The Wolf Of All Streets - Will The Next Rate Cut Send Bitcoin To The Moon? | Macro Monday

Episode Date: September 24, 2024

Join Dave Weisberger, Mike McGlone, and James Lavish as we break down what's happening in macro and crypto! Dave Weisberger: https://twitter.com/daveweisberger1  James Lavish: https://twitter.com/jameslavish  Mike McGlone: https://twitter.com/mikemcglone11 ►► WANT MORE? JOIN MY COMMUNITY AND GET EVERYTHING WOLF OF ALL STREETS! 👉https://www.thewolfofallstreets.com/ ►►JOIN THE CRYPTO CONVERSATION! EARN WEEKLY REWARDS! 👉https://roundtable.rtb.io/shortUrl/taFNFGM ►► JOIN THE FREE WOLF DEN NEWSLETTER, DELIVERED EVERY WEEKDAY! 👉https://thewolfden.substack.com/   ►► The Arch Public Unleash algorithmic trading. Discover how algorithms used by hedge-funds are now accessible to traders looking for unparalleled insights and opportunities!  👉https://thearchpublic.com/  ►►TRADING ALPHA READY TO TRADE LIKE THE PROS? THE BEST TRADERS IN CRYPTO ARE RELYING ON THESE INDICATORS TO MAKE TRADES. Use code '10OFF' for a 10% discount. 👉https://tradingalpha.io/?via=scottmelker  Follow Scott Melker: Twitter: https://x.com/scottmelker Web: https://www.thewolfofallstreets.com/ Spotify: https://spoti.fi/30N5FDe   Apple podcast: https://apple.co/3FASB2c   #Bitcoin #Crypto #macromonday  Timestamps: 0:00 Intro 1:30 Discussion on China’s Stimulus and Global Commodities 3:11 The Impact of U.S. Stock Market on Commodities 4:45 Inflation vs. Deflation: Powell’s Strategy and Asset Prices 6:58 Money Supply Expansion and S&P Market Correlation 8:07 Analysis of FED's Recent 50 Basis Point Rate Cut 10:31 Discussion on Interest Rate Hikes and Their Effectiveness 11:54 Unemployment Rate, Government Spending, and Job Market Dynamics 13:22 Divergence of Stock Market from Other Markets 15:34 Gold as a Store of Value in a Recessionary Environment 17:02 The Impact of AI and Technology on Inflation 19:09 Gold, Bitcoin, and Risk Assets Discussion 21:23 Bitcoin's Current Trading Range and Future Outlook 24:34 Discussion on Bitcoin Volatility and the FED’s Role 27:17 Introduction of U.S. Bitcoin Options and Their Impact 30:12 Predictions for Bitcoin’s Price Movement and Market Dynamics 32:33 Bitcoin’s Lagging Performance Relative to Gold 35:07 Global Money Supply and Market Liquidity Expansion 37:40 The Growing Adoption of Bitcoin and Mining by Central Banks 41:15 The Correlation Between Bitcoin and U.S. Stock Markets 44:25 Expectations for Government Spending in an Election Year 46:58 The FED’s Strategy on Rate Cuts and Market Impact 50:08 Future of Bitcoin in the Context of Global Markets and Government Policies 55:14 Potential Effects of U.S. Elections on Crypto Regulations 57:34 Concluding Thoughts on Market Uncertainty and Bitcoin’s Future 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.

The Fed cut 50 bips last week, surprising a lot of people and clearly sending markets higher. Does that mean that the big catalyst that aligns with the elections and the four-year cycle, the halving cycle, is another round of cuts at the next meeting? Is that what's finally going to be the catalyst to break Bitcoin out of its range, send it higher and finally send altcoins flying. There's a lot to talk about. And right now you can argue that it's all tied to the macro. It is Macro Monday on a Tuesday. Once again, my fault with James Lavish, Mike McGlone, Dave Weisberger and yours truly. Let's go. What is up, everybody? I'm Scott Melker, also known as the Wolf of All Streets. Before we get started, please subscribe to the channel and hit that like button.

Yes, guys, it's another Macro Monday on a Tuesday after having macro nothing last week because I was traveling to Singapore. I apologize. We've been off schedule. But now we are back with the boys. Dave in his OKX McLaren jersey right there. Lando Norris taking the victory again in Singapore. Amazing. Mike McGlone and James Lavish, who I haven't talked to, James, with his Bitcoin shirt since last time I saw him in person.

Right before I left for Singapore, he was here for the Florida Gator Texas A&M game. Lots of stuff. Literally the swamp. Oh, it was hot. To be honest, though, Singapore at the F1 race was hotter than the swamp for Florida, Texas A&M.

It was out of control. Out of control hot. But that's not what people are here to talk about. They want to talk about elections and stimulus and China and all the things. Mike, we've got China unleashing a stimulus package here, as you can see, causing people to be very bullish once again after the Fed 50. How are you guys framing this right now? Bloomberg, what are you talking about on the morning meeting? I actually just had a morning meeting with my fellow commodity crypto credit strategists all over the world and really brushed over to Chinese stimulus.

It was the most expected. I mean, commodity trade has been waiting for this for a month. The key thing I've been watching is that triple R rate. It just dropped again. It's been dropping since 2011. That's about the time, the first time I went to China and I've been somewhat waiting for this from China forever. Having worked for IBJ, for those of us who know who that stands for, Industrial Bank of Japan, no longer exists. So some of the take from my colleagues is, meh. I enjoyed the Bloomberg medals, IB chat. One of the guys said, copper down, China stimulus, give me a chance to sell. And I think that's the mode. Not so much copper, but from a commodity standpoint, commodities are way sold out. I mean, managed money net positions are the least long ever. Crude oil sold out.

Grains are sold out. And I think it's really bullish and long as gold and copper. And I think what we're seeing this morning is, yeah, we're getting that normal bounce on the stimulus. But I think most people looking in the macro, it's still really bad. And I'll end with this from a macro commodity standpoint. Commodities are clearly showing nothing but hard landing on a global basis. Gold up 35% on a one-year basis, crude oil down 20% on a one-year basis, and most everything else languishing. We basically need some combination

of the US stock market to keep going up. It can't have a correction because commodities will probably drop with double the velocity. You need some kind of sharp, quick, miracle recovery out of China. You need the dollar to be weaker and OPEC to cut more supply. Other than that, commodities are going to just bounce for a while. And it's just the next what's going to be next catalyst from the make the next trick lower, which is deflation. And to me, that's the macro big picture. But for right now, it's a short term bounce. A lot of guys react the entire.

I mean, I know that I it's been a few weeks since I've said I've quoted Milton Friedman. Inflation is always a monetary phenomena and money printing is off the freaking charts. We keep printing more of it. We in the U.S. have $2 trillion deficits. Is that about right, James? I mean, you know, I don't know. Actually, we're running even more than $2 trillion at the moment. Right.

But you can't have deflation in an environment where you're printing money because if you could, people would – that's how every single empire throughout history, none of them would have collapsed. They all collapsed because people realized their money was getting more and more worthless. And basically, that's the denominator of the equation, unless I learn math in school wrong. Now, does that mean that in inflated dollars or relative to inflated dollars that things could go down? Yes, sure. Could asset prices go down? I guess. But the one thing that I said last week, which I think is true, is Powell, say what you want. Once again, a common theme that I've made on this show, and I constantly say it, is his goal is to re-engineer asset inflation and consumer deflation. That's his goal. And to do that, you need to get capital prioritized over damn good job, right? That seems to be what the results are. Now, there's a lot of finagling on the side of statistics, but you can't change the fact that at my local gas station, the price was $3.50, $3.40, $3.30, and now $3.20. You can't change that fact.

And you're right. Oil is down 20%. And so you can see it. But it's a lot easier to influence the things that are the inputs to consumers than asset prices, which he actually wants to do the opposite. And so we've been talking about the S&P. I mean, say what you want, but the latest analyst projections are 18% profit growth in the S&P next year. Now, is it real profit growth? Is it inflated profit growth? Does it matter? I mean, that's really important. When we look at Bitcoin,

we're going to get there. It's still right on schedule. But Scott, pull up the chart I just put in the chat. This is the game of trades, the money supply. The issue here and what Dave is talking about, how money supply is expanding across the globe. And what's important about this is, yeah, now it's turned positive again. But what's really important is look at how much it expanded in 2020. And then the contraction was just pretty much just a fraction of that. And now we're back

to expansion again. I mean, so the question about whether the S&P is over, you know, overbought or not, yeah, you could, there are plenty of arguments to say that it's gotten ahead of itself. However, if you chart out the S&P versus M2 expansion, especially global M2 expansion, since 2008, it's actually pretty much on target. Yeah, that's the chart that I want to see. That's from 1960. What is M2 up from 1960 in actual? Mike can grab that on the terminal. Just give me a second. That's a good point.

And then we haven't even said the phrase that Powell cut interest rates by 50 basis points last week. And this is a pretty big deal typically it's typically like 88 90 at the time that it was going to be 25 bps so 50 was a bit of a no in the days leading up to it it got to be changed i was on a flight and the dot plot while you're on the flight moved towards 50 because they were signaling it yeah but and also a shout out to anna w Ana Wong who put out an article that morning, which was actually, it was spot on. I mean, she almost, she picked the red line edits almost perfectly. And, you know, her point was, look, they're going to cut 50 basis points this morning because Powell has talked about the beige book before and the beige book she looked at and she was like, that's it. That's the triggering factor. The retail, the retail environment is weak enough that he's going to say, look, we can't, the thing is we can't have deflation. We know that, you know, deflation is, that would be catastrophic to the, to the asset mark, you know, to the, to the financial markets, which were super financialized in the United States.

And that would require that M2 expansion to skyrocket again. And they want to avoid that. They don't want to have this whipsawing of inflation. They'd rather have inflation kind of, ooh, start ticking up again a little bit, maybe. But they don't want to have this going on because they have to pour money back into the markets and liquidity in order to stop that stem of deflation. So are they right? I mean, it remains to be seen. We were talking about it before the call even started, how this time is different. And it is a little bit different. All of us here hate that phrase. And it's the most dangerous, you know, second most dangerous thing.

Just four words in investing. John Sampleton. policy leading up to this rate rise. And so, yeah, you had a little bit of rate hikes in 2018, 2019, but they immediately turned that back over once we had that repo crisis and we were going into the lockdowns. And so you had, how effective have these rate rises been? And we're seeing that they haven't been as effective as they expected them to be. And it's because we have so many people locked into low interest rate mortgages, low interest rate loans, corporations have low interest rate debt. We haven't seen the effects. And that's why you kept hearing them saying higher for longer, higher for longer, higher for longer. They know they were trying to wait it out. But then unemployment ticked up. Facebook looks bad. They blinked. And that's where we are now. And so asset inflation will continue, in my opinion, for the foreseeable future. Yeah. I mean, Mike, how do we get deflation now? I understand in commodities, but generally if everybody's cutting, we're going to see a money printing bonanza here, it would seem like. We'll get it because it's not different this time.

You're talking about things that always have happened. We all know what happens when the Fed starts cutting rates. We talked about pre-show. We're going to bring it on right now. We'll all bring out what's different this time. We've never had the Fed cut rates with the S&P 500 23% above its 100-week moving average, never that high with the S&P 500, the most extended versus the commodity index in 25 years, the most extended versus gold in 15 years, most extended versus the rest of the world's

equity markets ever. And so we've already had the crack up boom and the Fed's cutting now because they know they see the numbers. You mentioned the beige book. Everything's tilting over. We all know that that unemployment rate's going to 6%. There's nothing the Fed's going to really do about it. Can't do much about human psychology and shifting, particularly after what we did by throwing money at people and they just spent it like- But okay, hold hold that thought right there because and then and i want you to continue please on on the things that are different but what's not different about what is different about that the unemployment rate is different because the

government is spending over two trillion we have two trillion plus deficits two trillion dollar plus deficits annually right now in a time that we're not in recession, number one. Number two, we've had who knows how many, 12 to 20 million illegal immigrants come into this country, just pouring over the border. And that is affecting the jobs. Powell said it. He said it is affecting the job market. And so unemployment may be ticking up because of more people seeking jobs, not because of a weakness in certain sectors. So there's definitely two economies going on, Mike. And that's the problem that we're trying to sort out is how deep is the recession in the soft economy versus how strong is it in the stable economy, right? So I'll give you my outlook. And we've never had the Fed cut rates with

the stock market. This is stretch versus GDP, two times GDP. It's the highest in 100 years. So to me, that's all that matters. We say before, it's not the economy and not the stock market. It's the economy now. No, I'm sorry. But it's anything, everything about inflation now is about the stock market going up, creating

that inflation and the will to spend and the opposite when it goes down. And I can't help but point out that's the most significant thing now if you want to get long gold or you got long copper, not gold, but crude oil, that the stock market has to keep going up. And we get a normal correction, which we probably will for the election. Remember, we still have the former candidate who still doesn't agree with the last results. That to me is what's going to happen. We're going to have some normal reversion of risk assets. Yes, I've been early, but the key thing is also to point out here is this is a clear case what's happening in commodities. Gold up, everything down. That's a clear recessionary trajectory. But we've also had that lesson of too much liquidity and inflation.

We got past the 100-year event. We see what's happening in China. Clearly, they have to stimulate or they're going to go to recession like Japan. And this is just a matter of time. They are. The bottom line, though, for here is and what at risk assets are, is we have been on top of this Bitcoin leading the fastest horse in the race for about 10, 12 years, certainly since I really got bullish in 2000 in what was it, 18. Once they, you know, they came down in tether and failed. Now, to me, the whole trade is done for now. And that's why I'm looking at these patterns I keep pointing out is, again, we're making record highs in gold, record highs in S&P 500.

Let me finish. And Bitcoin, yes. And it's, of course, yes, against dollars. Everything's measured against dollars. And even against dollars, Bitcoin is barely doing it. So what I see is divergent weakness in the fastest horse in the race, which tells me that at some point we're going to roll over. And the bottom line I'll end with is just key things that helped me make a lot of money in 2008.

I was early. It was volatility. And that's stock market volatility in the US. And it's just way too low. It's just starting to recover. You look at a 50-week moving average of VIX. It's just never a time you want to be overweight risk assets when volatility just starts spotting from such a low level. The Fed just starts cutting. They're following, yes. It's different, definitely, yes.

But just the number one measure in trading is volatility starting to recover from a very low level. Just not a time you want to be over at risk assets. Now, they're working, so I still stick with that bias. I think some of the best performing assets in the next few few years will remain gold and u.s treasury long bonds so okay so gold um there's two there's two ways of thinking about gold right there are two trains of thought there you could say that gold is is uh is rising because interest rates are falling though that there's going to be more inflation. Or it's a flight to safety because there could be a recession. Or maybe it's both.

The bottom line for gold is the unlimited friendship. We have to remember, those of us who live through duck and cover, it's gone back. The peace dividend we've lived for the last three years is completely reversing and it's getting worse every day. The unlimited friendship,

so that's unthinkable. I think the market hasn't figured out yet. Is the violence we're seeing now, is it going to just reverse and get better or is something going to potentially go nuclear? I'm not predicting. I'm just saying that's the trend at the moment and gold's figuring it out and the stock market hasn't yet. And the gold may also be sniffing out the fact that they are doing, they meaning central banks are doing everything they possibly can to avoid deflation. Everything. In the face of a rising technology of AI that is making so many things so much cheaper, who knows what that's going to do in the next two to five years?

I mean, truly, who understands that? I don't understand it. I'm going to keep trying to figure it out, but that is going to be a pressure on these guys. And they know that they cannot, central banks, the they, we have to define they because there's a lot of they's thrown around these days. But central banks understand

and their treasuries understand that they just cannot sustain deflation. The amount of leverage in the system will not stomach it. Well, I half agree with you and half disagree. Let's understand that we have to bifurcate what we mean by deflation. The central banks want consumer deflation.

They want consumer prices down. They want asset inflation, and they want things to be worth more because it creates the wealth effect, which keeps people happy, voters, blah, blah, blah, blah, blah, blah. That's the bargain that people like J.D. Vance talk about. And you can say whatever you want about him, but he's no dummy, and he understands the tradeoff. He gets it. That exact bargain is what hollowed out the American middle class, why we don't make stuff here anymore. Because we said, oh, let's import standard of living, consumer deflation, and we'll outsource. And yeah, it'll be capital intensive at first, but we're going to make it cheap or we're going to make it easy for people to do that. And we're going to export our

environmental degradation as well because other countries don't have the environmental laws and other countries have child labor laws other countries have uh other worker protection laws that we don't and so it therefore is cheaper to produce stuff in these other places and we'll let companies do that they're multinationals and vance basically says well no and so you know, you know, the whole tariff conversation, all of that is lost, but a lot of it is equalization. You know, a lot of what's going on in the election is around those. And we haven't even talked about what that means, but the reason I bring that up is because when we talk about assets, we have to understand there's gold,

there's Bitcoin, and then there's risk assets. And let's understand, gold is a highly manipulated but store of value. Gold was 100% of the monetary aggregates as recently as 50 plus years ago. But even long-term, long, long-term, gold has been a tremendous store of value yes it has thousands of years power it has gold but gold has been incredible perfect almost for consumer prices where gold lost got fell off the train in 1971 was it no longer represented asset prices. So gold has helped in a world of consumer. So gold, if you look at what gold would have been, if we had not gone off the gold standard, then gold is still the denominator for money. And so we had this massive, I mean, move where consumer prices did this and asset prices did that. And gold stuck with the consumer prices. Well, now we've had a era where consumer prices have gone up and gold is sniffing that out. And it

does that extremely well. It is look, I own gold. I've always owned gold. I mean, for exactly not always, but for the last 30 years, for exactly that reason. And it's fine, but understand what it is. Gold tracks what people, you know, purchasing power parity. People in India, when they, you know, as a Tawali, when they start giving gold chains as an investment to people, that is what they're doing. The, you know, the central banks of the world, that's what they're doing. And that has been my thesis. And it's a different thesis than a lot of others. People don't like to focus on that difference. I believe Bitcoin will ultimately, when it gets to the point that it's mature, will end up being financial assets.

And that is my... It has enough money in the protocol. The point is, with Bitcoin, is right now it's all... It hasn't even gotten close to where gold is as a monetary measure, but there's room for both of them to be there. And as gold goes up, it just increases where the first maturation point of Bitcoin is. And so we're still talking about Bitcoin as an option. We're still talking about Bitcoin in the same trading range. I basically said three weeks ago that we bubble around the middle of the range, which is for anyone who cares, Scott and I have been talking about this since March, between 50 and 70. So 10,000, either side of 60.

So now we're slightly above average. Okay, fine. I thought, and I've said it, that it's baked in with the same tenacity that I said Bitcoin would break 40 back before the ETF did and stake dinners and notwithstanding. I thought Bitcoin would stay in this trading range and verbal towards the top of the range as we got through September and October, unless we had a massive geopolitical event, which caused asset prices to get crushed. Nothing is changing

my opinion. Unfortunately, it's a boring long-term opinion, Scott, and it's a broken record because it's like if people say, is it going to the moon because of the rate cut? No, the rate cuts are lining up. Global liquidity is lining up to create that rocket fuel propellant as we get toward the later fall, toward winter. But honestly, I don't think a whole lot has changed, but it's important to bifurcate between assets and everything else. The other thing about the 50 basis points that's interesting is, I'm going to say the first thing that Mike said, which is now unequivocally wrong in the two and a half years that we've been talking. You could talk about being early. You've made a lot of great points. You and I don't disagree on very much, but you said something that I agreed

with. So we're both wrong. So this isn't me making fun of you, but I want to be clear. I thought you were right on this, which is you said there's no way the Fed will cut unless the market forces them to. And I nodded my head. So I'm not, this isn't me making fun of Mike McGlone. This is saying, okay, Dave, Mike, we were both wrong. The Fed doesn't give a crap about the market. What they care about is the stuff underlying and they care about politics. They care about unemployment and unemployment is far worse than, than, and the, and the politicians know this, And we've talked about this before. If you look, the native-born employment has still not gotten back to where it was in the pandemic, before the pandemic. In fact, native-born American people who were here at the time that Trump was in his third year know that there are still people who are out of work.

They know that. They see it. And the Fed's- And that's why we get 50 basis points? That's why we get 50 basis points because voters are more unemployed than the politicians want them to be. And yeah, to be fair, I mean, to be fair, if we have to,

the Fed's mandates are unemployment and inflation, not the stock market. I understand that. And that's point number one. Point number two, you know, in terms of the political implications here, are that Powell said something that was actually I thought was more important than the fact that he went to 50. He said after the 50 basis point cuts, he still believes monetary policy is restrictive. That is. Well, fine. And he doesn't believe it's warranted to be restrictive in this environment because of the way employment and inflation are,

which is basically is saying we're going to cut again and we're going to keep cutting until we're not restricted. That I think is very important because this was not a one and done unless there's a spike in inflation. That's why we have a title, Will the Next Rate Cut Send Bitcoin to the Moon? Because now when you see 50, they're not just going to chill. I thought there was a chance they might do 25 and then we might pause and then another 25 down the road.

But 50, it's a statement. Go ahead, Mike. It's sending the stock market and gold to the moon. And the fact it's not sending Bitcoin to the moon means to me, Bitcoin's already gone to the moon and it's heading back now. And the key thing, let me finish on that. No, let me finish on that. And it's anybody who says Bitcoin is going to be some kind of store of value or be competitive, you know, somewhat digital gold. I don't disagree with that. But at three times volatility, one thing we need to prepare for, be prepared for, see

what Bitcoin's done for the last few months, get used to boring Bitcoin. The good days of the teenager growing up fast are over. We have the mainstream in the space and it's getting arbed out. We pointed this out when futures were launched in 2017. The big days of Bitcoin volatility going up. Now it's time for Bitcoin to just get as boring as gold. It's on this way to doing it.

I would say that the institutions are barely coming in and a big development is happening right now with options being... I have it queued right here. I'm ready. Okay.

And so, yeah. I want to talk about this one because Josh Lim posted a great thread yesterday. I don't know, for those of you who don't know Josh Lim, he's one of the experts in crypto options, but he is a longtime option guy. He's my go-to guy on option math. And, you know, he's probably forgotten more

than I know about options. And I traded them professionally. So, you know, but he went through all of this. The point that I would make is that it is a double-edged sword. Bitcoin has not had three times the volatility during this trading range, but it has over the long term as it's gone up. One of the reasons Bitcoin has had more volatility was because most of the world, we'll call it half of the world because it's weirdly,

the US is half the world's investable assets. It's had these things called perpetual swaps, which allowed DGENs to trade on leverage. The U.S. is now about to have their own flavor of this. Now, it's not as good. It's not as good for the investor. There's no way any investors who use options to merely get exposure to Delta and leverage, leverage Delta, options are crap. They are much wider spread, much more expensive, much harder to use than perpetual swaps are. And eventually our regulators will figure that out when it isn't someone named Sam Bankman-Fried basically pushing perpetual swaps. But we'll table that conversation. That one is, anyone who wants to go to the side of that one in a debate, you'll get no takers because, you know, maybe I could get some TradFi people to debate me and I'll propose it for FIA next year.

That would be fun. I would love to take the other side because I'd crucify them. But take that out in a world where the most most highly traded options are zero day s p options you know one day s p options we have a gambling culture in the united states that is just as off the charts as it is anywhere else in the world and now the ability to trade bitcoin on leverage on options for retail is a big deal now that is a big deal that is a double-edged sword it gives retail for the first time the ability to take massive short bets in Bitcoin, just as it gives them the ability to take massive long bets. So it's not necessarily bullish, but what it will do is amplify FOMO and amplify fear.

And so that volatility that Mike talks about is going to go up. Oh, it's the opposite. It's the opposite. The more players involved in a market like that, the more you squash volatility. Just the way it is since I've been trading options and futures for 36 years. It's the opposite. And I've been writing about it since 2017. The minute they launched options on Bitcoin, volatility was at that time versus gold, it was 10 times. Now it's three times. It's going to one. But you got to expect Bitcoin to be boring. And it's just, come on, it's grown up. It's not a baby anymore. It's growing up. And

the options would give, for the first time, it gives institutional investors who are able to now buy this thing before, you know, they couldn't do it structurally. We've talked about that ad nauseum, but now it gives them the ability to hedge around it as well. And that's something you haven't had before. And that's a really important thing. When you talk about taking big positions, having a core position in something that is this volatile at times, you want to be able to hedge it out. And so what happens when you're buying an out of the money call or you're selling an out ofof-the-money put, like who's buying those things? Well, who's on the other side of those?

You know, it's the dealers who are delta hedging against it. And this is exactly what we're talking about with the gamma squeeze. Is that going to happen? Mike, I don't know when and how it will happen, but it will happen in Bitcoin at some point where you have a gamma squeeze that the dealer is going to be forced to be buying Bitcoin to hedge out their short calls up to that strike price. I used to do that. They're not that stupid. When you get lifted out of calls, you don't just hedge it with the underlying. You can hedge it with other money calls. The more part is illiquid markets.

Those are going to be expensive, more and more expensive. As Bitcoin goes up, it actually gets more volatile. Of course. Exactly. That's the point. So it has to go higher. It has to break out of its cage and come into new areas for volatility to go up. It's not doing that despite its key measures. It's measured against gold and beta are breaking out to new highs and their volatility is picking up. Yet gold, the S&P 500 volatility always goes down. So let's point out current trends. That's the current trend. But the fact that you have more and more participants in Bitcoin, just pointing out that volatility at three times above gold, and it was 10 times, is going down. And it's going to become more and more boring. And for it to break out, every time it breaks out a lot, there's going

to be more people arbing. It's just the way it always works. I remember seeing in the trading business, when you had a market that was not really traded with a lot of liquidity and you had issues with options and with widespreads, then it would move. But once you get all those options and participants, it just squashes the volatility of the market. It's just the way it always has worked. Scott, can you pull up the chart of Bitcoin and gold on that three-month lag? It's actually in my newsletter. I don't know where else to find it, but it's in there.

Bitcoin has been lagging gold, actually, Mike, for years here. And it's interesting to look at that lag. Here, I've got it right here. I can show it to you. I'll show it in a minute. Tire screen. When you get ready, I can just share the screen. I'll show you my key points.

And that's it. So here, you see in gray, this is a Bitcoin to gold ratio. It's 25 ounces of gold for one Bitcoin. It's been declining. I know Dave says I'm cherry picking, but I'm just pointing out trends. And this is a volatility, 260 day volatility of Bitcoin versus gold. It was 10 times and now it's three times. It's heading lower. I've been writing about this year. So it's going to continue lower. Remember, it's three times gold. It's not like it's same as gold. There's so much room for it to go lower and it's just getting more arbed every day

what will it look like when it ticks 240 you said it's it's it's an if statement no i said what would it look like if bitcoin i mean and that that's really the question you know if the thing that i always look at and that we we talk about this is when when you speak about how it's it's lagging and you know i know there's only three events of having cycles i understand that but the fact is if you look at the network the hash rate and and you look at number of addresses if you look at all the fundamentals underneath the bitcoin network and how it is now compared to where it was the last time it hit the all time high before Sam Backman, Fried and everybody else involved in the various serial default never, ever, ever are, they're processes, right? You know, Bitcoin is, it feels like a bottom right now, despite being poking up against

the all-time highs. And that is, and when I say feels, I don't mean emotionally feels, although that is also true. It is actually interesting how it feels that way in terms of investor sentiment and whatnot, but I wasn't talking about that. I meant in terms of its fundamentals. It's sort of like if you look at the S&P, if the S&P were trading at the opposite, let's say the S&P, instead of market cap to GDP of 200%, was 75% and it was trading at these prices, what would you be saying? You would be saying, well, okay, it's still cheap is what you'd be saying. And to me, that kind of matters. And so we like to look at charts, but fundamentals do

matter at some point. And at some point, it will either be something or not. And the smart money, the miners, the people who use the network think or not. And the smart money, the miners, the people who use the network think it will. We'll just talk about the facts of what you just said. I don't disagree. It feels like a bottom. The problem is, bottom line is, I'll say this about most at-risk assets at the moment. As long as the US stock market's going up, Bitcoin will be fine. That's the key risk right now. It's lagging. It's been lagging for quite a while. If beta has its normal back and fill, Bitcoin will drop with double the velocity unless it's different this time. Show me the test.

Show me the beef. It's still not doing it. It's still showing lagging. I'm just pointing out, in the last four years, Bitcoin is at the same ratio it is versus the Qs. I still look at it. Sure, we had that rush. We had the ETFs. I look at it.

Okay, well, show me the beef. Four years now, this cool asset is underperforming the Q's on a dip to buy or which one are you going to use? But on a five year basis, no, it's crushing them. I just point out the last blow off. So what we've happened, what's happened in the last few years, we've had futures based ETFs. Now we have physical ETFs. You see what's happening. It's migrated into mainstream. And I completely respect what you say. Everybody says there's going to be more buyers. Great. But I'm just pointing out the facts of what I think I've analyzed for 10 years. It's just not doing what it used to. It's still showing that. Bottom line is, if beta goes down and Bitcoin stays there and doesn't go, to me right now, the biggest risk for almost all risk assets is beta goes down, Bitcoin drops much harder. The biggest risk for all risk assets is asset

deflation because of a drawout of liquidity, but we're going to have more liquidity. We're seeing it already. The M2 money supply is expanding. Why are we going to have more liquidity, James? Because we absolutely positively need it now. Yes. So that's the point I keep when you were dependent on liquidity for raising the risk assets and they're already the highest they are in our lifetimes, then you know you got a problem. So I look at it like from a commodity standpoint. Yeah. You could have said that right. I agree, Mike, but you could have said that in 2010, 2011 when they dumped all that liquidity into the market and then 2020 when they dumped all

the liquidity into the market. What was, when they dumped all the liquidity into the market. What was the difference that happened after we had significant correction? I agree. I agree. That's the problem is we haven't had, there's one key missing link here. Well, okay. And that's the question.

And this is, this is exactly the point is that it will, we have that correction before we have that dump of liquidity to avoid the correction? That's the point. And we're in an election cycle, an election year, and we're spending $2.2 to $2.5 trillion more than we're taking in annually to keep this machine going. And that's the point. The point is that is – And that's going to get worse.

By the way, that's true point the point is that is and that's gonna get worse and that's the way that that's true but two points first of all we had this exact same conversation when bitcoin was trading in the mid 50s and we're now about to be into the mid 60s so you're talking about you know while the s&p's moved up one two percent from those days you know, where we were. It's made new highs. And gold's made new highs. Bitcoin hasn't. New highs are all very, very... Made new highs first. You literally have to look at, you know, you look at it from the beginning of this year. If it wasn't for the fact that we had, and this is why I think it's important to go back to fundamentals.

If you look at Bitcoin relative to its hash rate, just a simple thing, and yes, it's not perfect, but it's not bad. When it first got to the prices that it's trading around now, the hash rate was 165. It's over 700 now. I mean, literally 5x. That's like saying that new highs on the S&P when S&P earnings have multiplied by a factor of five. And you're looking at it, it is cheap. What has the ETF done? It has been the most successful ETF launch in history. What does that mean? Well, it's meant that all those people who FOMOed in, and there were a lot of them during that period

of time that you're talking about, Mike, basically have had a chance to sell the Bitcoin that they bought to people who want to hold it for the long term. We've had a six-month grinding transfer of long-term Bitcoin holders to the newer, longer-term holders. Basically, weak hands to strong hands. At a certain point, because bitcoin's a finite asset that ends at the same time it appears that now we have more and more companies you're hearing every week or so you hear about another company that's adding bitcoin to its balance sheet and we have central banks you know now we have we have a lot of them are doing it via mining like what was it butan who's now larger than el salv, yada, yada.

And nobody really cares about Bhutan and El Salvador because they're small. But that's that first trickle. The demand side is ramping up and the supply side is starting to thin. This is very important and it is outside of everything else. At the same time, the thesis, which is an easy thesis to explain to investors. I was talking to my brother, the financial analyst, not analyst, he's a financial advisor. And he has his first customers starting to dip their toes into iBit and a couple of the other ETFs. Why? Because it's easy for people to understand that the government is spending so

much of what James is saying is there. It is just starting. We always said that that would start in the fall. Well, the fall is what, three days old? I'm a little bit more patient than that. I think that it will take toward the end of the fall before we start seeing this really start to come in, but it's different. My only problem with everything that you say is you keep comparing it to all-time highs. All-time highs were a blow-off top where the leverage was incredible. I was pointing here, you can't see it, but I was just looking at the perpetual swap funding rates. The last time Bitcoin sat in the 60s for a long period of time, those funding rates were basically people were paying, I mean, the normal funding rate, which is 0.01, right? Those funding rates were 0.2, right? They were

20 times, you know, for two or three weeks before it finally crashed. We're now at 0.0006. There is no interest in buying Bitcoin on leverage over, you know, as Bitcoin is at these levels. None. Zero. And there hasn't been for months. There's no difference. And that is a very, very big difference. That's why I'm bullish. But in a sense, you have to look at those divergences. That's a divergence. That's a big one.

Now, Scott could talk about RSI divergences and higher lows and higher, you know, whatever. And that all looks that way too. But honestly, until we won't break the range until we break the range. And then when we do, then it really becomes a question of follow-through are, you know, and what happens to the people who normally get exuberant and get FOMO. We haven't, no one at FOMO right now. Is that a three-month process? Is it a six-month process? Is it a year process? Or is it a two-day process? And that will determine how the rally goes. So you're predicting the future and it sounds like you're making facts. I appreciate your predictions. I disagree. I think the problem

right now is Bitcoin is completely dependent. Crude oil, copper are completely dependent. The US stock market continued to make new highs. And when that stops, you'll see who's wearing clothes. And right now, Bitcoin is showing divergent weakness. I'm still bullish gold. My favorite trade. Bloomberg is running that. Yeah, I was going to say.

I personally think that the long Bitcoin short stock market trade will work at some point, but it depends on how it happens. If the stock market has a one or two day massive crash and panic, yeah, you're right. Everything will fall. If the stock market tops out and gets a little bit exhausted and goes into a consolidation phase for six to nine months, no, that's not going to hurt Bitcoin. Bitcoin cannot perform in that. So that's a view, which I hope you're right. Right now I'm saying it's the opposite. Bitcoin's showing your view has been wrong for about six months now. It's showing, yes, it was a blow off top. We all were on top of that. But lately, it's still not showing what you're saying. And again, hash rate has nothing to do with the actual physical demand of Bitcoin.

Well, we have this crypto's correlation with US stocks near his record in Fed fallout, which kind of goes in line with what we're discussing right now, but there's only on a 40-day correlation. That's right. I mean, look, my view has been we're going to be in a trading range,

we're going to be in a trading range between 50 and 70, give or take, since March. Until when,'re still there i mean i said in october and october is six days seven days away so okay then we'll see what happens my ever ended up being let me ask you all the bluster all the bluster sorry james really quickly but all the bluster about seasonality and uh obviously we started september poorly had quite a bullish september at least up for now we'll see what happens uh with six days left and historically those times when we do have an up september in bitcoin october november are absolutely massive doesn't mean it's going to repeat and one tweet you put out that which is of course i know i know

you're trolling people and it's great for engagement. Me? No. But, you know, the fact is Bitcoin doesn't give a shit who's the president. The rest of crypto cares a great deal. And U.S. innovation, U.S. capital market innovation in particular, cares a great deal. But Bitcoin doesn't care at all. Because Bitcoin is going to get, is at the point now where it's going to be, there's no anti-Bitcoin

hostility from either administration. Yes, Trump may put it into a Bitcoin reserve and the Loomis bill might get some traction, sure. But at the same time, there are other forces there. The fact of the matter is lots of spending

and bitcoin being allowed to do what it does if bitcoin doesn't anything let anything under bitcoin starting to surpass gold the government doesn't care which means there's nothing stopping a rally of the of the magnitude that that we've talked about in either administration, nobody gives a crap. And I think that is important. I think Mike agrees, though, long-term, Bitcoin will be higher than it is here. You know? It's just we're all talking about the interim. And the question is,

do we have a sharp drawdown a la, you know, great financial crisis or the lockdowns? Do we have a sharp drawdown in markets that correlates to one and takes everything down with it, including gold and Bitcoin? It's a distinct possibility. I think Mike is saying that it's a probability. I think it's a possibility. I also think that the spending, the sheer amount of spending that's coming out of the governments, not just the U.S., but now China and Europe and the U.S., I think the sheer amount of spending is expanding the money supply. And that expansion of the money supply means that we haven't really seen the blow off top yet, which is scary. That is frightening.

That's what is keeping me up at night. Not the, oh, we might have a drawdown. The thing that's keeping me up at night is just the absolute magnitude of liquidity that we're going to see to come into the markets to keep this engine going and to feed off of this leverage. And why do they do it? Because they need it. And so the question is, do we have a blow off top that is monumental? And then the drawdown is even worse. That's the question. But trying to time it and be cute, that's what I want people to avoid. If you have your core position, don't go selling it out just because you're worried about it. Yeah, keep some cash on the side. I mean, we can't give any financial advice here individually, but that's what I'm doing. I mean, I'm keeping some cash on the side waiting to take advantage of any drawdowns, but I have my core positions and I'm not going to sell them because of the now, what I think is a probability that we just continue to

melt higher as the money supply expands. That's the problem for me personally. And we're not seeing the government spending slow down with either candidate. Say what they want to say. You're not going to see that slow down. It's going to continue. Yeah. The interesting thing is that I would say is we've always heard and it's always been true, don't fight the Fed. We thought collectively that the Fed wouldn't cut until they were behind the curve as signaled by the markets. Now, they may very well be behind the curve as signaled by the real economy, but the markets don't think they're behind the curve. And I'm not sure what to make of that, honestly. And I think that that is really an interesting question because we all thought that until there was a stock market correction, the Fed, if anything, maybe they do some token 25 basis

point cut and look, be more patient. But 50 and saying that they're going to go lower is that to me is I don't care that the markets are high, whereas they used to, we thought, cared that the market was high. And Mike's wealth effect is something they wanted to squash. But clearly, that's not what they're interested in. Because if the Fed believes they brought down inflation by raising rates and being restrictive for the last year, while the market is at all-time highs, it's telling you that they don't believe the wealth effect is really what they need to do.

What they really need to do is stop consumer lending and the housing ATM and those sorts of things, which is much more important. Honestly, I'm not sure which way is true. What I do know is if the Fed is going to be, if we're going to see more liquidity, then markets, particularly markets like Bitcoin will go higher. If we are not going to see more liquidity. Last spring, Dave, when the Fed lowered QT from $60 billion a month to just $25 billion. I mean, $25 billion a month is nothing. They're basically stopping QT. They're just letting some of the treasuries

roll off their books. I mean, that is a huge indication of where their minds are at, truly. Yeah, that makes perfect sense, obviously. Should we talk about elections? Well, I mean... Because we had this, we didn't get to talk about it. Harris-Valence, A&I, crypto sectors and pitch to NYC. Here's a scenario analysis for you that I think is going to be is my base case.

We will have the first female president. There'll be a split. We'll have a Democratic executive branch and a Republican legislative branch, which would be very good for deficit spending. We'll reduce it. They'll just disagree with everything. To me, that's probably what's going to happen. I think she will be elect and that's not just based. I can dig into all the details. But the one thing about all our agreements is what you're pointing out is consensus in terms of being an ex-trader or money manager or whatever, the optionality, the big comes when you do construction positions that are against the consensus. Soft landing is priced in.

The most expensive stock market in its history of Fed's easing is priced in. We get it. So where's the optionality? I think that's where I look at, well, what's Bitcoin telling me? Mike, you probably should be looking at alternatives. And I'll stick with,

why is gold beating the AI-driven in the stock market at one, two, and three-year basis? I just stick with that rock that has mostly been, if you look at what people have been hating in terms of ETF flows, they've been hating the stock market,

hating gold, just starting to turn back upwards. And everybody's loved, as you pointed out, love Bitcoin because we just saw the biggest ETF launch in history. That, to me, where the optionality trade comes in, where we see more of the rock beating stocks in Bitcoin in the next, maybe not just months,

but years. And it's happening now. Maybe it's just early days. You're telling me it's going to be wrong and over, but you're also pointing out consensus, which is great. But that's what I look at is if I'm structuring an option position, if I can get 10 to 1 and it costs me nothing because it's against consensus, then I consider that. Of course, I'm a contrarian. And that's a bottom line with this. As a commodity guy, then you learn in commodities, markets go down because they went up. And it's completely autocorrelated. It's the opposite in things like Bitcoin and stock market until it isn't at some point. Well, consensus is clearly not for Bitcoin to go higher because if it was, the funding rates and all the other... It consensus among...

I think it's consensus in the Bitcoin world. In the Bitcoin world, among Bitcoin... They've just misread the headline. Look at the Google searches. You didn't say 4, you said 2 and 40. I wonder if you heard the last person say, okay, but I have to disagree with that because the consensus, the nice sense for everything is every Bitcoin is going up, risk-assist is going up, Fed's easing. I mean, come on, you said it earlier, Fed's easing.

That's good for me. Yeah, you're right. I understand that. It's changed over the last two days, or last week. But the truth of the matter is, we've been in this range, and people are, you know, I hate to say it, Mario, if you're listening, but how many times has Mario said, when are we going to get back to a bull market? What's going on? This is depressing or you know people like whatever you know exactly in the crypto world acting desperate trust me the despondency with bitcoin uh at where it is is is is definitely not consensus but dave i do think that there is a consensus that the cycle will kick in and among us but not among normies so why are they responding well it's don't ignore the human nature why are they despondent? Don't ignore the human nature. Why are they despondent of ignoring the human nature?

Now, you're more mature and older, as am I, but very young people who made a lot of money very young expect it just to keep happening. At some point, I mean, I've seen it from trading pits. You see the deaths and the divorces and the suicides. At some point, you have to say thank you. And that's what I'm worried about is what you point out is if people are so despondent because they're so hooked on that hopium. And I just point out at some point, like I'm just, I'm just pointing out the beef. It's showing divergent weakness and gold isn't. Okay. So let's, so let's, Mike, if you're, if you're looking at, one thing we haven't talked about is, is the credit markets. And if you're looking at the credit markets and you're looking at the 10-year and the 30-year yields are higher now than they were

before the Fed cut 50 basis. Yeah. Why is CLT down? So there's a good reason for that. It's called the most leveraged market in the planet, just taking off some positions. I used to do it. I mean, 100 to 1. I mean, most of our customers are 20 to 1 and using futures and options and treasuries. They're just taking off some positions. Maybe that's part of it. But also part of it is that there's an expectation that there's going to be more inflation in the future. That's part of it. Or they wouldn't be unwinding. It's more of a short-term thing. I just look at U.S. tenure note at 3.79 and China at 2.06. We're going there, just a matter of time.

Japan's been there forever. What stops it? Sure, all the central banks are starting to ease. Why? Because they see those deflationary forces. Yes, you point out they're trying to minimize them, and we have the massive deficit spending, which is part of the reason it's artificially boosting the economy. But the tilt is towards what normally happens after you get way too expensive and the Fed starts easing. You know that. We're going to go to 6% unemployment unless you've given up on that call. No, I haven't given up on that call at all. It's just a question of how much are they going to manufacture against it you know with it with the government spending so much money that they're manufacturing jobs that are not really productive but they're creating a way to to uh pay people through inflated dollars basically you know and that's the question how

much how much are they going to do that we did did see that they were you know, they the BLS had revised jobs down by a million jobs over the course of a year. I mean, that's a massive amount, you know. But the question is, where is that? Where is that really going to work? How much are they going to stem it with this insane spending? That's the question. And we don't have an answer to that. But we do have an answer that we're in an election year. It's not going to stop now. Could I come up with a conspiracy theory just so people could have- I love those. You got two minutes. I'm at it. First female president, whatever. I mean, look, I've made my point on this one.

I am terrified of a Harris administration's effect on freedom of speech, prosecution of sending all the federal agencies against Musk, lots of stuff like that. I think that going after crypto and pushing crypto development offshore while Bitcoin and Ether and financialization will continue in the United States is the most likely scenario in that world because it's the agencies that actually dictate the SEC, FTC. But so today, the McHenry and friends were going to take Gensler and the rest of the commissioners and grill the living crap out of them. And there would have been a number of soundbites in there that would have been really bad for the administration. And mysteriously, at the 11th hour, it was postponed with no definitive date given to that hearing. And that, to me, there's one of two people.

And without saying what's true, because obviously I have zero knowledge. So I could tell you that the people who are in the crypto for Harris camp are going to be giddy saying, oh, maybe she's going to fire them and change things. And so we don't want to make her have to be tried for it. And the Trump people are going to say, well, wait a minute. The administration called and said, call in sick. Don't show up because you're going to give them incredible advertising. And this stuff's going to go viral because you're going to look like a fool and you're going to make me look like a fool.

Now, I don't know which of those two things is true. If either, it could just be random. Someone got COVID or something. We don't know. But the fact that that is happening, that that hearing which people have been looking forward to would be the first time that all five of them, which meant that Hester and Mark, who have been brilliant and blistering in their dissents, would have had the ability to directly interact. That would have been amazing. And the fact that that got canceled is kind of a big deal. What we don't know is the why. And that why is going to play out over the

next week. Maybe we'll hear it, maybe we won't. But I think that people are going to have a field day with this because it really is a big deal. And just to put a bow on the thought, anyone who thinks that that is not an election issue is violent. They just don't understand. First of all, there are lots of people who own crypto, but it's not just crypto. The entire financial industry can't stand this SEC. You know, it goes way beyond, way beyond just crypto. And so this is not a small deal from people. People do care about their investments. And that would have been on full display.

And so I do think it's interesting. Good point. I think if I'm just running money, which I don't anymore, and I see what's happened this next few months in this election, to me, that's a reason to expect a backup in risk assets because it's a complete uncertainty. So maybe it's a short-term trade. I'm looking for that test. Let me see how Bitcoin responds in that environment.

We shall see. Good to be back, guys. It's been a long couple weeks without hearing you scream at each other. We love each other the four musketeers four stooges i don't know which we are but uh you know i'll take it i think it's going to be interesting certainly going to be an interesting few weeks we're getting very very close to the election and we're getting very close to that time when there's that, I think, consensus or not, depending on if you're Mike or Dave, on whether Bitcoin is going to go up in October and November.

We're going to get a lot of answers in the next two to three months. I'm glad I'm going to have you guys here to unpack it all. Thanks, Dave, James, Mike. Guys, we'll be back on Monday next week for Macro Monday, not a Micro Tuesday. Thank you. See you all tomorrow. Bye.