The Wolf Of All Streets - Bitcoin Sudden Crush: When Is The Time To Buy The Dip? | Macro Monday

Episode Date: August 21, 2023

Join James Lavish, Dave Weisberger, and Mike McGlone for a deep dive into the latest macroeconomic trends. We'll unpack the factors behind Bitcoin's recent downturn and explore strategies for determining the optimal time to invest in it Dave Weisberger: https://twitter.com/daveweisberger1 Mike McGlone: https://twitter.com/mikemcglone11 James Lavish: https://twitter.com/jameslavish ►► JOIN THE FREE WOLF DEN NEWSLETTER, DELIVERED EVERY WEEK DAY! 👉https://thewolfden.substack.com/   ►►MELD MELD will bring to bear the full power of decentralized financial instruments to the masses. Banks are at the heart of the economy, MELD will become a new set of banking tools that are by the people and for the people. 👉 https://bit.ly/meld-early-access  ►►OKX Sign up for an OKX Trading Account then deposit & trade to unlock mystery box rewards of up to $60,000!  👉 https://www.okx.com/join/SCOTTMELKER  ►►THE DAILY CLOSE BRAND NEW NEWSLETTER! INSTITUTIONAL GRADE INDICATORS AND DATA DELIVERED DIRECTLY TO YOUR INBOX, EVERY DAY AT THE DAILY CLOSE. TRADE LIKE THE BIG BOYS. 👉 https://www.thedailyclose.io/   ►►NORD VPN  GET EXCLUSIVE NORDVPN DEAL - 40% DISCOUNT! IT’S RISK-FREE WITH NORD’S 30-DAY MONEY-BACK GUARANTEE. PROTECT YOUR PRIVACY! 👉 https://nordvpn.com/WolfOfAllStreets   ►►COINROUTES TRADE SPOT & DERIVATIVES ACROSS CEFI AND DEFI USING YOUR OWN ACCOUNTS WITH THIS ADVANCED ALGORITHMIC PLATFORM. SAVE TONS OF MONEY ON TRADING FEES LIKE THE PROS! 👉 http://bit.ly/3ZXeYKd  Follow Scott Melker: Twitter: https://twitter.com/scottmelker   Web: https://www.thewolfofallstreets.io   Spotify: https://spoti.fi/30N5FDe   Apple podcast: https://apple.co/3FASB2c   #Bitcoin #Crypto #MacroMonday 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.

A lot has happened since the last macro Monday. We saw a sizable Bitcoin correction, one that some of our panelists have been looking for for quite a while. Also saw Evergrande declare Chapter 15 bankruptcy in New York, showing some structural weakness in the Chinese economy that we've also been discussing quite a bit here. And in the meantime, with all of that, bond yields, especially long-term bond yields, have been absolutely ripping. Is this Bitcoin correction simply a bunch of traders trading, or is it actually a function of all these things that are happening in the macro? I have three amazing co-hosts today, Mike McGlone, Dave Weisberger known as the Wolf of Wall Street. Before we get

started, please subscribe to the channel and hit that like button. Yeah, I can't wait to unpack the last week with today's guest because we had been talking about the lack of volatility in Bitcoin, how boring it had been, how it had become stable. And I think a lot of people obviously were expecting that volatility to play out, that return to volatility to play out to the upside. Not exactly what happened. Obviously, we saw some weakness throughout the week. And then in a matter of minutes, we saw effectively Bitcoin crash down to just around $25,000, depending on the exchange that you were looking at. Someone as low as $24,200, I believe.

Some, like Bitstamp, actually stopped around $26,200 on that drop. Most of them, I think the average was about $25,200. Obviously, that's a level I've been talking about quite a bit. That's exactly where we pumped from on the BlackRock ETF news. And $25,200, also the level where the market structurally, if you are a technical analyst, made a higher high for the first time since the $69,000 lows. All that to say $25,000 is pretty important and price is hanging out just above it at the moment. We're going to unpack all this right now. I've got Dave, Mike, and James here. Good morning, gentlemen.

Dave, actually, we were on Spaces talking about this and you dug in pretty deep. And in your opinion, this was a classic, somebody triggers a major spot buy to liquidate a whole lot of longs, long squeeze traders doing trader things, correct? Well, I mean, there's one of two possibilities, Scott. I never want to be definitive. Either somebody was a moron or somebody made a lot of money manipulating the market. And, you know, for the benefit of your viewers, this is a quick explanation. The moron or fat finger is somebody was doing a large Bitcoin buy. Now, let's just give some stats to put it in perspective.

And I've seen, I saw Frank Shaparo tweeting and Frank. Sell, presumably a sell. You said a buy, but I mean. So if you look at Bitcoin at any instant in time, basically, if you want to sell, knock the market down, you know, 1%, it takes somewhere in the neighborhood of anywhere from 20 to $50 million. And that will, and you can sell down. And by the way, your, your sell will not get a 1%. It will not knock it down 1%. You'll be about, you know, half of half a percent or so down on the average, but obviously the terminal price is there. Now, here's a function of markets. People need to understand this. Markets, if you look at the liquidity in any electronic market, it doesn't matter what we're talking about. It's literally

anything that is a singular asset. So whether it's an equity or FX, it's true, but it's much larger liquidity. But in Bitcoin, it's very much like the same. So essentially, all liquidity is clustered near the best bid and best offer. And it looks like it's a bell curve. And effectively, the farther you get away, the fewer resting stink bids there are until you get out onto fat tails. Now, Bitcoin is fairly fat tailed in those bids compared to a lot of assets. But the fact is, is it takes less to sell as it's accelerating away. So what happens is, is if you have a desire to manipulate the market down, then you could do it like this. You buy slowly over time, accumulate a long spot, short per position. In this particular case on OK OKEx because that's where it was sold. And you can see it in the data. And I published this. I talked about this specifically with charts

on my weekly recap. I talked about it in the Twitter spaces. You can see it. There's some very obvious charts about this. And what you do is you get this large $500 million position. It doesn't have to be 500 million, but that would probably be enough. So you queue at this huge position. And then when you decide you want to try this, you sell the spot aggressively lower and just start flushing the market down. You don't do anything with the perps. You put stink bids on the perps way down. And so you get all the average on the spot and you knock them price down and your perps get filled and eventually you're flat, but you've made money because you bought down here and you sold as an average all the way down. It is a classic, what we call

momentum ignition strategy, because the idea is as you start selling, you're going to trip liquidations. And in fact, that's what we saw. You can go on Coinglass, which is the one I use, but others do it. You're muted, Scott. I was saying a billion in open interest was flushed, I guess, since FTX, bigger than FTX, in fact. Yeah. So the fact of the matter is, is that that could very well have been intentional. It could have been unintentional. Someone just literally, instead of using a smart trading strategy, could have just decided to do a market sell,

but unlikely. And then that triggered it all. Now, why do I point to this? So if we're talking about macro, and we always talk about Mike and James and I, we always talk about the long term. Okay. This was literally five minutes of price action. If you're trying to tell me that five minutes, because there was, it's like a forest fire, right? You know, forest fires, everyone like talking about, oh, it's this reason or that reason. I don't want to get into the hoopla bullshit. The fact of the matter is if you have a lot of dry grits and a lot of unmanaged forest that is dry and you put a spark there, it goes kaboom. Now, we've been talking for six weeks, eight weeks about low Bitcoin volatility. So what happens when there's low volatility? Well, James, you know what happens.

Mike, you know what happens when the volatility is lower. People start creeping their heads up and taking more and more leverage. It's, okay, it's safe. What happens? And even the ones who don't do a lot of leverage, they start putting their stops really tight. And so, you know, eventually, you know, longer that goes, that's why it's a coiled spring to the downside and the upside, by the way, because had someone done the opposite trade and decided to cover a big short to push the market up,

they could have probably done that too. And who knows? We may see that at some point. The fact of the matter is that low volatility created more and more encouraged leverage, which allowed this to happen. So do I think this is a macro event? Hell no. Do I think this is something that we see every once in a while? Yeah, of course we do. I mean, I'll never forget because I remember I was watching it. CoinRoutes had just started in 2017. And we were watching, if you remember, there was a pretty sizable flush over the summer from above 3,000 or so down into the low 2,000s. I mean, sizable, like 30%, much bigger in percentage terms than this before all hell broke loose to the upside.

Now, I'm not saying all hell is going to break loose to the upside now, but I'm saying that to read too much into this is absolute, well, I can say it because this is a good show. It's absolute bullshit, and I will call bullshit on anybody who says that in a world where the bond market hasn't done a whole lot, the stock market hasn't done a whole lot, but this is the macro flush we've been waiting for. This is a leading indicator, a canary in the coal mine. It was five fucking minutes, Scott.

Yeah, you know, what's interesting about it, Dave, is, you know, I agree with you on the macro side and the trading side and how quickly it flushed out. If you look at it and you're thinking about it from the trading perspective, from a short term, not a long term perspective, but a short term perspective, there was a trend line, you know, that if you look back on that on that trend line, you starting from the low of about 16, 17,000. Then you had that you had that dip down to, you know, about 20,000 and then a dip to about 25,000. And then this last level was about 28,000. then it dipped to about 25,000. And then this last level was about 28,000. If you just look at that trend line. So people look at this mentally, you know, I mean, whether or not for long-term investors, it doesn't matter. This just doesn't matter. But traders look at this, it's a mental level. And if you get to that level, right, there it is exactly that, you know, and you get to that level and you

push through that, then there's a flush because you get a whole lot of traders just back off, they cancel their bids and they just wait to see where it goes. And everybody knows the next mental level is that next, you know, that next spot where that trend line touches, which is about the 25,000. And so sure enough, you know, that's exactly what happened. It got flushed out. What was it about 20,000 Bitcoin, Scott, they got flushed out in about three hours, boom, gone. And everybody just stepped back. And there it is. I mean, it's almost obvious to traders to see that. But just like, you know, Dave is saying, I agree, this is not some sort of macro deep, you know, long term event that we have to that we have to reevaluate the fundamentals of

Bitcoin. It's just this is this is a trading event, clearly. I mean, just just to put a fine point on it. If you're sitting there trying to do the trade that I was describing and you have to figure, remember, this is all competitive, right? Markets are competitive places. The person trying to do this, whoever was trying to put this trade on, it might have been multiple people, are looking at exactly what James just said and says, OK, I have this position and I could try this, right? Now, what causes this position, this thing to fail? Why do people not do this every single day? Well, the answer is because if there are large buyers out there and you start to try to do this, you get your face ripped off.

They push it back up and you really get squeezed because now all of a sudden you're short and you didn't move the price. So if you go to sell all this and you have the you know, you're you sell your your spot and you're still short your perks and you try to sell it. And as soon as you do, someone comes back in and buys it back up into your face. You get killed. I mean, literally killed, like potentially carried out. And you're done because we all know what happens to Bitcoin on the upside. So it's a it's a it's not trivial. So you're going to pick a time

and you're going to be looking at the exact levels that James is saying, because what you want is for people to step back. And so, you know, all of this sets it up for doing it. What people don't know is are there large buyers? You know, what news could come out? And the reason that it happened so fast is because if you do it in a five-minute period, the odds of a news event happening are basically zero. Right. Yeah. And now you've got that last level becomes resistance. So you can trade around that. Now you've got- We're also below all the meaningful MAs. Yeah. We're also now below the 50, 100, and 200, I believe on, well, we're not on the

daily and below the 200 and above the 50. Now on the weekly, if you look, I do find it interesting that if you take that level, I was talking about that 25,000 ish. I mean, it bounced to the penny, literally that's exactly. So if you want to know where the buyer was, Dave, they were, and to your point, just so people understand, they do this because it's a free way to make a ton of money. But it's not that easy. And you can only do this one time because now there's no open interest. Right. And on the flip side, it's basically a long squeeze. I mean, you guys talk, we talk about short squeezes all the time. There was all these longs compounded and they're flushed. But the question now I want to go to Mike, because I agree with these guys generally, but also if you are a technical analyst or you look at markets, these things happen. That doesn't mean we're going back up. Right. So I want to point out one thing. We just spent 15 minutes pointing out markets go to the point where they can create the most pain. That's bottom line. Getting into how you fix the transmission on the car

is something I learned to deliberately ignore in the trading pits in the 80s. And that's why I wish the best for traders. Most of them lose money. A lesson I learned from Jim Rogers. A lot of you know who he is. If you don't Google him, I met him probably almost,

probably 15 years ago, at least 10 years ago in Singapore at his home was the best positions he's ever had are the ones he involved in. Never looked at, just don't even, I don't want to see the statement. Don't look at the trade. That's the way I see Bitcoin. You're not supposed to trade this. Although it's the best trading vehicle in the world. Let those absolute complete professionals trade it. And that's the thing I learned in the trading pits. Those guys who traded analog back then were a bunch of slobs, but they got in the pit, they'd rip your head. They're a bunch of sharks. Now it's just so automated and bots and

everything. I just say, thank you. No, I say, don't mess with it. But you hit stops. The path to least resistance right now for Bitcoin is down. For the stock market, it's down. For bond prices, it's down. For the Fed to raise rates, it's still up. That's the bottom line. We're in August and we've had this massive bounce in all risk assets. I look at this as this is the beginning of something that's really bad. And then I ask myself, why is it bad? Well, the bottom line, number one lesson in markets is liquidity. The M2 is running. Money supply is still negative, most ever, 3%.

The Fed is still tightening rates. China is playing out like an Ayn Rand Atlas shrug. It's one person trying to manage economy that's way overdue for collapse. Most of the trading in the world really for cryptos comes from Asia. And I look at this as Bitcoin's the best leading indicator. So I'll end with this. Let's look at just simple numbers. And the goal is not to get people upset, but I need to point out facts of where we are. Right before we had this massive pump in liquidity, M2 money supply, which went up 40% from the end of 2019 to the peak in 2022. If you look at every risk asset, stock market's basically unchanged versus that. Gold's basically unchanged versus that. Commodities are basically unchanged versus that. And Bitcoin's up about 200% versus that money supply. So I look at this as it's very likely we're just going to head gravitate towards those means that we were trading at right before this big pump. In Bitcoin, that was below 10,000. I just pointed out facts. In the S&P 500, it was below 3,000. It's around 3,000. In crude

oil, it was 57. So that to me is that's the current trajectory going back to those levels. And the bottom line is the Fed still tight. So if you want to focus on macro, I'd say forget about trading. Let the people those other you know, all the things I really deliberately click off when I clip on cryptos, when they talk about trading. Oh, the market's going to go up because it went up. Be careful with those mantras. Those days are over. We've just had the biggest zero interest rate policy rally in our lifetimes, and it's all changed, except for in one country, China's cutting rate. So I look at this as that asset that led the way. I published about this this morning, that Bitcoin to me looks like the stock market did in 1930. It is heading lower on 100-week movement average. The Fed's still hiking rates rates the big difference with the stock market in 1930 is the fact it was cutting rates and trying to help save things

yeah i i have to point out the funniest the biggest important difference where mike and i disagree is on all of his analysis on stocks i tend to agree there there's this thing that we don't like to talk about as traders, but we call them fundamentals. And fundamentals are exactly the opposite for Bitcoin versus the stock market. That's just fact. If you look at the hash rate of Bitcoin, if you look at the network,

you look at the use cases, whether it's from Argentina to Venezuela to Turkey, et cetera, the amount of people who have currencies that are depreciating and paying globally are higher. If you look at the holders who are in Bitcoin, yeah, there's a core, I don't know what percentage of the 75% that haven't been willing to sell any of it, are cultists who believe that it's going to change the world. And, you know, the tin-pat conspiracy theorists who think that it's going to change the world. And, you know, the tin-pat conspiracy theorists

who think that it's the way to get away from governments versus people who look at it with a clear eye like James and I and Mike do as a alternative, that as a vote against, you know, whatever. I don't like institutions. I look at debasement. Look, the fact of the matter is the Bitcoin hash rate is still pushing towards an all-time high.

It is 4x where it was when it was at the levels Mike talked about. So if you want to value and you had Mark Yusko on last week, who did a far better job than I will at going through the fundamentals of Bitcoin or Mike Alfred will go through the fundamentals of Bitcoin very well. The fact is, is, yeah, it's up 200% against the M2 where nothing else is, but its fundamentals are 4x where it was when it was at the levels that mike talked about literally four times so actually it's a little bit more than that so depending on whose fair value model you look at most fair value models of bitcoin based on network dynamics based on hard data uh it looks undervalued uh now you you flip that script and look at nvidia and if you think think that looks undervalued or basically any tech stock or any bank stock, if you look at any of the stocks on a PE, price to sales, any enterprise value calculation, it is almost impossible to find anything that's been leading the market that isn't looking like 2x overvalued based on really

long-term measures of price to sales, price to earnings, et cetera. So to group them together, I think it's wrong. It doesn't mean they won't trade that way. Mike could very well end up being right, although I doubt it. I think that his numbers are too low because of the fundamentals. But the fact is, is we all know that when a correction happens, if there is a huge stock market risk asset flush, correlations go up and everything happens. But do I think that Bitcoin is less likely to lead it because of the fundamentals? Absolutely. Because the supply demand dynamics are such that we are going into a halving cycle. We do have this thing now called and yet, of course, they peaked and went crazy. And now it's much lower. But we've found this new thing called ordinals. And there's other reasons and other things going on in the Bitcoin network that

could be talked about. But the absolute reality is the fundamentals of the network itself, that chart is the greatest long-term stat arb trade in history, in terms of price versus fundamentals in the Bitcoin network. And it's been a great trade in every direction. When it gets above fair value, it's a great trade to short, right? 69,000 was a great short based on that metric. But it's really important to distinguish that because this is a macro show and you want to macro long-term things. I think that it's really important to look at that. So I want to agree with you on the macro. The on-chain metrics are awesome.

Here's what I'm looking for. I want to see, to turn bullish, here's a key thing I want to point out is 2018, I think it was 18 or 19, when the New York Fed came down on Tether and Bitcoin and Tether wobbled. It was around 5,000. That's when I got bullish on Bitcoin, around 5,000. Again, it went to 69. Didn't get the top, but that was a pretty good signal. I'm looking for any kind of signal to flip this downtrend narrative, which is clearly intact. And fundamentals are great. That's why I think in the long term, buy, hold, and invest. But in the short term, the best performing asset in history can easily go back to 10,000.

It's still the best performing asset in history, particularly if, of course, it's a key thing about all correlations go to one. But you can't, this stuff has never happened in our lifetimes. We have money supply running negative. Bitcoin, it's never happened in our lifetime, life of Bitcoin. The 100-week movement average is trending lower. The high in this move was at the 100-week movement. If it's heading lower, the Fed is still tight and the stock market's potentially rolling over. So to me, it's the macro and Bitcoin's just that leading indicator. And what's Bitcoin usually do? It overshoots. And it's also such a baby. I mean,

it's just been around for so long. So I agree with the macro. That's why I started out. We're supposed to buy and hold investors. But the traders, I think, are smart enough to know is you're supposed to be selling rallies. And by the way, because Fed's against you and most all risk assets. And if we get lucky enough that we don't have a normal recession. Hey, I'll end with this. We had our mortgage analyst on this morning, Erica Eidelberg, pointing out mortgage is heading to 8% and pointing out the affordability index in US housing is the lowest since the 1980s. He's never had an affordability index this low without

a severe recession. That's global. I mean, it's worse in China. So I'm going to point out the macro. And here's, I think about how important Bitcoin's in the macro is when I fill up my taxes, I have to point out if I buy, hold or sold any type of cryptos. I've never seen an entered asset. Yeah, I want to make two other points because I also want to hear James's point on this. I mean, I think first, it's really critical to understand that, you know, this is why I always yell about people who are investors using leverage, because everything Mike says is true, except there's a couple of interesting facts. And once again, fundamentals on real estate because of the mortgage market and what he was saying, they look abysmal. But fundamentals are really interesting. Bitcoin is still fundamentally an asset that was born out of the last global financial crisis. And my genuine belief is that the economy looks unbelievably vulnerable and the Fed

is waiting for that to take the other side of it. And Bitcoin will react very twitchily. I think that stocks tend to be dropping as the Fed is cutting over time. I don't think Bitcoin does that. I think it's the opposite. And so I think that the D-link is likely in both directions, but we'll leave that alone. But what I wanted to talk about was what are the white swans and black swans? There are literally three potential news events or really one news event negative, that's massive,

and one news event positive, that's massive, And one news event positive, that's massive, that everybody is waiting for. That affects Bitcoin only and doesn't really affect the stock market, the real estate market, et cetera. The black swan is what happens with Binance? And is there a impact on Tether and market liquidity? Now, why that's so important? Obviously, you know, there are, you know, one, our friend Mike, you know, talks about, he thinks that the big seller of Bitcoin has been CZ. I'm not saying, I know nothing about this. I'm not saying he's wrong. I'm not saying he's right either. I know there are a lot of people worried about the DOJ coming down on Binance and hurting market liquidity. I'm actually not worried about Binance. I think that OKEx and lots

of other markets are out there to replace Binance if Binance actually did get crushed. Yeah, sure, the market would get nailed if it did. But the real issue is tethered. Because during the operation choke point that we've seen over the last six months, we've seen something very interesting in the market change. The US dollar based coin, you know, pairs, the ones that trade on Coinbase and Bitstamp, etc. used to be more liquid than the Tether-based pairs, which the rest of the world use. It is now not. Now there's more liquidity in the Tether-based pairs, right? People have been, the reason Tether is making... By far. It's not even close. No, it's not close. It's, you know, you can buy a million dollars of

worth of Bitcoin in dollars, and we have charts on this, and you can look at it. Over the last, well, I have to go read Reboot It, so I can't give you the exact numbers, but somewhere in the neighborhood, it has vacillated between five and 14 basis points to buy just a quick million dollars worth of Bitcoin at any one point in time. Tether is between three and four.

And that matters. So the liquidity in the Tether pairs is huge. And that's why, by the way, Tether is making so much money. People demand Tether so that they can trade in and out of crypto, use it as margin on various places, do all that. If Tether got killed, now, I don't believe they will. But if they did and they got killed immediately overnight, that would cause a massive flush in the crypto market. Probably the clearing low that would do it. And that's the

black swan that people are worried about. On the white swan side, there is enormous latent demand from people who cannot buy Bitcoin. And when the SEC finally is pushed to realize that they've been punishing investors in order by picking, you know, by basically saying, you know, they don't want it to go up and they approve a Bitcoin spot ETF. And I honestly think they will do so because they've improved the futures ETF and they're essentially hurting investors by doing it, basically forcing people into inferior products, which is quite literally the opposite of their mission. You know, whatever it takes to make the SEC decide to do this, and I think they will for a variety of reasons, most notably that if they approve this one, they actually gain some oversight over the spot market, which is the only way they could get it. I believe that that white spawn event, which is not nearly

as click a switch and it goes to 200,000. I'm not saying that. I think it's much more gradual. But that change in the supply-demand dynamic is massive. And Mike said it very well. Bitcoin is a baby. It is a very new asset. It is very small. And people need to understand the supply demand dynamic there is huge. And it's really an interesting question of that. But I think the market is caught between those two swan narratives. That's a good that's a good, really good point. And, you know, like you both said, the Bitcoin baby being it's so volatile. Yeah, it hasn't been as much in the last number of weeks. But come on, that's a that's a small percentage of a lifetime. This thing has been incredibly volatile. So and like you said, Dave, it overshoots. It overshoots on the upside, overshoots on the downside. And so if you want clues and to get an idea of what Bitcoin is doing

in response to the macro landscape, I mean, take a look at gold and see what gold is doing. If you want, if you are trying to figure out whether Bitcoin has become a store of value or not, look, gold has been around for thousands of years. And this is the longest running store of value asset that we have in the world, basically. So if you want to get some clues on what Bitcoin is doing, just take a peek at that. And we're going to see a little bit of divergence here, I think, in the short term while these things play out, just like Dave is talking about. And and the greater macro picture plays out. We've got, you know, we've got Powell. He's going to go to Jackson Hole this week and, you know, talk up or down the market according to what the general outlook is from the Fed.

And that's going to be an important kind of marker for the macro landscape. Are we high enough? Are we going to stay this high? Are we going higher? It's on the rate side. And that's going to be this high or are we going higher? You know, it's on the rate side. And that's going to be kind of an indication. And if he's going to raise rates higher, just hold on. You know, I mean, this is there's there's there are many signposts to come.

So let me give you a preview of Jackson Hole. We're going to be data dependent. Inflation is still too high. We see no reason not to tighten further, but we can't tell be data dependent. Inflation is still too high. We see no reason not to tighten further, but we can't tell you how much. And there's going to be no indication that they're going to pivot. I mean, right?

I don't think there's going to be any indication that they'll pivot. But he could say that we are, it looks like we are above the neutral rate just because cracks start to surface in the debt markets. He doesn't want to disrupt it. He may say that we're kind of there. We're going to hold it at this R-star level above the neutral rate, and we'll just, let's see where we're at. So that's a possibility,

but I don't think that there's any indication that he's going to be cutting rates anytime. I just remember that, you know, we discussed this at length here in the last pause. What was that, June? And everybody was screaming, pause is a pivot. It's over. And they took all of a month off before going right back to exactly what they've continued to say they're going to do, which Mike will tell you they're going to continue to do. Right.

Of course, Dave, I see you. Yeah, I was curious if anyone else read the editorial in the journal from Obama's chairman of the Council of Economic Advisors, basically calling for a move from 2 percent to 3 percent inflation target as the base rate. Yeah, that's an old one. That's not going to happen. It's not going to happen. It's global.

They've discussed it many times. It's good to call for going to happen it's not going to happen it's global they've discussed it many times it's good to call for it but it's silly to even say it it's like balancing the balancing the u.s budget i just wonder someone like that writing an editorial in the journal is it a trial balloon i mean these are the things that are interesting because we all we all know i mean you know james talks about this better than literally anybody. I'm teaming up, dude. So just get ready. Better than anyone. There is literally zero chance. And that's not even counting unfunded Social Security and Medicare and Medicaid liabilities. There is zero chance of the U.S. being able to pay back the debt that we currently have. Zero. So the only way out is inflation. So anyone who's paying attention knows that that's

true. Of course, that's going to play out over years and nobody wants to cause, you know, lose elections because of inflation. So a 50% increase in the inflation target is probably not even enough, but they're going to have to start doing something like that. So the question is, are they floating a trial balloon? And what is this? Now, why do I care about this? Well, because this is a huge deal. You know, if they actually did do that, yeah, that would be reason for not a pause, not a pivot, not a this. It basically is saying, OK, we're willing to accept 3% is, remember something, inflation as measured by the Fed is in consumer prices, not inflation inclusive of asset prices.

Personal consumer expenditures, employment cost index are running around 4%. Fed funds target is 5.5%. It's very restrictive. A year from now, I fully expect we're going to be talking about severe deflation. If we're not, blame me. It's happening in PPI. It's happening. We've seen peaking in everything.

The one key thing, the bottom line trigger is the stock market has to stay at these levels. It's the measure of everything. If you look back at history, if it starts rolling over, which I think it will, it's going to be severe deflation from taking money away from everybody. That's usually how it works. Now, it's happening in China. Number two economy. It's happened in Japan.

It's been happening since 1989. Now, we just had this bounce or tilting that way. The bottom line is, you look at Fed rate height expectations, I look at it in the terminal every time I come in, it still shows so that November meeting, the 30%, they're going to raise another 25 basis points. To me, I look at this in the US two-year note, around 5% means you're guaranteed 10% in about the next two years when I fully expect virtually all risk assets are going to just continue to maybe be down 20%. To me, that's what I think the smart money is doing on a global basis. And then you also talk about the dollar. The dollar is the most expensive to short major commodity on the planet.

It's just hard to short it. That's also another thing I got from our meeting this morning about, yes, we're going to see higher for longer in rates in Jackson Hole. But it's the issue in China is much worse for Europe than it is here. And I just I see nothing but the things I lessons I've learned about treasuries. Every time that people tell me since 1980s that, oh, you got it. Yields are going to go up because we're having more debt. Well, they do the opposite. Yields go down. That's been the case in Japan. And now it's still don't fight the Fed. I think the macro is just bad for everything at these levels. Hopefully,

we'll get out of this, particularly what's by its nature, recessions are deflationary. Now, maybe we'll get lucky this time, but the way the Fed's going right now, but I want to tilt over the one thing that I think is quite obvious from just an outsider observation that reminds me of what happened with Madoff, and that is Binance. When Binance came into the space, their volume jumped so far, so fast. My first thought, without any indication, was there's a lot of electronic trading going on. They're probably inspired by things I learned about in trading pits. When an exchange launches a new product that wants to trade, they'll support locals to trade it. Now, I look at this, they might have done something on a very big scale to support the bots to just trade so we can get the volume and show how great we are. That's just logical.

But the point is, when you see volume jump that much, that fast versus all the competitors, yeah, was it done organically? I'm sure there's a little bit of stimulus there. So that might come out. It's just like Madoff came out. And that stuff only comes out when the tide goes out. I want to mention really quick, Mike, the second order effect of what you're talking about of smart money moving to bonds that a lot of people here might not think about that's important as retail is not only do you lock in that 10%, but if you're right, you also then have cash to buy these massive dips. That's the whole idea. So I say two years from now, if people say to me, man, McGlone, you're an idiot. The stock market went up 20% and you only

made 10%. You only missed a gain. Yeah. You only missed a gain. But if two years from now, you're one of the few that are solvent and can pick up these risk assets at very cheap levels, that's where fortunes are made and lost in history. Just go back to me. I keep, as you pointed earlier, I'm comparing this move in Bitcoin similar to the stock market in 1930. It's all there. I point out why. And it's just rapid advancing technology, changing the world, massive speculation on the back of liquidity that goes away. Now, the technology is still there. I mean, we got electricity, we got automobiles, we got telephones and stuff that really kicked in in the 20s and 30s. But what do we have this year? We have global money, we have Bitcoin and we have 30,000 wannabes. OK, maybe 100 are important. That to me is where the risk is. We just have to continue to flush market out of these, what people call altcoins. And yeah, I think Bitcoin's going to be the best offer. That's why I'm only focused on a Bitcoin, even less Ethereum, because it has

to go up. And just like the stock market has to go up. And I think that's when the case is, the risk is it goes down. Davey, I know you had a comment right when I jumped in there. Yeah. I mean, the fact is, is the stock market is like the stock market in the 30s, more so than Bitcoin. You know, the valuations are crazy extended. You know, we don't we don't call them bull and bear syndicates anymore. Now we have, you know, index funds and we have hedge funds in very crowded trades on the same, you know, chasing the same thing. I mean, look, I was I helped build the first futures trading arbitrage trading in Japan in the late 80s and had a front row seat for what happened in the 90s. And all through the late 80s, japan was making new new highs and

even when it was starting to come down it was like well you know we can justify a pe three times the rest of the world because we have corporate we have what was called kuretsu which is the cross ownership and so we didn't have as much supply on the stock market and they literally thought that and what ended up happening obviously was a lost more than decade. It crashed and still hasn't recovered back to its all time highs, by the way, you know, 30 years later. So, look, and Mike talks about turning Japanese. It is entirely possible that the stock market, which is priced for perfection and continued perfection, will, if there is a macro event, as he says, will roll over. I'll say this. There is also a very real chance, if Mike is a macro event, as he says, will roll over. I'll say this. There is also a very real chance, if Mike is right about China, and China has to retrench and they get a flush out

there, what does that mean to the stock market? And what does that mean to other assets? It means a lot to many, many, many companies who are dependent upon supply chains coming out of China, all sorts of things. There are lots of reasons to believe that the impact there will be in the larger market, not in the smaller markets. I just don't buy that Bitcoin is carrying a coal mine. I'm not saying it won't move with those because obviously it could. But the truth is, is there's a lot of reason for the G20, including China, to kick the can down the road, do everything they can to do that. You know, a large part of it is the debt spiral, but it's not just that. I think we also probably, you know, as macro kind of, you know, analysts, we overestimate just the amount of coordination that there is

between the Fed, the White House, and the Treasury. I think they each have their own, like, separate jobs, and not even the White House, more the Congress, right? And they're, they, Congress is, they're getting reelected. That's their job. Like they don't even really care about the spending. As long as it gets them votes, they'll spend it. Right. Then then you've got the Treasury, which is to execute that budget. And they're like, well, we've got to issue more bonds. That's why they put out that report that was kind of slapping down Congress, saying that this is an unsustainable fiscal path. You guys got to get your act together, right? Then you've got the Fed who's saying, we've got to keep

inflation in check. We'll try to have full employment, but if that's a casualty, well, so be it, but we've got to keep inflation in check. That's our job. And they're all kind of operating in these little silos. They know that the Fed knows what the Treasury's position is. The Treasury knows what the Fed has to do. But, you know, the higher for longer, the structural inflation. Yeah, I think that the Fed may allow for higher inflation, but not explicitly stated. You know, they'll just kind of accept it. You know that they're seeing multiple, you know, multiple reads on inflation. It's not just the CPI. They're seeing all kinds of different reads on it that they're not sharing with us.

And they know exactly where prices are across the board. You can't tell me that. Like we talked about just last week, food is not up 2.5% or 3%. I mean, come on. You go to the grocery store, that's not reality. So they may allow for that because they know the treasurer's position, but it's not explicit. It's not as coordinated as we might expect is the way I feel.

I've got to respond to that one because I'm glad you brought that out, James. That's one thing I've noticed about you, Scott, right away. For people like me, Dave and James, I mean, I started reading the Wall Street Journal before I was, when I was a teenager. I'd just been in the market since I was a kid and in the macro. The way you've come into this space,

we've had a different background and the stuff you come up with, I'm like, wow, this guy knows his macro pretty well. But that's a key thing I've learned about watching crypto people. A lot of people will repeat stuff they hear like, wow, this guy knows his macro pretty well. But that's a key thing I've learned about watching crypto people. A lot of people will repeat stuff they hear like, oh, the Fed's going to crush the dollar. The Fed meeting, if you read through the minutes,

this is a lesson I learned decades ago, does not care about the dollar. They've never really mentioned in their minutes. And they do, it's very rare. They have their mandate and they mentioned it. Right now, that's the dichotomy that's happening. Except in the case of declared war, that's the way our system works, checks and balances. When you get a declared war or something, everybody gets behind that and would save the nation. Now,

that's just the history. Now, we had a little bit of that recently, but that's the key thing I need to point out. We have a Fed here that is really, I've been wrong. I didn't think rates would go this high. I thought bonds were by a year ago and I'm still wrong on that. I think it'll come out to be ultimate, right? Because I never thought they would raise this much in this environment with the deflation I see happening. Now it's all starting happening, not so much in this country, but in the rest of the world. It's just going to get, the fact that they're hiking and offsetting this fiscal stimulus from the biodynamics is a train wreck. It's just the worst I can ever have depicted.

And that's why I have to point it out. If I don't, I'm remiss. But that's a key thing. I'm glad you pointed out that, James. And the rest of the world, you have to live overseas to really see how the U.S. works sometimes. And one thing I learned is there's nothing like the Ivy League. The rest of the world just envies that. I mean, come on.

You send your kid to China for school? Good luck. Do you want to immigrate to China? Good luck. Do you want to immigrate to Russia? I mean, Europe was a pretty cool place to go to school, but I didn't really go there to study. I went there for fun. So that's a key thing to remember is the bottom line to me from a macroeconomic standpoint, the number one thing in this space is the Federal Reserve is still tightening and they're giving you the best rates in almost 20 years. And if you're long risk assets, good luck. I mean, it's hard to argue with that, although I will push back on the Ivy League. I think the Ivy League used to be very different than what it is today. I mean, you know, honestly, if I were, you know, it didn't matter. I mean, my kids weren't getting into Harvard.

They got into, we won't go into it. But the truth is, if you hiring Bill de Blasio as a lecturer, I have many, many questions about what's going on in the universities. And I think our higher education system is broken, but that's an entire Twitter spaces or other huge argument. I don't want to get into that now. But what is interesting about is people learn lessons about what the U.S. economy is. And the supply chain

side of this is a big deal, right? You know, Bidenomics, at the same time as they're doing everything Mike said, they also are screaming, you know, his biggest supporters in the economics are screaming about raising minimum wages. You know, labor, you know, isn't getting paid enough. Corporate profits are too high. You know, I'm not saying they're going to win or be able to have the power. They don't have the control of the house to be able to do it. But if they did, a train wreck doesn't even I mean, I don't know. I don't think trains have the ability. I think we're talking about a much bigger wreck you know so out of some sort of you know disaster movie you're talking about you we cannot afford to have supply side uh and demand side inflation to both go

ballistic at the same time listen i asked this last week and i don't even need a number per se so i said at the end of the stream hey Hey, what's your like, Oh shit bid. Right. Mike, obviously you were sort of the double bottom. And then you said that was your optimistic case on spaces, which I giggled at. And then Dave, you sort of said this 24 to 25 area, James, I think you said 19 five. Okay. So we got to that 25 level a lot faster than I expected. Didn't think we'd be talking about it this week.

Yeah. Go ahead. go ahead, go ahead. I'm going to let you go. And then the next natural question then, and Mike, I think I'll know what your answer is. And I think I probably agree, was 31-ish the top for the year? I mean, is that the high until we see a halving and something after that?

I have a lot of guests who think we're going to 40 or 50 still, right? So, and I don't really have a strong opinion, to be honest. To give you a little bit of context, I was buying over the past number of days when this all happened. Yeah. And just, you know, I have levels. And for our fund, I can't talk too much about it, but we have a treasury. You know, we have cash. We're sitting on a lot of cash.

And so you can pick levels on the way down. The stink bids in 19.5 and then all the way down to 9,000, yeah, they're out there just in case. And that would be, oh, that would be a gift. That would be an absolute gift because of what Mike and Dave and you were saying before, which is this long-term, this is a long, long-term investment. And to get these short-term massive price moves, you have to be ready to take advantage of it. And that's not a trade.

That's just taking advantage and opportunistically picking spots because who can pick the bottom of Bitcoin? Seriously. If you can, you're done. What's that, Mike? Don't try. Don't try. I mean, like, that's just idiotic. So like Dave said earlier, don't be too definitive. I agree. Don't get cute is what we say in the business. Don't get cute. Right. So I mean, the fact of the matter is I told you the two swans, black and white swan. If neither happen, yeah, 31,000 is the high. If both happen, depending on how it plays out, then the high could be dramatically higher or dramatically lower, depending.

I mean, you know, it really matters. I mean, if Mike Alpert is talking about BNB, he says BNB is the canary in the coin. And he may very well be right. So let's say that it is true that Binance has been liquidating Bitcoin in order to support BNB. Are they liquidating their Bitcoin or their customers' Bitcoin? If they're liquidating their customers' Bitcoin, then it's a total train wreck and Binance is a disaster. Binance is a disaster. We're going to get a flush out that's going to make FTX look like a garden party. Right? And- So if Binance is a disaster, can we just, I would just say to me, that's just another

tree in the forest or someone, the tide's going out and someone you can see who's not wearing clothes. Well, if they're fraudulent, at least, I mean, that's, by the by the way dave you said that as a if but there's no indication that's happening i just want to be right no i don't want people to go watch that clip and be like no no i probably saw in their own reserve if that was even the case i am not saying that he's right um saying that that if he were right then you know then you would have it would be a disaster. To my knowledge, there's no indication that they have sold customer assets ever. There's no proof one way or another. And, you know, the fact of the matter is the only thing there's been proof about is that there has been wash trading of finance. So we know that when they went to zero fees, we know that's true. And the data is incredibly dispositive on that topic.

But wash trading is just pumped volume. That doesn't mean anything from a valuation point of view. It's just buyers matching sellers in order to make people think. And in Bitcoin, nobody cares. It's really the liquidity that's out in the book that matters and that's not fraudulent. So no, I'm not saying there is fraud.

What I'm saying is asking to formulate a thesis when there are unknowns of that magnitude out there. And by the way, the magnitude on the upside is larger. I mean, there is just no supply if, you know, for, you know, if Bitcoin were to become available as a diversifying asset to 30 trillion dollars worth of funds many of which have overnight just overnight that that is a that is a huge white swan and and so it look i listened to mark last week and i kind of feel the same way now this could very well be the you know i used last week the home stake mining you know analogy but it could very well be that now will it happen immediately of course not if we get if let's say there's a massive economic black swan and the stock market decides to go on a 25 30 correction flush out the wealth effect you know will that mean the fed is done

immediately no but it will ultimately lean to that. It took gold three months to de-link during the GFC from the downtrend. And will it be faster next time? Yeah, probably because traders try to jump on top of it, but it's still not going to be immediate. And Mike is right about that 100%. So you got essentially three stories that are all tracking and you want to make a definitive prediction, good luck. That's why I don't use leverage. That's why I'm not doing it. I'm just saying, you know, short term squiggles.

Yeah, for sure. People can trade and our company helps people trade cheaper. Great. That's wonderful. But without knowing, if you give me the answer, tell me, is Binance, you know, going to resolve itself in a fine and keep moving? And, you know, the dots will clear. Is Tether safe from the DOJ? Is the economy safe to not go into the beginning of the next Great Depression? And is the Bitcoin ETF going to be approved? And how is it going to work out? Give me the answer

to all those three, and then I'll make a prediction. But until I know the answer to those three, I'm not, I mean, you just have to, it's, it's a bunch of conditional issues. Go ahead, Mike, please. I just to piggyback, I look at Bitcoin right now as the world's number one leading indicator and it's broken back down. Now stock markets are going down, broken down too. Everything went up together. Everything went down together or, you know, it's kind of rotating. It, stock markets are broken down, too. Everything went up together. Everything went down together.

You know, it's kind of rotating. It's just everything's so coordinated right now. I just want to see it change that leading indicator status. Just give me a period where I can show that, oh, OK, well, Bitcoin's showing divergent strength versus a weak stock market. So here's my trader instinct. I come in this morning, look at markets last night, this morning, I see the equity markets up. I think that's great. By the end of the day,

stock market's probably going to be down because I look again, yields are up, rates are up. And I look at that as like, okay, that's a negative, just bad. That's just called money leaving the system.

Yet even what James said, he's high weighted in cash. And I look at this as smart. That's just too much, too compelling of a gravity pull towards safe to free money at 5% to take away from everything that's not going to give you that free money. That means everything, and Bitcoin's one of the riskiest. So that, to me, is part of the overwhelming force. So here's a good thing to look at for right now. 15 to 30, pretty good lock-in lock in range for Bitcoin starts creeping above 30,

staying above 30, showing divergent strength versus a weak stock market. Who knows what's going to happen? Oh, there's a good sign. Okay. Where's it go next? Maybe a hundred grand. Starts continuing to do what it's doing now, just going down and everything else is following it. That to me is the trajectory at the moment. Give me a good reason to change that. I look at it as to, you know, it's at 5% right now, 498. Mike, that's a good reason for more weakness in the world's best performing asset over the last 10 years of ZIP, zero interest rate policy. When I listen to you, Mike, I think that I agree with the other Mike, you know, Alfred, that the trade, if you have a long-term view, is short the U.S. stock market

and long Bitcoin. And yes, there's go and just be, but short the U.S. stock market and long Bitcoin. And yes, there's going to be, but not a leverage basis. Volatility weighted? What did you say? I was going to say, can't you just do one first and then do the other one and skip the hedging part of it? I agree with you. That's been the right, but it's volatility weighted, how you weighted. But it has been the right trade. I agree with that.

Don't get cute. That's right. I mean, to me, that trade makes a lot of sense. And yeah, you know, it's not like the reason you do it as a hedge is in terms of, first of all, if you don't time it, if you don't do it as a straight hedge, then you're taking a bet one way or the other. And the problem with shorting the U.S. stock market isn't so much that you get your face ripped off when it rallies crazily, because the crazy rallies I think we've already seen. It's people who generally do it through options. So when they do it through options, yeah, the options expire and then the market drops, you know, which is the time value of volatility and et cetera.

So I'm not talking about a trade, but I'm just saying, you know, I listen to you and I tend to agree that the fundamentals will ultimately matter. And I know, you know, if you ever had Cliff Atzness on, you know, listen to him talk about the valuation side of the story. And look, eventually, in the very long term, the market is a weighing mechanism, a discounting mechanism. In the short term, the markets could do whatever the hell the markets want to do. And we understand that and yeah uh you know what i always look people always ask me well when do you think the stock market's rolling over it's like when the stock markets are rolling over when the bond market the stock market are both moving simultaneously except here we've had the and in

every other period of time when you were watching the stock market and saying oh it's going to go down this time the bond market was rallying oh, it's going to go down this time. The bond market was rallying. And so it was like, OK, that's not going to work. We're basically getting fuel for a very serious, very serious stock market correction because the bond market is has been correcting already. Right. You know, it's memory yields and prices move inverse right exactly yeah and you have to i mean people have to understand that professional investors look at the stock market like a like just a set of discounted cash flows in the future and what is you know what what are what are the other assets they can allocate to that are on a relative basis you know that kind of return well you know, that kind of return. Well, you know,

now that you're getting exactly what you just said, Dave, yields are moving higher, period, across the board. Well, that just means that that is going to create a draw out of the stock market, out of risk assets into something that's less risky with better yield. It's just, I mean, it's just common sense, right? And so you can get tangled up in a lot of different theories and a lot of different, you know, analyses, but that's just reality. Just simplify it. Keep it simple. And that's just what it is. Yeah, I totally agree. I mean, my personal thought is that the going back to my question before we end, maybe an ETF approval would send us back above those highs. But I think that the move from 25 to 31 was basically this market because people don't understand it pricing in the approval, not just the fact that BlackRock was applying. So I think now if you're at 22, 24 and we get the approval, maybe we get right back to 31. And then I think the long tail effects of the actual ETF maybe bring it above. So you're talking about money running into going to Bitcoin. I think it's going to come there.

Absolutely. ETFs will help. But I look at something that just happened to me recently, with my father who's almost nine years old. I talked to his wealth manager. He's got him, a 90-year-old, over one one third directly exposed to the equity market. And I said, no, but you put the whole thing into your notes. His quote was, why? I want to punch him in the face. Good thing I wasn't there. What do you mean why? But then it made me realize what's happened in the space. There's so many people who on that side of the business can make no money at zero interest rates. They come up all with different ways to do it now with different strategies everything but there's a certain time in your life like i remember it and yes 2000 i was early and yes 2007 i was early but there's i've never

seen this where there's alternatives standing in your face and your average person doesn't realize it yet they will when it when it when they hit stops a 90 year old should definitely be in bonds my mom is 80 years old 80 years old and i just moved her i you know recently into 100 short-term treasuries basically thank you guaranteed five percent what are you thinking of course of course no brain for people like us it's a quote when he said why i'm like i'll never forget then i hope i'll put in my book someday because i don't want you to lose all of my 90 year old-old father's money, you jackass. I mean, even if the treasury yields weren't there, you might want to move into cash in that situation if you think that you don't have that much money left. There was no alternative,

now there is. Yeah. I mean, look, at the end of the day, the biggest thing people need to remember is, you know, the size of relative markets. And I don't think any sane financial manager managing a portfolio for someone under the age of 50 is talking about allocations to, you know, Bitcoin of more than, you know, some very small, you know, low single digits. One to three percent. Yeah. Right. Yeah. I agree with that. Of course, is easily enough to propel Bitcoin higher. But the fact of the matter is that when you start looking, my guess is, Mike, that the real reason that he would say why is because, well, I don't make any money. Yeah, exactly. Well, we know that we know the answer is in short term treasuries. And that's actually a very important problem. The real flush is going to be in the

asset management industry in the United States. Yeah, 100%. Well, guys, we ran out of time. I want to say I noticed today and we've been sort of steadily growing over time, even through this bear market, but it's been a long time coming since we tapped a thousand people live watching today, which, listen, I know that's only a thousand people live watching today, which listen, I know, you know, that's only a thousand people, but I think in this market and having been probably a year since we've seen that, it's a testament to what we've built here, guys.

And the four of us, I think being consistent and showing up and having these conversations, I can tell from the comments and what we're seeing here is very valuable. And we're getting a ton of people watching these back, obviously. And we're getting a ton of people watching these back, obviously. And we're also seeing, just so you guys know, tremendous, tremendous listening to these on Spotify and Apple Music

and all of the audio channels where we put these afterwards. So really awesome to see this continuing to build and the support from the audience. And thank you guys for that. Mike, Dave, James, everybody follow these guys. Thank you guys so much. Obviously we're off to Twitter spaces where I'm being forced to talk about friend tech today. Dave, I sent you a code so you can sign up and try to test it. My God, I'm pretty sure I, I literally, as we're here, I'm getting messages that the block just put up an article that they had a data leak of 101,000 people's information.

And apparently I've already given friendech permission to post to my Twitter account. All in the sake of YOLOing in for the DYOR for a show, guys. Here we are. If you doubt my commitment, here we are, guys. All right. I'll see you guys. See you next week.

Bye. Bye.