The Wolf Of All Streets - Here’s Why Bitcoin Will Pump In 2024 l Macro Monday

Episode Date: December 26, 2023

Join Dave Weisberger, Mike McGlone, and James Lavish as we break down what's happening in macro and crypto! Dave Weisberger: https://twitter.com/daveweisberger1 James Lavish: https://twitter.com/jameslavish Mike McGlone: https://twitter.com/mikemcglone11 ►►TAP A super-powered money app - an all-in-one investment, money, and trading platform. Coming to the U.S. soon, with tons of bonuses. 👉https://referral.withtap.com/scottmelker ►► JOIN THE FREE WOLF DEN NEWSLETTER, DELIVERED EVERY WEEK DAY! 👉https://thewolfden.substack.com/   ►►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  ►►TRADING ALPHA READY TO TRADE LIKE THE PROS? THE BEST TRADERS IN CRYPTO ARE RELYING ON THESE INDICATORS TO MAKE TRADES. USE CODE ‘2MONTHSOFF’ WHEN VISITING MY LINK.  👉 https://tradingalpha.io/?via=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/   ►►NGRAVE This is the coldest hardware wallet in the world and the only one that I personally use. 👉https://www.ngrave.io/?sca_ref=4531319.pgXuTYJlYd ►►NORD VPN  GET EXCLUSIVE NORDVPN DEAL - 40% DISCOUNT! IT’S RISK-FREE WITH NORD’S 30-DAY MONEY-BACK GUARANTEE. PROTECT YOUR PRIVACY! 👉 https://nordvpn.com/WolfOfAllStreets   ►►COINROUTES TRADE SPOT & DERIVATIVES ACROSS CEFI AND DEFI USING YOUR OWN ACCOUNTS WITH THIS ADVANCED ALGORITHMIC PLATFORM. SAVE TONS OF MONEY ON TRADING FEES LIKE THE PROS! 👉 http://bit.ly/3ZXeYKd  Follow Scott Melker: Twitter: https://twitter.com/scottmelker   Web: https://www.thewolfofallstreets.io   Spotify: https://spoti.fi/30N5FDe   Apple podcast: https://apple.co/3FASB2c   #Bitcoin #Crypto #MacroMonday The views and opinions expressed here are solely my own and should in no way be interpreted as financial advice. This video was created for entertainment. Every investment and trading move involves risk. You should conduct your own research when making a decision. I am not a financial advisor. Nothing contained in this video constitutes or shall be construed as an offering of financial instruments or as investment advice or recommendations of an investment strategy or whether or not to "Buy," "Sell," or "Hold" an investment.

Crypto markets have been absolutely exploding outside of Bitcoin, which is seemingly consolidating under the 44,000 level, really around 42,000. Not a surprise now that things are a little bit boring as we wrap up the year, but we are coming into 2024 and there are a ton of positive catalyst tailwinds, specifically for Bitcoin, but potentially even for other markets. Now, we don't right now have our favorite bear with us, Mike McGlone. So this might have a more bullish kind of leaning than you would expect from a macro Monday on a Tuesday. I'm really excited that we're back. It's been

about nine, 10 days since we did a show. I've got James and Dave here. Maybe Mike will pop in. Let's go, guys. What is up, everybody? I'm Scott Melker, also known as the Wolf of Wall Street. Before we get started, please subscribe to the channel. Hit that like button. That was one of my clunkier intros ever. You can tell that I'm rusty and that I've been badly falling down a mountain behind my Olympian wife for the last week. I told you guys this story last year. We go to Snowmass now every year. It's the third time we've ever gone.

I'm pretty proficient for someone who's been on a mountain 14 times, but my wife is doing like the slalom courses down the Mogul Blacks after skiing 14 times and literally waits for me at the bottom of the mountain for 12. I mean, it's the most frustrating thing in the world. I just cannot ski with her. It's so incredibly annoying, but I'm very proud of her. It's amazing. But that's what I was doing for the last week. We were skiing with the kids. Actually, the last day I even ended up chasing my eight-year-old down mountain, who we found out could do all the big blues and had no idea. So really, really an exciting week. Merry Christmas to all of you. I will say anecdotally, something that I found, I had quite a few people come up to me while we were out in Snowmass and Aspen and say, hey, man, listen, I'm a fan of the show. A lot of the ski instructors watch the show. We found that out.

So the first day I was there, two of them said, hey man, we watch every week. But what did they specifically say? 80% of them, I did a count, said, hey man, I watch Macro Monday. They know me specifically from this day and watching or listening to this show and not the rest of my content at all, which I found really astounding and really a testament to how much we've built and how quality the content is here on Mondays. Also want to welcome, I know you guys have been waiting, Misha is back. He is out of the United States system, at least temporarily, and out of the United States. He is here with us today in the wings, meaning that I don't have to come up with bad titles and thumbnails myself or make sure that people actually get their calendar invites. You don't want to hear about any of this, but here

we are. We're back on Macro Tuesday. I've got Dave and James. Good morning, gentlemen. Thank you for being here on a holiday. I don't even know what to do without McGlone. I was ready for him to tell us about commodities crashing, Bitcoin being a leading indicator, and we're all dead. But instead, we went with Bitcoin will pump in 2020. Yeah, well, as we get into the new year, we'll have to film our steak dinner. We're trying to figure out a good Brazilian churrascaria in Miami for the $40,000 pump. $40,000 dinner, Mike. $40,000.

That's a $40,000 dinner. Sorry, Mike. Don't do a $40,000 dinner. I don't have it. We're going to be drinking Screaming Eagle out of our shoes. It's going to be great. I think that the one thing that Mike would point to, because he, you know, he was in a, I read him over the weekend, he was talking about, you know, commodity prices again. And, you know, what it indicates to the economy and the bond market's basically saying the same thing. And if, in fact, all you did was you looked at the bond market and you saw this ridiculous curve. I mean, it is, it's ridiculous. I mean, you have, I mean, I don't know, how else would you describe it, James? You know, three months at 5'3", and by two years, it's a point lower, and then it's

basically flat out to 30 years. Yeah, it's bizarre. It's a broken yield curve. Let's put it that way. There's no other words for it, Scott. I mean, I have a word for it, and everyone who watches the show knows my opinion. I use the word, this was Sesame Street, it would be, the word is, or Jeopardy, or whatever that password is, the word is manipulated. Because obviously, you can't look at this market and say that it makes any sense. I mean, it just makes no sense. The only sense it makes, Dave, is that people expect and widely expect for rates to come down. And that 10 year is the benchmark for that, right? So they expect rates to come down next year and the 10 year has come down further. However, when you look at the 20 and 30 year rates are a

little bit higher. So it feels like we've got a little bit of rate premium coming back and people are realizing, oh my God, we are going to have a deluge of bonds come to market. And now that the reverse repo is getting drained, where are they going to go on this curve? And are they going to start going out on the curve when rates come down and how much are they going to have to issue? So that could explain part of it. But again, that just means that we've got a system that's broken. I mean, it's clear. Yeah. Go ahead, Dave. Yeah. I was just going to say, look, the budget deficit financing at this point, if they could dump the whole damn thing into the 10-year, they would at 4%. There's no doubt.

No doubt. Which is how much can they without things breaking? That's really the question. I mean, let's be clear. And, you know, look, I was the one calling for it. You know, we missed last week, but I was the one calling for it. I kept saying that going into an election year, there's no effing way that the Federal Reserve is going to stay restrictive. They're going to at least go to neutral, if not during an election year. I've been saying it all year long, and it's been my main reason why Mike and I don't agree on macro. I mean, the reality is I do agree that we have serious excesses that have yet to be worked out of the economy. I do agree that fiscal situations, not just in the US, but certainly in the US, are unsustainable. I agree

with all of that and what he talks about. Where he and I start disagreeing is his notion of consumer, not disinflation, but deflation, which I think is a joke. I think that you can't print this much money and have deflation. What you can have is commodities. If in fact, by encouraging too much production, commodities go down. Yeah, that happens and things that are cyclical, but disinflation is not deflation. It means your rate of change upwards is slowing. And James has made this point many, many times. Some of the best threads on X have come from James's explanation of how completely screwed up that is. So, I mean, we're in a situation where trust in governments is reaching, every time we talk about this, it reaches new low. And so that brings me back to

Bitcoin in 2024, which I believe is set up to be extremely volatile for a lot of reasons. And I want to talk about some of those later. Yeah, I just want to talk about that yield curve really quick. I've showed this chart a million times. Obviously, you get the un-inversion of the yield curve or the normalization. Then you get the Fed pivot. So the yield curve is blue. Then you get the Fed pivot. So the yield curve is blue. Then you get the Fed pivot in red. It flattens out. That's sort of the pause that we're in right now. Then you generally get the stock market correction. As crazy as this is, how long we've been inverted, how deep the inversion went, we still are in that same pattern where sort of the Fed flattens out the Fed funds rate, and then maybe we get the uninversion,

right? It flattens out, then you uninvert sort of at the end, right at the pivot. You know, you uninvert around the pivot, and then it's up. So this could still continue to play out this cycle, even as kind of crazy and strange as it's been that we've been uninverted for this long. But to your point, in those past cycles, you never saw this volatility in rates. I mean, this is insane. Yeah. Especially on a percentage basis. I mean, yeah, particularly there. But I mean, I think that what people need to understand is we are in a situation where the expression that a lot of people used to use was pushing on a string. Not quite that bad because they get some,

you know, some juicing of the economy from it. But the truth of the matter is they're doing everything they can to juice the economy and keep, you know, we're at relatively low unemployment. Admittedly, it's underemployment because of participation. And a lot of people are working two jobs. We are at the tail end of a cycle where by monetary policy being what it is, where the wealth gap has been increasing. Not necessarily income gap, but the wealth gap. There's actually some pretty good studies out there that say when you take transfer payments into account, income inequality isn't really that big of a deal. But the wealth gap is huge and it's getting bigger because pretty much all policy prescriptions move into asset price valuations. Whether it's housing becoming unaffordable, stock markets at high multiples, it looks like it needs to correct. The question is,

can it correct in a situation where all policy prescriptions are trying to goose them? That's the difficult. So it's sort of like, you know, you talk about headwinds and tailwinds. It's if you're trying to prioritize capital, you can prioritize capital. And that's what we're seeing. I mean, can it correct in an election? I mean, can it correct in an election year? We all know that literally if everything dumps from here, the election's over for the Democrats, period. Right. That's not a political statement. It's just a statement, I think, of fact. So I guess we have to decide whether the Fed is a political organization. But we know the Treasury is a political organization.

And I think that fiscal policy actually right now is driving the train much more than monetary policy. Yeah, look, I don't I don't think that I don't think the White House is calling Powell demanding things. I think they're just very vocal. And there's a lot of behind the scenes pressure coming from many different angles of the executive branch. It's not it's not just coming from the oval office there's just there's a lot of pressure that that comes politically and i mean look powell was was appointed by uh a republican you know so it's not i i don't think that he is particularly political i just don't that that's not the way i see it i see he's trying to do a job. He's trying to, to, you know, um, establish or reestablish credibility in the fed. And he's got a tough job. I mean, I wouldn't want

his job as much, as much heat as we give him. I wouldn't want his job. It's terrible. What about yelling? Oh, well, the thing about yelling, what I don't understand, it's very frustrating for me, is that she knows that she's gaslighting and lying. She just knows it. But when you step back and you think, okay, why is she doing that? She's doing it because she doesn't have a choice either. She's also backed into a corner. She has to retain credibility in the treasury. She must.

She must retain credibility in the treasury. She must, she must retain credibility in treasury. If that means that she's got to tell some white and just purely black lies, then she, she will. But, you know, um, it, again, it goes back to where it's fiscal irresponsibility at the very top. The treasury has a job and their job is to facilitate the spending of the US government and that budget. The Fed has a job and that is basically is to make sure that that we retain credibility in the US dollar. I mean, we talk about they have a they need to make sure that inflation is in check and that uh you know that we have we have price stability but why what is that that that all that is is it it go back to first principles the first principles are the fed needs to make sure that we retain credibility in the dollar

and the treasury needs to make sure we retain credibility in the in the in the bonds in the dollar and the treasury needs to make sure we retain credibility in the in the in the bonds in the in the government bonds and they're both being played politically at from the top of fiscal irresponsibility so that's you know it anyway that's the way i see it maybe i'm a little bit more of a realist but um i don't i don't think there are backroom meetings going on i think that everybody's scrambling trying to do a job that very difficult to do and i don't believe that any of them are going to succeed particularly well so so i'm a little bit i'm a little bit more tinfoil hat than james is uh i think that when you have a sitting treasury secretary writing op-eds in the journal there's the old will William Shakespeare line, he thinks thou doth protest too much.

And that is a ridiculous amount. But that was basically, that editorial was basically sounds like the line, well, why don't you love me? I feel like this was like, it just seemed ridiculous's, it just seemed ridiculous. Yeah. Oh, yeah, everything is great. You should be happy. And of course, people who read the journal are demographic who are probably saying, yeah, things are okay. People who don't read the journal are like, what the hell are you talking about? And, and that's really kind of amusing. But the fact is, I do not think that Powell is political in the sense of he wants to advantage Biden in any way. I think that he's trying to maintain independence.

Frankly, I've said it before. I think he's done, under the circumstances, as good a job as one could possibly imagine. I mean, look, he's got the long end of the curve down by one percent you know in in what is it three months james when we did it five percent i mean one percent down but do we give him credit for that or i mean well i mean it stopped with the rates because now they're just pausing so i guess we would have crucified him we would have crucified him if the long reach went to six percent that's true i i just i find you gotta give him i agree i think he's been consistent i think he's been consistent in his language he's done what he said i will never get past the the the problem the small

little fact that he created it in the first place oh i didn't say yeah you get a whole lot of credit for you don't get you don't get a Yeah, you don't get a pathomask. I agree. I mean, the fact that they were behind the eight ball, that they kept monetary policy, that accommodated for so long as the government was encouraging banks to buy long bonds is, yeah, that is horrendous. But if you look over the last year, if he had parachuted in a year ago, I would say he's done a phenomenal job. He didn't parachute in over a year ago. So, OK, I think that the criticisms are fair. He's flying the plane.

Right. I mean, you know, the plane is, you know, he basically was put into an airplane that was a four engine plane with one engine running. And he's managed to keep it going and it looks like i don't believe he's going to have a soft landing i think that that's that that's fantasy i mean i the entire notion of that is just stupid yeah i think the question then becomes is it like a soft recession you know i like or have we been in a recession already and is the rest of the world in recession i think the think one of the bigger problems at this point is that we've absolutely annihilated any fixed definition of what a recession is, right? Even when we went into one by the definition of no growth for consecutive quarters, et cetera, then they just

said that's not the definition of a recession. So I think they'll just continue revising that slightly anytime. But that goes back to the first principle. It's all narrative, all narrative, all narrative, all narrative. Yeah. If you think about it this way, I was thinking about it over the holidays. I was thinking about how America, and obviously things are happening much faster than they used to, how the collapse of a mercantilist empire looks like what America looks like today.

So, you know, as little as 50 years ago, we were a manufacturing powerhouse. We had all the resources. And if you think about steel, and obviously you know where I'm going with what happened with U.S. steel. But, you know, think about it. We are one of the only places on earth with coal and iron ore and access to shipping lanes and, you know, all in the same place. And we can't make steel competitively in the United States. Think about that. That's not even, that's not, I mean, we have huge advantages, right, in order to produce steel. We're literally, I mean, if you look at where Pittsburgh is and you look at where iron ore comes from and where coal comes from, I mean, literally, we have those advantages. We can't do it anymore.

Forget electronics. It wasn't that long ago that we were reliant on China for manufacturing masks because people mistakenly believed that that was going to somehow protect you against a virus with nanoparticles. But, you know, whatever. The fact is, is we don't make stuff anymore. We've hollowed out manufacturing. It's no different than the British Empire, which was built upon mercantilism, bringing everything back. So we're like the overlords and trying to manufacture elsewhere. That is a real problem. And people understand that. And what we're seeing now is now the standard of living is rising in other countries which are producing it. People here are noticing it, right? Your standard of

living that we've imported for years and years and years starts to reverse. That's the trend. That's where all the angst is coming from. And the solution to that isn't going to be more mercantilism, i.e. more easy money, make it cheap for companies to offshore, make it cheap for companies, cheaper than it should be, to automate and replace jobs. And that's why you're seeing calls for, in Canada and, you know, it's fringe candidates, but, you know, universal basic income. What is universal basic income? Well, basically, it's honestly, it's something that makes sense if you think about the implementation of a negative income tax. But what it is is saying, listen, I know we don't have enough jobs for people. So we need to make sure that everybody has a standard of living.

That's what it is. And think about what that means. Now, these are all big meta questions. But as you look at the markets today, we're sitting at a year of a presidential election, which is as, excuse me, I guess we'll lose our PG rate or G rate. we have the most fucked up election we literally have two candidates which neither which literally the country neither one has it do people want to vote i mean if you actually did a a simple vote 80 percent of people down the middle 80 percent of the middle would would be like i don't want either can either of them everybody's voting against somebody with their nose plumped. Right. And it's insane, right? And so we have that because we have this calcified system.

And the people at the top, as you like to call it, the gerontocracy. And as I just turned 62, I feel like, oh, my God, am I becoming part of the problem? No. I look at myself in the mirror and I go, you know what? I still hate these people. So maybe I'm not part of the problem. But, you know, the fact is that we have this gerontocracy sitting on top with ridiculous rules. I mean, you know, we haven't talked about, you know, all the stuff that involves crypto, but, you know, it really matters, right? You know, there were some great

posts. I mean, Chris Perkins from CoinFund had a great post about, you know, why he served in the military and why crypto actually matters. And there's lots of good things that you can talk about and what we all care about. But at its core, I'm in this because I believe a new financial system is necessary that's egalitarian, that's open to all, and that doesn't have these calcified institutions kind of sitting on top of us. And if you want to know why am I bullish on Bitcoin and bearish on the stock market, you know, so that I agree with Mike and a lot of what he says, I'm bullish on Bitcoin because I think this cycle is the one where it breaks, where that starts to dawn on more than just us fringe lunatic tinfoil hat types. That's why.

Yeah, that's great. that was great go ahead james if we go back to what you were talking about um and if you could you know what uh can you pull up a the uh the tweet i mean a thread on december 12th just just when you're talking i'll find it yep yeah it is a thread on the treasury you were talking about well who how did they get the rates down? How did they get the rates down? You know, quite honestly, we had that terrible auction we talked about, that 30-year auction. It was absolutely abysmal. And the treasury just about panicked, you know.

And so, flash forward about a month month and you have the next auction. And yeah, so if you can just make that bigger so we can see. Please, Scott. Yeah, right there. No, you're good. This is what I do. And then go down to that little chart. So, it was kind of masterful what they did. If you look at the December 12th, all the way to the right, and you look at the breakdown of this is the primary dealers up at the top.

You've got your domestic bids in the middle, and you've got your foreign bids basically at the bottom, right? Well, if you look at November 9th, that's when the auction was absolutely terrible. Yeah, there you go. So you could see that the primary dealers had to take 25% of the auction, 24.7% because there wasn't demand, period. They were stuck with it, right? That was what everybody was freaking out about. You could see that the foreign demand fell from 65. That was 75% earlier in the year. So it went all the way down to 60%. I mean, this is just awful, right? Then flash forward to December 12th. Look at how great the numbers are. The primary dealers only took 14%. And then the domestic bids were 17% and foreign bids were back up to 69%. Wow. Look at that. What an amazing auction. We're back in business. No problem. Everything's good, right? Now look at the numbers themselves.

The exact same demand, 14 billion, 14.3 billion, 3.6 billion. And so all they did is dial it back. They dialed it back $3 billion. So the dealers weren't left with that extra $3 billion. They knew exactly what the demand was. So this is how the rate, this is literally how the rates have come down. It's kind of like they've snowed the market. And I can't believe nobody's, nobody's looking at this and picked up on this. There are a lot of reasons that rates have come in because of the Fed job and all that, no doubt about it.

But this is a big deal here. So the question for me is, and going back to Dave's analysis of we're heading into a massive shit show this year. Well, we haven't even gotten to some of these auctions that we're going to need after all of them, the deficits we're running in the last month are massive, you know? So when we start having these auctions, like where's, where's it going to go? Where's this money? And I'm not out there and I'm not tinfoiling saying nobody's going to buy us bonds anymore. I'm saying that we're, we're pushing the envelope for the marginal balance sheet to own these bonds. And now here's the funny thing.

At the same exact time, you're going to have a Bitcoin ETF come out. And if you're thinking long, long term, if you're a money manager and you're thinking long, long term, do you want to own a 30-year US treasury not knowing what inflation is going to be in the next 10, 20 years? Or do you want to just grab 1%, 2%, 3% of an asset that cannot be inflated, that can't be deflated away from you, a Bitcoin? You're going to start having these conversations. Not this year, I don't think, but you're going to start having these conversations because of this problem eventually. I think that when I listen to you guys, it just boils down to Mike being right. Inevitably. I think we all know corrections, depressions, recessions eventually come, but being horribly impossible to determine the timing

or to determine how effectively they can kick that can down the road. Maybe we don't know all the tools they have. I mean, you just showed us one, right? Yeah. The headline numbers come in great, great auction, but no, they just offered 3 billion less, right? And so how many tools like that do they have in the background that they can use to make sure that this at least kicks past the election or into 20 whatever year they need to be in before they allow the economy to crash ad infinitum i mean right but but if you believe it's ad infinitum then we can just be bullish and ride it right until the wheels fall well i've been saying this for a long time. Davis was saying, you know, this can go on for a while.

Trying to determine when a recession is going to occur is extraordinarily difficult, as we've all seen. And that's why, you know, we always say it. In the chart you just showed, Scott, of how the markets roll over after the pause, after the un-inversion that it's so difficult to time that why, because this economy is a mash, massive ocean liner. Like when it turns like, okay, that's it, man, it's going this direction. And then to stop it, you know, like you, it always over, over state, you know, the fed always overstays their, their welcome. And we always overcorrect. It's just the reality. And so that's why it maddens me when people look at unemployment and they say, yeah, but everybody's got jobs. Everything's great until they don't. And that happens so quickly because of those turns.

Okay. Well, go ahead, Dave. And then Dave, after you go go respond to that let's actually talk about bitcoin because i know we want to get into all right i would just say a very simple point if this was not an election year i would think that this would be one of the roughest springs pre-tax season we would ever be facing since it feels so much like 2001. We had a big year, surprising people, and valuations got crazy. We had this, you know, it's, and what's the pinprick? The pinprick is people who need to sell stuff to live, waiting. I mean, I don't know about you, I own some stuff that I have no interest in selling in 2023. But when the calendar flips to 2024 and I have to take the capital gains, at least I have a year to pay taxes on it.

Right. You know, and I don't think I'm alone. I think there are a lot of people that are going to have taxes owed. And when that those when the assets that get sold for taxes happen in March i'm not sure there's bids uh in this environment and so i think that we could be looking at a pretty ugly march now understand and even in 2001 yeah there was a a monumental crash of the internet bubble you know and all those those those stocks got crushed uh but then it rallied in the summer right back to it before it started sliding into ignominy. I mean, I'm just saying this is I'm just saying that there is there's a setup here that doesn't look particularly good. But being an election year and being what I've said, I just don't see, you know, I think the plunge protection team, the PPT. And for those not old enough to know what that is, you can go, you can Google it. But basically, it's the theory that

the Fed, the Treasury, and the big banks don't allow more than a 20 some odd percent correction before they go in and start buying S&Ps and don't tell you that they're doing it in order to keep, to arrest the downside movement. So whether or not that's true or not is one of the great debates. It's sort of like the whether or not gold is manipulated down debate, right? You know, a lot of people will say that. Anyway, my point here is it's kind of an ugly setup where we've been having this rally and the underlying stuff has been fundamental. So if you think of it as a metaphor, it's like a bridge and the pins are getting knocked

out, but the bridge is still there. And everything's just priced to perfection. I mean, it's just, you know, like if you have any hiccup, like, God, how many times have we seen this, Dave? Where you're just like, well, the entire, like the whole herd is heading this direction. And it just doesn't, it feels something just feels off, you know? And of course we can point to these different things. Who knows what happens and what the event is, but we don't get through these years. Forget about even I mean, and we have this election, this just shit show of an election.

There's just I don't see how we get through this year without hiccups. I just can't see it. I'm not being negative. I'm being realistic. I'm just like, how do you how do you think we're going to get through this year without some sort of event? I mean, you've got tiny global things going on. But on the other hand, I just want to be clear. I mean, the basic economic indicators are all still quite healthy. I mean, I haven't talked about it in a while, but my favorite one was the Baltic Dry Index, which in December went nuts. I mean,

literally nuts. It was trading around between a thousand and twelve hundred most of the year coming into the fall it kind of got to two thousand that came back to fifteen hundred it went up to thirty five hundred and the volatile and this is this is how much shipping you have i mean it's freaking nuts yeah well then that that goes back to the you know the the uh the saying that we take that the market takes the escalator up and the elevator down, right? But maybe one of the big things I think that everybody underestimates just how much liquidity is not just out there and was pumped into the markets, but how it's still leaking in,

how it's still leaking into the markets. And so that liquidity is allowing for a much softer landing in reality, but I still do. I cannot get past the fact that we just don't have soft landings. It's just, it's extraordinarily different. So how much is that liquidity going to hold up the market before we start seeing that turn of events where you have just a kind of acceleration of bankruptcies and layoffs and margin pressures? So if you take it back to Bitcoin, and we do need to talk about that. It really is fascinating. It really is fascinating because Bitcoin is not a U.S. phenomena, has never been a U.S. phenomena, but is about to become more of a U.S. phenomena. And that's kind of what's going on here, right? Yes, the percentage of, quote, the smart money in Bitcoin in the U.S. as opposed to the rest of the world is the highest because it's a very there's just very few people. I mean, think about it. You know, we know what are there, 19 million Bitcoin in circulation, 40 some odd millionaires in the world.

Do the math. You know, it's like it's not it's not widely held among people who have wealth. It's widely held among people who do not have traditional wealth. That's a big difference. Yeah, it's a huge difference. And it's a ground. It's yeah, it's a grassroots movement that's moving upwards. And so they don't need it. I mean, yeah, like I know plenty of people on Wall Street who are just like, yeah, Bitcoin's, you know, I don't they don't need it i mean yeah like i know plenty of people on wall street who are just like yeah

bitcoin's that you know i don't they don't need it they quite honestly you know and that's the problem well that's not the problem that's the challenge for bitcoin and that's why this year is going to be so important because suddenly it's going to be on their radar as something they cannot ignore anymore they just can't ignore it they can't say well i can't own it because it's just too difficult i don't want to take custody or i can't take custody. They can't say, well, I can't own it because it's just too difficult. I don't want to take custody or I can't take custody or I don't know how to settle it. Now it's going to be like, why not? It's offered right there by your prime broker.

Or I want it in my 401k. I wonder if that solves the- I want it in that option in my 401k. Why can't I have that? Yeah, I guess my question there is, does what you just described actually solve for that demand? If they're dismissive of it and they say, I don't need it, do they even care that they get an ETF and it makes it easier? I think they will eventually,

but that does make me question slightly the initial demand. We know that this is going to give everyone in America the tool to get exposure. The question is, will they care? Would they have not found a way already? I do not think that we get the approval and Bitcoin goes to $120,000 the next day. I just, that's not the way it's going to happen. I do believe that it's kind of,

I don't know if you saw that meme or the video that Sven sent out a couple months ago of the sheep just kind of going through the gate. And there's like two or three tickle through and then like four or five. And then all the other sheep are like, oh, we're going through the gate. And then suddenly you've just got a flood of sheep going through the gate. It's going to be like that where you start getting the realization that this is real, it's out there, it's easy to trade, it's easy to settle, and you're going to have the people demanding it. You're going to have employees demanding that it's on their sheet as something that they can check off for their 401k. They want to be able to put this in there. And just even a little bit, just 1%,

just let me put a little bit in there. That's going to happen. And then you're going to have RIAs. Thousands and thousands and thousands of RIAs are going to be like, well, my investors have been asking for this and now I have a way to get them in this. It's so easy to just- Now I have a way to make some fees getting them into this. That too. Absolutely. 100%. There's nothing wrong with that. I think, but they, right, they have a fiduciary duty. They can't tell their clients to go to Coinbase. I mean, but the, you know, I do think it's more about what they can make money advising, and if they can make money advising it now, that's going to be huge. By the way, tomorrow is two weeks until the D-Day, I guess,

for these ETF approvals on January 10th. Let's talk about two things. First, I want to answer a question that one of your subscribers asked on X this morning. They said, well, why is it that Bitcoin has been stuck in this trading range? And that's an easy answer. And we've seen this easy answer multiple times. And I've talked about, you talk about markets. Now, I always hate oversimplifying, but let's oversimplify just to make it simple. I like oversimplifying.

So at the end of the day, in in market cycles, you have under you have long term buyers and up cycles, you have long term buyers, which causes grinding upwards and you'll blow off speculators and the speculators of the hot money and the speculators get impatient very quickly. So when the long-term buyers take a pause, which is what's gone on. So people were buying Bitcoin from the 20s into the 30s. And when it got into the 40s, the long-term buyers like, yeah, okay, well, you know, getting to the end of the year, I'm going to go get my GI Joe with the Kung Fu grip, you know, yada, yada, yada. And I'm kind of done here and we'll wait. We're positioned for, because everybody, anyone who was the smart money accumulators knew that all there's been no new news on the bitcoin etf side everyone kind of knew it was there so at this point the approval is priced in not the the ultimate reaction to the approval not the demand not the demand people don't know what the timing will be. And we're going to talk about that in a bit. But the fact is, every time in the history of Bitcoin, and now it's been nowhere near

statistically significant enough because it's only three or four cycles. But the fact is, when Bitcoin pauses and Ether pauses, then the smart money or the fast money finds the next hot thing to rotate into. And of course, this time it was Solana. It was actually something I own. So I was like, okay, well, that's kind of cool. Usually I'm looking at this stuff saying, oh, it's some dog with hat coin. And I have nothing to do with it. But the reality is, is it's just nothing more than that. I mean, as long as Bitcoin is kind of holding that 42 level, it's right where it should be. And the longer it consolidates there, and I said this two weeks ago, and I said this four weeks ago, the longer it consolidates there, the stronger the post, not approval,

the post launch move is likely to be. The post approval move will be something, and a lot of that will retrace. And it may actually- That's like the halving. It's like there's some news happened, but nothing happened. Nothing's happening on the surface. If you want to see, if you want a little bit of an indicator, and this is one of the indicators of whether or not institutional money is going to come into these ETFs, just take a look at how

MicroStrategy, Coinbase, GBTC, how these have been trading. And they have been trading at a high beta to Bitcoin as it's come up. And the reason is they know that there's demand there and that these are going to all benefit from it. And so, you know, it's a soft or it's a little bit messy, but it's a real indicator, you know? Yeah. But go ahead, Dave. I can see you got something. No, I just maybe I'm blind to what's happening here.

First of all, to what Dave's point to answer that question, nothing goes straight up forever, right? I mean, you can look at any chart anywhere of any asset, even if it goes parabolic, you have very long periods of consolidation and you want that. And frankly, you want to see that sort of selling happen so that everybody's not just waiting. It's very healthy to see it happen in that way. So I don't think that's a surprise. We're also in the middle of the holidays, right? I just don't see at this point tremendous headwinds unless we get some major black swan or something we're not expecting for Bitcoin specifically. So I don't disagree with Mike McGlone that if we get this recession or depression or great reset, I just don't see that happening in the next two or three months at this point, right? Because we've discussed that they can kick the can down the road. That could do it. I'm not... Honestly. You could have a credit event. You could have the repo market freeze up. You could have something that could happen, but that's a V sell-off and recovery. Exactly. So then that's a dip to buy, in my opinion. But if you're looking at an election

year, the four-year cycle in crypto, the halving, the ETF approval, the four-year cycle in everything that I discussed with Raoul Pal, repricing the debt, all these things, it just seems, and I hate to be like this, but it just seems like there's not many obvious things that should send Bitcoin back to lows or a massive 80% correction. It just seems like time for this thing to slowly grind up and max pain might be in that direction. Maybe I'm missing something. No, I think that everyone keeps saying that and that always makes me nervous when that happens. Yeah, me too. It makes me nervous, except when you actually ask people, that's what people are talking about.

Look what people are doing. There are a lot of people out there, I mean, lots, who are like, ah, this rally is terrible. It's going to be a sell the news event. And maybe it will. They sell the news event because people don't truly understand approval doesn't mean they go live. I mean, the curveball the SEC threw people, and this needs to I mean, the curveball, the SEC through people, and this needs to be discussed, the curveball of cash creation versus- Oh, yeah. We need to clarify that for people.

It's not great. I mean, even Matt Hogan came on, he's from Bitwise. So I guess he's talking about, he said, listen, any approval is a win, any approval is good, but it is a very big difference. Right. So let me explain the difference to you. I go back with ETFs a long way. For people who want to understand my history, I used to be in program trading for years and years and years. And actually, the second patent granted in ETFs was for something called Opals, Optimized Portfolios as Listed Securities. Back, you can look it up.

It's a long time ago. But I invented the trading methodology for that. So- 1927. No, it's not that far., but I invented the trading methodology for that. So- 1927. No, it's not that far. I remember it. I was doing the Charleston in a club drinking my legal alcohol and Dave was creating automated trading systems.

If I was an islander, you don't see me pulling a sword out of my back. Go ahead, old man. In any case, so the old guy's going to tell you. Look, the fact of the matter is almost every ETF out there has the following players. They have the issuer, which is the fund. Sometimes they have an advisor, but whatever. They have a custodian who holds the assets. Then the issuer qualifies and accepts some number of what's called authorized participants. Those authorized participants are generally Morgan Stanley, Goldman Sachs, Jane Street, Citadel, et cetera, large financial firms,

mostly market makers who have program desks who can buy all the stock that they need for stock ETFs or have a line on the bonds or have a line on the commodities. But back up Dave, like just identify each of those pieces for people. The BlackRock is and for people. Yeah. BlackRock is and Coinbase. Yeah. Right.

So BlackRock is a fund issuer and they do their own advice. But because there's no advice in the case of Bitcoin, it's one thing. Most ETFs have indexes. But if it's gold or if it's Bitcoin, it's one thing. Coinbase is the qualified custodian for BlackRock. Fidelity is their own custodian for BlackRock. Fidelity is their own custodian, although it's a different part of the organization, et cetera, et cetera. And you can go through all of the applications, who's involved. Now, in some of the cases, such as with 21Shares and ARK, ARK is an issue where 21Shares understands the trading side of it. Obviously, where Galaxy

is involved, they understand the trading side of it. You get that. The fact is, in general, in ETFs, the authorized participants are the ones who will acquire Bitcoin or acquire the underlying asset, deliver them to the issuer and get units. So let's be specific. Let's talk about the Bitcoin ETF. Let's just say for a simple argument that the size to create a unit of an ETF is 100 Bitcoin, probably around the right size. It's generally between three and five million dollars worth of stuff. And then you get a bunch of shares. So let's just say they want the price to be around 44 bucks. So the issuer creates, says, hand me 100 Bitcoin and I will give you 100,000 shares. The amount of Bitcoin, if it was in-kind, that's all they have to say. Say, you give me 100 Bitcoin at any time of the day that where I'm open and for a fee, I will hand you 100,000 ETF shares.

That would be in-kind delivery. Easy peasy, lemon squeezy. It's up to the market makers to figure out what's going on. So they're going to make bids and offers in the market all day long. And to the extent that the ETF has a lot of buying and they need to create more, well, they go create a block of it at 100,000. And it gets traded a spread to that net asset value of Bitcoin based upon the difficulty and the risk in having to buy could trade at a spread to that net asset value of Bitcoin based upon the difficulty and the risk in having to buy 100 Bitcoin at a time as opposed to an order for 100 or 200 or 500 shares out of the 100,000. So that difference is generally called the arbitrage channel. And at all times, you can deliver 100 Bitcoin and get the ETF, or you could deliver 100,000 ETF shares and get 100 Bitcoin.

Now, yes, there's sometimes a little bit of cash involved, but more or less, you have that all day long. And that's why it's different than GBTC, which can trade at a premium or discount all day long. So what did the SEC do? Well, the SEC, and the reason they did it is obvious. I wish it weren't, but it's true. It's that most of the broker-dealers who are also authorized participants are not allowed, literally not allowed, to trade Bitcoin as a commodity in their broker. In fact, if you look, that's why Robinhood has a separate affiliate that allows people to trade Bitcoin with.

Fidelity does it through a separate affiliate, etc. It's a completely separate unit. The Fidelity crypto unit is completely separate. That's right. I went through this with working with them about being a prime broker for the Bitcoin Opportunity Fund. It's completely separate. They barely even talk. So the SEC doesn't let the broker-dealer touch Bitcoin. So they said, well, wait a minute.

If authorized participants have to deliver 100 Bitcoin, they're going to have to buy it. We don't want to let them buy it. Now, one could argue, and Hester Peirce has been quite vocal on this point as to why this is idiotic policy. And frankly, I personally had conversations with Robert Cook, who runs FINRA, who kind of privately admits that it would be better if broker-dealers could be involved, but we'll table that for a second. So let's just take it as an axiom. This is, you know, after all, you know, whatever that broker-dealers can't. So what did they do? They said, okay, so you have to do cash creation. What does that mean? That means instead of giving 100 Bitcoin right now, you have to deliver 4,200,000, say 700,000 dollars and I will give you 100,000 shares.

What does that mean? That means that every issuer has to, in real time, create what's effectively a twosided quote for 100,000 ETF shares. Most issuers don't do quotes. That's what market makers do. Most issuers don't have to trade on a continual ongoing basis and take risk. That's what market makers do. Now they have to. So every issuer needs a screen, such as I'm staring at at CoinRoutes, we can, you know, we provide the technology to be able to do this. I'm not saying they're going to use us or not. They're certainly welcome to. We're going to talk to them. But we publish two sided quotes that actually look at the full depth of order book, because remember, they have to publish not just one quote. They have to say, yes, for 100,000 shares, here's our quote. If you want a million shares, they have to make a different quote because now there's much more demand than there's liquidity in the market.

You could look at what 1,000 Bitcoin is, and that's a lot wider, of course, because the order book is thinner than it is for 100 shares. So you've taken what market makers do competitively. You might have 10, 12 reasonably good market makers on every single issue that know how to do this. And all those market makers, by the way, have the ability to trade perpetual swaps offshore. They have the ability to trade futures. They have the ability to trade spot. They can have a coordinated portfolio. They may be hedging options positions. They have lots of stuff. These issuers have none of that. And so what are they going to do?

To my understanding, this is also wildly tax inefficient, right? No, that's not true. That's a misnomer. It's tax inefficient, very small. Basically, these things are set up as what's called grantor trusts. So the existing holders don't get impacted by this. It's only the people who are buying and selling it. So that's kind of a red herring. But the simple fact that we've taken 10 issuers who have literally never, have always outsourced this

function, they now have to outsource it. So what are they going to do? Well, they're going to take in market makers' feeds and try to aggregate those together. But now, understand something. Instead of the market maker who gets the trade, you have an extra mouth to feed. By definition, it's going to be more expensive. So we're forcing the issuers to be traders. We're forcing the issuers to be traders. That's what you're doing. And so you're- Market makers. You're forcing them to be market makers. So what's the risk then to retail or to the person who's buying this ETF who doesn't understand that now the issue is done, right? Slightly wider spreads.

Wider spread. And slightly less performance on some. The market, the issuers who are good at doing this. And the ones who have the largest balance sheet are going to have the effectively have the advantage and that doesn't but doesn't mean it's going to be black rock i believe whoever gets the most aom fastest effectively so like people get confused about is the creation redemption versus just the public marketplace so maybe it's going to be similar. But here's the thing. There's 10 of these things.

I don't think more than three or four of them are, will, I don't know the right way to use the word survive. I think three or four of them will get the lion's share of the assets. Will thrive. Yeah, but isn't this- Before they actually thrive.

Let me ask another question then. Listen, I've been off. I haven't been tracking things, but this sounds horrible for GBTC and for Grayscale because they're already holding 5% of Bitcoin. No, it's easy for them. They don't have to make a bargain.

They have a ton of AUM. They know how to trade. They already have all the established relations. But it doesn't matter that they're holding it all already in Bitcoin? Irrelevant? That's actually helpful. It's easy for them. They've already got it. Yeah. They've got their AUM sitting there. Yeah. It's got built-in liquidity already. I mean, if they're smart and they understand, I mean, here's the thing. In the short run,

it isn't going to matter. In the long run, the firms that are better, and there's two pieces of it. Think of it this way. If you quote wider, that means market makers, that means the spread of your underlying is going to be wider. OK, and that makes people less happy to buy or sell it. They'll pick the ones that are have tighter spreads because everyone's buying these brokerage accounts that they pay no commissions on if their retail or their institutions are paying very low. So the spread matters in terms of attracting assets. But here's the grub. If you quote tightly and let's say you think you can buy at $42,613, which is where it's trading right now, and you end up buying at $42,800, now your fund, that's a performance drag, right? That comes from performance of the fund. So if you quote wide, you don't incentivize as much assets in, but if you trade better, so let's say you quote what you trade underneath

it, your fund is going to have better performance because you're going to do this. Now, here's a dirty little, not dirty little secret, but here's a piece of financial history. There were two firms that realized when they were index funds that if an index funds, for those who don't know this, like say an S&P index fund gets priced, you know, in real time, you know, et cetera. But, you know, when there's index change events and things go in and out, the closing price matters, right? Because that's when it goes into the index. Vanguard, the guy named Gus Sauter, figured out he could make trading into a profit center. He could make the fund outperform the S&P so that when he takes his

fees off, if his outperformance is bigger than his fees, then it's going to outperform. There's a reason Vanguard became the largest mutual fund on the planet, because they were able to goose their performance. Trading matters for long-term performance. It will not matter very much for the first year. Marketing will dominate and AUM will dominate. And we're going to have 12 to 14 companies. We already have Bitwise running the most interesting man in the world with Bitcoin, Cufflinks, right? I'm sure you guys all saw the commercial, but if you didn't, basically marketing. There you go. Marketing. Marketing. I love it. Marketing the Bitcoin ETF.

I don't think we've ever seen a marketing campaign effectively for an asset hitting the mainstream at once like we're about to see for this, assuming the approval. So everything we're talking about about this cash stuff is it's going to create dispersion among the issuers but that will not play out or be very relevant for and it doesn't and it doesn't it doesn't create paper bitcoin it doesn't create more opportunity for for what we call re-hypothecation like that's not that has nothing to do with it it's just it's what dave just walked through it's just that's that's all it is exactly right understand that everyone talks about the paper bitcoin the futures the cme futures that is paper bitcoin that's right that settles in cash you could short it etc now the the the reality is when i've been looking at this i mean you're talking about uh you know you're you're basically looking at a $500 premium to January from December.

You know, it's not very much relative to previous rolls. But when you want to see shorting of Bitcoin, the futures go get that premium goes lower, lower, lower. It could even go negative. And there's nothing stopping that. We just haven't seen that in this particular battle yet. So it really it's much to do about nothing to the individual it is much to do about something to the issuers and in the long run will matter to the issuers that's really the point so yeah scott so you're gonna have this a media blast a marketing uh blitz

right and there's gonna be obvious winners that in my mind, like Fidelity and BlackRock and GBTC, because they have the weight, right? They have the underlying demand already there in-house. And then you're going to have one, two, three that just kind of pop up and they're just like the flavor that the kids like. It's the ones that people are just going to gravitate to. And then I do think there's going to be some sort of consolidation. I don't think that there's, there's going to be enough demand for 12 of these things to survive. No way. No way. And I'll be sad. I love,

I love all the guests we've had from all of these companies and everybody who's trying. I'm an investor in Valkyrie, as I've said, but I would be very surprised if BlackRock and Fidelity don't grab the bulk of the AUM and if we don't eventually see Vanguard coming. Even though they've been dismissive of it, I think if they see a successful launch here and a ton of AUM that they'll come in as well.

I can see, I know we're coming to the end. My wife right here is saying, hi guys, kids are here too. My eight year old and she just, Emmy just texted me. She said, you know, our daughter is watching. She said, why isn't daddy talking more? And I said, cause she doesn't know Dave. But hi Max and Miles. Because Dave has a microphone.

Dave has a microphone. Dave has a microphone. That's why. Because dad, because daddy, like you guys, like an eight-year-old and a four-year-old trying to make sense

of Bitcoin ETF, I'm just here to learn. But listen, for your kids who are watching, Scott has the ultimate power with the mute button. He can mute Dave and me

all day long. That's right. I can make people quiet anytime I want, but I can make myself. I just went away right there when I did that. And now I see people. Hi, Emmy.

Congrats on beating Scott down the mountain. Yeah. I mean, if you weren't watching at the beginning, Max, you as well. I talked about how both of you guys were much better skiers. I mean,

I met my eight year old, you know, we thought that she was just doing the little greens in the class. And the last day she says, I want to go down the big stuff. And we said, okay. And she went to the top of the mountain and did the hard blues all the way down the mountain. Absolutely. Absolutely incredible. Kids are amazing. Uh, their dads, maybe not so much. All right, guys, this has been a lot of fun. I'm so happy that we're back. I think next week we're going to do Tuesday also because January 1st is Monday. They're really messing with our schedule here.

Guys, I really appreciate the perspective. And in the next two weeks, maybe we'll be talking about an approval of this ETF and have a lot less jaw-boting about what's likely to happen. We won't have to make wild predictions. But I think 2024 is going to be an amazing year, and I will see all of you guys in 2024 for the next show. Awesome.

Thanks, James. Thanks, Dave. Maybe we'll get McGloom back. Thanks, Scott. Likely. Bye, everyone. Take care. Bye.

Bye. Bye. Bye. Bye. Bye. Bye.