The Wolf Of All Streets - Massive Pump | What Is Driving The Price Of Bitcoin | Macro Monday

Episode Date: April 8, 2024

Join Dave Weisberger, Mike McGlone, James Lavish, and today's special co-host, Noelle Acheson, as we break down what's happening in macro and crypto! Dave Weisberger: https://twitter.com/daveweisberger1  James Lavish: https://twitter.com/jameslavish  Mike McGlone: https://twitter.com/mikemcglone11  Noelle Acheson: https://twitter.com/NoelleInMadrid Subscribe to the Crypto Is Macro newsletter by Noelle Acheson: https://www.cryptoismacro.com/ ►► JOIN THE FREE WOLF DEN NEWSLETTER, DELIVERED EVERY WEEKDAY! 👉https://thewolfden.substack.com/   ►►OKX SIGN UP FOR AN OKX TRADING ACCOUNT THEN DEPOSIT & TRADE TO UNLOCK MYSTERY BOX REWARDS OF UP TO $60,000!  👉 https://www.okx.com/join/SCOTTMELKER  ►►TRADING ALPHA READY TO TRADE LIKE THE PROS? THE BEST TRADERS IN CRYPTO ARE RELYING ON THESE INDICATORS TO MAKE TRADES. USE CODE ‘25OFF’ FOR 25% OFF WHEN VISITING MY LINK.  👉 https://tradingalpha.io/?via=scottmelker ►►NGRAVE This is the coldest hardware wallet in the world and the only one that I personally use. 👉https://www.ngrave.io/?sca_ref=4531319.pgXuTYJlYd  ►►NORD VPN  GET EXCLUSIVE NORDVPN DEAL - 40% DISCOUNT! IT’S RISK-FREE WITH NORD’S 30-DAY MONEY-BACK GUARANTEE. PROTECT YOUR PRIVACY! 👉 https://nordvpn.com/WolfOfAllStreets   Follow Scott Melker: Twitter: https://twitter.com/scottmelker   Web: https://www.thewolfofallstreets.io   Spotify: https://spoti.fi/30N5FDe   Apple podcast: https://apple.co/3FASB2c   #Bitcoin #Crypto #MacroMonday Timestamps: 0:00 Intro 1:00 Macro update 5:00 Stock market 6:15 The jobs report is terrible 8:50 The dollar is the best of the worst 10:50 $1 trillion dollars every 100 days 15:30 Are we headed to the crash? 16:40 The gold surge 20:20 Geopolitics 23:15 The government wants inflation 28:20 What will China do? 31:30 Asian demand for crypto 36:10 Treasury auctions & rate cuts 41:30 Yields & the price of Bitcoin 46:00 Bitcoin trades as an option on its future adoption 51:00 Treasury market will be disrupted 53:30 Is halving priced in? 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.

On one hand, the economy looks exceptionally strong. Job numbers are good. Inflation is seemingly coming down and apparently wages are going up. On the flip side, your average person seems to be suffering. Debt to GDP is skyrocketing and we're adding a trillion dollars every hundred days to the debt. How does this all reconcile? How will it play out in the end? Is the economy actually strong or weak? And what does it mean for assets, including Bitcoin? Guys, I'm not really here today. This is a recording, but we have a very special guest host, one of your favorites, Noel Atchison, who's going to be joining Mike McGlone, James Lavish, and Dave Weisberger for this very

special Macro Monday. Let's go. Hello, everyone. Like Scott said on the intro, I am filling in. I am Noelle Atchison. Some of you may already know me as an occasional guest on the show, but this is my first time trying to fill some really big shoes. And I'm excited because this is absolutely one of my favorite YouTube shows, and it is a pleasure to be here today. Now, for those of you who are tuning in for the first time and you want to find out more about our guests, wherever else, I'm sure they need no introduction. But if you do want to find out more, follow Dave and his company Coinroots on Twitter, check out Mike's writings on Bloomberg, and subscribe to James's excellent macro newsletter. And also, as Scott, I don't know if he said that or not, but do subscribe to the show. And if you find this useful or heck, even just entertaining,

hit that like button. With that, let's dive in. There is so much to get through, not just Bitcoin's price, which last time I checked was up over 4% over just over the past few hours. But its reaction on Friday to the jobs data was also really interesting. And speaking of the jobs data, Mike,

I would love to get your take on what those metrics say about where the US economy is going and also has this changed your outlook for US rates this year? Well, let's start with the latter. It hasn't changed my outlook. The number was very strong. Our economist Anna Wong pointed out there's still some kinks in that arm, but it was indisputable, quite the strong number. They still think the Fed might cut in June, but you look at Fed fund futures for the Fed cutting, they're down to maybe not even 100% that they're going to cut in July now. And July is right around the meetings. But as far as economic data, it's still quite strong.

The key thing I see from a macro standpoint is it's U.S. exceptionalism accelerating. And one way to look at that is through commodities and interest rates. You look at interest rates in most of the top other countries in the world, at least the top four, at least China. Ten-year-old yields are 200 basis points less than the U.S. Japan, Germany, and India take that average, about 100 points less than the U.S. Germany, and India take that average, about 100 points less than the US. That's a serious problem. And then we look at lately now, we've had this uptick in commodities, crude oil and copper uptick in inflation. I guess it's stagnant and uptick in the S&P 500. So here's the fact I like to point out is on a one-year basis, the S&P 500 total

returns about 30%. And the Bloomberg Commodity Index is down about 2%. So I look at that as what's it going to take for commodities to go higher. And the biggest risk is just the little back and fill in beta. And that's one thing that our chief equity strategist, Gina Martin-Adams has pointed out lately, stock markets get a little frothy here. And we haven't had more than a one and a half percent weekly backup and yes, we 500 since that bottom, that's pretty scary. So from my macro standpoint, before I was writing about Bitcoin, beta, and gold and gold at record highs, beta is pulled back a little bit. Bitcoin is right near there. The

problem is Bitcoin trades about three times the volatility of both gold and beta. So beta goes down. We have to see how that's going to react. So far, it hasn't. And that, to me, is the key thing to look forward to. But also, I want to point out just one key fact, like crude oil. If you look at the price of gold now, it's up 210% from when crude oil at $86 a barrel, first traded $86 a barrel in October 2007.

So there's a bull market. Gold goes up, crude oil just fluctuates around. It hits the tape, it's the headlines. But I view things like crude oil, copper near the upper end of the range and absolute dependency on the U.S. stock market to go up for these macroeconomic quantities to go up. And it looks like we're getting towards that time of year too where equities oftentimes have issues. And that's one thing also that Dave points out too, is

tax season is kicking in this week. Speaking of equities having issue, you mentioned also the market's looking a bit frothy. Mike, what do you think it would take for the stock market to turn? There you go. Exactly. I have no clue. Number one thing, first, I know I love that. First, I love your book. You know, Bitcoin is macro now. But to me, it's the macro. And that is higher prices. The high price cure is kicking in in the stock market. That's clearly happening.

So you see every time market makes new highs, those Fed fund expectations for cuts in the futures. I used to I look at the one year futures are declining. And so market keeps every time it goes up and crude oil going up and copper goes up, taking away is taking away those Fed easing. It's that the value of the inflation pull of wealth and intangible assets, lifting up inflation and keeping it bid. So I don't think the whole, I think the whole thing needs just a little reset to get the Fed to ease. And to me, in this environment, strong economic environments,

their CPI doubled their targets, strong unemployment. Still, I mean, it's bottoming, but right now there's no reason for the Fed to ease until there's an inflection point. And I think that's going to make the stock market go down. What's that going to take? It's higher prices. And so far, we're just starting to pick it up. I'll end with this. Last week was a potential key reversal outside week down. That's a lot of words. The S&P 500 E-minis made a new high, closed below previous low. We'll see if that pans out this week. So you're saying no rate cuts in June? No, no. Right now, there's no reason to cut unless the stock market goes down.

Absolutely. Dave, what's your take on that? Well, I mean, the premise that Mike started with, I disagree with completely. Everything else I actually agree with. The reality is the jobs report blew. I mean, it's terrible. It's literally exactlyS survey is at the highest ever. And the number of jobs created based upon this chart that I'm looking at, you know, basically says, where was it? Twenty four, like in March, six hundred ninety one thousand part time jobs down six thousand full time jobs. That's a big difference. And so, you know, all the time we get this narrative out there that the public is stupid. We don't understand why they don't love Joe Biden. They don't love Biden on this. They don't love the economy. And because look at all these numbers and how great things are. Well, the reality is things aren't great. People are working part time jobs. Oh, by the way, this administration is also trying to hurt the gig economy by executive

order, which is rather amusing. I think someone probably is telling the 30-somethings running this country that maybe you shouldn't do that because you make it harder to do Uber, DoorDash, or anything on Angie's list that people are doing part time, that our job number is going to go into the shitter because they would. The reality is we have what's going on. We have what's happening in the 70s, only they're doing their best to Orwellian doublespeak cover it up. And, you know, basically, you know, in the 70s, we have what was called stagflation. That's what we're having. Now, where I agree with Mike completely is that prices are going up. And we see that. And that is important. So effectively, prices going up, full-time employment going down, people needing to work two, three, four jobs in

order to make ends meet. That's the reality of the economy. Now, the Federal Reserve is an interesting position because they don't want to be political, or so they say. But the reality is it's a presidential election. They will be political. They're going to try to be at least neutral and not restrictive. And there's going to be all sorts of yammering at them. We've already seen it from our favorite talking heads, Elizabeth Warren and others saying, you know, you should cut rates. Well, because Elizabeth Warren doesn't really care about monetary policy, doesn't care about inflation. So, you know, what's actually happening in the markets? Well, it's pretty straightforward, actually. The dollar is the best of the crappy basket of fiat currencies out there. And so the dollar is going down the least, but going down it is. And so what we're seeing are asset prices

going up, but denominated in dollars or denominated in euros or denominated in yen or denominated in any other currency. I mean, I guess the Swiss franc's a bit stronger, but that's what's actually happening. And why is gold outperforming the S&P? Well, because the S&P still has this notion of earnings and companies that can't raise prices when inflation is on their inputs means that they can't make as much earnings.

And there's still some idea of tethering to earnings, whereas gold, it's just a rock. And it's a rock that has a value of X in purchasing power parity. And when the dollar goes down, it goes up because it basically is almost a direct relationship. By the way, Bitcoin isn't a rock. Bitcoin is something that probably should will

at some point, as we're talking, hopefully we'll still be doing this show when Bitcoin passes gold. But it's still the same idea of gold. it's the idea of a store of value it's not tethered to earnings per se and we'll talk later about the fundamentals underneath bitcoin and why that matters but look i i think what i would say is this i come out the same way as mike in the sense of the stock market i think he's absolutely right. The Fed doesn't cut rates until there's a panic in the stock market of some sort, or until political pressure basically untethers up from reality completely. I don't know which will happen. I don't know if either

will happen, but I would be stunned to see them cutting rates in June. I think if the polls come out and people are really upset the following one right before the election, I think that's probably more likely. But the reason here is people, we just have to look at part-time versus full-time. It is a very big deal. And it's amazing to me how our media has become, I mean, the only word I can think of is Orwellian, and there's no other way to say it. James, I know you love this data and I know you do this. I'd love to hear your take on that. You all know exactly where I'm going with this, and it's pretty simple.

You know, out of out of all the jobs that have been created, 54000 jobs per month have been created in the government. Seventy one thousand last last month over the last year. I mean, if you're trying to figure out what is going on with the economy, why the numbers kind of look pretty good here and there, why there's so much noise in there, it's because of what we've been talking about for the last month, which is on this show that we've been talking about the last month, but we've been kind of hitting on over the last six months, which is the increase in fiscal dominance and how the Fed has been all but neutered by the by you said that we're spending. Actually, it was it was it was the intro. I apologize. It was it was Scott who said that we're spending, you know, a trillion dollars every hundred days. This is just absolute insanity. And so people are wondering why the numbers look pretty good here and not that great there, why there's so much noise in the employment data, why we have the establishment surveys look so good versus the household surveys, which look so bad. And that's just basically for the listeners to unpack that for people who don't understand what that means. When the BLS goes out and Bureau of Labor Services goes out and they do their surveys.

They call up companies and they ask them about their hiring and how it's been going. There's a couple of things that you have to think about here. And this is called critically thinking. And it's so difficult for the media to do now is critically think. And so when you're a BLS survey taker and you call a company and you ask them how they're hiring and whatever, they're just telling you how many jobs they've created over the month. Well, that has a serious bias to companies that are doing well. Because if you're a company that's scrambling, trying to figure out what to do in this environment, your business is sensitive to interest rates. If you're one of those companies that's sensitive to interest rates, you're not picking up the phone.

You are focused on the job at hand. You don't have time for surveys. So that's just one thing to think about. Data is always skewed in one way or another. You have to so that's just one thing to think about. These data is always skewed in one way or another. Just you have to remember that. And then as far as the household surveys, they call the household. And if you're you know, you're you're at home and you're you're telling them, well, I have I have two jobs because I'm you know, I'm working part time here and part time there. And so it just skews everything. Right. So you might, I'm working part-time here and part-time there. And so it just skews everything, right? So you might say I am employed.

And so that counts as one job per, per that household that you're, that you're surveying versus the establishment who has now said we've hired in two different places. So that's showing two jobs. So, because that one person holds two jobs, are you employed? Yes. How many jobs did you create? Two. Okay. So it doesn't match up. So that's one. And it explains the widening difference between the two surveys, which is something that a lot of people have been perplexed about. Yeah. And they just gloss right over it. Right. And so, and that's,

and that's been a problem. And so again, just unpacking that data, if you're wondering why certain sectors are doing well and why there's inflation in certain areas, well, the Inflation Reduction Act is a big part of that. The amount of spending that's coming into infrastructure, into now we're going to rebuild an entire bridge on the Fed balance sheet. You know, I mean, like, yeah, it's important. It is. It's more important than sending money in some places that we send money. But, you know, the reality is we're spending like mad out of the government and it's creating pockets of inflation. And the Fed, while it's raising rates, is creating pockets of recession. So you have two different Americas right now, and that's just the reality.

And so the media is telling you it's you, it's your problem. The numbers tell us that everything's good. And it's just you are used to a lifestyle that you're going to have to work a little bit harder for. So that's your problem. And I was looking, I was thinking to the numbers that you're going to have to work a little bit harder for. So that's your problem. I was digging into the numbers that you mentioned earlier this morning, James, about the government jobs. You're so right to bring that up. It's really important. 23% of the jobs created in March were, was it February or March? In the previous ones,

were 23% were from the government. The same as the previous month in March, February's data, 23%, same as 23% in January. And the last time outside of the pandemic that the government, the same as the previous month in March, February's data, 23%, same as 23% in January. And the last time outside of the pandemic that the government accounted for this much of the job gains was in 2008. Absolutely incredible. So that's a great data point. That's a great data point. I mean, just think through that, people. Think through it for a second. Okay, so does that mean we're headed for a crash? Look, I don't think so because of what Dave said. We're in an election year.

The Fed is apolitical, but they have said they work for Congress. Well, guess who's spending all this money? Congress. Guess who needs to float more treasuries? The Treasury. Why? Because Congress is spending so much money. So we're just watching this spending

continue and it's going to continue. We're going to create ways for businesses to buy more treasuries. And we've talked about that and we'll talk about that more later in the show. But going back to gold, I read an article this morning on Bloomberg, Mike, and I'm sure you saw this article. And it was about how maybe it came out Sunday night, but there's quite a bit of perplexion going on with gold. And why is it rising? If interest rates are going to continue to stay here, gold usually does well when interest rates are dropping. So what is the issue? Like who's buying it?

Why are the ETFs going down, but spot is going up, but then you look at spot and it's being bought on Mondays, Wednesdays, and Fridays. Dave, what does that mean? It means that central banks are buying. We couldn't get that together. There you go. And so it's just typical. And so what we're seeing is that there's a flight to safety going on here. There's no other way to really explain it is because if you believe that we're going to have high inflation perpetually, and the 10-year is going to bump back up over 5%, and because we're going to go back into the 80s high inflation era, well, gold is kind of a flight to safety for that. If you believe we're going to have an economic downturn and it's not going to be so painful, but the Fed is going to

lower rates and they're going to flood the market with more liquidity, well, you want to have money in gold. It becomes a flight to safety in a situation that it's kind of a barbell situation right now. And I'd love to hear Mike's take on this because that's all I can think of is it's just be it's that's what it's become. So I think I have I have to hop on. No. And about hop off about 10 minutes in about two minutes. So let's just do go real quick. The foundation for gold to outperform everything is the unlimited friendship started there. 2022 between President Xi and President Putin. So start there. The largest, the deepest pockets on the planet can print fiat currency and are buying gold starting with China, India and World Gold Council says it's unstoppable. Okay. Okay. The demonetizing that's significant. And then also you mentioned the unstoppable US

debt. That's all very bullish for gold. So the facts of gold in the last, just this year alone, you pointed out ETF outflows, a total amount of selling in ETFs has been about 7 billion. The total amount of inflows in Bitcoin ETFs has been about 12 billion. Okay, well, there's a bit of a connection. So I'm still bullish gold. I think at some point, gold's going to hit that inflection point, ETFs are going to go higher. But right now, the key thing for Western investors in gold is they need to start seeing a little bit of underperformance in the stock market because that's the main thing that pushes away gold and 5% T-bill. So here's a fact on the year.

Total return for S&P 500 is about 9.5%. Gold is up about almost 13%. Since 2021, gold is beating the S&P 500 by about 8% and with much lower volatility. I just look at it. What are the markets telling us? Don't mess with that trend. Bitcoin's part of it. And then I tilts over to you.

Look at the rest of the world's bond yields. And I have to hop. U.S. tenure notes, 4.43, which is scroll down here a little bit. Canada, 3.62, three handle. United Kingdom, at least there's a four handle. France, Germany, Italy, all three and two handles. Then you go to Asia. Of course, Japan's got no handle. United Kingdom, at least there's a four handle. France, Germany, Italy, all three and two handles. Then you go to Asia. Of course, Japan's got no handle. And China's 2.2%. I always like to go to South Korea, 100 basic points less. The world is telling us they're heading towards a

pretty severe, significant recession in the back of the biggest liquidity pump in history. And the one main thing that's holding up is the US stock market. If it's too much, it's an inordinate burden. So I'll hop off for a second i'll come right back speaking of that speaking of the geopolitical risk speaking of the gold buying from central banks i mean the biggest buyers are again turkey china and i think with the addition of india now and we have yellen wrapping up before they visit to china in which the one thing that we have not heard her talk about is the relative currency weights and also the gold buying and what China plans to do with its substantial holdings of U.S. financial assets. Dave, what's your take on why we're not hearing about this from Yellen's visit? I mean they're probably talking about it

and also what do you think the consequences of the visit might be? Well I think that these visits are bullshit. I don't think they matter at all. China is going to do what he thinks is best and is going to basically play this administration because there's no credit. This administration has zero credibility because every time they say they're going to do something, they do the opposite. They would be pushed around. It's actually sad. And I call it this administration, you notice I

don't say Biden because I don't think anyone in the world believes that Biden is actually running the United States right now. It's a pretty harsh statement, but it's a fact. I mean, you're not an American. Do you know anybody that's not an American who thinks Biden is running the United States? I can't think of one human being who has an IQ over over 120 uh who believes it and so you know understand that if that's true then you know z putin you may say they're evil you might like them for lots of reasons and believe me there's good reasons particularly in putin's case but the truth is they're not dumb and assuming that our adversaries are dumb is the easiest way to lose. I know I'm sounding very Machiavelli right now, but that's the reality. So now you put yourself in China's

shoes and what would I do? They have a huge problem. They created through a command economy, they had a bubble bigger than we did. It's their real estate market makes ours look like a garden party by comparison. I don't know how much vacant real estate there is in China, how much debt there was. But as a percentage of the economy, it's enormous. So what do you do when you have all this? Well, the answer is, you know, you do your best to reflate the economy. What are you not going to do when you're not going to help the U.S. reflate their economy?

And so don't expect them to buy treasuries unless they have to in terms of recycling. They're going to do as little as they possibly can. And so there's a few things you expect them to do. I would be ridiculously stunned if they weren't buying some gold and if their people weren't buying some gold. I mean, there was a time when Chinese people were not allowed. I used to have a collection before i moved into bitcoin of chinese uh gold coins right you know from directly from the shanghai mint 0.9999 purity buying it i bought them it was 20 years ago but it was over spot chinese people were not allowed to buy those

they're now are allowed to buy uh and they've done pretty well as an investment i mean bitcoin's done better but you know whatever uh the fact is is I wouldn't be surprised if there's buying there. I also, my tinfoil hat, the only conspiracy theory that I actually believe is true is I think the percentage of Bitcoin mining that's in China is creating Bitcoin reserves for the government. One way or another, I really do believe that. And I think that there is a lot of things like that that are going on. I think that their spending is on things that they think are geopolitically important, the so-called, you know, what do they call the belt and suspenders? I can't remember what they, you know, basically building manufacturing capacity outside of China, you know, helping with infrastructure projects throughout the third world, et cetera. Those are all things that give

them geopolitical advantage. That's what I think they're spending their money on. I think all this other stuff, I don't think they really care. Because remember, they're a command economy. They don't have to placate people. Now, I do want to say one thing about the U.S., though, because I think it is really important. Something I was saying two years ago on this show was I think that everyone says, well, they listen to Mike, they listen to James, listen to me. They say, how can the government allow this to happen? The answer is the government wants this to happen. The government is interested in inflating asset prices to keep themselves in power. And they understand that if they put money back in the

hands of individuals, again, like they did during the end of the pandemic, that that's going to ignite raging consumer inflation and they don't want to do that again. It actually suits the people in power, you know, which is why I think you see a lot of parties kind of dissolving before your eyes in terms of people who are smart. They realize this is not really a Republican Democrat thing. This is a both party thing. They want to see inflation go into asset prices or so-called good inflation. I'm not so sure how good it is. And they want to see people having to work multiple jobs as long as they can keep consumer inflation down to a dull roar. And so everything you're seeing fits that narrative. And that's literally the only narrative that explains everything that's going on. And if you take that narrative to its logical conclusion,

it tells you buy the hardest assets you can and hold them as a higher percentage of your savings as you can, because that's what the government is trying to inflate. And so that really is what's happening. Let's unpack that. And why are they doing that? Because, you know, like I said 15 minutes ago, because we are running massive fiscal deficits that are creating a mountain of treasury debt that needs to get paid down or at least get managed so it doesn't spiral out of control. I think it already is on a path of spiraling out of control. How long that spiral takes, it could be five years, it could be 25 years. I mean, the amount of confidence in the US dollar is probably underestimated by every single Bitcoiner in the world. But the truth is, like Dave is saying, where I agree with you completely here, Dave,

is that the treasury needs inflation. The government, the treasury needs inflation to help it manage all of that spending and that debt that's coming out of that's being driven by government spending by congress and so what they need is they need asset inflation up because they they need uh the the the dollar to be worth less in the future when they have to go and pay the principal on this debt when When the debt matures and the government has to issue more debt, they want to be issuing it in cheaper dollars. So if you think of it this way, the dollar has lost, what, 25% of its value in the last four years. And so if you just look at the expansion and CPI and you blend that to get to about the 25%. I think that's what it is. Dave,

correct me if I'm wrong, but I think that's about what it is. And so, which is just insane that that's such a large number that it's somewhere between 20 and 30%. We'll call it 25. But what does that mean? That means that if you issued a piece of paper four years ago, if you're the treasurer, you issue debt and it matures today. That means that the dollars that you're paying to write down that debt in order to monetize that debt or just pay it off because it's matured is what they're doing is by borrowing new money. You're basically borrowing 25% fewer dollars in order to pay that down because you've created that much inflation. That's why they do this. They need nominal inflation to go up to continue this charade. And that doesn't solve the problem. High perpetual inflation will not solve the problem. It just perpetuates it. That's it.

It just kicks the can down the road. Yeah, exactly. And if you're China, say James, if you're China and you're looking at this panorama and they say they agree with you, which they probably do, what are you as the PBOC, as a central bank, going to be focusing on? Are you going to continue buying US government debt as one of the safest liquid assets out there, or are you going to be spending more on bolstering your reserves with gold and other commodities? There's a lot of confusion around that, right? Because you look at the numbers and it looks like China's been adding debt in the last two quarters, but in the reality, interest rates have come down.

So there's a lot of noise in these numbers and the way that we portray them now. And there's confusion around whether it's mark to market or if it's actual treasury buying, you know, if you, so if you go back again, go back to first principles and look at these, look at the auctions that we've had. And we've had some troubling auctions recently, the third year and the 20 year in particular, I've had a couple of really ugly auctions. And why? Because international investors didn't show up. That's, that's the primary reason.

And so the primary dealers were saddled with a lot of that debt. So just remember that when you're watching auctions and look at that, look at those numbers to see if you're seeing foreign buying or not. But China, what would they do? Of course, they don't want to own treasuries long term. There's a few reasons for that. Number one, they know that there's high structural inflation. They're looking at our numbers.

They know that we're lying about it. They can do the math themselves and they can see that we are devaluing the base currency. We're debasing our currency that that treasury is denominated. And why would they even hold those? Because they have to transact in dollars. And so that's the only reason they hold them. They're not investing in the United States because they are our chums

and they think that this is a great investment. They're buying treasuries because they need dollars to transact. But as the friendship as you know, the, the, the friendship that Dave alluded to is, you know, they, they can transact in, if they can transact in one for oil and gas from Russia, then they, they don't need us dollars. So why would they, why would they be buying more and more treasuries for that transaction? They won't be.

And that's a really key development in the energy markets and with the U.S. dollar. And the other thing is them buying gold, you know, because that is exactly what you said, Noel. That is the long-term best store of value for them that they can find. And so, of course, that's why they're buying gold. And there's also the sovereign risk of, let's imagine that tensions escalate in the South China Seas, and China is no doubt worried that the United States and Europe might do the same thing to it that they did to Russia. In other words, the US dollars might well be seized. Now, one thing, Dave, you are the one who brought up tinfoil hats. I want that on the record. But as we're talking about tinfoil hats, there's also the theory that China is quite happy for its citizens to buy gold because gold is not a US dollar, a US economy asset. And the same reasoning could perhaps apply to Chinese citizens

buying Bitcoin. This is relevant given the potential or probable launch of ETFs in Hong Kong. Dave, what's your take about potential demand for crypto assets from Asia? I think that now that Xi has implemented the full suite of controls with social credit scores and the way their central bank currency for actually spending assets, I think that now does he really care if his rich people, the people who are on the good side of the party, invest in gold, Bitcoin, etc. to protect their wealth? I think the answer is no. From his perspective, throw them a bone and you can do it. When they first announced the Hong Kong Bitcoin ETF, I basically said, okay, there's your smoking

gun proving that my conspiracy theory is right, which is if you're on the right side of the party. And yet, you know, this is a tale as old as time as time you know my wife was making me watch a show i think called the gentleman something around that i can't remember what it was called it was a show about in moscow yes exactly and you know and it chronicles the you know a a former count who was saved by a a bolshevik party member because they were friends. And, you know, for whatever reason, it shows how they confiscated assets and they do whatever. And then, you know, look, there's a reason that my favorite line in maybe all of literature might be from Animal Farm from George Orwell, where, you know, the line basically goes,

and they look from man to pig and pig to man and couldn't tell the difference. And what it basically says is humans are going to human. People are going to want to be greedy. They're going to want to do what they're going to do. The fact is, if you're on the right side in the right group in China, I think you completely expect to see them be able to protect their wealth or even grow their wealth. And they're happy to do so as long as it serves China's geopolitical ends. And there's nothing wrong with that. I mean, I'm not making any, there's no criticism here. This is exactly what I would do if I were a

dictator. I'm not likely to want to be one, but the reality is that they have one. And so they're doing that. You know, at the end of the day, as long as as Putin, by the way, as we're talking about Russia, as long as oil prices are high nominally, don't be terribly surprised to see them taking their oil funds and stuffing them into into better stores of value. Also, that's another thing that's almost certainly happening, because in their case, it's even more obvious. It's like, well, wait a minute, you know, you're going to confiscate our actual assets and violate the first primary law of capitalism, which is protect property rights.

Okay, well, what do we do in that scenario? And so that is what they're doing. And, you know, when James was talking and you were talking about oil or someone said buying oil in one, just remember something. How many wars have we fought in order to preserve the hegemony of the dollar and the petrodollar? And it's a big number. I mean, I don't know what the actual number of people killed and the amount of billions of spent on protecting U.S. oil interests abroad, but it's non-trivial. And, you know, I'm not saying we're going to go to war over this, because at this point, I think we are overextended might be one of the great underestimations in my lifetime.

But I do think that it is a major seismic shift. And it's not the bricks that people talk about. It's not all that. It's just people who have wealth not wanting to have it denominated in dollars. And I think that that is a much more subtle but much more important consideration for people. And speaking of the gentleman in Moscow, one of the significant plot points, no spoilers here, but one of the significant plot points is that the count, he was not debanked. He got through the next few decades living in the hotel in a very comfortable style because he had a bunch of gold coins hidden in his desk. And this is part of what many people around the world are starting to think, especially since we are getting creeping indications of authoritarianism in surprising places like Brazil, for instance, trying to insist that X deplatform certain accounts. This is something we're going to be hearing about more and more, especially if the world economy does slow down. But one thing to now bring this back slightly to, I want to bring this back to crypto. But before we do, James, you brought up something really

interesting, which is the complicated treasury auctions that we've had recently. And one thing you've talked about often on the show is what would it take for Powell to cut rates? I personally maintain that the one thing that would cause the Fed to move drastically is trouble in the treasury market. And James, you've been writing recently about ISDA and their proposal to change the regulations regarding treasury holdings. Could this be part of that scenario of getting ahead of any potential trouble in the treasury market? And so if you could briefly give us a brief summary of what you've been talking about there, and then I do want to move on to what is going on

with the Bitcoin price. Yeah, really, really quickly. ISDA is the, it's the International Swaps and Derivatives Association. It's really, it's managed by bankers, you know, former and current bankers at mostly G20s. And so, which with mostly at GSIBs, which are, you know, the largest banks at the G20s, mostly at GSIBs, which are the largest banks at the G20s. So the thing is that what they said in the letter, what they're requesting, what they're

clamoring for is a change in the rules to be made permanent. So if you go back to March of 2020, you remember that the Fed and the Treasury teamed up and they eliminated, and with the regulatory authorities, they eliminated the requirement for a certain percentage of reserves for banks. They just lowered it to zero. So the banks didn't have to have any reserves anymore. It's a full fractional banking. But one of the reasons they were able to do that is because of the Basel III Accords, where they introduced all of these ratios that the banks have to maintain. And one of those ratios is the supplemental leverage ratio. And that supplemental leverage ratio looks at all your risk assets and it weighs it against your reserves and uh your your basically your cash on balance sheet and uh

and it says you have to stay within a a certain range uh or above a certain number and so the biggest Banks are held to a higher standard that these uh globally systematic uh or systemic uh important banks and they have to they have to hold a higher number and so when we went through march 2020 that was kind of tabled and or was tabled and so uh basically the fed just said well we're not going to worry about that ratio we're going to put that aside. Well, that expired. And so now that the, they, what I was trying to say in what I, what I was saying in my last newsletter is that the Fed and the regulatory authorities kind of let the big banks camelhead in the tank and the tent by tabling it for a little while and pausing it. And so the banks are now saying, and through ISDA, hey, let's just make that permanent.

Let's not have any requirement for leverage ratios in that we'll just remove treasuries from the equation. So treasuries will become a completely risk-free asset and they won't be considered a risky asset in the equation of the supplemental leverage ratio, which means that there's really no limit to the amount of treasuries that a bank can hold on any ratio, which if you go back to Silicon Valley Bank. Now, this SLR, this wouldn't have saved them. But this is just an example of how treasuries are not riskless. So when the Silicon Valley Bank, they had in reserves, they had a certain number of long dated treasuries, long duration treasuries that went down in value significantly when interest rates went up. So it's an interest rate risk. They didn't hedge that

risk. There was poor management there, but it means that they had lower assets than they really had liquidity, right? So if you mark them to market instead of marking them to maturity, then they had a lot lower asset base. And their depositors caught wind of this, who are big venture capital firms, who are companies who had venture companies, early stage companies who had a lot of cash there, they figured this out and they started taking out the cash. They had to run on the bank. Well, that's exactly what we're talking about here, is that removing treasuries from that equation exposes banks to that kind of situation. The biggest banks don't really care. Why don't they care? Because they're too big to fail. Yeah. And so what you're talking about, it'd be really great for the treasury market.

I mean, they'd be able to hold a lot more without triggering capital reserves, but it would add a layer of risk to the banking system. And we all know what happened last time there was any jitters about that. Mike, good to have you back. We're discussing the outlook for the treasury market. We were talking about structural issues, but structural issues inevitably play through to the actual yields. I know we've talked about that already this particular show, but I do want to get your take, Mike, on what impact you think the yields are going to have on the Bitcoin price over the next few months. So I think I'll start with what really, think U.S. Treasury is at three point four percent.

So four point three percent are going to just drop that handle to a three. It might be by the end of this year. I think that will be coincident with crude oil going to 50 percent and just a normal correction in the stock market. Yes, I've been early. Yes, I've been wrong. But I've been doing this. The Treasury thing I love to point out is look at the yield curve.

It's still inverted. That stuff used to matter. Now that we've priced completely priced out that recession, and we're completely tilted towards a soft landing or no landing, let's just price it back in a little bit. It's just a matter of time I see it. And that's the way I see it in commodities. I look over my treasury, my 10-year note yield chart for world bonds, and I see the US is about 100 basis points above the top four countries in the world, which includes India. And notably, China's collapsing. I mean, there's treasuries.

Why? They're 200 basis points less than the U.S. and they used to be above the U.S. So to me, that's just a matter of time and just a normal correction. And you have to say, is crude oil going to follow gold or follow natural gas? Natural gas in this country was the highest follow to the major commodity that's number one measure of heat, electricity, and fertilizer. It dropped to the first price it was traded in futures in 1990. So that's severe deflation. I think it's just a matter of time we get that trigger. And that's why all we need for that is let's start with just a little 10% correction in the stock in the S&P 500.

You know, stuff that we used to do. And that, to me, is where the dominoes kick in. And in that environment, that's why I have to see how Bitcoin will react. The key thing I like to point out is compared to gold in the S&P 500, Bitcoin trades with about three times the volatility. So initially it should go down and then we'll see how it responds. But the point is, I still have to point out is I think there's certain times you're supposed to be very careful being long risk assets when beta is on a tear like this and look for alternatives. And I think that's why you've seen a lot of those ETF inflows into Bitcoin. You're making a very good point in that volatility is really bad when things are going down. But when things are going up,

volatility is your friend. And we're seeing yields going up and yet Bitcoin is going up. Dave, why? Well, I mean, I think that the simple point is fundamentals. And people always like to ignore that. I made the point before that the S&P is, you know, chugging along here as fundamentals continue to worsen and worsen and worsen in real terms. We understand that. But, you know, where else are you going to put your money if you need to, you know, if you need to make, you know, if you're a pension fund and you have actuarial assumptions that you need to make 7%, 8%, where else are you going to put your money? It really is that simple.

I was just doing some quick math. If you take the previous price of Bitcoin and divide it by the hash rate of the network to give you an idea of what people and what miners and what's going on in the Bitcoin network, we are well less than one third, literally one third. When Bitcoin was at $ 65,000, the hash rate was around 160 some odd exahashes. We're now at almost 600 exahashes and we're at 70,000. It basically says that the amount of, if you call that the euphoria index for Bitcoin, we are so non-euphoric here, it's absurd and effectively tells you the Bitcoin price could triple and you still would be less euphoric than it was at the last double top back in 2021 and early 2022. And so that's kind of important to understand. The other thing to understand about the Bitcoin price is the fact that we've been in this trading range and we're still in a trading range. Yeah, this weekend was the upside to the trading range and weekend before was the downside to the

trading range, but we're still in a trading range as the market is digesting. The simple fact is the longer the market digests this trading range and it stays uncorrelated. And we're basically seeing a shift from weaker hands to stronger hands, people taking profits because they need to pay their taxes and need to pay for their life, etc. to new investors who are buying Bitcoin for the first time. Remember, the people who are buying Bitcoin now are being told by financial advisors, by their friends or have their own idea that Bitcoin should replace gold. So the other big piece of fundamentals is as gold goes up, your target for Bitcoin goes up. So anyone who made a price prediction for 2024 and said, ah, you know, based on this, based on past

gains and digital gold narratives and whatnot, what percentage of the way are we going to get this year? And let's say they came up with a number like Mark Yusko did and said 150. That number is 220 right now without anything changing just because what's been going on in the price of gold in the Bitcoin hatchery. So you need to understand that. So whenever Mike talks about volatility and Bitcoin being a downside thing, this is the source of our biggest disagreement over the two, three years we've been doing this. I think volatility in Bitcoin is a feature, not above, because let's all say it together, Bitcoin trades like an option on its future adoption.

I've been saying that for a very long time, and I think it explains a lot. And in that particular case, it matters. Now, that said, should we have a major cataclysmic event that would be the thing that would trigger the Fed to cut rates? Yeah, you'll get a V bottom in Bitcoin and a lot of other risk assets. And yes, the correlation will go to one, because as James puts it, managing director walks out on the trading floor and says, sell 10% of everything. Bitcoin is going to be 10% of everything. And that's going to happen. But I think it is extremely important to understand that the fundamentals of Bitcoin have never,

ever been stronger, really. The only overhang that we have now is some absurd fantasy that the Satoshi coins are going to show up in a wallet. I personally believe the US government has them, but they show up in a wallet and someone's going to sell them and do it stupidly to crush the price. I think far more likely is if they are ever going to get sold. Some institutions are going to come in and say, oh, really? It's that much more investable and they're going to buy it and the price will absolutely rocket.

I don't want to use the word moon, but I think that's more. Win moon. James, what do you think the u.s etf investors are thinking i'm thinking i'm more like those that are still on the sidelines are they looking at bitcoin just for diversification because why not because they can or are they focusing on the fundamentals that dave's been talking about oh yeah i mean there's so much misunderstanding still about bitcoin and and what how it's talked about in mainstream media. I mean, you still have mainstream media reporters asking questions like, well, what happens if they just decide,

if the people in charge decide to change the algorithm? It's really difficult for people to get their heads around true decentralization. And so there's just there needs to be a lot more education still. Now, that said, we've come across the chasm of the 90 days, 100 days of the launch, which means that that's kind of a quiet period for a lot of firms to see how it's trading, see what's going on, make sure there's no problems with it, that it's settled correctly, that it's being custody okay, and that it's a de-risking measure by these big investment firms to start introducing it to their own, their clients, you know, their customers. And we're starting to see that slowly, but it's starting to happen. So the highway's built, like we've been saying, the on-ramps are coming, but it's more of a trickle. And I'm going to be the first to admit, I thought it was going to be a lot more enthusiasm from the large investment banks around this than there really is. But it's growing.

And the reason it's growing is because the customers are hearing about it. They're seeing the ads. They're seeing the ads on TV. I saw ads on TV over the weekend and during, you know, basketball games, during hockey games, you know, BlackRock is running ads, GBTC is running ads. And so you see them. And so people are like, Hey, this Bitcoin thing. So I had, uh, family members, uh, you know, once removed, ask me this weekend, Hey, about this Bitcoin thing, can I just can I just buy it in my in my T-Roll price account? And so I have to explain to them how they do it, where they go, how to move their money. And so, you know, they're still they're still working it

out. Let's put it that way. And I expect it to be a trickle that turns into a stream. I just don't expect it to be a tsunami like people are hoping for. The tsunami is what we talk about. Tsunami is going to be it's show up in the same period of time, whether it's over the course of the days or weeks, that all have a certain percentage of allocation that they're trying to get into their books. And they're not price sensitive. They're just going along with it. They're VWAPing, volume-weighted average pricing, into their trade.

And that's just the way that they're going to buy it. And they're not going to care about price as much. And you'll see price just take off. And I do expect that to happen this year at some point. But going back through really quickly, because this would be my wrap-up thing, going back to what Mike was talking about and what Dave was talking about, V recoveries, recessions, some sort of cataclysm event. I still hold that I think that there is a likelihood. I don't know if it's a high likelihood, but there's a likelihood, a much higher than non-zero chance that we have disruption in the treasury market going back to your earlier question, Noel, to bring it all back together.

I do believe that we are headed toward a path that when the reverse repo is drawn down, which has been the extra kitty for the treasury to draw that money out for T-bill issuance, when that is drawn down enough, and when we have bank reserves drawn down to, you know, somewhere between two and two and a half trillion dollars, but it's over three and a half right now. But when that happens, you we get into a danger zone, the Fed knows this, they've talked about it, Powell, he actually referenced this in his last presser. And he said, look, once the reverse repo is drawn down enough, we're looking at the bank assets. And we want to know that the reserves at a certain level, because if you remember back into September in 2019, we've talked about this before, the repo rate spiked because there was illiquidity, there was dysfunction in the market.

And when there's dysfunction in the market, that I believe is what will cause some sort of drawdown in the stock market, not this slow recession play out. I just believe that the Fed has been completely neutered by the Treasury and really the US government and Congress spending, and that fiscal dominance is going to continue. The issue is that fiscal dominance causes the need for more borrowing, causes the need for more issuance of treasuries. And at some point, we could see a dysfunction. And that dysfunctional market is what causes that V drawdown in recovery, because the Fed and Treasury will rush back in to solidify the market with more liquidity and it'll be QE infinity and we'll print a multiple of the amount that we printed last time. And all of this is the backdrop for the upcoming halving in which Bitcoin's supply schedule gets

provably and programmatically halved. And I know we have to start wrapping up, although I could happily continue talking to you guys for hours. But as we wind down, Mike, is the halving priced in? Yes. No knowns are always priced in. But there might be a little bit of a hangover afterwards. It's also the timing, as Dave pointed out, is tax season. The key thing I want to point out is just facts. Let everybody have their own opinions

is volatility. It's always mean reverting. It's a fact. The VIX volatility index minus the T-bill rate is the lowest since just before the financial crisis. Now, I remember that well because I was way early, but I just pointed it out and put on a lot of shorts and took a long time for this kick in. 2008 took a little while. And also a key thing I'm worried about is you look at the Bitcoin to gold ratio, the peak was 3535 ounces of gold to one Bitcoin that was back in 2021. Right now it's at 31. It's starting to lag. And if you're late, relate with the stock market, the stock market is s&p

500 pulls that ratio used to lead the ratio now the ratio is being pulled along. So I look at the biggest thing here is just a little bit of volley volatility mean reverting the yield curve being right, a little bit of normalization in markets. And then you have to watch that Bitcoin to gold ratio, it's much more likely to drop with beta. That makes a lot of sense. I don't want to have to wind down because there's so much still to talk about, but I'm going to wrap up with a personal question. Are any of you traveling

to see the solar eclipse? Well, I'll see about almost 90% of it here right out my back door, so I'm good. Nice. Dave, how about you? No, I'll be staying here in Miami, going to Washington later this week for a conference, and then New York next week to the Security Traders Conference, where I have the pleasure of interviewing, in a fireside chat, John Deaton, among other things that we'll be doing there. Oh, that would be pretty fire. I'd love to see that. Mike, what about you? I'll be here in Miami, hoping to catch a glimpse of it.

Nice. Well, I hope it's epic for all of you. I just want to say no tinfoil hats, but having the solar eclipse so soon after an earthquake in New York, just saying. Things are weird out there. Things are weirder there, but that's why we're all here. We're all here to figure out what's happening and find our way through the noise as best we can. I can't think of three better people to do it with than a lot of you. That's it for us.

Scott will be back next week, which I'm sure you're delighted to hear. It's been fun. Thanks for everything. Talk to you all soon. Thank you, Noelle. Take care, Noelle. Thank you. Thank you. Let's go.