The Wolf Of All Streets - Bitcoin Liquidity Problem | Macro Monday With Mike McGlone

Episode Date: March 27, 2023

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The Fed continued their pattern of tightening last week, adding 0.25 bps once again. And the language that Jerome Powell used was still extremely hawkish, saying that they expect to get back to a 2% rate. I have no idea how they anticipate doing that. It seems like a fantasy to believe that that is possible. But that has markets continuing to wobble and trade in fear. Meanwhile, First Citizens is buying Silicon Valley Bank, alleviating some fears for some people. Also, I have no idea why that's alleviating any fears for anyone, but that seems to be one of the main stories right now that

Silicon Valley Bank is going to be purchased and owned only partially by the FDIC. There's a lot going on in macro and of course, a lot more going on in Bitcoin. Today, I'm joined by Mike McGlone. Of course, as always, Dave Weisberger. I don't know where he is, but it's probably having a more fun time than this if he's skipping it. I can't imagine. But here we go, guys. Let's go. An amazing weekend. I know that I did. I was single parenting all weekend, had my hands full with two little ones. Any parent knows that you actually look forward to Monday as effectively the weekend if you are single parenting all weekend by yourself. So it was a handful. I'm tired and very glad to be here. I mentioned a lot of things that we'll be probably discussing there in the intro, but obviously, as we allude to every week, I don't think there's ever been more to talk about in general between crypto and macro than we have at this exact moment in time. It's been absolutely nuts.

As you guys can see down there on the ticker, I never really talk about it, but you've seen me share a million times, plus one probably. I've got it right here. The screener that I use all the time from the tie. Well, we just took this screener and basically broke it down into a daily email newsletter for you guys to give you all the data that the big boys are using here. The tie like to tout themselves as the Bloomberg of crypto. But I've got the actual guy from Bloomberg here. And I think he'll probably tell you Bloomberg's a bit more robust.

I've got Mike McGlone here. How are you, man? How are you doing this Monday morning? Good morning, Scott. I hit home about your time with your kids, having raised four of them with my wife. I used to say, I need to go to work so I can relax. Oh, that Monday morning is, it's not saying I don't love the time with them, but Monday morning is generally, it can be a huge relief.

Well, speaking of relief, I also used to say having worked with traders all my life who oftentimes act like children, I used to love to go home and play with my kids because they're kids acting like kids. Yeah, instead of adults acting like kids. I can't imagine what life was like in the trading pits. You've shared those stories a million times, but that has to be probably a lot less appropriate behavior than you would see from my three-year-old and eight-year-old. But it's a basis for, I only spent five years at the Chicago Board of Trade, but it's a basis for me for learning stuff real fast and everything I look at in markets where

you have thousands of people, particularly I was in a desk, a tight row with a dozen people, all on phones with clients, all competing, and you just learn so much from each other. I would say it's a master's degree education in markets, and it's hard to replicate that. You can do it on a lot of trading desks, but in the pits, sometimes you can smell the bullishness or bearishness in the market just by how much people are sweating. I'm sure. And that will never be replicated again. No, it's gone forever. But it's replaced by stuff that what you're doing with cryptos, which is somebody got to jump on board. Yeah. Speaking of speaking of cryptos, I've literally got the story pulled up right here.

I want to talk about this really quick. MicroStrategy repaid its $205 million Silvergate loan at a 22% discount, which is incredible. And they added an additional $6,455 Bitcoin for $150 million, an average of $23,238. This time, nobody can say anything to Michael Saylor, right? Because they always tell him that he bought too high. But but this time he bought well below where the price is right now but they've had they have 138 955 bitcoin 4.414 billion an average of 29 817 for bitcoin right below his cost basis now we're knocking on the door but what do you think about this well he's an amazing person i enjoyed your interview with him. And remember, you came through and I interviewed him. It was in April last year.

Yeah, Bitcoin Miami, right? The night before. The night before. And man, it's a great interview because you just kick back and listen and get edumacated. It's like, man, the stuff in that guy's head is just amazing. I couldn't believe when he said, okay, I, he, he calls me before that interview, right? He calls me on the phone, says, what are we going to talk about? And he says, who else is going to be there? And then he says, actually, no one else is going to be there, Scott. I said, okay. He's like, just for an hour. And then he says, you know, we can have an open conversation we'll talk

it's going to be great he's like or do you want me to just you know do my thing and i said here let's have a conversation that'll be great i asked him one question and he goes into a 25 listed bullet point of the uh different crisis of confidence so i said okay i guess we're doing this but it is incredible i mean he and he's got like a new storyline for every interview. Yeah. Yeah. I don't know where it comes up with it. But more importantly, he's clearly still money where his mouth is.

Right. He's still buying Bitcoin. People thought he had laid off. There's been a lot of where's Michael Saylor? What's happening? Michael Saylor is going to get liquidated. Well, now he's paid off the loan at a massive discount and owns almost $4 billion worth of Bitcoin. It's that historical aspects he brought in when he first started discussing, this is right at the height of COVID in 2020 in the summer, that really helped shape a lot of my views.

I like to say I'm weak in statistics. I mean, I love statistics,'m kind of, you know, I like Sam Week. I mean, I love statistics, weak in math, but I'm just addicted to history. And that doesn't mean I know it well. I just got to learn it. And it's just the history of what's happening with money. And I have this concept I come through sometimes, or remember that movie, It's a Wonderful Life, where everybody knows it's a wonderful life, where Clarence is like talking to another angel, whatever, about the George Bailey. I have this concept of who knows of this hypothetical alien superior culture looking down upon us and saying so okay so they've they've figured out fuse uh vision there might be getting to fusion have they figured out global digital currency yet I mean it's just a

logical thing you you know, just looking at the progression of humankind. And oh, by the way, they're still having wars in Europe. Yeah, they're still doing that. And what are they doing? Oh, but there's oasis is prosperity in America. I mean, just kind of the concept of this is just a logical historical next step

is having to be able to transmit, transact value globally with the click of a button. And it kind of narrows down the Bitcoin. It does, unless you think central bank digital currencies are coming to compete with it or replace it, I guess. Well, that's the key thing. They still are subject to fiat currency. So I did enjoy that comment recently from Governor DeSantis, potentially President DeSantis of California. I'm sorry, of Florida. And he's pushing back.

I think California. Yeah. Dead opposite. Big difference. Oh, well, what's the difference? 12.5% state tax here, zero. I mean, why are people migrating here? Oh, it's not complicated. But it's that concept of a centralized digital currency is something that is not necessary when you have stable coins or crypto dollars just properly regulated. So I came, I started in this business working for primary dealers and primary dealers are authorized by the government to distribute US debt. It really helped during wars. I mean, this stuff really got started during the civil war. And then there's banks. Banks are regulated by the US.

So we have that bit of a glass wall. I mean, it's not perfect, but with privacy. And it's happening globally so fast with crypto dollars, which I think is what's defining this particular bank crisis. We were born on the last one. That's where Bitcoin was born. Now, this bank crisis is defining just that concept. If you have a crypto dollar that's fully collateralized on your phone something that didn't exist 10 years

ago it might be safer than a a deposit a u.s bank that's re-hypotheticated and you know and it's a fractional reserve um system that's unique i just didn't expect to get there and then where's bitcoin in the middle there's no one can control it So it's a bit of a safety thing. Yeah, I guess the fear there, as we kind of saw, I guess now it's two weekends ago, was that those fully backed collateralized stable coins are subject to having their deposits in a bank or in those same treasuries that could theoretically collapse a bank, as we've seen. So I wonder what the endgame solution for that was. Speaking of Saylor, when I was talking to him last week, one of his crises of confidence was in stablecoins because of that sort of hairy situation we had two weeks ago with USDC and their concern over their exposure to

Silicon Valley Bank. Well, this is the thing that's been an epiphany for me since 2018. I am in Hong Kong. I'm learning lessons of, I've always known, I've been, have luxury. I've only lived out of the country for about a year. I was in France and I learned a lesson of the old Frank from the people who lived through World War II back then. But it's a concept of debasing currencies. You really learn that in South Florida. But to me, this is what's happening globally is we're realizing that the dollar is more and more becoming the world's base layer. And it's happening organically through crypto dollars, stable coins. And they're imperfect. But the unique thing that happened with USDC is it dropped almost the exact amount it was exposed to a bank yet not the

treasuries which is okay what's the problem here u.s banking so to me this is where i want to really rope in what um where we're going now is we had hikes two weeks ago from the uh european uh east european central bank and last week from the fed and the Swiss National Bank. And I picture, I just try to, if I'm lucky enough to live to be old, or picture in a conversation with a grandchild saying, Grandpa, so did the Swiss National Bank really raise rates at the same week that they had a merger with one of their failed banks and only became one bank. And did the Federal Reserve really raise rates about during a severe banking crisis? Did we not learn anything, rules of the Great Depression from what's happening right now and what's happening

in 2023? What were they doing wrong back then that caused this great reset, which is my pick? So I look at this in real time. This is just shocking stuff that they look at 12-month measures inflation. Yes, stubborn core, I get it. But if you just look at forward-looking things like housing is dropping at a higher velocity than it did in 2006 and 2007. Now, I was getting really bearish in 2007 in the stock market. I was trading actively back then. It took a while.

Like that movie, The Big Short. Yeah. I mean, it can relate to it because you got to get stopped out first and then the market goes away. I knew a lot of people that did. So to me, this is the key thing I took away from our meeting this morning. Our chief economist filled in was Stuart Paul. He had two key quotes. He said, we had a dovish hike. I'm like, okay, well, that's an oxymoron. They hiked. He's quoted, pointed out, deposits are leaving the banking system to money market funds. We get that at the greatest pace ever. And we're seeing a credit crunch.

And the point is they still hiked. And I look at myself and think to myself, okay, well, what happens a year from now? I don't see anything good coming out. Somehow we get lucky. I got to push back against Stuart's comment there. I listened to the Powell meeting and I didn't see it as dovish at all. I mean, I think a lot of people thought that he started somewhat dovish, but if you listen to the questions, there were two things that struck me. A, he repeatedly said, we will get back to 2%, right? And so in a vacuum, I don't even see how that's theoretically possible in two years if the market and bond market right now is pricing in cuts,

right? So somewhere there's a major disconnect here. But he said that. And then the other one was his utter and complete dismissal of the Fed's interest rate hikes having anything to do with the banking system collapse. He was asked multiple times. And to me, it reeked of transitory inflation, like the Fed being completely clueless as to what was going on and as to what was coming. Now, given, listen, I will say the Fed, people don't realize we criticize them for what they're doing with the banking crisis. They have two mandates, and that's jobs and inflation, right? That really is the Fed's job. So if they're only focusing on those two things, again, in a vacuum, maybe I can see the thinking. But if they don't think that they have anything to do with what's happening with banks,

that this is just mismanagement of banks, and they think they're getting back to 2%, I can't see how this ends. I'm not even going to say well, I can't see how it ends without an absolute dumpster fire. So you touched on, I think, one of the most classic examples we're going to read about from the future is of human nature in markets and just poor timing. And that is what you just said. First of all, the 2% target in core inflation or CPI, these you used core, is going to go negative very soon. And that's based on facts. I will show it to point out in a second. But it's also, they were way far behind in the inflation, which picked up because we created way too much liquidity. But let's remember two years ago, a little bit more than that, we didn't even have vaccines. So it was a pretty good scare. And then they're way too far tightening rates. I mean, I look at it as a benefit of hindsight. You should have started tightening rates at the end of 20, beginning of 21, when S&P 500 made new highs, but they waited too long. So now we're in that transitory stage where we're tightening into a severe global economic contraction, almost inevitably. I don't see what stops it.

And so here's where deflation is going to kick in on July 13th. That's the day we're going to measure the producer price index on a year-over-year measure from June. And there is precedent for the most significant negative number ever for that came in July of 2009. Why? Because commodities pumped and then they collapsed. That period then was measured from the peak in 2009. And our measure of year over year deflation was minus 6.9%. That was the lowest ever in our database going back to 1950.

This July, we're going to measure from June from the high in commodities. It's going to be negative, almost guaranteed in my view. If it's not, it's going to tilt down because the number is so delayed. So these are just pure mathematical facts. So here's a fact. The Bloomberg Commodity Index has dropped 30% from its peak. Now, that's the key leading indicator on the planet for deflation. It's commodities, crude oil, natural gas, all those things. The peak, the trial in 2008, the biggest correction we had in a long time was 50%.

So we're almost there. It's just so lagging. And this is where I'm seriously concerned about this lagging nature of economists and human nature to look and not look forward to what's really happening and how bad it could get. And I don't want to be a fear monger. I just need to point out facts. So the key thing I'm watching now, the number one thing I'm watching is that stock

market, S&P 500. It's hovering around 4,000. The way I look at it is it's on a cliff's edge and everything is dependent on it staying up. I look at commodities. Look what happened with gold on Friday. Gold was up above 2,000 for a while. S&P was down a percent. As soon as the stock market recovered, gold went down. Everything is waiting on what the stock market is going to do in this situation. And I still fully expect what's around 4,000 in the S&P 500 is more likely to go to 3,000. And a normal correction, an economic correction in a bear market, the difference from this and any other one is the Fed is still tightening to fight the forward-looking indicators showing severe deflation. So to me,

this is a problem right now where the Fed is. I remember being in the trading pits back in the 80s and thinking, we need someone from markets who understands markets on the Federal Reserve Board. I'll tell myself maybe someday, I don't know if I'm getting too old. Because you need to look forward to what's happening. And I just look what the peak in housing was. The velocity of its decline right now is greater than from this 2006 to 2011 housing correction. It's dropping faster now on a global basis. And the thing I'll end with is studying booms and busts in history. Every single boom is coming on the back of liquidity we just had the biggest pump in liquidity ever that's dumping now if you heard me repeat this but now

we're seeing it real time the dump is starting and the fed is still a version most central banks are still pulling that liquidity so this is where i say as a macro guy i say okay there's a good reason natural grass dropped to the same price as it first started trading in futures in 1990. I mean, it's 33 years ago. And that's the number one measure for heat, electricity, and fertilizer in this country, which means food. Yeah, I mean, I'm looking at an oil chart as you were talking. I mean, oil is still trading below now what it was last July. I mean, everybody remembers that it went up to about 130, but that was, what, in March?

So that's it. And as we zoom back, you know, we're looking at 2005 prices right now for the price of oil. First time it traded, there was 2005. So if you're a producer, you can create more with less on an everyday basis. Sure, there's bumps in the road. But, I mean, you sell on a farm. A lot of that corn went to ethanol. But I like that crude oil chart.

If you pull back further on it, you can see it's an enduring bear market that peaked in 2008 at 145. It bounced to 130. And now it's heading lower. Why? Because of the pure forces of supply and demand elasticity. We can create more with less and we're using less every day. I mean, I have an EV. Just look at all the commercials. EV sales on a global basis are now almost 10% of global auto sales. In China, it's over 20%. So to me, that's that chart. You see what stops that from simple forces of

auto correlation. And that's the big difference. I really enjoyed comparing crude oil versus Bitcoin last year. The difference is you cannot create more supply of Bitcoin by code. Now you can create more supply of altcoins, but the key thing I wanted to get to here is what's happening is quite unique. So Bitcoin to me and gold are enduring. Bold markets have dipped for good fundamental selling reasons. You can't bring in more supply and demand and adoption increasing,

most notably Bitcoin. Crude oil and most fossil fuels are enduring. Bear markets have bounced and that bounce is creating that elasticity forces and make it go lower. But the key thing I want to tilt to

on the macro, Scott, is we're heading towards a severe recession based on almost every measure of the curve, what's happening in the Fed. And it's all coming to maybe later this year. And guess what happens next year? Two things. We have an election and we have a halving. It's going to happen. So I think it's almost a guarantee that we'll have a severe recessionary, deflationary period by the time we get a year from now and by the time we're into that election period, which means whatever incumbent is will be pushed out. Unless they get lucky, you almost always push out and you almost always go to the other party, some form of young Republican. It's just normal scales.

And at the same time, we're going to severe deflation. The Bitcoin supply is going to drop. It's going to just hit hard. I think like, wow, this is a revolutionary asset. It doesn't respond like crude oil does, like, oh, you have to bring the price up and people just create more of it and use less of it. It's just those early days of adoption. I wonder what's going to stop the bumps in the road. But to me, those are some major macro calls based on simple facts of recession kicking in. And that is, we're going to flip the totem to very severe Republican leaning because of recession. You almost always do that. Right. Of course.

Bitcoin might have that catalyst. It's already starting now to trade more like a risk-off asset like gold and Bitcoin. Although I still kind of worried about that when that S&P 500 finally breaks. And maybe it won't. So to me, that's a pretty deep macro there. But very high probability because of this, the highest probability recession from the yield curve since the 80s, that we're going to have some major shifts in politics. And then it's all going to line up with the halving. I don't disagree. Right now, there's a Bitcoin liquidity problem that says it literally right in the title, so I have to talk about it. This is obviously from Bloomberg,

and we know that this is largely a result of banking rails being cut off or even then, of course, humans reacting to the fear of banking rails being cut off. But there's some pretty astounding statistics. There was a thread here. Obviously, we're seeing that liquidity is down, which means that we should see a lot more volatility. Market depth is down by many multiples. On Coinbase, a 100K sell order has now two and a half times the slippage

that it did a month ago, to give people an idea. Binance market share is up 20% now, which is all being sucked completely out of, effectively out of Coinbase. Now, even BTC USDT depth on Binance is down 70%. To give people an idea, that's even a stable coin, but this is the most astounding one to me right here. Stable coins now have 95 percent share of volumes versus USD the dollar direct dollar trading to

Bitcoin is effectively finished right I mean that's that's what this is saying to me which is pretty astounding is you make the argument, obviously, about stable coins and important or as you call them, crypto dollars, which I love. But I mean, it's over. People have given up on even attempting to trade with dollars almost. Yeah, I think that has made greater implications for a great significant Global macroeconomic reset and yes short term it's going to be a bump in the road for Bitcoin but look at the macro this is called credit contraction and look what happened with 2022 what market went down the most cryptos why because they're the fastest horse in the race what's going up the fastest this morning But that credit contraction that we're having from this banking

crisis could and should, I think, if normal human nature matters, should be just early days. Because what you said earlier, what was the main source for this issue? It's the most significant, aggressive hiking from the Federal Reserve ever from zero. If you look look at on a logarithmic scale it's the most ever and we go back to like 1962 on that um and they're still hiking so why why are banks having issues well because their their reserve assets the off-balance your reserve assets are just collapsing because of duration because they're still hiking i just find this man i'm going to write the textbooks and they're and i think people are going to look back and, you know, if we get out of this without a Great Depression, that would be wonderful. But if we have the normal economic response to this, they're going to look back and say, that was really silly, stupid. Why did we do that? So I look at Bitcoin, what you're pointing out, I'm glad you pointed

that out because I haven't really read it, but I need to dig into the weeds of that. And to me, that's part of the bump and roll. But to me, that's the macro of credit contraction showing up in cryptos. Just imagine getting a mortgage nowadays. I mean, I've got the anecdotal. We've just seen the mortgage applications just plunging. And you can't, I mean, I read a great, listened to another Bloomberg podcast this weekend about real estate on odd lots from Joe Weisenthal, which you talked about. And that is, you can, there's just, with credit contraction, there's no chance of real estate to go well, do well. It just never happened that way.

Yeah, I want to dig in. I see it being talked about in the comments and I and I intended to mention it. Cloud Casino saying one thing that Bloomberg article doesn't mention is that the most Bitcoin since 2014 has been removed off exchanges. 70 percent plus are taken off the market due to FTX, Voyager, and Celsius. Really important point. And I literally had that like bullet pointed in my mind to discuss when I brought up this thread. This does show, I mean, you can see over there, the quantity of Bitcoin on the left has just dumped dramatically. So maybe the real story here is that people are getting their coins off exchange, viewing this as a flight to safety and viewing this as a store of value, which is the entire point. And there's just not that much Bitcoin on exchange.

Therefore, there's no market depth. And maybe this has a little less to do with the banking crisis and a little less to do with the dollar. I don't disagree with that. And I think if you want to be safe after having exchanges like FTX, you know, you can store it yourself, get it off exchange. And that's typically a very bullish sign. Also, what is price telling us? Price is telling us, sure, it could be short term. Price is telling us that there's been this flight to global digital reserve assets going and will go in that way.

And that's Bitcoin. And I'll perform Ethereum, which is impressive. I'll perform the crypto market, which is impressive. And that's kind of what we've been not hoping, but expecting. And the key question I ask myself, and I like to ask our listeners and viewers, is what stops this process of this banking crisis? And the Fed, OK, so they provided some liquidity in the short term, but raising rates, that was like you point out earlier, that was the main reason in the first place is hiking rates so fast. And Powell is completely apparently oblivious to that. I don't believe

that, but he refuses to admit that they have anything to do with it. I know that he's aware of it. He's not a moron, right? Like it's not very hard to look and see, well, I can go get this 5% risk free directly from the treasury who's going to buy my 2% or 1% yielding bond. But I like your point that the banking, what stops this banking crisis? Because people seem to be living in la-la land where they think that the banking crisis has stopped. I mean, are we now at the point where if you don't see a bank collapse in five days, that means that it's over? I mean, here's the story, right? FDIC says First Citizens will acquire Silicon Valley Bank. That's making everybody bullish on banks again for some reason, but go ahead. Well, that's part of human nature. I think people, particularly if things look like they

might be that bad, it's our nature, particularly as groups, to try to think away from that. And it's normal as strategists, human analysts, and they also never want to really point out the, you know, the, the gloom at which I have to, because I see a hurricane coming. I got to warn people. I feel like if I don't warn them, I'm going to be remiss. So that's the normal human nature, I think, until it really hits hard. And that's why I keep saying, I don't, so what stops us? I can't, I can't, I can't believe I've been saying that for over a year and it keeps getting worse. So what stops us? I will give indications what stops us. Typically takes a lower plateau.

And we're nowhere near that. If you look at stocks, housing, commodities are maybe getting there. The main assets are really a lower plateau and massive central bank easing. And that's the biggest 10 in the window of everything else is a five. That the fact that ECB, Swiss, Fed, number one, are still tightening. But the key thing to remember about Mr. Powell is I completely might point out some positive things about him.

He did push back on Trump, which was really, I think, so good for US and dollar system to have the Federal Reserve show that check, say, no, Mr. President, I will not ease. No, sorry, we'll not do it. I respect him for being that profiles encouraged. The key thing I think we need to understand now is this is a lose-lose for risk assets, number one, the stock market. Basically, you've heard it before. I've seen it before is when the Fed thinks the stock market needs to go down. And that to me is what I'm getting. That's my interpretation of what we're hearing from Mr. Paul. The fact it's not going down is great, but I remember this in 2007. I remember this in a lot of markets when you get the consensus and you get so much leveraged shorts in there. You can't make money until they expire, which I thought we had a major option expiration last week, usually makes it difficult. And that's from someone who's lost a lot of money trading options.

Yeah, I guess we can give Powell his little bit of credit there. But let's talk about liquidity, because obviously, we talk about the fact that they're still tightening, right? And they're still sort of hawkish. But how does that play? You mentioned what's happening with obviously the banks in Switzerland, but we've seen a massive reduction in the Fed balance sheet even while doing this because of the banking backstop. So how does this program, BTFS, which just blows my mind, by the way, all I can think is buy the F and dip when I read the BTFS, right? And that's the name of the program. But with them backstopping banks while tightening, do we get sort of an effective, let's not call it QE, but sort of QE happening with liquidity or is it a completely different thing? It's silly in a way. I mean,

I see it's trying to fix the forest fire. The forest is on fire by focusing on individual trees. You need to focus on the forest. And the mass of the forest is, yes, it makes sense because the classic old school academic economists see this inflation that's stubborn and don't seem to ignore what typically happens when deflationary forces accelerate. And that's what they have to do. I mean, but when you dig into the actual, you know, fixing the transmission or the tires, you got to have particular bank issues and they're focusing on one off. To me, though, it's the liquidity thing I want to focus on that I've been pointed out for over a year is in terms of, let's look at some of the macro indications

of liquidity and look at Bitcoin. And I look at futures open interest. Now, I'm looking at listed because it's CME. It's kind of harder for me to really define what I read about what's happening off the listed exchanges. And I see a clear upward trajectory and open interest of listed futures and Bitcoin. Why that's significant,

because last year in commodities, when people were talking about super cycles, I saw a clear declining open interest in all the major commodities, most notably crude oil. And that, to me, is a sign of maturation, bringing into liquidity. Liquidity is almost always based on increasing positions and interest um and it's the trajectory that matters it's clearly heading from the lower left the upper right so that's more indication and macro the key things were also point out that's more shorter term i think um and it'll be worked out but it's this you know i i have to sometimes i have to define what's the difference between one of these few trees in the forest.

And I'm not worried about the liquidity. I fully expect the bigger issue, the mass of 10 is going to be when the stock market rolls over. If it doesn't, okay, McGlone's wrong. And how Bitcoin and Ethereum, Bitcoin will respond to that. And what stops it? Well, it's right now not going to be the Fed. So I don't know what would stop that from happening.

And that's why it's just going to delay it as long as possible and drive people like, you know, people actually running real money. The benefit I have is I just say it. I have to respect all those people who do it. I used to do it. And now I'm buying restrictions. Actually, it's a key thing too that's really unique, Scott, having been addicted to trading from the pits, is it makes my view so much more organic when I don't have a position on. And I can't- Of course, you're not talking your book and you don't. And listen, people forget that we accuse people of talking their book, whatever, but a lot of these people aren't

intentionally doing it. If you have a position on your bias is fundamentally altered. Even if you don't believe that it is, at least I can speak for myself. Human nature will never change. That's a good point. And the key thing I remember I work on wall street is, well, do you want,

expect someone else to talk to your position? You got a position for reason. I want to hear the reason Michael Saylor's number one in the planet. I think about that. Yeah, absolutely. Okay. So listen,

we, we talk about this all the time, but since it's just you and me, I want to talk more about your base case. Obviously you kind of talk about the idea of a great reset. Yeah. We you've compared this many, many times more to a 1929 than to a 2007 or a 2008. I mean, it doesn't take being a history buff to know that 1929 was the beginning of the Great Depression. Yeah. Not a great recession. Right. So what does that actually look like in practice? We haven't talked about this in quite a while. You know, you always talk about sort of the depression, suicide, jumping off buildings kind of moments in the market. Unfortunately, I mean, if this is 1929, what's coming?

So I only say that because I'm worried and it's an actual observation based on a measure of patterns and human nature. And the key fact is, bottom line is, we are, the most central banks ever are still tightening as the world tilts towards recession. Now they're pointing out, yes, unemployment's low. Great. But unemployment is at the lowest level since 1962. So here's part of that. It almost always troughs in recession that goes higher. There's no room for it to go lower. Okay. So that's part of that recession. But the bottom line is I like to lay the groundwork is first we had this cheerleader and chief president unprecedented where, you know, we knew if President Trump's in office, the stock market is going to go up. We'll do things to make it go up.

So that period's over. And then we had this 100-year pandemic that produced the most liquidity ever. And then within a short period of that, we had this hot war develop in Europe, first time in almost 100 years, 80 years. All those things have lined up to this biggest pump in liquidity ever, the biggest pump in real estate prices, equity prices, speculation in history that's dumping. So to me, that's the significance. So I overlaid the pump in liquidity in money supply with the stock market if you just measure like 120 month basis back to 1929 it looks the same that pump dumped and the like u.s money supply which was the highest ever on a year-over-year

basis and 21 is now negative the lowest ever it's the dumping of liquidity the way it always always happened so i reread the book recently called them uh boom and bust uh qu, I think was one of the authors. And it pointed out every, you know, just every single boom and bust in history is all in the back of liquidity that's dumping. So that's happening. The key thing I'm shocked by is that we're still dumping liquidity as things are rolling over. And that's why I'm concerned. This is just the normal cyclical nature. And then let's add in some anecdotal things. We have the boomers, average age around 70. They've been overweight equities, not because they wanted to, because they couldn't help it, not only because they're advisors, because markets go up so much. And they

saw that two-year note at 5%, and Jim Bianco says, and it's still a little, maybe about 4%, lock in around 9% to 10% over the next two years, fully expect. And the price of gold is kind of creeping higher. And you see this thing called Bitcoin. Well, maybe I have some Bitcoin in space. To me, that's where the major money flows are going. Every single rallying stock market, I think they get it. Like, okay, the Fed's still tight and they're telling us to get out. And the Treasury is giving you something to do.

Gave you that TINA, gave you an alternative. So to me, this is historic. It's happening in real time. And the difference is the last crisis, we didn't have cryptos. Now we do. But also part of that pump, Scott, was this massive pump in speculation and cryptos. I mean, 22,000 was seriously silly. Shibuino and Dogecoin were going to go down in history as this silly speculation. And then there's this, you always get things like Amazon and Google and things that really make a difference. And that's where Bitcoin is global currency. So to me, that's the simplistic view for the biggest dump that's happening. And I'll end with this. What did the Fed do last week?

What did the Swiss National Bank do in the midst of their hiking rates in a bank run? Okay. I kind of learned that's not a good thing. Absolutely. You talk about gold. I went a day before and obviously that has been sort of the flight to safety, especially in a depressionary environment, you would expect for gold to continue up. I mean, I just happened to pull up the weekly gold chart. It's kind of dropping today. Interestingly, stocks are up once again but you pull out to the monthly here right this is the high from 2011 we're right around at 1920 but i mean this looks like the most textbook cup and handle in history first of all so so that should

lead to a massive breakout up in gold but i'll show you who this handsome guy this was your uh this was your uh report this this was your, uh, report this morning. Right. Uh, which I obviously read every time it comes through gold may achieve a boom in 2023. So Dave Weisberger actually, I think it was last week or two weeks ago. I think last week made that amazing point. He said, if Bitcoin didn't exist, gold would be $2,500 today. Yeah. A, do you agree with that? And B, I mean, just, I guess, go over the briefcase here for gold, which I think everyone here knows is the same case for Bitcoin, but with higher beta. Can you put that chart back up? Because one of the lessons, like I said, I learned

in trading fits, see that on the right, that's a triple top. The lesson you learn in trading fits is triple tops are made to be broken. There's always all these little sayings. Sometimes they work, sometimes they don't. Like don't fight the tape is very silly fits is triple tops are made to be broken. There's always all these little sayings. Sometimes they work, sometimes they don't. Like don't fight the tape is very silly. But triple tops are made to be broken. So that's a good technical pattern. You'll get crude oil. It's the exact opposite.

It's a bear market. So what's the fundamental reason for gold to go higher? Number one factor, I think, is the fact the Fed's still tightening. But if you look what the forward markets are expecting, I look at the Fed funds futures in one year. They're starting to price for that ease. Once that really tilts down, gold should be all takeoff. And that's been my base case of part of this global macroeconomic reset. The key thing is anybody who's 30 or younger asking about gold, where they say boomer rock.

So finally, my Bloomberg editorials allowed me to put that in a headline. Yeah, I love it. The boom part of boomer rock so finally my bloomberg editorials allowed me to put that in a headline because yeah i love it the boom part of boomer rocks made to find gold in 2023 and i literally laughed out loud when i read it this morning so the key thing is what's gold doing it's completely frustrating the bulls it's got to do that make it difficult and for good reason there's an alternative there's bitcoin treas, man. And the biggest thing that's really pressured gold, if you can move down to another chart, move on to that last chart. The thing that's really pressured gold the last 10 years or so is that white chart. That's the U.S. That's that's the U.S. stock market. I can talk to it. Yeah, that that one right in the middle. That's you can see the white. That's the US stock market measured versus the ex-US index. Now, my colleague, Gina Martin-Adams, our chief equity strategist, is great. She's a bit neutral on equities right now, pointed out that's been one of the key drivers for gold, is when the US stock market outperforms the world, why would you want anything

but the US stock market? And that's been the case for almost a decade. But it's the highest ever. It's moved at the greatest velocity ever. And it shows to me how scared I am of the US stock market. And that's been the case for almost a decade. But it's the highest ever. It's moved at the greatest velocity ever. And it shows to me how scared I am of the US stock market. Because not only is it the most expensive ever versus the world. I mean, OK, the rest of the world's got some inclinings for capitalism. It's the highest ever versus GDP a little while ago. It was the highest ever versus US housing. It was the highest after versus sales. And the Fed wants it lower. I'm like, OK, thank you. Got it. Out. Give me two-year notes. But that chart is once that starts rolling over, once there's an alternative to the US equity market, gold, Bitcoin, treasury bonds, until

treasury bonds drop really low yield, to me, should be the major assets to last for a while. The key thing about gold I like to point out anymore is all the rational investors on the planet who've been investing in it for thousands of years, entities, and of course, people are still alive, realize that if you don't have some Bitcoin in that space, you might be ignoring rapidly advancing technology, replacing what it has in the past. So to me, that's the macro. And that's why I like to show that chart. When people are bullish US equities, like what has really driven US equities to outperform the rest of the world. And that's why I like to show that chart when people are bullish U.S. equities. Like what has really driven U.S. equities to outperform the rest of the world? And that was massive liquidity from U.S. said, obviously, we have a better system.

But at some point, just a little reversion in that means gold should be the alternative. And remember, boomer rocks, boomers like rocks. Yeah, but I think it's important. I mean, I think that to Dave's point, you know, maybe gold will be twenty five hundred because there's an alternative in Bitcoin. But it's an interesting point that we kind of discuss a lot. But. Millennials and anyone under 30, even anyone under 40, they're just never going to start buying gold. They're just not like Bitcoin, whether Bitcoin exists or not, like the TikTok generation is more interested in meme stocks. They're never going to buy, you know, funds and gold and probably might even stop buying stocks. So I just think that there's an inevitable shift in sort of native technology generation versus the boomers anyways.

What you just said is never buying stocks. That to me is the most profound statement because never have we had the end of a bear market without extreme bearishness. So what we still have is this human nature, hoping that, oh, okay, it's over, it's fine. It almost, bear markets almost always end when they give up. I mean, I've been through a few of them.

I used to have hair. And like bull markets just get to the extreme. So to me, what you said is so profound. Once people give up on the U.S. equity market, which has always happens for periods of times over history. Now, maybe it happens for a few years or maybe it's just a few months. You have to get that. That to me is a transition. And there's one key thing that's going to make people buy gold is going higher. It's just going to it's the things are, self-fulfilling. Once gold sustains above 2000, it'll bring on more like, okay, well, my Bitcoin's not performing so well because the stock market is going down. It's still risk asset. Okay, load into gold. It's a whole transition. Now, obviously, predicting the future can be dicey, but that to me is the way I see

it. It's the bottom line is still, I revert back to that massive row we've had in the stock market for the last 10 years is almost unprecedented, certainly how far it got. And the way I look for a bottom in the stock market is when you have these extreme measures of bearishness kicking like, oh, GDP, the Fed can't ease more. GDP is going to get worse in a negative way. I mean, it has to be a pretty severe recession. I'm just predicting how it usually happens.

Yeah, I can't find it right now, unfortunately. But I mean, you can obviously look at the yield curve rapidly uninverting at the moment. But the bond market expects them to be cutting. Well, so I love this about, so the Fed, yeah, the Fed funds rate. So this, all the Fed bashing from crypto people is kind of entertaining sometimes because when you've been trading treasuries for as long as I have, you just respect them and work with them. And they do get a lot of things right. Like the 1994 tightening season, that was spot on. I mean, that's when I moved to New York in 93.

And if you want to dig into that, I can dig in. They nailed that one. But the key thing is the Fed funds target rate is 5%, the upper bound. The two-year note is 4%. Okay, well, there's your inversion. You can start right there. 100 major points right there. Yep. And there's one key trigger, Scott, that'll make that happen.

I've been saying it too long. All you need is one bad week in the equity market, 10%, maybe a little more. And people realize, okay, it's real. We're going to shut down. It's already happening. People are not only shutting down spending because they want to, because they have to, because of the credit crisis. I mean, you just can't get credit as much as you could anymore unless you have the highest rating. It's gone.

It's over. And that's just a normal cycle. So to me, that's the key trigger it could have be happening today i you know right now as we speak the s&p 500 is half a percent but it's going to happen if it doesn't glones wrong and the fed keeps tightening that's the problem but okay so what blows my mind there is that everybody's been saying this entire time the fed will pause or the fed will pivot or the Fed will pivot when they break something. This goes back to my original point. They broke something, just apparently not the thing they want to break. So that's adding to my, well, exactly. That's a good point. But the thing is, if you want to really break the thing you want to break,

they broke it. That's banking. That's liquidity. But they want to see stocks go down. To your point, I'm agreeing with you. I think they want to see stocks go down. Interesting. I mean, listen, here's the SPX chart, right, on the monthly. Go back to just talking about the panic. I remember this because I remember literally sitting here with my friends in December of 2018 being like, should we buy Amazon? Or it was like the stock market finished. I remember that mentality. The stock market dumped, they immediately pivoted. And you can see the liquidity came back in and then you get COVID, of course, but like nothing but up. And that was effectively almost just a one month panic. It was December, 2018. It's clacks at bin switch. I remember the key signal I got back then was the VIX volatility index dropped to its lowest level ever, maybe like 100 week, 50 week basis. That was got me really bearish in 2007 was the VIX volatility index dropped to its lowest ever back then. trickle down that I've been expecting since way too early, 2008. And it's just started kicking

because the massive liquidity they pumped in there to me was too wrong, too much at the wrong time. Like, oh gosh, here we go again. You can't fight the Fed, right? But that's changed. That's what switched in human nature, the Fed. And that's what COVID changed. That's what President Trump changed. That's how the world has changed is the Fed has realized, okay, this is our one chance in history to break that umbilical cord where people are more concerned when they invest in what the Fed's doing than the fundamentals of that actual investment. They will seize that moment. So Powell might go down in history as creating a Great Depression, and he might, I hope not, but it will go down, I think,

as the person who finally broke that thread. When you saw that dip back there, remember, I was predicting it. I fully expected the Fed. I remember being on a panel, and I asked everybody, but it was right before it happened, who expects the Fed to cut? I was the only one in the whole audience. I remember asking the audience. Well, no, they didn't raise their hand. That's when you know you're in it. Well, it's true.

That's a lesson I learned at TradingFish. Yeah, when all your clients agree with you, you're wrong. When they all think you're an idiot, you're going to be right. I mean, I have that fixed chart. I have that fixed chart. And I mean, it's like the most defined historical low area right there. Right. I mean, there's where you're talking about in, I guess it was December 06 going into 07. Yeah. We obviously had it down here in 1718 where I'm talking exactly where I'm talking about. And then it pumped from just literally in January. Well,

I guess that was over here. And now we're right in the middle. So do you think a usable signal at this point that maybe we see the VIX once again drop dramatically and we get our real serious dip in stocks again when VIX reaches those historical lows? VIX is in a bull market right now. I think it's supposed to get near the highs and work it out. I see the VIX in a bull market. Now, it's sustaining, what number now, 21? That's pretty low. Yeah, it's pretty low.

But it's not the kind of thing you can buy because you have to be technical. Those tops are 90. Well, exactly. But I think it's in a bull market partly because this sentiment shift, I think I'm sensing from boomers, from U.S. equities, from global, realize, OK, we've got to just take that money and say thank you. But that was a signal. Now it's also the key thing is the Fed's not providing that liquidity when you want to.

Markets go down. So good luck. Don't fight the Fed. You're supposed to be bearish equities. Do you think they're going to keep tightening? No, I think they're done. but markets need to force them now. So the next trigger, big trigger, I think, is you need for them to go in May. We'd have to have like a utopian situation where everything looks great in this human nature. It's over.

Bank wobbles nothing. It's just a perfect calm. Yeah, and you virtually certainly need a higher stock market. If it drops to 10%, that's going to stop everything. It's just going to legitimize, as people say, the smarter bond market. The bond market inverted curve has been expecting this for so long, and now it's inverted from Fed funds to two-year notes. I just hope they don't make the mistake of still tightening. And I'm afraid of what's going to happen to convert them to really have the first ease.

And that's probably going to be significant deflationary forces from markets. Now, it's already happened in commodities. They're down 30% from the peak, the Bloomberg Commodity Index. Yeah, it could bounce because they're getting cheap but you know the the rule of long and leading lags yeah so there's been this sort of idea yeah there's been this sort of uh idea that the fed at this meeting had to choose between saving the banks or allowing runaway inflation. But your base case here is that runaway inflation is off the table, that we're already in a disinflationary environment heading towards deflation, a.k.a. depression. That means inflation's not a concern anymore.

Oh, no, it's going to be deflation. A year from now, we can blame McGlone. But we're speaking, I'm almost certain we're going to be talking about enduring deflationary forces. I mean, just look, I mentioned natural gas. And why is the Fed not doing more to help us? That's what's changed in history is they will not ease with the ease they have in the past because we've learned the lessons. We've got the lesson now of easing too much in inflation. Okay, well, that's never going to happen again. So our entire lifetimes,

our future in markets, people will say, when we're getting to recession and things are looking real bad, they're going to say, well, the Fed might ease, but they won't ease a lot because of what happened last time. That's what's changed. That's what's different forever until it gets that bad. And that's my point. I like to point out is those days are over, but the deflationary forces are stronger than ever. Just look at technology. Things like people like Jeff Booth point out, like I pointed about natural gas. I like to read about it and then like to show the fact is this is going to. So here's another example.

I fully expect this year in the Corn Belt to be a massive deflationary year. Pressure, massive prices, pressuring food, unless we get a drought. And here's one thing that's a point I like to point out is the largest export people like to talk about grain so much, but this is where you really see it happening. The largest exporter of corn this year will probably be Brazil beating the U.S. Why? Because they had higher prices and they created more of it. Can't do that with Bitcoin. No, I just saw a comment come up. I happen to look over there from Monroe Crow. I don't know anyone personally who's actively investing in digital assets, no friends, no family, et cetera. They all smirk and laugh. And then, you know, it'll bring them back on. And they need to give up on the stock market.

And there's a good reason, because everybody in there has so much. It's been so easy to be long in the stock market. Everybody's in it. You're doing great. It's part of the system. It's always been that way. You need to have a period of, eh, that doesn't work anymore, I think, for cryptos. But again, that's where still Bitcoin is still more of a risk asset. Now, I'm still waiting for that transition of

stock market making new lows and see how Bitcoin will react. And I don't think it's an if for stock market making new lows. So, okay, let's say that we're wrong. I agree with you, stock market goes to new lows. Let's say that we're wrong. What would be a signal still, if not the situation you just described, that Bitcoin is reaching more adoption is actually being viewed as a store of value or a flight to safety? I guess people don't fly to safety

if the stock market goes up, so it's kind of irrelevant there. Price. Yeah, it's going to be everything about price. So we're already seeing it. I mean, okay, the transaction, the current trajectory is Bitcoin is showing it's becoming more of a global digital reserve asset and and a reserve potentially store value as a stock market is volatility is high. The key thing is, OK, let's say S&P is making new low and head towards 3000.

Let's see how Bitcoin reacts. It'd be wonderful if it doesn't go much below 20,000, but we got to see. I mean, I don't know. I mean, that's the thing is I think long term, as we get through this period, there'll be more significant signals that Bitcoin is going to go up to 100,000. And I like to put it back to April of 2019 when, remember, they came down in tether, New York return in general, and that a great buy signal for Bitcoin around $5,000. We might be getting that right now with the great financial crisis and Bitcoin doing very well. But it's, like I said, I'm just, I have to, I guess I'm too bearish at stock market. The number one measure of beta of risk assets on the planet, the S&P 500, and still too bearish that to be bullish Bitcoin.

I just got to see how that plans out. And remember, I'm just saying it. I mean, it's people who actually have to do it. It's difficult. But in the longer term, I fully expect either way, down in Bitcoin risk adjustment is a way outperforming the stock market. And the way down, it might have a problem.

I just want to point out one last chart before I let you go. This is for everyone else, just because I think before I let you go. This is for everyone else, just because I think this is kind of funny. This is the Bitcoin halving chart, which is the four-year cycle effectively. And if you fell on your head and ignored everything Mike and I talk about with Dave every single Monday and ignored all the macro, we basically just have yet another four-year cycle for Bitcoin. So it may be very interesting to see what happens if Bitcoin can just continue to somewhat follow this cycle into the future,

regardless of what happens. I can't wait to see. Basically, I know it's going to take patience, but I can't wait to see where we're trading at the next halving and what happens six months after. The key thing is what stops that trajectory. In the big picture, trying to play for these $10, I guess, well, that's a big amount of Bitcoin now, can make you lose your hair. But the big picture is, I think the bottom line is astute investors, institutions on the planet all realize every day that goes by is they need part of this asset.

And just getting it is difficult. But in the bigger picture, I think by the time we get to 24 and that halving, we're going to be talking about a pretty severe recession. All politics leaning Republican because they kind of we have at least a presidential and it's just going to be a great setup next year. I'm really looking forward to it. Yeah, I think we're going to do quite, quite well next year as well. Mike, I mean, I miss Dave. I'm going to be honest. We always miss Dave, but we just knocked out an hour in what felt like five minutes to me. That's one thing I enjoy about my conversation, Scott. And the way I'd like to picture you is sometimes when I'm riding that bike home in the wind over the Rickenbacker Bridge, I can hear your voice. Sometimes other podcasts, I can hear you got that, you got that voice, man. And it's good. And the stuff that comes out of it is profound. So thank you. Appreciate that. Yeah. I, you know,

it's the old joke, uh, a, uh, face for radio, right? I guess, but, uh, the, the old face for radio, everybody as always follow Mike, uh, of course, um, Mike, as always, follow Mike, of course. Mike, as always, also, you're invited tomorrow to the Twitter spaces. We'll be doing it at 11 a.m. Guys, we can't get Saylor every week and listen to him talk for an hour, but it's going to be awesome. We've got Greg Fost, Preston Pish, James Lavish. We're going to be talking about QE Infinity, their favorite topic. John Najarian, hopefully Mike will join us.

We're going with the experienced guys who understand what's happening. It generally tends to be the theme here. I like to bring in a lot of people who are a lot smarter than me. So, Mike, I hope you'll join everyone else. Of course, we're not on YouTube now on Tuesdays because I'm always prepping for that Twitter spaces. I hope we will see you all there. Until then, I've got to turn this banner off. Until then, I got to turn this banner off. Until then, see you guys. Thanks, Mike. Cheers. Thanks for having me.