Unchained - Bitcoin Stalls, Stocks Soar: The Disconnect That Defines This Cycle

Episode Date: May 31, 2026

Steve Sosnick on the ratchet effect in equities, the AI bandwidth parallel, Kevin Warsh’s impossible first week, and why crypto is the unsexy trade right now. --- Thank you to our sponsor! Coinbase: Get 20% off the first year of your Coinbase One annual plan at coinbase.com/unchained. Heads up! If you haven’t yet, be sure to subscribe to Bits + Bips, since the show will migrate there in a few weeks. Follow us on ⁠⁠⁠⁠⁠⁠⁠Apple Podcasts⁠⁠⁠⁠⁠⁠⁠, ⁠⁠⁠⁠⁠⁠⁠YouTube⁠⁠⁠⁠⁠⁠⁠, ⁠⁠⁠⁠⁠⁠⁠Spotify⁠⁠⁠⁠⁠⁠⁠, ⁠⁠⁠⁠⁠⁠⁠X⁠⁠⁠⁠⁠⁠⁠, ⁠⁠⁠⁠⁠⁠⁠Unchained⁠⁠⁠⁠⁠⁠⁠ and wherever you get your podcasts. ---- Equities are near all-time highs, the Fed’s preferred inflation gauge just hit a multi-year peak, Iran ceasefire talks are producing a familiar ratchet effect in markets, and Bitcoin is quietly underperforming tech stocks on a nine-month volatility low. Steve Sosnick, chief strategist at Interactive Brokers, joins Steve Ehrlich to map what’s actually driving these unique market dynamics. They cover the two vulnerabilities that could change things, the uncomfortable parallel between today’s AI capex and the 1999 bandwidth buildout, what $120 billion in money market inflows says about where retail cash is actually sitting, the challenge Kevin Warsh faces walking into an already-skeptical FOMC, and why crypto is currently losing the competition for momentum-chasing money to AI stocks, upcoming IPOs, and even a memory chip ETF. Host: ⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠Steve Ehrlich, Head of Research at SharpLink and Host of Bits + Bips: The Interview - https://x.com/Steven_Ehrlich Guest: ⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠Steve Sosnick — Chief Strategist at Interactive Brokers Learn more about your ad choices. Visit megaphone.fm/adchoices

The good thing at the time was that led to huge inflows and obviously price increases. Bad news now is, to a certain extent, they're crypto tourists. They can then say, you know what? I bought insert name of crypto, ETF or ETP here. I bought this. It did well for a while, and now it's not. Or I bought it at the highs, and I mistimed it completely. Let me move to something else that if it was bought by,

performance chasers in the first place, it's going to be sold by performance chasers as something else outperforms it. That's not me taking a view one way or the other on crypto as a long-term investment, but I do think that is a very important consideration. You can't you can't dismiss the importance of money flow. And for better or worse, you know, the huge success of crypto ETFs was such a boon on the. the way up, but now this is the flip side of that trade. I'm not attributing it's specifically to that, but to many investors now, it's one more sector among their speculative momentum-based investments. Hi, everyone. Welcome to another episode of Bits and Dips, the interview. My name is Steve Ehrlich.

I am the head of research at Sharpling and also your host for today. We've got another terrific episode, But before we begin, just a quick disclaimer, nothing that you hear on the show should be construed as investment or financial advice for full disclosures. We see unchained crypto.com backslash bits and bibs. And then finally, before we get started, let's take a brief moment to hear from some of the sponsors who make the show possible. If you've been loving bits and bibs, don't forget that the show is transitioning to its own feats on X, YouTube, and your favorite podcast player. If you're not already subscribed to bits and bips on its own channels, go there now and hear you. hit that subscribe button so you can keep up with our twice weekly live streams and macro meets crypto breakdowns. Bits and Bists will only be on the Unchained feed for a few more weeks. So subscribe today to be

ready for launch. You can get all the links at Unchained Crypto.com slash bits and bits. All right. Welcome back. So today I have Steve Saznick, the chief strategist at Interactive Brokers and a repeat guest on the show. Actually, Steve, I think you were my first guest on this show. So yeah, so really thrilled to have you back. You're one of the best. people, I know when it comes to reading the tape and understanding the dynamics between Tradfi, crypto, how macro forces are colliding with geopolitical uncertainty, et cetera. And we've got a lot to talk about today. As we are, as we're sitting down, there's new tension over the in Iran, straighter for moves,

skirmishes going on between U.S. and Iran. The Fed's preferred inflation indicator is the highest in years. Gold is dropping. Equities are up. Yields are teetering. So a lot to unpack. Thrill to have you with us. It's a pleasure to be here once again, Steve.

I always enjoy our discussions and looking forward to this one. I appreciate that. So let's dive right in. I kind of set the stage here, but equities are still like near all-time highs. I mean, how do you make sense of all this? Well, there's a few things going on. And, you know, they're not, they're not. they're working in concert. I will say to some extent, we can thank good earnings. And that's

always in my mind the best reason for a stock market to rally is the fact that in this past earnings season, we've seen a, you know, a decent number of, I would even say a significant number of EPS beats and more importantly positive guidance to the case in, you know, in some situations, you know, in let's say semiconductor memory stocks, the guidance has been extreme. We can argue whether some of that guidance has been extrapolated maybe a bit more, maybe a bit further into the future than it ought to be. But I will stipulate that there is a solid base behind this rally. But the magnitude of it we can question. And, you know, to a certain extent, what we've noted over the past few weeks,

let's say since the end of March, is what I've been calling the ratchet effect about news from the Persian Gulf. And that, by that, I mean, we seem to rally on each positive story about some sort of resolution to the situation, something that might reopen the straight. And so far, as we're taping this, yeah, there was a there was another positive story this morning coming out of Axios. But for the most part, basically we're 04, however many there have been, I'm not, I lose count of how many there have been. And while oil and bonds tend to give back their decline, well, yields give back their declines and bond and oil futures give back the declines, when the stories don't come to

pass, stocks haven't really given back anything. So that's why. I call it like a ratchet. You move in one direction. One one direction. Yeah. And so that's been a big factor. And, you know, what I'm wrestling with right now as we're speaking is stocks are reacting positively. I literally stepped off the dust to go to the bathroom and boom, we went from up, you know, down to up very sharp. I'm like, what happened? Had to be a good story. We had a good story. But they're not ripping ahead, even though this is one of the more detailed and more substantial stories that we've gotten. So I do have to wonder how much of this either A is priced into the market or B is basically trader's exhaustion at saying, you know, another one of these

stories. They're not mutually exclusive, but how the market interprets them can lead to very different outcomes because if it's largely priced in, you have to wonder if it's a sell-the-news type of event. If the market's not reaction, just because they're simply tired of reacting to these, that does leave room for further upside. So that's a huge unknown right now. Yeah, it's hard to tell because, I mean, people like to think of good things happening. And at this point in time, I get the sense from people I talk to that worst case scenario is that things stay ossified where they are right now. I don't see much appetite from the U.S. side to really renew hostilities in any major form,

despite what President Trump says from time to time, as much as he claims to not care about the electoral calendar, that is something that I'm sure is on top of mind for him. So maybe we're at worst case scenario, and this is where it's at, but I've read, and I'm sure you've have two, we may not have felt a full pan of oil prices if the straight doesn't reopen yet. I mean, $5 a gallon gas plus, et cetera, could have a damaging effect.

We have to kind of see how that's going to fit. But I think within everything you're saying, and this is not a secret, AI stocks, semiconductor stocks, they're doing the heavy lifting here. They are producing solid earnings, as you said, which is a big departure from maybe like the dot-com boom of 20 plus years ago when a lot of those just based on hype and hope. But these companies aren't profitable. They're extremely in debt. And there's still a lot of just faith. A lot of this upswing is based on faith that they're going to continue to deliver. And I found it really telling a couple of weeks ago when NVIDIA had another good quarter.

I think they beat earnings for, beat earnings expectations for the 14th or 15th quarter in a row. And the stock, I think went down a little bit despite a horrific, despite a terrific quarter. So there's a lot of opium here, too. How do you weigh that? Well, when it comes to earnings, let's say, in something like NVIDIA, you know, the bar has been raised so high. Right? You know, so, you know, to think of like the pole vaulter, you know, who's got the bar raised up already, it's very hard for the pole falter to clear it. And I think that's what happens to some extent when you have an invidia situation where everybody expects them to be better than expected. And to a certain extent with Nvidia, you do also have to ask the question, where is, where might fresh money be coming into into Nvidia? Is there anyone, is there anyone? Is there who is not familiar with the story already. Is there anyone who's left to invest in it in a major way other than sort of general inflows of the market? So I think in that situation, you know,

it's more of a victim of its own success than it is anything else. And so to some extent, you take it case by case. But you do raise the point. There's two huge vulnerabilities to this rally, neither of which has raised their heads yet. But number one, is all you really need is for to really create a terrible situation is for someone like Alphabet or Microsoft or someone else to say, you know what, we've spent a lot of money here. We're not going to, you know what, we're not going to continually throw more money at this situation. We're going to, we're going to try to sit tight with what we have and see if that, see if those investments pay off. That happens, you know, that you'll just hear like a big screeching

of the breaks, and that could be problematic. The second parallel that I bring in here, and you did raise sort of the dot-com era parallel, is I'm going to throw some names at you and tell me if these sound familiar. Global Crossing, Lucent, Northern Telecom, you know, Cisco, but Cisco's still around. But these were the companies, in those days, the race was to build bandwidth. We needed bandwidth to support the internet. And I will stipulate that bandwidth proved necessary. I'll also stipulate that even the wildest expectations for how life-changing the internet was going to be came true.

Yet many of the companies I've rattled off, and I haven't even rattled, I haven't finished rattling. You know, this WorldCom, there's MCI, there's a whole bunch of these companies. They fell by the wayside. Why? Because they spent and invested wildly putting in this bandwidth, but it wasn't necessary immediately, and it took a long time for it to pay off, and there was a lot of misallocated capital. And I do feel that that is something that we have to be cognizant of because no company wants to be left behind in this AI gold rush. And certainly the manufacturers of the picks and shovels have been the big beneficiaries of this.

Yeah. Metaphorically speaking. But you do have to, you know, at some point, they're not all going to be winners. It's just not going to happen. It's physically impossible. But yet you can't risk not taking your best shot because if you don't take your shot,

it's the Wayne Gretzky theory, right? You miss on all the shots you don't take. So everybody's got to take the shot. Everybody's got to spend a lot of money. Some will spend it wisely, some will not, and there will also be competitors that arise that we haven't really, that either we haven't thought of or honestly don't exist yet. Remember, neither Google nor meta, Facebook existed during the internet bubble, that host internet bubble.

So it's a much more fluid situation than I think it's a little risky for the market to just sort of declare victory. otherwise if that were true, we'd be searching, you know, we'd be connecting via AOL and searching on Yahoo and, you know, and things would be very different in our use of the internet. So these are the parallels, but, you know, history doesn't repeat, but yeah, there's certain elements that are rhyming. Although I do certainly miss my AOL instant messenger. That was a, that was a lot of fun back when I was in college. I guess two more quick ones before we move on, talked about how a lot of this, the AI companies are doing the heavy lifting when it comes to the SNP 500, NASDAQ 100, et cetera. I'm sure it's not lost on you that the equal weighted S&P is flat basically since February. And we're wondering if and when we're going to see a broadening of these gains.

Goldman had an interesting report yesterday, more or less saying that there's like historically, elevated levels of short interest on some of the more cyclical stocks. And if they get drawn up, that could lead to just forced buying pressure. That could broaden out these gains, at least for a little while. And that could sort of reverberate through the whole market. Do you have a view on that? I haven't seen the Goldman report directly. I am familiar with it from your commentary and from other reporting. Yes, it's plausible. If you have, if you have a big, part that door fell just rang. If you have a big,

if you have a big, you know, short interest in stocks in specific sectors, it does leave them quite susceptible. Not knowing the specifics, you know, are these stocks being shorted, you know, something like, I don't know, is it, you know, is it a Walmart,

which, you know, which won't, by the way, Walmart and Nvidia traded at the same PE prior to their earnings, despite one having much higher growth, or is it, I don't know. So let me just stipulate and say, yes, heavy short interest is a risk. But the flip side to that, of course, is margin debt as a percentage of the stock market capitalization is also at a record peak. So, you know, on one side, you've got, you've, you know, you've got the dry powder of short covering.

On the other hand, you've got sort of a record reliance on borrowed money to, you know, to facilitate the market's gains. it's a very fluid situation and that I think and and yet we don't really see people displaying any real risk aversion that that gets a bit that's that's a bit tricky yeah nobody wants to be the one that missed out okay well one more question on equities and then we're going to move on to a few other sectors last week I had another good friend of mine noel atchison who's a crypto analyst on the show and and she made an interesting point that historically big IPOs have coincided with sort of market tops and that can be very hard to sometimes predict but that's what we've seen in the past we have three big IPOs coming up focused on

AI SpaceX is likely going to be the biggest in history and then obviously open AI and anthropic I'm not going to ask you to kind of get into the nuances between the various deals and and kind of break that down plenty of time for that. I didn't as we kind of get closer. But I wanted to get your read on just the idea of whether or not some of these IPOs could signify market tops. One, this is a crypto show, one IPO that I know, I guess it wasn't technically an IPO. It was a direct listing, but one example that would resonate very well. But this audience is Coinbase when I went public in April 2021.

That was a local top during COVID. and Bitcoin and the market traded down for months thereafter. So what are your thoughts on that? Yeah, again, without getting into the specifics, let me just say broadly, given the reported size of some of these listings, that's a lot of money, that's a lot of money for the market to absorb. You know, one of the positive factors, like a big underlying scenario, factor is that there's been generally a favorable supply demand relationship in equities,

meaning that some combination of buybacks and private equity activity have tended to reduce the amount of stock outstanding. So, you know, less supply, more demand, or even equal demand, that provides a lift, that that's a positive for stock prices. This wave of IPOs threatens to put that into retrograde, at least for the short term. You know, if we're talking about somewhere between $75 and $100 billion, as has been reported in new stock coming on to the marketplace, that could certainly be a bit of a negative for, you know, for stocks from a supply demand basis,

particularly where in some cases you have, you know, some of these stocks, you know, which are not necessarily particularly profitable, at least from the early reads we've gotten with, you know, at least from early... That's what I think is generously. So that can be problem, this can be a big problem. Yeah. And it's funny too. This is coinciding.

I think that framing is really interesting, but it's also coinciding at a point in time where there's a glut of money in the system. I want to make sure I get these notes right, but I think $120 billion went into money market funds this month. Repo rates actually fell below the bottom of the Fed's target range, which, again, speaks to just a lot of cash switching around. Do you think that's a little extra dry powder that might provide a cushion, or is this just like uncorrelated data points that aren't that,

that related to each other. Yes and no. I mean, you know, obviously the money, the more money sloshing around is a good thing. Whether or not, why it's sloshing around a money market funds is, it can be two different things. Is it because people are concerned about their finances? And that's, that's the money they need to keep, they need to keep in a place where they can find it, which to certain, you know, which when one of the, the, the,

economic statistics that came out this morning was that personal income was the personal income growth was zero yeah with meaning that people are are losing purchasing power so you know to some extent consumers have not have not been acting all that well you know again Walmart we saw go down today dollar tree is zooming what does that tell you about consumer mindset now if you believe in the k-shaped economy thing if that if that money if that money into money market is coming from people who have disposable income to invest, that mitigates against the supply demand discussion that we were talking about. But it's very tricky to parse out. I'm always a bit, I don't know, reticent to sort of say, oh, you know, to use the cash on the sidelines

argument because sometimes that cash is there and it's not leaving. Okay. All right, well, that's a good point. And since we talked about new data that came out, Let's just briefly talk about inflation. So PCI headline was, I think, 3.8% in April. Core was with 3.3%, the highest in years. It was a little bit, I think, below analyst expectations, but still historically high. What is your read on all of this and it's associated an impact on consumer behavior? I know spending went up, but I think it was just like a tenth of a percentage point.

so relatively small. And just staying on our last train of thought, what does that mean for the psyche of the consumer and the investor? And like you said, it might depend on what income bracket you currently reside in. I mean, you know, we got a little bit of a surprise last weekend that the conference board consumer sentiment survey was a positive surprise, although the Michigan numbers that have been coming out just are sequentially worse, worse and worser for lack of, you know, to coin a phrase, I guess.

And when you dig into the Michigan numbers, because they break it down pretty effectively, yes, there's a partisan aspect to them. You know, Democrats feel worse than Republicans, but independents are feeling pretty crappy, too. and they've had some graphics in there that indicate that affordability is really a big, big issue for people. You know, one of the things about even when inflation is moderating, it's telling you the prices are going up just not as quickly. They're not coming down. It's a common disperception.

Very common misperception. I think that's where a lot of people really feel, I think that's a big messaging problem. It was a big messaging problem for Biden when he was. seeking re-election, it's going to be a big messaging problem for the Republicans as in the midterms because people hear inflation is coming down and they think, when I go to the store, nothing's cheaper. Everything's more expensive. That's literally what they're telling you. They're just telling you, it's not getting bad as quickly as it was. It reminds me of a similar misperception in crypto where people say Bitcoin is like deflationary. It's not. It's inflationary. It just, it's issuance rate,

decreases, but it's not deflationary. The supply is still going up, and it will go up for another 114 years or so. But please continue. Just more slowly. But that's the same. It's the same misperception. And I think the problem you have from a political and socioeconomic point of view is the people who are least likely to understand that nuance are the ones in many cases feeling it the hardest. because one of the other things in the consumer sentiment surveys is how miserable you are tends to correlate inversely with how educated you are. Not 100%, but there are statistics that show people with lower levels of education feel worse about affordability than people with higher levels of education.

But not exclusively, and everybody I think feels miserable about it. So we have to work through this. And the situation in the Persian Gulf is doing nothing to help affordability or inflation expectations. And so, yes, the PCE number this morning on a monthly basis going on the core PCE, which is the Fed's preferred target going up point two as opposed to point three, was indeed a good data point. but what we saw was that we didn't really see much of a rally based on that. We saw stocks come off their lows a little bit, but before the Axiostory, stocks were still, the stocks still had a minus sign in front of them when I'm talking about broad indices. So it's obviously we want positive inflation news.

But the problem is the law, as you alluded to earlier, the longer the situation of the Gulf persists, the worse the aspects are. And we're also seeing inflation and you're seeing it in other commodities like copper, which is that's a direct result of the data center build out. So a lot of moving parts, few of them moving in the right direction for affordability for consumers. Gotcha. And just one quick note, I probably should have done this earlier. But this Axiore that you're referencing, I just have it up here.

basically says that negotiators on both sides reach an agreement on, I guess, a 60-day MOU to extend the ceasefire appears to leave a lot of the big, nitty-gritty details for another day's negotiations. But I guess it is welcome news, especially since there have been fights, fighting going on the last couple days, around launched a, I believe, a ballistic missile at Kuwait, and nobody wants to see a return to all of that. So I can understand. why people are relieved, I guess for lack of a better term, but as you said in the very beginning, Steve, we've seen this many times before and nothing is done until it's done. So we'll just kind of have to see what happens. Is my crypto working as hard as I am? Honestly, that's the

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Head over to Coinbase.com slash unchained. Last chance to join at Coinbase.com. Coinbase.com slash unchained before member month ends. No purchase necessary. See rules and other ways to enter. Terms apply to other offers. Futures swaps via Coinbase financial markets. Risk of 100% loss. Payouts event-based, not investment advice, not available in Nevada. Coinbase 1 card is offered through Coinbase Inc. and cardless ink. Cards issued by First Electronic Bank. Bitcoin back rates are based on cardholders assets on Coinbase. So Kevin Warsh became Fed Chair. He's finishing up his first week as Fed Chair. And he's got a lot of pressures, basically. He wants a president that wants lower rates, but it certainly seems that that's

off the table, at least for now. And perhaps at the next meeting, I guess next month, his primary goal would be to maybe prevent rate hikes. I mean, what are your initial thoughts with Warsh coming in at this particular time? You know, the, the, the, the, the, the, the, the, the, the, the, more situation, as with anything Fed related, is not the easiest thing to parse, especially against the backdrop of price pressures emanating from the Gulf. You know, think about where we were just, you know, in February, before the missiles started flying. We were, the markets were pricing in two full rate cuts by December with a 50% chance for a third, give or take. You know, that extra rate cut chance, you know, sort of fluctuated between 35 and 65%.

So let's call it two and a half rate cuts priced in. So that would be about 62 basis points. Two times, two times 25 is 50 plus another half, 62 and a half basis points. We've now flipped, when I looked earlier this morning, we were talking about, call it a 70% chance for a rate hike by December. with a rate cut fully priced in for March of 2026. So when you look toward the end of the year, you know, with 62 and a half or four and call it another 18, there's, you know, roughly 80 basis points

and change at the front end of the curve. That's monstrous. And yet stocks are up. Stocks can rally when rate cut hopes fade, but that's if they're rallying because the economy is so strong. I would argue this is not around, you know, these rate expectations have moved, not because of, of, you know, a wildly stronger economic picture. But what we have seen instead is prior to, in February, you know, January, February, we were concerned about a slowdown in the labor economy. Remember the feds dual mandate, full employment at stable prices.

So there was a genuine debate of, you know, inflation is coming down, maybe not to the level that the Fed wants it, but if the labor market requires cuts, which side of the dual mandate will the Fed err towards? And the consensus was that they would err toward cutting rates to help out the labor, to help out the labor economy and say, you know what, we're good enough on prices. Well, that mentality has flipped pretty much 180 degrees. The last few labor reports have been solid enough to take a lot of that labor market worry off the table. That's not necessarily cold comfort for new graduates or having trouble finding jobs or some people who feel they've been displaced by AI. By all means, I'm not saying that this is a super robust labor market. But again, when you're talking about 4.3, 4.4% unemployment, you're also saying that 95.6% of the people who want a job have a job. So you've flipped on labor, and now you've flipped on price pressures because, you know, clearly the situation in the Gulf has raised energy price pressures and is starting to leak back into the core to a certain extent as well.

So now the question is, do we stay stable or does or do they have to, or do they have to, or, they have to raise. And at the last meeting, we had four dissents. One was Dr. Myron who dissented in favor of lower rates. I think he was, you know, in his relatively short tenure as Fed Governor, I think he was 100 percent dissenting in favor of lower rates. That was his prerogative, but his seat was because Chairman Powell didn't leave because of the legal issues. Kevin Warsh took Dr. Myron, seat. The other three dissents came from various Fed FOMC members who were advocating to remove the easing bias from the Fed's statement, which the market has sort of done for them. Last Thursday evening, Christopher Waller, who had been one of the more doveish members of the Fed, some might argue

was because he wanted the job that Kevin Warsh got. Others might just argue that, you know, hey, when the fact exchange, so does my opinions. I will not editorialize further on that. He came out, he came out basically saying he wants the easing bias removed as well. And what Kevin Warsh is going to have to deal with here and the markets are going to have to reckon with is a, he's one, when it comes to setting policy, he's one of 12. And it's not clear that, it's not clear that there is a consensus by any means to start cutting rates immediately. The other question that you have, which is sort of a broader question, which is we're not going to get an answer to for a little bit, is that he's a known quantity in the fact that he's been on the FOMC before. He was a Fed governor,

but he was one of the more hawkish members at the time. Yeah. And so which Kevin Warsh do we get? Is it the relatively hawkish member who, you know, in some ways, you know, voted against a lot of the monetary stimulus that occurred in the wake of the global financial crisis? Or is it someone who told the president, you know, what he wanted to hear and that I'm going to advocate for lower rates? One of the ways he's going to try to do that is, I think, to change the benchmark. I think he wants to use a trimmed inflation measure rather than quote BCE, because that would smooth out some of the some of the higher price influences. But, you know, he's going to have to convince a room full of skeptics at this point. And also remember, markets have a eerie way of throwing real-world tests at new Fed chairs. They don't happen very often, so it's not like a statistically significant thing. But if you look back, a few of them have gotten real-world tests early in their tenure. And we will learn soon enough how he handles it.

But it is, it's not smooth sailing. Yeah. You know, it's going to be, he's got, he's got some difficult, he's got some difficult things to navigate, particularly when it comes to deriving a consensus from what appears to be a fairly skeptical committee right now. Yeah. Something we, we talked about last week, too. I mean, sort of trying to, uh, that's the word I'm looking for.

Like, like, like, trying to make sense of like the two, the Dr. Jinkle, Mr. Hyde, the hawkish, doveish, Kevin Warch. one of the things that stood out to me during some of his confirmation hearings was kind of pointing out how he wants the Fed to move away from like, I guess, something more akin to fiscal policy and just focus on monetary rates. And that's sort of how he's trying to thread the needle with that. And I mean, just given a light of all the QE during the great financial crisis and the trillions of dollars added into the economy during COVID, I mean, the ratchet effect you mentioned, the Fed balance sheet has just been going up and up and up. And every time it seems they try to reduce it, something happens that forces them to either pause those or have it go off. So we'll have to see. All right, let's turn to crypto.

We have about 10 minutes left. And I want to get your thoughts of what's happening because it's pretty fascinating. As we're talking right now, I think Bitcoin is back up above 73,000. ETH is right around 2000. These are both up, I guess, a couple of maybe 100 bibs, something like that from Lowe's earlier today. before that Axio story came out and there were real fears about renewed fighting.

But enthusiasm for crypto is still, I think it's muted from what I can tell. I mean, implied volatility just hit a nine-month low for Bitcoin. We're not seeing a lot, I'm not seeing a lot of positioning for sort of like convex

movements one way or another. And I'd love to get your thoughts on what you're saying. Yeah, I mean, crypto has been, crypto, to a certain extent, the simplest answer would be, crypto's been dull compared to tech stocks. You know, I think, I think to a certainly extent,

there's a, you know, if you had to draw a Venn diagram between, you know, crypto enthusiasts and tech investor enthusiasts, tech traders, there's probably a pretty big overlap between those two circles. And so, you know, and momentum-based trading or momentum-based investing has been a huge feature of recent markets. And so, quite frankly, compare, if you're looking at your portfolio and saying, okay, my crypto's, it's not doing much. You know, and tried to rally, let's call from 65, I'll use Bitcoin, from 65 to 80.

and that didn't really pan out. And meanwhile, I bought, I bought, you know, micron technologies, and that's however many zillion percent, where am I going to want to go with it? And I think that that's a big issue. I also do think that looking down the road, if I were going to, you know,

look for excess liquidity to invest some of the IPOs that we discussed earlier, again, I would think that many of the people who would be thinking about investing in those IPOs, at least from the individual side, not from the institutional side, would be people who might view their crypto positions as something that they could sell to buy those IPOs, not advocating for it. But I think these are pressures that I think crypto is basing. You know, also now, the other feature is, you know, let's go back to the digital gold argument, which, you know, we could, that's a whole other topic for debate.

But real gold, the yellow stuff isn't exactly ripping ahead either because these are, for the most part, unless you're doing some relatively sophisticated stuff with crypto, these are non-interest-bearing assets, and interest rates, as we just discussed, have gone up substantially. And so when you have a situation where nominal rates and the money market rates that you're referring to have increased substantially, and you're holding a non-interest-bearing set of assets, that's not, that that's not necessarily a favorable backdrop. Yeah. You know, so I think that's kind of why we've seen crypto sort of get a little left behind.

They're, they're, it's, it's not the sexy flavor of the month right now. Yeah. Tech stocks are. And I think it's suffering as a result of it. Yeah, it's making me think of a couple of different, I guess a couple of different things. It's an interesting juxtaposition. I mean, going back to some of the AI-related IPOs that are coming down the pike in the next few months, et cetera. And then you think about, I mean, one of my former employers crack in, reportedly they've delayed their own IPO.

I think Ledger is another one that's delayed it. Citing, I think, like, market conditions, granted, there's different marketing conditions for SpaceX and Open AI and Anthropic, but you could also make the argument that they're almost, they're so big. They're almost immune to any market conditions at this point right now because there's going to be so much demand. So it's interesting there. And then I mean, billions of dollars in outflows from crypto ETFs. And I think I saw something. It might have been the FT today.

Forgetting the ticker. But I think it was like one like hyper-focused AI ETF like Micron and like only like two or three other stocks. Beat Fidelity, B1 of Fidelity is like crypto-related ETFs to like over $10 billion. D-RAM, which is the Round Hill Memory ETF, depending how you measure it, it either became the most successful ETF launch in history, surpassing Ibit or was neck and neck. It depends how you measure. It depends how you measure it. But bottom line is, you know, crypto-guide.

That was a huge boom for crypto. I mean, you had sort of the perfect storm between easy accessibility via ETFs and an administration that essentially was outwardly touting the benefits of crypto. That was as good of a scenario as you can come up with. The downside of that ETF adoption is, I think I termed it as, you know, Normie's own crypto now, too. And it hit me when I was invited to speak at a crypto conference here in Connecticut. And I looked around the room and I was around the average age. I thought I was going to be like, you know, grandpa going in there.

And it was a lot of people who'd gotten into crypto via the ETFs. The good thing at the time was that led to huge inflows and obviously price increases. Yeah. The bad news now is to a certain extent they're crypto tourists. They can then say, you know what? I bought, you know, I bought, you know, insert name of crypto ETF or ETP here. I bought this. It did well for a while and now it's not.

Or I bought it at the highs and it kind of, I mistimed it completely. You know, let me move to some, let me move to something else, you know, that if these people, if it was bought by performance change, in the first place, it's going to be sold by performance chasers as something else outperforms it. And that's not me taking a view one way or the other on crypto as a long-term investment. But I do think that is a very important consideration. You can't dismiss the importance of money flow. And for better or worse, the huge success of crypto, ETS was such a boon on the way up, but now this is the flip side of that trade.

I'm not attributing it specifically to that, but to many investors now, it's one more sector among their speculative momentum-based investments. And also think, by the way, of the popularity of some companies like IREN and NBIAS, which have largely changed from, they basically changed a business. model from data centers, you know, from big, the mining models to AI data centers. Yeah. Computing powers, you know, also, I'm not to say fully fungible, but it's migrating. Yeah, and I didn't mean to interrupt you, but we've done entire shows on that transition.

I had, I think John Todara from Needham. I don't know if you know him. He walked me through, I mean, the economics of that. And, I mean, it makes perfect sense. I mean, you're buying an asset. that, you're producing an asset in Bitcoin that, from their point of view, it's not moving up exponentially anymore. It's getting, hash rate keeps going up. It's more competitive. It's more expensive to mine. Or you can go, like, turn yourself into some sort of like hyperscaler,

get a 10-year contract from Google for an ungodly sum of money. Like, what are you going to do? I certainly get that. But it does, it makes me think all of this, I understand the points of you, you're staying here. And again, none of this is financial advice. But it does also, I think, this could have a good cleansing effect for it for Bitcoin. I mean, we've, in crypto in general, we've spoken about, I say like me, like on other guests on the show. There's a lot of other, there's a lot more competition for that sort of like highly risk on money. Like there's prediction markets. There's AI stocks. There's lots of other places, not just alt-coin. And in certain ways, I think you almost need to have some more.

you need to have a real sense of purpose when you invest in crypto today because it's not the sexy thing to do. I mean, people on this show will know. It means there's a comment saying you're not really a crypto person until you've seen your net worth drop by 90% and then have it go up like 300% thereafter. The norm as you said, they may not have the stomach for it, but it's happened to me multiple times and plenty of long-time listeners. Once you get through it once, you're like you're hardened, but it looks really skimps. on the way down. And I think sometimes that comes, it makes me think of like Howard Marks or Warren Buffett

in the sense that like you have to really put your money in when everyone else is bearish. I mean, Howard Marks did in the distressed credit space. And he made a fortune out of it. BlackRock, I mean, they launched their ETFs in, I mean, they filed for them during a, during a crypto winner when Gary Gensler was still at. SEC chair. So, I mean, it was not a popular thing to do, and they did it against the backdrop of a highly crypto-sceptical regulator. So we'll have to kind of see what happens, but certainly there's

a lot more competition for the money that would just automatically go into crypto. And I think some of those ETF flows that we spoke about encapsulates it perfectly. So we're just about a time, although I know we probably could go for another 45 minutes or so. So I just want to ask, you like one or two quick closing questions we talked about a lot today inflation gold I would even get to what's happening with the rising dollar and the flattening yield curve sort of the divergence between equities and and kind of like like geopolitical I guess uncertainty what is like the one thing that you're really going to be watching over the next few weeks I think number one it right now is

you know, I alluded to it at the top of the show is how does the stock market react if we get a peace deal? I mean, if we don't, we just sort of muddle along again. And at some point, at some point, traders get tired of it. But I think the question, to me, the number one question that was, that really jumped out at me today is, and I don't have, I wish I had an easier answer is, are we in a, you know, are we to buy the room or sell the news scenario, whereas a peace deal gets, a negative or is it just, you know, or market's not reacting better today because they're sort of skeptical of it, which means they can rally further. Those are two very divergent outcomes from the same, from the same potential piece of news. And I do, I'm of course rooting for something

that that brings that about. You know, and I think, you know, and there's a, and then I think once we get past this, because equity markets particularly are terrible at geopolitical events, Commodity markets are best. And notably, at least when we started the show, oil was not down today on this news. Oil was off its highs, but not down. Commodity traders are best. Treasury traders are next best. Equity traders are somewhere deep in the back of the pile.

Because, you know, the others are less focused. They're more focused strictly on supply demand or inflation expectations as opposed to stories. they're less easily distracted. And so, you know, I think that we're going to have to see how that all plays out amidst the backdrop of a flattening yield curve, as you mentioned. And that, again, is because that took a big, Christopher Waller is the one to largely thank for that because we've seen the inflation expectations rising and pushing up the short end of the curve, but it was pushing up the curve sort of parallel.

The Waller talk, you know, flipped it a bit because of, if the Fed's going to be more sensitive about inflation expectations, that changes the back end to the curve. And ultimately, let's see what happens in the midterms. Don't forget that from an equity point of view, we've had two down markets, two down years in the last 10 or 12. I forgot the exact, but those were 2022 and 2018. Those were both midterm election years. And you have a new Fed share. So while we've had a very successful year in equity so far, I think it's not necessarily right to just assume that the path is ever upward.

And I'm a little concerned by the lack of vigilance, by the lack of risk aversion that I'm seeing right now. Got it. Okay. All right. Well, that's a great place to end it. So thank you once again for joining us. Steve, thank you everybody for watching and listening.