The Wolf Of All Streets - Bitcoin Crashes - Buy This Dip? | Was The Bitcoin ETF Launch A Failure? | Macro Monday

Episode Date: January 15, 2024

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When the Bitcoin spot ETF started trading, we saw price pump as high as $49,000, but then immediately dropped back down, now trading between $42,000 and $43,000. For those who do not look at long timeframes, it begs the question, were these Bitcoin spot ETFs a failure or a success? Even last week, I did a stream about how it was a success. And then we sort of laughed on Twitter spaces that I had a very excited title and thumbnail and Rand Nooner had a very excited thumbnail and title about how it was an utter failure and we should sell all our Bitcoin now, which we then debated on Twitter spaces. But now I have three experts talk, of course, about macro, but also about how we should

gauge the success of these spot ETFs and whether this launch was or was not a failure. You guys don't want to miss this. It's Macro Monday with James Lavish, Mike McGlone, also known as the Wolf of All Streets. Before we get started, please subscribe to the channel and hit that like button. I'm going to go ahead and bring on our holiday edition of the panel, which means everybody except for myself and James gets a different background. It means you guys are not at work and are showing up for this on a Monday, but Bitcoin never sleeps, right? So we've got the title here, Bitcoin crashes by this dip. Was the Bitcoin ETF launch a failure? James, you just wrote an entire newsletter, which sort of sparked me to continue with this topic right here. Was the Bitcoin ETF launch a failure? Listen, maybe we

just go around the horn first. I say no. I say a rousing success. James, what do you say here? Yeah, I think it was a pretty solid success. I mean, people are looking at price, but that's just one factor, one indication of whether or not the ETF was a positive catalyst for the ecosystem. And quite honestly, just the sheer amount of attention that all of the 11 ETFs got, although only 10 traded, right? So the amount of volume, just the number of shares that traded, the NAVs of them, and the capital inflows and outflows, it's a pretty big positive. There are a lot of little details we can talk about, but I know people are definitely disappointed that we didn't get our God candle. But there's a lot of other things that go into these. And I

think that all in all, it was a strong positive. Yeah, I mean, I obviously go to James and Eric when I need the information on what's happening with the ETFs. We go straight to Bloomberg, right, Mike? But here's what he said. Latest with two days in the books, this is on Saturday. The nine newborns have taken in $1.4 billion in new cash, overwhelming GBTC's $579 million of outflows for a net total of plus $819 million.

IBIT now leading the pack. That's BlackRock with half a bill. Fidelity closed second, though. The newborn's $3.6 billion in trading volume on 500K individual trades, $1.2 million including GBTC, is very impressive as is the 20-bip average. So basically saying that this did- And, Scott, we probably don't have the full detail on that yet. Yeah, because you get T plus one, right?

I mean, you have no idea what really happened here. But this makes this collectively, there can be an argument whether it's fair to judge them collectively, effectively second to potentially Biddo, although I really think it was the third trading game that Biddo got to a billion. But I think a lot of the confusion here comes with whether we view GBTC really as part of this launch or if GBTC's

finally being unlocked is actually a headwind and should be considered separately. I actually think they should be considered separately. And maybe we should dig into what's happening with GBTC here. At the most basic level, there's a lot of people who either bought GBTC at a discount or have been locked in GBTC as investors for a very long time and literally could not exit or redeem. And this is their first chance. So naturally, they're either going to sell to take advantage, B, get the hell out of there because they're mad and have been there forever, or C, move to a product with a lower fee. Yeah. I mean, there's a lot to dig into with GBTC and exactly what you just said.

I mean, I think that honestly, we talked about this last week, I believe that Grayscale, they kept their fees so high. They're 1.25% above anybody else. And I just think that they did a cost benefit analysis on internally how many of their clients they would lose, investors they would lose, and decided that ultimately keeping the fees high for a period of time would make them more money than dropping the fees immediately. that and dave and mike touched on this last week also is that when you when you're an investor you pull up all these these uh etfs you want to see the one that's the biggest and that that just draws you to it um and one that has the most volume the one has most aum and so uh they know

that and they're well aware of that and they they they know that they can they can grab some fees here early from people who are kind of asleep at the switch and not realizing what's going on. Yeah, I mean, they started with a $27 billion head start, right? Even if 10 billion of that leaves, they're going to be multiples ahead of anyone else. Even if 75% leaves, they'll be the biggest. Exactly. You can see on those numbers what is happening, that a massive amount has been dumped out of GBTC in the first two days.

It's also the track record. I remember when I was at S&P, you wanted to sell an ETF or sell an index to any firm. It's, okay, what's the attribution? How far can I go back? Can you go back like nine, 10 years any other etf no but gbtc it's almost 30 billion um you know i do my i'm going to be publishing probably next week on just the crossovers crosses etf crossovers to gold i wouldn't consider any other etf but gbtz because it's the benchmark now it might lose that but it's like you know it's just there and what's the hurry to sell it okay you miss a few basis points and fees over a that, but it's like, you know, it's just there. And what's the hurry to sell it? Okay. You miss a few basis points and fees over a couple of days, but it's the big boy. It's the liquidity. It's everything. There's no hurry to get out of it. It's just a

lesson you learn. Once you get liquidity, you don't lose it. And don't underestimate. Exactly. I agree. And don't underestimate one thing that people have not touched on too much. And it's funny, Mark Yusko just popped up in in in the comments but and i was i was watching literally three minutes ago from his uh saturday morning interview um and so uh but one of the things that people aren't talking about is the the amount of arbitrage that is going on and the number of players and this is this was my life um it's you know 15 20 years ago is just straight arbitrage buying buying GBTC and selling anything else against it, whether it's Beto or it's MicroStrategy or it's, you know, whatever,

whatever you can get your hands on. And then when these things, because you're looking for that gap to close, you're making the bet on the days leading up to the ETF launch. You're making the bet that GBTC is going to be one of the ones that get approved. The gap's going to close. You're going to make your arbitrage and get out of them. So what do you do? You're selling GBTC. I mean, and so this is not surprising at all that that kind of pressure was on there. So that was both of our backgrounds and it's everything is never just a naked trade. What are you going to do against it?

And so I just pulled up the GBTC total return on the Bloomberg versus BITO just since the end of 22. GBTC is 365, up 365%. BIDO is 143, 144%. That was the trade question is, is it over? I'm like, yeah, pretty much. Yeah. Yeah, because GBTC is within what? One percent? Last I checked.

But yeah. So it actually closed and then the discount came back as people started to exit. Exactly. It closed immediately. And then about the discount. Yeah. And then it kind of and that arbitrage is going to continue until it trades at parity. Dave.

So, yeah. Go, Dave, go. Mike just threw me off because he said something that was, yeah. I need to get my David. Biddo is a terrible way of looking at it because Biddo is a shitty long-term investment vehicle because you pay the futures role every single month. It's great to short. Biddo versus Bitcoin spot is a sell. And you're going to see that trade go on until it's open interest. It's net asset under management drop to what's appropriate for a short-term trading vehicle. You're not going to see long-term holders, but that's besides the point.

When people look at the flows of the ETFs, the important thing to understand is who the marginal buyer and marginal seller was. Now, I've been banging the drum. I just didn't know whether it would be overwhelmed or not. I would say that if you have to look at whether the ETF was a success or a failure, it's going to be a success and the price is going to go way higher. And for Mark Yusko, who has been sort of the intelligent high priest of all of this, as opposed to Max Keiser, who goes off the deep end time after time after time after time, the fact of the matter is, I just point to my favorite long-term arbitrage chart, which is the hash rate of Bitcoin versus the price. And we'll point out to anyone who wants to listen that you're looking at a hash rate of a network strength of three times what it was when we were last at our all-time high. So anyone who thinks that the all-time high is some sort of, oh my God, irrational exuberance

now isn't paying attention. Irrational exuberance, the same level of exuberance would be triple that all-time high in the 180 range. Now, I do think that would be irrational at this point in the evolution of Bitcoin, in a sense, although the narrative of this matters. And we should come back to the narrative. But I want to make one clear point when you look at flows. Roughly $1.2 billion of open interest was eradicated from Thursday to today on the CME. And I've been pointing out many, many, many times on this show, I've shown the chart, I've done tweets, et cetera, that the CME futures are trading at anywhere from double fair value. Fair value changes every day. It has to do with the interest rate till the end of the month. So it's just not a dramatic,

not a thing. But when it was, the fair value was 40 or 45, it was consistently trading between 80 and 120 with spikes up to 200. So the CME futures, the entire rally when I won my steak dinner from Mr. McGlone was driving the fricking rally. In all those cases for the last month and a half, basically since November, the CME futures has been the lead sled dog. Now, why? It's because people were, you could call it front running. I don't call it front running. Front running is a legal term. It's ridiculous. But there were people in the United States buying the futures to get exposure to Bitcoin in advance of the ETF. What happened on Thursday? Well, they started taking those trades off.

The spot right now is trading roughly around fair value, and it has been a discount multiple times since Thursday. That's a major sea change. And we've seen $1.2 billion of outflows net. So if you want to know why the price dropped from 48, roughly, really 49 was like for there for, I'm not even sure it was there for more than 10 seconds. It was like five minutes. But from 48 to 42, when the futures were driving to a discount and they were the net seller, that makes, you know, that's pretty clear. So yeah, there were more inflows than Grayscale, but not enough to overcome that and all the future selling. And we don't know how much other pre-positioning there was in that. So the sell-

I was going to say, it's not binary, right? We can look at these numbers with Balchunas, but we don't know how much of that GPTC cap right now. And we don't know how much of that GPTC cap. We don't know how much was preceded versus actual interest. I mean, there's a lot to unpack there that nobody knows. Right. But my point is that the marginal seller were clearly coming from two places on Thursday and Friday. And as everyone was panicking or saying stuff, I'm like, yeah, okay, whatever. I mean, we were looking into the close on Friday. I hate those words into the close because we're obviously we're here on a holiday and it trades all weekend. You know, our company handled, you know, $400 million worth of trading on the weekend this weekend. So obviously there's a lot of people trading, but the simple fact is

position squaring into the close on Friday was huge. There was a lot on the CME and there's a lot in GBTC. And what I tried to say in Twitter spaces last week about GBTC is something you kind of made in your comments, Scott. Most of the people who were selling GBTC were told, they said, hey, when this thing gets approved, the arbitrage will collapse. Don't worry about it. Just sell it. You want to try to figure out what the NAV of GBTC is? You know, it's non-trivial, right? You know, Ian, you know, made a post that, well, why is no one saying it? I don't know what the number, there are two numbers that matter for every ETF. The amount of shares you get when you do a creation unit and the price now of what that would be. And those are being published in real time to the authorized

participants, but we don't know what those are. And when you know what those are, you can calculate the NAV, right? And in real time, because the NAV will have some cash component to it over time, but we don't know what those are. Bloomberg probably does put it somewhere. They're at their analyst estimates of these things, but I haven't seen it. So that's important. And the fact is, people, that was the selling. But there's one other comment I wanted to add, which is to James. James made a statement about how people will care.

There are two points, two points that people are going to look at for that James didn't mention. Number one is bid offer spread. The spreads on these things vary. And right in the beginning, when it's only buying, it's easy to have a phantom spread, i.e. you could say, yeah, I'll post a bid, but that bid isn't real. We don't really care about it that much. I'm not really buying. But because I really, the market maker has to post the offer. But over time, when it starts to equalize, that bid offer spread will become relevant and people will flock to the ones that have a better spread. And the way the trading is working on this stuff is crap. We know it is crap. I mean, someone made a comment in your, you know, on X that, well, there's no market impact because they're buying and selling OTC. Oh my God. I don't think

you could say something more wrong. You know, buying and selling OTC actually creates more market impact than buying and selling on exchange because you're telling the professionals what the hell you're doing. Anybody who thinks that buying and selling OTC can be done for free is just totally missing how markets work. So those points matter. Got to back that up. Former OTC trader, I remember some retail people telling me, oh, you just go to OTC. I'm like, where do you think it's hedged? Exactly. But it's not just hedged. It's if you go and do an RFQ to multiple dealers, the one who didn't win is now free to trade ahead of the one who did win. Look, there's time and a place for OTC trading. And in fact, Jane Street taught the world about this. And this is ETF history that people should

know. So the entire fixed income community scoffed at HYG and a lot of the fixed income ETFs. They said, oh, there'll be no liquidity in these things. The bid offer spreads are going to be enormous. You're not going to be able to do anything with it, et cetera. Boy, the joke was on them. These became the number one cheapest trading vehicles for people that were not the biggest institutions in the world. Why? Because Jane Street worked with the issuers to figure out how to make creation and redemption off of flexible baskets, and they consistently were able to price it in the middle. There's going to be some, so OTC trading can do that, but that was an issue, that was an ETF based upon illiquid instruments that aren't on screen, that they don't look at a CoinRoute screen and see the exact bid offer. Like I can tell you it's 42,610 to 42,601 right now. And I can give you a graph that shows you all the liquidity up to about a hundred Bitcoin, you

know, in, you know, in real time that didn't exist for those things. So considering how liquid the Bitcoin market is electronically and how transparent it is, the companies that figure out how to leverage that the best are going to have better spreads. Why am I saying this? Well, BlackRock's pretty damn smart. And right now their spreads are the cheapest. And they probably will figure this out. And Fidelity, they were pretty close, the two of them. Right. But the volatility of those spreads, they don't look anything like SPY or DIA or GLD or any of these things. GLD spread is a penny all day long. I want to talk about that, by the way, because we just have a great tweet here. This is from Altcoin Daily, but everybody's been talking about this. Look at what happened when the gold ETF launched back in 2004.

Looks like a big run up going into it, then a cool down consolidation period, then a huge melt up. I mean, so effectively it went up for a week or two, if I remember. Then it went down, had a really boring many, many, many months and then obviously went parabolic. Cathie Wood rang in and said gold was not the only commodity to soar after regulators approved the gold ETF. In fact, gold underperformed many other commodities. The Fed stoked broad-based commodity price inflation by easing aggressively in response to the implosion of long-term capital management in 1998. That is Chinese to me, but you guys were there. I was in college. Mike, so I guess the question then is, is the gold launch that everybody's been using as a corollary for what's going to happen with Bitcoin and saying, hey, look at this, now look at this.

Is that fair or are we in a different macro environment so they don't really line up? No, not at all. There's a macroeconomic environment for when the gold ETF was launched that would push up the price of gold. ETFs help. Let's look at what's happening lately in gold ETFs. They've been down substantially. Never been down this much over the last year with the price going up. Why? Because the deepest pockets in the planet are buying gold,

central banks. And that ain't stopping. They're not buying silver, not buying crude oil. That's why it's only the one commodity I'm very bullish on and why I'm less bullish on things like GBTC. Here's a key fact about where I sit in this space, having been buy side, sell side, ARB, everything that we talked about is in the last five Well five years ago. I get the questions. I start getting the questions from this most significant major Financial tutions on the planet who on the terminal because they want to know about this Bloomberg's Bitcoin stuff and they'd ask me and I remember doing Video zoom calls five years ago from you know my parents home and during around

Christmas holiday to help some of these people out you know what the questions I'm getting now not from them I'm getting from retail Mike how do I buy this this this ETF and where do I buy it I just the signals for me are so scary like good luck the trade was great five years ago when everybody hated it and people at Larry think thought it was a piece of junk and now that they're all selling product and eat retails get it in you've got to be careful. So then I go and point out, well, what's the relative performance over the last five years, four years, three years, notably since when futures were launched, which my space is a futures geek means everything.

It's the R. If you look at the price of Bitcoin relative to gold, relative to the stock market, it used to lead on the way up. Now it's lagging. So I look at, when I compare ETFs, which I already sent to editors, it'll be coming out probably Tuesday, Wednesdays. The only way, the best, the only ETF to use for Bitcoin right now is GBTC. The other ones maybe eventually, but they got to get a track record. They have to gain that. They have to earn that AUM right now. Yeah, one or two days is nothing. So I look at it as these are levels where the hype was the most extreme I've ever seen. The questions I get are most extreme. I remember hearing the questions in 2007, similar in 1999. And I just say, thank you very much. So I asked, I'll ask you guys as a group question, what is a normal retracement in Bitcoin?

I say maybe around $30,000. What would it take to get that? Well, just the macro doing what it has been a little bit reversion in the stock market and all the things I'm seeing in commodities. What's going to take from Bitcoin to make new highs and to make out new highs. It's probably going to have to kick into the normal beta. It's been doing forever. And it's a high beta, high volatility asset to the stock market.

That means the stock market has to go up. That's my view. But so far last year was just all risk assets went up. Bitcoin went up most on ETFs. Now we have those. Mark T. Markets can remain irrational longer than you can remain solvent. We say it every week, but there you go. Go ahead. Bill Svoboda Yeah. I don't agree for two reasons. One is macro and I want to get to that. And I'm going to juxtapose Mike with Lynn Alden's excellent January newsletter, where she made a couple of very interesting points that are worth talking about. where are we? She goes, from early 2022 to present, the Fed has been trying to reduce inflation by tightening monetary policy as much as possible. Then she talks about the tools,

starting in Q4 2022 and continuing in the present. However, the Treasury has been doing the opposite. They've been pulling their various levers to put liquidity back into the market, thus offsetting the Fed's actions. As a result, total liquidity was bad for the first three quarters of 2022, but has been neutral or slightly upward starting in the fourth quarter of 2022 and continuing through all four quarters of 2023, which I think is the single best explanation for why the market has done what it's done in 2023, given the fact that Mike and James are very clearly pointing out the debt spiral, what's going on with the Federal Reserve or whatever. So that's the macro side.

So I think that, look, with a rear view mirror, it looks accurate, right? Because markets have certainly all done well. He's right about that. But Mike continually, when it comes to Bitcoin, ignores the narrative shift and ignores that, repeat after me, Bitcoin trades like what? Adoption on its own, future adoption. And so the question is, when you start looking at, does an asset that people can now in every corner of the world have access to, 50% of the world's wealth just gained easy access in their normal way of buying, access to use it as a store. I know what you're going to say, Scott. Dan Garne. And we have to bring this up know what you're going to say, Scott. We got it.

And we have to bring this up because, Oh yeah, no, no, it's part of what, if I didn't look, Mike, I agree with, with your macro side.

I like you and I see pretty closely. I die and all that, but I do believe that Bitcoin is, this is still in an event driven situation that has not played out fully. It's going to play out over the course of the next few months and next few years. And Mark Yuska just put up that the BlackRock ETF is going to gather $100 billion in assets. I agree. The problem is, though, they're being shut out right

now because you have this super highway that was just built with all these ETFs, right? So you've got this super high that all the registered investment advisors, all these investment advisors that have wanted to buy these, buy Bitcoin for their clients, and they haven't been able to, now they can. And you've got all the, we've talked about now the boomer commercials, we need to watch that. But you've got the ability for these people who do not want to take self custody. They don't understand it. It's just too complicated for them. It scares them. They want to have an easy way to do it. Well, this is the obvious easy way. And yet still you've got Vanguard, Merrill Lynch, UBS, and other places that are either fully just not allowing, just put up a wall, not allowing their customers to get it, a la Vanguard,

or other places like Merrill and UBS and a couple of other firms that are only allowing their highest net worth clients access to them. The on-ramps to the superhighway are not built yet. The plumbing is not built yet. And of course, the SEC, they fumbled this thing repeatedly leading up to the approval. And if you're not Fidelity, you're not already in this, and you don't understand what's going on, you're probably going to wait and see. You're like, well, let's see what happens because the SEC is going to tell them exactly what they're doing. It's too risky for them to tell them. So they have to wait and

see like everybody else. And now they're going to build their plumbing. But one of the important things to note here is that this is not typical for an ETF to launch and for a firm with $8 to $9 trillion of assets to just shut all of their clients out of it completely in Vanguard. They didn't just shut them out when people aptly pointed out, hey, you guys have been allowing GBTC and BITO all these years, which are inferior and more volatile products. They delisted BITO today or this weekend. So they even retracted and went further down this rabbit hole. So you have, as you said, Vanguard, Merrill, all these companies. If you have a Vanguard account or Merrill and you want

to buy one of these products, you can't. So we haven't had the unlock. And James, you also made the great point in your newsletter, and we've seen this talked about, and we've talked about it here. RIAs, all of this takes a lot of time. They need to evaluate these first and then decide which one they want to recommend and then unlock these for their customers. So this money has not been unlocked yet, except for retail people on Fidelity and E-Trade who just want to buy. But if you're going through an RIA, go ahead. What's the difference in performance? It's minuscule. OK, maybe one over a one year costs 50 basis points more than the other. It doesn't matter on a volatile, an asset that trades 50 percent volatile in an annual basis. So I'll

just point out the facts. The Bitcoin to Nasdaq ratio is the same as it was right now as the peak of 2017. Now, it's fluctuated around there. VALTIL has gone down, but Bitcoin still trades two times VALTIL to NASDAQ. I'm talking about a simple person who's smart enough to sit in the value at risk model and say, I've been making a killing in NASDAQ. Yeah, maybe I can add this Bitcoin sub. But if you look at when the NASDAQ goes down, Bitcoin usually goes down, too, and goes down more. So the facts of the value at risk for Bitcoin are not, I'm just pointing out that they've changed. The performance hasn't been keeping up to what the hype has been saying it is.

Now we have these ETFs and everybody's telling me the same thing I've heard. The institutions are coming. Now it's retails coming. Okay, great. People are allowed to buy it. But let's just point out the facts of performance. If I compare it to Bitcoin versus gold ratio, that used to lead the S&P 500 up beta. Now it's lagging. I'm just pointing out facts of performance. Maybe it's going to change. But for me, this true test is still not there. Now, last year, the test passed.

We all knew GBTC was the trade for ETFs. Done, the trade worked. The trade for this year is show me the outperformance of Bitcoin beating the stock market and beating beta on a risk-adjusted basis. Let's see it. Right now, it's not really doing that. Right. I just want to say really quickly, Dave, the question is then, and Dave's going to say something similar, I'm sure, but the question is, can all of this, let me show you quickly, can all of this, this is the blackrock.com homepage introducing iBit, the iShares Bitcoin Trust ETF. In a second, after Dave speaks, I'll show you their very boring and very boomer-oriented commercial. The question is, can all of this

and the eventual unlock, Vanguard may never come around, right? Vanguard actually made a statement and said, Bitcoin's not for us. The rest of them have basically said, we're analyzing it and they're going to come in. So when that actually unlocks and with these marketing campaigns we're seeing, is that enough to sort of counteract what Mike is saying from the macro side? Go ahead, Dave. Yes, Vanguard had their Bud Light moment. And it's one of the dumbest marketing things I have ever seen a company do. It's it's it's I mean, it's beyond the pale because at the end of the day, Vanguard's ethos for years has been we will give our investors the tools to make their own choices in the most efficient way possible. That has been their ethos. The whole point of index funds are investors can now compete with institutions at the push of one button. You buy one mutual fund,

and if you don't want to be in the S&P and you want to be in the total return one, you got it. If you want to be in this index, you got it. If you want to be in that, you got it. Then they started a brokerage company. That came after the mutual. And the brokerage company was the same thing, self-directed, simple, easy, efficient. We're going to take the lowest fees. We're going to have the most efficient back office. That's what we're going to do. And now what they've done is they've said, you know what? We don't trust you people, self-directed. No, we don't have this value. Yet they had Biddo. Yet they had that. Hell, yet they have multiple, many, many gold ETFs, many of which have spreads wide enough to drive a truck through.

I'm pretty sure they allow you to trade the Palladium ETF. I think you actually, I think, could trade the 2X leverage Bitcoin ETF. So why would they make a decision like that? I think sometimes it's worthy. You have to say, okay, is it worth it for us as an institution to say, okay, what's the cost benefit analysis here? We've done, maybe we look at what the stuff McGlone is sharing. Oh, the value at risk in this thing is really hasn't been that great for the last four or five years. Maybe it's worth it, but hang on, maybe it's worth it. But why does that change with a spot ETF?

Exactly. No, but they're willing to take the risk and say, okay, we want to go down in history and take the risk at least for a year or two and say, we're one of the ones that warned you. That's one thing about the capitalist system I completely appreciate. Okay, we're one of the ones that warned you. That's one thing about the capitalist system. I completely appreciate, okay, at least one of them is saying, yeah, okay, maybe we're not going to, we want to be, let's take that risk. I agree, Mike. But truly, if they were going to do that, they would not have listed Beto. They would not have listed GPTC. They would not have across their platforms as an $8.5 trillion asset manager, be one of the largest holders of MicroStrategy. They just wouldn't. So something doesn't add.

I agree with you on the basis of it. Yes, it's a free market. It's a free market system, capitalist system. And you can offer or not offer the products that you want to your customers. If they want different products, they can go elsewhere. But in this case, it doesn't add up. And it's clear.

And it's clear that there's some sort of pressure somewhere politically or from the banking system or from, I don't know where it's coming from. It's likely from Elizabeth Warren and her defunct army of anti-crypto army, but somewhere they're getting tremendous pressure and it just doesn't make sense otherwise. But okay, that's my key

point. This is Macro Mondays. It doesn't matter. Let's focus on that really, what really will matter, like complaining about Elizabeth Warren. It just shows the- No, it doesn't. I agree. I agree. I'm not complaining. I'm saying that it just doesn't make sense. So the question is, if you know that, then you know that they're either going to stand strong and just not allow these to trade ever, or they're going to capitulate. So the only reason they would capitulate, and Mike, you know this, is that they have hundreds of millions of dollars of assets walk out the door. That's it, right? But I agree. What's also pointed out with the facts of what's happened last week, MicroStrategy, Marathon, Coinbase are all down about 20% last week.

So where's all that money coming? We see a lot of that's just money that people wanted to expose the Bitcoin. Anybody who want to get exposed to Bitcoin in a normal retail account have been able to get a high beta exposure Bitcoin if they wanted to. Now it's just much more straightforward. And that's part of my point is I think, I know people five years ago in Bloomberg and say, what do you mean you're not don't have GBTC in your retirement account? Because you could. And now you just have an easier way to do that. And Joe, the people who actually asked me how to buy it now are not the people I heard five years ago when I was repeating exactly the same thing Dave was saying. And I admit that. When I went to Hong Kong in 2018, that was the time. Now

I have to just point out that there are certain times you have to say, this is frothy, this is a massive frenzy, and I'm supposed to buy it after it's gone up. I think it's a great point that we all underestimated just how much MicroStrategy and Coinbase and the miners and GBTC were being used as a proxy heading into this whole release and launch of the ETFs. I think it's been clearly a massive amount as those premiums have closed down. So I got to give another example. Right when Russia invaded Ukraine, everybody said, hey, Mike, should I buy the wheat ETF? I'm like, that's the time you sell it. And I know a lot of people did.

It's collapsed 80%. It's just the things like the questions i get i had them i've had them so much lately just this red flag say good luck um by the way you still don't get five you get over five percent of u.s government treasury you are we are 100 right if bitcoin were a mature if bitcoin were at 20 times the price that it is if it were rivaling gold in its market cap as a backstop for store of value, you'd be 100% right. Dave, you're talking about the best performing asset in history. Nothing even close.

You got to do some zooming out, right? You really do. That is a zoom out. The fact is, is the best performing asset in history. I don't think you can zoom out any further than that. No more is ever. We loved it. Scott, when you first bought Bitcoin,

what did your average person say? Oh, you're an idiot. Why are you buying a silly internet money? Now we're like, dumb. What's the percentage return on, and my favorite example, what's the percentage return on Apple stock since its IPO? Exactly.

Great trade, but Apple has earnings. And that's the reason they banned people from buying it. But remember, we're talking about RIAs, retail. The first thing you'll say is, what are the earnings? Why are they not big investors in gold? There's no earnings. Why don't they invest in commodities? There's no earnings.

But it's earnings. That's the questions I used to get. Where are the earnings? That's right. For stocks, that's true. Look, there's no doubt. There is no doubt that people have been brainwashed to understand that fiat currencies are a stable value measuring stick. There's no doubt. We are yet only 50 some odd years into the fiat experiment.

We really are. And the reality is, is you can calculate, all you have to do is go back and go look at a McDonald's price board from 1971 before they cut the gold window and start looking at it. I mean- Yeah, and then try to explain to me how the dollar has intrinsic value. Well, no, we can go through all of this, but the point here is simple. And this option point is non-trivial. It really is. It is because Bitcoin is either going to fade into irrelevance or drive higher by at least 15 to 20 times. That is what's going to happen. I don't know. It's

going to be in the next 10 years and we're going to see it. But at the end of the day, those are the two things. That is not the same as a commodity because at the end of the day, the same bushel of wheat makes the same amount of bread now as it did 50 years ago. Gold demonetized silver effectively. The gold-sil silver ratio is dramatic. And once it became obvious that silver was just not portable enough, it just weighed too much money. If you, it weighed too much, if you wanted to sell a meaningful amount of it, there's a reason why platinum is 30 times rarer than gold, but trade and used to be much more money than gold in jewelry, et cetera. You know, how many places still have the silver level, the gold level and the platinum level where platinum

is the highest yet gold trades at twice the price per ounce of platinum does because it's considered money by people. And at the end of the day, that narrative matters. And that's all that's where you and my, our differences really are. It's on the narrative. But my favorite chart is, I always talk about it, when you start looking at pullbacks. What? No, I agree with your narrative completely. It's the timing.

And I don't know when that timing is going to be. What I will say is this. Bitcoin last year was just too damn cheap. GBT was just too damn cheap. And I point out, I love the narrative, but right now it's just pretty expensive and everybody's bullish. I just think sometimes it's best to buy when everybody's less bullish.

This chart is the chart I care about, right? Can we see this? Is this showing? I'm working on it. Yep, go ahead. Right. So this is blockchain.com's version of the Bitcoin hash rate.

That blue line is the hash rate. The black line is price. Now, a few things about this chart that's really important. First of all, the hash rate, if you look at it compared to where it was here, is triple. I've talked about that. The second thing is the run up to the all-time high started by, okay, that was the first bull market you talked about. If you look, there are multiple, and I mean multiple, big pullbacks in there. We'll see a pullback in here when they update this. But the fact of the matter is, this is just normal. When you talk about a value at risk model, this is really what you're talking about.

The blue line, you notice how much more stable it is than the price action. No matter how you want to slice it, that is the best way or one of the best ways to evaluate the fundamental acceptance of Bitcoin. The miners don't overreact and they are adding to the network because they see the potential of it. Yes, ordinals helps a little bit. There's no doubt. But the fact of the matter is that matters. And all of us, we're talking about stuff going on in the markets, the futures, the BTCC. The marginal buyer or seller today is still the crypto bros,

is still the stuff in the crypto ecosystem. What we're talking about is will that change? So yes, when I start seeing perpetual swaps trading at a premium for sustained periods of time, because make no mistake, at both of those all-time high, that double peak, the perpetual swaps for two to three weeks were trading at that. And people were killing themselves to get into Bitcoin at that point. We're not anywhere close to that. We did, however, see six weeks of sustained pressure, nowhere close to the level of excitement, but sustained pressure on the CME futures. And that has now reversed. And so, yeah, I wouldn't be surprised to see things trade

sideways. The real issue is where the marginal buyers come from. You made a point, Mike, which is incredibly important, which is track record. The question I asked and the one that I want to understand is, will companies starting with, well, BlackRock obviously is going to adjust. They're not stupid. They're going to adjust their model that asset allocators use. Will they use the spot track record to adjust their models or will they rely on the ETF track record? That's a really important one because things like all the robo-advisors out there, are the robo-advisors going to add Bitcoin to the mix of diversified portfolios that include things like gold and bonds? because you're right about comparing it to the NASDAQ. Although I would make the argument that earnings probably are more susceptible than the Bitcoin use case,

but you're right about it. The real issue is, will Bitcoin start getting added to models? And those models are the ones that RIAs use. Those models are the ones that investment consultants use. And the robo advisors are robo advisors. They're just going to buy some if in fact it gets added in and people see the marginal contribution. And I don't know when that starts happening. My guess is- I guess you got a chart brought up. It's a slow- I got to show you. I got to think. I'm just trying to say, I think I know when it's going to start happening. When Bitcoin starts doing what it did before, start outperforming most all assets. So here, what I show you is to me,

the best way I like to look at Bitcoin is versus gold, particularly now we have GBT versus GLD. And I'm not showing that chart right now, but all I have in orange in this chart is Bitcoin versus gold. It used to lead beta. Beta is the S&P 500, indisputably. Used to lead it. Now it's lagging. And on the S&P 500, we have this gap below the market. Everybody tells me it doesn't matter. I've been trading for 30, 40 years, and every time people tell me that, I'm like, okay, I'll buy more of that put spread to fill that gap. But this is what I'm pointing out from an RIA standpoint. I love it. Everybody tells me you're supposed to buy it. I agree with that. Everybody said last year, GBTC was going to die. But no, this is the fact is Bitcoin versus gold is no longer beating beta.

It's lagging beta. Show me that catch up. That's my point. We're going to get that tested. We're going to get at some point this year, a little bit of back and fill in the stock market. Maybe it happens soon to fill the gap. When that's where we're going to be able to see how Bitcoin can show us that

it's not just a high beta risk asset right now, it's a lagging high beta risk asset. For the record, which I think is interesting. Last I checked most RIAs also don't recommend, recommend gold at all, right? Because there's 60, 40 and they don't even offer anything else. So yeah, this is, this is business. I go to those conferences every time they said, why would I touch a commodity market or gold market? And I can buy

the miners, I can buy something with earnings. And it goes back to the essence of investing since the beginning of time, compounded earnings. Right guys, I want to pivot really quickly to the marketing campaign. And Dave, we keep talking about BlackRock. I want to show something. I wrote a newsletter this morning, obviously with Vanguard here as a sinking ship, my favorite new logo that we see out here. But I want to read you something that came from Larry Fink. If you guys have not been paying attention, the last three or four days, Larry Fink, the CEO of BlackRock, has increased his roadshow 5X, right? We saw comments in advance of the approval. Now we're seeing him talk about an Ethereum spot ETF being inevitable. But this is what he just said in an

interview with Bloomberg. If we can ETF a Bitcoin, imagine what we can do with all financial instruments. We believe we are just halfway there in the ETF revolution. Everything is going to be ETFed. We believe the next step going forward is the tokenization of all financial assets. We can rid ourselves of all issues around illicit activity about bond stocks and digital currencies. We can customize strategies through tokenization that fits every individual. Instantaneous settlement. It's a technological transformation for financial assets, a change in voting. The dominant form of products moving forward will be ETFs. Okay, listen, I don't know that this is good for decentralization,

right? To have Larry Fink talking about ETFing all of our assets. And I don't think their vision of tokenization is probably the same that Bitcoin maximalists would have or that people... But this is the most powerful financial player on the planet. And this is the only thing that he's talking about. This is the only thing besides the fact that they've gotten back above 10 trillion assets recently at BlackRock. This is the only thing they're talking about. And now I know it's a lot, but I'm going to just briefly play the commercial that they're running. Because I've played the VanEck commercial and the Bitwise commercial, which are all about Bitcoin and disruption and technology and not really about the ETF. This is what Bloomberg's running. I mean, BlackRock, in case you guys are wondering. Here we go.

Digital asset adoption has significantly accelerated over the past decade, with profound implications for the future of finance. Bitcoin is the original cryptocurrency to gain global adoption and has continued to maintain its dominance, despite thousands of others coming into existence. You might have noticed Bitcoin make its way into our everyday lives, from Bitcoin ATMs to various merchants accepting Bitcoin as payment, further driving interest in what the future holds for the cryptocurrency. Investors have taken notice, as institutions

and individual investors alike have been adopting Bitcoin into their investment portfolios, with some viewing it as a potential store of value and others as a potential store of value and others as a potential game changer in how money moves around the world. But for many investors, holding Bitcoin directly can be complex. That's why we launched iBit, the iShares Bitcoin Trust, an ETF that provides investors convenient exposure to Bitcoin.

Here are three things to know about iBit. iBit enables investors to access Bitcoin within a traditional brokerage account just like stocks, bonds, and other ETFs. iBit can help remove operational burdens associated with trading and holding Bitcoin directly, as well as potentially high trading costs and tax reporting complexities. Quality. iBit is built by BlackRock, a leading ETF firm with expertise across ETFs and a history of innovation. It is a new day for Bitcoin.

Access iBit through your online brokerage or discuss with your financial advisor. Yeah, that's the most boring commercial. He's talking as slow as possible. They didn't edit out the gaps between his talking to make it less. He's clearly reading from a teleprompter. He's not even an actor. He's literally just their ETF guy. They want every boomer to understand this in the most boring and simple terms possible,

which to me is massively bullish. But holy crap. I mean, come on. What a yawn fest. Imagine them showing that at the Super Bowl. Well, I mean, but it's really important to understand if you want to see what's happening in the market. And I want to be clear. I think that I would not be surprised to see sideways movement for a while, some ups and downs, or kind of at a support level. We'll talk about that later. The fact is, is people in crypto have

the attention span of hummingbirds, right? If the marginal buyers are still in the crypto sphere for a while, they're looking at the thing, black rock, holy shit, they should have put a hundred billion into it tomorrow. It is the kind of thing that builds slowly like a snowball going down a hill, but in slow motion, in time-lapse photography. And that commercial kind of is emblematic. If you ask yourself the question, will there be enough Bitcoin to satisfy what would be a rational allocation of money managers? The answer is no.

But the people in crypto are like, wait a minute, it didn't happen today. Uh-oh, I got to move. And everyone in crypto wants to get rich quick. The truth is, it's really a question of time horizon. I believe we will see a face melting rally this year. I don't care about God candles. You know, these things are dumb. But I think Mark Yusko points out very well why and how in the chart I showed shows very well. The problem with risk-adjusted returns. Yeah, that's a great point, Mark.

The problem with risk-adjusted returns, what Mike is talking about, is you're penalizing the asset for the fact that its marginal buyers and sellers go in, out, in, out, in, out, in, out. If you just look at raw returns or a exponentially or some smooth returns over time, you go to weekly charts, all of a sudden that looks very different. I mean, what's gold done in the last year compared to Bitcoin? In fact, any one month time period, right? On any monthly or weekly chart, it looks different. I mean, I don't want to get into the nuance of it because of why we've said it. The truth is that the crypto folks are expecting this massive wave to come ashore.

And, you know, it's like we've been watching Get Smart. You know, you know, it's like your boat is being surrounded by the entire sixth fleet. I find that hard to believe. Would you believe two destroyers? Would you believe, and you know, he keeps going down and down and down. And, you know, and at the end of the day, the fact is, is it, this is something that's going to take time. But if you zoom out and ask yourself the question, what were the headwinds to Bitcoin a year ago? And you look at where we are today. A year ago, we had FTX had just fallen. People were writing its obituary. We didn't know what the prosecution would be. We didn't know how much for selling there would be. We had Binance might go down. We had no ETF. We had a government looking out to ban it, et cetera. And now we're sitting in

a situation where our biggest headwind is a large money manager that's an index fund made a bad marketing decision, probably pressured politically to do so. And, you know, okay, you know, we've seen what happens when corporate America lets their politics get in the way of their capitalist ideals, and it doesn't end well. And will it end well tomorrow? No. But if a year from now, Bitcoin does hit 120,000, Vanguard will have lost a substantial amount of money in their brokerage platform. Their index funds won't care because their index funds don't hold it. But their index funds hold MicroStrategy because MicroStrategy is a component of the NASDAQ and it's a component of the S&P growth and value index and the S&P 600.

So they have to hold MicroStrategy. And MicroStrategy now is more of a Bitcoin fund than anything else. And so they can't not hold it in those funds. They could block it from their investment platform, but I think that would be really problematic for them. Yeah. It's interesting. I was at CES this last week and on my badge, it's got my Bitcoin Opportunity Fund. And so I got a lot of questions about it. And not one of the people that I talked to owned Bitcoin. There was just a kid, one kid did, but not one of the people, anybody around our age

did not own Bitcoin. And in fact, I got the same comment a number of times, which was, it's too expensive. I missed it. I can't afford one now. And so I don't know. I mean, so I think that sometimes it's difficult for us being in the seats that we're sitting in and talking about this day after day, hour after hour, minute after minute. We're in this little echo chamber, and we expect that there's more attention on this than there really is. And there are disinformation campaigns going on all around us.

And so people are distracted. I think it was Microsoft who did a study about 10 years ago, maybe 15 years ago now, which is interesting because it's a long time ago. And they were looking at the attention spans of people and how they were being affected by, you know, your devices, your smartphones. And they determined that a goldfish has an attention span of about eight seconds. And, you know, the average person was now down under eight, about six or seven seconds. What did you say, James? I missed it.

So the point is that, look, yeah, nobody's going to make it through that commercial unless they're a boomer, but it's a perfect commercial for the money that is going to pour into the space early. They're not idiots. Right? They're not idiots.

We may hate the commercial, but that's the point. That's the point. You know, I think. So listen, so go ahead, Dave. I'll let you go. And then we'll- No, no. I just want to say, you know, I think Mike and I look at this and everyone thinks Mike

and I disagree so much. And the answer is we don't. We have different time horizons. We have different time horizons and we have different narrative horizons. I think Bitcoin is different than a lot of the other things Mike's talking about. But from a macro point of view, I really would like to hear Mike's answer to Lynn Alden. I really think it is important before we go. I'd like to understand. Her comment based on the data is that Treasury has offset a lot of what's happening in the Fed. I know that the Fed has broken things on the internals of the banking

system, which is why they're going to have to cut. But I'm curious what you think about that as an explanation for why 2023 played out the way that it did. Well, I think Lynn Alban got that right. And it's also a key thing is that's never happened in our history that we've created this much debt, increased the debt to GDP during a normal year without a war or recession. So there's a big problem. And also one of the number one things that, there's three books I've been reading on the subject, Boom and Bust, The Price of Time, and Ray Dalio's Principles,

is the history of zero interest rates, which has never happened before, pumping up risk assets of which was the birth of Bitcoin, and then reversion from that is not good. Now last year, I think was an aberration, but in China, it's a clear depressionary recession. In commodities, it's a complete depressionary recession. The key question is what stops it? That's why I look at Bitcoin as the leading indicator this year. For me, I think what's going to happen this year is

we're going to have a little bit of reversion of last year's pump. We're going to realize what Lynn Alban said is very big picture. Remember, one thing about economists is they are great about telling you what happened. And I've worked with them all my life. But for you to put your position on a leverage basis at a hedge fund, which is what I've done with clients most of my life, I don't do anymore. Then you have to be careful. What does that mean for this coming year? So that's why I like to point out is we're not going to get that fiscal stimulus anymore, or at least at some point we have to have austerity. In the meantime, it's really the points I make about why it's very bullish for gold because increasing deficit, maybe Bitcoin, yes, but Bitcoin is just such a high volatility version of gold. I love,

I'd like to say about gold, you can't hold gold anymore without the digital version. And the key thing I want to end with is, is what I'm showing on my screen is price for Fed funds at this time next year to be at 3.55% versus the current rate of 533 is almost insane. And the only way for that to happen, I think, is for risk assets to go down, meaning the stock market. Or else we have some kind of, you know, and you don't, you know, all these iterations of events, they only happen after risk assets go down. So I think this is how mispriced markets could be right now. And the best leading indicator trading 24 seven on the planet, which I get a lot of pushback on

Bloomberg IBs is Bitcoin. So show me the show me the beef, beef, show me how good you are. And it looks like it might have put in a decent peak here. And I point out gaps below in the stock market. Remember, it's January. It's not like it's late in the year and we're rallying. We're coming off of this big pump last year on things that Lin-Anon pointed out that are at such extreme levels. The key thing is the wealth effect has to go back a little, has to revert a little bit of all the lessons of history are example. And I can mention three books. The latest is Greg Dalia's Principles, which was a few years ago. I have to ask the question in the title before we go.

And I know you guys are going to hate this, but I love what you just said. Maybe Mike could be putting in a bottom. We have Bitcoin crashes by this dip. My answer, I'll go around, is as an investor, always. As a trader, I think what Mike said is accurate and I'd be looking for a little lower. If I was trading it, willing to miss, willing to miss an entry if it doesn't. But like, you know, this did a perfect 61.8 retracement up on that 49K candle. It was an ugly weekly candle.

We're below the 50MA on the daily. Maybe we go down into the 30s. But long term, I don't think it matters. So I think a normal correction for Bitcoin is 30. Normal. Okay. My thumbs up was for Scott. I think that looking at what we've seen, we saw the shadow rally. Basically, if you look at the rallies that we've had on announcements and where we've gotten the kinds of retracements, somewhere between 38 and 42 was always my retracement from that high. I still think that that's right. I think that every time, I just think there's more money likely to be coming in that to offset the marginal selling on the end.

But I think that we're not done with marginal selling. And I do think GBTC is going to be a... Overhead. What's the word I'm looking for? A decelerate. Basically, the amount of GBTC selling is going to slow over time, but it's going to be a long tail.

Right. But that's not pushing Bitcoin. That money is just going to other ETF products. That's not net selling. I guess that will... I'm looking for clarity on that with time. Well, in tax-exempt products well in taxes in tax exempt products absolutely in taxable products i think that the next leg down in bitcoin could easily be in march when i think

that all tech stocks and all things that had a really good 23 people are going to have to do tax gain selling yeah their capital gains that they took i don't know how many capital gains were taken this year if capital gains were not taken in 2023, which they were definitely from the wealth effect. I don't know how many people sell Bitcoin. That's kind of an important point that is underappreciated. A March swoon as people sell because they have to, because they have to pay their tax bills matters. And I just don't know if there's a lot of that in the Bitcoin world. I know there's a lot of that in the NASDAQ world. James, you get the last bit.

Yeah, I fully expect high volatility in Bitcoin going into and through the halving. So for the next few months, I expect it. And so personally and in our fund, we have a ladder that we have set up where we're gonna buy all the way down to 30,000. I think that would be a tremendous buying opportunity, in my opinion. And so we're going to be adding all along the way.

And if you have a spike down, if you have some sort of credit event or you have something happen that is unexpected and it spikes down, I believe that would be a great buying opportunity. Because as Lynn Alden would also point point out and i think mike and dave would um fully agree with as as you would scott is that the the fed and treasury have absolutely no choice but to inject liquidity to keep markets operating properly they do they have no choice we're running such high deficits and we're issuing so much debt that there is little choice but to make sure that we keep liquidity in the markets. And so if you see a massive spike down or a drawdown, then it's probably a tremendous short-lived buying opportunity. Again, in my opinion. My base case for the ETF, if anyone was listening, was I have no

damn idea if it's going to go up or it's going to go down because I don't have a crystal ball. But my feeling was by this rumor, by the dip after the news, if we get it right. So now it's just a matter of- Grind sideways and I think it'll grind sideways and higher. Well, that's one thing I'd love to see, a high volatility, high beta acid go up when everything goes down. I just want to see it. I haven't seen it yet. Not when everything goes down, no. But look, the decoupling has definitely happened on lower moves.

If there's a crash, if something breaks, volatility, not volatility, correlation goes to one. Okay. Well, I mean, what Dave, just picking back on what James said, if the Fed has to add liquidity, that's probably because things aren't so, aren't going up. That's right. Absolutely. All right, guys, 10.04 spaces in 11 minutes. I would do this for hours, but I'm sure you guys have lives and things that you need to, and wives, I should so i know i know what the real truth is of why we can only spend so much time doing the things that we do uh guys everybody here subscribe to the channel like it i know there's a lot of new people here um and uh please follow mike dave and james on twitter x formerly known as the artist prince whatever uh whatever you want to call it.

Follow them there, guys. They're tagged down below. Thank you guys for joining on the on a on a holiday. And thank you. The chat GPT AI version of Mark Yusko for ringing in with the comments the entire time. It was fun to have him as like a ghost panelist today. All right, guys, that's all I've got. I will see everybody tomorrow.

Thanks, gentlemen. Bye bye. Bye.