#635: Bitcoin's New Paradigm with James Check

Episode Transcript
Available transcripts are automatically generated. Complete accuracy is not guaranteed.
(00:00):
It's gone nuts. All the central banks going nuts.

(00:04):
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 bull case for Bitcoin.
If you're not paying attention, you probably should be.
Mr. Check, there's too much paper Bitcoin out there. The price is being suppressed.

(00:30):
How do we get out of this? Doing well.
Yeah, man, I'm just watching red candles and you know, the market makers, they keep pushing the price down. Coinbase has got nothing on their balance sheet. The whole thing's a scam.
It's a scam. By the end of the year, there's going to be 2000 Bitcoin treasury companies in public markets. They're going to have 42 million Bitcoin and the price is going to be at 107k.

(00:51):
Yeah. My favorite, I replied to you on a tweet just before I went to bed last night. You were
talking about Canada's sovereign reserves and they've got like 350 billion. And you said,
imagine having 350 billion of some other country's paper and not buying 3 million Bitcoin.
And the first thing that struck me is, guys, we are so big that you can fit a G7 country's

(01:12):
sovereign balance sheet into 15% of the circulating supply. And just let that sink in for a second.
3 million Bitcoin is Canada's net worth.
You know, it's an amazing stat that we're this big.
So don't get caught up in all the price suppression.
I mean, we're a stone's throw from all-time high.
And, you know, the market's absorbing billions of dollars a day.

(01:32):
It's bullish as anything.
It really is.
And as somebody who's been in it for a while, I like to see the coiling.
I like to see the coiling.
I like this whole year.
Started right before we ended last year.
All-time highs dipped down.
came back up tariff tantrum back down now we're back to 107 you wrote a great newsletter

(01:54):
last night uh my time i believe yesterday morning you were tired no last night your time last night
this morning my time this morning my time i read on at a 6 a.m flight this morning so right on the
flight and i think you highlighted a lot of good data on chain that really made me extremely bullish

(02:16):
confirmed my bias towards the coiling seems like in the mid to high 90s range we've got a nice
sort of strong base of people that's scooping up coins there and you're you're saying we we may be
at p coddle or you're referencing the term p coddle the the metric p coddle yes i uh i tend to

(02:37):
there's always this uh supply squeeze narrative that floats around and like you know i'm generally
one of those folks is like, guys, supply squeezes, don't get too caught up on it.
But the truth is there are periods of time where there is a supply tightness.
So I'm not saying supply, same as paper Bitcoin. Paper Bitcoin exists in derivatives, in fraud.
There's all sorts of reasons why paper Bitcoin exists. You don't need it as your core thesis

(03:00):
to explain why the price isn't higher. You can easily explain it with sell side pressure.
That sell side pressure, and this is, I think, what a lot of people miss,
it's super bullish. The fact that we've had billions of dollars, tens of billions of dollars
a day sometimes of serious sell-side pressure and the price is $107,000, that is the signal.
So what you're referencing, you can look at, there's a few different ways we can look at it.

(03:24):
You can look at like short-term, older cost basis, but also I've got these heat maps that
basically just look at the UTXO set, give every single price, every single coin or UTXO a price
when it last moved. And let's put a density heat map and see where all the coins last transacted.
And in that 90 to 100K region, it's a massive, just an absolutely massive band. If you take that

(03:47):
realized value, so all of the coins that have last moved, and again, some of them change hands,
some of them are in exchange balance sheets, some of them are just some dude transacting,
doesn't matter. Don't get too caught up in the details. It actually doesn't matter.
when you look at where every coin transacted 55% of all dollars invested in bitcoin or held in
bitcoin or saved however you want to frame it has a cost basis above 90k that's insane that's a

(04:11):
super bullish scenario where the market is saying there's a flaw here right so the way that i look
at that i don't really want to see the market go below 90k i don't think that would be a good sign
i think it would take a lot you'd have to have a pretty major event happen i think i don't want to
see that if it does go below 90k then i'll probably start saying you know something is wrong um and

(04:32):
it's probably going to be a global thing not not a bitcoin thing uh but um in lieu of that if we
stay above 90k it's just a huge amount of support there there's a huge amount of demand we're seeing
demand come in and like that's that's where we're at don't worry about price suppression look at the
fact that there is so much demand that we've built this very very stable floor at 90k you know 90k

(04:54):
six months ago we're at 70k so you know it's just a whole different animal now yeah there's a few
things here i think you mentioned it in the letter and i'm beginning to ask questions like people
dming me like do you think there's paper bitcoin price suppression is black rock playing games and
if you look at it just looking at hoddle waves it looks like long-term hodlers are selling and

(05:18):
then if you mention that to people they'll be like oh why are the ogs getting out it's like
they're not getting out it's like they've been holding bitcoin for so long their cost basis is
so low and they want to treat themselves to say all right i'm going to take some off the top at 105k
and you know why this is i think probably the most important thing because life is more valuable than

(05:38):
your bitcoins your family is more valuable than your bitcoins the home that you want to raise
your family and is more important than your bitcoins you know bitcoin's not there to die
with it's you know just i think letting go of this idea that it's some like saintly spiritual
thing that you can never sell and it's a sin like go and live your life not living your life is is
far worse go and enjoy your life and there's but you know there's some guys you'd like they want to

(06:01):
go and buy a house they want to pay off their debts the fact that they're debt free not everything
is about financial returns and actually you can almost go the other way and say by being so fixated
on the gains in bitcoin is a very fiat mindset bitcoin buys you opportunity and you know time
It gives you time back with the things that really matter.

(06:22):
That's what it's worth.
That's what it's for.
Like if you're not using it to improve your life and your family's life,
what is the point of being here?
Right?
And people just can't rock that.
So you got to hodl forever.
Michael Saylor.
We're going to 21 million.
Why would you sell?
If you can get past the hodl forever,
that's actually the Bitcoin mentality.
Don't get caught up in this fiat gains thing.
You know, for example, I talk about this all the time.

(06:43):
I don't own gold to outcompete Bitcoin.
I own gold because I'm going to sell it in order to get into the housing market.
Its job is to not be volatile, but be the same trade.
I don't care about the financial gains.
I'm not there to make money on it.
It's a tool to give me life chips.
So it has a very specific purpose.
I view Bitcoin in the same way.
Its job is that in the long arc of time,

(07:04):
it's going to get my kids through a good education.
It's going to pay off my debt at some point in time.
I'll sit there and let it ride for the next decade.
But it has a purpose to make my life and my family's life better.
Yeah.
And so this is talking about OG selling.
And I don't know if you've written about this or been following along,
but obviously last year post ETF launch,

(07:26):
there was a bunch of 10K filings of institutions,
head funds, others getting into Bitcoin.
Like how much of any outflows of ETFs can be driven by rebalancing
that could be affecting the sell pressure as well?
Yes.
So I have actually done a bit of a study on this.
So there's a few elements.
I ran through a lot of the, it was a couple of, probably a couple of quarters ago, but

(07:49):
I looked at all of those 13F filings and basically looked at how much of the ETF flows were
institutions.
And it more or less aligned with Eric Balkunis and James Safer to talk about similar numbers.
About 20%, and again, this is probably half a year ago, but about 20% of the ETFs appeared
to be institutions.
The rest was mostly retail.

(08:09):
In my initial interpretation of the ETFs, I imagine there's a lot of hodlers out there
who finally got a vehicle to put their 401ks in there.
We call it superannuation in Australia.
Whatever their retirement assets,
ETFs are a very good vehicle for that
because you've got to do audits
and there's all sorts of,
every country's got their own system.
So I thought retail would naturally gravitate

(08:30):
towards the ETFs with that pool of capital
because much the same as what Sale is doing,
going after trapped pools of capital,
there's retirement funds that for the first time
have now got access easily into Bitcoin.
So I think that's a big component.
when we look at the and I actually ran this study we're talking just before that I was in
in Seoul for the Bitcoin Seoul conference and one of my talks at the industry day was all about the

(08:54):
how Bitcoin's institutionalizing what's actually happening under the surface and one of the charts
that I had in there was looking at the weekly inflows and outflows from the ETFs and what's
quite interesting is if you look at the outflows an average outflow week is about 160 million
which is not small money but the average inflow week is like 780 million so it's like a 5x multiple

(09:17):
on the outflows so yeah we get an outflow of 160 million but then it's followed by an inflow of
500 million 700 million a billion so the inflows are just so much bigger and then the other thing
you can do is you can overlie CME open interest and what we've generally seen is that CME open
interest will increase as the ETFs get inflows and it will decrease on the outflows. So of those

(09:39):
outflows that are occurring, almost always it's matched almost one for one with CME open interest
declining. Now, not all of that is going to be cash and carry, but a lot of it is. And I think
just recognizing this is actually not people like there was a big thesis at the start of the ETFs.
I think Jim Bianco was a big proponent of it. The ETFs are just an orange poker chip and all
these TradFi guys are going to come and just like, you know, gamble on the market. What's actually

(10:03):
happening is that when we get outflows, most of the time it's like structural. It's a hedge fund
who's just degrossing and turning off their risk neutral position. So there's a whole lot of these
things like actually it looks like the ECFs are just hodlers. People are just holding on to these
things and we are not getting any sustained periods of outflows. One divergence I have seen,
and I haven't fully passed it yet, but it does make sense, is the BlackRock ETF this year. So

(10:28):
So through most 2024, BlackRock and Fidelity were always increasing at about the same rate.
BlackRock was bigger, but Fidelity was kind of keeping track.
Since the start of this year, however, BlackRock is just peeling away.
And it has to do with the options, right?
I can't think of any other reason why.
There's this kind of centralization of liquidity.

(10:49):
If you've got the most amount of liquidity in the underlying,
then the options are going to be the most liquid.
There's not really much reason to trade the second best option market.
everyone wants to trade the best option market so it actually makes sense that blackrock's peeling
away but uh every single other etf combined is pretty much flat since december in total flows
and blackrock is just up and to the right it's more than double fidelity now it's like 55 billion

(11:12):
versus um fidelity's uh i think they're like 20 billion in total inflows so what does that bring
us to totally in in total aum it's 135 billion which is 35 for last i checked i asked rock a
a little while back.
I think we're 50% of the gold ETF.
So you take all the gold ETFs
and put them together
and we're halfway.

(11:33):
Yeah.
That's insane.
Yeah, 260 or something.
I mean, it's historically
the fastest to this AUM
of any ETF launch ever.
It's kicking ass.
It's incredible.
It's a signal in and of itself.
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(13:20):
And before we get to forward-looking, one more sort of past-looking indicator, too.
World War III.
People thought we were going to World War III two weeks ago.
You had that crash down the high 97s, quickly bought up, and I think that was incredibly bullish for two reasons.
One, it highlighted the fact that Bitcoin is a liquidity hedge when you need liquidity and nothing else is open.

(13:46):
If you own Bitcoin, you have liquidity.
This is a 24-hour.
seven-day-a-week, 365-day-a-year market.
And I think it proved that use case.
Obviously, there was some risk off going on
as the United States was bombing Iran,
but Bitcoin was open.
People were flying to cash for whatever reason
and went to bolster their balances.

(14:08):
And we crashed, but I wouldn't even call it a crash.
We dipped, and it was quickly bought up.
And interestingly, we haven't seen the bid
for Treasury's U.S. dollar.
Like generally speaking, if you were to wind this clock back two years, three years, and you had the exact same set of headlines, the DXY would be through the roof.
And it's not.
We're not seeing this like flight to US safe haven assets, which is quite interesting.

(14:33):
And just as a simple heuristic, whenever your timeline is full of TradFi guys looking at the one minute chart for Bitcoin saying, look how it's not a hedge.
it's usually a good time to actually step in and buy that dip because it's hilarious how they'll
grab the one minute chart to look at literally the longest duration asset that exists which is
bitcoin and gold and they'll look at these two and be like see how they're diverging on my charts

(14:54):
like pro zoom out yeah and look at yeah look at u.s treasury debt still around like four and a half
percent range for the 10 year and you think about if you're an international government or if you're
foreign government looking at the united states treasury market as a safe haven assets like it's
four and a half percent over 10 years enough for me i think you're going to need those yields to go

(15:16):
up and and then you get some i saw trump tweeted yesterday you know in in uh in as many words
nothing stops this train right basically saying like we're going to have to monetize this thing
at the short end um we're going to put someone in in power in uh in the fed's chair when when
power goes we're going to put someone in he's gonna be super dovish he'll lower rates then
we'll just finance the short end it's like oh man they're just being really really explicit here

(15:39):
that the uh the print the print's coming they have no choice they're going to grow their way
out is a euphemism for uh number go up yeah there's uh i didn't dive too deep into this
past the headline uh and the short clip that i watched but it seems like even scott percent
has made like a phase shift in in perspective and i think this morning he was on cnbc or

(16:01):
an interview was posted that he did yesterday or earlier this week where he was basically yeah well
we don't have to term out the debt we can we can play on the short end and it was funny because as
the trump administration came into power they were pointing and laughing and yelling for all the
short-term debt that she issued and now they're like yeah we can we can play in the it just goes
to show that they don't they don't have a choice and and i wrote a piece i think it would have been

(16:25):
april i did a very big like i sat down i really this is when we're in bed for the fact it would
been when we last spoke and i really tried to get my head around what was going on and i built this
table and it was like these three different games of chicken there was the u.s versus china
there was uh trump versus the republicans and then there was um beset versus uh jay pal and i was

(16:46):
trying to work out all these different games because someone's going to have to blink in all
three of these different games and like at some point in time i was like trump's going to come up
against he may want to do all the most radical changes in the world at some point the republicans
have to get reelected and it looks like we've just hit that point in time where he's like you
know you guys have to get reelected but you know let's all get on the same page and let's go

(17:08):
uh you know that the we still don't have really a trade deal between the u.s and china but i'm not
convinced that the u.s has the strongest negotiating position because china is just
the world's factory and i think there's a lot of challenges there as well and at some point in time
i think jay powell just has to deal with the fact that his boss the government has to be financed
and so he's holding out
and I've got to give it to Jay Powell

(17:29):
he has a very very difficult job
I don't envy him in the least
and look again
we can rally all we want against central
bankers given the role that he
has and the job that he has to do
he got rates to 5%
no one thought he could do this and he's
holding out against a president who's
tweeting you're a numbskull every

(17:50):
second day
he's doing alright he's got a tough job
I wouldn't want to be him that's for sure
Yeah, and I wrote about this last week and was tweeting about it last week as well, but it's crazy the short-termism that exists these days and the amnesia that people have.
like trump banging the drum to lower rates like to me it's like wait a second like if

(18:14):
the economy is not completely imploding unemployment's not blowing out inflation is coming
down but it's still higher than the historical target and interest rates are are relatively
elevated like isn't lowering rates a signal that something's wrong and if you're a president or
anybody just a citizen a consumer a business owner in the economy there like higher rates producing a more accurate opportunity cost and cost of capital throughout the economy

(18:45):
A good thing that we should want to be able to sustain.
Like, why is this?
I know why, but I think it's just hilarious psychologically how Zerp, Zerp, Zerp was like a meme.
Like, this is a bad thing for the better part of the last 20 years.
And all of a sudden now it's like, no, we need Zerp.
We need Zerp again.
It's a good thing.
It's being positioned as a good thing.

(19:06):
Yeah.
I mean, at the end of the day, the bond market is bigger than Trump.
It's bigger than the government.
It's the big thing, right?
It's the one that calls time.
And the bond market, like they can't finance themselves.
The reason they need to lower rates is not because the economy is in a good or a bad shape.
It's because the debt's too big.
And the number just doesn't make sense.
The math don't math when you've got, what is it, 37 trillion now.

(19:28):
By the time we talk next, it'll be 38, 39.
Yeah.
and i don't think it's a foregone conclusion that if the fed lowers the fed fund rate target
that 10-year and 30-year yields are going to go down the last time the 10-year went up yeah yeah
totally it's i mean it's a it's a tough position as bitcoin is we've obviously talked about this

(19:52):
for a long time and i mean i know for me i mean again my background civil engineering i knew
nothing about the bond market three, four, five years ago. I had nothing. Now, again, I'm not going
to pretend that I understand how it works, but I know a hell of a lot more than I used to.
And I'm just looking at the situation where you're like, they're kind of stuffed, aren't they? And
this is why Lynn's meme is just so effective because no matter which way you want to run

(20:14):
this calculus, you're like, guys, it's just math. It just doesn't work anymore. You have to print
the money. There's just no other way. And then once you reach that conclusion, you realize it's
all jaw-burning.
They just have to create narratives.
And the thing I find so fascinating
is that the market kind of has to go along
with a lot of the time.
It's a great example of shelling points.

(20:35):
So for example,
the bond market is supposed to be
the smart man in the room.
They're supposed to be the market
that understands what's going on
and they're trying to judge.
It's the big one.
And yet they still plug in CPI
as their bond,
as their inflation number.
And we all know CPI is bullshit,
but they have to plug it in because every bond trader knows that every other bond trader has

(20:57):
their own they've got their own inflation metric but every other bond trader is also plugging that
in so the shelling point is what other number are we going to reference so they all have to use the
same number because they know that everyone else is using the same number and in order to go out
on the risk curve and say well i actually think that number's wrong i'm going to bet against it
you're betting against the mass and eventually the mass will get there but it's not an immediate

(21:20):
thing and this is like you know not quite a perfect analogy but this is why in like the big
short they knew the housing market was cooked but it took years between when they realized that it
was cooked and it actually imploding that period of time that funding cost you you get you get
wrecked in that middle period so it's a really interesting thing that like simple things like

(21:40):
cpi is bogus and yet everyone has to use it because of the shelling point i find these dynamics in
finance so fascinating all right it's a hard a hard-coded input into all these calculations that
everybody knows it's a bad one but we got to use i'm having visions of michael berry going to the
whiteboard or christian bale playing michael berry going to the the whiteboard and and writing the uh

(22:01):
the losses he was stomaching during that period while he was waiting the carry yeah yeah and i'm
happy you brought up lynn because i was there in vegas when she gave what i thought was the most
succinct and clear and distilled version terrific wasn't it of her nothing stops this train and
we'll stay we'll stay on like backward looking stuff for this point my other favorite presentation

(22:23):
at that conference was safes safe adenomus's uh presentation on the tether and the u.s treasury
market because here in the united states looks like we're going to pass the genius act which
creates regulatory clarity for stable coin issuers and all the politicians and pundits
and macro think fluencers are saying that we need stablecoin regulation.

(22:48):
We need clarity.
We need stablecoins to proliferate because they're going to create a lot of demand
for our treasury market, which demand is waning right now from traditional buyers.
And so we need to bolster up this new buyer.
It'll drive significant demand.
And I really loved SAFE's presentation because it was a real finger in the eye

(23:09):
of the sort of the mainstream belief
around stablecoin regulatory clarity
and what it will do for the treasury market specifically.
And he's basically just looking at Tether,
the biggest stablecoin issuer on the planet by far
and what they're doing.
And he basically pointed out,

(23:30):
like the math doesn't math here either.
Very conservative assumptions too.
Like it was like 10 X's or something.
and yeah and and uh the reduction on interest rates is like very very it's a strong correlation
like it's just still happening guys no they're and they're taking those yields and funneling them
into bitcoin and i really when you're thinking about like creative thinking and thinking outside

(23:53):
the box like tether becoming like a bitcoin stable coin at some point in the future because
they'll be getting like their company reserves and i believe treasury reserves now maybe that
will change with the genius act passing which i believe for u.s issuers specifically they can't
have bitcoin as reserve backing the stable coins that they're issuing but we know tether the

(24:13):
company is separate from tether's sort of uh the liquid backing of the tokens themselves yeah
there's the backing of the stable coins and then there's tether the business who is generating
profits from that product yeah exactly and stacking a ton of bitcoin yeah and gold what
they got like 30 tons or something of gold it's crazy yeah all this is just to be said

(24:36):
getting back to what we were saying earlier you can't stop this strain like it doesn't it seems
like the big print has to come mathematically anyway you look and they just have to convince
people to uh to you know in some narrative shape or form it's okay that's not what's happening
don't don't believe your lying eyes they just have to convince enough people again that's why
brought up the cpi thing you just have to convince them enough to just go along with it for another

(25:01):
three months and then another six months and then just go along just just another three months which
we're almost there just massage these people through the journeys you just debase them through
this uh you know and it's gonna take a long time to do it but you know there's going to be a suddenly
moment everyone just goes all right i'm sick i'm done with it i'm done with it i'm out yeah i think
the holy grail narrative sort of framing that they're going with right now is that the productivity

(25:24):
gains from ai proliferating are going to be such that we can stomach more inflation because
productivity is going to explode exponentially don't worry it's good for you yes it'll be easier
and it's like as somebody who's been playing with the tools and leveraging it myself like i can
totally see that like we've done many things here at tftc that would not have been possible uh without

(25:48):
going out and hiring somebody which um which we're typically conservative about doing but we've been
able to do a lot more with the same team that we've had for the last year and it certainly has
made us more productive but um does that you also didn't hire somebody else yes that's the trade-off
right so yes you're more productive internally but you also didn't hire other people yeah so

(26:14):
That's a big question, but that's what they're going to say.
It's like productivity is going to be insane.
You may not be hiring people, but more people are going to start more businesses.
Little side gigs that they can make some money off of.
That's it.
Yeah, everyone's doing a vibe-coded side project.
Yeah.
Hey, vibe-coding.
Try it.
You may need it just to survive moving forward.

(26:35):
They're going to print money.
You have these massive productivity tools at your fingertips,
and you just got to shoot your shot and try to make some money out there
because AI is coming for your job.
if you're an Excel monkey out there.
Be aware.
Well, it's funny, actually.
I mean, like one of the many things
that I'd like back in 2019
where I was probably falling down

(26:55):
the Bitcoin rabbit hole.
Listen to plenty of your pods, by the way.
Walking around Regent's Park,
listening to you and Matt
shill self-custody to me.
But in that process,
I used to download...
Coinmetrics had this CSV
with all the original on-chain data,
like the very first time
you could get data for this stuff.
and I used to download it every day,
plug it into my spreadsheet.

(27:15):
I'm an engineer, right?
So I use spreadsheets for everything.
Plug it into my Excel sheet.
And I was like, eventually, I can't keep doing this.
This process sucks.
Waiting for all your charts to update.
So that's actually where CheckOnChain originated from
is me going, okay, I've got to get off Excel.
And it was my excuse to go and learn Python
and learn how it all works.
And it's still building today, right?

(27:35):
It's still plugging away.
I think it's 250,000 lines or something of code
that prints out every day.
and yeah that was my my job to get off excel and now like aside from the occasional little
accounting thing here or there everything is python i don't touch excel anymore it's a beautiful
product too anybody listening should go check it out it's check on chain.com correct check on

(27:56):
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(28:17):
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go pick it up all right moving forward you're pretty bullish if i if i read your newsletter
correct this morning on the plane when i was a little groggy you're pretty excited about what
stands before us here i mean i find it hard to look at the price being at 107k 108k a support

(28:42):
floor below us at 90k which again can it fail yes do i expect it to no not my base case
if it does then we flip around but we're in a very very healthy spot and uh you know even just
simple things like funding rates funding rates are like neutral to negative and i spent a bunch
of time last week trying to work out why that is and there's a few reasons why funding rates could
be negative, lots of cash and carry trade. Generally speaking, if you cash and carry trade,

(29:07):
which is where people long spot short the future, if the yield you get from that is at the moment,
it's like two and a half percent annualized. Just buy a T-bill. What on earth are you doing a
complex cash and carry trade to earn half the yield and a risk-free rate? It doesn't make any
sense. I'd be very surprised if it's cash and carry. There's relative value trades where people

(29:29):
would like go and, you know, short Bitcoin, long shit coin.
I don't see any of that happening, right?
I don't see that going on in the crypto world.
So really, at the end of the day, there's just like people just short.
People just like net short.
And that appears to be what's going on.
So there's a bunch of people who just net short Bitcoin.
And I wrote a piece on, it was probably two weeks ago,

(29:50):
a week and a half ago called Imagine Being Short.
And I literally put myself in the shoes of options and futures traders
and tried to work out why they were short.
and in the options space
it basically looked like
I think it was out
to the end of July
it might have actually been
to the end of June
there was a lot of put options
like people were just like
very very hedged
and someone in my comments

(30:11):
actually reminded me
that we've got tariffs
that start to roll off
or that 90 day pause comes off
I was like oh yeah
that makes sense
so there's a bunch of people
and again options
are a more sophisticated instrument
you're not going to get
like your average DJ in there
who just wants to like
gamble poker chips
they're going to be
more sophisticated actors
so you're telling me
that the guys who are in the sophisticated market
are hedged for downside for a very rational reason.

(30:33):
When you're hedged for downside,
you're not concerned about downside.
That's the whole point of hedging.
And then you've got in the more degenerate markets,
funding rates are basically negative.
There's a lot of short interest.
When I look at which exchanges it's happening on,
yeah, there's some on Binance,
there's some on Bybit,
there's some on CME,
they're the big three.
But a lot of it's on these like other,

(30:54):
I just put them in the bucket of other.
All these exchanges you've never heard of,
you don't want to hear of.
that's where all the people are short.
So I'm like, okay,
so I've got the most degenerate traders in the world
who are net short.
I've got a bunch of sophisticated guys
who are hedged for downside
because of a very rational reason,
which where's the max pain here?
Probably a down and up.

(31:14):
And I wrote a piece called,
we got to go down to go up.
And that feels like how it goes.
You just go and find this,
like tap a little bit of liquidity.
We went down to 98K, as you mentioned before,
super strong bounce off the top of that support floor
I was talking about.
so everything makes sense to me.
The next level is just go and tag all-time high
and grab all those people who are short
and going to get liquidated up there.

(31:34):
That, to me, feels like where it wants to go.
There's a whole bunch of other elements, right?
I mean, long-term holders, they're still selling,
but significantly less than usual.
So at the peak in November, December,
there was something like 40,000 Bitcoin per month.
Sorry, per day, not per month, per day.
So there's 40,000 Bitcoin that were older than six months

(31:55):
coming back to life.
And yes, I get this point all the time.
Not every coin that transacts is being sold.
That's true.
But it's very funny that they all seem to transact
when the market's ripping to the upside.
So it actually doesn't matter where it's 40K or 35K or whatever.
It's more than it was yesterday, significantly more.
So look at the trend and the direction.
There is a lot of old coin that comes back to market

(32:17):
when the market rallies.
We're not seeing anything quite like that.
So really where I sit at the moment,
I find it very hard to be bearish.
The one thing actually that I think is notably bearish is just the on-chain activity.
The blockchain is dead, right?
Empty blocks.
So that's the one thing I'm looking at going, I don't like that.
I would much rather it be full.

(32:39):
There's a case to be made that is because people are punting on treasury companies and
all that.
But even that is probably not a great sign.
That's a speculative signal.
So that's really the main area of like, let's be careful.
But I just draw a very simple line in the sand.
when we're above that short-term cost basis,
which is like 98K,
you're allowed to be bullish.
For me, until we're below the short-term cost basis,

(33:00):
you're allowed to be bullish
because literally every time we're above it,
it's generally bullish.
Once you go below it,
you've got to flip over
and there's no reason I can see
that we should go below that level.
We bounced off it earlier.
If it goes down to 90K, it's possible,
but we need to bounce higher.
If we go below 90K,
then I've got to flip around
and be like, something's very wrong here

(33:20):
and I'm wrong.
I'm now going to say,
I think we might be in a fairly protracted bear market,
but we're a long way from that.
So there's a lot of reason to be bullish
and until proven otherwise, I think be a bull.
Be a bull.
It's always a good advice.
And as it pertains to on-chain activity,
I agree, it's weird going to mempool.space
and seeing all these empty blocks.

(33:42):
It's very odd.
The meme, the guy holding the stick, like do something.
And then I think my own Bitcoin users,
like I transact in Bitcoin almost every day.
and if i'm uh and obviously i'm more of a hardcore user very well versed in the the different tools
and ways of spending bitcoin but if i just look at my own usage uh it's probably like 90 to 10

(34:05):
lightning to on-chain in terms of actually spending so you're 90 lightning 10 on-chain
yes like you're paying contractors like when i look at my my footprint so both myself personally
in the business, we're probably like three to five transactions a month, thereabouts.
Depends if we're doing, if we have any sales or something, but like something in that ballpark.

(34:27):
And that's why when I look at the chain, I'm like, okay, if just this one entity,
we're a small entity and an individual in a business, if we're doing five to maybe 10
in a month, that's like my chunk of the block space that I'm consuming.
you're telling me that we don't have enough people to kind of fill up at least a couple of
blocks here or there so that's the one area i'm like surprising so we're mostly on chain versus

(34:52):
lightning yeah because i wonder if you think about like steak and shake big meme here in the united
states they launched their point of sale lightning only if you think of the mobile wallets that most
people are onboarding to wall to satoshi speed wallets climbing up the ranks after the steak and
shake launch which they're running the back end obviously strike as custodial and even yeah like

(35:18):
in the i'm thinking of like if i get a zap right invoice and i have the option to pay on-chain or
lightning lightning automatically just because so here's the interesting thing right maybe this is a
question that we can riff on long term lightning and any kind of system that scales there is the
perverse incentive where it actually makes the on-chain security system because if you have a
fee market, right? In a way they work at odds with each other, which is a very interesting dynamic.

(35:42):
It's actually why I'm generally supportive of things like covenants, because I think that as
you make the on-chain side more useful, and even actually just as a side note, something I was
thinking about a lot of my walk yesterday, if you have things like covenants, thefts are actually
harder. So if you're an exchange, the exchange can set up, so it has to transact to a specific

(36:03):
way. So you actually make this paper Bitcoin thing. If you worry about entities being hacked
or stolen or not having the coins or whatever, there's actually more clever ways to ensure that
they can't be hacked as easily. So I think that's actually a very promising side to the equation.
But as we make the base layer more effective at doing those types of transactions, you can actually

(36:24):
start to see more stuff getting built on top. So you almost have to combat the scaling side of
lightning with more functionality no and i'm not saying go and just you know plug everything into
bitcoin but the more you make the bitcoin base layer useful to have those transactions go down
to the base layer it actually tries to counteract that idea of people just transacting on lightning

(36:46):
because when we're in seoul i think we went to two or three dinners and we settled by lightning
and again there was probably like i don't know 15 people so say 15 transactions on lightning
and i would say probably three or four of those had to do an on-chain to get onto lightning
beforehand so you know it it definitely is going to be a factor in that regard yeah i've always

(37:06):
been a believer this is that you can apply jevin paradox to yes txos in terms of you make them more efficient covenants a great example of making a utxo more efficient You can do more with it You get more optionality and therefore it should drive more demand
Yes.
No, I tend to agree.
It should drive fees.
Yeah.

(37:27):
I'm actually quite keen to see how CTV plays out
because obviously we've gone through this
as Bitcoin is a couple of times.
I wasn't around for the 2017 wars.
I bought the top in that market cycle,
so I've certainly read about it
and understood what happened back then.
But Speedy Trial was the first time I think,
first time I saw like a full scale network wide software.

(37:51):
It's gonna be very interesting to see how CTV plays out
because there's obviously a lot of support for it.
And I think rightfully so.
It's a fairly simple upgrade.
I'm not gonna pretend that I understand it fully
on the technical side.
I think a lot of this stuff is quite hard to reason about,
but there's enough people out there
who I'd certainly value their opinion.
I've listened to their views on it.
I'm gonna be very curious to see how we approach this
as a Bitcoin network.

(38:12):
because I think there's been a lot of movement
towards the ossification side of the equation,
which I think is incorrect.
Everyone's allowed their own view,
but I don't think ossification is the right outcome for now.
But it's going to be curious to see
how we actually attack this from a soft fork perspective.
I think that's the biggest boogeyman in the room
in terms of, I think if you ask most,
actually, I won't speak for anybody else.

(38:32):
I'll speak for my, I would love covenants.
And CTV specifically, I think it's been out there.
I mean, I remember funding lunches
for CTV research back in 2018.
This is an idea that's been around for quite a bit.
The code base has been pretty rock solid
in terms of it is what it is,

(38:52):
not much changes to it,
and there's been a five-bitcoin bounty
to find bugs in CTV for, I think,
two or three years now, maybe even longer,
and nothing's been found.
I think Covenant, to your point,
making exchanges unhackable
or individual cold storage somewhat unhackable is a massive benefit.

(39:13):
And then when you compare it, I think people have PTSD from Taproot and Segwit,
how big of changes they were, and not only that,
but the unforeseen consequences of what they enabled
when combined with urinals and inscriptions.
And I had James O'Byrne on, who was one of the co-signers of the letter

(39:34):
that went out to the core repository
that were endorsing the implementation of Ops CTV
and CheckSig from Stack together.
And when you compare the lines of code,
I think CTV is like 200 compared to Taproot and Segwit,
which were almost like-
Oh, no, Mammoth projects.
They were massive.
And so, yeah, but it is,

(39:55):
I think the boogeyman in the room is like,
how do you actually get it implemented if people want it?
And when do you start that process?
When do you end that process?
and uh i i think i do agree with you i don't think i think it's pretty it's already certain
like ossification is not an option there are things that need to be changed within bitcoin

(40:16):
if we wanted to sustain itself for a century multiple centuries potentially millennia
um so ossification is already a no-go out the door i think we need to i'm actually quite bullish
like again i don't have any reason aside from just my bitcoin or instinct but i'm actually
quite bullish that ctv will get activated i think we'll find out how we activate things
and strangely enough i actually was quite encouraged because when they released that

(40:41):
letter it was like at the height of the opera turn chaos right so everyone's at each other's
throats we're all arguing over stuff and by the way i found that whole experience quite
quite interesting intellectually stimulating in a way because again i don't really have a strong
opinion either way like i would i would prefer the scammers would and the spammers would would
piss off i fully agree with that at the same time i also see where the the tech side comes from it's

(41:05):
like it's kind of hard to stop them so we can yell and scream at each other all we want but like
probably unlikely stuff changes i actually kind of like that they launched this letter at the height
of that feud because it was a bit of a we're not going to be deterred it was this is just a good
idea and it's felt very meritocratic there's a bunch of smart people who've done the work they've

(41:26):
thought about it they've done the process they're very confident they're enough to put a signature
down to it and they launched it irrespective like if we had a bitcoin community that was like oh it's
too contentious there's too many people yelling let's not do it it's like no fuck that let's go
let's let's put this letter out there we think this is a good idea don't care what the environment
is and i'm actually quite bullish because of the order of operations in which they uh they issued

(41:49):
that letter i thought that was actually quite indicative that bitcoin is going to press on if
it's a good idea let's do it yeah it's like i hope you guys are having fun with that op return battle
here's another grenade ctv here we go yeah totally let's go but let the let the free market of ideas
fight it out and that's it's it's a very bitcoin uh um uh dynamic so i was actually quite encouraged
by the uh the order ops there yeah it'll be interesting to see how that plays out i think

(42:11):
that that was the i i think i'm very much aligned with how you described your perspective on
op return and that was
the most disconcerting
part of that whole kerfuffle
that's still ongoing
to a certain degree to me is that like the conversations
around covenants particularly CTV were
starting to gain momentum

(42:32):
and then that sort of came out of left field
and when it comes to op return
I think there were
people on both sides of the argument are being a bit
childish and
not pragmatic
but it is what it is
not ideal i don't like the spammers i don't like conscriptions i'm not big ordinals fan
at all but to your point like they're gonna do it anyway they're gonna do it anyway and uh i mean

(42:58):
my big takeaway and i had this opinion when they first came out in 2023 i was like it's kind of
cool that no one could stop this i'm pretty sure most bitcoiners are like this that this is a scam
this is a spam i don't like it i'm pretty sure most bitcoiners are there but i was also like
pretty cool that you can't stop it kind of like that there's no like central authority they can
So like, yeah, let's turn this off or let's amplify this.
Like, you can't account do anything about it.

(43:20):
Yeah.
To anybody out there, I can hear you typing in the comments right now saying that I need to overthrow core.
We need to replace them.
Bitcoin is money.
Okay.
I don't like it.
I think we all just got to be a little bit more pragmatic to understand the reality and the way people are using it, whether we like it or not.
That's it.
That's it.

(43:41):
Bitcoin is money for enemies, including me and Mr. Reply Guy.
um moving back to what's going to go on uh through the rest of the year what is sort of
the demand drivers that you see really falling away picking up staying where they are moving
forward as we sort of potentially go higher after consolidating at this level yeah so my general

(44:07):
framework here is that and it's just a reality every bull market exhausts itself eventually
just the same way that every bear market exhausts itself eventually.
Eventually, you just run out of buyers.
So how this plays out.
So one thing I have documented quite a bit in recent editions,
since April, so actually very recent,
since April we've definitely transitioned

(44:27):
from what I would call to be a healthy spot-driven market
to a less spot-driven, more derivatives, more speculative market.
As demonstrated by the fact that the on-chain market is quiet,
the market's at $107K, stone story from all-time high,
treasury companies are popping up like mushrooms uh we've got open interest in futures and options
just ripping to all-time highs uh i've mentioned this on a few uh few pods um recently i don't know

(44:53):
about you but i've received zero phone calls from normies being like hey should i buy bitcoin zero
this whole cycle in the last like three months many many big existing bitcoiners have asked me
how how would you recommend i lever up so make about what you will uh that's where we're at
so we're definitely in a more speculative environment and the way i often look at these

(45:16):
things and you can just look at the way these metrics trade we are entering the euphoric phase
now this is the period in time where things get really exciting like stuff really starts to move
we're going to get some of those omega candles that everyone's looking for there's gonna be some
red ones there's gonna be some green ones there's gonna be some periods of time where the market
really wants to move and the narrative will very quickly switch to there is no ceiling new paradigm

(45:38):
going up forever, Laura.
And yes, it is,
but there's going to be roundabouts along the way.
So how this plays out moving forward
is likely to be more volatile.
We've actually seen a fairly low volatility environment.
My base case is that we actually see volatilities pick up
because of liquidations,
leverage is going to start creeping in.

(45:59):
People buying all these treasury companies,
it's speculation, right?
So yes, I agree with the take
that it's probably not fair to lump them in with shit coins
and call them the shit coins of this cycle
because, you know, I mean, our business,
we're a treasury company.
We have Bitcoin on the balance sheet,
but, you know, we're a serious business
and I'm not saying any of them aren't serious businesses.
It makes sense.

(46:19):
Why wouldn't you put Bitcoin on the balance sheet?
It's the best asset that we have.
So that part of it makes sense.
But the behavior of people is a bit shit coiny
where people want to go and find the next small,
you know, you got to get in when they're a small asset
and ride them on the 100X multiplier.
So the behavior pattern.
is shit coiny speculative.

(46:40):
And really, there's nothing wrong with it.
It just shows us where we are in the phase of the cycle.
And if you think about market cycles
and why do bulls eventually exhaust their demand?
Because there's only so many people who are going to buy
and there's only so much capital that's going to flow in
over a defined period of time.
And case in point, every single one of us

(47:02):
who has a job and a salary,
you've got a month worth of pay
and then you've got to wait for the next month.
You literally can't put infinite money in.
Every entity has that.
Someone only wants to put in a 1% allocation.
Someone only wants to put in a 5% allocation.
Once they've allocated 5%, they're in.
They're in the market.
That's it.
So there is a limit to how much capital comes in.

(47:23):
I'm also of the view that these treasury companies,
they're going to have massive accelerant.
It's clear that we've got a very, very large spot bid.
The more that the market rewards these companies,
the more are going to show up
and the more the existing ones are going to buy more.
They're as big as the ETFs now in terms of the demand side.
So both of those are very, very significant factors.
So we have a massive spot bid.

(47:44):
We've got long-term holders who are generally speaking backing off.
I call it the lead foot.
When I talk about demand and supply just to simplify things,
you've got the demand accelerator and you've got the break from sell-side pressure.
The break is being backed off and the accelerator is going down.
There's probably only one way the price wants to go.
I only got a bunch of people who are short.

(48:04):
Love it.
Great combo.
but at some point in time,
we're going to hit a level where that sell side is going to ramp back up
again.
You know,
125 is where I expected to start kicking back in.
Once you get higher than that,
150,
160,
170,
you're in very,
very thin air.
We can go there,
but historically speaking,
the odds get slimmer and slimmer very quickly.

(48:25):
The higher above 120 you go at the moment.
What I think is going to be very interesting and what I,
I have a view,
but I'm not,
again,
I can't predict the future.
my base case is that we actually have a cycle top that looks like every other cycle top no one's
going to believe it because they're going to think it's a new paradigm but what i think is
going to break people's head is that the bear market is going to be different and there's a

(48:46):
lot of evidence to say that like we've already had two bear markets this cycle in 2024 and then
more recently they kind of look like bears at the same time i think the next bear is going to be
worse but we're in this kind of very strange environment where like bitcoin is just not giving
back the the sell side we're not getting the depth of these drawdowns that we've seen in the
past they take longer they take months not weeks um that's a very big difference and it leads to a

(49:10):
lot of people getting bored and that boredom creates price suppression claims and paper bitcoin
but like i think that's how this that's my current working thesis and we'll see how it plays out
yeah i saw you responding to i'd like you to expand on this is some i guess altcoin trader
who was likening the treasury companies to like ICOs and he was saying hey it seems

(49:36):
euphoric right now but trust me it's only the beginning and you you responded him saying
there is a difference like the thing they're holding is already about like I can't recall
it verbatim off the top of my head but I'm sure you you remember the conversation you're having
in that thread like i think that's one question myself included like i see what's going on with

(49:59):
the treasury companies and just pattern recognition alarm bells going off like the seams rightfully so
very familiar but there is a difference with the asset that's underlying the strategy and
um it's a different pool of capital so what's your like yeah so it feels very frothy because
a hundred i'm a hundred percent aligned with you where like i'm looking around being like

(50:20):
guys, this is like topping behavior 101. But the difference is, and if you think about strategy,
when strategy trades at a very big premium, I'm actually more bullish Bitcoin because strategy's
incentive is to sell MSTR, capture the premium, buy BTC. So in theory, there is sell side on the
stock, buy side on BTC. So in theory, all of these treasury companies, the bigger their premium,

(50:46):
the more buy side for Bitcoin is incoming.
Now, the challenge is going to be
a lot of people are not going to understand
how those premiums work.
So let's just, for example,
just for simple math,
let's just say that strategy is trading
at a 2x premium, MNAV of two.
If someone buys MSTR,
in theory, MSTR could literally double

(51:07):
their treasury and you could make $0.
The MNAV could go to one.
And in theory, you bought the stock at 500 bucks
and suddenly the Bitcoin balance is twice as big,
but you are flat because the MNAV is one.
So people have to remember
that if you're buying a treasury company at a premium,
you either need that premium to stay the same

(51:27):
as a percent or as a component
and the Bitcoin balance gets bigger.
So it kind of pushes you up
or you need the premium to expand.
This is no different to people looking at
like price to earnings multiples.
For companies trading at a 20X price to earnings,
you need the earnings to go up
in order to push
this underlying force

(51:49):
or you need multiples to expand
but if the multiples contract
and the market is willing to pay less
of a premium for future growth
and this is what's going to happen in the next drawdown
maybe not the next one, it could be the one after
it could be the next one
there is going to come a time
so do not cloud your judgement and pretend
that this is going to go on forever
there will be points in time where people buy

(52:10):
the hottest thing as these treasury companies, they'll pay a big premium because the market is
growing and they're the only one in their jurisdiction or whatever else. And then what's
going to happen is the market's just not going to perform the way that people thought it would
and the premiums will come down. And I think a lot of people will experience 70 to 80% corrections
in these treasury companies. I think that's going to be a normal thing. So the way I have been like

(52:35):
mentally thinking about it and just explaining it, Bitcoin is trading like Bitcoin in 2025.
It's a different animal.
It's low volatility, low drawdown.
Yes, Bitcoin, you can't lose.
Like over any meaningful timeframe,
Bitcoin is going to kick ass.
If you're buying something like strategy,
strategy lives in this like 2015, 16, 17

(52:55):
type volatility environment.
It's like 2X what Bitcoin is.
Once you go down to these micro caps,
these like brand new treasury companies,
welcome to Bitcoin in 2011,
where an 80% correction happens overnight
and you have no idea why.
There's no reason for it.
There's just not enough liquidity, right?
There's just people who come in and out.
Big orders can move stuff around.

(53:16):
There's going to be games where like,
if you're not in the Telegram group
that says that this company is about to go through a SPAC
and turn into this.
And if you're not aware of that in advance,
you're not going to catch the initial pump,
but it's going to be very, very exciting
because you're going to think,
oh shit, this one's going to be,
this is going to be the next meta planet.
There's going to be some meta planets.
There's going to be some,

(53:37):
that like there's going to be a Pareto distribution.
So just be aware that a lot of these companies,
like literally every business venture ever,
every startup ever,
they're not all run by a Michael Saylor.
They're not all going to make it in the same way.
And this is very retail money.
I can't imagine serious institutions

(53:57):
going and buying the 35th or the 52nd treasury company.
I just don't think that's happening.
They're going to concentrate in the big pools of capital.
So I think there's going to be a handful
of standouts.
Strategy is just in a whole different world to itself.
I think MetaPlanet is clearly doing its own thing in Japan.
There's a couple of others out there,
but generally speaking,

(54:19):
my business, we just put Bitcoin in the balance sheet
as part of our equity.
That's all we do.
We keep it really, really simple.
A lot of these companies that try to do this growth mechanism,
it's good for Bitcoin,
but I can't help but feel that a lot of these companies
will spit out and puke their coins at the end of the cycle
just because they don't have the skill set,
the shareholder buy-in,

(54:40):
the stones that Saylor has,
whatever it is,
there'll be a bunch of these companies that do it.
Miners have done it every single cycle.
We all thought in 2021
that miners would have access to capital markets.
Therefore, they would never have to puke out their coins.
What happened?
They all puked out their coins at the bottom of the bear.
So I suspect this will happen again.
Yeah.
That's sort of my thinking too.
Like literally right before we hopped on an hour ago,

(55:03):
I had somebody DM me asking,
and I haven't responded yet
just if you're out there listening
here's my response
my text you response later
but they were like
I just got a lump sum of cash
what do I do
do I put it in MSTR
do I put it in Bitcoin
and I'm like
old school
like nothing better than
cold hard UTXO
some cold storage
that's it
like
I'm not
I'm not going to try and stop

(55:24):
the way I would frame it
if you have to ask that question
the answer is Bitcoin
if you know the answer to that question
go and speculate
if you like
if the fact
if you don't know
because like for me, I've only recently,
I've been in Bitcoin for, you know, as I mentioned,
finally fell down the rabbit hole properly in 2019.
I've seen a couple of cycles.
My whole job is analyzing market cycles and Bitcoin data.

(55:46):
I'm only in the last like three, four months starting to,
and I'm limiting myself to strategy, really.
I don really care to go that far out in the risk curve I actually think what strategy is doing is quite fascinating Going after the bond market I understand I can reason about the product
The product is bonds and they're tokenizing bonds more or less with a Bitcoin backing.

(56:08):
I think it's a fascinating strategy.
I did a podcast with Preston, which will be out soon enough,
where we just went deep down this rabbit hole.
I get it.
I understand what strategy is doing.
I think it's fascinating.
So I want to share in that.
Everything else, I'm like, go have fun.
Enjoy.
I'm going to watch it.
I'll analyze it.
I'll see them pop up.
I'll see them explode.
Personally, I'm not interested.
I'm very happy with my predominantly BTC.

(56:31):
And then, you know, I'll punt here or there because I've been around long enough.
If you're asking the question, how do I split this up?
The answer is Bitcoin.
Yeah.
Keep it simple, stupid.
Keep it simple.
Keep it simple, stupid.
Keep your income higher than your expenses.
Save some money in Bitcoin.
it's okay to be Squidward in that where he's watching Spongebob and Patrick playing outside

(56:55):
you know that meme it's okay to be sitting there watching everyone playing with their treasury
companies because I assure you it's going to be fantastic for them in this phase of the bull
it's going to suck it's going to suck for a lot of people because they're going to go
too much at the top they're not going to understand the premiums and a lot of these
companies just frankly don't deserve a premium because most companies don't yeah all right

(57:17):
another factor in this cycle that may be different it's not completely different but
i think with the launch of the lending product that strike and particularly jack's messaging
around it bringing the cost of capital down through their lending desk i mean that that's
another meme that's more predominant this cycle which is we are going to get lending products to

(57:38):
make it extremely easy for you not to have to sell your bitcoin obviously historically we've had
unchained just down the hall for me right now led in genesis famously with their blow-ups
last cycle but it seems like block fi celsius named the blow-ups but i i think the market's
lesson on re-hypothecation i know for sure the strike is very on top of making sure they're

(58:05):
taking people's bitcoin to lend against it they're not going to re-hypothecate it and
there are many people that are beginning to look at the depth of liquidity of the market above
two trillion and see it as an asset that can be used as collateral to get cash to fund a lifestyle
without having to sell spot is this a factor at all in your yeah it will become increasingly so

(58:27):
so i mean lending against your bitcoin makes all the sense in the world like it's pristine
collateral why why wouldn't you so um for me personally and again i'm going to speak for
myself i have definitely looked at it and right now as it stands a lot of them are fairly
hefty interest rates, 12%, something with that ballpark, and 12-month terms. Now, there's obviously

(58:50):
then another layer. And I think actually, I forget the name of the website, but Hugo from Nunchuck,
I think he was involved. They've got a 21-something. There's a website that shows where they've kind
of rated all these different entities. I thought that was quite useful. And I think for me,
I'm going to allow this to play out for one more cycle. I'm in no need to go and tap that liquidity
just yet. I'm actually okay to just allow the competition to build, allow the rates to come down.

(59:15):
I think what strategy is doing, we're seeing in the TradFi world, they're normalizing Bitcoin as
a collateral. So I think that once the market gets more comfortable, so this is what I would
call the early adopter phase. You're right. We had like the cowboy phase with Genesis and all
that last cycle. We're now in the early adopter phase. I kind of look at like, what am I going to
do to, you know, you borrow a hundred grand and you'd have to pay it back in 12 months. Like for

(59:38):
me, if I'm going to borrow money, it's to get into the housing market. And that's just not really a
feasible approach. So for me, I'm just going to allow the market to find its level. There'll be
a lot of people who do it. I've had this question actually from a lot of people saying, hey,
how do I risk manage these kinds of things? It's like, again, if you're asking those questions,
it's probably a bit early to be thinking about it, right? So you should be in the market long

(01:00:03):
enough and understand your financial position enough that you shouldn't be questioning what
LTVs and you should know
you should be able to work this out if you're still
again this stuff isn't easy
but
go through the loops of trying to work
it out yourself model it out
and never
ever assume the Bitcoin price cannot

(01:00:23):
go to a certain level and I'll tell my story
I learned this lesson trading options
back in 2019 2020
I thought I was hot shit I've
discovered the realized price I've worked
out how on chain data works I'm
teaching people about it I thought I was a genius
and I've learned about options.
And I was selling puts below the realized price of 6K.

(01:00:44):
And my thesis was, we're never going to go below 6K again.
March 2020 comes, straight through that level,
literally liquidated me by like 6%.
Six hours.
Took my whole account, straight back up.
And the next thing you know, we go to 60K.
So I would have made all my money.
I would have made it all if I just hadn't have thought
the price can never go back to this level.
So, you know, when you're thinking about LTVs on this stuff, never, ever believe anyone telling you the price cannot go to a certain level.

(01:01:13):
I often say the odds of it going back to 40K and undoing the ETFs, in my opinion, is like slim to none.
I do not factor in these, not even in my cases, but I would never, ever settle alone on the assumption that it can't happen.
So just be aware of that.
I think it's going to build up over time.
I think in two, three, four, five years time,

(01:01:34):
this industry is going to be booming
because it makes all the sense in the world.
And especially with like Saab 121,
once the banks get involved,
and I know this is another,
Bitcoin is going to say,
oh, don't give your Bitcoin to the bank.
It's like, you use Bitcoin to do whatever you need to do
to make your life better.
Don't listen to anyone else tell you
what to do with your savings.
You do whatever you want with your savings.
Certainly listen to heed the warnings, right?

(01:01:55):
If you're putting your coins in a bank,
you are giving up self-custody.
but for me i'm going to sit there with my utxos for now let this market play out find the level
wait for the rates to come down wait for the terms to go out wait for the market to get more accustomed
for bitcoin as a collateral asset it will happen i'm just gonna be patient and wait for it

(01:02:16):
yeah i'll add some other pieces of advice there if you're going to take out a loan do not put your
whole stack in a loan number two i'm gonna bring this up again i brought up in rabbit hole recap
a few weeks ago but it seems to be a question in people's minds i was at a meetup in philadelphia
and somebody asked when's a good time to take out a loan the price is low and the price is high the

(01:02:36):
price is low that's when you want to take out the loan if you're going to do it yes when it's scary
yes if it gets above a certain level and you're thinking about it maybe too late
that that 100 i mentioned before i've had a bunch of people saying hey what's the best way to lever
up i had some questions like what's the best price to like where should we lever up it's like
probably at 20k when ftx blew up that's probably the best time to have levered up 110k when like

(01:03:01):
there's speculation coming out everywhere and you know um futures open interest is at all-time high
and people are levering up not really that like you can do it but be prepared to ride the wave
because it's going to be a wave yes it is that said we're talking to check the analysts we have
been very level-headed sober says things that not many people want people want the moon juice

(01:03:27):
and to pull that out of you what would have to change from like a market structure sentiment
psychology sort of demand drivers in the market for this to get weird in your mind very good
question um so this is more from check the hodlers perspective right when when the things get a bit

(01:03:49):
a bit loony tunes i mean i just look at the price pattern like look at look at the monthly chart
it's just it's an incredible stair-stepping pattern where the hell are the drawdowns i like i
i can't for the life of me put myself in the mindset of someone who's saying this cycle sucks
i look at this cycle i'm like it is unbelievable how much capital is coming in how little the

(01:04:13):
drawdowns are and i've been using this this analogy or this kind of anecdote from my old man
my old man bought in 2020 which means he went through the up of 2021 and he went through the
down of 2022 and let me assure you i heard all about it all the time when number go up mate when
is my number going to go back up now he closes every sentence with number go up love it that's

(01:04:37):
where he's at so like think about the pools of capital who are now going to look at this price
chart and be like yeah i'll allocate why not i should actually take five percent it looks like
it's no longer volatile. It looks like it doesn't do those crazy things. And I don't see it going
down anymore. It seems to go up. Hey, I'm waiting for a dip and I'd love to buy in. All of these
things, you just got to think about the pools of money who the lower vol that we're seeing at the

(01:05:01):
moment is going to be much more tempting for. And I've heard this from many people. People are
getting calls from investment managers and retirement funds and family offices who are like,
all right, it's time. I want to put a 5%. You mentioned, I can't remember if it was on the air
or not, there was like an IRA bloke who come out and said like 20 to 40%.
Like, guys, the amount of money that is about to start allocating

(01:05:25):
to risk-free Bitcoin is astronomical.
Like we can't actually think about how big, the numbers are massive. And actually,
I ran a study a little while back. I was trying to just put things in perspective
of how big Bitcoin is. If you look at the
capital inflows into BTC, whether it's via ETFs or treasury
companies or whatever over the last 30 days, it's about $36 billion a month. That's the rate of

(01:05:50):
change. $36 billion. The Bitcoin market cap in May 2017 was $36 billion. So everything up until May
2017, we absorbed in one month. If you take the ETFs and strategy and put them together,
the market cap combined of those two is like two days before the 2017 all-time high. So literally

(01:06:11):
everything up to 20k is in the etfs and strategies balance sheet which really both of those have
grown up over the last like you know really let's say 18 months the etfs are 18 months strategy
bought the most um over the last like six seven months so guys like old history doesn't matter
anymore like all those previous cycles they're irrelevant they're like a footnote of behavior

(01:06:32):
they don't count we are in a new paradigm they we are in a new paradigm and what it looks like
is stair-stepping, right?
This slow, boring-ass grind.
I think Joe Calasari said this.
We're in line with a slow, boring-ass grind
to a million dollars
and we're going to be price suppressed
the whole way up.
Stop being bored, guys.
Be bullish.

(01:06:53):
It's fucking bullish.
Get excited.
You're going to be at 200K
and be like,
there's paper Bitcoin out there.
I know, there's so much.
Why aren't we at 2 million?
We should be at 2 million.
We should be higher.
Yeah.
And if the other thing
we can focus on what's happening
in terms of demand drivers internally
within the Bitcoin market,
whether it's ETFs, treasury companies,

(01:07:15):
structured credit products coming to market.
Then going back to what we were talking about earlier,
is there a big print?
And if so, how big, how fast?
And what does that mean for inflows in Bitcoin?
Exactly.
And sorry, just something that clicked to me before.
I wrote a piece that I called Paper Bitcoin
trying to address this topic.
I mentioned before that BlackRock is tearing away from the other ETFs.

(01:07:39):
That is real Bitcoin going into those ETFs.
Why are they doing it?
Because of the options market.
In order to take advantage of the derivatives, people can now allocate to the asset in the
first place.
So the growing up of derivatives allows bigger money to come in.
This is why BlackRock is peeling away.
So it's just great evidence that just because you have paper Bitcoin in the system being

(01:08:00):
derivatives, that actually enables a lot of these big entities to allocate when they previously
couldn't because i can hedge risk so i think that's just a really really important uh um uh
thing to pay attention to i missed your question before actually um what would you say before that
no i'm just saying um it wasn't even a question it was a statement i'm just how big is the big
print if it comes oh yeah how long does it last and what is it i mean in terms of market structure

(01:08:23):
changing moving forward like how much effect does that went from 36 to 37 trillion like i remember
people talking about 36 trillion then like next thing it's like 37 it's probably like halfway to
38 by this point like i mean they don't have a choice so just like grit your teeth and sit tight
i really don't send it on turbo as elon said before he left doge

(01:08:44):
that's his hands and that's that's another great example right where they go in saying they're
going to cut one trillion two trillion they got 150 and then he got kicked out it's like
the beast is too big i kicked out saying that trump's on the epstein list as he's walking out
the door it's chaos it's beautiful chaos though i think despite whatever happens whether it's

(01:09:09):
within bitcoin treasury companies going crazy etfs going crazy ria's aping in externally
elon saying that trump's on the f-stein list world war three fears ufo fears who knows what's
going to pop just blinders on stay focused keep stacking bitcoin don't get over levered don't get

(01:09:31):
crazy just focus stay humble stacks yes it's just not that difficult that is is that is that is the
best advice it has to go i mean it's it's going to compete forever with nothing stops these trainers
the two like quintessential bitcoin memes if you just listen to those two little phrases you're
gonna be just fine well it's funny it's not that hard but it's very hard for for a lot of people

(01:09:52):
Well, it's simple, but it's not easy.
I think that's a really important element.
And I actually wrote about this in the piece you were talking about before,
P. Coddle.
I opened by saying, like, why do I actually write any of this stuff?
It's to just help people not feel like a deer in the headlights
because hoddling is simple.
It is a very, very simple strategy, but it is really, really difficult

(01:10:12):
because the world keeps telling you that you're wrong.
We keep getting crazy headlines.
Every influence in the world wants to shill you why their thesis
as to why the market's up or down is better.
like at the end of the day you just have to stay humble stack sats and just trust the process
this is just trust the process yeah it's funny because you have the the trad fi
incumbents who hate bitcoin saying uh it's going to zero and then on the other side you have

(01:10:37):
those far out on the risk curve within bitcoin like aping into all these treasury companies and
levering up whatever it may be saying oh you're you're gonna miss out you're not you're not levered
up enough and then you're in the middle like wait a second it's like smash buying moving the cold
storage that's not good enough and because every treasury company still has to buy the bitcoin as
well we're all in the same trade there and uh i'm just going to like at the end of the day you're

(01:11:00):
selling the stock and buying the coin i'm just buying the coin i'm just going to skip the middle
man of buying the stock who's going to buy the coin just buy the coin just buy the coin james
it's always a pleasure sir thank you for doing what you do good to be back on well uh we'll have
to do this again uh maybe uh we'll catch like peak euphoria at the end of the summer beginning of
fall uh we'll be catching up then yes yes we when uh when we enter the topping cloud things start to

(01:11:26):
get really exciting um we can definitely do a an ad hoc episode now the uh uh i have a feeling we're
gonna do an episode people are gonna be like oh james is too bearish it's a super cycle and then
something's gonna happen either it'll be a super cycle no no i'll have a very rational sound view
evidence as to why it's over

(01:11:46):
and it's just going to keep going forever.
That's how this plays out.
That's the best way it could play out.
Yeah, totally. And that's the other thing,
right? In a way,
by being very rational,
if it keeps going, I win.
If it doesn't, then at least I'm
aware and prepared for it if it doesn't
go the way that the moonboys think.

(01:12:06):
So, you know, again,
it's all about managing your psychology
because at the end of the day, you're the
only one that can manage your Bitcoin and
or how you deal with market cycles.
It's actually a mental game.
Don't worry about it as a financial game.
It's a mental game.
And that's what getting a reasonable take on things,
that's what I do.
That's why I write and why I do the analysis.
It helps me stay grounded

(01:12:27):
so that when stuff doesn't play out
the way the Moonboys said or the Doomers said,
it kind of goes down the middle.
I'm like, oh yeah, makes sense actually.
Yeah, check the rational analysts.
You actually win bigger
because you're prepared to buy the dip
when it materializes.
You're not over-levered.
and and the rip you're not surprised when it happens no all right you go enjoy your tuesday

(01:12:48):
thank you for hopping on and uh keep keep writing the newsletter i love it um if you guys haven't
checked the substack.checkonchain.com yeah i just gotta check on jane.com you can't you can't miss
it all right it's there go check it out peace and love freaks okay freaks thank you for listening
to the show i hope you liked it if you did like it please make sure you subscribe rate review the

(01:13:12):
show it helps us out a lot and also if you like these conversations i've come to realize that
many people listen to the podcast they don't know we have another sort of layer of this media
company we have the newsletter the bitcoin brief go to tftc.io make sure you subscribe there a lot
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(01:13:34):
we also have the tftc elite tier if you sign up for that become a member we have a private discord
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(01:13:55):
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