The Wolf Of All Streets - Bitcoin Skyrockets Past $28,000 | Banks Collapse

Episode Date: March 20, 2023

Join me and my co-hosts Dave Weisberger and Mike McGlone in this episode of Macro Monday: while banks are collapsing, is Bitcoin a new safe haven? Dave Weisberger (CoinRoutes) https://twitter.com/daveweisberger1 Mike McGlone (Bloomberg) https://twitter.com/mikemcglone11 ►►THE DAILY CLOSE BRAND NEW NEWSLETTER! INSTITUTIONAL GRADE INDICATORS AND DATA DELIVERED DIRECTLY TO YOUR INBOX, EVERY DAY AT THE DAILY CLOSE. TRADE LIKE THE BIG BOYS. 👉 https://www.thedailyclose.io/ ►►BITGET GET UP TO A $8,000 BONUS IN USDT AND GET MASSIVE DISCOUNTS ON TRADING FEES! 👉 https://thewolfofallstreets.info/bitget ►►NORD VPN GET EXCLUSIVE NORDVPN DEAL - 40% DISCOUNT! IT’S RISK-FREE WITH NORD’S 30-DAY MONEY-BACK GUARANTEE. PROTECT YOUR PRIVACY! 👉 https://nordvpn.com/WolfOfAllStreets ►►COINROUTES TRADE SPOT & DERIVATIVES ACROSS CEFI AND DEFI USING YOUR OWN ACCOUNTS WITH THIS ADVANCED ALGORITHMIC PLATFORM. SAVE TONS OF MONEY ON TRADING FEES LIKE THE PROS! 👉 http://bit.ly/3ZXeYKd ►► JOIN THE FREE WOLF DEN NEWSLETTER, DELIVERED EVERY WEEK DAY! 👉https://thewolfden.substack.com/ Follow Scott Melker: Twitter: https://twitter.com/scottmelker Web: https://www.thewolfofallstreets.io Spotify: https://spoti.fi/30N5FDe Apple podcast: https://apple.co/3FASB2c #Bitcoin #Crypto #MacroMonday The views and opinions expressed here are solely my own and should in no way be interpreted as financial advice. This video was created for entertainment. Every investment and trading move involves risk. You should conduct your own research when making a decision. I am not a financial advisor. Nothing contained in this video constitutes or shall be construed as an offering of financial instruments or as investment advice or recommendations of an investment strategy or whether or not to "Buy," "Sell," or "Hold" an investment.

It's long been a saying in the Bitcoin community, short the bankers, long Bitcoin. That was a bit of a meme for a very long time. Pomp used to tweet about it all the time, but maybe for the first time in history, of course, on my one week that I decided to take off when the entire world exploded. Well, as of last Monday,

if you shorted the banks and longed Bitcoin, well, you are a genius and probably are already retired on a yacht somewhere in the Caribbean. Is this a real trend? Was this a coincidence? Is this noise? Is there no signal? As usual, we have a ton to unpack and it's Macro Monday.

I've got my favorites, Mike McGlone and Dave Weisberger joining. Frankly, I missed a lot this week. And just like you guys, I'm looking for them to catch us up. You guys definitely do not want to miss this today. Let's go. What is up, everybody? I'm Scott Melker, also known as the Wolf of Wall Street. Before we Let's go. haircut by the end if things keep going this way. I was trying to keep up, do a Twitter Spaces with spotty internet, but no newsletter and no YouTube for a week. There's that old saying that, I don't remember exactly what it is, but basically that time can pass a full decade, but then you can have a decade in a week. It feels like we had about a decade's worth of news and events in a week. A lot of things that people were theoretically saying could happen. And you would have said, those crazy Bitcoiners

don't know what they're talking about. Banks won't start collapsing. We've learned all of our lessons from 2008. Clearly not the case. I'm going to go ahead and bring them on right now instead of wasting my breath. Gentlemen, how are you today? Hello. Hey, Scott. Doing great. Dave, you and I chatted briefly even yesterday, and you said, man, I'm really looking forward to tomorrow because we have a lot to talk about. We couldn't have missed a worse week, I think, last Monday, probably. That's going to be one of those goes down in history sort of days in markets that started this crazy week. Maybe we should just set the stage here, right? I mean, banks, obviously, in a lot of trouble. Should be no surprise to anyone who understands fractional reserve

banking when lizard brain humans all start to withdraw at once. But I think the bigger story is that Bitcoin actually kind of did what it's supposed to. So either of you feel free to just give me some context. What are you thinking right now after processing everything that's happened this week? Dave, you want to go ahead? Yeah, I mean, look, there are certain iron rules, you know, supply and demand, etc. There's one other iron rule that I've always believed in. Hayek believes in it. Milton Friedman believe in a lot of other people that inflation is a monetary phenomena, except for what people miss what they

missed. Well, Hayek didn't really miss it, because he talked about the crackup boom. But a lot of people ignore the fact that there's two types of inflation, there's asset inflation, and there's consumer inflation. You all heard me say this many, many times. So given a choice, what the powers that be would have happen is asset inflation is a good thing, in their opinion, and consumer inflation is a bad thing. So what did we have? We had a situation where consumer inflation started to rampage higher. We've talked about the whys, doesn't really matter. And the Fed decides to start hiking interest rates as, I don't want to steal Mike's words, but I paraphrase Mike all the time, in a historic manner. And essentially, the great

sucking sound we all heard during all of 2022 is liquidity being sucked out of the system. But what was interesting is the liquidity that was being sucked out of the system was the money being pushed to the sidelines because people couldn't afford the cost of capital. And the Fed no longer increasing the size of their balance sheet. And God forbid, they let it tighten a little bit. But what have we seen over the last week? And what do I expect to continue is a it is not the same war. So everybody wants to always fight the past war, look at the past thing. I think the Fed is in a rock and a hard place. You've all heard me say this for years. I think they've been trapped. So what do I think Powell's going to do? What do I think he needs to do? And I don't think there's a good answer.

This is for those geeks in Star Trek lore. This is a Kobayashi Maru scenario that I don't think he gets to reprogram the simulation. But what's his best attempt? His best attempt is flood the banking market with liquidity to preserve what's going on there at the same time as not signaling defeat. If Powell doesn't raise rates, the market sentiment will be, oh my God, he thinks everything is going totally to hell and the Fed liquidity isn't going to solve it. I don't think he wants to do that. That's why I believe he will hike rates and be much more noncommittal than people think about pausing. At the same time, the BTFP, which we'll talk about in a bit, which is the lending facility that has put in place, has the potential to be a $4 trillion of quantitative easing.

And that's only the Fed. If you listen to Arthur Hayes, who wrote another brilliant diatribe last weekend, I can't remember, it was recently. You know, his point is all the other central banks are going to have to do the same thing. So you have a potential torrent of liquidity to back up banks out there. Yet we have lots of plumbing broken. So, I mean, I don't want to go through everything. I'd like to hear Mike's opinion, But like promings that are broken when Credit Suisse gets bought by UBS, which has happened since the last week that you missed. The other way around. UBS buying Credit Suisse, of course. Buying them with a little bit of a backstop from the Swiss.

Just a little bit. And an 85% discount for it was trading on Friday and wiping out an enormous number of bondholders and and various other instruments is is a very big deal and there's a lot of other banks with those same sort of bonds and now the bondholders think they're going to get wiped out and so that is you know there are lots of cross currents going on here is sort of the point. Okay. I want to stop now because we have a lot. Godspeed my friends. Well, it was a good time. I'm first of all, I'm jealous of your background, Dave. And I have to think, thank Scott for the first thing you said is you just solved my dilemma.

I've been working on since last night. Like I've got to publish on what's going on with fully reserved crypto dollars and Bitcoin versus banks. That's like my headline. I was trying to find the right charts. When I published, I'm like, okay, one chart sells a story. And when you said that I just overlaid the KBW bank index with Bitcoin, I'm like, there you go.

So thank you, Scott. If there's a way I could thank you for that. And that's going to be what I'll publish tomorrow if I get time to finish writing about it today. But to me, I think it's also what's got to go to the Fed. I watched the Turner Classic movie last night, the movie Rare Window by Hitchcock. I mean, some of us, I mean, it's a classic human nature story and everything. And that's to me, it just hit me. That's what the Fed's doing and ECB. They're classic academics, intellectual views, what the ECB did last week, when the Fed might do this week by tightening.

And they're missing the fact that the forward-looking indicators for deflation, they're not falling, they're collapsing. I mean, this is a higher housing market has turned over at a higher velocity than it did in 2006-2007. Commodities are collapsing at about the same pace the fed was easing back then and i look at this as okay this is a 1929-ish type scenario is the most the next significant move we should see from the fed as futures are pricing in is easing and i just love that that um that narrative that everybody expresses, oh, if they stop tightening now, excuse me, markets are collapsing. And I like to look at the headline from my colleague in Tom Orlick that says, you can't be a hawk in a bank run.

And I look at it as, OK, so why, for what minor potential small probability should this be just a one-off. It was a year ago the Fed started the most aggressive freight hike schedule ever. We've had this war. We've had the big pump and collapse in commodities. We've had the collapse of mortgage refinancing. We're seeing the collapse of the price of new homes for sale divided by sales. I mean, this stuff is historic. Money supply, the fact that I can say in the U.S. it's negative for the first time in history after being the most ever just a few years ago is just historic. So I think we have to look at that in that context in the macro. And like I said, we have our 830 meeting with our strategist and Gina Martin-Adams is our equity strategist.

She's been spot on. And her quote this morning was, equities are going to be remarkably disappointed if the Fed does not pivot this week, or at least signal a pivot. And the key thing to remember is we had a triple-witch expiration last week. And Dave and all of us have learned trading options,

particularly when you're bearish puts. So markets go down after my puts expire. That's just the way it's always worked and i know you'd laugh because that's the way that's why i don't trade anymore because i would be white and then like oh my puts expire in the market drop right through my strike and like oh shoot so to me that's what's potentially at risk this week and i still worried about that and being tired of the stock market pulling down bitcoin but we have to admit what's happening here with this fully reserved crypto dollars and things like USDC that just backed up almost to full extent that had exposed to a bank.

And then everybody realized, well, they're fully collateralized. These banks aren't. This is revolution. I think this is that paradigm shift that we've been waiting for. Bitcoin is outperforming Ethereum for a reason. I mean, it's becoming global digital collateral in the world that way. Yes, I was bearish initially around 25, but it's showing that divergence strength. We tested it and now it's proven. I'm not saying it's not going to

be pressured lower, but to me, this is that shift lower. And I'll end on what's happening with things like crude oil. I did enjoy some of the simplistic comments you got last year from people who analyze supply and demand and didn't realize it doesn't matter anymore. It really doesn't. When the world's collapsing, the most significant thing for commodities to always remember is they're the most auto-correlated assets on the planet. When they go up too much, they push themselves lower, their own worst enemies. Now we're at the stage where they're probably going to help create the rebalance in supply and demand, but it's nowhere near that. You have to have a significant period of very low prices for that to happen, for consumers to come back, for that supply to get squashed and the demand come back. It's real early days.

I look at this as it's only March, and the best performing commodity so far this year is gold up nine percent. What stops that? Can we say the best performing commodity is Bitcoin? It's it's from a traditional commodity standpoint in something like the Bloomberg Commodity Index. But I hope I'm glad you push back. You made that comment because it's it's not a pushback. It's a good point. We were writing about this last year, people talking about commodity super cycle. My gosh, I've just seen so many people lose their jobs and careers trying to play for that decades ago or a decade ago when I was in that business. I just didn't want to see the young people do it again. And I've seen some of it again last year. Oh, that's commodity super cycle. Like it's happening in Bitcoin. Yeah. I mean, I would make two points, Scott. First,

this is completely unprovable, so it's easy for me to be a pundit on this one. But if Bitcoin didn't exist, I think gold would be at $2,500 this morning. sizable percentage of people who were speculating on gold as the hedge towards real monetary debasement. And so I believe that we've seen a lot of this. I mean, 2022, you saw gold being resilient on the way down, didn't really fall anywhere near as much as you would have expected during this tightening cycle. It's because people don't really believe in global central banks, and there's a lot of things that have been lost. But the absolute reality is gold is also a commodity and it costs its inputs prices went up also. So, you know, you have that small thing. The fact is, is when Paul Tudor Jones made his fastest horse comment a few years ago, that heralded in a rush of a lot of people who on the margin decided Bitcoin was a better

way of making that same bet. So gold is up. Okay, that makes sense for a bunch of reasons. But the reason it's not been anything crazy, and it certainly hasn't maintained purchasing power parity like it used to, is because of Bitcoin on the margins. That's the first point to what you said. The second point is, let's be fair here. What's causing this problem? And there's going to be lots of recriminations and lots of interesting deconstruction. But at its core, you had trillions of dollars of US and other bonds bought at sub 2% interest rates. And those trillions of dollars were allowed to sit on balance sheets of financial institutions with absolutely no loss. If you bought a bond for 100 and it's now marked

at 67, instead of reporting $33 in losses on that bond, you report zero because you say, I'm going to hold it to maturity. And so I am, the other thing that I am absolutely sickened by, by the absolute temerity and cheekiness of various senators who claim we need to investigate what happened when they know full well what happened. They knew there was a cancerous rot on the balance sheets of banks that as long as depositors left their money in the system, would be, the system would be okay. So to be blunt, I think that once, you know, people, when you look back at, at, at what was, if this in fact rages out of control, uh, like the Chicago fire, Mrs. O'Leary's cow was not even, I got to push back on that one, but I'll mess with you a little bit. My uncle, Ed Burke, who's a politician in Chicago, proved it was not O'Leary's. That was a push against the Irish at the time, but that's okay. Nothing to do with my name.

Well, whatever... In honor of last Friday, I won't say this is O'Leary's cow, but whatever it was... Can't prove it. last Friday. I won't say like Mrs. O'Leary's cow, but like whatever it was, in this case, it's easy to prove. When Elizabeth Warren and her colleagues attacked Silvergate Bank, sparking people to pull the money out, which they then folded. You then had everyone raise their heads up and said, okay, there's an issue. They have this problem on their balance sheet. So when the next day, Silicon Valley Bank announced they had similar problems, people forgot everything else. It was like, oh, well, had the Silvergate not happened? I mean, look, once again, can't prove this,

but understanding human nature, as you said, Scott, had Silvergate not happened, when SVB said we had a $1.8 billion loss, but we can raise $2.5 billion in capital, they probably would have been able to. The fact that another bank that was in the tech sector had just seen a run caused everyone to go, uh-oh, and boom. And this is the classic example of if you're in military strategy in the old days, the stupidest thing that nobody ever did if you were battling in a forest was light a forest fire. The wind might be shifting toward your enemies, but understand that wind can shift. And that is literally what happened here. And so, yes, I'm being vitriolic about Senator Warren. The last thing you want to do is yell

fire in a crowded movie theater. And I think it's much more, I'm kind of probably a little bit calmer and softer than Nick Carter might be, but he's not, he's on the right branch. We're certainly not far apart in terms of conspiracy theories, but I think it's really important to understand mob psychology. Once you start it, you need to stop it. And I think that's why the Fed effectively pulled out a bazooka by saying all bank deposits are now covered, period. Go ahead, Mike, please. And they're still expected to raise rates this week.

Oh, my God. That's where I was going to go. But I want to unpack even a bit more the sort of endless bazooka that you just talked about. That works at three banks. Maybe it works at four banks. Maybe it even works at five to ten banks. But, I mean, First Republic had $70 billion worth of withdrawals, four banks maybe it even works at five to ten banks but i mean first republic had 70 million 70 billion dollars worth of withdrawals 40 of the holdings in the entire bank they're done

well first one point scott first republic is very unique of most of the banks that have the cancerous rot in their in their balance sheet i mean cancer is wrong i mean it was we're basically saying that was the system they were forced into i mean that's right i'm not blaming all to do with in their balance sheet. I mean, cancer is wrong. I mean, we're basically saying- That was the system they were forced into. I mean- That's right. I'm not blaming- What you're allowed to do with your balance sheet, but yes.

But I want to make a point because I read this this morning. I think it's really important to understand. I think it was Noelle who pointed it out on her Crypto is Macro newsletter. It might've been her or somebody else. But First Republic had a disproportionate amount of their bad debt or their bonds that are underwater in munis, which are not part of the Fed program. Right. Flexible bonds, which is fascinating. So that would explain why the Fed has gone to such extraordinary measures to help coordinate a private bailout of First Republic. Because if they don't,

then the only thing they can do is expand the BFTP to cover municipals, which is a very slippery slope that they don't want to go down because that makes it even bigger than it was. And so that's why they're doing it. And it's fascinating to watch this play out because I'm sure if Powell were watching or listening to to me now he would be cursing under his breath saying

why the hell are you telling people this seriously the key thing key thing also take away from what you said dave is we're talking about trees it's the force that matters these are the forces overwhelming that okay so i'm getting nothing at my bank i I can get 4.75% in a one-year bill sold. It's just in the two-year note. Jim Bianco pointed it. The inflection point was in the two-year note went to 5%. And we said, what boomer on this planet is not, and maybe involved with Boomer Rocks, is not buying two-year notes. But to me, that to me is the key thing here is this is the macro ebbing tide just getting started.

At this stage, prudent central banks are supposed to say we see significant deflationary forces developing with banks, commodities, you name it, mortgage, housing, everything. Stock market can go lower, and we're prepared to help stop it from becoming a significant global depression. They're doing the opposite. And I got to end on one key thing. Quote, years later, this is about the Chicago fire. A man named Louis M. Cohn confessed to starting the fire by accidentally knocking over a lantern while running away from an illegal car game. When you're from Chicago, you hear how Catherine and Patrick O'Leary's car knocked over. I have a sister named Catherine and a son patrick i'll cyber should we get tweaked

but i had i had to bring that out because i'm just the american mud that's so funny look the other point i want to make here is is but powell's not an idiot and he knows that if the that if the banks all take him up i mean the last two weeks we've seen the biggest use of Fed expansion of the Fed balance sheet since the GFC. I mean, you know, in the repo facility was huge. I mean, you should pull that one up. I'd love to see that because I know you have that data. But the truth is, you know, if he's going to basically expand his program to all these banks, if Europe is going to do the same, I think he looks at the slight rise in interest rates as sort of a token to, quote, sterilize all the liquidity he's literally about to inject or is in the process of injecting into the system.

I'm not saying it's the right thing to do, Mike. I want to be really clear. Yeah, look at that. So you tell me that he doesn't look at that and say, oh, I know what happened. I can't afford to have inflation go crazy. I can't stand another bad inflation print. Now, once again, not saying that's what I would do. I'm merely saying I strongly suspect that's what what he feels he has to do. I could be wrong. Some of the other charts, this is the one I just happened to pull up while you were saying it. But I've seen somewhere

actually the 2023 number dwarfs that 2009. But here it looks like it's already about equivalent. But basically, I saw that within the first two or three days of last week, they effectively erased 60 or 70 percent of the quantitative tightening of the previous year. The key thing our economists point out is what you're seeing right now is temporary. QE is permanent. So the question is temporary. How temporary is it? And as you know, my views is this is early days. So I think the issue is how does this man pivot when he speaks? And I would say, well, maybe he should just say, well, in July, producer price in next year of year is going to be deflationary negative. Why? Because Mike McGlone told me just it's simple math. It's just that's it's it's just how it's going to work because of an index measuring index when commodities collapse.

PPI is 80 percent correlated to CPI. And this time next year, we're going to be talking about how much more they can ease. And we might be done with that because there can't go below zero. I just this is that bad. I remember being in the trading pits. We always used to kid around, we need someone who runs money like Dave or who's an ex-hedge fund guy on the board of FOMC to point out, no, you can't just be a bunch of intellectual academics when you're running the world's largest economy. You have to be looking forward. And to me, that's the big miss that's happening.

This is that 1929 ish thing I published a little bit about last year and got a lot of pushback on. I don't know what's not talking about that every single week on this show. What is that every single week here? Well, and here's the key thing is about what I'm supposed to do is, you know, call me McGloom. I had some of that. But if I see a hurricane coming, I don't warn people. That makes me very irresponsible. This is a hurricane. And everybody I know said, you need to protect yourselves. And there's nothing wrong with buying. I can't rank my conditions. But when you see treasuries and they're giving you four, almost 10 percent over two years, you're supposed to say that's just what you're supposed to do and

let the rest of the world try to make money in the stock market that is way overdue for peak to trial 50% correction when would it be corrected maybe less than 20% so I'm going to say I it ain't going to happen and I use that word because I specifically and the reason is because they can't afford it so I'm going to make three points first I want to quote the Gipper There's nothing so permanent as a temporary government program. And anyone who really believes this is a one-off, I'm going to back up the banks today, but tomorrow it'll be okay. I don't think so. The reality is, is what they need to do and what they will do are two different things. We'll get back to that in a heartbeat. The second is in the middle of what you just said, you had a little paraphrase there, which I think is a Freudian slip, but it's very true, and it can't work. The fact is the Fed does believe they are running the economy,

but the fact is no central place could ever run an economy, much less the economy of the world, which the Federal Reserve is really at the vanguard of. So you know it's going to be, excuse my language, but fucked up if you try to centrally plan and manage an economy. And they are trying to do that with too many things. But the thing I wanted to get back to is what they need to do or what they want to do are maybe very different. What they need to do is keep the long end of the curve low, which is what they've been doing, which, by the way, heartily explains why it is that they allowed banks throughout the entire system to take long duration risk. Why? Because they wanted them to own the long end because it kept funding costs lower. So why do you, I mean, if you think it's not intentional that the accounting rules are written the way they are, that that wasn't lobbied by the banks, well, trust me, as someone who spent a lot of years at Citigroup, I know that their lobbyists are working with all the bank lobbyists to make rules that are more friendly to what they're doing.

And if they're being pushed to buy long term, they wanted that accounting treatment. But now we have it. And we have significant holes in the system. If they just patched the hole and assumed it wouldn't take on water again, yeah, that would be the best thing to do. But they're unlikely not to do it. What they're much more likely to do is to reliquify the asset economy and hope that the real economy cools for a bit. And then in some period of time before the election cycle, like so the next six months, then reflate the economy. The problem is the asset markets can see that.

And so if you're looking, if you're saying it as strongly as you are, Mike, then assets are going to basically say, well, they're going to have to reliquify it. If they reliquify, the money's coming to us this time like it did before 2020. Because in every other previous liquefication cycle, it went much more to assets, which is why we have the wealth inequality that we have today. So I think that it's hard to see risk assets getting too badly destroyed when the Fed is likely to liquefy. Now, if they get really dumb and say, well, this

is temporary, we're going to limit this to the system. And by the way, we're going to keep hiking rates until we see inflation below 4% or some number like that, then I think you're right. Then 50% retracement will look like a garden party. I mean, it could be as bad as the last back half of the 70s accelerated into a six-month period. So, yeah, there is that possibility if they make that mistake. But I'd be surprised if they did it. How could you be injecting that much liquidity, the chart that I just showed you, and also be tightening at the same time?

I mean, it's semantics, right? I mean, that's a dog and pony show. That's completely pretend. And I just want to say, Mike, I know you're about to jump in. But when I hear you guys talk and when I read this news 2008 was only 15 years ago we've already broke the banks again the same effect okay it's a different problem of the same making how do we ever trust what are they going to do what legislation are they going to pass now what rule are they going to make that's going to fix this besides uh fully backed banks which then effectively like you know reduces uh all of the lending and

money in the economy they can't do that fully collateralized crypto dollars i think that there's a natural solution here right fully collateralized crypto dollars but those crypto dollars are backed in these banks and listen listen, I'm a huge fan of USDC, but we definitely saw a little wobble, you know, the day after I left. The peg was at 85 cents. That's false, by the way. I want to clarify. The peg of a stable coin is determined by the actual redemptions, not what is being traded at on an exchange because people are willing to dump it. But if all of those banks went under and

those assets were backed in those banks, and let's not pretend that treasuries, which are safe right now, could not have issues as well if this all goes down, then where are you at? So just like USDC publishes publicly what treasury they hold, and only a small portion, I think it was, were actually in banks, most of it in treasuries in the month that went down. And we proved that, oh my gosh, this technology is pretty amazing. So I just want to point out a little bit about the historical aspects of I think what's happening in the U.S. stock market. Just when it peaked with money supply at the end of 22, it was the most expensive ever versus GDP, the most expensive ever versus global equities, and the most expensive ever versus GDP, the most expensive ever versus

global equities, and the most expensive ever versus US housing. It's just starting to roll over. So also, let's look at the boomers. What boomer in their 70s is buying, had just had to, every one of them got way overweight equities without, with trying to avoid it just because markets make you that way and their advisors make it that way. Now, to me, it's changed. They might be buying boomer rocks. Some of them are smart enough to buy some way. Now, to me, it's changed. They might be buying boomer rocks. Some of them are smart enough to buy some Bitcoins. But to me, that's what you're going to get is a normal 50% correction. And it's part of demographics.

Remember, the U.S. stock market was the most expensive ever versus a lot of these measures. So to me, then the key add to that, the ease of easing we saw from the Fed, which really pumped a lot of the rally since the bottom at 666 in 2009, is gone forever. They will not make that mistake ever. Now, they will ease. They have to, but they're not going to throw the liquidity they did. So to me, that's part of that paradigm demographic shift that makes me think longer term, you're better off staying away from the U.S. equity market for an extended period. It's just normal underweight that's happened in history.

When it peaked in 2000 and it took till 2014 to stay above that level. Maybe not that long, but demographics have really shifted. And all this wealth creation, you can lock it up in a one-year bill and two-year notes. So to me, that's part of the macro shift. The key thing I want to also point out is I'm not going to pivot too much. Just one thing that's uber deflation, I think potentially is going to happen. We might see within the first few weeks is this pivot from Mr. Z right now. He's visiting Putin. He's got one choice. He completely gut-punched his biggest client, Europe, by supporting the war.

He completely gut-punched the U.S. And he realizes, okay, I'm the one person who can stop the hostilities there. If I do that, now I'm going to be Mr. Statesman, but I'm also going to crush the prices of food, grains. There's still a major war premium there. So that's my suspicion that's going to be hitting the tape soon, that this aggressions will be lightened up, partly because Mr. C.D. said you should, partly because he realized his economy is collapsing and will go down because his biggest export customers are gone.

They don't want to do anything, not right away, but they do not want to touch anything to do with him anymore. Because, I mean, we remember what happened with the Molotov-Ribbentrop agreement when Germany closed up the Soviet Union before. Europe's used to this. Yeah, there's a lot there. You know, I mean, obviously, you know, Putin also making overtures according to at least one news source saying, well, there could be a diplomatic solution. I don't think it is a coincidence given what you just said, but that's besides the point. I mean, yes, that's deflationary in the sense of commodities, but it also opens up people's willingness to take risks. Because a lot of people believe that geopolitical risk is there.

You can get rid of that premium, and that's another good thing for a lot of risk assets. I want to go back to the point about crypto dollars, because I was listening on the way in to rule Paul with Pomp yesterday. And he made a incredibly important point, which I kind of knew because I'm old and I remember it, but I kind of forgot, which is the fact the last time the U.S. regulators got overzealous thinking that they owned a market and we ended up losing the market was the euro dollar market created by the less regulation in the U.K. Sorry to talk about a competing one, Scott, but Rule was brilliant on this. And he's exactly right. London became the center of the financial universe because of euro dollars. The only reason why we don't worry about that here in the United States, or don't really learn about it or think about it, is because it benefited us, because it made

kicking and screaming over the objection of US regulators that turned the dollar into the global reserve currency, which has massively benefited American standard of living and been disinflationary for years and years and years. And so to argue it now, imagine a new world where Elizabeth Warren wins and Gary Gensler wins and all of crypto innovation goes to Europe and the UK and London gets the chance to become the biggest financial center, including owning crypto dollars, maybe. But maybe this time they learn their lesson. It's like, well, how about crypto Bitcoin? And how about crypto euros? And the threat to the US, if we lose financial primacy, when the dollar might not be the reserve currency in the long run, that is very serious. So the US.S. officials should really be thinking

about history. To say that it can't happen, it can happen. It has happened. It's happening. And so it's important to understand. So that's the one thing about crypto dollars I wanted to make it clear. To go back to what the fix is, I think the fact of the matter is that the biggest problem that we had here is an accounting system, which is so Byzantine and has so many incentives for various reasons that allow people to lose trust. I mean, let us not forget, two weeks before Silicon Valley Bank went boom, their auditors gave it a clean bill of health. Why? Because their balance sheet was not required to realize losses. You know, we could talk about fractional reserve banking and, you know, and we had a great conversation with Caitlin early, kind of the

middle of last year, Scott, you might remember. I really enjoyed it where, you know, I basically said there's benefits to fractional reserve banking, but we need to do it much more intelligently. And she's like, nope, it can never be good. You know, look, I think I'm right on this one, but I totally agree with her. The fractional reserve banking, when you don't require transparency in the P&L, profit and loss, on the bank's balance sheet is an effing problem. Because if you had to report unrealized losses, within two quarters of the Fed starting to tighten, you would have seen they would have had that data at the Fed of declining bank reserve quality, they would have seen it. And as it as it stands, they didn't see it. And that's a real problem, right? So you know, you can't enact policies blind. It's like trying to drive your car, looking out the rear view window. I mean, you know, it's problematic. And that's what happened. And the other thing that's interesting is there are people out there

who, you know, are making the statement that, well, this is all crypto's fault, which is the most laughable thing ever. And it's particularly laughable when crypto is showing the solution. The fact is, is whatever you think about DeFi protocols, whatever you think of the value, and I'm not going to talk about the value of Aave as a token or any of the others, but what I will say is Aave, Maker, etc. have all functioned through a period 2022 where they had to be fully collateralized and actually survived really well. And then the third point, you know, right, it doesn't work. If that system works, it's an over collateralized system, but, you know, but there's collateral on the other side. So there's leverage on the trading by the fact that all the exchanges give leverage and

market makers can use that. And the DeFi protocols are fully collateralized and they can work. The last point that I'll make, and this is one that I've said a few times, but I really, it just pisses me off, is what we endured, and I'm sorry to bring this up, at Voyager and at Celsius is literally the same thing that the banks have done. The difference is because it's crypto and because it's small, the society said, let it fail. Well, crypto has experienced a lot of creative destruction, as capitalist fans will tell you. The banking system hasn't yet. But anybody who claims that crypto is the cause, no, no, no. It's the other way around. The banking system now is reflecting back into the crypto economy. And that's what's going on.

And all the issues, like I still don't know whether Signet's going to be operational, right? They don't know because the, quote, rescue of Signature Bank was only a partial asset buy. So we'll see. Anyway, so there's a lot there. I'm sorry for the rant. That's a good rant. I wanted to add a little bit to that, Scott, unless you wanted to guide a little bit on that first. No, you first. And then I want to talk about Bitcoin. Go ahead.

I want to get the Bitcoin right away by starting with GBTC. It's up 100 percent from last year's low. It's just printing 16 right now. And I look at this asset. And when you mentioned Gary Gensel, Elizabeth Warren, there is litigation right now, and it's likely SEC is going to lose. And that's not my opinion. That's from my colleague, Elliot Stein, who's an astute lawyer who writes for Bloomberg Intelligence. And that's just the way it's looking. A good indication is what it's doing. And I look at this asset, and I'm like, what stops it from going to $100? I mean, it's clearly heading up.

It's at a big discount. And we're seeing what's happening in the macro. So to me, I like to start there as far as indications. And I do one thing I think it's so important in our society is we it's so important to have people like Elizabeth Warren, because that's what's important to have that discourse and see how bad it can get and how well okay why why my descendants of a bunch of irish and lithuanian peasants from migrated chicago because people like that don't know understand economies and to see how the tilt and to me this is what's happening is we're seeing okay well we don't want to go there yes it's going to be we're going to fight it out but i look at it and the macro is okay so gbtc looks like it's going to succeed. I don't see how it can it could get worse. But if they I have to end on what you said about euro dollars. Crypto dollars to me are the exact almost the exact same thing.

Fifty years after, you know, it started out really from the Soviet Union and Soviet states trying to get access to dollars. And I remember this was a key thing that struck me in 2018, 19 seen it happen in Hong Kong and crypto dollars. And when the New York attorney general came down on tether in 2019 and Bitcoin bounced to me and right away, it came right back. That to me is still the signal that we're, we're doing again right now. We just went through the same thing.

We had a pretty push, significant pushback in crypto dollars. And what did we realize wow this technology is remarkable we don't have to worry about fractional reserves and crypto doubt yes some of them are dicey but they'll work those out and tether since this entire crisis has been outperformed is is traded at a premium to the dollar and a premium to usdc and so if that isn't a almost proof of a replication of the euro dollar where the US lost control of the dollar market to its ultimate benefit, it's the same thing here. And the USA, New York AG, I mean, don't get me started on Tish James and what her priorities are because they're completely upside down from what her

constituents probably wanted to do. But that's besides the point. Look, the reality is that there's an inflection point here in the globe. And when it comes to Bitcoin, you mentioned Hong Kong. Hong Kong this weekend, or was it this weekend or late last week, that was the other piece of news you haven't thought about, opened up legally. Citizens can now buy and sell large cap crypto. Now, we know Hong Kong doesn't say boo without Xi saying it's okay. So if you talk about what could drive the next bull run in Bitcoin, well, now we have multiple causes. We have liquidity about to be unleashed into the market. We have people who have lower than ever confidence in the fiat system. We have the sleeping giant of Chinese wealth now legally able to buy it. And, you know, this is not remotely surprising. I mean, look, yeah, a few weeks ago, I said the 28 to 32 range was baked in the cake. And obviously, here we are into that range now. The truth of the

matter is, I will be stunned if Bitcoin doesn't make an all-time high this year, unless the Fed does something totally different than I expect them to do. I literally will be stunned. That doesn't mean it can't go gyrate wildly and stop out people. Never use leverage, please. And by the way, don't take anything I'm saying as investment advice. This is my opinion. And I only want to be the I want to be the only one who suffers if I'm wrong. But the fact is that the tailwinds are aligning, you know, you know, very strongly. So you want to talk about Bitcoin, Scott? I want to. Well, I do more, but I want to point out one other thing that I sort of just realized. Fidelity quietly opened their Bitcoin and large Ethereum, I believe, services to their 40 million customers this week in the midst of all of this nonsense about crypto and question marks and regulation. Fidelity opened that. And by the way, just like Robinhood, when they first started, you cannot deposit or withdraw crypto into a Fidelity account.

So what does that mean? Yeah, that's bad, right? You're shaking your head. But what does that mean? That means there's 40 million people who, if they want to sell Bitcoin, will have to buy it first on Fidelity. The only people who can sell Bitcoin on Fidelity will be ones who have bought it on Fidelity. And how many of those people are actively day trading? So you've effectively opened a buy only service to 40 million customers in the United States. Those are two, I think, significant, bullish,

fundamental things. Fidelity in Hong Kong. I was really shocked as he pivoted on Hong Kong like that. And I think he's realizing the error of his ways of complete autocratic leadership and realizing that we're really falling behind here. We've got to catch up. I think he was throwing a bone to his rich people. Because the wealth in China, a lot of people are pretty pissed off at what he's been doing to the wealthy people. And so this is a bone to the rich, I think. But that's besides the point. I mean, I am far from a geopolitical strategist so

it's just but that's that seems to be the case i mean sorry we've talked about all of this in theory for so long though right so we have this one week right and i kind of touched on in the intro is the signal or noise is bitcoin going up because people finally lost faith in the system see what's happening in banking they're buying it as a hedge or you know obviously last week everyone was saying that finance had moved a billion dollars and was just buying a bunch of bitcoin to move the price up is this something that's happening with a short squeeze or trading or are we literally seeing it all really happening now i think that's what i want to get the bottom of because i can't really reconcile that personally yet.

That's I have to admit, I have sometimes always get confuzzled with the trees in the forest. The macro is all the things that a lot of us have spoken about for five years or so are all happening. And it's the last crisis was the birth of Bitcoin. This crisis, I think, is defining its value. And it's that we're watching in slow motion. Like you said, Dave, if it makes new highs this year, I'd be quite impressed because I still think stock market is a much lower way to go. But it's showing that inflection point that I've been writing about for too long. And not that it's happening.

I don't want to be missing. But it's clearly showing pure inflection. The key thing is what stops it. But the key thing, they're trying to narrow down what I have the press ask me all the time. And since I was in the trading business, they'd be asking me, Mike, why is the market doing this or doing that this day? And a lot of times now I'd say, I don't care. Because trying to figure that out will just confuse you versus the macro is the world is turning to this asset. And I like to think about Fidelity is, okay, what boomer rocks?

Yeah, boomers are becoming much more conservative. They should be in fixed income, and fixed income is offering them good returns. What millennial cares about gold? I mean, and they think equities, but they're all involved in cryptos. Yeah. I mean, look, we just rattled off three monstrously large macro things that got unleashed last week. And what a surprise, the market behaved rationally between Hong Kong, Fidelity, and the BTFP, which I think that this banking crisis, look, I said it on a couple of interviews and a couple of things I've said, I've made the point. I think this is the second Genesis event. I called it two weeks ago or a week and a half ago when Silvergate, when SVB did it that night, I said, this is the next Genesis event because they can't let this go because I knew it. There was no way

they could let those depositors go because they know that there would have been a bank run on every single regional bank. There was literally no way. Now there's all sorts of politicization, politicization, I don't know how you pronounce that word, politicization. I have to look at it, but people are on one side saying, well, it's because Silicon Valley Bank was woke, they went broke. That's nonsense. They went bad because they had horrible risk management and they were sort of guided into it by the government. reality is, is if you allow depositors to lose money in this country, we saw how fast people can move money out of banks. The difference is, is back in It's a Wonderful Life, they had to line up at, you know, at Bailey's Savings and Loan. Now, boom, you know, minutes. And so, you know, this is the, you know, we live in a different world. And so that sort of crisis of confidence couldn't be allowed. So to me, it seemed pretty know, we live in a different world. And so that sort of crisis of confidence couldn't be allowed. So to me, it seemed pretty obvious that we get that wall of liquidity.

But Raoul Paul pointed out something else. He said, listen, you know, the last time there was that liquidity, Bitcoin did jam. Yeah, absolutely. But it took a long time and it's volatile along the way. The path, you know, if I say I think we're going to 100, that doesn't mean we don't see 20 first or it doesn't mean that we don't go to 50 and then back down to 30, you know, whatever say i think we're going to 100 that doesn't mean we don't see 21st or it doesn't mean that we don't go to 50 and then back down to 30 you know whatever along the way it could be very saw to because there's going to be regulatory news there's going to be people in politics

making threats i saw some you know very far out there uh you know prediction this weekend that well they were going to outlaw owning gold and Bitcoin again. And you're going to start seeing that FUD going. Now, people don't realize it. Just I want to be clear about this. Why do I make fun of the outlawing gold? The government did the gold ban thing for a very specific reason, to reflate the economy. They confiscated gold at $20 an ounce. And as soon as they owned it all, they revalued it to $33 an ounce, essentially making a huge percentage increase in the money supply and reflating the economy. It's almost like a one-off default, only they put it under cover of night. That's why they did it. That wouldn't help them today. And certainly Bitcoin is not even remotely, it's not even in the same

zip code of being large enough to make a difference to the Fed's balance sheet or to the government GDP. All of Bitcoin taken together isn't enough to matter. Unless they confiscate it all and revaluate it up by a factor of 100, yeah, I could do that. But my guess is that that would not be seen as constitutional by anybody, but we'll see. Anyway, that's a couple of historical points there, Scott, for you. Yeah. And I agree with all of what you're saying there. I just curious how high this can go. Like, I don't like to make price predictions. I think I'm just still kind of Mike. You said it right. You write about this all the time. Then you sit here in shock when it really happens. And that's sort of where I'm at.

That's the key thing that I think Dave made very important, and I've lost my hair trying to trade, but made a good living mitigating risk with clients, helping them hedge their risk, like this put spread I initially recommended around $25,000. And that is, like Dave mentions, about leverage. Now, I completely take that to heart, particularly for retail. But when you're like me, I come from futures, and the typical leverage is 20 to 1. It's how you manage it. And we used to say in the trading pits, oh, he's trading without stops.

When it means someone is seriously, or you make sure you use options properly. But, you know, leverage will hurt your typical retail person. But for investors, it's just normal. So I look at it as be careful trading. And like Dave said, he's not going to disagree. It can't get down to 20,000, but responsive. I think responsive investors. And to me, this is the trigger now.

Now I fully anticipate your average responsive investor now is going to be looking to buy Bitcoin and dips. And they might be lighting up on rallies. But that to me is – it's really switched. There's a fundamental paradigm shift here in this market because of the crisis. I mean, don't make any mistake. You know, the fall from 69 down into the 40s was – very few people said – there were no – very few people at, there were very few people at the time were talking about, yeah, you know,

okay, we know it was frothy and this is normal, et cetera. The fall from the 40s down to below 20 was pretty much almost exclusively forced selling from people who didn't want to sell their Bitcoin, but had to because it was the only thing they had or leverage. So when I say that the first stop is 28 to 32, but that ultimately,

I see a pretty easy path into the 40s. And then we have to assess what's the fundamentals. I've said that all along, you know, you know, when people want to get back into this market, FOMO gets very, very real when things start to move. Look, I don't like making time predictions because I'm almost always wrong on the short run, which is why every place I've been has been multi-factor hedged. But the fact is that the upside is substantively larger than the downside at this point, unless the Fed does something very different. But if the Fed and the global central banks reliquify like they have to to fix the banks, fixing a double-digit trillion-dollar industry is their priority. Worrying about whether or not a single trillion-dollar industry goes up too much is not on their minds. I mean, yeah, they say it. Even Powell said it yesterday. And this is his typical way. Yeah,

I don't want to destroy crypto. And I think we know why. He goes, but it's a mess. Sure. It's a mess. And your banking system, which has literally holes in its balance sheet bigger than the entire market cap of crypto isn't. I mean, it's kind of crazy to me, but that is the world we live in. How about the fact that it's 2023 and Powell is talking about crypto and being forced to do so? I'm not even sure I would have had that on my bingo card, to be quite frank. It's so much in the mainstream for an asset that's less than a half a trillion dollars. It's going to just you're going to have to multiply by X's in the mainstream for an asset that's less than a half a trillion dollars it's gonna just you're

gonna have to multiply by x's in the future and i think what dave said is really clear now this is why the world's different we will get really re-lickification from central banks most one that matters is fed but nowhere near the pace that we've had for the last certainly since this stock market crash remember 1994 that was a pretty serious tight tightening schedule you might remember that one day but i was kind of yeah but we're not going to have that reliquification like we have in the past because of the lessons of inflation which will be resonating for our lifetimes when they reliquify too fast too much so to me that's where the world is going now.

And that's why this is a different environment for things that depended on that, U.S. equities. That's over. And it's a recession. So we have to get through this recession. If we don't get it, that's a shock. I mean, as of just two weeks ago, the probability was the most ever from the yield curve. I can't say that's declined. So we got to get through this recession, I think, as of just two weeks ago, the probability was the most ever from the yield curve. I can't say that's declined. So we got to get through this recession, I think, to think about anything like risk assets like equity. But look what gold and bonds and Bitcoin are doing. Those to me are going to be some of the things that people are going to be looking to buy on dips as we tilt in the recession. Yep. And that would be my investment thesis in a nutshell.

I think the decoupling that people in Bitcoin have been looking for is upon us. And I think that's the reason why. The interesting question really is, I think that a lot of other crypto assets, once you get beyond Bitcoin, Ether, and maybe a couple of others, and I'm not talking about stable coins, are actually more like stocks in terms of they could get absolutely wrecked. And we've never seen that. They are. Relative to Bitcoin right now, I mean, this is a normal cycle, right? Of course, when Bitcoin's sort of raging, liquidity leaves all coins into Bitcoin, Bitcoin destroys that market, and then you even out on Bitcoin, money flows back into alts. But this might just be a Bitcoin rally because of the fundamentals of Bitcoin. Well, I mean, there's some fundamentals in DeFi land asts. But the problem is that this might just be a Bitcoin rally because of the fundamentals of Bitcoin. Well, I mean, there's some fundamentals in DeFi land as well. But

the fact is, and I'm talking about the 10,000 coin. Oh, yeah. No, I don't know whether there's 200 or 300, maybe 500 tokens out there that might ultimately have value or if it's less than 100. What I know is it's not thousands. And until coins like that, that have no value, get completely wrecked in a rally, I'm going to be, that's one of the things that always makes me cautious. You know, the tops in Bitcoin tend to be when altcoins get ridiculously frothy. And also the fact that altcoins aren't really doing that much, the correlation among altcoins is way too high. Those are the two things that always spook me.

That plus excess margin leverage and people paying too much in derivatives, none of which is happening now. Right now, this market climbed a wall of worry. There was never really a big liquidation. The long sides are still being more liquidated than the shorts. The shorts haven't gotten squeezed yet, Maybe because there aren't that many. I don't know. That's hard for me to tell. What is wrong with Shiba Inu being

the 13th largest crypto asset listed on CoinMarketCap? I look at that and remember one thing when I pointed out how silly, stupid, speculative this was in 2021. I wasn't more aggressive about it. That is the stuff I agree with you. Shiba Inu at that price is just like my favorite story from the internet bubble

in the 2000s, NetPaxi. Shiba Inu's value proposition, every time I pick on them on this show, I get lots of hate mail. So I want to be clear. Their value proposition is they believe they are building a community among themselves that's large enough to be able to merchandise and do stuff, which was the same as most of the Internet companies that completely failed. Geo cities and all. There's so many of them. I'll take an index of crypto's top 20 or 10. Let the index decide. But picking out winners.

Good luck with that one. That's right right we only got a couple minutes left so mike i want to ask you at this point both of you is this a choice for the fed this week between inflation and the banking system so are we now at that point where we're saying we have to let inflation run to save the banks, or can they somehow thread a needle here? I'll just say that their academic bent will disappoint us again. And this might turn out to look back at this in the future about abolishing the Fed because they've created way too much inflation, did not acknowledge it. Now they're going to create a depression, which is happening. It's just a fact and they should just say our forward-looking indicators for inflation are not they're not falling they're collapsing i can point out ppi is going to be negative in july for a year of a year

it's on an eight-month basis already is they should just stop tightening bar none and let this work out but i'll treat my colleagues um comment from Tom Moore. He's our chief economist. Central bank hawkishness in a banking crisis is an oxymoron. It's inappropriate. While I agree with the sentiment, I think that he knows he has put $4.4 trillion potentially available to the banks by his new facility. He knows his colleagues are pissed off at him to begin with. And there's a whole story there. You could read Noel about that, how people were upset about the way they handled the banking crisis, but they did

that bazooka. I think he feels, I just put in the bazooka. I need to stay the course on tightening and do it to, quote, sterilize. I don't think it's correct, but that's what I expect him to do. Now, maybe they'll surprise us. Maybe he'll realize that inflation from measured by consumers is down and he'll stop obsessing about assets and puncturing the asset wealth bubble to trigger a mild recession, which has been his thought. At this point, with banking stocks doing what they're doing, he's playing with fire and could actually trigger

what Mike keeps talking about in the S&P. I can't believe we're at 1030, guys. I feel like we should have done four or five hours just making up for last week. But the good news is that we get to run it back every single Monday. I'm so cautiously optimistic here. I want to get super excited and believe that everything we've sort of predicted for all of these years is happening with Bitcoin. It's just hard not to. After all the experiences, it's hard to let myself get there. But I'm on my way. I'm working on it.

It's never that easy. It's, you know, nothing ever moves in a straight line. But the trend is there. So, you know, we won't know if this conversation we've been right for six months to a year, but the trend is really what we're focused on. What Mike thinks should be done by the Fed and what I think will ultimately happen. But just, you know, it is what it is. Well, I'd like uh invite both you guys tomorrow if you can make it 11 a.m since i don't do youtube on tuesdays now i have another twitter spaces but uh i haven't really let the cat out of the bag but i've got sailor uh mike i know that you uh

have spoken with him i watched you do it uh on bloomberg and it looks like this i'm allowed to say as an unconfirmed guest it looks like Balaji will be there as well, who just obviously made the million dollar bet that Bitcoin will be worth a million dollars in 90 days. So I don't know, putting him and Saylor in a room at the very least, I think you guys should maybe just show up and sit on stage. I mean, I never hope somebody wins an outlandish bet more, but I'm not really happy with what that would signal. Oh, and Jimmy Song is going to be there as well, already confirmed. This is going to be a Bitcoin conversation for anyone who is curious. But that will be at 11 Eastern Standard Time tomorrow. Now, I can't guarantee that you guys will get to speak because we all know that if you ask sailor one question three hours later yeah there

you are and it's you know it's like listening to a prophet but uh i would love if you guys would would join so guys that's all i've got tomorrow of course i will not be on youtube because i will be prepping for this monster spaces uh which i'm really really excited about so i can't can't wait to do that guys i hope you can join everyone uh mike dave thank you so much as usual everybody go follow them please for god's sakes, already. Do it. That's all I got. See you guys tomorrow on Spaces.

Cheers. Thanks. Let's go.