#668: The Debasement Trade Goes Mainstream with James Check

Marty sits down with James Check to discuss Bitcoin's structural market transformation, the debasement trade gaining mainstream recognition, treasury company dynamics, institutional adoption patterns, and why this cycle's compressed volatility and sophisticated bid-side support signal a fundamentally different monetization phase.

Episode Transcript

(00:00):
James, the debasement trade is on.

(00:03):
New all-time highs are here.
It's all one trade, mate.
It's all one trade.
There's something wrong with the denominator.
It really is.
It really is.
People don't realize it yet.
It's fascinating, right?
And I've said this before, I think even on this pod,
it's amazing to me that bond traders,
I love Luke Groman's limer,
is they have to lull them to sleep

(00:24):
and just slowly anaesthetize the bond market.
They have to just pretend that they're going to try
and solve this problem don't worry just hold these bonds we're going to mandate these ones or no it's
okay we're going to try and get yields down which means bond prices up and it's like guys it's just
they're shit coins they really are and this to the skeptics out there the bitcoin skeptics it is

(00:46):
astonishing i think uh mitchell hoddle he had this tweet from earlier today i'll pull it up
because i thought it was a good one uh new all-time highs today and people for better or for worse
still believe bitcoin is a fad um not something to pay attention to but if i mean we've talked
about this many times i think how far bitcoin has come in only a little under 17 years is is

(01:12):
miraculous and it shows here like you will look back on bitcoin's monetization in marvel at how
fast it happened on the zoomed out timeline of humanity bitcoin's takeover happened virtually
instantaneously, truly a zero to one moment. Totally. So here's an interesting thought that
I'd be curious to get your ideas on. I don't know about you, I mean, I'm certainly observing that

(01:33):
Bitcoin has become desensitized to it. So there's almost this bifurcation of how people are observing
and analyzing and studying Bitcoin. People who are coming in now, let's call them the tradfys,
the retirement accounts, like granted, there's still a small chunk of the overall demand.
I would estimate something like 20 odd percent or thereabouts. They're coming in and going,

(01:54):
like they just see the ibit chart it's in a bull market it goes up only what's not to like and you
got all the bitcoiners who've been around through all the high octane phases looking at this thing
being like oh god this cycle sucks it's so slow so boring you've got this real interesting dichotomy
where it's like it is monetizing at an incredible rate think about some of the headlines that we see

(02:14):
these days if you told yourself that back in 2020 back in 2018 for you back in 2013 14 50 you
wouldn't believe it, right? You just actually couldn't believe it was happening. And now we're
so desensitized to it. There's like this bifurcation of the market. What are your thoughts on that?
I think Bitcoin bores people to death. This is what Bitcoin does. It lulls people into a state of

(02:36):
complacency and uncomfortability where they're not happy that it's not reaching new all-time highs
every day. But again, it's insane. Looking at the charts now, we're at $2.5 trillion market cap.
And thinking back to our conversation earlier this year where Bitcoin had established itself as a $2 trillion asset, it's already added 25% more in market cap since then.

(03:01):
And it's like, what do you people want?
What more do you want?
It's up almost 100% over the last one year.
It's up 32.6% year to date, five years up over 1,000%.
It is monetizing in real time.
but you were alluding to some things that have manifested over the course of

(03:22):
this year that may have some long time Bitcoiners,
but her because they made the wrong decision.
Oh yeah.
The old treasury company trade is,
I mean,
there's one of those things that like,
I love it.
Like all things.
I love the gray zone.
The gray zone is where I find it interesting.
And you know,
you look at some of the comments I get on Twitter,
I was,
you know,
I'll poke fun of them on Twitter saying,
you know,
Bitcoin's at 125 grand.

(03:43):
It's punching all time highs.
And I just flicked through all the treasury company charts down,
60, down 70, down 85, down 95. It's like some of them are punching new lows as Bitcoin is ripping
to new all-time highs. You just look at this thing like something is going on here, right?
The market is, in my view, like my real high-level view, I've had this line that MNAV gravity is

(04:05):
towards one. It appears to be that MNAV gravity is indeed towards one. By the way, gravity just
means that's the acceleration. That's where it wants to go. There are a handful of these companies
that I think are going to be able to fight that gravity.
But you need a toolkit, right?
And if your stock goes below one,
it's just hard to dilute shareholders.

(04:26):
We're below one.
And then people are saying,
oh, well, why don't they buy back this stock?
And I'm just like,
why would you want to own a hedge fund
that isn't a hedge fund
that basically sells Bitcoin at the high
before it runs to buy back their stock,
which is in a downtrend, right?
You're rotating out of your winner into your loser.
Why would I want to own a company that does this?
So I just think the toolkit
for companies that aren't strategy,

(04:48):
that aren't maybe meta planet.
Like there's a handful of these things that make sense.
I just think the market's sending a really,
really brutal signal that there isn't quite the demand
people thought there is for this like
hundreds of treasury company trade type idea.
Companies that are saving Bitcoin is great.
But like, I just think there's a lot of,
there's a lot of capital that's been incinerated.

(05:10):
And I think that's put a dampener on moods, honestly.
Some of them might come back.
and if Bitcoin goes on a tremendous run,
there's no question there'll be some kind of premium
baked back into these things.
But will they ever,
like if you go and do that calculation of what it takes,
if you're down 95%,
if you're down 95,
it means you've been down 90,
you've been cut in half again.
You've got to get a really, really big return

(05:32):
to get back to break even,
like to get back to break even.
So it's just a,
it's a challenging proposition, I think.
It really is.
And for most of these companies,
I agree with you,
There's going to be a parade of distribution, probably even more pronounced of a distribution.
And I've been saying it all year.
It's just too good to be true that you can just easily spin one of these up and issue shares, do converts, whatever it may be, accumulate Bitcoin and have your stock outperform Bitcoin.

(06:01):
to your point, like operating businesses that are profitable, doing something completely different
and unrelated to Bitcoin that has value and provides utility to the market is,
and they're funneling their profits in the Bitcoin. I think that's the best strategy long term.
Totally. I mean, our business does exactly that. And that's the separation. There's like the all

(06:24):
in seller style strategy. Whenever I talk about treasury companies, that's all I'm talking about.
like companies that just sweep cash into BTC.
Good, fantastic, exactly what you should be doing.
It's the ones that go all in.
That is a very, very tough.
It's a tough business because you don't have the scale.
Like strategy has the scale to tap debt markets.
They have the scale to do preferreds.

(06:46):
They have enough inertia where the market believes
that they can, you know, 640,000 corn.
Sure, it's going to be hard to double your stacks
and then out of two is challenging,
but they also have the most means and likelihood
of being able to do that.
If once you get these small penny stocks,
once they go below an MNAVA one,
like how do you restart those engines?

(07:07):
It's tricky.
But I think that's one element.
But I also think that part of this whole story
is actually just derivatives as well.
As the market matures,
that is, I mean, the least discussed,
but I think most important thing since the ETFs,
there's a market structure shift
has been these IBIT options.
I don't think people understand how big they are.
I'm doing a report as we speak on this.

(07:27):
it's 51 cents of options leverage per dollar in ibit like it's exploded it's now 57 of the trade
volume for options it's overtaken there a bit and then it went live in november so this is just a
massive massive massive shift to market structure uh you know it creates more avenues for leverage
wall street's going to start playing games to capture volatility but as we know bitcoin has

(07:52):
this very, very unique characteristic where it lulls everyone to sleep and then it rips and it
just moves. And that's the kind of thing where you can get a bunch of guys really off sides.
And where we are right now, we're at 125 something or 124, there's a massive pool of calls, like
350,000 contracts that are due in just October. So it's a massive, massive chunk of total open

(08:17):
interest. These are people who've sold covered calls above the previous all-time high. They've
just flipped over to being out of the money, right? So essentially the buyers of those calls
are in the money, so they're happy. But the guys who sold those covered calls, sure, if the price
stays here at 124, 125 till the end of October, that's fine. They collect the premium, they win.

(08:39):
But if we go to 130 or 140 and we just keep climbing, suddenly they've given up all that
upside at massive scale. So you'll probably see the higher that the price goes, the more of those
guys are going to say, oh shit, I shouldn't have sold that upside and start flipping and going the
other direction. So that's going to be a very interesting dynamic. Well, that's one variable

(09:00):
of many that you highlighted in a recent report that you did in collaboration with Unchained about
the changing market structure. And we've been touching on this during our quarterly catch-ups
throughout the year, but I don't know.
I read the report, went through it.
You see more bullish than you have been throughout the year.
You recall them for 150.
I believe the report had some potential targets above that.

(09:25):
Yeah, so I think the dynamic as it stands,
so chop solidation has been my meme of the year, right?
That's been actually meme of the cycle.
We've had two major phases.
The first one was in 24, proved we're a trillion dollar asset.
Second one, I would say all of 2025 has been one big-ass chop solidation.
And just for clarity, when I say chop solidation,

(09:47):
it derives its name from a technical indicator I call the choppiness index.
And it basically looks at how much energy is in the tank for a market to keep trending.
Short story is when the market runs really hard in either direction,
and it works on daily, weekly, monthly timeframes,
you just hit a point of exhaustion where the market can't keep running it's got to take a break

(10:09):
and my definition of chop solidation it's obviously taking the chop part combining with
consolidation price goes nowhere for like six eight twelve months absolutely nowhere you close
your eyes but it's sold off it's rallied it's blown up it's liquidated people like accounts of
the bodies of traders are littered all over the road to get there and the price is dead flat

(10:30):
2025 has more or less been that right up until very recently we were at 110 we had a previous
all-time high in january at 110 the market's gone basically absolutely nowhere and only in recent
history we started actually lifting off that base that 2025 zone here's some some fun facts for it
uh 30 of the supply currently has a cost basis above 95k 60 if you price those coins based on

(10:56):
when they moved on chain. So really, people, yes, some of us think about things in BTC terms,
most people think about it in USD terms. When you buy a big slug of Bitcoin, you're looking at the
price relative to that purchase price. So the dollar value is actually what people emotionally
anchor to. So 30% of the coins are up there, but 60% plus of the dollars that have ever been

(11:18):
invested in Bitcoin is above 95k. This is our new home, right? Imagine if we go down below 95,
suddenly that 60% of dollars, they're all underwater and going, holy shit, did I just
buy the top? So you can imagine how the sentiment would shift really badly if we were below 95.
However, we've now bounced, right? We're now at 125. We tried to sell off. And let me tell you,

(11:41):
there are plenty of signs of slowing momentum in this market. And you're right, I've been
relatively cautious over the last, I would say, month or two, really since the first 125
all-time high, somewhat cautious because I was like, why is gold ripping? Why are equities ripping?
Why isn't Bitcoin ripping? And there's this idea I've been floating around recently where gold,

(12:04):
I think, tells us the future. It's where we're going when all is said and done. It smells out
the debasement first months in advance. Bitcoin is much more sensitive to the near-term local
liquidity. So if Bitcoin was showing weakness, gold is ripping, one interpretation of what that
could mean is that the path between here and where gold is, is a bit weaker, right? Maybe you

(12:28):
see a crack in the equity market. Maybe the AI bubble slows down, whatever it is. The response
is going to be debasement at a monumental scale. This is the big print ID. But Bitcoin is going to
show us the road to get there. Now, the fact that we're still pushing up to 125, great. And honestly,
the market is now saying, I want higher. So my big picture view here is we could have gone to 95.

(12:52):
That would have been, I think, all over for the bull. We didn't. We didn't even get below 110,
which is a critical level there, short-term cost basis. And we've bounced. We did that twice.
The bulls are now in control. If we go back down to 110, you now have to ask yourself,
where the hell are the bulls? What are they doing? Where's your firepower? So it kind of

(13:13):
sets us up with a really nice just framework but going back to your original question that
shop solidation we've seen in 2025 if my thesis is correct we've built an enormous base up here
at 2 trillion we proved a trillion in 24 we've proved 2 trillion in 25 so now the question is
how many trillions and i mean the most logical thing is let's go to 150 let's see what that

(13:34):
looks like because that's 3 trillion but we've got this massive base right 60 of the dollars
invested in Bitcoin have said, I want it above 95K. That's more of a floor than it is a ceiling.
So it's one of these nice binary setups and markets, you've always got to hold two views
at the same time. There's no excuse for the market to go down to 95 right now. We have proven that

(13:58):
we want to go higher. The bulls are in control. If not, the bulls are just weak source and probably
over for a period of time. But that's not the base case because we're at 125 and it feels like we want
150 and we're coming off a really really nice stable base you can kind of start lifting some
of your targets and saying well because we've proven 110 that's the floor where where do we

(14:20):
go from here yeah and another chart that we're talking about before we hit record that i really
like in this report is a realized volatility and i think that is chopped solidation painted in
another picture if you just look at these ball numbers that you can see like it's a spring coiled
getting ready to pop.

(14:41):
And so-
I'm pretty sure that I called out this chart.
Like if there's one thing
in the entire Bitcoin market cycle,
if there's one data point that says
like this time is measurably different.
And it's important to make the distinction here.
When I say this time is different,
it is not in the financial sense of the word,
which is that when,
like the foremost dangerous words in finance,
this time is different,

(15:01):
is when it's ripping to the upside
and everybody is just saying new paradigm,
no more bears, blah, blah, blah.
That is not what I'm talking about.
This time is actually different, and you can see it in this chart.
We are trading in a very, very different regime.
If you look in previous bull markets Bitcoin is very commodity Volatility picks up during the upswings and then compresses in the bear when no one cares about it We had this very very compressive oil profile

(15:27):
And there's a number of factors that come into this.
There's derivatives, there's options.
There's also just this kind of institutional bid that's under us.
One thing that's been very characteristic of this cycle, if you look at spot order books,
because as you would know, you can do taker or you can do maker, right?
If you're a maker, that means you're putting in a limit order and saying, I want to buy

(15:48):
Bitcoin below the price.
Or if you're a seller, I want to sell it above the current price.
The taker is the one that goes across the order book and actually hits the ask or hits
the bid and is actually taking liquidity out of the books.
For almost the entirety of this cycle, we've had a massive bias towards net sellers, people
who are market selling into buy walls.

(16:10):
And the price hasn't gone down more than 32% twice.
there is a huge amount of liquidity that's just sitting there on the buy side but it's not rushing
to the other side of the book it's not doing fomo buys it's allowing the market to sell to them
it's a much more patient much more conservative sophisticated honestly bid side and it does it

(16:33):
compresses the volatility because you're not getting those crazy downswings we're also not
getting the crazy upswings but there's this like demand cushion sitting underneath the price just
accepting all the sell side. And let me tell you, there has been some tremendous sell side this
cycle. Tens of billions of dollars in a month. We saw 80,000 Bitcoin get sold. The market went down
3% and then recovered. There's just all these dynamics that say that we have a very sophisticated

(16:57):
bid side. And they are. They're just boring people to death. People are selling because they think,
Bitcoin cycle's over and we've come to the end of the four-year cycle and it's been shit. I may as
we'll get out of this position.
And then these like giant ball of buyers
are just like, thank you very much.
Keep it coming, keep it coming.
We're just going to absorb, absorb, absorb.
And then one day it's just,

(17:18):
there's going to be no sellers left.
It's just going to rip.
Yeah. And it's funny too,
the Uptober meme really becoming true
in the first six days of the month.
But then, I mean, just pattern recognition
of the psychology of the Bitcoin market,
specifically like you had Paul Tudor Jones
on CNBC this morning,
like Bitcoin's going to rip, gold's ripped, Bitcoin's going to rip.

(17:41):
You have a bunch of people in TradFi, you had JP Morgan come out and basically say,
we surveyed our clients and we're asking them why they're investing in particular assets
when it comes to gold and Bitcoin.
They're doing it because they're worried about debasement and fiscal dominance taking over.
And then you had Mohammed El-Rain come out and basically say, oh, like Bitcoin is the

(18:04):
debasement trade.
So you sort of have this memetic power, narrative power building around it at the perfect time, too.
Which, by the way, Bitcoin has just maimed that shit into existence, by the way.
Like, we literally just said it enough times, and now the whole world says it's great.
It is.
I mean, it seems like the basement is on the table.
I think if you look at what's happening here in the United States, particularly with the economy, it seems like the economic data is painting a different picture than what's actually happening behind the scenes in terms of the quality of life of most Americans that particularly don't own financial assets.

(18:41):
You look at this push towards AI dominance and it being viewed as an arms race that we have to win.
And when you factor in the amount of money that's going to need to be poured into that, it's immense.
And we're seeing that manifest in the form of industrial policy being at the scale that it probably hasn't been since World War II with the Trump administration taking stakes in chip manufacturers, rare earth metal companies,

(19:06):
pushing for the takeover of social media companies as well.
And it seems like we're definitely hitting a point here in the United States
where the sort of combined factors of the economic backdrop
and the industrial policy and goals that the Trump administration wants to go after

(19:28):
demand that we unleash the money printers or inject stimulus into the economy one way or another.
and there's only so many options that they have.
This is just what they have to do in many ways.
So it's part of that dynamic if they're trapped.
If you look at the correlation between like people say Bitcoin's just levered NASDAQ,

(19:48):
but the correlation between Bitcoin and the NASDAQ, Bitcoin and the S&P, Bitcoin and gold,
since 2022, since the bottom of that bear market, it's basically been just been one.
So everything is just correlated to everything.
And this is abnormal.
And it's because it's all one trade.
It's all one trade.
there's just something wrong with the denominator and again gold is sniffing this out we have an

(20:10):
inert yellow metal uh as well as a bunch of silver medals in fact i think i said on your
pod sometime back that i was a platinum maxi uh platinum is like one of the best performing
precious metals at the moment it's kicking ass um the market is just saying give me something that
isn't cash because cash is just not doing it for me at the moment which is it's incredible to watch
no it really is i'm going to pull up this chart i can't find the luke roman chart off the top

(20:34):
out of my hand, but I know that we shared it from 1031 this morning, but just like really
drive this point home.
Like it is, and it's crazy how under the radar it is for most people.
Totally.
Especially when you consider how much Bitcoin gets besmirched in the media.
Like if you look at the S&P going back to 2020, denominated in Bitcoin terms, it's clapped

(20:59):
by 88%.
on my deck there's two charts that are probably relevant uh look at slides eight and nine
these are both really nice visualizations like i like i think bitcoin is misunderstand gold a lot
of the time uh i like i like gold's my second biggest holding and i think it shows us the

(21:21):
future it helps me understand where the bitcoin trade is going and why it's doing what it's doing
So I think it's the next one.
This one here.
So I like to use gold as my benchmark.
So basically, for those who are just listening, what we've basically done here is since 2022
and specifically February 2022.

(21:41):
And the reason that I've checked that date is that's when the US froze Russia's reserves.
That's the immediate signpost to say, hey, the treasury market is no longer your sovereign
savings vehicle to anybody who is listening.
now it also the reason i like to pick that date is a it's a very important geopolitical date where
the the foundation has been challenged at a fundamental level uh counter-party risk has

(22:04):
been reintroduced to the savings asset but also it's not cherry picking like bitcoin's bottom and
saying look how much it outperformed we're not cherry picking bitcoin's top and saying look how
you know how much it got destroyed it has the bear market that has the bull market that follows
and basically what I've done is everything is indexed to gold.
So gold is the benchmark of one
and it's just looking at all the major fiat currencies,

(22:25):
dollar, Mexican peso, Aussie dollar, euro, pound, whatever.
They're all down 40% to 60% in gold terms
and that's when I took these measurements
which would have been in late August.
So it's down even more than that.
I view gold as like the benchmark inflation rate
over the long arc of time.
It is the real inflation rate.

(22:47):
Bitcoin is up 50% to 80%.
More than that now, it is versus gold.
And that includes a 55% drawdown versus gold in the 22 bear market.
But if you go down to the next chart, you can just say, well, you know, fiat currencies,
they're all programmed to debate.
So yeah, of course, Bitcoin and gold are beating fiat currencies.
Well, let's price the S&P 500, silver, TLT bonds, which is Luke Groman's favorite line.

(23:11):
Let's price all of these in gold.
And they're down 10% for silver, 24% for S&P, 65% for bonds since that same period of time.
So clearly, there is something going on with these hard, scarce, sound money assets.
Coins of all shapes and sizes are doing particularly well.
Everything else, yeah, everything's part of the fiat Ponzi, not so much.

(23:33):
well do you think i mean taking into account that this time is different in the sense of the market
structure and the players that are involved in in the bitcoin order books and the derivatives
around them specifically do you think people are beginning to wake up to this and if so
how does that change things moving forward so here's a an anecdote uh if i i regularly track

(24:00):
what's going on at the local bullion dealers here in Australia. Almost all one ounce gold coins are
on back order only. When I was buying platinum, every time I would go in, I would say, hey,
is anybody buying this stuff? And they'd be like, more sellers than buyers. No one really cares.
I can't find a platinum coin to save my life now. Sold out everywhere. All the gold coins are on

(24:20):
back order. Even the silver market, right? They've got thousands of these silver coins with stupid
designs on that no one wants to buy, even they're starting to run out. So like just the local
bullion dealers are moving into back order only here in Australia. There is a clear demand. Now,
what does that do to people's psyche? Once people work this out, and this is another thing that I

(24:42):
think Bitcoin has memed into existence. Goldbugs tried forever to get fiat currency. Call it what
it's actually called. Give it the name. It took forever for goldbugs to even achieve any kind of,
you know, acceptance of the term. Bitcoin has shown up on the scene. Next thing you know,
everyone from Gen Z to boomers are talking about fair currency. So we managed to just crack that
egg and say, hey, there's something wrong with your denominator, call the evil what it's called.

(25:07):
And as people work this out, this is another thing I think is really interesting.
We're all but seeing an era where information travels much faster. Narratives travel very
quickly through the internet. There's this dynamic at play where we're just kind of working out
what the actual trade is much, much sooner.
So I think about this in the context of the AI boom.

(25:28):
I think there's a lot of evidence that it's a bubble.
I'm certainly a little bit concerned about it
because I get there's the industrial policy side of it,
but also the revenue picture of it is very, very questionable.
But how quickly can...
If you look at the dot-com bubble,
it took a long time for people to actually work out.
They had many, many years of this thing just going vertical.

(25:49):
and there's no question there was a you know all the fiber was laid and all that the internet was
super powerful blah blah blah are we going to reach that point of the pets.com recognition moment
much sooner so if people kind of index and say oh it's still 1999 but what if the timeline from
1999 to 2001 isn't two years what if it's two months you know what if things just travel much

(26:15):
much quicker. And in my view, that's like the one thing, if there was a major risk vector for
Bitcoin, I actually don't think it's internal. I think the Bitcoin market is actually quite sound,
quite solid. I just think that the external factor of, hey, suddenly the AI bubble isn't
quite as healthy as we thought. There's some kind of external event that just breaks down.

(26:35):
That's the main thing that I think is hard to analyze, hard to kind of track when those things
pop. But there's enough warning signs that we should be paying at least a little bit of attention.
Yeah, it's funny. I've been spending the last two days really battling over this question internally in my own mind. I've had Jordy Visser on the podcast. I've been watching his weekly show and a bunch of other shows to it, too.

(27:01):
When you compare the AI boom to the dot-com bubble, they obviously rhyme in many other ways, but then there are ways in which they don't rhyme.
Like the dot-com era was laying broadband, and there really wasn't much use for that broadband yet because nothing had been moved to the digital world in size or materially or anything that was worth monetizing at that point in time.

(27:26):
And I guess this is what Jordy and many others are saying, was that it's different in the sense that like the AI has utility from a productivity standpoint right now for whoever uses it.
I think ChatGBT has 800 weekly active users and everybody admits that there's definitely a massive misallocation of capital going within AI specifically.

(27:50):
It's just the question of is it as sort of catastrophic?
Does the end result as catastrophic as the dot-com bubble bursting?
Or is the signal within the capital that's been allocated to AI strong enough to sort of just shed yourself of the bad investments and the good ones will shine?

(28:13):
Not only will they shine, but they'll produce so much productivity in advance.
The people will leverage them so much that it won't be as bad as 2000, 2001.
I don't know yet.
Jury's still out in my mind,
but it is like one of those fascinating inflection points
that we find ourselves in and trying to make decisions
because it's all new to everybody who's involved,

(28:36):
especially when you consider the exponential increases
to productivity that AI is bringing in the world.
Yeah, I very much agree,
and I think there's no question the potential is there.
And again, this is very, very anecdotal.
i certainly find for me ai makes way too many mistakes like there was when i was trying to do
this study on ibid options i started pulling number from because data sources in the tradfire

(29:00):
world you'll be amazed how often they diverge you're like hang on a second i've got five billion
from this source but i got 35 billion from this one which one is it so it's very very hard to
actually reconcile this stuff so i was using ai i tried grok and chat gpt and i'm like can you just
estimate for me what is the open interest for ibit options and then you do the deep think one where
it actually really goes through and looks at different websites and as i'm reading through

(29:24):
its copy it's like i'm just going to assume that there's a million contracts open and then just
carries on i'm like what do you mean you're going to assume there's a million contracts open and i
just send it a website like this one here says there's like 53 million contracts open oh yes you
absolutely you're absolutely right there are 53 million it's like fuck me like do i have to check
everything and i do wonder it'll get there but the mistakes it makes already i find that i'm using it

(29:50):
less and less and that again that's just me and how i work and i like to write my own stuff anyway
but even in my coding like it helps me do when i'm building up charts and things yes it can make
things faster but also the amount of times it just introduces random bugs or like it wants to make a
change i'm like i don't want to change anything just like fuck off leave me alone and sometimes
I just have to disable it because I'm like, you're literally just a pain in my ass. I got,

(30:14):
I didn't get to focus on my own work. So that's just where we are at the moment. So again, that's
not a, that's not a perfect analogy to say that it's all, it's not going to work, but there's still
a lot of errors and I can't quite see, like for me, I think the AI, there's a lot of similarities
to Bitcoin mining. Some examples of this, if we look at like the subsidy and fee model for mining,

(30:35):
They don control their output cost which is Bitcoin That a thing they produce The subsidy is guaranteed income The fees are volatile and based on user application We gone through a phase at the
moment where they're training all these LLMs. That must happen. It's like a big race for building up
these LLMs. That is guaranteed usage of these chips, of these data centers. That's the subsidy.

(31:02):
but at some point that's a very expensive exercise and those models get deployed and they have to
start actually generating revenue in people's business models in apps whatever it is over time
that subsidy is probably going to have to give way to the inference side of the equation where
people actually have to use ai and by using it that's your fees it has to be useful if you keep

(31:25):
plugging stuff in and it goes i'm just going to assume this legal premises you're like but that's
There's no premises for this whatsoever.
The more people are going to say,
maybe I can't trust this thing
to actually do the job I'm asking you to do.
So therefore your fee revenue goes down.
So it's one of those dynamics to just keep an eye on
that we're just not there yet where I'm like,
it's going to replace thousands and thousands

(31:45):
and thousands of jobs.
It'll certainly replace some and it is,
but I'm not necessarily convinced
that we're going to see like a shedding of the workforce
in the next period of time.
Now, that's a longer term view.
That is something that probably will happen.
and the sad reality that I have to balance this with.
The world is a bell curve.
And sadly, even with all the mistakes that AI makes,

(32:06):
there are still a lot of people
who probably are going to be replaced
by the systems as they stand today
because they also make mistakes.
So that's also a challenging dynamic to be aware of.
But yeah, it's hard to get your head around
where we are in this whole mix.
It really is.
It's so fascinating, dude.
I completely agree.
I catch it making mistakes every day.
We've been leaning more into the video gen stuff,

(32:27):
which has been fun, but...
It's just fascinating to think through this.
I wish I wasn't, actually, I don't wish I wasn't nine years old when the dot-com bubble was bursting, but it would be interesting to be able to sort of teleport back to that point in time and try to gauge the sentiment correlations that are happening, that were happening back then, that are happening today.

(32:52):
because everybody in Silicon Valley and obviously on CNBC is like dead set,
like it's here, it's happening.
We're getting to the point where trillions are being poured in.
It's like, oh my gosh, I better hope this pays off.
But it also highlights the relative value of Bitcoin as well.
I mean, we talk about this a lot at 1031.

(33:13):
Like you have all these venture capital funds and growth funds being thrown at AI
and yet still Bitcoin, which arguably,
I can make the argument is more important
or a bigger total addressable market than AI
because it's going to be the whole money of all the world
and AI is even going to be using it,
still overlooked by these same investors.

(33:37):
Yeah, and I think one thing that I've,
I can't remember, it was a couple of days ago,
you saw the headline that NVIDIA invested $100 billion
in, I think it was in OpenAI,
so that they can buy $100 billion of NVIDIA chips.
and you're just like, this is some like PowerPoint plugged into itself type shit.
It's starting to get a little bit circular.
And like, where have we seen this before?
The crypto industry in every facet.

(33:58):
Like we're going to fund this protocol, which is going to fund this one, which is going to put
and you just see these like loops of internal financing.
And you're like, is that because you can't actually raise money anywhere else?
Like, is that what's going on here?
So some of those dynamics are also, you know, leverage and debt starting to creep in.
And again, I'm not an equity analyst.
I couldn't tell you where we are in this whole cycle,

(34:19):
but also I've come to trust my gut in markets because generally speaking,
that serves me well.
I just have this,
this smell test.
You're like,
like at some point this doesn't carry on the way it's currently going,
right?
We're getting close to some kind of climax here.
Yeah.
Yeah.
It's,
it's definitely frothy right now,

(34:41):
but bringing this back to Bitcoin,
I think,
going back to Paul Tudor Jones' comments.
And actually, I've been recording.
I've recorded twice with Michael Howell from Cross Border Capital.
And his whole thesis is we have these liquidity cycles
that are dictated by the duration of treasury bonds
and other debt instruments.

(35:01):
And he was saying two months ago
that we probably have six to nine months left
in this liquidity cycle.
So I mean, four to seven months left from this point forward.
and then you had Paul Tudor Jones saying
from here to the end of the year
it's a big melt up
and so that's, I can feel
the 2017

(35:22):
vibes coming back in terms of the speculative
fervor, not only around Bitcoin
but all assets
Yes
and that's one of the real challenges, right?
You've got all these competing forces
and I was listening to Brandon Quidham talking
with Danny the other day, the whole
fourth turning idea, you've got the long term
debt cycle. You've got the social structures that are the institutions that are weak. You've got all

(35:45):
these things coalescing at the same time. Liquidity cycle, debt refinancing, social cohesion,
politics, all of it is just a real melting pot. There's not that many stable things when you look
around. Actually, going back to gold, I was talking to my old man. He's retired and he has

(36:05):
to have his assets somewhere. And he's now probably convinced and he understands the gold trade,
but I've been saying gold for years, for years and years and years. And he finally started to
catch on. He's like, I get it. He's now understands the Bitcoin and the gold trade.
But he was like, why gold? And I was like, because if you look around the world,
there's instability everywhere you go. Everywhere you look, there's just stuff that's

(36:28):
going wrong. And I said, do you know what a shelling point is? And he goes, no. I said,
we're in Paris and I say I'm going to meet you at midday where are you going to be and he goes
the Eiffel Tower so of course you're gonna be that's that's the shelling point so when the world
is in just a real pretzel and no one really knows how to like where do I put my money and he was
saying that he went out for like a golfing weekend with some of his mates and he asked how many of

(36:50):
you guys know what's in your we call superannuation your 401k how many of you guys know what's in your
401k they're all retired and he goes none of them had a single clue what was in what they'd invested
in they had no idea and it's like what are your fees they're like i don't know i've never checked
this is kind of where a lot of people are so if you come back to that view when people start to
finally click and go i'm struggling to retire and the things i own yeah sure i'm getting six percent

(37:17):
eight percent a year but my bread just went up 25 in three years like something's wrong i'm not
earning enough to stay solvent what are they going to do they're going to look around like gold is
just that shelling point where people go, I get it. You don't have to explain gold to anyone.
They just understand that it's valuable because it's gold. It's kind of as simple as it gets.

(37:38):
So that's kind of the dynamic, I think, why gold makes sense. I think Bitcoin,
it's just, I mean, gold's just got the size and the scale and central banks and all that.
But Bitcoin is the only other asset that has even a remote potential to achieve that. And I was
talking about this the other day once bitcoin i mean it's already at 10 of the gold market cap and

(37:59):
by the way the gold market cap going up is just raising the ceiling for where bitcoin's going
it's just lifting up where that target is as more people start to click that these two things are
synonymous and in a way we've caught again bitcoin has kind of memed that with digital gold
call it an affinity scam if you want but we've basically associated ourself with the only other

(38:19):
asset that's kicking ass people are going to start saying well maybe if it's 10 what happens
if Bitcoin goes to 20% of the gold market cap.
Once you're at 20, go to 50.
And once you're at 50, let's go the whole way.
Like if you can prove that you're at 50%,
go the whole way.
Because if the market's willing to support
that kind of evaluation,

(38:39):
then why wouldn't it go higher than that?
Yeah.
No, and I think this is a really important topic
to dive into.
Because I remember back in,
geez, like the first time
the sort of Bitcoin to gold parity
targets are being set out there i think the first time if i remember correctly it was like bitcoin
336 000 that's when it reaches parity with gold then like 2017 21 750 000 now it's like 1.8 million

(39:07):
and i think in terms of market cap that's what people really don't realize gold's up what 40
this year it's adding literally trillions of dollars to its market cap on a somewhat daily
basis at this point and that's i think we're talking about like orders of magnitude that
you're climbing up gold's obviously been the target for some time but even the target it's

(39:31):
like a moving target that's drifting higher as it appreciates and more people accumulate that but
the gold has added tens of trillions to its market cap very quietly and like in bitcoin
sitting at a two and a half trillion dollar market cap it would be basically insane to think that
that could happen in the timeline that it's happened with gold but i think that stat alone

(39:53):
highlights how early we are with bitcoin the fact that gold is quietly added i believe over
25 trillion to market cap and crazy it was like it was 25 trillion you know uh i think it started
the year somewhere around 25 and i think if you go back to like the the run here really started in
23 from memory uh and if you go back 22 i'm pretty sure it's like 7 trillion at the start

(40:15):
of that 2020 run so it's basically added 20 trillion dollars right 10 bitcoins worth of value
in the span of like three years and i i really believe this is very much a um elephant through
a keyhole type idea where you've like if you look i saw a sentiment poll um recently and it basically
showed the allocation that institutional investors have to gold and like 45 or 50 percent of them

(40:39):
had less than one percent allocation and you're like no one owns this thing and even like the
upper bound was like 4%. Most institutional investors have no allocation to gold. Very,
very small. And then you look at their Bitcoin position, it's even smaller. I ran a study,
it's a little bit outdated now, but it would have been in the first two or three quarterly cycles
of the ETFs going live. Something like 20% of the ETFs were held by institutions. And the vast,

(41:04):
vast, vast majority of these firms had like 0.0001% allocated to Bitcoin over their AUM.
Now, that 0.0001% was like tens to hundreds of millions of dollars. It was tiny portfolio
allocation, massive dollars. And you're just like, what happens if they go to 0.002, 0.003,

(41:24):
0.1? Suddenly, you're getting like a 10x. Now, we're talking about billions of dollars coming in,
elephants through a keyhole. At some point, there really is just so much capital that has to find a
home and it just takes time it takes time for the market to work out there's something wrong with my
denominator and i gotta go looking for an alternative yeah i think that's bringing back

(41:47):
to like fourth turning i know this time's not different in terms of uh if we get to like new
breakout all-time highs and it's like the new paradigm super cycles here but it's fascinating
you had germany come out today and saying they want to raise the retirement age to 72 to make
sure that they can pay out their pensioners. Trump, flippantly, there's like offhand comment

(42:09):
two weeks ago, posited the same thing here. Let's raise the age to 67. And I don't know if you're
seeing it over in Australia, and I'm sure you've seen the TikTok videos from over here. In the
United States, people are in their cars talking about health insurance premiums growing up like
50% on average across the board. Here in the United States, this year, we have the open enrollment

(42:32):
window, which just opened up at the beginning of this month and will be open until the end
of January and people get to pick their health care plans there.
And I think on average across the United States, the sort of premium is going up anywhere
from 25 to 60 percent.
And the cost is getting way out of hand.
People are intuitively understanding that something has gone off the rails.

(42:57):
and like at what point do they force their politicians or wealth managers or rias to say
hey you need to get into these hard assets the math it's funny and then it's like i uh
i mentioned to you before we hit record i moved to a new area i was at a little cocktail party
on friday night and met a gentleman who runs a big ria book here in the united states and he like

(43:24):
sort of like pulled me aside.
I was like, I need you to teach me about Bitcoin.
Like, I don't know much about it.
Anytime somebody's pitched it to me,
it seems like too good to be true.
But it's like, dude, you manage billions of dollars
and you don't have a grasp on Bitcoin yet.
That's not.
Yep.
I didn't say it to him and hope he doesn't listen to this.
But if you are listening to this,
we need to sit down and talk because it's not okay.

(43:46):
But it's also getting to the point
where people are asking those questions.
And that's, again, a very, very big difference.
I've successfully orange-pilled four or five different people this cycle,
but I don't go out of my way anymore to orange-pill people.
If they've got questions, they've got infinite time.
But the way I would characterize the folks who have actually come to me
with questions, people who actually have wealth.

(44:07):
They've got some kind of serious family wealth behind them.
They're looking around and going, there's something wrong here.
I don't really want to keep invest like real estate's illiquid
and there's certain risks with those depending on where you live.
there's just all these things people go you know what maybe i actually need to look into something
that is scarce liquid and just i can hands off i don't have to think about it anymore so that's

(44:29):
the kind of dynamic i think the the kind of the high net worth individual also the retirees um you
know we are one of our plans that we have at check and change our orange plan disproportionately
retirees who have a you know meaningful amount of wealth and they're now looking ahead and saying
well, I need to buy myself some runway, but I also really understand Bitcoin, trying to find

(44:50):
that balance between like, I don't really want to sell all of it, but I kind of need to sell some of
it. Or I need to find some kind of liquidity somewhere. But that dynamic of the type of
investor who is now coming into Bitcoin and staying here, that is a really, really different
dynamic that I think a lot of people have missed. We're not in that like millennial hodler phase
anymore. And of those millennial hodlers, I think a lot of us, like people say, well, why would you

(45:14):
sell your Bitcoin. This is a topic that I like to talk about because one sold Bitcoin is one bought
Bitcoin. It's actually a measurement of demand. But there's a lot of people like you and I who
are at that phase where they've got kids, they need a house, they've made a bunch of money,
they kind of need liquidity to improve their life and live because that's kind of more important
than your Bitcoin. That's another phase I think is misunderstood. People sell because they just

(45:37):
have life requirements that are more important than number go up, right? Because lifestyle go
up is just more valuable.
So I think that's another component that is worth tracking.
Agreed.
With that in mind, I mean, what are you seeing on chain?
Talking about new market dynamics new drivers for liquidity in the market and new buyers and sellers What are the levels that are sticking out to you now that we cross over a new all high Yes It easier to illustrate on the downside

(46:12):
because on the downside, the real risk is 95. 95 is a level that we don't want to hit.
Honestly, we go back down to 110, you're like, why? Why did we go there? We have no place being
there. I was describing that whole block, that 60% of all the dollars invested. I call it the
hodler's wall because that zone is super, super, like just so many coins are there,

(46:34):
so many cost bases are there. It's where our sentiment lives. We don't want to go below that.
Now on the buy side and the upside, this is where things start to get really interesting.
I think there's a chart, I think I can see in the background there, this chart with waves.
There's two arguments that I think should be put to bed. The first one that TradFi guys love to
put out there is that Sailor has been the only buyer in this market, and it's just measurably

(47:00):
false. There's no way. The numbers simply aren't big enough for Sailor to be the only buyer.
If you flick down to... Actually, we should come back to this chart. There's another one at,
I think it's slide 21. If we look at the overall... Keep going, keep going, keep going.

(47:20):
i think it's after this next one this one no although this one's also useful let's just start
here first things first um the most bullish metric of all time in bitcoin the realized cap
the realized cap i just want to pause here because it's actually really important it explains the
next chart the realized cap prices every coin when they last moved on chain so the coins that you

(47:44):
bought back in 2019 or 2013 if you still hold those utxos it's saved at that price point and
the reason why I like this is it represents our as investors, as Bitcoiners, this is our proof of
work. This is the money that we earned in our fiat job and we gave to Bitcoin to look after,
right? It's when we allocated. It just crossed a trillion dollars. So Bitcoin is a two and a half

(48:05):
trillion dollar market cap. We have collectively allocated a trillion dollars in our hard earned
savings to this thing to look after. And by the same token, we're now sitting on 1.5 trillion
of unrealized profit.
Just let that sit with you for a second.
Bitcoiners are sitting on a 1.5 trillion
of unrealized profit.
Berkshire Hathaway's market cap is a trillion.

(48:27):
So we've got an additional half trillion worth
of just profit relative to Rat Poison Squared's market cap.
Kind of tough.
Anyway, so go down to the next chart.
I think this is a really good one
to understand the supply and demand balance.
So I mentioned that it is impossible
for Saylor to be the only buyer in this market.
so that's the first thing i want to put to bed for those who are listening the chart we're looking at

(48:50):
here so the realized cap is like the on-chain market cap if you buy a coin at 10k and you sell
it at 100k someone had to come in with an additional 90 000 to buy that coin so it's really
representing a capital inflow and likewise if you buy the top and sell the bottom you've destroyed
capital so your realized cap is going to increase and decrease as we all do this in aggregate

(49:12):
So if you look at the 30-day change of the realized cap, the best way to think about this
is capital flows. It is profit taken by one guy, but new demand by another guy. Newton's third law,
equal and opposite forces. So if you look at the orange curve, we see these massive waves
in the 2024 peak in March, in the January, November, January of this year, November of last year.

(49:35):
and we're talking about $70 billion, $80 billion, $100 billion a month in profit-taking. But that's
also demand. Profit-taking and demand, they're synonymous. So there's two narratives that go to
bed. The first one, the purple, the dark purple you can see there is Saylor. It's just so much
smaller than the amount of aggregate demand. There is so much more demand than Saylor. Very rarely

(49:59):
is his buying more than like 10 to 15% at most of the overall demand profile. So it is literally
impossible for Sale to be the only buyer because you're missing 85%. Now there's about 20%. The
green zone is looking at the flows into the ETFs. So this is how much coin the ETFs are buying.
So this puts to get bed another narrative that a lot of people have missed. They just say that

(50:22):
all the price, it's not really profit taking. No one's actually taking profit. They're just
rotating into the ETFs. The ETFs are five to six times, sorry, the profit taking is five to six
times larger than the ETF flows. It's impossible. It is impossible for all of those coins that are
taking profit, so to speak, at the top are just rotating into the ETFs. The ETFs should be 10

(50:44):
times bigger for that to make sense. It just doesn't make sense. So I think those two narratives
can be cleanly put to bed. Now, when I talk about sell side, in my opinion, it's super bullish.
It is the most bullish thing that's happened this cycle. $55 to $65 billion a month in July and
August of net sell side, and the market went down 12% and has just rallied to all-time highs.

(51:10):
that is 55 to 65 billion dollars a month of demand that all the bears just aren't quite
understanding is sitting underneath us so yes there's a lot of sell side and i'm actually i'm
running a report as we speak the average age of coins that are being spent this cycle is much much
larger than previous cycles and trending higher we are seeing a lot more old coins whales ogs like

(51:36):
actual serious old money, lots more of it is coming back to market this cycle, like significantly
more than any previous cycle. And it's sustained as we're going on since mid 2024. So that's an
important thing to note. And we've barely pulled back 32%. You know what I mean? Like the demand
profile of who is coming in, it's institutional in scale. If you look at the actual mempool,

(51:59):
we have very, very few, like the mempool is almost empty. We don't have as many transactions,
but the volume, the on-chain volume is like almost at all-time high. So what does that tell you?
You've got few transactions, but it's almost all-time high volume, big money. We have huge
pools of capital. What we don't have this cycle is retail at all. And I talk about this in terms

(52:21):
of Bitcoiners as well. If you look at the 90-day change of all of the balances held in like UTXOs
under one BTC, so the shrimp cohort, we've been in net distribution since 2023. The overall balance
of small retail holders has been decreasing persistently since 2023. So there's a lot of

(52:42):
sat stackers out there who are also taking profit, which is just, that's just part of the handing of
the baton, right? We are seeing a major change in Bitcoin's ownership structure.
Well, and that's one thing I worry, or not worry, I wonder with this cycle too,
many people anchoring back to 2017 and 2021 specifically and saying, retail's not here,

(53:02):
retail's down here and i'm sitting back thinking i don't think retail's coming this like i don't
think retail has the money i don't think they have the money to come i think that's true and also you
actually don't want retail to come because they come like sorry and i just say there's two ways
to think about this you do want retail to come because you don't want wall street to be the only
player in the market so that's the the more sovereign side of the equation but you don't

(53:22):
want dumb retail to come because that means it's over so you kind of want to balance your views like
if you're waiting for retail to come that means it's actually finished it's all it's all over so
So I also just think that Bitcoin is a big enough market
that you kind of need institutional money
to move this thing now.
It's just the nature of being a very large
multi-trillion dollar asset.
Retail just don't really move the needle.

(53:44):
They're a small factor, but even so,
after all these years,
shrimp only have like 5% of the BGC.
They're a very, very small component.
Sailor's got, what is it, 3%, something like that.
One entity versus all of the shrimp, comparable.
Yeah.
What are some of the sort of events or entrance into the market that you're keeping an eye out for in the coming months that would signal that things have not only changed but are changing massively?

(54:15):
Are you expecting nation states?
Are you expecting normalization of ripping cash flows into a Bitcoin treasury for profitable businesses?
I think the last time we talked was right after Figma.
filed their S9, or excuse me, their S1 to go public.
And we were made aware that they had $70 million in IBIT,

(54:36):
and they intended to buy $30 million of spot BTC as well.
What are some of the sort of sticky demand drivers
that you're looking out for that we haven't talked about yet?
Obviously, we've got ETFs, treasury companies,
family offices, and high-members individuals.
But is there anybody else you're looking out for?

(54:56):
I mean, no one specifically.
I just think that we're watching a modern Bitcoin cycle and we've got to come into this thing
recognizing that things have changed, right? It is measurably different. There's still going to be
cycles. We're still going to have peaks and we're going to have troughs. But as we've seen so far,
those peaks and troughs, they have a very different character. The volatility profile is very different.

(55:18):
The derivatives landscape is evolving. Like as an analyst, for me, this is awesome because I'm
watching Bitcoin grow up and mature. And there's all these different facets, right? Yes, I'm known
for the on-chain side of the equation,
but that's really just the substrate
that stitches all these things together.
It's like it's the settlement layer
between all of these different vehicles.
And really you've got to analyze
and study all of these components.

(55:39):
It's not as simple as just looking at old metrics
and saying, oh, it's got to get to this height now.
It's got to get to this level
or it hasn't hit that level.
I think a lot of people are going to hang on
to old ideas way too long.
I also think people are going to throw out things at work
because they're like, oh, it's a new cycle now.
That's broken.
they're going to throw stuff out too quickly and they're going to hang on to stuff too late

(56:00):
for me that's that's exciting because we get to live in this very very new
modern idea of like be flexible allow the market to tell you where it wants to go
look at what the etfs are doing look at what treasury companies are doing look at what
sovereigns are doing like there's a whole bunch of different angles here that we've got to study
and it's just all information like for me some people look at metrics and they go oh this metric

(56:22):
has to do this. But to me, it's information. Tell me about the profit of investors. Where's
the supply dynamics? How many coins are and aren't moving? What's the average age of them?
All of this stuff just helps you understand who the buyers are, who the sellers are.
One thing we've seen that's very different this cycle, in 2017 and 21, if you look at long-term

(56:43):
holder supply, it was basically one big sell-side event. The bull was just one big sell-as-you-go-up
type thing. We've had three waves already of that. And we saw that in that chart before.
Massive sell side in 24. But then what was really interesting is long-term supply recovered,
almost back to its high. Then we had the second wave of sell side in November, December,

(57:04):
long-term hold of supply recovered. We're having the second or the third wave of net sell side as
we speak. But here's the thing that it's telling you. On the way down for long-term supply, so
price is up, supply is down. That's telling you a story about the sellers. Lots of sell side.
But then the recovery is telling us about the buy side. Who bought those coins five months ago?

(57:25):
They are hanging on to them. So that's one thing that's very different this cycle. We are not
seeing this like, I'm going to exit my Bitcoin position because Bitcoin's overvalued. I'm taking
profit because I've got to do X, Y, and Z, or my firm has to do it, or I need to retire or whatever
it is. I'm going to take my profit. But then the buyer's like, hey, I really want to own this thing,
stick it in my vault and sit tight, whether it's ETF or spot, doesn't matter. So that's a dynamic

(57:49):
that's very, very different. We have this buy side that is willing to buy at 100K, 110K, 95K,
and put it in the vault and sit tight. That is a very, very different dynamic. We've seen that
in previous cycles, but not only with the hardcore hodlers. Now it's a bit more mainstream. The hodl
idea is much more mainstream than I think people give it credit for. And that's super bullish.

(58:13):
And do you think this has been made easier by derivatives? So the institutions get and buy
and then hedge out. Yeah. And that's derivatives getting bigger. Yes, it massively changes market
structure, but it gives them an opportunity to buy in the first place because they can hedge risk.
And when they can hedge risk, they can take the risk in the first place. So it actually enables
big money to come in. It's a natural part of market structure. There's no question it changes

(58:36):
volatility profiles and you can call it paper Bitcoin and whatever else, but it also enables
the initial buy side. You had that chart up before that was looking at the cash and carry trade.
We saw the ETF flows and CME open interest trade alongside each other.
Now we're seeing Ibit open interest trading much the same with what's going on with the ETF flows.

(58:57):
So covered calls.
And I mentioned before at 123K, there's an enormous call wall.
People have sold covered calls at that zone.
But you can see how these things move together.
And what's really interesting, if you go back to pre-November last year,
it doesn't matter what ETF you buy in order to put on a buy spot, sell the future on the CME.

(59:21):
It doesn't matter which ETF you buy because they all track the Bitcoin price.
So up until November, all of the ETS were growing at the same rate.
We saw FBTC growing, even the small ones.
It was a Pareto distribution, but IBIT had some advantage, but it wasn't just like tearing away.
If we look at it since November, Ibit as of today just crossed over 58% of the overall AUM dominance, flows into all the ETFs except Ibit are flat for the last basically year, and Ibit is just tearing away.

(59:52):
Now we're seeing that the Ibit options are the preferred vehicle for pretty much all these trades.
Futures volume and futures open interest is kind of stagnant across like Binance and CME.
CME is down.
Binance is flat since November.
Bybit is flat since November.
We haven't seen that much growth in futures.
And they used to be like the lion's share of trade volume.

(01:00:16):
Options, absolutely parabolic.
In every single metric you look at, just straight parabolic.
So this is now the thing that is, in my opinion,
the most under-discussed, biggest change to market structure
since the ETFs went live themselves.
The fact that Ibit options surpassed Deribit as quickly as they did
is kind of mind-blowing.
Oh, totally.

(01:00:36):
And Deribit's been the market leader, like 95% dominance forever.
Yeah.
And I guess you mentioned paper Bitcoin summer.
But James, Wall Street's going to take over Bitcoin.
Price suppression is on the way.
So that's what's right now.
Right now, we've just seen a bunch of guys with covered calls at 123K suddenly go, hang

(01:01:01):
on a second, we're at 125.
Did I sell too much upside?
Now, for those who aren't familiar with options, when you sell an option, if you sell a call
option, you're basically selling the upside above that strike price.
So you do collect an insurance premium.
So if the price goes to 123 or 124, 125 and stays there for all of October, you actually

(01:01:23):
win.
the insurance premium that you collected for selling that covered call will more than offset
your losses, generally speaking. If on the other hand, we go to 130 or 140 and the bulls really are
in control and we start moving, all these guys are going to say, whoa, hang on a second. I got my
$600 worth of insurance premium, but I just missed out on $25,000 worth of upside. Maybe I shouldn't

(01:01:48):
do that again, right? And more people will come in. But these options, the way that options dynamics
play out. Same as futures. If you've got a very large liquidation level, let's just say at 125k,
let's say there's a giant guy who sold all these contracts, it may be easier for him to lean on
the spot market because it's smaller than the futures market. Sometimes it's easier for them

(01:02:10):
to lean on spot in order to keep their futures position alive. But we have to remember this
paper Bitcoin summer, the bulls have the same artillery. They have the same leverage in play.
and all the guys who've written those call options there's a bunch of guys who bought those call
options and they want it to go to 130 140 so paper bitcoin summer in many ways it works on both sides

(01:02:35):
of the ledger both teams have the same weaponry and it's like in many ways i might if i had to
predict what goes on from here on if we go down to 110 i think the bull market's over because we
just have no place being down there that's my like i think it deteriorates quickly below that
that's not my base case my base case is i think we're heading higher if we're heading higher i

(01:02:56):
think the era of chop solidation as we know it is probably going to take a back seat because i think
we now enter the proper euphoria phase if we get proper legs from here i think it's off to the races
and my base case is we probably get more corrections like actual proper sell-offs that
make people shit themselves and go oh damn it's over and then it springboards higher again so

(01:03:17):
I suspect we actually move into a more volatile regime. That's going to bring more options traders
in. The more options traders who come in, the more they have to buy the underlying to sell the covered
calls. Suddenly, you actually get more liquidity, more demand, more inflows. All of this assumes
that we don't get an AI bubble that implodes and just nukes everything. But my base case is that

(01:03:38):
we actually move into a much more volatile environment moving forward. Exactly. This chart,
dead on. I can't stop thinking about this chart and when money dies.
Well, like when money, like if you haven't read when money dies, go back.
You only have to read like a few pages of it when they're talking about every paper boy was trading stocks and thought they were wealthy on pay.

(01:03:58):
Like they thought they were wealthy, but they didn't realize that the denominator was getting blown out.
I think it feels like we're living through that now.
And to your point about increased volatility, like this could be what the Bitcoin price chart or the return chart looks like.
over the next, I mean, this is a 10-year chart.
Like this can be compressed to a year, two years

(01:04:20):
moving forward from here.
In the age of the internet, yeah.
So I personally think volatility is mispriced.
When I say volatility is mispriced,
it basically means a bunch of people
who've got very, very comfortable
with that chart we looked at earlier.
Vol just goes sideways.
Markets lulled to sleep.
Oh, we've tamed Bitcoin, right?
We've tamed a wild horse.
Next thing you know, volatility comes ripping back

(01:04:41):
and it just blows people's socks off.
And you know remember options are 100 to 111 So when shit happens it happens in a really big way So to me it going to be pretty exciting I looking forward to this next phase where Bitcoin kind of reminds everyone
hey, you haven't tamed me just yet.
Yeah.
All right.
What's your adjusted upside potential here?

(01:05:03):
So I think it was January.
I'm pretty sure it was January.
I wrote a piece that was basically saying if we had a...
So this is where we've rallied to 100K.
I think we might have tagged 110.
and I basically was looking at the amount of capital that we see come in per unit of market
cap change. And my case back then was, I don't know if we have the real capital inflows yet to

(01:05:25):
justify going to 150. So if we go into a different universe where Bitcoin had gone in January and
February this year, let's say it had gone from 110 and had to reach 150. I think we would have
come back down to this 90K region. I think it would have been a major top, big correction,
probably would have looked much the same in many ways, like chopped around and then away we go
again. But I don't think we were ready for 150. And my base case was, I think the ETFs approximately

(01:05:51):
have to double in AUM, and then we probably justify 150. Well, in that process, if you take
the ETFs and Saylor, just those two entities, which really are just like net buyers, we now
have that doubling. So personally, I think we belong at 150. I think the difference is, I think
we go to 150 i think we stay there that's the big difference now obviously it'll correct and

(01:06:14):
consolidate and chop around but i think bitcoin deserves a three trillion market cap and i think
the market's going to keep saying well how many more trillions if you get up to 160 180 200 possible
for sure but also we're really on like the there's low probability of it happening we're in the like
sub 10 sub 5 of all trading days markets are mean reverting and the thing about chop solidation

(01:06:39):
when you're doing a mean reversion model and that's what i base a lot of my stuff on it's like
how high do we have to go before the average bitcoiner is in so much profit that they have
literally sold in every previous cycle the sell side we looked at before it was always because we
hit some meaningful deviation away from the mean and the mean is some cost basis whatever it is
200 a moving average you pick it if we get to 200k just about every mean reversion model is

(01:07:05):
stretched into the far right tail it's just like improbable events happens during euphoric bulls
unlikely we stay there 150 is kind of that like it's medium heated it's yeah we'll probably get
some vol there it'll chop around but like we're not overheated we're just toasty so that's how
i'm thinking about things at the moment i think we both deserve 150 i think a lot of people are

(01:07:26):
going to look at it and go well all these metrics are overblown again but what if it keeps going
and then they're going to buy the top and then it's going to sell back down you know i'm excited
for that phase because I think volatility is going to come back in. We're in that late phase
of the bull, but is this bull a little bit different, right? Are we just going to keep
stair-stepping higher, but with a bit more vol? It takes some time for the market to adjust,
but it's exciting times. It really is. I know we got to wrap up here. You mentioned it earlier.

(01:07:50):
What are the metrics that people aren't going to throw away that probably they should throw away,
not focus on this time around? Good question. So I think a lot of people like to look at MVRV
And MVRV is a very powerful tool.
The realized price is one model
that I think a lot of people look at.
It the average cost basis for all BTC in the supply Includes Satoshi includes early miners all that stuff Now it currently trading I haven checked it for a while I think it like 155K something like that

(01:08:22):
We have gone below that in every single previous bear market, every one.
I don't think that happens anymore.
So I'm going to put it out there.
I think there's a new model that Dave Puel and I developed
in CoinTime Economics called the True Market Mean.
Now, the True Market Mean, basically, we filter out
do we process and get rid of the satoshi era coins the early miners people who just don't spend their

(01:08:47):
coins are long lost to history and the reason why this is important in order to be at the break-even
level which is like where the average bitcoiner is not bitcoin the average bitcoiner satoshi can't
respond well no i shouldn't say can't probably won't respond to a ripping bull market lost coins
can't really respond to a bull market. But the guy who bought the top can. He's going to sell,

(01:09:11):
he's going to buy, he's going to trade in and out. So the true market mean is currently about 80K.
That's where I think if we have some kind of a bear market, not necessarily at 80, but wherever
that true market mean is, that's where I think we start to bottom out. And the reason is that that's
currently the average cost basis for active investors. Sailor is at 75. The ETFs are at 80.

(01:09:33):
there's like four or five different levels all coincident with that price model so i think a lot
of people are going to expect that we go down to the realized price in the bear and i think that's
too bearish i just don't think we have that kind of a drawdown potential these days uh if we rip to
the upside right these models will all drift higher but i just don't think that looking for
the same thresholds to the upside the same thresholds to the downside in my view look at

(01:09:59):
the incentive, how much profit are people in? Look at the result. Are they taking profit? Are they
fearful? Are they actually taking losses? Are they not? This is where I live and I love it. I think
it's great. And quite frankly, Bitcoiners tell you the answer. When you see people capitulating and
just panicking, get me out at any price, bear market. When you see a couple of top buyers get

(01:10:19):
flushed out and then the market rebounds, you flush out the top buyers, away we go. So there's
these very distinct character shifts that we see. So look at these metrics more as information,
less as it's got to hit this level. Get rid of that kind of very basic horizontal line.
You're looking at incentives. It's all about incentives and then the actions and reactions to it.

(01:10:42):
I love that. Thank you for starting your day with us. It's Tuesday where you are.
It is.
It's Monday night where I am. I'm losing my voice. And it's a great check-in. I
I can't wait to do the next one,
which should be the beginning of next year.
And I'm sure a lot is going to happen between now and then.
So it should be a pretty fun catch up in January.

(01:11:06):
So let's, I think we at least tag 150 between now and then, at least.
You heard it here first, 150.
I think it's written into Destiny already, 150.
We could be at 150 by the end of the week.
Who knows?
It could be.
No, it could be.
Again, this is not a special call here, right? It's literally 25 grand, which is,

(01:11:26):
what is it, a 12.5% move or 20% move? Let's go. Yeah. I'm not calling for 150 by the end of the
week But I think the one thing that is clear is that we entered a new market dynamic People are waking up to the debasement trade They waking up to the fact that Bitcoin is scarce comparing it to gold saying why if it is digital gold where can it be

(01:11:50):
I think people are, obviously, we're here.
We've woken up to Bitcoin, but I do think we are at this incredible inflection point
where people are beginning to take it more seriously than they ever have,
which is important.
Part of the process should be expected.
but don't get over your skis.
Don't get too greedy.

(01:12:12):
Make sure you have cash, cash flow, most importantly,
and you're able to stay alive.
And that's why we bring James back every quarter
because you are, check the analyst at least,
is very level-headed, making sure that we're all staying in line
and not getting over our skis.
And the most sage advice of all time is just stay humble and stack sats.

(01:12:33):
You really don't have to deviate too far away from that plan.
the rest is just managing your own mental state making sure that you're never confused by why
things are happening never be a deer in the headlights like that's that's if i can if i can
help people not be a deer in the headlights whether we go to the moon or we go to doom
that is essentially what i like that's what i love doing i like helping people just go
why did bitcoin do what it did i don't care that it's up at 150k because i'm not a seller

(01:12:58):
i don't care that went to 75 because i'm also i'm a buyer i just don't care but i want to know why
because if I understand why,
it makes it so much easier
to dig through
and just get rid of all the noise
that you see in narratives
and just focus on what's really going on
because it's fascinating.
It really is.
If you want to download this full report,
you can go to unchained.com slash tftc.
If you want to read through it yourself,

(01:13:19):
throw it into an LLM,
see if that LLM is hallucinating.
You're absolutely right.
Go check that out there, James.
Thank you and congratulations
on the birth of your new child
since last time we met.
It's a big thing.
And likewise.
Welcome to the Bitcoin Dad Club.
It's a fun one.
Yes, I've always thought someone should do like,

(01:13:42):
because there's all these things,
like how do you deal with kids in AI, right?
Bitcoiners are going to be the ones
who we're trying to pioneer.
Like, how do you do this stuff right?
How do you teach them the right tools?
There's scope out there
for all these Bitcoin dads and moms
to just like, how do we do it?
Like, there's going to be problems and challenges,
but like, how do we as Bitcoiners
navigate this parenting thing?
Because it's weird for us.

(01:14:02):
It's going to be bloody weird for them.
It's definitely a double-edged sword.
Me and the boys, we've had some fun with AI purely for learning reasons.
If they ever have a question, it's like, okay, let's explore this.
We see a mushroom, a random mushroom while we're walking.
All right, let's take a picture.
Let's see what it is.
And yeah, there's definitely going to be a whole new sort of niche carved out of child AI that is safe for children.

(01:14:30):
AI literacy
yeah
I'm actually joining
that reminds me
I need to send an email
joining a task force
for AI
at my child's school
so
need to make sure
that they're doing it right
get involved
good man
no that's good stuff
that's what you need to do
and I can't
there's been a few podcasts
I've heard people saying this
like we as Bitcoiners
we've got to make

(01:14:50):
a positive change
you know like
if you just win and walk away
what's the point
the whole idea is to try
and make the best change
you can
within your sphere of influence
yeah
go forth and make some good change
be a good influence in the world and stay humble
stack sets
peace and love freaks