The Wolf Of All Streets - Soft Landing, Recession, Or Great Depression? Alex Kruger, Mike McGlone, Dave Weisberger

Episode Date: February 27, 2023

►► Sponsored by PRIME XBT! Sign up for a new trading account using the link below & receive up to a $7,000 deposit bonus with “wolfofallstreets” promo code.  👉 https://u.primexbt.com/WolfOfAllStreets  ►►NORD VPN  An essential crypto product to protect your privacy and keep your crypto safe!  Sign up on my link below & enjoy the benefits of NORD VPN from just $4 a month.  👉 https://nordvpn.com/WolfOfAllStreets  ►►Check out CoinRoutes: http://bit.ly/3ZXeYKd My special guests today are Alex Kruger (Economist & Trader), Mike McGlone (Senior Macro Strategist at Bloomberg Intelligence), and Dave Weisberger (Co-Founder of CoinRoutes).  Alex Kruger: https://twitter.com/krugermacro Mike McGlone: https://twitter.com/mikemcglone11 Dave Weisberger: https://twitter.com/daveweisberger1  ►► JOIN THE FREE WOLF DEN NEWSLETTER https://thewolfden.substack.com/   Follow Scott Melker: Twitter: https://twitter.com/scottmelker  Facebook: https://www.facebook.com/wolfofallstreets   Web: https://www.thewolfofallstreets.io  Spotify: https://spoti.fi/30N5FDe  Apple podcast: https://apple.co/3FASB2c  #Bitcoin #Crypto #Trading 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.

No landing, soft landing, hard landing, incoming recession guaranteed, or will we not have one? Or are we going to go right over the edge of a recession and straight into a repeat of the Great Depression or the Great Reset that many think is coming? It seems that analysts, pundits, traders, everybody, very mixed views and polarized sitting on both sides of the fence of these debates as to what's going to happen. So of course, since I have no idea, I bring on three people and they can talk about what they think is likely to happen. I've got Alex Kruger and of course, Mike McGlone and Dave Weisberger who are here every single week. You guys don't want to miss this conversation. Let's go. What is up, everybody?

I'm Scott Melker, also known as the Wolf of All Streets. Before we get started, subscribe to the channel and hit the like button. And also check out our sponsor, PrimeXBT. Scrolling right down there at the beginning. If you've seen the Wednesday streams with Dirk from over there, but I know you're aware of it and have already clicked on it because he is awesome. He's been trading exceptionally well live on this channel. Guys, I'm going to go ahead Monday morning, bring on our guests right now. Not waste much time. Guys, I'm going to go ahead Monday morning, bring on our guests right now, not waste much time. Guys, good morning.

Nice to have you. Alex, I'm going to let you go first since everybody hears our voices all the time. What's your general feeling on inflation, odds of recession, and what we're likely to see here moving forward? Basically thinking that what's coming up on March 10th and 14th, it's a coin toss. So we have to get through that. And I mean, for me, it's really a coin toss. But beyond that, into half year, June, July, I think we're going to see inflation coming down sharply. So I'm bullish. I think when it comes to crypto in particular and Bitcoin, I think it's I'm shooting for 28K, 32K, that range. I think we're going to see it. And for for basically for me to be wrong there i need to see very bad data

we see very bad data coming up on payrolls on the 10th and cpi on the 14th i think uh we should see like a one month downtrend and then pop up uh and beyond that i'm thinking that basically markets you have to admit that there is not everything is great in markets and real estate markets. Eventually, I mean, something it's likely to implode. I'm thinking of the commercial real estate market and leveraged loans. And mainly it's real estate, mainly commercial, not retail, not residential, I mean, and would make sense to see something bad pop up later in the year. So that's kind of like the path of risk assets I'm looking at right now. I think that makes perfect sense.

I mean, anecdotally, we're seeing data in some of the big cities about large office buildings just remaining empty and unfinished. So I think that commercial real estate could be a certainly a leading indicator there. Curious what you view, though, for March 10th and 14th. What do you view as bad data? Are you saying basically an increase in inflation or something that's just slightly worse than expectation? Because we all know that it's really what happens versus expectation and not necessarily what happens. Well, we don't know that the Fed is looking specifically at core services, ex-housing. That's what I'm looking at. And basically that number is just core inflation. I'm basically, as a trader, I'm basically trading against the forecast consensus. So if the number either of those two numbers comes in point two percent

above or below, I expect a trend that lets traders get in after the number. If we see anything around consensus or point.1% away in either way, it's likely noise or very hard to trade because basically the thing, once you start like triggering your hours or clicking on those buttons, you're late. Yeah. Yeah. Mike, you always joke about how we can't beat the machines. They're too fast, right? Well, it's just one of those things.

Know what I don't know. And having worked with a lot of these systems a long time ago is I just can imagine how intense they are now. And to me, trying to day trade is good luck. It's just a good way to lose your hair. I come from that environment of trading pits. But I want to respond a little bit to what Alex said. And that is I fully agree with him. I think inflation is going to drop at the swiftest pace in history because it rallied at almost the swiftest pace in history.

And the key fact for me is this has never happened in the history of commodities. We have the Bloomberg Commodity Index down about 11 percent on an annualized basis, one year, 12 months. And the Fed has never tightened. That was back in the 70s. you can measure they might have been tightening in an environment, but we didn't have crude oil futures back then. So that is what's happening in the underlying markets. It's happening in housing. Housing is plunging in some areas. I think the total estimate was housing value dropped something like 2 point something trillion last year, except in some places like Miami. But that's just getting started. The key thing I like to point out is the trajectory right now in risk assets remains downward. If you look at a one

year basis, crude oil is down 20 percent. S&P 500 is down 10 percent. Bitcoin is down 40 to 50 percent. And the Fed is still tightening. So simple facts of discipline is you're supposed to be looking to sell rallies in that environment. So we talked about that $25,000 level in Bitcoin. Big picture, long term, a very bullish Bitcoin. But in the short term, you're supposed to be responsive selling and make the market prove you wrong for a trade. So I look at trend versus trade. The trend is deflationary recessions, early days. The data you see printing is already old.

Like we saw durable goods today, it was weaker than expected. That's old. Housing, unemployment, all old. In fact, unemployment has a history of not bottoming until well into a recession. And it's almost a 100% correlation in history. When unemployment bottoms from a very low level, we go through recession. That's exactly what we're doing. And the stated goal of the Fed. So I look at it and narrow it down to levels and markets. And now we've had this bounce. Now we have the S&P 500. It's just stuck at 4,000. Pretty well stuck there. It's bounced pretty well. I fully expect on a normal recession and a normal correction and a normal boom and bust cycle, which we're in, we're in the bust part right now.

Most people say maybe we're going to get out of it. I'm like, well, good luck. S&P 500 is supposed to go to about 3,000, which means Bitcoin might not have put in a low yet. I'm fearful it probably hasn't. Part of the reason I'm wrecking me in that tactical short. And I just try to find other markets. Like I published my outlook on energy today, my energy outlook,

and I think we're in the swiftest reversion ever. So you look at the benchmark measure for heat, electricity, and fertilizer in this country, it's natural gas. And natural gas dropped to two. That's the lowest price since 1990. Last year's high was 10. Now I think as a responsive trader,

you're supposed to be buying that. But it's already pricing the curve. It can't be easy. You're supposed to be selling things like crude oil and corn and stuff. So in the macro, early days, recession is barely getting started. And the key question I like to end with is what stopped this. The Fed is still tightening. Back to you. Dave. So, I mean, I'm going to take a slightly different tack. I mean, I think that I don't disagree with what Mike is saying, although, I mean, I'm just not expert enough to try to predict what, you know, kind of our manipulated statistics are going to show. I think that we're seeing things like what looks like a classic dead cat bounce reversion of the means on one of my favorites, which is Baltic Dry.

It's up like 25% in the last month or so, which is okay. Green shoots, are we getting a soft landing? It feels more like my trader hat tells me that it feels more like a dead cat bounce than anything else, which tells me that I don't disagree with Mike on the economy. I think that Bitcoin in particular, forget the rest of crypto for a heartbeat, even though it will be dragged along by the nose based on whatever Bitcoin does, is at a really interesting point. We've said many times 24.5 is, give or take, the 200-week moving average. It's the level that i would be really

would have been extremely surprised to see that this rally powered through and go into a new bull market given all the backdrop of everything we're saying that seems highly unlikely uh but the most if you remember about a month ago you know a, and probably for a couple of weeks, I made the comment, Scott, that the most bullish scenario for Bitcoin is a scenario where it bumps up against that, you know, 24-5 level. And when it fails, it doesn't fail too hard. It's not a significant rejection, and it still stays around that era. Well, that is literally exactly what's been playing out over the last several weeks. You know, very briefly below 23 at the end of last week. It's now back up again, you know, pushing towards 24, you know, et cetera.

It feels like we're in one of those accumulation phases, which Bitcoin goes through in preparation to a big move. Now, I think there's a much more likelihood of the big move being upward, not downward. I think, yeah, you know, unless the Fed does something like, you know, raise hikes 1% in the meeting, which no one is calling for and is highly unlikely to do shock and awe and really try to screw over the economy. That doesn't seem likely. But what does seem likely is continued pressure and it stays range bound for a while. I mean, it's hard as U.S.-based traders to contextualize it. But the scenes of Lebanon's banks being set on fire from people who can't get money out is a very big deal for Bitcoiners and people always have to remember the bitcoin market is unbelievably small relative to what it potentially could be which means it just takes one buyer to break through a level of

size now i'm not saying that's going to happen i'm saying that it's interesting and i think that last thursday's i'm going to call it news because uh it's important last thursday's statement by the banking regulators is extremely important for Bitcoin and crypto in general. So you all remember, Scott, how everyone freaked the excuse. Well, can I say fuck out? Yeah, I guess I can. It freaked the fuck out when when when, you know, Nick Carter started documenting Operation Chokepoint 2 and said, oh, look, the banking regulators are going to tell every crypto company you can't have banking rails. All the exchanges are not going to get fiat. And people started

puking and really worrying. The fact that that triggered the FDIC and the Fed and other banking regulators to put out a statement on Thursday, basically saying, whoa, guys, that's not what we're saying. We're not saying to discriminate against companies based upon what they're trading. What we are saying is something completely reasonable, which is that deposits from crypto exchanges, fiat deposits are extremely volatile, not because crypto is terrible, but because when FOMO happens and you're an exchange, let's just pick an exchange. You got a hundred million dollars in customer assets. You're a small exchange. I should have said a billion. So, you know, okay, you got $10 billion in assets and that is made up of

$2 billion in fiat and $8 billion in crypto that you're custodying for your clients. Bitcoin goes on a bull run. That $2 billion in fiat could snap to a billion in a heartbeat. That is extremely volatile. No company, software company, manufacturing company, agricultural company, medical device company, it doesn't matter. No other company other than crypto has the ability for their dollar deposits to literally evaporate because customers want to use them in the current business. And that is different. And so what that means is if your signature bank, if you're Silvergate and you have a huge percentage in crypto, then you can't have 90% of your deposits loaned out because that's too risky. That's what the regulator said. And by

the way, the math on that is impeccable. They are 100% correct on it. And so to me, that's too risky. That's what the regulator said. And by the way, the math on that is impeccable. They are 100% correct on it. And so to me, that's a big deal because we had the entire crypto community freaking out that we're going to lose banking. And now people are like, well, okay, we still got the guy down at the SEC who's a pain in the ass. But one of the big worries were people losing banking. And it does matter. And that is not priced into the market. That's not priced in. People haven't realized that it's not as bad as people were saying. And I think that that's important to understand. So I'm looking more at the idiosyncratic stuff. That said, from Alex's perspective, what he was talking about, Bitcoin is moving. I mean,

when you get into these periods of time, the correlation is just ridiculously high with the Nasdaq. Nasdaq's up 1% today. What's Bitcoin up? Well, yeah, more or less the same, right? It's a little bit more because it's a higher beta. So your short-term trades are going to be driven by all of this, but I think it's really important. It looks, it feels to me like we, if the situation that Mike is talking about, a 25% correction in S&P happens, I think the beta of Bitcoin will be much lower than historical. Yeah, that would be, I believe that would be from here, right?

Mike, we're at four. So we're talking about a 33-ish percent correction still further down, right? Which would be over 40 from the top. That's pretty significant to be at 3,000. I guess then the question becomes, can Bitcoin still rise in the face of that? I do think it can, by the way. And last week, it was reported that on a 40-day basis, we're actually at the lowest correlation between Bitcoin and the stock market since May of 2021, when it was at 0.8 and we're now at 0.3. So at least we do have some anecdotal evidence that we could see things go a different direction. Mike, sorry to interrupt you. Oh, well, that's a good point. I mean, I agree with most of what Dave said. We are showing that divergent strength. I mean, it's delightful to see. It's fully what I expect in the bigger picture

that Bitcoin is going to come out of this ahead like gold and long bonds are. We can see lately that that hasn't been so much the case in long bonds, but it's that transition stage. And I look at it as I think we're in pretty severe global macroeconomy recently. I think what we saw kick in last week is your average boomer gets it you mean i can lock in and get about 10 percent and that too you know thank you and i and even though for my equity analyst so that's just too much headwinds for the equity market so i'm pointing you know i'm looking at the overall macro and plugging bitcoin in is the fastest horse in their race the biggest leading indicator that's bounced the most this year because it went down the most last year is it's more likely to roll when you go down in the short term. How do you define short term? That's

the hardest part. But the key thing is you got to look at the data that you're seeing print is so lagging. But the forward looking stuff like the curve, like the futures in commodities, the futures curve, the just looking at the key thing I like watching is that Fed funds future a year from now, it's going to look at least a year ahead. It just dropped to the lowest price, highest yield since 2007 and still heading that way. And I look at, okay, fine. The number one factor to make that reverse is risk assets going down. The Fed won't say, but the market will do it for them. Say if we turn around and S&P 500 is down 10 percent in a couple of days. Yeah. All those all that tightening that's going to come out real fast. And to me, that's, I think,

what we still have to face. Alex, we I mean, you're talking about soft landing, recession, depression. Obviously, you believe that inflation is going to come down. I think a lot of people agree with that. Is there a world where you can get your twenty eight thousand to thirty two thousand Bitcoin target, which, by the way, is I completely agree with that. I mean, I think that a break of twenty five cents price to twenty eight, twenty nine pretty fast. Is there a world, though, where the S&P can drop to three thousand and we still see, you know, Bitcoin trading up to twenty eight or thirty two thousand? No, there's not, unfortunately. Absolutely not.

Now, I do want to say something. Actually, I do question the 3,000 level target because the thing is, that's quite an extreme drop from here, right? And the way I see it is to get there, which is definitely feasible, to get there, we need an information shock or a ball shock or whatever you want to call it.

And that means extremely bad data, worse than priced in, or a geopolitical shock. And that's something that may happen, but for me, that's getting into crystal balling territory. I could never make, I can't make that forecast. So that's basically based on that, my ignorance as to what's going to happen in that regard. I think that it's most likely that equities stay range bound, capped by, as you guys were saying, by basically interest rates. I mean, on a historical basis, comparing equities uh uh rates and real rates they're

actually quite high and it's definitely a headwind but uh to me that means uh range bound and basically almost no upside on equities and as they were saying what what bitcoin has and what crypto has is this idiosyncratic variables that can truly just for brief periods make it completely decorrelated and go ballistic either way, up or down, right? I'm thinking that. Yeah, I agree with that. I prefer when it goes up. Go ahead, Dave. No, it's the same. Look, you know, we keep hearing the same, it's the same narratives on the, you know, on either side, right? You know, and we could be talking about this, we could literally snapshot time capsule this conversation six months from now, go back and it wouldn't surprise me if we're saying the same things, which is, you know, is there a global regulatory crackdown that pushes, that screws over Binance, basically? Or did Binance do something, as Steve Berlich in Forbes commented this morning, or there's an article that I have to read, that talks about are they actually playing fast and loose with customer funds, you know, yada, yada, yada.

That's the thing that has everybody kind of sleeping with one eye open at night, right? You know, because Binance has so much of the liquidity. Now, the truth of the matter is, there are other liquidity, other places to trade, other pieces of liquidity. It's not nearly so monotonic, but that's a big deal on one side. And on the other side, it's, is there something that will allow large pools of capital to participate? And there are a few of those. I mean, the UK has this consultation out there. UK pension funds are not in the market, right? You know, the UK, the FCA basically has a consultation out there, which by the end of this year, it could very well be that there is a clear path of regulatory clarity for UK-based banks. That is so far from being priced

in. It's not even, people aren't even thinking about it. So, you know, the fact of the matter is there are supply-demand things that can move Bitcoin completely idiosyncratically compared to other assets. The other point that I will make, which is fascinating to me, and I'm curious what Mike thinks, is to what degree does the consistent debasement of the dollar, if you do, if there are more dollars today than there were, well, I mean, slightly, it actually is slightly decreased. Money supply has gone a little bit down, but so much more than there was back when Mike was talking about natural gas hitting $2. To put it in perspective, natural gas at $2 in 2023 compared to natural gas at $2 in 1990. I mean, I would hazard a guess.

I'm not 100% sure, but I think that's like 30% to 40% maybe more in money supply. So that is really, really low. That is showing just how incredibly elastic the demand for natural gas continues to be. The question is, are company values perceived that way? With so many, so much money sitting in pension funds and other assorted funds, people chasing yield, how much supply actually is capable of being elastic, i.e. how many funds could actually sell their equities because they have bad, you know, they have expectation that it's going to go down in this environment. That's a real question. And so the real thing is, is, you know, if there's not a pension fund on the planet with an actuarial assumption that is less than six or seven percent from the last time I've checked and most of them are slightly higher.

If the long bond gets to six or seven% or slightly higher, then you can see a massive rotation in the bonds. Until that time, I'm not sure you see it. And so that's why I sort of agree with Alex that I'd be surprised to see that strong of a correction without a geopolitical event going into, if we survive 2023, going into an election year, 2023 is much more risky to me than where I think there is definitely a, I don't think the Fed is going to have a put on the market in 2023. I think they do have a put on the market in 2024. I've been saying that multiple times because there's, I don't believe that the Federal Reserve is going to want to be,

is going to want to meddle in a presidential election. But in 2023, I don't think they give a crap about asset prices. I think, you know, controlling inflation and trying to engineer their soft landing is all they care about. I mean, I've worked for a lot and I've talked about a bunch of things. But there's no cross currents here. I really appreciate the tee off, David, because this is something this is a really good discussion I think to have that a lot of people don't understand.

And that is if you look at the U.s dollar versus a basket of similar currencies any history or historical period i'm i'm doing since 1970 um because that's a trade-weighted broad dollar and it's always appreciated now it has periods where it goes down but because it's the you know it's the worst it's the least worst of all the horses in the race. And the key thing I want to point out is you are absolutely right about the debasement of currencies. It's the U.S. does it less. It's still the best system. It's that check and balance.

When Chairman Powell pushed back on Trump about easing rates, that to me set up this massive dollar rally that's come back a little bit. But where's your better currency? I mean, where's your basket of better currencies? Bitcoin might be the one. So I like to point out is you look at the trade-weighted broad dollar. I just plugged in since 1980. It's up about 300% versus a basket of currencies.

Money supply is up about 1,200%. But that's the thing that's unique about commodities. I point out they're so deflationary. If you compare over money supply, the number one word for all commodities is deflation. And they go down over time. And to me, it's that rapidly advancing technology that people like Jeff Booth points out in terms in the price of tomorrow that is just starting to kick in. And it's I think this is a period where the Fed is tightening into a significantly deflationary paradigm shift. It caused it.

So part of the reason I coined for 3,000 in the S&P 500, it's less than a normal correction in a normal recession. So here's the fact. The last two recessions in the US had 50% or more corrections peak to trawl in the S&P 500. From the peak, if the S&P 500 goes to 3,000, that's only about 40%, very modest in a normal recession. So you have to be not expecting a contraction of economic activity. If you look at the yield curve and the normal historical pump and then dump cycle, we will get that. Now it's happening in housing and it's happening in most leading things, but it's not happening

in lagging things. So to me, that's the macro. And the key thing I like to point out is when we point out this massive pump in money supply, yet deflating commodities, why is the U.S. the most significant energy producer and exporter, net exporter of agriculture? It's just enhanced. Sure, we have a great system, but it's enhancing, adopting that technology. And that's where I come in cryptos. I'm obviously very bullish Bitcoin in the long term, very bullish in the capabilities. I look at Bitcoin and Ethereum and cryptos doing

the same thing that futures did the financial markets and ETFs did the financial markets. And as Dave says, it's such a small portion right now. It's just a matter of time. But to me, that's that technology. But you know what happens with technology you get that volatility and um right now it's the macro that's overwhelming if we if i'm lucky if we're all lucky and by the end of the year the s p 500 is 4 000 or 8. i still expect bitcoin to be around 30 000. so you don't believe that there has to be a black swan or geopolitical event uh as alex and dave have somehow out, that we could just basically drift. I mean, we're basically historically low on that yield curve inversion.

Those things make a big difference. Those of us who remember 9-11, that really accelerated the – I mean, I was long a lot of zero coupons back then. I remember it did very well because they were pretty cheap at that point. But yeah, those things really accelerate things. But oftentimes the key thing to remember is that lower tide. Why did FTX and Celsius and Voyager and all those go under? If the market hadn't corrected 70, 80%, they wouldn't have gone under. It's the classic Warren Buffett. You find out who's wearing clothes when markets go down. So sometimes I think that was Lehman. Would Lehman have gone under if it didn't have that plunging CDS market, plunging housing market? To me, that's part of the black swans. Are they either directly catalysts or are

they related to the lower tide? And I think that's kind of debatable. That's why I think the lower tide is a more significant factor. And it's been declining. I mean, it's 10% on a one-year basis. It's really nothing in the stock market, but we haven't had a recession. Alex, I want to ask you, based on your Bitcoin prediction and the fact that you think that $3,000 is unlikely, do you think that the bottom is in yet for stocks? Or are you looking that basically we push up and continue into that 2832 and then we see a major correction? Because both of those things could happen, right? I mean, Mike, this could be a huge dead cat bounce that just continues up, right, for another 10, 20%.

And then you could easily see that drop. I mean, we're talking about an entire year here of, you know, we haven't even gotten to the recession yet to your point so alex do you think that i mean are we bottom is in smooth sailing slowly climb up or do you think that we are just seeing a massive bounce and we could still see lows i think the bottom is saying yeah but i i do want to say it's uh i could i mean it's i mean this is not just covering my butt you know here it's like I have a position. I'm playing the long side. But I could definitely be wrong.

I'm just saying that for listeners who are basically somehow using podcasts such as yours for determining, you know, like making important investment decisions could definitely be wrong. And, yeah, shit could happen and uh the bottom could go through based on as i said it's like mainly it's uh inflation could end up being actually sticky as uh some of the bears are are saying based on basically how uh payrolls and then the uh the the u.s employment market is still really hot. So if that doesn't give some leeway and core services, basically inflation, real estate services doesn't come down as expected,

we could see like the Fed pushing up to 6.5%. And then, yeah, I mean, I can definitely see the bottom. I mean, it would make sense basically to trade you those, right? percent terminal rate turned to five point four percent over the last week as far as expectation. Can we see, you know, that rates the Fed rate go to six and a half like Alex kind of just mentioned? But you just point out the lose lose of risk assets. The Fed has had a stated goal of causing pain and increasing employment, reducing inflation. Yet they're looking at data that's extremely lagging. I showed in 60 months, 120 month measures of CPI and PPR, blips and collapsing. If you look at PPI, the number that's going to print on July 13th will be a one year measure from last June. It's very likely to be negative. PPI measure from the peak right now, the latest data is negative.

So that's deflation. The Fed is not really focusing on that. But that to me is the lose-lose. And this is where you get to the point in markets where you need to, for good purchasing in market, you typically need, to me, here's how I predict the low in equities is when these strategists, the average strategists, which a year ago said, oh, we're not going to have a recession. And now they're talking soft landing, but they're still, and earnings aren't so bad and that's not so bad. And they're all optimistic. That's great. But they, when they start capitulating, we've seen this, I've seen this main time when they

give up and say, oh, next two, three years, we're going to have a severe recession. We're never coming out of this. That's when it's typically tying the buy-in. We're nowhere near that. But I like to point out as far as inflation and PPIs, wait for July 13th. That number might be negative year over year number. And Alex pointed out the lose-lose. People are raising their estimates for Fed so high now. That's the point. Why would you bother by risk assets until that number comes down, until your estimates for Fed tightening is not 6.5, but 4.5, 3.5, 2.5? That has to happen, I think, for risk assets to go up. Dave, what do you think?

That when you're talking about stuff from a macro perspective, it's really a scenario analysis sort of sort of game. So it's all game theory, right? You know, there's Alex's is in the real world trading on behalf of the scenario we have now, probably stops using stop losses in order to keep or some version of that in order to say, OK, is the scenario I think that's going to happen not happening? And I think that, you know, let's just let's just be very vague, very general and just talk about three scenarios. Scenario one, we're bumping up, you know, we're in this range bound trade right now in most risk assets. And I think that Alex and I think that in that scenario, Bitcoin will break beyond its current range into the next range up, which is the 28 to 32 range before, you know, an assault on 40 if there's no real reason to. And that's

that sort of middle range thing. There's the bottom end, which says risk assets are going to get clobbered because we're going to go into a recession. The Fed is hell bent on doing it. They're going to cause it. They're looking, they're going to do what they always do, which is overshoot, in which case you're going to see everything go down together. And then you'll see, just so we've seen every other time, gold and Bitcoin will join it, I believe, will de-link. Just, you know, in the great financial crisis, gold didn't bottom for three months, but then started rising far, far in advance of equities. During the Great Depression, home stake mining, you weren't allowed to legally own gold back then, but home stake mining outperformed and went up while everything else was was just getting destroyed etc so you know we've seen those those sorts of scenarios uh the rosy scenario the upside is the one i think is the least likely which is everything's great we

have a soft landing the fed uh pivots away and stops and we we peak at like five you know five and a quarter or something like that and it never goes higher i think that's unlikely but in that scenario obviously you're gonna get you know the rallies out of pretty much everything that we're talking about but you kind of have to play the scenario and see what's happening and then there's also black swans and there's black swans you have to worry about uh in the case of crypto that are different than black swans in the case of of of the world obviously there's geopolitical risk we don't want to like talk about nuclear wars but the fact of the matter is we are in a dangerous time uh there are things that could happen that would be bad I don't want to belabor

those numbers or belabor those things but it's there uh meanwhile we have the SEC yelling that they want to basically shut down every crypto exchange. And somehow Bitcoiners, like your friend Max Keiser and Michael Saylor, completely with their heads in puffy clouds, thinking that somehow Bitcoin is not going to get annihilated in a world where no one can trade it on an exchange. And when I say shut down, I literally mean that because he's claiming that everything is a security. And we all know that securities laws do not work coinbase could not operate nor could kraken or anybody else for five or six factors that articulated hester has articulated many people have articulated you know without changing securities rules it's a death sentence for the entire crypto market in

the united states that is a black swan that could hurt Bitcoin just as badly because people forget that a huge percentage of Bitcoin volume is to trade in and out of other things and as a base layer. And that's part of its use case. Now, do I think that will happen? No. But the reality is, is those are the black swans you have to worry about in the world of crypto. The rhetoric has changed over time here. Gary is really ramping it up, right? I have a quote here. This is from my newsletter, but something that Gary Gensler said just this weekend. Everything other than Bitcoin, you can find a website, you can find a group of entrepreneurs. They might set up their legal entities in a tax haven offshore. They might have a foundation. They might lawyer it up to try to arbitrage and make it hard jurisdictionally or so forth.

They might drop their tokens overseas at first and contend or pretend that it's going to take six months before they come back to the U.S. But at the core, these tokens are securities because there's a group in the middle and the public is anticipating profits based on that group. This is the first time, even with all of his rhetoric that I've heard, Gary Gensler say everything not Bitcoin is a security. Look, I sat in the SEC's offices four years ago, and of the 30 some odd people in the room, at least 20 of them believe what he just said. This is nothing new. This is not news. This is this is fuming.

This is old man screams to cloud kind of thing. Now, the problem that we have here is being a security not only shouldn't be a death sentence, it should literally be good for these assets. The reason it's not good for these assets is that the rules and the approach of the regulator is so wrong. And I'm going to repeat that. It should be good. If you look at the world of securities, everyone always focuses on Microsoft and Cisco and IBM and Apple because those are what are called Reg NMS Securities National Market System. But there are 14,000 other securities in this country that trade on venues like OTC Markets, my friend Cromwell Coulson's company, the Pink Sheets, what used to be bulletin boards, etc. Those are securities too. That is light touch regulation. If there was a view of crypto securities that could trade within rules just like those that are tailored to a 24-7 market with on-demand settlement,

with clarity of what a custodian could be based upon the principle of protecting customer assets rather than 80-year-old rules that assume that paper certificates are sitting behind all of these things. If you could do that, then being a security is not a bad thing. The reason that you use words like being taken out and shot is because the rules literally don't work. I use the analogy this weekend. It's sort of like when airplanes were invented. If you said the Department of Motor Vehicles should regulate how airplanes are built, constructed, and fly. Well, obviously, they needed new rules. It took till, you know, 19, they didn't do that.

In truth, the FAA didn't get formed until 1958. But the point is that no one, crypto is to equities as airplanes were to cars, and you don't regulate them the same way. Yet here we have someone who is gung-ho on trying to do that. Now, the reason he wants to do that is pure political power. Sorry for the rant, Scott, but I just wanted to be clear. Every action he has taken has had more to do with getting jurisdiction than protecting investors. I'm going to repeat every action. My favorite one, which is I have to, I tip my cap to him, suing Do Kwon was a frigging masterstroke because in that suit, he's alleging Luna and US tier securities. And he knows that Do Kwon is going to go anywhere near a place where he can argue with

them because he doesn't want to get thrown in a Korean gulag and he's on the run. So, you know, you pick somebody who can't fight back and you make these assertions. And that is literally what he's doing. So the problem, when I talk about black swans and crypto, it's really what will happen in Congress and the Senate and will anything happen? And will the SEC be allowed to drag, I mean, Kraken paid 30 million, but that's not going to stop them. You know, at what point is he going to really take on Kraken, Coinbase, Bitstamp, you know, etc.? Or will he? You know, is he backroom dealing it? Because what he's trying to do is have individual no action letters that are non-public and not clear

so that everybody is forced to come in and pay him a fine as a cost of doing business, which, of course, is dramatically against smaller firms and for bigger firms. So there's a lot that we could talk about this for hours. I don't want to talk about it anymore. But from a macro perspective, the most important thing to understand is, yeah, there's a risk out there and people are going to worry about that risk. And that could cap upside until people become euphoric. And we're a long way from that. I mean, perhaps the most encouraging sign is the last black swan we had. FTX took all of two months for Bitcoin price to erase the downside from that and trade higher.

So, like, I'm actually in my mind, I don't know what black swan could. You're right. But I don't know in my mind what black swan could come that would be worse than FTX. I mean, perhaps a grayscale collapse, maybe everyone talks about. That's gone. I agree. Look, I'll be honest. I am with Alex. but the reason i'm with alex is because i've thought about all these scenarios and the most likely scenario to me is is is uh but the bitcoin at least bumping along this range for a while until things resolve itself and then you know one more institutional buyer comes in i mean

we were talking this morning internally about signals and construction of algorithms because that's what we do at coin routes right and we all kind of have this general idea, and the data is sort of descriptive of the fact that the small moves are all driven by the perpetual swaps and the speculators, or options out of deribit, etc. The big moves are driven by big spot buyers or sellers. Sort of what we kind of understand. And so what I'm saying is the small moves will be up and down in this range until there's a change in supply-demand dynamics. That's kind of what I'm saying. I'd like to add something on the SEC side.

If we look at the SEC versus Ripple, they've been at it for two years. So the thing about it is that this black swan, fortunately, I think, it wouldn't be an overnight thing because they still have to win their case at court. So it wouldn't be an overnight thing. It wouldn't be an FTX thing for the industry to go for another FTX.

We need to see either Tatter go down or Binance go down, basically, pretty much, I think. So, Alex, you make such an important point, and I actually wrote about that right after I included that quote, which is that just because Gary says it doesn't make it true. I mean, it would still have to be coming from a judge. It would have to be into law. So, I mean, it's kind of blowing hot air, right?

So you're not that concerned that in the very short term, Gary Gensler's words are particularly impactful or harming. Yeah, and he's been saying or hinting at the same thing for a very long time, right? Yeah, I mean, this is nothing new. Yeah, nothing new from him. I mean, Mike, does any of this surprise you? Well, obviously I think it's disconcerting

and I really appreciate listening closely to what Dave and Alex say on this because I look at, okay, we have to ask ourselves one question here is, what's so bad if, what is the implications of some of these 22,000 highly speculative machines that are called crypto um can't call them currencies crypto um speculative um machines are considered securities bitcoin stands out but this for me is a lot of

deja vu all over again i mean i was in in commodity indexing and Gary Gensler's head of the SCFDC. I've mentioned this before. Most people in commodity indexing were adamantly angry with him. They got over it. It was probably properly regulated. And that's debatable, but it's probable. And the market's moved on. It's been fine.

So I do. I'm a bit concerned about what you mentioned um dave that this is a personal thing because history will not shine on him kindly if that's the case because the rest of the world move on just the inklings we're getting out of hong kong lately is quite unique i think because there we have a whole country hong kong is no longer hong kong it's china now it's and it's no longer china anymore. It's Mr. Z. And the fact that they're starting to cave in a little bit to the technology, realizing, oh, we're falling behind here. We shouldn't let the world move far ahead of us.

To me, it's the overwhelming force. I look into the macro. If we continue to push back in innovation in this country, we will suffer. And the people who are doing that will be looked back in history like Aaron Burr rather than Alexander Hamilton. That's their risk. But I do want to point out is we do have Bitcoin ETFs in this country that track the futures, baby steps to see if DC did allow that. And now they are actually outperforming. They have outperformed in the last six months of Bitcoin because some of them, they were rolling in the backwardation. They're somewhat contangled now. But what I see

is I see early days, and I'll end on on this i look at open interest in bitcoin futures listed futures is in a bull market i don't see that in how any other command commodities except maybe platinum platinum crude oil all the major commodities open interest is declining so there's you know to me those signs are there yes there's risks um black sw and risks like that. But you look at Ethereum, what it's doing to crypto dollars is just shocking. Yeah, I know we're having problems with that too, but I just don't think the US is dumb enough to mess up this technology that adopted the dollar as its base layer. And the most widely traded cryptos are dollar tokens. I spoke with Michael Sonnenschein from Grayscale the other day. That conversation will be out in the coming days.

And I think most people aren't aware that their lawsuit suing the SEC is actually coming up in two weeks. I'm glad you brought that up. If they win that, which is possible, right? I mean, they really believe they have a strong case. If they win that, we effectively see a spot ETF, whether Gary likes it or not. Right. So that was my point. Gary can say what he wants, but the courts are going to have to make the decision. And we are going to see that litigated in the next 14 to 21 days. And that happened. Yeah. So I heard part of an interview he did with another podcaster,

and he says in the fall might have a result and potentially appeal. But that happened in Canada. And the Bitcoin issuer won. And now there's Bitcoin ETFs in Canada because of the lawsuit against the Canadian regulatory authority. So this one person can only push back so much. And then there's simple facts of Congress and politics in this country. And yeah, so some of the money has disappeared. But there's money, jobs, and votes still in cryptos.

And you want to get elected. You probably shouldn't be too negative on cryptos because you'll get money from it. Now, let's go a little bit. Yeah, I was going to say the case is really interesting because I'm not a lawyer. Right. So I'm not going to comment on the legal niceties of it. But the arguments, the main arguments the SEC made in their declining release and whatever uh were like if a kinder cart you know basically not kindergarten when's the first time you get an actual math class you know maybe first grader did math and again they come home and they show daddy that i i said two plus two equals seven and i got an f on my on my on my test That's more or less what Gensler did. Making the claim that it is easier to manipulate spot than the futures, which are derivative upon spot, which by definition is

easier to manipulate than the actual spot, is beyond insane. And there's not a shred of mathematical, anecdotal, or other evidence to back that claim up. And that is at the core of the SEC's rejection. It really is that strong. I mean, I will say it again. You're talking about the CME. Every single person, how many times have you mentioned the word CME gap talking about trading? Same thing for Alex. What is that? That's a period of time when the CME is closed and spot is open, rife for manipulation. So the times right before it closes and right when it opens is more. It would be impossible to get anybody who is a trader who actually looks

to manipulate markets for a living, and some of them do, to say anything other than it's easier to manipulate the CME futures than the underlying spot, because the spot is just more of an amorphous beast, right? It's like whack-a-mole. It's just a very large market. So the fact is the core of what they're saying in this is wrong. And they can point to the fact that it's been in backwardization and it's had six months of outperformance. But what you can't argue with is USO, which is a contango market, and how USO has underperformed oil. And you can't argue the fact that a futures-based ETF over the long run is going to underperform. At a bare minimum, it has tracking error. And it's not what people necessarily want. And so those are two, those are simple facts. Now, I'm not a lawyer. Is that dispositive? I don't know. I mean, John Deaton

would say yes. And a lot of other people who are in the crypto world that are lawyers would say yes. And that's why this is going to be such an interesting case. But I do think it matters a lot. And, you know, if you take away the overhang, it's kind of a big deal. So yeah, I do think it matters a lot. And, you know, you took it, if you take away the overhang, it's kind of a big deal. So yeah, I do think it is important is that could be the white swan event to use, you know, to use a stupid word, you know, that I was talking about. But it's going to be a while. I mean, the case will start in two weeks, but you're not going to, I mean, they've been litigating the Ripple one, as Alex pointed out, for over two years now, right? Yeah, it's over two years.

Because I think they filed it right in December. Yeah, they filed it in December. So it's two years and a few months. So these things take time. But we'll see what happens. I do think, however, that history will not judge that kindly. We need to get John Deaton on this show with us. Misha, Mike, if you're listening back there, we need to get John Deaton on this show with us. Misha, Mike, if you're listening back there, we need to get John Deaton, the lawyer. That's a great point. I saw about three

people mentioned in the comments. Interestingly, talking about the futures ETF, when it launched, there was so much demand for the Bitcoin futures ETF that they were forced to buy contracts six, nine, 12 months out when it was supposed to be tracking. There literally weren't enough contracts for them to buy for it to accurately even perform as intended. But so we all know that that's fundamentally broken. But Alex, I want to ask you if Grayscale wins this, right, if we see news in the coming weeks that we're going to likely get a Bitcoin spot ETF, Michael Sonnenschein's point was if we win, we're getting it. He didn't think there was any other barrier to entry after the lawsuit. I'm not sure that's the case.

I mean, is that game set match for Bitcoin? I'm sorry, I got to unmute you, Alex. Go ahead. Absolutely. That's something that basically would take price in a matter of like three weeks up to $35.40, I think, realistically, without any hopium involved.

It would be major. I mean, that's effectively the biggest piece of news we could get, in my opinion, and has been for a year and a half, right? I mean, we've all sort of awaited these every time the applications expire and they get rejected and they kick the can down the road. But it's still my feeling that there's a massive wall of institutional money that's waiting for a spot ETF. I've got to say, I would put the odds of them winning that at like around 1%, you know? So, yeah, we've been over this so many times. They're not budging.

They keep on repeating the exact same thing. They've been repeating since the first rejection of the Winklevich ETF, but basically the absence of information sharing agreements with offshore exchanges and basically how big offshore exchanges are in the spot market it's nothing has changed it's incredible yeah it's an argument i just find that's the other one that's mind-bogglingly dumb right i mean every one of these exchanges gives their data away. CoinRoutes, we process over 10 terabytes of market data every day. If you could see every trade, you could see every book movement, every position, et cetera, for all the major liquidity dividers.

And there's two points I want to make. Point number one, there is a lot of volume in Bitcoin dollar on U.S. regulated exchanges. And if they're going to single out the CME as well, OK, you can be based on that. Just make the price index based on Coinbase, Kraken, Bitstamp, you know, whatever. There are a bunch of regulated U.S. exchanges. You know, there's a whole list. Make that and effectively go to the exchanges and ask a simple question. Say, okay, look, we have all your data. We see all of it. If we see something that we need to know who the customer is, will you give us the ability to work with your compliance people? I would be beyond surprised

to see anybody, any of the major exchanges say no to that request. They don't want them to be overseen in a ridiculous way, but they're already giving out the data. I mean, we already have it, right? So they could process it and deal with it. So to say that they don't have access to it is ridiculous. Now that as far as the foreign exchanges, same thing, the data is there, but yeah, I'm sure Binance would tell them to pound sand, right? And say, yeah, we're not going to tell you who our clients are, we're overseas, etc. And by the way, that is actually, that problem is one the European regulators, basically every regulator is going to care about. They're going to want to be able

to look through when manipulative trades happen to who did it, so they could go after those people. And the biggest single thing that people always ignore about Bitcoin is it is a truly global market. And so if a manipulator sitting in any, I don't want to pick a random country, it doesn't matter, a random country that's not OFAC, that's not terrorist, just some group of people decide to manipulate a coin in the, you know, some coin and it happens,

can the regulators in the US or the regulators in Europe or the regulators in Japan, for that matter, or Hong Kong or Singapore or anyone go after someone who's outside of their jurisdiction? That is the single biggest question that regulators gnash their teeth over. But that we are a long way from getting to that point. And we've seen approvals of spot ETFs all over the world outside of the United States. Well, sure. It's not like these same issues don't exist for regulators in Europe, Canada, Brazil, and elsewhere, where these have passed with relative ease in some of these places. Well, I mean, keep in mind, I mean,

we have a gold ETF based on spot. We have multiple ones. There is literally no comparison to how much more Bitcoin is transparent than spot gold. It is, you know, to the point where the SEC's defense against that in the argument is, well, we shouldn't have. Literally, we shouldn't have approved it. I mean, there are other precious metal ETFs. Most of them are based on futures. But the fact is, they have an oil futures ETF, which doesn't track, and a gold ETF that in one of the most opaque markets in history with really wide spreads and no data. Right. So and silver as well. Not only that, there have been multiple billion dollars, you know, in present day dollars fines against for silver manipulation, and we have ETFs there.

Right. So it's like, the whole thing doesn't make any sense. It never has. But the point is, is I understand where Alex is coming from. And Alex's point is why I'm so bullish, the Bitcoin community at this point are like Alex. That's one percent. They're never going to approve it. Those guys are, you know, pick your adjective. They're just not going to. So it is beyond not priced it. And to me, I always want to think about what scenarios, you know, when you do an expected value analysis, what scenarios are priced in and what ones aren't. I think there are a lot of people who think rates could go to six and a half percent. That is, if not fully priced in, it's at least somewhat priced in. I don't think very many people are betting on a Bitcoin ETF. Mike, what do you think? I agree with that. I think it's the thing that we have to,

we all understand, this is revolution in technology and incumbents trying to protect their turf. It's just normal human nature to push back and then they get squashed. This is the matter of time we're going through that. And FTX was just part of the lower tide and finding who's wearing clothes. To me, it's the key point that from a guy who came from futures into trading pits he used to work night sessions and things i've just you know something like this that never stops trading no one's responsibility no one's authority the best trading vehicle i've ever seen 24 7 is going to just overwhelm in the long term and i don't see what stops bitcoin from getting 100 000 higher in the long term and i

might be able to buy below $15,000 first. But to me, this is just part of what you'd expect after this major bear market. And this is part of the pain. But the bear market is more, the key thing is Bitcoin is so in the macro now, as Dave, it's just so international. You can talk to, what I mean, it's just so international. You can talk to what I mean. It's just everybody's heard of Bitcoin. You might be in a rural farm in India and people heard of it. That's what I've heard. So it's just that overwhelming. But in the meantime, that's the key thing is in the

mainstream. And my bottom line is, I'll end with this, what we launched the Bloomberg Galaxy Crypto Index about five years ago. To me, that's the ultimate goal is to have an ETF. Why do they track ETFs? To track indices of cryptos. Stop this picking winner stuff. I mean, we've seen a lot of the Ethereum killers just rise and die over the years. That's the proper way, I think, that the institutions, the pension funds, the sovereign wealth funds, the institutions of the world are going to want exposure to space.

And it's broadly tracked index or an ETF helps on-ramp that. But it's still early day. I 100% agree. And just like that, it's 1030. Guys, thank you all for joining. As usual, Alex, always a pleasure to have you. Alex and I had a conversation in October in Vegas. So did I with Mike and Dave Weisberger.

All recorded that we're supposed to be podcasting, and FTX blew up and basically invalidated half the conversations that we had. But I will say, Alex, a lot of your predictions in October came shockingly. Yeah, it was actually shockingly spot on. Yeah, especially about bonds, right, and yields. So I wish that we had been able to put those up, but a lot of people still did hear them. Guys, you can follow Alex at Kruger Macro,

Mike at MikeMcGlone11, Dave at DaveWeisberger1 all on Twitter. And tomorrow, you know, we do trading on Tuesday, so I've got the chart, guys. It's going to be pretty epic. Looking forward to that. Got to go. Thank you, tomorrow, you know, we do training on Tuesday, so I've got the chart, guys. It's going to be pretty epic. Looking forward to that. Thank you, gentlemen, once again. As always, a pleasure. See you on Monday.

You guys have been a pleasure. Thank you. Take care. Bye-bye. Let's go.