflationary because of these other things. But what's the flip side of that, right? Eventually, you print, you print, you print. You can't even fight the deflation. And then depression? What do you think happens?

Or do you think it stabilizes? We don't really know. That's the thing. We have the case of Japan. And Japan is still there, right? Aside of the crisis that affected everybody else, Japan hasn't been special whatsoever in that case. I mean, they don't have a crisis.

They just, they can't get out. It's an old, it's an old country. I think that the Fed in a way, and all central banks are going into the place where from where they can't really get out, right? That's a fact. It's gonna be like for them to get out of this, this new environment, that this new paradigm, they would screw everything. Yeah, I think that's the thing. There's no way out.

Just keep on printing forever. David Sherman Sure. They'll keep on printing forever. But assuming inflation is transitory, as you said, and that deflationary pressure is strong, then why do we need Bitcoin? Yann Tsoi We don't need Bitcoin. What we need is, Bitcoin is useful. You don't really need it. I mean, we don't need anything, I think.

At the same time is, what is Bitcoin? Bitcoin is an alternative. We don't really know that that's going to happen for sure. It's in a way, it's insurance. For those who care about that, you can see, even if you think it's not going to happen, you can think of Bitcoin as insurance against the tail risk of governments and central banks losing control. It's like, the way I like to put it, it's like a put option without expiry on central

banks. So we are covered. That's a great analogy, actually. I really like that. If inflation is not transitory, let's say that the markets react negatively, which obviously is not what you're expecting, and we see some sort of correction or crash. Do you think that Bitcoin has done enough to prove that it's an uncorrelated asset? Or do you think we see March 2020 again, and we see Bitcoin sort of being a risk on asset, obviously it sells off and then potentially bounces? Or do you think that it can kind of float on its own at this point?

It's a great question. I don't think it can float on its own at all, unfortunately. I would love it to be the case, but I don't think so. I think it's an asset that went from being almost entirely uncorrelated to slightly correlated through most of the time, becoming highly correlated at times of stress. And I think basically what happens is if inflation gets out of control, that would mean that the Fed gets their hands forced to start hiking rates aggressively. And if the Fed gets pushed to the point, everything collapses, including Bitcoin. One of those things, ideally, we could envision a scenario where actually Bitcoin collapses, but after a very big drawdown, it basically assumes a different form because the market looks and goes and flux towards Bitcoin as an inflation hedge. So basically put on a new avatar on top. It's like, hey, this is my new me. I think it's very feasible in that unlikely scenario, which I don't see happening. David Sherman Yeah. I had a guest named Harry Dent,

who's sort of notorious for always calling major market crashes an impending doom, which has been a right about at times in the past. And he was sort of notoriously not particularly a crypto enthusiast. But what he said basically was, if it all crashes, crypto goes the hardest, and it's the first thing I buy. There you go. And that's a thing. That's what makes the market. We make the market. People like us and people like him think in that way.

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I mean, effectively, it flattens out, but they still continue to rise. So do we still see as much upside in, I guess we can talk about crypto as a whole separately, but in Bitcoin from here, assuming those sort of scenarios, or have we really passed the point where the biggest percentage gains have been seen in this asset? I think we are past that point

or most definitely past that point. That doesn't mean that we are, that doesn't mean we're going down. We're just past that point, or most definitely past that point, that doesn't mean that we are, that doesn't mean we're going down. We're just past that point. I still think, actually, that crypto is going to continue to be the best performing asset class by a long stretch

basically across time frames, actually. So even that being the case, it's not an issue. I do get worried when i see this basically all these moon calls and uh that basically drive people and and usually drive people that are uninformed to to buy tops right and i i hate to see that so buying tops would you view buying bitcoin now as buying a top if i had nothing nothing on, I would be buying Bitcoin now. If I had nothing on right now, I would be putting basically 20 to 30% of my crypto allocation and deploy it

immediately. If you have decided to play this game and you have nothing on, you have a problem. And if this thing may break out and yeah, it's a little bit hard, but we can run a lot on this level, on these fumes. Could be at 75, it could be at 85 by year end. It's very feasible. So you can't be flat. Are six-figure targets hyperbolic by the end of the year or beginning of next quarter? Do you think that that's stretching it too thin? People call for seven figure Bitcoin. Do you think that that's realistic or do you think that that's moon boys, as you said? 100K by year end is possible. I think it's very unlikely. Or let's put it this way. It's unlikely. It's not very unlikely. I thought it was delusional in the event of basically under normal circumstances, but these are not normal circumstances.

We just had a slew of ETFs approved and that changed everything, I think. So my base case scenario is more like 75, 85. Can we hit 100K by year end? Definitely can. One million Bitcoin, I think it will happen. Most definitely. I have no idea when. I think

where it's way out there. I also, it's, if you look at the people calling for 1 million Bitcoin, you quickly realize that they're always wrong. They're right in their view, but they're always wrong in their timing. No exceptions. Of course. Yeah. And does timing particularly matter if you're, I mean, listen, if you're looking for a million dollar Bitcoin, that's a retirement trade, right? I mean, that's an investment. You're not disappointed if it doesn't happen next year. So isn't it just sort of absurd to put timeframes on targets that big?

I don't like it either, honestly. I think it's actually absurd when you have no edge. But if you can, it's very valuable when you have no edge uh but if you can it's very valuable because basically the faster you get to a to a target the harder the return so it's not the same at 20 than 99 a year but yeah i try to stay away from targets and most models actually they're mostly for building narratives and justifying views. Basically, if you're a hedge fund, if you're a VC, or if you're an opinion maker, you need tools to basically say,

this is why I think we're going to X or to the moon or whatever. And models are extremely handy when it comes to that. I guess the question really is, how much will a Big Mac cost when Bitcoin hits a million dollars? Exactly. What does a million mean in the world where Bitcoin hits a million dollars? What does a million mean in the world where Bitcoin is a million dollars, right? Be very unimpressed with people who are millionaires probably by that point in the world and we'll only be talking about

billionaires, right? So you brought up something interesting that's been obviously a hot topic of conversation on every podcast and everywhere on Twitter, obviously the ETF, right? So I think a lot of people wanted to see a physical Bitcoin ETF, of course. We got a Bitcoin futures ETF, and I've heard a wide spectrum of opinions on what that means, whether it's bullish or bearish, why it happened, why they accepted that structure. What are your sort of top end thoughts on the futures ETF? It is very bullish. Undoubtedly, it's definitely bullish. It's not as bullish as pot ETF would have been by a very large margin

because it's not a good product because it suffers from basically a construction. Basically, the way it works, I'll try to be not too technical but basically what this thing does is it has futures as underlying assets so basically x say they get 100 with 100 they're gonna get a hundred in bitcoin futures uh which on the other hand by the way on the other side you get a market maker that is basically hedging the trade. So actually 100 Bitcoin spot do get bought along the chain at some point. So, yeah, it impacts directly spot price. And by the way, those like X percentage goes towards buying futures as you use it as margin. The margin is 40 to 50%. That means that basically your leverage, your max leverage on those futures is 2X,

which is way lower than the leverage you get on non-US exchanges. And then the other thing, what I wanted to say is that basically they're buying futures and futures are derivatives with an expiry. They expire every month, every quarter, et cetera. Bitcoin futures expire every month. So every quarter, et cetera, Bitcoin futures expire every month. So they need to be rolled over around expiry, which means you are selling one future

and you're buying the next. And because the Bitcoin futures curve is upwards sloping, basically, well, yeah, you get it. It's what is called a contango, where basically the further the curve of futures you go, like the longer the expiry, the higher the future. So you're basically selling one future that costs X and buying another future that costs a little bit more. So the ETF is regularly buying high and selling low. And that basically costs a negative carry that should be around in the order of around minus 10%. Right. So again, contango bleed, basically. Right. Yeah. It's a dreadful thing.

Yeah. And so that's a great explanation of why the spot would be better. And what was interesting is that with the launch of ProShares, they had saw so much interest from the beginning that there were literally no futures contracts left to buy. Right. And so they had to start buying further out, which obviously detaches the price even further from spot. That sort of is a risk they probably did not have in mind when they launched, right? I mean, they thought that they would just be able to do end of the month contracts. And now you're talking about two, three months out. That's not a product that's going to track spot, correct? Yeah, 100%. That's exactly the case.

Yeah. And then I guess the other side of that, that is, you know, sort of the institutional yield model, the BlockFi model, if you will, the cash and carry trade, of course, which you buy spot and short the future, right? And you just sort of gain on the, as they converge, there's money to be made there. So how does that affect, does that in any way, do you think affect the price of spot? Obviously people are buying it to short the future, but then they're selling futures contracts, right? Yeah. So the delta, the impact on price there is actually, it's

negligible because they're exactly, they're being neutralized. But what you do see is basically this, it's exactly what you were saying. It's all these inflows coming into the futures markets. They steepen the curve, the futures curve, which basically means that the implied interest rates in the market are way higher. And that basically goes across Bitcoin markets and pushes interest rates across all Bitcoin markets higher. So in a way people can be looking at rates right now

and getting concerned that the market is too hot. It's a little bit hot, but it's not really as hot as people think, because on one hand, rates now in this new environment are supposed to be a little bit higher, at least for now. And at the same time, the thing that I mentioned before, which is basically the fact that this open interest behind the CTF is not as levered. But finalizing the point that you were talking about is this brings a lot of opportunity for players in traditional finance to come in and capture that yield. And it's going to generate massive amounts. It already is, but it's going to continue generating massive amounts of smart money interest. Yeah, I mean, we saw GBTC already.

GBTC was trading at a 20% discount before the ETF launch and immediately went to about 12% or 11%. Because, I mean, if you can make that trade buying spot Bitcoin and selling the future, imagine what you can do when you can buy GBTC, which is at a 20% discount from spot, right? Yeah, absolutely. It's a good trade. I still think it's a good trade, by the way, GBTC. I agree, actually. I actually think that the futures ETF made it a better trade than it was. I think it helped quite a bit. And then, of course, you see Barry Silver tweeting, hey, listen, we've approved a billion dollars to buy back more GBTC. Well, that's the reason, right? Because they can make this trade and it's free money, billions of

dollars a year. Yeah. The GPTC is actually a great example of a case of buy the rumor, sell the news. GPTC going down in anticipation, significantly, I mean, in the spread, the discount going down in anticipation of the ETF. As soon as the ETF hits, the market goes down a little bit more, and then boom, off to the raises up. Right. I mean, maybe I'm bearish, but it's my feeling that we got the futures ETF, and that's pretty much it for a very long time. You know, there's a lot of people who are looking at a VanEck this month is going to have their final decision on a physical ETF. GBTC is trying to convert to an ETF. I don't see any of that happening for a very long time.

I think they basically threw us the bone that we were going to get. That's it. In fact, I would make the argument we're more likely to see an Ethereum futures ETF before a physical Bitcoin ETF. I concur, actually. There's a lot of the market is not there's no agreement there. I think we're basically one to two years out to a spot ETF, but there's a lot of people, actually very smart money,

that think that it's going to happen in four to six months. That would be a game changer, by the way. Oh, that would be the game changer. And they're, honestly, I mean, it's just my take from the outside. I would never have been against the people who actually have inside knowledge of what's happening in this situation. It would just surprise me because it seems like the administration, Congress, they don't have their have it together enough to actually even decide what committee they're going to

put together to make this happen. It's more about just like your bureaucratic red tape, in my opinion, you know, to even get close to being able to look at this seriously. And I think the futures ETF was just very easy. But regulation, obviously, has been sort of the other hot topic. We got the ETF, but we still don't have regulatory clarity on crypto, certainly. The President's Working Group on Financial Markets just released their report this week on stablecoins. I don't know if you read it or if you took the time to look at it, but actually I was sort of surprised in a positive way at their take on stablecoins.

Did you have a chance to look at that and have any thoughts? Very briefly, all I know is basically the way I see it is one less thing to worry about. They didn't really deliver anything. They just said that basically they're going to do what has to be done. On the good side is that they also pushed the can down the road. So there's nothing really happening right now. So we can worry about that again. It's like in a way, it's kind of like one of our debt ceilings.

You know, this thing that happens regularly and that we get all concerned about it, right? And then, ah, okay. I had sent Senator Lummis on the show right before the debt ceiling vote. She joked about that. She was like, yeah, the hot topic right now is the debt ceiling, but we all know it's going to be approved. We're all just negotiating and putting on a dog and pony show, acting like there's any risk that that wouldn't happen. But I found it very interesting that they put it in there that stable coins were effectively a superior medium of exchange. They were faster, more efficient, that they saw mainstream adoption coming, whether they regulated or not. So to me, it seems like stable coins, they're just going to try to make them banks, right? If you want to issue a stable coin, you need to be a bank and it could be bad for

Tether long-term. I think Tether is just going to get a license eventually in the States and it's going to be just fine. What happens is at the same time is stablecoins are just a superior product. So it's unavoidable that all of fintech eventually ends up using stablecoins and maybe issuing their own. And at the same time, the one big loser here is basically custodians, unlicensed custodians. It does generate, it will generate some ripples, but I don't think it's a reason for crashing crypto. It's just something that has to be done and generate some noise and changes the balance of power. And it's fine. We can move on. It's interesting what you said, because if it's the unlicensed custodians get hurt, that means the implication, obviously, is that banks become the custodians, right?

And we were supposed to be shorting the bankers and longing Bitcoin, right? And it seems like inevitably most of the Bitcoin is going to end up in a bank, just like your money. Yeah, but at the same time, I think most banks are going to, because of the crypto, they, at the end of this adoption cycle, they will have lost massive amounts of ground to either other, to fintechs or crypto companies. So yeah, I mean, we end up, banks are part of the, they end up being part of the system,

but in a much diminished, with a diminished footprint. I do think actually shorty bankers and long crypto still is a good trade. Yeah, I agree. So what sort of crypto maximalists believe that DeFi can disrupt and replace the world global financial system and every single part of it. And then I think there's people, myself, I think my view is that it becomes a parallel track and you sort of have a choice and people who are unbanked or underbanked obviously gravitate towards DeFi or a system that works better for them. But but certainly the big banks still exist and most of the world's wealth is maintained there. I think DeFi is going to end up being mostly

what we call CDFi. So basically the centralized platforms adopting DeFi technologies, money legos, composability, transparency, being able to audit things, being able to execute things in one block. There's a lot of innovation behind DeFi that goes way beyond the fact that it's permissionless. It's just great tech and it's inevitable. And it is eating banks and it's going to continue happening, I think.

So you see a world where DeFi can be the dominant financial system? Not DeFi, CDFi, basically a combination. Right. Absolutely. Somewhere crossroads. They basically adopt the technology and present you a product that you're familiar with. It looks like your bank. I think proper DeFi is going to be like a secondary crypto market, like a separate. I think there's a high probability that basically the crypto market splits into a regulated one and unregulated one. The unregulated is true DeFi and it moves on the sidelines like a great market. It's hard. I'm not asking in any way, shape or form for a price prediction.

But what do you see then in any way, shape or form for a price prediction prediction. But what do you see then in five years, 10 years? Right. Because I think a lot of people, we still believe we're very early. Certainly, I don't care what the price of Bitcoin will be. But what do you see the role of crypto? Do you see it eating the world in all these places? NFTs, DeFi, Metaverse? I mean, now we have so many different avenues, right? When I got into it, we talked about Bitcoin, right? We talked about Bitcoin being, well, there's a store of value, payments, where it was the endless argument about what Bitcoin was. That's almost become the smallest story in crypto, in my mind. I agree. Yeah, I agree. So what do you think it looks like in 10 years? Bitcoin uh becomes uh an asset uh it could be bigger than gold in 10 years i

think bitcoin's role is actually competing against gold this is the gold of of the uh younger generations um uh d5 gets uh adopted and um basically it ends up being like a hybrid between fintech and DeFi and they become synonyms. And NFTs are going to be absolutely everywhere. There are so many applications and it's not just characters and art, which by the way are great. I mean, even if we think they're worthless, we get emotionally attached to things that have a have an image and they talk to us so it's we're less likely to dump them and um it's not just the art it's basically uh uh from

tickets to uh um miles programs to uh stocks to real estate i think there's so many applications and i think actually the killer the killer app in crypto is uh nfts uh i agree because you can tokenize literally everything and and finally metaverses i think metaverses are are one of the uh the five uh main uh topics uh from an investment investing perspective long term and i think what uh sac did z Zuckerberg, with Facebook is absolutely brilliant. And something interesting there is this talk in the market that basically Facebook and SAC made that change as a tactical move to basically take the attention of the marketplace away from all the scandals that Facebook is going through, such as the one around teenage girls and Instagram. And I think that's actually coincidental or may have impacted the timing of the decision by a tiny margin, but it's really a very large strategic move. And in a way,

what SAC is trying to achieve is turning Facebook or Meta now into the company behind the company in which the Metaverse in the movie Ready Player One runs. Yeah. He's trying to become that thing. That's the way I see it. And if, I mean, if the audience hasn't seen that movie, I mean, it's really fun.

And I heavily recommend watching that movie to try to envision where we may end up being in 2020. Yeah, and my view has been that the metaverse isn't like this one parallel universe, right? It's each game is its own metaverse. And you sort of, people have their own options. But saying that they have their own options, we just talked about how, you know,

we have the banks and DeFi. I see a world where we have like centralized metaverses like Facebook and then the decentralized metaverses and people have the choice, right? And which one, and I think your people are generally going to choose decentralized when possible. But do you see that sort of bipolarity in that space as well? Yeah, we think exactly along the similar lines. Yeah. I think we're going to see the same with central bank digital currencies, where many of them are going to be closed. So basically, the analogy between the Chinese CBDC that is closed and Facebook's metaverse, which we can assume is going to be heavily closed, even though they're talking about

maybe interoperability as part of the narrative. And then we're going to have all these metaverses that are entirely open or some that are partially open. Same with CBDCs. We're going to have the closed ones, partially open ones, and fully open ones. We're going to have the closed ones, partially open ones, and fully open ones. Can you talk a bit more about that? Who do you think would have a fully open central bank digital currency? Obviously not China. I think a good candidate would be

Scandinavian countries. Scandinavians are very progressive, highly educated, disciplined people and they innovate. So do you think that digital dollar, United States, Central Bank digital currency is somewhere in the middle or totally closed? Yeah, I do. Yeah, I do. No, no, somewhere in the middle. Because obviously, I think one of the biggest arguments or fears about Central Bank digital currencies is the violation of privacy, right? I mean, we already see the US government talking about, you know, reporting transactions $600 and greater. Well, imagine if they have access to your digital wallet and, you know, control of the money supply. Do you think that that's something that would drive people to crypto? Or do you think that it's something that could potentially, you know, a central bank digital currency could be a threat? I think both, actually. It's a threat precisely because of the desire of governments to

have control of digital currencies. We've seen that in China, actually, this year already. And at the same time, CBDCs, they would act as both a great fiat on ramp, those that run on blockchains that you could bridge between one and the other. And at the same time, the worry about the states abusing the power that actually a blockchain-based currency would give them to snoop on our activities. I really think it's exactly as you said, I think that would drive a heavy interest into crypto. At the very least, everyone would know how to use a digital wallet, right? Pretty good start, in my opinion. So you mentioned that, I think you said one of the five investments, Metaverse being one of them. So clearly, you sort of have a hierarchy here of

what you're looking at for the future and think people should be putting their money in. So what's your long-term view of how to get your money? What assets are you looking at that people need to have exposure to? I think you need to be exposed to Metaverses. You need to be exposed to crypto in general. Metaverses, which is not necessarily just crypto Metaverses, also now you have Facebook. Other ways to play metaverses on the public equity side are basically stocks of the companies that build these engines. So basically Unreal and Unity. Unreal is a private company. I think it's going to go public in about two years.

Unity is public. And then you have the ones that make the hardware behind. So the likes of NVIDIA and AMD, so the chip makers. So metaverses are crypto metaverses, CBDCs, which are not necessarily metaverses. And actually to get exposure to CBDCs at present is very hard because there are no public companies that offer you exposure to that theme. So the best way at present is actually having small positions in layer one blockchains,

hoping that some of these are going to be working with nations and central banks. Yeah, exactly. Yeah, and layer ones, I love that you touched on that. I've been saying this for months every time I get on an interview. Just buy every layer one, right? I mean, that's been sort of my approach over the last year. I just want to have exposure to all of them because I don't believe anything kills Ethereum.

I don't even think we need to talk about an Ethereum killer. I think each one can just find its lane and you can profit from that. And if two succeed and five die, the success is going to more than pay for what you lost on investing in the others. 100%. I mean, I wouldn't buy all of them, but I think buying quite a few, especially for those who are not living 24-7 in the market, having a diversified basket with a reasonable weight, don't go too crazy on exposure, it's definitely a winning ticket. Are there any that you're particularly excited about and think could win that race?

Solana. It seems like the obvious answer. Yeah, I mean, we all, yeah. It's not a non-consensus trade anymore. But that still has, I think, a lot of room in relative terms until it becomes fully, how to put it, until its outperformance goes away. It still has room to outperform, not the same way,

but it still has room. And just looking at the market rankings, and you see Cardano above Solana, it tells you everything you need to know. There's something wrong there. The market is not efficient. And on the long term, it gets there. But Cardano has seen quite a drop over the past few weeks.

Do you think that that's a function of the market actually becoming rational? I mean, listen, I have nothing in the world against Cardano. I just never believed it should be the third coin by market cap when they haven't delivered anything fundamentally except for ideas. And maybe it will be the greatest blockchain that was ever created. But do you think that we're just correcting from that? The higher they go, the farther they have to fall? Two things there.

One is I do want to say I'm sure you have a lot of people in the audience that are Cardano fans and shareholders. And I definitely respect very much the community. And I think it is a good asset and what they achieved is incredible. But at the same time, the tech is not that good, to keep it simple. And I see Cardano more like a meme, like a hybrid between a layer one and a meme coin because most of the value is actually driven, it's like a meme coin,

it's driven by the power of the community, which is actually, at least in the short term, is the most important thing. I was going to say that's not really a negative. No, definitely. So it's, and the power of the founder and his reach on YouTube is admirable. I mean, the guy is a machine and I admire that. That said, on the market, I mean, what happened is

they had a botched launch, right? Their smart contracts finally came out and the narrative quickly caught on the fact that basically these things are not working well. And it started tanking Cardano and all the tokens in the ecosystem. Before we go, I know we're running out of time here. Is there anything else that you're really looking at as either a trader or investor? What's really exciting you right now that we maybe haven't talked about? I think we touched most topics. I mean, things I'm excited about, I'm working in a lot of projects at present,

which keep me really busy and very excited, but it's not something we talk about. Not for public consumption. I'm sure we'll find out soon enough. I'm sure we'll find out soon enough. It's very exciting. Well, where can everybody follow you and keep up with you after this conversation? Basically, just Twitter. My Twitter handle is Kruger Macro, like my last name and macro from Macroeconomics. Awesome.

Well, listen, I've been excited to have you on for a very long time. I know you don't do very many podcasts, so I very much appreciate you taking the time to do this and all of your insight. And I hope that everybody gets quite a bit out of this as I did. So thank you very much. Awesome. Thank you, Scott. Thank you very much. Thank you, everyone.