The Wolf Of All Streets - How Hard Will The Recession Hit The Economy And Your Pockets? | Mike McGlone & Dave Weisberger

Episode Date: January 16, 2023

Mike McGlone: https://twitter.com/daveweisberger1 Dave Weisberger: https://twitter.com/mikemcglone11 ►► JOIN THE FREE WOLF DEN NEWSLETTER https://www.getrevue.co/profile/TheWolfDen  Follow Scott Melker: Twitter: https://twitter.com/scottmelker  Facebook: https://www.facebook.com/wolfofallstreets   Web: https://www.thewolfofallstreets.io  Spotify: https://spoti.fi/30N5FDe  Apple podcast: https://apple.co/3FASB2c  #Bitcoin #Crypto #trading  0:00 Intro 2:40 Bullish crypto markets 6:25 Biggest rallies come at bear markets 11:00 Bull trap? 17:00 Classic cleansing 20:45 Bitcoin ETF 26:00 Gemini/DCG 33:00 Debt ceiling 35:30 Platinum coin 40:00 Liquidations 46:00 Baltic dry index 49:00 Demand for Bitcoin 52:30 1929 type scenario 54:30 Su Zhu & Kyle Davies to launch a new crypto exchange 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.

Bitcoin made one of its biggest weekly moves in recent memory, actually in memory at all, if you're looking at consecutive days up, while some charts show a couple of little doji and red candles there. We've seen it reported that this was a 12-day up run, basically since the year started, which is the most basically ever, since like 2013. So important to realize just how bullish this move is and that effectively all of the effects of FTX have been erased. But that doesn't mean that 2023 is going to be an easy year. There's still a lot happening in the macro that's of great concern. Some saying that the Fed will continue to over-tighten, even as we see evidence that inflation is already cooling. Of course, I've got,

effectively, my two co-hosts here, Mike McGlone and Dave Weisberger, to discuss all of this because it is Macro Monday. Guys, don't want to miss this. 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. Well, after last week's conversation, Mike and Dave definitely coming up smelling like roses. Not exactly the week necessarily we were expecting, I think to that degree, but basically Bitcoin made a move from mid $16,000 all the way up to $21,000 this week. Huge move, real volume, and seeing quite a few reports or conjecture that there was a single entity behind it,

basically somebody that was averaging on the way up to the tune of $5 billion in just a matter of days. You got to wonder who that is and what they know. But I'm going to go ahead and bring on Mike and Dave, of course, because it is Monday. How are you gentlemen doing today? Thanks for showing up on a holiday. Hello. Yeah. Thanks for having us, Scott. It's always fun, particularly good when, you know, you can talk about a continuation of what we talked about last week and kind of like get into why and how. Well, when's the last time that we

actually got to have a conversation on bullish crypto markets? Well, I mean, it depends how you define bullish, right? You know, it's, you know, we kept talking about the fact that all the force selling was gone and that we were bumping in this ridiculously low trading range. And the fact of the matter is when you're in a low trading range and you're moving from weak hands to strong hands, moves like this happen. There was one other thing that's worth talking about. You said something about FTX effects being over. I disagree about that entirely, actually. But I do think this is a residual effect of FTX. I think there's two things that we'll be living with for a while, or three things

we're living with for a while. One is probably momentum towards some sort of regulation, but we'll talk about that later. I think that's not really the macro Monday theme. The other is there were anywhere from eight to ten billion dollars of crypto collateral investments on FTX that regardless of what how much you think they're going to get out of it, that's eight to ten billion of crypto investments that the people who have it became pretty obvious to them that they were no longer invested. And that's an important point. If you had a billion dollars of Bitcoin for funds or Bitcoin, Ether, whatever, on FTX and your fund went gone and the funds closed and they returned money to their clients, those clients did have a reason for wanting to be allocated to Bitcoin and Ether in the first place. And so it's really an interesting question of, as people believe, more and more recovery. So the story of FTX, quote, finding money. Now, I don't know how much of that. Five billion dollars.

Right. I don't know where the market is currently trading. It was like 45. I think it had gotten up to like 45 cents of recovery. But it was 45 cents of recovery. That's, you know, three to $4 billion that's going to have to come back into the crypto market or is likely to plus other people there. So it's important understanding supply demand dynamics at the same time as there's no real selling volume. And there's no, it was no real offer except for, you know, basic speculators. And so there is a supply demand

dynamic going on just from the recovery out of FTX as people move to different exchanges, to more DeFi, towards more self-custody, et cetera. But still, it's different because you're not getting Bitcoin or Ether back from FTX. If it's in bankruptcy, you're getting, at best, you're getting dollars. Well, I want to make two points to clarify. I was speaking in terms of price and not long-term effect as far as FTX and it's retraced the entire drop from FTX and the price of Bitcoin, certainly not talking about the contagion, which I mean, we're still watching Genesis play out. So it'd be absurd to sort of make a comment about the contagion at this point. But yeah, so I was speaking very,

very specifically, I guess, about price there. And to a point you made, which I've been making consistently and beating the drum on, I think that the market's half of maximum pain for actual crypto natives is up because of the very point that you made that billions of dollars are locked now on these platforms and nobody is long anymore thinking that they are. To me, the worst case scenario for an FTX creditor is they get back, you know, 40, 50 cents. That would be good on the dollar in a year. And Bitcoin's trading at $50,000. Right. And then what do you do? You lost it at 17,000. You're getting back a portion of your money. And now do you want to buy back and get long? But Mike, I would love your feelings, thoughts on what's happening right now with Bitcoin as well. Oh, it should start with the

lessons that the biggest rallies come in bear markets. And Dave, we're all laughing. We know that's the case. I mean, I want to be so bullish. I fully expect in the big picture, Bitcoin is going to go way up. But one thing we have to recognize, and we can show some charts in a second, is what's happened recently was a massive bear market rally. For now, it could be a bottom like 2018 and 2019. We hope so. But there's a big difference with back then is that is this is in the context of still a lower tide. Liquidity is being there's a rug pull in liquidity still on a global basis. And that is not just the Fed tightening. Every central bank and the plan is still tightening. And the key thing I'm watching for this week is we have the Nasdaq.

It's just teetering on that 200 week moving average. It's broken below it. It's only done that three times in history. I'd like to show you that in a second. And every single time the Fed was easing and it came out of it okay. Fed's tightening. So I look at Bitcoin as yes, it's a leading indicator.

Maybe it's leading on the way back up. It maybe is putting a bottom like 2018 when it dropped below 5,000, then back up about 5,000 and built a nice little island bottom. But like I said, the difference is liquidity is being pulled away still. And if the Nasdaq breaks down, everything breaks down, Bitcoin is going to be part of that. I still think it's going to come out ahead. So to me, that's where we stand. And the big picture macro is I still think we're in

the middle midst of the biggest macroeconomic reset of our lifetimes. I can detail why. And the way you can start that with is we just had a hundred year event in terms of pandemic. We're having a historic war in Europe and we're having a historic shift in political leadership in China. I mean, it's going back to the days of Soviet Union when you have one leader and expecting to be economically viable. And those are kind of the basis, I think, where we can really start. Yeah, that makes perfect sense. Did you want to give a shot at sharing those charts now and we can start to dive into that? And to your point, as you're preparing that, you know, and the biggest rallies coming, obviously, in bear markets. I mean, I can show my screen right now.

You know, we have BlackRock who, you know, don't want to fade BlackRock necessarily saying that the traders are wrong on rate cut bets and that the Fed is going to continue to overreact and continue tightening here. Right. Which basically is saying we are far, far, far from out of the woods, which is the point that you're making as well. Let me go ahead and bring up your chart. You're good. Yeah, exactly. Your chart is up. Far from out of the woods. And look at it this way.

If the stock market... Good. Is Bitcoin bottoming like 2018-19? Yeah, I can see it there, but you broke up there for a second. Yeah. Go ahead. OK, sorry. So, yeah, the exactly we're still pulling liquidity from the market on a global basis, a historical unprecedented basis for good reasons. And if equities go higher, if risk assets go higher,

this liquidity is more likely to remain constrained from central banks. So what I'm showing you is a chart. We see this potential island bottom developing around $20,000, the same way it did around $5,000 back in 2018. The big difference is what I show you in white is the Fed funds futures. Back then, the Fed already started easy. And we held the bottom and broke out higher. And then we had that issue 2019. The cool thing is we've had basically an 80% correction. But the thing I want to really show is, to me, this is the macro watching this week,

and this is the NASDAQ. The NASDAQ is at its 200-week moving average, not 200-day. 200 days is for day traders. The 200-week moving average. In the history of the NASDAQ, since it could be calculated, we only broke through that level three times. And every single time the Fed was easing. The last good example was 2008. Fed was easing aggressively. Right now they're tightening aggressively. So you look at that. You can't be too excited about any markets until we have, give it some time.

I'd say don't really. Big picture, yes, really bullish Bitcoin. But to me, this is an environment that's unprecedented where we're having bounces in what we know are bear markets. And the Fed just says, sorry, we've taken the punch bowl away. We're not going to bat you. Dave, what do you think? I mean, do you think that we are just here on a bull trap or do you think that we could be actually starting to see a real move here? I think we are in a trading range. And I think that you have, I mean, I've said it many times, Bitcoin trades like an option, right? And so Bitcoin clearly is a, it has the percentage of people holding Bitcoin today

that are trading it at treating it as a speculative asset compared to the percentage of people who were holding Bitcoin in May. I wish we had that number. Being a data guy, that would be a great thing to measure. I am sure that number is dramatically lower. I'm sure the number of pure speculators in Bitcoin is dramatically lower. If you look at the liquidations or open interest, the numbers sort of confirm that. It's kind of an important point. You look at the percentage of long-term holders. Essentially, we were talking about it all summer when it dropped from the 40s like a stone,

plummeted through the 30s, plummeted into the 20s, and settled into a trading range from the entire summer from more or less, obviously, there were some wiggles, but really between 18 and 22. And yeah, we got some excitement, both pair market rallies up to, you know, I think really briefly from 22, went up to 24, 25, and then back down into the trading range. And you and I kept talking about it. If you go back at an archive of this show, you'll see we've been talking about it. We've been going basically since that, since July. We had the wiggle down below the trading range when FTX collapsed because people who had really done all the force selling they could, now all of a sudden were, you know, knocking the seats out of the boat

and selling that, you know, because they had to. But the truth of the matter is they were as hard to believe as it is the volume and the amount of liquidations during that selling was much, much lower. Why? Because there were no more long speculators. It was just people selling what they had to, Bitcoin being the most liquid, Ether and Bitcoin being the most liquid. And so you see that we're now back into that trading range again. So you're basically what we're talking about a trading range from a fundamental point of view. You're talking about people, the long term holders of Bitcoin who believe in the story. People like Mike and I are going nowhere. We have a long term view. The speculators get excited whenever anything happens. So this week we saw a return of speculation and yeah, they could get there,

you know, they could get smacked again. There's no doubt about it. But the percentage of speculation, this percentage of FOMO moves is small. Now, of course, everyone wants to invent a boogeyman. So, you know, I know people say, oh, it's BlackRock buying, it's this buying, it's that buying. It's like, listen, you know, a few billion dollars here or there in Bitcoin is a very big deal. In the global financial markets, it's Tuesday. And, you know, you know, it's just not that big of a deal. And so it doesn't take much. You know, Mike used the words before, and I think it's right, that if you're an asset allocator and you don't have 2% to 5% of your allocation in Bitcoin in what you used to call a 60-40 portfolio in this market, it could be very troubling. A lot of them, and we know it because we see it

at CoinRoutes, a lot of them after FTX basically said, whoa, and just stopped doing what they were doing and said, look, we got stopped doing what they were doing and said, look, we got to see, is the entire world going to unravel? What's happening here? Is there a way to keep my coin safe? I think people have gotten to the point now where it's like, okay, wait a minute. This was a theft. This was something that was on a bond, excuse me, bond villain or deranged bond villain, Dr. Evil style theft. So there's a little bit more confidence. And so you have to ask yourself about the supply demand. So my opinion is very much like Mike's that there's that the wiggles are definitely bear market types rallies.

I mean, they are sharper to the upside, but I think we're in that trading range. I still think that the 18 level holds in, you know, at the end. I think that that number over time ratchets higher. I don't know where the bottom is the next time if Genesis falls, if some other shoe drops. and forming bottoms and i've said this before mike get ready to nod bottoms take time they take time right you know it's when selling gets exhausted just remember how people made fun of tom lee for turning bullish on the s&p and bitcoin uh you know a couple of times over the last decade and i remember because he stood out like a sore thumb in 2009 on the S&P and he stood out like a sore thumb in 2018 on Bitcoin. It's the same. In my mind, it's very, very similar. That doesn't mean you run out and start speculating and FOMO by the upside,

but it does mean that I would be very, very careful on the short side here still. And I would be careful on the long side too. But the reality is, is there's a lot more long-term capital that could move the market because there just is no real selling. There's nothing, you know, there's no people who are waiting saying, oh, if I get back to 22, I'm out. That's a big level for me. It'll make me whole. We don't really don't have a whole lot of that. It was very long winded. I'm sorry. That's a good one. And there's two things on that there. And first of all, I appreciate what you said about Tom Lee, because anybody who's run money, as long as you have, and for me, part of my career, but as a strategist,

it's a classic lesson I learned that you got to be a contrarian because when everybody agrees you're virtually always wrong. So I'll give this lesson. I remember being in the trading pit and I'd have, you know, I'd spend my whole weekend. I'd come up with a great idea. It's Monday morning. I call seven clients and Mike, you're an idiot. You know, this is a strategy position you want to do it. Every single time they would say idiot. You know, his is a strategy position. You want to do it every single time they would say if there was everyone said it was a wrong, it always worked. If they all agreed, I got the trade, but it virtually never worked. So that's part of the thing about what we do is, you know, you tweak something when people get mad at you for your call.

And that's what really happens sometimes. The other thing I want to point out, I think, expounding what Dave said is what's happening now is we're going to look back at this like we did with Mt. Gox and like the cleansing of 2006 and 2008 in the stock market, which makes foundations. Foundations and enduring bull markets almost always come from cleansing. And this is classic cleansing. So look at this example. If we didn't have that tide go out, FTX, the FTX paradigm scheme that started Almeda would have just lasted. It's gone. We flushed it out. Better now. Yeah, better now. Exactly. But you got to get that out of the way. And it's opportunities for those of us who remain

solvent. Dave knows that. And I've been stopped out in a lot of wrong positions in my life. And sometimes, you know, like, I know I got to buy, but the management's clapping on the back of my shoulder because, Mike, you're overweight. You're too early. But this is what it is now. The thing is, we could get down to $12,000 in Bitcoin, but I fully expect in five years we're going to be talking about, man, we got problems of $100,000. And all those people Dave would talk about, all those people who are underweight, they're going to have to follow a bull market. And the best time to buy and to allocate typically is bear markets, where you know you're not leveraged too much or you have strategies that are not going to stop you out. You can just accumulate and forget about it.

Look what's happened to GBTC. I'll end with this. That's some of the signals I got last month. Now, I admit I've been early in GBTC was a big driver of the bull market, 18, 19, 20. But what's happened to it recently is it hits some major cleansing stops at 50 percent discount, which is now about 36 percent. To me, it's going to go down in history as one of the best buying opportunities ever. I could go back to 50 percent. But what's happening, I think, in there and in BITO, which is the other ETF, which is actually outperforming Bitcoin because it's rolling into backwardation, is this is an example of things you talk about years from now when you say that was a bear market bottom. But come on, it's not easy. And if it's easy, something's wrong. I've learned that lesson. Dave kept his hair. I didn't realize the GBTC was back to 36%.

When you just said it, I looked it up. I thought we were still right around 50. So I don't know where I've been, but that's a heck of a trade. It's one of the best performing assets this year, up 36%, 36.6%. And yeah, how does that happen? It gets hammered. But it is a fundamental. Is it a fundamentally bullish market that I think is going to 100? Yes. If I'm wrong, you know who to blame. But I can show you it's had some major issues. It has some. But I don't know all the interworkings of actually how it works.

But it's just the number one most widely traded ETF and Bitcoin. Not widely traded. Bitcoin is now more widely traded, but held. And it's so in the tape every day that, sure, this is a dead cat bounce. But just taking away that premium, which is going to happen over time, is part of the indications of 50% discount. You're going to say five years from now. Yeah, that was pretty low, just like when Amazon was trading at five

and went up to 2,000. But I have 0% expectation that they win with the SEC and get that converted to an ETF. Oh, I think that, that it, that story is going to play out in the court because the SEC's argument is literally the dumbest argument I have ever seen the SEC make.

And I've seen some doozies trying to claim it. You, seen the SEC make, and I've seen some doozies, trying to claim it. The only way they're going to be able to find a, quote, expert to say, excuse me, I should look at the camera, expert to say that a spot ETF is harder to manipulate or easier to manipulate than the CME futures ETF is they're going to find some academic who couldn't get a peer reviewed paper through practitioners ever. I mean, we have some of them running the SEC now, you know, people who are saying things that literally everyone knows. But the reality is, is the judge in that case is going to have a preponderance of experts to say that the moves in the CME futures is the tail wagging the dog, that if anything, it's easier to manipulate the CME than it is to manipulate the totality of Bitcoin spot. And, you know, the fact is that argument is

bad. It's just a it's a loser. I mean, I debated and and did pretty well in competitive debate. You know, we've talked about this before. That is an argument I would not want to make. If I were a lawyer, that is a case I wouldn't want to take. And so we'll see. That argument at the core of the SEC is a losing argument. Now, they may win if DCG goes bankrupt, I suppose. My point was going to be that I don't think they'll be the ones to win. And I don't think it will happen under this regime. Gary Gensler's not giving us a Bitcoin spot ETF. And with all the problems going on at DCG, I can't imagine that Grayscale is going to be the one to win that. But maybe. But trusts are not breakable, which is why the discount is down.

People are realizing one way or another, it's a question of the time value of money is the discount. The discount should be where the time value of money is. And make your bets when it either gets converted by a Reg M or converted by an ETF. That's really where that that's going. And that's a big deal. You know, two months ago, people were arguing about whether or not they could be forced to sell the Bitcoin out from under the trust. And I think at this point, we know that that can't be done. So that's a different that's a different argument. It's just of all, as you know, if there's one way to get me to go on a rant, it's to talk about the Gensler SEC. If you really had on multiple levels, if you sat down and said, how can I ruin financial markets, ignore the protection of investors, ignore capital formation,

but try to use the SEC for other goals than those two things, what would you do? You pretty much, you now have a template for what you would do because that is what they're doing. And it's crazy. And in crypto, it's kind of tail wagging the dog. The 1400 pages of rulemaking that I have still yet to get through all of it is testimony to that. Although there are some good nuggets in there, there's no doubt. I mean, RegBestX makes a lot of sense, a lot of things. But the fact is, I don't think we're getting any tailwinds from the regulatory side for some time. Yeah, it would take a completely other regime. Mike, I see you

have another chart pulled up here. So what did you want to show us inspired something earlier about interest and what i'm showing you is one of the key things that kept me bearish commodities and crude oil when it was people were calling for 150 a little bit less than a year ago and And it kept me very bullish crude oil. And this is just simple adult listed open interest in futures. So it's not the stuff you see on some of the unregulated exchanges. This is in white. That's just the open interest of Bitcoin futures ETFs. I mean, that is started by the CFTC.

The SEC is going to have to come around. But when you see increasing open interest, and this is not dollars, this is actual futures trading contracts where people who are actually buying GBTC and hedging in Bitcoin and pushing that to a backwardation are. And this is what I see as a nascent bull market and a nascent asset, just like futures were in the 70s and ETFs were in the 90s. And then I like to overlay that with the world's most significant commodity. Open interest in crude oil has been declining for like ever. It's part of what kept me bearish. So to me, this is a key thing to point out.

Institutions are just getting into this space. They're going to see cleansing of the market. They're going to see cleansing of the market. They're going to see eventually an ETF that tracks an index in cryptos. And that's what institutions want. I mean, they don't want to just have, yeah, okay, that's part of my goal portfolio. That might fit in with my bonds. But I want exposure to the beta of this space for the alpha. Give me an ETF that tracks for Galaxy Crypto Index. Now that I'm pushing a

product, I get nothing for that. But that's the reason that I pushed the management that we launched that index five years ago. And I think that's what our ETF team said when we saw that FTX collapse. An ETF solves it. So to me, that's part of the iterations that is a matter of time. And it's taking too long for the SEC. But if they look around and they're truly trying to help investors and protect investors, let them have an index. Don't have to pick winners like Ethereum or Bitcoin. So that to me is what's going to happen. The SEC is not trying to protect consumers. mandate but i think it's pretty clear that uh by uh enforcing their laws by litigating after the

fact and charging people with things after nobody's protect i mean going after genesis and gemini now after everybody already lost their money and genesis everybody no no no they didn't lose they didn't lose all their money they now are unsecured because there are two points to be made here. Because the SEC and the CFTC have not been able to agree and Congress doesn't agree. Gemini, as a bank, still had no vehicle for making customers senior creditors as they would if they were securities because of car bouts in the law. So there's no regulation to allow to protect creditors. So now they're unsecured creditors. And way worse than that, honestly, if you could impeach an appointee, he should be impeached for this. Knowingly making the SEC a senior creditor to investors who will almost certainly get some amount on the dollar that's non-100,

is literally stealing from investors is what he's doing. And even worse than that, he knows how much Genesis and Gemini are going to have to spend in legal bills. Anyone who's ever dealt with an SEC investigation knows it's costly. So he is literally stealing money from the investors in that program in the name of protecting future investors, where he could protect future investors by getting together with the CFTC and agreeing or getting together even with themselves, doing what Hester Peirce said five years ago now or four years ago now, and actually working with the industry to craft rules around lending programs. If you could find anybody who's serious in the Bitcoin and crypto space that doesn't believe that we should have disclosure rules of risk

and covenants that associated with these lending programs so that people who invest in it know how their money is being used, how yield is being generated. If you could find anybody who thinks that a regulatory regime on that is a bad idea, I want to meet them. I mean, I know it's accused. We hear accusations all the time that, oh, you crypto people don't want regulation. It's really? I mean, I run the largest or second largest algo trading firm in crypto, and I talk to pretty much everybody. And I have yet to hear somebody who doesn't think that reasonable principles based regulation wouldn't be a good thing. I don't know anyone. I mean, I'm sure they exist. I mean, I haven't looked under every rock.

But the reality is, is people want that. So, no, this case may be the single biggest example of malfeasance I've ever seen. I mean, it's just it's literal theft from investors. I don't know how well you say it. And you say it's to protect future investors, of which there will be none because these products won't exist. So it's literally almost irrelevant. And just to be clear, this isn't just some crypto dude rambling, right, and ranting. Representative Tom Emmer said exactly the same thing on Twitter. And, you know, he's the majority whip now in the House. McHenry has more or less nodded his head

at these things. And they're salivating like Homer Simpson with pork chops that get sort of in front of them and start asking him these questions. I think he's going to be extremely uncomfortable because this is, I mean, I'm actually appalled. i don't think i've seen anything that's this dumb but but anyway you got me off on a rant again the important thing here is something that that go back to mike and i'd like to hear mike's opinion on this is the app the rate of change of rates and the sucking out of liquidity is historic. The actual rate itself is anything but. Yeah. And I look at it as if you looked at Bitcoin, the historic context of it, when it was created, even assuming it has no yield, and obviously its yield will be because there's some speculation and stuff, it'll be more than gold was. The fact is, if Bitcoin is going to be digital gold, 4% absolute yields or a negative real

yield to inflation isn't going to deter long-term investors in gold. Gold is kind of sitting where it was. We could talk about the monetization aspect, but my point is the rate of change, I think, is what matters here much more than the absolute rate. And so isn't the question from a macro point of view, are they going to decelerate their pace of liquidation? I don't think any Rensane believes they're going to dump liquidity back into the market, and certainly not in the next year. But isn't it that rate of change that matters, Mike? Everything. And so, man, it's amazing, Dave, how much we agree. Like you sound like one of the clients I would spend my life with on the phones dealing with

who taught me how to trade. And then I learned and I trade for a little while, but it's just exactly ROC is everything in markets, rate of change. And that's to me is what's happening. So here's, let's give the macro outlook. So we have the greatest pace of taking out liquidity I've ever seen in my life. Yes, it was from a very low level, but that classic lessons of booms always followed by bus, always led by liquidity that goes away is happening now. And there's no signs of it ending until or unless markets stop that. And that means we have to have either the liquidity to come back by the Fed to start easing. I mentioned the Fed, largest central bank in the world. Now we have all those other ones are still easing, are still tightening.

They have to start easing and or risk assets have to go lower. That's going to happen. It has to happen, partly because the lagging nature of inflation. Here's what I fully expect this next year. We're going to have increasing downward revisions of inflation measures because that's what's happened in recessions. Inflation collapses. In particular, what pumped up inflation? Everybody knows every single asset in this country went up 40%. If they didn't, it was a bear market. Why? Because money increased. Now that money is going away. So to me, that's what we're going to

look for. And then this week, the signals I'm looking for, how that's going to out is can NASDAQ stay above this 200-week average? Can the S&P 500 stay above 4,000? that's going to out is can NASDAQ stay above this 200 week average? Can the S&P 500 stay above 4000? Is Bitcoin going to stay above 121,000? I think it's unlikely because if it does, it means that sledgehammer is going to come down. And a lesson that Dave knows is if it looks like it's a bull market and breaking out, just be careful.

It's way too early. It's got to be hard. That's why I'm not a fan of trading. That's got I respect people who can do it. I've learned my lesson. I'm not good at it. But so to me, that's the thing we're going to look forward to this week. Can we keep that? I suspect by the end of the week, we're going to be pushing markets a little bit lower. And the same thing from the Fed is we're tightening. What are you not getting about that? Well, let's talk about something else that's happening this week, which is that the U.S.

could hit its debt ceiling by Thursday. And of course, you get to hear what you need to know and all of the hyperbolic opinions about what that could mean. But this time, it does seem like the Republicans are willing to push back. The Treasury has very limited measures. And the last time that we actually saw a debt ceiling hit was the only time, I believe, 2011, that the United States saw its credit rating reduced. And there was a hell of a lot of pain surrounding that. I mean, this is this is not a small story. It's sad. It hits the tape because it's really insignificant.

In terms of GDP, the U.S. is still one of the most solvent countries in the world in terms of debt. We have the deepest debt markets in the world. Just how we, this hits the tape like that because they have to have a physical change of it. But it's one of the things I think people forget about how significant you see this debate is on a global basis. Do you want to invest your money in a country that does not have open and throw it out there debate like China and Russia where one person's making a decision or you want to have it in a country like I thought what happened with choosing our house leader was unfortunate, but it showed to the world if there's any problems in this country, as Churchill said, we will debate it to hell and then come up to the

right answer. That's the things you're not seeing in other countries is that open discourse. So yes, this is sad that they might shut down for a week. We'll get over that. But that's also part of the reason why you have to have assets like gold, Bitcoin, and anything that helps protect you. But again, also from a dollar standpoint, what better currency is there in a long-term basis? I love how Bitcoiners criticize. I'm like, give me a better one. Where are you going to put your money? You're China, you're Russia, you're Canada, you're Europe.

There's no deeper bond market, no safer place. And it's imperfect, but it's just part of what Bitcoin helps and cryptos help solve. Dollars, what's the key thing about dollars? You can get now access to dollars through Ethereum-based tokens. You could never do that in history. And that's where people like Dave and I look at.

This technology is not, it's completely revolutionary. And this is a big dip in the price. I do want to point out one unlikely, but ridiculously interesting scenario. Your colleague over at Bloomberg, who I played poker with and I like a lot, Joe Wiesenthal, he's been calling for the mint the coin, the platinum coin idea for a while now. And it's actually fascinating. If Treasury does do that and shows what, and he and I talked

about this, I think that if Treasury does that, then they're essentially telling markets that, you know what, this Federal Reserve, these guys are important, but they're not as important as you think. We can we actually can mint money. Now, it is not a likely scenario. But if the government decides, if the if the administration decides, Yellen decides and abandoned her central banker roots, which I don't think likely, if they decided to do that, that is a situation which could spur what I would call the most important delinking, i.e. if they minted the coin, I do not think that's bullish for NASDAQ companies and risk assets, but I think it's bullish as hell for Bitcoin and gold. And I think that that is something that has to be watched because if we get to a debt ceiling

and the treasury decides to take extraordinary measures to prevent default, to keep things going, that's the kind of thing that would be a tail event, an upside tail event. And I do believe it's a tail event. I do not believe it's going to happen. I want to be clear about that. But there are a few people out there who are looking at that saying,

hmm, this would be really interesting. So I do think that is worth talking about. I think Mike's scenario is that over 90% likely to play out. Some version of annoying either 11th hour or after the 11th hour compromise, where we kind of get something moving. And yeah, yeah, we in traditional in traditional, you know, parlance, it's, it'll be one of those deals that everybody's unhappy with. Right? Because that's what true compromise comes from. But I think that's the most likely scenario. But it is worth understanding what the tail events are. So people who look at risk assets and say, well, the bad tail is we default and our credit rating goes down and all assets in the U.S. are repriced downward.

Yeah, that's an unlikely tail event. There's just as much of a tail event on the other side is Treasury says, screw it. We can mint money and get ourselves through this and we'll, we'll, and we'll stop this from being a problem. That's a positive tail event for these assets. Anyway, I do think it's not, neither are likely,

but it is worth understanding that it is symmetrical. Dave, there might be people here who don't aren't familiar with the concept of minting the platinum coin. Can you just give the, the two second TLDR because it's quite a yeah the tldr treasury has the ability to mint money they mint a coin with a trillion dollar notional and then they deposit it uh you know they deposit it in in well i don't think they put it to the federal reserve but they they make that coin

available for the government to you know borrow against or spend it's good and and then basically kneecaps the fed it i mean joe would it would be if you could get joe to come on your program i would really because he has talked about this more than any human being that i know of and he is not he i'm not even going to say he's not dumb he's's a very intelligent man. Well, he'd be surprised to hear me say that. But he happens to be a very intelligent guy. And I'd love to hear his explanation of the inner workings. I just know that a lot of people will look at this as a positive tail event for I won't call them in. I don't think Bitcoin is an inflation hedge. I do think it is a proto fiat currency hedge proto because I don't think Bitcoin is an inflation hedge. I do think it is a proto fiat currency hedge. Proto because I don't think that,

I think it's trading like an option now. Gold has been historically a hedge against a basement of currencies. That's the difference. Yeah, so I can get Joe on. I'll give him a call and we can make that connection. I met him at Mainnet as well. I would love to have him on a Monday with you guys and just let you guys go.

But Dave, well, Dave mentioned the thing. One thing I love about Joe is he makes me smarter and he's got that high pitch voice. I love it about him. And when I listen to his Odd Lots podcast, I'm like, dude, you just made me smarter. Thank you. What can I do next? It's just part of this. Well, we have now.

We didn't have this kind of stuff 10 years ago. Well, this is getting better and cryptos are part of it. But yeah, I'm happy to make that happen. I think it would be great. Mike, do you see a scenario where the Treasury actually does that? No, God, no, I hope not. But it's fun to talk about because to me, I could just not see rational people ever doing it. If we got that bad, I mean, I'm trading Bitcoin at a million dollars and golds, who knows what handle. Because it's great conversation. It's a great way to learn how the iterations and as Dave started out, it's a very low probability. But we're discussing it for a reason. And it's part of the reason we have things like Bitcoin. Now, the key thing is, I like to point out is we do have, there's no better monetary

situation on the planet than the way the US is. Now, people might point to the Swiss, but it's nothing. We can run over the Swiss with a few tanks. I mean, if we really want to admit, this is how the US is. And this separation of of Fed from the government, Jerome Powell crushed that when he pushed back on Trump. That's part of the reason we had that massive dollar rally. The U.S. is just shining in this environment of tanks invading Russia and autocratic leadership in China. I think people are underestimating this is the beginning of the U.S. crushing it. And the U.S. is very favorable to Bitcoin. Why? Because we're one of the few countries that can. We don't have to worry. It's that whole layer of crypto has adopted the dollar.

And to me, this is where the macro comes into play. It's like the focus and the micro. But so I'm kind of ranting a little bit. But to me, the macro is so favorable for the U.S. And people like a lot of other podcasters point out how, oh, you know, every great major country has its peak in Trump. We've only been around 300 years. I mean, Rome was like 1,000. China peaked in the 1800s. Yeah, I mean, I think since we are on Macro Monday, I do think there are a couple of other macro points that are worth talking about. On the economy and the one I looked at, and you'll see I look at it every week. I mean, the Baltic Dry Index, which tracks shipping, continues to move lower.

I mean, in a year chart, it looks like it's about to bounce off a bottom. But if you go back further, no. It has a fair amount to go. You could probably pull that up with better charts than I can from the internet. But the fact is, real economic demand is certainly decreasing. At the same time, completely separate, the hash rate for Bitcoin and the network is still stubbornly sitting at an all-time high in the 260 level. And it looks a lot stronger. Once again, not something miners necessarily want to hear, but that's important. One of the things that the other thing that's

happened this winter, this winter has been really odd in the sense of people are saying, oh, my God, there's no snow in Davos, Switzerland. But we've had incredible warm streaks and incredible cold streaks, that volatility. And you notice you haven't heard a lot of environmental thought about Bitcoin recently. Why? Because they would look like the village idiots to say so. Because every single grid manager in every region where there's major Bitcoin miners are saying, oh, thank God for Bitcoin. They were able they're able to take on the demand when the when it's it's either over naturally too warm in terms of heating anyway, when it gets naturally too warm and they're able to turn off when it gets too cold. And so the grid stabilization of Bitcoin this winter is a case study for that. I'm sure come the summer, we'll start hearing more about,

you know, the Thunbergians will start talking about, you know, Bitcoin's impact on climate. But the truth of the matter is Bitcoin as a grid stabilization mechanism this winter is being proven on a large scale in multiple regions in the United States. And that matters because if you're really going to push for renewables, which need which require more grid stabilization, you're going to hear more of it. The reason I mention it is because that literally is the single biggest piece of of, quote, FUD, where people are saying, well, yeah, they're going to outlaw it for this reason. And it even, you know, typically when Bitcoin is getting killed, that's when it gets the loudest. And they tried again this year, but they couldn't because of these stories. So that's a big deal on the macro side as far as Bitcoin is concerned. And I think that matters

a lot. You know, and lastly, if you look at liquidations and what's going on on the non-CME markets, liquidations, even, you know, there was a day earlier, you know, the day that Bitcoin had the biggest rally over the last two weeks. The amount of short liquidations that actually occurred, I mean, they were large. It was, you know, 457 million shorts got liquidated on January 13th. That's half what previous moves we've seen. And that, and by the way, that peak was triple any other day during this rally. What I'm trying to say is that the amount, the actual absolute value of liquidations during the volatility was much lower than in previous moves, where we've seen either the rally last year, which took Bitcoin, or a little over a year ago, which took Bitcoin up into the 60s. And the liquidation pace was dramatically larger.

And it's just worth understanding that because there's just less people speculating outside of the CME. The CME has two reasons why you would expect an up into the right open interest. First, it's the only ETF has to have long open interest. And second, it is the only place that a lot of US players can, on a leverage basis, short Bitcoin. And so it is interesting, but that regulatory shield is why that's up and to the right. All the other markets combined, it's lower. And that's kind of a big deal. And it's just something to watch. Yeah, Mike, I had the Baltic Dry Index pulled up here, but I think you have it as well.

So I'm going to go ahead and jump. Same thing. Well, I'm enjoying the conversations because it's refreshing my chart skills in the terminal. So I love the Baltic Dry Index and watch a lot. Dennis Gartman, the famous commodity guy, used to mention it a lot. And I overlay that this is just the monthly Baltic Dry Index. It's collapsing and it's pretty much getting this is just the monthly baltic dry index it's collapsing and it's pretty much getting hammered but what you'd expect but the key thing i'd like to show you here is a bloomberg crypto i'm sorry bloomberg well it's divided by its 60 month moving average so you can see um the rate of change which is everything it's just making an early high this

is that deflationary environment. I think this is the macro that to me, this is the big picture. People said transitory. Transitory is going to turn out to be enduring. Sir, we had that one year blip, maybe 18 months of inflation, but it's collapsing at a historical pace and it's got everything pointing that way. That's why I think this is a historic reset Baltic Drive Index is part of it just look at the normal take back in the Bloomberg clinics when it gets expensive it always gets cheap it's still way expensive so I see commodities likely to continue dropping everything's going down the Fed's still tightening Bitcoin is going

to come out I think trading more like gold and And Ethereum is, you know, which is part of that revolution. And so to me, this is the macro that I'm glad Dave mentioned it because it's what I found about the dry index. It became less of a leading indicator that kind of was kind of distorted by COVID. But it's macro is quite clear. That's the environment I think we're going to spike. This time next year, we're going to be talking about why isn't the Fed easing more? Because everybody's losing their jobs. Unemployment's going up. And by the way, their stated goal. And then we had, look at what happened with real estate. The pump in real estate was bigger than 2006 peak in terms of actual prices. Yes, there was different reasons, but the dump is actually

happening worse, Bart, because rates are going up. Remember, the Fed started easing in 2007. So that to me is the difference in the macro. And that's where I see, OK, right now this bounce in Bitcoin, be very skeptical, be very careful. Maybe we'll get lucky. It'll build that island bottom. But you don't ever want to trade trade from a lucky standpoint. You want to invest with probabilities on your side. I don't think that we've entered a new bull market. I'm just hoping, as you said, that this means maybe the absolute bottom is in and we can just be super boring and sideways for a while, which I think everyone would take over a drop below that sort of mid-15s low that we saw after FTX.

And also, I think you could just make the argument now that we've reset to where we would have been if FTX had not happened as far as price. And now we're just back to ranging. Well, I mean, if you want to go that level, like what would have happened if billions of dollars hadn't gotten siphoned out of Bitcoin and Ethereum investing into yield farming and Luna and all of that stuff, one can make a very strong argument that 100,000 would have been a low number for Bitcoin if this whole thing hadn't happened. Because how much of the real demand for, I'm not talking about demand for shiba inu or or or other coins i'm talking about how much of the demand for bitcoin and ether was driven uh by yield farming i mean

you can make an argument ether that was a big part of its of its appeal back then but you know post merge is that really the big use case certainly in bitcoin's case and this is where i start sounding more and more Bitcoin maximalist. I mean, you can make an argument that the shenanigans of this year are essentially why Bitcoin is trading at 20,000 and not at 80,000. Because all that money that went into Luna and everything else is money that probably would have ended up in Bitcoin and without any of the force selling and all the other things that

were going on with it. Now, there's obviously cross currents, but it is worth understanding that. The other thing that I'll point out is something about the Fed. I always like to look at motivations. If you asked somebody objectively, if you were Jerome Powell, what do you want to happen? Well, I think what he wants to happen is for the reset to it to literally forget the handing out of helicopter money as a result of the pandemic. So basically erase 2020's actions completely. We had decades, not years, not days, decades of the Federal Reserve and helping engineer asset inflation and consumer deflation, or at least consumer, no consumer inflation because of substitutes, etc. Commodities

are, as Mike points out all the time, the canary in the coal mine for the consumer, because it's ultimately the inputs to what the consumer has to buy or sell. And as we get better with technology, we mine, grow, whatever, transport commodities cheaper. And so commodity prices are classically elastic, right? If the Fed could erase it and go back to asset inflation as opposed to consumer inflation, which will keep long rates low and allow government to borrow to cover their debt and keep people more or less happy, that's what they would do. Now, I'm not saying they can do it. I'm just saying that's what they want to do. And I never like to lose sight of what people want to do because it's an indication of what will bother them. I think that when they came out, I can't remember when it was, but I think it was over the summer. And they said, we don't care what happens to asset prices. I

think that was half true. I think where they're basically saying, we don't give a crap what happens to asset prices. We need to put the inflation genie back in the bottle. That's not to say that they wouldn't prefer what the bottle. That's not to say that they wouldn't prefer what I said. That's to say what they're willing to accept. So I don't think the S&P rallying makes them want to raise rates. I think that consumer inflation and inputs and all of the things that we've been talking about rallying are, okay, that's where they need to raise rates. I just think it's collateral damage more than anything else. I got to follow up on that because I think it's spot on. It's also, but it's don't

underestimate, and I'm only saying this to our audience, the wealth effect of asset prices going up and the absolute opposite of them going down. I still will say this. This is a 1929 type scenario. In 1930, the stock market rallied 50% and then went down. It's just taking away liquidity. But I have to defend the Fed. Remember, they did something in reaction to something that never happened in anybody's lifetimes. And the example was from the plague from right around World War I I. And obviously they did it too much. Remember, it's only been two years since we've had vaccines. Look who really messed it up. China did not, their system did not allow them to get over this like we have. Yes, people have passed away, but

you know, it's sad, but we're over that. And that's part of it. Why did the Fed pump so much? But it's a classic example of human nature where there's no way out of this. I see it now except taking it back. The Fed's doing it. And assets, risk assets have to go down. That's why I still think the best performing assets will be gold, U.S. Treasury long bonds, and eventually Bitcoin in the macro. Now, the micro things attract those like GBTC.

Dave can figure that better than me. But to me, this is why this history is being made is it's almost inevitable. We have to get through this reset. And if we are lucky enough to do it, and here's one thing I do enjoy with people calling from bottoms in the stock market. What did you not understand about the history of stock markets? Typically bottom after the yield curves is well into a steepening mold, well above inversion, and the Fed starts easing well after they start easing. We're nowhere near that. The curve is still inverted and still going inverted. And that to me is the key thing I want to point out is if

you can, David Rosenberg points out, there's one estimate he wants to watch. If he had only one measure, it's the curve and it's still inverted, which means the market's getting started to price for this big reset. I'm not shaking my head because of anything you just said. I happen to be watching the news as it rapidly rolls in. And there's something I have to leave. I know we got to go. I have to leave you guys with because this is going to make your brains hurt. And Dave, you're going to lose your mind. I'm sorry.

Three Arrows Capital founders, Zoo and Davies, pitched to raise $25 million for new crypto exchange. Okay, so wait, wait, wait. It gets better. So this is in conjunction. I was reading this while Mike was talking. This is in conjunction with the guys from CoinFlex. You guys might remember that CoinFlex

was one of the exchanges that went under because they said that Roger Veer was the guy who had borrowed 40, 50, 70, whatever million from them. And there was that huge thing. So they were one of the ones that was insolvent before even a lot of this contagion. They're partnering up to try to raise 25 million for a new crypto exchange. And the purpose of this exchange, as I'm reading it right now, is to focus on trading claims of Voyager, Celsius, BlockFi, et cetera, customers. So basically buying and selling the claims speculatively for a certain amount of pennies

on the dollar. And doesn't this just mean that we're not done yet here? I mean, we deserve a bear market if these guys get this. Well, I mean, you know, P.T. Barnum said it right. Right. You know, there's a sucker born every minute. And the fact of the matter is, if you might think that there's a model there, the fact that those guys aren't in prison or at a bare minimum, you know, in the court to face the face, the music from their investors is amazing. But, you know, why is anyone to be surprised by this? I mean, I'm not surprised, but it's just and it's also a drop in the bucket. It's a small thing. Twenty five million to this market. It's not going to move the market, but it is it is indicative of something that I've said many times. And you don't want me to go on this screen, which is the biggest problem I have in the crypto market. And in fact, in VC investing is the deification of people based on selection bias who got lucky.

You have a lot of people that are considered brilliant despite having, you know, I'm not sure they have a spare brain cell to walk and chew gum at the same time, but they did happen to bet on the right thing. And, you know, we've all these stories about Sequoia and this story, which just are mind numbing. I mean, look, we have a regime in this country that is dramatically outdated. It's called the accredited investor rule, and it stops the average person from being able to invest in things that are not fully disclosed under SEC rules. And we could talk about how ridiculous the fact that Edgar even exists

and prospectuses, written prospectuses that nobody reads, they're obsolete by the time they're printed, you know, happen, as opposed to using the internet and what could go with technology, all we want. But what is allowed to happen is concentration of capital that could be invested in a few hands, those hands by their own admission and i couldn't believe the guy from sequoia had the balls to actually admit this he said well it's all about trust when you're talking about founders and it's like if we if we either we trust the founder or we don't and that was his explanation of why they didn't do any due diligence in FTX to even look at a bank account ever, not once, or look at a wallet or ask for an accountant to look at a

wallet or a bank account. I mean, you can't justify it any other way. He literally said that. And the reason in crypto, it's that way in spades. I mean, Zuin Davies, among other people, were heroes. They were geniuses. Why? Because they got lucky. That's a bull market. And in a bull market, everybody's a frigging genius. When you buy and it goes up by a factor of, you know, it goes up 10,000%, sure, they were there. That doesn't mean they're smart. I'm not saying they're dumb, but obviously they were dumb.

They had no risk control. And that, to me, is the worst thing you could do as a trader. But why should we be surprised? They were deified and they still have hundreds of thousands of followers. And so they're going to raise this money. They're going to raise this money and this thing is going to launch. And it is sad. But when you have a marketplace where you deify people who got lucky. Bad things happen. And, you know, it happens in the equity markets as well, but less. Right. You know, it's like think of how many people are deifying Michael Burry because of the big short or deified Abby Joseph Cohen for being right.

Or like me, I don't have a lot of respect for Tom Lee. You know, one or two calls is not enough data points to know whether a person is brilliant. Now, those people might very well be brilliant. I don't know them, and I've heard good things about them, so maybe they are. It's very clear that unlike them, that Davies and Zhu are not brilliant, or at least are degenerate gamblers. And degenerate gamblers is not the kind of person I would trust with my money. But the fact is they did get deified

and there are enough people who said, well, they made money for me once. Maybe they can do it again. And that's just scary. It's just- Yeah, yeah. But you're right. You were right.

That did set me off. I'm sorry. Yeah, I knew it. I knew it. I had to read it. Now we got to go. I'm sorry. Thank you guys, Dave, Mike.

Maybe we'll have more to talk about on that one in the future. Thank you once again for showing up today as usual on a holiday since I don't take them. Appreciate you guys doing the same. I hope you guys have a wonderful rest of the day. Everyone, I will be back tomorrow, of course, Tuesday, 930 a.m. Eastern Standard Time. Once again, see you guys there. Thanks, Dave. Thanksave thanks mike always a pleasure

thanks let's go