The Wolf Of All Streets - Bitcoin Spot EFT Approved, Then Proven Fake News! Global Markets Brace For Volatility | Macro Monday

Episode Date: October 16, 2023

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Global markets are bracing for more volatility as the world moves closer to war. Obviously, we hope that the world is not, in fact, moving closer to war, but we do have some context for what's happened in situations like this in the past. We also have yields continuing to show strong, gold being strong, bonds refusing to drop. A lot is going on in markets. Luckily, I have James Lavish, Mike McGlone, and Dave Weisberger here to help us unpack everything that makes for a good Macro Monday. You guys don't want to miss this. Let's go. What is up, everybody? I'm Scott Melker, also known as the Wolf of Wall Street. Before we get started, please subscribe to the channel and hit that like button.

I'm going to go ahead and bring up Dave, James, and Mike so we can get this show going. I know we have a lot to talk about. James, first, I'm showing you this story. U.S. Treasury debt dynamics, very unfavorable, IMF official says. Now, this was five days ago, but it's been dominating my timeline in quick sort of like one sentence. Oh, by the way, the IMF says that United States debt is unsustainable. Usually, this is the IMF talking about El Salvador, Argentina, you know, Lebanon. I don't think I can remember a time when the IMF had the balls to come out and criticize the United States. What do you make of

this? It's kind of funny. They said this before Moody's, right? So it, the debt problem has gotten so severe and it's, we have piled on so much in the last few weeks that it can't be ignored anymore. And I don't, I can't for the life of me, Mike, and you and I were talking about this really quickly before the show. I can't for the life of me, come up with a reason for the IMF to say that, that that's beneficial to them. I just, I'm all I can think of is it's so obvious now that they have to say it. And hopefully, I think, and I wrote all about this this weekend in the

information about the bond vigilantes. But I think that you've got the world trying to talk the treasury or really Congress into being fiscally responsible and i don't i don't see that happening but uh you know that is so unlikely but they're pulling all out all the stops is all i can imagine we're adding a trillion in debt every 45 days right now so yeah we win yay is that a win i think that's not a win so but it's crazy in an environment of tight uh monetary policy yeah i mean i think did we talk about this last week we have we had piled on over 500 billion dollars of debt in just over two weeks and then and then you flash forward just three days later it's another 50 billion billion. I mean, it's crazy.

It's insanity. Term premiums are up, and that's why you're seeing this steepening of the yield curve. It's not because people think, oh, the need to be compensated for what they expect to be a massive amount of debt that's coming onto the market. And the IMF saying this is just astounding. I mean, yeah, like Mike said, who do you think funds the IMF, right? Thank you for the money. Who funds the IMF, Mike? The United States government's the biggest.

Where's all this based? Mostly New York. Yeah, so, right. I mean, James unpacked it well, but the very fact that the IMF that is effectively... We lost Mike. Scott. I'm here. I think we lost Scott.

You hear me, right? Yeah, I hear you guys. Go, Dave. It looks like you're ready. Yeah. So what were you going to say, Dave? Well, what I was going to say is if you think it's an accident that over the last few days that Paul Krugman declared victory over inflation in one of the funniest tweets I've ever seen, only to be surpassed this morning. Oh, my God.

Our viewers haven't seen it. Oh, my God. of Janet Yellen saying, we can certainly afford two wars, U.S. Treasury Secretary says, if only Congress could get their act together. So essentially what you have is, and you also had, what's his name? You had at least one Republican Senator saying similar things. Yeah, I saw the Yellen quote. We can afford both wars, two wars.

Yeah, Yellen was like, two wars, why not three? Make it five. We can afford as many wars as you guys got. If people need to understand the context, Stephanie Kelton is the godmother of modern monetary theory, which holds that we can print whatever we want, we export our IOUs, and people love them, and they'll always love them.

And that's a little harsh of a way of expressing it, but it's more or less the same thing. People thought that that was discredited because after the pandemic, consumer inflation went up, but they've learned their lesson. They know they want asset inflation, not consumer inflation. Let's screw the proletariat and the peasants and let's just have asset inflation again, because that's what everybody wants. And, you know, let's just print our way out of all this. Now, that is the reality of the mindset of the people who are running this country. Let's make no mistake. If anyone believes that Krugman

isn't, you know, taking marching orders or that Stephanie Kelton isn't talking with the Elizabeth Warren, you know, staffed people throughout financial services and treasury, and the treasury secretary aren't all in concert here. Oh, by the way, last week, we had what six Fed governors say that we don't need to raise interest rates because long rates are doing it for us. You add all this, this is not like a, you know, I don't feel like this is the Da Vinci code we're cracking here, guys. I mean, this is a very, very clear policy attempt. Now, they may not succeed. I mean, this is a very, very clear policy attempt. Now, they may not succeed. I mean, consumer inflation might very well increase because, of course, at

the same time they're doing this, they're also cheering on labor unions, which will, of course, result in wage push inflation. But the truth of the matter is this is their only way out. And I don't really see an alternative. I mean, you know, I've said this before, James and I both tweeted about this last week, there's only two options. And this administration is going to pick one, the two options are inflation, at least in the sense of inflating away debt, being able to pay it in nominal terms, and or to massive wave of deregulation to improve GDP. We know that's what at least the previous president wanted to try to accomplish. And we know that there are others who say they can accomplish it. But the truth of the matter is, it's unlikely either administration could and this one for

certain is not going to do that because they have a record number of lines in the Federal Register going in. And and, you know, comraderen wants to have uh wants to basically the government to control everything and we've seen you know we have only 5 000 years of human recorded history where government controlled economies don't work so i assume she knows better than all of them but yeah the fact is you remember a time we were going more yeah can you remember a time when we were going more definitively in the opposite direction of reducing of deregulation in history? No. So look at Gary Gensler. Does he seem does he seem scared to overregulate? No, certainly not. But look, at the end of the day, the only model it used to be, we held up Japan as the model for what not to do. Internally in the administration, they're holding up the model of what they need to do, of getting rates to be low and keeping consumer reported inflation

as low as possible and effectively just not caring about debt to GDP. That's the Japanese miracle they're probably talking about inside. And in all of this, you need to realize that sound money is going to do well. So whether Bitcoin starts to gain more adoption as a result of this, you need to realize that sound money is going to do well. So whether Bitcoin starts to gain more adoption as a result of this, I think the answer is yes. I think distrust in institutions is very high, yada, yada. We've talked about that many times. Gold is certainly going to be one of the primary beneficiaries as this goes on. The real question is what happens, right?

You know, this is not, this is the recipe for stagflation in a normal economy, but who knows, you know, manipulated economies do weird things. Okay, rant over. Go, Mike. Oh, that's good stuff. So let's narrow this down to some specifics. The average price of gold this year is around $1,930 an ounce.

It's the highest ever. Now we're hovering around there. We bumped up near there this weekend. It's trading 19.20 at the moment. It got down really low. I think it's classic examples. Someone like me would have been, if I was aggressively long with clients, I would have been stopped out. And then you go back up. And we kind of did the same thing with bond yields. The 30-year yield peaked around 5%. I think we've had a pretty significant capitulation bump in yields. And it looks like that's all starting to roll over in terms of markets. And one thing I really enjoy reading a lot of these statements, clickbait statements, $150 crude oil.

And if you look at crude oil average price this year, which we're kind of heading towards right now, it's right around $77 a barrel. Last year, most people said, oh, I was supposed to have a one in front of it. Oops. Okay. So I haven't been completely right on crude oil, but if crude oil does pump, that's guaranteed we're going to have a global recession. Now we're already tilting that way. So it's a key thing to remember about, I think what's happening in terms of stuff I watch is clear recessionary tilt, industrial metals down almost 15% in the year. Gold is one of the best performers on a one-year basis, up about 16%. It's just a matter of time it breaks out.

The question is, what stops it? And I think one thing that's really been important, I'll add to this meeting from our morning meeting this morning, is our chief economist pointed out the fiscal deficit is obviously way larger than most people thought, running 6% of GDP, highest ever in a non-war, non-recession. Okay, we know that's bad. We pointed it out. And then one thing I was surprised was our equity strategist, Gina Martin-Adams, focused on something I never heard her focus on before, rising taxes are a real threat to earnings. So man, what good way, best way to mess up this epic stock market rally that's so overdue is the government messing it up. Too much deficit,

got to pay it off with taxes and at some point messing it all up. So I think I'm so impressed now or this morning to see it's nice to see Bitcoin bumping up around that 2800 level. I want that whole scenario to play out eventually sound money, but it kind of needs to show divergence strength versus the stock market. So I just kind of, uh, and it's been showing weakness for a while. So I, I pulled up some of my old bits. First time Bitcoin reached 30,000 this year was when Ethereum was bumped up around two grand, right around April and the stock markets, uh, you know, what Nasdaq has gone from essentially 1300 to 1500. It's just not good. I mean, you got to- Yeah, and ETH is at, by the way, ETH is at $1,585 now, right? If you want to have an idea of how

poorly ETH and altcoins are generally performing against Bitcoin at the moment, that's all you need to know, right? As you said, Bitcoin at, every time Bitcoin kind of gets back to these same levels, you can put a marker on ETH and it's been lower, right? So that's the scenario. Sorry, I was just going the scenario that is the scenario yeah well that's what's happening right now though is i i think at some point we're going to get there but i think it's going to be similar to what happened in like 1933 that's when the government basically you know um confiscated gold to basically debase the currency versus gold and it bottomed everything bottom def it bottomed the stock market and poof, everything was fine because we're heading towards a recession.

Now the question is how bad it is. And here's a key thing I like to point out is the thing I like to point out every month is these Fed fund futures. You look at the WRIP function in the terminal. And for the first time, for the November meeting, they're basically taken out, tightening almost completely. That rate right now at 5.35% is the lowest since June. That's when Fed funds are pricing. And they're still 5.41% for December. But our economist on a walk says if that GDP number comes out strong

next week, the Fed's going to tighten. To me, that's where we're at the stage right now is the only thing that's hanging. Cryptos have shown the weakness. Industrial metals are showing the weakness. We have this spike in bond yields, which is not because there's going to be expect demand pull and loan demand. It's because of the fiscal problem is the key thing that's holding everything up right now is the stock market. If that stays buoyant, that would be wonderful. But to me, that's the shoe that's supposed to drop. And so far it's not. And we're entering earning season. There you go. I don't know if you notice, Mike, but I saw one of the articles this morning in Bloomberg.

And the downgrades have overtaken the upgrades pretty significantly here. So, you know, analysts are starting to realize this is going to weigh on stocks. And so eventually, but going back to the Bitcoin thing, look, this morning, it's kind of a risk on trade again, right? So unfortunately, as much as I want Bitcoin, the thesis to play out, it hasn't yet. It's not playing out yet. What we think it ought to do is not really happening. And so gold is down. Bitcoin is up. I haven't seen the yields yet, but the futures are up. I mean, it just plays to a risk on trade again. People thinking that the the the tensions out in um you know out in the middle east are are kind of um they're not boiling over yet so there's some optimism there uh and so

that's the trade we're seeing this morning but interestingly enough the other thing that's been up is uh the swiss franc is is held pretty strong And so that's... I was going to ask about that, which is a huge hedge, right? It's not the yen anymore. People are not fleeing to the yen for safety. They'll go to the Swiss franc. And it's interesting because that would be the safety valve there in Europe, where so much of this will play out in the energy side. I see this Bitcoin move really quickly. And to me, it's, I mean,

this is just a whole lot of more sideways chop, right? I'd love to see it, but I mean, look how many times it's been rejected just at the 200 MA on the daily, right? So this to me just looks like a technical short squeeze until proven otherwise. I hope they prove me otherwise. And to your point on stocks,

big tech's profit machine is propping up S&P 500 earnings, right? If you look at anything but big tech, everything is getting downgrades. We're seeing increased bankruptcies in small businesses. I mean, nothing looks good except for Apple, Meta, NVIDIA, and the other huge companies. So can that sustain? I mean, is that possible? Well, it looks great. Is that to your note deal? 5.07, you clunk down your Ben Franklin, So can that sustain? I mean, is that possible? When the yen collapses, it's over. Well, it's collapsing. It's bumping up against this 150 level. And every time it goes there, they intervene. Well, they only last so long. It's bumping up again.

You know, that's cheaper yen. You look at the Chinese yuan. I mean, it's bumping up against the 730 level. The last time we had this disparity in short-term rates between the U.S. and China, which was 2006, it was like 300 base points. The yuan was 8 to the dollar. That's a giant wrecking ball, just like crude oil pumping, but this- And two different problems, right? Two different problems. So you've got, China just doesn't have demand. And then Japan, it's relentless zero interest rate policy and

yield curve control, relentless. and so money is going to flee to seek yield like you just said it's going to seek yield and they can't get it there so the the people are selling yen of course there's a reversal of that that hedge fund short trade and that's kind of uh stabilizing it here along with uh you know the bank of japan but it can only hold so long until it goes back up to the 170 level. And then it'll go, you know, it's gravitating toward that. It's over 150. That's the natural price is well over 150.

But it's just how long are they going to stand there? Quickly, can one of you just give us the context on why the yen is viewed as such a benchmark for what's happening? Carry trade. I mean, yeah. It's the carry trade. Two words, right? Days over. Look, Japanese yields are way below US yields. You can borrow in Japan at ridiculously low rates.

You take that money and you invest in two-year notes, whatever. It doesn't matter. And you lever it up a bajillion times, which means that as long as the currency is manipulated and it stays stable to the dollar, no problem. Currency loses that peg. And then all those people who are levered up on those hedge funds go boom. That's always been the fear it actually the Japanese carry trade unwinds have been behind a couple of the historic moves that we've seen James can go through that but it's it's basically everyone needs to understand the cause

the most important thing for people to understand how why you should care a little bit about trading is to understand economics to know that money is not free. We always think of it as free, it is not free. So I don't care who you are as a hedge fund, you're borrowing money by your prime brokers are doing whatever to lever up the assets you have under management. And so the carry trade where you borrow from low interest rate environments and you then export that into buying yield of various ways is there. If you read When Genius Failed, the LTCM crisis, that was a carry trade where people were buying and thinking that the spreads were, it was sort of a reverse carry trade, but it doesn't matter. It's like, you know, the fact is

whenever, when you look at bond yields and you see the U.S. as the highest 10 year yield out of the developed world, you know, the U.K. being, you know, 20 basis points higher than the U.K. But all of them basically almost 400 basis points, like 380 some odd basis points higher than Japan's 10 year yield. That's going to cause stresses in the economy, people are going to try to exploit that. And you know, it's difficult, James, I mean, you know, you understand the history, but that carry trade is the reason why is that way, Scott, I mean, to simplify it super simplified for people, what you're saying is basically, if you're if you're a Japanese

investor, and you know, you you're looking for yield that means that you need to sell whatever you have and and often it's uh japanese treasuries and you sell those to get yen to buy dollars and then turn around and buy u.s treasuries and then you hedge that out with futures and it's called interest rate parity. And so you just see there's a strong correlation, very strong correlation between the spread of the 10 year yields and the movement of the currency. So if you look at the spread of the Yen and the treasury, you'll see that as that spread widens,

the yen will weaken and vice versa. And that's basically the trade we're talking about. And hedge funds do this where they will make this trade and lever it up a bazillion times, like Dave said. We have to lever it up a bazillion times for Forex movements. The 100X leverage makes sense in Forex that you see naturally because the moves are so small. But then when you carry that over to crypto where you have low liquidity and massive volatility, it doesn't work particularly well.

And also, it should give you guys some context as to where these cash and carry trades in crypto and Bitcoin that absolutely wrecked the market came from. These things are not unique to crypto. This was what people were doing with the GBTC discount. This is what people do with futures versus spot price to get that quote unquote free yield in between. And it works really well until GBTC is trading at a 50% discount. Can you show the screen that I've got up now? All right. So this is what I'm talking about. And you can see how that spread between the 10-year, this white line is a spread between the US 10-year and the Japanese 10-year. And as that moves, the yen, the spread between the US dollar and the yen moves with it. And this is the yen getting weaker, this blue line, and this is the spread getting wider, this white line. And it's just, that's the trade. And you can see it's clear that that's what's going on in the yen. And so it's because the bank of Japan is holding their yields down because they

want more inflation. And so what they're doing is yield curve control. They're keeping their rates low artificially while the U.S. rates are climbing. And now we're seeing the 10-year in price discovery because of everything we talked about, the fiscal policies. And it's not because people think that the Fed's going to hold higher for longer. It's because that's the 10-year is the benchmark of the world. The US 10-year is the benchmark treasury of the world. And people are looking at it saying, we need to be compensated more for the fiscal irresponsibility of Congress, period. And for the record, doesn't this then explain the confusion for people as to why the dollar, which is represented by DXY, which is the dollar

versus other currencies, can continue to rise even if you think in this environment and money printing and all these things that the dollar should be getting crushed. Yeah. In Greg Foss's terms, it's the cleanest shirt in a pile of dirty laundry, right? I mean, think of it this way, Scott, if us yields are higher than everybody else and yields are going up, um, you know, while yields are going up, the dollar will generally, you know, soften, uh, as yield and other, there's sort of an inverse relationship, but then at the end of the day, as yields, if yields are going to roll over, you would expect that rollover is going to be

foreign buying and that's why the dollar will go up i mean it's not 100 nearly as much as what james just said but it is fairly obvious look the reason i started with my diatribe about the mmt crowd and you know i felt like they were getting close to halloween it's like sort of like, you know, they're back. You know, that is that's literally the trade here. I mean, the reality is, if you think about what the government has to do with this debt burden, you know, imagine a world where the US becomes a manipulated market, as opposed to perceived by the world as a free market. That's the imagination you have to ask yourself. The words Bond's Vigilantes is, it's older than, well, it's older than dirt, basically. It's been a very long time. But the Bond Vigilantes featured prominently in the 87 crash, featured prominently in years prior. It's

been a very long time. Guys, I'm not trying to interrupt. I'm just for clarity. I'm seeing in the comments and now also trying to discuss. I think a Bitcoin spot ETF was just approved and Bitcoin is absolutely- What market's price and it's trading like it is. Yeah. SEC approves iShares Bitcoin spot etf this is coming right now from coin telegraph that sounds like dave's call wasn't that some of the day was that your call dave i should yep yep there you go breaking sec approves iShares bitcoin spot etf uh i can't i mean it's coin telegraph. So that's seemingly pretty reliable. I'm going to now tweet. Holy shit. And yeah, live on TV. I don't know what to say. We should be it's a very big deal for money that isn't, it's not like the demand shows up in a day.

The demand is a groundswell. It's basically something that will happen. If you're positioning yourself short, you got to cover. So yeah, there will be a short covering rally, but it's not like people are going to walk in and just buy immediately. I was just saying that this looked like a technical move, a short squeeze, but we had Bitcoin up a few percent already on the day. Who knew? Who knew? Who knew? Who cares about bonds?

I mean, we're going to do spot ETF. I'm just going to go ahead and tweet that everybody needs to watch this stream right now. But guys, what does this mean okay this is i'm shocked i'm shocked we okay so now we can uh erase all of this time of discussing how black rock was going to be first and it was manipulated and blah blah blah and 75 percent this is actually brilliant it's brilliant for them to approve this first they can't so nobody can claim that black rock strong arm them right what what you said you let you let the you let the gbtc uh you know you let that that appeal kind of um where's the actual story i'm looking for it because black i just see i i know we're all trying to we're over 29 000 guys i mean bitcoin is going absolutely

but as i have to ask you mike Mike, listen, first instinct, does this change anything for your base case on Bitcoin versus everything else? No, no, you can show my screen. I mean, it's showing the first sign of strength. This is widely expected. And Dave's been all over it. It's a question of how much it can bounce and respond. And I'm really, really, it's going to do what crude oil did. Crude oil popped up at 95 right before the invasion. And it peaked, you know, buy the rumor, sell the fact. And it wasn't really a rumor. Someone should know what's happening.

So it would be wonderful if this is the case. But right now, we know this is not real money flowing in. This is speculators getting long on leverage. Or short-scanning. I'm not talking about this move, though. I'm saying for the base case, because you're saying this is just speculators speculating, but the real money could come in now. Well, we know that. Unless our case that people actually care is wrong. The idea has always been if a Bitcoin spot ETF gets approved, RIAs will allow this to their clients.

Now they can actually access institutions right yeah so that's been the quote in this space from people like michael mcgraths for at least five five years so we get this we this is hopefully it's real but it's just one of those candlesticks i'd be careful buying first move up you're always going to get dips to buy if it's true but it's you know it's nothing new, okay, fine, we got the fact. It's been rumors for years and finally just accelerated this year. The point, Scott, is look, we saw a rally over 30 to 31 when BlackRock first came out, and that got faded. I don't know where the terminal price of this rally will be. But whenever it is,

it will fade. The fact is, it might fade from 40. It might fade from 31. Again, the fact is, however, behind this, the patience of the people who have been buying and the the statistics on long term holding rates on chain are literally at an all time high. It's an up into the right chart. That's one of the great up into the right charts in history. Same thing with hash rates, same thing with everything. People need to remember, this is a question of when Bitcoin will change from an option on the potential of adoption to having a reached escape velocity to be that digital store of value. And when you're looking at an asset, that digital store of value. And when you're looking at an asset that digital store of value means 20x where it is, I mean, we're still nowhere near that level. I mean, let's just be honest,

we're talking about technical levels that will be unrecognizable on a chart in the future, if in point of fact, it does achieve that. So Grayscale is opening up 14% of the GBTC. But if there's anything that was so obvious, it was that trade. And now it's up 180% on the year. But at least that one worked. It's the underlying Bitcoin is another story. But that thing was 50% discount at the end of the year. What did it do? It just took all the week longs out, crushed them.

And also, it's what you mentioned earlier. It's a cash and carry trade this is thing futures etfs um this is just squashing volatility in bitcoin we're going to bounce a little bit but it's just going it's the volatility of bitcoin is heading towards that of gold right now it's still three times and it's doing it fast partly because it's it's a mature adult now you can easily arbit not as easily as you can go but it's getting there fast well people need to understand that there's a mature adult now. You can easily arbit. Not as easily as you can go, but it's getting there fast. Well, people need to understand that there's a very big difference. And just for your audience, one of the things that the implicit in that statement Mike made, which I disagree with violently, by the way, is that the ETF will allow more shorting and being balanced. It's not.

A spot ETF is different than a futures ETF. It's Bitcoin held at Coinbase's custodian, which is easily trackable on chain. The biggest difference with gold ETF, and by the way, if you look at the history of the gold ETF, it rather it was a that the $80 billion that went into that over a not horribly long period of time, it was a few years, but did actually have a big impact on the gold price. I'll make two points. Point number one, no one has a freaking clue how much gold is really held in vaults. Their liens against Federal Reserve and government gold deposits, it is not the same thing. And it's really difficult to audit. And you can't demand delivery. It's there. We kind of accept it, etc. But it's not the same. Bitcoin being on-chain is going to make it much, much harder to manufacture paper shorts as demand actually gets in. Oh, we lost Dave. We're struggling today. Go ahead, Mike.

I just had to take a break to send a text to some of the hot money people I knew. I'm doing the same thing. We're all scrambling for information. But who are long GBTC and just pointing out the cash and carry. Arb and Bitcoin has been wonderful, particularly with futures coming out with GBTC, but it's all getting squashed. And I agree with Dave about ETS, but it's just part of no longer is this going to be the kind of thing that can just go up many Xs or down many Xs. It's armed out. It's in the mainstream. Like I said, I really got the... It's just a hedge fund guy who knew about GBTC. He's just been doing the complete delta neutral arm. Yeah. I can tell you this right now. Really quick, James, I'm in the crypto town hall.

We have a news group and James Seifert from Bloomberg just said, it's not true. Oh boy. Privately. Privately. Privately. He said, ha-ha, it's not true, at least not that I can see. Will it happen? Yes. Does it happen now?

Who knows? I mean, you know, it's like, but it seems odd that they would approve BlackRock given their negotiating window with Grayscale. That's why the news seems odd to me. Someone said in the comments, BlackRock just got approved also, but I'm not, I can't get that. So we can't spread that rumor. So Mike, let's talk through what you just said, because that's an important point, is that when Bitcoin does get the spot ETF, one, two, three of them, that will make it mainstream. Yes. But it will also go to price discovery. It'll find that level. And then when there is enough volume trading in it at some point, and I don't know if that means

that it's a trillion, two trillion, three trillion dollar asset, but once it gets to that spot, then I agree with you, then the volatility dampens, but it's got to get far, far, far more liquidity in it before that happens. It's going to take a while. And you know that because it's just the friction of entering and exiting a large trade. You cannot have a large institution like a pension fund or an endowment that has Bitcoin as a separate allocated asset without having enough capital in the asset for them to move in and out of it. A 1% position on a billion dollar fund, you know, that's a little bit, but when you start talking about a hundred, you know, a hundred billion dollars, a trillion dollars of assets that need to find homes for that liquidity, it's going to have to have a lot more, just a lot larger market value, in my opinion.

I mean, look. So that's. Yeah. No, you go. You go. Well, I don't disagree with that, but I just want to point out facts. I will just publish it on this morning. Bitcoin annual volatility is the lowest ever on a standalone basis.

Well, it's kind of a stable coin right now, right? Well, it's a coiled spring. Right, but versus the stock market. Yeah. The key thing is, right, but it's also versus the stock market versus gold and most other major assets. It's not the lowest ever because that's indicative. Everything's been squashed in volatility. Everything's done the same thing this year.

Went up this last, down last year, up this year. It's just everything, stock market kept going up and crypto started tilting lower. Now we're getting this bounce. That's my point is I'm seeing indications that crypto say, okay, well, we're going to have a recession. We're not, you know, we're a leading leading indicator i mean i i'm going to make two points we always talk about this you look at volatility of bitcoin you know the volatility of an option is different than the volatility of an underlying asset i've said a billion times on this show okay that's hyperbole i've said hundreds of times on this show that Bitcoin trades like an option on its future adoption, that it's very, very immature, 13 years in, fine. But imagine gold 13 years into

a 5,000-year run. I mean, okay, that's a bit hyperbole. But the fact is, is the average human being on the planet doesn't think of Bitcoin as an asset. They think of it as a speculative thing where they might be able to make money. And the Bitcoiners that are hodling, which are 75% of all supply, feel the opposite. Eventually that changes. The thing about volatility is, and I've been pointing this out to people, everyone should be reminded of what happened to S&P volatility, stock market volatility, which is much more mature, from 2005 through early, early 2007 before Bear Stearns collapsed. It went from the 30s down to eight. Options market makers and firms that were in that business that overspent based upon

the early ones died by the wayside. So if you just look at the options market making business, at the end of 2006, it looked like the least healthy business, nobody wanted to be in it. Now, I was at Citigroup at the time. And you know, this on the second attempt managed to buy from Knight Securities, one of their second worst trade they ever made was they sold us what was a company called Arbitrade, which was an options market maker. By 2008, the seats alone from that market maker were double the purchase price that we did. And options market makers in 2008 had their single most profitable year. In fact, it was so profitable as an industry, the options trading people made 10X. They actually made more in that year than they had in the previous 20 years.

By a lot. It wasn't even close. By the way, guys, I'm sorry to keep interrupting. I have to do the breaking news thing, which we never do. James Saford is now saying, I believe this to be fake news. While this would be positive for the things we've been saying, I can't find anything that would confirm this at the moment, Bitcoin. So this is all coming from Cointelegraph, which for all we know in this world could have just been hacked. It could have been. Yeah. I mean, if you look and the market is trading, it's down below 29 again. Down below 29 now. Right. Of course. Right. I mean, it just shows you the magnitude of, you know, people will jump on, to use Michael's

terms, into hopium when these things happen and the shorts will get squeezed. The fact is, is that the price pattern that will happen when it's approved because at this point james sayford even he believes it's 95 likely so you know it will happen and so from a positioning point of view you have to understand but the point that i was making about volatility is volatility begets volatility and when you're looking at something like bitcoin it's going to be different right you? If this turns out to be fake, the whole rally, this whole jump God candle gets faded. And that's certainly what it looks like right now. Faded well below where it started, if you ask me. So yeah, we'll see. Let me expand on that a little bit. I can show my screen. What Dave said was

very profound. It was the key thing that got me extraordinarily embarrassed the stock market in 2008. It's a lesson I learned in the trading pitch day one in options is options volatility is always mean reverting. This was a VIX, 100-week moving average. The lowest ever was 2007. I just started getting short everything. I sold everything and started getting short. It sucked for a while. And then we did this. Boom. That was kind of nice. Just had to wait it out. Michael Burry. This is what happened in 2018. Same thing happened again. I started getting really bearish. We had a little blip. And I don't think we've ever really had the resolution from the lowest volatility ever. Market's still going up. But that's a key thing to remember about

volatility. But it's also, Dave, you brought back some memories of what happens in markets. That was a key lesson that some of us did very well during that period. I was just kind of hedging everything because volatility told you to. Now it's kind of moderate here, 21%. But when you mentioned long-term capital management, I'll remember with clients, we were sitting there, it was the summer of 1998 and noticing the Fed's done. They said they're going to tighten, but all these year-on-year futures, the calls, way-out calls a year out were ticking higher. And we're like, why is that? Like, I don't know. So we'll just start buying some because they were showing divergent strength than they should have. And then they all went up like 10 X. It took a little while because some of them expired,

but because of what all that extra leverage from long-term capital management. But to me, this is, this is what's happening now. So we have this little head fake above the a hundred week moving average in Bitcoin, man. I hope that's not one of those, we call it the baby seal trade, whack-a-moles. And if it is, that's what you need. Sometimes you got to hurt the most people, stop them all out, and then you take out support. So hopefully it's real. But if this is for real, this means the next trade is to take out the supports at 25.

I agree. I think this, honestly, man, okay, here's Bitcoin dominance, by the way, which if you wanted an idea of what would happen if a Bitcoin spot ETF is approved to altcoins, Bitcoin dominance just went all the way up to over 52%. People sold their alts immediately into Bitcoin on this news. This is what you're seeing there. When you look at that, you can look at any altcoin versus Bitcoin got absolutely destroyed in the last 20 minutes. Right now, it's obviously fading as people realize that we're probably also come to fake news. We're all the way back down to 28,000, guys. I mean, this is the kind of candle that, like Mike said, that is the toppiest of topping candles you will ever see in your entire existence. I don't know where price is going next, but this is just absolute jackass.

I don't know if Cointelegraph was hacked. We're all out here tweeting like assholes. We, we, not great. Well, the key thing to remember about Bitcoin is it to me, bar none, it's the most significant traded trading global trade vehicle ever. 24 seven, most liquidity. I mean i mean it's it's been horrible lately for people want to trade it and make things move but that's what it is there's nothing i mean being from a futures environment where all my clients all they just want is trade anything there's nothing that's comparable and it's what it's just doing it's this ironic it did it while

we're speaking i mean we haven't had a spike this high but oh man for now about junis saying that it's on your on the bloomberg terminal from reuters via benzinga but that last week via reuters through i mean he says he's looking for more confirmation second source i don't know where this is all coming from but this is now from baltunis real fake i have no idea i i can't even begin to unpack this but i can say that only in crypto could we literally have this much volatility insanity and question marks on something that should be so straightforward like if this was any other industry would we be debating fake news about an etf approval that's now hitting a bloomberg terminal this is so stupid it makes my brain hurt.

But so remember that one thing I think the key thing to remember about Bloomberg's defense, they did put out a headline I have on my professional terminal here that says Bitcoin surges above 30,000 on ETF approval speculation. Yeah. Well, but let's never forget there's so much in this space. One thing I've been, been i think adamant about is let's not underestimate the amount of people who can and will and have the ability to manipulate things for short-term profits pump and dump and make a killing and then turn around and get out

and say thank you i mean i've seen the pits now it's just okay people can do it electronically on a global basis the milk futures in the pit back in the day there you go when are they going to open like what there were there were larger bets on when it would open than there than the actual trading of the milk futures i'm just i'm in shock right now guys i don't know i got nothing left i'm over here i'm distracted i'm counting on dave to give me some hot takes i'm trying to figure out for you guys if this is real and it's literally impossible well look eleanor terra just said on twitter that BlackRock says, as far as they know, it's not true yet. They're still under review. The fact is we know the SEC has just entered because the news on Friday, which could have easily caused this scandal in and of itself and didn't, is that the SEC is now effectively in negotiation with Grayscale.

Just confirm this is false. According to, I'm sorry to interrupt, Dave, something on Bloomberg IB. Yeah, well, I just said the same thing from Fox. So look, at the end of the day, remember, the SEC is in negotiations with Grayscale, and BlackRock is under review. The SEC does nothing fast. Well, this sec does a lot of things faster than past secs, but still the sec does nothing fast. I was surprised. I still think the likelihood that black rock gets approved before grayscale

gets the ability to convert seems unlikely. I think they will probably get them at the same time and it will probably be them and Kathy Wood and a few others, Fidelity, et cetera. And look, the interesting thing is, is we have shifted, Friday shifted from, we're going to delay, delay, delay to, okay, this is now going to happen in the next, we're measuring it in days, weeks, or months. We're not measuring it in years anymore. That could have easily caused a God candle from, but the fact is the money takes months from the time it gets approved before the money actually starts getting into the market. So the real question is, are people front running? And I keep saying this, you know, I always mentioned my brother as a financial advisor. He and thousands, tens of thousands of his brethren across the United States and far-flung

territories have customers asking them about investing in Bitcoin and can't do it. And we can't do it until this is approved. But once it's approved, it's not like they turn on a magic switch and the products get listed. It takes time. Whereas the first thing that will happen is the grayscale arb will disappear. And what does that mean? That means that people need to buy back Bitcoin and sell there and convert, or the people who did it for a trade, if people just bought,

there's certainly some percentage of grayscale buyers that didn't buy it hedged that bought it unhedged. So in the short term, that has probably some supply and it'll be traders and speculators buying that supply. So the futures, and I know people have been shorting futures and some of the options in Bitto, but at least some of those should see some covering. Yeah. I just saw basically the funniest tweet, one of the better tweets, by the way, I have to share that came through as a comment to one of my tweets, which is someone saying, as a Bitcoiner, I'm waiting for six confirmations before I believe this. It's a really good tweet.

Yeah. And you know what? That is true. I mean, look, at the end of the day, every single one of these rumors get speculative bounces, fade into the bounce. When it's real, it will be a speculative bounce. And then from to wherever it's going to be, it will fade, probably be more of a normal 50% correction. So because in markets, when we do this, I mean, Mike and I have talked about this for years, is there's a difference. What we've seen over the, this is now the third time we've seen a candle,

like a significant candle that gets immediately faded. That doesn't happen when there's real news. When there's real news, you see what James calls price discovery, and then it always goes too far. We're back to where we started, by the way. It's all the way back down to 28, literally. Right, of course. I mean, 27.9 yeah you know look the people who anyone who bought expecting to be a long-term holder is going to sell and the people who bought speculative it's going to be there but just keep in mind if you're shorting from this level you're going to get you're going to end up getting wrecked when the news does come out and people understand that so you get all these sorts of cross currents going the difference between a fade a rumor or a fade something that isn't real and a fade something that's actually happening is at

least 50 of that candle and you know in most trades you you look for 50 retracement of a big move but these moves are moves right and they tend to hollow out so mike is saying well you know when it hollows out, it tends to go lower. Technically, yeah, there's good reason to believe that. Because remember, the buying support for Bitcoin are patient long-term people who are not quick twitch. You talk about athletes, you say fast twitch athletes and whatever. I mean, the speculators just boom and boom. And people who are long-term holders are much more patient. And so yeah, it does tend to correct below that level,

but we'll see what happens. I'm so pissed off. I'm so pissed off. It's just like, it's a never ending clown show in this industry. Imagine that you're now sitting at any major institution and have been looking at Bitcoin and you see this crap happening,

flashing across your Bloomberg terminal and price going up $2,000 and back down. And you know, you react to fake news. It's just so embarrassing. It never stops. Yeah. You're just thinking that it's a bunch of, you know, amateurs. It's amateur hour.

It is. Because if you're sitting at a hedge fund, you know, you're looking at this room, you're trying to confirm it. And all you're doing is you're selling on the way up until you figure out that, okay, it's not true. Now I'm going to short it and it comes back in. But I want to be very clear about one thing. At the end of the day, if people want to understand what is needed in this market, is there anybody on this call? Certainly all four of you are going to agree with this. Do we think that if you did this or any

news like this in any regulated asset market around the world that the perpetrators, so let's say Cointelegraph was hacked, or let's say that it could be proven that people bought Bitcoin futures, leaked this news, knew it, faded it, and made a pile of money. That's called market manipulation. And I think pretty much everybody in the market thinks people who do that should go to prison, certainly have their ill-gotten gains be disgorged. And I would say the regulators in the UK, the regulators in Europe, the regulators in the United States would generally say that a capital market that features that sort of regulator cop on the beat would be a good thing. You know, the fact is our SEC, by abdicating its responsibility to actually manipulate this and do anything, they can do nothing. The CFTC, if they find the people, will do something because it affected Bitcoin Futures,

which is a regulated product. But the question is, is there global cooperation to do that? Finding out how these sorts of things happen and punishing the people that do it is really what's necessary. And in a digital world, it gets increasingly tougher to do. That doesn't help us today. No, that's true. I understand that. But the point is, is that for people who want to understand why, you know, dinosaurs like

me being, despite wearing my Bitcoin ring and being a bit, being and believing that it will be at a much higher price and in a number of years, there is a reason for regulation because these sorts of things are damaging to the confidence of people in the industry. Which is why, by the way, it generally fades below the level that it started. Yeah. Can you imagine being at CalPERS or Texas Teachers and having a position in Bitcoin, seeing this happen and saying, wait, what is the news? And has this been confirmed? Like what? Reuters via Benzinga, via Bloomberg, via Cointelegraph's fake tweet with no source.

Well, I take the other side of that one. If I was at CalPERS or Texas Teachers and I'm deciding, okay, I'm gradually accumulating. I don't know if either of them are. But if I were one of the funds that are accumulating Bitcoin, have been doing so every time it goes below 27. And I see this, I'm like, you know what, maybe I should be a little bit more aggressive and try to establish my position because this sort of news is inevitable at this point. And you kind of get an idea of what it could mean. And so from a price discovery point of view, I think it is actually

positive that the market, that there's just no supply if, and when this news gets, is actually approved. That's the difference. But to your, to your earlier point of, you know, there needs regulation around, if you had, let's say that you had the same sort of headline that came out that said that the bank of Japan defaults on a bond bond you know like is it going to default on a bond and and and that that i mean the the shock that would actually run through the market if that were true would be massive and there would be there would be some uh pretty big uh repercussions for that that's right and we've seen that we've seen nothing that big but you know we've seen you know reports of fake geopolitical news fake

all sorts of stuff and when those happen it does cause moves it's just that people you know it's like that right in a specific asset or in a specific security it it you know there would be massive somebody would be going to either prison or they would you know there would be some there would be some problems for that you know insider and the there should be manipulation it it's serious and but like you said like we've all been saying it's not taken seriously here yet because you know it's seen it's still seen as amateur hour kind of doing ourselves any favors we we're the this industry are the kings of self-inflicted wounds. I mean, nobody can sit there and just play Rochambeau with themselves like this industry,

just a swift kick back and forth in the nuts for fun. I just say, I'm sorry. This just pisses me off. And yes, I understand that this happens in other markets and everywhere else, but this entire market clearly is, as you can see from the price action, is waiting or hinging upon this news and to see it happen in this manner. I mean, doesn't the SEC look at this and go, doesn't the SEC go, see? See?

Now doesn't Gary go, I'm not approving this. What if it is true? And at 7 o'clock my time, at 10 o'clock, they released, SEC released a statement that says yes but it was you know it was released before the sec officially said it like that's also i mean either way it's not good right so there's a lot of reasons i think gary gansler would take these ignore exorbitant risks of going down in history like Aaron Burr because he knows we all know there is massive illegal speculation and

tax things going on in this space I mean it's just front running it's just guaranteed because they couldn't get caught I mean I've just seen it when it was illegal, but because you couldn't get caught. But when you can't get caught and eventually you do, we just know that. And we've seen it all. We've seen the pumps and dumps of things like Dogecoin and things. But what's happening to me and now today is now I'm worried about, I just was watching the Bloomberg IB chat. And the guy says, yeah, cool. I had my hanging offer at 30,000 sold.

I'm like, oh, perfect. That's one lesson you learn with clients. Always, if you're long or short and you've got targets, always leave an offer in a rebid. And I'm afraid now that this, if this, say if it's kind of trickles down in the day, that's a pretty significant peak that might last a while. Yeah, I think that's a fair assessment.

I just think Gary's laughing right now. Remember when I said this was a manipulated asset class? He had some valid points. I mean, this is an example of it. Well, I mean, yes and no. I mean, this is a global market. And the fact that it's actually embarrassing for him. It is at this point virtually inevitable. We understand it. We see what's been going on. And the fact that news about what he's doing is so important to the market. The SEC is when they're doing their job right, the SEC should never be in the news and should not affect asset prices. It is in fact part of their charter. So the fact that the SEC is impacting asset prices so much

is actually a proof of failure of the SEC to conduct their mission. Full stop. There is no way anyone at the SEC in that building, and there are many hardworking, good people in that building that I know personally, there is no way anybody is happy that them being in the news is dramatically impacting markets because their literal mandate is not to impact markets, but to root out bad guys and protect investors from this. And yet they are the ones who are causing this. So no, he's not laughing or if he is, he's psychotic. I doubt seriously he's laughing. I think he's pissed off because he knows that his job is not to be causing markets to go up and down. And yet the fact is, is news about him is doing that, which is more proof of why he needs to accelerate this and get it done. So the SEC could go back to looking for bad guys and go back to providing a methodology for people to invest safely, as opposed to being the generator of the news, which is the opposite of what they're

supposed to do. He needs to get back out ahead of it. Yeah. Well, in a million years, if you had said to me we would have a title that was about volatility and then we'd have a live stream that went from 9 a.m. to 10 a.m. Eastern Standard Time. And in that time, Bitcoin would go to $30,000, but clove would be at the exact same price as when we started, I would have taken that bet for probably a billion dollars. Ultra volatility. I mean... Yeah, it was certainly, to use geek terms, it was certainly more than a six standard

deviation event likelihood that it would not happen. Yeah, I mean, we should have all bought... I don't know if anybody finally won the $1.4 billion Powerball, but it seems like we all should have bought tickets right before this because the same likelihood that we would be back at the same price, literally trading at $28,000. I think we started at like $27,940, something like that when we started the day. All right. Well, I got a little emotional and excited there. It doesn't happen often, but it was all happening in real time. You guys got to witness my full roller coaster that my wife gets to see and nobody on camera does.

So welcome to my personal life, my off-camera personality. Guys, that was fun to unpack with you. I can't believe I'm just in shock. And now I have to go talk about it on Crypto Town Hall and apologize for all my excited tweets about the Bitcoin spot ETF approval. Guys, thank you. Macro Monday, always an adventure. This one was special, I have to say. Thanks, Scott.

Dave, enjoy the rest of your day and your trip. Mike, James, thank you. Next week, maybe we'll talk about macro. Guys, thank you very much. Bye. Ciao. Let's go.