BTC Flash Crash: Final Shakeout Before Liftoff? | CryptoTownHall
00:00Good morning, everybody. Welcome to yet another edition of Crypto Town Hall every weekday here on X1015 a.m. Eastern Standard Time. And I would also like to welcome you to the depths of hell, the bare market that we are in, the extreme fear that Bitcoiners are experiencing at the horrid Bitcoin price of $103,000. Who could ever imagine price could go this low? If you have not looked, the Fear and Greed Index for the S&P, which last I checked,was 2.01% off of the all-time high set very long ago, you know, like last week,fear and greed was at a 22 extreme greed, extreme fear, one point lower than the fear thatBitcoiners are experiencing in all of my short days on this planet. I have never seen so manyspastic, emotional, rying people in a bull market near all-time highs.Anybody triggered? Go for it. Hi, Dave.Yeah, well, yeah. Good morning, Scott.Good morning, Dave.
01:06Look, yesterday I said my piece. I feel pretty confident in the commentary, which is when you see these sorts of things happen, they accelerate.And what do you want to see if you're a bull? You want to see a, you know, you basically want to see a washout.You want to see the, you know, the people to throw in the towel, et cetera. And I think that's what we saw yesterday.I think it looked like a capitulation bottom.And it was based on, you know, kind of dumb shit, right?You know, the notion that October 10th caused massive problemsthat's going to repeat Celsius and Voyager and ultimately FTXis literally what people were selling based off of.
01:49And that's dumb.I mean, there's literally no reason to believe thatother than a bunches of rumors going around and people looking at it.And if you want to understand what the dynamic of retail selling looks like, we saw it yesterday.So just to give a little bit of background, when you have a retail-led sale off, it starts in the morning, it reverses in the afternoon and it accelerates in the mid-afternoon.And then it accelerates after, you know, after three when people who have bought stuff on margin, get their margin calls and they go, oh, crap, and they dump it.And that's literally exactly, you know, what the pattern that we saw.And the lows happened right as the market was closing yesterday in, you know, from the
02:32ETF perspective.I haven't seen what the ETF selling was yesterday, but I'm sure it was substantial.I think it was over 500 million on Bitcoin ETFs, but as it tagged above total spotBitcoin ETF trading volumes surpassed $1 billion in the first 30 minutes of trading today.So. Yeah.So, I mean, you know, people are like, look, it, I hate to say it, for those whodon't know. I ran a very large market maker that took the other side of retail trades.Retail is not stupid all the time, but on market extremes, retail is unbelievably dumb.
03:08And so the single most, if you want to look at the top, you know, whatever, end number of days ofprofitability from market makers, they're always on days when there's capitulation lows oreuphoric highs. Why? Because they get to widen the spread because retail will sell at anyprice. And when spreads widened, that's great for market makers. And literally that's what we sawyesterday. So it is exactly that. As I've said to you many times, Scott, I think that, you know,the argument that we're living in a simulation is backed by things that it happened to be right at the 50day, you know, moving average, you know, the one that the price level that you always like point at.And what do we do? We, we slice through it briefly, but closed above it. And here we are. So, you know,
03:53Look, the most important thing to understand is there's a value transfer going on.The fiat markets are doing what they're doing.Bitcoin has had literally only positive news on the fundamental side all year, and that keeps accelerating.And yet, yet it leads the market up, it leads the market down.We haven't experienced anything compared to what a normal, quote, cycle would be.And what will occur in my humble estimation is that having won the three elections they wanted to win, the Democrats will say, because they think there were a lot of Democratic strategists that said that the shutdown will help them in New York, New Jersey, Virginia, actually four elections, California, Prop 50 will help them in those jurisdictions.And now that that's done, they don't have any political reason to keep it going because the rest of the country actually blames them.So I suspect you're going to see a resolution over the next week,
04:55which means the Fiat printer gets turned back on and all of a sudden people are going to be ignoring what happened over, you know, this week as we go into the end of the year.Now, that sounds awfully bullish.I'm sorry for that, but I get much more bullish when everyone is bearish.If everyone was doing like this, I'd be the opposite.So anyway, that's my thoughts for this morning.I don't know what other people keep.See, Andre, I see you throwing the 100% up, so you probably agree.What do you think?
05:21yes good morning totally agree you mentioned washout i also think we've seen a washout yesterdaybased on for instance short-term holder realized losses right they've spiked to the highest levelsince april 25 so since essentially the the tariff shock i think they realized that aroundhalf a billion in losses yesterday right you mentioned the etf laws i mean they tend to cycle withwith sentiment as well, right?We had like half a billion in net outflowsfrom US ball Bitcoin ETFs, also in line with like catastrophic sentiment.We've mentioned sentiment being bearished
06:03essentially since 10th of October, right?But I think what's quite striking is you,at least in our crypto as a sentiment index,you can see there's a bearish divergence.And what it means is bullish divergence, sorry.And what it means is you're actually approaching the point of max seller extortion, right?So where there essentially no sellers left, right?There will always be sellers left at some point, especially if like long-term holders
06:32start selling into losses, right?And we've seen some of this.But usually, I mean, we've just seen short-term holders relying losses so far.We've seen extreme fear and so on.But yeah, this bullish divergence is quite.remarkable. But I think like in the ground scheme of things, I mean, we had a drawdown of minus 21%from peak to trough. I mean, it's in line with like the standard bull market correction.I think in terms of duration, it's been around 25 days so far. So approximately a month,
07:10I think previous bull market corrections have seen around 60 days in average duration. So yeah,I think so in terms of like the duration we could continue to consolidate.But I think in terms of the depth, the drawdown, it's totally in line with like previousall market corrections.This is the fifth time since the 17K low in 2022 that we've had a 20 to 23% drawdown.Fifth time.And there were two that were bigger, 34% and like 37%, something like that.And we've done it to above 100K and people are losing their mind.
07:47Exactly.And I mean, what's also interesting to talk about is why has to have been a sell-up in the first place, right?But I think, like, my thesis is probably similar to Arthur Hayes' thesis, right?He said you have this increase in the TGA, right?You have a decline in the liquidity.You saw this in the sulfur Fed funds rate spread, which widened to year-to-date highs because of liquidity issues.And so the NASDAQ went down.It was like a general risk off also in U.S. equities.
08:24I think that propagated into crypto assets.It wasn't like it wasn't originating in crypto markets.I think, I mean, you have this Deepak, right, an XDS,but I think apart from this, I think it was like a more general risk off.But I'm happy to hear your thoughts.Yeah, I think it's important to understand.that October 10th can't be understated, but as is typical with markets, the impact of October 10th,I think has been exaggerated. And we'll see, we'll see what happens next. So what I mean by that
09:00is, you know, we talked about it yesterday. The, you know, the people who made money and it was a lotof money were the ones who were short biased who think, or the cycle, the people who believe inthe four-year cycle saying that Bitcoin should go out of 50,000 or whatever. And, you know,Who knows? I mean, anything can happen, I suppose. But the truth is that there's a lot of that. And so they, you know, they had the ability to sell. And the people who were the generally the long ones got wiped out and got crushed. And all coins have sustained serious damage. So, you know, the real question was, is, is are there any major for selling events that were triggered by that like Luna did? And the answer seems to be no. And if the answer is. And even if there was and we're above 100.Okay, well, okay, if that doesn't make you bullish, I'm sorry.I can tell you that from the mining side, there's a lot more pain in the market.And so there's, I mean, transparently.Exactly.
10:01Yeah, so you're getting a lot of bigger who were, you know, previously hot-all-at-all-all-cost, fundamentalists are now starting to,looks to be flocking to liquidity, just because hash price is really low.difficulties really high there aren't any new mind-blowingly efficient machines coming to the markethowever so that's that trend will continue however the good news is due to the having over timeminor cell pressure by design goes down so i think that might be midterm the strategy mine are justcontinuing to sell off for liquidity purposes but after the next having there won't be any cell pressureraining because they can't mind as much.Can I ask you a question, Marshall?
10:48It feels like what's going on in the mining market is a lot of sovereigns who really aremuch less price sensitive, whether they can make money or not, are competing with minersthat are purely capitalistic.And as a result, hash rate just continues to stay, as you said, persistently high with highdifficulty.Is that completely naive?Am I, am I crazy for thinking that?but that's what it feels like.
11:15I mean, but I'm not on the ground.Yeah, there's been a, there's been an influx of nation state actors.I'll give you a good example.The Jordanian government just put out a RFP.There's a lot of Middle Eastern countries that have surplus power with nowhere to send that power.So that's a good example.Iran's been doing that for a while.I would estimate that percentage of the market to be around 15%,
11:44maybe a little bit less and it's growing but it's not growing as quickly as the the publicminers are growing their hash rate so i think today it is maybe 15 percent over the next fiveyears it could be 30 percent the bigger reason is people are retrofitting their older machinesfor the newer machines and there's also a growing mid-market so uh people who areless sensitive to price, they might not have massive scale, but they have massive geographicfootprint. And the mid-market for mining, that's not public companies, it seems to be growing.I personally fall in that category. Ryan falls into that category where we're attracted to,for instance, I have eight mines in Nigeria, and it's all effectively more or less free power,
12:37and that'll continue to grow. So there's a few moving pieces there. I think today,Today, sovereign actors, about 15% over the next five years.So that will go.Thanks.I just think it's interesting.But if we get back to the market, Scott, I mean, the other obvious thing that that's going on is if you look, and yeah, it's true, future's premiums, you know, just on the CME are distinctly lower and, you know, have stayed there.there's like no you know there's just not there's not a lot of there's no technical indicators i seewhich show you're saying it can tango like where there's still futures are trading in a premium
13:20well of course they're at a premium but it's a lower premium that it has been with interestrates being where about per i haven't looked at perp funding rates is there anything there they'rethey still suck and you know they they still are in my mind bullish because but they've beenthe whole time i mean basically nobody is is paying a lot to be longRight. It hasn't been that way. That doesn't mean that I'm hyper liquid in other places people aren't still, you know, pushing themselves to high levels of leverage. They just don't have to pay a lot for it. So, you know, whatever. But, you know, it's also interesting. If you look, despite what we just went through, if you look at Bitbo on the 30 and 60 day volatility predictions, it's risen almost, not quite, almost to the middle of the recent range and still well below historical averages, which is, which is interesting.as well. It's telling you that, you know, as volatile as we think it's been, it reallyhasn't been. And that's kind of, and that's, this is the first time that people in theETF world are starting to see it creep up to where, you know, a 20% move, you know,
14:24to Bitcoiners, it's like, well, okay, big deal. But, but to that, but to ETF, you know,holders, yeah, those sorts of moves are, are sizable. And then, and we'll see, we'll see howthey react. My suspicion is they'll take it in stride because most of them don't really care.I think yesterday was the crescendo cell.Anyway, I see Ryan as his hand up.Yeah, Dave, I completely agree.And I've been saying this for a while when we started seeing the ETFs come out.I'm like, well, welcome to the party.
14:51A lot of the bitcoins have been here for a long time.And we know the back-to-back-to-back 20% losses each day.You know, I'm just waiting until the day that happens over a weekend.And then, you know, people wake up Monday morning and they realize that 40% of their wealth has gone from their position.So, yeah, it's going to be very interesting.But we're used to it by now.Yeah, Ajit.So, you know, anybody looking at Bitcoin being substantially higher, let's say, 150 or more,
15:28in the next several months, I would not disagree with.However, I also do not think this was the last shakedown.What I have found, shakeout.what I've found is that when such shakeouts occur, everybody who has made only a little lossbecause they entered at a price just a little higher than this, as well as somebody who isactually sitting on profit and did not act in panic is still on the edge. So if we see a rapidmove down of price, even from the present 103 to let's say 101 or 100, that is likely to triggerone more retail panic.
16:04So when a retail panic occurs,we are sitting on vibrating groundand there can be another volcano.So unless we are at least a week away from this,I expect that within the next day or two,we could see a sharp fall again below 100.I mean, it's definitely possible.We were there like 12 hours ago,
16:25so I don't disagree that that's possible.I think we can get a much lower dropand then a big bounce.Right, but it is encouraging, I think, when you test the liquidity below a level like that to see at least a reaction and not a deep push through, right?So bottoming is not necessarily a price.I think we're bottoming, which is sort of a process that day.That's my opinion, I see.Well, you know I agree with that.
16:50I've been saying it for years.Bottoms are processes, and frankly so are tops often.But, you know, the difference is when you get a crescendo after a process,has been in place and it happens to be at the bottom of a range and it starts to hold there.And if if I'm right and they resolve the government shut down in the next day or two,which I suspect is going to happen, I know that's also contrarian.Very.Well, Polymark that disagrees, right?
17:20Well, the problem, the problem is polymarket is really good when people are voting on what they understand.I mean, what the issue is the Democrats had a very specific agenda.here. And you have to know that. I mean, there were multiple states where, if you look at thepolls, where the people blame the president, they blame Trump for the shutdown, right? Those states,New York, New Jersey, California, Virginia, you know, Massachusetts, blah, blah, blah, blah, blah.Where were their major elections? Well, it was in those states. Okay, those are done now. Now,the rest of the country is the other way. And they don't want to lose ground everywhere else. So they're notgoing to let it go to past Thanksgiving. And when that ends, we'll see what happens with Sofer
18:07in the liquidity situation. But one way or another, I think the printer goes back on. And I think itgoes on in a big way. But we'll see. Anyway, there are four different hands up. So I sawAmateo first, but I don't know, who did you see first? I only see Amateaio. So Godspeed, my friends.Oh, well, also, it goes out for Ryan and David and Ajit Silas his hand up. But he just talked.So that may be a shadow. Amatoo, I think you're up.All right, all right. Hey, guys. Yeah, I mean, what kind of interesting conditions we findourselves in. Harking back to my previous statement I've said on spaces, which is the governmentcan stay shut down longer than you can stay solvent. I think we're seeing maybe the very
18:50final tailwind of that, where instability has started to sort of cascade and finally sort ofcatch up into markets. I just think there's a lot of fear, a lot of instability. But I also thinkthat there's some interesting things that are happening within the market. Specifically,you know, the majority of ALS have just been absolutely crushed and decimated. But, and I knowthat this has been talked about, but like there's definitely been some outperformers. Zcash has beeninsane. The privacy narrative is starting to affect other altcoins. And,And we're also seeing a trend where some of these more dino alt coins where the majority of the supply is already in circulation and the use cases have been established are starting to catch some bids.So I don't know if this will sustain, but many of these were able to perform better than Bitcoin in terms of the drawdown in the last couple days, which was.
20:00pretty surprising or they're just rebounding faster. So I'm not exactly sure what this is signaling,but there's definitely a signal here. And if we were to look at like the sort of larger rotationpossibility, I think we're getting some signals that once we get through these risk offconditions and liquidity comes back, we start to see where all of this stuff is headed.I don't think it's over, frankly.There's a liquidity pause.Yeah.Yeah.
20:37Exactly.It's a liquidity pause.It's also renewed interest in some stuff that's literally been laying dormant for three years.I mean, that's not insignificant to all the projects and all the tokens in the space.But I also think what it's signaling is a sort of return to who's been building during this period of time.Where are there tokens that are in supply and you're not going to get just dumped down by like huge VC lockups?You know, it looks like it's a smarter utility driven investment game in this current environment.And I expect that to continue.
21:15And that's exactly the market conditions that I think anyone who's not just a pure maxi has been hoping to see as the mean coin madness iced over and hell have to be done.Yeah, honestly, I actually think it's really promising setting up for risk on conditions that people are starting to position properly for in the way we would all hope.And there's some crazy announcements of late, like when you talk about utility.So I'm scrolling down my feed.One of them was ChainLink's announcement with Denari.I don't want to misquote it.Denari partners with ChainLink to tokenize S&P, DGI Digital Markets 50 Index.I don't know if you guys saw this.
21:55but uh ripple raise 500 million at a 40 billion valuation in round led by fortress investments groupand citadel securities i mean 40 billion there's a lovethose are huge announcements i mean we could we could keep going through that i mean the realquestion is and it's funny with ripple swell going you're going to do the ripple xrp thing but yeahgo ahead right well i mean ripple building a prime broker that isthat has all the components, you know, with the Hidden Road and their custodial and now,you know, payments and et cetera, all makes an enormous amount of sense and requires a lot of,sorry, I'm going to have to jump and grab this, but requires a lot of capital.
22:40Anyway, I think I saw Ryan next.Brian.I can't see a hands up. So, Ryan, yeah, go ahead, Ryan.My hand up was a while ago, but I'll jump in on this.I really hope we're past our D-Gen gambler phase and everyone's looking at functionality in these projects.I still don't know a lot of serious use cases for Bitcoin other than buy and hold.I know there's a lot of layered twos that are trying to get in there like stacks, but, you know,hopefully we moved into the realm of functionality investing rather than just full-on speculation in D-Gen.
23:22And I'm not convinced.Maybe it's just a reprieve.Anyone else can jump in because I do not see any handsand I see half of you as listeners.So if we're not calling on you,probably not our fault.Cool.Well, Dave, are you still here?
23:41You had to run.I mean, we can move on to other topics.If not, I mean, I think it is.Go ahead, David.We can talk to the other Dave, me.Double Dave.Go ahead, buddy.I didn't know. I saw you as a listener, but you did just appear as a speaker when you came up.
23:56Hey, but we're back now.Yeah, we've all done our routines around crypto of certainly picking ourselves, shaking up the dust, checking for our wallet, our spectacles, our testicles, and our glasses.But, you know, I can just say personally, I got out of Bitcoin around 110.I'm interested in buying back below 100.Didn't move fast enough yesterday.I think probably the most positive thing we could see for crypto right now would, yeah,it'd be get the government back in session and actually make forward progress on the Clarity Act.But, you know, if I'm looking at Polly Market right now, which is putting a 61% chance that, you know,
24:36government doesn't reopen until after November 12th, you know, unless we get some leeway or, you know,headway on keeping the Affordable Care Act in place, you're probably not going to see the Democrats want to come back.So, yeah, the election may have been won.They may have been won in democratic-leaning states, but I think an issue still stands out there that's fairly significant to, you know, the lower end of the socioeconomic income distribution, namely healthcare.And I think that that's a big issue, and we really haven't gotten over that hump yet.So I'd love to see the Clarity Act passed.I don't think we're going to get anything done before we get health care results.congressmen and congresswoman senators they all get their paychecks right yeah i mean look
25:24there's all these paper tiger issues and it always makes me sad when people fall for them i meanthe the the the amount of so they've conflated many of these issues and bundled them togetherbut you know at it at the end of the day shutting down the entire government over aover particular pieces or trying to spend.I mean, there's very little doubt that it's not going to go.I mean, Trump may think he's going to win totally,but I think that the elections are going to have scared them a little bit.They're going to be willing to compromise a little,
25:56but they're not going to give in on the illegal alien stuff, you know, funding health care.That's not going to happen.But what will probably happen is there will be ACA subsidies of some sort.But they just want to get the damn thing open again.This whole thing is getting people pretty pissed off.And the political calculus has changed.and you just need to understand that.I mean, look, it's not going to go on forever.
26:18The other big thing to watch, though, that we haven't talked about, Scott, is gold.You know, people looking at the gold price.Remember, you know, when gold went to, you know, started flying way pastto what did they hit 4,400?It was 44.What is it today?38th?I hadn't even looked.
26:34No, no.It's basically, where are we right now?We're 3985.It's just, it's flirting with 4,000.again. And what did we say? We said there's this hotball of money that propelled gold from themid-3,000s to the mid-4,000s, and that the most, the best setup for Bitcoin would be forgold to establish to get itself back to a range and get boring again. And the longer it stays rightaround 4,000, the more likely it is that hotball of money will look at at yesterday and today
27:04as a buying opportunity. And momentum tends to feed. So we'll see. I do think that that people,People who think gold is going to drop down into the low 3,000s are going to be disappointedbecause they're not taking into account either geopolitics or money printing.And people who think that's going to fly up again immediately, you know, don't really understandhow ranges work.Just like, you know, we've lived with ranges in Bitcoin.And I think that gold is going to be in a range for a little while.And that's also very constructive for Bitcoin.
27:36So it's just worth looking at that.But, you know, we'll see.Honestly, we'll be talking about it for a few weeks.I'd say by December we'll have a pretty good idea.I can't see any hands on there.There were before. I mean, oh, there's Jeff.Jeff. Go.Hey, guys. Yeah, thanks having me on.
27:55Yeah, I'm just looking at the sort of the relative strength index on Bitcoin,and we don't seem to be at anywhere near the euphoric levels that we sawsort of back in the bull markets of 2017, 2021, where we reached sort of 85 on the relativestrength. We're currently sitting at around sort of 55, 60 at the moment. So yeah, I don't thinkwe're anywhere near at the sort of euphoric levels. And I don't know if anybody sort of monitorsthe stock to flow sort of model. That seems to be an interesting model. That's currentlyforecasting like 500K at the moment. So that's like super bullish. But I think I'm sort ofmoving towards sort of a different model, sort of more statistical models at the moment.
28:40One of the particular that's interested me recently is the Bitcoin quantile model.I don't know if anybody's seen that by Plan C is the guy who created that, yeah.And that's sort of forecasting anything up to 316K at the moment for next month, lookingat the 99.9% percentile, which was the peak of sort of last bull cycles between 99 and 99.9% percentile.There could be anything from 260K to 320K right now for next month.By the end of the year.What's that, sorry?I said by the end of the year, I'm asking.
29:22No, that's by next month.That's by the next month.By the end of the.As a betting man, I'll just take the other side of that,no matter what anybody's model says.If it's time-based, I would, with everything.Yeah.But even a worst-case scenario, I mean, down to the point.
29:38And then I'll be right.They can go there on December 2nd and I'll make all the money on my Bitcoin and stillbe right on my bed.Sounds good to me.To me, there's just nothing more ridiculous than a very specific time-framed,like massive price prediction.Like, if you're right, I guess you look like a hero.But every Bitcoin model I've ever seen, and I find them all impressive,
29:59I actually really like Plan C, but like they're all great until they're not.And I remember, you know, I've had Plan B on a number of times.I count them as a friend, but like, stuff.Dr. Flo, he was the hero of the entire cycle until it broke down.And then you realize that, you know, it's easy to be a genius in a bull market.So, yeah, that's why I quite like the Bitcoin Quantile model.It seems to be a bit more statistical.It doesn't just go for one sort of number.
30:25It gives you a range of quantile.So at the moment, we're looking at anything from 50K to 320K.I mean, I know it's a large range.That's a hell of a model.Yeah.Can I be that good at my job and get paid?Oh, my God, guys, I have a prediction for Ethereum.I'm between zero and 10,000 this month.
30:45I think these are the same models they use for COVID numbers.Yeah.I mean, the problem with all these models are, you know,if you base your model based upon fractals or patterns of thingsand you don't take into account what's actually happening in terms of adoption,you have it's just it's going to be wrong and it always works that way okay we we got we got a bunchof people willing to talk about this so uh you know i think ryan was next you yeah i'll justthrow in on the model thing because every single time i've heard someone say 300 500 you know a million
31:25to me that's always a cell signal uh when everyone especially this time a year for whatever novemberDecember when anyone tells me that it's going to double or triple or whatever by the end of theyear or whatever months, I'm like, we've topped. We're done and I'm out. I've gotten caught on thehype for several years in a row a while back and it was painful. So now anytime I hear someonesaying numbers like that, I'm like, okay, I think we're pretty close to being done.That's when you switch your minor to start running AI.Exactly. Exactly. But what I started doing is a forward casting price based on what miners need to be solvent. And I've been doing this for years. So I knew what the mining target for Hutt 8 and Rhodium and all these different guys were years ago going into the happening. So I knew that the price had to be at least 66,000 going into the happening. Otherwise, they wouldn't be, you know, they wouldn't be in business.And I'm like, okay, so that's my price target.
32:34I started forward calculating based on network difficulty increases years in advance,September by September, so September 2025, September 26, September 2027.And so far, my model has actually been pretty good, tracing pretty well.So my top in September 2025, 126, and that was like a highly optimistic top.my top for, uh, 2026 September, um, optimistic top is 190. And that's like extremely optimistic.More, more realistic optimism is around 150. So anytime someone's saying 300, 500, whatever,I hope they're right because, hey, like that's great for me either way. But I just, it's not,it's not in the probability. But you know, people will be like, why are you so bearish? And if you're
33:25saying at 100, and we're at 150 in 10 or 11 months and go up 50%. That's really good,like, annual growth. Yeah, it's amazing. It's amazing. And people always forget, you know,even the most ardent bitcoiners who like me believe that the ultimate target, but the first realtarget is somewhere in the 10x range from here, you know, to be digital gold in, you know,in 2025. It's not getting made.there in a straight line that just just not the nature of of these things i mean the most optimisticmodel i've seen by far is the adoption s curve one that bastion sinclair talks about and which isreally more based on tech that's the most optimistic one and in that in his yeah there will be
34:15some tipping point where it accelerates very rapidly you know even in a in a sense similar to howNvidia had its real serious growth. But I mean, most people don't expect that because it's justnot the way the world works. You know, there's still a lot of people who held Bitcoin from$100 or $10 or whatever that are going to cash out along the way. There's price elasticity.We know that, you know, you know, to, you know, to a lot of people, even the ones who are completelyare full believers. Anyway, I think I saw Amateo next and then Jeff.Yeah. Great analysis, Ryan. That was really fascinating. So thank you for that chair. Minor Koss makes it super obvious from an analysis perspective. We've been doing to be a little bit self-referential for a second. Some AI modeling on basically chart-based data. So we've been pulling in data on 100,000 plus assets and,basically piping this all into AI models that can reference prices, charts, volumes, RSI,
35:25MacD, etc., where it's basically using an AI model to do the analysis of Trading View and otherproprietary trading data. And the one thing that we've realized is just the way that the modelhas to constantly be taking in fresh data because markets are so chaotic to actually get a clearanalysis. And this isn't long-term view. This is trading-based perspectives, intraday swings,positional. But it's just been really fascinating. And I almost never shill on this spaces. Butcheck us out at Gofer if you're interested in using. It's like chat GPT, but for trading.And it's a really fascinating tool and apologize for being promotional. But it gives yousome really amazing insights and can prevent liquidation measures.
36:16Is it named after to go for a Caddyshack?It is now, Scott.I'll give you all the credit.If we kill all the golfers.Okay.Anyways, anyone who hasn't seen Caddyshack, Bill Murray, sorry, go for golfer.Yeah, so, I mean, models are great.I just think that you end up looking stupid if you create one and publicly share it,
36:44especially if it has a massively hyperbolic target in the very short term.That's all.I hope it's right.Like Ryan said, I mean, what would be better than like $300,000 Bitcoin by Thanksgiving?That would be amazing.Not going to happen.Not going to happen.Dave, do we have any other topics on the docket today?
37:03I've got to check the news.Well, I mean, I think that, yeah, I mean, we've talked about the obvious news or the elections yesterday,and we talked about that and, you know, what's going on in the market.so we're talking about that but i still see three different hands up i meanoh i didn't see them so i've tried to move on and i yeah i don't know if i'm right i mean ino you got to be right better better odds of the actual hands being there than not being therewho has their hands up i had ryan and jeff either you guys is it shadow handsis this this x glitching again or you guys uh that was a that was a glitched are they
37:39scissor hands for me yeah yeah i'm gonna tell you as wellYeah. They got to love this platform. I mean, Scott, I thought you were going to get the threedevelopers at X to actually start fixing it. They're not returning my calls for some reason,because it's been so hypercritical. And they're not employed anymore. Yeah. I will say that I findit fascinating, the more uses of chat gbt and these AI to generate trading models. You know,I went down this rabbit hole and every single model I came up with and back, you know, it soundsreally good and every single time I came up with a trading algorithm that I came across wheresomeone was claiming great returns or we use this model of that model and I'd lose like 90%
38:26of my my holdings within 10 months like AI doesn't seem to have cracked the code on a lot ofthese trading but if someone does have it they're probably not publishing it so well it'sgoing to speed up yeah speaking from lots of experience having run you know quantifor a decade. I'll tell you a couple things. First of all, most of the models that youbase upon indicators that we all talk about are all in context, out of context. So I'll give aquick story. So we had a model. It worked extremely well. And one of the things that, and it was basedon covariance of stocks, not pairs trading, but clusters of stocks to other stocks. And it, itIt was, you know, generally market neutral, et cetera, and it did extremely well.
39:18What we learned relatively early was that there was a sweet spot.When the signal gets strong, it's good.When it gets very strong, it's bad.And what do I mean by that?I mean, when a market signal gets extremely strong, generally there's a reason for it to be,and it means that it's invalidated.And that is exceedingly difficult for AIs to deal with,because they're very, what's the word, episodic?
39:48So you don't get to the statistical significanceto understand that.And so unless you know how to promptand build models that understand, you know,when the strength of signal is there,how do you size positions, et cetera,unless it's truly multivariate, it's really difficult.Most of the simple models that people do
40:07based on indicators fail.Now here's the real funny part.The real funny part is when you,you get a lot of AI models and a lot of people doing the same thing, you end up with a situationthat we call the crowded trade philosophy. And the crowded trade, the biggest example of thatin quant history, believe it or not, was August of 2007. And most people here have absolutelyno idea what the hell I'm talking about. They called it the quant quake. And what you ended up withwas enormous numbers of people with the same sort of fundamental value model. And one that Goldman
40:40and Sacks happened to have been looking after went kaboom, and it dragged everybody else down with it.You saw, you know, multi-standard deviation moves to the point that it seemed impossible.Literally my head quon on that model, which I had shrunken because I didn't believe it,because it felt wrong for a lot of reasons, told me that the move we experienced in our portfoliowas a six standard deviation move.Now, to put that in perspective, that's about the same probability of a meteor hitting ourbuilding and me living through it. It's the kind of thing that can't happen. But the reason isbecause statistics don't understand crowded trades. So when you have a lot of AI models all looking at
41:23the same data and a lot of people using them, you're going to get very crowded trades. And that'swhy your 90% thing happens. It's because the models are all doing the same thing every other modeldoes. And when it goes wrong, boom, you know, it underperform. So sorry for the deviation, but you mentionedAnd it's one of my favorite topics to talk about with people because they don't generally understand it.No, you're so right.That's exactly what I saw when I kept modeling out these algorithms.In fact, even the AI, like, chat dialogue I had going, kept going back to you would have better off just buying and holding Bitcoin.You would have been better off just buying and holding.
41:59And the only algorithm I found, like simplistic algorithm I found, actually turn a better profit than just buying and holding.holding was selling at a 7% upswing and then buying back at a 1% down and I back traded that likesix years and that was the only thing that outperformed just buying and holding so and it wasn't evenby that much right and so that's why are you know you know not to not to shill a company thatI don't get anything for shilling but not not to shill but that's why systems like archpublic which give you the ability to build very simple models that make sense and that tend to dovery well in as long as volatility patterns stay the same, but more importantly, doesn'tover trade. That's why those do tend to work, but those are not get rich quick models, right?
42:49You know, those are steady accumulation sorts of models, and that's different.You know, it's so if you're, if you're going to be DCAing, you can use quantitative techniquesto DCA better, right? But that's not the same thing as what you're talking about.That makes sense? And that's, that's what I landed on where, yeah, I have a, a,model running now on one of my servers that is going to probably trade about 10 times a yearof that. It's just about the angle to sit in terms. So, yeah, it's going to be interesting.Exactly what we said, where more and more use AI to generate trading algorithms,probably not are the trades going to be. It's going to be very interesting.
43:31Yep.the algos will just trade against the algos with no humans and they'll all just take the same tradeand then everybody get liquidated to zero i'm just kidding it's joe you know it's funny about thatscott a lot of people have been saying that for 25 years uh and and but it completely ignoresthe fact that humans like the human people like to gamble you know all over the place in in somany different vectors and so i think if anything is more of it i mean polymarket and and calciumare a perfect example of that, right?So, you know, we'll see.
44:04Anyway, I think Mark is going to gamify everything.Mark had his hand up, but the prediction markets are the beginning of the trend of gambling,not even the end now that you get over the same.You're right.Yeah, go ahead, Mark.Yeah, you're totally going to have to get a new space for the gamification and the falloutthat's going to come, you know, from the dopamine overdrive that's hitting more and morepeople through Robin Hood and all that.
44:28When you guys were talking about the crowded trades, you know, later in my career, when I went to Credit Suisse from the hedge fund side, that's all I did was aggregate data and prevent it.And, Dave, you know, you're talking about the six standard deviation moves.You know, the reason why these spaces are good, because when we have these times when odd things are happening, it's basically it's not in the data.The crowded trade is new.It's very front-loaded.it's not in the historical data and that's why the data says well it can happen because based on the look back you would have to you know need more time but crowded trades compress it they jam everybody in and you know it's it's like being on trampoline alone feels good but if you don't realize two or three people come in you can get triple bounced the fuck out into the neighbor's yard and that's and that's what happens during the crowd of trades a bunch of guys creep on your trampoline you don't know itAnd they basically add gearing and risk that isn't otherwise incorporated into the algo.So that still remains a huge component.
45:39And the biggest alpha drop, I think, on the call with Scott earlier, just reminding us,we've had five since 2022 of these moves.And this isn't even the biggest.And I believe in the previous cycle.This sounds a seven that are over 20%.Thank you.Now, going back, aren't there seven or eight, 30% or 25% drawdowns?Yeah, okay.
46:03These have been shallow.Like we, you know, like, we will forget, like we talk about 2021 as the most bullish year for crypto.We went to 65, back to 28, back to 69.Yeah.I think we went from 65 to 28 in 15 days, maybe less.Right.And it's also very important to remember that during that with that backdrop, with all that crazy volatility, the exuberance,both, you know, measured by what people were paying to go long in funding rates as well as
46:32relative to hash rates or many other things was dramatically higher than we were a few weeksago at 126. I mean, honestly, triple, you know, by most objective mathematical ways of measuringit. So, yeah, things can happen. The sole question really is, you know, the supply at levels thatno one really knows. We always talk about price discovery. Price discovery is quite literallywhat price will bring out sellers. Well, we know that this 100 to 120 range brought out a lotof selling. The question is, is how close is it? Is there another three, four, five millionBitcoin available at these levels? I mean, seriously, and there might be. And that means we'regoing to stay here for a very long time. It was 400,000 sold in the last month by whale wallets was one
47:23thing. And I think yesterday another $45 billion worth of whale wallets selling.Right. So understand that we don't know what the actual supply really is. Everyone talksabout Bitcoin is constrained. It's static supply. It's not price elastic. Well, that's a bunch ofbullshit. Yeah, the overall supply is. But there are a lot of people who own it from another level.And if you believe that Bitcoin is going to ultimately go to a million dollars, you know that onthe way for that to happen, at least another five or six million Bitcoin need to come out ofthose original hands and into the financial system. And we don't know the prices that's going totake and where that's going to be. But I'll tell you what, I'll take, if we could get a year
48:09of October's in a row and we took four million plus Bitcoin out of those hands and into newerhands, then I think that the S-curve and the speed of appreciation would be breathtaking.But that's just not the way markets work.It just doesn't happen like that, Scott.I mean, at least none that I've ever seen, not at this scale.Right.So that's really that point.Yeah, we had Mark was actually, I interrupted Mark on the correction.
48:39So you were still making a point there, buddy, if you were going to keep going to.No, I think that we've seen it.And we need that perspective, you know, like this, called the Zamboni look, just taking a little cut over time in order to see what's going forward.And then the unspoken one, which a few folks, I don't know if, I know that Andre is on the call.I don't know, Andre, if it was you or your firm, so I'm talking about the distribution.You know, this is just new hands coming in.This is a painful transition.and much is learned and gained in loss in transition.
49:18And this is a very constructive transition.The hoddle wave of 10 years is still rising.So a lot of these coins on average are still coming from across the spectrum.Yes, Wales, but from the tourists in that kind of two to three year period as well.Yep.Andre, I see your hand up.So obviously you...I just love that our painful distribution is above Andre.
49:41Okay.Go ahead, Andre.That's not by accident.Yes, I think you're referring to that Jordi Vista piece for an IPO moment.And I think Matt, Matt Hogan, he has also commented on this in his latest CIO memo.But I think it's completely right.I mean, what we've seen, just a couple of statistics around this.I mean, we've seen massive long-term holder distribution.
50:06We've seen around 400,000 Bitcoins being distributed in the cycle by long-term holders.We've seen that Dats and Bitcoin ETPs have absorbed around 33% of this distribution, right?You can calculate this by just looking at net flows and net buying by these companies and ETS and dividing it by the amount of profit taking by long-term holders.So it's been around 33%.It's not much, right?There's not even half, but it's been like a structural bit, right?It's been quite consistent, although it's been slowing down more recently.But I think what's quite remarkable is we've seen this long-term holder distribution,
50:53which is quite, it looks like cycle top type of distribution, right?But still, we haven't seen a full bear market blushing out yet, right?My materials, I don't think so personally could materialize, but it's been convinced.consolidating, right? Bitcoin's been consolidating since one year recently. But the key to underscoresis consolidations, they don't create ceilings. They tend to create flaws. And I thinkif you look at the vol compression, usually vol is like, I mean, it tends to meanrevert, right? If you have like low vault tends to foretel like this, like a highball regimecoming and vice versa, right? So I think we'll see a spike in volatility going for, but we've
51:45just seen one right to the downside. But I think we'll probably see another one to the upsidebecause if you're looking below the surface, you can already see that there's massive accumulationgoing on as well. Right. We've seen accumulation addresses accumulating, I think 300,40,000 bitcoins over the past 30 days, which is incredible, right?We're also tracking like accumulation across different wallet cohorts,so like small wallets, big wallets, whales, and so on.And this accumulation score has been grinding higher, right?So into this dip.
52:22And so I think we'll probably stabilize pretty soon because of sentiment,all of these factors that we discuss, right?And, yeah.I agree with all that.I think everybody's freaking me out for nothing.People like to freak out.It's the most predictable thing in finance that as things start going down,it accelerates and people overreact at the bottom.
52:46And as things start going up and it accelerates people overreact at the top,it's always like that.And it's, it's, it's, it will never cease to amaze me that that's the case.But betting against that is like betting against the sun rising in the east and setting in the west.I mean, you can do it, but it isn't going to work out to.well. Ryan. I will say I do enjoy the commentary on welcome to the bull market. Oh man,we're in a bear market. Welcome to the bull market. Oh, we're in a bear market again. It'severy other week we're in a bear market right now. It's over. We're so back. It's over.
53:21We're so back. Yeah. So I think next week will be the bull market again. We keep followingthe trend. Yesterday, yesterday I was literally watching panic people panic sell and I was quite literallypanic buying.Yep.Yeah.Same.At the biggest level that I have bought in a very, very long time.And, you know, there you go.
53:45Like the opportunity to buy Bitcoin at 100K again, regardless of what comes next,is seemed pretty spectacular for me.And I was hoping for it and got it.And I'm, you know, maybe it'll go lower.I'll buy more.Great.Go ahead, David.Yep.
53:59Hey, Scott, you bought my Bitcoin.I want to pay.Thank you.Thank you, sir.On a more serious note, in a spaces that I wasn't on in the last week, I did share a link to a paper that was talking about technological change and asset prices, written by a couple of guys out of University of Chicago.And long story short, uncertainty, which is not knowing necessarily the use case to an asset, say crypto, you know, helps to boost.actually the price of it. As things get to be better known, the prices tend to collapse. Now,maybe we should be thankful that, you know, beyond stable coins and, you know, other cases,
54:45yes, use cases are being proven out. But, you know, are we at that adoption curve yet wherewe can see that this process of pricing out uncertainty and pricing uncertainty is startingto be a factor to contend with. Yeah, I think I think that's right.I mean, it's funny.I drag my ass out of bed this morning and join the morning finance show with Davidto Will, who is often on this show too.And listening to a lot of the technical analysts from traditional finance talk about, you know, Bitcoin.It's like, you know, everyone in crypto thinks that Mike McClone is one of the only people
55:23who believes what he believes.No, I think it's the actual, the, I think it's a very prevalent view in the market that,these technicals matter. And I tried pointing out that you have to look at the denominator. Youcan't ignore, you know, 10% a year of increased dollars and, you know, just stuff, not just dollars,but also yen euros in circulation globally and look at prices in a vacuum. And, I mean,you can do that a little bit in stocks, although in the case of the stock market, corporateearnings have been growing at just as fast a pace. So, you know, arguably it's really just, you know,inflation in a different sense. But it is amazing how the technicians all think that, well,
56:08you know, you need to get Bitcoin down to this level. You need to get gold down to that level.And they're all slightly different, but they're all dramatically lower than where we are here.And that's because they're ignoring the impact of money printing. And as Bitcoiners,most of us are saying, well, but that is the point, right? That literally is the point.And at a certain point, it becomes very hard. And Andre, I'm curious, your hand is up.So I'm hoping that you have a thought here. But it feels to me like there are a lot,a rising tide of institutional investors that actually understand that point, right?My hand was not.
56:42Oh, it is on my screen.Maybe it's still switching.That's good.It's 1115, Dave.So it's a good segue to ending the hand list.Yeah, whatever.Yeah, but I mean, Andre, you guys are talking institutional investors all the time.And I assume that that is the main theme that you're talking about.
57:02the quote debasement trade we haven't mentioned in this trip in this yes debasement trade that that'slike the part of also the topic of our next webinar which is tomorrow i mean we talked about thislike at rouse yeah right right but but the point of it is that it changes graphs rightbecause you have to factor in adjustments to each of the lines that you're looking at that's reallythe point and i think that that's that's missed by a lot of people but it's not missed by the corepeople in investing in this asset class i think like the the most obvious selling point ofbitcoin and crypto assets is like sharp ratio risk increasing risk adjusted returns and portfoliosessentially free lunch for fun managers yeah you skip 5% in there and see what it does
57:53pretty straightforward pitch if you look at the sharp ratios historically right yes allAll right, Dave, anything else?No, I don't want to start any new topics today.I think we'll have some more to talk about, you know, things like Supreme Court cases on tariffsand all sorts of other crap that we can talk about later in the week.But for now, I think-Yeah, and tomorrow we can talk about Bitcoin at 75K.So we just got to look forward to that.
58:18Anything's possible, dude.Anything's possible.But not probable.But I'm still here for the models that are telling me I'm going to be three timeswealthier by Thanksgiving.So I'm just going to roll with that as the next title and hope for the best.It's all we got, guys.Thank you so much to everybody.
58:37We'll be back tomorrow for another Cryptotown Hall.Thank you all.Bye.Thank you.
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