#550: Predicting The Impact of Derivatives on Bitcoin with James Check
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You actually need derivative for us to get .

big dreams check specializes in study the bitter economy and has made significant contributions to the field of on chain analysis. He accurately predicted this long stretch of consolidation and has formulated new theories on how the introduction of more bit unions will affect the market, many of which he will share today. What are the to praise some more important volatility moving forward?

There is no question the volatility profile will evolve and change with options. I think cycles, the idea cycles is probably breaking down the four year. May not this clear cut as a new debates.

which side the market you think goes a first along to the shorts?

You've had a dynamic where money become freer than free. Let me talk about a fed just gone that all all the central banks going that so .

it's all acting like safe haven. I believe that in a world where central bankers are tripping over themselves to devalue their currency, bitcoin wins. In the world of fiat currencies, bitcoin is the Victor.

I mean, that's part of the broadcast for bitcoin.

You're not pay attention. You probably probe, probe. Was that a bull trap that .

we just saw last night? We bull trap right now.

And if you if you look at the cinema on twitter, right, the first daily red candle after is the biggest monthly bull flag ever seen. Look at the only shopping like we should IT up.

I thought we were going to seventy five k last night.

Yeah, it's funny. Isn't like i'm certainly a lesson that i've learned from markets in my time is they love to catch you into IT like it's emotional thing and people don't realize you're trading is yourself. And even if you're not trading, our emotions live on the daily chart. That's what we see that what we feel. But at the end of the day, like you have to look at the big picture and I know a board or drop zoning that is actually a legitimate thing because if you're a one of these big institutional guys that I care about, the ali chart, their trades to do execution, worry about the only chart for most people around these big institutions and looking at the monthly in the weekly and saying, is this thing and up trend? And I mean, it's it's hard to argue .

to downtown d unna. In the states at least, it's typically like a sunday night pumping c, where to A P M. On the east coast, sunday night football on it's like half time the Price is running.

The about time you get a bit today looks like this is dead. But let's zoom out. I mean, I was telling you before, we hit record of reading your news letter pretty consistently since the last time that we spoke.

And i'll let you say, but what what is the latest with chops? Saldar is IT over. You mentioned the monthly bulbs. G what is a bull flag? Yeah, for those listeners who we aren't well versed in T A.

yes, absolutely so. So mean, chop solidity being my faces more less the whole time I start right news out of ID April rise would hit the old time. We've pulled back a bit and that's when actually started writing.

And I think we would a bit about early may we started writing about chop solidity and the the thesis was close, seized for six months and will probably be at the exact same Price on pretty sure when I wrote that piece was like sixty three k close your eyes for six months. Bulls and bears will get liquidated ever, will be excited and yet blown up, and six months later will be the same Price. And then we just the bodies of traders all the way to get there.

And I can't even begin to show you how many to be opposed of scene of traders who blew up their accounts, like lost millions in this shop. And the reason that I had this thesis is markets just can't go on a straight line, right? If you spend enough time in this space, you realized you get trends and then you get corrections in consolidations and which basically trend IT up for eighteen months, right? There was a pause gone a halfway through last year.

But for the most parts since F, T, X, it's just been uninterrupted, up only with very, very small drawdowns, right? Less than twenty percent, which pico I Normally does like a thirty on a regular basis. So and even on a closing basis, we only they got like twenty six percent h through this whole chop solidity process.

So I was really just about like recharging the gas tank, but IT wasn't recharging the gas tank on like a small daily time frame. On the monthly scale. We were tired, right? You go up for eighteen months, six months of other ways is about right? We are not getting seven months.

But you know, what this is really done is just built. This like foundation is really accumulation pattern. I mean, I think many people talk about IT big coin has this like bear market floor and then IT goes through a bitter recovery phase and then there's a reachum lation period.

And twenty nineteen was by far the closest analogue to this period. But the difference to the twenty nine was much more aggressive to the downside. We got really, really nasty ks, really bad sell lofts.

No IT was down like fifty, sixty percent, if you include covered. But this was like down twenty six. We had one week on the end Carry trade to thirty two.

But like for the most part, it's just been shopping sideways. If you look in a month each other, it's just like red, Green, red, Green bars. Just step next to each other is beautiful.

And what do you think the institutions I need? You mentioned them earlier. They're looking at this zoom out chart, obviously had pretty massive influence into the betwen etf last couple of weeks. How how do you think they're been viewing this summer of job?

yeah. So I think we spoke this the last time I was on this is Carry trade, right? And I do believe that still a big component of IT and there's still a lot of misunderstanding about derivative is in general.

But this whole Carry trade, the idea of the Carry trade is that there's already a premium in the same, a future, which means there is a long side bid. So in order to get that premium in the first place, people are just generally accumulating in buying. When they do the Carry trade, they have to buy the atf.

And because bitcoin is fix supply, it's still taken coins off the market, right? This they're not available for sale if they blocked in at ef and also even though they can go a short position of the derivative. So generally speaking, I think for the institutions, they're saying in asset that is volatile, although a little bit less volatile rights, that's going to allow some more institutions to come in.

It's bigger in size, right? Yes, we've been shopping around seven months. We been shopping around for seven months between like fifty five and seventy k right? This is not 6k and 7k。 We're talking about a whole maggy bigger and it's just shopping sideways, right? And if you think about the market cat, we have proven that we belong up here at a trillion dollars, right?

For the second time, the first time we attempted that in twenty twenty one, we got rejected. We tried IT again. We ve got not to be rejected in twenty two day.

And here we have seven months, barely twenty percent road down, just shopping around at a trillion in a bit um a trillion and change. Now these institutions, if they look at those big scale charts, they're just seeing an asset that has holders who aren't willing to sell, right, and that's buy in large. What was saying mean there's definitely being cell IDE.

There's been kind of two different buckets of cell size that i've seen. There has been long term holders in O, G, selling. This is just a real thing and you can see there's like coins.

This is a beautiful thing. Went on chin data. I can see that coins are taking profit, meaning they were acquired a very cheap Price and now they're moving and they were old.

And you can't fabricate that right? The block changes is what IT is, the ut XO, either old or they are not and the in profit or they're not. So we can see lots of those coins coming back into the market.

And in the last like month, really towards as we come into August, the thailand of september, that og like long term hold the ceiling really take IT off like markedly almost just went to zero. And since then we started creeping higher. There's also been a whole of the big buckets, right at german government, U. S.

Government, mad foxes distributed like there is a huge polls of supply that were moved, redistributed and these big institutions, right? I mean, we saw with the german government the market sold off in anticipation, right? The actual selling when that the market traded lower before the german government solve most of their supply as they sold like forty eight thousand bitcoin, the man could actually rally through IT.

Who is they? Absorbing forty eight thousand bitcoin in like a matter of one, was like things one week. IT has to be just big money right there.

Simply non ough hoddle up here at a trillion dollars to do that. So there's money that's been patiently allowing the market to sell to IT. It's not hitting the market bit saying here's my Price you come to me sell to mate. Thank you very much.

And when you consider the macro economic landscape to, you have to imagine some of these larger institutional types are doing exactly what you just described because you you look at the fed loads by fifty bips and you at the ten year, in the thirty year running, running higher the yield, which is counter intuitive to what you would expect with the fed lowering rates.

You have stand drug and Miller coming out, putting twenty percent of his family office portfolio, short bonds, U. S. Treasury bonds specifically, which is a big bet.

That is very contrary right now. Obviously, we have the us. election. I think a lot of people are waiting for the results that election in a couple of weeks before making any larger allocation decisions.

But then yeah the tried and true alarm balls and precious metals with gold and silver running towards all time high as well. So despite the fact that pick in p in this shop solidity, you do have these external macroeconomic factors that play. There are signals that there may be a shift in the liquidity profile of of the world.

We lower rates and that has in inflation expectations. And outside of bitcoin, looks like people are certainly shuffling the chairs and allocating their money with the expectation of something not going as IT has been going last few years. Yeah.

I think it's about right. And and the other thing about the election right is IT doesn't really matter so much what the result is to take out. The politics of that really matter what the result is.

Markets can rally on bad news and sell off on good news, right? If you've been around marketing enough, you will say this all the time. What they don't like is uncertainty and the fact that they the market is slowly getting an idea of how is going to play out.

But once that knows the result and those okay, now we can actually allocate money, there will be people and institutions who take bets early, right, having a view and where it's going. Like for me, probably for you, I will take a care who get in because I think big going, going go anyway because that's not really the problem, the problems of monitary. And so you, my bt, already in play.

But this give me a lot of institutions are just waiting for the rules to be laid out. And then they'll make their allocations because now they've got different Mandates, you know, they can't with the big drawing downs. And the other thing I wrote a piece on this other day, the concept of derivatives, you actually need derivatives for us to get bigger.

And in my like call of you, the status i'm currently working to, if you look at the hardware like shrimp in and crab, right, we talk that people understand bitcoin. Their baLance has been more or less flat for the last twelve months. They haven't really grown this stack, and I I spent a lot time thinking about this.

And I think there's kind of two big reasons for this. The first one is at one point, two trillion dollars. It's painful. Point one, bitcoin used to be like two stack away. Now it's like a multitude venture.

Like when you get there an achievement, right? So at this scale, people's incomes just simply don't buy as much coins are used to. But the other one there's a lot of hot list have been around is twenty thirteen, sixteen, even seven, eighteen.

Then again, to the point where we've been stacking for seven years, the additional stack is not making a marginal difference to their baLance. So we're kind of in this like eighty currently is like history between um the the original kind of hudler who got us here. But it's very hard to push the market up into the two trillion, three trillion dollar mark, right? Hard for real to do that.

You actually need the institutional capital to move higher. But at the same time, these institutions, they need derivative whether to be futures of the options, which is why this options thing is actually very, very important. Because if you want to allocate fifty billion dollars, you need to be able to hedge that risk.

And if the only way you to hedged that risk is to short a future contract or to sell spot, if you just can't allocate the fifty billion in the first place. So run this like interesting handing over of the battle from retail, who got this to the size we currently are to the institutions. And they do need the driver eves.

They ve got the etf now. They've got the futures very soon out of the options, then they actually have, you know, options, the optionality to hate their risk, which means they can not allocate serious capital. So we're in this like transition period between retail dominant to institutional dominant.

Well, yeah, let's dive into new options because obviously the S, C, C, approved options on the big queen E T S, I believe they started trading at the end of last week. I believe one of, I think Charles wab clients had access to the options. Either broker dealer portal could be wrong there.

But regardless, IT seems like they're come on to market and believe this is jeff from bit wise wrote along thread last week. What impact are the options going to have? I've seen many takes on both side.

Is gonna be incredible, squeak upwards in others saying options are here. It's similar Price manipulation that we seem with gold in your thoughts. What what are the options going to do as IT pertains to press and more importantly, volatility moving forward?

There's a lot of interesting dynamics. One thing I just note because it's important before I forget, I liked to this really interesting like a skier podcast with David dredge. He's one of these like all time great volatility managers.

And here, at this real interesting point, the guy was interviewing him is big coin allocated to IT. And they were saying, until this point, you know, i'm a volatility guy. People ask about bitcoin all the time and he goes, really, I haven't been that interested for a while, not because I don't see IT.

There's like a little risk insurance to where the worlds going is like I understand all that that make sense. But he goes, the problem is if you've just got retail like you and I, we earn our salary, we allocate a bitcoin, we put our old money on the line. We have a different, I guess, risk pro for how we behave.

I'll hoddle through the bear market because it's my captain. He goes, what i'm interested in is I want to see when the golden sex of the world and these big guys coming because they bit other people's money with a value behind them. And he goes, that's where you get the real title risks, right? I want to see these guys blowing up on the wrong side of the trade with options not like retail.

There are different animal. I can't extract serious money out of them. I can't extract serious money out of people who building other people's capital with a biot in the background, right?

So that's that's kind of I thought that was a really interesting dynamic. That's kind of aluminum get more volatile as these big institutions come on and these derivatives creepin. Now there is no question the volatility profile will evolve and change with options.

There's a couple of ways this happens. One is this things like volatility catch up. So this is kind of what the cash and Carry trade is, is looting to IT like extracting a yell.

But if you imagine the market rallies and we go into another chop solidity period, you can essentially have calls above and puts below and capture the like an income stream, right? You sell at all to put the market trades in between IT, and you are essentially collecting an income right? At some point, one of those options will get exercise, but you can essentially roll them the ideas.

You can generate income by selling volatility and pulling that volatility out of the market. The other side of the equation, you think about who is gonna, the one who's you know, who benefits from options and ultimately, what are derivations. There are a tool to transfer risk options.

Best way to think about the business insurance contract. If you're a minor, you know you have bitcoin income in the next months, two months, three months. I, anna, sell that income today, right? Collected a praying by selling a covered call or something like that.

I know i'm gonna have the bitcoin, so I never take to the care if I get exercise because i'm going to have the spot anyway, but I can collect a prayer until that option get done. So you're transfering risk from the miner's baLance sheet to the speculator, right? The speculators job is to take that risk and be right or wrong.

That's basically how these reviews markets work. And if why options in futures contracts were invented in the first place is to actually transfer that risk. Now there is the element of leverages at creeped into these things.

So not only can you have people have speculated betting on one direction and transfering that risk from the produces or you know, if you're portfolio manager, I want to ensure my fifty thousand bitcoin portfolio put a an actual by a put option, you transfer at risk to a speculator. But what happens is that people can eventually over ever these things. So yes, you can freeze volatility out at certain point in time.

But like anything, right, there's always going to be the flip side of the equation, which you can get this explosive volatility where a whole different people are wrong and markets full of pigeons, like they're all about people being wrong. And then you get these explosive moves in one direction. So as a whole series of dynamics to come in to IT, right? If you have sold a whole lot of insurance, you now have an incentive to defend that level.

So you don't get exercised, and that's where they start playing the spot market. But if you kind of envision what all of this is doing, it's bring you buyers, bringing sellers and that creates depth, that creates liquidity, that allows bigger money to come in IT, gets bigger money to be more comfortable with IT. So all of these things are creating deeper, more liquid derived vatican and spot markets, which allows bigger institutions to coming with bigger capital. And this is, this is how you move beyond one point two trillion, start move IT into the two, four, five, six, ten illy.

Who do you think blows up? Which side the market do you think lows up first long to the shorts?

Well, that big difference in that IT actually has typically speaking, when you look at options, downsides to put insurance is more expensive, people are willing to ensure their portfolio. Bitcoin actually has, if you look at to called the volatility smile, you actually looking at how expensive is volatility on your left tile sell offs and your right tail, which is ripping to the upside.

And this is what I think jeff, jeff parks were talking about. This bitcoin actually has a positive on both sides, meaning there is more volatility on both tails. The equity market based IT just grains higher and then has these nasty sell fs, bitcoin has face in ralls and wild sell off.

So IT actually has a true volatility smile. And I mean, that's just all right, and I can literally explode in both directions. In my view, if you look at the way the world is going and look at the gold shot, it's telling you what is going on. Are the right tiles going to yet get pretty wild thing?

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But now as begin into a deeper, deeper market with more liquidity, getting multitrillion dollars decadron ons eventually, like what do these new holders look like to you? And what what type of Price yna ics outside the options, the votile ity introduced by options? Is that introduced because there's one thing i'm saying, a ten thirty one is I think this could be the cycle of bitcoin being paired with structured credit with longer durations, which creates like a new type of long term hodder.

Er um and when you think about the new mental equipment particularly focused on on credit markets, that could be immense, but then you have this trading as well. Not sure if I explain that well, but is training get into something we were discussing early, which is the peace he wrote a couple of weeks ago, was zoom ming out in looking at the the harder architecture that that existing? Potentially, we will come into existence as we transition to the next chapter.

Yeah, I mean, there's a whole lot of dynamics here, right? Like if you think about and you're probably seen this in your youtube stats and and all that, who is the average bitcoin, right? The bulk of them millennial, they are milenio s that's that's the dominant majority of people who are watching bitcoin content IT from every single metric of ever.

Science is like the social demographic. Millennial s giant bulge that some people who are Young out, some people who are all the most manuals we are about to the in their journey. If you been in a bitcoin for a number of years, you probably did enough stack in this cycle.

I mean, I do have A A kind of general concept. And again, I think cycles, the idea of cycles is probably breaking down. The four year may not be as clear cut as a use debate, so i'm certain ly running on that assumption.

But let's just if we talk about the cycle, the next ten years, right at five years, six years, whatever that kind of general periods, I think this is probably going to be this cycle where a lot of those millennial, right, they're doing two things. One, they're probably going to have a nice day. They go whole shit.

But actually look at the number that is actually pretty, pretty big, right? Didn't right? Good job. But then they're also moving to appear to their life where they're starting families, buying homes.

You know my favorite saying for for bickerings like what is be going for me it's my savings, what you use your savings for with the fucker one. And you know for me it's a house at some point i'm saving for a house. If I look at the in the australian housing market is wild, right? It's gone up forty, fifty percent in two twenty, twenty, but it's down.

I think the last I check in december actually. So actually be Better than this IT was down seventy five percent bitcoin terms. So I can buy four times more house that I could in twenty twenty.

Where is the average person is down fifty percent and on their salary. So what where are those millennial s gonna? They are probably going to be either using their bitcoin, just celibate of IT to actually pay for these things.

I you'll never trial the bitcoin out of bitcoin his hands, right? You market five, ten percent before the most part they're to to sit tight. So I think there's going to just like transfering to the battle where the the market will have to finance bitcoin is progressing in their life and then they will just holdall the rest.

But I also think you write in terms of that like structured product that feels like the next real evolution, whether it's biton getting added like a global index because this is really a bit of a global index. IT is one of those diversify. That is where you can put IT into like in five percent, three percent.

I think we saw fidelity recommending like up to five percent for their clients. There's all these like just just put a little bit in here, right? I go from zero to something and that dynamic, just tucking in into that etf, putting into that global fund, putting into that pension fund, just little bit here.

And there is very hard to get your head around the size of the numbers in the traditional finance world. I think one of the most instructive things for me that happened in the last twelve months, I was this concision that the pension fund added, point one, this is one hundred eighty million dollars, and that's like that. Don't care because it's such a small component takes to get to two percent.

And you just think about how many pension funds and you know global asset allocators have point one percent that is hundreds of millions dollars. It's just enormous capital, right? So these are some of those DNA ics, I think is pRobing a player.

I think there's the structure product is interesting is like you've got A A debt instrument and then you're attaching like a bitcoin kicker to IT probably start to say things like that will also see etf. So I just like covered coal strategy so people can actually earn an income of bitcoins volatility, which again, yes, they're extracting volatility over here. But what they're also doing is adding depth to both the options market, enter the spot market order to achieve that. So all of these things to allow bigger capital for more money. It's how this Marks stuff to evolve.

Yeah and were we were talking about before, we had record to the idea of copycats because we think about these different poles of capital. There's different type of others. That's why i'm partial towards like credit to colonizing a commercial real state project with the real state asset in bitcoin over the life of a ten fifteen year alone, that big coins locked up in that loan percent fifteen years.

But obviously, Michael sailor microstrip gy have proven to be very successful in their specular of attack of fia capital markets to accumulate much bitcoin and have their stock Price benefit as a result of that. And that seems like there are many others that are looking what they are doing, saying we should be doing this too. But this is a new type of buyer where the big coin isn't locked up in the way that would be in the structure credit product. You can have much, much weaker hands at this level. Oh.

now I I really enjoying your chat with that. I was deal in the other way because he's got a lot more inside of the mechanics. This, I think for me when I look at microstrip gy, it's breath taking.

What he is just, just incredible the way that is play in the capital really as a site to behold. We haven't seen all that many companies going to click on to doing this. And personally, I think it's actually good.

I I I don't particularly want to see too many companies doing this for one reason. They just won't have the stones that microsys a has in that bm market, which will come. And the closest analog dry can think of is actually minors.

So miners have forever been procyclical al, and that means that they, hoddle, too much in the bull, which squaze a supplier, gives us you to the outside. But then they had a way too long, and they end up ceiling, usually near the ice and of the bear. So you've got this like they buy IT and hold at the best times and they sell all of IT at the worst times.

And I can only imagine we start in these like like the day that game stopped by as bitcoin like save itself. That's like the retest to flag the major shooting up in the air going, okay, I will getting pretty close to you for you at this point. So you know, that will be all these dynamics, but I kind of don't want to see too many companies do IT like putting some of the baLance sheet, yes. But at the same time, I think there's just that, that one component you can only see IT, right? All these zones company saying on my jaw freak like you going to stretch jaw this that .

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When you make your purchase and you'll get fifteen percent off and tell you get on a freak, you're to love this stuff. We ve been talked about this a lot, ten, thirty one to that. What is the evolution of this strategy looked like? And I certainly think there will be the zombie company.

We need to get ourselves out of the situation where we're going, where no prospects for growth and use the attack on the capital markets, develop a big coin trader, get herselfe out of this whole. But I think ford to be successful in the long run, it's gonna to be done via companies that have strong cash flowing businesses under them where they can lever just microstrip gy strategy to the extent. But at the end of day, they have enough cash flow and they actually producing productivity in growth throughout the economy allows them to this service that, that would get a pickle. I give up just a zarmi companies with no cash flow. I think that is not in the best interest of the biceps en Price in the long ga.

But I think the one thing that and certainly what i've learned the most by watching Michael salla, and it's funny because IT seems really obvious in hindside, but the role of volatility, right volatilities always I think people oh becomes too volatile. But if you think about so, well, if that is not volatile, you're not going to go from zero to one point two trillion.

You're not going to go from one point two trillion to trying, right? Without volatility, you need volatility to move. Uh, so microsys ler is really injected volatility.

You can see in new stock rice, you went sideways for like thirty years and now it's just the most is ripping to the upside. You got three x levity. Tf, like it's it's chaos.

But at the same time he's added, I mean, I actually know know when the multiple is, but he tend to, I think like a thousand, whatever IT is in terms of how is grown the stock Price, it's it's unbelievable. So injecting that volatility back into markets. This is the thing I ve always found so fascinating about, like commodities versus equities.

Equities just don't have volatility, right, certain in the last decade and a half. They just grind sideways. They get the occasional wall Spike to the downside.

Someone steps in, balls IT out up, goes again. So it's this like really odd fictious look at the world around us. It's volatiles anything that should happen all over the place.

Bitcoin s volatility reflects the world in my view. It's like a more Normal than can I understand IT things happened on a sunday night. You get some kind of headline of that conflict to whatever is bitcoin trades up, down, left, right.

I find IT so funny that all these trade fight guys are just, they hate bitcoin. But then the moment that something happens on a sunday, they post the big coin shot because it's like a lens into what's going to happen on monday morning. So IT is becoming the global that global index.

But at the same time, this is like this, this volatility coming back, right, making volatility a part of market cycles again. And volatility allows people to capture a yell that allows people to trade things less growth to, as IT can't go up in a serious man, and rePrice to the upside and the downside bit to the upside without volatility. And I think volatility is good.

People should actually get more use of volatility. And I got this long term places that bit kind is have dealt t with volatility. We said that net worth go up and down, you know three hundred percent of the upside, down eighty percent four, five times.

And like a decade, you're hardened up. You've got this like hardened up nature to you that once you get into a decision making capacity and the world's vote all around, you can keep a cool, calm head, actually make these decisions right at low time preference thinkings. So I think is there's so many benefits to the world being a little bit more volatile.

And in a way, bitcoin and microstrip is kind of injecting that back in as as a good thing, right? It's taking away the negative connotation of all. It's forcing people not to be .

complacent one hundred percent. You just can just write the liquid speed anymore is a good thing. And I mean, getting back is like volatility reentering the bitcoin market, particularly after this six plus months of chop sal asia, I mean, you mentioned IT at the beginning.

We've got a monthly bulletin. G what what does that mean me before? Votile, how quickly, if at all, do we get from here on out? Because obviously it's october tober are getting october this year.

Yeah, I love that right. The moment that october was the headlines, we sold off over of the Price was we sold off in ten, twelve percent almost immediately. So when we talk me about a bulk flag is a technical, I don't do a great deal of technical analysis, but understand the general concepts.

A good way to think about markets. They, they, they do IT here to the laws of physical. You cannot just go up in a straight line.

You must have corrections and console libation along the way. And what that does is people who people always buy too high and then they slow. And who are they selling to people with a higher conviction who are waiting for a Better Price.

Now when you get just markets ripping to the outside, the pullbacks are smaller and smaller. Doesn't you allow people to get in? People start to former and you get a real explosive top.

And really the the march etf high was one of those explosive top. People are going, holy shit, we going one hundred k i've got to buy this thing right now. And of course, that was the maxim period of ephori.

You can get this process of redistribution. Top buyers, they buy high. They sell low. Long term holders, they take a bit of profit taking chips off the table because they saying the access of bigger size, they now have the etf to actually sell to, right? There's a big bid on the on the spot side.

But overall, you've got this kind of downward with trending channel in the way we described the last six months is extremely structure, just trading within a really, really well defined channel like a top bound and low bound, just bouncing between them as as a range down. But there's a general concept that markets that are trading lower, assuming the acid is a complete dog sheet rights that just talk about big when as IT is trading lower, eventually IT will break back to the upside, right? Downtrend break to the upside eventually and exactly the same up trends will break to the downside eventually cause nothing can keep going up in a straight line.

Nothing can keep coming down the straight line in the world of big coin, right? Chicken ago zero if we're going. So from that perspective, it's amazing to me to see all these people saying are but we were on bare market territory.

People are saying all these things. You know it's a downtrend for seven months. That's so barish. Yes, the maximum drawdown was twenty six percent if you get back to any previous bull cycle that's like the smallest draw out. So you've got seven months of yes, trending lower, but downtrend break to the upside eventually.

So when we talk about a bullet flag, if you look at the monthly Price shot, IT looks like a flag pole with a markets ripped into into march and there's just chocked downwards and sideways for six months. And what that's doing, it's allowing the market to redistribute coins from people who don't know what they own to people who do know what they own. Now of course, sometimes those things can break down.

You actually get some kind of a top formation, but usually speak if you go back to twenty, twenty one, those rounds at tops, they were assending patterns, right? The Price was going higher but with less momentum. That's actually a barrel sign because you've got less by as the market market going higher, we actually had declining suicide during those tops.

So you ve got less sellers. Prices kind of going higher. But I was really telling you we were ring other team.

Where's here? You've got this nicely descending pattern. Descending patterns break to the upside eventually.

And that's what I need. Buy a bullet. Ly IT literally looks like a flag pole. And that a flag on a monthly basis, if you zoom into the ali chat, IT looks like chaos IT looks like the nasty bam arc i've ever seen.

But warming out that all within the context of allowing the monthly charges to take a breather, have arrest, right? recharge. And then a way you go again.

In its funny alth psychology leaks into this for seven months of shop trending lower. A lot of people checked out in particular if you're not already in vicot. And I tweet about this the other week, but i'm it's very reminiscent now and IT will always be, remember ising because the way bitcoin having cycles work and cycles workers more generally is like some reasons there is always an election year during a having um things typically pop off in the fall.

But comparing all of the cycles that i've lived through twenty thirteen, twenty fourteen um through the twenty seventeen, obviously forward to today, IT feels a lot like the fourth twenty sixteen. Now I don't like a big wind starts of floating up and float up somewhat slowly from like six hundred to eleven hundred between october to march chibi. Even then things really got pop in and like you in july, obviously in to the the blow off top in the end of that year.

But is remembering and I actually have like journal notes from this time, I go back and read and read some of the other day. You can remember being like bitcoins going up every pank attention sort of feels like that right now, where if you look at google trend search data, like big coin search volumes, that all time was, and yet people have been paying attention for as long we ever going to oh, I I remember this feeling. I remember what this environment was like and what happened after.

yeah, one hundred percent. So I was and twenty sixteen I bought the twenty seventeen top. So that was made up there.

But just from my studies and just kind of understanding how this mark works, twenty sixteen is very close analogue. So and I think a lot, a lot of twenty sixteen is actually because it's a spot of the market, right? Twenty sixteen, there was no derivatives.

So very, very spot driven. And yes, derivative and futures, all that are all time high in terms of open interest. However, we still have a very spot dominated market.

In fact, I would say that the current market is much more spot dominated. IT wasn't twenty one, twenty twenty one. IT was all about the ppp petula swap.

Everything was about futures. And the only spot element there was that gbt c bid pulling in like six hundred and sixty thousand big point in four months, right? That was the spot ID for the most party.

I was just leverage this cycle. Most of the leverage is also paid with a spot by right. And I did a chat the other day rozin. The etf inflows were same, like two billion the last couple of days, that two billion is paid with about one point eight billion coming into the same. A future.

So that to me looks like a lot of bysset t sell future, right? But remember the reason the future has a premium, because people long, so generally speaking, as a long bias to these things, the other period is very simple. Twenty nineteen, although much more barish, right? And we also had a lot of cell side going on.

That was the plus token ponzi absorb, like two percent of the supply. And the ccp sold those coins. We didn't fight out until we were down like eight k you know I was just IT was k OPEC then and then we have much twenty, twenty, but really twenty sixteen, twenty nineteen by far the closest periods.

There's a couple of similarities to that like mid twenty twenty one, although that mid twenty twenty one sell off for, remember the chinese mining ban that was a really, really important. I actually write a piece on this. The chinese mining van, in my view, wasn't what started.

That pair market, usually market as they need a catalyst. When there's already something backed in the cake, he just needs a catalyst to trigger IT. The GPT c going from a premium to a discount was what really happened, something you ve got a six hundred and six thousand bad, that just the market side occuring over leverage was really high from bedding on one hundred thousand.

And then the chinese mining ban was just the match I got flicked in. And then a way we win. And that sell off was like fifty percent down. That broke the ball sentiment. And in a peace I did yesterday, how do you how do you determine when a bear has really kicked in? Because a lot of people are talking about this chop solidity, saying you to bear market, and I try my whole face is really for the last six months.

Has been trying to distinguish, is this a bear or is that a correction? How do we how do actually distinguish those two? And that made twenty twenty one point, is actually a really good reference point, both in mid twenty one and in this chop solidity, we had thirty percent of all bitcoin was underwater, right on.

I just ease the coin above, below its cost Prices. Thirty percent of all coins at the worst point were below. They cost spices.

So then the other one is, how bad is IT? Because if you bought a coin, you down five percent, that's another day in bitcoin. If you buy a point, you down fifty percent, that destroys your sentiment.

You feel bloody awful after and you'd start making decisions going. I'll take the next exit liquidity pump. So then I started looking at unrealized losses.

And in twenty twenty one, IT was massive as like twenty percent of the big coin market, that was just unrealized loss, really nasty stuff. The market starting in this job, solidity. The peak.

The high water mark on the end area was about seven percent. So you comparing twenty percent under what of us? Seven percent.

Very typically in a bull market, corrections are all through twenty seventeen, five percent, seven percent, six percent. Very typical. So we never got the the scale of the damage right.

IT just wasn't bad enough. Yes, thirty seven of coins underwater, but they under water by five percent or four percent or three percent when hot. Less can handle that.

So many ways this chop solidity looks a lot more like a ball market correction than that does to some kind of really nasty bm market starting bull sentiment shattering event. We just didn't get that and that's been a real grounding anka mia is just as a coin is under water. The next question is by how much yeah.

that's really good info to have. That's like again, going back to that's why I love talking you because you come equate with data that allows people to detach hed themselves from the the emotions are come from these cycles. I mean, just speaking for myself, having been through many these cycles, the emotions still get here.

You're still like on you're up on a sunday. I look up, we're going to seventy five and then I take step back, zoom out. But with all that, my legs are anything in your mind that could like prevent the ball from from materializing.

Just thinking of again, go back to the macro o economic landscape, but does look like there is some system chemic weakness despite what many economists would would lead you to believe. Again, looking at the treasury markets and been doing a lot of still seeing on people covering covering banks, particularly bank of america. He just had more in buffet cell of a huge chunk of bank of america, which she's held as one of his largest positions for decades. And seems like some of the savior institutional S A types are shuffling the the chairs on on the tight or not suffer the chairs, but they are positioning themselves expecting um some economic turmoil moving forward. Like do you think some major economic crisis could throw a ranch in any potential bull market that may lie ahead for big corner, saying this is potentially cycle becomes a true safe fave and people six safety and bacon .

yeah a great question. So I think first things first, we're going back to the top we had before. It's gonna, right.

Things are going to happen because if there was, I probably about six months ago, maybe eight months ago, I remember I took a screen shot of mine, my podcast feed, right, all the new episodes coming and IT was just top to bottom. Markets go on a zero. Deflation is coming.

Watch out for the bus bubu. Just every single thing was like on the most giga barrister of ein. And of course, the market went up despite all of that, right? So you've got all these experts saying on the end of the world, bub, a lot.

And now we're seeing this kind of reflation stand to kick in and I pick stand to believe that hang o second marked at all time high feds cutting cycle inflation actually might come back like you've got all these are interesting dynamics. Um you're arguably the feed should be raising rates, not cutting rates at this point in time. So then you've got to look into all those kind of, you know why is IT political? Is you know what is that? Because the government is paying too much in interest.

I think that the thing to really recognise is the world isn't a very, very volatile place. And very few, I would argue, no traders have ever experienced kind of market before, right? You hear the drug mills of the world, these guys that will say, no one, no one in the world has done this before, right? No one has dealt with this.

So in that regard, there could be things that happened on the sunday night. And bick on is the only way for them to express their view. I would also say that many of these institutions, they simply haven't done the compute cycles that you and I have.

I know why I hold bitcoin is because after whatever this volatile ride is, I want to own IT at the end of vegan. Because I did a study in a couple of weeks back where I was basically looking at in this chop solidity range, how many days out of bitcoins life does a go up one percent down one percent or nowhere. And over a third of all days, bacon goes absolutely nowhere, right? Less than one percent move in either direction.

So if you think about if you're a longer trade up, right, you put on a long position, there's a thirty three percent chance you're going to go nowhere, which made you be wrong. If if IT goes down as the other thirty three percent, you've going to go to one in three chance of being correct on any single day. This is why day traders get blown up all the time because the odds are actually, you know, one to three.

But if you look at that on a big picture of you, or like a quarterly basis, it's massively screw to the upside, right? These traders, you actually do you get these like single quarters where IT plus one hundred percent, and then I go sideways. So bitcoin doesn't nothing most of the time, and then explodes to the upside of the downside sometimes.

So many of these firms are not ready to trade this kinds stuff that they have seen an asset trades this way. And then you've got the world going through altmore, inflation, deflation, sovereign debt, t crisis, conflicts, elections and are just complete circuses like pick picky poison. There's so many things that can create the swings in the upside, in the downside.

But over the macro s trend, bitcoin is one of these assays. You will perform Better assist bin hole because if you are there for those explosive quarters, where are just all happens and between three Prices, that's what you need to be. Therefore, and you know how many people when you try to convince people that be going right the like ottawa, i'll just buy IT when it's the time, it's like, no, you have to position yourself long in advance and then just wait right?

The hardest of me bit is is doing absolutely nothing and just waiting and just but eventually you get this tail event. So I think we will get volatile swings in every direction is why these options are going to be, in my view, the killer product for wall street. Finally, they have an action that is really volte.

They can trade options on and there's me value capture strategy the whole lot. But those swings on both directions is really where those kind this what David dredge talks about, I don't care about the expected return. I don't care about the you know the bell care in the middle.

You make your money on the left and the right tails. That's where the money is actually made. And from his perspective, it's like and it's even Better when the people who are blowing up on that left and right side have been other people's money with the bail out behind them because that's the big money. That's where you pull the huge .

returns out of yeah, everything is going to get interesting and and .

it's going be really easy to get shaken out and you know, sticking your I did A A peace reason about doing that. We live on the daily show, our emotion like we live day today, we check the bitcoin Price. Our emotions live on the daily chart.

But your decisions should live on the weekly, in the monthly chart, right? So just extract the the emotions from the decisions, put your decisions on the bigger time frame, let you you know the emotions will always get to you. It's a constant battle.

You have to constantly fight yourself from foo and fear, right? You're always going to be fearful when it's trading lower, even like even the mouth x guys. I love this kind of analogue.

These mount oxy guys bought their coins in the hundreds of dollar range, right for paints ts. They got their coins back at about sixty eight k when the market sold off to fifty three. Where do you think their emotional state was? They're not looking at the two hundred dollar Price point and I did IT, i'm only up forty five thousand percent.

Now it's like, no, they feel like they're the coins at sixty eight and that down. That's how they emotionally feel. And that's a real like in terms of how you think about these markets, understanding where your emotions live versus what your decisions should be is, is such an important skill for a hoder to learn because otherwise you will get caught up on the twitter arrow.

If you go looking for all the reasons why it's selling off. It's almost nevertheless, on the narrative on twitter is almost always just an excuse. People rap around something that was already forming months advance.

So people like all look A T flows. That's why we're going high. It's like we're going high because how those refused to sell and a bunch of people bought the lows for seven months, that's why we're going higher. Nothing to do with the t etf is just like like final kindling that gets the ball moving.

yeah. No, no, you got me thinking like the volunteer ly that I can imagine, understand king, is the the extent in the the gravity of the mount cox, mount cox blow up, just like an appetizer for what one of these large option trader funds blowing up is gonna lately .

and look and .

does that not?

That's a risk. I really factory. I see a lot of people saying coin base doesn't have the coins for these atf guys, that's not the risk.

Should be worried about the risks that they have. Way too many coin bus has so many queens as unbelievable. The biggest risk is that something actually goes on there like IT.

To me that the most catastrophic risk that I think can happens to be going right now is that something goes wrong with going based custody. That is the the gillier in the room the norm wants to talk about. So don't worry about them not having the coins, worry about how many they actually already have. That's the real risk.

And if you're listened and you have your coin sand coin, best do your part to distribute the a concentration risk away from them. He, I was just going to set the give me second here betwen institutions, volatility melt guards. Something else is a very upset by, mind them. I don't come to me. Lost IT completely lost IT.

First time I think I cut in there and that's the I thought.

no, it's we're going out like broader trends of where we're going. And particularly, that's what i'm going to break up like the volatility. The the y margol chart is what comes up a lot is the volatility that happened during that period prick with the golden Price. That seems like we could be heading into that territory with big coin, with the options in the macro economic sothern deck races.

Backtrack you? No, I think that's actually like spot on, absolutely spot on. I think that is the framework that most people should go into this thinking is on the macro o scale is going to look like a parler is unstoppable, able on the monthly scale, right?

When you start looking at what's going on, wake to wake, month to month, that we draw downs, that we swings hard, that we drawed every chaos, right, on that like rate of change basis at all over the place, but on the macro o scale, right, they're not paying off this get any time soon. It's not going to happen. So you know they have to print the money. This is do not you can stop the train. It's going to happen.

Yeah and we have so much circumstance, al. Evidence of the central banks even believe this with the papers that were recently written by the european central bank. And the mini apple is fed branch, which basically, I mean, the E, C, B tried to say the big in is failed as a payment system at a zero some game.

The holes are going to extremely wealthy if you don't get in and you're not if you don't have big coin, it's could be the detriment to you many happiness fed century coming up like we recognized we're going to keep printing insane amounts of of debt moving forward. We should probably make big win illegal for individuals to hold and just try accumulate as much as possible and issue det into od and funny, tom, so that we can keep doing this like they're even beginning to admit IT though they are, try to paint bitcoin is the big bulging man that is. That was astonishing over the last week, was to say, oh, you have the ecb and fed basically feeling compelled to to respond to bicky success in painted as a bug.

Eman, it's funny is like IT is almost the the they could do because they're basic saying like don't look at this is the perfect strive effect. Don't look at this thing right? If big queen was irrelevant, they wouldn't any papers written on IT.

But the fact that IT is relevant and IT is growing and IT is seeing this uptake, right? It's no surprise that y're writing this as the markets stand to push hieron. If the market was trading lower, they wouldn't be writing this stuff.

I did find that very interesting when you see like the easy way. And again, I don't know how they end up know who has to review these things and what the process is writing a peace like that. But did nobody just say you just explained how assets work?

Like yes, when they go up, the people who bother them earlier get wealthier. That's the whole point. And what they're missing an omen that obvious ly understand that what they're not talking about as the fact that will really assist you destroying the denomination, right?

What are you doing is saying that everybody has to hold this paper while we print IT. And it's, again, they need people to hold the paper. This is the other thing, right?

The system needs bag holders is why they regulate funds into having to own example t treasuries. They need someone to hold the paper as they do the device ment, right? And the more people that opt out into gold, sva, bitcoin, whatever, is as IT stocks, more people who up out, the fewer bag holders exist for the paper.

So know this is the game that they have to play that I was very impressed. Like surely, surely someone to some senior in the U. C, V.

Read this package in goes, god, we look like idiots. We can't publish this. Like it's got to go. It's going to go out. So you know directions .

from above and that I mean, do you think you'll have any a success? I mean, the E C B, but the E C B and the fed papers, almost explicit, called for laws, again, insulting bitcoin. And that actually had a conversation earlier on another show I was on just a curious battle testing this off a big corners like tea, social, legal, be able to successfully demonize bitcoin hadler. And the asset itself is an .

using question. Convince ed. Because like if I think about like at a retail level, if I think about people in in you know in in my world that aunt into bitcoin, they would know what the latest ec b stands for.

They would understand what that even is. So the fast majority of I don't think this is targeted retail. This is a targeted at the the institutional guys who are starting to think about this.

Um it's more less know if you think about what's the number one thing when you hear institutions wind back o'clock two years, what's the biggest thing that most institutional guys and trade fy guys would say there's the volatility, which is fine. But the other one is they going to make IT illegal. That was always the big risk vector. Like, uh, if I was, everything is successful y'll make IT illegal to me.

What are they doing this for? Is to remind those guys, you watch out, we going to make IT illegal and like, I can not touch you yet, they're trying to keep those guys off because who's reading an E C B paper? It's bitcoin ers and trade five guys like this right bit in this gold bugs and try by guys who want to be told don't buy this thing.

And when I left my engineering job, I sent an email and he was basically like, you know, i'm leaving engineering to go work on this biton thing. I know many, everyone understand this decision that doesn't probably vents even to heard a bitcoin. He's a cup.

I think they like do like ten points where he's what the narrative is, he's what's really going on, energy, human rights for of all these things. And my last point was think about the incentives of the media and put the easy way in this right. Think about the incentives of the media.

Would you rather to consider you don't only bitcoin and has gone on this tremendous run, right? I would have been over where was trying that point in time? Twenty, twenty one, probably probably close to now fifty or something like that.

Would you click an article that telling you, you kind of miss the really important thing, you know, you kind of fuck up there. Would you read that? Or would you rather read something that goes, no, you were right to a mistake to scan which use all these nasty things.

Don't touch IT they're onna ban IT don't worry, we are going to bit of course you're onna click. The thing that confirmation bias tells me I made the right decision for ignoring at this whole time. That's the incentive of this system.

They want people who already have this previous position that the government's going to end IT to be reminded by the government we're going na en IT. Does you buy IT? right? That's that to me. That's what you're doing before.

That's a great take. And I wonder if gang go to like IT cannot be successful. Obviously have mentioned bailout. The target audience of these papers are institutions who historically been bailed out quickly the century. Are they having like is the the margin benefit of each subsequent bailout enough to convince them or that that yeah you're going to ban IT and we should stay away from this? Or if do you think putting your institutional investor cap on their looking at the problem preaching thirty six trillion dollars in debt here in the united states maceo omy geopolitical risk going parabolic um are they do they have the intensity ford to debase we look the fed, the cb, any central bank in the eyes and say, no, i'm calling pulsate like it's obvious that you're going to continue down this path that makes my job way harder and my persons power way less over time and we're going to go reason i'm getting out this. Do you think we had a pivotal point to ambiquity history where we probably need, despite what any like safer punk may think we need like institutional social support of this asset to really ensure that we can reach the benefits of the bickering that we ve accumulated .

up until this point? Yeah, I mean, I as much as IT goes against safe on athas in many ways, how many other one point two trillion dollar assets exist out there that are just retail holders? It's not like this.

none. They eventually. And this is what I try to write in my drivers space, right? It's kind of just a so bring things like, look, you can't swim against the tide. You will draw on that.

Just how these things work, right? You can't change the direction of these things. And as if that gets of an appreciable size will eventually develop derived as market. And without a derived market, an asset is capturing how much I can actually grow. This is just truth. why? Because in order to get to a ten trillion dollar market cap, you need the guy with a fifty billion dollar position to be able to hedge forty billion of IT in a liquid options market.

If he can't do that, he can't overate fifty billion in the first place so that in the only way he can hedged that is by selling IT, right? Which means why you don't get to that higher level so that derivatives component is really important from that perspective, right? You actually do need people without to heads their risk.

Now on the the treasury side of the equation, and just like trade fine general, I mentioned before that everyone saw met deflation and you know I was going into a nasty baja and stocks going to go to zero, and know some of these predictions were insane, that there was, you know, two months ago I was with my recession, recession, recession, right? That was the dom minority is all that recession. And what do people do? They pile into bonds because historically speaking, when you get a deflation or a recessionary period, bonds are the correct trade.

Doesn't the systems at power? If they need people to hold this sheet paper, don't they need to convince them that there's a bay market coming in that you should probably buy these bonds, right? This salesmen, they need these institutions who are conditioned for years and years and years that downed in bonds.

Anything goes down. Backbones volatility goes up, means the market selling off. I should bite bones.

This is how the most investors been conditioned. And IT will take a long time for that, that conditioning to be worked off. And you know again, I haven't been in markets long enough to say this convincingly.

ly. But generally speaking, I think the rules changed after koba. I think that's probably becoming a more consensus view that the rules probably change.

We don't really have the same system because a lot of these things just flipped over, whether you call fiscal dominance or the return of inflation of whatever is there was just like a switch that flip. The old rules are no longer as relevant, but everyone gonna keep Operating under the rules y've trained on for their whole life, right? Some of these guys have been a marked for forty years.

In fact, maybe some of the more seeing of veteran guys who have been there for that forty years, fifty year period, they know the rules of flips because they can see the difference, right? That experience, they can see the difference most people have only ever seen in a deflation ba bones. So the systems of power, they want people to believe that it's going to go lower.

They want people to believe that, you know, we're going to hike rate until the market falls over. It's like they need people to buy the bonds. And if you think about what happened in the last two years, they essentially took away we took the unrealized losses on the banks.

They basically force them to hold those bonds because they destroy their purchasing power. They now have to hold them for the ten years to maturity. Thank you very much, mister. Behold a, you're going to hang to those bonds because you can't sell them on, right? This is like it's so clever had they've done IT.

But at in the day, someone has to hold the paper, they have to convince people to buy the paper and it's gonna take such a long time for the market to start working out. And maybe those rules don't work. And really, the gold shot, in my view, is really the story of of right now, because IT is telling you that the rules have changed, goal doesn't run and actually is a good exercise.

I pulled out the gold chat other day. I was just flipping through my trading view, and I got the gold chat like the full scale monthly chat, or monthly or weekly for the full history, and initiates like god, that's a weird itou cha holy sheet, not bitcoin. It's actually the gold cha.

And if you look at through the whole eighties, yes, IT took twenty years to do IT, but IT looks exactly the same as the twenty eight nine thousand bar market, right? Because because this big long descending triangle breaks down. Gold is just a slower version of bitcoin, right? It's a biton is fast speed running the whole the whole gold .

experience yeah and what's gold out right now like twenty seven.

twenty years.

后海 旅行 的 面。 I can get like ten thousand this one up like that coming because let's see the big, the big elephant in the room, a sothern debt. And I completely great code, completely changed games so you can control work to me.

You cannot trust the central planners anymore that I was trusting them before. But I think it's become well apparent in, as you are describing, that, that is going to take time. And COVID was a market change in incentives, actually remained ate of when I work, that a man is futures fun. We h index modi trading advisers.

And this was right around the time, like right after QE one Operation, twin Q E two, when I was working at this fund and you saying that we, me of conversations, I would have a cio s at the city where they hadn't lived in the world with ballots the extent of two thousand eight, and so this was like two thousand eleven, two thousand and twelve, and they were still reorienting themselves and their strategies to world to which I, which he had serpent infinite QE. And they underperformed massively because they um still believe that that they were living a environment that existed three two thousand eight. And I think IT took them a while to actually adjust.

absolutely. And IT just takes these guys time because you've been condition for years to try in a particular environment. On your question with gold, I actually really likes look around me how to take recently, and I really thought about IT from this perspective.

I kind of click a with this idea that gold doesn't have any other purpose as much as Peter shift will disagree, if you Price goal based on its dental usage, you don't want a whole goal, right? It's not a very high Price if you be just Prices based on on on gold feelings. So really gold is like primarily monetary premium.

That is really as you guys as monetary premium, bitcoin is only use case is monetary premium, right? Because at all IT is IT. Literally, you can't use IT for anything initially storing and moving out that any job.

And this idea that like if you go back to the seventies, you have these problems with the oil Price would rise. And when the oil Price and you kind of put oil and the dollar in the same bucket here, when oil in the dollar rise, IT creates stress globally, right? Because energy is the primary input.

If your energy comes more expensive, etta, your debt is U. S. Dollars nominated. If your, if the thing you need to buy the dollar to pay off your debt gets more expensive. Both of those things create stress. So the system really can't have the release of the oil because IT has a utility purpose. We actually need IT for the economy to work.

So how do you refine and actually get capital as the aca would say, how do you empower is everybody else in order to make the system healthy again, you need an asset that if IT goes up, it's not gonna blow up the system. So IT can't be the dog IT can't really be um I can't really be oil IT can be bombs because we kind of very close to the zero bound ride. Five percent kind of a long term average ones, you're probably not going to go below zero.

So you can't really inflate bonds in terms of their Price. So what asset do you have left to inflate? And kind of the most harmlessly recapitalize the system is only two candidate is bitcoin and gold, that the only two assets that if you were to inflate IT and give wealth effects to a bunch of investors, right? Let's just imagine for a second, that goal went to ten thousand or twenty thousand years.

Annes thinking, all the gold holders out there, right? Yes, a lot of the central banks, a lot of them are people, would just gold in their safe peer with what are they like? Gold eventually gonna to a bar market.

They can take that capital and buy other stuff, right? They can buy bank stocks. They can buy equities. They can do whatever they need to do to push that money back in and recapitalized the system.

Luke roman talks about the feds got this Operating menu, where if they just revalue the Price of gold, they can suddenly deposit trillions of odin, four thousand dollars. Every four thousand dollars ounce IT goes up, they can deposit a trillion dollars into the T G. A.

Scott free. Imagine if gog's twenty k simply, they can just take that trillion of dollars either pay for infrastructure, pay off a bunch of the debt, get det G D, pay down. You need an asset to recapitalize the system that its inflation doesn't blow up anything else. So I can't be oil IT can't really be commodities.

But in gold, other primary candidates that you can inflight, even silver because it's using electronics and all this kind of stuff, like probably don't want to, but to go to high because you want these industrial metals to be cheap because that's going to help the world not blow up economic goal bitcoin to go up. So ironically, not enough the a base, not wrong, they do need bitcoin to impoverish, just happens to that's how you can you recapture ze the system. That's the game. That's what they trying to do.

Yeah I don't hate IT. There's a big quite holder and a small holdings a gold on my finger but um yeah it's kind of a wild know, as you last time, how hi everyone .

wants to know. So I have two answers to this question. First one is the practical one. The second one all so in terms of the practical one, we were talking about unrealized losses before as like there are market creating foot that around what creates a an uptrend will break to the downside eventually.

What creates that downturn? Too many people see a fat Green number in their portfolio and go, yeah, i'm in, have to take some right. So unrealized profit getting really, really high is that level where we start to see people sell.

Now you are going to remember that just because people are selling doesn't mean there's no enough demand to just punched through IT. So I use things like you're hear mvv ratio, right? The various forms of this is spacious modeling how much unrealized profit is in the system.

So as IT stands right now, if we get up into like the hundred and twenty hundred and thirty thousand rome, that's where we get to a point where hodden ers can be expected to start seriously ramping up their cell sides, right? So in that one hundred, ten hundred, twenty thousand, that's way that real cell sides gna kick in. Now that doesn't make the man come punched through.

IT certainly can, but that's where we'll see a lot of metric saying huggers are taking some chips off the table here and eventually that will overwhelm things. So that's a moving target, right, that continue to climb as demand creeping in. But that's where IT stands as of right now and doesn't where I think we're going to go.

Right, having some fun with this thing when I play around with these ideas, right? And I my old man's got big coin, I have to pair back where I think it's gonna go because otherwise you just think i'm insane. You know, I wouldn't be surprised if we ve got to two fifty in the next you know about nine, three years, something in that kind of period.

I am certainly in the camp. I think bama, it's are not going to be the eighty down. I think a lot of people that we're going to be expecting that eighty down and then I get a fifty or forty five or is sixty five and then away IT goes again.

I don't think we're going to to get a dependent all to factors. But I think generally speaking, unless we get game, stop buying at the highs, right? We get game of buying at the highs maybe a seventy.

But if we don't, I think that the the bears were more muted. So I think people will lose track away the topics. Where is the cycle? Where did IT start? Is that a bear? I don't know.

We just go through a bear. Maybe there's all these interesting dynamics. I look I think two fifty is reasonable, right? It's not completely ridiculous. Will will get up into the hundreds.

I think I see so many people just talking about this is where it's going to end like trade fy guys, IT makes sense at one hundred k IT makes sense at two hundred and fifty k um I think the the concept of relative value becoming is about ten percent of goal. I think it's about less than that now the gold run. But if bitcoin can get to twenty five percent of gold, right? I think you and I would agree the bitcoin is a superior asset to gold.

And in case in point, if you eble physical goal, IT is a real paid in the house, you've got to go to a physical place. You've got to pick IT up. You got to start in like it's a physical thing.

Now is great because it's self custody, but it's A I could also buy a big into my cocoa and will take me a fraction of the time. Doesn't require a bus ticket. You ve got all these different dynamics we pick when he's just vastly vast. You superior.

So can I get to twenty five percent of gold? Of course I can, right? That's that's kind of obvious. So can I get to one hundred percent goal? Not any time soon.

But what would a hundred percent parody be? Well to be about ten point eight kilograms of goal for a bitcoin right now. It's just under one one killer, right? Thirty answers or something like that.

So you know that's that long term view. Know my Price targets is actually in gold terms, right? Ten point at kilos. That's my my actual number, which is I think I like six hundred thousand and six hundred thousand and I ridiculous yeah .

and it's funny like the gold, the bitcoin overtaking or reaching parody. The golds market cap has been I mean a bit coin for silver and not a gold running like that. The benchmark is going up way higher and they give a goes to ten thousand, you at five back the the benchmark Price, which I think right now there around two thousand dollar go to was what like six hundred thousand dollar bitcoin. And if cold runs to two ten thousand dollars and stays there for a while, like this three million dollars.

anything I think is actually quite interesting. I've been just observing hail markets where I I recently actually bought and platon, and the only reason ball platter is because history ally speaking, IT trades a premium to gold right out to sixty five percent discount. And I do know that a lot of investors have not ridden this gold wave right with mostly central banks and people in the east spring buying gold.

So there are only just saying, oh, shit, I missed the run on gold. So that's why silver starts to move because it's like the poor man's gold, right? You going to buy the cheap acid.

And let's have this very simple things like, well, you know, if platforms currently trading a thousand box, could I get to twenty seven hundred? Probably you know that's that's not a bad little return. So I and I expect people to go on this like catch up trade.

And in many ways, bitcoin is that catch up trade as well, right? Because it's a sound money has said that is still monodist and really IT tends to follow gold like six months you in the in. So I do think this like catch up trade thing is a very, very real concept.

We see IT all the time in the cypher space, right, to get fucking some chicken runs, like, oh, I missed that one. Do you buy the next one down? You get this waterfall effect.

We see IT an equity as well, right? The big caps run that you get this rotation down. And I can't help to feel that these catch up trades are probably going to going to kick in. So I bought some plant because it's a test, the theory, I want to put money in the line, actually test and see whether this I get some skin in the games. I am a kind invested in the outcome.

But I do think bitcoin is going to sit in that catch up trade as well because why is gold running okay? If I once I form a faces on that, can I apply that? Do any other assets that haven't already run? Look, this really like three or four. Oh, by one of those.

No, I know you heard to hear first. James is a no plata .

alist and .

plata maxi James. Thank you for your time in your research. You is that are loving a renewed letter if you're interested in shutting the psychological volatility that you will never really go through. If you hold back when I highly recommend reading James is news letter, get that a check on .

chain up to come.

Yeah it's a incredible stuff and you you're putting out quite a lot of content to yes.

So getting a video and written post to every single one because some people like to listen, some people like to read. And that works to me when I write the peace and I develop the charts. So I write th Epace, that's where I do my thinking, and that's what I like, really consolidate ideas.

And then the video is me kind of wrapping the whole thing up. So they're the same thing some people read and watch. In fact, we ever really, we did a survey a little while back.

We got to really like organic distribution. Twenty five percent of people read twenty five watch and fifty percent do both. So I kind of serves as all those different, different, different angles.

But the type we went with this, your bitten personal china. And the idea is that, like, you know, the market is it's it's like being in a live combat sport, right? You're continually fighting all these different piece of information and ideas.

Should I sell? Should I buy? My scared and I not. And the idea is, is to ground people and say, well, let's focus what really matters.

Do we care about how people are in profits? Are they taking profits like? And just sequentially stepping through doing the routine, you know, you go to the gym and you do your reps and you get much Better surviving these things.

And it's going be increasingly important as volta increases. So Better started early.

freak.

James, I hope you enjoy the rest of your day. Thank you. And i'm sure we will be catching up at some point as the volatility increases.

Good on you might help me on .

piece and love freak.