The Wolf Of All Streets - Election Shock! Will Argentina Adopt Bitcoin? l Macro Monday

Episode Date: November 20, 2023

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Pro-Bitcoin candidate Javier Millet has won the election in Argentina. He is a self-described anarcho-capitalist, far right-wing libertarian. Probably if he wasn't a pro-Bitcoin or maybe the world wouldn't be cheering for a description like that. But I guess in this community, we will take whoever we can get. He wants to abolish the central bank. But yes, this is a massive economy, a much bigger deal than El Salvador, obviously, if they actually adopt it. But in the meantime, we have Bitcoin still trying to break that 38,000 level and a lot happening in the macro. It's Monday, which means it's Macro Monday. I'm here with Mike McGlone, James Lavish, and Dave Weisberger. Guys, can't wait to get back into it today. Let's go. What is up, everybody? I'm Scott Melker, also known as

the Wolf of All Streets. Before we get started, please subscribe to the channel and hit that like button. I spent the last few days completely detached. I told Mike McGlone, I pulled off an Olympian Herculean feat for me, which is that I showed up on vacation on Wednesday with a charged phone and I never plugged it into a charger and left with the phone still working on Sunday. So I actually managed to detach and not pay attention to what was going on in the world. It seemed like a pretty good time to take off. Well, it was pretty incredible. We were on a boat.

I still actually feel like I'm rocking at the moment. But a lot of the people who worked on there were huge, huge, huge crypto fans, advocates. Two of the guys were South Africans. So obviously big fans of Rand Nooner. But I got to spend a lot of time talking in the real world to people about crypto and the importance of Bitcoin. One of the guys, Charles, was incredible, talked about taking all of his extra salary and dollar cost averaging, his conservative approach and F meme coins. Just really awesome guys who totally got it and were absolutely in

it for the right reason. So it was really interesting to get that perspective while on vacation without having to look at my phone. Let me go ahead and bring on Mike and James. We're going to talk about what's going on in the world right now. We're going to wait for Dave to show up to talk about Argentina. I think he wanted us to title it, Don't Cry For Me Bitcoin. Don't Cry For Me Argentina. Maybe we could have had Madonna sing it. But Mike, before we get into Argentina, can you just give us the broad strokes, the Monday morning call? Where are we at? So I'll start with one hypothetical for next year.

The Nasdaq's up 44% this year. Bitcoin's up 120%. That's almost exactly what you'd expect on a risk-adjusted basis, about three times the Nasdaq. Let's just look at a scenario for next year. We've got a whole 12 months or 13 months till we get to the end of the year. What if the NASDAQ has a normal, simple, somewhat little bit of a version for a normal recession? What does that mean for Bitcoin? Now, crypto is in all the bigger space, it's somewhat negative. But to me, that's the key thing investors should be thinking about, particularly as at this time last year,

the consensus was recession. Now that obviously turned out to be wrong. I was wrong there, but the consensus right now is completely towards soft landing. So I really enjoyed getting that scoop from my colleagues is our chief economist on a one point out. It's very hard to start unemployment for rising. Goldman Sachs expects it's going to stable rise around 3.7%. Typically in cheap expects. Well, next year we should see unemployment around 5%. Now that's a recession. unemployment for rising. Goldman Sachs expects it's going to stable around 3.7%. Typically,

and she expects, well, next year we should see unemployment around 5%. Now that's a recession, but that's just normal. James and I have been all over that. You just don't bottom from such a level with such solid fundamental backing coming from a big pump like we had without just stopping and without Fed easing. So still the case. And key thing is also, like our chief equity strategist point, their fair value model points is for pretty stable, pretty flat S&P earnings growth, which means somewhat recessionary for next year,

but that's so much dicey. But a key thing also for Myra Jersey, our fixed income strategist, and the consensus with our FX FX strategies is you basically need weak economic growth in the US for the Fed to ease or some good reason for them to do that. Now, it's also for the dollar to show continued weakness. You need continued decline in economic growth, continued pickup in unemployment claims, continued rising in unemployment rate for the dollar to weaken it

and for the fetties and absent that to me that's part of the lose-lose for risk assets where bitcoin fits in there i don't know so i'll end with this from a commodity standpoint we're clearly in a global recession you have gold up about eight percent virtually almost all commodities down eight percent almost ten percent crude oil starting to give it up. It's showing you that tilt. And at this stage, you usually have to ask yourself is what stops that body in motion? Assets going down, except for stock market. Gold going up typically takes a lag to decent amount of Federal Reserve easing. We haven't even started that. But it seems like we have consensus now, as you mentioned right before the call, Mike, that it's a soft landing, no recession. Complete consensus. Yeah. Well, look at what markets are priced. I mean, we've got S&P

up almost 20% this year. Yeah. Yeah. It's great. Good for it. Go for it. I mean, and I still, well, at least the two notes, not 5% anymore, but I doubt it goes much above that level. Yeah. So Scott, you might've been in your, your self-imposed restriction from social media, but I posted something last week. I had just gone on my Bloomberg and my terminal and just, I searched soft landing and pages and pages and pages and pages of story came up. These are our Bloomberg stories. They were stories from all over. Off landing, A number of news articles mentioning the term recession. We've shared this before, but it's hilarious. Yeah, go ahead. Yeah. So, I mean, I agree with Mike. Look, we've said it before. We're going to keep pounding this. Unemployment is a lagging indicator,

you know, and you're not seeing it yet. And I don't think, I agree with Mike again, I do not think that we're going to top out at 3.7 unemployment just does not it doesn't bode with or it doesn't it doesn't dovetail with uh you know um reality or or history so um it's it is lagging we saw over the weekend some terrible shipping uh data and that is that's you have to understand how to, how do goods get to the, how to get to the stores? How do you, how do you ship these raw materials to make the goods? I mean, when you have shipping drop off so drastically, it's, that's a, that's a big

red flag. You know, so inventories picking up, that's not a great thing. Inventories picking up because it's, it's, it inventories picking up. That's not a great thing Inventories picking up because it's it's piling up, you know We have channel stuffed before holidays and now you're seeing Walmart pull down numbers because they're worried that they're not going to meet expectations That's another red flag You know, so we're there there red flags around that it seems It seems like many professionals are just either choosing to look at in a different light or ignore completely. And so it concerns me for sure that we hit mid or even late first

quarter, early second quarter next year, and we've really started to contract. The problem is that the Fed, as Mike pointed out, needs enough data to back off interest rates in order to start lowering that Fed funds rate. And one of the pieces of data they keep talking about that they're looking at is unemployment. So it's almost as if it gives them a free ticket to allow us to hit a recession first before they start lowering. Can't fix stupid. Well, Argentina is going to try. That deserves a conversation, but we're going to do that in a minute. Yeah, we're going to do that in a minute. At the end of the day, I mean, the chances of an actual soft landing as opposed to a let's make the statistics look like a soft landing so that we don't get political – we don't commit political suicide are slim. I

mean, the stuff I saw this weekend, and you guys have better access to data. My source is Twitter. So sorry about that, guys. So you know, I'd love to hear about this. But I'm hearing business loan growth negative. I'm hearing delinquencies on auto loans and consumer credit. Significant, well over average. And that's the sort of thing that presages a consumption drop. What Mike is trying to say nicely to people, I'm not as nice as Mike, is that if you believe that a soft landing is possible, point to the last time in history that it ever did and the answer is it doesn't work like that dummy the fact is once you

start seeing a contracting economy because people can't afford stuff it turns into a cycle and that cycle takes a while to materialize but when it does, unemployment doesn't go from 3.7 to 3.8 to 3.9 to 4 to 4.1, it goes from 3.7 to 3.8 to 4.7 to 6, right? You know, people start, you know, moving it. People, there's a herd mentality in the economy that's a big deal now the only reason why that could be different this time and i do not believe this to be the case is that the structure of the economy is different people will make an argument that well that's true if you're in manufacturing consumer goods led economy where we actually make

stuff and in a knowledge economy we're more exposed to the rest of the world. I've heard that argument. I'm curious what you think about that, Mike, but I don't think it's real. The bottom line is that the Fed is, I think, I think the market is basically saying the Fed's done, that the next move will be easing, and it'll be, as usual, too slow. And I think that that's probably accurate. Now, all of that said, go back to the original thesis that we talk about, that James and I talk about, which is there's zero probability that quantitative tightening will continue. There will be more liquidity injected into the market and confidence in global markets is going to continue

to ebb. And that is the Bitcoin case. I mean, I'm basically calling for delinking, but I'm calling for delinking for a specific reason that we'll talk about in a minute. I'll let Scott tee that one up. Just quickly before we dig into Argentina and what's happening with ETF and all of those things, James, you sort of made a point that they're willfully ignoring all the red flags. Is this just one of those cases of the headline numbers are good and so people just buy it and move on? They don't even bother digging in behind it because consensus, literally everyone where you read now thinks it's off landing. They did the job. Job well done. Obviously not us. But if you look just at the numbers that exist and not what's behind or under the hood, it does look like the

economy's humming. Yeah. I mean, like if you look at the, just the headline numbers, of course, but you have to look beyond that. You know, when I hear, when I hear analysts point to, well, look, high yield spreads are historically low. That's a symptom of reaction to numbers. It's not actual numbers. It's actually a symptom of investors searching for yield. They're looking for some way to create alpha in the market. And it's difficult when you've got everybody piled into the same trades, the same seven stocks, everybody piled into the same seven stocks, it's difficult

to find alpha. So you start going out on the risk curve. What's out on the risk curve? Well, there's nothing further out on the risk curve than distressed debt or distressed, you know, uh, uh, bonds. It's, it's difficult to, to, uh, to point to that to me is a mistake to say, and those are the kinds of things that we're hearing. And that's, that's a bad indicator to me for whether or not we're headed for a recession when you point to things like that. And so, but, you know, if you're not an extremely experienced investor who's been doing this for decades, you may hear that and say, oh, well, it must be great because, you know, the professionals, the institutional investors are all going along with it, so they must be right. And, you know, we saw what happened in the great financial crisis. There's a herd mentality. And that's why that's why that term exists, because there is a herd mentality in Wall Street. And it doesn't mean that being a contrarian will make you more successful. That's not it. You can't just be a contrarian. We've seen on Twitter how that doesn't work, you know, but you, you know, you, you have to be able to

critically think and look at the data yourself and determine, and none of us, Mike, Dave, me, you, not, not, not, not one of us. I will speak for all three of us is calling for when the recession is going to hit hard. When we see everything fall off, we can't do that. It's really difficult, but you have to look at, you have to read all the information and take a more holistic approach to it. So, and I brought up this chart. I don't know if it, is it sharing properly? Yeah. So this is to the point of Dave and we've shown this before. Look at where unemployment, where it is right for the gray lines are recessions. So look at where unemployment is before the recession and then during it.

And every single time there is an absolute spike, a roar in unemployment during the recession, not before it, but during. So everybody just needs to be aware of that. We've showed this before. We're going to keep showing it for the people who haven't seen it. But that's reality. And so we have to, you know, this is the reality of soft landing. I don't see a soft landing in there. You know, I don't see any, you know, when you spike from 2, 3% unemployment up to 6, 7, 8%, 9, 10%, 10, 12%. That's not soft landing. That's a lot of economic and personal damage in the economy. And that's what we're trying to make people aware of and be ready for. Yeah. Pull that back to 1700 or something, James. I think I love when people say sometimes if you had one indicator, Rosie, Dave Rosenberg always says, oh, it'd be the yield curve.

I think that's a great indicator, but also piggyback on some things that Dave and James said is one thing that Dave said, I think is really what you point out. Unemployment typically jumps. It could be different. But one thing that's really different is typically when you hit towards recessions and you get towards into that recessions, interest rates will go up on the escalator and down in an elevator. Well, we just went up on the elevator. So I think it's more likely we're only going to go down in the escalator. It's the lessons of the biggest pump in inflation in our lifetimes, except some of us who grew up in the 70s, is over and the market's never going to give up and never going to forget that. To me, that's the thing to look forward to. And typically it takes a spark. I think it's a stock market, but I just want to point out some

of the things I do appreciate being at Bloomberg and having the term is I'm addicted. It's one of the things is fulfill your good addiction, addicted to information. So there's four headlines I read this morning, just from my fellow strategists I want to point out to you. And the key thing you have to remember is you write about China. You got to be very careful because I've had a colleague who was detained for a year for writing something. It's just a different world. So he comes over here and smiles and everything, but everything I hear from colleagues, it's not that way. So China Insight, golden October, no more housing slump deepens. That's one headline. Another headline from a colleague in China. China Insight, property correction could hit 5 million jobs. Another headline. China home prices at risk of up to 50% discount from new supply. And then just one other

one finally in Europe, risk indicators worse than free financial crisis as a question. So these all sounds like things you hear at the bottom of economic cycles. And the key point is we've already priced for that bottom to be over. It's not nearly started. That's part of my great reset bias and questions. Where does Bitcoin fit in there? It's been great. It's been a great leading indicator. It was down the most last year. It's up the most again this year. Next year is the key. I think it'll be that final test. And I hope Dave's right about that disengagement. Risk assets going down, Bitcoin going up, and I just need to kind of see more proof of it. Let's talk about that, Dave, because obviously I know that you were hyped to talk about what's happening in Argentina. Javier, when's Argentina present?

I think it's important. First, I do want to go back to a couple of things. I mean, look, indicators are interesting. I mean, you talked about, you know, the yield curve is the best indicator. Well, obviously, we now know that that's wrong because we've had a year of it being wrong. But it's always important to understand the whys, right? You know, it used to be, they have to be old. So all three of us will remember this. It used to be traders, the thing they most were glued to was the money supply. Money supply numbers were what was going to move the market, whatever. I understand that.

That was what they used to be glued to. It ceased working once it became obvious that the money supply numbers only represented a small piece of what actual liquidity was. That those measurements of money supply are I don't want to call it bullshit, but let's just say so manipulated that it stopped being relevant for traders 15 years ago or 20 years ago, maybe. So it's relevant. I think the yield curve is the same. If anyone believes this yield, our yield curve is not manipulated, then you are not paying attention.

Look, I lived through it in Japan. Japan's yield curve wasn't like this forever. It was an actual real yield curve, and it isn't, and it hasn't been for 30 years. You have to be pretty old to remember when it wasn't, but that was when the Japanese stock market, the Nikkei, was at 40,000. And everyone said, well, it's OK, because Japanese economy is different. There isn't that much supply. So P.E.s and other resort price to sales and all these things don't really matter. And, yeah, that lasted for a decade. But once it did start to matter, well, we've seen what's happened in Japan for 30 years. So I just want to point out that the problem with and Rob Arnnott, I think once said this on stage when I was there, and he was referring to quantitative analysis. And what he was talking about is the danger

of driving a car, but looking in the rear view mirror. And I think looking at a lot of these things when you're seeing a regime change are relevant. That doesn't change the story. Actually, I agree with Mike's story. I think confidence in the global economic system is at serious risk. I think that the powers that be are going to, they're expert can kickers and they're going to continue to. And the only place they can really kick the can is the United States with the global reserve currency. The point that I'll make about Bitcoin is it is a very young asset. It is not trading like an asset. It is trading like an option on what the asset could be. And as a result, you know, when you start looking at correlations of options as opposed to correlations of the

underlying, you end up with interesting implications. I mean, people in Bitcoin are like, well, the four-year cycle, oh my God, it's like some inviolate thing. Scott, you fall into this as well. I mean, it's four. You try to get statistical significance out of something that's happened four times. I mean, nine to three. Literally impossible. So my point is Bitcoin is an option on whether it will be, and I am firmly in the pomp and Michael Saylor camp on this. The first step, first stop is digital gold. Digital gold, to remind you, would mean demonetizing where gold is.

Gold became demonetized, as Pomp pointed out in his weekend's newsletter, years ago. It's still a shadow of itself. Gold used to be 100% of monetary aggregates. Then it moved to about 10% and stayed there for a long time, be 100% of monetary aggregates. Then it moved to about 10 and stayed there for a long time, about 10% of monetary aggregates at $12.5 trillion today. It now represents a lot less than 10, but it's still $12 trillion. And gold has demonetized silver completely. Silver, the silver-gold ratio, as I've talked about many times, is much, much, much lower than the ratio of gold to silver in the earth.

And don't talk about platinum, which is 30 times rarer than gold and actually is cheaper per ounce than gold. So obviously the monetary component matters. Now, why does all this matter? Well, Bitcoin is 50% below, not quite 50, but 40% below its all-time high. Every single metric on the Bitcoin network is double where it was at the all-time high. And it's really basically giving you an idea of option pricing. So now what's the question? What is the question? The question is, will Bitcoin get to critical mass where enough people think that it should be digital gold that it will get there? It's one of those questions. So here we have, we had El Salvador. And when El Salvador adopted, went

dollar and adopted Bitcoin as a reserve asset, which is exactly what Mille has said he's going to do. Now, whether we'll do it or not, we'll see. But El Salvador is 1 20th the size of Argentina. Yeah. And that is kind of important because, you know, we've seen the pump. We saw 330, just so people know, it's about thirty three point four billion GDP in in El Salvador and six hundred and forty one billion right now in Argentina. So roughly almost a 20 X difference. Right. So the question is, does this election, and even if he doesn't do it, does the fact that, you know, I don't know what the turnout in Argentina was, there's 46 million people, but does double digit millions of people voting for someone who says we need to be dollarized, we need something and believing in Bitcoin, does that increase the likelihood

of that narrative? Because when you're talking about an option that has a 20x positive asymmetric return, that's the question. And the same thing is another story that came out last week that didn't get a lot of press, which I don't really understand because I think it's massive, is someone at the Bundestag in Germany said we should investigate Bitcoin as legal tender. That's Germany. That is a very big deal, because if you're talking about an option, then what is it an option on? Well, it's an option on something much bigger. So I personally think that those news stories are very big.

And the reason that it's not moving is because of what Mike said, because you're right. I mean, I agree with you. I think that there's very serious rocky shoals ahead for the global economy. And so the question is, is where's the money going to come from? Will people de-risk into Bitcoin? Well, I think so. And the longer that they're expert at can kicking, the more likely you're going to see a rally. And that's where we're at. I mean, I just think that to discount every one of these pieces of news is wrong, doesn't mean that it can't correct, doesn't mean that if there's a global asset sell off, that the correlation will go to one. It will, right? It always does. And so all of those things are true. But the reality is, is you're going to bet on a horse, bet on the, you know, to use Paul Tudor Jones's, you know,

comment, bet on the fastest horse. And that's sort of where I'm at. I mean, I kind of think that the best trade is long, you know, Bitcoin short, economically sensitive, consumer sensitive equities. Note that I say that because a lot of people who, we had another huge story last week that we have to talk about. It's macro enough because it's so big, it's the open AI story. I mean, what's going on in the world of tech is a very big deal as well because that's where a lot of this our stock market performance is coming from it's coming from the tech sector oh yeah which is claiming you know people are claiming well they're insulated from these you know this soft landing kind of nonsense and i'd love to hear mike's take on that i just want right before we do that dave

just for clarification i could be wrong but i was looking it up because i couldn't remember me actually saying he wanted to make bitcoin legal tender as they did in El Salvador. And I don't think he's actually said that just for anyone. No, he's pro Bitcoin in the sense of he sees it as the alternative. You know, he in the sense of he says things central banks are wrong. He wants a dollarized economy. I have the quote. And the bottom line is, is remember something.

Forty six million people have been a lot of people have been using Bitcoin in Argentina and throughout South America. Most of them having to worry about defying the government. They won't be defying the government anymore. Most of them have been using, have been using Tether, but Bitcoin is very popular, obviously. And to your point, last time with this Argentinian government that they made moves and started making statements about Bitcoin, the IMF quickly stepped in and said, you know, that loan you guys wanted, stop mentioning Bitcoin. Right. Which is why it's more likely that it's removal of the problem side of it. And it's still the long term side. It really is. It's very important to understand what these things are. You know, when you're, look, we're talking about a 20 times option. We're not talking about a,

oh, you know, an at the money option here, right? You know, it's a very, very different situation. And I do not believe, and then just to be very, very clear about this, not only does the things not go in a straight line, do I think that this cycle or the next three, four years, we're getting to digital gold? I do not believe that. I think that there's just too much wood to chop to get there. But the question is, what does it take? The market is so small. All it really will take is you know what 20 30 billion dollars of investment in bitcoin is enough to move the price significantly i mean you talked to mark just go on your show about that it is not it this is not a question of you know what the squiggles are doing now this is a question of supply demand and it it's the same thing, the same reason unemployment does what James showed it does.

Right? Once it starts, every company has to start to catch up. Once people decide that a one, two, whatever percent allocation in portfolios is smart, then everybody feels they have to catch up. Yeah. I mean, the question here. So this is exactly what he said, the kind of famous quote. We have to understand that the central bank is a scam. What Bitcoin is representing is the return

of money to its original creator, the private sector. So he's not gone as far as proposing making a legal tender. He's instead calling to eliminate the country's central bank and dollarizing an Argentine economy that's been walled by inflation that reached 142% in October. But isn't there some irony here, James, Mike, either of you, that central bank is a scam, but dollarizing your economy is just attaching to our central bank instead of theirs. So it's a lesser of two evil central banks in this scenario. And I don't blame him. I think actually this is the correct move if you have the problems that they do. But it's hard to say central bank is a scam and then attach yourself to ours. Yeah. They don't have much choice at this point if they want

to avoid more hyperinflationary events. I mean, they already have, what is it, Mike? 180% inflation this year? Something insane. So look, they don't have a lot of choice here and uh to go straight to a bitcoin standard would be pretty painful i think um going to the dollar standard is going to be painful they have massive debt and they they're they're uh also apparently they have a not just a deficit but they're, they, uh, they don't have internally in their, in their reserves enough, uh, enough reserves to, to pay for their obligations at this point. So, you know, they're, they, they have a serious problem going to a dollar standard will be hard enough and it will be painful. Um, so yeah. How does that happen?

What does that actually look like for those of us who have not followed along when this has happened in the past? What does it look like to completely eliminate your currency, default on all your debts presumably, and move to the dollar? Let's look at other countries that have quasi dollar pegs. Hong Kong. Is it a country? But the thing is that I really struck me

being in Hong Kong in 2018 is the ability to access the dollar via this device. That's never happened in history. And everybody can get a phone in India now here for the equivalent of 12 US dollars. So the dollar is where it starts. I think this is where a lot of people and who don't understand this technology are missing that this is a paradigm shift in access to other stores of value and currencies in the planet.

You've never been able to do this before. And this whole crypto space has gone to the dollar. Crypto dollars, I am people call them stable coins. It's a bull market. And that's just because it's a better technology. I just talked to Visa and MasterCard. But I want to tilt back a little bit. And then, of course, Bitcoin's in there as more like the digital gold. These are the key things I want to tilt back to some of the history as an old person I've learned. It's 2018. I first read that book by Seif

and Inamis, The Bitcoin Standard, completely spelled out what Dave said. And it predicted what's happening, that we should at some point see central banks holding Bitcoin. But also I worked for Japanese companies. I remember in 1995, I started working the equivalent of the Asian desk in New York. And every single person I spoke to said they wanted to be happy and were short in JGBs. They were all wrong. And that hasn't changed. And to me, this is lessons that I knew that would tweak some of that.

You just learn these lessons that, okay, when everybody agrees in something and they're happy to put on positions with you on the phone, that's the concern I have a little bit in Bitcoin. It's just so much consensus versus a question I have for you, Scott, is when you first got in Bitcoin, did the mainstream think you were doing the right thing or they think you're an idiot? I think we know the question to that. I'm pretty sure the mainstream still thinks I'm an idiot. Larry Fink doesn't anymore. That's the key thing i'm concerned about now it's it's not it's past those days of it's some of the best we know this some of the best investments and ideas and you got to have complete pushback from normal people to be right when everybody agrees with you it's a red flag so okay that's just part of my sense of sense but a key thing i want to point

out is bitcoin is an option let's explain a little bit what options are. I've been a former options trader. There's delta and gamma. Options typically have time decay. That's the cool thing I thought about Bitcoin. It doesn't have time decay. If you buy a call, my lessons of buying calls is the market will go up after it expires. But it's that gamma that matters.

And I knew because that's just the way it works. I'm a guy, fine, that's why I don't trade anymore. I just say it. But it's the gamma that matters. And I knew because that's just the way it works. I'm a guy, fine. That's why I don't trade anymore. I just say it. But it's the gamma that matters. What gamma is, it's the rate of change of your delta. So Dave mentioned, it's kind of an out of the money call. Meaning if it's at the money, in the money, it just goes, the delta moves rate of the market. But if you're out of the money and say your delta is 20%, as you get closer to that, it gets stronger and stronger. I think Bitcoin's there, but it's got to that it gets stronger and stronger i think bitcoin's there but it's got to prove it and by i'm looking for that signs of proof for instance let's just

say next year bitcoin is up and most risk assets are down that would be a great sign yeah i agree with that i mean look at the end of the day, a zero time decay out of the money option is a product that everybody would buy with both feet. Exactly. Pretty much always. That's what it is. And so will it stay that way? Of course not. Of course not.

At some point, it starts approaching, quote, in the moneyness. Now, the problem is, in Bitcoin's case, it's the in the moneyness. Where is that? Well, the where it is, is somewhere in the in between 250 and 500,000. And we're somewhere somewhere between now and price discovery. Right. And so, you know, the reality is, is, until then, the question is, well, okay, if I need liquidity, and I need to go by you know by the GI Joe with the kung fu grip where am I gonna sell it right and so you see it I mean I want to share my screen to show you our newest toy because it's it's kind of fun

so you know I sit here you know I make fun of it you'll you'll like this I make fun of the squiggles right but i'm watching this is a consolidated order book and it it's it's some it's basically a real-time consolidated order book within that's close to the bid and the offer and it is amazingly predictive of the next few ticks so you know if you're a short-term trader humans probably can't react fast enough our algos do but we're watching this stuff all the time and you can see the difference like there are times you know when bitcoin you know this morning it was you know it's been moving in about a 200 range you know this is now aggregating bitcoin dollar and you'll see bitcoin dollar doesn't really look like much bitcoin tether on the other hand where most of the trading action

is what's predictive and so you know if you if you understand looking at this stuff, and every time you see the book get really big on the red side, the next price action effect is just dropped, you know, $30. So that's not terribly surprising if you see it reverse. There are traders who are glued to this stuff, right? Tens of thousands of them around the world that can trade using this sort of stuff. And the reason I point that out is, yeah, you know, it sounds obvious. Oh, wow. You know, I should, I should own some of this. The question then becomes when, right. And how, and, you know, and people who are watching the show should understand. I mean, you've all heard me say, don't use leverage. Well, the reason is because the when and the how can

move really fast and can change things. When I'm talking about the, you know, I'm just saying that if the world is pricing the odds of Bitcoin reaching digital gold at somewhere around six to six and a half percent, depending on how you measure it based on market cap, the fact is this election should have increased that, those odds. That's all I'm saying. The fact that when the Bundestag, someone at the Bundestag says,

you know, maybe we should investigate this. Now, this is Germany. Now, it makes sense that it's Germany because of all the developed economies are the ones who understand the need for hard money the most and sound money the most as opposed to soft money. But it is a very big deal. So we wake up here on a Monday morning where the actual odds of Bitcoin reaching digital gold are dramatically

higher than they were a week ago. And the price is up a little. And you see those squiggles that I was showing you, right? It's a bit. That's all I'm saying. And that's the world that we look at. So Scott's listeners, Scott's viewers on all of your channels care about what's going to happen tomorrow, cares about what's going to happen next hour. Right. And, you know, at a certain point, someone once taught me, one of my mentors in the trading world said, listen, establish the trade, the direction you want to trade in and then trade around that position. There are the vast majority of the world and Mike Alfred says this really well, although he says it generally much snarkier than I am. But Mike basically says, listen, I feel

sorry for the people who don't have any Bitcoin exposure. Okay, whatever. You know, look, the truth of the matter is, we are nowhere near people having a core position to trade around in Bitcoin in the in the world. We're nowhere near that. Most people don't have any position. And when I say people, I mean, most pools of capital are completely unexposed. And that is all I'm trying to say. And when that changes to they have some core position, the price will be 10 to 20x where it is today. And then we'll see whether it goes and does everything else. And at that point, we're at an asset that will behave pretty much exactly the way that you would talk about an asset. But we're not there yet. And so, yeah, it's going to move up, down, sideways, etc.

And we haven't even talked about the fact that a lot of the reason Bitcoin hasn't done much is because of rotation into alts. I mean, Ethereum is actually, you know, will when things move higher outperforms. And there's still money that goes into Dogecoin and other meme coins, you know, and that takes away because most of the money in Bitcoin is in the crypto community. It's not in the mainstream community. And so that's my point.

I was gonna say it takes away from it now, but it will not take away from it when we reach the point that you're talking about. No, but that's my answer to Mike's point about what's consensus. The broader consensus is, are you freaking kidding me, Weisberger? You're a lunatic. That is the broader consensus as opposed to, yeah, we got a couple of smart people who agree with me. Go ahead, Mike.

I don't want to take from James too much. And Dave, I love your Yoda rants. I just got one little piggyback on that. Here's the connection. This weekend, I had a call with one of my former customers, now good friends, based in London, retired, really good futures macro trader. He says, I got this good friend. All he does is create a trading system his whole life, and he wants to see how he can parlay to cryptos. And that, to me, is a key thing to remember here.

This space, cryptos, is bar none on a global historical basis. There's never been a better trading vehicle, 24-7 trading vehicle ever. There's no, particularly Bitcoin, no intermediary. It's just, it's perfect for traders. I've just never seen it. It doesn't stop. It's got great signals. Dave, you showed up. You just showed us live what can happen. But the key thing to remember is when you have things that are traded this much, it's clearly a risk asset still. And if you get a purge or a

major move in most other risk assets, this one is probably a leading indicator. So here's what I want to point out this year is you can point out that Bitcoin has been a tremendous leading indicator this year. Yes, it had a lot of nuances with all these ETFs, but last year went down hard and first, and this year it's gone up strong and first. So what's the next iteration? Is it still a massive trading vehicle? Yes. That's the problem. I say, if it's that much of a, everybody loves a trading vehicle. When you hit stops on leverage, which was my background, everything was leverage in futures. 20 to 1 most of the time. You just got to know how to manage your risk.

And I've seen customers blow up. But when you hit stops and leverage, things move and they almost always go with the tide initially. Now, that's what happened to gold in 2008. It dropped 30% from 1,000 to 700 and then it popped up to 1,900. But Fed added liquidity. That's where we need to see the transition in Bitcoin and crypto. Remember, it's the number one trading vehicle 24-7 on the planet, which is somewhat of a negative if we get a rug pull and other risk assets. 100%. You nailed it, Mike. That

is exactly right. Prices in the short term are determined by speculative traders because it is the best vehicle out there. You're absolutely right. Prices in the long term and what we've seen in this rally are determined by a little adjust. It's sort of like the ratchet of liquidity into Bitcoin slowly. And then on the margins, you get this. I mean, it was very, very, very illustrative last week. Another point that I made, we saw the week before. If you looked at if you track go on, I use CoinGlass, but there are others for tracking liquidations,

that when we saw a massive range day, that the liquidations on the short side were less than the liquidations on, I know the other way around, liquidations on the long side were less than the liquidations on the long side were less than liquidations on the short side. That is telling you that long side that this has been a spot led rally and the FOMO players have not really jumped in with both feet. Obviously, on the margin, there's always speculative trading on both sides of this to the hundreds of millions of dollars, no doubt. But I think Mike nailed it. That is why if you look at the amount of supply on exchanges, everyone says, oh, they get all excited. Yeah, but the price discovery really is still set on the derivative exchanges. And so that's why I think liquidations are more important to track. And what we're seeing now

are people, the shorts are getting more and more afraid of picking up pennies in front of the steam rollers. And the longs are not just not that excited yet. There's no animal spirits. We haven't seen funding rates or any of the things you see when longs are driving it. So, you know, right now, if you look at the. We did on all coins, though. We had historical last week before there was a flush. There was, I think, historically high open interest on leverage all coins, which is like, I mean, literally just go give the casino your money, take your one free drink and leave.

Yeah, exactly. And so when you see that, it's important. So, you know, I'm following Bitcoin. You know, I look at the at the funding rates. I look at the premiums. I look at all of those things and you just don't see it. You know, the strangest thing that we have now is because the strongest indicator of money moving into crypto generally slightly is when Tether trades at a noticeable premium to the dollar, which is true today. I mean, it's only seven basis points or five and seven basis points. But that matters so bitcoin and tether is trading you know what forty five dollars below bitcoin in dollars because of the because of that tether premium tether goes to a small premium as opposed to par when there's more demand to get money into buying crypto could be all coins could be be Bitcoin, could be anything, but probably mostly all coins. It's still there. When that reverses or starts to reverse, that's when I always go back to the lookout below sort of thing. That to me is your best leading indicator. And so I showed you my screen, the stuff I look at. That's, of course, on my screen. Now, I'm not trading. I just like

to see what our clients are trading. But were I to be trading, being able to look at all of this stuff across all of the exchanges is an absolute must. I know there are a lot of people who trade who are probably watching this saying, oh, I didn't know that I could get all this stuff put together. And then there are other people who do it. But understanding Bitcoin tether, five basis points may not sound like a lot, but it's 50 bucks in Bitcoin, right? And so it matters. And so, yeah, Mike's 100% right. Price discovery right now comes on the margin from people who are trading on leverage, full stop.

Price discovery in the next ratchet where the macro level is, is coming from a different type of person and so on and so forth. So it's important to understand the market. So let's talk about that macro person, James, right? So we have this election, we talked about what's going on in Argentina. I'm not surprised. I think it's nonsense that they say Bitcoin moved $300 above 37,000 in the articles. I mean, that's just the implied price action of Bitcoin in any five minute moment. I don't think that had anything to do. I also don't think it's that huge of a deal yet that this guy's elected, right? Because when we see what actually happens, then we can see what price action is. But that is the real question that I have. What will it take from a government

like Argentina? What kind of move will be that next El Salvador moment, right? And that even, by the way, did not move price, if anybody remembers. El Salvador, literally, we were at Bitcoin Miami and price was kind of dropping in El Salvador, we had another on stage, Jack, announcing that it's going to be legal tender. That didn't even move. But at what moment does one of these nation state adoption announcements really wake people up? I mean, that's a good question. People don't take it seriously yet because the economies just aren't big enough to move the needle against the U.S. dollar. And that's really what everybody's weighing it against. You even heard it this

morning. The first thing that you read about is that the new Argentinian president wants to dollarize. And it's that Brent Johnson dollar milkshake theory where they're just going to start swallowing other currencies. So that's, so that's really hard to fight. So that's, that's number one, the dollar is, it's, it's, it's a, it is the behemoth. It's, it's extraordinarily difficult to fight. So I think you're going to have to have a number of, of, of countries adopt almost simultaneously for it to actually take hold and really impact price action. Really, the reality is that the first huge adoption that we have that is upcoming, that's on the docket for Bitcoin is a spot ETF. That's the first mainstream of adoption. And so what happens there is what Dave is talking about, that macro crowd that's trading it suddenly becomes the most important and the one that is most timely. And it's not just the on the margin traders who are, or the traders who are moving minute to minute. It's these massive amounts of capital that are

coming in because they actually have an on-ramp to do it. That's the difference. I think that that's really the major adoption. So when we talk about what Bitcoin does next year, as opposed to what the economy does. Well, Bitcoin may be uncorrelated because of that. It's not that it has become a store of value. It's that people are realizing that it can, and there's going to be some sort of price discovery as institutions do start to step into Bitcoin because they have the ability to. They don't have that ability yet. But when they do, that's when you get what we all call, Dave and Mike will know this, you're legging in. They will all leg into the trade. They'll have no choice but to leg into the trade. They'll have no choice but to leg into the trade. And that means getting a half a percent to a percent position

as they go and figure what the fuck this thing is. Why? Because they have no idea yet. And when they do, that's when the price discovery begins. And so you're going to see these massive moves. You're going to see this move that rips right through the all-time high and goes up through $100,000. And there's a lot of profit taking. And then it comes back down. And then once it goes through again, that's when

you have your real price discovery. But you're going to have these big, in my opinion, volatile trading patterns as this all plays out. Yeah. I can't wait to see the 69,000 retest as support after hitting 200. And I would like to explain graphically. Can I explain graphically why the spot ETF is such a big deal versus the futures ETF? Because every time this comes up, someone says, oh, well, retail and institutions can buy the futures ETF. So this is, let me just share this for a second. Same dashboard I showed a second ago. So this is just a different view.

You see this here? This is the spread chart of the November futures that expire this month, this week to December. Now, keep in mind, I put this in dollar terms just to make it easy for people to get the math. If you do the math at today's interest rate, the spread should be around 120 bucks. That's basically give or take where it should be. But you'll notice that anyone buying this calendar spread, having to move, sell the Novembers and buy the Decembers are paying somewhere around $280, potentially higher. That's pure loss on your portfolio. That's pure draft.

I mean, if you want to just graphically just show people the price of Bitcoin, the appreciation of the price of Bitcoin or performance versus the performance of the ITO. Oh, no, it's true. It's true. But it's easy to understand. If this should be midpoint $120 and it's here, that means every quarter you're trading it. Now, this is a volatile thing, and you can use algorithms to trade the spread in and out. Lots of people are doing it.

You can see how volatile it is. That's the other thing. When you want to have- When you're doing this, you're introducing that time decay that you don't have on actual Bitcoin. Right. You're paying for it. But you're paying for it. You're paying for it.

It becomes one of those things that, so it is a big deal. The spot ETF is one that you're basically saying, I own a claim on it the same way GLD, because you could always trade gold futures, right? You know, beforehand. But GLD and IAU and, you know, all the others were a very big deal for gold because it allowed you to own it without having to go through the pain and suffering of putting gold bars in a safe deposit box or gold coins in a safe deposit box. And I've done that in my past. I mean, I don't own very many boomer rocks anymore compared to Bitcoin, I'll admit. But before I moved into Bitcoin, I was a gold bug, right? And that's been a pretty good trade. And at varying times, depending on when you look at it, but performance was pretty good. The reality is you just need to understand that there's all these cross currents here. So you're, so James is right. It's a big deal.

Yeah. What I want to touch on really quickly, James is, you know, you mentioned, um, that eventually they'll get in and then they'll figure out what the fuck this is, right. As they're doing it, we now, whether they're relevant or not, we do have actual examples of the narrative, right? Like Kathy would loves to do have actual examples of the narrative, right? Kathy Wood loves to point out now, Silicon Valley Bank, right? We saw exactly what happened to Bitcoin price action. Whether it was a result of that or not, you can't prove, right? But I believe it was 19 to 25 or something the minute that we saw the collapse of Silicon

Valley Bank, right? And so when you start to see those examples in the real world, I think those things are actually much bigger than nation state adoption and all these, because that's what gets the big pools of money. That's what gets the wall street guys saying, buying into the narrative that you just mentioned, maybe this is a hedge, right? And it erases all the times when they go, it wasn't a hedge when it went from 69,000. Because that's a direct derivative to the the fiat system that people are locked into here and that's why right so that's why it but remember bitcoin is not us

centric i mean bitcoin is around the world and that's the and when you when you have economies that that are collapsing and you've got uh you know citizens that are just trying to protect their time their their own their own energy that they're trying to store that in a money they can trust. Well, that's when they're going to tether. That's when they're going to Bitcoin because they can take it with them anywhere and it's not being inflated away on them. But that's something that we don't. Yeah, we're suffering. We're suffering from six to, you know, 10% inflation, depending on what you're looking at when. I mean, these people are suffering 180% inflation. You walk around Venezuela, Blair is in the street. It's just, they're, they're just the,

they're just in the streets because they're kind of worthless, you know? So that's, that's, that's a difference. Mike, you were going to say something. I want to hear what you were going to say.

Well, I got, since you said that, I'll just piggyback the headline I have right on Bloomberg is Bitcoin nerds, all time high in Argentina after Javier Melies wins presidential election. The key thing I want to point out is some of the math of futures that Dave was talking about. Remember the way futures are priced, it's the price of the cash plus what it costs to carry that cash. So the basics for all futures curves is gold. Gold, the one year out future right now is about 6% above the current future.

Why? Because that's what it costs in interest rates. That's between 5% and 6%. So right now, we don't have Bitcoin futures, listed futures that are one year out that we might have in an exchange. So with the price right now, $37,000, a future that's a year from now, expires a year from now, should be $39,000. Just priced on what happens with, and that's a year from now, expires a year from now, should be $39,000, just priced on what happens. And that's what Dave pointed out. But I think what you both point out is, to me, this ETF cash launch in the U.S. is to be the end of the beginning for Bitcoin in a good way, meaning now it's completely legitimate. single sovereign wealth fund hedge fund family wealth office you know the big money can now

finally get exposure with less of that risk that it's something that they can't lose money on you know when you can't lose money on so you can't so to me that's the tilt it's the um it's just it's so widely known now i mean there's the things we pricked in a while but the key thing you remember about from a futures and dribs, they can be great indicators. I always use futures as they were tremendous trading vehicles, but Bitcoin is bar none. So I was kind of confused by futures on Bitcoin. It's just kind of more ways to get in trouble. But either way, Bitcoin is a great trading indicator. And the key thing to remember is the spot ETF in the U.S.

Yes, I agree. But it's the end of the beginning. Now, what's going to happen? So here's what I think is going to happen. If markets continue to rise on this rising tide, Bitcoin continues to outperform with lower volatility, less so than it has in the past. In the past, it was 10, 9, 8 times of volatility. Now it's three or lower. So it's just going to continue migrating to mainstream. The key thing was if we get a normal overdue two, three, maybe five-year period of underperformance in the stock market, that's where we're going to see what will happen.

And if Bitcoin starts showing it's going to outperform in the environment, there's not going to be stopping. But it hasn't shown that yet. I think it just hasn't had the chance. And I guess we will see. Yeah. So, guys, thank you so much. That was amazing. I can't wait to see what

actually happens in Argentina now. The guy gets into power and we'll see if these are hyperbolic statements and he gets in there and understands the reality and we stop hearing about the dollar rhetoric and the Bitcoin rhetoric and the central bank being a scam, which often happens when politicians actually get into power. But I hope that he does shake it up and that it is helpful for us. Guys, that was awesome. It's so great to be back after a break. Mike, James, Dave, everybody follow these three guys. I will be back tomorrow. I have Stacey Worden from Algorand. Last week on Tuesday, my guest, Invest Answers, made a passing comment that Algorand was a CBDC coin and they were building CBDCs. I didn't push back, honestly. I might have even been drunk. I have no

idea. I wasn't. But Stacey sent me a very, very strong worded, angry message about my journalistic integrity that I did not push back and know that that was not the case. So I just said, so come on the show. And I've had her on many times. So we're going to do that tomorrow. We're going to talk about what's happening with them and why we were completely, apparently wrong. Guys, that's all I got for you today. I will see you tomorrow.

Thanks, gentlemen. Bye. Bye. Let's go.