The Wolf Of All Streets - Will There Be A Recession In 2023? | What Will Happen To Bitcoin? Macro With Dave Weisberger

Episode Date: December 26, 2022

Macro Monday with Dave Weisberger (https://twitter.com/daveweisberger1) ►► JOIN THE FREE WOLF DEN NEWSLETTER https://www.getrevue.co/profile/TheWolfDen Follow Scott Melker: Twitter: https://twitter.com/scottmelker Facebook: https://www.facebook.com/wolfofallstreets Web: https://www.thewolfofallstreets.io Spotify: https://spoti.fi/30N5FDe Apple podcast: https://apple.co/3FASB2c #Bitcoin #Crypto #Macro Timestamps: 0:00 Intro 3:00 Santa Claus rally canceled 8:40 The biggest news event caused the smallest price move 12:30 What is the fair value for crypto? 16:00 Are the Tether guys morons? 20:00 SBF is a compulsory gambler 25:00 FTX fucked up the majority of the crypto community 29:00 Trading volumes 32:00 Biggest buying opportunity 35:30 How bad the recession will be? 40:30 Bitcoin price 48:00 Bottom 56:50 CoinRoutes 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 best seven days of the stock market per annum, almost every year, 77% of the time, are from Christmas until just after New Year's, the seven-day mythical Santa Claus rally, but it's looking a lot less likely this year. We're going to talk about whether that is going to happen. Of course, it's just a few days right before the almost inevitable recession hits in 2023,

but I've got Dave Weisberger to talk about all the nonsense we saw in 2022. And of course, what we can potentially expect for 2023. You guys don't want to miss this. Hope you're having a wonderful holiday. Let's go. that like button. I hope that all of you are having an amazing, wonderful, terrific, great holiday, a Merry Christmas, a happy Hanukkah, whatever it is that you celebrate.

Yes. I know that many people are off today, but we decided that we would show up. I'm in Florida and it's like 19 degrees outside. Dave's in a better part of Florida where it's not 19 degrees outside, but I know that it's still chilly. It's so cold that our pool broke, and pipes are trying to explode around our neighborhood.

Pretty crazy. Floridians have no idea what to do when the temperature hits 20 degrees for four or five nights in a row. A-Rational here says it's minus 8 degrees where he is. Wow. I was like minus 21 in Colorado when I left, or at least feels like minus 21. But we're going to start to dig in right now. I'm going to go ahead and bring on Dave.

Dave, I see you're not in your normal digs right now. You were nice enough to show up on a holiday here, man. How's it going for you? Oh, it's fine, Scott. I mean, I'm in my apartment uh in miami beach where when it goes below 50 people are like you know don't have any idea of what to do it's it's actually really pretty funny yeah it's hilarious i know that that's not your necessarily your route so uh you're putting on uh your your warm weather clothes for effect for us there well i mean we got

we have uh you know thesleeve shirts I own down here in Miami are the ones I used to go skiing. So there you go. I got my spider, right? You know, you can see the spider outfit. I like it. Yeah, you look slope ready. So listen, I talked about it right at the beginning, right?

I mean, this is all anyone's talking about. There's a million articles about it. Here's one. Will a Santa Claus rally come to Wall Street this year? I mean, I guess the better question is, does it even matter if we get five to seven days of exciting price action and a slight rise, unless you're an aggressive day trader? Well, I mean, look, if we're talking about Bitcoin, which is what I think we're talking about, we are at a very interesting part in the cycle. It is it looks very much like, you know, the bottoming process is is moving along. But what you're seeing is something fascinating in in both of the last two cyclical bottoms, one was just the flash bottom, right, in March of 2020. And in December of 18, you saw grinding, relentless, major action moving down in 18.

And you saw sharp, oh, my God, what the excuse me, can I say, you know, what kind of language, what the F is happening? And, you know, did CryptoHaze kick the cord out on BitMEX, which was the leading provider of leverage trading back in 2020, you know, for about an hour when things were at their most dire before the Fed decided to do the Sunday night intervention. In both of those cases, there was enormous volumes. In both of those cases, there was a desperation among the holders of, oh, God, I better sell to get any value out. None of that is happening this time. Literally none of it. Bitcoin is four times that the both times the cycle bottom from both of both of these last things. All time holders at an all

time high and volumes are approaching cycle lows. Don't believe the volume you see from some of the wash trading exchanges. Well, what I can tell you is volumes on the more certainly on spot exchanges are dramatically lower than they were back then. And people are sitting on the sidelines. I mean, you know, data points that people might care about. I personally am involved with either clients or prospects or people or friends in the industry, dozens of bankruptcies, chapter 11s, reorganizations privately, whatever you want to call it, where firm dozens of major trading firms who are reorganizing right now or giving up dozens because they lost their money from, well, they didn't lose their money. They had their money stolen from them by Sam and his little cabal while he enjoys his Christmas holidays out in Stanford. I would love to see him have the guts to come on a program like this and look us in the eye because he lied to me to

my face. And I never forgive that, Scott. I'm one of those interesting people who I'll put up with all sorts of shit, but just tell me the truth. He's a liar. And I would never trust a word that comes out of him. But there are that many firms that aren't trading. There are dozens more that we're involved with who stopped trading in December, actually in November, and said, we'll take it up again in the new year. We know what's going to happen. So when you see that sort of action, you know that the professional trading community isn't really there to amplify any moves, which, of course, it often does. Momentum chasing funds will the price of Bitcoin yesterday or two days ago and I saw, you know, on our on our app, I was watching. It's really pretty funny, but I was watching and I saw like a vertical line and another vertical line. I'm thinking, wow, volatility, that could be great. And then I actually looked at the axis, the X axis.

And it was it moved from at the time, I think it was 16.7 to 16.9. It was a $200 Bitcoin move, but it was so flat apart from that. And it looks dramatic. Yeah, I mean, that's where we are now. I mean, here's a Bitcoin chart, right? I mean, the last four days, we talked here at the FDMA, 16.9. And yesterday, 16.746 was the bottom. Right. We're talking about $200 range

for two or three or four days. That is astounding. There are a lot of technicians who will look at that chart and go, well, that doesn't look like an inverse head and shoulder so it's not a bottom yet. We need one more move down. With one more move down, it would look like an inverse head and shoulders. If you could zoom back out

of that, you'll see it. You know, so if you, no, the other way around. To where basically, you know, I'm pointing at my screen, hoping that you can see me. Obviously I can't. You can always share it, but we'll work on that. So, right. So, you know, we had a big leg down and then a recovery.

There was a, this looked like a big recovery. If you go back to the beginning of that chart, you see the big leg down, the classic 50% retracement recovery, another leg down, another recovery, another leg down. You didn't quite get that 50% recovery, and we're kind of middling around. And so technicians look at that and go, oh, okay, well, maybe, you know, whatever. The truth of the matter is, you know, you can see these things, but we know what's happening. The news context for those moves is very important. So, you know, the first move down, you know, from the 60s to the 40s, we were talking about it was in the context of Eat Right.

And then Luna and the stable coins, then Three Arrows and then that, and now FTX. Here's the funny part. The arguably biggest move, the biggest news event, the one that is the most crippling to the industry, caused the smallest move by far. When you listen to various investors, I mean, all of the famous investors that you listen to, they'll all tell you bottoms are when selling gets exhausted and tops happen when FOMO finally gets exhausted. People get tired of doing it and the people who aren't't are gone. Well, it is extremely clear that the selling that's been happening has been, is getting exhausted. The sell, it just isn't as much of it, right? There's not as much volume, it's not moving down. The FTX event is the biggest event of the year by far, even though it's at the end. Normally when you get it, you know, if you were like, if you were, if you,

for those video game people out there, if you're playing, you know, any any fighting game, when someone's live starts getting low, and you get delivered the knockout punch, generally, the market gets knocked out. Well, here, post Luna, post three AC, post, you know, Voyager Celsius, all of the stuff that I hate to rehash, one might have said that Bitcoin was paused for a knockout blow. And then here we have the single largest exchange for professional investors. The single, the poster child for crypto in most of the normie world at this point is exposed as a scam. And what is Bitcoin's price action? Just about nothing. What does that mean?

Yeah, it means that there's nobody left really to sell. And I mean, I guess the silver lining when you look at it is that the four sellers already sold and none of these guys had any Bitcoin left to sell. I mean, you look at FTX, literally there was no Bitcoin on their balance. There was no Bitcoin on their balance sheet. Well, here's the important point. Who are these guys? The professional trading community, the levered traders, the lenders, et cetera, they're done. So who owns Bitcoin now? People who actually believe in the long-term vision. I'll say it again because I've been on this show countless times.

I've said exactly the same thing. Bitcoin trades like an option on its own future adoption. And, you know, its future adoption as digital gold, and if you believe Max Keiser, well beyond that. And that's fine. I mean, I don't disagree with the potential. And I certainly understand why we would care, you know, whether you're Mark Yusko, who's been on this program with me, and he talks about the base layer of the Internet of Value. None of this stuff has changed. What's changed is the speculation in Bitcoin has been crushed because their favorite place to do speculation was crushed. It's more or less would have been the same thing had in 2020, instead of, you know, being a mass panic, if BitMEX had gone kerplunk, then people would say, Oh, my God, what will we

have done? But it turns out they didn't steal anything, at least not that anyone knows of, and they actually seem to be, you know, coming back now. I mean, the market has survived dominant players crashing before. And it will survive dominant players crashing before, and it will survive dominant players crashing again, because at the end of the day, and we all have to remind ourselves of this, the market that we are talking about is about a real asset, not real in the sense of it can touch and hold it, but real in the sense of it's something that a lot of people ascribe value to. And I'm going to say it again. We are still ascribing 4x the previous cycle bottoms.

And I don't think that's an accident. Because the network itself, if you look at the hash rate, the adoption, number of wallets, is four times the size. Actually bigger than that. One could argue that we should be eight times the last cycle bottom would be more or less a, quote, fair value. I got to get it in frame, but yeah, fair value, right? And so when you ask me the question, will there be a Santa Claus rally? I mean, it's possible. Look, it depends on who has money to be. The reason for Santa Claus rallies are people get their tax selling out

of the way before the holiday. Now the selling pressure abates. And there are still some people who get Christmas bonuses in December and have money to allocate. And when they allocate money, where do they, where does it go? Well, low volume. They're allocating when there's low volume, which is, right. Yeah. If portfolio managers out there, and I'm not talking about professional ones necessarily, but people with their own portfolio who say, OK, what percentage of my wealth should I put in Bitcoin as an asset class? And they come to the conclusion that somewhere between two and five percent, which is really there are a lot of very smart people who believe that that is the rational case.

There are plenty of other really smart people who think it should be greater than that. And a lot of others who basically say, oh, my God, bah humbug, there is no such thing. It's, you know, it's a scam. Those people, while they're louder now than they've been at any point in the last three years, really don't have a whole lot of credibility because their reasoning is the same as, they basically took out their reasons from four years ago, from eight years ago, and, you know, whatever, and redusted it off and they talked about it again. But the point is, is that if there is Christmas bonus money, then, yeah, you could see a slight rally going into the new year because there's not as much selling and there just isn't a lot going

on. More likely, you'll see bouncing around these floor levels until there's a new catalyst, until people start looking at macro. I mean, the macro picture ain't pretty, right? But it's not disastrous either. I was just looking at my favorite macro indicator this morning, the Baltic Dry Exchange Dry Index, which tracks shipping. I saw some stuff that made me think it was going to be lower than it is. Maybe the one I'm looking at on trading economics is delayed. But I saw that imports coming into the US was at a much lower level than any Christmas recently. I couldn't find that data this morning. What I'm looking at, however, is a chart that basically shows we're back down to the historical average, where obviously in 2021 through 2022,

we were way above this, like literally double to triple the historical average because of easy money and things booming. Reverting the historical trend is hardly disastrous. It's just, you know, a fact that, you know, yeah, we may be in the middle of a mild consumer recession, yada, yada, yada, but it doesn't seem anything that's going to make the Federal Reserve say, okay, crap. And so the real issue is going to be their perception of inflation narrative and how much more they have to raise rates, because rates are really what's going on here. And people always need to understand it's the direction of rates, not the absolute level, because the absolute level of rates is not high.

Let's be- Yeah, my parents paid 14% on mortgages in the 1980s, right? This is not historically high. No, we're not. We're more or less getting close to historical averages even there. But the pace of change and the percentage of that change was historic, right? You know, not since Volcker have we seen that steep of a curve.

And in the case of crypto, that's a big deal. So like a couple of things that there's a positive and there's a negative. Let's start with the positive because people don't really understand all that tether fud out there. Now, maybe the guys that tether are morons, but I don't think so. The fact is with T-bills at the rate they're at now, tether, because of what it is, which is you put money into it, you earn no yield from it. It is a means of transaction in dollars around the world. It is essentially that and that has value in the crypto sphere. Holding Tether now, the Tether people are making, and here's the here's the data, three billion a year just by holding T-bills. There's two implications of this, Scott. Both are obvious.

One is good for crypto. One is bad. Good for crypto is why the hell would they take risk? So when they make statements, we're winding down what risk we took. People are like, oh, yeah, look, at the end of the day, they don't need to take risk. It's extraordinarily profitable without risk. When interest rates were zero, sure, they invested in commercial paper to make money because their entire business is based on flow. Right. So if you want to ask me, I'm a big believer in following the money. Is it possible that they have risk on their balance sheet from the past? Yeah, it's possible.

Do I think that that's the case? I mean, maybe. But at $3 billion a year in profit with the small group they have, I mean, do they need to? And wouldn't they? I would say it just doesn't fit with reality. Now, the bad news is holding Tether to trade in crypto has a cost because the people who hold Tether could also own interest bearing, you know, stuff, you know, T-bills, dependents, etc. Which means, in essence, the entire crypto ecosystem that is where Tether is used to buy, your hurdle rate for it being a worthwhile purchase is now dramatically higher than it used to be. And that explains a lot of why the DeFi tokens are lagging. Yeah, they probably overshot. Why would you take risk in DeFi when you can get four plus percent on a government bond?

Correct. And so until there's demand for trading, for financing in DeFi that is in excess of what you could get on a risk-free rate, why would you put money there? I mean, the money that's locked there may very well be locked there. But the truth of the matter is there's just not a lot of reason to do it. Whereas when DeFi was because there was huge demand to borrow stuff and the people willing to pay above market interest rates to borrow stuff, which happens when there's a lot of speculation, which happens when there's a lot of derivative trading activity, et cetera, a lot of lending, et cetera, that cycles around, that still isn't fully unwound yet. The long term of DeFi, and you've heard me say this, will be to disintermediate many of the

players that charge excessive amounts to borrow and lend, whether it's securities lending or interest rate swaps or repos, et cetera. But those applications haven't emerged yet. So the applications that did emerge in the last cycle were based on speculation. Right. Based on offering high yields, which are gone. And then you can't beat the yields that are available and safe for investments. And therefore, it's stagnant. Now, I like the fact really quick. I like the fact that you talk about the fact that Tether really nothing to earn three billion dollars a year, literally just put the money into treasuries and call it a day. Some could have made the same argument for, I don't know, Sam Bankman Freed, right? I mean, that guy had the easiest free money maybe in the history of people with easy free money and still completely lost everything and blew it well i mean you know

in the casino i'm reading an article the other day about one of the symptoms of the drug that he takes being and it's not a symptom it's a correlation there's a high correlation of people taking that drugs to be compulsive gamblers i mean look i i've told you before i've sat at enough poker tables in my life and and while it's been a lot less recently over the last five years and not looking too good for 2023 either, the fact is, my father, may he rest in peace, one of his, he had lots of, we used to call them artyisms. One of them was never bet more than you could afford to lose, which sounds pretty obvious. But the person who's willing to bet more than they can afford to lose is someone you never want to trust with your money. The trick is knowing

that that's the person. Sam, Caroline and their band of merry men and women were people who were totally willing to bet more than they could afford to lose. And they kept doing it. I mean, at the end of the day, you know, FTX was if there were two ways the trajectory could have gone. One, in this history where Alameda made some money, they used it to build a trading venue which achieved prominence. all the profits that we're making and dump it into donations and political and advertisements, et cetera, to make us look bigger than we are, to attract more money, to become a bigger and better platform. And we'll shut down the gambling operation because we don't need it anymore and we have no edge. In that world, FTX probably becomes the dominant global crypto exchange, certainly the dominant exchange in the United States, and squeezes out competitors by use of regulatory capture

because they'll be the ones that own the regulators, the legislators, et cetera. I actually am happier to live in the world we live in today than in that world, what it would have been. It would have been much more pleasant this Christmas. We'd be making more money. My company would be more profitable. You'd have more subscribers interested. We'd all be happier. But we'd wake up at some point like the frog in the pot, not knowing we were being boiled and not

knowing that the market was being basically handed to somebody by regulatory capture until, and we'd have to be talking about who can disrupt know, who can disrupt that, who can break the FTX freight train, you know, who can stop this because he wanted to, with the DC CPA, basically strangle DeFi, strangle, you know, other companies, you know, competitors that would that I think are have a better long-term prospect. The world we do live in, however, he didn't stop gambling. They kept doubling down. They lost how many ever billions on, on Luna and they doubled down again.

They lost how many ever, how much ever on three hours and whatnot and kept gambling. And then when the SEC denied the Bitcoin ETF and the GBTC trade blew up for good, you know, or not for good, but went from 20s discount to 40s discount. Another few billion got lost and what you know basically from you know an alameda lost and at that point the hole was so big the only way they could paper over it was with their own you know shit coins their sam shit coins you know the the serum and and ftt and that made it incredibly vulnerable it's actually amazing that it took three months but you know when it happened it happened and it happened fast right between coindesk and people said oh cz took a headshot cz didn't take a

headshot what he should have done is not said anything sold his own and then watch the carnage from afar instead of losing a lot of money on his own side uh because you know his fdt was worthless that's what he should have done. I mean, I don't know the man. He's way too opaque for me. Not a big fan of the way they do business. It's really hard to talk to them, even about API changes and stuff. I'm telling you, it is not a company run for working within an ecosystem. It's a company that runs as if it's its own ecosystem. And that's dangerous too. But the fact is, is I don't think it was him trying to kill Sam. Maybe it was in a way,

but it reminds me of the guy who starts a forest fire, you know, in war hoping to, you know, smoke out his enemies and the wind shifts and ends up getting his own troops. I mean, there's no way that people are happy with what's happened.

Anyway, that was a very long winded diatribe. Yeah, but what you just described, he actually could be ascribed to SBF as well, right? Because it's clear when you're starting to dig in and look at it that, I'm not going to say that he was fully behind all these things, but he was certainly aggressively shorting Luna and, you know, sweeping apparently the stops of Three Arrows Capital and all of these things. And the contagion that he started was in the end what probably buried him as well.

I mean, there's some lessons there for anyone who's still left. I mean, there's no doubt. There's literally no doubt that, you know, in a small market, you know, that things are interrelated. And the fact of the matter is, you know, maybe they didn't really understand how much leverage there was. Yeah. I think there is a little bit of truth to him saying, I have no idea what the hell's going on. And that being true. Yeah. I mean, that part may very well be true, but, but what was, what was on what is now unquestionably true because we've seen it, I mean, that part may very well be true. But what was what was what is now unquestionably true, because we've seen it, you know, unless, you know, unless you're one of these real radical conspiracy theorists who thinks that, you know, that Caroline and Gary in their in their their plea deals, signed up and said things that were complete lies to try to get themselves out of prison, which I can't imagine why they would. It's illogical. Both of them saying more or less the same thing, that Alameda was allowed, was given trading privileges. That's something that we had multiple accounts

tell us they thought was true, which made FTX less fair of a venue to trade on than others, but they still were able to make money. So they did it, but they weren't happy about it. We now know for sure that, that those, those accusations are true. We know for sure that Alameda was allowed to go negative and that the

vaunted FTX risk engine, which very well might have been really good. Yeah. You just don't want to, when you turn it off for your largest creditor was exempted from it, which essentially gave them an easy way to steal. It's sort of like, you know, if you're a bank manager and you have a backdoor to the vault

and the bank manager's friends are allowed to go in and take everything out of the vault whenever the hell they want to, what's going to happen at the vault if the bank manager's friends are a bunch of compulsive gamblers? And let's call it what it is. That is what happened. And so we now know all of this stuff. But the effect and the impact on Bitcoin and on the rest of crypto is profound because so many people got sucked in. That's what's important. I mean, it took, you know, in none of the previous events was the underlying financial health of smart trading firms who were making money, who actually were either short or not long during the falls. In none of the other events did those firms lose

money. It was Darwinism. So in 2020, the firms that made money trading were still there after the event. In 2018, the firms that made money trading were still there after the event. Yeah, there were fewer of them in 2018 because of more of a grind, but there were firms who made money trading were still there after the event. Yeah, there were fewer of them in 2018 because it was more of a grind, but there were firms who made money. Here, you could have had a fund, and I know of funds, making 20%, 30% a month over the course of the first 10 months of 2022 that are bankrupt right now, not because they lost money, but because their money was stolen from them. This is a very different sort of event, right?

You have to, and I keep telling the people in my company who are panicking, oh my God, look at how bad volumes are. I'm like, you literally took 75% of the professional trading community globally and took a crowbar and smacked their knees with it. Some have crumpled to the ground never to get up. Some will dust it off, get back up and recapitalize. Others are in better position and will continue to trade, but they have to have someone to trade with. Yeah, I don't think I've made the point even not from the professional trading community,

but even if you just look at the established retail trading community, I'm not talking about the retail that just invested and bought Bitcoin and thought, you know, I'm going to leave it for a while. I'm talking about the people who aggressively trade their own portfolios. They are the ones who got crushed on FTX, right? Like retail, the other ones got crushed on Voyager and Celsius and BlockFi and all of these. But the people who really believed in trading this market were doing it with sizable portfolios of their own. They were on FTX. That's where they traded. And now they just have no money to trade.

So where would this volume possibly come from? Well, I mean, OK, so what you just said is 100 percent true. But where did the volume come from three years ago two years ago oh it'll eventually come back in it's just i mean you know all you have to do is understand the amount of financial loss and if you look so the entire market cap of crypto is what is it right now let's see six or seven hundred you know it's it's it's we're well under a trillion dollars tech stocks lost way more than the entire market cap of crypto in 2023 way more the the truth of the matter is it's a small asset class globally does not does not take much. It doesn't take much for money to flow back in.

People have dusted themselves off the floor before. The only thing I will point out is, as much as I like to see quick V reversals, this has the feel of an exhaustion bottom. And that takes time. This is, you know, we could be looking at a much longer than, you know, so we could be going into the halving and still talking about, I mean, literally going into the halving, just starting to see, I mean, the green shoots. I'll remind you, Lehman went bankrupt. The stock market didn't bottom for three months after that. Yeah. And after that, if people like like Tom Lee, a fund strategist we haven't heard from recently, I maybe I'm just not paying attention. I don't know what he's saying. I'm curious because he's one of the smarter macro brains out there. You know, he basically said in 2009, this is a massive

buying opportunity. And people laughed at him. Not only laughed at him, they called him names. I mean, you know, anyone who wanted to be a buyer in 2009 at the bottom was derided. They were made fun of. They were told, oh my God, don't you realize what just happened in 2008? The entire financial system has been shaken to its core. We will never recover. I mean, it's really important and instructive to learn from that because we had had this huge bull market that went from, you know, the 80s, you know, and ended in the Internet bubble. Then we had the Internet bubble. It took three years for tech stocks to recover. Three years. I was looking at a chart

this morning, which showed the only time since tech stocks have been measured that there were three down years in a row. Now, of course, it came on the heels of this ridiculous rally. Now, everything in crypto happens faster. It lost as much, basically, in the last, you know, whatever, you know, from the highs as NasDAQ did in that three-year period. So I don't think it needs that much time. But the fact is it took three years. Then after that, we had this huge bull run in real, led by real estate, you know, which was a four or five-year thing. And that bull run was, was, was crazy, you know, strong. And then all of a sudden we had the financial crisis what a surprise because people were but were levered on their houses you had waitresses flipping condos i mean

you know what would you expect was going to happen and once again in 2000 early 2009 we're sitting at a point where you look at the chart now and you go oh my god what an obvious buying opportunity anyone said to buy in 2009 literally was told they were morons. It's like, oh my God, this is going to continue for years. We have to unwind this. March of 2020 as well, by the way. March of 2020 as well. I mean, March, April and May of 2020 were like the worst historical two months for hedge fund performance on Wall Street, when literally all they had to do was buy anything during any point during those two months. But they were all still aggressively shorted. Right. So, you know, I have very little concern about where the money is going to come from.

In an asset class that is as potentially disruptive to the future as crypto is, I understand that we are facing a winter. We understand that. We have had body blow after body blow, and we still don't know whether all of them have floated to the top of the pond yet. What I do know is we have personally at CoinRoutes had conversations with half a dozen derivative exchanges or people trying to build new markets over the last two years,

some of which probably ran out of money, some of which are probably actively building. The fact is marketplaces are the least of our concern. Yeah, it's a concern now. Right now, it's like, okay, do you trust OKEx? Do you trust Huobi? Do you trust Binance? Do you trust BitMEX?

Do you trust AscendEx? Do you trust BitGet? You know, whatever, Phemex, you know, name them all. They're all exchanges out there that have varying degrees of technology and risk engines that are all claiming, yeah, yeah, yeah, we're cool. Here are proof of reserves. And I'm sure I forgot a few others. I'm not trying to.

We also have DYDX, a distributed exchange where people can hold their own wallets, where you don't have to worry about it if the smart contracts work. I know I made the if, I'm not a forensic accountant to know are the smart contracts working, although we have enough people telling us they do. The trend that's going to happen out of this is more DeFi, not less for trading, and more separation between custody and exchanges. Those are two trends that if they don't happen, I will be extraordinarily surprised, Scott. But none of those things happen overnight. Both are incredibly productive in terms of towards the future. But that's the trend, right?

And so you'll start seeing that. It's just like in 2009, people were like, OK, the Fed is in we're at zero risk. Assets are basically free. I could buy anything. Yet people were derided for doing it. I mean, you're going to see all sorts of macro cross currents in here. But, you know, the market seems more or less in some level of stasis right now. And markets don't like to be in stasis. So, yeah, I agree. I mean, interestingly, you could take a look. Here's just a couple of other headlines. World economy is headed for a recession in 2023. OK, listen, Goldman's price is 100 percent. I think everyone agrees that we are either in a recession or headed to one. But then BlackRock gave their

sort of opinion on it. They showed that we're starting to see a lot of flashing red indicators, you can see here. But their conclusion, even with all of this nonsense, if you look at the end, overall, we think this all adds up to a mild recession. Right. Not as not as cataclysmic. They made a few good points, which is that we have a lot of room to fall comfortably considering the outsized gains that we've had the past years. And basically, they're saying we think we'll see a mild recession and then things will be fine. Right. And and I want to make one more point to your point. While you were talking, I was pulling up a few charts. First of all,

bear markets can take a long time. Mike McGlone pointed this out, but this is SPY. You could basically take the market. This is February of 2000. It took until 2013 to make a new high, right? So it can take, these things can be prolonged and they can be slow, but it's very disingenuous. And I wrote about this in the newsletter this morning. People talk about how Bitcoin has made this round trip. We're back to five years ago.

What a piece of shit asset, all these things. Well, take a look at Amazon. Amazon was trading at the same price as it is now in 2018. Take a look at Facebook. Facebook went back to 2016, right? I mean, you talk about stocks, but even with all of this contagion and all of the 3AC, Celsius, Voyager, BlockFi, FTX, we're not doing worse than companies that are well established and have been the biggest companies in the world for all of this time.

And if you pull up the hash rate of Bitcoin, which is why is people are like if you're if you're a Bitcoin miner and you're on the margin in terms of your electricity cost, you're basically saying to yourself, what the fuck? How are people constantly going into this business? Why are they still investing in it? Because, well know, Bitcoin has been said in many respects to be the bet on against trust in institutions. And the dollar, while the dollar has been ridiculously strong over the last year, the dollar, the U.S. is not where the demand for Bitcoin is coming from. The demand for Bitcoin is coming from all the places whose currencies have gotten wrecked. And, you know, if you're a store owner in, you know, Argentina or Turkey, for that matter, and you're earning the local currency, you know, whether it be Bolivars or Lira or whatever, if you're, you know, you're seeing the kind of inflation that you're seeing there,

what do you do? Do you want, you know, do you want to be taking in boulevards and then knowing you have to buy your shit, you know, and spend them as soon as you get it because it's worth less the next day. It's not surprising that we're at an all time high of Bitcoin ATMs and Bitcoin money, Bitcoin being accepted by for purchases, you know, peer to peer by vendors. I mean, these are not small things. I mean, the use case for Bitcoin is significantly stronger than it was five years ago. Five years ago, when we hit 17,000 in that high, and yes, I say 17 and not 20, because it was offered on, I've said this before, it never really went higher than 17. So we're more or less within spitting distance of the

all-time high at that point. The fact of the matter was it was all hype. Today, it's grown into it. When you look at Amazon in 2018, you know, it was still, all of them were at hype. I mean, the multiples were ridiculous. If you pulled up a chart of the multiples, you would see it's much more normal now. In short, it took a roller coaster to grow into where it was back then, but it's very similar. Bitcoin isn't even in sniffing distance of where it could grow into if it were considered digital gold. I mean, the fact of the matter is gold has been in a holding pattern more or less, even bigger for a long period of time. But a lot of it is because Bitcoin is demonetizing gold at the margin. A lot of the same people who would have bought gold and probably chased it to 3000 by now with all the shenanigans going on with money

are in Bitcoin because it's the marginal player that sets the price, not the long term holder. And so that's why Bitcoin is where it is the marginal players are sidelined the long-term holders are like okay you know i'll accumulate more slowly but i'm not going to be the one to push the price up i'm not going to let it fall well not that i'm not going to let it fall but there's too many of us for it to fall and so we're stuck in this situation but it's a really interesting dynamic and you know this time we look I will be surprised if we're not still talking about how markets are boring come June. I really will be. I hope to be surprised, but I will be surprised. Does that mean you think that Bitcoin will be trading at roughly the

same price and will just sort of be this correlated asset where everything is boring and sideways? Or do you think that we could still, I mean, like you said, at the very beginning, you said, hey, I'm talking to a lot of institutions and they got wiped out. Nobody's heard about that, right? So is there more contagion yet to come to dump the price or is there just nobody left to sell

and we jump on board the- I can't do, my view is, it's funny. I had my view before I read, you know, I've been reading, you know, Arthur Hayes and stuff. I think his Pembus, which is the order of operations article that we talked about the last time I was on is is sort of where I'm at. I think that, you know, when you can earn money and you can sit and earn four or five percent, take your four or five percent and wait for shit to happen. The fact of the matter is, I think that Bitcoin, we're going to look back at this period in time and say, okay, this is a great time to accumulate. I think the

asymmetry of Bitcoin risk versus reward may be higher now than it's ever been. But it takes time for people to make that decision. Right? Now, what do I mean by that? I mean, the likelihood of Bitcoin becoming digital gold and actually seeing a new all time high and beyond that at some point in the next decade, I think is higher now than it was a year ago. I think that DeFi is has a higher probability of becoming major primitives for the financial market of the future now than it ever did, because we've seen the risk of humans and what they do in terms of risk and the demand for verifiable financial intermediaries is off the charts. All these things, that's very bullish long term. It doesn't take much. All it would take is one major pension fund, one major catalyst.

And a catalyst could be the legislation. It could be, you know, we're going to have the SEC do X, the CFTC do Y. They're going to have a period of time to figure out how to do this. And off we go there are two ways that could go out with gensler it's entirely possible that what he wants to do is destroy in the united states all crypto uh exchanges because they they they're not he calls them exchanges he may personally try to litigate them out of existence and that would be definitely a cause for selling because he would lose all u.s citizens wouldn't have any place to buy any of this stuff and then with his goal being use exchanges that trade only

nine you know only on normal market hours with custodians that you have to trust. You can't self-custody where you can't buy it in multiple currencies, et cetera. And it basically will drive everything offshore and everything will be driven into DeFi protocols and driven underground again. It will be more or less where, and that this is the bear case. This is the bad one. Is he going to be allowed to do that?

I don't think so. I don't think the administrative procedures act would allow it. I think it'll end up in court. I think he's going to get challenged and they're going to get challenged heavy. One is for auctions. You probably heard about that, which basically he wants to take away. He wants people to pay for trading and he doesn't want free commissions. He thinks that's bad for some reason. I don't know why, but I'm sure most of your viewers think, you know, agree with me that he's being that his control freakiness is hitting an all-time high.

He wants to over-engineer tick sizes and fee caps and everything in a way where it's basically mandated by the federal government. And it was written by an academic who he put to run trading in markets who clearly has never traded in his life. Well, he seems like a very nice, smart man. He has zero experience. And so there's massive holes and problems with that that are going to come out in the comment period. We don't know whether he's going to try to push ahead with it.

He has a regulation, best execution, which crypto people need to worry about. Because while I think best execution is something that crypto folks really do need to care about. I mean, you should. I have a whole company based upon providing a better way of trading. The fact is, is he wants to put in and make everyone have pages and pages of policies and procedures and committees for you to allocate money to an asset class. And this is not just crypto. In fact, in point of fact, he's targeting fixed income with this. He's trying to fit a round peg into a square hole with regard to the way that actually works. And I won't go into the details, but there's going to be a lot of comments about that,

too. Why am I saying this? It's because at the end of the day, anything you want to do against crypto exchanges is fascinating. Like the point we didn't talk about, which I wanted to get to today, is FTT. So the FTC, the SEC said FTC is a security in their in their indictment of Sam and in the pleas with with Carolyn and Gary Wang. Honestly, that's really good news. People haven't figured it out yet. They basically said it's a security because of stuff that doesn't exist for most other cryptos, because they said it was based on, the white paper said, buy this because we have an excellent management team. That's really very important. And in point of fact, if true, their allegations on the surface

make it seem like that. They said, buy this because it's going to go higher because we're doing X, Y and Z in the future that hasn't been done yet. And they said, buy this because it's going to trade liquidly and we're going to support it and it's going to be traded with us. Well, I mean, no DAO set out crypto in DeFi. None of these platforms have any of that. So, you know, if you basically said that this means that BNB is an exchange token, it's a security, I think there's an argument there. But BNB isn't marketed, at least I haven't seen any marketing that says it's based on future growth or future applications that don't exist yet. You know, it gets burned.

It's there. It's for, you know, it is what it is. I mean, at the end of the day, to me, their reasoning in the FTT case, and there were all sorts of articles saying, oh, the game is over for crypto because of this. No, that's actually not true. But even if it was true, even if it was, let's take the worst case scott do securities laws as currently constituted would be death to crypto because they don't work not because the idea of being regulated is bad it's because it would force it forces things to be held by third parties and you can't self-custody you know stuff like that we've talked about it a lot so i'm not sure that it's as negative a news as people were

saying in fact the market price of those instruments shrugged it off. I mean, Ether's back over $1,200 again. I mean, I guess it got down almost to $1,100 when that news first broke because it's, oh, my God, Ether must be a security. Really? People are buying Ether because of a management team? Really? Maybe, but I don't see how. Yeah, I 100% agree.

While I was listening to you, I was looking at the hash rate versus price. I wasn't able to really get the trading view chart that I was looking for. But if you take, I mean, it's astounding to see where the Bitcoin hash rate and adoption are versus this same price in 2017. It's thousands and thousands of percent increase while price is now back to being the same. And that is my point. That's what bottoms look like. Bottoms look like when things are anomalous and you can't explain them and they make no sense. It never makes sense at the top and it never makes sense at the bottom. And that's because we are humans. We all,

I mean, I'm one of the worst. I overreact almost everything as my wife will, will be, it would be happy to tell you. Yeah. I mean, if you look at, I just like, you can obviously it changes and this is on a percentage basis, but the, okay, that says 734, but if you pull this back to where price was basically the same, okay. It's saying that we're 4%. I had it right there, but let's say a price is up 18% since then. It's not, it's slightly down, but just, you know, it's, it changes every time. Hash rate being up a thousand percent there. If you're just looking at the price on the bottom versus the hash rate. I mean, when you look at those two things and see that the price is exactly the same,

it should tell you everything you need to know about what the potential is, even if you just believe in mean reversion. Yeah, I mean, if price even reverts to the mean and they meet somewhere in the middle, imagine how high price can go. Right. And so you have a lot of stat traders doing this saying, OK, I'm going to short the miners and buy Bitcoin. And a lot of that has happened. The problem with that is the miners are not necessarily a proxy for the hash rate. It depends on their inputs, their funding situation, et cetera, et cetera. So I'm not sure there's that much more to do in that trade, but I know very smart people who've had that trade on. Yeah, I'm certainly not advocating for the trade

because these are actual businesses. They bought a ton of miners during the bull market that they had to put online, which has perpetuated the problem of the hash rate going up. I'm just saying, if we're looking at price versus adoption and that's being the metric that you use, then even if hash rate comes way down and price meets it somewhere in the middle, we're talking about many multiples on price. Oh, yeah. I mean, look, at the end of the day, the bull case for Bitcoin is completely based on the notion of the Internet of Value and being able to transact seamlessly. And that gets driven, is not being driven from in the United States as much, but it will. I mean, we talked about, you know, the BlackRock stuff and what they're saying, and people are saying, yeah,

it's going to be a mild recession. I will remind you, because I've said it multiple times to you and in public, the Federal Reserve wants to keep the long end of the curve lower so the government doesn't get bankrupt, right? Because at a certain interest rate, the government literally is, because of our debt, and it's not just us, but because of our debt, it is literally interest payments would be a balanced budget, would be pay your interest and shut down every single program in the government from defense on down. Now, obviously, they're not going to do that. So they want to keep the low end of the curve down down they want an inverted yield curve i said it you might remember over a year ago i told you they want an inverted yield curve and and even though it signals recession they don't care they want it well they've gotten what they wanted so you know if i had a hat on i would say you know tip my hat to them they've done exactly

what they said they wanted to do uh they still want an inverted yield curve they don't want it to to to go the other way around. They want to be able to push short rates to knock inflation out and keep the long end down and let short rates gradually normalize to being a flat yield curve. That's what they want. That's what they need. So, you know, is that a recession? In the past, when people see an inverse yield curve, they say, oh, my God, that means the world believes the economy is going to slow down over the next 10 years. So that's why the long end is down. I don't know. I mean, this curve is being engineered, Scott. So I'm not sure what it shows. You know, people are still financing household on household debt.

People are doing whatever. The fact of the matter is, I don't know how big a driver tech jobs are to the economy. But, you know, as anyone will tell you, the job market for, you know, tech companies right now ain't perfect. It's been worse, but it's not great. And, you know, it's kind of hard to see how that doesn't tip some places into some, you know, into some semblance of recession. But in a world where the U.S. dollar still reigns supreme, you know, I don't think the U.S. gets hurt nearly as bad as the rest of the world. And so we'll see. But no, it could get serious out there. But if it even smells serious, the Fed is going to have to capitulate. They do not have the stomach for a deep recession. And while the Fed put on assets, they don't care about assets,

but they do care. They don't care if stocks go down, but they care about the American becoming homeless. Right. And keep in mind, one last thing is the year. They're much more likely to care about to not care about damage in 2023 they're going to care a lot about damage in 2024 yeah the last thing they want to do uh is be seen as political or uh potentially cause a you know the ruling party, whoever that is, to get destroyed in the next election because they triggered a, you know, a significant recession. Right. 2023, I think they care a lot less. But going into the next presidential election cycle, I think it's extremely clear that, you know, they will get more political and there will be huge pressure on them to not allow really bad things happening. Yeah, they don't want a depression.

They don't want a depression, etc. And if you think that the ruling party didn't look at the pandemic, because people forget that right before the pandemic started, the economy was doing incredibly well. And the truth of the matter is, it was a layup to see Trump get reelected. And then all hell broke loose, and he handled it really, really badly in many, many respects, with the exception of Operation Warp Speed, but still handled it, was incredibly vulnerable because of it. He lost because of that. There's no reason in the world to think that a major recession or depression being triggered toward the end of 2023 into 2024

wouldn't have the exact same impact on the Democrats. And they're not dumb. They know what I'm saying is true. They're going to do everything they can to avoid that. Yeah, I absolutely agree. And I now have kept you way over your time, but luckily we're on a holiday. But now I'm going to let you go out and enjoy that crisp, cool weather that you're having here in Miami, probably like 70.

I don't know. Are you guys in the 50s? It's in the 50s. It's fine. But still sub-freezing here. It's amazing. You actually get to pull out that one box of relics that you kept from when you lived up North and pull them out for one week before you're back on the

beach. But Dave, thank you so much. Guys, you may have noticed Dave's pretty much here every Monday. Now that's kind of the plan is for him to be very regular him and also Mike McGlone. And you know, I guess we'll just call you a recurring guest. I don't know. We can call you the host if you want. You can do the whole beginning thing. Save me a lot of trouble. It's all good, Scott.

I mean, today we talked too long, but it's mostly because I'm not planning on working the rest of the day. I'm going to go. Yeah, and we appreciate it. I think we sorted through it relatively well, Ben. And so thank you very much. Thank you guys all for tuning in. I know that it's a holiday and uh, and, uh, maybe you have better things to do, or maybe actually this is the first time you can sit down in front of YouTube and enjoy it without having other things to do.

I hope that that's the case was certainly a good for me because now I get to go take the rest of the day off. Thank you guys so much. I will of course be back tomorrow, 9 30 AM Eastern standard time when it is not holiday anymore it seems like the never-ending holiday we do have more coming but david uh thank you man once again i really do appreciate you always showing up and sharing your insight thanks scott and one plug uh yeah please launch our new website uh coin routes.com uh we will be taking you know people for wait lists for as the product gets pushes down toward more active traders over the rest of the year so you know just just a shameless plug no

it's not shameless is that so is coin routes available to retail is it available to us and our it's generally an institutional platform product now we're finally we put up a wait list online because we are we have a multi-tenant solution. I could go through that and explain it. But the fact of the matter is we're working on on the scaling and security to be able to handle lots of users. I mean, people have traded over 100 billion dollars in the platform. So it's not about scale of how to trade. It's about being able to go down towards the active trading individuals. But I would expect by the end of this year, by the end of certainly before the end of 2023, all of your users would have the ability to access the platform. So I'm just starting to plug it now so people can start seeing it as we build our waitlist. You know, we will be looking for beta testers, et cetera,

et cetera. So it's just worth knowing that. So shameless plug, but you know, there you go. Uh, if you can't shameless plug here, after all that you've contributed to this community, I don't think there's any way that you can shameless plug. Let's do a longer conversation about it. Definitely. Just so you know, my plan, because I was going to ask you now we're doing, I'm asking you live is we will almost certainly, you know, as we get this stuff going, offer discounts and trials for your listeners. And we can talk about expanding that relationship as well as it grows. But we're just starting the process of moving in that direction.

And right now, building a wait list and trying to get a curated list of beta testers for the third or fourth quarter of next year is something we want to do. I know that's a long time in the future, but basically nobody who trades retail has access to anything like this, and we want to start getting it out there. Also shows that you actually have a long term view, that you're thinking about this. We're going nowhere. That shows that's how you, right, exactly. And that's how everybody should be viewing everything in this asset class, by the way. So I should give you some context.

Well, anyone, guys, we'll find a way, I guess, Dave, you and I maybe will come back on in the future and we can actively set up a way in advance to get people that access and beta testing. And so we'll talk about that offline. Perfect. Thanks, Scott. Enjoy the rest of the week and have have a happy new year thank you you too bye everybody see you tomorrow peace let's go