The Wolf Of All Streets - Bitcoin Is Underperforming, But The Upside Is Huge! Here Is Why | Macro Monday

Episode Date: August 28, 2023

What the world of macro and crypto will look like after Jackson Hole? James Lavish, Dave Weisberger, and Mike McGlone will shed some light on Jerome Powell's comments.  James Lavish: https://twitter.com/jameslavish Dave Weisberger: https://twitter.com/daveweisberger1  Mike McGlone: https://twitter.com/mikemcglone11 ►► JOIN THE FREE WOLF DEN NEWSLETTER, DELIVERED EVERY WEEK DAY! 👉https://thewolfden.substack.com/   ►►OKX Sign up for an OKX Trading Account then deposit & trade to unlock mystery box rewards of up to $60,000!  👉 https://www.okx.com/join/SCOTTMELKER  ►►THE DAILY CLOSE BRAND NEW NEWSLETTER! INSTITUTIONAL GRADE INDICATORS AND DATA DELIVERED DIRECTLY TO YOUR INBOX, EVERY DAY AT THE DAILY CLOSE. TRADE LIKE THE BIG BOYS. 👉 https://www.thedailyclose.io/   ►►NORD VPN  GET EXCLUSIVE NORDVPN DEAL - 40% DISCOUNT! IT’S RISK-FREE WITH NORD’S 30-DAY MONEY-BACK GUARANTEE. PROTECT YOUR PRIVACY! 👉 https://nordvpn.com/WolfOfAllStreets   ►►COINROUTES TRADE SPOT & DERIVATIVES ACROSS CEFI AND DEFI USING YOUR OWN ACCOUNTS WITH THIS ADVANCED ALGORITHMIC PLATFORM. SAVE TONS OF MONEY ON TRADING FEES LIKE THE PROS! 👉 http://bit.ly/3ZXeYKd  Follow Scott Melker: Twitter: https://twitter.com/scottmelker   Web: https://www.thewolfofallstreets.io   Spotify: https://spoti.fi/30N5FDe   Apple podcast: https://apple.co/3FASB2c   #Bitcoin #Crypto #macromonday  Timestamps: 0:00 Intro 1:30 Jackson Hole 7:00 Significant downside risks 13:30 Lightning effects 17:00 Liquidity pump 18:40 Bitcoin as an option to its own adoption 22:20 Stocks and Fed’s pivot 25:44 Debt to GDP 26:40 Fed’s budget is broken 28:45 Bitcoin’s underperformance 29:30 Bitcoin reached the level of saturation? 30:50 Upside is dramatically higher than the downside 34:30 Real estate market 35:40 Risk reward on Bitcoin is tremendous 37:55 Spot Bitcoin ETF will blow Bitcoin up 40:00 Liquidity issues with Bitcoin & economy 42:00 Lack of liquidity in the housing market 47:50 Anti-crypto army 54:50 TikTok and crypto 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.

We saw a whole lot of jawboning from both Lagarde and Powell last week, Jackson Hole, on what's happening with inflation, what's likely to happen with interest rates and monetary policy. And spoiler, nothing really changed. It's still highly problematic. The Fed clearly sees no reason to stop their path, no matter what they say. And it could get very ugly until they actually break something. Is that going to be the labor market? Is it going to be the stock market? And is Bitcoin going to be the asset that's telling us exactly what is happening? I'm joined as always by Mike McGlone, James Lavish, and Dave Weisberger to discuss it here on Macro Monday. You guys don't want to miss it.

Let's go. What is up, everybody? I'm Scott Melker, also known as the Wolf of All Streets. Before we get started, please subscribe to the channel and go ahead and tap that like button since we are a few minutes late we're working through some technical details i'm just going to go ahead and immediately bring on mike and dave who just got here dave i know you were delayed we're trying to get james on but getting a technical error gentlemen just the three of us right like old times you know a month ago So listen, let's get right to it. And Mike, I'm going to let you have it first. We talked about this on Spaces on Friday after Jackson Hole and obviously have not had a chance to talk about it here. What I heard in that speech was

absolutely nothing new. Fed has never changed their tone. They've said exactly what they're going to do and they're going to do, and they've continued to do it. But for some reason, predictive markets and analysts seem to think something has changed. Well, the simple fact is you look at Fed fund futures, I look in the terminal, the functions of WRP, and it says the expectations for the September meeting is they'll hike another 25 basis points at 20%. And for the November meeting, 40%. The bottom line is they're still hiking and just got off our meeting this morning with my colleagues and the economist on Wong says they might misinterpret the data and hike more. It's

just a simple way of saying, don't just fight the Fed, fight the most central banks in the planet that are still tightening with the exception of one, China. And China is the second largest economy and they're in a significant, I think, reversion period. So that to me is the most important thing. So I think the most important thing for someone like me to do is focus on what I got wrong and what it matters. And the key thing I've gotten wrong in this last year is how much the Fed has hiked rates. I didn't think they'd go this much. I didn't think I'd see the 12-month, the one-year bill in the U.S. at 5.44%. That's a high since 2000. It's 23 years.

Bitcoin has been around for 9,000. So first I'll rope this over to I see the problem with Bitcoin is it's never, I look at it as a parent. My kids are in almost 30, some of them now. And that is the process right now. It's a question of what stops these things. So I look at this in terms of the big picture macro is don't fight the Fed. We've had this bounce in the stock market. And the key thing that's still happening is I don't think, and it's showing that the Fed's going to lighten up on that tightening button until the stock market goes down. So what does that mean for all risk assets? They typically go down. Definitely for all the altcoins, Bitcoin, maybe at some point it'll look

back and say, okay, up 26,000 Xs since it pre-traded one in 2011. Maybe it reverts a little bit of that. To me, that's the risk in the macro. And the key thing is what changes this? Now, to me, the thing I did get right is I thought China was going to go the way of Japan and Soviet Union, as you read in things like the book, like Atlas Shrugged. It is going there rapidly now. We heard from our strategist in Hong Kong this morning and says, China's not done easing and the Fed's not done tightening. That's the train wreck happening. Strong dollar in the worst, most significant currency, weak currency in the other one and

sentiments for what changes that? Nothing. It's not. We haven't seen the accumulated effect of all the right hikes in their best customers. And then there's this war going on. So there's the issue with China. Most cryptos are traded and traded in Europe. And the key thing that really struck me this week was when I heard you say this weekend, Scott, that it's not the store value, it's the value to be stored.

That is what I'm expecting is total value, total monetary value of assets on the planet to decline. Now, that's happened a little bit. It's happening with housing now. It's just getting started. It's stock market bounce. In China, it's happening with housing now. It's just getting started. It's stock market bounce. In China, it's happening. But if it has a normal reversion that is historically, we can take that GDP around 17, 18 trillion and knock it back a few. It's just what always happened. China, look at Japan. Its GDP has been the same for about 30 years now.

30 years. Yeah. So this is, I'm not going to make it long-winded, but it's just the key things that are the bottom line for me is these are significant macroeconomic trends that are in motion. And the bottom question, the bottom line we have to ask ourselves is number one, where we're from and where did we come from in markets? We are talking about in terms of Bitcoin, the best performing asset in history that potentially would revert more. That's my bias. We're talking about the stock market just a few years ago by four or five metrics was

the most expensive in history that just may revert more. And then we have the most significant monetary authority in the world that's indirectly saying, OK, it's time to cut that umbilical cord of all risk assets being dependent on us being there every time they drop 20%. That's a body in motion. Yes, I've been early. But at some point, gradually and suddenly, things are going to kick in and all risk gets go down. And even our chief interest rate strategist, Ira Jersey, pointed out there's pretty good risk reward in that two-year note yield at 5.05%.

Dave, did you hear anything new on Friday? No. The only thing I've seen, I heard new last week, was a brilliant essay that you talked about from CryptoPay, kite surfing. Dave, you're a bit quiet. I don't know if you can get closer to the mic. Oh, how's that?

Is that better? Exponentially better. Okay, sorry. Got to get the Yeti closer to me. Yeah. The only thing I heard last week that was different is the data and the analysis that Crypto Hayes put together on his sub stack. He does medium too, but then he puts out the sub stack has more than medium doesn't have

for subscribers. And his analysis where he talks about the holders of treasury actually receiving interest. And if you look at that in terms of net flows into the economy, it's actually quite, quite fascinating. I encourage anybody to read it. I think it's titled Kiter Surf or something, Kiter Board. But the net of it is where I disagree with Mike is I think there's significant risk to the downside. And I think that risk, the beta, I think the beta of the stock market to Bitcoin is going to be high and not the other way around. I think that that is a very important point. Yes, if the stock market goes down 25 percent, Bitcoin is going to drop.

But I wouldn't be surprised to see Bitcoin drop less than 25 percent. In fact, I'd be surprised if it dropped more than 10%, you know, from these levels, I think that that it's important. And the teenager that this or that, that's a bunch of nonsense. The fact of the matter is the network and the fundamental value and I'm going to paraphrase Yusko, who you had on last week, he did a ridiculously good job of explaining that from the levels that we keep talking about on the charts, those the chart squiggles on price, that the Bitcoin network itself is triple the overall size it was. At 400 terahashes, I think. It's more than triple it was than before, or than the nadir of after China did the Bitcoin ban or more than triple where it was when Bitcoin hit 20,000 the first time. So for Bitcoin to hit 15,000 essentially has to go dramatically past

where its fundamentals are. Whereas the stock market, on the other hand, by every metric you can look at is massively overextended. And so I agree with Mike Alfred on if you really want to play that trade, then short spooze, long Bitcoin and hold it. And then if Mike McGlone is right, you're going to make money because the spooze are going to crater. And I think Bitcoin holds up because the fact of the matter is the marginal sellers are dwindling and we see it. I mean, it's over 75% of long term holders now.

You think longterm holders care about a 10% drop? No, they sell only if they need liquidity. And so the buy-sell dynamic can't be ignored when you're thinking about price. Whereas the stock market, there are many, many people out there who are dependent upon small sales for liquidity and are depending on the wealth effect to keep them afloat. Many, many people, if it starts dropping at that point, it could become a vicious circle. I don't see the vicious circle in Bitcoin. I do see the possibility of the vicious circle in the stock market. Now, that said, we are coming into the election year. And yes, I think this fall I've

been pointing to it. And, you know, I've been saying this the whole time where Mike and I completely agree is when you get into window dressing season in the fall, at the same time as you have an overextended stock market, at the same time, you have a Fed that basically is taking a sledgehammer to people's wealth effect or trying to. It is a dangerous period. I'm not going to argue with it. I just disagree on and think that the fundamentals behind Bitcoin, particularly not altcoins necessarily, although Ether potentially is in a similar boat to Bitcoin. You pointed out last week as well why that might be the case. But the truth of the matter is there's absolute fluff in the crypto market in the altcoin space. There are many projects that are worth billions that

you look at, you scratch your head, you say, why is this worth millions? Forget billions. And so, yeah, I mean, I think that there could be a lot of carnage, but at some point, and this is making me sound like a Bitcoin maxi, so I apologize. I do think there are altcoins out there, and I hate talking about it writ large, that have interesting use cases and might very well win. But the fact of the matter is, I do think that there is some major stuff going on in the event of a crash. Now, if we don't get a crash, I think Bitcoin is set up right now, as I said last week, the black swan, white swan thing. However, Binance resolves itself, either in one way or another. I think that I would be stunned, stunned if they don't approve a Bitcoin spot ETF, because at this point, politically, it's a loser to keep doing what they're doing.

And politics is all that matters with this particular SEC. I mean, let's let's not get let's not kid ourselves. You know, the fact is, is that, you know, there's no question that they've gotten some oversight if they approve it. And I've written about this extensively. There's no question that the existing approved futures-based ETFs are underperforming. There was just another ETF, which was clever, which was asking for the ability to hold the spot in an ETF, but buy the spot by futures and then doing exchange for physical, which is going to be really, really hard for them to say no to, because it's still based on the CME and it backdoors into the spot ETF. So I think that

those things are why I think Bitcoin will de-link in if there is a mess. And so if you start looking at risk reward, I think the short side, if you want to play it, is in the stock market, particularly overextended, incredibly high price to sales, all the fundamentals being out there. And I wouldn't be shorting Bitcoin to play a macro event. I actually, if anything, would use that as the head site. So I'm sorry for being long-winded. No, I don't think now is the time to short Bitcoin, personally. Right? I mean, I think at that time it was $69,000, $52,000, $42,000, maybe $31,000. But I'm more in Mike's camp at the moment that if we see this absolute slaughterhouse, that we're going to see some downside.

But I don't think we double bottom either. I think it's a 2019 kind of $19,000, $20,000, as James pointed out. James, you're here. Guys, just so you know, a 2019 kind of 19,000, 20,000, as James pointed out. James, you're here. Guys, just so you know, James was on time. James was on time, and it was our tech that was failing him. But he did make it. Listen, so we were generally, as you probably heard, we started talking about if anything had changed

in what we heard at Jackson Hole on Friday, right? And consensus is they're staying the path, right? I mean, did you hear anything new there that led you to believe that something might change or we're in better shape than we were? And then Mike, I'm going to obviously give you a chance to respond to what Dave said. No, I mean, what's interesting is Powell stayed on that. Look, we're on this path 2% period. This is our mission. We're going to stay on this path until the job is done. And, you know, but you could hear him in this one speech,

he finally started talking about the lagging effects and the possibility of lagging effects. That was really interesting to me. So, you know, and he also said he believes we're above that neutral rate and that neutral rate where it's actually tightening and causing the economy to tighten, then that means that they understand that they're there, but always, they always come back to the fact that they can, they have tools to deal with over tightening, but they that they have tools to deal with over-tightening, but they don't have tools to deal with hyperinflation. And so I still believe that he's going to continue to hold rates

higher for longer. I don't know if we get another hike next month, but I do believe that he's going to hold them higher for longer until we see something break. And I think that their hope is that it's not something big, period. They can tolerate a break of the stock market, in other words, right? I mean, Mike, we can see they can totally tolerate a 20% dip in the stock market. They probably can't tolerate a 3% rise in unemployment. Well, that's the lose-lose at the moment. What James said is right. That's what economists mentioned this morning, and I appreciate that. Looking forward, he's somewhat CYI. He's going to make sure he's covered. But I just look at futures markets as great.

Thank you. But before they had the speed to around 30% they would hike at the November meeting. Now they're above 40%. So markets still price for higher rates, as we know. had the speed to around 30% they would hike at the November meeting. Now they're above 40%. So market's still priced for higher rates, as we know. There's only one trigger, I think, that's going to make that go down in any time in the near term, and that's stock market going down. They don't care about things like Bitcoin, but there's a few things I need to address. Just one thing that Dave said is, I appreciate you hope and think that Bitcoin will outperform when we get this eventual reversion in risk

assets. And I didn't say if, it always happens in history, it's just a question when. I just look at this as the best chance, indication I've ever seen. Never forget from where you're from. And markets were the most expensive ever just a few, about a year ago, and that's equity market. The key point is, show me the beef. So let's look at Bitcoin versus the NASDAQ. The level we're at right now, the ratio is like 1.75. It first

traded there six years ago, almost six years ago. So I look at it as, yes, Bitcoin volatility has gone down since then, but it's still two to three times X that of the NASDAQ stock index. So we're supposed to get these ETFs and the world's going to jump in and join and buy Bitcoin. First of all, that has to assume they have money and appreciation in their other assets. But the problem is, if you look at Bitcoin, it's been a horrible performer on a risk adjusted basis for five to six years now. Just the fact. And that's why I pointed out this morning. Again, I'm just pointing out that's a fact.

If that's going to be changed, let me see it in the data. I'm obviously a markets guy i got to see some performance at least indications of performance and try to predict it and here's what i think the indication of the bad performance is if you look at the overlay of bitcoin versus this widely tracked stock index that shows tech and everything it typically outperforms when liquidity pump is on and it typically underperforms when liquidity pump is on. And it typically underperforms when liquidity pump is off. Now, again, relevant history is more relevant because it's such a young asset. And the point is that liquidity pump is clearly off.

And it's way off. I just look at Fed fund futures in one year. They're right around 5%. That shows no hope of getting this liquidity pump to go on. And what's going to make that go on? It's the lose-lose. Risk assets going down. Bitcoin bottom line, I'll point out, is the riskiest of them. And the rest of the also even riskier. So show me the beef. Let me see some performance. And that's

what I've been looking for. And that's why I've been waiting and pointing out lately is this major pump. We saw the 31,000 where everybody in the world said how bullish it was for the exact same reasons. Number one and two, they're halving. And then the ETF. ETFs are the known, known it's going to happen at some point. And so far it's failed. So it's one of those things that you just learn with, you put your hat on when everybody says the same thing and you feel like people are in it and leveraged for the same reason, do the opposite. So this is something I've been pointing out lately and forever in commodities. There's so many people who get bullish commodities. I'm like, just buy gold. Historically, it outperforms virtually every commodity on the planet. There's only short

terms of parity of dozen. And right now, since 2013, Bitcoin is the first time it's actually still about the same level versus gold, actually 13 times. Yet on a risk-adjusted basis, that's really bad performance. And what's the oomph for Bitcoin now performance? Yes, it's the known knowns. It's the unknowns that I'm pointing out. And the key thing is don't underestimate a lot of this reason for Bitcoin came from a lot of that money that was created in China that might be going away. Well, I have to point out something

that I've said on this show dozens of times. Bitcoin trades like an option. It trades like an option on its own adoption potential. That potential is minimum 20x where it is now. And so when you start talking about risk adjusted basis of an option, it's an oxymoron. And the reality is, is there are people out there who 75% of the Bitcoin holders have accumulated it and are, and that supply is not available for sale. So the dynamics are different. And if all you're doing is looking backward, I mean, everything you said, Mike, is more or less the moral equivalent of driving a car looking at the rearview mirror. The fact is, valuing an option on a risk-adjusted basis based on its correlation to risk assets is frankly silly. Everything else you said in terms of why risk assets, why risk assets have huge headwinds,

I agree with. So we end up in a situation where it really becomes supply demand dynamics. And it's fascinating what's going on. And look, you and I aren't going to agree on this. There's simply no way. And we'll see in six months, you know, we'll see who's right. And, you know, we should let James talk. But I want to make one point about Powell that I think is really important. I believe that the Fed is going to continue to talk tough and continue to stay higher for longer, continue probably to do higher for longer, precisely because of things like the story that no one's talking about in macro, but I think it's a huge story, which is the UAW voted the membership almost unanimously to strike if they can't get their demands met. And if you think Powell isn't watching one of the largest unions in the country and what wage demands they are making in order to worry about what's going on with inflation, then, well, let's face it, he is watching that. And that is exactly

what he cares about. And so his point has always been, and he's let it flip multiple times. He's used the words inflationary expectations. I don't think he did in the Jackson Hole speech, at least I didn't hear it. But the reality is he cares about that. And so him jawboning down in order to help, you know, forestall wage push inflation is a big deal. And let's let us no mistake. We can massage the numbers as much as you want. But, you know, union members don't care about give a crap about core CPI. They care about what they actually have to pay to fill up their cars, what they have to pay in the grocery store, what they're paying for medical insurance, what they're paying for life's necessities. And there the inflation rate is dramatically higher than the PCE deflator that the Fed uses. And Powell knows that, too. And so it is a he's stuck in a rock and a hard place.

I've said it many times that they're trapped. I think that trying to do what they're doing is going to be very, very difficult. And I think that's the issue. The issue really is, can he forestall major unions from becoming more powerful and more strident in the face of what is obviously consumer inflation to the rank and file. Yeah, I mean, I don't disagree with any of that. I guess the big question I want to ask, and James will ask you first, but Mike, you'll have an answer. Is there literally any way that the Fed changes path if stocks continue up? Like if stocks go up, is there any way that the Fed

pivots? So better way to skin that maybe, do stocks have to come down, period, for us to ever even talk about a Fed pivot? Because it seems like people are predicting one thing, but not realizing what has to happen for the other thing, right? At the same time as they're saying stocks are going to keep going up and make new all-time highs, they're also saying that the Fed is done and they're going to pivot. The same predictive markets. Yeah, well, I think it's also cause and effect, right? So you're talking about the stock market going down, but why would it go down?

And it's giving indicators that the Fed is winning its fight against inflation, if we do start seeing the, you know, the compression of multiples, we see, we start seeing, you know, the, the, the downgrade of earnings, and we start seeing the back off of these ridiculous valuations, because it's clear that there's a slowdown economically, and these companies are tightening, they're tightening their belts they're they're actually feeling the effects of of a more expensive money and so uh that that's the it that's the causal effect of it right so of course the market's going to come down on the back side of that and that gives uh powell some breathing room to say okay now we can pause. If it comes down hard and fast enough, it really depends on the nature of that sell-off though. Is it a natural just tail off of this ridiculous rise in prices across the board from consumer prices all the way up to stock prices? Or is it some sort of event that just

topples a large enough company that causes enough contagion that the entire bottom falls out? Two completely different scenarios. And I just keep maintaining that I believe that we have a significant risk for that that uh you know that last scenario is that we we are walking down this tight line we're it's kind of like uh you know the fed is trying to to land this jumbo jet on the piano string right and they're not going to do it it's just It just seems like there's just no way they're going to do it. And I don't think they care, quite honestly. Look, the Treasury has their job.

The Fed has their job. And they're completely separate. The Treasury's got to keep spending money that Congress tells them to. And the Fed's got to make sure that we don't hyperinflate and they instill confidence in the dollar, period. Powell is not worried about yelling you know Powell's worried about his his own uh Legacy and whether or not he is seen as the Volker or you know the Arthur Burns he wants to be Volker he does he he wants to leave a Legacy that he did the job that he was set that he set out to. I have no idea why he took this position again. I can't imagine what was going through his mind when he decided to do this. But some people like a challenge that they know is going to be their last stand. So I think this

is going to be it for him. Yeah, I just don't understand the inconsistency. The Fed literally saying there won't be a recession. There's a piece of delusional, you know, being delusional out here. I mean, when Volcker did what he did, debt to GDP was like 30 to 34 percent. Debt to GDP now, depending on how one measures it, is minimum 130%. And if you take in unfunded pension liabilities, you know, Social Security and Medicare, it's way over 200%. And that is... Well, it's $200 trillion, right?

Yeah, it's way over. I mean, well, it depends. I mean, look, who knows? I don't know, James. I mean, it will. It depends. I mean, look, who knows? I don't know, James. I mean, I'm I'm 62. I suppose my only path to actually getting Social Security benefits would be to start taking it soon and not postpone it until I'm done, done working. Yeah, well, I'm I'm Gen X. I don't expect anything. Yeah, I'm pretty, pretty, pretty. So I don't know what the number is, but the bottom line is he,

what's good, what's happening here, what's breaking. The biggest thing that's breaking right now is the federal government's budget is being broken. And that's assuming a inverted yield curve. He, I've said this a million times. He needs an inverted yield curve. And, you know, if you keep pushing up and eventually if the yield curve ever gets back, and he's talked about this, I mean, normal, you know, a normal real interest rate on the long end, all of a sudden we have an unsustainable budget. I mean, there is a reason Japan with their debt to GDP, which we are,

we're not, we're, we're approaching, there's a reason why their yields are much lower than us in the long term, despite every possible expectation. And in fact, I mean, Japan, what's going on is fascinating because this is the first time, and I can't remember how long, I think it's to the 80s, where inflation is above is above the consumer inflation, even the way they measure it is above their target. And yet they can't allow they literally can't allow their their their long term debt to go up much more, because if it does, then they're going to be completely insolvent also. So the Japan kind of situation is extremely interesting to watch. I mean, you're looking at, there's no way any of these either the US or Japan could possibly pay back their debt without some form of devaluation, which is

a liquidity pump by another name. That's the thing that's interesting here. I mean, that's stuff we hear a lot of. You can read in New York Times, I get it. Let's talk about that word you used, Dave, I agree with and delusional. And there's my assessment of mass delusion is trying to assess markets from the future and look back. And this is what, I've never seen a more hyped asset ever than Bitcoin. What's tweaking me lately is this underperformance. Like, okay, show me this.

Remember, it was the best asset to invest in five, 10 years ago when no one heard about it. But now it's really, I mean, we have to fill up my taxes I have to write if I'd ever trade in Bitcoin. It's that much in the mainstream. It's just that shocking now that we have to be careful about this. Everybody says the same thing, yet it's up 26,000 times in just 10, 13 years. And just give you an example how that's relative. It took 25 years for Amazon to increase 130x. So this is what we're talking about with this asset. Now, I'm just pointing out facts. It's been underperforming and showing significant underperformance just this quarter alone. It's down 14%. Stock market's down 1%. So I'm pointing out an asset that maybe has reached a level of saturation in terms of massive hysteria, best performing asset ever,

massive delusion. It might have, and show me signs of otherwise. Yes, you've pointed out the metrics, but price is all that matters in markets. So I like to point out, as everybody says these holders are in forever, where's their stop? Let me finish. Let me finish.

Where's their stop? So we saw what the stop was for FTX. The market went down enough, FTX went under. Is there a stop for Binance? Binance is, you just read the papers lately, they're potentially doing some very illegal things. But who knows? They're getting pulled out of a lot of countries. Is Binance the next FTX? I don't know. But I'm pointing out current trajectories in this asset that's widely known. Show me some outperformance. Right now,

I'm pointing out it's still underperforming. If it can sustain above 30 with the stock market ticking down, I can flip that quick. I flipped bullish when the New York Attorney General came down on Tether in 2019. Bitcoin was around 5,000. But now it's the opposite. It's already gone up a lot. And now everybody knows about it. Everybody can't wait to buy it. And the holders are never going to sell.

Everybody has a stop. That's what I'm concerned about. What if Michael Saylor hits a stop? Well, Michael Saylor stops around $3,000 and change. So I don't think that's happening. But look, at the end of the day, there's a trap here. And yes, I'm going to keep saying it. Bitcoin is an option and you're looking at risk return. And there are a lot of very, very smart people. And there's a lot of assets ready to move in when they can do so legally. People are looking at risk return. Your downside is, I mean, look, I don't know what your downside is.

Your downside is probably to zero. I suppose if you really believe that it's going to fail completely. Most likely the downside has been well seen in the double bottom scenario where FTX was. You want to know why you actually said it. You know, Bitcoin has underperformed. Sure it has with an all out assault from the not popular, but elected administration against Bitcoin. There was a memo that people have talked about and published that came from a Warren Place staffer in the Biden administration saying we need to go after Bitcoin. And they have been trying. I mean, they have done a lot. Binance may very well. I mean, I don't know the situation. I mean, Mike Alpert, who's been on the show, thinks that with BNB goes down, they'll be down. You know, they will be in solvent because

they borrowed too much money. I mean, they're printing money. They are making a lot of money. So it's hard for me to believe that they without a lot of prop trading, that that is something they've done. But I so I find that less likely. But could they get shut down by the DOJ? Yeah, absolutely. But there are multiple exchanges that will take their place. Will that knock the market down? Yes. I keep saying that is the one black swan on the horizon that's capping upside. And the white swan on the horizon is also there. And you have to look at this as an option. And the question that you have to ask yourself when you're valuing an option is what's the upside versus downside? The upside is dramatically higher than the downside risk. It's very asymmetric positive and people look at it that way. And so, yeah, you're right. 100%, it is underperformed. We are

stuck. You keep hearing me say the same thing, Scott. We've been talking about it. When it was at 29, the buyers were not going to sit there and catch a falling knife, but whenever it stabilizes, they're going to be buying again. And the sellers are going to try to liquidate. We literally saw a week after the fall from 29 to 26, an exact duplicate. Someone tried to jam the market down and failed miserably. And they didn't lose nearly as much money as they made the time before, but people have tried. It's a very different supply-demand dynamic. And I think that if you're trading, investing, you need to be, and I'm going to say it again, because you're absolutely right, Mike, it is very risky. If you're using leverage to trade Bitcoin, your odds of getting

carried out are off the charts high. And you should really be mindful of that. But if you have a low time preference for a small part of your portfolio to avoid it now, because all risk assets might go down, I think is silly. And that's my point. My point is not back up the truck and buy Bitcoin at these levels and whatever. Although I do like long Bitcoin short the S&P. I think long-term, this isn't a bad time to start buying Bitcoin. I mean, but my point is not to dispute.

My point is it's part of a portfolio allocation and we all need to say that responsibly to your viewers. People should know. I mean, if you have a allocation, it needs to be money. You don't want to touch for years because that's what you're investing in. To me, that's the right way of looking at it. So I disagree about the squiggles.

I just look at the fundamentals and say, the upside is much bigger than the downside here. And that's my reasoning. It's not that I disagree on the risk to whatever. I mean, just the housing market data, I haven't talked about that. I mean, are you kidding me? The app that some huge percentage or the average mortgage rate of people who have bought in the last several years is somewhere in the threes. I mean, these people can't sell. And so, you know, you have a housing market that hasn't imploded. But the truth is, is where the buyer buyers going to come from at these mortgage rates? And there's all, I mean, we haven't even talked about that. And we haven't mentioned commercial real estate, which is you could arm wave as much as you want. But like New York commercial real estate, forget San Francisco.

That's a wasteland. I mean, it takes a long time. There are big holes out there that have popped in. And there's a lot of macro headwinds. But the last thing I'll say is, is the major reason that long-term holders buy Bitcoin and stash it as part of their portfolio is a vote. It is basically a hedge against losing trust in institutions. And everything we're talking about is actually losing trust in institutions. Okay, so there's a lot to unpack there.

Look, Dave, I would tend to agree with you. And my investor mindset on Bitcoin is that the risk reward on this particular asset is so tremendous over the long haul. If you're looking at this with a low time preference, as you said, and a long, long-term holding, it's tremendous because the risk to the upside is so much greater than the risk of a violent move to the upside you know so yeah if if if finance uh collapses it that will be a tremendous headwind for for bitcoin period there's it structurally it means a a massive amount of selling and again just a yet another black mark on on the industry

and a loss of confidence but you, you know, I think that there are plenty of speculators in Bitcoin still, plenty of speculators that are saying that they're just long-term holders, but they really just want price to go up. You know, that's just period. They believe it. And like Mike said, they have their stops. And if it doesn't get there, they're washed out. And again, to what, you know, your point about trading Bitcoin on leverage, God, please, Lord, do not do that. That is just that's suicide. This is not an asset that you want to trade on leverage with it being the underlying collateral. That is just absolute insanity in my mind. But if you do have that long-term, low-time preference attitude, and you can look at the different things on the horizon, whether they're black, gray, white swans.

Yes, we could have what we just talked about, Binance collapse. What else do you have on the horizon i don't know what else there could be but we do know that all assets correlate to one and bitcoin will lead those assets down i would expect that but it could be a v recovery so good luck trying to trade that but on the flip side you know we could have could have our ETF approved earlier than people expect. A spot Bitcoin ETF would be tremendous, you know, tailwind for Bitcoin, I am of the mind that it's not going to just double or triple in price overnight from that it may and then it will back off and, and that's, you know, but

it would back off significantly from that. A lot of that would be short covering. And then it would just start to accumulate that capital that's been sitting on the sidelines that has confidence in this asset themselves, but they do not structurally have the ability to buy it for their own investors or their own family office or whatever it may be. And that will take a long time. But you also have, you know, the significant upside of of one of the major S&P 500 companies saying that they've been buying it for their Treasury. You know, you have significant upside for somebody like Apple, for a company like Apple to say that they're integrating lightning payments into their

into their protocol, that that would be there. There are these things that could happen. I'm not expecting any of these things to happen, but these are the types of events that would be so strong fundamentally for Bitcoin in a very short period of time that, like Dave said, if you have a long time preference, then this should be a portion of your portfolio. What that portion is, is extremely personal and individual. And I agree, it should not be 100% of your portfolio. Unless you're a kid who has absolutely zero liquidity needs in the next year term. I can't imagine how that would be responsible. However, that's me and I'm a risk manager. I must be diversified. I can't help but be diversified.

And so that's the way my mind thinks. And so this should be a portion of your portfolio and it should be something that you don't expect to touch for a very all time highs in the first week of an approval. And I know there are people who think that and people will ultimately pile in and FOMO and get reversed. And, you know, if they time it, if it happens to be that both of those events happen at the same time, I think that we've set up for a sustainable rally in Bitcoin. But I wouldn't be stunned because if you think about how many people would love to put on a trade like I mentioned, which is sell some of their their stock for Bitcoin, small piece. You'll they'll be able to do that. They will not be able to do, you know, and so it's what will facilitate somewhat of a delinking. I do not think that it's a wall of money like these people, like these crazies who think it goes crazy. I think there's just no way. It just doesn't work like that.

I mean, maybe Bitcoin does stupid things, so maybe it's possible. I believe that there is a wall of money, but it's not going to come in a tsunami wave. No, exactly. It's going to come in waves, and that's just reality. It's the reality of the growth of this kind of asset. Yeah, that's the issue. But I mean, look, I think it's really important to emphasize the headwinds to the economy and the liquidity side of the economy. And I advise everyone to read Arthur's Missive because it really is eye-opening that what's going on here. Because the Fed is paying that 5% interest that you're talking about, Mike. People are collecting

that. And someone's collecting that. And the question is, that money is going someplace. It's a giant sucker town. I want to hear what Mike has to say about the housing market, because this is a really, really... The last thing you were talking about, Dave, in your last comment and unpacking that. It's very confusing for people. The lack of liquidity in the housing market, exactly what you said with the difference of locked-in interest rates versus what you could get today on a mortgage above 8%. There's just absolutely no inventory out there. And Powell's now fighting this. And so this is a major portion of inflation right now. I seriously think... Go ahead. I seriously think if we see rates drop 1% or 2%, like mortgages go down to 5%, we're going to see a massive, massive wave of people selling,

and that's what's going to crash the market. I'm not sure where these houses reprice. It's coming down. But I'd be interested to hear what Mike has to say. I do believe, yeah. It's a clear train wreck. I mean, it's completely locked up. I mean, clearly, let's just point out what's happening. It's a clear train wreck. Since when is spiking mortgage rates good for any type of liquidity in housing? So existing home sales have collapsed. We get that. That makes sense.

And what's spiked up? New homes under construction, about the highest ever. And the last time we had a similar high in this was when we had the big – it was around 2006 and then well before that in the 80s when we had boomers who were buying. Now they're – get me out. But it's a classic sign of a cycle in a market. We have this initial period where, okay, existing home sales are inventories. boomers were buying now they're get me out but it's a classic sign of a cycle in a market we have this initial period where okay i'm existing home in sales are inventories now first of all

we teach the number one rules about inventories are low inventories and high inventories prices always peak when inventories are low and they always bottom and inventories are high i remember pointing that out that out in crude oil about a year and a half ago on live tv and they thought i was crazy like well i'll show you the facts. So that's what's happening. The thing is now they're going to new homes under construction. They're making this supply kick in because they're giving them favorable deals. They can give them lower rates. And it's classic going to kick over until massive supply kicks in.

The whole thing's tipping down. The bottom line is don't fight the most significant fact in the planet here, and that's the Federal Reserve still tightening. So that's just starting to kick in. I mean, come on, you see it in condos in Miami. I've seen people involved in it. And then people I just meet who own this property and that property reads very much like the Big Short.

So many people, and here's a key leading indicator, we did not have during the last recession, Airbnbs. They're collapsing. I mean, this was a quote from our economist a little while ago. They're just starting it. And that's going to be a lot of overextended. So that's the one thing we need to remember where we came from. We're just coming off the longest extended period of zero interest rates on a global scale ever. What does that make people do? Take too much risk in areas they shouldn't be and seek yield. Now they look over that to you note, as Dave said, to me, that's the giant sucking sound, as Ross Perot used to say.

And it's overwhelming. But, you know, to me, this is how markets work. The key thing I'm concerned about, and I have to point out my fears, is what Benjamin Straley said. What we anticipate seldom occurs. What you both said and we all said about Bitcoin, things we've known for eight to ten years. And here's the inside scoop. When I started pointing these things out inside at Bloomberg and when they did not want to, oh, we're not in any hurry to be in this space, that's when I was so bullish because I felt

like a contrarian. Prices were low. This big firm doesn't get it. And then they kicked over. Now, it's completely in the masses. What you said is a no-no. And I go to parties and things. Everybody says the same thing.

I have to admit, my contrarian bent is up. When everybody says the same thing about the best performing asset in the history of mankind, you got to be careful. But housing in this country is a train wreck. Early days. But look what's happening in China. It's just getting started. This is like Japan and Soviet Union all kicking in and collapsing at the same time, early days. Just for context, although this isn't just housing, but Evergrande shares plunge 87% in Hong Kong after trading resumes. I don't know if people saw that today, but if you want a quick

barometer for what might be happening in China, that's probably a pretty good indication of what's happening in real estate in China. I want to tell you anecdotally, Mike, you pointed out obviously Miami and what you've been seeing there. In the last market, the last time we saw a housing crash at the last Great Recession, you could really see the crack starting to grow in the hottest markets first, right? I mean, it was Vegas and Miami that really crashed the market. I can tell you just very anecdotally, in Tampa, about a year and a half ago, which was the hottest market in the country, a friend of mine was looking for a house.

There was literally no supply at all. There was a house sitting right on Bayshore, beautiful, $7 million, right? There were like five houses that were large. They were all way overpriced. You don't see this often. You're talking about a market where there were very few houses. Right now, that same house is $4.5 million was just reduced and still is sitting on the market 18 months later in Tampa, the hottest market. Now, I know maybe that's a single overpriced house, but all of a sudden, there's a lot of houses for sale, and they're all sitting there, and they're all going down, and this is the hottest market in the country. This is the bottom line is never forget where you're from. I mean, some of us did very well in 2008. And just by watching what markets did was every time you go up way too much on the back of liquidity and the liquidity pumps, you go down way too much. That's just the lessons of life it's

like night coming after daytime and this consideration it's hard to sometimes sense when you're in it real time it's happening now in real time and that's question i keep asking myself is what stops it and that's why i always trigger the bitcoin please show me some divergent strength and it's doing the it's doing what it should do, I think, when everybody has to start losing wealth. That's just getting started. Not a good time. I want to go back, Dave, really quick. I see you're about to talk, but there's one thing that you pointed out that I want to

circle back on really fast. You said that there was a note that had been circulated that there's a rumor of that it was a White House staffer placed by Elizabeth Warren, who is behind this entire anti-crypto army sentiment. My podcast with Kate and Lynn Long is coming out in six days, but she went absolutely apeshit on this. And it was a lot of stuff I hadn't heard. So I'd heard the rumor from you, but she obviously has lawsuits open, right? And is suing the United States government and says that she has very, very clear evidence. This is all top down from the White House. But she made a claim I hadn't

heard, which is that very clearly they not only wanted to crush the crypto industry, they wanted Bitcoin to go to zero, period. They wanted Bitcoin gone. She says she's seen the letters, they've seen the emails, and that basically Elizabeth Warren has a plan. Biden has no idea about any of this, by the way. He's just being Biden out there doing whatever old guys do. And that it was a very clear directive over Christmas last year, right before we started to see the anti-crypto sentiment really gear up in January with the SEC, all the others coming from the White House, but someone in the Warren camp in the White House to send Bitcoin to zero. Zero. Right. And to understand how Bitcoin has persevered in the face of that insanity,

which by the way, it's funny. If you understand politics, politicians, I'm going to offend people here. I can't help it. But politicians are more likely to change their tune than the Italian army throughout history in terms of picking sides. The fact is, is the anti-crypto army isn't polling bueno, as they would say down here in Miami. And you haven't heard about it a lot. I mean, yeah, she still talks about rich crypto people and taxing, but we haven't heard that. The fact is it's polling like crap. And when you get Richie Torres and other progressives doing what they're doing, you know, in terms of the FID Act and what's going on, I mean, there is a change going. Now, Warren's too far gone to

publicly, you know, recant. That will never happen. But the fact is, is a lot of the other politicians out there are looking at this and saying, yeah, this is a loser. There's too much money and too much vulnerability on people who actually care. And I'm not talking about, you know, Michael Saylor and others. I'm talking about Larry Fink, right? You know, when you get one of the larger supporters of the Democratic Party, I mean, this is an important deal. So if you think about it, yeah, I mean, everything Mike said about performance is true, but it was in the face of, and we've done the data on this. It's like what the government did. We actually have a paper that we're putting out, you know, Christy Matthews, my head of product and I, we've done the research on the effect of the choke point 2.0 and what

it's done to liquidity in U.S. dollar pairs relative to stable coin pairs. And it's actually fascinating how, you know, it is it is a smoking gun and how the U.S. regulators have not just spit the bit, but literally directly harmed American investors. Dave, just to sprinkle some reality on that is I can't say too much about it, but I experienced it with my hedge fund, with the Opportunity Fund, the Bitcoin Opportunity Fund. Because we had Bitcoin in our name name we experienced exactly what Caitlin's talking about you know that this is uh this is a reality that from the top down these banks are being told and they're telling their employees to not direct any wires outbound wires that go to anything that seems to be of crypto and it's just it's reality i mean we worked through it every single one of them one at a time but they made it difficult and it was it was difficult to actually collect lp investments because of that

it was uh it's an incredible uh it's an incredible thing to see i mean for people who don't understand the choke point is just it it's it's um eliminating the bridge it's eliminating the on-ramp from or the off-ramp from a uh a traditional bank into anything that has to do with crypto and so and we were experiencing that. Yeah. It's, look, you know, you're, I'm really looking forward to your podcast with Caitlin. I mean, I've talked with Caitlin many times. I wouldn't call her, I wouldn't say we're friends because we don't know each other that well, but we've had five or six conversations. I look at her and I'm hoping, I mean, she's at the vanguard, the tip of the spear of the industry fighting against some of the biggest injustices out there.

I don't want to use a historical methodology because the only person I can think of didn't fare so well in her fight, although it was important. So I don't want to I don't want to like, you know, you know, jinx her. But the fact is, regulators are not supposed to pick winners and losers. And they have been. And and frankly, it doesn't look like it's going to work out well for them. My guess is that it will look as good for Elizabeth Warren as a previous Massachusetts politician who forbade their citizens from buying Apple. That's a great one. I love that history. And, you know, so it's's like i guess history doesn't always

repeat but it certainly rhymes so now we have a massachusetts politician who's doing everything they can to forbid their citizens from preserving their value or good news for her though is she'll throw gensler and others under the bus and the masses will have no idea it had anything to do with her she's really good at uh doing the you the behind the scenes thing. I think it's going to be fascinating to see what happens. I mean, you know, we'll see. The politics are interesting. And you talk to people in D.C. and there is not a lot of support for that policy. And there's not a lot of support for, you know, for several of the things going on, you know, at the SEC.

There are a lot of people who are like, why are we doing this to ourselves? This is because we're giving our opponents an issue. Now, it won't matter if you end up with a president campaigning who's behind bars or, you know, it probably won't matter. But, you know, assuming, you know, hoping, I mean, I guess, I don't know. I'm just openly optimistic. I am just hoping that neither, that not only do we not get a rerun, I'm hoping neither run. I suspect it probably will happen. What's funny about this, though, Dave, is that everything we're talking about now, we've been talking about the Fed. We've been talking about inflation.

This is all going to shift pretty rapidly to talking about politics and you know the driving forces behind them and and i i tend to agree with you that the young people they're they're disengaged completely from politics they want pretty much nothing to do with it. And the one thing that they can all pretty collectively agree on are two things is that they all want TikTok and they want access to crypto, you know, period. And, you know, for any of you guys who have kids from anything from 12 to 20, that's just reality. And so, but as this conversation, you know, changes it and it evolves into, it's going to rapidly evolve into, let's talk politics. So you may have to change the name of this show, Scott. I know, seriously, it's going to have to be Political Mondays. I'm sorry, guys, it's 10.01.

I know we got to go. Oh my gosh. A few quick points. James here saying BlackRock just started buying Bitcoin miners breaking news. Yet again, crypto media are idiots and have no idea what's happening. BlackRock is an indexer. They passively invest in everything, including micro strategy. This is for their mixed reactions. We're going to talk about that on Crypto Town Hall and Spaces, but I will tell you this, it's really bad. Friday, I said it didn't seem that bad. Then I dug in over the weekend. It's really bad. That's the gist of what I've got for you guys. Guys, thank you so much. Appreciate as always, always showing up. And James, glad we were able to get through the technical difficulties

to get you guys on here. We'll be back next Monday, everyone. Thank you for joining. See you then. Bye, guys.