1 00:00:00,000 --> 00:00:07,000 Liquidity is exploding higher as we speak. 2 00:00:07,000 --> 00:00:16,000 If the gentle ascent continues, does that extend the bull market beyond our typical four-year cycle? 3 00:00:16,000 --> 00:00:28,000 I believe we could be in an environment now where the accumulation of Bitcoin remains steady for several years. 4 00:00:28,000 --> 00:00:34,000 I would expect the price to be between $100,000 and $150,000 here over the next several months. 5 00:00:34,000 --> 00:00:44,040 As that $50,000 realized price goes to $80,000, then the range then moves from, you know, to $160,000 to $240,000. 6 00:00:44,220 --> 00:00:50,200 I've never been able to put a year on Bitcoin hitting a million until this year. 7 00:00:50,420 --> 00:00:53,080 But I don't feel like it's speculative now. 8 00:00:53,160 --> 00:00:56,500 Now it's within, you know, our current market reach. 9 00:00:58,000 --> 00:01:07,220 Bitcoin is absolutely ripping and in every bull market there's always a new wave of investors and with it a flood of new companies, new products and new promises. 10 00:01:07,780 --> 00:01:10,720 But if you've been around long enough you've seen how this story ends for a lot of them. 11 00:01:11,160 --> 00:01:13,960 Some cut corners, take risks with your money or just disappear. 12 00:01:14,460 --> 00:01:17,860 That's why when it comes to buying Bitcoin the only exchange I recommend is River. 13 00:01:18,180 --> 00:01:23,840 They deeply care about doing things right for their clients and are built to last with security and transparency at their core. 14 00:01:23,840 --> 00:01:28,240 With River you have peace of mind knowing all their Bitcoin is held in multi-sig cold storage 15 00:01:28,240 --> 00:01:31,920 and it's the only Bitcoin only exchange in the US with proof of reserves 16 00:01:31,920 --> 00:01:34,320 There really is no better place to buy Bitcoin 17 00:01:34,320 --> 00:01:38,480 So to open an account today head over to river.com forward slash WBD 18 00:01:38,480 --> 00:01:40,900 and earn up to $100 in Bitcoin when you buy 19 00:01:40,900 --> 00:01:43,940 That's river.com forward slash WBD 20 00:01:43,940 --> 00:01:46,520 Do you wish you could access cash without selling your Bitcoin? 21 00:01:47,040 --> 00:01:48,120 Well Ledin makes that possible 22 00:01:48,120 --> 00:01:50,460 They're the global leader in Bitcoin backed lending 23 00:01:50,460 --> 00:01:55,360 and since 2018 they've issued over $9 billion in loans with a perfect record of protecting client 24 00:01:55,360 --> 00:02:00,160 assets. 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That's learn.leden.io 32 00:02:34,900 --> 00:02:41,040 forward slash WBD. Mr. Nick Bartia, how you doing man? I'm doing great Danny, good to be with you 33 00:02:41,040 --> 00:02:45,640 again. Good to be with you. I've not, we've not bumped into each other in a little while, this has 34 00:02:45,640 --> 00:02:49,700 been probably the longest I've not seen you for in a bit. Yeah, you're busy out in Australia. That's 35 00:02:49,700 --> 00:02:54,440 why. I know just traveling all over the place, but things are going good, man. Bitcoin's absolutely 36 00:02:54,440 --> 00:02:58,900 ripping. I want to talk about macro with you, but we've got to start on Bitcoin. We're at what we 37 00:02:58,900 --> 00:03:05,840 are on just over 117k right now. That's pretty surreal on its own. But what's been your kind of 38 00:03:05,840 --> 00:03:12,760 take on the Bitcoin market over the last few months? Slow and steady is my big takeaway for 39 00:03:12,760 --> 00:03:19,640 this bull market and a very impressive slow and steady because slow and steady is not really in 40 00:03:19,640 --> 00:03:27,880 Bitcoin's DNA, Danny, if we go back to its early history and even its recent history. So I find 41 00:03:27,880 --> 00:03:36,320 what I'm looking at more and more is the gentle ascent of Bitcoin's valuation relative to its 42 00:03:36,320 --> 00:03:42,680 underlying metrics. For example, realized value is one that I watch really closely. The gentle ascent 43 00:03:42,760 --> 00:03:44,400 versus a violent ascent. 44 00:03:45,160 --> 00:03:48,080 And if the gentle ascent continues, 45 00:03:48,440 --> 00:03:50,800 does that extend the bull market 46 00:03:50,800 --> 00:03:54,040 beyond our typical four-year cycle? 47 00:03:54,500 --> 00:03:57,760 I think anybody that claims they have the answer 48 00:03:57,760 --> 00:04:02,440 as to whether we are in another four-year having cycle 49 00:04:02,440 --> 00:04:05,400 or not is ahead of their own skis. 50 00:04:05,400 --> 00:04:10,960 But I was joking around with our readers 51 00:04:10,960 --> 00:04:24,860 and community that I'm about 51 to 60% on the side that we have broken through this bull bear, 52 00:04:25,180 --> 00:04:30,620 this Bitcoin winter, two to three year Bitcoin winters every four years. 53 00:04:31,140 --> 00:04:36,400 I'm 51% certain that we've broken out of that. 54 00:04:36,400 --> 00:04:42,220 but any odds maker will tell you that even 60-40 is 50-50. 55 00:04:42,680 --> 00:04:47,180 I mean, 60-40 is how an odds maker just tries to get the action 56 00:04:47,180 --> 00:04:50,280 when they don't know when they're really 50-50. 57 00:04:50,280 --> 00:04:54,880 So I say it as a joke, meaning I'm somewhere between 50-50 and 60-40 58 00:04:54,880 --> 00:04:56,100 that we've broken out of that. 59 00:04:56,520 --> 00:05:02,060 But that's where I have a lot of my focus, 60 00:05:02,540 --> 00:05:05,460 trying to analyze that and trying to explain to the readers 61 00:05:05,460 --> 00:05:17,060 whether they should be thinking in terms of caution in six months, or is it okay to have an 62 00:05:17,060 --> 00:05:23,460 aggressive strategy for the next six months as opposed to a cautious strategy for the next six 63 00:05:23,460 --> 00:05:29,080 months? And that's where a lot of my analysis is living right now. Yeah, I like that framing, 64 00:05:29,080 --> 00:05:32,980 because I would be the same. And I think probably some of that comes down to a little bit of PTSD. 65 00:05:32,980 --> 00:05:37,020 So like last bull market, the super cycle narrative was pretty pervasive. 66 00:05:37,760 --> 00:05:43,120 And I've been really reluctant to say, has the cycle broken? 67 00:05:43,200 --> 00:05:43,920 Are we in a super cycle? 68 00:05:44,020 --> 00:05:46,020 Or is it even just like an elongated cycle? 69 00:05:46,180 --> 00:05:51,300 And that's probably the one that I think is most likely that this may just end up getting 70 00:05:51,300 --> 00:05:54,640 dragged out for another six months, a year for a few different reasons. 71 00:05:54,740 --> 00:05:58,260 One being, I think going into the midterms next year, Trump's going to want to run these 72 00:05:58,260 --> 00:06:01,360 things really hot and that's going to be good for Bitcoin if that happens. 73 00:06:01,360 --> 00:06:07,000 but at the same time like i i'm not willing to put my hat like my head on the line and say no 74 00:06:07,000 --> 00:06:14,380 the cycle's broken um so what would be the thing that breaks the cycle is this time like structurally 75 00:06:14,380 --> 00:06:22,380 very different i think that let's start with the word cycle because if we start with the word cycle 76 00:06:22,380 --> 00:06:31,340 then we're assuming that or let's actually start with the word super cycle because i don't know 77 00:06:31,340 --> 00:06:39,380 even want to use that word. What I'm thinking about in terms of the 60-40, what I'm thinking 78 00:06:39,380 --> 00:06:48,160 is that I believe we could be in an environment now where the accumulation of Bitcoin 79 00:06:48,160 --> 00:06:52,920 remained steady for several years, 80 00:06:53,920 --> 00:06:57,680 and the Bitcoin price oscillates 81 00:06:57,680 --> 00:07:02,400 around a multiple to realized value. 82 00:07:03,060 --> 00:07:05,440 As realized value continues to increase, 83 00:07:05,680 --> 00:07:07,760 Bitcoin continues to chop around 84 00:07:07,760 --> 00:07:10,480 two to three times its realized value 85 00:07:10,480 --> 00:07:17,980 and just is in a structural bull market 86 00:07:18,160 --> 00:07:24,780 that can have periodic consolidations or even bear markets where Bitcoin falls 20, 30, 40%. 87 00:07:25,400 --> 00:07:33,900 But it's in this oscillation around 2x its realized price. So right now the realized just 88 00:07:33,900 --> 00:07:41,180 crossed over $50,000 and the cap at a trillion. So two times that is $100,000. Three times that 89 00:07:41,180 --> 00:07:48,740 is $150,000. So I would expect the price to be between $100,000 and $150,000 here over the next 90 00:07:48,740 --> 00:07:55,260 several months. As that $50,000 realized price goes to $80,000, then the range then moves from, 91 00:07:55,260 --> 00:08:03,940 you know, to $160,000 to $240,000 and that we're oscillating. Now, if you go from $240,000 92 00:08:03,940 --> 00:08:09,360 to 160,000, that's a pullback of 33%. 93 00:08:09,360 --> 00:08:11,920 That could happen even over a year. 94 00:08:12,960 --> 00:08:17,780 And it still wouldn't be this previous, 95 00:08:17,940 --> 00:08:19,480 what I would call the cycle, 96 00:08:19,680 --> 00:08:22,140 the mining driven, the having driven cycle, 97 00:08:22,140 --> 00:08:27,700 where you get these rises up to four times realized price 98 00:08:27,700 --> 00:08:32,200 and then a crash back down to one or even 0.9. 99 00:08:32,200 --> 00:08:39,200 So that is the way that I'm thinking about the next few years. 100 00:08:39,200 --> 00:08:42,200 And would that be a super cycle? 101 00:08:42,200 --> 00:08:44,200 I wouldn't really describe it as that. 102 00:08:44,200 --> 00:08:46,200 It wouldn't be the word to describe it. 103 00:08:46,200 --> 00:08:53,200 Because super cycle might mean that you just continue on into elevated valuation metrics. 104 00:08:53,200 --> 00:08:55,200 So not that. 105 00:08:55,200 --> 00:08:58,200 And then you use elongated cycle. 106 00:08:58,200 --> 00:09:08,340 perhaps that could be a better way to describe what I'm thinking about is more of this but I 107 00:09:08,340 --> 00:09:13,320 wouldn't even use elongated I would just say that actually you break out of a cycle 108 00:09:13,320 --> 00:09:22,120 and then you're more subject to global macro factors when rates get hot it's going to be 109 00:09:22,120 --> 00:09:30,280 punitive, et cetera, that type of thing. And then more on the adoption story. So the reason why, 110 00:09:30,360 --> 00:09:36,280 let's go back to the reason why we get a market price to realized price ratio of 4X. 111 00:09:36,800 --> 00:09:45,980 The reason why you would get 4X, for example, Bitcoin at 70,000 in 2021, when realized price 112 00:09:45,980 --> 00:09:49,620 was at around 15,000, 17,000. 113 00:09:50,220 --> 00:09:52,760 You get that type of gap 114 00:09:52,760 --> 00:09:57,120 when you don't have structural selling in the market. 115 00:09:57,460 --> 00:10:01,740 You have so much exchange-based, 116 00:10:01,900 --> 00:10:04,520 futures-based leverage trading, 117 00:10:04,880 --> 00:10:10,140 and you get this extreme profitability in the market 118 00:10:10,140 --> 00:10:12,040 that is not really tapped 119 00:10:12,040 --> 00:10:16,520 because you don't have structural selling. 120 00:10:16,640 --> 00:10:19,720 You don't have selling calls on ETFs. 121 00:10:19,760 --> 00:10:21,940 You don't have all of these vehicles 122 00:10:21,940 --> 00:10:24,180 that are managing the volatility down. 123 00:10:25,040 --> 00:10:26,520 And so one of the charts we've been charting 124 00:10:26,520 --> 00:10:29,800 is Bitcoin's trailing 30-day volatility historically. 125 00:10:30,340 --> 00:10:34,080 And it's just compressed, compressed, compressed. 126 00:10:34,080 --> 00:10:35,960 And the last three years, 127 00:10:36,760 --> 00:10:39,360 the volatility can be described as muted 128 00:10:39,360 --> 00:10:42,060 versus trailing five to 10 years. 129 00:10:42,280 --> 00:10:43,960 Even if you look at 2021, 130 00:10:44,560 --> 00:10:47,520 the volatility was so much more than it is today. 131 00:10:48,140 --> 00:10:51,140 And so this compressed volatility 132 00:10:51,140 --> 00:10:55,880 is the new structure of the market, I believe. 133 00:10:57,100 --> 00:11:00,340 And compressed volatility prevents 134 00:11:00,340 --> 00:11:04,140 the 4X MVRV ratio. 135 00:11:04,520 --> 00:11:06,920 And if you can never get to 4X, 136 00:11:06,920 --> 00:11:09,860 then you can avoid the winter 137 00:11:09,860 --> 00:11:13,720 because the winter is so much destruction 138 00:11:13,720 --> 00:11:15,160 on the technical chart. 139 00:11:16,340 --> 00:11:18,140 And so you avoid the destruction. 140 00:11:18,380 --> 00:11:21,360 And I believe that the structural buyers, 141 00:11:21,560 --> 00:11:23,460 for example, the strategies of the world, 142 00:11:23,780 --> 00:11:27,740 they would love to prevent overheated Bitcoin prices 143 00:11:27,740 --> 00:11:30,000 because they believe that it could lead 144 00:11:30,000 --> 00:11:33,660 to a more winter-like environment 145 00:11:33,660 --> 00:11:38,040 in the subsequent months or years. 146 00:11:39,360 --> 00:11:41,100 So that's, I hope, Danny, 147 00:11:41,200 --> 00:11:43,140 I've answered a few of your questions 148 00:11:43,140 --> 00:11:44,320 in terms of how I'm thinking 149 00:11:44,320 --> 00:11:45,560 about this current bull market. 150 00:11:46,500 --> 00:11:47,480 Yeah, no, that makes sense. 151 00:11:47,660 --> 00:11:49,440 And so like what you're saying there 152 00:11:49,440 --> 00:11:50,820 is we won't get the blow off top 153 00:11:50,820 --> 00:11:52,420 like we have in previous cycles, 154 00:11:52,420 --> 00:11:53,280 but at the same time, 155 00:11:53,320 --> 00:11:54,800 it meets downside volatility. 156 00:11:55,260 --> 00:11:57,960 I'm in that 60-40 that we would avoid it. 157 00:11:58,040 --> 00:11:59,160 Yes, I'm hoping that. 158 00:11:59,160 --> 00:12:01,580 Yeah, and I like that idea 159 00:12:01,580 --> 00:12:02,200 for a couple of reasons. 160 00:12:02,200 --> 00:12:08,200 One, just I would prefer that. But I also think it makes it way more sustainable for people to build Bitcoin businesses. 161 00:12:08,700 --> 00:12:17,080 Because when we have the two years of just down only, obviously the first companies to go in the last cycle are all the fraudulent ones. 162 00:12:17,160 --> 00:12:23,040 But then there are real good Bitcoin businesses that just can't survive two years of negative price action. 163 00:12:23,380 --> 00:12:28,000 So I think that's a way more sustainable path if we can manage to do that. 164 00:12:28,400 --> 00:12:30,420 Is this just part of the market maturing? 165 00:12:30,420 --> 00:12:49,140 I do think that it is part of the market returing. And I use the word market structure a lot because it is about structure, options, hedging, calendar. Calendar is so important for risk management. 166 00:12:49,140 --> 00:13:13,500 If you can sell options one month, three months, six months, and 12 months forward, you can buy options three months and six months forward. You can plan. You can manage risk. And all of that mutes the volatility so that when you get, let's say we got a rise from today at 117 to 138, which is around my short-term, medium-term target. 167 00:13:13,500 --> 00:13:22,000 I'm not the only one that's looking at a 61.8% Fibonacci extension from previous breakouts. 168 00:13:22,480 --> 00:13:29,500 Everyone has their stop orders and their call options and their structure around the risk. 169 00:13:30,300 --> 00:13:40,600 And they understand that as this market matures, it's not going to go from 138 to 170 in the blink of an eye. 170 00:13:40,600 --> 00:13:42,380 They're not going to miss out. 171 00:13:42,380 --> 00:13:57,360 So they need to sell, lock in, create the income for themselves based on this basically herd mentality that we're not going to get the blow off top. 172 00:13:57,360 --> 00:14:09,060 So I see the call option volume at higher strikes, and it's not just Bitcoin. It's IBIT. It's MSTR. There's so many vehicles. 173 00:14:09,060 --> 00:14:29,960 And so all of that, you're talking about maturity. It's the maturity of the structure, the vehicles, the options, the calendar. That's what suppresses the volatility because remember, volatility is a function of options pricing, not realized volatility. 174 00:14:29,960 --> 00:14:35,820 Realized volatility is statistical look back, which in Bitcoin is declining, right? 175 00:14:35,900 --> 00:14:40,320 The realized variance looking backwards is declining. 176 00:14:40,780 --> 00:14:49,140 However, implied volatility is based off of options prices. 177 00:14:50,000 --> 00:14:55,080 And so if you are buying options, you are increasing volatility. 178 00:14:55,080 --> 00:15:00,120 But if you're an option seller, you knock that price of volatility back down. 179 00:15:00,520 --> 00:15:08,540 So it's the volatility sellers that have graduated from basically not even having the vehicles 180 00:15:08,540 --> 00:15:14,980 to now having the full suite of vehicles selling options on iBit, Bitcoin Futures, MSTR, 181 00:15:15,580 --> 00:15:18,580 across multiple vehicles across the entire calendar. 182 00:15:18,580 --> 00:15:23,720 the structural sellers physically mute implied volatility 183 00:15:23,720 --> 00:15:40,217 and dampen forward price action That how the stock market works Danny And so when we look at SPY options across the curve and across the calendar that how we manage risk in equities is that we 184 00:15:40,217 --> 00:15:47,477 know that there are levels at which volatility will, I'm sorry, the price will stop rising or 185 00:15:47,477 --> 00:15:54,298 stop falling because there's just a lot of buyers and sellers around those areas. Bitcoin players 186 00:15:54,298 --> 00:16:00,617 will always get rinsed in the absence of good risk management. 187 00:16:00,857 --> 00:16:03,717 And so it is alarming, Danny, 188 00:16:03,898 --> 00:16:06,918 the number of companies that are popping up. 189 00:16:07,977 --> 00:16:12,197 You have to think then they're all competing over capital. 190 00:16:12,898 --> 00:16:15,957 So which ones are able to raise the most equity? 191 00:16:16,957 --> 00:16:19,317 And of the equity holders, 192 00:16:19,817 --> 00:16:22,018 how long are those equity holders 193 00:16:22,018 --> 00:16:23,857 going to be willing to be patient 194 00:16:24,298 --> 00:16:33,457 not all of these companies are going to be able to issue debt or borrow in order to sustain. 195 00:16:34,438 --> 00:16:39,138 So the corporate finance expertise, I don't know if you just caught the news, 196 00:16:39,138 --> 00:16:45,798 that strategy released yet another vehicle, which is now targeting the shortest duration of fixed 197 00:16:45,798 --> 00:16:53,058 income money market funds, and is trying to offer a dividend or a yield with a stable net asset value 198 00:16:53,058 --> 00:16:56,778 at around 100 or par as we call it in money market fund land. 199 00:16:57,398 --> 00:17:00,538 So completely giving up capital appreciation, 200 00:17:00,758 --> 00:17:02,418 but also combining with a short duration. 201 00:17:02,938 --> 00:17:05,418 This is sophisticated layering 202 00:17:05,418 --> 00:17:08,498 of the liability side of the balance sheet, 203 00:17:08,977 --> 00:17:10,217 liability plus equity, 204 00:17:10,977 --> 00:17:13,057 all of that to leverage the assets, 205 00:17:14,338 --> 00:17:16,078 leverage up the assets 206 00:17:16,078 --> 00:17:18,057 and buy as much Bitcoin as possible. 207 00:17:18,057 --> 00:17:23,158 not everybody is going to be able to compete with that. 208 00:17:23,777 --> 00:17:26,957 So yes, if you have more companies, 209 00:17:27,098 --> 00:17:28,498 you have more Bitcoin demand, 210 00:17:28,858 --> 00:17:32,017 but the Bitcoin demand from the companies 211 00:17:32,017 --> 00:17:36,118 comes with owing debt and equity to people. 212 00:17:37,118 --> 00:17:40,017 And so their patients will be tested 213 00:17:40,017 --> 00:17:44,977 and they will withdraw when they don't see the results 214 00:17:44,977 --> 00:17:49,517 and that can create bankruptcies and all of that. 215 00:17:49,777 --> 00:17:52,358 But if you look at the number of coins 216 00:17:52,358 --> 00:17:54,217 that has come to market, 217 00:17:54,598 --> 00:17:57,918 let's just say with these recent 2011 coins 218 00:17:57,918 --> 00:17:59,898 that have started to move on chain, 219 00:18:00,358 --> 00:18:02,438 come into the custody of Galaxy, 220 00:18:02,658 --> 00:18:04,638 which we know is a big shop. 221 00:18:04,638 --> 00:18:08,197 Maybe the coins are moving for taking dollars out 222 00:18:08,197 --> 00:18:09,457 against collateral. 223 00:18:09,918 --> 00:18:10,998 Maybe it's to sell. 224 00:18:11,517 --> 00:18:12,777 Doesn't really matter. 225 00:18:12,777 --> 00:18:20,557 80,000 coins, how does it knock the market? It just doesn't. So you have strategy at 600,000 coins, 226 00:18:20,557 --> 00:18:25,598 but the rest of these companies buying a few hundred coins, or I don't even mean to, 227 00:18:25,598 --> 00:18:34,838 you know, dismiss a 4,000 coin purchase, but that's what micro strategy does when it's sleeping, 228 00:18:34,838 --> 00:18:45,877 You know, it'll buy another 4,000 coins. So if you have a few companies go under 4,000, 8,000, 20,000 that are, you know, spot liquidated. 229 00:18:46,457 --> 00:18:46,998 It really doesn't matter. 230 00:18:46,998 --> 00:19:06,237 I don't know that it hits the market, I mean, in a material way. Now, to all the people investing in the equity and debt instruments of these individual companies, I can't give all those people a pat on the back and say, best of luck to you. 231 00:19:06,237 --> 00:19:13,098 It's more, you know, may God be with you in your endeavors. 232 00:19:14,057 --> 00:19:16,118 But, you know, it's not my game. 233 00:19:16,217 --> 00:19:19,977 As you know, as a macro analyst, you can't necessarily be an equity analyst. 234 00:19:20,197 --> 00:19:25,037 And so I'm not going through the capital structure of these companies and saying which ones are good, which ones are not. 235 00:19:25,358 --> 00:19:26,318 Management will matter. 236 00:19:26,318 --> 00:19:54,398 And what I can tell you, Danny, is that reading the sophistication of MSTR's capital structure, the different vehicles, and how they are layering their approach to liability management, because that's the name of the game, I can promise you that the level of sophistication is going to be in the—I'm just making up a number. 237 00:19:54,398 --> 00:20:05,178 10x to 20x the skill set level that some of these other companies will employ. And that's not me 238 00:20:05,178 --> 00:20:14,557 discrediting the corporate finance officers at these companies. It's just the size that 239 00:20:14,557 --> 00:20:23,398 strategy has, the way that they're able to layer it out. It's very impressive to me as 240 00:20:23,398 --> 00:20:29,678 more of a corporate finance tourist myself, and I'd proudly call myself that, a corporate finance 241 00:20:29,678 --> 00:20:36,678 tourist. I teach corporate finance in its minutiae as it applies to fixed income, U.S. treasuries, 242 00:20:37,158 --> 00:20:43,977 thinking about economics, but I'm not a corporate balance sheet analyst by trade. 243 00:20:43,977 --> 00:20:55,237 and so but i can recognize those that are really good at it and i can also understand that those 244 00:20:55,237 --> 00:21:01,418 that are not really good at it can maybe fake it till they make it but that won't 245 00:21:02,898 --> 00:21:09,258 make you know every one of those last forever yeah that makes sense um just quickly back to 246 00:21:09,258 --> 00:21:13,758 the cycle thing um i've spoken to like a ton of macro people on the show over the last few months 247 00:21:13,758 --> 00:21:23,398 And one of the things that a lot of people tie the sort of traditional Bitcoin cycle to is not necessarily the halving cycle, although that definitely plays into it, but more a global liquidity cycle. 248 00:21:23,938 --> 00:21:25,277 First of all, do you think that's the case? 249 00:21:25,377 --> 00:21:36,018 And then secondly, do you think that could mean that we don't actually exit this kind of four year cycle that we're in and instead like rather than staying in a super cycle or extended cycle, whatever you want to call it? 250 00:21:36,018 --> 00:21:48,737 So as you know, Danny, I'm a liquidity, I've built a lot of the analysis that we're building at the Bitcoin layer around liquidity. We have our own index. 251 00:21:48,838 --> 00:21:49,277 Liquidity maxi. 252 00:21:49,277 --> 00:22:03,297 I certainly am. But I'm not a liquidity cycle maxi. And so I don't know that just because 253 00:22:03,297 --> 00:22:11,877 we had an inflation wave that was mostly supply side driven, as we saw inflation go from 254 00:22:11,877 --> 00:22:25,578 2 to 9 back to 2%. That was a pandemic-induced, a one-off. It's one-off structurally increased 255 00:22:25,578 --> 00:22:34,318 inflation from the 1 to 2% to now the 2 to 4%. I genuinely believe we're in this 256 00:22:34,318 --> 00:22:44,018 structurally higher inflation. But that doesn't mean that because there was restrictive in 2021 257 00:22:44,018 --> 00:22:51,777 and 2022 as rates were skyrocketing, that then we get easy in 24, 25, that then it's followed by 258 00:22:51,777 --> 00:23:02,078 restrictive in 26, 27. I don't necessarily follow that approach. I'm looking at liquidity 259 00:23:02,078 --> 00:23:04,998 in the way that we analyze it, 260 00:23:05,078 --> 00:23:07,078 which is the size of the banking system, 261 00:23:08,578 --> 00:23:09,658 treasury volatility, 262 00:23:10,338 --> 00:23:15,858 and I'm analyzing it in the spot market. 263 00:23:15,858 --> 00:23:17,237 Like, where are we? 264 00:23:17,838 --> 00:23:18,498 Where have we gone? 265 00:23:18,617 --> 00:23:20,117 Rate of change matters a lot, 266 00:23:20,518 --> 00:23:25,598 but I'm not thinking it in terms of three, four, five, six-year cycles 267 00:23:25,598 --> 00:23:29,057 and how that liquidity cycles through the system. 268 00:23:29,057 --> 00:23:38,297 I now you know my mentor Michael Howell has this five-year number that 269 00:23:38,297 --> 00:23:46,858 every five years because of the quantity of debt and the size of the economy that every five years 270 00:23:46,858 --> 00:23:54,217 there's a rollover risk for the debt of the system I don't disagree with that either but 271 00:23:54,217 --> 00:24:00,877 Again, I'm more like, let's look at treasury volatility today. Let's look at the rate of 272 00:24:00,877 --> 00:24:08,258 change over the last 30, 60, 90 days. How is it going? Well, I'll tell you, it has collapsed. 273 00:24:08,598 --> 00:24:16,018 Volatility has collapsed in treasury land. The move index has collapsed. I ran the numbers last 274 00:24:16,018 --> 00:24:23,838 night, 12 or 14 red weeks on the move index. What have stocks done? They've gone straight up. 275 00:24:23,838 --> 00:24:40,457 And so that is the framework working in real time for me to, I'm not like other analysts in that I can always think in this two to three to five year in advance and where the cycles are. 276 00:24:41,938 --> 00:24:44,537 I have to more live in the now. 277 00:24:46,018 --> 00:24:50,318 I was also running the numbers on treasury, 10-year treasury rates. 278 00:24:50,457 --> 00:24:52,537 They're at four and a third today, approximately. 279 00:24:52,537 --> 00:25:08,717 Well, guess when we were at four and a third two months ago, four months ago, 10 months ago, 18 months ago. I mean, you and you when we tagged in October of 2022, we tagged four and a third on the way up, but then you've been flat. 280 00:25:08,717 --> 00:25:32,598 So the rate of change was punitive in 2021 and 2022, but then it stopped being punitive so that four and a third looked like a disaster in October of 22. But today it's not a disaster. In fact, it's actually a supportive. It's not even normal. It's supportive because stocks are at the all time high. And that's crazy. That's that's how we have to think about it. 281 00:25:32,598 --> 00:25:36,537 So where is liquidity? 282 00:25:36,797 --> 00:25:41,158 Liquidity is exploding higher as we speak, 283 00:25:41,857 --> 00:25:44,018 despite four and a third on tens, 284 00:25:44,438 --> 00:25:46,977 because if you think about four and a third on tens 285 00:25:46,977 --> 00:25:49,717 three years ago, you're thinking about it wrong. 286 00:25:49,838 --> 00:25:52,737 It's four and a third today and collapsing volatility 287 00:25:52,737 --> 00:25:55,258 as opposed to four and a third three years ago 288 00:25:55,258 --> 00:25:56,898 and spiking volatility. 289 00:25:57,477 --> 00:26:00,258 While stocks are at the all-time high today, 290 00:26:00,258 --> 00:26:07,857 it means that four and a third is a good liquidity condition. It's providing liquidity. 291 00:26:08,578 --> 00:26:15,697 And that's how I have to live in my analysis is I have to look at where we are, rate of change, 292 00:26:15,877 --> 00:26:26,918 how it's affecting multiple asset classes. I think for sure that Bitcoin's 2022 bear market 293 00:26:26,918 --> 00:26:33,697 is driven by a spiking of broad macro volatility 294 00:26:33,697 --> 00:26:37,557 due to the inflation wave due to interest rates. 295 00:26:37,658 --> 00:26:38,617 And we talked about it. 296 00:26:38,658 --> 00:26:39,818 It's not that the Fed is hiking. 297 00:26:40,158 --> 00:26:43,338 The market sells the bonds before the Fed hikes. 298 00:26:43,338 --> 00:26:45,018 So it's the market punishing 299 00:26:45,018 --> 00:26:48,138 and liquidity being sucked out of the system, 300 00:26:48,418 --> 00:26:52,278 volatility spiking, markets stopping to be made, 301 00:26:52,617 --> 00:26:54,737 people pull back from their Bitcoin position, 302 00:26:54,737 --> 00:27:00,078 and then the reversal happens in the subsequent years. 303 00:27:00,217 --> 00:27:02,438 So that's how I'm thinking about it. 304 00:27:03,178 --> 00:27:05,457 So I definitely want to get deeper into the macro stuff 305 00:27:05,457 --> 00:27:06,578 and what that means for Bitcoin. 306 00:27:06,697 --> 00:27:09,037 But before we move on from kind of the cycle stuff, 307 00:27:09,037 --> 00:27:14,117 do you have a sort of target in mind for this year, 308 00:27:14,617 --> 00:27:16,098 next 12 months, whatever it is? 309 00:27:16,678 --> 00:27:17,918 And no one's going to hold you to this, Nick. 310 00:27:18,037 --> 00:27:21,037 But I did see you tweet recently that Bitcoin is going to a million, 311 00:27:21,138 --> 00:27:21,957 but it's not going to be straightforward. 312 00:27:22,418 --> 00:27:23,758 I mean, we know Bitcoin is going to a million. 313 00:27:23,758 --> 00:27:33,197 is when not if right and that i think that that's part of what's making this new era of bitcoin fun 314 00:27:33,197 --> 00:27:42,697 is the increasing certainty that it gets to a million in the 2030 to 2032 area that's i mean 315 00:27:42,697 --> 00:27:48,838 that's something itself that i've never been able to put a a year on bitcoin hitting a million 316 00:27:48,838 --> 00:27:55,258 until this year. So this is the first year I've been like, okay, by 2032, you might expect Bitcoin 317 00:27:55,258 --> 00:28:00,357 to be at a million dollars. That's seven years from now. The next order of magnitude, 318 00:28:00,998 --> 00:28:11,697 we hit 10,000 in 2017. So seven, eight years from 10 to 100, another seven to a million. 319 00:28:12,057 --> 00:28:16,658 And you can really put it there and be like, yeah, the next order of magnitude is seven years away. 320 00:28:16,658 --> 00:28:31,537 That's amazing. And I love that. It also means that the obsession over a million on this current cycle, that's not where the action is or the analysis is to me. 321 00:28:31,537 --> 00:28:50,078 It means that at this portion of the cycle, we should be thinking about 200, 250. And so I am starting to think that 200 to 300 is what my expectation has been for the last few years. 322 00:28:50,078 --> 00:28:53,117 but it's starting to lock in. 323 00:28:53,217 --> 00:28:55,557 I think I was doing some back of the envelope 324 00:28:55,557 --> 00:28:59,098 that 225, somewhere around there 325 00:28:59,098 --> 00:29:03,557 in the next 12 to 18 months 326 00:29:03,557 --> 00:29:06,498 seems very, very realistic to me. 327 00:29:06,998 --> 00:29:09,057 The numbers that I was using there, 328 00:29:09,297 --> 00:29:13,318 70,000 unrealized and 3X on the MVRV 329 00:29:13,318 --> 00:29:15,617 puts us at 210. 330 00:29:16,518 --> 00:29:19,158 And I really like thinking about 210 331 00:29:19,158 --> 00:29:22,318 And it's a nice multiple of 21 as well. 332 00:29:22,918 --> 00:29:25,477 And so we'll put it there at 210, Danny. 333 00:29:25,678 --> 00:29:30,117 I don't want to put a time on it, but I'm not talking about five years here. 334 00:29:30,598 --> 00:29:37,477 I'm really, I really am talking about one to two years now looking at like the next. 335 00:29:38,518 --> 00:29:45,758 When we, remember when you guys were in my corner and we did that in person, we were 336 00:29:45,758 --> 00:29:57,797 talking about we're talking about 300 and what would it take to get to 300k and that was i felt 337 00:29:57,797 --> 00:30:04,598 like it was much more speculative at the time but it's i don't feel like it's speculative now now 338 00:30:04,598 --> 00:30:11,898 it's within you know our current market reach it is wild though that the idea of throwing out a 339 00:30:11,898 --> 00:30:15,938 million dollar Bitcoin, isn't that crazy anymore? I remember saying to people that Bitcoin is going 340 00:30:15,938 --> 00:30:19,957 to go to a million dollars in like 2017. And people looked like you were fucking nuts. 341 00:30:20,418 --> 00:30:24,697 And if I say that to people now, even if they're not very into Bitcoin, people are like, okay, 342 00:30:24,697 --> 00:30:31,678 I can see that. And that mind shift is crazy. It's wild to see. And it's bullish. 343 00:30:32,438 --> 00:30:39,857 It is. You have to lean into it too, because you have to normalize it. And it's my responsibility 344 00:30:39,857 --> 00:30:45,617 to normalize it to the readers because, you know, I'll single out a reader that I have, 345 00:30:45,898 --> 00:30:51,578 and God bless him, but he pinged me around the week of Liberation Day and he said I sold it all. 346 00:30:51,818 --> 00:31:09,735 He an older gentleman not an American had set himself up very well but you know he out and he was a longtime reader and it wasn enough What we were doing wasn enough to keep him from doing that Not that it our responsibility to prevent him 347 00:31:09,735 --> 00:31:16,935 from selling or to hold it all the way to the end, but okay, then yes, we do need to do a better job 348 00:31:16,935 --> 00:31:24,055 or change the language, alter it to make it more as something that people expect. 349 00:31:24,055 --> 00:31:28,875 yeah that's one of the reasons i do as well it's more to kind of shock people into taking it 350 00:31:28,875 --> 00:31:34,095 seriously like i want people who i care about to own bitcoin and i feel like that's a really 351 00:31:34,095 --> 00:31:38,855 easy way to make them take this thing seriously if they think it's going from 100k to a million 352 00:31:38,855 --> 00:31:45,195 dollars in relatively short amount of time um but let's get on to the macro stuff i think to kind of 353 00:31:45,195 --> 00:31:49,315 set everything up that i want to talk to you about we should probably talk about jerome powell and 354 00:31:49,315 --> 00:31:54,915 Trump. Because Trump seems to be doing everything he possibly can to push Powell out of that seat. 355 00:31:55,595 --> 00:32:01,235 But let's start with Powell. Do you think, if you take into account everything that he's gone 356 00:32:01,235 --> 00:32:06,575 through sort of after the pandemic and high inflation, do you think he's done a good job 357 00:32:06,575 --> 00:32:13,955 as Fed chair? The reason I like Powell, Danny, has less to do with his policy. 358 00:32:13,955 --> 00:32:18,055 and we'll talk about his policy too. 359 00:32:18,555 --> 00:32:20,995 But the reason I like Powell 360 00:32:20,995 --> 00:32:23,515 is we're coming off of Yellen and Bernanke. 361 00:32:24,155 --> 00:32:26,335 And I was on the desk for both. 362 00:32:26,655 --> 00:32:29,355 So I got to experience, you know, 363 00:32:30,335 --> 00:32:32,655 it's my third Fed chair, let's just say, in my career. 364 00:32:33,515 --> 00:32:36,575 I like Powell because he doesn't insult my intelligence 365 00:32:36,575 --> 00:32:37,495 when he talks. 366 00:32:38,115 --> 00:32:40,655 Doesn't mean he doesn't have a political slant. 367 00:32:41,295 --> 00:32:43,375 Sometimes you can hear his political slant. 368 00:32:43,955 --> 00:32:51,155 But he doesn't talk down to the financial participant and try to tell them the condition. 369 00:32:52,315 --> 00:32:59,615 He's more descriptive, and he's a financial market practitioner, so he does understand 370 00:32:59,615 --> 00:33:05,855 things like volatility, bid-ask spreads, and options pricing. 371 00:33:05,855 --> 00:33:11,875 he's not that economist guy 372 00:33:11,875 --> 00:33:15,115 that Bernanke and Yellen were and are. 373 00:33:15,855 --> 00:33:19,055 The hardcore academic economist. 374 00:33:19,775 --> 00:33:21,795 He's a private equity guy. 375 00:33:21,935 --> 00:33:26,655 He's a private sector background guy. 376 00:33:27,615 --> 00:33:29,455 He is a long Fed career. 377 00:33:30,175 --> 00:33:32,415 So I don't want to just put him as, you know, 378 00:33:33,315 --> 00:33:35,035 as like a besant, for example, 379 00:33:35,035 --> 00:33:46,555 which, you know, spent four decades in the private sector, a drug guy, a Soros guy, and then he comes into the Treasury Department. 380 00:33:47,615 --> 00:33:57,395 So I've always liked Powell more than the previous two, because when he does the presser, I don't feel offended. 381 00:33:57,395 --> 00:34:05,955 I mean, it might sound silly, but whenever Yellen or Bernanke spoke, I felt personally 382 00:34:05,955 --> 00:34:12,435 insulted that you think this, you're taking my time if I'm going to listen to you. 383 00:34:12,575 --> 00:34:14,075 I don't want to hear propaganda. 384 00:34:14,375 --> 00:34:19,415 I want to hear more ascription of the situation. 385 00:34:19,775 --> 00:34:21,955 So that's how I feel about Powell generally. 386 00:34:22,215 --> 00:34:26,575 The policy, yeah, he was late. 387 00:34:27,395 --> 00:34:43,035 in 2021 by a mile, the 2021 and 2022 QE will, I think, forever be inexplicable 388 00:34:43,035 --> 00:34:54,255 from a pure Fed independent standpoint. But if you, and I know that you've done lots of work on 389 00:34:54,255 --> 00:34:59,955 this, Danny, the arrangement between the Treasury and the Fed Department during the 40s up until the 390 00:34:59,955 --> 00:35:07,475 1951 Treasury-Fed Accord, when they unpegged rates from where the government was setting them. 391 00:35:10,615 --> 00:35:18,555 The 40s were a war period, and this was a non-war period, war-like spending program, 392 00:35:18,555 --> 00:35:22,655 and the government needed to do that to prevent collapsing GDP. 393 00:35:23,655 --> 00:35:29,075 So instead of blaming Powell, 394 00:35:29,555 --> 00:35:33,575 maybe we assume that he didn't really have much choice 395 00:35:33,575 --> 00:35:37,915 on the 2022 decisions to do extended QE. 396 00:35:37,915 --> 00:35:39,535 Maybe he didn't have any choice. 397 00:35:39,675 --> 00:35:41,875 Maybe he was tapped on the shoulder to do that 398 00:35:41,875 --> 00:35:48,395 because of the CARES Act and the $3 trillion that had to be 399 00:35:48,555 --> 00:35:54,835 rolled out to the market in the excess treasury supply that needed to be absorbed to not shock 400 00:35:54,835 --> 00:36:01,715 the market. So we're on the topic of Fed independence. That's where this conversation 401 00:36:01,715 --> 00:36:09,095 is going. Let's think about whether even that was independent, Powell, or whether it wasn't. 402 00:36:09,095 --> 00:36:18,475 I don't think there's much of an argument to say that he was independent when they were doing that 403 00:36:18,475 --> 00:36:20,175 secondary QE infinity. 404 00:36:21,675 --> 00:36:25,995 That doesn't, I mean, it was terrible monetary policy, 405 00:36:26,135 --> 00:36:28,515 but what if you didn't do it 406 00:36:28,515 --> 00:36:35,175 and that spending package still had the green light? 407 00:36:35,175 --> 00:36:37,295 What would that have done to the treasury market? 408 00:36:40,195 --> 00:36:44,635 So what about Powell's policy? 409 00:36:45,835 --> 00:36:47,595 Another thing is the SOFR wave. 410 00:36:47,595 --> 00:36:57,335 he was one of the architects. I believe the acronym was AARC. I was studying it when I was 411 00:36:57,335 --> 00:37:04,135 on the desk. The Alternative Rates Committee, that's what the ARC, I can't remember exactly 412 00:37:04,135 --> 00:37:10,115 what it is. The Alternative Rates Committee, it was like the LIBOR cert, the search for the 413 00:37:10,115 --> 00:37:15,135 replacement of LIBOR. This was going on during 2017. Powell was one of the architects of this. 414 00:37:15,135 --> 00:37:18,395 and then he came in, he pounded the table on SOFR 415 00:37:18,395 --> 00:37:21,455 and it all went over my head at the time. 416 00:37:21,595 --> 00:37:23,255 I did not understand this. 417 00:37:23,375 --> 00:37:26,595 I was barely getting into LIBOR. 418 00:37:26,595 --> 00:37:29,535 My first real LIBOR mentor was 2018 419 00:37:29,535 --> 00:37:31,815 as SOFR was popping up. 420 00:37:31,895 --> 00:37:33,035 I'm like, what is LIBOR? 421 00:37:33,195 --> 00:37:34,115 Why is it so important? 422 00:37:34,415 --> 00:37:35,375 I was actually asking, 423 00:37:35,555 --> 00:37:37,315 why are all these bonds that I'm trading 424 00:37:37,315 --> 00:37:41,475 issued out of London and trading off of LIBOR? 425 00:37:41,535 --> 00:37:42,915 I don't understand it. 426 00:37:45,135 --> 00:37:48,835 It was the offshore dollar system, but I didn't understand what I was trading at the time. 427 00:37:48,955 --> 00:38:02,435 So I definitely didn't understand the foresight of trying to bring a repo rate into the U.S. dollar capital market to anchor activity going forward. 428 00:38:02,655 --> 00:38:03,655 I understood repo. 429 00:38:03,935 --> 00:38:05,695 I understood why it was a great rate. 430 00:38:05,875 --> 00:38:06,715 I traded repo. 431 00:38:07,175 --> 00:38:10,395 So I understood why this is a brilliant rate to use. 432 00:38:10,875 --> 00:38:13,195 I still didn't put the pieces together. 433 00:38:13,195 --> 00:38:31,715 So Howell's ability to help the nation, or I shouldn't even say help the nation. Maybe he is patriotic in that way, or maybe his directive was to protect the United States of America as a nation. 434 00:38:31,715 --> 00:38:47,655 But from a capital markets perspective, he was trying to reduce the influence of non-U.S. banks. Where is that in any of the conversations? See, it's not really present. 435 00:38:47,655 --> 00:38:53,235 So how do I feel about Powell versus Trump? 436 00:38:53,375 --> 00:39:03,615 Well, I don't actually know that it has anything to do with Fed independence at this point versus 2022 versus 2024. 437 00:39:04,015 --> 00:39:11,415 This episode is brought to you by the massive legends, Iron, the largest NASDAQ listed Bitcoin miner using 100% renewable energy. 438 00:39:11,415 --> 00:39:17,995 IREN are not just powering the Bitcoin network, they're also providing cutting-edge computing resources for AI, all backed by renewable energy. 439 00:39:18,515 --> 00:39:22,955 We've been working with their founders, Dan and Will, for quite some time now and have been really impressed with their values, 440 00:39:23,115 --> 00:39:26,755 especially their commitment to local communities and sustainable computing power. 441 00:39:27,215 --> 00:39:31,615 So whether you're interested in mining Bitcoin or harnessing AI compute power, IREN is setting the standard. 442 00:39:32,215 --> 00:39:36,095 Visit iren.com to learn more, which is I-R-E-N dot com. 443 00:39:36,335 --> 00:39:39,575 What if you could lower your tax bill and stack Bitcoin at the same time? 444 00:39:39,575 --> 00:39:44,595 Well by mining Bitcoin with Blockware you can. 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That line gets blurred way further. Do you see that 466 00:41:32,975 --> 00:41:37,155 as being a problem then or not really? It sounds like you're saying that may not even be a big issue. 467 00:41:38,775 --> 00:41:44,335 It becomes a little bit political in that it's going to be more overt 468 00:41:44,335 --> 00:41:50,155 as opposed to the 2022 when it's less overt. 469 00:41:50,155 --> 00:41:57,375 that it's just the Fed responding to conditions, independent monetary policy. 470 00:41:57,375 --> 00:42:05,455 Oh, and it so happens that Congress and the president are passing $2 trillion deficits also. 471 00:42:06,195 --> 00:42:09,035 So is it a problem? Perhaps. 472 00:42:09,295 --> 00:42:19,255 Besant is on the tape today, again, saying that the independence of the Fed is so crucial to the health of the U.S. economy. 473 00:42:19,255 --> 00:42:32,395 So they're saying all the right words in terms of the independence. He's saying, but they also are doing all these other things. There's mission creep. So we have to open up the whole thing to investigation. 474 00:42:32,395 --> 00:42:46,335 I think that it would be material if they overtly strip away some of the independents. But material to what? Material to the current politics. 475 00:42:46,335 --> 00:43:08,815 But if you go back to the 40s, it's not even remotely different than something that's happened only eight decades ago in a period that, hey, we are also in a new period to what happened in 1944. 476 00:43:09,455 --> 00:43:13,975 Bretton Woods Agreement, there was a new monetary system that was arranged in 1944. 477 00:43:13,975 --> 00:43:21,735 It didn't even really kick off until 1958 because of capital controls in Europe. 478 00:43:22,655 --> 00:43:41,695 That's something that was in my book, and I know it's something that you've talked about on your show as well, that the Bretton Woods Agreement and the system didn't even really get going until 58, and it basically died in 68. 479 00:43:41,695 --> 00:44:03,755 So what are we living through? So if 44 was a time that the U.S. had to redo the monetary system and protect itself, and it had a Treasury Fed accord for many years during that time, how is this that different? 480 00:44:03,755 --> 00:44:26,175 And if it's the same, is that bad or is that in the national interest? And if it is in the national interest, should we criticize a faltering of independence when you have – it's not even a speculation whether it went non-independent during the 40s until 51. 481 00:44:26,175 --> 00:44:29,915 that's what it was, it was not independent 482 00:44:29,915 --> 00:44:33,655 the treasury was pegging rates of the bills 483 00:44:33,655 --> 00:44:36,755 and the Fed would buy them at 484 00:44:36,755 --> 00:44:41,555 and actually what you learn when you learn about the history 485 00:44:41,555 --> 00:44:44,315 is that the Fed didn't really even have to move the market 486 00:44:44,315 --> 00:44:48,455 the Fed didn't really have to participate 487 00:44:48,455 --> 00:44:52,995 it just kind of guides by its policy and then the market adheres to it 488 00:44:52,995 --> 00:45:01,175 so it it's quite natural i think for it to go back this way doesn't mean you won't get critics 489 00:45:01,175 --> 00:45:09,215 of the of the faltering of independence but again that's probably another 10 questions 490 00:45:09,215 --> 00:45:15,995 um because obviously like the start of this fallout between trump and powell is really that 491 00:45:15,995 --> 00:45:21,415 trump wants to cut rates and powell's been really reluctant to do so do you think there's an argument 492 00:45:21,415 --> 00:45:22,655 that Powell should be cutting rates? 493 00:45:25,555 --> 00:45:26,115 Yes. 494 00:45:27,195 --> 00:45:28,255 Why is that argument? 495 00:45:28,495 --> 00:45:31,075 The argument that Powell should be cutting rates 496 00:45:31,075 --> 00:45:34,895 is that the curve isn't necessarily steep enough. 497 00:45:35,235 --> 00:45:36,995 It's at about 50 basis points. 498 00:45:37,055 --> 00:45:38,295 I'm talking about twos, tens. 499 00:45:39,255 --> 00:45:40,655 It could be at 100, 500 00:45:40,915 --> 00:45:42,095 and that, I would argue, 501 00:45:42,175 --> 00:45:44,135 would be even healthier for the economy. 502 00:45:45,135 --> 00:45:47,155 A steeper yield curve is good for banks. 503 00:45:47,155 --> 00:45:51,335 They borrow short, and they lend long. 504 00:45:51,415 --> 00:45:53,735 and they capture the curve. 505 00:45:54,295 --> 00:45:58,515 And with more steepness in the yield curve, 506 00:45:58,715 --> 00:46:02,675 they have more protection for their profitability. 507 00:46:03,775 --> 00:46:09,215 And the two-year yield has been guided a little bit lower 508 00:46:09,215 --> 00:46:11,175 than where the Fed Fund's rate is today, 509 00:46:11,495 --> 00:46:13,955 which means the market has room for them to cut. 510 00:46:15,235 --> 00:46:18,855 I don't know that rates need to be at 2% 511 00:46:18,855 --> 00:46:25,415 because again, it goes back to what we said about four and a third. And I realize that's 512 00:46:25,415 --> 00:46:39,793 tens and we talking about twos different parts of the yield curve With tens at four and a third and the stock market raging on do we need lower rates No I would argue no we don 513 00:46:39,793 --> 00:46:44,532 really need lower rates because stocks are doing great with tens at four and a third. 514 00:46:44,692 --> 00:46:49,652 So why do you need twos to go from four and a third to three and a half? Not necessarily. 515 00:46:50,273 --> 00:46:52,652 Can I ask you a question on that just so I can understand a little bit more? 516 00:46:52,652 --> 00:47:00,332 But are rates of that while stock market is at basically all-time highs because the market is factoring in inflation? 517 00:47:00,592 --> 00:47:02,612 Is the market saying they think inflation is coming back? 518 00:47:03,232 --> 00:47:06,412 No, and I think that we talked about this last time. 519 00:47:06,672 --> 00:47:20,152 When you decompose the yield of tens into the tips yield, which is the real yield, that's a market yield that you get plus inflation, you get this coupon plus inflation. 520 00:47:20,152 --> 00:47:26,152 you strip out the real yield, then what you're left over is the break-even, the inflation break-even, 521 00:47:26,273 --> 00:47:33,432 the assumption of CPI going forward. It's frozen at two. It just doesn't really move from two to 522 00:47:33,432 --> 00:47:42,492 two and a quarter and hasn't for the last three years. So there are not, there are the expectation 523 00:47:42,492 --> 00:47:49,172 for inflation going forward is somewhere in the two to two and a half percent. It's not very high. 524 00:47:49,172 --> 00:47:56,452 and the real yield is also around two to two and a quarter percent and which means that if you own 525 00:47:56,452 --> 00:48:04,752 treasuries you have an option i can either get four percent from the notes or i can get two percent 526 00:48:04,752 --> 00:48:12,492 from the tips i expect them to come out even because i could either get four or two plus two 527 00:48:12,492 --> 00:48:18,632 that's going to be the same. If it wasn't, if you had, let's say they expected 5% 528 00:48:19,192 --> 00:48:26,912 inflation, you know, in three years from now, you would be buying tips at two because you get 529 00:48:26,912 --> 00:48:34,072 two plus five. I'm going to get 7% next year or in two years. That's a buy all day, all day. 530 00:48:34,532 --> 00:48:41,712 But it's not. I mean, tips would be trading at 0% or negative, which they had. You know, 531 00:48:41,712 --> 00:48:49,252 tips had traded at a negative yield for quite often over the last few years. I should say 532 00:48:49,252 --> 00:48:59,092 going back 10 years, it's traded negative. It just means that the inflation expectation going 533 00:48:59,092 --> 00:49:05,732 forward is not much more than two. If it was, you wouldn't be able to buy tips at two because it's 534 00:49:05,732 --> 00:49:09,492 free money. That makes sense. It's free money, right? It's a breakeven. So if we get into like 535 00:49:09,492 --> 00:49:14,372 the more speculative side of this, then let's say Jerome Powell does get ousted, Trump brings 536 00:49:14,372 --> 00:49:19,352 someone in. I imagine the easy assumption there is the first thing they do is start cutting rates. 537 00:49:19,352 --> 00:49:23,313 Does that then lead to a higher chance of inflation going forwards? 538 00:49:24,332 --> 00:49:32,273 Of course. Well, when you pump the economy, when you lower rates, we'll just go first, 539 00:49:32,412 --> 00:49:38,592 second order, third order, right? When you lower rates, you spur borrowing. When you spur borrowing, 540 00:49:38,592 --> 00:49:44,273 you create new money, right? That's credit creation. When you create new money, 541 00:49:44,732 --> 00:49:48,452 you increase aggregate demand because they're just new borrowers. There's just more money. 542 00:49:49,012 --> 00:49:54,273 When you increase aggregate demand, inflation goes up. So it's one, two, three, four, 543 00:49:54,273 --> 00:50:02,252 and it happens. Boom, boom, boom, boom. That's it. So yes. And do you think the, 544 00:50:02,892 --> 00:50:07,472 I guess the question is, what else do you think the next Fed chair will likely do? Do you think 545 00:50:07,472 --> 00:50:13,412 things like QE will come back? I don't think you need, and I think they're trying to go away from 546 00:50:13,412 --> 00:50:21,892 that. I think they're trying to go away from the swelling of the Fed's balance sheet being 547 00:50:21,892 --> 00:50:29,912 such an influential part. I think back to 548 00:50:29,912 --> 00:50:37,612 the dual public good that this administration is trying to address. 549 00:50:38,492 --> 00:50:39,832 They have come out and said, 550 00:50:40,172 --> 00:50:42,532 we are providing the world a dual public good 551 00:50:42,532 --> 00:50:46,352 of treasuries as a reserve asset and global security. 552 00:50:47,112 --> 00:50:51,232 We are going to reduce the public nature of that good, 553 00:50:51,313 --> 00:50:53,313 meaning you have to pay for it now. 554 00:50:54,872 --> 00:50:59,712 So the defense is easy because you just have to 555 00:50:59,912 --> 00:51:05,952 purchase more weapons. If you purchase the weapons, then we will protect you. So that's easy. 556 00:51:06,372 --> 00:51:12,132 But how do you get them to reduce their reliance on treasuries as the reserve asset? You actually 557 00:51:12,132 --> 00:51:20,572 have to buy less from them on net. And so you send less dollars out. So if you send less dollars out, 558 00:51:21,012 --> 00:51:26,892 they have less money to buy treasuries. Well, then you better not issue so many treasuries. 559 00:51:26,892 --> 00:51:31,072 you better reduce the amount of treasuries that you're issuing. 560 00:51:32,152 --> 00:51:41,412 And so the shift into Bitcoin policies and supporting the idea of Bitcoin, even talking 561 00:51:41,412 --> 00:51:47,412 about gold, you know, the whole Fort Knox thing, something that's so funny because I 562 00:51:47,412 --> 00:51:51,112 saw an absolutely epic meme of Trump. 563 00:51:51,112 --> 00:51:56,532 It's the mom in the pool holding up a smiling baby. 564 00:51:56,672 --> 00:51:59,152 The smiling baby is Coca-Cola with real sugar. 565 00:51:59,572 --> 00:52:02,932 The other baby is drowning and it's the Epstein files. 566 00:52:03,232 --> 00:52:06,912 And then at the bottom of the pool, the skeleton is the Fort Knox audit. 567 00:52:07,872 --> 00:52:10,052 Yeah, we didn't get that live stream audit that they promised. 568 00:52:10,632 --> 00:52:11,652 We certainly did it. 569 00:52:12,452 --> 00:52:19,392 But I say all this to say that increasing the legitimacy and popularity of gold and Bitcoin 570 00:52:19,392 --> 00:52:24,112 as neutral reserve assets reduces the necessity 571 00:52:24,112 --> 00:52:27,592 of foreign governments to stockpile treasuries 572 00:52:27,592 --> 00:52:28,592 as the reserve asset. 573 00:52:28,692 --> 00:52:31,492 Because, oh, the U.S. is doing it too, 574 00:52:32,132 --> 00:52:34,132 you know, stockpiling these other reserve assets. 575 00:52:34,273 --> 00:52:35,392 This is going to be good for us. 576 00:52:35,472 --> 00:52:38,472 So your question was about QE. 577 00:52:38,992 --> 00:52:42,472 I say all of this to say the U.S. government, 578 00:52:42,472 --> 00:52:48,472 from a policy perspective, actually wants less treasuries 579 00:52:49,392 --> 00:52:57,172 debt relative to the GDP. They want that number to go down. And if it goes down, 580 00:52:57,472 --> 00:53:03,412 you are less so reliant on the central bank to stockpile treasuries and all of that kind of 581 00:53:03,412 --> 00:53:10,512 stuff. Do I think that they're trying to get their own Fed share so that they can do their 582 00:53:10,512 --> 00:53:18,852 own version of the CARES Act or this, you know, big, beautiful bill cubed where they 583 00:53:18,852 --> 00:53:25,752 borrow and spend $10 trillion on energy grids and energy infrastructure and new nuclear power 584 00:53:25,752 --> 00:53:34,232 plants. I don't really think so, Danny, that that's part of what they're trying to do is like 585 00:53:34,232 --> 00:53:43,012 a blank check for 100 new nuclear power plants and rewiring the electricity grid around the country 586 00:53:43,012 --> 00:53:54,052 and, you know, rebuilding bridges and ports and all of that kind of stuff. I don't think so. I 587 00:53:54,052 --> 00:53:58,532 actually really don't believe that that's what they're trying to do. They want the private sector 588 00:53:58,532 --> 00:54:05,232 to do it. They want US banks to lend. It's actually the same thing as the CBDC versus 589 00:54:05,232 --> 00:54:11,232 stablecoin thing. It's all about public versus private. They want digital dollars. They just 590 00:54:11,232 --> 00:54:14,712 don't want to issue. They don't want the central bank to issue. They don't want to issue them. 591 00:54:14,952 --> 00:54:20,452 They just want the banks to do it. So they want the private sector to do all this growth, 592 00:54:21,532 --> 00:54:26,612 build out. They want the banks to lend, and they just want to be supportive. Low regulation, 593 00:54:26,612 --> 00:54:35,972 low taxes i i know it's a very long answer but i don't believe that it's a qe for the blank check 594 00:54:35,972 --> 00:54:43,112 for 100 nuclear power plants funded by the u.s treasury okay interesting um so on the bitcoin 595 00:54:43,112 --> 00:54:47,152 stuff i got you to speculate a little bit if you had to speculate here do you think 596 00:54:47,152 --> 00:54:52,912 again let's say in the next 12 months probably sooner power loses his job and rates get cut 597 00:54:52,912 --> 00:54:56,852 politically I do believe that's where we're going. 598 00:54:57,512 --> 00:55:01,012 I don't know how healthy it would be to slash rates, 599 00:55:01,352 --> 00:55:02,892 let's just say, right? 600 00:55:02,992 --> 00:55:04,392 Stock's at an all-time high. 601 00:55:05,313 --> 00:55:07,012 Inflation isn't reined in. 602 00:55:07,412 --> 00:55:08,212 It'd be good for Bitcoin. 603 00:55:13,813 --> 00:55:18,132 I want to see Bitcoin weather all the storms, 604 00:55:18,672 --> 00:55:20,313 not just get a free ride, 605 00:55:20,852 --> 00:55:23,632 which is why I don't really believe that, 606 00:55:24,032 --> 00:55:27,832 again, four and a third stocks at all time high. 607 00:55:28,012 --> 00:55:30,773 You don't need stimulation. 608 00:55:32,672 --> 00:55:35,112 It's actually stimulative. 609 00:55:37,072 --> 00:55:40,592 It's unbelievable to see the economy 610 00:55:40,592 --> 00:55:43,672 and the stock market both do what they have 611 00:55:43,672 --> 00:55:45,912 with tens at four and a third for three years. 612 00:55:46,532 --> 00:55:47,472 It's incredible. 613 00:55:48,192 --> 00:55:50,192 You actually, one must marvel at it. 614 00:55:50,313 --> 00:55:55,992 Think about, Danny, all the, and I'm going to pick on maybe some of the people you interview. 615 00:55:56,112 --> 00:55:58,632 Think about all the hysteria about treasury auctions. 616 00:55:59,252 --> 00:56:00,112 Oh, my God. 617 00:56:00,852 --> 00:56:02,392 Treasury auctions are failing. 618 00:56:02,712 --> 00:56:05,492 Every three months, like, one 20-year goes bad. 619 00:56:05,492 --> 00:56:10,972 And everyone's like, treasury auctions, are you kidding me? 620 00:56:11,492 --> 00:56:19,112 Three years with rates absolutely flat, the last five, 10-year auctions have gone stop through, 621 00:56:19,112 --> 00:56:23,332 meaning more demand in the moment than where the going-in price was. 622 00:56:23,412 --> 00:56:25,132 It's called when issued, the when-issued market. 623 00:56:25,492 --> 00:56:29,372 Five straight months that tens have beat the when-issued market. 624 00:56:29,773 --> 00:56:34,152 This is a—I wouldn't say you're in a raging bull market, 625 00:56:34,293 --> 00:56:36,092 but this is a very stable market. 626 00:56:37,052 --> 00:56:39,972 Not only is it stable, but volatility is collapsing, 627 00:56:40,313 --> 00:56:42,072 which rewards all the risk holders. 628 00:56:42,072 --> 00:56:53,152 Treasury market stability has been the name of the game for three straight years. 629 00:56:53,152 --> 00:57:04,773 so what does the fed what does trump or besant need to get the fed to do for them other than 630 00:57:04,773 --> 00:57:05,892 one thing 631 00:57:05,892 --> 00:57:14,632 annual interest expense right which feeds directly back into how much they can cut taxes and all that 632 00:57:14,632 --> 00:57:20,832 kind of stuff that's this fiscal dominance idea annual interest expense the actual dollars that 633 00:57:20,832 --> 00:57:27,692 they spend. They're like, hey, please cut the rate so that our actual interest dollars that we spend 634 00:57:27,692 --> 00:57:35,912 can go down so that we can cut taxes and not get scored by the CBO in this negative way that makes 635 00:57:35,912 --> 00:57:40,552 all the headlines say you're increasing the deficit. They're not actually increasing the 636 00:57:40,552 --> 00:57:49,872 deficit. They're reducing taxes, hoping that the deficit doesn't continue to spiral. But 637 00:57:49,872 --> 00:57:59,032 yes, that's the way that it gets spun and that the CBO scores it is that when you reduce taxes, 638 00:57:59,192 --> 00:58:07,012 well, if the interest rate doesn't come down, you're going to have a deficit and it is going 639 00:58:07,012 --> 00:58:14,293 to grow. That's just math. So it is about math. They want it lower because of this first order 640 00:58:14,293 --> 00:58:24,072 effect reason not to do all this. And I want to mention one more thing. I was in Washington in 641 00:58:24,072 --> 00:58:33,232 January, and I got to go to the Capitol and chat. It was obvious to me that this false narrative of 642 00:58:33,232 --> 00:58:41,012 poor treasury auctions was an underlying scare tactic for the government to get the votes, 643 00:58:41,012 --> 00:58:45,492 to get stable coins so that you can have an additional buyer of treasuries. 644 00:58:46,032 --> 00:58:46,813 It was a psyop. 645 00:58:47,472 --> 00:58:49,172 Everyone was talking about it. 646 00:58:49,793 --> 00:58:51,472 It was obvious to me. 647 00:58:52,012 --> 00:58:54,372 It doesn't, I actually think it's good, right? 648 00:58:54,412 --> 00:58:57,592 The stable coins being another source of treasury demand. 649 00:58:57,752 --> 00:58:58,313 It's good. 650 00:58:58,372 --> 00:58:59,912 It's not going to save the treasury market. 651 00:59:00,192 --> 00:59:03,773 It wasn't necessary to save the treasury market, but they got it. 652 00:59:05,252 --> 00:59:06,472 It's another buyer. 653 00:59:07,632 --> 00:59:09,852 The treasury market didn't need saving. 654 00:59:09,852 --> 00:59:19,392 it is, again, it's stable, it doesn't mean that they can ignore it. Like, they're doing everything 655 00:59:19,392 --> 00:59:30,313 they can to structurally reduce the amount of net imports, right? I mean, everything from tariffs to 656 00:59:30,313 --> 00:59:39,332 the tomato ban now on Mexico, every little marginal thing that they can to prevent 657 00:59:39,332 --> 00:59:45,092 the export of dollars, the stockpiling of treasuries abroad. They can. They're trying to do. 658 00:59:46,052 --> 00:59:53,313 And maybe it is contributing and maybe it's not. But the U.S. Treasury right now 659 00:59:53,313 --> 00:59:59,632 is in a decent place. And look at the June numbers. I literally fell out of my chair 660 00:59:59,632 --> 01:00:07,852 when I saw that they had a surplus in June. I mean, is that a weak treasury market or a good 661 01:00:07,852 --> 01:00:14,212 treasury market where you're actually turning a surplus even if it's one month um it's a little 662 01:00:14,212 --> 01:00:20,532 surprising to the upside to try and take this back to like the start of the conversation when 663 01:00:20,532 --> 01:00:25,372 we're talking about bitcoin cycles is there a bit of a strange irony here where someone coming 664 01:00:25,372 --> 01:00:30,252 into replace powell cutting rates might lead to bitcoin pumping and be one of the things that mean 665 01:00:30,252 --> 01:00:35,212 we stay in the four-year type cycle if we have more of a blow-off top type event and things do 666 01:00:35,212 --> 01:00:43,793 have to pull that down. I can't really see that happening. I don't think that a new Fed chair 667 01:00:43,793 --> 01:00:54,012 pumps Bitcoin. There's the quote. I don't think that one person, even Donald Trump, 668 01:00:54,012 --> 01:01:00,672 can have that type of effect. Remember that the current wave of pro-Bitcoin policy is driven by 669 01:01:00,672 --> 01:01:06,652 the electorate. Trump is responding to the electorate. It's not a Trump. Trump is not the 670 01:01:06,652 --> 01:01:14,612 one that's like, let's use Bitcoin to save the nation. He tells us that it's him pumping Bitcoin. 671 01:01:14,612 --> 01:01:23,392 Yeah. He loves himself. Yes, that's clear. Well, Nick, you're the best. I've really enjoyed talking 672 01:01:23,392 --> 01:01:28,652 to you. Always do. Where do you want to send anyone to find out more about Bitcoin layer, 673 01:01:28,652 --> 01:01:34,012 the Bitcoin age, all the work you do. The Bitcoin layer.com is where people can find 674 01:01:34,012 --> 01:01:38,352 all of the work. So you get links to the channel. It links to our research offering 675 01:01:38,352 --> 01:01:45,072 and my two books, layered money and Bitcoin age. So the Bitcoin layer.com, you guys can find 676 01:01:45,072 --> 01:01:49,293 everything that we're doing over there. Amazing. Thank you so much for this, Nick. It was good. 677 01:01:49,392 --> 01:01:52,293 And I'll, uh, we'll definitely catch up in October as well when I'm in LA. 678 01:01:52,832 --> 01:01:55,172 Danny, all the best. Thank you so much. Appreciate you. 679 01:01:55,732 --> 01:01:56,293 Thank you, man. 680 01:01:58,652 --> 01:02:28,632 Thank you.