The Wolf Of All Streets - Bitcoin Hits $106K: Record-Breaking Rally Ahead Of Crucial Fed Announcement | Macro Monday

Episode Date: December 16, 2024

Join Dave Weisberger, Mike McGlone, and James Lavish as we break down what's happening in macro and crypto! Dave Weisberger: https://twitter.com/daveweisberger1  James Lavish: https://twitter.com/jameslavish  Mike McGlone: https://twitter.com/mikemcglone11  ►► JOIN THE FREE WOLF DEN NEWSLETTER, DELIVERED EVERY WEEKDAY! 👉https://thewolfden.substack.com/   ►► Arch Public Unleash algorithmic trading. Discover how algorithms used by hedge-funds are now accessible to traders looking for unparalleled insights and opportunities!  👉https://archpublic.com/  ►►TRADING ALPHA READY TO TRADE LIKE THE PROS? THE BEST TRADERS IN CRYPTO ARE RELYING ON THESE INDICATORS TO MAKE TRADES. Use code '10OFF' for a 10% discount. 👉https://tradingalpha.io/?via=scottmelker  Follow Scott Melker: Twitter: https://x.com/scottmelker Web: https://www.thewolfofallstreets.com/ Spotify: https://spoti.fi/30N5FDe   Apple podcast: https://apple.co/3FASB2c   #Bitcoin #Crypto #MacroMonday The views and opinions expressed here are solely my own and should in no way be interpreted as financial advice. This video was created for entertainment. Every investment and trading move involves risk. You should conduct your own research when making a decision. I am not a financial advisor. Nothing contained in this video constitutes or shall be construed as an offering of financial instruments or as investment advice or recommendations of an investment strategy or whether or not to "Buy," "Sell," or "Hold" an investment.

Bitcoin hit $106,000 yesterday, making new all-time high after new all-time high before a slight retrace today. The Bitcoin gold ratio also hitting new all-time highs, which always makes for a spicy conversation on Macro Monday. We have drones circling New Jersey, apparently here to buy all of your fart coin. It should be fun today, guys. We've got a lot to talk about. Let's go. that drones are here, the aliens are circling, and they want all of your fart coin at a $848.22 million market cap making it, I don't know, one of

the top few hundred. Will they buy it in a multiple of book value? That's all I want to know. We know that Saylor will probably announce another micro strategy buy today. Maybe not.

He already did. He already did. He did? He already did. Yeah, he already announced it. How much did he buy today? So he owns a total of, let's see here, 439,000 Bitcoin now. So he tapped the ATM and did it again.

Okay, so what did he buy today? I didn't even see. Today it was... I saw him teasing yesterday. I'll pull it up right now. Pretty wild. So, I mean, you kind of knew it was happening, right? Yeah. He bought another $15,350 for $1.5 billion. I think five Mondays in a row that he's done over at least over a billion dollars in purchasing. We shared sort of the stats, I think last week, which was that it took a year to buy the first hundred thousand in two weeks

to buy the third or fourth hundred thousand, you know, from 300,000 to 400,000. I mean, this is insane. And fart coin, obviously a joke. I don't think we'll be getting a company buying Farcoin and adding it to their balance sheet. But I do think that it is a worthy conversation for the clear sort of excess and insanity of a bull market in crypto.

I mean, Mike, we've got to tee you off with Farcoin, right? As much of a, as hilarious as that is, you're talking about something that's almost worth a billion dollars. Well, I, we, a little pre-show, we enjoyed talking about this. So I think it's the aliens and the aliens have come down and they've really finally, Oh, those, those humans have finally figured out real money. And then just like humans do, they get a little extreme, like, you know, I'm going to put my kids' college funds into, well,

I'm sorry my kids are out of college. My grandkids' college funds into Dogecoin at $60 billion market cap. So it's entertaining. But I like to point a tilt over. I'll tilt over to the meeting this morning. You might want to know some of the facts because there's one key thing that flipped that hasn't flipped in years. And that is our chief equity strategist, Gina Martin-Adams. I've never heard her pointing out this is just silly. The extremes that the

expectations for earnings for next year are just, compared to last year's, the expectations were very low. Her quote was, earnings expectations are just way too optimistic. She thinks that we're going to have a difficult environment for stocks at the start of 2025. And that completely makes sense. There's so much optimism for this new administration, which we all know, low regulation, you know, cutting out the waste and everything. But usually means initially tariffs, you usually have just a little bit of a correction. So I'm still hoping and seeing at some point maybe we're going to get this pair where we can see the equity market go down in Bitcoin to prove to us that it's not just that piggybacking on that $13 trillion that was added to the total market cap of the stock market cap this year. That's almost half the US GDP. It's the most in history. So I just have to revert back. Is this 1929, 1928, or 1927? I think in terms of speculative

accesses. And the best place you can go for that is the altcoins. Now, I definitely don't want to tee off Dave too much. But maybe we should tee off Dave because this might be our last era. Look at that smile. But Bitcoin's great and everything. But from my standpoint, I'll end with this. The stuff I'm looking for from a macro standpoint is if I talk about any commodity, the word glut starts. You start with crude oil.

We don't have to dig into details. And you just lean over to why. Well, let's look over to China. 1.73. That's the 10-year note yield in China, the CGB. Now, I traded JGBs in the late 90s, Japanese government bonds. I remember the same thing. They just weren't just volatile. They just didn't go straight down in yield. They knocked around because people like me were trading them. You can't do that. So the second largest economy is heading towards severe recession. We see pretty severe layoffs

in Volkswagen and Europe heading towards recession led by Germany. And commodities, my point is, if we have this normal equity market correction, say 10%, yeah, it'd be great. It'd be nice to just get that over with. Pre-Q1, number one, next quarter, Trump gets it over with. What does that mean for everything? I think what I see is severe deflation forces from commodities. And the key question would be, how can Bitcoin respond to that environment? Now, I fully expect everybody's price is supposed to go to $140,000 instead of $60,000, which would be the first standard deviation move based on 40% volatility or so. So it's going to be a great start to next year. But we have to admit, this is actually in terms of adding, accumulating wealth.

It's in terms of dollars, it's the best year in history of stock market. $13 trillion. Awesome. Well, I expect retail sales will be strong next week or this week. And we have a Fed rate cut. Yeah, exactly. So here's the thing. It's probably going to be one of those.

I just love this term, a hawkish cut. Unexpected, Mr. Paul is going to come out and say i just love this term a hawkish cut on expects mr paul's going to come out and say yeah i knew that would get dave going because you're cutting rates it's silly but and james would be on it but you know they expect that the pipe can make a sign it's probably going to be tilting towards not um it's towards the end of cutting rates but to me it's all about you know if that market keeps going up they're cutting rates in that environment yeah sure they're going to goose it. But how much do they goose it?

And they've goosed it. Markets look ahead. They've goosed it to some of the highest levels. You have to really go back to late 20s in many measures. But inflation is also rising. And assuming that we're going to see a mass firing of government employees, we know that unemployment will also be rising. Yeah. Well, that's the thing about inflate it's it's the thing i've been like when you have

market captain gdp at two times it's not hope most in about 100 years and stock market's going up it's kind of silly to expect cpi inflation measures to go down i mean it's the animal spirits and the the wealth effect is about the greatest in history and that's that's a wonderful thing and that's why you know we look for alternatives now bitcoin's been a great alternative but shibuino and Doge good luck with that one Dave should I wrap the present so you can unpack it no it's all it's all good I mean what is amusing to me is every time Mike talks about uses the word deflation in an environment where every central bank is printing money, I think Milton Friedman is rolling over his grave.

Commodity prices are deflating. So back to you. Sure. And that's important because there's two types of commodities, as we know. There are industrial commodities and there are commodities that people buy and accumulate as a store of value gold is on the outs but it's still there and it's going to be there for years but it trades differently which is why the gold silver ratio is towards the top of its channel not towards the bottom of its channel and that's not really all that surprising but i think that

what you're seeing in bitcoin is fascinating, and different. And let's make this point. The price setter in Bitcoin for most of its history in every other rally has been the crypto community, getting all charged up and pushing Bitcoin up, then they get tired and they say, Oops, I need to look for the next shiny new object, whether that be a fart coin of the day or whatever. And so the marginal price center moves into what we call alt season. Today, the marginal price center continues to be people who realize, hey, wait a minute, I got to get me some of this in my portfolio because I am underexposed to Bitcoin as a store of value and look, look at the potential explosive upside.

And so you have a lot of patient accumulators. And we've talked about this a bit before, but I think in the same week, and you can't ignore it that BlackRock is basically told people put it as 2% of all your portfolios. And they're not talking to people like us. They're talking to people that wouldn't know what Bitcoin is and go, isn't that magic internet money, sir? When the financial advisor explained to them and they go, oh, no, no. And so they start explaining it. And so you're seeing something very, very different. In fact, the marginal seller of Bitcoin at these prices is still the crypto community. That's why unsurprising,

we've had n number of weekends in a row where sailors bought Bitcoin, the prices rallied, and then Monday it kind of cools off a bit after Sunday. That is not the traditional Bitcoin behavior during bull cycles. Scott, you said it was, but I don't remember it that way. I remember weekends being fairly volatile during most bull cycles, but I think in this particular case, people are just kind of trained to fade it, just like whatever the opening of MicroStrategy is going to be today on the inclusion in the NASDAQ 100, generally you short something at the inclusion. I'm not sure I would short MicroStrategy. I think there are, you know,

I don't like bungee jumping either. I'm not a skydiver, you know, packing my own chute. And I think that it's probably in the same level of dangerousness to do that. But generally, having traded index inclusion events for most of my adult life, I would tell you that the general point is you short the actual inclusion price. For those who don't know what happens is every index has a different time period. Sometimes it's a close on Friday, sometimes it's the open, it doesn't matter. But when the actual price at which an asset is included in the index, in this case, the QQ, not QQ, the NetDev 100, that's the price that the index fund owns it at. And so what do people do?

They try to buy a little before, then it gets jammed up onto that particular auction print because the way stock markets work, there's an auction on the open, there's an auction on the close. That auction, you can be, what Quants would use the word deterministic about it. You would say, okay, this is the price

you know it's going to enter at. And by the way, this morning, we have to talk about my defense. I haven't even looked, but it'll happen while we're on. James wrote an entire newsletter on it, so we're going to get there soon. Okay, cool. So you have these animal forces going. I look at Farcoin and I laugh, but as I scroll down to see Farcoin, I see the coin that makes me wonder what the hell this market's about. Can anybody explain why the old

FTT, and it's down today, but it was up over a billion dollars last week. Why would FTT token, the remnant of a dead exchange, the settlement has already been agreed. There will be no new one. Why does that have a billion dollar market cap? To me, that's almost as dumb as back in the day, for those who remember, any viewers, that BitConnect, when CoinMarketCap was calling it a scam for two months, was over a billion dollars before it eventually crashed. Why the hell is FTT worth a billion dollars? So in crypto, to understand, Mike's not wrong. There's a ton of excess.

When you see things that are clear, not just zombie coins, we're talking literally preserved in the ice coins with values that are larger than a lot of businesses. You know, there's still a lot of speculative excess in the market. That said, I don't think Bitcoin is even close to speculative excess.

I still think it's five to 10 X undervalued. And that's why it's priced dynamically different. And there are a lot of projects out here that make sense and there's others that you ask questions of people i've never seen anything quite like it i'm going to pick on them because i actually know that you know i know justin and ando uh ando is a really interesting project right you know a lot of people say it's a great project and there's going to do all sorts of things in real world assets i asked a question and got crickets as a response and i will continue to do so

if you're a token holder of a governance token what economic rights does that token give you and why would anyone pay for it so let's say ando becomes a proud owner of a 10 trillion dollar ecosystem what does owning the token do for you? That's the answer is it gives you a substantive participation that comes from the trillion dollar ecosystem, then by all means buy it. If on the other hand, it gives you nothing, then what are you buying, you're buying a governance token, so you can govern something but you can't participate in the economics. What's the worth of that? We're plumbing new models, and those

models are going to ultimately change. I think a large part of what's happening in the market is Bitcoin is going up. Ethereum is lagging, but people are starting to come on the train and say, wait a minute, guys, there's some real value locked here. There's some demand for the token. Solana is massively underperforming despite it having a lot of utility. And then other coins are starting to percolate up. So we have a very interesting market to talk about.

But on the macro side, I think that the Bitcoin use case and the Bitcoin story needs to be divorced from a lot of the other stuff that's going on. Because Bitcoin, if anything, I hate to say it, it feels cheap at these levels. It really does to me. And that's very different

than looking at the speculative excesses that are undeniable across the cryptoboost. There's a lot to unpack there. Let's talk first the altcoins that have no value, the things like Farcoin and whatever people are. I mean, that's clearly just the casino side. Why is that happening? Is it because there's just excess capital in the world? Is it because there's so much money out there that people, and this is where I think some of the economists are getting this wrong, where they're like, well, just, you know, there's so much money out there that people are driving up the values of these things. No, that's not what it is.

They're betting on them because they need something. They need something to catch up. They feel so far behind that they're gambling. That's literally a casino that they're gambling at and saying, I need to make a hundred X my money. Why is Solana and Ethereum and those are underperforming? Because they're not going to give me a hundred X. So I might as well either own some Bitcoin and then fart coin or whatever the heck it is, dog Wi-Fi hat, because I need something to get me some, I need to catch up. I can't fucking keep up and it's driving me nuts. So I've got to do something. So I'm just going to gamble. And that's what people are doing in my opinion.

I don't think it's because it's just this grand excess of money. I think people are using credit cards and debt to do it. I don't think it's a bunch of just excess capital that people are sitting around and like, hey, you know, my Costco bill is low this month, so I'm going to go and put $500 into dog Wi-Fi hat. No. They're saying my Costco bill. They think they can take that $100 and turn it into $100,000 and change their entire lives, and what's $100? Exactly. It's the opposite. It's my Costco bill is so high that screw it.

I'm going to take a hundred bucks and put it on this lottery ticket and hope it wins. You know, that's, that's from, from my understanding, what I'm watching, that, that seems to be the overwhelming kind of theme there. Okay. So that's number one. Number two, Bitcoin. Let's talk about Bitcoin. This is where we're at a spot here now where it's really important to understand. And Scott,

I shared Croce's chart that he shared with me, gave me permission to use this widely. So Jesse's chart here. And you see Sailor put this up. This is really this is really important. And this, this is Mike, where you've been talking about this for a long time. We've been talking about, we expect it to happen. It, we may be at the beginning of the stages of this, which is what that's where Bitcoin is now starting to eat into the other asset values, right? Meaning it's taking market share from them, wallet share from them. And so it's not just that there's excess capital out there and it's following the expansion of the money supply, but it's also taking money out of where the one place that we're seeing a massive amount of money being taken out. We believe that gold is being demonetized. We believe that Bitcoin is becoming,

you know, really becoming that the that ultimate digital gold. And then some we there are many reasons why it's even better than gold. But let's just put that there and say that I believe that it is demonetizing gold as we speak. OK, so the second place that we're seeing it demonetize and it's just a tiny sliver right now, but it's happening is that big gray box in the middle of the bond market. And you're watching it happen as these public companies, and right now they're just Bitcoin companies. It's just MicroStrategy and Marathon and Riot and Semler Scientific and some others that are going out there and they're issuing debt and they're using – well, Assembler is issuing stocks. That doesn't really count.

But they're issuing debt and they're buying Bitcoin with it. So they're literally – so people are then buying – they're buying Bitcoin instead. So they're using Bitcoin in their treasury. So you've got those companies using Bitcoin in their treasury. So you've got those companies using Bitcoin in their treasury, and that's going to take market share away as people realize that, oh, Bitcoin is something I want to have in my treasury instead of treasuries, US treasuries. That's going to eat into that big gray box. It's a big deal. And so is that happening? It's just at the very, very, very beginning stages. But that's where the big switchover will occur, in my opinion. And so the question is, is Bitcoin still just the tip of the risk sphere, as we've it actually starting to become that true store of value

that people realize, like Dave was saying just a minute ago, that institutions are saying, I need an allocation to this thing. Anything, half a percent, something, quarter percent, I got to start dipping my toe in and putting this in my portfolios. Because the risk is becoming, oh, how did you not have any Bitcoin? You're managing my money. How did you not have any Bitcoin in the portfolio? This thing is up tenfold in the last few years. And now it's going to be up tenfold again in the next number of years. How did you not have any? And so that's a big switchover. Are we there yet? I think we're getting there. Not fully yet, but we're getting there. James, what's interesting is that as these institutions eventually eat into their bond portfolio to buy Bitcoin, the adoption of stablecoins will probably counteract the selling of those treasuries by stablecoins buying them. What's the stablecoin market cap? It's now over

$200 billion, right? And tethers at $140. I mean, that's 40 more than, I don't remember when we were talking about them breaking $100, but it wasn't that long ago. That's right. That's right. And Scott, we even talk about the rumors or rumors. I don't know if there were indications or verifications that Trump is looking to start a Bitcoin reserve on day one through an executive order. And that's something that I don't understand the rules around that. Maybe Dave understands them better, but that is something that is wild and will have an impact. There's just no doubt about it. Dave, do you know anything specifically? I've heard the same thing, obviously, but I don't know what the mechanics of it are. I don't know the mechanics of it,

but if he can use an executive order to protect the currency, the US dollar, then that, I mean, that's just... It's not even clear to me that he needs an executive order to do it. It would be besent at, he needs to get his people in charge of treasury treasury. It's not entirely clear what the treasury's powers are because frankly, we know the treasuries, I don't think there was an executive order of them to buy mortgage tax securities when they did quantitative easing.

So who the hell knows what, what that is. is i mean the executive order could be done for sure and you know someone could challenge it in court but who's going to stop them i mean come on you know you have to have someone who's going to sue against it and they may do that symbolically and i personally think that the smarter trade rather than doing the executive order immediately would be hey dude go buy some so we'll look like we'll look like heroes and then do the executive order. But I guess we'll find out. Right. The most important question is, is the Biden administration actually selling any of that Bitcoin that Trump promised to hold? I mean, nothing would surprise me about this administration. I call the Biden administration because I don't think Biden has

anything to do with anything that's going on right now i don't know that anybody believes that we actually have a president running the country we have a committee and we don't even know who is on that committee you know and you talk about the drones but i mean how do you have you ever heard of anything like this before you know where nobody nobody knows and one of the things for bitcoin that is interesting and you can't deny, is Bitcoin is an asset that effectively is, I mean, I don't like the word vote because I think it's a bit too strong, but it's something that people buy when they distrust governments. And so when you think when people are starting to worry about space aliens or is it a foreign power? Is the U.S. government spying on its own citizens? Are they looking for, God forbid, weapons of mass destruction?

You know, I've seen all sorts of crazy theories. People start getting angst about their government. Well, what's the one asset that is considered to be a, quote, well, as I said, vote against not trusting the government? And so it's not ridiculously surprising that Bitcoin is doing well, but look, the rest of the markets are ignoring this, you know, and it's like, it feels like the beginning of kind of a, of a sci-fi movie where stuff's happening and people are looking at it.

Like remember Independence Day, people kind of, you know, partying on rooftops saying, Hey, come get us aliens. You know, this is going to be great. And then, of course, they get blown to bits. I'm not saying that's going to happen, but it feels very, very strange, right? And strange is not, you know, until something bad happens, strange is not bad for Bitcoin. It's not bad for a lot of things. So, yeah, I mean, there's a bunch of cross currents here.

I want to talk about MicroStrategy, but first I want to talk about the Bitcoin reserve. Matthew Siegel tweeted this and now it's going viral with coin telegraph. I'm not sure if you guys saw this, but let me show you that. Let me just bring up the chart. So there's a lot of assumptions here, which is kind of wild, but this is basically saying that the, by 2050, if we have a Bitcoin reserve that is proposed by Cynthia Lummis, it could cover 44% of the national debt. The assumptions here, though, is that CAGR of Bitcoin is 25% a year.

Might be aggressive as volatility decreases through 2050. And starting with $37 trillion in debt, 5% added to the debt yearly. Basically, you end up with a 44.4%. Of course, Bitcoin's starting price of 2025 here is also $250,000. Okay. That's maybe absurd if we're at $250,000 when this starts next year. The idea here though, that if you look at the theoretical compounding rate of Bitcoin in a reserve versus a theoretical compounding rate of US debt, you could end up with Bitcoin eating into that massively. James, I mean, do you think that a 5% increase in the debt seems conservative

to me at this point? That also seems as aggressive as the Bitcoin part is the debt increase of 5% a year seems... But the funny thing is with the debt increasing five percent that yeah that's probably low but um the bitcoin 25 percent kager is that's that's probably you know well you you would say if you're looking at all of the different uh models and all the the diminishing levels of returns whatever because each cycle is a lower level of return. But OK, but if the United States adds Bitcoin as a reserve asset, it becomes a self-fulfilling, like 25 might be low. You know, I mean, it would likely be low.

So for those who don't know, CAGR is the compound annual growth rate. So I looked it up. But Bitcoin from the very beginning, if we can count that, I don't think you really can. But it's 244.63% per year. Then I put it in since 2016. It's still 99.41% a year. That's a, you know. Right.

So this is not a gimmick. This is like, it's on the table. Okay. The bill still does not have a co-sponsor. It's early stages. It's a lot of talk about it. Cynthia Lummis has been talking about it quite a bit and trying to get some gather some support around it. Clearly, the Trump administration is supportive. It's just a question of just how much support they would get in Congress or if they'd have or if they would if Trump would do something unilaterally, that would be likely smaller just to start. So it's hard to say.

And we're going to we're going to find some things out. But the one thing is, is that this is this is a structural fundamental change in Bitcoin support from the last administration, the one that we have sitting there that we don't even know who's running this government right now, and the new one that's incoming. It's a structural change for Bitcoin. It's extremely positive. So you can't ignore that. That's just a piece of reality that you have to pay attention to. What happens with the money supply, where, where are rates going? You know, the, the interest rates are this morning, the, the fed funds futures are saying that we're going to have, it's a 97% probability. We're getting a cut on Wednesday of 20 of 25 basis points. Okay. And then it's a very low probability. It's 70% probability that we're getting one in June in

January. So it sounds like this is the expectation. So Mike, when you're talking in your morning meeting and talking about the hawkish cut, this is what you're talking about, right? So this is where the Fed comes out, Powell comes out and says, we're going to cut, but we're then leaning into a pause. And so that, because we're probably at a neutral rate or whatever, we're close and we're going to watch. That's the hawkish cut. And so, but even then you look forward and you're still getting a 50% chance of a cut in March, and then another almost 30% chance of a cut in June. But that could change with one strange sneeze by Powell at this meeting, right, Mike?

Sure. If he has a twist to the left or something, that goes down to 1%, right? But the expectation is the rate to go down to 4% by the end of next year. You know? So, or even lower, 3.75 or something. So, another full percentage rate of cut. We'll see. I mean, it really does depend on where the unemployment rate goes.

And if, because that's what they're staring at now. Like Dave said earlier, inflation is kind of ticking higher again. How much higher is hard to say and how much that has to do with eggs or housing or, you know, car insurance. I mean, like the components now are swinging this thing around because they're having massive swings in individual components. So it's hard to say, but I would expect the unemployment rate to tick higher pretty quickly going into February, March. And they're going to fire everyone, right, Mike? I mean, if they do, I mean, Well, that's the thing. They don't have to. Yeah.

It's a little trick of running a business as you've done before. We all know is don't have to fight. Yeah. Just here's, here's the rule. You're coming in five days a week and the subject, no choice. Yeah. Right. No more work from home. You're seeing big companies do it. And they don't have to pay severance. Yeah. No more work from home. You're seeing big companies do it. Start with that. They don't have to pay severance. It's just. Start there.

So we had a thing here that there was a trend I noticed that, you know, I've always been in the office type. I have to speak to be around people. And so I came back right away. That's what helped get me to Miami. But they started some here. I just noticed an algorithm. People were being let go where the ones who generally weren't showing up. Like, all right, fine.

It's simple. No judge is going to support a employee who doesn't show up. So it's an easy thing to let the attrition kick in. The key thing I think that's most important here is we are sensing, I'm sensing, extreme bullishness. When you see a market that can't go down, that has nothing but upside, and has a lot of if statements because of a new administration. But one thing I have to push back a little bit, this is not just the previous administration.

It was the Trump administration, too. Remember Muchen right before the end of the Trump administration? What did he try to push back on? Stable coins or something? They were so negative against crypto. So one thing that's impressive about that is it knows how to convert. They've completely converted, Mr. Trump has. But now, it's just the things i've noticed in life

when you have people like the president's son pointing out a million dollar bitcoin and michael saylor making fun of the best investor in history for holding cash i i push back and my my my uh contrarian nature shows up from being commodities like yeah good luck go ahead buy all the bitcoin you want at these levels i just just point out these, you know, you nailed it, James, at 50 and you did too, Dave, just a few months ago. But now at 100, I get the long term. We've talked about the long term forever. But this needs, I'm worried of the purge, which always happens when you have extreme bullishness like this. And that's a known known. Everybody knows how bullish it is. So as a trader, you're supposed to, I think, lay back and there's always an option

strategy that can help you be involved if it keeps going up. But this is from a macro standpoint, and to push back on Dave's statement about deflation, go to China, second largest economy. Second, what is this, almost two years now of PPI declining? Those of us who remember this happening in Japan, it's just getting started. And this is global. So that's why the whole world's dependent on the US going up. And that's why I can't write a metals outlook anymore without pointing out the Bitcoin. Before, I didn't have to. I can't write a crude oil anymore without writing, pointing out the Bitcoin. Because if it goes down and the stock market falls, which I think is indicative of everything, it's the tide going out. But that's why we need to see the proof.

And so far, everything's making record highs, and that's mostly because the world changed on November 5th. But now, let's see the action. And that doesn't start until for another month. Bitcoin did hit $106,000 yesterday. I mean, I get that the S&P is also rising, but I mean, we said that at 30, we said that at 30, we said it at 50, we said it at 70, we said it at 90, or like 110, but I guess everything keeps going up, but

I still think all bets are off if we get a reserve or something like that. It's a hit statement. Yeah, it is. But I don't view that one as priced in, by the way, Mike. You know, so I don't think the expectation that it will be approved is priced in. I think people still don't expect it to actually happen

in this case. One thing I have to admit about that is, remember the book, The Bitcoin Standard by Safey DeNomis? It came out in 2018. Yeah. I mean, he predicted what's happening and central banks buying it at some point. I completely disagreed at first. And then within a year, I'm like, yeah, you're right. It's going to go there. But now it's just I have to just have to mention a little bit of caution. That's all. It's just so.

Are central banks out there yet? We don't know, you know, but that will be an interesting dynamic because it what what is priced in, Dave, is a percentage of likelihood that it will happen. It's just a probability. Whatever that sliver is, it's being priced in. So a 5% probability that it hits a million dollars in the next few years, well, that's getting priced in a little bit. I don't know how much that's where it's going to actually go when if and when this does happen if if the united states announces it i don't i mean i good luck trying to figure that out it'll be price discovery so but that would be dumb for them just come out and announce it instead of actually doing something in the background and accumulating first?

Look, there's nothing, and I mean no asset, goes immediately to where you think its value should be. Right? Never happens. And so I am very nervous when everyone is bullish, except for the fact that people are talking bullish, but acting like, hmm, maybe I should take profit here. And so you get this dynamic that's going on. And I think it's extremely interesting that Bitcoin, to be monetized gold, the most conservative estimate of that is 60 to 70 percent of gold value is monetary versus industrial and 60 to 70 percent which is fake 60 means that somewhere in the neighborhood of 10 trillion dollars is the market cap that's for gold that is its monetary value That's still a five X from here in Bitcoin price, full stop. Yet, I and everybody

else that I know of that made bullish announcements said, we're not going to even get to half of that this cycle with all of this. That's sort of, I'm basically defining for you, not priced in. Remember, Bitcoin is an idiosyncratic single asset. So you can't look at it the same as you would an index of lots of assets, which is different. And so you need to understand that that is that is extremely important. If you look in the internet bubble, for example, and this went for years, we're talking, there is a very large difference between the okay look at cisco which was the bellwether for that in terms of you know the infrastructure underneath the internet uh and look at at net taxi and net taxis like fart coin cisco is is like you know where

bitcoin what cisco still exists now did it get ahead of itself? Was there one analyst on the planet who could justify Cisco's valuation at its peak based with anything presuming other than maybe about 10 years of potential growth, which of course ignored everything else that was going on and potential competition. That dynamic is different with Bitcoin, you can be an analyst and say, Well, wait a minute, I think that the fundamental valuation of Bitcoin is going to be north of 10 trillion based on that graph that chart that you had, none of those trees grow to the sky stocks in that bubble had that sort of analysis. Now, does that

mean it's right? No, does that mean it's necessarily going to happen? I think it will. But that doesn't matter. It's a question of we are all trying to determine its path. When you have a group of people who are analysts who look at this, whether it's Mark Yusko, who's been saying this for years, Michael Saylor, who goes completely to the far right tail of good distributions, but you have people who are justifying an asset price that are many multiples of where we are now. That is something new. Don't pretend that there were analysts who were saying that Cisco was going to go to

be a $10 trillion company in 2000 uh based on any sort of analysis it just didn't make sense because people were saying it but you know it's different so i i keep coming back to the fact that bitcoin is and we all know that i say it too often is an option what is the strike price of that option the strike price is at a bare minimum is 60 to 70% of gold's market cap. And so are we more likely? Yes, we are more likely is that price didn't know, does that change anything that Mike was talking about, about the stock market being at ridiculous excesses and to change anything about people betting on various and sundry memes,

whether it's fart memes or dog memes or cat memes. No, it doesn't change any of that. Those are very different. And so I think it's important to contextualize the Bitcoin rally inside of what is the fundamental analysis that people are actually doing when they're buying and holding it. And it's different. It is undeniably different. And that they're buying and holding it and it's different it is undeniably different and that that's why i look at it that's amazing this time in history is different because god knows we're going to see the same sort of crap at some point this house of cards that's built on the fiat economy is going to go boom now is it going to go boom in a spectacular flame out well only if these really are aliens with the drones and this and that.

But most likely what will happen is we'll get a correction and the money printer will jam up again, et cetera, et cetera. But, you know, let's see what happens. And I don't know the answer. Yeah, and in that case, though, of course, Bitcoin becomes a store of value.

You know, it becomes that, look, I've got to have something to protect myself against that QE infinity. When does that happen? Well, you know, we saw it happen in, in the great financial crisis to some degree. We saw it happen to a greater degree in the, in the lockdowns from COVID. And, you know, the next time, what's the event? Who knows what the event is? Hopefully it's not an event. Hopefully it's not a 20 to 30% market correction on some sort of black swan, you know, because that would be painful for everybody. But if it is, if we have a black swan event like that, I would bet everything that we're going to have massive money printing. I cannot see

us get out of it any other way. I posted it. I tweeted it, posted it, whatever you want to call it, on X this weekend. Someone said, ask the question, if the market crashes, what will happen to Bitcoin? And my answer was straightforward. It was, it will, of course, on the day that it crashes, go down. And then it will recover off the bottom. And the global financial crisis took three months, but gold made massive new highs way before the S&P made new highs and gold led the market higher based on that same thing. Cycles get shorter and shorter as people try to anticipate this. This is the Bitcoin gold ratio, by the way.

Right. And I don't need to jump up and down and talk about it. We all know what's happening. But I think this is just the beginning. I mean, I'm basically calling for it to go to basically go almost parabolic at some point. And yeah, you know, I think that that that is highly likely. But because as a general, general feature of something bad happening, but I think there's one piece of news that we need to talk about, that, you know, if you look at Vivek, his posting over the weekend, I think it's very important because he made an interesting statement, one that I thoroughly agree with, but I'm surprised that he actually said it, which is that the most important thing about Doge isn't necessarily cutting the budget deficit based on spending, but by empowering economic growth by cutting regulations. Yeah, that's a big deal. That is an extremely- That happened with Chevron, by the way, that theoretically already started with all of

the Supreme Court decisions before Doge even was- Yeah, but you got to have an army of lawyers to go to the courts to get them gone. What he's basically saying is, listen, we're going to start cutting regulations. This is a very big deal i mean i don't care which think tank you talk about you can't find a single one that doesn't think that's a very big deal and if but what's a big deal out about this that people haven't connected the dots on is what he's basically saying is listen we know that even if we cut two trillion dollars out of the federal budget and got rid of all the discretionary spending and all the excesses, we still have a deficit. So deficit's

bigger than that. The only way to get rid of a deficit is to do, and you heard me say this on this program many times, the only path out is to, at the same time as you streamline the government, is hyper growth. It's the only way. Now, am I saying it's going to happen? Am I talking about how is that investable? Well, at least this is going to develop over months, years, actually. But a recognition from the people who are actually doing it, that this is the goal, matters. And you should invest accordingly. So investing without, if you're buying, if you're in the stock market in anything that doesn't have exposure to potential hyper growth

from deregulation, well, that's going to be a main investing thesis over the next couple of years. So just watch out for that. And that crypto is definitely impacted by that. What I mean by impacted by it, I mean, you're going to, I think the biggest theme you're going to see in crypto that's going to emerge, and I've said this before, but I think his statement makes me make it even louder, is a shift from bullshit memes in an economy that's a casino to, is there a use case for opening up open source and for incentivizing value creation? Because value creation, because value creation is going to be made legal. And I don't think there's a person even in the crypto world

that knows what happens where we go from complete hostility to complete welcoming of that use case in crypto. And I don't believe most of the tokens that we have, say for a few of the layer ones that ultimately win, had anything to do with what I'm talking about. I do not think that, with all due respect, if I want to get people to go crazy here, just pick on XRP or pick on Shiba Inu or pick on whatever dogwits had. It doesn't really matter. I don't think these are the coins that are going to be valuing. I think they're going to be American companies who are going to say, you know what? We can list a crypto that will help us build a usable usability network.

We can do this. I don't think anyone has seen anything like that before. So figure out where that's going to go. But the next words are very important here. They see hyper growth as important. They see getting rid of regulations that are stopping it as important. So expect that sort of growth dynamic. And that to me matters. Should we talk about micro-saler and micro-strategy being added to the NASDAQ?

Because I'm sure we have some pretty solid takes on that. Obviously, to enter the NASDAQ 100, exposing Bitcoin-linked stock to billions in passive investment flows. James, this was the topic of your entire newsletter yesterday. Yeah, I mean, for the – Nice. Well done. So for the listeners on the show here, why it's important is when you have a company that's included in – just to get super basic here for people who don't even understand why this is impactful, when you get included in an index like this, then nothing magical happens with the index. It's just that now for all of those funds that are passively tracking these indices, right? So with, you know, with the S&P, you're going to have the,

you're going to have the different, you're going to have the Fidelity funds and you're going to have other, you know, mutual funds and you've got the S&P, you've got the spiders, which is the SPY and that's an ETF. So you've got ETFs and you've got passive mutual funds or, you know, mostly passive mutual funds. And then you've got some mutual funds that are less passive, more active, but they generally hold most of the most of the indice in their portfolios in some way, shape or form in different weights, maybe. So but what's important about this is that MicroStrategy getting added to the NASDAQ 100 means that the ETF, the Qs, must own that expected percentage of micro-strategy. James Safer did an analysis on this, and I think he got to 0.47% of the NASDAQ 100 indices.

And that comes out to be about 2.5 billion dollars of uh of purchasing um on that so uh i think that's what the number was right you can just keep that's right right around there yeah so and so that's what's important about this is that it's not it it it is it's significant because it it uh it validates that that MicroStrategy is one of these large companies. It is following all the rules and regulations. It has grown to the size where it should be included and now it is going to be included. And so that's a big deal. So it's $2.1 billion of buying for all those ETFs that have about $450 billion of AUM collectively. So that's important. Another thing that's important about it that people aren't really thinking about, maybe the Bitcoiners are

thinking about it, is when MicroStrategy is going to be in the Qs, that means that anybody who owns the Qs now owns a derivative of Bitcoin. Everybody's owning Bitcoin now, and that's the significance of it. So people are now saying, well, own the queues i already own a little bit bill a little bit of bitcoin maybe i should add the real bitcoin they'll go out there and start buying the ibit you know it's just an it's a switch in in mentality but the structural change is that this means that microstrategy will be added to all of those passive funds and it does mean buying. Now the question is that Dave brought up earlier, typically you short the actual inclusion because there's a run up ahead of it. That's typical. Whereas I think MicroStrategy, you can look at the price of MicroStrategy and say, yeah, there was a run up ahead of it, but was that just-

For a different reason. Yeah. It's because he continues to leverage a balance sheet um to buy bitcoin for free you know and it's still trading at a fully diluted if you take all of the shares that are outstanding that would be outstanding if every single one of those converts was was converted into common stock it's trading at 2.5 multiple to the underlying Bitcoin. It's been trading at a 2.5 multiple for the underlying Bitcoin for well over a month now. So this is not what is creating that demand. It's still in that range. Does it matter if Bitcoin goes to 75 or 60 or 50?

Of course. Yeah. I mean, it's going's gonna follow it but if it stays at 2.5 ratio it's gonna follow it dollar for dollar right so um it's just a question of how how much that ratio moves so percentage might not not a percentage percentage for for percentage so what's that scott i was gonna ask mike actually, or either of you, but I haven't been around that long, but I can't remember a time when a stock like this ended up in an index because it's obviously not based on the fundamental business of the company, or at least what it originally was, right? I mean, this is a pretty, I guess it doesn't matter, maybe, but this is unique, Right? It's not, their software business isn't the reason that they're getting

included as a tech company. Right? In the NASDAQ 100. It's not really a tech company at all when you look at the size. Well, you could argue, yeah, that's it. It's a technology company because of the software. You know,

That's a couple hundred million a year. Yeah, it's minimus, but it is paying technology company because of the software um you know that's a couple hundred million a year which is yeah it's minimus but it is paying it is paying for the debt so you know um that's one side or i'm just saying isn't it interesting that what's effectively uh you know a bitcoin etf a levered bitcoin etf you could say is being included in the nasdaq 100 it's interesting i mean all these tech companies. Yeah, and I'd like to hear what Bloomberg was saying about it, if anything, so far. Well, just as we were speaking, a headline that came out in Bloomberg was Bitcoin at 100,000 lures, long-term crypto holdouts to invest. Stuff that you've talked about forever.

But you look at microstrategy, you basically have about a two to three X beta to Bitcoin. So if it's what, three to 4% of Qs, then you already have a pretty good exposure to Bitcoin. Just because of the beta. Because if Bitcoin's up 100%, microstrategy is up two to 300%. And of course, then the downside. So does that mean if you're a Q guy, I mean, hey, cool, I've been trading Qs forever and I've been wanting to buy Bitcoin. They just did it for me. Maybe I don't have to go out and do that, take that risk. So that's one thing that can't you think about. It's just that it's also has about two to three beta to the S&P 500. So it's just good leverage stuff. Mike, I doubt there's people who would do this on the flip side of that. But there's also people who despise Bitcoin and want no

exposure to it and now are going to have forced exposure through buying the Qs or, you know, having exposure to the NASDAQ 100. I don't think they'd pull out as a result, but there is a theoretical. No, I'm not saying pull out. You have a good, decent exposure. It means that are they going to go buy iBid if you already got the exposures through Qs? You're doubling down on a pretty risky asset,

which is guaranteed to go up according to some people you talked to. Never use the word guarantee. I know. I got you fired up on that one. Yeah. But I think there are a couple of other things going on this morning that are worth looking at. So Bitcoin is just under 106. A second ago, it was 105.8, 105.5, whatever. It started to show at like 104. Right. So bitcoin's moving higher microstrategy is still is a small fade off of its open uh not surprising uh but i do want to

point out because i pointed out every week it's important is to look at the funding rates on bitcoin which are still hovering right around normal at 0.01 and right there. The last few times when Bitcoin ran to all time highs, those funding rates were north of three times that and to as much as 10x that. This is spot buying. It is not speculation. Crypto speculators are buying fart coin. They're not buying Bitcoin. And we're seeing it. And it absolutely matters if you're trying to understand what's going on in the short term and supply demand dynamics. And so we have to be cognizant of that. Uh, you know, micro strategy being included in the NASDAQ is, is yeah,

there's some substantial buying there, but the big one is the S and P and that is in my opinion, exceedingly unlikely. I know that people keep getting excited about it, but I just don't see it. I just don't see it happening. I don't know who's running the S&P committing these days, but they have an enormous amount of discretion. And there are a lot of big companies. I can remember pretty much every new technology company took multiple years before they got included in the S&P and had to grow to be enormous size before they got there.

So take that with the grain of salt that it is, but as a result, I don't think that any of the dynamics that we're talking about are likely there. Now if you want to understand what's at stake, once something does get put into the s&p at that point 24 of the equity is going to be held passively because that's the number there's so much money either indexed or closet indexed in the f of you're shaking your head because it's ridiculous and you say yeah because they think my map's wrong man it does scare me a little bit the the amount of money that's in ETFs, the passive flows, it is a little bit frightening because of what it could trigger. That's why I always laugh when people are like,

Vanguard owns 12% of MicroStrategy, or BlackRock owns 15% of the Bitcoin miners. It's like, okay. Well, over 24% of the U.S. stock market is held in index money, whether it's indexed in the sense of Vanguard, which is the largest mutual fund, BlackRock, which is the largest ETF, state-free ETFs, state-free funds, or money that is a component of self-run portfolios attention funds that are indexed it is a big number and i think we are a long way from microstrategy being there i think that uh if that did happen we would be talking about completely different price levels so if someone really believes it's going to happen, be contrarian, it has some major implications because what would Saylor do with all of that excess supply? He'd use it to buy more Bitcoin.

And so it then becomes a demand push instead of a demand pull. Is that likely? I think the answer is no. In fact, I'm almost screaming no because I just think that the people who are doing it understand what's going on and that won't happen. So it also matters that you have to look at the float. I don't know what the float of MicroStrategy is these days and how much is locked in, but the S&P committee cares about that as well. And I know this because when I was at Salomon Brothers, we sold the S&P, our float weighted

methodology for building indices. So there's a lot of stuff when you're talking about passive that needs to be broken down. But honestly, I think that it's going to be noise and no one's going to talk about it for much longer. I think people will be talking about that, whether it's 2.5 to 3.0 to 2.2, whatever the ratio should be for MicroStrategy. Just remember, people are buying MicroStrategy in their retirement funds because they want to have a levered plate of Bitcoin that isn't likely to get liquidated. They're not looking for 10x or 20x. They're looking for, as you said, 2.5x. That's what they're looking for. And is that smart? Well, I'll leave that to everybody to determine what's smart, but that's what it is. So, Dave, you're guilty.

You nailed it. I did. And it became overweight, so I just had to lighten up a little bit. But those of us who are early now, that's a good problem for those of us who are early, but the rest are jumping on now. But, yeah, you're right. That's what I did because I couldn't buy Bitcoin at Bloomberg. It's interesting, though, we've had

these trades, right, Mike, because you were very aggressively pointing out that the best trade was going to be GBTC when it was, right? And now you had GBTC as the best way to take advantage of the discount and basically make more than the appreciation of Bitcoin. Now you have microstrategy. Isn't it interesting that we keep having these sort of proxy ways that you can get more downside on Bitcoin? Well, glad you pointed out. That's the difference now. Those are great contrarian type trades. Only a few of the hot money in the world were involved. Now, microstrategy, it's such an extreme premium to Bitcoin. If rational investors are not going to buy that, they'll do the r maybe in shorts hasn't worked they'll buy something that's just by gbts or ibit or even bitcoin now because you're getting that

actual asset versus something that's trading two times leverage it's like that kind of in a bull market you got to be careful you all are missing something though on on micro strategy and that is that he's he is on his way to owning a million bitcoin and imagine if you had a million bitcoin on your balance sheet, what could you do with that? That's the question. You know, you could become the largest Bitcoin financial company. You could actually become something different and end up getting kicked out of the NASDAQ 100 because you become a financial company. You know, like this could be a very big deal.

I expect it to be a very big deal. I expect it to be a very big deal as long as what we expect to happen and Bitcoin continues to gain support, grow in value, grow organically. And I believe that that is what opens up doors for MicroStrategy that people are just completing discounting to zero. All they're seeing is a levered Bitcoin purchasing play. And he's thinking far beyond that. And that's the question. Where does that go? And that remains to be seen. But I don't think it should be discounted to zero. That should be something you're thinking about in the future. Yeah. How did it become 10.01?

I do not know. But here we are, gentlemen, at the end of another incredible Macro Monday. Absolutely the best hour of the week. I'll be here next week. Will you guys be here next week? It's Christmas week. Then we got New Year's week. This is that weird time of year where nobody works.

I'm going to be off. Market's open. Mike's there. I'm open. Mike's there. I'm there. Dave's there. We're there. We're not, we're not leaving.

We're going to hang out in Miami, which, you know, a lot of people pay a lot of money to come there during those weeks. So it's amazing. Yeah. All right, guys. Well,

thank you so much. Thank you to everybody as usual for watching. We will in some form be back next week. See you guys later. Thanks, James, Dave, Mike. Have a good one.