Unchained - Bits + Bips: How to Play the ‘Trump Trade’ in Crypto After the Assassination Attempt - Ep. 675

Episode Date: July 17, 2024

In this episode of Bits + Bips, hosts James Seyffart, Alex Kruger, and Joe McCann, joined by guest Jack Platts, dive into the market's reaction to the recent assassination attempt on former President Donald Trump, looking at how this event will influence the 2024 U.S. presidential election—and the crypto markets. They also cover potential rate cuts: Could there be a cut this July? How big might the rate cut be in September? Could the decision ever be influenced by the upcoming election? They also give their predictions for what percentage of the BTC ETF inflows the ETH ETFs will reach, and James talks about what he’s expecting for Grayscale’s ETHE (hint: his view would be positive for ETH). Finally, they delve into what’s next for Bitcoin as the German government runs out of BTC and Mt. Gox distributions begin. Is it up only now? Show highlights: 00:00 Intro 01:18 Whether the Trump shooting has settled the election and whether the event caused a “flight to safety” 11:23 How election markets are becoming a place to watch election odds and whether crypto “leans right” 20:16 Whether rate cuts are coming in July or September and how much they’ll cut: 25bps or 50bps 29:06 How Joe views the relationship between global liquidity cycles, rate cuts, and Bitcoin's potential rise 34:41 What new updates there are about the Ethereum ETFs and their expected launch 42:08 Why Solana hasn't outperformed significantly since the Trump news 43:25 What market breadth indicates about the current market rally and the impact of rates in small caps 49:01 Everyone’s predictions of ETH ETF inflows and how much outflows we’ll see on Grayscale’s ETHE 53:04 What’s next for BTC after the German government is out of bitcoin, and with Mt. Gox distributions starting this week Hosts: James Seyffart, Research Analyst at Bloomberg Intelligence Alex Kruger, Founder of Asgard Joe McCann, Founder, CEO, and CIO of Asymmetric Guest: Jack Platts, Co-Founder & Managing Partner at Hypersphere Ventures Learn more about your ad choices. Visit megaphone.fm/adchoices

Like Trump or not, this is about trading here, about making money and I'm trying to anticipate how people are going to be reacting to the news. And these really should drive Middle America further towards Trump. And yeah, that image is like, I saw the image and we're like, wow, he just won. Hi, everyone. Welcome to bits and bips, exploring how crypto and macro collide one basis point at a time. I'm your host, James Safert, Tradfi Archmaister, Lord of Bloomberg Zen. here with Alex Kruger, Kruger Macro of House Asgard, Protector of the Realm,

and Joe McCann, Lord Commander of Asymmetric and Master of Bunk. We're here to discuss the latest stories in the worlds of crypto and macro news. Just remember that nothing we say here is investment advice. Please check unchained crypto.com slash bids and bips for more disclosures. Also, joining us today is Jack Platt from Hypersphere. I'm going to let him introduce himself a little bit. Sure, thanks, James. I'm Jack here from Hypersphere.

started the firm in 2020. We've launched four funds. It's a digital asset management firm, predominantly investing in tokens at the infrastructure and earliest stage through public blockchain networks. We support networks through a series of venture funds and an open-ended hedge fund. So that's a little bit about me. And thanks for having me on. Great. So let's get into what is arguably the biggest news of anything that's happened in a very, very long time. We're recording this on Monday, July 15th. So this just a couple days ago, I guess former president and potentially future President Trump was shot at during a speech, hit his ear. Does this settle the election? Do you think that all the images and what we're seeing out coming

out of this situation, does this settle the election, Joe? Yes. It's over. It's a wrap. Listen, look, I mean, irrespective of your political leanings, What happened on Saturday, there's no place for that kind of political violence in the United States, period. I would say anywhere, but certainly not in the U.S. And it's abhorrent that it happened, period. Even if you despise someone like Trump, right, shouldn't happen. I think that the perception of Trump now has gone up dramatically. Now, you could see some sympathy in the polls, et cetera, you know, surviving an assassination attack.

in the in like the Rocky Balboa kind of way that he did. I mean, it was truly unbelievable. I think I'd probably speak for everyone when they saw that. They just could not believe their eyes. As an investor and a hedge fund manager, the first thing I did after, you know, getting the news was check the markets. Because that's my job. And in the prediction markets, one of the things that I noticed was on, so there's a website called predict it that has nothing to do with crypto. It's been around for a long time. Yes, there's polymarket and hedgehog. these types of prediction markets for Web 3, predicted saw record buy volume on the Trump contract to win the election. And I remember we had a guest on previously that really favored prediction markets because folks that tend to trade in those markets are very good at these types of things.

And his chance of winning is now two out of three, or at least it was on Saturday when the event happened. but the amount of volume that came in was pretty significant. The other thing, though, and I think that this is probably, as it relates to price action and crypto and what it means, as I was watching all this unfold on Saturday, I contacted my trading partner and we were having a conversation. The price action and this sort of, you know, call it Black Swan, left tail, idiosyncratic event reminded me, totally different scenario of March of 2023 when Silicon Valley Bank

had subsequently been drained of all of its funding in 48 hours, a denial of service by withdrawal. And that weekend, they were putting together a plan to effectively shore up SVB. And the price action over this past weekend with Bitcoin specifically was almost identical to what was happening the weekend that they were looking to save SVB. Now, let's be super clear, these are totally different types of events, but the price action was consistent. And so, you know, it dawned on me that given that we've had, basically, I call it like

two straight months of programmatic selling in the markets. And we'll kind of touch on that a little bit. This was a flight to quality trade, meaning, one, folks were looking at an assassination attempt as clearly something scary and terrifying to, I think, a lot of people in the United States, rightfully so. and when people tend to get scared, they tend to invest their money in flight to quality assets. Just like when people got scared about SVB and whenever there's stress in the financial system, people tend to flow into things like gold.

Well, of course, Bitcoin is digital gold, it's easily accessible, and it trades on the weekend. And so you saw that happen. And then I think the second thing, which Alex will probably touch on with respect to the Trump trade, Trump is clearly pro-crypto. And we've talked about this on the last pod in the case that even, you know, if he's lying about everything, let's assume he gets elected and he doesn't follow through on anything crypto-related, the narrative and perception of what he could do is very, very influential to price. And so if you look at risk assets more broadly, you saw a huge steeping in the two's-thirties curve today.

That's Trump trade. That's not even interest rate specific. That's just Trump trade. You saw things like Bitcoin and other forms of crypto rise over the weekend and really continue today since the equity cash open at 930 Eastern time. So I think that with, you know, take like sentiment in the gutter, two straight months of programmatic selling, there's now this catalyst, a tragic one, but a catalyst nonetheless, that is, you know, kind of bringing people back to market to say, hey, I think Trump's probably a, shoe in for the president. He's pro-crypto. It's a flight to quality asset. And we've been, you know, oversold sentiment down. It's probably time to get long. What do you think, Alex? I think it's spot on on everything, but one thing where I disagree, which is the flight to quality. The way I see it is this is just a Trump trade. And we've been talking about this and quite a few people in crypto, maybe not the majority, but quite a few people have been talking about it as

the Trump trade. So basically, when we saw this news, a lot of people just started hitting the bid. The one thing that I found was interesting on the PA was that it was kind of slow to take off, which I'm pretty sure through quite a bit of traders. But yeah, aside of that, That's the only thing. I'm in disagreement with what you said. Everything else I think is spot on from extreme bearish sentiment on expectations of Vox on Germany selling. The chart completely broke down and basically bearish stakes or if we're going way

lower, they really became deafening. And then we go on to the Al-coin side and actually everything was, was so bad to the point that the most Alcoins literally reversed everything we saw, all the gains of 2024, in many cases, even all the way from all the way till summer 23. So basically no bull market. Yeah, anything, Jack, any thoughts? I mean, it's incredible where we are where we are. And it's hard to think seven and a half years ago whenever November 4th, 2016, when Trump was getting elected, the price of Bitcoin on his election victory went from $700 to $600, finished the year off at $1,000, and then finished off by the time Joe Biden was sworn in on

January, 20,000 at over 30,000. So last time Trump was sworn in, we were about 100x lower on Bitcoin. So, you know, a lot of us were still in crypto at that point, but it's zooming out is, I think, is important in the past two months. It's been the supply of the ongoing selling, systematic selling that Joe pointed out with Germany and the anticipation of Mount Gawkes distributions and so on and so forth being weighed against a lot of the longer-term bullish regulatory environment with SEC dropping cases, with Trump now going from, you know, in the margin of air for winning in November to being the overwhelming favorite. But in things at the Supreme Court level like Chevron, deference being overturned, those are all kind of now finally in the driver's seat. And some of the selling is finally done, at least on the German side, right? They went from something like $3 billion to zero within a month.

So with Gawks coming at maybe a couple multiples of that, we'll see a little bit of fighting still in Q2. But a lot of people had come into Q2 thinking, hey, this is this. quarter is going to be, you know, if we can end at scratch on the quarter, then we're an okay place because we just did a lot of work in Q4 of last year and Q1 of this year. So, you know, three-month break, while difficult for the intention span and patience level of the average crypto person is a small price to pay, I think, for a big win for Trump in November. And then some of the regulatory pieces being slowly taken away from the regulatory agencies and given back to to the judicial brands where it belongs.

Yeah, I would add the two things that I took away was some polling came out that was done even before this happened. And pretty much all the swing states were showing that Trump was leading in the swing states. And then after the assassination attempt on Saturday, I have to assume these numbers probably get better for Trump. I mean, Arizona, Georgia, Michigan, North Carolina, Nevada, Pennsylvania, and Wisconsin, recent polling shows that they're leading there. And what's important there to me, like the thing I noticed from it is like if you look at the polling for like Senate, the people running for for election in the Senate in the same states, the Dems are ahead by even more than Donald Trump is ahead as president. So it shows that like this is almost more just like it's a Trump specific Biden specific thing. It's not just to do with with necessarily the politics. The other thing I would say is I was saw obviously this assassination attempt was the topic of conversation at the office today. And our interest.

rate strategist who I was talking to. Some of them were like, yeah, one of the first places I looked was I looked at the price of Bitcoin because I knew it was the one thing that was definitely trading. So when you have people who aren't really necessarily in this space, they're like, they went to Bitcoin to see what was happening, what your action was. My first place, Joe, was I went to look at predicting polymarket, obviously, and I saw the stuff that you saw. So that's all I pretty much have to say on that topic. The one thing I'll add is that, you mentioned the senators in these various states are leading on the Democratic side. There is still a risk that, you know, people may say that they want to vote for Trump,

but why would they then, you know, they're just going to vote for Trump, but then everybody else down the Democratic Party line, they're just going to tick all those boxes. There is a scenario where people are, which was the opposite of Trump's original campaign, embarrassed or not willing to suggest that they're going to vote for Biden because, for whatever, reason. So I do think that there is, you know, some nuance in, in that that polling data, which is one of the reasons why I prefer the prediction markets. It's not a, nothing's a silver bullet. No one can predict the future, but the prediction markets were pretty damn clear. And with, you know, with, I think the VP nomination that just came up and I'll James,

I'll let you introduce this topic. I don't see, it's very difficult probabilistically to look at an outcome that Trump isn't the president next year. Yeah, I mean, the chopping block are, this to podcast and Laura was actually a guest, the most recent episode, they spent a lot of time talking about these prediction markets. And I tend to agree. The prediction markets, I think, are so much better than polling and better than the media. Because people, like, for the most part, are putting their money where their mouth is and putting their money behind what they think is going to happen.

Whereas, obviously, there is some bias in there. Like, if you want somebody to win, you might be more inclined to put money. Like I know when I've been on my favorite sports teams, I do tend to put money on those teams, even if even if the odds aren't necessarily the greatest, it just gets you more involved. But you kind of are, you know, invested in what's going in the election if you're a U.S. citizen. Really, anyone is invested in what's going on here. But yeah, I'm with you. The prediction markets and what we're seeing across, even some of the legacy stuff like predicted,

but Polly Market, too, is pretty impressive. But yeah, let's move on to the fact that today, I mean, before James, sorry interrupt, one thing I went out there, which I think is interesting. when I fully agree on picking the prediction markets as my go-to place for election notes. Now, that usually triggers a criticism from people saying, like, those aren't even polls, those are prediction markets, or another one. On this one, actually, I think, is somewhat valid, and I would like to see data on this, which I haven't seen, which is the perception that prediction markets, they lean right.

So there's going to be a bias on the data just basically because of who, who is voting, especially if we're talking about polymarket, it's crypto people, right? And crypto liens right. I'm pretty sure that we do lean right on average. And you can see that difference between like the Bloomberg likelihood of Trump getting elected and the polymark market likelihood is like 70% or 63%. I checked yesterday on Sunday. Yeah, yeah, Polymark is still at 70, 71.

The other thing I wanted to say on Polly Market, actually, for example, I use Polly Market as confirmation that I'm not going crazy for adding BTC loans on when it happened. Definitely there is value in there, in my opinion. This is the Bloomberg Trump Biden. This is favorable. And then they use predicted, actually, for the Bloomberg markets for the most part. And obviously Donald Trump is way up on here. That's a stunning chart. Yeah. I mean, just look at the rise there in the fall. I mean, I think this is this is June 23rd. So that's a debate. You can see the drop off. Obviously a little bit of uptick here on Biden. But yeah. I mean, one of the thing about this, the Trump stuff is with the assassination attempt. Like the imagery is iconic. Even if you, again, even if you despise Trump, it doesn't matter. The imagery is unbelievable. And Trump's,

election team is very good at memes, propaganda on the internet, and they are going to put that photo of him on every major TV show and all of their distributions and content that they create until he gets elected. I mean, it is that powerful and that story carries a lot of weight. And I think that this is potentially one of the reasons why he announced that the VP nomination earlier today on Monday. This guy, J.D. Vance, I think from a crypto standpoint, it's pretty clear. The guy is pro-Crypto. He's got some incredible tweets over the past few years, I should say, as well as personal

holdings in the six figures of Bitcoin. So, you know, I don't know, Jack, if you had a chance to look at the J.D. Vance VP nomination, but I'd love to kind of get your perspective on what it could possibly mean for crypto to have such a pro-crypto VP behind Donald Trump. Crypto and AI and some other core technologies that are exponential and exciting and that have been regulated out of near existence in a lot of Western countries are a big part of the R&C agenda, which is already a big switch from the past three and a half years. And then to have J.D. Vance, who's started a VC firm, you know, he's deeply connected with Peter

Teal being his biggest backer. Peter Thiel obviously looks prescient once again for in 2016 backing Trump and famously saying this time he's not going to back anyone. It turns out he, you know, he's going to have a close friend and mentee and in the White House perhaps with JD Vance. So it's obviously just a continuation of the pro-crypto theme that has basically been a catalyst for for the market since Mara Lago about two months ago where Trump came out in a big way for crypto. It's every domino to fall since then on the political regulatory side has been been positive. And it's hard for me to even listen to analyses or read them from pre-Saturday since with the assassination attempt, it feels like everything is now changed. Because typically the market price is in an election victory for a new administration closer to the election night.

And here we are three or four months still before the election. and you're already seeing the difference between a likelihood of 52% chance of winning versus 70% chance that, you know, the market can actually price that stuff in a lot sooner. Yeah, on the imagery you were talking about Joe, I mean, that one image of him with his fist up and the flag over him, like, but the guy knows what he's doing. Like, once he realized he was fine, he knew exactly what he was doing and posing. And that was completely a political decision. And that was the first thing I said, I'm in a group chat with like 20 of my friends.

and we were all talking about it. And we were joking about different things before we realized how serious it was. And the first thing I said was like, this image is going to be in history books for our kid. Like your kids down the line, like this is going to go down like as something pretty remarkable and how close it was to being something way more tragic. That image when I was, I mean, that night I was thinking about it. And it made me think of two images that are really iconic and historic. Like one is the evil, what's the name of this, Iwojima.

The flag, the American soldiers planting the flag. It really felt like, they felt like a combination of that. And Muhammad Ali, that picture where he's, I think he's over four men. It's like incredible picture. It's like those two things combined. And again, it's as we've been saying is like Trump or not, this is about trading here and about making money and trying to anticipate how people are going to be reacting to the news. And these really should drive middle America further towards Trump.

And yeah, that image is like, I saw the image. And we're like, wow, he just won. This is it. Couldn't have done it better. Okay. Let's move on to a note. That's enough politics. This podcast isn't meant to be a political podcast.

But, I mean, you kind of don't really have a choice here. J.D. Vance, probably very good for crypto. Oh, the one thing before we move on, I would say that, Trump is supposed to speak next week at the Bitcoin Conference in Nashville. I'm assuming that's still happening. It looks like he's at the RNC now, so he didn't hold back. He didn't let this hold them back even a day or a day or two. But he should be speaking at the Bitcoin Conference in Nashville next week. So that'll be very interesting. I will also be there speaking on theoretically the same stage as him at some point long before he is. But moving on to a little bit

more macro. Let's talk some interest rates. Right now, last time we were talking about how the odds of September were creeping up, that was like basically a theme every time we talked about macro. I'm going to share right now for those who are watching this on YouTube. Right now, it's basically pricing 100% chance of a rate cut by the September 18th meeting. So they're pricing a 25 Bips rate cut by September 18th. That makes sense to me. I said last time September makes sense to me. Joe thought July was still on the table. July is only about an 8.5% chance right now, but Joe's a little more bullish than that. So I'll turn it over to Joe to get started here because I know he has a bit of a strong opinion on a tail of that here.

Yeah, look, I mean, you know, I've been pounding the table on this since April, basically, that the Fed's cutting rates. The question is how much and when. And we had a negative CPI print last week. negative. The first time in years, we've had a negative CPI print. And yet the rate is at five and a half percent. And so if you if you just look at that in a vacuum academically, that is, that doesn't make sense. You should not have rates that restrictive when you're having a negative CPI print. Your inflation is clearly coming down. So last week was a really big deal as it relates to the, you know, September cut, I would say it's a wrap at this point. The reason I still think that there's a

shot for July is the following. One, you had an uptick in unemployment, 4.1%. Two, you've got a negative CPI print. But three, tomorrow, so Tuesday, by the time this airs, we will actually have the answer to this, you have retail sales. And there is a concern that the economy is slowing and that the Fed has held rates too high in a restrictive manner for too long. You mentioned it's about an 8% chance right now of them cutting in July, and that's probably about right. You know, sub 10% is kind of where my head has been for quite some time. But if they are all of a sudden, you know,

if the retail sales number, for example, is really weak tomorrow, you will see that this week there's 10, 10 Fed meetings, or excuse me, not Fed meetings, Fed speeches. 10. That is a lot for one week. And next week, they go in their blackout period before the FMC meeting at the end of the month. And so if the retail sales number is weak,

what we should see is a signal coming from these Fed speakers throughout the week as to whether or not they're going to telegraph a July cut is on the table. And my view is, if they don't cut in July, they're going to have to cut 50 bits in September because they'll be so far behind keeping rates that restrictive for that long with this type of poor economic data coming in or certainly inflation coming down, employment ticking up. And to be clear, 4.1% isn't a horrible number, but it's the trend that the fact that we're actually starting to see weakness in employment.

We're seeing weakness certainly in inflation, which is a good thing. But if the economy is slowing from the consumer, you know, consumer makes up roughly two-thirds of GDP in this country. If retail sales do come in soft, I think there is a strong case he made for 25 bits in July, and then it can carry that forward into September. They don't do July. They're going to have to do 50 in September, in my opinion. Alex, any thoughts? You disagree?

I think it's going to be September. I mean, I can see it. Let's say I would put odds of that happening, and I'm going to make this app because I haven't looked at any models. but I'm going to say odds of July at, let's say, 20%. And September is a down deal. I think it's going to be September. Do you think they'll do 50 or 25 in September? I think this is the other thing that is very important to discuss, which is, I think it's

going to be 25 in September. And in fact, if it is 50 in September, I would be concerned that the market may interpret that as the Fed actually having their hand folded. it and we get a risk of reaction out of nowhere. That's the thing I'm concerned about if we see 50 beeps in September, I think is very real. It can happen. So for me, it's 25, but I'm concerned about 15 September, to be honest. Just remember, September is the last time that the Fed has a meeting before the election.

Yeah, I'm not very big on that. I don't think the election actually affects very much the, policy short term, to be honest. I know it's a big thing people likes to talk about. It's, I think it's more, more tied to beliefs in conspiracy theories. I haven't seen evidence in my entire life of the Fed affecting, changing their, their behavior around presidential elections, to be honest. Any thoughts, guys? Yeah, I mean, dude, that's the black swan. I've only seen white swans. I could never see a black one. They've only had this behavior their entire life. I mean, we need something really bad. I mean, we'll get housing data also, I think next week,

or actually, that's this week. We have another two months. I think you need something really bad showing up in the data for them to go 50 bips. I'm staunchly of the opinion. I think we're going to see 25 bips in September. I'm not an economist. It's actually our rate strategist who's been calling for November for the last few months is basically on the line now between November and September. They haven't been an official call, but their call up until the last couple of weeks has been, they still thought November. On that note, just to be super clear, and, you know, maybe I'm, I'm just talking my book here, but pretty much every investment bank on the street has said more or less 50 bibs is the max that will be cut this entire year. And then today, Goldman's,

I think it's, yeah, Goldman's guy came out and said, I forget, Hatesius or something. I'm always mispronounce his last name, but he said he sees July on the table now. Right? Like so, so they've been saying like, oh, they're not going to cut it all. And then it's going to be only 50 bips for the entire year or two. Wait a second. All of a sudden, they may be cutting in July. It's like, what, like how, like how accurate or how valuable is this type of information

when they're flip-flopping this like intellectually convex concept over and over and over again. It just, to me, it seems pretty clear. The Fed has been saying for. months that they want to cut, that they need data to support that. The data is here. Now, the question is, have they been too late and the economy is slowing such that they either need to do July or they need to do maintenance cuts of 50 bips in September? Yeah, I mean, I think we're all, we're all like, we're picking at a minutia of details here. I think we're all, for the most part, we're kind of an agreement, which is less fun for a podcast audience. But I guess I'll turn it over

to you, Jack, we're all kind of in agreement. We're going to see 25 to 75 pips of rate cuts this year. I think I think 50 to 75 seems more likely. What does that do for crypto markets? How are you, how are you guys thinking about rate cuts? Do you think it impacts things at all? Like, how are you guys looking at it? On balance, rate cuts should should be helpful. I think the context in which the rate cuts are being done is obviously important. If it's because of the economy crashing, right, It's different than if it's kind of these safety cuts because inflation is falling a little bit faster and there's still, there's still, you know, real growth in the economy. So how things are looking now is rate cuts would be more in the latter camp. You know, the financial crises, bank crises aren't really haven't been allowed since COVID.

You know, if there's ever an issue in the banking, regional bank crisis or or anything. like this, there seems to be a government intervention right around the corner. So, you know, for that reason, the left tail is, is cut. You know, I don't think it would be a big, you know, a big deal if they cut 25 in September or 50 in September. The point is that they're, you know, we're done tightening, which was a concern in like the March, April timeframe with inflation picking up in the first couple months of the year. Now, you know, we went from six or seven cuts to start the year to, oh, are they going to

hike this year to, you know, somewhere in the middle, which was broadly in line with what the Fed said they were going to do at the end of last year. So from that perspective, it's, it looks kind of like it's smooth sailing on the, on the monetary policy front or, you know, the macro front. Joe, Alex, you agree, disagree? I largely agree. And my, my view still remains the same. I agree with Jack in a lot of cases here that the global liquidity cycle has not even gotten close to topping. Few too historically has been

things tend to slow down because of tax receipts and TGA and there was RRP, things that were affecting like I would say certainly U.S. based liquidity. China has a real problem and they have not been able to

defend their currency. And so they either need to, you know, there needs to be some form of devaluation there. That's not great for global liquidity, but we're starting to see green shoes of global liquidity start to tick up even in the first couple of weeks of this year. And with rate cuts coming forth with the Fed, just like with their tightening cycle, that was a very much a follow-the-leader, almost coordinated plan by global central banks. They're going to do the same thing. And so that, you know, it is critically important for the Fed as it relates to liquidity to cut rates.

but if it's a coordinated effort globally, you should actually see liquidity pick up elsewhere. And so there is this sort of almost one-for-one correlation between the global liquidity cycle and the price of Bitcoin, which is inversely correlated with things like the dollar index. And so the dollar actually got smoked last week on the CPI news. And when you cut rates, the value of the dollar tends to weaken. So from my perspective, again,

it's like bigger picture, look at global liquidity, and then kind of dive into the details there. Fed's cutting rates, then you've got a coordinated central bank cut, central banks cutting rates, dollar weekends, in theory, it should anyway. And that's also, that's all very positive for Bitcoin. I mean, in kind of like this very like rudimentary sense, right? Like right now, if you're, if you have dollars and you're relatively, you're not living paycheck to paycheck, like you probably got them in some T-bills, you probably got them in a savings account, you're earning five to five-and-a-quarter, whatever it is.

Well, if those rates start to come down, where do you think that money's going to go? It's not going to just flow, it's not going to just sit in T-bills if the price of T-bill, the yield-on T-bills are starting to come down. It's going to chase risk. And so there's an enormous amount of, I saw something last week from BAML, enormous amount of the Treasury purchases for T-bills, are basically all retail. It's not that all T-Bills are retail,

but out of the things that retail buys, an overwhelming majority of that is in T-Bills. They're not buying 10 years or 30s. They're buying T-bills. And so I think as those rates come down, those retail investors are going to look for the next thing. You saw the Mag 7 last week with the NVIDIAs and Netflix, excuse me, Nvidia, Amazon's, Tesla's of the world,

really a monster rotation into, to value. Maybe there's something to be said about this Bitcoin trade also picking up steam with something like that as folks are moving cash out in a rate-cutting environment, looking for what could be the next momentum trade. It's probably something like crypto, at least to some extent. A quick question on that. That email statistic about retail, is are hedge funds classified as retail in that? No, this is their private wealth management group. Wow. So people are literally just like going on to treasury.com. What a lovely website. Yes, they are going through that pain.

That's crazy. You know, guys, I'm looking at a chart here, basically, I forgot the sample size, but the, it's a chart basically showing that when cash yields, so short-term yields go from basically five to seven percent where we are at right now, the allocation to equities goes from historic that it goes from like 50s to 60%. So it's, it's, this is, this is not just the narrative. This is a real thing. Of course, it's also logical, right?

As rates go down, money flows back into risk. And that also means Bitcoin and it means crypto and shitcoins and you name it. That's right. Like it or not. Yeah, I mean, we're also at record levels in money market. funds too. So I think there's a lot. The question is like how much of that is, is like people treating like savings versus is it just in a money market account and their brokerage and they're holding onto it while they're getting 5% rates and if all of a sudden they are it,

are they going to, are they going to go and put it into, I don't know, equities or crypto, potentially, who knows? There's a lot of people with a lot of strong opinions on that. I don't have a super strong opinion on it. Anybody with anything else for macro or should we move on? Well, I think the last piece with macro, and we can segue into your topic, James, with the potential for money coming out of things like money market funds, T-bills, et cetera, and hopefully chasing for all of us, hopefully chasing things like crypto, how much of that's going to end up in something like an Ethereum ETF, James? Very, very good transition there, Joe.

Yeah, so we've been talking about, I feel like every freaking podcast we've recorded here. We've talked about the potential for Ethereum UTF, maybe not the first one. But we finally got, we were hearing rumblings from different of our sources. So we broke the news today that it looks like the SEC wants everyone to submit their final documents on Wednesday of this week. So that's Wednesday, July 17th, I think. So at some point, either on the 17th or some point this week, we should see a bunch of these prospectus documents get filed from these eight different issuers, and they have to include all the information.

So we'll see where the fees are going to be. My expectation is they'll be roughly in line with what we saw for the Bitcoin ETFs. We know that VANAC and BitWise are definitely doing fee waivers right now. I would expect probably most of them are going to do fee waivers. But they're likely to launch, it seems, on Tuesday, just. July 23rd, ironically enough, two days right before the Bitcoin conference down to Nashville starts. So these things are going to be live and trading as everyone is the Bitcoin maxies and including me are down in Nashville. So yeah, it looks like these things are going to start

trading July 23rd absent some huge changes or some unforeseen consequences. But yeah, we're expecting them to begin trading next week, which is it's about damn time, to be quite honest. Like, these things, if you look at some of the most recent updates, I think that said this on the last podcast, like, they were so minuscule. And then they just took over a week to get back to the issuers. Like, with some of the other stuff that they do, it's like, you send it in and they get back to you the next day, particularly if there's not that much to do.

And the SEC was just taking their sweet old time on this one. So they all filed July 8th of last week. And they took a full week to get back to them and basically said, yeah, these are good to go, just submit with all the final information and then be ready to launch next Tuesday. So we'll see if that happens, but it's finally here. Well, now that we know that it's finally here, I mean, I'd love to get Jack's perspective. I mean, because me, you and Alex have talked about this ETHETF, like you said, every episode. Because there's always some new thing about it, right?

Jack, from your perspective, as an institutional investor and a long time, you know, crypto advocate, you know, how do you think about the ETH ETF from a inflows perspective? or its ability to be accessible, the fact that there's no staking yield applied. Like, what is your overall view, you know, bullish, barris, neutral as it relates to Ethereum ETF launching next week? The direction of travel is extremely bullish for the industry at large because there's, you know, the original or the first alt-coin that's been solidified as the second pillar after Bitcoin is now getting, you know, institutional business.

And so the overtime that will that will just lift all boats. And we've seen the salana filing for the ETF. And under a Trump administration, there would be potentially an approval of that. You know, you guys have said on this podcast as early as, you know, end of next year, 2025. So the rate of travel is really clear. I've seen different analyses that say, okay, there's one and a half percent of Bitcoins outstanding in the Bitcoin ETFs. So will Ethereum be more or less than that? I think there's good reasons for both arguments of why it'd be more or less because there's not staking,

because it's going to be potentially less known because so much of it is already staked or restaked or, you know, in some liquidity sink somewhere on the network. So I think if so long as it's not not a flop, I think it's I think it's bullish. I don't think I wouldn't over, overthink this. A lot of people have just been overthinking a lot of the ETF news as looking at daily inflows and all of this. But it's incredibly positive for the space. There's just, it's hard to underestimate how bullish it is with ETH and then potentially Solana.

Eventually, maybe all of these will be trading in one way or another through brokerage accounts. Before I let Joe and Alex jump in, I just want to echo what you said because this might sound like counterintuitive. But for me, somebody who looks at the ETF flows in, the people that are so fixated on exactly what's going to happen and how much money is going to come in, like, you guys need to chill. Like, it is what it is. The money, there will likely any money that comes in. They are not the market. They do impact the market, but they are not the sole market.

And I agree with you, Jack. Honestly, I would even go so far as say, even if they are a flop, even if they take in less than a billion dollars in net inflows in the first six months, I mean, it's still a net win for Ethereum over the longer term because it's still an air. where institutions and retail investors and advisors can allocate it. So you're creating a new bridge to Ethereum for traditional financial capital. So we can get into our predictions, but I won't give my predictions. I'll let Joe and Alex chime in here. But I just wanted to say that like people need to relax about exactly how much money is going to come in and what these flows are going to do.

James, how many DMs do you get a day of people asking you about it? Yeah, it's DMs, comments, reply. Honestly, a lot of Gluber clients care very much about this exactly when they're going to launch and things like that. So it's good to finally have an answer on that front. Yeah, I share your sentiment, Jack. I mean, overall, I think bringing the Ethereum ETF to market is net positive for crypto in general. That way, it wasn't like a one-trick pony with Bitcoin. And also, no surprise.

I do think that other ETFs are going to end up launching likely Solana next. And it kind of raises the question of, is this part of a bigger trend of this sort of ETFification of crypto assets and particularly ones that are heavily traded? Salana, of course, is the third most heavily traded crypto asset out there. And it does make a lot of sense that it would be potentially one that would come next. This doesn't mean, though, that others can't or won't. And also, you know, I've talked about this in the past BlackRock has flat out come out and said that they plan on tokenizing like damn near everything. And so there's a lot of fee fee money to be made by tokenizing a lot of these assets that are just simply unavailable to folks that say don't have a Coinbase account or a Phantom wallet.

So I think, again, directionally, this is super positive. I actually hope the Ethereum folks get a solid win out of this one. And we'll see who's next. Because once the news is already here and it's live, yeah, we can like, you know, pontificate overflows and this and that. But it's always what's on to the next one. It's not just who has those accounts. Like some institutions, some people literally are not allowed to invest in the direct asset.

And by wrapping it this way, it allows you to get access to it. So, like, there's that whole other world of, like, capital that, like, theoretically, I mean, yes, theoretically, you could change the documents and make it so they could invest in these things to some point down the line. But, like, wrapping it an ETF wrapper, putting on the trad by rails, means that they don't have to go through that long, argument's process, and they can just click by in their brokerage account. No, I just wanted to say that I'm, I was actually surprised that Solana.

I am surprised if Solana hasn't outperformed by a, um, much larger amount. I mean, it's kind of like in line with, it's slightly well bit to see in line with this. I'm talking about since the Trump news, right? Because one of the first thoughts I had when I saw when it settled after the assassination attempt was like, okay, this is guaranteed

a Solang ITF coming next year. So, and a lot of people had the same thought, right? So I would have expected more of an outperformance there. Well, I mean, on a relative value, it is, not by much. It didn't have like a giant gap up against Bitcoin or Ethereum, but it has, it has, over the past couple days since the assassination attempt outperformed ETH and Bitcoin.

And to me, it's actually not a surprise that it's slightly outperforming because this is the beta in the market that you can get. And it trades, you know, the realized fall on Solana is what Bitcoin used to be. And so, you know, punters love trading this asset relative to something like Bitcoin. coin and Eath and I think that shows up a little bit in the RV there. Yep. Changing subjects slightly something I wanted to bring up that I was forgetting. It's back on macro and more like equities is market breadth.

Basically market breadth is a number of stocks that are participating in the move in the market. And it's something that like last month, especially last week, actually last year, and especially last week, it became deafening, basically. The view there, what people believe is that if market breath is very low, that is extremely varied, it means that the rally is fake, to put it in a way. And we're due for a large correction. And two thoughts there. One is basically the counter to the view, which is basically market breath, when you have such a move of being driven by AI and investment in cloud and data centers and etc. Market breadth is supposed to be low because the story is AI.

That's the story. So, like expecting that the rest of the economy to perform more or less in line with AI, given that what's been happening, it's foolish in my opinion. That on one hand and on the other, the other thing is this changed on Thursday with inflation print, where the Russell had a move of over 4.5% the Russell is a small caps index. At the same time, the NASDAQ dropped 2%. So it was like a really remarkable divergence between large tech and small caps. So we're kind of like getting that breath back in. So people who are bearish are losing an argument that for them was important. And the other thing is Trump, you could argue that actually part of the Trump trade is bullish for small caps because of basically lower taxes, the regulation.

things that he would be pushing would be all in more favorable. Not saying like it drives a trend, but it's more favorable in relative terms for small cabs and large tech. And we can actually see these price validating this view. If you look at what happened today, again, the rass of this up 2%. And NASDAQ is 70 beeps. The SMP is a point four. So this is a real thing.

And if small caps outperform market breadth improves by definition. So this is something very positive, I think. Yeah, one thing I'll add on to that. I saw something from Bank of America's global research team put out last week as it relates to market breadth. Q2, so when we get earnings for Q2 in the current quarter, Q2 is expected to be the first EPS growth quarter for the other 493. in the S&P 500. That's a huge change because it hasn't been that way for a number of quarters.

Now, couple that with the CPI print, which, you know, let's be clear, small cap companies versus, say, large cap or even mag, mag seven, but certainly small caps, they're actually constrained by high interest rates because there's the ones borrowing money, whereas Apple's corporate treasury is shoving billions of dollars in the T-bills, right? They're making money at a very basic level, whereas small calves are constrained because they have high borrowing costs. And so if we're already seeing at least estimates that the second quarter is going to be the first growth quarter for earnings for the other 493, plus on a technical level, I don't have the chart to share with you guys. There's a huge breakout in Russia.

Massive, massive, massive breakout. And it's what a classic, what they call a gap and go because a lot of people, myself, included like to see gaps get filled. This is one of those where it's just going to run. And it has a lot to do with interest rate sensitivity of small caps. Something interesting there to add is on rates, like there's a lot of concern as well on commercial real estate. It's been the case for two years. Again, one of these deafening narratives like people thinking this is enough to basically tank everything. And companies on commercial, doing commercial real estate, they get funding on the short end of the curve up to say three years.

So even in a scenario of a steepening yield curve where basically, let's say, short yields, short rates go down, long rates go up, long rates going up is bad for residential, yeah, mortgages, and short rates going down is good for commercial real estate. So we may be at the beginning of seeing a trend change on that part of the world. Yeah, I mean, you have two options here, right? Either the ones that we're leading the Magnificent Seven with you, Willie, they either, I mean, you usually have some sort of a vergence to mean. So either they collapse and fall down to everything else, or this is my view, or you kind of see what we're seeing right now, which is where everything else kind of

starts to catch up a little bit and show some market breath. and I guess we'll know in the next few months or how that actually plays out. Before we move on the Bitcoin, let's do a quick prediction going back to Ethereum real quick. So Bitcoin ETFs took in about $15 billion in their first six months. We'll go to you first, Jack. If you had to put a number on that, so my one way to one number to throw out there is that Ethereum is roughly a third the size of Bitcoin. What percentage of $15 billion do you think that Ethereum of ETS will get in their first six months?

And I'll give you some other numbers. So bitwise, threw out an estimate they said $15 billion in the first 18 months. And then Galaxy Research, our friends over there are staying. They think 25 to 50% of the numbers that the Bitcoin ETS have done. So Jack, just throw out a number, a percentage or a dollar amount. What do you think the Bitcoin ETS are going to do in, I don't know, the first six months or so? Ethereum ETF. Yeah, I'd say in the first, I'd say slightly, if the ratio holds, I'd say slightly below.

So anywhere from one to two billion in the first six months seems right. I think a lot of these groups, I'm not sure, James, you'd know better than myself about how the seeding of these ETFs works from the issuers themselves, how much they seed it with and whether that counts towards the total. But it seems like, you know, slightly, slightly less on a percentage basis than Bitcoin. would be normal because it has less brand awareness. It's the second horse and doesn't have staking rewards, et cetera, et cetera. But that's just, you know, shot in the dark guess. Joe? I think we'd do about 20%.

I'm in the same. That's my number. 20% is my base case. I'm 20 to 25. My boss, Balchionis is a little lower at 15. Kruger, Alex. What do you think? 20 to 30.

Okay. Yeah. We're all pretty much in agreement here. Which is good. You know. Yeah, I mean, I hear a lot of people like screaming like, why won't this be more? Why won't this be the Bitcoin ETFs? The one thing I would say is one Bitcoin ETFs, the biggest launch of all time. I mean, even if we, so even 20% is about $3 billion, right? That still would be an absolutely massively successful ETF launch as a group, potentially the second best ETF launch I've ever seen. So it's still, we're still talking about like stuff hitting home runs. It's just like people if I think I got accustomed to the Bitcoin. The one, the one positive I will say, is I don't think we're going to see the same level of selling in ETH that we saw for GBTC. So ETHE and Grayscale are working on their mini Ethereum trust, which it basically is going to spin out 10% of ETHI into this trust. We don't have the Fuseiide.

It's going to be really low. And I think it could happen right around when these things actually launch. So it could be coming next week because basically they have a record date for when these things would be spun off as I think today or sometime this week. So it looks like they're going to launch their ETHMITRust and they learn from the mistakes of GBTC. So we'll see where they go with fees on that front. But there's also just not the level of like bankruptcies that are stuck. We don't have one estate with like $2 billion in ETHE like we did for GBTC that are going to dump and go to cash and distribute of shareholders like we have with FTCS and a few others. So there are like some nuance positive catalysts, but as Jack kind of hinted at, like if you're giving up a 3% yield on staking, that's almost like having a 3%.

set fee and who the hell wants to do that. And the only people I think would want to do that are people who literally just don't either don't have the ability or are not allowed to access directly. Yeah, there's $400 billion market cap for Ethereum. So one percent of that would be four billion. So, you know, probably your your three billion predictions guys is more reasonable than mine at one to two in the first six months. Yeah. I mean, EVEE specifically Gracefield's product is around nine billion assets right now. before it converts. So we'll see what that looks like.

Ironically, with GBDC, they lost like almost 50% of their assets, but, or I should say their shares because their assets are higher than when they actually converted because Bitcoin has rallied so much. All right. Anyone, anyone, anything to add on ETH before we move on to Bitcoin real quick? Well, I'm just saying, I think it's a, I think we should move on to the Bitcoin selling because you mentioned no one's going to really be dumping ETHE, but they have been dumping Bitcoin.

This is near and dear to your heart. you kind of touched on it earlier. What's your, what's your latest take on Germany, Mount Gox, Genesis, you name it. Well, Germany is done. Cox is about 15 billion. Of the 15 billion, say,

of the 15 billion only thing is nine, nine get distributed early. And of those nine, let's say, 30% get sold. But they get sold, they get sold through time. So first, we don't really know how much is going to get sold. Secondly, it's not all at once. So it's going to be spread out.

So I really don't think we're going to see anything alike what we experience with Germany. Of course, I have to say, full disclosure, yeah, the Germany thing called me by surprise. But I don't see this, that happening again. I think that what we just saw is a trend change, a major trend change, and we just continue higher. Yeah, I'll add to that. the German selling. I mean, of course, they do it in thin order books on like holiday extended weekend, just brutal for, for holders. But I think this is also part of the reason why try to time this stuff at a very micro level is very difficult because if, for example,

you were waiting for it to get to 50K, which I saw some people clamoring for, well, oops, We're trading almost 64K today. And instead of just wearing the P&L and recognizing that, you know, there's going to be pullbacks in these markets, these order books are super thin. Even though it did, you know, break below 60 and held down there, man, in hindsight, it's going to look like a really great opportunity to have remained long or gotten longer. And I also think that, you know, there's still going to be, there's still going to be more things that are always going to be coming. I was talking with my trading partner about this. He's like, man, once the Germany thing and the Gox thing is done, there's no supply overhang.

I'm like, there's always something. And the next thing is the Genesis selling. So Genesis trading has a few yards of Bitcoin. One thing that I think is, that I learned today actually about that is that those distributions are actually in kind. So they don't actually have to dump those on the market. But people are rightfully shell-shocked from what happened with the German government selling in the Gox News where they see a headline like that and they're like, oh, shit,

here we go again, right? I don't think it's going to be as impactful. So I do think, you know, to Alex's point, big trend change. Some of this other stuff I think is more manageable with respect to the way that this Bitcoin supply hits the market, particularly the Gox stuff. And I don't think the Genesis thing is going to be as serious as the folks on Crypto Twitter want to make it out to be. Sorry, guys. Just one quick thing here is on the numbers I mentioned earlier.

So this is something I wrote what was it like nine days ago. Basically, Gox has 141K coins, Bitcoins to distribute. Of those 95K going to be distributed within 90 days, which are basically going to those who elected to receive an early distribution with a 10% haircut. out of those 95K, 20K are going to credit funds, 10K are going to a New Zealand exchange that is entangled in its sound bankruptcy process, so it won't hit the market, 65K going to the individual creditors. So that's 85K within 90 days, let's say 30% gets sold, that's 25.5%.

That's about the same as Germany. but spread through time. So that's why I think, yeah, it's important to be aware of this. If you're trading short term, you definitely can make very good money by watching the MMPL and trading alerts 100%. But I would be very surprised if this actually changes the trend and we go down rather than up. What do you think is next for Bitcoin here, given all the conversations around government selling Gawks? etc. Yeah, I think I think really the past couple months is real, it was just making sure that the,

the, the, the, the, the, the market, you know, is, it wasn't over. And the past three, three days has shown us that it's, that it's not, that we're still somewhere in this, in this range. And so people, I think, should, you know, take, take solace in that and, and feel, feel comfortable. And as you said, Bitcoin's even performing in line with, with projects like Solana and Telegram, the past week. So there's clearly a lot of larger pools of capital that are still attracted to bidding it in the 50K

range. If Trump does become the next president, I think that's it's hard to underestimate how how positive that would be for Bitcoin and crypto at large. I'll actually take the under on Alex's numbers because I feel like, one, it's laughable that they're calling it early distribution considering the bankrupt. He started a decade ago. People had Jeanne and I heard already get their money out of that. That was like a year ago.

FTCS is almost not early. It's just laughable there. But also, like, those people had plenty of time to sell out. There was plenty of different funds out there willing to buy at discount. So if they didn't want to get their Bitcoin back, they could have taken cash like long ago. So I think, I think honestly, your numbers are probably a little high in my personal opinion, but who the hell knows? I guess we'll know in the next few months.

But yeah, I just wanted to throw that in there real quick. Yeah. I mean, the thing I was going to add to what Jack was saying is to go full circle back to politics and we can't avoid it because it is directly associated with what's happening with Bitcoin and crypto. If Trump actually does end up getting reelected, which it seems likely that he will, we've seen some rumors out of China about unbanning Bitcoin and crypto. And this is, you know, this is kind of,

Jedi mind trick, 40 chess if you want. But the Biden administration, for whatever it's worth, has done a pretty good job of, what's the word I'm looking for to be diplomatic, kneecapping China from a trade and economic standpoint. And it would almost be, you know, poetic for Shishong. Yeah, sorry. I always mispronounce his name because my Chinese.

is terrible. For him to actually come out and be pro-crypto, kind of as a wink and a nod to Trump. Now, I am very much pinfoil-hadding this right now. Like, I'm not suggesting this is actually the case. But if you look at the Biden's effect on China's economy, it's been pretty impressive what they've been able to pull off. And it's not crazy to think that,

If he wants to align himself with Trump now or now-ish, maybe this is a wedge into that that could also potentially accelerate and reignite some of their economic woes within the country. Or it's respect to the game theory of different countries adopting crypto, where if U.S. is now suddenly pro-growth, pro-innovation, pro-crypto, it would be, they need to compete basically a little bit more than just an outright ban. on trading it or buying and selling it. And it would be a way for them to just stay basically in the game if we're going to be reshoring in the U.S. a lot of innovation and capital that's been driven to offshore exchanges and talent that's been driven to overseas territories. Yeah, right now it's mostly just rumors.

I saw David Bailey, who's the CEO of Bitcoin magazine, talking about it today on Twitter, saying that he thinks Bitcoin trading in Chinese currencies is going to be unbanned in the Q4 of this year, maybe your early. I know that's tweeting about it. So this is a rumor that's going around, but I haven't seen any really like truly substantiated facts about this happening, but obviously it's interesting for all the reasons that Joe just mentioned. Alex, you have any comments on this?

You're not going to happen. But if it happens, we go in a single four-hour candle to 200. No, it would be insane. Like remember what was the G candle? of 2019. We went from, what was it, 7.5K to 11K in a matter of hours. That was beautiful. Yeah, well, Alex, you just got to believe, man. You've got to start manifest. Speaking of believing, which I'm surprised it didn't even come up at all. For those that don't know, Alex is Argentinian. Argentina just won Cuba America last night.

congratulations Alex. I'm sure you were up watching it. Thank you. I was screaming out of my lines. Trust me. Yeah. Yeah. Did you watch it at home or you had a bar when they, when they scored that, what, 112th minute bowl or whatever? Yeah, I was at a bar. I wanted to go to Miami, actually, but it was a very long, very long trip for just a few hours in and out. So, yeah, yeah, it was epic. Yeah. We now have a... Like two back-to-back Copp Americas with a world cap in between. It's one of two teams who's ever done it in history. Yeah, amazing.

Congrats. Well, we're going to wrap it up now. Thanks for joining us for this episode of Bits and Bips. We'll be back in two weeks to discuss more about how the worlds of crypto and macro are colliding. Until then, talk soon. Thank you, guys. Talk soon. Cheers.

Thanks.