The Wolf Of All Streets - Crypto Macroeconomics: Bitcoin Supply & Demand, ETF, Debt Spiral | Macro Monday With James Lavish

Episode Date: June 26, 2023

In this video, Dave Weisberger, Mike McGlone, and our special guest James Lavish discuss macroeconomics and its impact on Bitcoin and other cryptocurrencies.  ►►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  ►► JOIN THE FREE WOLF DEN NEWSLETTER, DELIVERED EVERY WEEK DAY! 👉https://thewolfden.substack.com/ Follow co-hosts and guests: Dave Weisberger: https://twitter.com/daveweisberger1 Mike McGlone: https://twitter.com/mikemcglone11 James Lavish: https://twitter.com/jameslavish 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.

As the United States attempts to shut the doors on the crypto industry, China is opening up with news today that HSBC will be offering Bitcoin and Ethereum ETFs to their customers. This after HSBC was taking a very anti-crypto stance just a few months ago. Is Hong Kong and China, everything happening there, just a reaction to this shutdown in the United States, this crackdown? I believe it is, but we'll be discussing that and a lot more with today's guests. Of course, Dave and Mike were always here, but we're really honored to have our buddy James Lavish here with us today. Can't wait to have this conversation. Let's go. exactly the kind of comment we need to wake up to a Monday to looking forward to watching my grumpy mates. It seems that guys, we have some fans here who know exactly what to expect on a Monday. Well, why I'm going to bring on my grumpy mates right now. I'm trying to save my James. I

don't know if you count as one of the grumpy mates yet, but I guess it remains to be seen. Today. I do definitely. Well, it's like 6am where you are. So I would imagine that at least you got to have a little bit of a grumpiness assuming that you are on the west coast still today i am i am on the west coast it is early but it's great to see you guys yeah yeah you too bad so speaking of grumpy um we were talking about just before the stream came on that operation shoot uh operation choke point 2.0 is real uh and that you have experienced it for context guys operation choke point 2.0 is the idea we've had basically for the last few months really starting with caitlin long and custodia banks rejection for a fed master account in

january that the regulators and legislators in the united states are cracking down on the crypto industry by basically cutting off the rails to the banking system. It's been sort of speculation. Is it real? Is it not? James, you have some anecdotal personal experience with this, right? Yeah. So I've heard debates about that. And some people say it's not real. And I can tell you without a doubt, it is absolutely or was real for a while there. So for context, I launched a hedge fund this past spring and with a number of partners that you know. And when you launch a hedge fund, just for your listeners' understanding, you have a prime broker that's your bank that custodies your assets that you act that hold your your investments that are that are public holdings whether bonds or stocks or whatever and but when you when you launch your hedge fund you have to have get get the assets into that

entity that the prime broker owns and typically you have this separate bank that collects the assets and then hands them off and the problem was we didn't have a problem getting a prime broker, but we got turned down by a number of banks, number one, the name of the company. And so they just refused. And so that was the first thing. But then we worked it around it. We got a good, respectable bank that's been doing this for a very long time that a lot of hedge funds use. But then as we were collecting assets for customers, their wires were getting canceled. They were not getting released. They were being held up. And then they were asking for all of this information.

I've never seen banks. Just the banks were sending the wires, Wells Fargo or JP Morgan, Chase, Citigroup. They were not releasing wires. They were refusing, especially international banks. They were not releasing the wires and they refused to do it because it was going to something called the Bitcoin Opportunity Fund. And so it was for their customer safety, even though it was their money, they're deciding where it goes. They're wiring the amounts.

They're giving all of the instructions. The banks just said, no, you can't have your money if it's going to go there. You can keep it here, but you can't have it if it's going to go there. And so it was interesting. I mean, we worked through all of it. We got all the wires released and we got everything tied up, but it was absolutely choke point. And it took months to get through, basically. Wires just got lost. They got canceled. They held up. It was nuts.

It's almost like Bitcoin fixes this. Right? And that's a good comment because we're a Bitcoin opportunity fund. We had a lot of customers who say, hey, can I just send you Bitcoin instead? And you custody my investment in Bitcoin. And that was the obvious answer and the obvious response. Unfortunately, because of the way we're structured, we couldn't really do that. But that was the obvious answer.

Yeah, it seems that way. I mean, Dave, have you experienced any of that with CoinRats? I've never even asked. I mean, we're a software company, but yes. So, you know, we don't touch client assets. We don't engage in any way in the flow of funds. So as a result, honestly, we shouldn't. But because CoinRoutes has coin in the name, we have.

Because, you know, look, we want to bank where our customers bank. So we have a major bank that we've had forever and they've been fine and they haven't had a problem because they actually know our business. And so they know we're a software company. They don't care. Well, I don't want to name banks, but whatever. It's one of the big ones. And we have Signature. And then Signature obviously got closed.

And so we started applying for new ones. And we would get denied, denied, denied, denied, denied. Okay. Den, denied, denied, denied, okay, denied, denied, denied, okay. So now we have five different banks. And we did that just because I never want to go through that again. Because God forbid you wake up one day and you have one bank and all of a sudden you can't get customers, customers can't pay their bills. I mean, that's literally what we use it for is is to pay our vendors and pay bills for operating business. But I will tell you the most interesting one was when we were toying with the idea of opening a retail platform,

which we'll probably do eventually someday. It'll be more an active trader platform like, you know, a thinker swims with it because really our platform is designed for people who trade a lot. We asked Stripe. And Stripe said no. And that, to me, being one of the original fintech unicorns, the fact that they said no spoke volumes to me.

It's actually disgusting. The reason they did it is because they're prepping for an IPO and they didn't want any headaches. But we basically said, listen, this is for software services. And they're like, yeah, but it's for software services related to crypto. So no, thank you. And it turns out that there are a lot of people out there who are being pushed. And so when you're going through a regulated process like IPO, regulators have their hooks into you in a great deal of ways. At the end of the day, it all speaks to overreach of the administrative

state. In my mind, an unconstitutional overreach, which is happening in all facets of society, which is why you and I are both so supportive of people like Congressman Davidson, who you've had, you know, you've interviewed and talked to, and we've had him on the town hall, the crypto town hall, you know, their efforts to, their efforts to bring balance and depoliticize agencies. But frankly, it's not just the SEC. It should literally be every agency in the United States government needs to be depoliticized because it's gotten to a pretty bad point. Yeah, I don't think anyone disagrees with that.

But now we get to talk about Bitcoin price action, right? Basically, this week,'re started the week about 26 too. I can't believe this all happened in a week. Uh, it topped about 31,500 trading now about 30,300, but basically erased the last 10 weeks of correction and made a new yearly high for this year and for the last 12 months. This looks like the real deal. Mike, does this, I mean, it's a week. I know you're a zoom out forest trees.

I know where we're going here, but does this change anything for you at all? I'm very fearful of the, if it goes up, it's going to go up technical mantra. And what the James and Dave spelled out is a very serious attack from some, I think, US authorities. But then we have this issue of, oh, well, maybe we'll get this ETF. That's why I'm kind of concerned. If the SEC, now we have this issue, well, maybe in the next three months they'll approve a Bitcoin ETF. Is that why we're all bullish? And I think that's what I have to sit there and think, okay, that's an if statement. No one has any clue when it might happen.

We all know at some point there's going to be ETFs in this country where you can track a broad index of cryptos, physical cryptos. That's just a matter of time. And then, of course, people who want to volunteer in history to go back down in history as Aaron Burr is of history. Fine, we've seen some of those people. That's fine because this technology is overwhelming. I can fully get that. But to me, the macro is just, if you saw what Chiron, we all saw what he said last week. We saw what he did, the Bank of England, the Bank of Canada. I mean, this is a classic historical case of the rug full in liquidity. Now, I have to admit this weekend, I went back and read about

a hundred years more of history of the crashes. And almost every single time, it just reiterates my views. First of all, you pump things too much and then you dump things too much. So we have to be hoping, let's say for to be bullish Bitcoin here, obviously we have to hope for that ETF soon. Okay, maybe we'll get that. We have to hope for the stock market bull market to continue. Maybe we'll get that, but I fully expect a recession. So that's just not my view. Look at commodities are collapsing. Look at the inverted yield curve. It's doing it

more today. You've seen the 10-year no deal ticking down this morning. And it's just the bottom line liquidity. The Fed is still pulling that, still raising rates, pulling that liquidity. So the macro is very poor. And I don't like to be bullish on hope. You like to be bullish on facts. So I think what's going to happen, my base case is we're going to tilt back into this normal bear market for a typical recession where stock market goes down. I'm sorry to say that's just the way this usually happened in history. People just forget what happened the last 10 years. They would have been able to buy every dip when the Fed was here. That's what Chairman Powell said last week. He

said, we're not going to be there. We're raising rates, yet we know there's a lot of signs of slowing down. And there's no sign of that, of cutting rates. It's not just the Fed. It's virtually every central bank with the exception of one key one, China. China's a country that backed Russia. Well, the unlimited friendship, we all know that's failing. So I see this as, I'll end with this. To me, these are all the iterations of part of what I see of just significant economic reset. By the end of this year, it's going to come clear. And if Bitcoin can get out of this and beat an equity market on the way up, that would be great. If it can beat an equity market on the way down, that would be even better. I think that's where we're going in the long term. But right now I see it as gold and long bonds are the most likely to do well. Now, just look at crude oils. It's back down again

this morning, even after this issue with Russia over the weekend. Yeah, it seemed like we had a little liquidity pump there when the banking system was wobbling, right? But James, I mean, you follow probably this more closely than anyone. Are we still now seeing that liquidity sucked back out? Are they still lending to banks and bailing them out? Or was that sort of, did it end up being the nothing burger we didn't expect it to be? Yeah. No, I mean, the treasury has done a good job of issuing hundreds of billions of dollars worth of short-term T-bills in the last few weeks, they had to refill the TGA. We all know this.

The debt ceiling was cleared and the treasury had spent all its money. And so they literally had no money in their checking account. They have to refill it back up to the tune of just the TGA. They have to refill it by half a trillion dollars. And so where do they get that money from? They've got to float treasuries. And they're floating them, and they're doing an exceptional job

of draining the reverse repo facility by taking hundreds of billions of dollars out of there. But remember, these T-bills are very short-term. They're a few days to a couple of months or a few months old maturity. And so they have to redo it again. So this is going to be this perpetual thing where we're just continually going in to tap the market, tap the market, tap the market. And they are, they're drawing liquidity out. The only other places this is coming from, the really large access of capital is the bank reserves and that's pulling liquidity out. So on one hand, you can argue today that just on this one facility, like just this one part

of the market, they're taking money that's sitting idle on the sidelines from the reverse repo market, right? It's just sitting there collecting interest for the banks. On the other hand, they are having to take some liquidity out of the reserves, which is definitely tightening. And then the Fed has been saying all along, look, we need to pull our balance sheet down from all of the QE that we've done from 2020, and that's to the tune of $95 billion a month. So they're saying that they're tightening. But then, just like Mike said, on the flip side, they're only going to be able to do this for so long because we're headed straight into a recession. They know it.

The Fed talks around this and talks around it and talks about how unemployment is historically low. We're still not seeing a rise in unemployment. And so the economy is fine. And they're going to continue to gaslight the American public until we hit the recession, unemployment spikes, and then just like Mike said, all markets sell off and they correlate to one. So yeah, go ahead, Dave. Well, I mean, in any crash, correlations go to one. We know that. I mean, to argue other than that would be to ignore the 30 some odd years loss that i've been dealing with this crap so i mean james and mike

and i all know this but i have two words and i think that we've now reached escape velocity where where it's going to be there and the two words are home state mining. When you look through the 30s, you know it, which is why Mike mentioned the boomer rock that he did as money. I think that in the 21st century, in this millennium, it's going to be Bitcoin and not boomer rocks. I think Bitcoin's going to demonetize gold on the next roundup. And I think that this past week has been one of the most bullish weeks for that, for a very important reason. I think the narrative war that's been going on has been lost by the anti-crypto

army. They just haven't figured it out yet. They made a major strategic mistake and now their opponents are pouncing through it. So what the hell is this idiot talking about narrative wars? And what does this matter? But remember something. Bitcoin's is either going to be a curiosity in the future that niche people play with and whatever, a bunch of geeks. Or it becomes the store of value for the digital world. That store of value for the digital world at a minimum, I want to say minimum, is the monetary value of gold

as opposed to its jewelry and industrial value. Now, I calculate that at north of 75%. It's actually way higher than that if you use platinum as a comparison because of what's going on. I mean, platinum, for most of James Mike's and my life, your life too, Scott, was valued more than gold, considered more rare, better for jewelry.

It was the platinum standard. You would go to a conference, you'd have the silver, the gold, and the platinum. Gold passed platinum's price years ago now, despite platinum being 30 times more rare than gold. Now, why did it pass platinum's price? Because gold is used as a monetary instrument. Platinum isn't. Full stop. So when you look at gold's market cap, it's mostly monetary value. It is not jewelry and industrial value. Silver is dramatically better for jewelry and industrial uses for sure. I mean, yeah,

gold-plated, you get the occasional gold-plated thing. Like you go to Dubai, amazing thing about Dubai frame. For anyone who wants to go see it, you see an entire building clad in gold. Okay, great, you see that. But it's still monetary value. And a side note on that, Dave, to prove your point, is that that was the whole issue with the trillion dollar coin,

is that there's that loophole that could mint a platinum coin for any value because it's not really money right so they could they could mint a platinum coin for trillion dollars but not a gold coin because the the the legislation does not allow for that because denominated in certain uh currency how nonsensical is that by the way completely insane but but but let me go with the narrative so what what is happening here? So the real question, when we look at Bitcoin, and James is going to laugh at this. Obviously, as a hedge fund trader, you can't have this kind of view. But I view everything that we've been talking about for two years, Scott, as squiggles. When you zoom out in 10 years and you see a chart of Bitcoin, and you try to look at the

difference between 25 and 30,000 when it's trading at 500,000, it's going to be irrelevant. You're literally not going to be able to turn it. There are squiggles on a chart that mean nothing because that's where the war is being fought. The question is, will Bitcoin reach what I call escape velocity? Will it get to the point where adoption triggers a self-reinforcing feedback loop. And I believe that will happen. I think we are way over 50% likely now towards that. And the market is pricing it at less than 5%. Hence, the Bitcoin Opportunity Fund makes a lot of sense for people as a percentage of their portfolio.

So why am I focusing on the narrative? Well, that's because Bitcoin threatens many people who care about the big banks. And we know that. And we've seen it. Now, in the private conversations of the people who run the biggest banks, they are pro-Bitcoin. They understand what I just said in terms of expected value, that metric of a 20 to 1 upside with probably at a 50% probability and maybe a 50% or a 60% downside with the other 50%. And you start looking at that asymmetric upside and people are like, this belongs in your

people portfolio. And they have enough customers who are absolutely demanding it that they have no choice but to offer it. Think about the last of what happened in America. So first salvo was, well, there have been a lot of salvos, but the first major skirmish was the two congressional committees, Agriculture and Finance,

who have been fighting over jurisdiction of the CFTC and SEC for as long as Bitcoin has been in the public eye decided, screw this, we're going to work together to come up with a framework. And the first tenant of that framework was no regulation by enforcement. And so 168 pages later, and we could argue whether there's good stuff and bad stuff, and it clearly needs work. There's no doubt about that, but it was a good faith attempt by two committees that had been heavily criticized for not working together to come together and work.

So what happens there? Well, I said it at the time, and I'm going to say it. I was right. And I'm sure she's mad that she hears it. And there have been multiple people who have now parroted this viewpoint, including Christian Carlo, that Warren picks up the phone and calls Gensler and says, what do you got going that can counter this? How close are you to filing? And basically said, well, we can get the Binance case out over the weekend. And they said, yeah, okay, do it,

push it out there. And well, what else you got? Well, we're working on the Coinbase case. Okay, well, let's push that out the next day that was i believe a strategic tactical error on the narrative side because the bydance case has the price and yet you could argue it whether it was rushed or not there is there is serious stuff there like you know you and i and everyone on this call knows that there are allegations that are serious and measured and understood but the coinbase case was the absolute insanity. I view that on the narrative war as the same thing as Napoleon going into Russia, because they took on Coinbase for the crime of not being able to comply with rules that are literally impossible to comply with. And in an environment where the

court has already consistently pushed back against the SEC for that very thing. Exactly. And so- Grayscale and Voyager and stuff. What has happened since? So last week, why was it so bullish? So we will talk about the BlackRock ETF being a big deal. And I got over this in both my last two weekly recaps. This past weekend, I explained why it's not bad for Bitcoin. We can discuss that but what's more important is the chairman of blackrock who was against bitcoin years ago is clearly been persuaded that he needs to move forward and what did they do they're saying coin

bases are custodian and our trading method that's the bet that's the craziest part the basic to the to the anti-crypto army from the world's largest asset manager. And then who else do we see talking? Paul Tudor Jones comes back out, comes out of this bunker and says, you know, I said it was the fastest for us. Maybe it's not so fast, but it's the right horse. And he's saying it. And you're seeing this across the spectrum. Everyone's fidelity saying we're going to want the ability for RIAs and wealth managers

to get in, trillions of dollars of potential demand. And all of these three are basically saying to the SEC, you've gone too far. Enough is enough is enough. And that's a very big deal in terms of adoption. And so the price is the price. It's going to be correlated with risk and whatnot. But now the other thing that's important here is people, Tyler and Cameron Winklevoss have been interesting. I mean, they're about six months late or at least many months late in what they said. They came out over the weekend and said, we think the next accumulation cycle is upon us. Wrong. The accumulation cycle, according to the on-chain data, started six months ago. And I've been talking about it on this show consistently for six months that we see lots of speculative up. And we don't see the buyers follow it.

So it comes back down to it. But the buyers have been there. And the accumulation of long-term holders on-chain has been steadily increasing for six months. And that is a big deal. Let's back over into the big picture. The last three years, Bitcoin has basically gone up with the stock market. First it went down and then went up, back down.

And now the stock market is going up a lot more than Bitcoin's going up. Okay, maybe Bitcoin's going to catch up. So we have to point out the fact is since 2017, the Bitcoin's first reached this current level versus the NASDAQ. It's still at that same level. So I completely agree with what you said, Dave, and what you're doing, James.

In the big picture, this is going to revolutionize. It's going to be a digital world. It's digital gold and digital. But show me the beef. I mean, I'm honestly at the shredding. Let me finish. Let me finish just because I mean, I gave you a lot of time there. We all did.

It's got to show that divergent strength when the market's going up. Right now, it's like on the year, it's up a dollar. I mean, see, it's volatility weighted up about as much as it should be versus NASDAQ. It basically takes two to three vol versus the NASDAQ. Okay, great. It's done what it's supposed to do. Yet the last few months has been underperforming for stupid reasons, right? Maybe we'll get that ETF. That's my point is you got to get the big picture trend. Is this going to be a little different than the last 12 years where every single time the stock market goes up, the Fed's going to save you? No, it's going to be different. We know that's going to be the case. The Fed's told us, we see it. So we have to get through that period. Is this early days of it? I think it is. And I just need to see that indication that when the stock market goes down, this is going to be more of a risk off asset. And that's the point. It hasn't happened and still on the year, maybe it's catching up, but just certainly the last Q2, because of these reasons, it's just trading poorly. And we need to see that. And I look at the macro as it's still

the fastest horse in the race. One thing we have to point out is a lot of the people who are the most bullish Bitcoin are the people who keep telling me the same thing I've heard for five years. I've been part of it. Institutions are coming, institutions are coming, institutions are coming. Great. I agree with that. It's coming. It's all coming, but we're still hearing the same thing. We just kind of get immune to it after a while. Yeah. I want to say really quick, Dave, that to your point, Mike, the price action this week was a result of a perfect storm, right? At the deadest bottom of sentiment already. And then we had the Binance and Coinbase news. And then somehow four days later, it's BlackRock ETF.

And so I'm not surprised that we traded back to the highs here. I now want to see what's going to happen as we wait months and months and months for anything to happen on any of these ETFs, right? I think we got the pump based on the fact that it could happen. So now it's almost priced in that it will. And we need to see more, in my opinion. James, I see you kind of nodding over there. Yeah, no, I agree.

And I think Mike is right. We have not decoupled fully from the risk on asset narrative for, like Dave is saying, the narrative for Bitcoin. It's reality. That's why, and that's exactly why I launched this fund, is I think there's going to be a ton of opportunity still. There's going to be another wipeout here, in my opinion. Do we hit the lows? Honestly, I would be shocked if it does not lead that way down again. Whether or not we have a V recovery, that's up to the Fed and how bad it is. It's whether we have a credit event or whether we just slide into a recession, right?

If we have a credit event, the Fed's going to step in quickly because it has to make sure that the treasury market remains liquid. But if it's just your plain vanilla hard recession, it's going to drag down. And that's reality. But the good news is that BlackRock and Fidelity and all these huge firms cannot deny it. And they are realizing that this is going to be a place that people want to store their money. And so we're waiting for that. And we've got to survive the storm. And so I'm careful. I'm just being careful here. day, trading on the margin is driven by the risk asset speculators in the Bitcoin space, period, full stop. And that is exactly why we've seen everything that Mike has described. And that is exactly why James is saying it. I, however, believe long-term as a contrarian is kind of important. I think most of the people in the Bitcoin space believe what James does. Now, most of the people in Bitcoin space believe what James does, which is we're going to see when the economy comes down, we won't de-link. Bitcoin

will lead the way down. We'll get better entry prices. We got to do that. That's cash on the sidelines. The sad reality, not sad reality, the actual reality is Bitcoin is really small compared to the kinds of money flows. Yeah, the bond market. I mean, even the gold market. I mean, it is. And there will be an adjustment period as it moves on. I'm talking about a narrative space. Narrative space takes a long time.

I mean, this is not trading advice, but any stretch of the imagination. I just want people to understand that if you literally are saving for five or ten years from now, it's basically the entry points around here. You don't want to get too cute if that's what you Yeah. And I'm constantly telling people never to buy Bitcoin on leverage. And one story we have to talk about is the absolute insanity of the SEC approving a leveraged Bitcoin ETF or approving a spot ETF. It is insanity, but it makes sense with their narrative because if futures are okay and spot is not, they can go approve a thousand stupid futures-based products. But again, go ahead. But there's no, yes, that's true. But that's like when your kids say,

but you let me have ice cream later, why can't I have ice cream for dinner? I mean, by your child's logic, and all these kids, and that's exactly how they think. Well, I mean, what the f- So for the listeners, though, is that the futures is a regulated market,

so it's easy for them to approve those. it's also for the for bitcoin itself though it's difficult and it's not a it's not a positive uh development because it's all cash settled and so everybody so the the problem here is that there's no underlying asset that has to that has to be bought to show the inherent value. But what Mike and Dave are saying, and we keep hearing these long-term investors say it's the fastest horse, it's the fastest horse, and they agree with that. But I kind of think it's just the strongest horse. And the problem is we don't know how long the race is. And so you want to be on the strongest horse because it's going to take a long time for this to play out. And just like Dave said, zoom out. You look at your squiggles and in an appreciating asset, volatility is okay.

It's good, actually. In a long-term appreciating asset, volatility is good. But you just got to be careful not to play with leverage and not to, yeah, so I agree, but not to play with approved leverage ETFs. I got to follow up on that. The strongest horse in the race. I completely agree. It's going to be, it probably is now, it's early days, minor adoption.

Let's prove it. Let's get it through a first decent recession. Now, you guys have done that where you've traded bear markets where the equity market goes down and stays down. And actually, the Fed saves you. They try to save you and eventually comes back, right? That's changed. That's what I think we're going to come through. Now, obviously, I'm focused on the macro here. We have to get through that period. I think the Fed says that too. They know they want to cut that umbilical cord. All that matters is every time the stock market goes down, we cut rates, everybody's happy.

It's got to get through that period. That's what I think we're going to be seeing in six months, the next 12 months. Bitcoin's going to do that. But one thing I want to point out too is for all these products, I just remember in the trading pits, we used to call them CGs, commission generators. What's Bitto? Bitto is a tremendous commission generator, but it also did one key thing that we fully expected. It harnessed that cash and carry trade that brought Bitcoin into the mainstream. And now it's, what's volatility doing in Bitcoin? I just know people, hedge funds have been going and buying Grayscale, signed some of the futures and saying, thank you. It's just what it's happened. So to me,

it's getting there. It's a tool. Yeah happening. So to me, it's getting there. It's a tool. Yeah, it's a tool. But that's why I want to see it as... Here's my outlook. I think we're far from a low in the stock market. Just like I said in the commodity market a year ago, we are far from a low in the commodity market. A key question I ask people is, what stops this bear market? Now, this is a bear market in commodities. It's a bull market in the stock market. That's very rare, unless we have a big deflation environment, Fed's easy and everything's fine. They're not doing that.

So to me, everything's going to tilt over that way. And then the question is, what stops it? So I think we're going to be at a point where in the near future, maybe it's 12 months, maybe it's six months. The whole consensus that the worst is over and the stock market's going to get a good reality check that you too have traded in your lifetimes. Yes, there's periods where stock markets make highs and they don't make that high again for another 15 years. NASDA my measure and my history of cycles. This cycle right now, the worst I've ever seen for a pump and liquidity in a dump. And also with the narrative and where I'm sure James is all over as a hedge fund guys. What's my value risk adjusted value to put on the positions here?

Now this NASDAQ has completely told me we're going to break out. We've already done it. It's different this time and the stock market is going to keep going higher despite the Fed tightening. It's already done it, a lot of it. So what's my value versus maybe the pendulum just swings back towards the bear market. For me, that's what's going to start. Yes, I've been early. I've been late. I've been wrong. But there's a lot of indications. It just has to drive people crazy and then eventually go that way. Real quick, Dave, I just want to show, because he mentioned it, that it is actually pretty meaningful what's happening in the market as a result of even the rumor of BlackRock getting an approval. I mean, BITO, he talked about here,

saw massive inflows, over a billion now, assets under management again, which really hasn't happened since the futures ETFs were launched in the first place. Total assets under management in crypto investment products reached the yearly highs for passing 37 billion and erasing the losses since 3.0's capital shook the market in July 2022. And you can see this is the biggest, it is just the biggest inflow we've had this week. So the market is believing that something's going to get approved here, that something different is going to happen. Well, I don't know what will happen or not. I think, you know, Mike, I just want to go back to your thesis because I kind of toss it off blithely. But I rate the odds of like 50-50 of a, call it whatever you want, a 10 or 20% sharp downward move some point in the fall.

This feels a lot like periods where we've had that August to October swoon, shall we say. My question to you, and really to you, James, is what do you think happens if we get blood in the water and people start panicking and you see a 10% to 20% move down in the S&P with maybe the NASDAQ a little bit more than that on both. You think the Fed stands pat or you think that the wealth effect matters to them or you think they just kind of say, yeah, whatever, as long as employment and everything else is okay, that's fine. I personally think the latter, but I'm curious what you think. I think that as long as the treasury market is not impaired, impacted, endangered, liquidity there, they don't care about the stock market because the Fed doesn't care what the treasury has to do as far as their budget is concerned. And if it means that tax receipts are going to be lower, that's not the Fed's problem. I mean, it's literally not the Fed's problem.

They're like, we have to get inflation down. Our job is to get inflation down. The Treasury's job is to manage the amount of money that Congress is spending. That's up to them. That's not our issue. But the Fed's job is also to make sure that markets operate properly, right? So there's no, they have to be liquid. And so the question is, Dave, do we draw down because of just their straight vanilla and tough recession that we're heading into? Or do we have another credit event? Does a bank, a big bank collapse that has counterparty risk that induces contagion that they have to contain. If they have to step in like they did with Silicon Valley, well, then it's a whole nother story. And we're seeing these backdoor injections of liquidity from the Fed to make sure that the market operates

properly. And that's kind of propping everything up right now. So if something does happen, all bets are off. And then, yeah. Just following up on that, I think that's, this is, I mean, I've never seen a period where I've seen the Fed this adamant and seem this happy and this much battling the stock market. Every time the stock market goes up, the rate height expectations go higher where they seem satisfied if the stock market goes down. I've never seen that. So sure, maybe if you get a quick crash, they might come to save us again. But I'd look at Fed Fund futures right now, we're at about 90% that they're going to be up at, what is it, 5.3% by November. And then by next year, they're going to drop 100 base points. Now, what's going to take that for a happen? Inflation going down? Yeah, who cares?

If the stock market goes down, I look at it, I wrote about this recently, there's no reason for the Fed to do anything until the stock market makes them. That's the problem. Now, I just want to point out, we mentioned BITTO. I'll just turn a little bit. If you want to see a good island bottom chart and something that's Bitcoin related, GBTC, just spend a little more time here. Now, there's a nice chart.

And I also look at that as if this ETF happens, we know that premium, that the discount is still about 31%. Pretty much is likely to go to zero in just a matter of time. So I look at risk reward. I can't make trade recommendations, but I can't trade either. I'm not allowed, which probably keeps me neutral. That to me, there's a bottom formation to me. And that's also, it's got that, it could still ride out a 30% collapse and, I mean, still has that premium that can help support that price. Right, I'm talking about this.

I'm assuming that's what we're talking about right there, yeah. Yeah. I look at some of the smart money might be going in and it's, okay, now we knew it was wide at 50. Now it's maybe, is it still wide at 30? But there's a good solid reason for it to narrow, particularly if BlackRock helps. Yeah, I remember who's trading those futures, right? Those Fed funds futures.

And hedge funds use it as a way to hedge themselves. And so there is some noise in there for sure, Mike. We both know that. If you really want to boil it down just to the essence of it, just look at the spreads in the treasuries. Just look at the spreads of the two-year and the 10-year because that's reality. And that just tells us, it is basically 100% probability that we are going to hit a recession here, 100%. And that means these rates are coming down, period. And the rates don't come down except for when the Fed feels they need to loosen the reins on the economy and allow for more liquidity. That's it. That's the only reason.

Look at that thing. I mean, yeah. Is that sub minus 1.021%? I think the lowest we've seen previously before to 1989, at least on a close was 7.7%. Yeah. That's telling you that the bond market and we all know that the bond traders are the ones who the credit traders understand what the claims on assets are of this world and if they're believing 100 that we're that we have a uh you know we have a policy error on on the table right now that's what that's telling me well mike you've been saying that for a while now yeah too long but wrong and long and early right you can talk about how you've said that that you know i think your quote was that history will not judge uh this tightening cycle the fed very well i mean it's inevitable it's just it says what happens it's

inevitable unfortunately i have to admit i did more reading again this week and it starts to keep solidifying my views but it's just the basis of all measure of liquidity. But what I think that's so important to point out there, James, is I like the New York Fed. I think the Cleveland Fed does it too. They just assign a probability to that. And they say, okay, right now it's 70%. We'll get a recession in the next 12 months. And the last time they had a similar reading was 1982. And every time it just happens. So what's the hopium for the stock market? Yeah, sure. We're going to get a recession, but the Fed's going to save us. It'll be okay. They'll cut rates. Just like now, what's the hopium from Bitcoin? It's great. Okay. We're not going to go with this down in the stock market and we're going to get these ETFs. It's

all going to be okay. I like, there's just too many of statements that I think that's just not worth it. Yeah. And there's, there's also noise in the market because of all the AI hype, right? So you have all these tech companies that have been just ripped the last number of months because of the AI hype. And it's real in the long term. It's real. But today- It's a bubble. It's fine. It's a bubble. We all agree. It's a bubble. 100%. Yeah. Yeah, well, you know, the funny part about, yeah, I mean, there's clearly that's true. I mean, if you look at at sectors that are disliked, you know, versus, you know, this has not been a uniform rally in the stock market. I mean, this has been a very folk consular alley on technology, AI and things that people think are resistant to, you know, to macro, which I find amusing because at the end of the day, they're the ones that will actually lead on the downside when there is a correction. But that's neither here nor there.

But I think that's where Mike and I agree. My point that I keep making on Bitcoin is it was born out of a financial crisis for a reason. If we do end up, the longer we go before a recession starts, the more sharp it's likely to be. And of course, the closer we get to election season. I mean, if a recession happens this fall, that's sort of on target and the Fed can allow it to play out

and then voters won't be caring about it as long as it's dissipating by next spring. But I don't think a recession that starts next spring and starts to get whatever will be treated with as political hands off. I think that- Isn't the world in recession just not officially here? I love how we talk about this all the time. If a recession comes like here- Well, what are central banks doing? Obviously, it's a big lag. We know that. But we've had a historic event, and there's no measure in history.

You can go back to the 1919 Great Plague, but it's never happened before. The key point is, what are central banks doing? I look at it simplistically. It's not complicated. There's Bank of England, surprise surprise hike more than bank of canada surprise like federal reserve hike the most ever um from zero ever you look at a lot don't face and sit in the head so that it's just simple you're supposed to just say okay what's my two year note 475 thank you see you in two years i mean that's what you that's why you look at it why complicate it yeah every single i just wrote about this this past weekend uh in my newsletter the the the out of the g7 treasure yields every single one is inverted except for which one japan right no surprise surprise and

they're and they're manipulating their their their central bank is manipulating their rates, I mean, horrifically, right? But every single one of them is seriously inverted on the 2 in 10. It's just reality. And the only one that actually has a bump that goes back up is Italy. And that's because people are worried about them defaulting. So they demand a higher yield for the 10 year. It's just yeah so we're the the developed world is heading into a recession yeah yeah really quick so i have to

talk about it because i talked about in the intro we're talking about etfs hsbc rolls out cryptocurrency services in hong kong basically making three ETFs, Bitcoin and Ethereum based, available to all their customers. As HSBC, the same one that made headlines, HSBC and Nationwide blocked transactions with crypto exchanges just three months ago. So is this symptomatic of the United States shutting down in Hong Kong and potentially China seeing an opportunity? Or is this yet again, yeah, we're going to shut down everything that has to do with the crypto incumbents and move it to the trusted Wall Street institutions? Because, listen, I mean, we see Binance and Coinbase getting attacked. BlackRock's fine, right? People are excited about that.

So it seems like it's the same thing. HSBC is not going to let you transact with these native crypto exchanges, but they'll open the doors to institutional ETFs. I think that you have to decide what politicians can accomplish versus what they want to accomplish. And it's also what do they not want to accomplish? The thing they don't want to do, the ones who are against crypto, is allow it to become a big negative politically. That is the single thing they are most concerned about. What do they want to accomplish? They want their friends to have power. But the question is, can they?

And it really is a fascinating conversation if you think about it. We don't have anywhere near the time to talk about that, but the absolute reality is that there's no doubt that the anti-crypto army's sole focus is to... And I say that blithely because I think that was one of the big mistakes, actually calling herself that. But what she really wants is a reinforcement of the banking cartel. And James, you've been dealing with this a lot, what's going on with the regional banks. I mean, do you think that concentration in the banking sector is going to be higher or lower five years from now? And more importantly, do you think that the concentration, what people want? I mean, it's clear this administration wants banking concentration dramatically higher.

And so- And they're allowing it. They're facilitating it. It's clear. I mean, JP Morgan, Citigroup, and Wells Fargo took in, what, hundreds of billions, trillions of assets, basically, because of the banking crisis. They allowed it.

I think it's tail wagging the dog here. I think the bottom line is, do we want a cartelization of the banking system, yes or no? And I think the political lines are very well drawn on that. It is a partisan issue, although there are lots of Democrats who are made unbelievably uneasy by that. And so I think that matters. Right. And so when you start talking about, you know, things like choke point and what's been going on, I mean, yeah, you know, they to agree with Mr. McBloom over there, but the fact is we've reached a budget system with, you know, that holds it. I mean, commercial real estate is a long-term disaster. You know, I talked to a couple, I was at a, spoke at an event in Miami with a bunch of real estate agents called Biopsy. You know, the president was nice enough to invite me to speak. And the, the only thing people talk about with commercial real estate is the hope

that in their eyes is that, that, that local authorities in New York and other places will allow them convert commercial real estate to residential, right. Which is a time. And you, you, you know, what we saw in Dallas, right? So downtown Dallas wanted to convert a lot of those, uh, old business, the old commercial real estate buildings, the high rises into residences, but there were no grocery stores. There were no theaters. There were no, there were no supermarkets or, or, you know, uh, restaurants down there that stayed open on the weekend. It just wasn't a place to live. So they had to build all that around it first. And so it takes a long time,

even if they do get it through. In addition to the plumbing, I mean, typical residential detail, it's a major, it's just hard to put in all those pipes and everything and balconies. And it is not designed, the building's not designed for residential.

So that's one thing you notice when you go to a building that's not residential. Always notice the bathroom's always on top of each other. Why? Because you only run the plumbing up one area, but in a residential area, they're everywhere. It's just a big deal. That's a lot of piping, a lot of things you're going to tear up. The point that I was making is I don't think that any conversion like that is anything close to a time enough to allow the loans to be performing.

Which means that all the rents to be as high as they are now for those new buildings or higher and there'll be nobody really to pay it by the time they come online. Well, but that's the problem. So the issue is there's this gaping hole in the balance sheet of the regional banking system as we enter into a recession, which is never great for the banking system anyway. And that's why it's fascinating to me. And when I listen to James talk, and by the way, James's newsletter is amazing. I'll plug it if need be. And when I read it and I'm thinking about it, it's like, well, yes, I agree with your analysis that only comes in as a credit, but I'm trying, I'm struggling

to understand how we could have a sharp onset recession without triggering credit. That that's what my brain is struggling. How we could have them without a credit event. Yeah. Well, I mean, we've seen it happen where you, you this influx of layoffs. The credit tightens enough that the access to capital, I mean, Mike, you've been studying this for so long, right? So access to capital goes down. It costs so much more for everything that company is doing. It costs them more that they have to, then they have to, they have to cut costs. And that's typically people.

The people are your highest expense, you know, your employees. So they start cutting, they start laying off employees and it just slides down. Right. So that could happen. I still believe like you,

Dave, I believe that that's a kind of a pipe dream that we just kind of slide into a nice recession here and touch off and go back up again. I just don't see that happening. The commercial real estate, there's $1.4 trillion of loans are coming due for these landlords. I mean, they're not going to remortgage these properties. They're going to walk away from them. It's just easier. And they need to get to San Francisco to start already.

Yeah, exactly. Some of it is literally walk away. It makes a lot more sense to just walk away than to even deal with it, which is what then happens. So then you hand the keys to the bank. The bank owns an impaired asset. Then the Fed has to come in and help them. Or if it's not an important bank, obviously the GSIBs are not going to be affected by this, but the regional banks hold a lot of this paper and they will be affected by it. So the question is, how big is

that next bank to fail? That's really the big question. So that's the key thing too, I think, about the tide. What happened when Bear Stearns went under and then Lehman, the tide went out, we saw it was wearing clothes. To me, that's the problem right now. It's great. The tide's nice, high, it's great. But you mentioned commercial history. I just look at things like even residential, everything's great. And we all see how our home builders are it's great. But you mentioned commercial history. I just look at things like even residential, everything's great. And we all see how our home builders are doing well lately. But the thing that really struck me, if you look at new homes, new U.S. homes under construction, it's the highest ever in this country. And it's bounced up recently.

You go back to 1970 on this database. It's never been higher. And then sales are collapsing. Interest rates are going up. This is a complete recipe for a severe recession. It's just the way it always worked. And that's residential. It just hasn't started yet.

It just back in that thing. The peak I'm looking at right now is 1973. I remember that one. I was young. But we had a pretty good crisis there with OPEC and stuff. And then the most recent peak, 2006. A lot of those, that rings a bell for a lot of us. Now it's the highest ever.

Yeah, you're going to have that pricing reset finally when rates start to come down. You'll finally have that reset when people are willing to sell their houses, right? And then the prices will, yeah, right? See what that takes. So rates are high. People are not willing to sell houses. So the market freezes up. Right. And not only new homes are really, okay,

you can build your own, you can do construction, you can rehab. And then, of course, but we all know since there's a freeze up market bullish. And the bottom line is what sparked this? Never forget from where you're from in markets. It's the biggest pump of liquidity ever that's dumping the fastest pace ever.

Yeah. Go ahead, James, please. No, that's a guy I completely agree. I completely agree. Yeah. I was looking in the comments. Drucified over here said, look at these stats I found, and I'm waiting for them. But basically, just being 80% of commercial real estate is held by small and regional banks.

Yeah, and that banks. Yeah. And that's the problem. So, okay. So, what's happening? You've got these huge REITs. And here's the crazy part. Oh, that's a good stat right there. Here's the crazy part.

You have these massive REITs, Blackstone, right? So, in one area, they have massive redemptions. And they're saying, okay, we have to walk away from this real estate in San Francisco or whatever. They're walking away from global real estate. They're just walking away. They say, well, we can't pay the note, so we're walking away from it. On the other hand, they're raising a new fund over here. So they're just getting ready to swoop in and buy the impaired assets that they walked away from. It's nuts nuts and they're allowed to do it it's this is this is because they're this is where the uh the non-recourse mortgage loan becomes problematic for the regional banks and they hold a lot of this paper yeah quit to the point it fits with

with with this that that's the issue is if there is a massive contagion in the regional banking industry, how much can we go from 5,000 to 1,000? We go from 5,000 to 500? I mean, what happens? I mean, at what point does the Fed say, okay, well, enough is enough. And then what do markets do about that? And does the bifurcation that we've been seeing go more and more and more? I mean, it's a very interesting point. Obviously, when this all starts, it's going to be horrendous and every asset's going to go. I mean, it has to, right? People don't fly to quality immediately, people don't adjust it. And every single, in 2008, gold went down for three months before it took off again, right? Eventually making all-time highs.

It dropped 30%. You're right. For $1,700, you got to get the pain, unfortunately. No doubt. There's no doubt. Correlations go to one. That's my last comment when you see this sort of thing. I find it hard to believe it. No, Fed will save us.

The Fed will save us. Trust me. No problem.s will save us. The fed will save us. Trust. No problem. Yeah. The fed. Yeah. We'll see. We'll see if the fed comes to the rescue.

I can't believe it's 10 o'clock already. James, awesome having you. I can see in the comments, have James every week, have James every week. Guys, we're not waking James up at 545 in the morning to join us every week,

but whenever he, whenever he does want to do that, he's a welcome. If you're listening, by the way, I never say this, but if you're not subscribed, just subscribe. We do this every week. But whenever he does want to do that, he's welcome. If you're listening, by the way, I never say this, but if you're not subscribed, just subscribe. We do this every Monday.

You know, we're always here and it's nice to see that we have some new blood. I think at least Dave and James, you guys are joining Twitter Spaces in a bit, guys. Again, I had a podcast with Warren Davidson

that came out yesterday, but he's going to be on Twitter Spaces once again. This guy is really, really serious about helping this yesterday, but he's going to be on Twitter Spaces once again. This guy is really serious about helping this industry, but also really serious about getting rid of Gary Gensler. Really serious.

I can tell you in private, public chats, I don't know if it'll be successful, but he's certainly going to try. Guys, thank you once again to all three of you. I'll be back, of course, tomorrow morning, 9 a.m., but see everybody, hopefully, on Twitter Spaces. Thank you, gentlemen. Thank you, guys.