The Wolf Of All Streets - Bitcoin Pump Then Dump | 95% Chance Of ETF Approval Then 40% Correction | Macro Monday

Episode Date: January 8, 2024

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There's an expectation that Bitcoin is going to pump after we finally get the approval of a spot ETF. But is it going to dump massively in March or April? Arthur Hayes seems to think so because of the reverse repo and also because of the halving cycle. And that's generally what happens. And he even made the argument that the higher we go on an ETF approval, the worse and more painful that correction will be. We've got ETF madness. I'm going to give you updates on everything happening there. But then, of course, dive in with my three experts and get out of the way here.

Mike McGlone, James Lavish, and Dave Weisberg. It's the best hour of the week. It's Macro Monday, guys. Let's go. Let's go. Gently tap on that like button. Good to see so many of you here today. It's been great watching the channel grow and especially our Macro Monday, which I think is the consensus favorite, probably because you don't hear my rantings.

You get to listen to actual adults who are experts on the topics that we're discussing, giving their opinions, and I get to just move out of the way and learn alongside the rest of you. Dave will be here momentarily, but I've got James and Mike. Guys, I don't know if you mind, but I want to just give a quick ETF update because it's absolute madness right now.

And I think we can just get it out of the way and then have the conversation afterwards. We have it now with the Bitcoin professionals, Beltunis and Seifert, who have both been on the channel in the last week, saying now 95% of a chance of approval. This thing's happening, right? Polymarket, if you're betting on the odds there at about 85%, why so bearish is what the article says. Why only 85%, guys? But I think there's this Bitcoin ETF hopeful's eye this week for long awaited SEC green light. Everybody looking for this BlackRock last week said they think they'll hear it Monday. The Bloomberg experts have said the entire time they think January 10th, excuse me, Wednesday, they think January 10th, also Wednesday,

and these things could be launching by Friday or Monday. Now, for the very quick update, we're now really coming into the finish line here. Eleanor Terrett saying, we're now past the official SEC submission deadline of 8 a.m. And all issuers, aside from Hashtag, have submitted their updated S1s. That's the second part of the process there. So everybody basically got their homework in except for Hashtag. But

apparently Hashtag already has an ETF product. So the rules could be a little bit different for them. It's also an S3 for Grayscale. Now, what's really happening here is this massive fee war. This morning was wild for Bitcoin ETF filers. Here's the state of play on the fee war front. Longest, lowest long term fee is Bitwise at 0.24%. They did the price is right thing, but the opposite. On the price is right when you always just bid a dollar over the highest bid and then you win if anything's higher. They went a bit lower than the lowest bid, but we had ARK revising down to 0.25, BlackRock revising down to 0.3, and then BlackRock doing a waiver, which makes it basically 0.2. People giving away six months free. They're going to be paying us by the end of the week

to buy these ETF guys. Of course, the one that I really want to talk about later, Grayscale, you guys can't see this. Still at 1.5%. Still up here at 1.5%, pretending we're not even doing a fee war, just keeping it where they were. And then this is, I do want to talk about this. But Caitlin Long saying, when fees are lower than cost, please, please, please ask yourself how the asset manager is making money managing the fund. With no fee funds, the answer is usually securities lending. A practice that can pose a lot of hidden risk to investors. What's really going on here? I don't know if I want to go down the hyperbole path and get scared. I think ETFs are pretty good. But here was the bombshell,

and this is where we're going to start because, James, you wrote a whole newsletter about whether this is priced in, which I'll show in a second. But everybody's saying they think it's priced in. Matthew Siegel went on Spaces the other day. I've had him here. I love him from Ben Eck. He said that he has heard that BlackRock already has over $2 billion in AUM lined up for the launch immediately, that they've been on the phone doing their roadshow, putting in the calls. People are going to convert their Bitcoin over. You wrote about this literally right in the informationist uh here where's oh that's not it uh we'll find it here wrong one here right at the top right you you shared that so guys van

eck was originally saying two billion in like the first quarter now we're getting two billion in the first five minutes so uh james fair to say maybe this isn't priced in? I mean, look, $2 billion. BlackRock has $9 trillion of AUM. $2 billion is like, it's 0.02% of these assets. It's literally, it's a rounding error on a rounding error. It's nothing. So as mind boggling as that is, it's nothing. So yeah, it doesn't surprise me at all. And I would expect the same thing from Vanguard and Fidelity and other places. They're saying, yeah, we've got customers who want this. This is why all these ETFs are, you know, they're pushing to get approval because they know that demand is there. BlackRock and Fidelity and Vanguard or VanEck, they don't do this unless they know that demand is there. BlackRock and Fidelity or VanEck,

they don't do this unless they know demand is there. And they are putting a massive amount of time into this. Now, the funny thing is having this fee kind of war before we even have an approval, it's clearly coming to a head. It's clearly accelerated right into this last few days on this path. And honestly, my thinking is, number one, if somehow we don't get approval this week for an ETF, then it's a rug pull. Something happened behind the scenes with Warren or Biden or something.

That's a rug pull because everything is pointing in the direction of this is happening. That's number one. Number two, it can't be priced in. There's still a risk reward probability that's priced into the Bitcoin price of whether or not this happens, number one. So if you're a investor and you can't buy and sell Bitcoin, you're looking at this, you're looking at the upside and the downside, you're making that calculation of if it's an 80% upside of 20%

and a 20% downside of 30%, then you're factoring that into the price and so you get to whatever the price is. That's number one. Number two, just the nature of this event driven trade you know for the short term like this for long term this is absolutely uh bullish for the for the assets in vickmore but short term the if you you know the just the event given probability you don't have all the players that are going to come into it yet because they're on the sideline, just as you just pointed out.

From BlackRock alone, $2 billion. It's literally just the beginning. So it's clearly not priced in, in my mind. I'm just very confused at the sort of idea that everybody has that this thing's going to launch flat. We saw BITO launch a few years ago. Yes, it was at the top of the bull market, but for a futures Bitcoin ETF to do that $1 billion in 48 hours after 10 years of spot hype, why does everybody expect this to come in flat? You have Larry Fink literally doing his roadshow. BlackRock's not launching an ETF and getting 20 million. They're just not. Dave, you're muted. I can see you want to speak. Yeah. I mean, look, I think the more important

question is the rug pull thing. I mean, people underestimate stupidity. I have some very smart people out there who think that this better Markets letter that came out on Friday will be used as a reason for rejection. And if that's so, then in court, they're going to look like the biggest idiots. And I hope people depose them to find out whether or not they've been compromised by Elizabeth Warren. And I say this meaning- She's on the website. It's literally- The letter itself. Everyone who followed me, and if you don't, go back and read it. I actually effectively wrote a comment letter in response this weekend. The two main arguments they make, one is insane and the other is just flat dumb. Insane is asking the SEC to say, asking the judges or the SEC should say, well, there's manipulation and ignoring the fact that that was considered arbitrary and capricious

by the judge. The quote new argument, which is really dumb, is that Coinbase is too small, is not a market of significant size. And they cite the global percentage of the Bitcoin market. The response to that, which is obvious, but no one actually had a chance to make it because they submitted it on the 11th hour on Friday, is Coinbase is north of 40% of the Bitcoin US dollar market and actually is four times the percent that the CME is of the Bitcoin dollar futures market, where it hovers around 10%. So honestly, Coinbase is 4x more a market of substantial size than the CME is. And this argument is, it's just data, right? So if it ever does get to court, if Gensler does say, well, you know, we don't think there's a market of sufficient size here, and I know there are some lawyers in the United States, I'm not going to

name them, who are well-placed, who think that he is going to use this as a rug pull, then effectively what you have is two things. You have a dumbass argument that will get rejected in court, and you have it done by a Washington insider, Dennis Kelleher, who is a hack. And I would love Mr. Kelleher to come on your show and debate me on this topic, but he likes to operate in the back rooms in the dark where there's smoky substance and nobody can actually balance it because that's what he's been doing all along. And if you talk to practitioners, this is, by the way, going on for years. I mean, when I was running two stigma securities, I got to read his comment letters and they were all dumb. Things like PFOB is bad. Exchange rebates are bad.

Look, I'm supporting IEX because who, by the way, has now flipped and actually offers rebates because they realize it's necessary. This man does not understand market structure at all, and yet he runs a think tank. I think it's really important. I've always wondered who the funding for this place is. Because if it turns out it's funded by the DNC or offshoot of the DNC, then that is a criminal enterprise. It really is. It's like trying to make and masquerade using a charity to masquerade as somebody who is trying to improve market structure. And honestly, it's sickening. And so, yes, I am mad. I was really mad this weekend. I'm really mad now because any rational debate on this topic, and obviously the staff agrees

with me because the staff would not have spent the time they have with all these issuers. So we have rot in DC. Vivek is not wrong. Hell, when it comes to it, Trump is not wrong. Hell, DeSantis is not wrong. Effectively, there is some stuff going on down there that is hellish. And if they do decide to rug pull, this is the moment where that hell could be exposed because now we actually have the breadcrumbs. And so I just want to get it out there

to your audience and let people continually understand it. This is a big problem because if you take stupid arguments, and I mean stupid arguments, ones that don't make any sense, and elevate them and announce that at the end of a comment period when there is no time for anybody to respond by official SEC channels, we have a problem. And that's exactly what was done. Yeah. And clearly, it appeared to be a massive Hail Mary, right? They see this is coming. This is the last they're this is the last play and it might work and if it does you're right dave corruption to the end write a letter you know i agree with what he said but at the end of the day it's just a letter it doesn't mean that the sec is giving it any weight

you have to understand kensler has been looking for an argument and the argument they made that no one had answered because it's so dumb but it's's dumb. I mean, it's just wrong. That Coinbase is only 2.3% of the global BTC spot market, so it's not sufficient size, is idiotic. Because the only thing that matters is Bitcoin traded in dollars. It's like saying, name that ADR, where the ADR that's trading on the New York Stock Exchange or NASDAQ is trading is only 2% of the global volume. Well, you know what? That happens all the time. And yet nobody argues it. What matters is that the New York Stock Exchange for that ADR is 100% or a very large percentage of the volume of the US dollar base of the ADR itself, not of the other. So, you know, look,

at the end of the day, I don't want to belabor the argument because it's such a dumb one, but the fact that you could make a dumb argument, claim it's new, and do it in the cover of Night on a Friday night, it just makes me mad. Because they wouldn't have done it if they didn't think there was a chance of war. The 59th minute of the 12th hour, yeah. Right. The point is scott is is

keller her and his band of of thieves would not have done this if they didn't think there was a chance it would work repeat that right but elizabeth warren is literally like isn't she the endorsement on the website it's like a quote and a picture and i mean they love her so maybe this is just maybe this is just like jam Jamie diamond on the Senate floor doing his little brown nosing for Elizabeth, getting there, getting their points in when they know it's not going to mean anything. And that's true.

But the way it works is the sec commissioners are being lobbied behind the closed doors. There's always are the, Oh, you got this new argument. You should use it. And the fact is, is it's a new,

terrible argument that they will lose in court. They'll be humiliated again. But there's no accountability. That's the thing. And this is where Congressman Davidson, when he goes on on his SEC accountability rants, and he's totally right. There's no accountability. I mean, they should already be ashamed of themselves for how badly they haven't just been lost in court. They've been humiliated in court and they don't seem to care. And so it's important to understand this because this is, you know, the future of innovation in our economy at stake. And look, I wish I had the time to be able to, or the oomph, I think that, you know, it would be if anybody from BlackRock or Fidelity or VanEck or ARK or anybody is listening, make a comment letter, make the point that Coinbase is 40 percent of the USD market to rebut this stupid thing so that at least the SEC can't have an unrebutted comment out there. There's no way for any private citizen to get it in because they've closed it.

But if those people do, it's important. That's the reason I'm making it. I'm making this point. People should be screaming this from the rooftops. These people are wrong. And it just doesn't make any sense. Yeah. And so I want to talk about sort of what the headline here is, obviously, Bitcoin pump and dump. We don't know what's going to happen. But Mike, there is something underlying this. And it's obviously Arthur Hayes' statements. And this brings us into the macro. So if you guys didn't read this, Arthur Hayes foresees 30% Bitcoin crash amid vicious washout. Here's why. Now, I think the expectation when people saw Arthur saying, I'm going to short the hell out of this in March is that we get this big move up after the ETF.

And then that's a gratuitous short. And we also can look at the halving cycles. We generally get that big 30% correction in advance of the halving, sort of the last washout before the move. Okay. But he didn't talk about any of that. What he actually talked about was liquidity. And he talked about the reverse repo. And he basically said, listen, this thing is on average should be at about 300 billion. It went up into the trillions. Now it's back to 700 billion. It went up into the trillions. Now it's back to 700 million. It's going all the way down. This is where crypto has been getting its liquidity.

Once the reverse repo is finally drained, where is that liquidity going to come from? I was actually a bit surprised. In my mind, there's not that tight of a correlation between the reverse repo itself and the crypto market. So I didn't know if this was just, I'm surprised, but we do know that there's a very strong relationship with liquidity, right? And I think that people got really excited about the pivot already. And I think it's going to be delayed, right? Job numbers, even though they're fake, they came in strong, everything's still strong. I don't know where he's getting

the reverse repo going into crypto and Bitcoin. That doesn't, that's nonsensical to me. It's going into short-term T-bills. It's literally money market accounts, you know? So it's, to me, it's going to short-term T-bills. And once that's, once it's drained from there, then the Fed's going to have a real hard time continuing their QT program. That's the issue. You're on mute, Dave. I really want to hear Mike's response, but I just want to tee him up. Yeah, yeah. You already teed me up.

No, but the point that Arthur, because I read the article, I read it a while ago because, you know, whatever. Anyway, I subscribe. His point is that there's an almost perfect correlation between liquidity in the market and the big moves in Bitcoin. He's always said that one way or the other. And he's basically saying, to quote James Lavish, at you, James, something's going to break. And we can see it breaking because the reverse repo is almost tapped out. And he's predicting that they will wait for something to break. That breakage will cause Bitcoin and everything else to get dumped. And then they will turn

liquidity spigots on. So that's what he's saying. Dave, I think you nailed that pretty well. On a scale of 1 to 10, everything that matters for Bitcoin, what you... And first of all, I think you nailed that pretty well. On a scale of one to 10, everything that matters for Bitcoin, what you... First of all, I want to know what kind of coffee you're drinking because... Oh, wait, I see what you're drinking now. Whatever it is, I want some of that because you are so fired up. There we go. That'll do it. I've never even seen that thing. They're illegal here, I think. There are only 70 milligrams of caffeine, which is one third of the Celsius. Did you deliver directly to Dave from aliens at the Miami mall? Let me poke in some of my macro views here.

I mean, remember the lessons I learned in a trading pitch. Lick your finger, put it up. You talk to seven customers and they all say the same thing. You got a problem. This amount of speculation and bullishness I sense in Bitcoin now is about every time I've seen the extremes in 2017, when two Sundays in a row, Bloomberg Radio asked me to comment about futures when BitTo was launched. And you have to think about it. The number one trade for what's happened here was to buy GBTC at the end of last year. That's up 300%. Now you have $27 billion in that trade. There's only like 5% left. Where's that money going to go? You got to take some profits, prudent people do, and they're probably going to

go to the new ETFs. So the key thing I want to also rope in on ETFs, I've kind of, Bloomberg has actually asked me to focus a little bit less on Bitcoin and more on commodities. I've enjoyed that because I've taken a 30,000 feet above the market view. And that is what's, let's look at a good, I'm hearing all these examples of how much flows you're going to see in ETFs. And I think we'll just simple look over how much total money is tracking ETS in gold. It's about 180 billion, maybe it fluctuated up to 200 billion for a while. So maybe we'll get that in Bitcoin. But where is it coming from? The number one thing I want to ask my colleagues, the number one thing I've learned being a commodity guy for 20 years is when people

come from traditional equity space and they buy anything else like gold, the first question is, what are the earnings? It's going to be one of the main, you're going to get some of the traditional, maybe some people have been sitting on the fence, but there's so much hype here. I think the only thing that's missing is mayors competing about who's going to get paid in Bitcoin. So I look at it in the macro sense. The macro sense is let's put some, I have to be the bad guy here and put some water in this fire. If you've been long and overweight long from the end of last year, which was the right trade, and you made some

money on this ETF coming out by being long GBTs, which was the most obvious trade in the world, you're not adding to that position if you're prudent money manager, you're lightening up and looking for other things. And then let's open the macro. Here's the thing about the macro I want to point out is we are heading to a severe recession. And it's already happened. I'm going to start with China. The latest from China is the CSI 300 just made a new five-year low yesterday. Everything I see happening out of China is deflation contagion. It's just kicking in.

And I've been reading a book lately called The Price of Time, and it shows that kicking in. And then I also point out in the macro is we see crude oil right now hovering near its lows of the $70 range. And gold is, that's the same price it was trading 15 years ago. And gold's trading at uncharted territory. It's backing up a little bit. So in the macro, I think, is what happened last year is Bitcoin had a good reason to rally. We all know the halving and then the ETFs. But everything rallied.

Now the risk is everything tilts down. What I think Arthur Hage gets right is, first of all, usually when you have these issues with repos, I used to trade those. It's usually signs of speculative excesses and people having to lay off. They took too much risk and getting stopped off. You can get into details there, but Bitcoin's probably a good leading indicator. Now, yes, it has this ETF, but once we get over this, I think it's going to go back to, okay, well, the whole consensus to recession has changed. Now everybody's bullish. And what's the best leading indicator on the planet still? Trade 24-7 is Bitcoin. And what's the risk? We just tilt a little bit downward. That's the way I see this year. It's already starting in equities and Bitcoin has to get through this ETF thing. Yeah. And I would agree with you on every

single point of the economy and the macro outlook, Mike, and you and I see eye to eye on that. I think where we diverge is that Bitcoin is stuck in an event driven situation right now, period. Like it is decoupled from the market because of that. And this has to play out first. And because there's so much money on the sidelines that does understand Bitcoin enough and wants to have some access to it, but just can't, especially in the RIA world, most of these people are not looking for earnings. They're thinking it's digital gold. That's what they've been told. That's what they hear. And they think, I'm going to buy a little bit of digital gold. So what do you buy when you have uncertainty in

the market? You buy gold and now you're buying digital gold. So I think I'm not saying that this is going to be up 50, 100% in the next two days, the next five weeks. This is going to play out. And I do believe that it's going to be quite volatile in the very short term. It could sell off very hard in the first few days on just a washout of leverage. Who knows? It's Bitcoin. However, over the longer term, over the two week, one month, three month period this, on the event side of it, I believe, is headed higher because of just the sheer amount of liquidity that's going to come into it that's been sitting idle on the sidelines. It just doesn't have access to it. Can I share something on leverage, Scott? Always. Okay. to it that's i just think something on leverage scott always okay so uh so basically this is just a bigger view is it is it working did it work yeah yeah it's very hard to see but i'm gonna

make it bigger hold on um let's do this there you go okay so what you're seeing here, these are the funding rates right now on the Bitcoin inverse perpetual. Negative, negative, small, extremely small, and negative. Not a lot of leverage betting on Bitcoin right now. Whatever rally we've had over the last day and a half, it's been spotlight. And the thing is, is, you know, we can see this, you know, consistently when you look at our spread charts and stuff. I'm not going to bother. There's just too much stuff here. So but the fact is, is we can always see whether the perpetual swap markets are implying leverage, which is where the big washouts come. We can always see when we look at the spreads from the futures and whatever. I mean, all of this stuff is there. This one isn't.

But look, at the end of the day, it will happen. It always happens, right? When there is an approval, who will jump in first? It's not going to be the people investing in the ETFs. Those are going to come days or weeks later. It's going to be the FOMO types. They're going to be YOLOing in. Uh-oh, I've been waiting for this.

The subject of my rant, I mean, look, the betting markets still have a 20% chance of them rug pulling. And that matters, right? I mean, I'm telling you, I have talked over this weekend with people who are not dumb, who think there's a material chance that this won't get approved. Now, by the way, it won't get approved. We'll end up in court and in all likelihood, given who will be in court, this is not a death sentence, but of course you will see a flush out if that happens. But there is a lot of it. Look, the bottom line is it's not priced in. I mean, anyone who thinks it's priced in is crazy. But it's volatile. I mean, this thing thinks it's priced in is crazy but it's volatile i mean this thing has been volatile since the beginning and it is still nascent enough and not enough liquid be in the market that it can be pushed around you know quite a bit on a percentage wise basis so

yeah we saw the flush yeah the flush everybody's predicting we saw it last week right i mean that was that 500 million in under 10 minutes was the largest that we'd seen even since I think before FTX. And that short amount of time, the amount of leverage that was flushed, the funding rates, I'm not saying that won't happen again, but what was there was flushed. If it builds up again, you now ask, so, you know, we were talking just to get back to the macro, sorry. I'm usually the one who wants to talk about Bitcoin, but you know, the reverse repo facility, how much is left? Oh, it's 700 billion now. Yeah. I think it's about 700. It fluctuated at the end of the year, but it's, it's right to about 700 again. So, you know, but we, we have so much debt coming onto the, with our massive deficits that we're running. We're just, we're going to use that up. It's clear. That's going to get drained in the next month or two, in my opinion.

So, and then it's anybody's guess because you're going to have to slow down QT. We heard, I think Yellen was talking about slowing down QT just to, you know, make sure that you don't, you don't have to slam the brakes. You're already pumping the brakes. I mean, that's already, we're talking about, we're talking about reversing course here and we're supposedly at full employment. The, you know, although we could talk about the employment, I would like to hear what Mike has to say about the employment numbers, because I think they're, it's pretty, you know,

I've got some conflicting signals there. Same right here. Just really quick here. The key takeaways. You could just dive into Kobe's letter. We've had revisions of 10 of the last 11 months. These numbers are fake. They give you a headline number that looks good.

And then they revise it when you're not looking. That's what happens every time. We're talking about one of the most significant numbers that people watch. It's extremely lagging and notable for that. So from Ana Wong, our chief economist, point out temporary work, workers' demand is plunging. Drop in labor participation. Household survey and spike is at 99.7 weeks. The warm weather is probably a factor.

If you include ISM services and employment, they're plunging. Plunging diffused index. The October Beige Book was one of the worst in years. And so her bias is, good luck with that one. And that's what I point out. It's not only here, that's the US is catching up. Remember, we haven't even started feeling the effects of the interest rates. They're starting to think about cutting. But that unemployment number, according to her, was the headline looked great, but good luck with that one if you dig in. The numbers are fake. Over 50,000 jobs were created by the government alone, right? Largest single employer. Gradually, then suddenly is the way I see it with that. You just look at the ISM composite, right?

It's hovering on 50. I've gone back since I'll be publishing on that tomorrow. It's just hovering. That's a composite, both services and in the rest of the world, a lot of it's deeper. It's never been this low hovering. It's just bouncing there, which is the inflection point with interest rates higher. Never. So, okay, well, good luck with that one.

I just look at those rules of economics, which is kind of when I listened to a colleague, Jeff Curry, talk about commodities this morning, what he missed was just a simple macro economic rules of economics. And that is the invisible hand. And it's just getting started. That's why I kilt over. You got to watch China every day. The things I see out of there. I love what you said about suddenly and then all at once, sort of, or gradually then all at once, gradually then suddenly. That's what we're saying now about interest rate cut hopes, right? Just a month ago, we were getting 4 billion bips in the first day of January. You know what I mean. We're going to get aggressive rate cuts by the Fed. It was going to start already now the predictive markets and the pundits are saying

not so fast. Jobs are strong. Wage growth is strong. So, I mean, you can't even believe any of it. And then I want to just point out the most important thing to everyone, which we say all the time. And I just noticed he's quoting you, James, in this video. I did not realize that. But what does the Fed pivot mean for stocks and for jobs? How many times have we talked about this? Historically, stocks fall by an average of 32% after the Fed pivots. Jobs also historically plunge with a typical 12 to 18 month lag. In other words, the true carnage should start after the 2020 quarter. What's so important about that? First of all, the market's been consistently wrong about Fed cutting rates.

Let's factor that in there. The Fed will not make the mistake of past Feds of cutting too early because the lessons that has never happened in my lifetime. We had the highest inflation since when I was a kid in the 70s. They will not make that mistake. That was Arthur Burns, right? Yeah. So the key thing is, well, so the market's just got the hopium. And that's what you just pointed out there, potential. The last two normal times when we started cutting rates was beginning in 2001 and sept 2007. At that time, from peak to trial, the S&P 500 declined 50%. So maybe it's different this time.

That's where I focus in the macro with Bitcoin and certainly with the alts. If the stock market goes down, the alts have no hope. Bitcoin might turn to gold eventually, but that's what I see right now is they're not going to get the cuts until they have to. Why would they even consider it? Because of the risks of the past. And the only way to make them cut typically is, okay, maybe they will cut in May, which is 25 basis points, is you need risk assets to go down like they have. March isn't happening. March isn't happening. So right now I have May at a hundred percent that they're going to cut.

I guarantee that number comes down. But the funny thing is they're talking down, they're talking down the QT and the liquidity they're talking up. So it's not as if the Fed and the Treasury don't see what's going on behind the scenes. They know these are lagging indicators and they understand that these people are not stupid. They're gaslighting, you know,

and they're going to continue it. And the hope is that miraculous soft landing, you know, but it doesn't happen. It just doesn't happen. Here's a question for you. Did we expect to get to a recession without feeling like we're in a soft landing first? Did we expect to get deflation without disinflation first? I think there was an expectation a year ago that it was going to be extremely painful and maybe we wouldn't get this off, but that was at the time. And if you actually look at history, you're right. We've showed the chart a hundred times from Bloomberg where the mentions of soft landing perfectly predict the worst

recessions, right? So Mike, so the base case is then you hold higher for longer and you keep holding higher for longer because you do not want to be Arthur Burns, you know. And so what happens? Your base case is that you trigger some sort of credit event. That's your base case. Your base case is some sort of credit event where something breaks, you know. And it could be the Treasury coming in with another $36 billion of 30-year notes and the auction almost fails because they just don't have enough demand for that kind of duration risk. That's out there. You just don't know. I mean, Arthur's point is that it will break and then they will react. And whether he's right or wrong, I mean, the fact of the matter is

when you're Icarus and you're flying too close to the sun, which they are, you know, you have to worry about that. Now, the question really is in an election year with an administration, and don't say Yellen is not part of the administration because obviously she is. And if you think she's not treasury secretary because of her talents in the Federal Reserve, then you're not paying attention. The simple fact is, is does this administration, especially given that who's running it, do they allow something to break? Or do they, at the first sign of water being taken on, do they panic and start pumping liquidity again in order to try to push this thing, you know, to try to get

it over the finish line for another year. That's been my base case for over a year and a half. I think that politics is when people start yelling in the behind closed doors meetings, it's okay, we need to pump. And that's, I think, why Mike said 100% in May. And frankly, I think he's right. I think that, you know, people are looking at this and saying, hmm, what's going on? I mean, do you think there's even a slight chance that they're going to let the BTFP expire in March? Not with credit, not with the commercial real estate looking like it is. Exactly. And so, you know, can you imagine a debate about that do you think there's anybody who seriously looks at the fed and thinks that not an election year there's no way but people

yet i've seen multiple economists say asinine crap like well the reason the btfp drawdown is starting to increase again is because people are worried the program's not going to get re you know it's not going to get renewed in march the reason it's drawing down now is because there are banks out there that need to short their balance. They need to short their balance, yeah. And it's not out of hand yet. It's not out of hand yet, but it could be. Sorry, Mike. Go ahead.

Well, there's almost always one simple prerequisite for things to break. Why did Lehman break? Why did FTX break? Risk assets have to go down. It's almost always, that's what's missing. And Bitcoin's one of the riskiest assets. That's fair. It's just saying when I do my value at risk. Yeah, no, and that's fair. And I agree with you on that. However, it is stuck in this event-driven. Yeah, the event's going to be over this week when we get the ETF. I mean, that's my point. We've had the hopium. We've rallied 50% from 30. We've rallied

three X from last year. We've had 300% DC. I look at it as like, okay, great. Thank you. You don't want to be getting overweight here. You want to be saying, thank you. I just look at prudent value at risk managers saying, yeah, this is, yeah. I mean, okay. So in the bigger picture, that's going to cross those bridges. I just want to get through this first bridge. Yeah. And I think you're going to have time between now and that first bridge. And there is, there is this event driven situation that will be resolved this week.

And if it isn't, and we, it is dragged out, we get rug pulled. I mean, just hang on tight everybody but then you have what you're talking about which is you're getting into april and may and something is starting to really break and risk assets are are really selling off well then you know there's all bets are off it's a completely different world but we're in that we're in that little capsule right now. And until we get out of that, anything is possible. We've been in this capsule definitively for six months. Eight months. It was May when they first came out,

and most of us thought about this years ago. It just finally kicked in. Now I look at, okay, well, this is the week. If they rug pull, that's bad. If they launch, well, the lessons have been that those haven't been good. And is there a lot of hype and bullishness? Yeah, just as much as I've seen at other peaks. Right. I think there's two things. There's the, this narrative trade is done. Like if you were positioning in advance of a Bitcoin spot ETF approval, you're not doing it today, right? You've had months to do that. Everything is noise,

I think, in advance of that. So either, to to mike's point we need a new bullish narrative to continue to push it so what's the new trade after the spotty tf or those inflows are just so massive that it legitimately pushed i think well it doesn't even they don't have to be that massive they just have to be continuous you know and it has and they will be they mean two million versus an expected 50 we're already seeing commercials um they're terrible commercials but we're seeing them daily okay and and so you know but once you get into that period of of just continuous buying remember this is a this is a unique event-driven trade where the event is more liquidity coming into the asset, which just has no access to it. It's a different kind of event than, let's say, oh, Apple has this new device that comes out. Well, the money's already there and it's already speculating,

right? Or you're speculating on a merger to happen. Back in the 80s, they used to do that all the time, but that's not what's happening here. And you got to remember, we're in a little bit of a bubble. We talk about this every single day to the point where our wives are saying, take a shot the next time you say ETF. I feel attacked. I feel attacked. But if you ask any one of your normal friends who are not in our psychotic bubble here, then they have no clue what's going on. They don't know the difference between the Bitcoin ETF and an ETH ETF, really.

And they're going to start hearing it. But you do have that money that's on the sidelines that does understand it that's waiting. And so the question is just how much does that come in to play right after the announcement that these have been approved? That's the question. I mean, I think it's time for me to repeat my normal statement. Option? future adoption. There you go. Bitcoin trades like an option on its own adoption. So one has to ask yourself the question, if broadening the investor base in Bitcoin makes that more likely or less likely?

And the answer is it makes it more likely on steroids. And there have been a lot of various posts to talk about this. But the truth is we have to keep remembering that, look, we don't know if Bitcoin is going to become digital gold. But digital gold Bitcoin is 10 plus X what the price that it currently is. Ten times. And nobody, I don't know anybody who predicts Bitcoin other than Samson Mao, I don't know of anybody in the financial community who is actually calling for a Bitcoin of half a million bucks this year. I think people are thinking this is going to get it closer to adoption, but that's your narrative, James. I don't believe that.

And we have to talk through the fact that, look, if you get, there's $11 trillion dollars in assets apparently according to think advisor in the ria industry okay so it's 15 000 rias have 114 trillion dollars of assets i mean if you just have one half of one percent of that that's over 700 billion dollars right so that's the entire market cap of Bitcoin today. And that's not even talking about... But here's the important

point. I'm not saying it will happen, but if it tried to happen, they would never get more than 10% with that $700 billion. Trading friction and multiplier effect. That's right. Talk through that, Dave. Trading friction is real. And if you've ever traded micro caps or you've traded small event driven situations, you understand that this is worth. And that's, of course, that's not going to happen overnight. Anyways, you're talking about a few hundred million dollars coming into it in days, but you know, that's going to have a, I believe a material effect on the price because of the multiplier effect and friction. So here's what I'm sometimes, I guess I've kind of taken more of a 30,000 foot view and I've joined kind of looking at headlines of all the podcasts.

You mean the Dave and me rant? Well, no, none of that. But it's just honestly, from my 30,000 foot view, this is as hyped up as I've ever seen it. And then I look at simple facts. It's one thing about my position. I don't know how many times when Bitcoin is really cheap, I'd get these messages from people who would say, hey, Mike, you know, it's just silly, stupid internet money. It's going to fail. And here's why. I would get those messages from people who would say, hey, Mike, you know, it's this silly, stupid internet money. It's going to fail. And here's why.

I would get those at the lows. And at the highs, all I get is which kind of we are now. We're 50% above the 50-week moving average, which is declining. How do I get it? How do I buy it? Yeah. It's like, just like I say, I just remember running money for real money. I would say, okay, thank you.

I'm not overweight at these levels. And that's not advice. That's just the way I see it. And I'm like, let's get through this week. And again, you know, it's, I don't want to keep reiterating the same thing. It's just, there's levels that are hyped up and overdone. I sense that now. And there's levels that were too, too cheap. And that was a year ago. Let's see how we are. Yeah. For the event driven situation, I think it's underpriced, but I don't think it's so severely underpriced. You should be pushing all your chips to the table like that's not clearly that's not what we're saying. But, you know, it. Yeah. Arthur's point, by the way, in the article, he said, listen, I got super long all last fall. You know, obviously he was a mega bull. He said now's the time to do nothing.

And I'm probably going to shorten March. That's what he's saying here, right, Dave? I mean, the quick summary. That is what he's saying. But I want to make this very visceral, the point about the liquidity and the multiplier effect. So let's look at this. So window here. So basically, this is our cost calculator. And this is a window into real time.

Let's just hit it again. So just across Gemini, Bitstamp, Coinbase, and Kraken, just to make life easier. Right now, if you want to buy 100 Bitcoin, 100 Bitcoin right now, the offer is $45,067. And it's telling you that you'd buy it at $45,105. That's the optimal smart routing price. So about $40. Okay. Now, let's say you want to buy five creation units of Bitcoin.

Just simple. Just five, right? It's not, what you'll see is, whoops, I did it again. You'd think I wouldn't make the same mistake twice, but okay. So should I hit the button? Yeah. So now the hit the button? Yeah. So now the offer, and it's fallen, right? So Bitcoin has just fallen.

So the offer is now $4,5001, but now it's $200, okay? Right? Because it's $4,5002. Now it's cost $200, so it's four times. So it's more or less linear, okay? Watch what happens. We do something stupid. Now I want to buy $5,000.

So it's 10 times that you didn't put the buying in yep i did it oh my god i love it let's go back to get this guy another clearly canadian or whatever he's drinking over there watch what happens so now this is the order books of all the exchanges and so now what do you see you see if you buy 5 000 bitcoin which is a big number but it's not but if you look at the number and you could do the math uh you know it's it's 263 million right so buy 52 000 i just zoomed in it literally would would take the price the average price to 52 000 and the last price because you cleaned out the book book, the last price is $91,000. So the point is, isn't that-

Now, in reality, as this- Yes, it attracts more. It attracts more dollars. They wouldn't do that. But it does move. It absolutely does. But here's the thing. If someone went to a issuer who's not a professional market maker and say, okay, I need to buy wholesale from you $100 million or $200 million, where's an issuer who can't make that market well going to price it? They're going to price it very close to this 52 because they're going to basically say, listen, I can't take this risk. And another thing is, Dave, the creation, you know, when you have the agents who are creating

these things, they're going to err in the beginning here. They're going to err on buying it rather than waiting because they do not want to miss it. And the cost to miss it for the creation side, and maybe you can talk through that a little bit for people to understand how these ETFs are created, they're going to err on the buy rather than holding back and waiting for a better price. That's right. So I wrote an article about this for Bitcoin Magazine. Scott, I don't know if you want to pin it or whatever, but it's about this mechanism. Basically, what does it mean? It means that with in-kind creation, which was not allowed by the SEC, market makers would have taken this risk. And the issuer would just blithely say here, you want your ETF shares, just hand me Bitcoin.

Now the issuer says, give me cash. But if they can't buy the Bitcoin and they have to legally, they have to like very quickly buy the Bitcoin. If they can't get that Bitcoin in, then they got a big problem. And so the fact is, is the bid offer spread for the wholesale side of this is going to come from the issuers, meaning what are they going to do in practice? They're going to go to their market makers and say, where can you guarantee me, guarantee me that I can buy X amount of Bitcoin right now. And so nobody is going to price that at an inside spread. They're going to price $100 worth of the Bitcoin ETF or $1,000 or $10,000 inside as long as they can. But when you have to create the wholesale amount, those spreads are going to be wider than they would have otherwise, because it's a different market. And so these things do matter. Mike, I see you've got some screens queued up. So let me bring you back.

Yeah, I got to show you one chart. What you see is the maturation of Bitcoin. I show you in white, that's just Bitcoin divided by its 50-week moving average. What you would expect when more people get involved, the highs are lower and we're at a new high versus this 50-week moving average. And then I show you the Bitcoin volatility versus the S&P 500. It's about 2.5 times. Now, for a while, it was 12 times. 2017?

No, but it's been picking up late. I just look at this simplistically on my value-at-risk models. It was a great reason to get all the way along here, but good luck here, and there's a really good reason that this might be a high because what's happened in the past, futures were launched here. Bid tow was launched here. Maybe it pops up a little more. I just look at it as a long-term. Yes,

I completely glee in the long-term like Dave and James say, but you got to believe that more when people hate it at the lows versus levels like this it's just the this is a maturing commodity um digital gold i get it but if you talk to a lot of ras and money managers they don't want to touch gold in fact there's been outflows in gold partly because there's earnings and the stock market has been the place to be for 10 years why be in gold so remember gold is such a small portion of portfolios we have to remember remember most people, RIAs, which you mentioned, James, will ask, well, what are their needs? The simple fact is, the reason Bitcoin is likely to be volatile, the reason what Arthur is saying and what Mike is saying has traction, is the new investors in Bitcoin aren't looking at what we call fundamentals. So we look at it at the last

time we did that peak at 67,000. The Bitcoin network, the hash rate of the Bitcoin network and what's gone on in the Bitcoin network has more than tripled. Tripled, not up by a little. It's tripled. But if you're an RIA, you don't really care or know about any of that. You're looking at what Mike's looking at. And so, yeah, this is not going in a straight line, Scott. That's kind of the point. And that's where I look at it as, yeah, Arthur's comment is, yeah, 30% pullback and then a slow sustained grind that eclipses the all-time highs significantly.

I tend to think that there's that possibility. When things become too obvious, it never happens. Markets are really good at one thing. They're good at humbling all of us, right? You know, don't ever expect it when, when everybody believes something is going to happen in a certain direction, it doesn't. Just like the reason I said Bitcoin was not going to go back down to 15,000, it was going to go to 41st. And by the way, I'm still waiting for, we got to, we got to do that. Yeah, I was going to say, but by that rationale, Mike is sounding very pragmatic and reasonable. I don't, I'm not disagreeing. I'm just saying anything is possible.

The difference is, is I do think that depending on whether or not there's a rug pull this week or not, I'll make a different statement. If Gensler does bow to this and does rug pull and we have to wait another six months for another court case, I think we get to Bitcoin as digital gold faster than we do if he approves it and the market starts going up because I think that a lot of the trading effects will take into account. Good point. because I think that a lot of the trading effects will take into account. I think that the court case where the SEC finally gets their head handed to them completely by the financial industry will mean we will probably get Bitcoin as digital gold. It's actually counterproductive. The real argument for Elizabeth Warren and Gary not to do anything horrible this week is that ultimately it will be worse for them in the end, because they're going to public, all of the facts that we're talking about will become public. Because when it was grayscale, it was a court case. It was a niche thing. When it's BlackRock, Fidelity, Franklin Templeton, you know, Invesco, when they're the ones suing them, then you're going to see blitzes about, this is digital gold, and this is why, and in the federal and they're going to basically talk about all the things that that honestly they don't that elizabeth warren doesn't want to get

talked about so yes it will be short-term bearish very bearish but long term i'll be even more bullish and frankly they should know that they're not that dumb that that's probably this you and i have talked about this before we've definitely talked about it on the show before. I think that Gary and Elizabeth even will position this as a victory lap. Well, they should. They delayed it for 10 years. It wasn't ready. There was market manipulation.

Now we have the trusted Wall Street institutions who we can believe in, and they'll handle it, and we know that they won't be manipulated. We have Coinbase, and we have Coinbase, and we have Coinbase. And we know that they won't be responsible. And then they can go about their business, absolutely attempting to destroy every other part of the market, which I still consider, think that they will do. We have three minutes left,

Mike, listen, are we just all like a high on clearly Canadian and smoking hopium or what is drinking? I mean, it's something I remember doing. I remember CME Futures and us being really excited. Bitcoin was 20 grand. We're getting the institutions straight back to three grand. Yeah, well, OK, it's just trying to it's it's it's more fun because I got to play the devil's advocate in this crowd just because someone's got to disagree.

But it's it's just real rational. And, um, I show you the facts and it's, it's some of us had made some really bad calls. And one good call I had was it was this time a year ago, there's only one place to be in. It was GBTC. And now like, yeah, no, thanks. It was like one of the best trades you can have. I couldn't do it. I can't do it. But that's why it worked. Now, if I had loaded up, it wouldn't. You know how these things work when you run money. It's true. It's just the way it works.

That's why I really enjoy this space. But I had people last year in December calling me up and saying things from the smartest people I know who didn't really understand cryptos and say, well, this is like distressed debt. I'm like, yeah. Okay, well, it's not anymore. Next. You're selling yourself short, Mike. You were also one of the only people I know that called what would happen in the oil market reasonably. You were a bit early, but you basically nailed it. Yeah. So far, I appreciate that. I still owe you that nice dinner for the 40. I'm happy to pay that one. Next time I'm in Miami, we're doing that. Yeah, for sure. We're going to fly James in too, for sure. I'm going to end up buying time I'm in Miami, we're doing that. Yeah, for sure. We're going to fly James. We're going to fly James into for sure.

I'm going to end up buying. I'm just telling you guys, I think I owe you guys a big one at this point. Yeah. They've gotten enough free labor out of out of the three of you doing this show and especially James who wakes up so early to do it. I mean, any last thoughts here? I think we hopefully, I want to say hopefully by next Monday, we won't be talking about what will happen when the ETF gets approved and we can put this behind us and we can zoom out and start to refocus on that 30,000 foot view that Mike is talking about,

because I do think that's way more important than these endless sort of debates on what's going to happen when it gets approved. Even Arthur saying a 40% correction March, April, who cares? I know it's my title and it matters, but who cares? I think that all of us agree. Everybody sitting here and people should know we're all in this with a decade long view. It's fun to talk about what's going to happen in three months or three weeks, but every one of us, I see somebody asking constantly over here that I should have plan B on you and take the wider view. Well, plan B's last interview was a year ago with me and I've been in touch with him, but every time I ask him to do it, he's like, well, we need price to be a little

higher and then we'll talk. We're good. Now it's when it crosses 52, I think you said we'll do the interview, but we are lining that up. And I think it's important to take that longer view. Do you gentlemen agree, I assume, that this is fun? The problem with plan B is it looks at supply and not demand. And the demand is going to increase there. Yeah. Look, I think most of us, I think we're all in general agreement. When you pull out the 30,000-foot view, 50,000-foot view think we're all in general agreement. If you pull out the 30,000 foot view, 50,000 foot view, we're all in agreement.

And so the last minute thoughts are like, this is going to be an exciting and quite possibly a volatile week. I would say stay metered with your exposures. You know, that's really important. Do not get over your speed tips. Yeah. I mean, well, you should have your position by now. Right, I'm saying my plan is if you're here right now, do nothing. Because I can't see a viable reason to start taking major positioning on Monday.

And do not use leverage. There's the PSA, thank you. Do not use leverage. Be metered in your exposures and have fun. But, you know, it could be quite volatile. And so we'll see. None of us really know anything. That's the biggest thing, is none of us know anything.

I do know that long-term, that if these things are approved and when they are approved, that a lot of money will come into the space long-term. Not today, not tomorrow, but it will be a flow of money will come into the space long-term. Not today, not tomorrow, but it will be a flow of money that comes into the space. That's what we know. And so if you have a longer than a six or 12-month view, I think you're in good shape. I think we all agree there. All right, guys. Well, next week, let's do the, holy crap, do you believe what happened to price when the etf got approved conversation what if it just stays at 45 000 45 000 that's the conversation

i'm looking for i mean speaking as a jet fan who i always view how they do it through the lens of it will be maximum pain i wonder if markets are there to inflict maximum pain. I don't know what the maximum pain trade is, but whatever it is, it might be the most likely. I think it's actually shifted from being a Jets fan to being an Eagles fan, but I'm going to leave it right there. All right, guys, that's all we got for you. We will see you tomorrow, of course. I have Matt Hogan from Bitwise and Dave Nodding, ETF expert. I know Thursday we got Yusko.

I think we got Hunter Hornsley, the CEO of Bitwise, we've never had coming on soon. Obviously, guys, we can't help it. We're going to be talking about ETFs this week, and then hopefully we can move on with our lives. Guys, thank you very much. Everybody, we will see you back here tomorrow and back next Monday. Bye.

Let's go. Bye.