What Bitcoin Did - WBD IS BACK - $100K BITCOIN, MICROSTRATEGY AND THE BULL MARKET w/ Checkmate

Episode Date: December 5, 2024

Checkmate is an on-chain analyst and founder of Checkonchain. In this interview, we discuss the relaunch of 'What Bitcoin Did,' Bitcoinbreaking 100K and the growth in institutional demand. We also get into the the Strategic Bitcoin Reserve, the impact of options on Bitcoin's market dynamics, and the MicroStrategy playbook as a volatility product. MASSIVE THANKS TO OUR SPONSORS: IREN: https://www.iren.com/ RIVER: https://river.com/wbd CASA: https://casa.io/

The bull market will author the bear that follows. If we have a bull that is just vertical, like 2021, just goes straight up. You better believe we're going to come straight back down. If the market just teleports to a million, right, there's a pretty good chance we're going to come back down at 250. There's your 75% drawdown. If the market slow and steadily grinds up sideways, up sideways, this thing just keeps going. Hello and welcome to the What Bitcoin Did Podcast. I'm your host, Danny Knowles.

And for this first episode, I just wanted to give a bit of a background about what happened to what Bitcoin did and what the plan is moving forward. So at the end of August this year, we decided to close down the pod. Pete wants to be UK-based, more UK-focused with his content. And so he spun up Mr. Obnoxious, which he's crushing. But for me, I just needed to be all in Bitcoin. Our timing was as impeccable as ever. We closed down the podcast at the very start of the biggest ballroom we've ever seen. And I just wasn't done with the conversation.

So what Bitcoin did is back. The only thing I'm going to ask of you is if you can go and subscribe. We've started again with the RSS feed and the YouTube channel. So if you can head over to your favorite podcast app and subscribe. And if you can go to YouTube and subscribe, that'll be a massive help. And so for this first show, I was trying to decide who the best person to get on was. So I called up my good friend, Checkmate, asked him to come on the show. He's one of our favorite Bitcoin is he has such good take on everything in Bitcoin.

And in this one, we obviously got into 100K Bitcoin. It's a huge milestone. We got into the general structure of the market. what's likely to happen next. And we did a bit of a deep dive into the micro strategy thing, which is something that I've completely missed. So that was really interesting. So thank you for listening.

If you do have any feedback on the show, please do let me know. It's Danny at What Bitcoin Did.com. I hope you enjoy. Check, mate. We're doing it again. Good night, round two. Let's see if it's a...

We can get the price right this time. I can't believe the very first show on What Bitcoin did. The new What Bitcoin did, I'm having to re-record the first interview. I'm one for one. Yeah. I mean, you called me this morning, you're like, look, if it breaks above 100K, we've got to do another episode. I say, yeah, okay, let's sort of make sense.

And then literally about 10 minutes after you got off the phone, the thing's punching through 100. So just for some context for anyone listening, we recorded the show a week ago today. I initially wanted to get the first show out on Tuesday this week. So we're recording this on Thursday 5th. It's going to go out today. I initially wanted to release the first show on Tuesday. And so after we recorded, I was like, please just don't break up. because a big part of the conversation that we had was about the kind of 100K cell wall and what

was going to happen next. And so obviously the night before I wanted to release the show, it broke 100K. So here we are. So I've been sound asleep while this all happened. So give me the update. What's happened? Well, I was actually, I was at tennis practice, right? So I had no idea. I came back. I had a couple of calls. And then I just happened to check the price. And like, it wasn't 100K. It was 103, right? Things just blown through the roof. So I was pretty good. And I'll tell you what, the Bitcoin meme game has been on all time high. My absolute favorite, I believe that Craig Womke started it. Basically just took a screenshot.

There's been a Neuro-Rubini, and you just screenshot Niro Rubini, Lagarde, all these different characters. I did a Zihar, and everyone just posts all the critics. And what I love about 100K, like obviously it's a really nice round number. Bitcoin has been talking about it forever. The laser eyes have been on. Some of those laser eyes are coming off. it's just like a great sign of you were really, really right.

And I think for Bitcoin, it's a lonely journey and to have just a really, really epic move. I mean, it's 100K, guys. He said it was going to go to 100K. Here we are at 100K. It kind of feels like a job done, so to speak, at least phase one. Totally. I mean, Yellow can finally stop his spaces. It's funny, though.

So when I first got into Bitcoin, like 2016, in 2017. 10K was always the big number. And I was, I think that ended up breaking in like November 2017, if I remember, around then. And I remember being so excited about it. I'd stayed up late. I think I pulled like an all-nighter. I was watching the chart on GDax. You could watch the order book and I was like watching these cell walls get bought. And when it finally did, everyone was obviously, like super happy. 100K happened. I slept like a baby. I didn't know it happened. I woke up this morning. I was like, fuck. I've got to re-record the first interview. It's funny how your emotions completely switch with this.

Totally. I mean, you spend enough time around Bitcoin. You become battle-hardened, right? You know, volatility becomes part of the day. And, like, to be honest, like, this is actually the first of this whole cycle. This is the first time I've been like, oh, yeah, I feel hyped now. Like, everything else has kind of been quite methodical, quite technical. The market has been trading very structured.

And now it's like, fuck, yeah, we're off to the races, let's go. So it's funny. When we were speaking last time, one of the questions I asked, this is now the lost tapes. no one will ever hear it. It's in the archives. But one of the questions that I asked was, like, who would sell at 100K? Because we don't think this is the top. And you, like, rightly said, yeah, big round number, people are going to sell. People are going to take some off the table, which makes sense.

But now, now we're, like, through 100K, I have no idea who's going to sell. Because we're in full price discovery mode. There's no big round number ahead until 200K. And there's just fresh air. So what do you think happens now? I think that's the right way to think of. And price discovery is unique for this very reason. There's no roadmap, right?

No one's been here before. The price has never been here before. So it's a very, very different world. This is where I come back and look at a lot of the, this is why I think on-chain data is really useful because it gives us a roadmap for these periods. Now, of course, we have no idea where the market's going to go. I never pretend that I do know.

But we know when a lot of Bitcoiners go into a lot of profit. Now, this particular cycle is interesting. They're all different, right? Every cycle is different. But this one, I think, is a bit special. because if you think about the all-time highs, the one back in 2011, 2012, no one even knew that Bitcoin had an all-time high. You go back to the all-time high break in 2016, 17. This is when you kind of had the first phase of people really coming into the market, right, in terms of retail.

But it was still pretty early. You had to buy Bitcoin and funky exchanges. And, you know, that was the quote currency for everything. The one that we broke, when we took out the 2017 high, a lot of Tradfly folks just said, oh, that's just a ZERP phenomenon, right? It's just money printing, you know, it'll go back to zero. For me once, for me twice, for me thrice. Here we are on the fourth all-time high break, convincingly, right? At 70K.

I know like the pre-2020 was like 69 or whatever, but really busting through that 73K ceiling. That's probably the all-time high. We're now well and truly above the inflation adjusted all-time high. We've blown out the goal. Like there is no currency left where we're not in price discovery. now fourth time, if you're Mr. Critic, you're the idiot. You know, you've got something wrong with your assumptions. And I think that's what makes it really special.

There's like the ETS behind it as well. You know, Bitcoin has now been a reminder that you actually hold the winning ticket. You won. You were correct. So there's a lot of Bitcoin who's going to sit tight, right? There'll always be people who profit take. But like as we move in a price discovery, I like to fall back on when is the average guy in a lot of profit? Because they are generally going to take it.

And that doesn't mean there's going to be very. the top, there's going to be lots of tops. There's been 16 years of tops, right? And I try to frame which top matters to you. If you're a short-term swing trader, the next one might matter. If you're a long-term holder, you don't give a shit about tops, right? This thing just keeps going. So, you know, trying to work out which top matters for you, and for most people listening, I'd say you don't actually care, right? And that's what makes this whole process so exciting. So one thing you kind of touched on there, which I think is really interesting. So 2017, money printer was kind of starting to go, made sense.

that Bitcoin was doing its thing. In 2020, sort of 2021, there was obviously COVID. I know that there was the kind of like the repo market was having all sorts of problems. And there's always been reasons for Bitcoin price discovery. But this cycle, I don't know what the macro reason is. It is the one in the same way. Well, I mean, the stock market's doing very well. I think if you really look at the whole equation, the world didn't fall over when interest rates went higher. So there's been this kind of like everyone was terrified. 22, too, was a pretty nice. nasty bear as well. That washed out quite a lot of speculative interest. Obviously in Bitcoin, it was bloody nasty, but across all markets, right? We had a kind of massive de-leveraging,

but at the same time, like, not that many things have blown up, at least in the Western world. Obviously, there's some trouble elsewhere. But there's a lot of, like, markets are forward-looking. They're trying to assess where is the liquidity picture. Generally speaking, we're seeing a cutting cycle now as well. So, like, all things being equal, there's like a net increase in liquidity. But at the same time, these things are going to ebb and flow, right? You know, there's obviously excitement around Trump getting in. When he actually gets in, it has to get stuff done. There'll be roadblocks. Like, it's just not going to be smooth sailing. So there will be some excitement on the run-up. I suggest there'll probably then be some like, you know, this end-of-year

effects as well in all markets. The last quarter is usually pretty strong. And then actually, generally speaking, the last quarter and then into the next year is usually really strong. Because there's all these, like, you know, people's P&L sheets get rebalanced. Everyone's got the new cost basis for January onwards. So you get this kind of initial wave of capital as everyone kind of resets the books. And then February is actually usually a pretty pretty shitty month because people start to rebalance and they've got to then look around and go, okay, do I actually want to own what I own? So, you know, there'll be some shakes and road bumps along the way. But I think broadly speaking, all assets are doing really, really well, at least for the time being.

So I think it's worth looking back at some of those previous cycles. So I know that you always described the 2017 cycle as like very spot-driven. 2021, will you remind me how you kind of try and frame that cycle that we had? Yeah, I think we actually explored that, didn't? We went through the whole my story of 2021. So 2017, very much, very spot-driven. And I think what's actually a really interesting framework is to kind of think about what Bitcoin was in 2017.

In my view, it was very much a adoption-driven market. We've obviously broken through the first all-time high that retail became aware of this thing, It started to flash cross people's news screens, even though they didn't take it seriously. They kind of heard what Bitcoin was for the first time properly. There's all the old coin space and Bitcoin remember was the quote currency back then. You had to buy BTC to speculate on everything else. So it was kind of like a demand vector both in terms of demand for BTC itself, but also demand for alts. So that was like the 2017 beautiful parabola.

2021 was a bit different. It was very different. We obviously had COVID. We had all that stimulus. But at the same time, stable coins had grown. So we didn't really have that quote currency demand for BTC, and yet it still managed to perform really well. My general read across the whole 2021 cycle, we had lots of leverage,

and that's like futures, mostly futures. We didn't really have a liquid and deep options market back then. It existed, but not to a great extent. So you've got stable coins taking away the quote currency, but you've also got GBTC. And I think people underestimate the role of GPTC. I see a lot of narratives about, you know, the China mining ban killed the bull. I see, you know, really, in my view, GBTC was the start engine and death of that bull market.

660,000 BTC between like when Sailor started buying in August, between then and that like February peak, there was the premium in GBT. 660,000 Bitcoin go in. People are trying to arb this thing. I think, I mean, there's a lot of stories. Three arrows is involved. all these entities are involved, blockfi. They've essentially levered up, taken leverage positions, put that into GBC to collect the yield. The moment that thing went from a premium to a discount, that spot bid just evaporate.

So suddenly you have no spot bid. Prices at 60K. Coinbase direct listing goes live. That's like a meme top. And then there was just air. Now, at the same time, the narrative was stock to flow, 100K, right, laser rays, all these things. That was like the social narrative. So people are not only bidding spot, but they're betting on leverage in futures.

And back then, it was like 80%. So people would have Bitcoin and then they would lever that Bitcoin to go long. So that means you've got negative convexivity. So when the price goes down, not only does your long position get worse, but the collateral backing, it gets worse as well. So the margin call happens really quickly. And we got that massive sell-off. Now, quite often in markets, when you look at markets, it's, the firewood gets built, weeks, months in advance, and then there's a match, right?

In many ways, the China mining ban was just the match. The fire was already built. The tender's already there. That was just the final flick. I would say very similarly, we just had seven months of chop consolidation. Trump getting elected was just the match. That chop consolidation period is what built the firewood for the move higher. So that's kind of the first half of 2022.

I might pause there and see if you've got any kind of thoughts or questions there, because then there's the second half, which is post that sell-off. Well, so my next question would be really, like, so if we had spot-driven in 2017, and then it was kind of like this leverage and degeneracy in 2021. Yeah. So what, maybe you want to finish that, but my question would be, what do you think is going to drive this cycle now? Is it all, like, institutional demand?

Yeah, good question. I think this really describes the maturation, right? So 2017, spot-driven, using Bitcoin to speculate on alts, and really very little derivative. They existed. Bitmex was around, but it wasn't major. Bitmex grew up in 2018, 2019. Then we have perps on everything in 2021 plus the everything bubble. Now, the back half of 2021, that second pump, right?

We had that nasty sell-off in mid-21. That was what killed the bear. It was killed the bull, started the bear market. So I still, to this day, hold that we hit an all-time high in a bear market on that second leg in 2021. sentiment was shot. Every on-chain metric I was looking at massive lower highs, really nasty stuff. And at that time, about 90% of Bitcoin's on-chain volume, you won't believe this, but I assure you, 90% of Bitcoin's on-chain volume was associated with FTX, Alameda and Binance.

Literally, Al-A-Movings of Bitcoin to and from. Lord knows what they were doing, trying to save themselves because they were also blown up with GBTC and that Luna and all this stuff. So that second pump was very, in my opinion, manufactured. So there's two narratives I kind of want to just challenge. The first one is that we had a curtailed all-time high. We didn't. We hit an all-time high when the spot went to zero. And that's when GBT went from a premium to a discount.

So I don't think we had a curtailed cycle. I think that's where we deserve to be because the spot bid absolutely evaporated. But you can kind of say a story here. Sorry to interrupt. So that second all-time high, in 2021. I mean, you said that's during a bear market, which breaks my brain a little bit. But that was all, I mean, we know that FTX were basically like using other people's Bitcoin to try and save their position. Is that why you think it was still a bare market? Because it was

just, it wasn't real. It wasn't real. No, I believe that second peak was manufactured because the day FDX blew up, suddenly Bitcoin's on-chain volume just absolutely created and it took years to recover, right? To be honest, we've only really recovered from that particular reduction in on-chain volume in the last six, seven, eight months. So it's been a really, really, like that has been a long-lasting impact, and it shows you the scale of that thing. So the second pump, absolutely fake bullshit. Who knows what was going on behind the scenes there, but that is really where things are

going pretty, things were already wrong at that point in time. And then we obviously had the 2022 bear. So now this cycle, this cycle is very interesting because it very much feels like a maturation. The market is in a much better position. from up till about 30K, right? That's kind of when we broke through the middle of the previous cycle and there's a whole bunch of on-chain metrics. That's like where the average Hodler was at the time.

So this is going back to like October 23. Everything from FTX till October, 2023, Hodlers only. Only people who survived the bear market just slowly chipping away, stacking sat, very retail driven, and some clever institutions. Then in October, the ETF start to get some hype. then they actually go live in January, again, another spot bid.

So this is again like GBTC, but much more controlled. We had a pretty significant redistribution, that chop consolidation period. Lots of OGs actually cashed out. We can see old coins coming back to life, locking in just tremendous profits, which makes sense. The ETFs are a huge demand vector. You've got lots of coin. You've got to remember that these guys have been around for years and years and years.

They have to diversify at some point. They do because you can't die with this many Bitcoin. It doesn't make any sense. It makes sense for them to actually get some of that out when there's demand for it. But that kind of formed this new base. And what's really interesting about institutions, they don't hit the market by. They patiently wait and they allow the market to come to them. So you probably saw when the German government, they sold like 50,000 Bitcoin,

which, by the way, good move, folks. That was almost a, you're almost down 50% there because they sold about 53. And the market went up as that was happening. So, like, these are patient, sophisticated actors. allowing the market to come to them, not market bidding and just pushing the price higher. So that reacumulation range was very serious. And now this is kind of the reward from that. We've kind of built that second floor. And here we are at 100K, right? And German government's made a huge mistake. But we're now in this kind of territory where we have the ETS. We have a much

more stable derivatives market. Yes, it's very spot driven. But we still have derivatives, but they're no, they're big, right? They're still 6% of the market cap, but that's always been 6% of the market cap for the last like five years. So in a way, the derivatives are growing up with Bitcoin, right? They're not getting excessively large. CME is now a big player. So we've kind of got all the pieces from those previous cycles, but it's much more sophisticated,

much cleaner. It's now like 20% coin collateral. It's now mostly dollar collateral, so that negative convexivity's gone. There's just a lot of things that are really, really much healthier. and like, you know, if you look at like the really nasty risks from previous cycles, it's kind of hard to spot them these days, which I think is just really, really constructive. So with that, because I don't know how many people would have said FTCs were a risk to, like, the Bitcoin market in the, like the start of the last cycle.

Do you not think those risks will appear at some point? Oh, they will. Absolutely. So if we think about some of the risks, like, you know, one that just kind of catches my eye is, who knows when we're going to get some zombie companies that we're, We're never going to make it. Let's say, hey, I can run this micro strategy playbook, and that's like a get out of jail free car. Look, my stock's going to go up. Now, those CEOs probably don't have the stones that Michael Saylor does.

They're also a little bit later in the piece. I don't know where the top's going to be, but they're not as close to the bottom as when Saylor started building his position. I think his average cost basis is like 56K. Actually, what's really interesting, there's a model that Dave Puell and I developed, which is called the true market mean. Some people have heard the realized price, which is like the average cost basis per BTC, we get rid of all the lost coins, the Satoshi coins, because the problem is they hold huge unrealized profits. And the problem is if Satoshi's got all these unrealized profit and he can never take them because

they're, you know, in inverted commas, lost coins, then that means that the guy who's holding unrealized losses to be break-even, there's a lot of loss to offset that profit. So what we do is we get rid of all those old coins. So we're only looking at active investors. Saylor and Microstrategy have consistently had the same cost basis as the average Pledb. So in other words, if you're just a Hodler, DCA Hodler, you pretty much have the same cost basis as Michael Saylor, which is a fascinating insight. He is the same as all of us.

He really is buying in the most average way, statistically speaking, possible, which I think is a really fascinating trend. But, you know, we're in a good spot. What Bitcoin did is brought to you by our lead sponsor and Massive Legends, Iron. the largest NASDAQ list of Bitcoin miner using 100% renewable energy. Iron are not just powering the Bitcoin network. They're also providing cutting-edge computing resources for AI all backed by renewable energy. We've been working with their founders Dan and Will for quite some time now

and have been really impressed with their values, especially their commitment to local communities and sustainable computing power. So whether you're interested in mining Bitcoin or harnessing AI compute, Iron is setting the standard. Visit iron.com to learn more, which is iren.com. So in terms of like the market structure at this point, I know, I don't know if there's ever been like such a long period of basically sideways.

Like it's pretty much been the entire year. It's been sideways. What does a kind of base level like that, like a long period of consolidation mean for the then coming kind of real bull market? That's a great question. So there's a couple of angles here. The first one is on how often Bitcoin goes sideways. So I actually did an exercise when we were six or seven months into this chop consolidation. And I went to the trading view. It was like a one-year view. And I literally scroll left to right, looking for any period that was similar to that. And in my view, the only one that's even remotely close is 2019, which I think would also classify as chop consolidation, except it had a lot more down.

Right. There was really nasty red candles. I remember living through them. It was pretty shit. So is this when it went from like 6K down to 3 and then up to 12? Yeah, it went from like the bottom in 2018, it was like 3K. It rallied very quickly on April Fool's Day in 2019, all the way up to 14K. And then we had like another miniature bear.

That miniature bear was kind of similar, but a lot more downside. And then we had COVID, right? COVID was kind of the final punctuation mark at the end. So that was like the only similar process. But what these long consolidation periods do is they reset people's expectations. So I don't know about you, but I'm sure people listening as well. I became used to buying. For me, it was, you know, 60,000 US was 100,000 Aussie.

I got very used to buying whenever it went below 100K, right? That was like I reset my cost base going, well, I'm probably not going to see cheaper prices again. I'm quite happy to buy under 100, right, especially it hit 160 today, right? So it's brutal. So you kind of reaclimateize yourself. It takes time for hodlers and just investors in general to do that. But at the same time, I think probably the most important. important insight that I want everyone to really listen to this. We tried to go above $1.2 trillion

twice in 2021. The first time we were rejected in that nasty sell-off, and the second one, we had a 2022 bear market that took us back down to $300 billion. So we attempted it twice. Chop consolidation this year, we spent seven months, and every single time it got below $1.2 trillion in market cap, the market bid and bid and bid. We have now proven that we are a $1.2 trillion market. So in my view, I think it's very unlikely that we go back down there. I think the market has now proven. This is a serious demand zone.

The ETF's alive. I think it makes sense for us to want to go higher. And we did. And we've now doubled, right? We're now $2 trillion. What the market's trying to do is find that next level. We flipped silver and we quite impressively, we didn't even like, oh, no, we don't belong up here and rejected, no. We flip silver and we stayed there. And now we're, you know, above Saudi

Aramco, next stop is Google. The market's going to eventually find some kind of ceiling near term, long term, whatever it is. But we have proven we're a $1.2 trillion asset. So we've kind of reset expectations, right? It is higher than $1.2 trillion. So do you, how much attention do you pay to that like market cap? Because personally, like, I only really look at the price of Bitcoin. I never really consider the market cap. But when these kind of, bigger investors are coming into Bitcoin. Is that something they're looking at in a significant way? Yeah. So you can think about it in a few different angles, right? I think Jack Malas does a good job of explaining this, which is if you're, and again, Bitcoin actually becomes more useful the bigger

it is. You can't put a big position on unless it's a big enough asset to absorb your size, right? If you want to invest a billion dollars, you need a market that you can put a billion dollars on and not send a price mooning, right? So there's that element. If you're using Bitcoin long term to do settlement, right? I can envision a world down the road where it is a true global reserve asset and people will need to transact, you know, $100 million lots of oil or trade or whatever it is. Bitcoin's actually a really good asset for that. The bigger it is, the more that volume, you can kind of move around the network without disrupting both sides of the equation. So the bigger Bitcoin gets, the more useful it actually becomes. You know, you can't enter

these positions otherwise. So I think that for these big institutions, it's now well and truly on their radar. I've even noticed more recently, you've probably seen it on Twitter, people like, oh, whatever Michael Saylor and MicroStrager is doing is a Ponzi scheme, but Bitcoin is okay, right? We've kind of progressed beyond that point where they're like, oh, Bitcoin's a scam. They're like, no, micro-stratory is a scam, but Bitcoin's okay. So even in Tradfey Lexicon, it's kind of broken through that barrier. And the other thing I think is really interesting. Imagine something happens on a Sunday, whatever it is, some global event, whatever it is. every tradfired dude under the sun is going to be posting a Bitcoin chart,

not because they want to look at the price of Bitcoin, but because it's the only index they can look at to get a view of what their stock portfolio is going to do Monday morning. So it's reached that level of it is an index now. It's beyond an asset. It's an index of what's going on in the world, and I think it's fascinating. Yeah, Odell has a really good take on that. I think he calls it like the kind of macro thermometer,

because it's the only thing trading all the time. Absolutely. So if you had to kind of put us in a bucket of one of the other cycles, do you think this is more similar to 2017 than it is to 2021? I do. I think it's got a lot more 2016-17 properties. So far, this climb pretty much to where we are at the moment, I would actually call quiet and trending. And what that means is basically a leg higher, sideways. Leg higher, sideways.

Once you start going parabolic, like obviously this thing is going to eventually get pretty excited and then it starts to move in a more parabolic vertical fashion. What we saw in 2021, for one of a better term, go and measure how many corrections there were in 2021 versus the first leg versus 2017. 2017, we almost ran like, you know, run two or three months and then you have a correction. Run four months, then you have a correction. If you look at 2021, it was basically vertical into January, one correction and then rounded top, right? One more leg, rounded top. And that just went way too hard, too fast. We have had more of a 2017 style kind of up sideways, up sideways.

And another fun fact, I ran a study a couple of months back, because I wanted to help people understand why the market trades the way it does. And this is the same for many assets. You just do like a distribution of how much Bitcoin moves minus 1% or more to the downside, plus 1% or more to the upside, or plus or minus 1%, meaning nowhere on a daily basis. 40% of the time Bitcoin goes nowhere, right? 40% of all days, it goes less than 1% in either direction, right? This is why now think about this from the perspective of a trader.

If you're doing that, 30% it goes up, 30% it goes down, 40% it goes nowhere. If you go long, there's a 70% chance you're going to get frustrated or be just outright wrong. This is why day traders get blown up because they're betting with a 30% probability it's going to go in their direction. Every other time it goes sideways or down. However, on a quarterly basis, when you zoom out, if you look at that same spread on a quarterly basis, there's a positive skew, which means it wants to go higher more often than not. And sometimes you get some just 100% plus quarters. And they're not uncommon. They do happen.

And the whole idea is you've got to be there for those quarters. You have to survive the 70% of the time when it goes sideways and down to be there for those handful of quarters where it just absolutely rips. And even if you move, I've done a study as well where you remove 10 of the best days. It's not a perfect study, but just remove 10 of the best days of every cycle. In most of them, you're either dead flat, like as in you don't actually make any money. You're flat. Sometimes you actually lose money. So if you're not there for those 10 best days, they offset all the red, all the sideways, all the frustration.

You've just got to be there for them. So it's like the classic time in the market, not timing the market. It is. So I know. You've written a lot about this. And during sort of this big consolidation period we went through, a lot of the buyers, like you say, I'm sure there's obviously the smart institutions. But a lot of the buyers are just normal bitcoins. Like, they're keeping the price where it is.

They're just stacking sites constantly. But now we're like actually moving. Is that still just the regular bitcoins that are moving the price? Who are the buyers at this point? Yeah. My instinct here is that this is actually a gap in sellers. People just aren't willing to sell anymore. Yeah.

So I think, yeah, there's a few layers here. I mean, I would say that that chop consolidation, range. This is my gut feel. And I don't think that Hoddlers, retail Hodlars, can really move a $2 trillion asset that much. And if you actually look at all on-chain balances, less than 10 bitcoins, this is everyone who's got less than 10 BTC and on a UTXO basis. So all of the DCA hodlers who are doing 0.01 and 0.1 and whatever, that's all included here. The total amount of Bitcoin they hold has been flat for about 18 months, meaning we can't really grow our balance. There's still people stacking, but we can't really grow our balance that much more.

And this is what American Hodler calls the BitLife crisis. We're all looking at this thing going like, I mean, it's 160K, right? I can't even get a million sets for a thousand bucks anymore. So, you know, it can't even do that for the US dollar either. So these are like, this is like a process. The institutions, now that it's bigger, it's much more attractive to them. And that, again, Hoddlers still make a meaningful difference. But we also have to recognize that we're now in a, we're a small fish in a big pond, right? We've progressed from being the biggest fish in our pond to small fish, big pond. And now we're trying to work out what that new level looks like. We've got options coming live on the ETFs. We've got, you know, CME is growing up as a

major, and it's now the dominant exchange in futures. So all these things are really starting to develop. We're going to see the volatility profile change. There's all these interesting dynamics that it does make this cycle different. It is unique. But then again, they've all been unique in their own special way. So it'll be interesting to say whether the four year actually stays around. I thought that American Hoddle tweet was great. Like that was obviously he was talking about personally everyone reaches that point where you just can't really move the needle on your own stack. Like like you say, not even getting a million stats for a thousand dollars. Like that's wild. Have we reached that point now an aggregate for the market where we no longer move

the needle for the market? Is that what you're saying? I'm saying we definitely have a smaller impact. We're always going to operate on the margin, but it makes sense, right? If Bitcoin's now twice as big, your dollar goes half as far. And if you're now trying to move this thing higher and higher, but you've got to remember, like, I was talking about this before, today, gold added $6 trillion this year, like $6 trillion to its market. Bitcoin's only two at 100K. So like, you know, the size of some of these markets that can, once it gets going, granted, it took 40 years of sideways for gold to do this, but in 12 months, it added $6 trillion. If Bitcoin was $6 trillion, just the gain that it had, it'd be like $300,000 a coin. So, you know, the size and scale of these

things, it takes time to get there. So in my view, I think people should probably get more used to chop consolidation. In fact, chop consolidation is very good. Sideways, long periods of sideways is actually really, really healthy. Resets cost bases, helps people kind of work out where the new level is, takes the steam out of things, and then you do get these massive moves. It'll go in both directions, but generally speaking, I think that's going to be more common, especially when the options start to develop. You'll have put walls and call walls and people who want to defend those. There'll be all sorts of games. But you probably remember at the end of that, coming into like September, November, the market was really sleepy. Went to, went like nothing was happening.

Everyone was bored. Everyone was frustrated. Lots of people just turn around and walk away from their machines. They stop looking at the price. And then bang, it just goes. And this is how I think this is going to play out. When these options come in, people are going to be putting positions on and getting used to selling that volatility. And then Bitcoin's going to move. And it's going to move explosively because all those guys are going to be offside. And it can go in both directions. Again, like you can have this positive and negative volatility smile. But that's where I think, like, when the big institutions start to blow up because they put too much and they get lulled to sleep, that's when you're going to see some really explosive.

moves. This episode is brought to you by River. There are many places to buy Bitcoin, but there's no exchange like River. They have innovative products, phone support, and a dedication to security that I haven't seen anywhere else. With River, buying Bitcoin is easy. You can set up zero-fee recurring buys to automatically build your stack, and while you're waiting for the perfect buying opportunity, River even lets you earn daily Bitcoin interest on your cash balance, which outperforms most high-yield savings accounts. Your Bitcoin is stored safely in you sit cold storage, plus you have peace of mind knowing that River has monthly proof of reserves and holds all client Bitcoin that wasn't withdrawn to self-custody.

Open an account for yourself or your business at river.com forward slash WBD. That's rivir.com forward slash WBD. So in the past, you've talked about this being like the first cycle where on-chain is kind of grown up as an idea and it'll be the most useful that it's ever been. But so I'd like to hear a take on that. But I'd also put a question there being, we now have these huge pools of Bitcoin, like the ETFs are holding a ton of Bitcoin with Coinbase. They're like, they're not tens of thousands of UTXOs on chain anymore.

They're now just pools of hidden Bitcoin essentially. How much sort of edge does that take away from on chain data? Great question. And I get this one quite a lot, actually. So the first one is in terms of like why I think on chain is like the most ready that it is ever been, because we actually have people who understand what it does now, right? In 2021, I know it got a bad rap back then. Even myself, I was only just learning what this stuff did,

let alone in a live fire exercise actually using it to understand markets. I kind of knew the principles, but like it's one thing to have read a textbook. It's another thing to be an analyst in the field actually learning this shit. So really, for most of 2021, 2 and 3, that was a bare market. and, you know, me and my team at GlassNote at the time, that was our job to understand what do we actually do with all this stuff? How do we use it? How do we learn about it? How do we use it to actually understand the market? So we have a toolbox now. We understand what those tools actually do. And this is actually the first bull leg where truly I can say that I think we

understand what this stuff does. But even for me, this is my first up cycle where I'm using my full tools. I'm still building ones as well as I go. But like I'm like on the cutting edge as well. and I'm very aware of that. So that's the first thing. So put it this way, our understanding is at an all-time high of what this stuff does. It's also really important to remember that on-chain is just one component. We also have ETFs. We have spot.

We have derivatives. These are all subsets of the market. Now, we've got metrics and all these different things, right? Funding rates in futures. We've got SOPA in on-chain. What's fascinating is that these always speak the same language. So at the same time as a bunch of investments, are taking profit in the on-chain world, some other guys going levered long and paying a high

interest rate in futures to do so. You're looking at the same market. It's like surveying the population. You're looking at the same set of people just operating in different parts of the market space. So in a way, you're trying to look for confluence. When the options market tells me the same story as the ETFs, which tells me the same story as on-chain, I have three different cohorts that I've surveyed and gone, hey, they all gave me the same answer. Do I think I should probably base my analysis on that kind of outcome? Yeah, probably, right? If they start to diverge, that's where it becomes interesting. Why? Why are they diverging? Have I missed something? So, look, generally speaking, I think a lot of people say, oh, but all the coins trade off-chain,

and that is true. There's still a shitload of coins that trade on-chain as well, right? On any particular day, 80% of the volume on chain, excluding that whole FTCS period, which still was this, but 80% of the volume is going in and out of exchanges. So if 80% of the volume is going in and out of exchanges, do you think that that's probably going to have some level of insight as to who is buying, who is selling, why are they doing it? How much profit are they in? Of course it does. So I think I would actually say that discounting that information is where the mistake is made, because you've got a whole lens and what everyone's doing. You can like see. 30% of the cards at the poker table.

And if you look at futures, you've got another card. Like, suddenly you've got a pretty good view of what's actually happening in this market. So you don't think the ETFs nullify on chain even a little bit. I know you're saying that it's just one tool, but does it take away some of the edge there? No, because if you think about it, we've had ETFs before. Finance was the ETFs back in 2017. A bunch of coins go in. They stay on the finance balance sheet, but they're still doing stuff.

But you've got to remember, if you're going to survey a popular. you've got a bunch of houses in front of you and you need to determine like what's everyone's political preference. The coins that are in the ETF or the coins that are in Binance, they're just doors that you knock and they don't open. But then you go to a bunch of other doors and you open. And if you're doing enough of a random survey, the doors that do open and give you a response, you've now got a statistically significant subset. And in this instance, that statistically significant subset is literally every UTXO and literally every spent output. So it's a pretty meaningful sample size, right?

It's actually the entire asset. So that's where I think it's kind of interesting. So one of the other kind of big developments recently is obviously the SEC's approved options on, I don't actually know if it's just Ibit or all the ETSs, but it will be on the ETSs at some point. So again, there's always like two sides of these arguments. One side being like this is just rocket fuel for Bitcoin. other side being there's a risk of kind of manipulation and paper Bitcoin. Where do you kind of sit in that?

Yeah, I think this is a really good question. I actually wrote a piece called Paper Bitcoin. I tend to take the narratives on Twitter and then put my own spin on it. So the narrative on Twitter is paper Bitcoin, price suppression, blah, blah, blah. Keynote, whenever you see people banging on about manipulation, the price is rarely going down. It's rarely going up. It's always going sideways. That's when people get bored and they go.

looking for an excuse. When people say manipulation, I say markets. And the reason why is like, okay, Bitcoin is a trillion dollar asset. Can it really go from one trillion to 10 trillion without big money? Maybe, but like everyone has to agree to just like not sell. And then some guy's got to bid everything and push them. Like it's just not a real scenario. So in order for the market to grow, you actually need big capital.

Now, what does big capital need? well, if you're a big money manager, you cannot allocate a billion dollars to Bitcoin unless you can hedge a billion dollars of risk. So you need options, futures, mostly options, because the best way to think about options, they are a tool to transfer risk. If you're a portfolio manager, what's your risk? I don't want to go through downside. Who do I transfer that risk to? Some speculator who wants to bet on downside, right? If I'm doing a covered call strategy, the miners, for example, they can do covered call strategy.

strategies, earn an income from the premiums. When the market goes up, they don't care because they were going to sell the Bitcoin anyway. They got to sell it at a higher price. Who do they transfer that risk to? A speculator betting that it goes higher. So speculators have a very important role in all markets. They take risk away from primary producers, from money managers, whoever it is, without a deep and liquid derivatives. And specifically in options market, you can't have the big money allocate in the first place. So in a way, yes, people will claim. manipulation. But you also have to remember if spot markets are like fighting with sticks and stones, leverage markets is like fighting with machine guns, and both sides have them, right? And once you've

got all these options, yeah, everyone's got a nuke, but we've all got nukes. So it's like it's, it's like even on both sides. So, you know, the guys who are manipulating the price lower, they are also able to be manipulated higher if you've just got guys with enough firepower. So, you know, these things work in both directions. So when we were talking about like risks in this cycle of what's going to eventually blow up, because something's going to blow up at some point. It's just inevitable. Do you think that's going to come from the options market? It can do. So I listened to a great interview with David Dredge recently, who's a volatility guy. I love his framework. He basically says, like, you know, he talks about it in the framework

of like driving a car, if you're driving a car, which is your portfolio, the whole idea is like, you don't want to drive so slow because you're scared of risks, right? And let's just say risk is drawdown. He goes, rather than driving your car super slow, he goes, drive the fastest car you can, put really good brakes on it so you can handle corners and obstacles. And that's what these options are going to provide, right? You can keep driving and not worry so much, and you just have this insurance that if it sells off, you're going to be protected. So, you know, I think it will change market structure.

And it will put, there will be guys who blow themselves up. Bitcoin is a very special asset because it has a positive, a volatility smile. So in the equity world, it kind of is like, it is manipulated, there's like boring-ass grind higher and then occasional vol spikes down. For Bitcoin, it's volatile to the downside and the upside. This is relatively unique. More commodity-like, but certainly Bitcoin is pretty significant in this front. And I think there's going to be people who get very comfortable selling volatility

and then they get blown out. And that's what David Dredge was talking about. He goes, look, the problem with Bitcoin, he's a vol guy. He loves volatility. He trades volatility. It goes, I like Bitcoin, but I can't really get that excited about it because the average guy who holds Bitcoin, earned an income, put his own money on the table. His risk profile is very different to Goldman Sachs betting some other dude's money with a bailout behind them. When they blow up,

that's when fireworks really happen. That's the alpha that you can really capture. So you kind of, in a way, I would describe him as a shark, right, and he's in the water. And he can see that there's a bunch of dudes who are about to be like fireflies, attracted to the leverage, attracted to the vol. And he's going to see an opportunity to take those guys to tar. This is going to be happening all throughout the Tradfire world. There's going to be sharks in all the waters. And the thing is that the fish that are swimming around this thing are no longer just your hodlers. They're now institutions with bailouts and betting someone else's money, right?

Hedge funds, all this kind of stuff. So they've got bigger prey. This is how you get bigger alphas, right? So it's a fascinating dynamic. But you've got to remember both sides now have machine guns and they're getting bigger and bigger. So talking about selling volatility, I do, definitely want to cover the micro strategy thing with you. But just quickly before that, I saw a tweet that you part out in the last few days that was basically you fading the idea

of us getting an actual Bitcoin strategic reserve. Tell me why you think that first. Yeah, look, I think it's one of those things that I usually go into all my pieces. I use two personas. I have checked the analyst and check the analyst is quite objective. His job is to understand what's going on, doesn't matter who you are, right? He's to try and paint the clearest picture possible. And then there's Check the Hodler. And Check the Hodler is all of us, right? I'm long, I'm bullish.

I want to hold Bitcoin for as long as I possibly can, like, you know, all these things. So Check the Hodler's job is to interpret what the analyst does to turn it into actionable information. So check the analyst, when he looks at the Bitcoin Strategic Reserve, he sees the global reserve currency issuer. He sees the Federal Reserve, whose job it is to print that money. He sees a bond market that is already lacking demand. Just generally speaking, there's a lot of reasons why the US adopting Bitcoin at that level.

Check the hodler loves the idea. It's fantastic. Check the analyst, looks at it and goes, it's possible, but it's a big move. Because if you were the U.S., you're the U.S., what does that say? Not everyone is a hodlaw. In fact, most people are not hodlers. Not everyone is Michael Siler. He is not the average dude, even though its cost basis is.

When you actually look at the, like, the mechanics of that playing out, it's kind of a vote against your own currency. It's a vote against your own treasury market. Now, there's an argument to be made that, you know, there's a few levels, maybe because they have the Bitcoin that that's, like, actually better because, like, overall, the country's got more assets and more assets is good. This is why China buys gold and all these kind of things. There's also, like the Bitcoin dollar thesis, which I think that Mark Goel

Goodwin and Whitney have been talking about this idea that like stable coins proliferate. I think that's definitely going to happen. I do think that the stable coin world is going to expand. Bitcoin's obviously a part of that. So look, there's arguments in both directions. But check the analyst looks at this thing and just goes, look, there is a very real possibility. Last I checked Polymarket for whatever that's worth. Polymarket had like 25% odds on this thing happening.

I would probably say that's even a bit high. But look, I would love to see it from Check the Hodler's world. But check the analysts is looking at this thing going, if it doesn't happen, the first couple of months as we get into the Trump term, we're going to find out how much is real, how much is going to happen? I would say the steam will come out of a lot of markets because they're going to bid up saying, oh, everything's going to happen just the way that Trump said it. Is there any political environment ever, ever that has gone that smoothly, especially one that's trying to shake stuff up, right? We had a got, Goff Whitlam here in Australia. He tried to do this way back, right? and he was the only prime minister that was actually sat down and removed by the queen because he was too

radical. So this shit just doesn't ever go to plan. So that's where Check the Analyst comes and he goes, I'd love to see it over here, but it's not on paper yet, right? It's not signed. It's not happening. They're not buying. Then there's the mechanics of like, what, you're actually going to buy a million coins? That's, I mean, price is going to go up a lot, but check the analyst needs to keep everything sane and in check. So we've already got a bet going from a previous episode, but I would take the other side of that. I'm hearing some things that are sounding pretty positive on that front. So if you're 100Ks, I don't know, by mid next year? No, no, no.

The thing is, what I do know is I have no edge in the political realm. So all I do is look at this thing and saying, look, from my perspective, my plan has always been to stack as many sets as possible. So I'm hedged in the instance that it happens because if it happens, it happens, and I can't do a goddamn thing about it. and I can't have stacked more than I already have, that's the plan as it stands. Therefore, I need to look at the other side because that's really the only risk. The only risk to that thesis, I keep doing exactly what I'm doing, but being aware that if it doesn't happen on the timeline people expect, steam can come out of this stuff really quickly.

So at the end of the day, I'm hedged both directions because I'm analyzing this side, because that's all that is a delta. If it happens, happy days. I just hear you being scared on that one. Totally. I'm happy to earn it. So one of the thing, like the kind of big narratives in terms of Bitcoin price is this supply shock's kind of thesis. And I don't actually know your take on this, but I would guess that you would again fade that narrative just because supply always comes back online at some price.

What do you think of the kind of supply shock thing? Yeah, it's a good question. I mean, it's a common thing, right? Supply shock. I wrote a piece on this the other day. The idea is there's obviously many dynamics. What do we actually mean when we say supply shock? Really, it means an evaporation.

of sellers. So the market has to go higher for that to happen. So yes, of course that happens. We're looking at it happen as we speak. But a lot of people go, oh, this particular moment, it's very similar to the multiplier effect where if you put a dollar into the market, how much of an impact does it have on the overall market cap? You know, there's this painfully persistent 118x that the Bank of America did. I can't even my most wild numbers come up with 30x, let alone 118x. What I think a lot of people miss is that markets are a process, not an event.

If you shrink down your time horizon to literally today, yes, it might be a 100x multiplier. There might be a supply squeeze on this particular one-minute candle. But you've got to remember, in order to get this one-minute candle, we needed eight months

where the price went absolutely nowhere. And the narrative was, they're suppressing it. That wasn't suppression, guys. That was the market re-accumulating and refining its level, this is what happens after that. So I think my view is that markets are a process without that seven-month chop consolidation, which was not, I think everyone would agree that was not a supply squeeze.

It was a very painful and boring process. This is like the final, this is the kindling. This is like the sell-off, right? You have these events where it's baked in the cake. That's the kindling. This is exactly the same thing, just happens to be going to the upside. So I kind of fade that narrative in terms of the people have a, too much of a microcosm and they look at small-scale things and forget that markets are a

process. Without the chop, you don't get the rally. I'm not going to actually do a price target, but we did one in the past. Did you say 180K? Is that right? No, no, no. It was 250. Mine was 250. You mean Pete, right? So mine's 250 and it's, I think, to the end of 2025. Mine's 250. Yours is like 280 and Pete's like up in space somewhere. 350 or something, I think. 350 or something. So mine's 250 because it's a nice number that captures everything underneath, right? You've only got like plus or minus 30K between me and you. So you've got a very, you've got a very narrow target, whereas I win as long as it's below that. And is that something you would stick to? Is that,

is that still the kind of ballpark you're thinking? Look, my, my instinct is in the immediate term, a lot of my models, now, again, a lot of my models can absolutely break to the upside. I'm very willing for that to be the case. However, if we were to get to 150, 130, that kind of realm, many of the pricing models that I look at and use, the reason I use them is because they tell us that the average investor across the board is holding massive profits. What usually happens when people are really up on their portfolio, it may not be you, but it's some guy is going to take profit. So if we get to 130 to 150, just about every model, we're talking about like eight out of ten of them are all going to be broken through. So statistically speaking,

there's like five percent of all trading days where we keep going. Five percent's not zero, but it's also not the dominant majority, right? There's a 95 percent chance the market wants to go lower. Now, that doesn't mean we're going to have a four-year bear market either. It just tells me that if we were to rip tomorrow, if this whole rally keeps going and I wake up tomorrow and we're 150, for me personally, check the Hodler, check the analysts will say, there's about a 5 percent chance this keeps going and check the hodler of that instance go, okay, I've done this many times before. I don't want to buy the top again. And it may not be the top. It could be a top. But check the hodler doesn't like buying too high because it hurts every time that happens. He's going to go

into wait and see mode and just let this thing play out. So that's how I kind of frame that up. So 150 is where we get the first, let's call it the first stop. Once that chops around, who knows if that goes for six months, we can absolutely go for another round, right? You kind of need the market to just take the steam out, chill out. I have this other saying that I think is really useful for people. The bull market will author the bear that follows. If we have a bull that is just vertical, like 2021,

just goes straight up. You better believe we're going to come straight back down. There's no support built on vertical moves. I know a lot of people don't look at TA, but if the market just teleports to a million, right, there's a pretty good chance we're going to come back down at 250. there's your 75% drawdown. If the market slow and steadily grinds up sideways, up sideways, this thing just keeps going.

It keeps going until we go fully vertical and the market just can't sustain it anymore. So keep that in mind, the more steady and slow the bull is, the less the drawdown is probably going to be. The sharper and faster this thing just teleports higher, the angry of the sell-off is going to be and the less interested check the hold there is of buying that top. So the kind of idea of a supercyclist coming back with a hat tip to Marty Bent here, but personally, like, I do not think bear markets are over. What's your take on that? Of course they're not over.

I mean, like, you check the Hodler loves that there's no bear markets, check the Alice goes. I mean, am I going to bet against just like facts? Show me an asset ever, anywhere at any point in time that doesn't have a bear. There's none. It's not a real thing, right? Supercycler is just a green candle forever. It's just not real. Green, green, green, red.

The red is there for a reason. It's creative destruction. It resets things, right? Shit's going to get wild. And the problem is that people buy into that narrative. And it makes sense, right? But my general framework for what is a bear market, what creates a bear, it's when too many people buy too many coins are too high of a price.

And we can see this in a lot of different ways. But when the market shoots up, lots of people buy in, generally speaking, who sold those coins, OGs, who bought those coins, the guy who heard about Bitcoin on the news because it broke 100K, right? He's finally putting his first dollars on the table. Lots of people step in, unsophisticated people step in late in the trend, and then they get wrecked. And what happens when the price falls, all those coins go from in-profit, having a fun time to not-in-profit and having a not-so-fun time.

And because they're unsophisticated, they become the sellers. And you get this cascading effect where any price is a good price to sell because they're terrified. Right. So these are the kind of dynamics. And then the smart money backs off and they go, I'm going to wait. I'm going to let this thing find a level. I still love Bitcoin. I want to buy it.

But I'm going to be really patient now. In downtrends, you can be more patient. And remember, the smart money knows this. This is how they operate. When you feel FOMO, institutions are usually not the ones fomowing in. There's obviously some that do. There will be institutions, companies and countries that buy the top. That's also going to happen, right?

That's a real thing. But generally speaking, the smart money, they know that they'll be bears. They position for it. They wait for it. And if you really want to have this, they manipulate it to make sure it happens. This episode is brought to you by CASA. For those of you out there who want to protect your Bitcoin, I want to tell you about CASA, the leading Bitcoin self-custody solution.

So if you're serious about protecting your Bitcoin, then you need a rock, a solid security plan. and CASA gives you just that. With their multi-signiture security and key management services, CASA makes it easier than ever to take control of your Bitcoin without the risk of a single point of failure. They offer multiple levels of protection,

all designed with simplicity and ease of use in mind, even if you're not a tech expert. Don't leave your Bitcoin security to chance. Go to CASA.io and check out their services today to protect your stack and sleep easy. That is CASA.io, which is c-a-s-a-i-o. Let's do the micro strategy thing.

And I want to frame this in a way that sounds at least fair. So I think everything that Sailor's done is incredible. I think he's got, yeah. However, so I own no micro strategy, never have. I'm having fun staying poor. But when I look at that market, I just see like top signals everywhere. Like my Twitter is now just micro strategy Twitter, or at least before 100K it was. But at the same time, there's always that idea.

I know Bitcoin is always the underlying, and I don't think this is the top for Bitcoin. So give me your kind of full view of micro strategy, how you're thinking about it, and try and explain it to me because it's something that I'm 100% missing. Yes. No, I was also missing it. And the other week, I finally sat down to do a proper deep dive because I, too, had no idea. And one of my, like, core views is that there's just something visceral about what's going on that you like. my immediate reaction is something feels wrong.

Now, what I wanted to check the analyst in steps in and it goes, piss off, check the hodler. I mean, I step in and actually work out what's going on here and crunch some numbers and see what I can come up with for my own view on it. So I went down this rabbit hole. Now, the first thing that I noticed, I put out a bunch of provocative tweets because I used Twitter to like gauge sentiment and ask weird questions to just like see what comes back. One thing I've definitely discovered is that the microstratage you Hornets are like a super concentrated version of the laser-eyed Bitcoiner. And micro strategy hornets are to Bitcoiners, what Bitcoiners have been to the Tradfey world for the last 16 years, right? I get it now.

I understand why Jim Bianco doesn't like us so much. I get it. So I think that's kind of the first point. Now, the second point is to understand what micro strategy is doing. Since they adopted a Bitcoin standard, two things have happened. The first one is that they went from number go down when priced in BTC to number go nowhere, right? So when they adopted the Bitcoin standard in 2020, their stock price,

stopped falling and started going sideways in Bitcoin price. Only this year has it started going number go up in BTC terms. So in a way, Michael Saylor's job, his actual job, is to make that stock price not go down. At the end of the day, that's what his duty is to be shareholders. So he's now got it going up in BTC terms, which, again, massive achievement. There's very few assets that can do this. The second thing that changed is that MSTR's volatility relative to Bitcoin. So if you take MSTR's volatility and you divide it by Bitcoin's volatility, you can see what the

relative change is, it's started to climb. And it's now hovering somewhere between one and a half and two times. Now, this is micro-strategy's product, in my opinion. I think Saylor says this as well. This is now their product. As long as they can generate excess volatility on top of Bitcoin, they then package that up into equity. They package it up into bonds, into convertible notes, whatever.

instrument is available. Bon traders can't buy equity. Equity traders can't buy Bitcoin. Bond traders can't buy Bitcoin, but they all kind of want exposure and they all want exposure to volatility, because volatility is good. As Michael Saylor would say, volatility is vitality. If you think about an asset that's non-volatile, like the dollar, it goes nowhere, quite literally, because it has zero volatility relative to itself, it goes nowhere, which means it's never going to go anywhere either. So a volatile asset is going places. And that's really important, right? If you want to grow, you know, Bitcoin's volatility is very similar to Nvidia, Tesla, the Mag 7.

So those assets are going somewhere. So is Bitcoin. So what Michael Saylor does, he takes MSTR, the stock. He makes it more volatile than Bitcoin. And I'll talk through what that means. He packages it up in shares, bonds, whatever other instrument, and he gives it to parties who otherwise can't access it. Now, as the stock price goes up, more bonds go into. the money, which makes more people money. And when people make money, they do it again. And then

they keep giving him money. So he continues to get financing in the bull market to buy more Bitcoin. Now, what creates this volatility, let's call it a premium. A lot of people call it MNAV, and there's all sorts of words for it. I have a simple, I just call it the sale of premium. We can measure the Bitcoin value of his treasury. We can't really, no one knows the answer to how much that premium should be. Should it be one? Should it be two? Should it be three? How much of a premium on top of that Bitcoin treasury value should the stock command. Now, there's a whole bunch of stuff that goes into that. There's speculation on the future of Bitcoin's price, right? If you've got a measurable value, what if Bitcoin goes to 200K? Oh, shit, that's going to double.

Let's put a little bit of that in there with some probability. There's, what's he going to do with this Bitcoin? Is he a Bitcoin bank? He's the man with the collateral. What's he do with it? There's his unique ability to sell these instruments, right? So he's kind of got a bit of a network effect going now. There's just the stones on the man. There's all these different. things that go into this sailor premium. Now, Brent Johnson had a great tweet where he goes, why would you ever enter a trade that you can't exit? And I've been thinking about that for quite a bit, and I came up with the answer. It's like, well, he can't exit because if he sells a single Satoshi, the whole thing falls apart. So go hard or go home. And I think he's realized like, go hard or go

home. So then he does his 21-21 plan, right? 21 billion of equity, 21 billion of debt. Why would you announce that in advance? Instinct tells me because he's now got 21 cannonballs on his left hand and his right hand, and he can pull three this day, he can pull two tomorrow, he can wait a week, and then he can shoot another one. So like it's kind of like announcement of announcement. Is he going to do it? Is he going to buy more?

Stock price goes down. People go, oh, fuck, he's doing an ATM. That means that stock price is going to go up. You know, like there's all these dynamics where he creates volatility on top of Bitcoin and sells that to Wall Street. and Wall Street loves volatility. So in a way, has he found product market fit? Yeah, absolutely.

But his product is selling vol to the market, and the market loves it. This is going to work fantastically in a bull. I'm not quite there yet believing it's going to be fantastic in the bear, but that's probably a roll pause for now, and we can probe some questions. Yeah, so a few questions in there. One being, with the trade he can't go out of, I assume the reason he can't go out of, I assume the reason he can't get out of it is because he sells a single Stoci, it just the sale the premium is gone.

It just trades like an ETF. You can't believe that he, yeah, you can't believe the company will be stack only. So therefore it's going to trend. My instinct is that the company will always have gravity. If Saylor stops doing everything, the gravity will always be to go back to its ETF value of a saleer premium of zero, right, equal to treasury value. So he had, the company has to consistently fight that gravity back towards ETF. like it's holding value, he needs to keep generating that premium.

So yeah, that's exactly right. And so for the people that are buying these notes, so I know Allianz are one of the big buyers, one thing that, again, I've not quite got my head around, is do they actually care about the price of Bitcoin, or is the only thing that they need to worry about that micro-strategy still exists as a company? Yeah, good question. So at the end of the day, everyone wants to make money, whether you're Alianz or whoever else. So from their perspective, they've got a bunch of bond traders and they need to do all sorts

of liability mismatches and all those kind of things. And like keep whatever their liabilities are and check with their assets. If you've got a stock that's trading at a 100 vol, right, just for easy round numbers, and you put the strike price... Can you just actually, sorry, will you explain what 100 vol actually means? Yeah. So, I mean, think about when you hear 100 vol, just in terms of the magnitude, just for people to kind of easily simplify this, this is the magnitude of how how much the stock is likely, or the asset is likely to move on a statistical basis in any particular window. So over a one year period, is it likely to move 100%, 20%, 50%, whatever it is in either

direction? So if you've got an asset that regularly moves 100% over the course of whatever your time frame is, right? And again, that's where these insurance companies and bond traders are interested, because they're used to mapping out duration and, you know, prices and all those things. if you've got an asset that moves 100% a year, typically, and you put a strike price, 55%, which is what his most recent one is above, the probability that's going to get hit is very high.

So in a way, this is why they're giving him 0% interest rates, because the probability that this bond is going to convert and they're going to be in the money in five years is extremely high. So he's basically putting a briefcase on the table, which is full of money. he's walking away and saying, does someone want to come and pick this up? And someone with even the smallest risk tolerance goes, yes. And when it works out for it, they go, I would like to do that again, please. And then suddenly he's got this Bitcoin accumulation strategy. Now, if you had an infinite money printer, would you buy Bitcoin with it? I would. I don't know about you, but I would

do the same thing. Of course. He has, exactly. He has one, right? He has an infinite money printer. But this is where we start talking about, like, what does this look like long term? And again, I'm still forming these ideas. He's got this. this concept of Bitcoin yield, the idea that your Bitcoin per share keeps growing. Now, there's two times when I can see that this is going to slow down. This is like your growth metric or your PE ratio, how we want to map it out. This is one of these things where it's like, as long as he can grow the Bitcoin per share, it's a growth stock. I would keep buying it because he's adding Bitcoin to my stock. There's two ways this falls apart. The first one, long term, everyone goes

through their bitlife crisis. No matter who you are, your Bitcoin supply that you will ever own, by a definition, because of the 21 million, will follow the same logarithmic decay, right? As price goes up, you buy less. Now, I haven't actually checked my numbers recently, but he's done like 13 billion. I'm not going to get these numbers a little bit wrong, but last I checked, he's done like 13 billion in November, which is something like 60% of his total dollars in, but he's only increased his Bitcoin balance by, I think it's like 35%.

So if you run this experiment again, the higher the price goes, another 50% of his dollars, you might increase it by 20%, and then by 10%. So this thing will slowly but surely decay. So eventually, that's the gravity starting to creep back in. If he can't grow the Bitcoin balance because of his bitlife crisis, he then has to find some other revenue stream with the Bitcoin he has, because otherwise he's going to trend back towards its ETF value, right? So he has to do something else.

Bitcoin Bank, the man with the collateral is king, all these kind of things. That remains to be seen. The other one is in a bear market because in a bull, this is great. Because Ali-Ans is like, oh, it's 100%. That's great. I'm going to get almost assured to get my money. Now Bitcoin starts going into a bear. Now, yes, maybe it's only a 40%, but the market doesn't know this.

I would think that there's a lot of investors who, you know, there's what is fundamentally true and then there's what people think. My instinct is a lot of people will think that micro strategy is just like levered Bitcoin, so they expect it will go down more in a bear. And sometimes that becomes a self-fulfilling prophecy. So you've got less buyers for the stock. You've got the maximum share count because he's essentially diluted shareholders on the way up. And then you've got a larger shareholder share count on the way down. He may not be able to finance as much so he can't. buy as much Bitcoin, so his growth metrics go down. Suddenly, like, a lot of the great things in

the bull, they just aren't so great in the bear. And as we know, with all companies, that's sale a premium. If that's the price to earnings, when a company has a shitty year or their revenue numbers aren't as good, we know that that P-Ratio compresses. And I can't quite see or build a case for why that won't happen here as well. So he can't finance as much. He can't buy as much. There's going to be a lot of traders who will probably sell the stock rather than buy the stock. If you hold spot and MSTR and you've made a big killing on MSTR, I'd say a lot of people would probably sell that in preference to their spot. So there's a lot of the dynamics here that I'm not quite sure if it performs

fantastically in a bear. But I am a very small micro-strategia shareholder now, and I'm keen, I just put a spot position on just to see how it trades, get a bit of a feel for it. So I'm in the trade, but not, you know, I'm not going to make any significant money off it. So I'm very aware that I'm probably mid-curving this big time. But to me, like, so we know in the last bare market, it traded quite a significant discount. I don't remember exactly what it was. 75% overbook? Yeah. So I assume, like as soon as it feels like Bitcoin's kind of topping out, if I was holding my strategy, I'd be selling that first, 100%. And so in that case, do you think he's

done this 2121 plan, which is buying Bitcoin over quite a number of years, to try and suppress that volatility to the downside? It's possible, but at the same, in many ways, he's kind of loaded his cannons. He's got the cannon balls, but someone still needs to buy the cannon balls, right? Someone still needs to finance the debt. So in a bull market, they're willing to say, hey, stock price keeps going up. I keep getting my strike. Yeah, sure, I'll give it to you a 0% coupon.

But in the bear market where things aren't so pretty, they might be like, yeah, there's a lot of downside at the moment. Maybe how about 4%, how about 5%, oh, actually, no. not that interested. So you get less demand for the bonds because the stock isn't going up as much. So he may not be able to use as much of the 21-21, right? And if he's doing that at the money, at the market, he's essentially selling shares into an already supply overhead market. So he's kind of, he kind of loses a lot of the advantage, which you need people buying the stock in order for this strategy to work to its fullest potential.

So super cycle aside, it's probably going to be a pretty brutal bear market for micro strategy. Well, much the same as Bitcoin, the bull market will author the bear that follows. If that sale a premium goes to 10x, then that's going to be a horrific bear market, in my opinion. If it stays at like two and a half, right, which again as a shareholder at about two and a half, I'd prefer it to stay there. But if it doesn't go up too much, if it doesn't explode too much, then you kind of soften the downside. But as we know, markets can get pretty ridiculous. And the more ridiculous it gets, the more angry it's going to be when the hairy back of the bear arrives. Is there anything else you want to touch on on the micro strategy before we move on from that?

No, I think that's all my key thoughts. And again, I'd love to, like, I'm still working through this puzzle. It's fascinating. I went into it knowing nothing. I now still believe I know nothing, but I know a hell of a lot more than I did when I started. So I'm still very early in this thinking. I was, I also felt like I was mid-curving it, so I wanted to run some numbers. I got a bunch of charts mapping all this stuff out live on my side. So people want to go check out and see what's going on there. I've got all those, so people can kind of wrap your head around. whatever this strange and weird stock is. So actually one more question on that.

So in the last bear market, obviously the talk of like sailor getting liquidated was real. I don't know how close you ever got and I don't know exactly how those liquidations would have worked. But is there a similar scenario that could potentially arise next bear market? I don't believe so. I think the way that he's essentially the risk is not so much because in that instance,

I think it was that 500 million Silvergate loan. He had BTC. which then had a liquidation price. I don't believe that's the case now. He's essentially sold notes into the market bonds. Those traders have, and investors have bought those bonds as an asset. Their expectations it will appreciate.

It may depreciate. Now, the trade-off there is that if those bonds depreciate, the interest rate for future issuance will go up. And this is what I was saying before, right? Let's say that he sells a bunch of bonds at the absolute pico top. All those traders are going to go, happy days, we're going to the moon. And they're probably going to be holding a bag. and then the next guy who comes along, he goes, hey, I want to issue more debt.

And I'll go, I saw what happened to the last guy. I need a bigger interest rate. Because the business, I mean, the software business generates bugger all in terms of revenue. Essentially, he's got no way to pay the higher interest rate. So his ability to buy more Bitcoin kind of collapses. Again, I'm 100% sure that sailors thought about there's a hell of a lot more than I have. And I'm sure he has answers for this. But this is maybe my mid-curved take, having done at least two-step.

on this journey. I think that's kind of everything I had. Is there anything else you wanted to get into before we close out? No, I think it's a really exciting time. I mean, 100K. I'm glad we got to actually redo this because it's always been fun. But the, you know, I think just just hang in there, folks. I mean, it is a wild ride. Things are going to get more ridiculous, not less. You know, have your own check the hodler, check the analyst, right? Have your objective side that's trying to just say, here's what I think is most likely. It may not be what you like. what you want to hear. But just have that grounding anchor of like,

I'm going to look at this thing really rationally. And then you can have, check the hodler. I'm sitting here. I've got a hat that literally says, have fun staying poor in front of me, right? I can't wear it in public. I actually check the hoddler in the house. Check the analysts, right?

Have those two personas because for me, at least, it helps break apart the narratives on Twitter from what I want to happen. And if you can separate those two, it puts you in a much better position. You think more clearly, you don't get caught up in all the hype and generally speaking, you'll make better decisions,

whether it's when you want to DCA or how you want to think about these things. Just separate the hype and the foamer because it's very easy to get caught up in it. As bullish as we all are, keep a grounding anchor with you. You've got to put the hat on now, for the memes at least. Check it out.

It's a ripper. So thank you for being the first guest on this new What Bitcoin did twice. Very happy to have you on. Is there any way you want to send anyone before we close? Matt, thanks, Matt, Neil. I'm really glad you spun this thing up. It's definitely, I mean, people are going to love this, right?

Bitcoin is talking to other Bitcoin is about Bitcoin. Talk about product, market fit. That's it. Yeah, I mean, for me, head over to checkonchain.com. We've got a newsletter, which is where I share the thoughts of both check the hotland and check the analyst. But we've also got a charting website, which is, I mean, any Bitcoin chart you could possibly want.

It's there. It's free. You know, it's a constantly growing project. There's always new stuff. But that's where I kind of use the charting. I use my own pasta source, right? I make these tools because I then use them. And they're not there because they're just for the sake of being there.

They're there because I use them on my own analysis. Love it. Well, thank you very much for coming on. I'll come down to Sydney and do another one in the new year. We'll do one in person, which would be good. But yeah, appreciate you, man. Thank you. Thank you, mate.

Happy to be both the first episode and the first lost tapes.