What Bitcoin Did - $100K Bitcoin: Is the Cycle Breaking? W/ Checkmate

Episode Date: May 12, 2025

Checkmate is an on-chain analyst and founder of Checkonchain. In this episode, we get into Bitcoin’s breakout back above $100k and what on-chain data reveals about who’s buying, who’s selling, and whether retail is finally showing up. We also discuss whether the Bitcoin cycles are over, how the global macro shift is influencing hard asset flows, and why gold might be the early signal for a longer Bitcoin run. Finally, we get into the OP_RETURN war. Follow: Danny Knowles: https://x.com/_DannyKnowles or https://primal.net/danny Checkmate: https://x.com/_Checkmatey_ THANKS TO OUR SPONSORS: IREN: https://www.iren.com/ RIVER: https://river.com/wbd ANCHORWATCH: https://www.anchorwatch.com/ LEDGER: https://www.ledger.com/ CASA: https://casa.io/

Anyone starts talking about consensus changes on this. I said this on Twitter. My answer is absolutely fucking not until you prove without a shadow of a doubt. The onus is on you. This is why it's not easy to be a hodler. Your brain will make you do the worst possible decision at the worst possible time. We can never tell the future, but most likely, we're headed for some new range to say, well, okay, you liked it at 100.

How do you like it at 120? Can you support it at 150? How high can you go before the bulls finally run out of steam? This is a fundamental trade. This is a reshaping of how global trade works, how sovereigns save money. What Bitcoin did is brought to you by our lead sponsor and Massive Legend, Iron, the largest NASDAQ listed Bitcoin miner using 100% renewable energy. Iron are not just powering the Bitcoin network.

They also provide cutting edge computing resources for AI, all backed by renewable energy. So whether you're interested in mining Bitcoin or harnessing AI compute power, iron is setting the standard. Visit iran.com to learn more, which is iren.com. Welcome back. 100K Bitcoin again. How you feel? Nice, mate.

No, we had the, what did you call? The checkmate put or a checkmate call. We had a level. If the price goes, I think it was like Thursday or something. If the price goes above 100, we'll do a show. If it goes below 90, we'll do a show. Yeah, exactly. And if it didn't do either, we were going to pull it.

So when we were speaking last week, you said 100K was a pretty critical level. Why do you think that? and what's happening now. Is this the bulls back in control? Are we off to the races? Yeah. So I think the key area here, you'll often hear us in the on chain world talking about the short-term holder cost basis. And the reason why it's really important, it's the center of gravity for all the people who recently bought. And from my perspective, and what I actually think on-chain data is so powerful for, it's all about psychology. And it doesn't matter how long you've been in Bitcoin, your whole net worth can be swinging around with the price, but you are going to be very anchored to

your last buy. And we all know what it feels like. You put a, you know, you put a couple of grand on two seconds later, the price goes down 10%. It feels shit. Doesn't matter how long you've been in there. It doesn't matter if it's peanuts compared to your stack. It hurts. So most people have this recency bias and they focus on that particular recent, recent, they're most recent purchases. So the short term cost base was around 93K. And the market broke above and then started consolidating across it. And the other thing that was really important is that in that top zone between 93 and 100, there was a stack of coins. Like, and I think we spoke about this in a previous edition, the amount of sell side,

and that also means buy side that occurred in that topping range, is absolutely massive. And so many of those people were waiting and waiting and waiting for the price to get back to their cost basis. And the moment that it did, that is the point in time where anyone who's looking at the world and tariffs and, you know, whatever else is going on and saying, I don't really like where this is going. This is the kind of environment where they start to de-risk. So as the market comes back into that supply zone,

they start to de-risk their positions. And what we're basically, if we got above 100, you've kind of cleared that zone. So all those folks who bought in February and January and December, they've held a high price, but they just hodeled through the correction. They had the opportunity to sell and, like, de-risk, and most of them just seem to go,

nah, I'm good, let's go. So breaking above that supply zone is just kind of a clearing out of any concern saying, all right, the bulls appear to be in charge. The sellers didn't come on board. Overall, it actually looks pretty good. So from that point in time, we don't want to go back below the short-term cost basis. Again, it's not a perfect level. It's just a zone where lots of people's recency bias is.

If we stay above 95 and cheat heading higher, it's to me, it's happy days. Yeah, it's a funny one, this move because like the first time Bitcoin went over 100k, which was literally when we recorded the very first show this knew what Bitcoin did. I was watching it like a hawk. I was expecting it to happen. This time I'd kind of stopped looking at the price a bit. It was a bit boring. Nothing had happened for a while. And then last week I looked at the price like, oh shit, it's going to go over 100K again. It kind of took me by surprise. And there's not really been very much like bullishness on Twitter. Everyone's arguing about op-retem, which I do want to get into with you. Is that a good thing that this is happening

while the market's kind of a bit subdued? Like the sentiment is sorry, is a bit subdued. Yeah, no, I think so. And that's why I think the psychology is so important. I've become acclimatized to seeing an 85k, a $90k Bitcoin, right? I don't, I kind of opine and wish that we had 75K Bitcoin again. And I remember when it sold off whenever it was in April. And I was sitting there on the couch and I'd been like tentatively stacking sats because I'm like, I just had this feeling. We're in that air pocket that we talked about. I was like, you know, we're probably going to get down to the bottom range. And then I was just sitting there on the couch like six, p.m. And I just see it go to 74. And I hadn't intended to do this, but I really did actually empty my bank account. I spent way more than I should have, but I was like, I just can't. I can't not buy 75, 74. I just have to do it. So I just dumped everything I could in. And over time, I think people just become a climate size to these new ranges. So, you know, 75 was really like a, we might tag it. And we really did just tag it and then away we went. But people got used to that 85K range. People don't think about 40K Bitcoin anymore, right? 20K is a thing of the past. And,

you know, below that is even more so. So markets are very much a confidence game. And I think people have just become acclimatized to it. And, you know, that's ultimately we look at all these things. People become acclimatized to a new price range when we correct. So people got pretty used to that 95K range. That's why there was so much buy side. And then the market gave them 75 and gave them 85 and said, ah, you liked it at 100. Do you like it at 75? you're willing to put up. And they did, right? The Bulls stepped back in and said, yeah, you know what, actually like 85 as well. So I'll just keep stacking stats, keep buying. Price goes higher. And most likely, right, again, we can never tell the future, but most likely, we're headed for some new range to say,

well, okay, you liked it at 100. How do you like it at 120? Can you support it at 150? How high can you go before the Bulls finally run out of steam? Yeah, it's funny. Before we look forward, maybe we could kind of look back at the last few months. Because with all the tariff stuff, market's completely melting down. I think if you've asked me like six months ago what Bitcoin would have done in that scenario, I would have guessed that it would have sold off way worse than it did. It held up pretty well. Were you surprised to see that? I was. No, I really did think that it held up remarkably well. You know, those phases, there's a couple of data points. And people are talking about on Twitter as we do. But, you know, equities are down 5%, and then 5%. And then, you know, there's like three days of really

nasty sell-off. And Bitcoin was down either as much or sometimes less. And then there was this one point in time where the equity market was down five and Bitcoin is flat. And these are just these like small data points. And yes, it's a bit early at that point to be like, oh, the decoupling. And lots of people are talking about the decoupling. But like every single tradfied dude with a Bloomberg terminal saw that and goes, I mean, it's kind of interesting. And then obviously it sells off the next day. And then I'm going to, ah, suck it. But if you like, I was just looking at the other day. look at the Bitcoin chart on like a weekly basis, I don't know, the last two years, overlay the S&P 500.

Bitcoin is basically about to punch through its all-time high on a weekly basis. I think, in fact, by the time we finish this recording, will be pretty close to the weekly close. I think it could be the highest weekly close ever for Bitcoin, which is kind of remarkable. And if you look at the equity market, it's just meaningfully down from its all-time high. So, like, there has been a degree of decoupling. So, yeah, I think it performed really, really well. the backdrop is obviously gold just absolutely kicking ass and I know people like oh it's up 50% well done

you know it only took you 40 years to get there but you know that's a big move in terms of dollar value and the size of what gold is and that's certainly been a bit of an anchor for me as saying like you know why is gold doing what it's doing this is beyond you know this is a reshaping the global economy neutral reserve assets bitcoin is the only other asset that really lives inside that bucket And, you know, if you've got that kind of backdrop with gold, then Bitcoin is going to follow at some point. And historically speaking, for very long-term moves, gold has actually tended to move first. So you see gold is really like the leading indicator. Because like you say, it's a vast amount of money that has to go into gold to move it as much as it has.

It's been running for like, I don't know, all year, basically. It's been absolutely flying. Do you think this is going to be a scenario where gold runs first and then Bitcoin runs fastest? I think so. Because at the end of the day, right, gold, this is a fundamental trade. This is a reshaping of how global trade works, how sovereigns save money. Gold is being reintegrated as that neutral reserve asset. That's pretty clear, I think.

So when those kind of moves happen, you have to pay attention because it's, you know, it doesn't happen very often. We really do not see gold bull markets. Most of the time, right, I talk about the stats for Bitcoin on a daily basis. It goes sideways 40% of the time. It goes up more than 1%, 30%. And it goes down 1%, 30%. Gold goes sideways for like two days.

decades, and then it just rips to the upside for 10 years. And if you actually compare, I actually love doing this chart. If people want to kind of see how I use gold as like the benchmark, it is the inflation rate over the long period of time. And if you price equities in gold, to look at the S&P 500 divided by the gold price, you basically see this 10 years of equity outperformance, 10 years of gold outperformance, 10 years, 10 years, these things come in 10 years. And we had a bit of a pivot point around 2022. So if you think of from that perspective, we're like two and a bit years into what probably looks like an era of sound money. And if you think roll that back, right, if they're 10-year cycles, Bitcoin really didn't exist in any meaningful scale the last time that we had a serious

gold bull market. So this is the first time that we have two genuine competing sound money, neutral reserve asset on a global stage. And gold is obviously going to move first because it's the incumbent, but Bitcoin is by far and away the most likely contender. So I think it's a fascinating dynamic and that's what we're all here for. It's why I started buying in 2019. It's interesting that you say gold moves in sort of 10 year cycles. Do you think that the Bitcoin cycle is over and may end up following a path more similar to gold? I think so. And you get a lot of people who say that, oh, Bitcoin is just a levered NASDAQ. But I can't remember exactly when I ran this study, but it would have been during all this decoupling nonsense, right? And everyone's like,

like, oh, Bitcoin's just going to sell off like everything else. And I was looking at since 2024 because, you know, people love to look at the one-minute chart when they want to call out Bitcoin and they forget to look at the one-year-plus chart. So I was like, let's just see, since 2024, this is like at the pits of all the tariff tantrum. And how has the equity market done? How has gold done and how has Bitcoin done? Since 1st January, 2024. Bitcoin was up 80%, gold was up 40%. And the S&P 500, I think it was like plus 3%. So, basically it's given back the entire gain from last year. So you just look at that spread and you're like, well, Bitcoin's kind of doing pretty well, right? If you've just held it for 12 months,

given the Bitcoin as a long duration asset, let's get off the one minute chart. And if you look it on a yearly basis, it's kicking ass, right? And the only other thing it's kicking ass is gold. So, you know, you just look at those two and you go, at some point, you have to put the one minute chart away and say, guys, there's signal here. The market is sending a very clear message. What I want to know from you then is like if you obviously, think Bitcoin's breaking out now. I think from watching your most recent video, it sounds like you think all-time high is just a matter of time. We're going to go above that. How far we go above that is up for debate. But in terms of this fitting into the cycle, do you think we're now in a period where

we might go up to like 150K back down to 100? Or do you think we will still see the huge sort of bear markets? It's a very good question. So my base case is, and I use this saying that bull markets all for the bear that follows. So if we just have an absolutely tremendous run, right, let's just imagine it just goes completely parabolic. I don't know, you know, we've had strategic reserve announcements, like, I don't know what's going to be the driver of this. It's not going to be retail, you know, betting on Robin Hood. It's got to be something pretty sizable that's going to come in. You know, if gold just, sorry, if Bitcoin just appears at 500K, you wake up one morning, it's half a million or it's a million bucks. I can construct a case where we've got an 80%

bear market, right? So it really depends on what the bull market looks like to create that bearish impulse. Certainly it's been an anchor for me through this whole process when the ATF went live in 2023. We just never, you know, I just struggled to see a bear market from 73K and like, you know, we go five grand above the previous all-time high and that's it. I just struggled to see that. In this correction, when I looked at how long we spent in 2024, I was like, that's the floor. Like it just, it feels like that chop consolidation range, we prove that we're a trillion-dollar plus asset now. We don't belong below 75, right? We might go there, but we don't belong below it. So I'm just an absolute buyer in that

zone. And then, depending on where we get to, there's a model that I use called the true market mean. A lot of people have heard of the realized price. So the way to distinguish these two, the realized price is if we look at every coin in the supply, price it, so give it a price stamp when that UTXO was created. So when did the coin? last move, price it at that value. So Satoshi's million coins, they're worth zero. And the guy who just transacted 100K is worth 100K. So it's like a liquidity adjusted average price. So the realized price is the average cost basis per Bitcoin, right? Per Bitcoin. So Satoshi's in there, lost coins are in there. Dude who bought yesterday's in there. If you do the true market mean, this is

something that Dave Puehl and I worked through in coin time economics. And in that study, we tried to get rid of Satoshi's coins and the lost miners. The reason for that is because to get to break even at a market-wide level, the tens and hundreds of billions of dollars that those guys are going to be in unrealized profit has to be offset by people who bought at the top and are really underwater. They have to neutralize each other. So we actually found a very elegant solution to using coin days to get rid of all of that behavior. So we actually look at the average cost basis of active investors. So realize price is cost basis per Bitcoin. True market mean is cost basis per active investor. And historically speaking, this thing is like dead in the center. Bitcoin oscillates around it.

It's a really, really tight mean reversion model. Now, as much as those statistics are very beautiful and I love the fact that it's in the middle, my gut feeling is that it will no longer be in the middle. That is my bare market floor level. Right. We can trade below it, but that's the kind of area that is deep value in my view, because I think that over time, the realized price just doesn't make that much sense. In order to, we actually tagged the realized price, and I lost a $100 bet with my colleague at Glass Note at the time for doing this. I lost $100 bet because I said, I just don't think we belong at the realized price. I don't think we'll go there. It was trading like 15K, 16K. So of course, we did end up going there, or maybe it was 20 grand. Anyway, and my base case

back then is we don't belong there. But then we had Luna. We had all the G. BTC shenanigans, we had three arrows, and then we add FTX. So like, when you, when you kind of compare the amount of leverage, bad actors, just like, think that was like our GFC. So talking about the bear market, if we do not have a GFC level de-leveraging event, then we probably don't have your big 80% corrections unless we just have a roaring upside. So let's just assume we don't have a stupid omega candle, which I think is very improbable. If we don't have one of those, a typical bare market, in my view, is going to be shallower. It's probably going to be a bit longer. Like gold, right? Gold goes down 50% and it takes a decade. I don't think Bitcoin's going to take a decade,

but that's kind of similar framing to what I'm thinking. So I think that true market mean is probably, for me, that's going to be my target. Right now, it's like 68K. So, you know, if we had to go on one more leg lower in this correction, then you would have been getting into like, it's a bear market, but it's also probably the bottom of the bear market. So it's probably time to step in. So that at least helps frame up where we are. Now, if we go to 150 tomorrow, which you can, you know, that's something that's in the air now. That's, I think most people can probably see that as a, as a possibility. Imagine now pulling back to 68K or 70K. Yeah, that seems like a savage move. Now you've got yourself a bare market. Now it starts to feel a bit more.

So that's the kind of scale and how I think about it. It's a fundamental model, but it will continue to move as demand comes in, it's going to be a moving target. But when the time comes that we have the next correction, that's always going to be sitting there as my floor level and say, look, if we keep going lower, this is what I would consider to be deep value. And beyond that, how can you forecast? This episode is brought to you by Anchor Watch. The thing that keeps me up at night is the idea of a critical error with my Bitcoin called storage. This is where Anchor Watch comes in. With Anchor Watch, you're protected by their time-locked multi-sig vault and with your own A-plus rated Lloyds of London-backed insurance policy. You get to hold your keys, Anchor Watch holds the risk. Whether you're worried

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and it covers how authoritarian regimes use money as a tool for control and how people are pushing back against that using privacy tools and of course Bitcoin. It's an amazing newsletter. It's pure signal, and you can subscribe for free at financial freedom report.org. So we've had like three months now of chop and a bit of down. What's the on-chain thing? How high do you think we're going to go from here? And in what kind of time frame you're looking? Yeah, so you're going to hate this answer, which is pretty much exactly the same as the last time I gave this answer, which is I've got this thing called my topping cloud. And basically, it's looking at several different on-chain and technical models.

and it's just looking at how often or how high do these oscillators get where we're talking there's only like 5% of days that are higher. So I'm just looking at a statistical basis. When do we get to these points where look, the market can keep going. I can't predict the future. Who knows what's actually going to happen, what the drivers are, what the catalysts are. The thing about bull markets, so here's a framework to think about things, in bull markets, we have no idea how much demand is coming. You just don't know who's going to show up, how much size, when are they going to, hit the green button. Demand is the great variable, but we know a lot about supply. We can see when

existing holders start to sell. It's very, very reliable when too many long-term holders and traders and whatever start to sell their coins. That's what actually puts tops in. So we can see the supply, but we have no idea about the demand. In a bear market, it's the exact opposite, where we actually have a pretty good idea of the demand because Hoddlers are hardcore, and they will step in, they have a certain measurable pain threshold that they will take, and they will just hoddle through it. So we can actually see when all the dumb money capitulates and the speculators are washed out. So we know a lot more about the demand. What we don't know is all the three arrows that are out there and the FTXs that are running stupid game. So we don't know about the supply side. So it's almost like

a flipped example. So to get back to your question, all of my indicators, everything will be in like 5% territory, meaning there's only 5% of days where these oscillators have been higher if we get to 160K. So I think last time we spoke, it would have been 150. It's creeping up to 160, 166. Can we go to 200? Absolutely. Can we go to 300? Absolutely. Do I think we're going to stay there? Probably not, right? So that's how I think about these things. The 5% is actually where the most parabolic insane returns occur, but they don't last for very long, right? In 2017, that 20K price level lasted for half a week. I happened to buy it.

It didn't last very long and I'll stuck up there for however long, right? So that's part of the journey. So at the moment, 120K, 130s where I think serious sell side starts coming in. We'll see. If we don't see that cell side, that's great. I can then start to recalibrate and adjust as things happen. But 150, 160, that's where we're getting into thin air. Above 160, you know, it's anyone's guess how long we stay.

up there. Look, we could blast right through it and I could be very wrong and I'll learn as I go. It's not that I don't like that. You said I was going to hate the answer. It's that there's two things that you say that don't quite make sense to me. It's that one is that like the top this cycle you're looking at 15160. But then when we were speaking on the phone the other day, we were talking about this cycle compared to 2017. And you, like, I actually thought that sort of comparison was dead. I thought we'd underperformed that now and it was kind of out the window. But you were saying, no, it's like picture perfect still 2017. And If that's the case, 150K won't be the top if that holds.

Yes. Okay. So the chart you're referring to is the since cycle low, where you basically peg all the previous cycles from the bottom and you map how they move. I love that chart. I think it's fantastic. I love the left-hand side of that chart. I have no faith whatsoever in the right-hand side of that chart. So let me explain what that means.

Imagine a chart we're looking at days since the cycle bottom on the X-axis, and on the Y-axis is price-priced. performance, right? Are we up 2x, 5x, 10x, whatever? 2017 was like 100x move, right? Now, 2017, we were also literally 100 times smaller than we are today in terms of market cap size. Yeah. Now, up until this point, and really, until this correction, we were almost dead in the middle of both the 2016-17 cycle and the previous cycle, 2018, 2019, 2020, right, a bit more volatile, but really the same trajectory. They've started accelerating towards all-time high at the same time. You know, Bitcoin, even though it's a trillion-dollar asset, is moving like it did when it was a $10 billion asset, which is insane.

Now, I love the left-hand side of that chart, meaning that recovery phase from the bear, the acceleration into the bull, right up until the euphoric phase. And the reason why I like that is human beings, we have this like PTSD. You all know it. You've gone through a bear market. It takes you time to recover. It's a shitty experience and you've just got to go through the loops of, you know, it feels like every single sell off. It's just a return of the bear. And once you get to all time high, your confidence is a bit stronger. You're like, hey, wait a second, this could actually be it. We could actually be in a serious move now. The euphoric side is very much talking about what I said before. Where does the demand come from? I have no idea. I can't pretend to predict.

you know, if you said at the start of this bull cycle when FTX is just blown up, by the way, the US government's going to have a strategic, I'm going to call it a stockpile because I haven't actually bought anything. I'll call it a reserve when they buy something. So they've got a strategic, whatever we want to call it. You know, micro strategies lumping in, you know, what do they buy, 55,000 Bitcoin when they first got to 100K? Like, you know, billions and billions of dollars, if you told me we're going to chop around sideways at 100K for three months and the market would just take it like a champion. I wouldn't believe you. But, you know, these are the kind of things that we just can't predict in advance. So, yes, I love the left-hand side of the chart, the recovery into

the bull phase. The further we go on the right-hand side, I struggle to see us going up another, you know, whatever it is, 12x or something in this cycle. We can move like a 10 billion dollar asset in the first part. I think it's much harder to move as a, you know, at 100 times the size. It's a different ball game. Yeah, to be fair, I don't think we're going to follow that 2017 chart. either. I think that would have us at like $2 million Bitcoin at some point. Yeah, exactly. But, well, which I do think we'll get at some point, just not this time. I know what you're going to say to this, but I'm going to say it anyway, you're going to tell me to temper my expectations. But if we are actually looking at like 120 to 150K as the top of this cycle, that does seem

disappointing. No, it doesn't. And also, that doesn't mean it's the top of the cycle, right? That's the other thing. This is just the zone where historically speaking, it would, be, and I use my two personas, check the analyst, his job to be, is to be very objective. If I was to say is check the analyst who's looking at all these models and I've, you know, I've spent time kind of understanding them, if I was to say, guys, look, we've only ever been this high for 5% of all trading days and I think now is the right time to go levered long and go all in. That would just be dishonest and wrong. Like, I couldn't do that to my subscribers, right? I wouldn't do that. Check the Hodler is all of us, probably most people listening.

and he's like, how bullish is this? Let's rock and roll, right? I'm going to be part of that whole thing, but I use those two personas because different people have different needs. You know, retirees and people who actively manage money, they're going to focus more and check the analyst's perspective, whereas the average hodler, right? That's where I turn more of the objective analysis that I come up with

is to turn that into a bit more of a human scale. I say, look, it's pretty scary right now, but this is why I'm stacking stats. I know it's probably going to go lower, but I'm actually okay to buy down here. It's just trying to like, frame up how things work. So it may be atop. When gold got its ETFs, it had a 10-year bull market. And another thesis I've been playing around with quite a lot recently is previous cycles.

Bitcoin was very much an unknown, right? We were kind of working out what this strange thing is. So a lot of people, very adoption-driven with a side of leverage in that 2019 to 22 period. So we were reacting to Bitcoin as a new thing. I think since FTX, we now kind of know what Bitcoin is. We know so much about what Bitcoin is that Larry Fink is one of the biggest chills of it. That's where we're at. So I think most people know what Bitcoin is, and they're using Bitcoin to respond to the world. And the world doesn't move in Bitcoin four-year cycles. It has a whole different tenure and how it operates. So if we are going to have an extended long period cycle, and if my models are going to break, this is going to be the cycle where it happens.

I just don't think it's going to break with an Omega candle. I think it's going to break with time. We'll get up to these levels. We'll correct 40, 50%, people will say it's all over. We'll form a base. We'll start flying again. And then you have to ask yourself, well, hang on a second with that cycle bottom chart, where do I peg the bottom? If we keep just getting these 40, 50% corrections and they take, you know, six months, eight months, four months. Where's the bottom of the bear?

So suddenly people go, hey, and this thing just keeps going. So maybe we do get to 2017, but I've got to extend the X axis. It doesn't take, you know, a thousand days. It takes four thousand days. days. Now we start saying, well, that's the new concept of how Bitcoin kind of trades. So I'm very open to all these possibilities. And that's why I don't pay attention to the right side, because we just don't know. Yeah, fair enough. And with this move, we've got back over 100K, who are the buyers now? Like, what's the on-chain telling you? Is it still just sort of sailor and ETFs or

a retail showing up in any meaningful way? It's a good question. So definitely the ETFs. The ETFs have come back in a pretty serious way. And by my general calcs, the ETFs usually represent about 20%, 20, 25% of the overall demand. And I compare that to how much the realized cap changes. So the realized cap is, it's kind of the on-chain market cap, going back to what I was saying before about the realized price, it's basically the big brother of that. When the realized cap is increasing, it means that someone who bought at 50k is selling their coins at 100, right? So someone else has to come in with 50 grand of extra money to buy that coin at a premium to its original cost basis. So when we look at that, that's like $20 billion a month at the moment in terms

of how much it's increasing. And we're seeing about $5 billion coming on in the ETFs. So that's pretty nice. Sela recently has been somewhere between like 30 to 40% of the size of the ETFs. Back at the 100K range, so February, January, December period, he was as large. All of these things are just net by side. Now, we haven't seen a huge amount of retail uptick. And when we look at smaller wallets on chain, a lot of retail balances are pretty much flat. In fact, they've been flat since 2023. So the average hoddler isn't really growing our aggregate balance. But I could also say just as easily that there's going to be a lot of people out there who are just saying, you know, like for me, for example, a lot of my retirement,

I'm actually using the ETFs to diversify my custody, but also, you know, there's a bunch of reasons why the ETS are more beneficial for me in that sense. A lot of my sat stacking is actually via the ETS now. I've still got spot, but my overall, if I spread out what my overall balance is, obviously the ETS was zero. Now there are a much larger portion of my buy side. They're not going to show up in on-chain balances. So definitely the ETS are a big component. One thing I think is a really, I think quite powerful thing to look at. When you look at the weekly flows into the ETSs, With very few exceptions, most of the time it's like 300 million outflow on a weekly basis, 200 million, maybe 400 million.

We had one period of time when we first started selling off in, I think it was March. We got about 4 billion total of like two or three weeks of ETF outflows. But when we compare that to the CME open interest, it looks like just a basis trade unwined. So the amount of CME interest going down was almost exactly the same as the ETF outflows. we're getting 300, 200 million whatever outflows, and then they're followed by 1.5 billion inflows, 2 billion inflows. So like the scale is just different. The outflows just have nothing on the inflows.

And quite frankly, I'm amazed that the amount of demand that keeps coming in via those things keeps coming in because it's quite, it's quite astounding, right? Bitcoin's ETS after a first year, record setting in every way you want to measure it, are still some of the highest inflow ETFs in the industry, which is, you know, Bitcoin's here to stay and it's kicking ass. Do we have any idea of the makeup of the ETF buyers? Do we know how many would be what you would probably consider like retail buyers as opposed to hedge funds or whatever? So from memory, so don't quote me on this, but I feel like I've seen James Seyffert and Eric Balcuna saying something to the order of 20% institutions and 80% retail, I think, is, is

from memory, and that was probably some old data. I ran a study maybe four or five months ago, and I looked at all the 13F filings, and basically that showed a similar number. About 20, 25% was registered institutions. So that's, you know, I would say that's probably about the right balance. Maybe it'll change, but that's at least the last time I looked. So one of the things that you haven't talked about yet, and it's probably a very hard thing to talk about because it's speculation.

You can't actually meaningfully know what's going to happen here. but I know you pay a lot of attention to the macro side of things. I assume if the Fed actually ends up doing something significant, whether that's cutting rates, a ton or printing money, then all bets are off and this stuff kind of gets thrown out the window. Yeah, I think so. And look, there's one of those things where I think if you spend enough time in the macro world, even as a hobby macro analyst, at some point you realize that the math don't math,

and they are going to have to monetize. But I always come back to, I think it's that murmuring capital chart of gold in the Weimar Republic. And in price terms, over a period of years, it's just exponential up and to the right. But on a monthly basis, it's all over the place, periods of up, down, left, right. So that's, I think, the right framework to think about this stuff. There's going to be swings and roundabouts, for sure. I think the Fed is in a very tricky position because they still are afraid that inflation is going to come back. And I think they're holding steady. And they're probably going to be late to cutting. But they really need to see the hard.

data start to signal that recession, slow down, whatever it is. I can also look at all the tariffs and say there's a good case to be made that there's going to be a slowdown in the US. In fact, when I just take a really big picture and I wrote a piece called There Is No Undo Button when I was in Bedford. And it was quite nice actually sitting by the river watching the swans swim by and surrounded by daisies tapping away. But I was trying to consolidate many months and weeks of just like thinking hard about what is the impact of all these tariffs. what is the impact of just the shifting of the global order because it's much bigger than tariffs. It's a signal that all of the rules that we've had for, I mean, 40 years, 50 years since 71,

all of those rules, those trade relationships have almost been switched into perfect reverse. We've had a tail win. So if you're a, you know, someone who's investing in Europe, you're a pension fund manager or similar, you've been able to just buy the dollar. The euro has been depreciating forever. And then you go and buy U.S. assets. So you get a double whammy of U.S. assets up and your currency is depreciating, and your benchmark is euros. So you're winning on both fronts.

If we move to a world where friends aren't quite so friendly anymore, and all the money is already in U.S. markets, if there's a switch where that money just starts to repatriate, and it goes back to Japan, it goes back to Europe, how does Europe, which has quite a lot of savings, how do they pay for all of their defense spending and funds, you know, German government bonds because the German government's just taking the debt break off. How do they fund that? They have to go to their savings. What's their savings in?

US assets. So you just start to see like all the rules that we're used to, a week a dollar now. Maybe US assets don't quite outperform other assets. Like I don't know how this all plays out, but I think there's a good case to be made that the rules that previously worked probably won't work moving forward. Bitcoin's kind of interesting because it's never seen the other side of the equation. It's only really seen the tail end of the system that was. Gold's been around for a lot of those times, but the other fun fact, and I'll get my numbers

slightly wrong here, but gold, it's been pegged at like whatever it is, 20 bucks and 35 bucks and whatever the Romans pegged it at. It's been pegged for most of human history. Gold's free-floating price is from 1971 onwards. So that's the only price history that we actually have of gold doing what gold does, kind of doing its Bitcoin thing. So if you actually compare, I think I ran the numbers, if you compare the number of trading hours, because gold doesn't trade over the weekend, if you compare the number of trading hours of gold and Bitcoin, Bitcoin's already 40% as old as gold in terms of that free

floating price. If you look at Bitcoin because the stock market only trades, whatever it is, 10 o'clock to 4.30, or depends where you are, if you compare those hours and you make Bitcoin a stock, it started trading in like 1942. So it's one of the oldest companies in terms of trading, hours. So, like, you know, there's all these historical precedents. And I can go back and look at the gold price chart. And in the 70s, into the 80s, it kind of looks like 2013 for Bitcoin, where it's got these two double pumps. And then that period through the 80s and the 2000s, it kind of looks like 2018. So it took gold two decades to do what Bitcoin did in one year. So there's just all these like interesting parallels where you can like look at the gold price and be like, you know,

if I shrunk that down by 5x, Bitcoin's kind of speed running that move. And now they're both running at the same time. So it's fascinating stuff. I remember like a little sound buy. I can't remember who said it. It might have been Travis Kling, but in 2020, it was that Bitcoin was born in the last financial crisis. It'll come of age in this one, which is a really nice sound bite. But that actually might be true now. With the world like fragmenting so much, perhaps this is now Bitcoin's like time. You would think so because if we've got a breakdown of trust and this, this occurs across many levels, like, and, you know, maybe this is starting to pivot towards the, the op return debate. If you think about what Bitcoin is, it's something that I trust. Like, the reason

that I buy Bitcoin is my monetary assets, because I trust it. I also understand it quite a bit. I've spent many hours studying it. Same as gold. I don't understand gold as much because it's far less transparent. I can't see how it trades and things like that. That's a whole different animal. but I trust it as a metal that it's going to be there. But it all comes down to trust. And if you've got countries that don't trust each other, people who don't trust their authorities, they don't trust the media as much.

They don't, like this breakdown in trust is a really, really big factor. I know that Bitcoin's going to be there when I need it. I know that that network's going to keep plugging along, producing blocks, my savings aren't going anywhere. I trust the cryptography. All of these things, it gives me peace of mind. And the same reason that people would buy a gold. gold at a sovereign level, it's really very much the same trade. So, I mean, I can't think of a better

backdrop for Bitcoin. And whilst I certainly could have envisioned all the, the color that we're seeing at the moment, the core reason of they're going to have to monetize the debt. That is why I made the decision back in 2019 when the penny finally dropped. I go, I just need to buy as much of the shit as I can. And just, I've been doing it ever since. Yeah, but I do want to go into the operetta and stuff. But before we do, I'm curious on that piece you wrote on tariffs, because I saw you that night, and it was when everyone was in meltdown around this thing. Trump had put tariffs on every country in the world. He obviously stepped back on that, and he's focused on China. How well did that piece you wrote age? Quite well, actually. So I call that there is no undo button,

and the rationale being that I think a lot of these things were always coming. Call it a fourth turning, call it a sovereign debt crisis. All these things were coming. Trump has very much just been an accelerate. He's just kind of, and in many ways, he was voted in to accelerate this. You know, the point is that the, something that I've had floating around as an idea, a lot of the Bretton Woods or post-Bretton Woods system has been very beneficial for America, and that is the country and really politicians and people who are very well off. It hasn't been so great for Americans, right? The Rust Belt. It just hasn't been good for those people. The reversal of that, if that is indeed what they're trying to,

trying to do. The reversal of that is going to be, and they've been saying it, like, you've got to give it to the Trump administration. They're very, very clear, this is for Main Street. This is not for Wall Street. And they've been pretty explicit about that. And that appears to be what's going on. Now, can they get there? I don't know. But what they have done is they've fired the cannon. And now everybody, friend and foe, is looking at and going, oh, okay. I know just the same as when they froze Russia's reserves. They now need to. start thinking, I've got to get my money back home. I may need to start doing my own defense spending.

Everyone has been kicked into gear, having to now rethink their world and who are their friends? Is America going to show up for us? Do we have to start defending ourselves? How do we frame all that up? There's no undo button to any of that stuff. And I think one of the key pieces I talked about there was three games of chicken. US and China, who's going to blink first?

Treasury in the Fed, who's going to blink first? And I forget what the third game was. But one of my core views is I think America blinks before China does. And I think we're seeing, I think America has blink before China. Oh, the other one was Trump and the Republicans. Because at some point, the Republicans are going to have to go for their primaries and then their midterms. So at some point, they're going to have to say, all right, this radical stuff has got

to stop because we need to get reelected. So at some point, Trump, and I would say it's soon, the radical side of just how big in the art of the deal will probably just have to take a step back. because other, and I actually think that Trump may have to blink in that case. So my three games of chickens that U.S. will blink versus China, which I think has happened. Trump will eventually have to blink for the Republicans because the party is going to have to get reelected. And if they want to continue doing this, this is not a four-year project. This is a multi-year project.

So, you know, you really can't stick around for one term. And then in terms of the Treasury and the Fed, unfortunately, Mr. J. Powell, I think you're going to have to blink because your boss is insolvent. and he's going to need you to buy the bonds and you just have to tough it out. Yeah, I think the Trump versus Republican one's interesting there, because I wonder if that's why he's been kind of speed running all of these more radical policies. Once you go big, and he's a go big kind of guy, you can't back down. You just keep going because, again, you've broken the ice now, just go all in and clear as many of these things as you can, and then it's all about a process of, I think Brent Johnson actually

framed it really nicely. You've just kind of shattered all the reality, and now, I'd say, volatile and slow-moving process, not back to full recoupling with China, but also not complete decoupling. It's a slow walk back towards, not the status quo of where it was, but closer to where that status quo was. And there'll be a lot of geopolitical tussing to see how these power dynamics play out in that process. Yeah, and I think Jerome Powell is either going to have to play ball or Trump's going to find some way of getting him out. That kind of just seems inevitable at this point. I think that's basically how it plays out.

Yeah, on the America versus China side, saying America is going to blink first, like what do you see coming there? Look, at the end of the day, I think that the Chinese population will take a hell of a lot more austerity pain than I think the Americans will. I just think that's generally where the social fabric lies. And it's a cultural thing. It's a historical thing that these cultures have gone through all sorts of challenges historically.

I just think that they can weather. And they'll be willing to weather. They'll be forced to weather just a different level. of pain. But the other thing I think is really important. China is a manufacturing hub. It is much easier to go from a production-based economy to a consumption-based economy on the margin, because all you have to do is stimulate. So China just has to stimulate and they can achieve consumption. America, it's much harder to go from a consumption-driven economy to a production-driven economy because you need to build the production. And that, oh, by the way, the guy who sells you

the things that you need to build the production happens to be the guy that you're in a tariff war with. So I just think it's a much harder ask that is a lot more curveballs. It's slower. It's much harder to go from consumption to production. So again, how long does it take to do that? You can't build a factory in two months. So at some point, the art of the deal probably has to see to some physical constraints and realities. This episode is also brought to you by Ledger. If you're serious about protecting your Bitcoin, Ledger has the solution you need. Their hardware wallets give you complete control over your private keys,

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2019 and I can't recommend them enough. CASA have options for all Bitcoiners from a two of three multi-sig to a three of five and a private client option for absolute best in class security. CASA also do inheritance which I very recently set up and it really couldn't be easier. My inheritance plan has gone from a vague treasure map for my wife to a rock solid security plan that I have total confidence in. To find out more about CASA, go to cassa.io, which is c-a-s-a-o. Should we talk about op-return? We can, yes. You've been weighing into this war a little bit on Twitter. Maybe the best place to start is, do you want to just give your kind of like overarching take on this?

Sure. So. And maybe explain what the debate is just in case anyone's not aware. Yeah. So look, the way that I kind of view myself is I'm a Bitcoiner first and foremost, right? And I dedicated my career to this thing, right? So I'm kind of in a position where I just want to understand what's going on from a, I'm an engineering, I'm a pragmatic dude. I look at things from a empirical basis. I don't really have all too much time for theory and, you know, getting neat into the weeds of Austrian economics and all that stuff.

It's all very interesting. I'm sure it's true. I just don't have the time. It's not my cup of tea. Now, I just look at things from a very pragmatic engineering perspective. So the core of the debate, and I think there's two elements here. It's all about arbitrary data being put into the Bitcoin blockchain. And the other one is how Bitcoin Core handled the situation.

I actually think we should just push that to the side. Let's not worry too much about that because that's a whole separate discussion. They probably could have done it better. But yeah, if we look at the data scenario, a lot of this goes back to where Casey Rotamor released, I think it was the Ordinal Protocol. And basically it takes advantage of the witness. discount, which is in the Bitcoin transaction, there's two data structures. There's a part of it where you put the address and the transaction details and the UTXOs, like the what needs to be

spent. And then the other one is the signature. And some clever engineers found a way to put data inside that signature, and they started using it for putting inscriptions, which is JPEGs, images, whatever. I think Doom is on Bitcoin somewhere. So you can put arbitrary data in. Now, a lot of this debate got kicked off because there's another op code, which is basically a script in Bitcoin called Op Return. And it's been around for a very long time. I think it's been since Satoshi wrote it. And it allows you to put arbitrary data in as well in a scripting field. Now, this whole debate got kicked off because there's been a debate forever, or I think for a very long time, op return's been limited to 80 bytes. And there was a proposal I think Peter

Todd put it in to say, let's get rid of that limit because there's various scales. scaling solutions, bridges, you know, roll-ups, all these things that are trying to scale Bitcoin and give it additional layers beyond Lightning Network. And the way that they're doing it at the moment is quite inefficient. They're putting extra data into those inscriptions, and it's creating UTXO set bloat. It's a memory problem with nodes. That UTXO set bloat is a problem. The better way to do that would be to put it in Op Return, which doesn't get included in

the UTXO set because nodes can just ignore it. Now, I think at the core of this whole thing, there's people who say we shouldn't have any arbitrary data whatsoever being put into the Bitcoin blockchain. And there's some people who say, but we might need it. And then there's another group who actually wanted, let's just call them the spammers, because I think that's easy, just language here. They are the ones that want to put JPEGs and whatever in the blockchain. So, and it's all about getting your language right, right? Because otherwise you're going to lose people along this journey. I'm just trying to look at things from an objective perspective. Let's just for simplicity say that anything that's a JPEG and all that stuff, let's just call that

spam, just for easy math. There's another group who's going to want to put scaling, like, let's call these anchors. You want to put some kind of hash so you can anchor your bridge and scale Bitcoin in a layer. And then you've got the other side who goes, I don't want any of that stuff. I want pure Bitcoin is money. Now, my position is Bitcoin is money. And I view Bitcoin first and foremost, primarily as money. There's literally two things I've ever used Bitcoin for, using it as money in my savings, and I inscribed one picture of my dog when he passed.

That's it. That's all I've used Bitcoin for. That's my primary use case. So yes, I've been a spam up once, but I also wanted to test the technology. I'm a tinker. I'm an engineer, so I actually want to see how the technology works. So understanding that,

thank you all node runners for looking after scruffy for me. I appreciate you a lot. But the other side of this whole thing, is it's about a pragmatic approach of how do you stop spam. Now, the current campaign, there's two elements to a node. If you go on Mempool.Space, you can see on one side is the confirmed blocks. On the other side is the pending blocks. That's the right way to think about this.

Consensus level code, which all of this talk is not about, this is not about changing the rules of Bitcoin. I think this is a really important starting point. Consensus level code affects, miners and node validation, that is what nodes will say that is a valid or an invalid block. It's what miners will say that's a valid or an invalid transaction. That is what is able to get confirmed. We are not talking about that. And I see a lot of people talking, getting this wrong.

This is not consensus code. So this is not someone changing the rules of Bitcoin. So I think we can put all of that to one side. On the other side, in the Mempool, these are all the pending transactions that are waiting to get mined. Now, if you broadcast a transaction, your node speaks to, I think the number is eight, it speaks to eight other nodes, and that each of those nodes broadcasted to eight other nodes, it's called a gossip protocol.

So every node is basically telling eight of its friends and propagating that transaction through the network. The argument that's going on at the moment is in that mempool, you can set filters and you can say, I don't want to receive any transactions, and I don't want to tell my friends about any transactions, that have a data size that is bigger than X. And the idea is this is trying to filter out the JPEGs

and people putting files and text files and all this stuff in there. Now, the problem is, if you don't get full saturation where all of the nodes or a large majority of the nodes, at some point, that JPEG will find a guy who's willing to talk to a guy, who's willing to talk to a guy, and eventually it gets to a minor.

And when you say vast majority, it's like 90 plus percent, I think. Yeah, so I'm sure someone has run the numbers. I've seen people talk about like, I think full RBF, which was replaced by fee. I think that was propagating with single digit percentages of nodes where you could start replacing by fee and it would eventually hit the minor. But there is another problem here, which is that if everybody starts putting these filters up, and I think every node runner, you have absolutely your right to do whatever you want in your

Mempool. There's your node, you do whatever you want. You can't mess around with a consensus code because you will get kicked off, but you can mess around with your Mempool policy. say, I do not want to translate this information. And quite frankly, I think that's a very fair position. You do, you, go nuts. Your men pull your choice.

The problem that I think comes in here is that if you allow all of these, if every node starts filtering in this way, the gossip protocol essentially is ineffective, right? And this is where the filter guys, this is the argument. They are trying, and I think trying is the correct word, to get as many nodes as possible to start filtering this stuff and saying, I will not relay it. The problem is not every node is going to upgrade to a new filter. A lot of nodes run legacy code, which is fine. Bitcoin is backwards compatible, and that should be the way.

But there is another risk here. Let's just go to the extreme. If the system allows full filters, Bitcoin Core adopts a default setting, which, in case you don't know, in anything to do with product, most people will never change the default. This is why this is important. So if the default on Bitcoin Core and default on knots and all these, different node implementations is I'm going to filter. You're creating an incentive for the spammers, the people who want to create JPEGs and NFTs and tokens and all this nonsense. You're going

to create incentives for them to pipe directly into the miners. You are now no longer on the P-to-P gossip protocol. This you can't control. Once they start doing this, and this has already happened, happening probably too late, to be honest, once they start doing this and they just send their transactions straight to minors, you're going to have these big miners. Marathon's got one called Slipstream. You can literally just send it straight to them. They are going to collect all the fees from that spam. So even though your node is saying, I will not look at, I don't want to filter, I don't want to relay any of these transactions, you will still have to download the next confirmed block and there will be spam in it. So you actually still have it on your hard disk. Yes, you don't have it in your

mempool, but you do have it in your hard disk. And this is where I think a lot of the challenge is. seeing more of it recently, I think both the filters and the non-filter camps, I think most people understand that the filters are not going to stop spam full stop. The argument mostly to my eye is that we just want to make it more expensive and more difficult, which I think principal perspective, totally. Makes perfect sense. Full agreement. But let's just talk about the trade-offs here. The trade-off is you're going to create a direct pipeline between spammers and miners that you can't stop. So that is, I think, a real core problem. is that it's actually going to embed these guys,

and those miners are going to get bigger and bigger because they're going to earn all that fee revenue. So if everyone else is trying to price you out, in theory, you're going to have to pay more, which is what they want, but you could actually end up embedding these guys and making it a kind of a worse and less controllable black market. So that's not to say that people shouldn't try.

My whole view, really, and like that's why I said, I don't worry too much about the economics, and, you know, people say that Bitcoin is money, we shouldn't use this as a database. To me, none of that actually really matters because at the end of the day, there is no, in my opinion, and from my, and I could be wrong, I'm happy to be wrong. I can't envision a codifiable way. Bitcoin doesn't see spam and monetary. It sees valid and invalid. So if I put myself in Bitcoin's shoes, it can't tell the difference between spam and instruction and a normal transaction. It can't tell the difference. If we are to codify some way

so that Bitcoin understands this, now I'm listening. To my eye, there is no way to codify this without throwing the whole baby out with a bathwater. Because if you try to block data in this place, some clever devs going to stick it in that place. And then you're going to block that place and they're going to stick it in that place. So it's this cat and mouse game where I just don't think we actually get to the promised land. So my core, I guess, message, probably don't want to be a preacher here, but my message to the filter guys is that I get it. I actually am aligned with you, but I do not think that this is the solution that you're looking for. Like, if my engineers came to me with a solution, like in civil engineering, I was like,

it's got like a very low chance of working. And even if it does work, we could actually end up with all these tradeoffs. I'll be like, go and see what else you can find. You've got to find another solution for this because I just don't think this is it. And I think we're spilling a lot of ink and a lot of Bitcoin of brainpower on probably what I think is the wrong solution. I don't know if there is a right solution. And maybe this is the right solution. I'm just an idiot, very possible.

But I'm just, like, from a pragmatic view, I can't see what the end game looks like. Even if you get to 100% filter propagation, you actually embed the problem and make it arguably worse. Maybe there's less span. Maybe. You know, that's kind of a tenuous bet as well. So it's a tricky debate. And I can't really see the middle ground what it looks like just yet.

Yeah, I think I wholeheartedly agree with almost everything you said that. Like, ideologically, I am on the side of, like, the mechanics in this argument. Like, I agree that Bitcoin, to me, Bitcoin is just money. Like, I've used Bitcoin in two ways. I've sent and received it. Like, I've never done a description. Like, I'm not interested in that stuff. I think that stuff is spam.

But I just, I'm not sure if it's reality that we can actually do something about this with filters. Like, miners are profit maxis. They're going to do everything they can to pump their profits. And if it's just going to send all these transactings out of band, you have the minor centralization issue. you don't know what's actually in the mempool. Like, I think the downstream consequences of making these changes are not worth it. And then the second thing is, like, obviously everyone's now starting to run knots.

Like, I think it's great that there's multiple implementations of Bitcoin. Like, all powers people who want to do it, I'm not going to go and run something that's maintained by one guy. Like, no matter how brilliant that guy might be, it's still, that is a risk that I'm not willing to take. Yeah, and that's the other thing. And I think a lot of people, you know, it's just like being on a sports team. It's very exciting once the flares start going off and everyone starts chanting and roaring and it's all very good.

But I've seen a lot of people recently swapping over their nodes. And that's fine. Again, your mentor, your node, your choice, do whatever you want. However, for me personally, when I go to look for my hardware wallet, when I go to look for a software wallet, when I go and research my node, I don't just see some dude on Twitter who I value their opinion and just go, oh, I'm going to follow him and just do exactly what he says. I spend a lot of time making sure that I know this is my life savings here. I do not mess around and just run some other code.

I just don't do it. So that's just my personal position. So for me, the best solution for me, and I would actually argue the best solution for most people who are node runners is just keep running. Well, do that, but just keep running the software that you're currently running. Go and do some research.

And before you jump in, and that doesn't mean you shouldn't jump in, just take a pause and say, What are my trade-offs here? What are the trade-offs of what I'm doing? So don't just jump on the bandwagon. I'm all for if you run all that calculation, you do your own work and you go, you know what? Actually, you know what knots is for me?

Go nuts. Love it. That's great. And I used to run knots many, many years ago because I was built into Wasabi. That was the first node I ever ran. And, you know, I benefited from the convenience of it being built into the node itself. So I've run knots. I've run core.

For me, my default is I'm just going to stick with core at the moment because knots is downstream of core. Knott's is 99.9% core. And if core stops working, and this is the other thing I think is quite dangerous, there's a lot of people are saying that core should be completely defunded and shut down. So, guys, core is called core for a reason. It is the centerpiece of Bitcoin security. All the security that Notts has comes downstream of Bitcoin.

So just be conscious there. They're doing amazing work. It's a bloody hard job. I don't know how they do it. So I think it's important to give a lot of respect to the core developers. yes, I think they probably didn't handle this. In fact, I heard a great analogy for this. Corp. Just Leroy Jenkins, right, where they're basically looking at all this nerdsplaining and all these people bantering about stuff. And then they go, all right, let's do it. Leroy Jenkins. Now that's, again, not the right thing to have done, I think.

But also, just another, take a step back. This is not consensus code. They change an optional Mempool policy. If you disagree with it, don't upgrade to the latest version of core. The great thing about Bitcoin is you can run historical node versions. You cannot update. It's all backwards compatible. Sit tight. Do nothing. Just be conscious of the psychology of crowds. It's easy to get swept up on both sides. I put out a tweet the other day where I said, I actually think there is far less daylight between everyone's position. A lot of people on the filter side probably think that I'm a data boy, right? And the reality is I'm like, guys, I think we actually have so much more in common than anybody, like when you actually put the daylight between these two, I think,

most people, in fact, I don't think anyone in the Bitcoin wants it to become more Ethereum-like. I just don't think this is the case. I think Bitcoin is so far beyond that, and if there are people out there that think that, they're in the super minority. Don't worry about it. Bitcoin is money, first and foremost. Everyone who holds Bitcoin is going to be in the same boat. We're talking about optional mempool policies. I just think people get really swept up in the team sport. I actually don't think there's that much daylight between either of these two sides. No, you put scruffy on Bitcoin, so you're a scammer. I'm a spammer.

I'm a spammer. Thank you, Node Runners, for looking after my old mate for the next 10,000 years. I appreciate it very greatly. I did see, Gloria came out at Bitcoin Plus Plus and basically said they got the messaging of this wrong and kind of held the hands up. I don't think they needed to do that, but it was kind of cool to see. And I think anyone that thinks Core is like an attack on Bitcoin or is somehow like a negative thing, you're just tripping.

Like, it's completely wrong. Kid yourself. So I think a little bit of respect there is probably due. Yes, mistakes are made. This is not consensus code. This is not the kind of thing that is dangerous to Bitcoin, in my view. I think what is dangerous is the crowd mentality of not just taking a step back and saying, guys, what do we actually disagree on?

And my position is I can't see a pragmatic solution to stopping the spam, and I don't think the filters are the correct solution. There may not be another solution. there may be, but I think maybe just like, just, maybe just rethink how we're going about this, because I think there's a lot of hot air and there's actually not that much daylight between our views. Yeah, I do wonder if this is one of those debates that'll last for two weeks, then everyone will forget about it. Yeah, and look, some people have been saying it's the next block size wars, guys, let's not call the next

block size wars. That was consensus code. This is Mempool policy. This isn't even in the same league as a block size wars. When you start talking about consensus code, that's where, and my default position, by the way, if anyone starts talking about consensus changes on this, I said this on Twitter, my answer is absolutely fucking not until you prove without a shadow of a doubt. The onus is on you.

I don't even think this thing has to go there, and I don't think it should go there. It's absolutely not from my side. Mempool policy, you can turn off, switch off and not worry about any of this and your life won't change. Yeah. One of the good things that may come out of this, though, obviously there's massive renewed interest in NOS. I think if that got more, like, developer eyes on that software, I think that would be a cool thing.

Fully agree. We don't probably have enough options in Bitcoin in terms of implementations of Bitcoin. So that could be a cool outcome. The one thing that I think is scary, though, is like, I do wonder what this does to the ossification argument. Like, I would quite like to see things like CTV and Bitcoin. I'm a scammer. But, and I probably put that in, like, a decent chance of getting through. I wonder if this kind of reduces those.

chances. Yeah, it's a good question because I was thinking about this, like, you know, at the end of the day, is this, and again, this is maybe this is just my pragmatic engineering view, is this more important than the quantum threat, which people can argue over what the probability of that is, but at some point in time, I assume that we will get, you run human history long enough, and eventually we're going to encounter a cryptography-breaking thing. So there's the quantum threat. There's the fact that there's like three mining pools that control all of the block templates. And by the way, a good thing that has come out of this whole filter debate is Ocean started bringing block templates to the four. Two thumbs up.

Good shit. That's exactly what we want to see. These are the kind of things. And I just look at where do we focus our energy? Is this filter debate? Think about how many Bitcoin brain hours have been consumed by this thing. Is this really what we are best using our time for? And everyone can use your time for whatever you want.

That's why I love it. The world and Bitcoin just do. do whatever you want. But is this really what we're supposed to be spending our time on? I think the minor centralization thing on pools, huge problem, huge risk. Bob Burnett's on a fantastic job of illustrating this. It's a massive risk. Quantum, massive risk. Both of these unsolved at this point in time. To me, can we focus on those? Like, that's where I want to put my energy, because that, to me, feels like an important debate. This, which I do think if you run either extreme, you put filters on everything. You create an embedded pipeline. If you put no filters, I get it. It's

sending a signal that we're accepting spam. I get it. That's probably not a good result too. Let the fee market do its job. That's what it's there for. The fee market said to price these guys out. I think that's how it works. Yeah, I totally agree. Just before we close out, can we talk a little bit about micro strategy? Sure. Because I think it was the first time you came on the show, the very first show that knew what Bitcoin did. We were talking about micro strategy. And I kind of my hands up and said, I don't fully understand it. Not in terms of like how it actually works, but in terms of like everything I was seeing looked like a top signal. Yeah, it just keeps going up. I think you kind of shared some similar views, but you've done a bit of work in like

trying to understand it. Where are you at with that now? And especially when it comes to things like MSTY and the sort of financialization on top of just micro strategy. Yeah, it's a fascinating fascinating studies. I mean, their market caps is blasted to a new all-time high of $113 billion, I think, so quite remarkable to watch. So the market cap's at all-time high. Price isn't at all-time high, and this is an example

of share dilution, by the way. I'm not equating microsvaded to a shit coin here, but you see this all the time in shit-coins where the price will be in the gutter and the market cap hits an all-time high because they've been diluting with so many more tokens. So this is an example of the market cap can hit an all-time high,

but price isn't at all-time high. That is share dilution gives you a bit of a measure of how much the shares have been diluted. Now, I think the thing with, I call it the Sailor Premium, which is just market cap divided by their Bitcoin balance, if you look at it from that perspective, I think they've just hit 2x, so that means that the company is worth twice the Bitcoin balance. That is historically between 2 and 3x, that is historically where Sailor raises the most capital. So for me personally, I think, I view MSTR as an incredible, trading vehicle. I think it's something that you can have incredible ups and incredible downs.

And if you want to experience Bitcoin in 2013, MSGR is pretty much your simulation event of that. So that's pretty much what I think on that front. Once the sale a premium gets to 2x and 3x, that is where he has the most capacity to sell stock and buy Bitcoin. So for me, that's actually a signal that's bullish Bitcoin. I'm actually a Bitcoin bull on the spot level because he's going to buy and I do believe he's got diamond hands he's not going to sell. So the more that sale the premium goes up, the more he's going to want to sell to capture that yield, essentially, which is the premium between your stock and the BTC price. Now, on the financial products, these are very interesting because I saw a good tweet. It might have been Bit Payne, who I think

has got some fascinating takes here or there on Twitter. And I think you were saying there's a diversified portfolio where you just have like MSTR, MSTY, you know, and all STRK, And it's fascinating because when I first, I wrote a piece called The Infinite Money Glitch, and this would have been during the run-up. And this was where I just sat down to like try and wrap my own head around this thing. And my conclusion, which I think Saylor then has been very vocal about saying, so this is not a special insight, they package volatility into securities, more or less. And they sell that volatility to various pools of capital, whether it's bond market investors, equity investors, retail investors, whoever it is, who want that kind of profit. So if we look at their new preferred shares, they pay a monthly dividend of 10% a year, 8% a year. Some guy out there is saying, I can choose between a 5% T-bill or a 10% preferred equity stock,

that's paying me double what the risk-free rate is. And if you can deem that Saylor can continue to raise that capital and continue to pay those dividends, then that's basically a bond that's twice the risk-free rate. That's great. There's MSTY, which is a covered call strategy. That is paying insane dividends. And I've spent, what, five, six months just kind of watching it because it's like, where does the yield come from? I understand covered calls.

They're synthetic covered calls. I know that some people are having a great time with it. You know, I've dipped my toe just to see how that plays out. Where does the yield come from? Tell me. So basically, they own a call option, which means they have exposure to MSTR on the upside. They then sell that exposure above a strike price. So let's just say for easy math, the MSTR price is trading at 400 bucks.

They may sell a strike at 450, which means MSTY will experience the up trend of MSTR up until that 450 price, and then it's capped. What you convert is that upside that you miss, they convert that into a monthly dividend income. So, and some of the yields are crazy, like 70% was the lowest, I think it got to, and it's like 125% a year. Again, these are crazy numbers and like it's one of those things. like I'll dip a toe and just see how it goes. It's a curiosity more than anything. There's then also like the levered products, the MSTX and MSTU, I think.

Not financial advice, but if I'm going to give any financial advice, don't touch that shit, guys. Those things are destined to go to zero. They are not 2x levered long MSTR. They're 2X levered long intraday in the time when they're trading. They rebalance every day and there's a thing called drag. It just, you can see how you go down like 85, 90, These things get killed.

So just be super careful. Don't touch that stuff. So I think at the end of the day, they're packaging up securities and they're selling them to Wall Street. They're packaging out volatility and they're selling it in various forms, bonds that pay 10%, bonds that pay X percent, the stock, which is volatile. It's basically choose your weapon, right? What kind of exposure do you want to Bitcoin?

And it's fascinating. And, you know, I think 21 is coming out. We're going to see more of this. I would just say that, like, I'd love to see Bitcoiners doing more. than financial engineering, but also that's where we're on the cycle. So we'll see how it goes. So what's the risk with MSTY? Is there any way that can blow up? I've been trying to reason about this. I think the main issue is that they have basically basically because they're paying out the income, in theory you have AUM decay. So the assets

under management will slowly erode because they're basically selling, when they've sold upside, they have to pay out whatever the excess upside is. That's why they're longed the call option. So I think that they actually need to continue, I could be wrong here and people can correct me, I think they need a continual inflow of new money to keep this thing healthy in generating those premiums because it's like an economy of scale. And if they continue paying out these distributions, I think there's an AUM churn over time. So that's my kind of initial case. I think there is a risk that a lot of this stuff blows up, particularly the 2x-leven and 3x-levard

and all this stuff. That's, you know, there's a lot of risk that's baked into those. So, look, I don't think MSTR, I don't think strategy's got at any risk, but leverage on leverage on leverage creates leverage. And that creates, you know, that's a widow maker trade. So you've got to be careful. But there's no risk of the actual trade blowing up for MSTY. It's just the AUM decay.

You're fully exposed to the downside of the stock, and you've got limited upside. So you are trading your upside for income, but you take the full brunt of MSTR going down. I see. Okay. So your capital. Let's say that MSTR has a bad bear market. market, you're earning 120% yield. The yield goes down when it's trading lower as well, because calls are most expensive when it's trading higher. So the yield will be really nice when MSTR is going

up and it will be much lower and your capital will go down in value whenever MSTR goes down. So you take a lot of the downside risk and you have a capped upside that you're converting into income. So we were talking before about like the 22 cycle and FTX and 3AC and the GFC, all these companies going on. Do you think that some of these, like, levered plays on the strategy could be, like, the next one of those? I obviously take strategy out of it, but the, like, the levered financial products on top of it. I think so. I think so. And I had a case a long time ago. It was, oh, maybe January last year, I wrote a piece. And I basically said that, maybe it wasn't January. I don't know. Maybe it was like Q1, Q1 last year. And the take generally was,

when companies like GameStop and miners start running a strategy playbook, it's getting frothy in here. Now, GameStop hasn't bought yet, so I'm going to hold that that hasn't actually top signaled yet, but that is something that I'm like, do they have the stones to do the bear market? When we go down, because we will go down, at some point, do they have the ability to weather the bear? And in one of my recent pieces, I tried to highlight six months ago, I struggled to see what that GFC type de-leveraging might be. Now you can see all these levered ETF products. Lending in the crypto space, Galaxy and Alex Lawn's team,

they did a really, really good study on all the loans and lending books and stuff in the space. It's not at 2021 all-time highs. I think it's like $30 billion, but it's accelerating. So there's your levered products. Open interest in futures and options is kind of at all-time high. So there's just more leverage creeping in. At some point in time, probably not today, probably not tomorrow, but at some point in time, that leverage gets very exciting.

People have the most confidence that Bitcoin has no ceiling at the absolute top. That is when the most people lever up and take the most risk, because it's super scary, doing it at 75K when the market's going down. It's super scary to do it at 20K when the market's completely blown out. It's really easy to do it when it feels awesome. And you go lever along the top and you do it I did in 2017. and yeah, you pay that price. Why do we always have these blowups in Bitcoin

where other markets don't have them? Oh, they have them. They just get paid it over by the authorities. Oh, no, this happens all the time. This is the only constant in markets. This is why I love about on-chain data. We literally get to watch the only thing that never changes, this brain.

The hardware that we have will always make the same mistakes. There is something about the human brain that is designed to lose money in markets. This is why it's not easy to be a hoddler. your brain will make you do the worst possible decision at the worst possible time. The amount of times you buy when it feels great, it's usually a horrible time. Every time you buy and your stomach is churning because the market's just going down and you want to be sick, generally speaking, that's a great time to actually step in front of the market.

So you've just got to counter yourself, your own contra. Yeah, love it. Well, thank you for this, mate. We'll do one in person one day. We've been trying, but this has been great. Tell everyone where to go to check out, check on check. before we close out. Yes, so you'll find me on Twitter. It's underscore checkmatey. We can see my ramblings about op return and everything else. And then, yeah, check onchain.com for our newsletter and charting

site, which is free, by the way. So all the charts, you'll, you know, you can get all the on-chain data for free. Perfect. Thank you, mate. Appreciate the time. Thanks, mate. Cheers.