What Bitcoin Did - Bitcoin Is Running Out Of Sellers | Checkmate

Episode Date: August 18, 2026

“The reason it goes up is because you get to seller exhaustion. No one wants to sell anymore.” Checkmate is a Bitcoin analyst and founder of Checkonchain. In this episode, he explains why Bitcoin may be entering the final stage of the bear market, even after $8.2 billion of ETF outflows, Strategy selling, the Coldcard attack and the failure of BIP110. We discuss whether $58k marked the bottom, why a fall to $45k would inflict damage comparable to the brutal 2015 bear market, and the key levels that would signal Bitcoin is turning bullish again. We also get into the massive accumulation between $58k and $78k, why bull markets begin before the narrative arrives, whether the parabolic phase of the AI trade is over, and why money printing will eventually bring investors back to Bitcoin. THANKS TO OUR SPONSORS: LEDN SWAN ANCHORWATCH BLOCKWARE BITKEY CAPE FOLLOW: Danny Knowles: https://x.com/\_DannyKnowles Checkmate: https://x.com/_Checkmatey_

This was by far and away the densest, most concentrated, what we call point of control. Tons of supply has been sold and therefore accumulated by somebody in this price range. So if I force the price to go down to 45K, the only bare market that is comparable is 2015. This has started to look a lot like seller's version. I'm sure there's a lot of wealth still be generated in the AI trade, but I think the parabolic crazy money has probably happened now, and now it probably won't be as explosive. So investors are going, okay, well, what else is out there that is attractively priced and well positioned for the future?

I think Bitcoin's it really. But yeah, really, you're waiting for that demand. And folks are like, well, what's the narrative that's going to drive Bitcoin into the next bull market? And honestly, it's just the price going up a little bit. If I look at the world that's coming for us, they're going to have to print the money. None of this has changed the mathematics of the equation. These things take ages. At some point in time, the debasement trade is going to come back. The fastest horse is going to get looked at.

It just takes time. Mr. Checkmate. We're back, man. Rock and roll. We started already. We've got a lot of stuff to talk about. I do. For the price going absolutely dead flat, there's a lot happening. Well, I think that's the best place to start. I do want to talk to you about the cold card hack, vulnerability, and about the Bitcoin 10, failed fork. But we should start because, like, these are two big events, especially the cold card vulnerability. This is something I've never seen in Bitcoin. I think it's hopefully a Black Swan, we never see again.

But while we've had all of this fud, well, not even fud. these problems, Bitcoin price hasn't really given a shit. Yeah. No, it's pretty remarkable. And not only that, you've had not in the last couple of weeks, but you've had the ETFs, they puked $8.5, almost billion. Wow. You've had Sala be a strategy be a seller.

So the two public entities, if we all remember, were the only ones propping up the Bitcoin price, would be net sellers. There's a lot that's happened. And the price is hanging in there. So, I mean, that doesn't mean that it can't go lower. But from my perspective, this is starting to look a lot like. seller exhaustion. It feels like we've been saying that for a long time. I think not even last show, the show before that, we'd started saying, like, clearly we're near the bottom. And I think

the price was probably similar to today. This is just the time paying period. Totally. So I think we spoke, we had a podcast very shortly after we hit 60K in February. And my read at the time was, we've just seen a major capitulation event, likely that we're in the process of bottom formation. And I think this is something that I talk about all the time. A lot of folks worry about the bottom tick, to me, you're looking for those changes in when market structure changes, investor behavior changes, capitulation events, they are generally very large. You can feel it. February felt like you could fear the, you could feel how unfearful people were. My inbox slammed. So that was a point in time where sentiment hit a level with bigger,

oh, okay, now this is a full scale bear. There was no denying it. But also we've seen a ton of people puk out coins. Then you go into the time pain chapter. So I call that the price pain capitulation. If we go back and look at 2022, that was June 22. Lunar collapsed shortly after three arrows blew up. I think Genesis was then in the headlines. We'd seen the majority of people who are price sensitive, puke. Then you have the chop. And I've described this before, but it was 176 in June 22. That was the low, 176, bounced back and chopped around the 20K. And then then we bottomed it 156. For most people, given Bitcoin is a long duration asset, the difference between 176 and 156 is the eight months that separated them. It's a time thing, not a pricing.

So here we are in our current bear market. And I believe that 60K level in February was the price paying capitulation. We just saw all the people who are price sensitive give up. And then you've got this choppy period. We rallied up to 80. We sold back down. Strategy sold 32 Bitcoin, took us down the 58K gang. You got a second capitulation event. This is very similar in terms of the on-chain signatures. It looks very similar to FTX. And then you've just got this quiet period where, if you go back to 2022, after FTX, right,

we technically bottomed in November, like 18th of November from memory. And then we chopped sideways until the 1st of January, doing absolutely nothing. And I remember writing a report over the Christmas period, which is always very, very quiet. Yeah. Bitcoin traded with like a $250 range. It was just like complete nothingness. So look, I'm not drawing a perfect example, right? Markets are going to do whatever they're going to do.

But from my perspective, there's a lot of similarities in terms of the investor behavior. The drawdown is nowhere near as significant, as we've seen in previous pairs, as most people know. But the overall investor behavior is remarkably similar. And I think we're going through that time pain chapter. But I think the reason that things take ages, there's no influx of new buyers, right? You're really left. And why the cold can't think is interesting.

is from an investor standpoint, it kind of hit the hardcore folks who've been here for a long time, the sat stackers. So that's why I think for us, even though it was small in terms of overall coin volume, where I think 2000 is ballpark of how many coins we believe were lost, it's a small number in the grand scheme of things, but it hits us all really hard because it was cold storage. It was, you know, all of those elements. So I think there's a lot of components here, but like this quiet, no volume,

like volume is through the floor. all of these things are what you typically see in like peak apathy, late stage bears. It's only us. You know, like there's no people rushing in. So any kind of sellers that are there are being met with just the folks who are willing to stack away. But you don't have that influx of buyers. Like, 2003, we spent almost the whole year below 30K. We just couldn't really get any momentum.

So even the start of bull markets are really quiet and sometimes indistinguishable from a bear. That's why they call it the disbelief rally. No one believes it. And it's just kind of this nothingness choppy period. Drives people mad. But I think most, I believe in February, most of the price pain damage was done, I would love for 58K gang to just be the bottom wick that would just be so poetic. Very Bitcoin, but we'll see how it plays out.

I think the question that everyone probably has right now is, like, while we're going through this time pain, like, how long do we have left? Because after the ETF, we were in that chop consolidation. I think that's where you first coined the phrase. And that was a long time. I think that was like nine months. Eight months. Okay. How far into this are? We may be five months, six months?

Yeah, so it depends. So from my view, I think we're my broad picture thesis, I think we're very late stage bare. Now, that may have another leg lower. I've modeled, and I get this question. I wrote a piece called, what if I'm wrong? Because my current working thesis is, I don't think we go below 50, right? I think that if we do get a leg lower, it's probably not going to be driven by a Bitcoin thing, it's been driven by a macro thing. Not sorry, adding to what we were talking about before, not only only, Only have we had cold card, soft forks, sale of selling, ETF selling. We've also had equities pullback.

The AI trade had a pretty meaningful pullback, probably not the end of the bull, but a pretty sizable pullback. 64K, 64K, 64K. So if we just hit this point where we've got rid of the vast, vast majority of sellers. So now it's people who are, you know, frustrated. There will always be this kind of slow drip of people coming out of the system. But yeah, really, you're waiting for that demand. folks are like, well, what's the narrative that's going to drive Bitcoin into the next bull market?

And honestly, it's just the price going up a little bit. Yeah, the narrative normally comes a bit later. Price just goes up a little bit because you get seller exhaustion. There's enough buy-side that it just gets it above a moving average. Suddenly a hedge fund buys and it goes above another moving average. You're like support level. And suddenly people just start getting interested because the chart doesn't look like ass anymore. I'm convinced the next narrative will be the same as the last one, institutional adoption.

I've always been to the view that like people like, oh, it has to be sovereigns now. It's like, no, no, no, you just need corporates to go one extra step. Yeah, because I don't know if we really truly saw institutional adoption. Like, I think one of the most obvious signs of that is Sailor's stretch product, which is obviously had a bad time, but it's like getting close back to par, been impressive. It's like 80% retail. I think that proves that the institutions aren't here properly, yeah. Yeah, no, I think the whole industry, by and large, is still individuals.

By and large. Now, there's certainly companies, and I think what I find very interesting, I mean, we're a Bitcoin company. We stack Bitcoin as part of our treasury asset. You know, we're a small firm. But there's a lot of us. There's a lot of small firms, Bitcoiners who are running their own business or, you know,

whatever there is. There's going to be a ton of these. You hear it from the rivers and the like. They often say, like, our clients are plumbers, electricians, dentists, you know, various small businesses. Which is awesome. That's what I want to see. I totally agree.

This is what Lynn's doing with Orange Juice, right? Looking for those businesses that are, they understand the value proposition of Bitcoin. They're profitable. They're small. but they're this consistent buyer. So I think all that stuff is great. The bigger corporates,

and I think folks often, I mean, this is just very human nature, the reason why the tradfibros were like, the ETS and Sailor is the only thing propping up the market is because they don't understand the market. So they look for the big boogeyman entity that they can blame or point fingers to

or say this is the only thing to confirm their own bias. But in reality, those entities have been sellers. So who is buying? There's clearly a pool of people in these spot market. markets who are buying this thing. I'm buying. Totally.

So you said ETFs have sold $8 billion. I think it was 8.2, I think in total, and I think when we look back in the arc of history, this is like June-July, was the stretch of about eight weeks. When we look back in history, I think this will be a case study for an ETF capitulation because we've never seen what the ETFs, how are they going to respond in a bear. So 8.25, I think it was about a 12% total drawdown in cumulative inflows. And to give you a bit of an idea of like, what was the driving factor? I try to apply my own, like, on-chain lens to this, which I think is all about psychology.

What was the forcing function for the ETFs? Because they huddled through most of it. And they only gave up the ghost in June July. Yeah, everyone used to say they were the best holders. And they were. They were. And that's why I think this was a notable capitulation period because in terms of the average inflow cost, we can't know the cost basis of because you've got, you know, shares

trading behind the scenes and all these kind of stuff. So you can't know the exact, like the on-chain. cost base like we can for Bitcoin itself. But we were about 30-odd percent below the average inflow. So if you've got like, assume all the inflows like a big set of DCAs. Yeah. Average cost base was like 80K, 82. We went 30% below that. And then if you look at all the inflows on the date they occurred, and again, this is not a perfect model, but 87% of the inflows had occurred at a higher price. So if you kind of think about that like percent supply and loss, right? We're at 87%. For the Bitcoin side, we got to more than

50% of supply and loss. All of these things are enough. And then we see the reaction function, which is 8.2 billion of outflows. So to me, incentive, a lot of people underwater by about 30%, 87% of inflows underwater. Outcome, 8.25 billion of outflows during a period where the market was, scary, went back to the lows of February. Feels like a capitulation.

So we've been in Bitcoin quite a while. And at 65K or whatever right now, you have to rip Bitcoin out my cold dead hands. There's no way I'm selling at this price. But with the ETFs, is that just classic newbie behavior that they're selling the bottom? Look, I think part of it's going to be that. I also think that we can't underestimate just like the rotation. Yeah. I want to put it in something else.

Yeah. Anything else? I think that that's been, honestly, with the AI trade, people have just been putting money into the AI trade, no matter what, selling everything, right? Could have sold gold, could have sold S&P, whatever it is. I think there's been just, there was a point in time where I was looking at my trading view. I've got my, you know, a certain list of macro assets and things I was tracking. and there was points in time over the last six months or so

where you could almost feel the black hole of money as everything got sucked into your chips and your memory and Korean stocks and all this kind of stuff. And then interestingly, they start lifting some of those companies on the US markets and that was the peak and you've got situational awareness blowing up and like all these things. It felt to me like there was this black hole of money.

At some point in time, like I'm sure there's a lot of wealth still be generated in the AI trade, but I think the parabolic crazy money has probably happened now, and now it probably won't be as explosive. So investors are going to start going, okay, well, what else is out there that is attractively priced and well positioned for the future?

I think it becomes in a really good spot. Yeah, see, this is a narrative that I really believe, just in my gut, is that when the AI trade does either slow down, roll over, whatever happens there, if you're looking for where to park that money, like Bitcoin is the best option. It's something I spoke to Peter Dunworth about. Do you believe that's going to happen? No, I do. And honestly, I'm a simple dude.

I think Bitcoin and gold, just as like if I look at the world that's coming for us, they're going to have to print the money. None of this has changed the mathematics of the equation. These things take ages, right? Macro tends to move glacially, and then it happens all at once. At some point in time, the debasement trade is going to come back. The fastest horse is going to get looked at. It just takes time.

Yeah, I was speaking to Luke Grohman about the AI trade, and we were kind of asking the question of whether they're already too big to fail, and that's what sort of sparks the money printer next time. Well, it's really interesting how, what China's doing with the open source side of things. I think if you kind of wound back the playbook two years and said China's going to be the open source and America is going to be...

I would never have believed it. No, I think anyone could have picked this. But it's a fascinating part of their strategy and this is what they've done for many industries, mostly like commodities and chips and all the rest of it. They essentially subsidize local businesses to undercut any Western price, which just drives them out of business.

in the AI front, they've kind of recognized there's a ton of capital being burned. That's probably irrecoverable. Some of these frontier, the open AIs and the Anthropics, are they really going to be profitable long term? Ever, maybe. Ever? So then they do the open source side, which again is wild. Yep.

And some of these models, I mean, Rob Hamilton and his red team, they can't use American models. That's a crazy, crazy insight. And it's not even that they just can't use the normal models that mean used. They're on the, like, cybersecurity team. and they still can't use them. Totally. So from that instance, like China has undercut them by offering a price of near zero and the gap

between a frontier AI model and an open source one that is as good is like three weeks now. So these things happen real quick. So I think from the whole AI perspective, again, I'm no equity analyst, but if I look at the memory shortage that's going on and I think forward five years time, there's going to be just a glut, a total glut of memory, because there's a massive, massive, you know, a massive incentive to spin up more production for these things. A lot of stuff is going to get commoditized because you've got infinite intelligence.

You can produce things at lower and lower costs. This is very much the Jeff Booth. This is everything is deflationary. At some point in time, like, it's just going to bite. I listen to your interview with Luke. I mean, he's all over this kind of stuff. At some point, the pressures that the governments are under is going to bite. Bitcoin's going to be back in the headlines again because the price is going to go up.

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Like, they see how important the AI sort of trade, the AI industry is to America and are just attacking that. Do you think that's why they're doing it? Yeah. I mean, it kind of, when you actually put it in the lens of what are they done with every other industry, it is the same playbook, undercut. So, so heavily undercut that you can't be competitive. So I think it's fascinating. But when the entire US economy is propped up by the AI trade at the moment, like, that's really dodgy. It is.

But it's also very clever. You know what I mean? Like, that's, it's state craft. So a lot of these chess pieces that are moving are very, very big and have been thought about for a long time. The scary thing is, like, I don't, who knows what's going to happen in the US, but I could see them trying to regulate the use of Chinese AI, which is such a losing move.

It is. I mean, that's what governments tend to do, right? They tend to put more rules in, that'll fix it. And very rarely does, in fact, I was talking to people the other day. Almost every time the government puts a regulation in, they achieve the exact opposite result of what they want to do. So I can only imagine this is going to happen at some scale. All right, back to Bitcoin.

Last time we did a show, we were again talking about the bottom looks like it's in. I think so far at least it still looks the same. And I had a ton of comments under this show. I can't remember the guy's name that everyone was referring to. But everyone was saying 45K is the bottom. Sure. Why don't you think that's the case? Yes.

So this is the piece I mentioned before. What if I'm wrong? So I wanted to run the study and say, look, I've seen this kind of general consensus. is forming about 45K, 40K, 45K. Because I can't predict the future like anyone else, right? I'm just trying to use the data in front of me and look at how investors behave. Are we seeing certain things that look like bottom formation?

My view, yes. What if we go to 45K and my thesis is incorrect? And we go below 50K, right? Which, by the way, across a number of metrics would be very consistent with previous bare cycles. So my thesis is that this cycle is a little bit different from the bare market perspective. I think there's a lot of angles there. So I forced all my models to go down to 45K.

Now, one of the really cool things about on-chain data is we can see where all the coins have moved. What's their cost basis? Where do people accumulate coins? The 200-week moving average like 63-6 or something at the moment, basically where the price is now, this is the densest. Like, we haven't seen something, this concentration of cost basis levels, excluding the cold card thing, even before that happened, because obviously coins move.

even without that. This was by far and away the densest, most concentrated, what we call point of control. Tons of supply has been sold and therefore accumulated by somebody in this price range. So if we force the price down to 45K, all those coins right now, which are at their break-even level, suddenly go into loss.

The people who bought the top go even more into loss. The folks who are holding from 50 go into a loss. So you can actually model how the damage, like how many long-term holders are going to be underwater, what's the unrealized losses, all of these dynamics. So if I force the price you go down to 45K, this is not to say it can't happen, totally could happen. The only equivalent bear market on a damage done, supply and loss, long-term holders underwater, all of these dynamics, the only bear market that is comparable is 2015. Now, 2015, I wasn't there for 2015.

Me neither, but the most brutal of brutal bear. The most brutal of all brutal bears, right, down 90% and stayed there for a year. The market cap of Bitcoin back then at the bottom was a billion dollars. One billion. Tiny. Yeah. Strategy is $4 billion in cash that they raised over the last, like, month. So there's that side of the equation.

Mount Gox had failed. Like, Coinbase has only just started. It's kind of like there's bit stamp. It's like the only exchange. It's like meaningful with the price history back that far. So there's very little infrastructure back there. And if we, the bottom formation zone that I've been talking about, 58K, which is our current low, to about 78K.

We can talk about why I picked that level. But that's kind of the zone that I've been describing as the bottom formation, like we're hammering out the floor. That is equivalent if you go back to 2022 of like that 25 to 15, right? It's a range where we hammered out the bottom. It takes time. It's months. There's leaky price, all of these things.

But it was the bottom formation. No one who looks back, even today at the arse end of a bear mark is going to go, oh, I really regret buying it 22K. You know, like, no one cares. So from that perspective, in that bottom formation range, we've got like $320 billion worth of cost basis levels. The market cap at the bottom of 2022 was $300 billion. So the whole Bitcoin market cap is just in this price range in terms of cost basis level.

People sold that much and other people bought that much. So there's just like massive zone. of accumulation that's occurred. The last time we saw something of this concentrated magnitude was after FTCS. So from my perspective, yes, of course, we could go to 45K because the market's going to clear where the market's going to clear. If that does happen, in my view, it's going to be very, very fleeting. I've got a model I use, which I call my mean reversion index, markets are mean reverting. They swing away, like, let's just take the two in a week moving average. It swings away for it for several years, and then it comes back to it in the bear. Swings away,

comes back. On chain, we've got cost basis levels. Why does the market oscillate around these levels? Because people bought, price goes up, they're in profit, they sell. Price goes down, they get scared, they capitulate. So it swings around people's cost basis because what people paid for it. So I've got a set of these different anchors. Some are technical, some are on chain, different things. And we can then look at like quantiles, right? You can look at the power law. What quantile are we in with the bottom 10%, bottom 5%, up a 95%. Going down to 45K, is like a Q1 or a Q2 event, which means it's like the bottom 1% of the distribution, bottom 2%, can it happen?

Yes, 1, 2% of the time it does. It's just not something I can professionally form a base case on. And you'd have to imagine, like, if we did have a drop down to 45K, it would most likely be on some serious news. And further to that... The interesting is, like, at the moment, we've had two pieces of what I would consider serious news. I know it's a little bit inside baseball when you're talking about cold card and bit 1-10,

But price hasn't moved. And I think there's like a meme that when price doesn't move on bad news, you're probably at the bottom. I don't know how true that is, but it seems true. Likewise, when bad news means nothing at the top of the bull, right? You still got legs. Exactly. So you're looking at these sorts of things, but going down to that like Q1 type event,

it's possible. It puts us into a 2015 BAM market type setup. To me, it feels, it just feels too much. That's like a major, major player. And when I ran non-year-old-example-old. I had a fantastic question from one of my clients. And he was saying, look, you know, a lot of us are DCA is. We've got a salary.

We buy it. There's a lot of other folks who they've just, you know, they've sold a business. They've got a bunch of cash. They've got a cash pile. And they want to know what's the best, like, strategy for allocating? Obviously, I don't help people directly. But I wanted to go through the process of, because I'm a big fan of DCA. Yeah.

Even if you have a lump sum, DCAing just takes the emotional toll out of the whole thing. Because if you do want to allocate, if you're, trying to pick the bottom wick, what ultimately happens is the price rallies and you think, oh shit, I've missed it. And then you throw everything else in. Correct. But if you just DCA, you just buy the whole bottom. It's just a really good way to manage the human element of markets.

Anyway, I tried to run an analysis and say, what happens if we go to Q20, Q10, Q10, Q5, so I've got my mean reversion index. If we get to these different quantiles, look at previous bears. How long are we at Q5 and below? How long Q10 and below? Q20 and below. And the simple kind of summary of that, Q5 and below is like seven days. And every bare market, it's been between one and seven days.

COVID was like... It's the COVID week, yeah. COVID week. It's the 2018. You like dip down and then suddenly you're trading around 4K, not 3K. Yep. FTCS, it was 15, 6. And next thing you know, you're hovering around 16, 17,

climbing back to 20. The crazy thing that I didn't realize until recently about FTX was the price when it blew up was only like 19K or something. It didn't drop that much. much. It went, I think it got to like 16 something on the FTX news. And then there was a couple of days later and then I had a final 15, 6 and then chopping higher. But Q10, you're like three, four months, right? So that bottom 10% of the distribution, you've usually got 10, sorry, you know, four or five months down there. Q5 is like seven days. So it's like a wick. And then Q20, sometimes

it's eight months. So I can't give you a ballpark. To me, we've been in this bottom formation zone, which has been Q20, for, you know, eight months now, nine months in February, or whatever that is. So, in my view, we've kind of got all, all the statistics kind of look very similar to previous bears. So you said, you mentioned 78K before as like the top of this range. Is it, are we in a situation now where above 78K, you'll start calling the bull market back on? So the way I think about the recovery, like all things, you have more, it's easier to call it a bull market when you punch to a new all-time high. Yeah. It's much harder to call it when you're further down. And it's really hard to say it's a bull on the day of the,

like the last day of the bear, which is the first day of the bear. So you look for levels where your confidence can start to build an increase. And I've got a fairly simple framework. The short-term older cost basis is just a really powerful tool because it's people who bought in the last five months. Now, think about the last five months. It's been horrible, right? People who are buying in the last five months is a very, normally we think about short-term holders as speculators, fast money traders. At the bottom of a bear, it's the only time where that interpretation flips over. Because the people who bought in the last five months are people like you and I who understand this thing. It goes to 45K. I'm certainly not selling. I'm buying

as much as I can. So you get to this point where the short-term holder cost base is actually representative of the hardcore folks who stuck with it through the bad times. So that's like 67K at the moment. Getting above that, my simple framework, is until we're above the short-term cost basis, keep your bear market goggles on. Just assume that every rally is going to fail. But at some point, it's not going to fail. It's going to get above that level. And then it's going to hold that level.

And then it will get above the 200-day moving average. And then your hedge fund start to notice, right? Because it shows up on their screeners. And then suddenly momentum starts to switch in the other direction. So I try to build up confidence and say, look, above short-term cost basis, that's the first line of defense for the bears. Same way it's the first line of defense for the bulls when we break through it. It was 114K.

breaking below 114, you go, okay, maybe not a bear, but I've got one goggle on. Once it goes below the 200 day, I probably should have both goggles ready to go. And then once it goes below, you know, 50 week moving average, now your confidence builds and builds and builds and builds. You say, okay, now I think it's flipped. So short-term cost basis is the first level, 200-day moving average, second level. Once you get of like 78, 80, that's the breakdown in the start of the year. 80K was the low in November, that's just kind of punching new highs, technically speaking,

the charts now in a weekly uptrend. Your momentum traders start to notice. That's the midpoint. The reason I use 78K, there's a model called the true market mean. It's the cost basis for active investors. Now, active investors is an interesting idea because there's two models, and I'll go a little bit into the weeds here because it is important. A lot of folks are looking at the realized price.

The realized price is the average cost basis per base. Bitcoin. There is a problem with the realized price. The way it's calculated in the numerator is the realized cap, total value every coin in the supply at the price when it last moved. What was the price of Satoshi's 1.1 million coins moved out? Zero. So it's contributed nothing to the numerator. And it also holds a tremendous amount of unrealized profit. So hold those two ideas. But you have to assume that's never going to actually be realized. Which it can't take. On the flip side, in the denominator, is circulating. So you go, Realize Cap, total wealth in the systems, just over a trillion dollars, and then you've got the total circulating supply.

Satoshi, early miners, even the dude who bought it five bucks and still holds, they've contributed nothing to the numerator, but their full dilution in the denominator. So if you want to say how a ratio works, that means that you are going to underestimate the cost base of people who are real and active and doing stuff in the market. So if we consider the realized price, which is 52, as the cost basis for the market, to get to the break-even level, you need to offset the hundreds of billions of dollars of profit that cannot be taken by lost coins by folks who buy the top and just hold. Now, a lot of people do buy the top and hold, but what do a lot of people do? They panic and they sell. So the unrealized losses can be locked in and realized.

You can reduce that, but you can't reduce the unrealized profit. So as Bitcoin gets bigger and that unrealized profit in lost coins gets bigger, you need a much bigger profile of people who buy the top in size and just tough it out. But they don't tough it out. We know for a fact that they capitulate. So what that means is the realized price of 52. As the Bitcoin gets bigger, we should stop going below. We've gone below it in every previous bear market.

So here's me, Mr. OnChane, saying, look, we've gone below this in every previous bear. the standard default on-chain analysts would just say, yeah, of course, we've got to go below the realized price. And I'm saying, maybe not. Why? Because it actually isn't correctly formulated. And the true market mean adjusts for that. It basically looks at all the coins that are high dormancy have never moved. We discount them as a function of how much they've not moved.

Can I ask you a question on that? Would it have discounted the coins that were sold at the top last cycle, the 10,000 Bitcoin that hadn't moved since like 2011? So, yes, basically it's a self-correcting. system. So think about every coin in the supply. There's not a perfect analogy, but I think it'll make sense for most people. Imagine every coin has a health bar. And every day, each coin produces coin days. So one Bitcoin will produce one coin day per day, two will produce two. It's got a health bar. And when I say coin, UtXO, Satoshi, yeah, whatever, Satoshi's coins are 100% of that health bar as coin days created, never destroyed. The guy who spent his coins yesterday is 100%

coin days destroyed. So what this basically does, it looks at the whole network of all the coin days that have ever been created in the system, how many have not been destroyed? The more people hoddle by, put in a cold storage, it sits there, it does nothing. That's starting to accumulate more coin days and the activity, the active investors are the ones destroying coin days. So someone sells, someone buys, the buyer, once they're a hoddler, they change the ratio from 100% destroyed to 1% stored, 2% stored, 5% stored, 10%. The more hodlers, the more the health bar ticks in the other direction towards hoddling.

So what the active or the true market mean does, it corrects the realized price by discounting. Coins that are 100% coin days stored, never destroyed, we actually don't care about them. Ones that are active and mobile, we care a lot more about them because that's what people respond to. Satoshi doesn't respond to the market going up and down. The guy who bought it 100 absolutely does.

feels that every time he checks his portfolio. So to me, that's the angle that we should be looking at things. So if we don't go below the realized price this time, is that one of the things that kind of breaks the cycle theory? And I know this is a buyer's question, because I don't really, I just can't, I can't buy the cycles. Like, they can't exist forever. I know you don't. But is that something that completely changes the structure? No, I think that's just a technical, like, it's the way it's constructed, that it makes sense for us to stop going towards it. It's an underestimate of where the cost basis is. The reason why this is actually important, the cost basis for investors is what drives people to make decisions. When you're bought and it's gone up a lot,

people feel the demand to sell, right, to take profit or do something dumb, right? Go to 11. When they're well below their cost basis, they sell in a loss. So the reason we use cost basis levels is because it's that forcing function, the incentive for people to do something. If we're mismeasuring the cost basis, then we're going to mismeasure the results that come out of it. And my thesis was, when we go below the true market mean, which was an 80K when it happened in February, selling off below that is probably going to precipitate the capitulation event. And that's more or less what we saw. By far and away, the largest, like one and a half billion dollars a day for like a week every single day, just massive, massive losses. People are going, no,

I'm done, I'm out. So my thesis was, the true market means a level that's going to precipitate the sell side. We went below it. We saw the sales. We saw the sales. sell side, and that's how I like to frame this stuff up. Now, in terms of the cycle, the four-year cycle debate, it's fascinating, right? My framework, I do not worry about it. I don't use it as part of my analysis. And the main reason is I'm just not going to look at the calendar and assume the market does what it should do on that calendar date.

For me, the way I like to frame it up, show me when the capitulation happens, bottom formation dynamics happen, enough pain is in the system. are we seeing bottom formation? Yes. What's the date? I will look at the mechanics and then I'll look at the date rather than say the date

are therefore bottom. You know what I mean? Like I just flip it around. Like I want to see the thing that puts bottoms in and then I'll check the calendar and the price. Yeah, see, I agree with that

but you have to give the cycle crew their dues. Like it did top when it should have done, quote unquote, like the number of days from ball market to ball market top. And if we do end up rallying into sort of Q4 this year,

that kind of is the cycle. It is. but then if you assume that we must then top exactly 1,050 days in the next cycle, and we don't, you're going to be looking at your compass going on, what's going on? Right? So from my perspective, if we're at 1,050 days and we're seeing no realized profit and no long-term fold of selling, it's going to be really hard to form a top. So you kind of flip it around, like, are we seeing the mechanics that put a top in?

People messaging you saying, hey, where do I lever up? long-term holders selling with massive profits, massive volumes. And to touch on this, again, in a technical detail, a lot of folks asked me recently, has the cold card event, it's about 210,000, about 100 times more coins that were attacked, moved in that period of time. So a lot of people shifted their wallets and all the rest of it. Does that disrupt a lot of these on-chain metrics?

And the truth is, yes, there is obviously going to be an impact because coins move. But the realized price went down by, like, from like 52-something, it went down by like 40, 50 bucks. So just to give you a bit of a sense of scale, we've got 210,000 long-term holder coins moving, realize price moved by like 40, 50, 100 bucks, which is insignificant in percent terms.

Imagine how much realized profit occurs. So when someone takes profit, it pushes the realize cap up, realize price goes up. It's come from 20K, 25K in the last bear, up to 52. So if 210,000 coins moving in a short window drops it by 100,

Just think about how much profit taking occurred in the bull to get it from 20,000 to 52,000, or a peak to 54. It gives you a bit of a sense of scale that, like, there's a ton of sell side in bulls. You wouldn't reuse a Bitcoin address, so why does your phone broadcast the same identifier for life? Every sim has a static ID, and carriers, ad networks and bad actors all use it to track you. The big carriers have been caught selling that data over and over again. Cape is America's privacy first mobile carrier. Their identifier rotation feature changes your ID every 24 hours, so you look like a different subscriber every single day. And sim swaps are off the table.

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happened to ledger. Yeah, I was asked that question, what would happen to ledger? And honestly, my answer is none of us want to know that story. Yeah. If it was like a treasurer or a ledger or a Coinbase, just pack it in. Yeah. Thank God it was a small company. Yeah. And like I knew they were small. I was surprised how small they were, honestly. And again, not all the coins that moved were going to be a cold cars. You're people who are always doing stuff. But when you see a event like that and then suddenly a long-term older supply has just been climbing because we've got more of that hodling going on, as I was saying before, you get a very significant drop. It's related. Yeah. I want to say that that sounded very flippant saying, thank God it happened to a small

company. I'm very sorry for anyone that lost money. It's just, it could have, like, for the entire market, it could have been. And honestly, I think something, I wrote a couple of pieces on this. I think the industry did a really good job in a really stressful situation of doing something about it. As an example, I had about four of my clients reach out and say, I got hit, which is just devastating. I had about 20 people reach out. And again, these are just the people who reached out. I had 20 people reach out saying something to the tune of, I'm not on social media. If you didn't send that notice, I would have. got here. Yeah, when I did the show with Rob Hamilton, I had quite a few comments underneath saying,

I'm not on Twitter, thank you for doing. 100%. But I think Rob, Calais, James O'Bern, like, these people have done such impressive work. And the Red Team kind of is a bit scary. They've been finding vulnerabilities in almost everything. It is. I think software has changed forever. One of my mates, so I had two friends that had a cold card, a Mark 3. In fact, I like my co-founder, literally the version of the firmware on a mark three passphrase right so anyway my other mate and i said this at the meetup last night thank god no one listened to me about bit moment i only had two people to call anyway um he works in the airline industry in the legal side and um he had a great framework the actual event is always a tragedy and it is it's a horrible

thing to happen and he's using an analogy of airlines the reason the airlines are so safe today is because we learn from all the disasters in the past, right? The disasters themselves are tragedies, but over the long arc of time, the industry hardens. We learn how to avoid those things in the future. This is engineering 101. Unfortunately, bridges fall down. And we learn how to make bridges earthquake resistant.

You know what I mean? So we learn these things over time. So Bitcoin was always going to be on the forefront of these attacks, open source, codes visible. It was going to be on the forefront of these things. But if we wind the clock forward, it's going to be. hardened much sooner than a lot of the other stuff in the world. And again, I mentioned this in the meetup. Like, don't worry about banks and the like. Like, I'm worried about hospitals and water

supplies and electrical grids and all this stuff. Like, there's a lot. I mean, imagine the bugs out there. And, like, Bitcoin was always going to be at the front of this, not only because it was open source, but also, like, you get someone's keys, you've got their Bitcoin. Like, there's no recourse. But, like, absolute tragic event. Totally. Can we get a bit of fun and talk about the bull market? Sure. This is pure speculation, obviously, at this point. But what do you expect the next bull markets look like? Because one of the things that you always said throughout the last bull market was it authors the bear that follows. And I think we've seen that. Like if this is the

bottom, we have seen that play out. Do you think we get any sort of blow off top style euphoria ball markets ever again? Or are they done? It's hard to tell. I'm very much of the view that like anyone that says we can never go above or below a price again is wrong because of course we can. We can never have a blow off top again. Silverbug's just got a blow off top. They've been waiting 50 years for it. So, no, I think Bitcoin can absolutely have a blow off top because things can get just really euphoric and really crazy. So, no, I don't think that there's any reason we can't. I also don't think that we have to have diminishing returns.

I think the market can, it'll find its level wherever it does. I don't like Anchor saying this must happen, this cannot happen, because how could you know? Does that actually work the other way where the bear market can author the ball that follows? We've set such a solid foundation here if this is the bottom, like we've chopped around for a long time. Does that give us a better sort of springboard to go from? Of course. I mean, every bare market, it's horrible at the time. But the reason it goes up is because you just get to sell or exhaust you and no one wants to sell anymore.

And your ownership is disproportionately Hodlers. Yeah. People who want to be there. As it's the same for any asset, right? This is not just a Bitcoin thing. We just happen to be able to see this with the on-chain side of the equation. I'd love to see the on-chain data for gold and silver because you would see all the long-term holders, dumping a ton of it at the exact point in time when retail FOMO was kicking in and people are lining up and so bullion dealers.

So, yeah, I think that all the bear market always authors the bull and vice versa because you form the base. If we form a base at 60K, right, we're at 156, like the Kager of the floor, the Kager of the of the 200 week moving average is like 30%. And Kega is a bit like inflation rate. So Kager is a bogus metric. Part of the reason is like we've been shopping sideways from months, effectively sideways for months. The four-year Kega has ripped from like eight. percent to 30 percent. How does that work? Price has gone sideways to down. Because we're taking

our previous bull markets. Basically, it's literally an anchor. What was your exactly four years ago? What was happening exactly four years ago? We were puking down the, the ass end of the 2022 bear. So you're kind of measuring for a different starting point. So my preferred approach, if you're going to do Kega, do it on something like the 200-week moving average. It's a little bit like inflation rate. And what is it on the 200-week moving average? About 30%. But you've got to remember that it's like an inflation rate. It depends what you buy. The guy who bought 58K in 2021 and then just sat and is now looking at 58K and being like, man, this thing goes nowhere, the guy who bought at 156 is happy as Larry. Because his keger is significantly better because of his starting point. So, you know, that's why I'm like the

bottom 10% of the distribution. What's the price of gold right now? 4,300, something like that. The reason I ask is, I remember you obviously told the story of when gold was at his peak and you went to the gold chop and there was cues outside. I was in a shopping centre last weekend, a mall for the American listeners. And there was a queue outside the Bullion Place. Oh, interesting. And I wondered if Euphoria was coming back there in any way. That's interesting because I've been through Martin Place, not regularly,

but every saw from recently and there was like lines outside ABC Bullion that seemed to have gone away. Maybe it's coming back. I don't think there's any euphoria at this point in precious metals. Honestly, I think precious metals were a good price at this point in time. I thought when it gets to a 6K Aussie, which is about where we are now, that's where I've been like, yeah, I'm kind of happy to start rebuying. Because I still think gold has a very important role.

Not that fuss on silver. Honestly, it was always a trade and a speculation for me. But no, I'm very much like a gold, Bitcoin savings. That's where I park money that I just, I know I don't need now. I might need in the future. I just put it there as safe harbor. Yeah, I pay basically no attention to gold, but I kind of get it. I just don't want it.

I want Bitcoin. No, that's fair. What else have you been watching? What else is looking interesting right now? In terms of the unchain stuff? Honestly, I mean, we've been in this bottom formation zone for a while, and I feel like I've hammered out the thesis fairly well. That's why I'm, like, testing the extremes.

I ran a couple of pieces being like, you know, we've got the Kager on the upside. What could we potentially get to and, like, spitballing? Honestly, I think spitballing, like, where the peak can be is much better in the bare market floor because once the market starts running, it switches over. but I thought the cold card incident was interesting to like just analyze how the market moved. I know you spoke to Lloyd recently who did a fantastic dashboard like studying the attack and then how people started moving their coins and then wave two and three.

I think that stuff was fascinating to see. That show will probably go out after this one, but everyone should listen to that. Lloyd's done some really interesting stuff. He basically did the exact attack and got all the data. He's been crushing it. Yeah, yeah. No, it was amazing to see. So I think like that kind of stuff is really, really interesting.

we're very much in a waiting game. You know, we're in peak apathy, which is why the market goes absolutely nowhere, even though there's a bunch of bad headlines, I really thought the cold card incident was going to be far worse than it did, and it's just sideways. So that's a data point.

When it does start running, how quickly do you think we'll go back to 126K, or above 100K? It's hard to tell. I mean, if, look, previous bears take a long time to recover from. So, for example, 2018. But when in the last,

Ball market. Wait, which one was it? No, when we went back above 20K in 2020, 2020, that was a long time, obviously, hammering out the bottom. But once it started moving, we got above 20K quickly. And it also didn't stop. I expect us to chop around the all-time high then for a long time. It just didn't care about it. No, the general way the Bitcoin has traded is you have the bottom. And then you have the 2023 period, which was like nine months of nothingness, just sideways grind. Every sell-off, there's a lot of, a realise loss because it's the disbelief phase. People think it's just not a lower high and they've got whatever technical model

that tells them it's all over again. 2019 actually is a very interesting bear. There's a lot of similarities. If you consider 2019 as a bear market in its own right coming off 14,000. So we had the 2018 bottom. And then you had the scam work because of the plus what was it called plus token. So we rallied up to 14K, which is interesting because it's a miniature bull. Yep.

A very heavy spot bid that sucked up like 2% of the coins. I went from 3K to 14K. Which was actually not dissimilar to GBTC in 2021. Yep. Hooved up 2% of the supply in a very short span of time. Plus token was kind of the same. And then the CCP started NAS selling it. For anyone who wasn't there, that was a Ponzi scheme running out of China.

Yeah, it was. And so 2019, if you look at 2019 in terms of its own bear, remarkably similar to this bear market. It's actually the most similar. If you just map it on price and all these things, 2019 is actually the closest analog to today. We even had that like rounded top into a COVID sell-off when strategy sold 32 Bitcoin. It's like the exact same chart.

Not to say that that's going to be a perfect analog, but 2018 bear market bottomed. And then we had a second bear, which is 2019. 2022 bottoms. Then we had the 2023 just like sideways grind until the ETFs came in. And then we chopped around the all-time high of the 2024. So generally speaking, the recovery phase is often a long journey. but it's also, you know, cheap prices relative to once it gets to the all-time high, long-term holders, and I think a lot of people understand it now, didn't see it at the time.

Long-term holder selling is almost always what kills the ball. Yeah. Almost always. There's always like, oh, see me, futures went live, or there's always a thing. But that comes after all this sell-side pressure has occurred, and the realized cap's gone up. It's a 52K in terms of price. There's a lot of sell-side. long-term holders start really ramping up their sell site at the previous all-time high.

So they're generally quiet up until then, and then they start to one load. And for those people who think the ball market starts when you beat all-time highs, you've missed a 100% game by the time that happened. Totally. And that's the way like your Kega depends on when you accumulate. And, you know, again, can't tell anyone what to do. But like, I'm of the view that when Bitcoin's in a level where it is now, I think it's really, really deep value.

Yep. right so if you've got that longer term time horizon i think it's a fantastic fantastic zone and that's why i'm a big advocate don't worry about the bottom just buy the whole bottom it's a process DCA just takes all the emotion out of it um for me i've been in bitcoin long enough for like i'm gonna buy as much as i can now i'm in a stage in my life where like i actually need to buy other stuff right gold equities um just because i you know you need a bit of diversity as you get older you got dependence you just other things in life that force you to have to be a bit more conservative in some ways. Why do you think you need diversity? Because like the thing, the famous line from Saylor

is diversifying is selling losers to, sell the winners to buy what losers. Totally understand that. So my general view is that I'm not a portfolio of 50 things. When I did that, it was shit coins and it was a bad mistake. Same. 10 grand to 10 cents. That's how you do it. Generally speaking, there's a handful of assets that are the dominant proportion of your returns. For example, I've used this for gold. It's just a great example for this. I save because, because I want to buy something. That could be my kid's schooling when he's old enough. It could be a house, house deposit.

Imagine the Australian housing market is a great example. We're coming off the top over the course of the next 24 months. I think the Australian market probably comes down more, certainly in terms of purchasing power of other things. There is a potential world. I don't know what the structure of it is where a ledger gets hit. Or something really bad goes wrong. And Bitcoin just has a lot longer to chop at lower levels.

but the house market is absolutely ripe for me to buy. If I'm all in Bitcoin, stiff. See, this is like a risk tolerance thing, I think, because we're in the same situation where we're both looking at buying a place at some point soon-ish. And I look at it, like, have your money in Bitcoin. Like, in two years, do I think it's going to have broken all-time high again?

Yes. So the price of the house essentially halves. Sure, but how guaranteed is that? Not. No, I mean, it's not guaranteed. But, I mean, it's not with gold either. Sure. I mean, for sure.

it's probably going to be more stable. But if it does, I'll just wait a bit. Look, I think everything is about duration. Yeah. I mean, duration matching. Bitcoin is my longest duration asset. What is, like, from the way I think about it,

my Bitcoin is there to clear my mortgage. Yeah. Right? It's there to get my kid through school because he's one, right? Not even one. So I've got 12 years until I have to worry about private school. So there's a bunch of things there where I've got a long duration. House, this is something in the next,

like three, four years, right? That's kind of the timeframe. So from that perspective, yes, Bitcoin will probably be higher, but I might need something that's not quite as volatile as Bitcoin for that period of time because I'm saving relatively near term. For example, I would not buy Bitcoin if I had a, if I need to buy a car. I'm not saving you Bitcoin. I mean, saving probably cash. Honestly, I wouldn't even go to gold. So it's a duration problem. The car one makes sense. I really don't understand the house one. Like, obviously, what if the housing market is perfect in 12 months. I have to sell my Bitcoin in 60K.

It's terrible. No, well, I mean, we don't know what it's going to be in 12 months. But also, I don't think the housing market matters. I think the moves in the housing market will always be disproportionately small compared to the moves in Bitcoin. They will. And so, like, even if in 12 months, the timing is perfect for the housing market, you wait another 12 months, Bitcoin might have ripped another 70%.

And the house, even though the house prices have recovered, you've still got a cheaper house. No, no, I understand that. But when it comes to housing, I think housing is a small. special case because buying your fortress is not about money. In my opinion, I totally agree. There's a part of that where it's like it's actually just a thing where you just want security for your family. This is a different animal. I do not look at this as an investment, but I'm looking at like opportunity cost of where I can have money in the meantime. And look, there's no right away,

right or wrong way to do this. I'm not looking at his investment, but I wanted to buy as cheap house in Bitcoin terms as possible. Yeah, yeah. And that's why I think like for me, I actually don't really care about selling my gold ETF, really don't care. It's purely a fared instrument. It's purpose is to be sold for the deposit. Yeah. The Bitcoin's there to clear it when the time is right. You know what I mean? So, yeah, it's just way I do it.

I'm sure you saw Jeff Booth talk about his house in Bitcoin terms. And I'll get these numbers wrong, but like directionally, it's correct. He was like, when he first bought his house, it would have cost him 100 Bitcoin. And then when by the time he sold it, it was like 12 or whatever, like, however those numbers worked out. Like, that's the trend I'm betting on. For sure. And I've got a chart that shows the Australian housing market in Aussie dollar terms versus

Bitcoin terms. And it's the same thing. Yeah. Depreciates over time. means your Bitcoin is kicking us. Again, it's why I'm disproportionately Bitcoin, but also, there's just, for me, it just seems I would like to have other things. Again, it's really hard. I've said this before, but I try to get gold to like 10% of my portfolio and then Bitcoin goes up and I'm just like constantly chasing my tail. So like you actually need a Bitcoin

to go into a bare market to hit your 10% level. So, you know, Bitcoin will always do its job. But yeah, it's just duration. It's funny. I was talking to Luke after the show we recorded. I hope he doesn't mind me saying this, but I was basically asking him for advice as to what he would do if he was in my shoes. And some of the advice he gave was really good advice in terms of just making sure I've got a more solid foundation rather than just being all in Bitcoin. I just can't make myself do it. I can't make myself sell Bitcoin to buy things that I think are way less interesting.

Sure. And have way less upside. And honestly, part of it is that emotional decision. It's hard to sell the Bitcoin. Yeah. I don't care about the gold ETAF. It's a number on a screen. So in a way, I'm saving there because I know I'm going to sell it.

Yeah, it may not go up as much. But also, I know the wealth is going to be there when I need it. It's a psychological game. All this stuff is psychological. Work out what works for you. Don't worry about what other people are doing. Some people are going to be all in Bitcoin. I know I'm in a phase of my life where I could be all in Bitcoin.

I've done that journey. I just need the 10% that's not because that works for my current setup. Yeah. Gives me optionality. Especially, I've got, I don't think I've even said this, but I've got another kid on the way as well. I know. I mean, I know you know that, but, like, that makes you think.

Yeah. Yeah. I don't know, man. It's hard. It is. I just love Bitcoin too much. Yeah. No, and even with all the chaos that's gone on this week, the last couple of weeks,

all the security funding, you know, you've seen lightning services get shut down, left, right and center. Like, there's a lot of holes out there. After the disaster, engineering is about learning from the mistakes and it's going to be hardened as. Yeah, I think that's a silver line that everyone has. Like, it's easy to look at the, stuff the Red Team are doing and be like, holy shit, so much stuff is broken. But at the end of this, we're just going to have a way more solid base. There'll be consolidation. Lloyd used a great term. It's Darwinian. Yeah. You know, and it's going to be Darwinian for a little while,

but that's kind of the world we're now in. I forget the exact terminology, but it's like vulnerable world or something. There's like it's framing that we're now in a, you know, you can't obscure things and just hope no one finds it. We're now in a vulnerable world where everything is exposed. We're so digital that there's going to be just holes found everywhere. Yeah. It's going to be interesting, man. Should we talk about Bit 110? Sure. This played out exactly as I expected.

I think it's one of those really hard lessons. Like I've got nothing against the normal people who sort of fell for the Bit 110 narrative. I've got a lot of things that I find wrong about the people that were selling the Bit 110 narrative. But everyone's learned a harsh lesson about how Bitcoin consensus actually works. Do you want to just give like a take on everything that's happened? Yeah, I mean, look, from my perspective, remove the point. of what Bip 110 was trying to do, because that's its own discussion today. And I was talking a lot of guys at the meet up last night.

I agree. I would love to stop the spam. I think it'd be fantastic. I think you'd actually be hard-pressed finding too many Bitcoiners who aren't on that side. And it's funny, that got so much noise in the argument, but everyone agrees on that, generally. Generally speaking, the challenge is devs will always find clever ways to hide the dark. Anyway, that's part of the politics of it. I think what's a bigger lesson here, the default answer, there was a lot of talk about we need

to launch a user-resisted soft fork. If you imagine a world where that was correct, every soft fork proposal that a government three-letter agency can cook up in a basement and rally a bunch of bots on Twitter to make a bunch of noise. By the while, I'm not saying that that's what happened with Bit 1-10. I'm just saying, if the network had to actively fight every single one of these things, we'd be bug squashing forever. ever get any man. Bitcoin's done. The default position of all Bitcoin is no. All soft fork

proposals, the default answer is no, until proven otherwise. And I think the main lesson that should be learned from Bit 110, there was a, I think, delusion is probably the right word as to how far down the rough consensus path they were. I don't believe they'd come anywhere close to achieving rough consensus. No. There's a lot of talk about miners being a cabal that got together in a back room with sailor and shut it all down. Look, mining, there is a problem that is mining pool centralisation. It is a problem. Definitely. I believe Bip 110 is a terrible case study to demonstrate that. Why? Because the miners must sell the coins. If the users won't buy the coins, then their mine effort is worthless. As there's still miners, I think they found

a new Bip 110 block today. They did, yeah. They're mining something that's worthless. There's not going to market for it. So they're kind of just burning their money. The miners follow the users. And I think there was this delusion that this was going to play out like Segwit. Segwit had consensus by the users. Taproot had consensus by the users. We saw in Speedy trial, the miners slowly and surely flipped the bit. And over time, we actually did have rough consensus, right? Now, rough consensus is really hard to measure. It's not node count. It's not number of bots on Twitter. It's really difficult to measure across the board. I think it's also worth pointing out the threshold that needed to be hit for taproot.

I think it was 95% or 95. Whereas they were asking for 55%. Yeah, I mean, that's, to be honest, the fact that we didn't see any miners like pivoting to ocean in the months before and then using their BIP 110 pool, there was just no evidence of demonstratable rough consensus. So the miners, they did, I mean, not that I know, but if I was going to be, if I'm a betting man, I do not believe they got a, into a shady room. I listened to the stream

that Canute hosted where they actually watched the thing come in. There was points in time where they said, oh, the Chinese government and the American government must have leaned on the pools on my, bro. That's insane. They don't know that this is going. This is so irrelevant. I think that there was an overestimation of rough consensus having been

achieved. They believed it. I think in many regards, when it didn't play out as expected, they needed to blame something. The miners did what they should have done, which is nothing. They just pressed on with exactly, because there's no consensus, so don't change. The default answer to all soft forks is no. User-resisted soft fork by default is doing nothing and just continuing to run the code you currently do. And I love to use the example of chess

as explaining Bitcoin consensus rules to people who are like, why can't people just spin up a new Bitcoin? It's like, okay, you've got a game of chess for Bit 110 because they wanted to revert something. I'm like, all right, they're taking away the porn moves two forward move, right? I think it was like the 1500s where they brought this in. And then they go, okay, but chess is, it's impure. We have to get rid of the two porn forward move. It's the only way to play chess. But the rest of the world's like, yeah, but that kind of, no.

We don't want to play that game. This is how it works now. This is how it works. We've agreed on it. You can change the rules, but the problem is you're only going to have your small chess club. Yeah. Who plays this weird modified version. No one wants to play that game at scale.

So. There's a chess club in the world that plays those rules. There is a chess club. club that plays with 14 queens, right? Somewhere out there, that's part of the game. But it's just not the consensus version of the game. It's a small click of people in order to change the rules. Now, the reason I like to use chess as an example for Bitcoin, chess has changed. There have been evolutions of the rules. People in China agreed. People in America agree. People in Europe agree. Everybody agreed these are the rules. So it can change. It's really, really, really hard to do

when it happens very infrequently. And the longer that it goes on, on, you know, this is where you get to kind of ossification, I suppose, and that that's not the perfect example, but I think that chess example is a great example for why we just resisted the change because we kind of like the rules as is. You may want to change it, and you may even have good arguments for it. It wasn't rough, we hadn't reached rough consensus. This is exactly how it was going to play out because there was an overestimation

of how far down this pipe the system, the change was. One of the things that I found really frustrating, especially towards the end of the Bit 110 thing, was they kind of took the Bitcoin mining pool centralization as their narrative as if no one in real Bitcoin was talking about it. But this has been something we've been speaking about for years and years and years. And now they've got one miner.

Yeah, but like... Yeah, well, exactly. Then they got one minor for now until they're changing the proof of work algorithm. But like the stuff that Stran V2 have done, Ocean with Datum, really like good moves. And I think... It was amazing seeing Ocean on both sides of the change.

It was the most beautifully ironic thing. It totally was. And the chances of, so for anyone listening, OSHA mined first or second block second block on the Bitcoin 10 chain. And then they got the fourth block on the proper Bitcoin chain. And like that shows like Ocean and Datum

very, very cool. Fantastic. I'm incredibly bullish on that company now. Luke, a mechanic have gone and that narrative is not going to be driven as hard from that company. I think that was a really, really good thing to see. You know, I know that Foundry tried to do like a mine of vote, probably not the right way to do it. Yeah, I hope that we do so.

see that process where you give, and we should probably separate, there's minors and there's hashers, right? People providing the hash pad and the miners are really like that. It's complicated, but yes, we do have a minor pool centralization problem. I'm of the view, and I use this example of the meet up the other day. Say what you will about quantum. We can all, I'm just going to use it as an example. Let's just imagine that quantum is like, all right, shit, it's coming. We can see it, like they're starting to crack stuff, and it's like, we all agree that it's now happening, just for simplicity. Imagine that's happening. and then the miners refuse to put in some kind of a change.

Now we have, that is a good example of minor centralisation being a problem, or they want to force their own signature scheme. That is an example of a problem. The Bit 110 is not a good example because we did not have rough consensus. So in the event where we do have rough consensus and the miners are causing trouble, that is a good example. The case where we don't have rough consensus, the miners have every incentive to do absolutely nothing

because the existing chain is the default. The answer is always no, and there's proven otherwise. I want to give a shout out to Bob Burnett. I heard him on a lot of spaces around the time of the fork. I think he's been really good. As a board member of Ocean, I think he's on the board. He had some really good takes. And I'm glad there was some dissent, at least, amongst that company.

No, I think a lot of people have reflected. And in my view, the correct thing to do is to reflect and go, what went wrong? Yeah. Because clearly it didn't play out to plan. So rather than blaming a shady cabal, actually just self-reflect and go, well, what if there's actually a simpler answer, which we just didn't achieve consensus. Yeah.

You know what I mean? Like, you can always find a boogeyman if you think long and hard enough and you go digging through someone's emails. But at the end of the day, is there a simpler answer? Yes,

you just overestimated where you're at. I think it's also interesting. Like, they were claiming there's a shady cabal in Bitcoin core or whatever. Like, if you look at the two groups, they look like the shady cabal. I mean, there's a Discord server where they're picking a new proof of work algorithm now.

Like, it's kind of, it's a shit coin. And then in like the circles that I've been in this, entire time, everyone's like, please don't talk about Bitcoin 10. No, no, no, no, no, no, I know wants to even have the conversation. Everyone's bored of it. No, no, I think it's, it's probably time to move on and stop giving it air, stop giving

it oxygen. Yeah. Because we have more important stuff to focus on, which frankly is almost anything else. Yeah. Do you think, one of the things that I think has been very interesting in the cold card vulnerability is the idea of covenants has come back a little bit. Sure. And for anyone that doesn't know, essentially, this just limits where you can send coins. It gives you control and constraints over, so you have to send it to a staging address or something like that.

And like, I've always thought Covenant sound like a good idea. Do you think this actually goes against the ossification narrative and might open the idea of having changes in Bitcoin again? Yeah, so I do actually. I think this has been a bit of a wake-up call. Now, again, I'm not promoting any particular bit because I've not read enough of them, but like things like the Great Consensus Cleanup is kind of just bug fixes. In the world of AI, I think we should actually really be taking these things seriously.

So I'll spend the time to review that and understand it a bit better. Covenants. This is one of those things where I think we have to be careful. I'm pro-covenants. I think it's a good idea. However, I also am very cognizant that this is going to be one of those things where we will assume that's going to be much more powerful and then we don't use a lot of the tech. TAPRoo is a good example. However, I've also seen a lot of people using TAPRut for, you know,

the Frost Knap guys. Fascinating. Awesome piece of hardware. I think it's great in terms of like the U.X and all the rest of it. users tap route to its fullest extent. All of, like, overtime, different, with a bit hardware, I can imagine for covenants, where this is going to be really useful, imagine an anchor watch or an unchained or a CASA, they would be able to use those types of things

as part of their setup that the user is a bit more hands-off, but they can opt in with a user interface. Yeah. Right. I think fewer people are going to be loading up their sparrow wallet and, you know, building covenants by hand, but insurance companies can suddenly start using as collateral because it can only go here and you know time locks and all this kind of stuff i think that's where it's going to be really

really useful um there will be a lot of pushback i mean sailors a classic um example of like ossification doesn't want anything to change i think that we should probably be a bit more open to like but also let's not let's not assume it's going to change the world so yeah people measure about all of these things yeah no that's fair if you had to put like a probability on it where Do you think we will get changes to Bitcoin? I do. And take out, like, clean up, the consensus cleanup. Like, that one seems obvious.

I don't think there'll be many people that are against that. But a real change is like adding covenants or something like that. I do, actually. Yeah, I'm actually just gut feel. I feel much more constructive on Bitcoin is now going, okay, let's not argue over this small stuff. And I mean, you gave a good example when I spoke to you after the Cold Card incident. You said you put out a tweet that was saying, you know,

elevating Rob Hamilton and some of these guys who have been fairly anti-Biton 10. And there's a lot of B110 folks who were liking the post. I thought that was a real, even though we disagreed on that one issue, there was a lot of unification at that time because we realized this is a bit bigger. Yeah. You know what I mean? So, look, honestly, I actually kind of hope the gears have been unstuck a little bit, and we start thinking a bit more from a technical, what are we actually going to benefit from moving forward?

So I'm constructive. I couldn't give you odds on it. But I think there'll be a lot more technical discussion now, which is very healthy. Yeah. Do you think there's a path back for the very, very, very, very, sort of loud Bitpon 10 voices. I mean, not Luke and mechanic, I don't think, but like the other people, the sort of influencers that were on the Bitcoin 10 train. Look, I'm with the view that Bitcoin has kind of two setups, right? It humbles you, no matter who you are in some way, whether by price

or by technology, and you have to slay your heroes all the time, regular thing. So, I mean, I certainly don't hold any grudges against any folks. I think that by and large, the whole idea of Bitcoin is a single chain. If you want to go on to do a proof of work chain, that's an coin goes. That's a whole different thing. Bitcoin is unchanged at this point in time, right? It hasn't changed from however many days ago. It's the exact same system. There's a benefit from network effects. I think anyone that wants to support the asset. And by the way, Bitcoin is also money for enemies. There are people who are going to disagree as Bitcoin gets bigger on a lot of stuff. That should be the default. Yep. So yeah, I mean...

I hope they do. There's just not that many cases in history of people sort of be doing something like this and then coming back to Bitcoin. Like Marshall Long is probably the best example of someone that did. He was... I think it was a Bitcoin unlimited the fork he did. I mean, the shelling point is it's the money that everybody uses. Yeah. So, you know, and there's only one of them. You know, you can't replicate this thing.

You can't change the rules of chess and expect everyone to sit down and play your game. Yeah. It's going to be interesting, man. It is. Anything else you want to talk about? No, man, I think we've covered a lot. So, yeah, look, I think Bitcoin's really, really good value down here. Right.

And again, you've got to set your time horizons in the short term. I mean, no one can predict anything, right, in terms of markets. But from my perspective, have we seen. seen the capitulation. I think we've seen two of them, one in February and then what I call the time pain in June July. ETFs have capitulated. We've seen a lot of bad news. Price has gone nowhere. The two biggest public buyers have been sellers. Price has gone nowhere. I think we're close to seller exhaustion. If I just look at the equation, right, if we go to 45K, it's like a 2015 bear, not that the market cares what I think we deserve, but do we deserve that? Probably not.

I'm constructive, man. Let's go. One thing that I want people to do. So I went to the Bitcoin meetup in Brisbane last week, and then last night we had the one in Sydney. I'm so bullish on those events. Like, we need to get more and more people to them. There's almost been a case of, I think, shared trauma over the last couple of weeks. Totally.

The cold card thing. But like the in person events, I think are really important. So if you're in Brisbane, first Thursday of every month, Sydney, second Wednesday? I think so, yes. Go to your local meetup. No, I agree. They're fantastic. We got a massive turnout yesterday, which was great.

And just case in point, right, bit 110 is obviously one story. But we had the Q&A. It was all cold card. Everyone wanted to understand about entropy and, you know, how multi-sig works. And it was all about the technical side. So it shows that that was the shockwave. Yeah. That was the real shockwave that affected people.

And it was a unifying event. I think across the industry, I think as terrible as the result as the event was, given that bad circumstance, the way the, the, The community rallied, I think, is tremendous. Again, the Rob Hamilton and Kelly and these guys. I think it's incredible work. It's hard to go through the storm, but once you get to the other side, it's greener pastures.

Let's go. Thank you, checkmate. It's been awesome, as always. I'll speak to in a few months. Good on you.