The Wolf Of All Streets - Japan Carry Trade Risk Not Over? | Crypto Town Hall

Episode Date: August 12, 2024

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Testing DB, can you hear me? Yeah, all good. Good morning. Hey, man. How are you, man? Scott, hold on. Why is Scott on stage? He's meant to be on a boat somewhere. Can you actually hear me? Is that someone using Scott's account? Alright, am I glitching again? Maybe he just really missed you, Mario,

and he didn't want to have to spend a Monday morning without you. I don't know, man, because I did get a message from him last night saying, Mario, make sure you cover for me because I'm on a boat. So it doesn't seem like he missed me, but we'll go with that. Let's dig into the – we've got the panel immediately filled up. It's pretty good. Matt, I want to dig into directly to numbers,

and then I want to get into the market, looking at the markets as well. But just looking at the Bitcoin and ETH ETF, one thing I was asking about last week, especially after Black Monday, and I know we discussed it briefly. You weren't on stage, so I want to get your take on it. We discussed it briefly, I think it was someone else from Bitwise. Regarding your client's reaction to Black Monday, did you get a sense of fear from them? Because based on the person we spoke with from Bitwise, I can't remember who it was, they didn't seem to care much. Yeah, that's exactly right. I mean, that was the incredible thing. We got a few phone calls asking what was going on, but almost all of the phone

calls were about whether this was a good time to buy, not whether it was a good time to sell. We saw net inflows across the complex of our products. That was true at many of the providers, not all of them, but we each serve a different clientele. So our investors, I think, demonstrated that they're in it for the long haul. They see it as more opportunity than risk. And I suspect that's what we would see if we saw another sharp drawback. I really think people are pretty diamond hands in the ETF space right now. And that was a debate that we were having in the early days of the ETF's launch. So that was just another test. And obviously today there's been a fair bit of volatility.

It's going to be volatility throughout the week. How have they reacted to volatility so far? Because there's two arguments being made. One of them is that those institutional investors are sophisticated and they would not be reacting to fluctuations as we saw last week. Yet last Monday was pretty brutal. And the other side of the argument is that they don't believe in crypto like we do. So it's hard to believe that they're diamond hands. miss. If you're a professional investor who's allocating to crypto, even today, that's a risky move from a career perspective, from a reputation perspective, from a peer perspective, you're sticking your neck out. And what that means is that the people who are doing it in the early days, and we're still in the early days from a professional investor perspective, they aren't like 51% confident. They have to be 80, 90, 100% confident that crypto is going to matter more in the future than it does today, or else they're not going to do it. Bitwise,

if we go back, we had net inflows until 2018. We had net inflows through the FTX crisis. And the reason for that, the thing people miss is that the only professional investors who are jumping into this space are not dabblers. They're people with very high convictions. Anyone who's like 51, 49, maybe this is a good idea. They're sitting on the sidelines because the career and overhead risk is too high. So I think that's why you've seen ETF investors generally be diamond's hands. And I think that will be true until this asset class sort of matures from a professional perspective. Your thoughts on the argument as well that all these people are allocating, all these investors are allocating a very small

portion of their portfolio into crypto. So that portion is not really going to impact their overall portfolio significantly. Therefore, corrections of 10, 20, even 30%, while it could be significant for us who are a lot deeper in the space, for someone that has 1%, 2% of their portfolio in crypto, it's not that significant. Is that a fair argument as well? That's absolutely a fair argument. Yeah. If you have 1% or 2% of your portfolio in crypto, who cares, right? If it goes down 10% or 20%. I'll be honest that a lot of our investors probably didn't even notice they had other things to worry about. You know, on Black Monday with the DK down 12%, they're freaking out about the 60% of their portfolio. They're not surprised that Bitcoin

is volatile. And they're certainly not doing anything about it. Now, at this phase, they want to see research that shows why Bitcoin does well when we recover, which there's strong research that suggests it strongly outperforms in market recoveries. But yeah, absolutely. During a crisis with a small allocation, Bitcoin's not something that they're worried about. They expect it to be volatile. They know it. They've seen it. That's why they bought it. I want to go to the whole carry trade that triggered Black Monday.

Jonathan or anyone else could jump into that discussion. But has anyone been looking into it? Because it feels like in the financial world, everything is so levered up that you just don't know what could blow out. And it could just change everything for all of us. Something that no one was talking about just two weeks ago suddenly became the main discussion after Black Monday. Has anyone been looking at what percentage, I read somewhere that the majority of them, like 70%, 80% have already been unwound. What percentage of these carry trade positions have already been unwound? But Morgan Stanley also said in that same tweet that you're talking about, they said something like, but with a very high probability of risks.

In other words, like almost saying like, we think, but we don't really know. I think that's what they were saying. And I think the number is way bigger. I doubt that half of the cash and carry trade has actually been refused. No way. Yeah, no way. No way. Not a chance i mean i think the

cash and carry trade is anything between 3 trillion and 20 trillion and i think that what was unwound was very very very very very small very small like it was the canary in the coal mine and i think that i think we need to look at a couple of things regarding this cash and character number one the japanese calmed the market by saying look we're not going to increase rates again if we think it's going to have an impact in markets i know when i did a show about that i called that a pinky swear because i think it's as effective as a pinky swear that we used to make when we were little kids um and mario i know you still do them now, but we stopped doing them when we were little kids.

But it's a pinky sphere because as soon as Japan gets inflation again, they're going to have two options. Let inflation run rampant in Japan or increase interest rates. And already this morning, an ex-minister or governor or something, he came out and said, oh, they may look to do it again in March. And so I think that the cash and carry trade still has a very, very, very big – it's still open, and there's a very, very, very big chance that at some point it's going to unwind. Now, the question only becomes, is it going to unwind in the form of a soft landing, or is it going to unwind in the form of a hard landing? That's the only question here.

But at some point, it has to unwind. The second stat that I read this morning, I was actually doing some more research just to see how we did. But the Bank of Japan owns 80% of the country's ETFs, 7% of the entire stock market, and 55% of all the Japanese government bonds. You're literally talking about a bank that's printing money and using it to buy up its own country with the money that's printed. Literally. 80% of the country's ETFs and 7% of the stock market and 55% of the Japanese bonds are all owned by the Bank of Japan. They would literally have to call their own debt. Can I just point out one thing, guys?

Next week, 22nd of August, I believe, is the day the Japanese CPI comes out. It's projected at 2.8%. If it's even a smidge above that or gets to 3%, you can forget it. They don't have a choice. They're going to have to raise rates. There's no way. That's what I said. It's a pinky promise.

It's a pinky promise at best. It's a pinky promise. It's hopium. We're hoping inflation isn't going to get worse. And if that's the case, then we cannot raise rates. But if it gets worse, they don't have a choice. They have an aging population. Inflation is going to eat away at the aging populations um funds and they are very concerned about this and all they're doing right now is calming the market down because they

don't want to spook everyone and they're hoping that inflation comes on by itself and you also got to pay attention to what the bank of japan the Ministry of Finance is. In currency trading, we call the yen, I'm an old school currency trader, called the yen the widowmaker, but it's also what's called a dirty float, where you have free floating currencies and the yen is a dirty float, meaning that the government and the bank, whenever they want to, without forecasting, without anything, they can just jump in and intervene. They often do it at low liquid times whenever. But the other thing is, is that you got to pay attention to what the officials are saying. They use words like

watching, undesirable. The most recent comment from the ex-BOJ guy. Japan's done the equivalent since October 22 of fuck around, find out, where they will keep saying they're watching things. Everybody tries to say, they're bluffing, they're bluffing. They don't bluff. They will pull the rug when it's the worst time to do it. And it's going to cause the worst amount of harm to the most amount of people and like like like you said if it's up just a little bit of a tick they're gonna have to bump it up yeah and there's a comp there's a compounded risk by the way this week we have cpi numbers for the us uh and ppi and and the next and then the fed meeting comes up a month later so if the fed goes and cuts while japan has to raise that carry trade just goes nuclear but but the the

the heroin that is the the the carry trade is what it over six days it's gone up what almost 650 pips the the dollar yen i mean it's back up to what 148 maybe it's i haven't checked since a couple hours ago but i mean people are still wanting to milk that cow and that cow's gonna start kicking them in the face here pretty soon it's it's this is not something i would want to be hanging on to so So Vinny, all around, what percentage of the carry trades do you think have been unround so far? I think at peak it was 20% in the move.

I think everyone in the court were their pants down and they either posted collateral or they had some margin left potentially. Not everyone runs at like 20x margins on the carry trade. So I think 20% max, which is probably, in my opinion,

I don't know if a certain $1-2 trillion got unwound. And then I think they took the positions back the moment they reverted because the market bounced back pretty hard. So it was kind of a very elastic sort of move because the reason it moved was that they surprised with the 15 basis points above forecast, and they threatened more.

So then the moment they backed off those threats, the carry trade went back on. So I think we're still sitting with, who knows, somewhere between $5 and $10 trillion in the carry trade. Yeah. When we talk about positions being unwound how does that work is that the only way to unwind the positions is pure liquidation or is that could you have that leverage move from one one asset class to another through through other means how does it it just seems too complex for me to understand it depends on on whose account uh you know which heads fund which family office uh how they've applied leverage, what collateral they go in

account, what percentage of the portfolio it is for them. Everyone's different, but it becomes a pain trade when it's really the currency that affects things, right? So the interest is less of an issue. It's the currency because now you've borrowed yen to buy dollars. And in the moment, the yen is strengthening, you're losing more points on that than you are paying an interest and then so so if you have if the the the central bank is forced to increase interest rates what would that mean for the global economy how concerning is it you know you obviously you've had all that fear back on black monday people comparing it to 08 could that have been you know first could it spiral out of control could you have other leveraged assets around the world that no one's paying attention to start to be impacted as trust is eroded or is that an overreaction yeah i think that the good

news the silver lining in this is that everyone's now aware that there's a problem in the carry trade so i think a lot of traders will probably be positioning themselves a little bit more defensively than just being all gung-ho people are going to be watching the the cpr numbers from japan seeing what the u.s does i'd be watching the CPI numbers from Japan, seeing what the US does. I'd be surprised if it was a big blow-up right now because it seems like things have kind of normalized. And if they do have to raise rates, it might be a bit more orderly.

Don't know for certain. I can't predict what other people are thinking. But in my mind, if I was in the carry trade and I'm not, I would be paring down my position, taking a lot less leverage and just waiting it out because this is, it's a very volatile situation. Yeah. Another thing is what Randy was talking about this in your show as well. The, the weakness in the U S economy, I think unemployment rate has been rising, um, you

know, been gradually rising and that's just spiked up recently as well. So the, the American economy is just starting to show weakness. Um, how would you, how would that impact crypto in your opinion? And what would that mean for the rest of the cycle, at least before the market recovers? I think when the Japanese cash and carry trade came tumbling down, I made a couple of predictions. I'm glad to say all the predictions have come right,

except one that's less to come right, which is our forecast is going to be one more rate. There's going to be a rate cut in September. I think that the market's dreaming if it thinks it's going to get a double rate cut on its first rate cut i think it's going to be a single rate cut and i mean the market was then forecasting like multiple rate cuts thereafter at one point they were forecasting the equivalent of two pips i'm sorry of one full um so two half a percent rate cuts this year. I think we're going to get at best 0.25 in September, and we may get another 0.25 sometime between then and the end of the year.

I don't think that Powell is going to rush to all of a sudden reduce the interest rates. Ryan, you're speaking from my handbook. You know, I're speaking from my handbook. Well, no, Vinny, our bet is you said that the next move for the Fed is going to be a rate increase. That's what you said. We haven't recorded it, sir. Hold on, hold on. Wait. Just wait, just wait. So, last year,

I did say there'd be two to three this year, and everyone said seven. I still don't think it's fair to complete that it's going to be a rate cut. I still don't believe we'll get a complete it. It's going to be a rate cut. I still don't believe we'll get a rate cut this year. I'm still like… I think September we've got 25… Watch the CPI this week, buddy.

Watch the CPI this week. Okay. Yeah. But I think September is a 25 basis point rate cut. And I don't think they're going to rush again to cut again in October. The next one is November. I don't think they're going to rush again to cut in November. Cutting the rates is going to exacerbate the carry trade uh unwind for japan

you realize that yes and who do you think the biggest buyer of of u.s government bonds are i don't think i don't think that i don't think that that powell is is mandated to look at that i know that that yellen is but i don't think powell gives a about that powell gives a about unemployment and he's getting some recession indicators there was that that recession indicator that flashed the other day i can't remember what it appears i guess called the pearson uh indicator which flashed the other day um and then and the whole market panicked into recession territory and i think that if powell's smart and he is smart um i think what he'll do is he'll say i'm going to preempt this and i'm that if pal's smart and he is smart um i think what he'll do is he'll say i'm going to preempt this and i'm going to go with a very gentle rate cut uh in

september and then i don't i think we get one more rate cut this year but i don't know if it's gonna i mean i have to wait to see the data whether it's going to come in in november or december but there's going to be i think it's going to be mac i predict one but maximum two rate cuts this year and all of them are 0.25 there's not going to be, I predict one, but maximum two rate cuts this year. And all of them are 0.25. There's not going to be a 0.5. No chance. Yeah, the 0.5 is never going to happen. But again, I think we have to at least accept the fact that there could be no move in September.

I mean, as much as everyone thinks there's going to be, depends on the CPI and the PPI this week. And depends on what happens with Japan's numbers as well. Here's the problem. If Powell cuts, so if Japan's CPI is a tick above 2.903, do you think Powell can still cut knowing Japan now has to raise? I don't think Powell gives a shit about Japan. I think Powell gives a shit about the U.S. You have to because remember what's buoying U.S. assets is the carry trade. That's Yellen's problem. That's Yellen's problem.

That's Yellen's problem, not Powell's. No, no, I know, I know. But they've got an agreement here, dude. There's no way these guys are not talking to each other. That's Yellen. I mean, Powell has his division to worry about and Yellen has her division to worry about. Yeah, but they operate in unison. And that's, by the way, that's why Powell didn't raise rates higher this year because he couldn't

because the Treasury isn't saying you can't raise rates higher. Like that's as much as you think there's this like Chinese war between the two, there isn't really. Can I ask both of you if you think that there's a if it exists, is there a an unspoken live unlimited swap between the Treasury Department and the Bank of Japan Ministry of Finance? Do you think that's honest? 100%. I'm convinced it is. Because here's what happened. A few months ago, when Japan first wobbled and the currency went to 180 something, they had to step up and they started putting 50 billion at a time into protecting their currency.

Now, the only way they can get that sort of money loosened up quickly is government bonds. And so Yellen, as far as I know, she went there for a meeting or there was some interaction between two and all of a sudden everything was fine. They don't want Japan dumping U.S. treasuries to come up with the cash to protect the yen in the open markets. So what do you do? You get a swap line. I've spoken to other macroeconomists about this we all agree that that is exactly what happened

yeah because I I mean who who capitulates first I mean at what point does the government of Japan start to say listen we have been we have been scratching the backs of the whole globe, and now it's time for everybody to get on scratching our backs. When they can't hide the inflation anymore, right? They can't do it. The problem is they can't do it. They will go insolvent. The U.S. government hides inflation at the moment, and this is what Powell said publicly at the hearings,

like illegal immigration keeps costs down and therefore inflation numbers go down but that's just official reporting it doesn't you know all you're doing is you're widening the the labor supply base and i'll tell you why this is important so by america expanding the labor supply base and keeping labor costs low you deprive workers of higher incomes but you keep inflation down japan does not allow illegal immigration japan does not allow illegal immigration. Japan does not allow immigration in period. You can't just move to Japan and become a citizen and work there. It's very, very hard. So their problem right now is they're seeing spikes in inflation

from labor because they can't hide it. You can't reduce it. And I don't believe that the 2.8 forecast that they have for the next whatever uh months in japan is going to hold it's going to go over three and now you're in shit so the whole thing unwinds at the same time the moment people realize that japan can't hide the inflation numbers america's been hiding it and we're on a bad track so it'll unwind yeah so so when inflation if we do see that uh vinnie what does that mean for the global economy and crypto? Well, so first of all, it's going to be a liquidity crunch. So the moment – so think about this, okay?

The Japanese carry trade over the past – at least the past year and a bit since COVID and the low rates, as the rest of the world started raising rates, the carry trade moved more to Japan because they kept rates – I mean, they kept rates low for years now since COVID. So all the global liquidity that's been sucked out by other central banks raising rates has kind of moved to Japan because you could borrow cheaply there and you can run the carry trade. The moment Japan starts raising rates, all of a sudden, that money is going to flow out. And so do the math. This is such a complex situation. I don't have the expertise. It is. You're much been, you're much deeper in the space and you calling it complex. Like I'm trying to decipher it. Other people in the audience are probably even less knowledgeable about all this. Long story short,

long story short, let's summarize long story short. Japan is fucked completely, completely, completely fucked. And how fucked they are is they went and bought up everybody. They went and bought up everybody else's treasuries. They printed money.

They used that money to buy everybody else's treasuries and everybody else's stock markets, including their own. Including their own. So if and when that trade unwinds, it's going to be catastrophic. Is there any healthy way to unwind that trade? Is it just doing it slowly over a period of time? No. Because it just feels like a second time bomb. No, unfortunately not.

But then why the market? If that's the case, why the market? Well, if you said that there was a window open, why couldn't they open the window and just buy $3 trillion? There's no way to unwind this cash and carry trade. There's no way to do it. Because imagine the Bank of Japan starting to sell down their own stock market. That's

effectively what would need to start happening. The Bank of Japan would have to start selling their own treasuries, their own stock market. It's not possible. The impact is beyond Japan though. You said Japan is going to be fucked. It's everyone. It's Taiwan. It's everyone. It's Taiwan. It's Korea.

It's up to $20 trillion. That's what I'm saying. No one can give you a number, but Deutsche Bank forecasted $20 trillion. Okay? Like $20 trillion. Imagine $20 trillion of fake money that has been printed in Japan, and they're using this money to buy and leverage other markets around the world. It's a shit show.

It's a fucking shit show. The only thing is that they've made a pinky promise not to raise rates. But this is why Powell is stuck here. Powell is going to be stuck here because Japan, if their inflation number is high and they're going to raise, Powell can't meet them by going down. I just don't see how that happens. It's going to blow the entire financial world up. I'm telling you that Powell doesn't give a shit.

I'm telling you Powell doesn't give a shit. Doesn't give a shit about what? About Japan. I think Powell gives a shit about inflation, about recession, and unemployment. You don't think that the Japanese government dumping a couple hundred billion dollars worth of US bonds is going to make it? That's Yellen's problem, not Powell's problem.

I think he cares, but he's limited by his mandate of what he can publicly talk about and what he can do about it. Privately, I'm sure he's like the rest of our three's like he's like oh this is fucking shit show this this is there's nothing but he can't he can't it's not like the japanese officials he can't say anything about it but guys

guys like i the numbers we're talking about when you say 20 trillion you're talking about the same numbers as the 08 financial crisis and he's saying that it's inevitable there's no way around it other than implosion yes well i'll tell you what I'll tell you what the way around it is. I'll tell you what the way around it is. They increased 0.25 basis points now. They shocked the market. And then they increased 0.25 again. Then they shocked the market again.

And then people realize that this thing is going to unwind. And hopefully it doesn't unwind over three days. It unwinds over a period of three years. And we can mitigate the damage out of it. But, or, or they... There's zero appetite for that, Ron. The politicians have zero appetite for that right now.

It's all or nothing. Bang or keep going. Well, for now, they said, pinky swear, we're not going to raise interest rates until we do. When there is inflation in Japan, they're going to be faced with,

they have two options. Increase interest rates or allow inflation to go rampant. Japan has a non-productive population. They have the biggest age, they have the most exacerbated aging problem. Average age is like late 40s, like 48 average age. Yeah, they're screwed. They are absolutely, absolutely screwed when it comes to that. That's what I'm saying I think

that our best case here is that I think for the next six months until March, we're fine. The next eight months, whatever it is, until March, we're fine. I'm just saying I think the Japanese government won't raise rates for the next six months. But I think in

six months... I don't know how you think that we're going to get past the next two months, rates for the next six months. But I think in six months... I don't know how you think that we're going to get past the next two months, let alone the next six months without having any major... Because they made us a pinky promise, Vinny. They made a pinky promise. And they're going to have to hold the pinky promise for two months. So between Japan and the US in the next two months, I'll predict before the election something breaks big time.

Okay. I don't agree. But Dave, thanks for coming up. Is there another way around this because i feel like if this is a ticking time bomb the market should start pricing that in because now it's clear the risk is clear it's like what we saw in 08 we started seeing the kind of the kind of the mash that lit the fire we started seeing people early on start liquidating but it seems here that everyone's just moved on no one's talking about it is there a way to slowly unwind those positions without imploding the market and causing a global liquidity crunch and moving that liquidity into other markets, finding other similar opportunities, similar arbitrage opportunities?

No. Where are you going to get cheap money from? This is a cheap money problem, guys. Yeah. Where are you going to get cheap money from? Everyone else has raised their rates. The short answer is no but. Vinny's right.

It is the cheapest source of money. It's been the cheapest source of money for 30 years. Japan has gone through, they have an aging population. They have the highest savings rate in the world. And those savings are used to prop a debt to GDP that is unsustainable. That said, it's been unsustainable for 30 plus years. And, you know, having been involved, and for those, I'm showing my age, I apologize. back in the 80s and the amount of money that morgan stanley and goldman sent and goldman and solomon brothers which is my next firm made shorting the japanese market uh in a coordinated way during that period of time when it was at its all-time high wait did you did you i gotta interrupt you that is so bad sorry nobody else gets how badass that is i just have to like fanboy it oh you have you you have no idea jon, of the stuff that was going on there.

You have no idea. There's a chapter in a book that I've been thinking about writing that I may have to out some people, but there's some stuff that went on that is just unbelievable. You should put a Reddit thread on that because that would blow the fuck up. I want to hear about it. In any case,

the simple fact is we've been saying the same thing about Japan for 30 plus years. And every once in a while, there's a threat to it breaking. And the reason is because Japan has a debt to GDP that's, you know, depending on how you measure it, well over 200 percent, probably 300 percent. And people say, well, how the hell is their borrowing cost so low? Well, the answer is the BOJ quietly sits there and buys, and now they have more than half of all the JGBs, the Japanese government bonds, in existence. And so they continue to prop it up.

Meanwhile, their older population has their money in what's called postal savings accounts. You can't make this shit up. That is literally what it's called. And that's where there are trillions of yen in those accounts. And then hedge funds come in and borrow cheap yen and buy stuff. And they've been doing this for 30 years. Is it likely to all unwind?

I mean, no. The government's – I guarantee you we were talking about this with Scott this morning. We don't know for a fact because I'm not on these calls. But I asked James Lavish, what is your odds that there weren't phone calls between the head of the BOJ, Powell, and the head of the ECB over the weekend, both last week and this week, and coordinating what's going on? And the answer is zero. Of course, they were on the phone. We don't know what was agreed, but the fact is they're going to prop this up as long as they possibly can. But to call this a crisis like 2007 and 2008, it's different. It felt like there was a run-up.

In 2007, there was a massive spike. In 2005, 2006, a massive spike in subprime borrowing with people going further and further and further at the yield curve. That's not happening here. What's happening here is the same thing that's been happening for 30 years. The yen is cheap. Borrow it and lever up whatever you're going to buy. And so that's the yes. And the but is so it's not like a tindering powder keg. There are probably other things in the financial system that can break.

And we could talk about those, too. I mean, I think net net what I'm learning is that everything works until it does. Right. We've seen that repeatedly. We've seen that repeatedly. I mean, I think net-net, what I'm learning is that everything works until it doesn't. Right? That's true. But we've seen that repeatedly. We've seen that repeatedly. Yes, exactly.

You've been waiting for it to break for 35 years. It can go on another 35 years. And that's the point. The market can remain irrational longer than it can remain solvent. But you mean Japan could keep low interest rates for a lot longer? No, guys, guys, guys, it can't. Japan has been struggling with deflation in the past they're at a point now where they're about to go about three percent inflation and it looks like they could hit that this month and i i just don't see how japan at three percent

to four percent inflation is gonna manage to pay the bills for everyone and may keep all their retirees happy and everything else this is what this how many times have you heard can't in 35 years? Japan can't do this. No, the thing is, Japan is a contained economy. It's very different, right? They import everything. They're an island. They have energy costs, which are external.

They have raw material costs, external. The currency devaluation is the worst we've seen. It's come back a bit right now. And you've got inflation running high locally. It a perfect storm something's going to break it's possible vinnie it is certainly possible then why then why why why are the markets not pricing it in like there's very intelligent people trading those markets just like you guys because the yen's trading at 147 and 160 was where the bank of japan basically drew their line in the sand and we don't know what and if you're're a currency trader, I mean, people got,

it's very hard to explain this to people who trade crypto. But, you know, the magnitude of a move, when you have a 10% move in a G7 currency, really G4 is really the four biggest, or the pound, the euro, the yen, and the dollar together. When you get a double-digit percent move in a currency, that's like a 95% move in the shit that we trade. It's like a four-sigma move. It's a four-sigma move. It's insane. And everyone's using leverage.

So when you leverage it up 20, 30, 50 times, you see a 10% move. You're going to get wiped out. Let me put this in the perspective of a retail trader. The normal Forex crypto trader, like if you're in the US, you're using a Wanda or Forex.com. And they trade in lots, which is 100,000 units of something. And in the US, you can trade max, the brokers usually put more of a limit, but max 50x. So if you've got $100,000 in leverage, like one pip move is worth $10.

It's moved over the course of six-ish days, 650 pips up. Take that times $10. If you're the average retail trader and you're affected by that, that's a lot of bank for the normal retail forex trader. So we talked about last week, just to continue, this is what Vinny's saying. Well, we said last weekend, we were sitting here on the show a week ago today, and the markets are starting to rebound because, you know, what we worried about, the fear over the weekend, which was clear that was going to be the fear on the Friday before, so now we're going back a week before that,

was that one or more hedge funds were blown up. There were debt charges in the ocean, submarine hedge funds went boom, and they're going to float to the top. Why that creates such fear is because nobody knows what they have to sell in order to meet their obligations, what derivative contracts will get tied up, what liquidity will get sucked out of the system. The real fear here is the bond market, not the stock market, not the crypto market. It's the bond market. And the real fear is that enough liquidity would be frozen in a bankruptcy hellish situation that would cause a repeat, a sub-repeat of 2008. Because that's what happened in 2008. It was all the plumbing failed because nobody knew whether

they could get their money or not. And that's the fear. And so you have to ask yourself the question, well, here we are a week later and there may have been some bodies, but we haven't heard a whole lot. And certainly none of the big banks have gone. What Vinny's contention, and he may very well turn out to be right, is that something will happen that will cause that sort of event, which will cascade upon the prime broker banks, which will make plumbing seize up. That's the kind of thing that that could cause it. The market basically this week is basically saying, eh, we don't care. And they're shrugging it off. And you can make an argument one way or another. It feels to me that with the bond market below 4% still in our country, maybe the bond market is kind of telling you that they think there's still a risk of that.

And that's why the rate cuts are priced in, because people think there's that risk. Simon? By the way, just for the audience, I was Googling while you guys were speaking. Is this the size of the Japanese yen. It's a lot bigger than I expected. It's sitting at 9 trillion US dollars for the Japanese yen, which is more than half of what the euro is. I didn't know it was that big. I'm not sure what the remnant B is at, but that's number three.

The yen is at number three, US dollar is number one. And euro is number two. But then the other question I have, and so I'll give you the mic, but it feels like there's kind of three ticking time bombs now. I think one of them were past it, and some of you might disagree. But I think the one we faced during the Silicon Valley bank collapse, the time-based risk, whatever it was. Duration risk. Duration risk. There you go. So that one, unless you disagree, but I think that one is no longer a risk now.

No, no, absolutely it is a risk. The US banking system is sitting at over $500 billion in losses. But with the interest rates, we're now seeing a reversal when it comes to the central bank's position. Are we? So here's the thing, right? If Japan has to unwind and do yield curve control and sell US bonds,

listen, that's going to get worse, okay? The losses are going to get bigger and bigger, especially if it's like 10-year bonds, whatever else, longer duration bonds that they're going to be selling to try and get money to prop up their currency. And then we've got, as Dave mentioned, we've got the credit risk spread right now.

There's a credit risk in the market which is not being priced in. Nobody knows who's got what and how much it's worth. And if one firm goes bankrupt and takes everyone down with them, you're going to have this cascade because what happens is, for example, they have to sell a certain amount of bonds,

push the market down. Other firms are running close to the edge. They're going to go under as well. You can have a domino effect because everyone's using leverage and everyone's on the wrong side of the trade if yields go up. And that's where I'm at right now. I think that if the Fed fund rate is cut, then that problem is no longer there. It all depends on what happens next month, correct? The Fed's fund rate will only be cut if US inflation is under control. And there's a view

that it's not going to impact Japan negatively because if Japan has to unwind its bonds, Japan unwinding its bonds because the carry trade unwinds impacts the US in such a big way because it basically impairs the Fed's balance sheet even further because the yields are going to go up on those bonds that they've got and they have to hold to maturity. And the entire banking system has to hold to maturity. Guys, this is a cluster. That's all I'm going to say.

The reason, but just to continue that thought, that's why we've been talking about this a lot. The simple fact is that were that to have happened, that's the game of chicken that's being played. There is a reason that I'm sure Powell was talking to the BOJ. It's because we don't want them selling those bonds. And so we're going to open up credit facilities for them to do that. The question is how much credit, whether they'll make it public or whether it will be the implied threat.

That's all the stuff that we can't know. I mean, honestly, anyone that you could get up, Mario, that could talk about it. I mean, maybe you can get some ex-Fed people, you know, maybe Daniel DiMartino Booth or someone like that to talk about it. But there's a lot going on here. And what Vinny's talking about is something that's very well understood by the people in the Federal Reserve Building. They get this. And trust me, they're doing what they can to stop that. That is the stuff they care about. Stock market moving up and down, crypto moving up and down, US bonds being sold to make our borrowing costs go higher, that is literally the thing they care about. More important than inflation in their eyes mario dave vinnie can i ask real

quick at what point because here's where i i i feel like when shit really hits the fan is when you start to see the armchair economists of the publications news fox business cnbc like when they really start diving into this because it was just a news thing. Oh, again, carry trade. Okay, people, most people, except for those of us who pay attention to the ship, like they forgot about it. But at what point do the armchair economists or any of the educated economists, when does this start something where they're telling their editors and stuff, hey, we should really get on top of this because this is going to be a huge ass story. And everybody needs to be talking about how bad, like, when does this become normal news? And then people around the globe start to actually get scared. Great question.

Let me give you that simple answer. Go and watch The Big Short. In The Big Short, two of the guys on the hedge fund, they went to go see the Wall Street Journal guy. And he was like, hey, guys, I've got a wife who's doing a master's degree. I've got a kid. I'm not going to put my neck on the line and go to my editor to tell him to write this story. Good luck with all your conjecture around this market unwinding.

And if you look at history, no one puts their neck on the line for this stuff. Until it breaks, everything's okay. And I think that'll continue. So it starts impacting the bottom line. When traders, investors, the average Joe starts to lose money from all this. That's when it starts hitting the press. It's like when we lost Black Monday, it was a blip. It went down.

Now it's back up. It's just normal vol. That's what everyone thinks and we've gotten accustomed to. When it goes down for a day, two days, three days, five days in a row and it doesn't look like it's coming back, that's when people start

going, oh shit. But isn't it a wake-up call for all these holders that everyone's participating in the carry trade opportunity. But isn't there a wake-up call for all these holders? Everyone's participating in the carry trade opportunity. They see the risk involved in the arbitrage opportunity. So wouldn't they start taking action when they start minimizing that risk gradually and deleveraging? I mean, that's what you would do if you have enough equity in your balance sheet.

If you're underwater, you're just basically holding on and praying things bounce back oh yeah again it's the it's the domino the first domino to fall and i even tweeted about this last week like something broke in the ecosystem somewhere we just don't know about it we don't know where it takes a while for it to come out the moment something breaks and you go okay these guys just lost three billion dollars or five or ten billion dollars or whatever it is in their hedge fund. And these are assets they have, and they have to sell it. And this is the precious one in the economy. Then you start seeing things unwind. Remember, it took a full 18 months between Bear Stearns collapsing and Lehman Brothers, right?

A full 18 months difference. And I don't think that— How many months? How many months? 18. Now— 18 months between what? Lehman and Bear Stearns? Yeah.

Yeah. So remember, it takes a while for the market to figure out what's going on. Shit. But I think we're past that point. I think the Bear Stearns moment was last year at Silicon Valley Bank, that whole thing. So I think the 18 month marks coming up right now because we know all these hold to maturity bonds are not worth like the duration risk is massive right now the fed's got a impaired balance sheet the banking system's

got 500 billion by by inflation it's what all comes down to inflation if inflation starts to settle for whatever reason which is obviously hard to imagine happening. The inflation numbers are incorrect. Okay? There's real inflation and then there's reported inflation. Globally or are you talking about the U.S.? The U.S., the U.S. The real inflation numbers we all know is a lot higher than what they're reporting.

And, again, this is because you hide inflation by having, for example, increasing the worker base. You're more illegal., more illegals, 50 million illegals coming in to work, whatever, it brings down inflation numbers. So this is my point. Like, you know, inflation doesn't escape from the economy just because you can show the official numbers coming down. It just goes to other places. So it goes into rents.

It goes into other things. So the government trying to hide inflation by manipulating the supply of labor base doesn't take away inflation. It just moves it elsewhere. And do you believe the numbers coming out of Europe or same issues as the U.S.? I'm not a Europe expert, but right now I'm just focusing on Japan and the U.S., to be honest. Simon? Simon, I know that's the argument for gold being a store of... Actually, a question for you, Simon, and others on stage. So what does that mean for Bitcoin?

And then what does that mean for the rest of the crypto market? Yeah, that's a very interesting question. So I think it's quite clear from this conversation, the level of degeneracy our economies have gone thanks to complete removal of market forces and central banking. So we all live in central bank markets and nobody cares about the reality. They just care about what the Fed does. The Fed has completely occupied and taken over all of these countries. At the same time, we have this very interesting demographic issue as well.

So politically, everything's about the horrors of immigration. And yet the strategic advantage of both countries in Europe and America is that they're actually able to attract immigrants in order to solve demographic issues that a country like China and Japan have a lot more problems. Now, politically, this has become a complete hotbed topic with the desire to do mass deportations and demonize immigrants.

So this is just fascinating that we've hit this level of disjointedness in the realities of the market, central banks and some of the more political issues to create this perfect storm. And let's not forget that we've got the geopolitical risk to add to that equation that China can decide, do I want free markets and do I want an unwind of the credit? Do I want to be more interventionist? Or do I actually want to be more like America and more like Japan and intervene in markets way more aggressively? That's just a fascinating thing we all have to watch. Now, the real question, does all of this leverage now apply to Bitcoin because of the ETF market? Is there some wild trades that we don't know about in the Bitcoin market from some of these hedge funds through the ETFs and futures? We don't know the answer to any of this stuff. And so we get to see, is Bitcoin just going to be risk on, risk off? because we know the narrative. We know that it is actually

a solution to the central banking problem for those that want to exit. And it's also a solution for those that want to combat inflation and civil unrest. So we get to see the narrative roll out in real time. And my guess is that the four-year cycle prevails, but we haven't had the real test. And this is the real test. And this is why there are still asymmetric returns in Bitcoin. Is it going to go with the commodity market while the crypto market goes with stocks? Or is Bitcoin going up, going to drag the crypto market with it and create an exodus out of traditional asset classes over to this sector.

I think, you know, all interesting things that we've which is why there's still so much more to go and so much more to understand in this cycle. Dave? I think that Simon has his finger on the key issue here, which is, is the asset value of Bitcoin that's being told to American investors in the ETF world and we kind is, you know, gold is going up. Well, gold is going up because people are worried about what's going on with all the central banks and debasing currencies. And Bitcoin is that on steroids, if in fact gains that critical massive acceptance. The thing that's interesting, and I keep talking about this, and Mike McGlone and I have this argument most every week, is I keep explaining that Bitcoin has core holders and buyers who will buy this for the same thesis that Simon has done far earlier than me. So he's done a great job there. But, you know, I'm only there for, what, my seven years? So I'm a tourist, I guess, by comparison.

But the fact is, is that narrative means that that's where the real value of Bitcoin will be. And the people who are, quote, hodlers are, saying, listen, if it doesn't 10x, don't even talk to me. Meanwhile, the price action is driven by speculators using leverage on PERP exchanges around the world, full stop. And we see it time after time, whether it's on the upside or the downside. I mean, just look at the market today. The market's rolled over. The stock markets are down, what, 30 basis points? Bitcoin dropped, what did it drop, $2,000 lower than where we are now? You know, all in one day. I mean, it happens all the time. It's because the marginal buyer or seller now are leveraged speculators while the holders are still there. Yet the holders or the

long-term buyers are the ones who have been driven the market into this price range and are the ones who will reassert the four-year cycle, if Simon and I happen to agree with him, is correct. And so that dynamic is happening. At the same time, we are clearly seeing fractures in the fiat system. People always have to put it in perspective. The fiat system has only really existed as a global system since 1971, right? That's not that long of a time in terms of economics, but it encompasses the entire investing life for almost everybody who's investing, myself included, right? So we need to understand, so we talk about things like Japan, we talk about the Federal Reserve. It takes a lot more money now to make an impact than it did 10 years ago than it did, and it's been exponentially growing.

And that is the reason why, when Simon mentioned the asymmetric return potential profile of Bitcoin, it's because of that. I mean, it takes billions to do what millions used to do. And that's important to understand. Yeah. I think it's worth mentioning, Dave. I agree with your points there. The issue right now for me is market depth and liquidity. So Bitcoin has always historically acted as a liquidity sponge in good times. And when things go bad, it was when we have low liquidity Bitcoin tanks.

At some point, there may be a flip over where it doesn't actually matter. But for now, I think it's entirely tied to the global liquidity situation because people who hold Bitcoin in their portfolios, if things unravel, they're going to sell it. They're going to have to, whether it's from margin calls or whatever else.

And that's the issue right now. It's still a bit of a savings account for a large percentage of the world right now. It's still a bit of a savings account for a large percentage of the world right now. It's about $1.6 trillion market cap. And I just don't think that Bitcoin is going to be immune from any downsizing. Absolutely not. Short term, short term, and long term? No, short term, not long term. All you have to do is look at my favorite example. I've used it on this show before. If you look at home stake mining, because remember, US citizens couldn't trade gold in

the 30s during the depression. Everything went down. And then as the depression started grinding lower, but the major shock was over, home stake mining diverged completely because what money there was was attracted into it. And so Bitcoin could be like that. I often say it will be like that. But the weekend, the day, the month, even potentially, I mean, it took three months in the GFC for gold to de-link. Gold went down with everything else in 2008. Exactly. But three months later, it de-linked and then went on an epic bull run. So remember, Bitcoin is a risk-on asset, not a risk-off asset in the current climate. So if people go risk-off, Bitcoin is going to go down.

And if people go risk-on, Bitcoin is going to go up. And if we have a financial crisis and everyone goes risk-off, it's going to come down with everything else. I mean, that's right. But I think that Ethereum is being positioned as more of a risk-on asset than Bitcoin. And I think it was... Solana has been taking their spot now. I was actually chatting to a friend about that this weekend, a trader buddy of mine. And it looks like when the market's rallying and there's excess liquidity and people are trying to diversify, they're not going to Ethereum. They're going to Solana now. And then when the market pulls back, Solana comes back down as well. So Ethereum is a lot more stable, and Solana looks like it's jockeying for liquidity right now. Well, that's within the crypto space.

But now that there's an Ethereum ETF, don't underestimate. Remember, half the world's investable capital is still in the US for reasons that are – well, there are lots of reasons, but that's just a simple fact. And the fact that Ethereum has outperformed Bitcoin over the last week isn't really that surprising. It got crushed. It went down much further. Venick just filed for – Venick filed for a Solana ETF now, and the SEC withdrew their case against Solana. So now it looks like Solana ETFs are going to be coming. Sorry, all the crypto-

Did I miss something? That's true. That's not true. And I'm not the lawyer here, but let's explain this really quickly. What the SEC did is they have multiple cases, and the one with the most hostile judge is the one where they pulled solana they didn't pull it from the other one they only pulled it in the binance case they have not pulled their ah okay okay i thought it was a base case if the se if harris actually is convinced by the various people to to do make a pivot you will see the sec drop their cases against coinbase and kraken

etc and then those of us and I am a Solana bull. I'm not going to lie about that. I mean, you know, we're not, I own more Solana than Ether for all the reasons that you're mentioning, but you have to be realistic about it. The fact is, is until the SEC pulls those cases, you're not getting a Solana ETF. Yeah, I've just checked, by the way, I saw Punk in the audience, Punk 2520. I'm like, what happened to Punks? They're down bad. So I know it's irrelevant to the discussion, but that was a nice site here to see. But that gets to Vinny's point, which is what I think is

real. When Bitcoin and the Bitcoin community goes up, it creates liquidity for everything else in the ecosystem. And people recycle those dollars. So-called alt season. How many times have we all heard that? Right. When Bitcoin's been in a range like it's been and you can go look at it. Bitcoin is now at the exact same price as it was at in February. And it's been in that range, you know, pretty consistently for six months. There's no alt season when there's no more money being pumped in. And at the same time, liquidity conditions around the world are worsening. That's the issue.

That's what Vinny's talking about. I just think that within the crypto space, Bitcoin will be the most resistant, but nothing is fully resistant if in fact we have it. You'll need this. Yeah. So if I ask you to speculate what could happen, best case, worst case scenario over the next, let's say, 12 months, can we see the cycle repeat previous cycles or with what happened in Japan and what's happened on a macro perspective? It all depends on the inflation numbers, the unemployment numbers and what the Fed will do. I personally think that there will be a significant rally in Bitcoin once we see what's going on with the elections and once we get into

the fourth quarter. Why the elections? If Kamala's changing her stance about crypto and Trump is obviously pro-crypto, why do the elections still matter? No, she's not. She's not changing her stance. She's just pandering to voters. But you could change... Don't you change your stance on crypto if you just pandering to voters. Yeah, but you could change.

But no, but you can't. You don't change your stance on crypto if you're pandering for voters. Are you saying she'll say she's changing her stance, but she doesn't actually change her stance? As soon as the election is over, she'll go back to being anti-crypto. Is that what you mean? I think that's what I think that was Vinny, and I agree with him. I think, look, we don't know what's going to actually happen. Right.

She changed her. She agreed with Trump on no tax on tips, which is rather amusing. And the reason for that is because Nevada is such a pivotal state. But let's not go into, I don't really want to do a political spaces. All I'm saying is that if the market genuinely believed that Trump had a 50% chance of winning and he was going to do the things that he said he was going to do, Bitcoin would be a hell of a lot higher than it is today. It's not priced in. So the market is placing a wait and see. And as we get closer, those sorts of bets will start to take shape. Yeah. So based on PolyMarket, Kamala's at the highest I've ever seen her. I'm using PolyMarket because I had Trump. We're not getting into a political space we did that last i think it's lost fighting but it is important when trump

was at 70 it was not enough to bring bit to bring bitcoin to new all-time highs and the reason is because that's because people maybe they were expected to swap because people look at that and say you know it's it's too early right let's figure out what, let's get some real, Democrats haven't even had the- So the Trump, what you're saying is that the Trump rally, we got a taste of it when the assassination attempt happened, when the debate happened as well. So we've got a sense of what would happen to crypto if Trump wins. But it's just too early to experience a full-blown bull market, especially now seeing Kamala ahead in the polls. Oh, you can believe them, not believe them. I don't want to get into that debate. And based on Polymarket, Kamala has a 52% chance

and Trump is at 46% chance. All of that is true. And it's at the same time, Mario, understand portfolio rebalances always happen in the fall and it gets setting up. The summer, people don't make big decisions. Expecting there to be major moves in markets over the summer other than downward black swan

surprises we've had a few of those in the past august ones etc they generally recover and then the real shit happens late september into october and it's just it's a seasonality thing and you know we'll see i mean it could very well be that a spike in one day to vix of 60 is a poor is a foreshadow for some real suras in in October. That's Vinny's case. And he may be right. We'll see. But there's a lot of things to happen. And Simon's right. There's a lot of geopolitical things that could happen. The fact is, when you're sitting in August and half the people who trade are at the beach, you know, myself included, you just don't get that kind of real big money action. You get twitchy reactions because of illiquid

market. Yeah, the numbers are just anyone that's been watching party market, we've used it a few times, Trump at 70 something percent, just before Biden dropped out, and now it's down to 46%. But going back to the I think we've discussed this pretty, pretty in depth, you talk about the carry trade, I think next time we'll bring it up is when the markets start to jitter again and we get the inflation numbers later today. But it's a pretty fascinating predicament that we discussed on where the central bank stands, where the Fed stands in the U.S.

in terms of not triggering another panic sell based on the carry trade, another round of liquidations versus keeping inflation in check. But let's get into the discussion with our partner, Mitch. I appreciate you being patient. I know you've been waiting for like 20, 30 minutes on stage. How are you, man? Yeah, good, thanks.

How are you? Good, man, good. Thoughts on the discussion? Thoughts on the discussion? Sorry, go again. Your mic is echoey, by the way. Echoey, by the way. Yeah, just one second.

Cool, I'll let you fix that. We're going to have a discussion with Zerk. Mitch, I'm hearing myself double. Can you just turn off Bluetooth? Can you just turn off Bluetooth? Mitch, you there? Mitch, you there? Sorry about that, fellas. I just had to put another phone outside.

Ah, cool, cool. Ah, okay, you were listening on another spot. No, I can still to put another phone outside cool okay you listen I can still hear myself double man can you turn off Bluetooth okay we need to put that as a rule make sure you turn it off a bit better no bro I No, bro. I hit myself double. All right. One second. Cool. 30 seconds. While you're doing that, just let me mute you for a second. Dave, I'm going to be selfish. I'll ask you another selfish question to you and Jonathan. We've talked about Bitcoin, but if you look at the risk on assets in crypto, if Kamala wins, is that – so how bad is it for crypto?

Do you think it could derail the bull market that we're all anticipating? Well, from our stock to its users, which we do have a very broad amount, like most active, I forget what our tagline is, the most active investor trader platform um people are not buying the the if kamala switches people aren't people aren't buying it um and also there's a there's a good chunk that are not buying it yeah i just i'm not buying it yet um just want to be clear yeah i think if she had a whole debate on on friday if she does more if she starts taking action and some people kind of listed a few of these actions that she could take if she starts taking action um then that could change their perception but at least what we've seen so far they don't think that she's really changed her mind correct

yeah that's right look you you need to to bifurcate there is a very real chance that the people who are advising is you have to look. It's not crypto degens that are advising the crypto the U.S. for a subset of centralized exchange traded stuff. And that's it. And still come down on DeFi, still come down on self-custodied wallets, still come down on the ethos that is crypto. Now, what does that mean? That means they wave the white flag and say, OK, all the FUD we've been saying for yearsos that is crypto. Now, what does that mean? That means they wave the white flag and say, okay, all the FUD we've been saying for years about Bitcoin is bad. Bitcoin is okay, as long as we can monitor it and control it. By the way, I'm not painting a rosy picture here.

I just want to be clear. This is not me being devil's advocate. This is a very reasonable possibility to try to minimize the damage of crypto voters in the U.S., basically back off Coinbase, back off Kraken, back off Bitcoin, back off Ethereum, and potentially back off Solana and some of the other ones. That is not great for crypto entrepreneurship in the U.S. It's actually pretty bad for it, but good for some of the assets. It is not great for a lot of the projects and the things that you are invested in and care about in terms of US money. It just means it all goes and stays offshore. So it's a very complex thing. To me, that is what a pivot is going to look like. I don't think it will ever go beyond that.

Now, it may not even go that far, but that's kind of the point. And we don't really know until we start seeing platforms from them and things that will take shape over there. And is that, in your opinion, is that enough derail um hitting all-time highs again this year next year no well if we're talking bitcoin no not enough if in fact that kind of pivot happens like i'm talking about where the anti-crypto army is disbanded and they tell warren to shut the f up and we're going to do this stuff but don't't worry, Liz, we're not going to, you know, allow self-custody wallets without lots of KYC and AML and all sorts of stuff that we'll want. That's not going to hurt Bitcoin, but it will have repercussions in terms of the

way the markets work. And there will be many, there will be, there's a lot of possibilities there, too many to unravel in a 30-second explanation. All I'm saying is, to me, that's the extent of what a crypto pivot could look like. And since we don't know if that's going to happen, it's really hard to prognosticate. Jonathan? I'll go with the, I'm smiling here because this is sometimes an unpopular thing to say because some people view technical analysis as something fanciful. But from a time cycle perspective, I'll just say it doesn't matter. when it comes to technical, well, it's in 98% pure when it comes to technical analysis that like the news here, if you believe in the cycles and structures of how things move,

doesn't matter either way. If you want something that is positive and rosy, that's about as positive and rosy I can make it as that, it won't matter. Let me dig into the discussion on Zerk. Mitch, are you back? Is your mic working? Is your mic working? Yeah, mate. Sorry about that.

That's all right, man. But the issue is still there because I'm hearing myself double. I'm hearing myself double. Is that – you tried using another phone? I tried using another phone. Yeah, I might have to. I'll try that. Sorry about that.

That's all right, man. What we could do is if you're free tomorrow, man, we'll just bring you back in tomorrow when this issue is fixed. We'll probably get you with tech support to make sure that the mic does not echo and we'll just do it again and have it prepped in advance. But yeah, for anyone that wants to check out Zerk,

I'm going to quickly give it a quick shout out here since we have to reschedule them. But essentially, it's Zerk on gemstones. I had a lot of questions for you guys. Tokenized Zircon gemstones. That's a very brief overview. They're built on Polygon. We're going to get into a discussion with them today as a sponsor of today's show.

But obviously, we're having technical difficulties. So we're going to be rescheduling them for tomorrow. We'll get Joe back up to get his thoughts on the discussion, and we can wrap it up. I see Benjamin Cowan in the audience. Very well, we haven't had you here, Ben, but last time I remember we spoke, you were talking about how you see another kind of complete carnage when it comes to altcoins.

I think we talked about this months and months and months ago, and that carnage did happen. So you ended up being right, and I ended up losing a lot of money. money so congrats ben uh but joe i would love to get your thoughts on the discussion and simon before we wrap up the show uh joe kind of glitched out as well simon yeah i was just gonna say probably beyond the scope if you want to close your show off but there was a story that hit the docket um in the court over the weekend with the Celsius estate suing Tether for 57,000 Bitcoin. So we can cover that on another show if you like. But if you want to cover it, we can.

What was the story? So the Celsius estate had a series of, they're coming back for the collateral because there's a rule in bankruptcy code where all transactions that happen 90 days prior to the filing are subject to clawbacks and preferences. And what was happening is Tether liquidated approximately 57,000 Bitcoin from client money in order to unwind the loan. So obviously, Tether managed to walk away with the vast majority of the estate, which was a big reason for the loss that was locked in for creditors. And so there's a pretty interesting sequence of events. And it also ties in with the fact that the strategic reserve assets that the US is trying to use at the moment 95,000 of them actually belong to Bitfinex shareholders and obviously the DOJ is holding on to those at the same time as finding out what the settlement will be between the Celsius estate

Bitfinex and Tether so there's a massive bit of a circle jerk happening around that transaction, which we can cover another time. Yeah, DB Crypto just shared it above. I tweeted about it. My team did. I wasn't aware. Yeah, we can probably touch on that a bit tomorrow. Joe, you're on stage.

How are you? Yes, good morning. Hope everyone's doing well. We are. I know you're covered, by the way, I want to speak to you because I know you were covering the whole Black Monday fear with Danish before we kicked off our space early on. So maybe getting your quick thoughts on this. We didn't get you on our stage, but getting your quick thoughts on this and the discussion today on whether you think the worst is behind us or not. And then we can wrap up the space yeah um personally i do um i know that's not really the conventional wisdom um is some of the traders that i've talked to said significant positions were unwound forcibly unwound right it wasn't even unwound by choice by the market participants the margin clerks were tapping them on the shoulder and saying you have

to sell and and that's consistent with what we saw right a sharp down tick that was instantly bought with big institutions heavy buying coming in right at the open. You know, look at the intraday action on the NASDAQ. You think you see that? So I think it's consistent with people taking advantage and playing games with leverage. And we know this in the crypto market, right? You had a ton of participants betting on the fact that the yen could only fall against the dollar. And guess what? Whenever someone says it can only do one thing, the market tends to move the other direction. It's swift, violent reaction. The good news is that we're several days later, and you haven't heard about a major firm going

under. You haven't heard that a hedge fund or even a minor one lost their shirt and were carried off the floor. That's good, right? That's bullish. The longer that goes on, the easier it is to unwind positions, the easier it is to pivot and react and to anticipate. So, to my, you know, barring some other rapid, you know, devaluation of the dollar against the yen, meaning the yen surging, a repeat of that, which would repeat the process all over again, I think you're out of the woods for the near term. And I think that's why the market's been on a straight up rip. If the Japanese central bank does raise rates again and they break their promise, how do you think the market would react? Could we see another round? Yeah, I mean, if that interest rate differential widens, right?

I mean, if that happens, right, it's not going to be bullish, right? That's the lending currency of the world, right? And people, you know, I think they were presenting this incorrectly. They're presenting it like, well, this is a yen carry trade that gets unwound, right? And the reality is that it will always be put back on because the Japanese will have the lowest interest rates for the foreseeable future because of the construction of their bond market with the majority of his own by the bank, Japan. And that's not going to change. This is 1020 years in the making and probably going to continue for the next 10 to 20 years. And from my standpoint, I think I think people

continue to look at this like, like a one off emergency event when really it's par for the course. These periods of deleveraging come and go consistent with bullish trends. And to me, I think that unless you see a firm actually face systemic risk of going under due to the trade, there's really nothing to worry about. I appreciate that, Joe. I think we've covered this topic enough. We went over time today. So I appreciate you all. We'll see you again tomorrow, same time.

And for the Zerk guys, we'll get you on tomorrow with the mic working. Thanks a lot, everyone. And thanks for Joe ending it on a positive note. Bye, everyone.