Unchained - Bits + Bips: Trump Will Soon Be President. Where Will Bitcoin and Crypto Prices Go? - Ep. 761

Episode Date: January 8, 2025

Bitcoin crossed the $100,000 mark, only to slump back down on Tuesday, sparking debates about what’s next for the crypto markets. In this episode, James Seyffart and Alex Kruger are joined by Charles Edwards of quant fund Capriole Investments to break down the macro trends shaping Bitcoin’s trajectory. From Trump’s inauguration to the Fed’s looming decisions on quantitative tightening, they analyze the key factors influencing risk assets. Plus, they unpack the premium on MicroStrategy’s BTC holdings, the future of AI agents in crypto and whether AI agent swarms might someday hire humans, and their bold predictions —supercycle? SOL ETFs?—for 2025. Show highlights: 01:54 Why bitcoin broke the $100K level again 07:28 How the markets will react to the inauguration of Donald Trump as President 19:09 What factors will affect the Fed’s next decision on rates 26:38 What the premium of MSTR to its BTC holdings should be 34:37 Why they all hate the current version of AI agents 43:19 Why Charles likes Ethena and ENA 45:49 Alex’s and Charles’ thoughts on what to expect in 2025: supercycle incoming? 50:01 Alex’s analysis on the market corrections and what they teach us 57:34 Whether James believes the spot Solana ETF will be approved this year Hosts: James Seyffart, Research Analyst at Bloomberg Intelligence Alex Kruger, Founder of Asgard Guest: Charles Edwards, founder of Capriole Investments  Links Capriole Investments | Update #58 MicroStrategy just bought another $100m in Bitcoin on path to $2bn spree – DL News With AI Agents Now Trading Crypto, What Does Their Future Look Like? Learn more about your ad choices. Visit megaphone.fm/adchoices

There's a lot of uncertainty with all these things trump, the fared and rates and things, but most of the uncertainty is skewed to the upside. Like you say, if there's a change, it's probably going to be positive. It doesn't have to happen, but it does set things up very well. And as you say, equity is going to and risk on attitudes across Tradfire are going to drive this. So if it's positive equities, Bitcoin crypto is just going to be, you know, double or more. Hi, everyone. Welcome to Bits and Bips, exploring how crypto and macro collide,

one basis point at a time. I'm your host, James Safer, Tradfai Archmaister, Lord of Bloomer's End, here with Alex Kruger, Kruger, Macro of House Asgard. Today, we are also joined by Charles Edwards, sage of strategy, and sovereign of Capriole. We're here to discuss the latest stories in the worlds of crypto and macro. Just remember that nothing we say here is investment advice. Please check Unchained Crypto.com slash bits and bips for more disclosures. All right, guys, Charles, before we get into it, why don't you give us a brief background on on who you are and what you do in the crypto industry. Yeah, sure.

Thanks, James. So I'm, yeah, founder of Caprioli investments. We've been running primarily Bitcoin trading strategy, investment strategy for the last coming on six years now and managing the Caprioli hedge fund. We also, yeah, it's primarily quant strategy, Bitcoin, alts, but also in last year or so, we've been getting into equities as well. You know, one thing here is I remember. Charles, I think it was 2019, you started with an index for tracking energy costs, right?

Yeah. The cost of producing Bitcoin was very good. Yeah, yeah, exactly. Yeah, Bitcoin production cost or that may have been Bitcoin Energy Value index. Yeah, that wasn't 19, right? Yeah, exactly. That was one of the earlier metrics. Yeah, still use it.

Awesome. Let's get in. So we're recording this on Monday, January. you're six. And I mean, really, first thing we need to show out is Bitcoin price. I mean, obviously, it's been trading around that 100K level. It dipped into the low to mid-90s. But as of early this morning when I woke up, it was trading 98, 99. And then like literally in one candle, it went up to basically 102K. So one, I mean, do you guys have any thoughts on what sent that candle rocket? I mean, honestly, obviously it could be just liquidations and what have you. So I don't

know if you guys have any special thoughts on what's going to happen. Do you think we're going to stay? Is this the last time we were under 100K in 2025? Alex, what are your thoughts and prices? It was meant to happen pretty much. In my book, round numbers are meant to get round over. People put their stops there and eventually once it breaks, it runs. You could see basically like there's if you're looking at order books and liquidations, you have very easy liquidations up to one or two, which is exactly what happened coincidentally. And then there is some big walls that start in around 105, 106. So the way I see it is just the market being the market, nothing special happening, to be

honest. Just add to that fair point. I had a bit more of a bearish or neutral macro view and we're in the mid-90s, and we were sized pretty small for the last few weeks, especially over the Christmas break, and given long-term holder and on-chain selling. But the last couple of weeks, we did see the order book, especially on the bid side, really step up to an extreme, which doesn't usually happen, or maybe once, twice a year sort of thing.

that usually forms a bit of a low. Yeah, we saw a few other metrics as well, like premiums, spot perp premiums kind of skew pretty drastically and stay in a stretch spot. So spot leading perp markets for the last couple weeks, also cross continents. So Bitcoin and Binance and Bybit perps trading below Coinbase, for example. So when those things, and you get several of them come together, you can get kind of short-term pumps in the opposite direction as the markets come a bit offside. So it was obviously a bit too bearish before and now it's kind of bounced back up. I didn't think before Christmas that we should have lost 100K, given all of what the buying action was happening, sales deploying billions a week, the ETFs, etc.

And given where we were in the ball market, I thought we should probably hold that level, maybe bounce on 98 and keep going. And we kind of lost that as I wrote in our newsletter about three weeks ago, it could get ugly. And it kind of dipped down to 91 and now we're back above 100. So I'm really happy that especially the weekly closed above 98 yesterday. And if we can hold 100K here, I think that's great. So 100K is really the level we want to stay above to have the ballmark in full swing. And it's looking like that's the case so far. so let's hope we get a few closes above here.

On the FOMC three weeks ago, right? I think it was the 18th Wednesday, whatever the day was. The hawkish cut? It was a hawkish cut. It was like a lot of people were saying, like, what was it hawkish about it? He's actually bullish on the economy, et cetera. And I had a hard time. I got very right during the FOMC, like in real time.

And I had a hard time actually pinning down and explaining exactly what it was. It was something in his tone. Like he was really, he felt very nervous to me. When that happened, actually, like, it's interesting. You mentioned 98K, Charles, because actually my view was down to 90K. We're there for a few days back up fast. And it took two weeks, right? A little bit over.

So it's been a long, long two weeks. Yeah, I suppose to be part of that Christmas and New Year's we're talking about. That's kind of a week where most of us shut down. I think all of us included probably. And yeah, I think with the big thing with the FMMC that you just mentioned for me is that the forecast of where the rates would go from their behalf just climbed up quite a lot. And we'll now look at one or two cuts next year instead of three or four or whatever the market was pricing at the time.

And then there was obviously a bit of a hawkish reaction from that. And that obviously helped drive us lower as well. But obviously where we are now with tenure over 4.6, well above the Fed's, you know, target FMC rate, FFED funds rate. And given that they are still planning and cutting next year, maybe it's only one, maybe it's two, it seems pretty skewed on the bare side of that, if you will. So I think maybe the market's a bit too bearish in terms of rates and the Fed at this point now that that pricing in has happened. But let's see. All right. Let's get into, I guess. I mean, when we, when we were talking about the election, it was always, there was a lot of

rumors of people talking about this. I mean, I remember Alex, the night of the election, we recorded an episode essentially, or it was like the day right after. And Alex was like, just buy everything essentially. I guess my question would be, do you guys think the, there was a trope, you know, buy the election, sell the inauguration. We're a couple weeks away from Trump actually taking office here in the U.S. What do you guys expect in those coming weeks? Do you kind of think there's going to be a buy the election, sell the inauguration type of event? Or what are you, what are your guys' thoughts here? I agree with the first half by the election when the problem really started climbing on the day that Trump would win and, you know,

went to 60, 70 percent. At that point, it was, you know, pretty convincing and that was a massive opportunity. I don't necessarily think it's to sell the inauguration. I just did a newsletter yesterday on primarily just focusing on macro, the economy, so bonds, equities, sentiment, etc. And it looks like this should be a great year from that perspective. The economy is really strong. The bond market's suggesting risk on still.

Sentiment's getting pretty bearish, not extreme, but on the, you know, below normal side. So things look quite well set up here. And then generally in January, if you've had a poor end of the year in the prior year or a week last few days and you usually get a strong start to the year, so we're kind of seeing that as well. But obviously there's a ton of uncertainty in the coming two, three months with Trump, right? Like we don't know the details of his policies. We've got a rough idea. He wants to do tariffs. He wants to cut taxes. You know, cutting taxes, are going to be great for the economy, tariffs. We don't know the extent of it, how much you can actually implement what the percentages

will be. If they're severe, that could be inflationary. It could drive up costs. But if they're just moderate or they're slow-paced or maybe they don't get through in some format, it all has a very different impact. So I think broadly there's a lot of uncertainty. We'll see a lot of volatility probably in Q1, Q2. But I'm net bullish on all of that because I think Trump at the end of that he measures

is himself and performance off stock market. He's often tweeted, you know, look how great stock market's doing under my leadership type thing. So I think he's aware of all that. The tax cut is going to be significant. You know, it's a 29% drop from 21% to 15. So there's a lot of things like this which set up bullishly. And then at the end of the day, you know, improving efficiencies from Doge across the

government and allowing, you know, the business sector to do more, which has been a big vein of obviously Elon's existence, the number of regulations they have to meet. I think that will net help and attract business. I talked a lot of people also around Europe and the UK and they're like, man, I'm thinking about going to the US just because of, you know, it's all these positive changes, which may take years to implement, maybe doesn't get a lot of what he wants done, but in terms of business and entrepreneurship, it is a really attractive movement. So, yeah, people probably under forecasting the GDP benefits, I think, of the next few years. But, yeah, again, tons of uncertainty.

If he puts up insane tariffs, then the effects could be a bit the opposite. But on balance, I think it should be really positive. Yeah, I mean, I'll say, so like, I have very mixed views. I mean, my problem is like it's, if I think about risky assets, I tend to think about crypto's and Bitcoin. I throw up in there. And you look at the S&P 500, the last two calendar years. I think 26 and 28%, something like that, back to back, mid to upper 20s percent returns in

calendar years is, I mean, obviously it comes off of like deep recession following COVID and the correction like of supply chains and whatnot. But I just wonder like, can those types of like positive returns continue for specifically risk assets? And I know equities are different from other things. And equities and risk assets are not the economy. The one thing I would say is the economy looks like it's roaring. But Anna Wong, the economist at Bloomberg, he's pointing to a lot of things showing, like,

there is a lot of data softening in employment and labor. Basically, people are unemployed for much longer periods of time. There's not the same amount of jobs. Like, for a while, the labor market was so tight. People would be unemployed, and then they'd find a job, like, rather quickly. And the length of time that people are staying unemployed is getting much, much longer. Obviously, the numbers are still pretty strong. Like, our unemployment numbers aren't too bad.

But I think that's kind of the stuff that, you know, Alex, you said, I think that's kind of more what Powell might have been worried about. And he's obviously also worried about re-ignition of inflation due to, due to tariffs some of the things that you were just talking on Charles. Like, I don't know. The trope with Trump, and I've said this on this podcast before, is like, you know, take Trump seriously, but not literally. Like, I don't know how much of this stuff that he says he wants to get done. Like, I bet a lot of it isn't going to get done in the exact way he's talking about. He's starting from a point of where he wants to negotiate and he'll end up somewhere. I hope he doesn't, like, from my personal view of the way that I think of

tariffs and their impacts, like, I kind of hope he doesn't get across a lot of the things he wants to do. I mean, I guess it makes sense in some regards. Scott Bessent, like a lot of the interviews I've seen from him and stuff, I listen to a lot of podcasts. He's now going to be a treasury secretary. I hope he's going to have a lot of input because all the podcasts and things I've listened of interviews from him over the past year and a half, like, I love the pick of him to be running treasury sect now. So, yeah, I don't know. I'm, I was very bullock. going into 2024. And I just feel like things have been too good for too long in the markets right now for

investments. So I'm just like weary. I don't feel the same super optimistic way that I did. That said, I am pretty optimistic for the crypto markets and Bitcoin specifically just because of how positive Trump has been on the campaign trail and all the things that him and the people around have said about the space and anything to do to stop the animosity we've seen from the government towards this space over the last year plus, it's positive. Yeah, for sure. Just to add to that, a few things from packed. So I think unemployment is obviously

a big lever to watch. At the moment, it's still strong, but it does show signs of bottoming. If you take out, you know, a portion of the illegal immigration and assume, say, half of them were unemployed, that rate drops, you know, a little bit. So it's not necessarily outside. But there's also, it is a bit of a gray box because we've just found out this whole year of 2020. before that all of the numbers that came out of the Biden, admin were basically wiped out. So, and false. So it's hard to know, but it is a risk sign.

I think obviously jobs and inflation are the two main factors that powers monitoring and will adjust accordingly. On the other hand, if the unemployment does go up, that could be good for things like Bitcoin, at least when the Fed starts, you know, easing more because they will ease more if jobs become under threat. And then in terms of the length of bull, in terms of equities up two years a lot, definitely important. They're not, you know, they're not undervalued here. They're in higher levels of valuation.

But you just have to look at the kind of the underlying data. So corporate profits, personal income, they're all just trending straight up with great strength. And AI has obviously been a factor to that, which will probably continue. and the ball markets and equities can last many years much longer than, you know, in crypto we're used to one year and then devastation. So I think that that does condition, condition us a bit that way. So, yeah, if that data changes, I'm happy to change. Basically, I just play the data that's in front of me.

And right now, unemployment could be bottoming, but it's still relatively strong. And the other aspects of the economy look very good to me. Those numbers you said being thrown out by the Biden, what did you mean by that? What were you specifically referencing? The employment numbers that we've seen throughout the year. How they keep reverting it. Yeah, they basically all reverted. Yeah, yeah, yeah.

Alex thoughts. So first is the SELD News, right, SELD the inauguration. I think that may have made sense, similar to what Charles was saying, may have made sense in the absence of what we just went through. which is a very, very considerable deep in both equities and Bitcoin and crypto, right? So the fact that we had a hawkish FOMC changes things. Risk cleared, I do not think is going to be a seldom news at all, to be honest. Unless, of course, we go crazy in the next two weeks, if that's the case, yeah,

or in the next 10 days, whatever, 12 days. But if that's not the case, I really don't see it. And what I do see is a lot of people talking about it. because it's become a dominant narrative in the mind of the crypto trader. On something else that was mentioned earlier, on rates, there's only one cut priced in into H1 right now because of the Fed. That's nothing. So the risk is 100% to the upside.

So the risk to me is that the Fed goes dovish relative to what's priced in in Q1 and equities ramp up. that that is more likely than the opposite in my opinion, which also makes it hard to be thinking of a cycle top or even a top for Bitcoin in March. Because if on March, in March the Fed goes dovish and the S&P goes up 6%, what's Bitcoin going to do? And I like in line with an extra puncher, right? Yeah, that's exactly it. I think there's a lot of uncertainty with all these things Trump, the fared and rates and things, but most of the uncertainty is skewed to the upside.

Like you say, like if there's a change, it's probably going to be positive. It doesn't have to happen, but it does set things up very well. And as you say, equity is going to and risk on attitudes across Tradfeyer going to drive this. So if it's positive equities, Bitcoin crypto is just going to be, you know, double or more. on on like the broader market like on to my head I would say I would say S&P up slightly above average the average returns of the S&P total returns about 13% so I'd say definitely smaller than prior years but a slightly above average because precisely of the of what I'm saying that the risks are in my opinion to the upside and because of Trump's obsession with the stock market and the change I

really expect that he's going to bring and I hope to be right. That said, like another way to think about it, the Biggs right now is around 16. I think we go end up back down to 10. Bigs down, equity is up. When is the time to start taking profit if you are, if that's your style, which is mine. It's basically once the Biggs goes down to 10 and stays there for a while and we go into this mode of, okay, everything is great. Nothing bad can happen. And then what it doesn't mean something bad is going to happen. It means something but happens. We're fucked.

That's what it means. Yeah, that's true. We haven't had those vibes yet. Like we've seen at least from a crypto's perspective in prior cycles where everyone's like, it's up only forever, super cycle. Like we haven't, those vibes haven't kicked in. And that's when you want to be kind of taking some risk off. So yeah, I agree.

Real quick on rates before we let's let's stay here with what the Fed and other central banks you're going to do. So Alex, you kind of hinted at it. The Fed, I think they signaled that there was going to be two cuts in 25 after pricing for however anymore. The market right now is pricing for a cut around June or July of this year again. And then there's like a 60% chance of another cut before the end of the year. Charles, what is your, do you think the Fed is actually going to, do you think they're going going to get two cuts in 2025 or do you think we might actually be done here?

Where do you fall? Yeah, it'll depend on a lot of things. primarily jobs probably. If jobs are still really strong, it gives an unemployment stays roughly where it is, gives the Fed ammo to continue to hold steady and try and fight inflation, which is becoming less and less of a concern,

but it's still somewhat high and they want to get it down to two still, so about a percent lower. It'll probably come down organically, even if they cut one or two times, but it depends on these other factors. And also on Doge, right? So what Elon does, you know, if they completely slash employment across government,

that could create unemployment as well. It depends how effective they can and be there and how long that takes. But I think Jobs is the key thing to watch here. As long as it remains strong, you know, the rates will remain relatively high. But, yeah, I expect it will start to creep up unemployment. over the next year. That will probably quite possibly be a growing concern later this year. Not right now, but later this year.

And yeah, I think we will see at least one cut this year and quite possibly more if that risk does skew up as Alex was talking about. Oh, the same thing. It's exactly that. It's too little cuts pricing now. It's basically a probability of what? What is it? Like, it's, I'm looking at it right now, 15.9% probability of unchanged rates this year.

35% one cut. It's nothing. It's too easy for something to happen on the Fed turnaround, for the Fed to turn around. Yeah, so all of a sudden they start signaling a bunch more cuts. They're going to send risk assets through the roof based on the way the markets are pricing rates right now. The other thing is Trump will probably pressure it, whether, you know, how much impact he has there. But he has said before rates are way too high. They need to lower it, you know, whether you agree with that or not, right?

And probably most people at the Fed wouldn't agree with what he wants to do. But he will be applying pressure either directly or indirectly to lower. Yeah, I would also say, like, I think it makes sense for the Fed to stop solely because, like, what is Trump going to do, right? Like, if he's really going to institute a bunch of these tariff policies, and a bunch of those other stuff that could be like pretty seriously inflationary. And the Fed is cutting into that. Like that's the last thing you want.

Like we had the Fed cutting into unprecedented fiscal stimulus that caused this inflation. We don't need like, you know, another similar situation or at least that's something I'd be worried about. But I also do think like the Fed's going to stop QT. Like they're getting near what's called. I'll have to about it on this on this podcast before the LCLR, which is the lowest comfortable level of reserves. Basically the Fed, like they need to hold a certain.

level of reserves in order to keep markets functioning smoothly and all these things. And they're getting to a level with their QT or letting assets run off, bonds expire or they're not selling anymore. They're going to have to stop that because they're going to reach that lowest comfortable level of reserves. Probably by the end of the first quarter, maybe in the beginning of the second quarter. So all of a sudden, QT is going to stop. China might be injecting.

I mean, I feel like we've been talking about China potentially launching a bazooka into the markets. And I don't know. Sorry, in front of China on QT, what basically QT does is increases volatility of interest rates, especially in the long end of long-term interest rates. So QT winding down, quantitative tightening winding down, what it's going to do is is going to help bring volatility of interest rates down, which helps people in the market to take more risk with a lesser probability of getting stopped out. out so they can lever up a little bit. And basically, it's just good for risk overall, anything. You're talking about more certainty, basically, so you can manage that risk. Yeah.

Yeah, exactly. Yeah. China, by the way, it's been a very bad trade for me. I'm long China. I'm down on China. I'm not very happy with China. I don't have anything. Moving on.

Alex is saying no talking about China. I mean, my only thing would say is, like, I feel like we've been talking for three months about a massive bazooka of quantitative easing or some sort fiscal stimulus, something's going to happen and nothing's really happening. So I guess, Alex, aside from what I just said, do you have any more complex thoughts on the topic? I think they will eventually deliver. They have to, and they are not doing it just yet. And I think it's coming.

So unfortunately, it's a kind of position where you just have to back hold. And if you got into that trade like I did, you're like a community member, crypto style. because really it's not eventually it's going to happen. So it's not unless you're levered up, it's not the trade I, which I'm not. It's not the trade I want to get out. Alex, what about the opportunity costs of crypto and other equities? Yeah, but I handle the risk between crypto and equities separately. Yeah.

So, yeah, it's not, don't have that that call. But yeah, it could be a trap. Charles, you're geographically much closer to China over in Australia. have any insights what do you think is going to happen over there the second largest economy in the world yeah not a lot to add um obviously there was a bit of a shift to the to the easing side um the dollars but with the dollar strength we've seen that's probably put that under a bit of threat for all economies globally right with the i think people underestimated how high and for how long rates would stay out for example from an australian perspective they're predicting some cuts um and

then as soon as the Fed talked a few weeks ago, they put pressure on a number of things, rates, but also the housing industry as well. I went down in December for the first time in two years, and we've got the strongest, if not the strongest housing industry in the world at the moment. It's a massive bubble probably. So, yeah, I think the whole world basically just responds to the Fed. They have to. How much is, if you would know, a square fit?

I'm not knowledgeable enough in that area, unfortunately. Depends. So I'm in Melbourne, but Sydney is even more. I think I read recently Sydney was the second most expensive city in the world now after something like, I think it was Hong Kong or something. Yeah, Vancouver and Canada is up there too, I think. Yeah, exactly. The leverage ratio here is comparable with Canada. It's like, which is beyond what the US was into the GFC.

So, yeah, pretty crazy stuff. But, yeah. Let's get into, so briefly, let's just, you can't like, I feel like every week we're going to have to talk about whatever the hell microsailers doing over at Microshattagery. So he did buy more Bitcoin this week. It looks like his 100 million, which is, you know, not nothing, but it's not as big as some of his other buys. You covered this in your market update today, Charles. I mean, do you have any complex thoughts on what sailors doing here or the move today and or anything

else in your market update that we didn't talk about yet that you want to get to? So for Sailor, yeah, I think as long as his premium to his holdings is really high, which it is, and as long as Bitcoin shows some strength, and it's above 100K, and as long as those two things hold, he can continue to raise a lot of money. That's why the whole newsletter update was pretty much about equities and macro, because if there was some kind of risk event that were to happen or equities were to struggle this year, again, not what I'm predicting, but that would put pressure on his premium, which would limit his ability to buy Bitcoin. As we saw on the bear market, for the couple years there,

he did continue to raise and deploy, but it was tiny numbers compared to the, you know, the multi-billions has been doing the last few months. So that's just a, it's just one example of how Bitcoin is becoming tied into risk markets and equities. And how, you know, just through micro-strategy alone, it can influence the buying activity in Bitcoin and our pricing. And that's just one small element of it. Obviously, we've got the ETFs as well, which are over 110 billion now and growing insanely of the last few months. You know, Bitcoin is a trad-fi asset essentially. So we have to consider all these macro elements. So I know you guys do, but a lot of people in crypto had been ignoring it. But it's just, it's probably the most important factor really now.

is this is a multi-trillion dollar asset. My question to you guys would be, so right now I think it's at like the premium is like somewhere around 2x like the value of the Bitcoin that he holds. I know plenty of people are saying that it's only worth like what it is like with a Bitcoin it holds. I think I could make a pretty strong argument that it makes sense to be trading at some level of a premium to the underlying Bitcoin it holds due to the operating business and his ability to, you know, take in that.

take an investment and buy Bitcoin. I don't know what that premium level is. What are you guys' thoughts on the premium level and how you think about the micro strategy premium? There should be a premium. Exactly as you're saying. The question is what is fair value? I don't know.

I haven't modeled it. This is something you can actually go and put into a model and get an actual number, which I haven't done. But it should definitely be positive, at least for now. Yeah, the premium should be positive. it's just a question of how much, I suppose. And that all comes down to how much Bitcoin do expect Saylor to buy. So he put out the 2021-21 plan saying I'm going to buy 42 billion Bitcoin over three years, I believe, a couple months ago.

I've been tweeting about that quite a bit saying I think that's probably going to happen in six months. And he's already, I think, maybe even halfway there in like three months. If not, it'll probably be halfway this month. So that's one and a half years of buying activity in, you know, three, four months, which is insane. And so, yeah, obviously, I think it's going to be a lot more aggressive. And if the market was pricing in 21, 21, as his plan, then the print, you know, it's just going to push the premium up further as they reassess that.

So, yeah, I did a tweet with a few scenarios. I'm just looking at it also depends on the Bitcoin price where you, you see their value, but the Bitcoin price and the premium, they go up together, he can buy more. So this is the perfect definition of Sauris reflexivity, right? Like if Bitcoin's strong and their asset inequities is strong and the premium stays high, they can buy more and then that, you know, updates what they can, what people predict they'll buy in the future and that impacts their premium. So if we have an ultra bare market, it will go back to one and possibly below, as it did just two years ago.

So people shouldn't expect necessarily the premium will always be positive, but for most of the time it probably will be, as it has in the past. This is a perfect example of two co-integrated variables that are not the same. Like usually, this is a term that is often misused. And usually variables that are co-integrated are basically like spot and futures or spot and perps. or the 10-year yield and futures or even the 5-year and the 10-year, things like that.

In this case, micro-strategy and Bitcoin definitely go hand-in-hand. And the driver is mainly Bitcoin, though the direction can be reversed, right? So, yeah, I agree. It's mainly about Bitcoin's price rather than micro-strategy in bull market conditions. In the bear market, it's going to be different.

Yeah. And exactly. So as long as you think Bitcoin's going up, you're probably going to do very well or better holding my strategy. But it also works to the inverse, right? As you saw when Bitcoin went from 108 down to 92 and micro strategy just collapsed as a chart. It looks a lot better now, now that we're back above 100.

So as you say, Bitcoin strength year will be a massive driver there. Quickly on the premium I wanted to add. Something I were thinking the other day is that the, the, premium eventually has to collapse very, very far into the future. And the rationale I was, I was going into was that no single party should have too much of the supply of Bitcoin or on any coin. Once any single party goes, gets too big, becomes veryish. Because it's like having Kima and risk. So the thinking here is that at some point in the future, we're very far from it. So, now supply, I think micro strategy holds around 2.1% of supply. It's a lot, but it's not insane. At some

point, once it starts getting closer to 4 or 5%, they would have to wind down their purchases, and the market would appreciate that that has to be the case. And therefore, they would start trading against it. I think that the pream collapse even before then, because if you go far enough out, I don't know what the number is, say, five, 10 years, right? At some point, they've accumulated so much Bitcoin and Bitcoin's grown into even more multi-trand dollar asset class, the returns lower. And a lot of their model is relying on high returns in Bitcoin over a five-year period, which significantly outweigh the yields they get in, you know, equities, bonds, etc. And that's where they can raise capital, more or less, very simplistic a summary of it.

But at some point, you know, we see diminishing returns already. going to continue. Maybe it's five, 10 years away that they reach some kind of parity, but at that point, they're not going to be able to raise as aggressively as they are. They won't be to buy as much, and the market will slowly forecast in that, wait a minute, the nav of the Bitcoin isn't going to grow, so the premium will start to approach one. And around that time, it could be many, many years away. They'll probably start exploring other strategies and obviously all of that will need to be considered to. Well, we know what those strategies. GAR. Sailor has said he wants to become like a Bitcoin bank essentially in many different ways

in multiple times in different phrases. So he wants to, we'll see what that actually looks like in the future. Let's go to a favorite topic of Kruger's here. AI agents and crypto. Laura just did an interview. She's done a bunch of interviews on this topic over the last couple weeks for Unchained. What's your take on on AA agents, AI meme coins, what have you in the space, Alex. Let's see. We started talking about this when Goetzee came up right in October. Since then, there's been a million copycats,

and I'm beyond mainly late October to the first week of two weeks of November. So right now there's a lot of, there's a few very well-established players going from A.E6 to Z-Ribro. What else? Elisa, which is related to AI16Z, virtuals, arc, and a graphene, a few others, right? Most of these things are absolute trash. I was going to ask you, what do you like about them now and where do you see it in the next few years? Well, I don't really like it at all now.

What I see is mostly it's promises of things that are going to happen sometime in the short term to the midterm that are very good, that I like to cover now. But what we're seeing right now is mostly basically just LLM wrappers. So like a chat GPT or Claude or et cetera or a lamma mold that is wrapped and plugged in into a Twitter account or a telegram account. And what we see is actually very low quality verbal diarrhea. That's what we see. Yeah. Like I guess like you have a large Twitter account.

Charles, I'm pretty, well, both of you guys. Okay, it's a good question. You get a lot of these guys on the replies, right? Can you, like, spot them from like a mile away? You see it's like, okay, that's a freaking bot. Yeah, it's an nightmare. Honestly, I hate it. I cannot stand it.

I'm like, I'm going to start block. I think I just need to start blocking them because it's good. Because they just regurgitate what you just said sometimes. Are they like, yeah, that's right. And then like, just read, it's annoying. just spam your replies, spams your notifications, spams everything.

And I tried to like... They lack randomization. If you look at what they're writing, it's very monotonous. They have a cadence of one, two, three. They do rhetorical questions that like normal people don't speak like that. Now there's a few...

And by the way, the big ones are... They just got early. There's very little difference between most of the big ones, like Cerebro. And the ones came after. They just got early.

This is an equally bad rapper with some variation on like creating some content. That is nothing extraordinary. Yeah. So my kind of thoughts are it's a lot like defy gaming of the last cycle 21, right? Where you had lots of games coming out with a token attached. And people like this is the future of gaming. I also saw some value there where you have a token in gaming. if you're in a big community.

The problem was that the games were just not good. And it's hard to make a good game. You know, these established massive companies doing it for many years to create good games. You don't just pump them out overnight, like we saw in the gaming then, and we're seeing in these LM AI agent tokens now. So it definitely could work in the future,

but I'm just not convinced it's this cycle. It feels a lot like that gaming iteration where you're going to get tokens absolutely pumped. Probably this year you'll see insane returns in AI agents, but none of those will be around or they'll be crushed probably in the next three, four years is kind of where I think that's probably going. That said, I do like the Goatsy meme,

not the actual meme in terms of the actual story because it reminds me of crypto punts, like the first NFT, whether, you know, whatever you think of it, it was like the first AI crypto token and that always carries some the first of any kind of sector in crypto tends to carry a lot more strength with time. Obviously it's up to the team to continue to improve and deliver to make that actually happen. But if, you know, those are the, if you're going to hold any NFT, you probably want it to be a crypto punk because it's because of

that, you know, first mover advantage. So yeah, that's my kind of, kind of, two cents on it. I've been very surprised at how poorly it's been performing precisely because it's number one. So it should have been, I would have expected it to perform via the forefront and it's been done, been doing exactly the opposite. So what I wanted to say on like where I think it's going, I think this is happening this year, by the way, not in three.

I think we're moving way too fast. and we're going to have some major winners in this very year. I think we're going towards basically high-functioning autonomous agents. That's something we're going to be seeing. We're going to be seeing what people call swarms, agent swarms or multi-agent systems, where basically agents are interacting with one another. There is, for example, a company called Spectral Labs. that they're basically working on a system where agents create companies that hire other agents.

And these other agents can be agents from any framework or any, it doesn't have to be theirs. It can be from anything. And if you think about it, agents are algorithms, so it's code that can work 24-7. It's fully scalable for as long as they don't have constraints such as compute or capital, either traders. So those are like two things are like the way to think about it is autonomous, decentralized agents. Right now they're all centralized. Agent Swarms and Agent Frameworks. And on this topic, by the way, I'm an advisor and investor and shareholder of a platform called Memetica.

Been working on exactly these launching agents. And at the time, actually, the agents we have, they're pretty much, they fit the description, very critical description I just made of the other guys in the market. However, these agents will soon have the ability to actually trade effectively on the market, manage risk the team behind it. They have a long history in Wall Street and market making. And you should check it out. the main one is called Big Swinging Dick, by the way. So, yeah. But yeah, that's how I see it.

I think there's going to be some major winners. I hope my guys are one of them. And in the meantime, most of it is thrush, sadly. Typical of crypto, right? Yeah, it's typical. The one thing I would add also, we were telling me how annoying those damn bots and the replies are, Laura Shin just had on Shaw Walters, who was the founder of Eliza Labs and one of the guys behind AI 16 Z and what have you.

And he basically said he hates that too. Like he doesn't want that to be happening anymore. So I hope like there's there's enough of like, I don't know, a hive mind reply to all these bots out there to like get them to stop like replying and posting such so much BS. That was just one thought I wanted to add real quick. Charles, do you have any thoughts on the AI agents? Just what I said before. I think it, yeah, the complexity. of fully deploying automated systems like this isn't to be understated and also

decentralizing. And you see it in crypto as well. Not much is actually decentralized. Solana shuts down like multiple times a year. So I'm just skeptical on them delivering anything significant this year. You know, long term being multiple years, yeah, definitely feasible. But yeah, I see it like I said, like gaming. defy like NFTs. It's the thing of this cycle. It'll probably do really well this year, but I'm not super convinced on how that will perform over the next two, three years. Any, by the way, any favorite names on the DFI side of things that you may have? I wouldn't, yeah, I don't know if I'd say favorite, but I do just DFI specific.

I do like ENA. So, yeah, I like the flywheel. Yeah, I like the flywheel effects of what they're doing. It just should be, if they do it well, it should be a sustainable long-term product that delivers value for many years, unlike a lot of the other stuff out there. And it's kind of simple and easy to understand once you get into it. So, yeah, that's something I think we'll stick around if they do a decent job for many years. A way for the listeners to think about Ina or Athena is, by the way, I'm a late guy on Ythina. I'm not a seed guy.

I'm not chilling a very early back here at all. It's basically what Athena does is it's putting on the short perps, long spot, carry trade and doing this in a way that it enables anybody to participate in that trade. You could say decentralized. It opens the door for anybody to put the trade through them, which normally, even though it's not too complicated, it is a sophisticated trait, right? It's not for everyone. It's kind of like the crypto version of micro strategy, if you will.

Yeah, good point. It kind of reminds me of an ETF. Like, there's so many ETFs out there that like just package, like, what you could do if you really wanted to on your own and you're just outsourcing somebody else to do it and they get to, you know, it makes things way easier. Never underestimate the, uh, the attraction of convenience for something. Just because you can do it or it can be done by somebody else,

sometimes more efficiently if you're really on top of it, a lot of people will outsource for convenience. And that's kind of the way I see that personally. And it's a pipeline that can just continue to take billions and billions and billions as crypto grows. So, yeah, there's definitely a lot of potential, I think. Right. We're going to wrap up kind of early.

But before we do, let's go back to what's something we were talking about in the beginning, I guess, like, let's talk about, like, what are your guys' outlooks for this year? I know we, Alex, you said you were, you were, like, mostly optimistic in equities and you were very optimistic in crypto in certain areas. Like, are we anywhere near a cycle top as far as you see it, Alex? Not even remotely. So, I think we're, I think that what happened is the introduction of the ETF and the flows, which are significant, they tie together and they make the correlation between risk and Bitcoin more

sustainable. So that's why I'm not thinking about a cycle top. And also I have to say, this is something I think about on a regular basis. The obsession with the top and the cycle that we have in this industry is incredible. You don't see this in any other asset class. And it's just because it's happened a few times in the past. It's happened quite a few times in the past. But it's not such a large sample size that we have. And at the same time, market conditions for Bitcoin, they are changing because the impact of the halving is lesser.

And we have the ETFs now. So I am on the super cycle side of things, which doesn't mean that we go up only. It means that we have shorter, for as long as equities do well on the economy does well, that may not be the same, but they're usually the same. We have smaller drawdowns that last for shorter. And lastly, the way to think about this is in bull market conditions,

usually what brings the market down is you get a trigger. And the triggers happen, and they're very, very fast. And the correction is very fast. And if you don't catch the trigger early, the best thing to do, if you're not like full on on the market, it is not traded. Because by the time you're aware it happened, it's too late. The last FOMC is a perfect example.

The entire correction took place in three days, four days, Wednesday to Monday, inclusive. That was it. Charles, how about you? Do you think it's a super psychic? Do you think we're never going to see another 50% correction? Yeah, this is the endless debate, right? Yeah, broadly super bullish on this. year, as I said at the start, everything kind of points to it being a strong year. But I'm a bit more

cautious and monitoring for red flags, I suppose, that could pop up in the next months at any time. And it's a trigger, as Alex said. It could be a significant Fed change. It could be some Trump policy. It could just be that micro strategy is just not capable of continuing to buy at the rate they want to. and long-term holders selling, you know, just continues. So that's something I'm monitoring. There's some on-chain things like that, which make me a little cautious, but not yet a cause for concern, I'd say. I think we've got at least several strong months ahead,

and broadly it should be a really positive year. At a kind of more longer-term perspective, I agree with Alex that drawdowns and things will diminish. a bit. We're just a much bigger base now. We are a tradfair asset. You've got entities holding this longer term, whether it be in micro strategy, meta planet or, you know, ETFs, etc. You've got things like Athena, which we touched on, which just suck up spot supply as well. So this asset will see diminishing volatility with time. And we've also seen that this cycle already. The dips are smaller than any prior ball market so far.

So the cycles will smoothen out, if you will. I still think there could be some measurable downside. But at the moment, things look really good for an amazing year, I think. By the way, 40% drawdown B. I know you have to go to Charles, but I just want to say quickly, 40% drawdown is it's a lot there. Yeah. It's better than 85.

Yeah. Better than 85%. Which is saying a lot. Thanks, guys. I better run. Thank you, Charles. Great having you. So, James, let me, let me, I think this is a good exercise.

Like, let's look at basically, like, corrections since the ETF came out, right? So the ETAF comes out, the news. This is October, late October 23, right? What kind of corrections we had since then is we have the early January correction which was basically a seldom news event, which in my opinion, it had like this improbability happening, but it was not dominant.

And what's the trigger there? Well, it's a seldom news event. And why? Because we go into the launch with a lot of leverage people that basically were highly levered long into the launch. So a correction without a trigger

that macro trigger makes sense. The next big correction, we get it in April, and that is like second to third week of April, or like the end of April, and that is driven by war in the Middle East. Again, it's a macro trigger. It's at the beginning is very fast, and then after the drop,

it basically cools down a little bit, gets people very nervous at the bottom and then we go up back up again. The next one is in July and that is driven by Mount Gox. Okay, not a macro trigger, but there was a

very trigger, sorry, Mount Gox, so that was Germany selling Bitcoin and I had a lot of Bitcoin. Yeah, yeah, that's right. We could see the Bitcoin. It's like these guys are fucking selling. They dumped it down to like into the low 50s, I think.

Exactly, yeah. And they sold in the weekends, like in like crazy. Yeah, it was weird. Yeah. That was down to 53s. Then we have the first week of August that was very bad payrolls. And that we have the FOMC and driving the the beginning of the carer when trade and wind in Japan. So FOMC plus BOJ on Tuesday and Wednesday.

then on Friday we get really bad payrolls, perfect storm, we get shit everywhere. And literally we drop down into basically into Monday. It was like panic, max panic into Monday, which is a typical pattern in global markets. You panic over the weekend, Monday the open, you start bottoming and then woof. Next one was September. September, I don't have an answer for September. I don't remember either. And then right now we have the FOMC on like, like on the 18th.

So my point is that like we should be expecting this kind of corrections all throughout next year this coming year. But it's very hard to know what is going to hit us before it hit us. Or we know this is a source of risk, but quite likely nothing happens. happens and then something happens. So like a perfect example is Trump's immigration policy. I think he's going to go soft on it, same as with tariffs. If it happens to go all out on against immigration, illegal immigration in the U.S., that's very bad because it's very bad for growth and basically drives inflation up and growth down. So if that happens, yeah, a two-through-week drop, perfect sense. It's tradable. And if you're not trading and you're very long, it's a pain in the

ass. And if you want to buy more, is your opportunity. Yeah. I mean, on the last two things you said, I'm with you. I think the immigration stuff, I think he's only going to try to, you know, force the deport people who are like violent offenders or repeat offenders, things like that. I think he's going to focus on stuff like that rather than just like deporting everyone like he kind of was talking about in his jargon on his campaign. I think the terrorist won't be is as strong. I think he might try to do serious tariffs in certain areas. I don't know. We'll see. I mean, even Besson is on board with the tariffs. So we'll see, I think, targeted and used properly, they could make sense. But solely because, you know, just you can't compete with China

in certain areas when they're putting so much money and basically completely funding different industries in China and taking away jobs from the U.S. So I kind of get it. Last thing I would say, they're not the last thing. The second and the last thing I would say is, I kind of disagree with you a bit. I think we're going to see a similar cycle play out. I think now I think those amplitudes of those peaks and valleys are going to go down, like as far as percentages up and percentages downs. Like I know we're used to seeing 60, 80 percent drawdowns from peaks.

I do think we're going to see another massive peak. I don't, I personally don't think it's probably around 100K. I think at some point we're going to go much higher and then come back down maybe into this range. Who knows where it ends up? I do think we're still, people will get greedy, people get over levered, they bid things up too high, and they come back down at some point. I feel like, I don't know if it has to follow necessarily exactly a four-year cycle like it has, but yeah, I'm not somebody that's fully on board with the super cycle.

That said. Go ahead. Quick interrupt, sorry, it's like, that's the thing. It's like, if that happens, I agree with you. Okay, okay. But like, like, so if we see absolute madness and we should up, we shut up to like, to, I don't know, 180 or 200 or whatever. And the basis goes up to, I don't know, like 35% to 50% annualized.

And funding goes off. That goes absolutely bananas. And you can see that everybody's like doing idiotic things and just taking like wild risk. I would agree with you. The thing is I'm not expecting that. But if that happens, I would 100% agree with you. It's, yeah, then we then we got to pay the cost. The market is definitely maturing.

I mean, the iBit options market, so we talked about the options launching on the Bitcoin ETS, the Ibit options market is like already institutionally liquid for the most part. It's crazy how institutionalized. And it was one of the last things that Charles said before he left. I was like, we are at Tradfine market. There are a lot of things that have basically become completely traditional financially institutionalized, specifically the ETFs. I mean, I just want to point out real quick, the Ethereum ETFs, those things, they had net outflows

until the election, 500 million. -ish net outflows until election day. We're at almost $3 billion in net inflows. So they've taken in $3 billion, over $3 billion since the election, which is huge for the Ethereum ETFs. The Bitcoin ETFs since their launch are now have almost $40 billion that have come in. I mean, these are serious, serious numbers that are obviously like, if money just keep pouring

in, which is what we were talking about before these things even launched, if money just keeps pouring in, trickling in from different areas of the market over time, it's going to basically put up a base. And we've seen a lot of these ETFs. Yes, there's outflows, but there's also a lot of dip buying happening in these ETFs. So I think it all just kind of lessens the volatility and why I kind of said, like, I think the amplitude of those booms and bust is going to get smaller.

But I still think the market, as we know it, we're still going to see those booms and bus. Yeah. Maybe a question. I don't know if we have more topics, but if we don't, a question for you for closing, I love to, and I think the audience would love to have your view and take on Solana ATF this year. Oh, okay. Complex.

So I actually, so there's a few different trains of thoughts here. I was, when those things were filed before they were ultimately, like, basically killed by the SEC, I said I didn't think the SEC was going to allow it. There's too much going on right now. So, like, the SEC has all these different divisions. One of them is a division of enforcement. They have a bunch of active lawsuits act there against Coinbase, Crack, and you name it, basically literally calling Salana security or at least saying it went through a securities offering.

They're doing that with the many different things. There's a lot of questions around Solana and Ripple specifically with some active court cases. Is the SEC going to repeal? So I don't think the SEC or these issuers, like I don't think these other divisions that would approve an ETF are going to go through the process of doing all that work until like that legal stuff, settled. Now, how quickly can Paul Atkins, who's coming in to be the SEC chair, can he settle that? Can he figure out what he's going to do? Is he going to drop the cases? Is he going to settle parts of it? Who knows exactly how that's going to work? So I think that kind of needs to be sorted.

But you also got to realize, Gensler is stepping down on January 20th. So is Liz Araga, another Dem commissioner. And you're going to have to get other commissioners coming in. So all of a sudden, whoever's going to be leading it, it's going to be a Republican. So theoretically, they can kind of kick things down the road, but I just don't think anything can be approved until they settle some of that legal stuff. Like, you can't have one division of the SEC approving these things as a commodities ETF, while another division of the SEC has active litigation calling into security. So I think like all of that needs to be sorted. So the question that everyone wants to know, that's all the stuff I said beforehand. What everyone wants to know is like, is it going to happen

in 2025? There's two things you need to think about. There's a lot of betting markets out there about this. One is how quickly does Paul Atkins get into his chair and start moving things, right? Even then, if you have this 240, 260 day clock that I always talk about with these ETF filings, the way the SEC usually works, and this is also before Gensler, you typically just wait for anything that's new and novel. So in this case, if a Solana ETF or another ETF that's never been put, another asset that's never been put in an ETF wrapper, you take that full clock and then you write up this whole approval on what's required and then you approve it or deny it. They don't necessarily have to do that. So like, but if we say these issuers are going to wait,

they can't, the SEC won't acknowledge these filings until those legal things are cleared up and that takes to the middle of the year and then an issuer files and then the end of that clock ends 240, 260 days later, that takes you into 2026. So one, if they follow the precedent, depends when these things are acknowledged by the SEC. We'll know, I mean, we're only 14 days away from these guys stepping down from the SEC or the issue is going to try and file again and see if they'll acknowledge it. We'll know what the final deadline would be. It's just that like if if we actually have to wait for all of that to be cleared up and the SEC takes the full timeline to approve these things, then it's likely going to happen in 2026.

Like I truly believe it's a matter of when, not if anymore, particularly after the election. So I bet if it happens, it could happen in 2025, but it would be the SEC breaking the normal precedent of like kind of taking all those like those dates, delay, delay, delay, and then deny or approve. Theoretically, they could just approve on that first deadline, which they do do for things that are like more normal and new on and just keep recurring, nothing special. So it's possible that it could happen in 2025. I just don't think it's guaranteed.

So basically really pay attention and track the SEC activity on the lawsuits. If they start dropping the lawsuits, very bullish. Yeah, and I would also say, so those guys filed the stuff in November, I think, October-ish time range. And the SEC basically refused to acknowledge. to them. So if people refile again, you know, at the end of January and the SEC acknowledges it, then your deadline's going to be in late 2025. And I think that will also get you into 2025. It's just a matter of will the SEC acknowledge those filings if people try to file them

at the end of January, early February, who knows? Yep. Makes sense. All right. Good. Yeah, I think we good, though. Yeah, I think we're good. All right. Thanks for joining us for this episode of Bits and Bips. We'll be back in one week to discuss more about how the worlds of crypto and macro are colliding. Until then, everyone. Thank you guys. Happy new year.