James Lavish - Did the Government Just Crash Bitcoin? (James Explains the REAL Story)
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Hey, hey, welcome to the Bitcoin Matrix. I'm your host, Cedric Youngleman. In this episode of the Bitcoin Matrix podcast, I chat with James Lavish, a reformed hedge fund manager who ditched Wall Street to champion Bitcoin as the ultimate signal against the collapsing fiat system. We dive into key topics such as the recent official announcement of the strategic Bitcoin reserve and the game of chicken between Trump and the Fed.

James also breaks down hedge fund strategies in Bitcoin, the Warren Buffett indicator and the potential inclusion of strategy in the S&P 500.

If you're looking to understand the financial landscape and how Bitcoin clearly fits into it, this episode is for you. The world's largest Bitcoin conference hits Las Vegas May 27 to May 29 at the Venetian Resort. Get 10% off your tickets using code MATRIX at b.tc/conference/2025 or grab the link in the show notes.

Join me for an ice cold beer in Las Vegas this year for a massive Bitcoin pump. Get your tickets now. What is real? How do you define real? You can't jump into cash. Cash is trash. What do you do? You get out. James Lavish is a reformed hedge fund manager, co-founder of the Bitcoin Opportunity Fund, ex-Yale hockey player, CFA, and all around cool dude.

James is the author of the Informationist Newsletter, where he simplifies complicated concepts to make you smarter. James Lavish, welcome back to the Bitcoin Matrix. How are you? It's awesome to be here, Cedric. Thank you for having me. That was a very, very flattering intro. Thank you. Yeah, man. Well, it's all true. And it's always great to hang out and see you.

You know, these are crazy times. You know, I just did a group therapy session with Vijay and Jesse Myers and Joe Burnett, you know, because there's so much turbulence out there. And, you know, kind of speaking of market turbulence and like tariffs and strategic Bitcoin reserve, did you see that Canada, USA Canada game the other night with all the fights? I did. That was quite fun. You know, the first, and I think it was in the regular round robin,

you know, lead up to the final, the first game where they had three fights in the first nine seconds or whatever. Um, I didn't see that. I just started getting all these messages from friends. They're like, Oh, did you see Keith's kids? And so this is, um, that's a guy I used to play with Keith Kachuk, uh, out in Boston. And those are his boys. It's pretty funny seeing them. And he's like, Oh, they're out of control. But, um, it was fun. It was, uh, it was great. It was actually a great tournament. Um,

Really liked that a whole lot more than the All-Star game. It had a lot more passion to it. And, yeah, it was fun. Even though Canada did win, ultimately, it was a great series. I'd love to see that again next year. What were all those fights about? I mean, there were two brothers involved from the U.S. I don't even know if both are fighters, you know, in their other element roles in the league. No, that's not their typical role. Those guys are just, you know, they're just power forwards. But, yeah.

What the fighting was about is that Canada booed the national anthem, and they just turned to each other, and they're like, no, we're not going to stand for that. And they immediately just went out there and just, you know, they're like, you boo our national anthem? You guys are going to, you know, get it on the chin. So, you know, a little bit of friendly cross-border kind of rivalry, I guess. Yeah.

That's crazy. I mean, what I loved about it was a lot of honor. I mean, I grew up watching hockey. I saw the Islanders win four Stanley Cups in a row. Grew up with guys like Ty Domi and Rob Probert.

But it seemed like, I didn't know that this was about booing over the national anthem. And I don't know why Canada was booing the U.S. national anthem. Is that normal? Was this a little different? I mean, it was in the east. The game was taking place in Quebec, I believe, or maybe it was Montreal. I can't remember. But either way, it was in the east. And so it was kind of far left liberal area of Canada. Yeah.

They don't like Trump. They're really upset about what Trump said about the tariffs and about making Canada the 51st state and all of that. So I think they're just they're just booing because they don't they don't agree with our politics. It's amazing. You know, I mean, it's probably if you're not a fighter in the league, it's probably even extra scary to fight. I mean, you're fighting on skates.

Maybe the guys you're taking on are a little bit more known fighters than you. I mean, it looked like these guys were getting up even like proud of themselves for just even getting in the ring with some of the other opponents. You know, honestly, Cedric, I don't know. Where are you from?

Long Island, New York. Yeah, that's right. Oh, you're from there. Okay. So you grew up watching Long Island. I mean, if you're a skater, you have a lot of stability on skates, surprising amount. And you can actually dig in even a little bit better than if you're standing flat foot, you know? So you have some, you know, you have those edges you can really dig into the ice if you know how to, if you have good balance, obviously. If you're in the NHL,

you have good balance. That's not going to be a problem. You're probably more, um, you know, comfortable fighting on skates and you are just, uh, on, you know, on flat land. So it's, uh, it's, it is a different technique. Uh, but you know, it's, uh,

It's a way – it's like a kind of self-enforcement. People always ask me, like, how do you feel about fighting? And honestly, it's been part of the game for a long time. And it's just a little bit of – like hockey is a fast game. There's a lot of stuff that happens away from the play that the refs can't see. And unless you're going to employ an eye in the sky kind of enforcement for the league, then there's stuff that happens outside of the play that –

People, these guys self-enforce it. And so that was kind of an extraordinary situation. But there's a lot of times where you just get chipped. You get jabbed in the ribs or something. You're like, come on, man. And then you're like, okay, that's it. We're going to fight because, you know. But it is strategic too.

you, you can use fighting to get the other team out of their rhythm. So if you're, you know, it's such a physical game that you can use fighting to get the other team out of their rhythm. You see it sometimes in, uh, in football games, uh, or basketball games where, where it is physical, there's no fighting, but there, it is physical. You, you, you get the other team off their game by, you know, taking penalties or, you know, being really physical with them. Um,

you know, hitting them after the play or something like that. And like, and in hockey, you can do it just by starting, starting fights and then you get them out of their rhythm. They've been, they've been really rocking along and all of a sudden it knocks them off their rhythm and it changed the game. And that's sometimes it's used for that sometimes too. So yeah, it's a, it's just, it's just a part of the part of the game. Yeah. And you get your team, you can get your own team back into the game, maybe through a fight, you know, a lot of times fight. Yeah.

and the crowd into it. But I was surprised, I mean, this was over tariffs. This wasn't even about what happened on the rink. This is more about the crowd. And what do you think of tariffs right now? I mean, do you think that this is a major upender to the economy? Is this a little bit of a sleight of hand where maybe they're not going to do or it's not going to have as much impact as some are saying?

Yeah, I mean, it's a good question. If you look at the headlines here, there's a lot of headlines about tariffs. There's a lot of uncertainty about them. And that's probably the biggest, that's probably the word that you want to use when you describe, you know, the impact of tariffs. And I think that what it really comes down to is the markets hate uncertainty.

And that's one part of it. So that's kind of affecting the markets in one part of it. The second part of it, and so the uncertainty is around, well, where will the tariffs be? How high will they be? How much could they and would they affect inflation, pricing of goods coming into the country? You know, I mean, we're a net importer. So, you know, it's a big deal for all the prices to go up. So,

That's one side of it. And that's just the uncertainty part of it. The other side of it is, which feeds into it, is how much is Trump using these threats of tariffs as a big sword? Because he likes to use...

You know, he's used tariffs as a threat before, and it remains to be seen how much this is a threat and how much he's really going to follow through on. I mean, one of the headlines that literally is coming across the tape as I'm talking to you is White House is saying that 25% steel and aluminum tariffs begin at midnight. And so, you know, and that's coming into Canada, to your point here, talking about Canada. And so...

He wants to secure the border, and he wants to stop fentanyl from coming across the border. That is part of the excuse. I mean, the reality is we've had tens of millions of illegal immigrants pouring into the country that were not vetted properly. We've got to stop that. That's just not right. I'm all for immigration and all of that, and not to get political, that this country was formed on immigration. But you've got to do it the right way. And so he's trying to stop that, and he's using...

And, you know, we've seen him operate before. He can be less than politically tactful at times, right? But it can also be very effective.

We've seen that, too, especially in just business. But now he's doing it in Washington and it's it's rattling cages because it's just not the way that that business is typically done in Washington. It's not the way that international relations are managed typically in in D.C. So that has a lot of people on edge and they don't understand exactly what the impact is going to be.

And he changes his mind like that. He could turn around and say, okay, we came up with a deal, no tariffs. And it's like, oh, wait, okay, so I was hedging against possible steel and aluminum tariffs, and now I don't need to hedge against that because that's off the table. And then maybe it's back on the table. So it's just – it's like keeping people off kilter is kind of impacting the market. And that's probably the biggest impact of all of this is just the uncertainty around it. Because once you get the certainty around it –

Well, people can position themselves. You know, you can figure out exactly how to, you know, the producers will figure out exactly what they need to do to get the goods at the best price that they can. And it'll either be passed on to the consumer or it won't be. And I would think that the biggest threat, truly, Cedric, of tariffs that are followed through on,

The biggest threat is for companies that just can't pass those prices along to their customer and they wind up either losing a lot of money and struggling for a while or ultimately going out of business. And I guess that's the biggest, to me, that's the biggest worry in reality. The rest of it, there's a lot of noise and there's just a lot of uncertainty.

Yeah, I think when people say there's inflation in supply chains or supply chain breakdown, it's really just repricing up and down the line and everyone trying to figure out, you know, the inputs and the outputs of their new system and the new pricing. Right. And then so people say, well, you know, and I apologize. I don't remember who I was reading who said this a few days ago. It was one of somebody intelligent that I respect in the space. And they're saying that, look, if.

And I think actually it was passed on by Anna Wong of Bloomberg. And she was saying that, look, the reality is that if the companies could pass on these higher prices to customers, they'd already have done it. So they're not going to, you know, and so the threat is that they're not going to be able to, and then it disrupts their business. That's the biggest threat. I think that's the biggest negative, like real threat is,

That's more of a real threat than all of the other noise that we hear about it. Yeah. Something else I've heard, maybe it was Bessin, talk about sort of Main Street versus Wall Street. And, you know, last term that Trump served as president, he was very keen about stock market and seeing it rise every day or talking about it weekly or monthly. He seems to not care as much right now about stock market. Do you think this is about Main Street versus Wall Street at all? He cares. He cares a lot.

He may be posturing that he doesn't because, again, he needs the Fed and the Treasury to believe. He needs the Fed. Well, he's got Besant. He's his appointee. But he needs the Fed and Powell to understand and believe that he's going to follow through with all of this.

Meaning that he doesn't mind if the market's down 10%, 20%, 30% here because they're signaling that this is a period of transition.

that Wall Street may suffer a little bit in order to do the right thing, meaning make sure that they get inflation down, get that tackled, get interest rates down, and that will help Main Street. Well, how does that help Main Street? Well, first, there's two things, right? If interest rates are coming down, that's not great for banks, right?

because banks need interest rates to be higher to have a spread. And that's how they'll make a lot of money. And that's how they'll make a lot of profits. And there are margins on that spread. The higher the interest rates are, the more of a margin they can get on their products. For Wall Street, obviously, the market has been soft here. It's been struggling because of uncertainty and because of thoughts that we might be heading into a recession.

And if that's really the case, then that's bad for Wall Street here. In short term, bad for Main Street. But in the long term, getting interest rates back down is – this is what –

Trump's point is that if he gets interest rates back down, then it's better for Main Street because the cost of borrowing, which we live in a debt-laden society, the cost of borrowing goes down and you can get that car loan for a lower price, lower monthly payment because the interest rate is not 7%, but it's 4% or 5%, or it's not 8% or 9%.

And then the same thing with houses, you know, instead of having your mortgage up at six, six and a half percent, maybe it's down around four or four and a half percent. And that's that's means that it opens the door for people to buy houses where they might not have been able to before. That's the idea. You know, whether it comes to fruition, we'll see. But right now, it seems like they're willing to stomach this for a little while.

to allow for the market to have a breather and hopefully not tank. But the Fed needs the market strong. They may say that they don't care about the stock market. They're not in the business of managing the stock market and all of that. But the reality is that we're in a highly financialized system here.

then if the stock market is down 20 or 30 percent that will impact all good all uh markets and it will not be good for uh the fed ultimately and so because they you know ultimately it's not great for the treasury so the treasury needs to be floating a lot of bonds and so i mean we've got to repri we've got to re-issue um upwards of 10 trillion dollars of bonds

This year, in the next year, not this year, but in the next year. And so we can't have such strong softness in the market and an economy that's tanking because we have to borrow more. And so that would be problematic. And you don't want your revenues to go down.

As GDP goes down because of some sort of recession, then you're just going to – that gap that we're running a deficit just grows. And regardless of what Doge does, that deficit will blow away what Doge is doing right now. And so that's the problem.

And they need to manage around that is the way I see it. And ultimately, I believe that Trump does care what the market is. He ultimately does care whether or not he's making his Wall Street buddies and colleagues rich and whether they love him.

And it's been his benchmark for the last administration. And I would bet that it's going to be a benchmark for him again. I mean, is this a game of Trump playing chicken with the Fed and Powell? It might be a little bit of a game of chicken because, you know, Powell said that he doesn't care. He's not going to do what Trump asked him to do. He's going to wait. He said, you know, he's not concerned about the economy yet.

He said, again, he said he's not concerned with where the stock market is. And so it is a little bit of a game of chicken, I believe, like you said, with Trump. And we'll see who wins. I don't know. I mean, I think that Trump is going to hold strong here for a little bit. We're seeing the market react negatively to it. And so we'll see where we shake out. But ultimately, rates will come down.

The Fed will stop whatever minuscule QT that they're doing. And ultimately, you know, or eventually they'll have to print again. That's just math. Right. The big print, like Larry Lepard, is coming. Right. Don't know when.

Speaking of benchmarks, though, I mean, I think he's going to be looking to Bitcoin as a benchmark the way he has or does with the stock market. That's my assumption that he's going to track that and want to reward his backers maybe and just see it do well. Maybe he his team has him convinced that it's going to be a big part of bringing America back. How do you then sort of interpret, you know, there's been a lot of news about Bitcoin, but specifically around the strategic Bitcoin reserve.

And what we've seen is a, what seems like, I'm not gonna say a large pullback or dramatic pullback, but definitely a pullback of sorts and not, you know, an upward trajectory from the announcement, except for the initial pump. Yeah, I mean, look, I'm,

When Trump was elected, like you just walked through it kind of chronologically here, there was this uncertainty around who was going to be elected. There was a lot of, you know, again, no surprise, misinformation, disinformation in the media about polls and all that, you know. I mean, Trump won handily. And so what that meant was that it's kind of a referendum for him. And

He had a job to do and he knows that part of what his base was, was the cryptocurrency and Bitcoin community. And so when he won, Bitcoin soared, you know, from the 60s all the way up into 109.

And so and then once it broke 100, it kind of bumped around there. And then as as people digested what was going on with the administration, good things and not so good things, good things were. Look, we got we've got some great movement, you know, tailwinds that I've been talking about.

for Bitcoin. One of them was the full repeal of SAB 121, that banks can now custody Bitcoin and create products around it. That's a big deal for Bitcoin. And we, you know, last week, we, but leading up to this, right? So leading up to last week, we had, we had a bunch of, of, you know, what seemed to be positive movement for Bitcoin, and then uncertainty creeping into the markets because of tariffs,

because of mixed economic indicators, because of the continuous of, you know, the kind of the entrenched inflation that's above 2% and the Fed stopped lowering rates. So it's kind of like, well, are we getting into a stagflation period and the markets are getting nervous? The mag sevens are pretty frothy and they're starting to sell off. And that's all happening.

All while, you know, you've had this euphoria of Bitcoin after Trump was elected and the positivity that will come around that with the, you know, enhanced...

you know, regulation and understanding what, um, what regulation would be. And, um, then, you know, people just expecting, and, and I expect that that choke point 2.0 will be obliterated. The, that whole, uh, is kind of like, um, you had companies that, that were kind of a, they were oppressed because of traditional banks and traditional banking rails, just shutting them off.

secretly behind closed doors. They were just not doing business with them, refusing to do business with them, debanking them, all that stuff. That happened. I can assure you it happened because it happened with my hedge fund, just because we had the name Bitcoin in it. We had trouble with traditional banks here and there of refusing to send wires, canceling wires, trying to debank people. And so that was problematic and it was going on. So there's optimism that that's stopping.

And for the most part, it has. But I still see instances of it. So that's happening. But then you have this kind of rollover in the general market.

And Bitcoin started drifting and it drifted back underneath 100,000, that big mental level. Not a huge surprise. You know, a lot of OG selling after that rise to that all time high of over 100,000. And so, you know, it started drifting, getting softer, getting a little bit weaker. And then we come into the announcement last week.

And there's a lot of hype around this. You know, David Sachs has been he's been a great proponent. He's the crypto czar. But there's confusion about talking about a stockpile, talking about other coins being included in it. And then we finally get the announcement last week. And the announcement is that by executive order, Trump created a Bitcoin strategic reserve.

Okay, great. That's exactly what we were hoping for as Bitcoiners that we would, you know, okay, we've got a reserve that's great for the United States. Look, I like the United States. I want the United States to be strong. And I think that we can strengthen the balance of the United States by adding Bitcoin to it. And, you know, even if we don't,

Outright secure bonds with it. Another thing we can talk about a little bit the bit bonds, but you know, it's a great development. Now it's signed into law that they they're not going to sell any Bitcoin that they have in their balance sheet. They already sold 200,000 of them over the last 10 years from seizures and from from illicit or illegal activities and

But there's still about 200,000, they believe, that the US holds. And so they put a stay on that, you know, moratorium for selling. They're not going to sell it. But... Hey, Bitcoiners, get your sats off your exchange now. This is not a drill. Thea is the world's simplest Bitcoin self-custody solution. With their module, Multi-Sig Vault, you decide how to hold your keys.

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But at the same time, they created a digital asset stockpile, which will hold other digital assets that – which are not really digital assets in my mind. They're more tokens. But like the Solanas and Ethereums and XRPs of the world where the –

the U.S. would seize these assets and hold them, but they wouldn't add to them. That's still a rounding area. They don't have a lot of that. Now, here's where it comes in that people are upset. So there were traders who were expecting there to be announcements that the U.S. would be buying a certain amount of Bitcoin with this strategic Bitcoin reserve.

But the stipulation was the only way they would buy any is if it was budget neutral, meaning that they'd have to sell something else in absolute terms. There are other ways you can do it, but just to keep it simple, they'd have to sell something else from the balance sheet in order to buy this, whether it's gold or silver.

or land or one of these other tokens or uh or maybe even the strategic cheese or oil you know whatever what whatever it may be they're not doing any of that stuff they may they may sell some of the other tokens in order to buy bitcoin especially because they're just a rounding error eventually i expect them to do that but there was no announcement of okay we're going to buy

There were hopes of using the Gold Act and saying that they could buy Bitcoin with some of that $200 billion investment.

fund that, you know, that they could use maybe half of it, maybe buy $100 billion of Bitcoin. That wasn't announced. Well, maybe they would, you know, take on Cynthia, Senator Lummis' plan of buying 200,000 Bitcoin per year for a million Bitcoin total over five years. That was not a part of the plan. So people were upset that

And Bitcoin sold off, sold off hard. And so that drawdown ends up being about 30% from the all-time highs over the course of the few days. And it's a pretty significant and I would say healthy trend.

consolidation for all those traders that were in this on the momentum of buy the rumor, sell the news kind of thing, where hopefully they're going to buy this asset and it's going to it's going to appreciate quickly for them because you're going to have the government stand in there and start buying. And when when a government buys it, probably you're not very price sensitive. So I think that's what the hope was. And that was factored into the price.

So, you know, a certain percentage of probability is factored into that and wherever they think that the that Bitcoin would go once that was announced times that probability that that is been embedded in the price. So that's been extracted. And so it's no longer in it. And and that's where we stand now. And that's kind of that's kind of what happened over the last week.

I mean, it's tremendous. And thank you for that breakdown. Do you think that the United States has to form a multilateral agreement with its allies before it could actually start to add to its Bitcoin reserves or sort of move or tilt in that direction? And that way afford, you know, our allies that we don't get an unfair head start? I mean, Japan's been doing the carry trade for us for decades and

harming their economy. I mean, they've done a lot. I mean, do you think that we need a multilateral agreement with other nations to move forward as a government?

Well, I mean, look, any government could be out there buying right now. They just have to also understand it and put forth either orders or legislation to do it. There's nothing stopping them. I mean, this is now, Cedric, where game theory starts to come into play, where, hey, if we want to be the strongest country financially, we ought to be considering really adding a lot of Bitcoin to our balance sheet, in my opinion. That's my opinion.

You know, I've read a lot about Bitcoin. I understand it. I understand how it's decentralized. I understand the strength of the network. I understand that it's running on, you know, 75 terawatt hours of energy, which is like 20 full-time, full-scale nuclear reactors running on.

24-7. That's a massive amount of power. And so it's, you know, I understand that Bitcoin is nation state resistant. It's a digital fortress. I get that. Well, some of the other countries don't understand it. Quite honestly, I was up in D.C. last year and

talking to senders and senders' aides. And there's a lot of them. There's just disinformation, misinformation, misunderstanding. They don't understand the difference between Bitcoin and the other protocols. And so it takes a lot to get your head around.

And when you're in those positions and you're not being briefed on them properly or fully, then there's going to be confusion. And so you're just going to probably going to do the thing where you just say, I don't understand it. I'm not going to touch it right now. It's just too big of a risk.

And this is where the game theory plays out, where if you're curious and you're steadfast, you understand that you better learn about this stuff and get on top of it. That's what matters. Now, flash forward a year. Now I'm in New York City at Pomp's event for the Bitcoin Investors Week. And I'm in the green room and I'm talking to Senator Lummis and her staff. And they get it. And they're like, look, there's still a steep learning curve.

in DC. Congress, you know, by and large does not understand this and we've got it. It's up to us to educate them about it. Now, some Bitcoiners that are watching this would say, well, we don't need the government. Screw the government. We don't need them. And that is true that if you're just a straight Bitcoiner and you're

living your sovereign life and you do not care about living in the United States or wherever else you are, that's fine. I've got pretty deep roots here in the United States and I want to stay and I want the United States to be strong. So I'm in favor of the United States strengthening their balance sheet. I don't see them taking control of the protocol. I'm not worried about that. Again, for the reasons I just said, it's nation state resistant, even against the United States. So I'm not too concerned about that.

But I am concerned about the massive amount of debt that we have in this country, the deficits that we're running, and how we're going to dump all of that debt and those liabilities onto our kids and grandkids. That's a problem. It's not going away. And so we can strengthen our balance sheet by adding Bitcoin to it.

There's a lot of, you know, math that will go around that that can show that they can demonstrate that. But that's the basic premise. And so I'm all for it. And I think that would be good for both Bitcoin, Bitcoin holders and for the future of this country. That's just that's my position on it. You know, I hear that. I think I wonder how much when you mentioned crypto, I agree with your take on crypto, that's tokens.

But I wonder how much stable coins play a role in what they're trying to develop and roll out over the next few months to have in place so that they can tokenize the economy, whether it's equities on it. We can I'm not trying to debate what blockchain is, but I think they do want to tokenize it. And I think that they know that those asset classes or the way they're doing that, it all is built on the tailwinds of Bitcoin.

Yeah. I mean, like, like, like let's, let's step back. Like if the, if the United States wanted to buy, um, you know, if they want to buy the mag seven, they want to buy some Amazon and, and, uh, and they want to buy some Nvidia and Microsoft and Apple and put that in a strategic stockpile. Fine. That does, I have no issue with that. That's, you know, um, those are, those are our technology companies that are, that are, you know, some of the backbone of the, of technology of this country, whatever, that's fine. Um,

Some of these tokens I mentioned are, look, there's utility there. There's clearly utility with Solana and Ethereum. There are protocols out there that are going to be important technologically. That's fine. I get that. Absolutely. And are they going to use those? Well, the country will use them. Investors, businesses, they'll use them. That's fine.

And so what is the country doing? What is the US doing about the stablecoins? That's a little bit different conversation. I think that the stablecoins are really important because... Hey, Bitcoiners, I'm heading to Bitcoin 2025 in Las Vegas from May 27 to May 29th, and you need to be there. This isn't just another conference. It's the ultimate Bitcoin party. Grab your ticket now using promo code MATRIX or at the link in the description.

See you in Vegas, freaks. Let's make this one legendary. Look, if you look right now, Tether is, I think it's the sixth largest buyer of U.S. Treasuries right now in the world. I mean, that seems to be significant. I'm being facetious, of course, but that's, I mean, that's a big deal. The U.S. knows that. So even again, let's go back to being on the Hill last year, talking to these people. They understand, you know, even the aides, they understood it. They're like, look,

We understand that stable coins are important. Like this is an important area that for us to focus on because stable coins are a built-in buyer of treasuries. Why do they do that? Well, because stable coins are, are there, they're, um,

Pegged to the dollar, the U.S. dollar. And so they need dollar-based instruments that they can have as collateral on the underlying stablecoin. And so...

Buying treasuries is the way to do that. And the U.S. knows that if they get good, strong regulation around stable coins, this will help that market and it will only strengthen the U.S. treasury. That's the most important part. I don't believe that this administration has any intention to create a central bank digital currency, a CBDC, and I don't think Powell does. That's another thing that's kind of a...

It's an important distinction to make that digitizing the U.S. economy, putting things on, tokenizing stocks and all that, that I think will eventually happen. I just don't see a reason why it wouldn't. I mean, I've been in Wall Street for over 30 years and DTC and collateral and the problems with third party and with counterparty risk.

And then ultimately, you know, having custodians watch over your stuff and move it around be way easier and way more transparent if we had things that were tokenized. I mean, that just is an obvious kind of evolution for the market and to make it efficient and the need for less of a need for trusting a third party or a counterparty. So, yeah.

All important stuff. I think the most important thing is that we just keep steering clear of CBDCs. We're seeing other countries trying to implement them and to introduce them. Those are evil, and we want to stay away from that. I have no problem with stablecoins, and I think they're important. They will continue to be an important part of the market. Has it impacted...

Bitcoin? Yeah, because it used to be that if you wanted to put your money into other cryptocurrencies, you'd get onto an exchange and buy Bitcoin and then trade it around Bitcoin and those other currencies. Now you can do it with stable coins. That's okay, though. It probably helps manage the volatility. Yeah, for sure.

What's interesting there as well is I think when you touched on it, but when they issue one tether or one stable coin for the dollar, they get a two-for-one deal in a way. I'm still trying to wrap my head around this, but they issue the stable coin, which is the $1, and then they have to back it with a U.S. Treasury, one-for-one, so you get $2 in the system for $1 being issued.

And it's a heat sink for all the U.S. debt and treasuries, which they need, and it helps push the dollar into parts of the world that's not currently on rails. But there's another sort of canary in the coal mine here. What is gold telling us right now?

Well, gold's telling us there's a lot of uncertainty in the markets, right? So gold's bumping around all-time highs here. And that's always been a flight to safety in periods of uncertainty. So that is what's happening with gold. One of the problems, though, we've seen in the last number of weeks is that

There's a rehypothecation of gold that goes on in these vaults, and we've seen that out in London. And so the Bank of England got into a position where they're not able to deliver the gold that their customers are demanding back from them. And likely what happens, they just lent it out too many times. We don't know exactly how many times or what that looks like because we are not privy to seeing those ledgers, but...

I think that that's one of the issues that customers and investors are seeing, that there's a problem with gold not being perfectly auditable, especially when you have it in a vault somewhere in London, you know, and you've got the Bank of England saying, oh, no, no, it's good. We've got your gold. Don't worry about it. But they may have lent it out four, five, six, seven times. And so then you're sitting there waiting. They're like, well, it may take two or three months for you to get your gold.

That's nuts. I mean, just think through that, Cedric. Two or three months, it might take you 10 minutes to get your Bitcoin. Maybe. So maybe it takes you... If they had to audit and really make sure that they had the right accounts and make the right addresses, maybe it would take two or three settlements. It might take you 30 minutes. But the thought of taking...

you know four to six weeks to get your bitcoin is just insane and that so that's that's one of the things that it solves now that bitcoin remains to be a risk on asset however in the minds of investors and until you get enough investors to understand exactly what it is it's going to continue to be like that because it's just being treated like a technology stock right now and that's uh

I guess it's natural. I mean, when I was on Wall Street, traditionally, I was in the hedge fund. I was looking at Bitcoin and I didn't understand it. So I went and asked the technology portfolio managers and analysts about it because, well, it's a technology. And I didn't really understand exactly what it was. And that's the way Wall Street is still. They feel like it's a souped up NVIDIA because...

They don't really understand exactly how the protocol works. Well, yeah, I want to ask you, like, how do you think hedge funds are looking at Bitcoin right now? I follow Josh Mandel on Twitter. He seems to be a brilliant trader. It's like watching Michael Jordan. So I don't advocate, you know, just because you watch Michael Jordan that you can go out and go dunk like Michael Jordan. So don't go try trading maybe like Josh. But, you know, he has some euphemisms that are really interesting around Bitcoin.

You know how he really believes like the market almost like never gives anyone a head start or a sneak attack. And the market always kind of, you know, kind of lets people get in at the price they deserve. And what I'm seeing now is like maybe smart players are letting the game come to them. They've been patient. They're getting prices they could have got.

three, four, five months ago and missed out on. They maybe didn't buy the big run or maybe they rebalanced a little bit at the top. But now smart players have a chance to kind of maybe accumulate or build a position now at a much more de-risked point in the political cycle. I mean, do you think...

hedge funds are getting it in a different way. Is the conversation changed around Bitcoin since, uh, I guess January 20th. I think it has for some, um, I still believe there are some hedge funds who are whipping it around, treating it like a risk asset and doing what's called the carry trade. Um, you know, whether they're holding a Bitcoin and shorting futures against it and just trading around it. I think there's a lot of that going on. Um,

And there's also, I mean, people have got to wrap their heads around this, that these hedge funds have massive, massive liquidity. And if you're in charge of a billion-dollar book of a hedge fund, you can move these markets in short term really easily.

You can go out and get leverage off that billion dollars and then just go liquidate what you see on the levered Bitcoin holdings. You got these, you know, we talk about the leveraged degenerates, the deans. So, and they're, they're standing there with,

5, 10, 20, 50, 100 times leverage on a position. And the hedge funds can see that. They just clear them out. They'll buy it, make sure they get wiped out and they get bought in. The price rises and then they short it. And then they'll do it the other way. They'll sell, sell, sell, sell, sell until all of them get wiped out. And then they'll go and they'll buy it at the bottom. It's easy for them. They've got so much money.

However, I do see some intelligent hedge funds in there just buying these ETFs and holding them. And there's some big ones in there. And that shows me that there's some intelligence coming into the space. They do understand it for the long term. And they're using it as a portfolio enhancement and a long-term portfolio hedge. Okay.

Yeah, I mean, interesting strategies. In terms of kind of, you know, benchmarks and things like that, that you look at, what is the Warren Buffett indicator? Oh, the Warren Buffett indicator. Yeah. So this is so I think I wrote about this. I wrote about Warren Buffett a few maybe was a few weeks ago in my newsletter. And and, you know, it's kind of like you.

Some of these things that they just don't go away. Right. These are things that that are their old indicators that are traditional and they and you can still look at them and say, well, OK, so this is.

This is something that I need to take into consideration when I'm looking at all of my portfolio as a whole. If you're looking at Bitcoin for a long, long, long-term trade or long-term investment, sorry, it doesn't really matter, right? But when you're looking at your total portfolio, this is something that he has touted as a great indicator.

And what it is, is he just looks at the total value of all the publicly traded stocks and he divides it by the GDP of that region. So all of the U.S. stocks divided by the GDP of the United States.

And so when you look at that, if it gets over 100%, it's kind of like flashing red, right? And that just means that it will revert to the mean that's below 100%.

I believe it's about 80%-ish, somewhere around that. But if it gets over 100%, it's kind of like, uh-oh, there's kind of an indicator here that we're getting ahead of ourselves. And so when we had the tech bubble back in 2000, it got way up there. And then the great financial crisis was just over 100%. And now when you look at it, if you look at it today, it's up over 200%.

So it was even it was like maybe 135 or 140 percent at most in 2000. Now it's up over 200 percent or got there a few weeks ago. It's come down a little bit. But that's the issue is that when the market cap gets way, way, way ahead of itself, then that's the problem. Now, the question is, why is it happening? And is it is that indicator still viable? Yeah.

And so my contention is that once we got through the, the, that huge, you know, the great financial crisis and we started printing money, well, now you've got this, this, what, what I call a liquidity surge into the market. And it's kind of like a, it's in a liquidity effect where, um,

all that money printing has now affected these assets where they're, you know, um, they inflated to the point where that indicator now is, is, is maybe, maybe it's been not broken, but maybe it's been repriced. And so it's, it's hard to tell if that's, if that's really, um,

You know, if it's really as much of an indicator as it used to be. Right. So it's hard to it's hard to say if that's if if over 100 percent really matters anymore. Maybe it's over 150 or 102 or 200 percent of of market market cap to GDP.

But that's just one indicator that kind of was, it's like people are out there going, oh my God, this thing's flashing red. Like this is crazy. This is going to be nuts. It's going to be the crash of, of history all time. Like the all time biggest bubble we've ever seen. But the question is, is it really that big of a bubble when we have so much money out there? I mean, they printed Cedric, they printed $5 trillion this last year.

You know, and that's out there in the market. Some of it's been drained out. Like we saw some of it come taken out in the last year or so towards the end of the last year. But and some of it, obviously, during that period of when the Fed was raising rates. But there's still a lot of money sloshing around out there. And so where is that? Where's the indicator make sense now? It's hard to say. But if you just take it on face value.

It's flashing bright red is what I said in my newsletter. But if you stop and think about them, just the sheer amount of liquidity that's been added into the system, into asset prices, that's what we're talking about, asset prices. Some of that flows back into the economy, but not all of it. So that's the question.

Yeah, well, at 94 years old, you have to wonder, I mean, Buffett looks like he sold the local top of Apple and maybe the entire market, you know, for a while, who knows, and went right to cash. And, you know, a lot of these companies. Yeah, it looks like a brilliant play. Looks like a brilliant play. And a lot of these, you know, huge companies are sitting on a lot of cash from maybe liquidity issues.

You know, when are we going to see one of these big companies like from the Fang, like buy some Bitcoin? Like we've seen what Michael Saylor has done, you know, climbing into the Nasdaq 100 on his way to the S&P 500. It seems like how are other companies not noticing yet or do you think they are? No, I mean, yeah.

I think that, well, if you look at the markets the last couple of days, they're noticing. But here's the crazy thing, Cedric. Let's say that Buffett is a genius. The market goes down 30% and he's out of it and he's in cash.

And the interest rates drop back down to zero. And there's a flare up of inflation before he gets back into the market. He's got to time it right to get back into the market with that cash. Otherwise, he's still sitting on a melting ice cube. It's just going to he's going to lose 30 percent on the inflation on the upside. So, you know, how brilliant is he? Really? It's hard to tell. You know, it really depends on what he's that.

What his cash instruments are, whether he's got some long term bonds that that are that have value that will go up in value with the interest rates come down or if if he's going to get hurt with real rates and real return on that cash. It's hard to say now, obviously, from the face of it, it looks like it's a brilliant play.

But let's see on the other end of it. If stocks do come down 30, 40 percent and he makes all that money. But if he misses it on the upside, when we have the inflation of prices again, when the Fed comes in and dumps cap, dumps more liquidity into the into the markets and, you know, you start getting inflation again and negative real rates, then that's that's hard to say. So we'll see. I'm really interested to see how this one plays out.

Yeah, I mean, it's brutal taking profits into fiat, you know, but it's not like he was like saving up for his first house or something. So we'll see how he plays it. Do you think MicroStrategy is going to be included in the S&P 500 this year? And what would that mean? I do not think it will be included this year. And it's not because it shouldn't be on my in my opinion. It's just because it's a different it's a different process to get

in the S&P than it is into the NASDAQ 100. You know, NASDAQ 100 is much more methodical and mathematical, whereas the S&P 500, I think there's a little bit of, like there's a voting process there, and I'm not sure that they would vote them in yet.

So, but that said, all that said, I think that MicroStrategy is poised to have a fantastic year. And, you know, it's been one of the biggest, it's been the biggest position in my fund for a while. And for a specific reason. And we, I understand what Michael is doing and how he is monetizing volatility and capitalizing on it.

and he's actually embraced it. And we say that all the time on Twitter. We're like, embrace the volatility, embrace the volatility. He really embraced it and then he capitalized on it. He found a way to change the underlying value of his company, attach it to a highly volatile asset that has volatility and it's a rising asset

and be able to borrow in fiat

and buy that volatile asset for free and that's the it's just a brilliant um strategy and you know now he's just called strategy it's literally what he's done and uh and i you know i i know michael i like michael and sharish is a treasurer who has been um very involved with this whole strategy it's been it's been exciting to see and so even though ultimately i think that he that uh

My long-term view on MicroStrategy is that he'll own a million Bitcoin and he'll be one of the largest holders in the world, if not the largest. And he will eventually, strategy could be turned into Bitcoin.

a version of JP Morgan, a future version of JP Morgan with the Bitcoin they hold in their balance sheet because they'll be able to create products and services that other companies won't be able to do because MicroStrategy will have the Bitcoin to do it. It'll be sitting right there waiting. And maybe a version of like a baby of Berkshire Hathaway and JP Morgan because they'll also be able to have all the capital and buy whatever they want and

monetize it in any way they want um what do you make of all the exotic etfs around micro strategy and is that like sort of changing investor behavior yeah well um i think it's giving it's giving retail a lot of things to play with i would just be careful with them uh you know if you were buying some of those uh etfs up at you know 500 you're you know you're you're

Some of those 2x ETFs are just, they're in trouble, you know, so you've got to be very aware of that because they're based off of daily volatility. And so I've seen cases where these things actually go to zero, even if the underlying company doesn't. So that's just a little bit of a danger.

But it's a way to get even more juice on already levered play to Bitcoin. And so I don't use them.

In my hedge fund, I haven't. I mean, we played around with them in the very beginning at first, but then we don't trade around them right now, at least not right now. Maybe we will in the future. If we had a severe drawdown in MicroStrategy and in Bitcoin...

Those would be something I would look at. Some of those would be, they might be helpful. Rather than taking on leverage at the fund level, you can do it at the individual security level.

Right. It's been interesting to see MicroStrategy and Michael Saylor, I think, financial genius, financialize Bitcoin with, you know, within Wall Street. And it's interesting to see Wall Street financialize MicroStrategy, you know, and whether it's going to retail or not. And I do think retail should be very careful with that stuff. You mentioned Bitcoin or BitBonds before.

Well, I mean, this is kind of a new concept. And it's funny. I met Andrew Hohn this last week up in Jackson Hole at a convention, like a meeting up there. And he's got this new hedge fund within his family of hedge funds. It's called Battery Finance.

And he's been working on products that include Bitcoin as collateral to loans. Well, his idea here, and I don't know if it was his idea. I really have to start looking into it. I've been very focused on my hedge fund. And this is such a new idea that I want to dig into it more. But the general idea would be that the United States would issue a bond

And so just using face value for every 100 cents in the dollar that they issued the bond for, you bought the bond. Well, the US would turn around and buy and use 90 cents of that dollar for operations. And then 10 cents of it would go towards buying Bitcoin. And then that upside would be... And the interest rate on it, I think, would be 1%. Then the upside would be that...

You get the first appreciation of Bitcoin that would equate to 4.5%. And then from there on out, you split it between you and the government, the 50%. From there on out, you split the upside. And if you look at Bitcoin appreciation over the course of history, that would be a very good example.

security for both the government and for the individual, especially if you're looking to get individuals to buy U.S. treasuries that are trying to get away from this just horrific inflation and knowing that if they buy a bond, they're not going to be protected very well. But this is a way that would protect them

And it would create upside for the government and create a security that would have upside potential and optionality that is very attractive. So it's an interesting concept. And I need to call Andrew and talk to him about it because it's fascinating.

Yeah, I recently did a show with CJ Constantinos, who's starting a People's Reserve this spring. I recommend you check out that episode and get in touch with CJ. Really sharp Bitcoin OG, understands sort of the Bitcoin bonds, and they're doing it with mortgages, but also looking to do that at the federal, state, and all the way down to the municipal level for all levels of government. Last time we spoke, and for a lot of us, when we...

At least when I started following you on my journey, you know, it was when you started simplifying concepts for us and breaking them down. But it started for me with around the debt spiral and you breaking that one down. It seems like we're still in one. It seems like it's only gotten worse. It seems like they're trying to temper it. But my final question for you, you know, before we roll out is maybe your outlook for 2025. Are you still bullish on Bitcoin? Oh, yeah. So, yeah.

In short, meaning the debt spiral, we're still in a situation where we're running deficits. Right now, I just pulled up the US debt clock. It looks like Doge has saved about $200 billion.

And so there's a lot of excitement and hype around Doge and whether or not they can get us into a surplus. And that answer is no, I don't see that happening. You know, Pomp and I kind of debated this on stage the other day, but I just don't see that happening. The only way it could really happen is if we have nominal inflation that inflates the GDP at such a great level that you're able to tax away a lot of that inflation.

a lot of that deficit, you know, your taxes rise so much because of nominal GDP, but that's only because of the expansion of the money supply. That's the only way that really happens in my opinion. Um,

So my outlook for Bitcoin is, yeah, I think that I'm I mean, I am super excited about the opportunities we're seeing in our hedge fund, especially. There's some great opportunities out there right now and we are taking advantage of them as we speak. And so over the over the course of the year, Cedric, I expect for for Bitcoin to have a great year. There's uncertainty here at the front end.

There will be volatility, but the tailwinds for Bitcoin are undeniable. You have the ETFs that came in last year. Those make it easy for all these tailwinds to take hold, which are the repeal of SAB 121, the new gap accounting for companies holding Bitcoin so they don't have to market down as an impaired asset anymore. They can actually market to market.

The new administration is positive. We've created strategic Bitcoin reserve. The U.S. government is not going to be out there selling their Bitcoin. The U.S. government could find a way to add to its reserve budget neutral. That's still a positive. Chokepoint 2.0 is going away. That's good for the industry. It's good for adoption.

Institutions are learning about Bitcoin. Now that you have, this has been created at the government level. I mean, if you're an institution, if you're a fiduciary, you're not digging into Bitcoin. You're not learning about it. You are violating your fiduciary duty at this point. You're just being obstinate and ignoring something that's sitting right in front of you that could augment your portfolios and actually protect them in certain ways.

And I know that that sounds crazy to some of the institutional investors who don't understand it, but you've got to get in there and truly understand it to see how and why. And so I believe that institutional adoption will continue to accelerate through the course of this year and into the end of this year and into next year.

And that Bitcoin price will reflect that. And there will be a lot of positive developments in the Bitcoin ecosystem.

And so, you know, we're looking at companies and working with companies and certain investments that we're looking to get into these funds in the next few months that we're super excited about. And I'm like, embrace the volatility. This has been this has been great for us to go in and, you know, shuffle some stuff around and get get access to prices that we didn't have before.

Yeah. I mean, volatility is vitality. And part of embracing it is not just enjoying the upside of that, but, you know, really leaning into the downside and maybe seeing this as an opportunity. You know, the old saying, when there's blood on the streets, even if it's yours, buy. You know, I agree with all your bullish reasons there. I mean, we've seen, you know, the repeal of SAB 121 and the rollout of SAB 122. I think that's huge as well. FASB rule changes coming up. I mean, this that is just huge.

humongous. The ETFs, you know, I want people to self-custody. One thing I love about the ETFs is it's getting Bitcoin into people's 401ks, into America's 401ks, which is sort of, for me, the strategic Bitcoin reserve, getting it into the people's hands. It's much easier to buy it in your IRA if it's an ETF than moving the money around, getting it to, that's just a little bit. And it gets rid of unit price bias. Mm-hmm.

maybe takes away some of the nihilism from all coins because you could afford to buy fractions of a Bitcoin or at least see that through your brokerage. So all these things are just tremendous, bullish reasons for Bitcoin. I definitely want to let, you know, any parting words and let people know where they can find the informationist. I know you're rolling out Bitcoin Opportunity Fund number two. So let people know where they can find that and you and your work. Yeah. So the information is on Substack.com.

I love doing it. I write one newsletter every single week. There's a free version that you get one every month.

It's got 40,000 subscribers and I just absolutely love doing it. It's been, it's been a, it's been a fun journey. Um, met a lot of great people through that. So, uh, and then the Bitcoin opportunity fund yet we're, we're launching fund number two here. Uh, we just started opening. Um, and if you want information about that, if you're an accredited investor, then just go to, uh, you know, www.bitcoinopportunity.fund. And, uh, just, you know, just fill in the, the, your name and, uh,

and email and we'll get you some information about that sounds great you'll hear from rosie then uh this has been so dope james i appreciate you coming by and spending the hour with us it's always incredible to hear from you very insightful as usual you're very knowledgeable thank you so much no it's been great to be here cedric we talked about some fun stuff and i look forward to the next time

Thank you so much. Thanks for tuning in to this episode of the Bitcoin Matrix. If you enjoyed the conversation, don't forget to like, subscribe and drop a comment below with any questions or thoughts you may have. We'd love to hear from you. You can support the show by checking out our sponsors and affiliate links in the description. It helps keep bringing you great content while connecting you with awesome products that I believe in. Share this episodes with your friends, family or anyone curious about Bitcoin.

and let's keep growing this community together. Stay curious, keep stacking, and I'll catch you in the next one.