Latest / What Bitcoin Did / Why Bitcoin Could Hit $500K in 2029 | James Lavish

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Why Bitcoin Could Hit $500K in 2029 | James Lavish · What Bitcoin Did

• 0:00
  We're already at $40 trillion of debt, and we're on pace to get past $80 trillion by 2035.
• 0:11
  God knows what happens with the Strait of Hormuz. Oil rips up to $200, and prices are screaming,
• 0:21
  and you're back to 1980. Can you imagine if the Fed raised rates to 15%? Not to 20. Let's say
• 0:29
  raised the 15% because inflation got out of control. Inflation gets up to 7, 8, 9, 10%.
• 0:35
  Can you imagine $15 trillion? If you raise rates by another 5%, that's $750 billion that you're
• 0:44
  adding to the deficit. I can't do it. You have inflation. You better own assets. I do believe
• 0:49
  that the bottom is in and that we are back in that expansion cycle for Bitcoin. Yeah, I would
• 0:56
  say that we're going to top out somewhere around 29, early to mid 29. That's my guess.
• 1:03
  And I think it would be, you know, my base case would be somewhere around four or 500,000
• 1:09
  then. To be honest, though, I mean, let's face it, Danny, like Bitcoin has been sleepy
• 1:19
  here now. I mean, quite honestly, for years, you know, I mean, when I started getting into
• 1:26
  it in 21, late 20, early 21, somewhere around there. And then I started buying it late 21.
• 1:37
  You know, we're just a little bit above that level now. It's like, I can't believe it. Now,
• 1:43
  for people like you and me, we've been involved in it all this time. We've clearly been buying it
• 1:49
  at prices far below here.
• 1:54
  And that's been good,
• 1:55
  and I started a hedge fund and all that.
• 1:57
  But, man, there's a truth to the Bitcoin fatigue,
• 2:02
  you know?
• 2:03
  Oh, for sure.
• 2:04
  And I think that it's gotten to that point now
• 2:07
  where you've got so many of the original people
• 2:11
  who were in it sold enough
• 2:13
  that they're just not even active anymore,
• 2:15
  and they're just like, they're gone,
• 2:16
  they're doing what they're doing.
• 2:17
  And then you've got the draw of not just the AI, which was a massive draw, but then you've got this draw of other things.
• 2:29
  So it used to be you had the young kids who held Bitcoin, and then they'd go and buy some of the altcoins and ride those and play them and go back into Bitcoin and then go back into Bitcoin.
• 2:42
  But now it's like, yeah, they may play some of that stuff, but then they go and move the money out to Calci or Polymarket and they're betting, they're sports betting.
• 2:51
  And the attention, the hot ball of money is one thing, that big hot ball of money moved around.
• 2:57
  Bitcoin, AI, gold, AI, you know, it looks like some of it's rolling back into Bitcoin here.
• 3:03
  But then you've got the new money, the younger money that was so attracted to this in, you know, 2015, 2018, and just, and then went into altcoins after that.
• 3:18
  And now it's just all on, all on the betting sites.
• 3:21
  Like it's gone.
• 3:21
  It's not here.
• 3:23
  And I'm talking to the kids in college because we have one in college and I've got my interns in college.
• 3:28
  They're both out in Florida.
• 3:29
  And, you know, they're like, oh, nobody talks about this stuff anymore.
• 3:35
  They're all betting.
• 3:36
  Everybody's on their phone betting 24-7, you know?
• 3:40
  And they're-
• 3:41
  It's crazy.
• 3:42
  Yeah.
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  And they're getting into trouble, you know?
• 3:44
  Of course.
• 3:45
  And it's kind of like, it's essentially the same thing as the sort of broader crypto world,
• 3:51
  isn't it?
• 3:51
  It's like the nihilism.
• 3:53
  So you look at your future, you can't see how you're going to get ahead.
• 3:56
  Therefore, what's the point in saving for tomorrow?
• 3:58
  instead, you may as well bet and just like swing for the fences, hope you hit something.
• 4:01
  Yeah, because it'd be better to take 500 bucks and swing for the fences than to put $500 in a
• 4:08
  savings account and make 4% on it. That's not going to get them anywhere. So they're thinking,
• 4:15
  oh, well, hey, if I buy this bet at 10 bucks, man, I can make a 10X off that. I can make 90
• 4:23
  bucks off of that. So if I buy a hundred dollars worth, I may walk away with a thousand. Yeah,
• 4:30
  I'm going to do that. And so, yeah, that's a tough draw. They walk away with nothing invariably,
• 4:36
  you know, most of them that make that bet. But on the other side, the guy who's making the $900
• 4:42
  bet to make a hundred, well, he's going to make a quick hundred bucks. Now that's a whole lot
• 4:47
  better than putting 900 bucks in and waiting two years to get that same return. You could wait two
• 4:53
  hours and get that return as long as that, you know, the game went your way. So of course,
• 4:59
  way higher risk, you know, but a much higher annualized return. So it's, it's, it's the,
• 5:08
  it's just become this, we have that, that problem here now with the K-shaped economy and, and
• 5:14
  especially that younger demographic, they're being pulled away. And so I don't blame them.
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  I don't know what I would be like for me in college. If I were looking down the stairway
• 5:28
  of options, man, it feels like everywhere you go, you're going to be in a trap.
• 5:35
  So yeah, I do think from a very Bitcoin-specific lens as well, what we've not done very well
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  recently is the sort of replacement rate of Bitcoiners. So I got in in 2016, and the people
• 5:47
  that were sort of big in the space then and very vocal and prominent like some of them are still
• 5:51
  here but a lot of them have kind of drifted off and they're doing their own thing whatever
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  but then there was there was always people coming in to fill that void so like you say 2021 you came
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  in and that's when a lot of the macro people came in it's when Lynn Alden started getting much more
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  vocal um I know she'd been in longer but that's when she became much more vocal and in the last
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  few years like it's really the same group of people that were around in 2021 who are still
• 6:11
  the most prominent voices and we've not had that many new people come in true and I was speaking to
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  Justin Moon about this and he ran the BitDevs in Austin and he was like, there was just no one,
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  they ended up closing that BitDevs down and it was like, there was just no one to hand it off
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  to who was like, still had, was new, I had the enthusiasm, it was fresher. And I don't know what
• 6:30
  that is. I think price is just going to solve everything in that sense. Like as soon as Bitcoin
• 6:34
  starts ripping, it starts being interesting again. But we are in a bit of a doldrums right now,
• 6:38
  I think. We had more interest, you know, in our hedge fund when Bitcoin was above 100,000
• 6:44
  by far than we did when it was at 15 or when it was at 16 17 18 000 you know and part of that is
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  just because of the the ftx stuff and it seemed like everything been solved and okay now we're
• 6:57
  off the races it's going to a million so but um i agree and i think that once we get back over 100
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  you're gonna like the the interest is gonna tick back up again it's gonna be like well this thing's
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  never gonna die it really is going to a million and then you get the herd come back in you know
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  so and we needed like a a proper bull market again like the last bull market wasn't enough
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  for those nihilistic people who just want to gamble like it needs to be more than that and
• 7:23
  i think it will be to be fair um the thing that i don't really get is like you look at the
• 7:27
  the macro situation right now 40 trillion in debt two trillion dollar deficits inflation's
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  nearly four percent um still at war with iran oil prices through the roof and it's like bitcoin's
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  $80,000. Like, why is this not taking off more quickly? Well, because so much money rolled into
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  AI. And, you know, that very concentrated bets there in the S&P. And just a handful of names
• 7:51
  that are up on the year there. And, you know, that's one thing. You know, as people are getting
• 8:00
  more return on their money, just sitting in cash or being rewarded for it, that's another thing.
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  You have seen some money roll into longer bonds here, playing that, thinking that those rates will come down and they'll make money off a quicker trade there while they're still getting a 5% yield on it.
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  Not a terrible bet.
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  You know me, long-term bonds, awful bet.
• 8:25
  Short-term, yeah, if you want to play around in it, yeah, I could see that.
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  And so there are other things going on here, though, with Bitcoin.
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  You see the leverage in the paper all over it that just keeps it in this, it keeps it range bound, I think, at higher amounts of liquidity, which, okay, because, you know, way back when, 2013, 2014, this thing could move thousands of dollars with a fraction of the money that is moving it, you know, can't move it $10 now, you know?
• 8:59
  So, but then you've got, and you've got all those, you still have original, you know, investors, OGs that are out there and they're, you can still see that they're selling calls.
• 9:13
  And when you do that and you, it has the effect of selling stock, you know, selling Bitcoin.
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  And the way that happens for listeners, the way that happens is if they sell the calls, who are they selling them to?
• 9:27
  Not to you and me. Typically, they're selling to a market maker. And so he's a proprietary market maker, which means it goes on his book. That means if he's long a call, he's got to be short some stock against it. He's got to be short some Bitcoin against it. And so I keep saying stocks. I'm thinking in terms of calls in your typical hedge fund.
• 9:50
  But he has to sell some of the underlying against it to be what's called delta neutral. You know this, we've talked about it before. And that works out to be somewhere about 30 to 40% of what they're now long.
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  So if there's long a million dollars of underlying through those calls, they've got to sell three or four hundred thousand dollars worth of Bitcoin to hedge themselves.
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  And they're doing that. And so that's another that's just another factor.
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  Um, so, but once this clears, you know, once this clears out and confidence gets back in,
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  remember, it's difficult to get institutions to buy into something when you're getting yield
• 10:35
  elsewhere. You're seeing the same issue with gold. So even if you, you do still have
• 10:41
  an expansion of liquidity, as we're seeing through Michael Howell's, um, awesome, um,
• 10:48
  analysis and i and i really i really do like how michael looks at the world it's not just m2 it's
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  liquidity and even though is liquidity going up again now it's been going up at a slower pace
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  anything is rolling over here but i have to look at his latest newsletter but um you know the way
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  that what he looks the way he looks at is that it's not just money supply it's not just central
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  bank liquidity. On top of that, it's also debt and it's also volatility. And that feeds into
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  the underlying collateral. If you have a lower amount of volatility, then that means that the
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  lender is requiring lower amounts of collateral to secure whatever margin that you're taking on
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  that to create more liquidity. And so higher volatility requires more margin. So you saw the
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  volatility of treasuries, you know, a month and two months ago, and the move index has been moving
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  up. And so that requires more collateral. And so that lowers the amount of liquidity. So it's
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  kind of, you know, evening out. But anyways, because of that, and because gold had such a run
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  and Bitcoin had such a run, it wasn't as much as you and I would have that I expected. But still,
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  now you're in a situation that you have investors who are like, well, what are my other options?
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  You know, I can get yield over here. Why would I be putting my money into something that's not
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  not at the front end of a rapid expansion of liquidity.
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  We're just not there yet.
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  And when you have the Fed that's talking about raising rates,
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  and now you're talking about, you know,
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  even if they're not taking money out of the system,
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  even if they're not doing QT, they're not doing QE,
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  they buying just a smidge like a little bit Tiny amount Tiny amounts but then when you don have that and you got the Fed they tightening conditions for lending That what they doing And so today we had
• 13:12
  wars come out. We could talk about that. But leading up to today, that's what's been going on.
• 13:17
  And people are trying to figure out, investors are trying to figure out, okay, where are we in the
• 13:21
  in the economic cycle, the, you know, the ISM manufacturing cycle, where are we in GDP,
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  and where are we in inflation, and where does it all come out with the Fed easing or tightening
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  conditions, and then the expansion or tightening of liquidity due to the expansion or tightening
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  of the overall economy. And that's what we've been kind of in a holding pattern here,
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  both in the stocks, as you've seen in AI,
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  there's been a rotation in the S&P and in the NASDAQ
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  and in gold and Bitcoin.
• 14:00
  They're just kind of stuck here.
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  that's expatmoney.com slash wbd for your free report so i do want to get on to wash and the fed
• 16:35
  but just quickly before we do and i did a show with geordie visser in new york a few weeks ago
• 16:39
  And he was saying that he doesn't see Bitcoin as a debasement trade.
• 16:43
  And his reasoning for that was that in sort of high, if the central bank starts printing again, basically everything does well.
• 16:52
  It's not just Bitcoin that does well, like stocks do well, the lot.
• 16:55
  So if you define it as just a debasement trade, he thinks that's too narrow and he doesn't think that's what Bitcoin actually is.
• 17:00
  I don't think I agree with that, but what's your take on that idea?
• 17:03
  Well, it's a pure debasement trade, meaning that it's more pure than real estate than stocks.
• 17:13
  OK, because real estate or stocks, for instance, you have stock specific risks that you have to deal with.
• 17:22
  You have technology sectors.
• 17:27
  You've got consumer discretionary, consumer staples.
• 17:31
  You've got industrial stocks, defense stocks, and you have to decide, well, you could either just buy the S&P and be more passive about it, which is a closer approximation.
• 17:47
  And that's a better way to do it if you don't want to have stock-specific risks.
• 17:51
  But also, with real estate, you have a lot of different inputs there that you've got to deal with.
• 18:04
  And they're geographically specific.
• 18:07
  You've got taxes that you have to deal with.
• 18:10
  You likely have tenants or you have maintenance on that real estate.
• 18:16
  Whereas if you buy Bitcoin-
• 18:18
  Yeah, it's illiquid.
• 18:19
  That's right.
• 18:20
  And you've got big fees coming in and out of it.
• 18:23
  But with Bitcoin, it's just a more pure representation and reflection of the debasement.
• 18:28
  It's just a mirror image of the debasement of the currency.
• 18:32
  Now, it does have a lot more volatility.
• 18:35
  And so even though we got that report out that I wrote about this in the information
• 18:41
  last week, even though you had JP Morgan with that report out saying that, hey, look,
• 18:48
  Bitcoin is at the top of our list of the expected returns from different asset classes for the next 10 years.
• 19:01
  Now, it comes with a dose of volatility, though.
• 19:04
  So you have to understand that.
• 19:05
  And so that because of that, even though JP Morgan has kind of I wouldn't say that I would not go as far to say that Jamie Dimon has pivoted on this.
• 19:16
  but he's given the green light to his company and to his employees to talk about it and to start
• 19:23
  doing business with it. They haven't put it in their portfolios or model portfolios that they
• 19:29
  give to their high net worth and key investors, but they have named it as something that they
• 19:36
  expect will do very well over the next 10 years. Why would they say that? They would say that
• 19:42
  because of exactly what we just talked about
• 19:44
  is the debasement of the underlying currency.
• 19:46
  And it's a pretty pure expression of that.
• 19:50
  And it has a much higher volatility than gold,
• 19:53
  which is why gold is towards the bottom of this list.
• 19:57
  So, you know, for the listeners who haven't seen it,
• 20:02
  this is a chart that they put out.
• 20:05
  And actually, you know, let me pull this up.
• 20:08
  Right.
• 20:08
  So if you go to, okay, so now you can cut to this part.
• 20:10
  But when you look at the list of assets they have on here, again, it's not Jamie pivoting and saying, oh, go buy Bitcoin.
• 20:21
  But it's his team of analysts who have said, look, we expect Bitcoin to be the best performer in the next 10 years.
• 20:30
  With that comes serious volatility, though, of 55%.
• 20:34
  So I want to know, because you're obviously a traditional finance guy.
• 20:38
  When people are looking at this, like the big money is looking at this, you see compound return rate at 10%, but with the annualized volatility at 55%.
• 20:47
  How do you trade off the risks and how do you then look at allocating to Bitcoin?
• 20:51
  That's a great question.
• 20:53
  And as an investor, if you're an investor, okay, so let's be real.
• 20:59
  This is not taking the place of bonds yet.
• 21:01
  Okay, some place down the future, maybe it'll get an allocation out of bonds or out of gold into this.
• 21:08
  I think it's getting some allocation out of gold into it, but not big.
• 21:13
  I think the bigger allocation it's getting is out of tech.
• 21:16
  Okay, so if you have a portfolio that owns stocks and owns technology stocks, you may put some into this.
• 21:21
  Now, what does that mean for you?
• 21:22
  Well, it means that you likely have a longer time horizon and you've got a smaller allocation.
• 21:29
  Yeah.
• 21:30
  Because you're looking at, what you're looking at is the overall risk to the entire portfolio to market shocks.
• 21:37
  And if you have an asset with 55% annualized volatility in your portfolio, then you cannot have a large allocation to this.
• 21:46
  If you have a situation where you have a market shock, then this will negatively affect your portfolio in a large drawdown.
• 21:55
  And so as a professional investment manager, you have to go through your risk analysis of your entire portfolio and you do all kinds of stuff. You have VAR, value at risk. You have Monte Carlo simulations where what you do is you say, okay, the Monte Carlo simulations are where you take your portfolio and you run it through past shocks.
• 22:22
  You know, you say, okay, if my portfolio that we have today, if we have something like the long-term capital management shock and drawdown, what would that do to my portfolio?
• 22:35
  And it goes, boop, and it'll show exactly what all your portfolio would do on that day or that week or whatever it would be.
• 22:43
  They need the same thing for the 99-2000 tech bubble popping, 2001, the 9-11 drawdown, 2008, that months-long drawdown of the great financial crisis, 2020, what happened in lockdowns.
• 23:04
  And you could see in those simulations what would happen.
• 23:07
  And so you look at those and you say, okay, none of those will happen again.
• 23:13
  okay you could do other things you could do oil price shocks uh you know you could do all kinds
• 23:19
  of stuff but you just do these simulations and you say okay what can i live with what can i stomach
• 23:25
  and what will my investment manager the cio what will he sign off on here and if you come in and
• 23:33
  you say okay here's my portfolio and you've got a 25 allocation of bitcoin and he looks he's gonna
• 23:39
  I go, are you out of your fucking mind?
• 23:41
  This is a 55% annual vol.
• 23:46
  No, take that position down.
• 23:49
  Bring it down to one or 2% or get it off the books.
• 23:52
  It's not appropriate.
• 23:53
  It all depends on what you're doing though.
• 23:55
  If you're at a hedge fund and you made your own book
• 23:58
  and it's your money, meaning it's in your book
• 24:05
  and your manager has signed off
• 24:07
  for you to have complete control over it?
• 24:10
  Well, maybe you do that,
• 24:12
  but there's very few portfolio managers
• 24:15
  that have that kind of freedom and autonomy
• 24:18
  when investing money.
• 24:20
  And so that's what people have to realize.
• 24:21
  When you hear people like,
• 24:23
  why are the institutions not in more?
• 24:26
  Why are they not buying these ETFs now?
• 24:28
  Look, it's under 100.
• 24:29
  Why are they?
• 24:30
  Well, man, these large institutions move slowly.
• 24:34
  They have a lot of personal risk
• 24:35
  attached to manage the portfolio. And they've just, it takes time. So, and that's kind of where we're
• 24:42
  at. But this was a big development. And that's why I wrote about it. Even though it's not,
• 24:46
  they're not recommending it, man, it cannot be ignored anymore. It is at the top of this list
• 24:52
  of JP Morgan. It can't be ignored. And the thing that like stands out here is
• 24:57
  volatility being high makes sense. I think volatility will continue to be high in Bitcoin,
• 25:01
  but the return rate of 10% seems very low.
• 25:05
  And I don't know exactly what that number will fall to be,
• 25:07
  but like, let's say that's 20, 25%.
• 25:09
  How much does that change the calculation then
• 25:12
  in terms of how much you can allocate to it?
• 25:15
  Well, I mean, it would,
• 25:17
  if you had a 20, 25% return with the same volatility,
• 25:20
  it would double the amount that you could have, right?
• 25:23
  So-
• 25:23
  Is it literally linear like that?
• 25:25
  Yeah, more or less, more or less.
• 25:28
  And so, but likely if you're having that kind of return, you know, where are you looking back to?
• 25:38
  If you're looking back of the life of Bitcoin, well, you know, that volatility has been vicious on the way down.
• 25:47
  I mean vicious.
• 25:49
  And so that's one of the things that you're looking at too.
• 25:52
  This is an isolated number here, this annualized vol.
• 25:55
  Another number you looking at is drawdowns You looking at peak to trough drawdowns on this thing in those market shocks And so remember when we talked about the Monte Carlo situation and whatever or VAR
• 26:09
  you're looking at, okay, when you have one of these shocks, remember that annualized vol,
• 26:15
  that gets pulled apart and now you're looking at, oh, this thing has 80% drawdowns? What?
• 26:22
  what? This worked down how much during that shock? And so, yeah, so it's not quite as simple as that.
• 26:31
  But now you've got AI that'll model out every single aspect for you in milliseconds. And so
• 26:38
  you can get to exactly the allocation that you want to have according to what you expect.
• 26:44
  And obviously, we've had 80% plus drawdowns in the past, but this last one was 50, 55%.
• 26:49
  Like that must change the calculus head quite significantly as well.
• 26:52
  It should.
• 26:53
  It should take into consideration, though, remember, okay, so why was it only 55%?
• 26:59
  Well, I mean, I have my theories about this, but, and you and I, I think we've talked about
• 27:06
  power law before, and I'm a, you know, I'm a strong proponent of the power law because
• 27:12
  of just the pure fit of it, that R-squared fit is so tight that, you know, 96% is like,
• 27:19
  that's, it's hard to argue with. It's the best thing I think we have for such a short-lived asset.
• 27:27
  And it's only been around for 15 years, 16. And so, you know, but remember, there's no,
• 27:38
  there's no base for the power law there all it is is it's showing you a um you know it's a it's a
• 27:46
  mean value and expected value on on those past prices and and extrapolating into the future
• 27:54
  people say oh it broke it it broke the support there is no support um what there is though is
• 28:01
  there's a there's a line of support that has been getting tighter on a what what we would call a
• 28:10
  a standard deviation from that expected value so one standard deviation two standard deviations
• 28:17
  okay so when you look back and i've i've modeled this out uh myself um you know actually using the
• 28:25
  the most powerful uh version of um of claude but when you if you want i didn't realize i was still
• 28:35
  sharing that sorry um but and i'll just show you this so you could see it uh and people can
• 28:43
  figure out how to do this themselves but can you see this yep okay so you know when you
• 28:54
  if you look out and so for some reason it's uh it's got it's frozen on that on that on that uh
• 29:02
  date but when you look back and you look at the past cycles you know back um in 2011 we were almost
• 29:11
  four standard deviations on our blow off top you know 1.3 standard deviations on the on the drawdown
• 29:18
  from that expected value, okay?
• 29:22
  Then you had a 3.5 standard deviation blow off top
• 29:26
  and then almost a 1.4 standard deviation drawdown.
• 29:32
  And then 2.7, 1.08, 1.85, 1.17.
• 29:40
  Okay, so what do we notice up to this point?
• 29:42
  We notice that the blow off tops and the drawdowns
• 29:46
  are both, you know, getting smaller on average.
• 29:50
  This was bigger than this one,
• 29:53
  but, you know, on average,
• 29:57
  they're getting tighter to that expected value.
• 30:01
  And so down to-
• 30:03
  The interesting thing there to me, though,
• 30:05
  is that like, obviously,
• 30:06
  the blow-off tops are getting significantly smaller.
• 30:08
  The actual downside is not.
• 30:10
  Like, it is relatively similar.
• 30:12
  Well, but look at the difference
• 30:15
  between the, okay, there's a couple things
• 30:17
  that we notice here.
• 30:18
  First, we notice the violent drawdowns.
• 30:21
  Okay, they are violent, okay?
• 30:24
  Right?
• 30:24
  And it takes a long time to build up
• 30:26
  and then boom, violent down, you know?
• 30:30
  Long time to build up and then violent down.
• 30:33
  But the other thing we notice here is that,
• 30:36
  like you said, the drawdown is only 1.3, 1.38, 1.0, 1.17,
• 30:42
  you know, now remember,
• 30:44
  there are different versions of this model.
• 30:45
  This is just the one that I created.
• 30:47
  So there are different versions of this.
• 30:50
  So it's not, you know, so,
• 30:53
  but the other thing we notice is that this last cycle,
• 31:00
  it went from 3.5 to 2.7 to 1.8 to 0.45 of a blow off top.
• 31:08
  So this is what you and I talked about before
• 31:11
  with the OG selling so much and sitting that mental price they had of $100,000. And when it
• 31:17
  went to 125, they were just selling and selling and selling. And, and that just, it just became
• 31:21
  a self-fulfilling prophecy that that was it is over. And so I think that this was a muted blow
• 31:27
  off top. I just believe that. And because of that, you know, you still had a 1.15 standard deviation
• 31:37
  from the mean or that expected value, right?
• 31:43
  And so, which is interesting
• 31:46
  because it still is similar to what the last ones were, right?
• 31:51
  So it's still going off that mean.
• 31:54
  But what you just said was, sorry, the expected value, right?
• 32:01
  So, which is the mean.
• 32:02
  But for people to understand what I'm saying,
• 32:05
  that expected value is what we usually talk about. So like today, you're saying we would say that the
• 32:11
  expected value would be 144,000. But even though we had the regular drawdown, it was only 55%
• 32:21
  because we didn't have a blow off top. That's why. So extrapolating to the future,
• 32:28
  I think that we get a, you know, a less muted blow off top, which would come out in some somewhere in the beginning to middle of twenty nine.
• 32:38
  I think if you go off of that economic cycle we're talking about and election cycle and all of that, then, you know, you're talking about and you're talking about an expected.
• 32:51
  blow off top of maybe one standard deviation again, which would be more like four, five,
• 32:58
  $600,000 rather than $150,000, $200,000. So, and that's kind of, I mean, it's a lot of,
• 33:05
  that's a lot of, you know, if, if, but- No, that makes sense though. And it kind of gets
• 33:10
  to what Checkmate always talks about when he says the bull market author is the bear that follows.
• 33:14
  And so like, if we do have a real bull market again, where we get that one standard deviation
• 33:18
  or more above the mean,
• 33:20
  like maybe an 80% drawdown happens again.
• 33:23
  It doesn't necessarily mean they're over
• 33:24
  just because we didn't have it this time.
• 33:27
  Exactly.
• 33:27
  Yeah.
• 33:28
  And I think that I believe that it was muted this time.
• 33:33
  And then we had that October deleveraging.
• 33:37
  And who knows what Jane Street or whatever
• 33:42
  was involved in that.
• 33:43
  Who knows?
• 33:44
  But that was significant.
• 33:46
  And that just ended it right there.
• 33:48
  So, yeah, yeah.
• 33:51
  That October event is quite interesting because it didn't get talked about that much, especially not in Bitcoin circles.
• 33:56
  I think it was it was more of a crypto thing than a Bitcoin thing.
• 33:58
  But I do think that was a big part of the impetus that sort of called the top for Bitcoin.
• 34:04
  Like, I don't know exactly what happened, but I think something significant happened there.
• 34:08
  I do, too. I don't know exactly what happened either, except it was obviously a massive deleveraging event.
• 34:14
  People who had a lot of leverage got wiped out.
• 34:16
  And I don't know if, you know, it's hard having been on Wall Street for 30 years to not think that something nefarious was going on there because, you know, I've seen it so many times that somebody, you know, a few bad actors decided they were just going to wipe out everybody and make a massive amount of profit on it.
• 34:36
  Maybe that's what happened.
• 34:38
  Yeah.
• 34:39
  It could have just been just a terrible event that people got off.
• 34:42
  Too many people got over their ski tips at the same time.
• 34:46
  And when that happens, though, I mean, even happened.
• 34:49
  Look, you didn't need for there to be a bad actor out in the UK when you had that guilt drawdown.
• 35:00
  When their pension funds were blowing up.
• 35:03
  What you had was a finance minister with a big tax cut with no plan to pay for it.
• 35:12
  And then sellers were just like bondholders and were just like, I can't hold this thing.
• 35:18
  Who knows how they're going to pay for it?
• 35:20
  Inflation is going to go through the roof.
• 35:22
  They're going to print a bunch of money.
• 35:22
  Who knows?
• 35:23
  And so they sold and that tipped off a cascade of sellers.
• 35:27
  And when you have something like that, the way that was structured, which was not too dissimilar to what we see in Bitcoin sometimes, is you had those, the leveraged debt instruments, basically, that were giving the pension funds a greater return on low volatility assets, the gilts.
• 35:50
  and so um they were levered on top of that that asset itself and when the asset was was drawing
• 35:57
  down they were forced to sell that asset and so when they had to sell it when they had to sell
• 36:04
  their guilt then it forced other players who were on margin other um you know who had this these
• 36:12
  leveraged debt uh instruments of the derivatives um it forced them to sell and so it was a
• 36:18
  cascading event. And so you don't have to have a bad player for that to happen. But man, it does
• 36:24
  sometimes does seem a little bit, you know, there's sometimes where there's smoke, there's fire
• 36:31
  in Bitcoin typically is what it seems. So, but. Recent hardware wallet vulnerabilities have
• 36:38
  definitely made me rethink my entire security setup, as I'm sure it has for a lot of Bitcoiners.
• 36:42
  And the uncomfortable truth is that no single security product can promise there'll never be
• 36:46
  problem which is exactly why the design matters. BitKey is a self-custody hardware wallet that uses
• 36:51
  three keys created in three separate environments. There's one on your phone, one on the BitKey
• 36:56
  hardware itself and one on a secure BitKey server. Two of those three keys are required to sign any
• 37:01
  transaction so a problem isolated to just one key is never enough to move your Bitcoin. So if you are
• 37:06
  rethinking your setup right now as I'm sure a lot of people are you should really think about the
• 37:10
  BitKey. The hardware looks great, the app and the user experience is second to none, backing up and
• 37:15
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• 37:19
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• 37:25
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• 37:30
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• 37:36
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• 37:56
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• 38:01
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• 38:16
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• 38:19
  That's anchorwatch.com.
• 38:21
  I imagine you think the bottom is now in for Bitcoin.
• 38:24
  What do you think the next sort of 12 months will look like?
• 38:28
  I think the bottom is in barring some, again, some sort of deleveraging event across the board.
• 38:35
  I don't think there's going to be one in Bitcoin isolated.
• 38:39
  But if we do have a drawdown, let's say that we get one of these,
• 38:43
  one of the, say, the peripheral players of this AI trade
• 38:52
  that is not an Anthropic or a ChatGPT, or, I'm sorry,
• 38:56
  an OpenAI or SpaceX or even Microsoft or anybody What if we do get a big player that is just big enough but is not at the center that trips a covenant on all this debt that they taking on to
• 39:10
  facilitate this build out? We could have a massive drawdown. That would be more of a,
• 39:17
  you know, it wouldn't even be a black swan. I mean, it would be like an off-white swan because
• 39:24
  people be like, oh yeah, of course, you know, of course that was going to happen. Um, so, but, uh,
• 39:31
  if we had something that was unexpected, let's just say, and the whole market drew down from it,
• 39:36
  Bitcoin could draw down with it. So that's the caveat. However, I do believe that the bottom is
• 39:41
  in and that, um, we are back in that expansion cycle for Bitcoin. I, I, I also believe that
• 39:49
  AI is going to continue to expand, you know, more money is going to get put into it. These,
• 39:54
  these companies are going to continue to be profitable um i don't believe in the in the
• 40:01
  the productivity miracle that they talk about but i do believe that we're going to continue to march
• 40:06
  forward here there will be rotation and rotation and rotation but i believe that we will still
• 40:11
  still march forward here it's kind of like in the um you know there could be a short-term drawdown
• 40:17
  like we had um that wouldn't be as painful as the ai as the tech bubble um back the internet bubble
• 40:24
  way back when, but that was different.
• 40:27
  I mean, those companies weren't making any revenue.
• 40:29
  And people were just like, oh, pets.com,
• 40:31
  here's billions of dollars.
• 40:33
  And there's no distribution,
• 40:36
  like they don't have a distribution network.
• 40:38
  Like, what are you thinking?
• 40:40
  And so this is different.
• 40:44
  I don't believe it's like that.
• 40:47
  So I do think we just march forward here.
• 40:53
  Now, what does that mean for Bitcoin is what you're asking?
• 40:56
  Yeah.
• 40:57
  You know, well, the biggest unknown right now is the election.
• 41:02
  That's what's right ahead of us.
• 41:04
  Okay?
• 41:05
  That seems like one of the catalysts that could cause a drawdown on the AI side.
• 41:11
  If the Dems do a clean sweep, they're the anti-AI, anti-data center party.
• 41:16
  I wonder what that means for markets when everything's driven by these AI trades right now.
• 41:20
  You would think, but the market loves gridlock.
• 41:25
  They love it when we have a split in D.C.,
• 41:30
  whether you have the executive branch
• 41:32
  and the White House is one party
• 41:35
  and Congress is another party,
• 41:39
  or maybe the House is one party
• 41:41
  and Senate is another party.
• 41:43
  They just like gridlock because it's safer.
• 41:47
  Nothing's going to change.
• 41:48
  It reduces uncertainty, right?
• 41:51
  That makes sense.
• 41:52
  You get certainty because you know nothing's going to change because it can't.
• 41:55
  Yeah, it just goes back to glacial movement, you know?
• 41:59
  And so that's one thing.
• 42:02
  And then remember who's at the helm of these companies.
• 42:06
  They're massive Democrats, you know?
• 42:09
  Like they're huge supporters of the Democratic Party, all these big companies, except for SpaceX.
• 42:15
  so um and elon so that's another thing is that that's okay if they have a clean sleep sweep would
• 42:25
  that be bad for bitcoin well it's not like you know the the it's not like um the clarity act
• 42:32
  is i mean that's that's kind of it's it's kind of passed i don't think that that's gonna not i mean
• 42:38
  it's been put on the side or way back burner now.
• 42:44
  If it gets, if it's on the side burner now,
• 42:47
  if we get a clean sweep and Democrats take all of Congress,
• 42:52
  then that gets put on the no-do list, you know?
• 42:56
  But likely.
• 42:59
  So what do I think happens to Bitcoin?
• 43:04
  The only thing that I think would be bad
• 43:06
  is if you somehow had the anti-crypto army resurgence,
• 43:12
  you know, if you had-
• 43:13
  I don't think they're coming back.
• 43:15
  I don't think so either.
• 43:16
  Their attention's on data centers right now.
• 43:18
  I agree.
• 43:19
  I agree.
• 43:19
  And their attention's on that.
• 43:21
  And then, so they're going to want to put regulation around it.
• 43:24
  You're going to put red tape around it, you know.
• 43:26
  So we'll see.
• 43:27
  But I agree with you.
• 43:30
  I don't think that they're going to come back.
• 43:31
  So more certainty.
• 43:33
  um the other thing is okay so that's one thing that's right ahead of us it's just a couple weeks
• 43:40
  away the other thing is it's being long drawn long drawn out um is the war that's a big uncertainty
• 43:47
  like what is going to happen with this thing i mean you're hearing all kinds of freak outs with
• 43:53
  um the leaders across the western world you've got i don't know what they've said out in australia
• 44:00
  But basically all across Europe, they're telling their citizens to have three days to three to 30 days of food and water in their house and at the ready because they, you know, you could have a situation where they bring down the power grid.
• 44:16
  And if the power grid goes down, then eventually water goes down, all that stuff. You know, you had the United States even said all military bases have to have their 90 day ability to exist without any power or food and water.
• 44:35
  um of course it's got people freaking out here a little bit too uh so there's uncertainty there
• 44:42
  and what would that be from who knows who knows what that would be from that would be a massive
• 44:48
  black swan but if we can get let's just pretend we don't have that and if we could get a resolution
• 44:55
  here um and oil prices can come down again well that frees up the fed to just back off
• 45:03
  you know the prices are going to come down one of the issues here is that as your listeners are
• 45:11
  smart enough to know is energy feeds into the price of every good and service and so it's a
• 45:16
  massive portion of it and so once you bring down that cost of energy as of now the producers have
• 45:25
  been eating a lot of that rise in cost they've not been passing it on to consumers but in the next
• 45:32
  three to six months, it's going to get passed on.
• 45:35
  And so that's where the Fed is kind of
• 45:37
  going, how much more is this going to,
• 45:42
  like, are they going to be,
• 45:43
  start passing this on to consumers?
• 45:45
  If they are, then we're going to have to,
• 45:46
  we're just going to have to crimp demand.
• 45:47
  Like, because then, which I think is wrong.
• 45:52
  It's, I think it's an error, be a policy error.
• 45:56
  I agree with Anna Wong on this one.
• 45:58
  She's a Bloomberg economist that I actually
• 46:00
  see eye to eye on all of this in the Fed.
• 46:04
  And she thinks that they would be making a policy mistake,
• 46:06
  I believe.
• 46:08
  I hadn't seen her latest posts,
• 46:10
  so I don't want to speak for her.
• 46:11
  But, you know, that's kind of where we're at with Bitcoin.
• 46:17
  I think that we get that resolution.
• 46:20
  You get oil prices come down.
• 46:22
  That means interest rates will come down.
• 46:24
  That means the fears of inflation getting out of control
• 46:28
  will come down.
• 46:30
  And then, of course, you know, we wouldn't be driven into a recession.
• 46:36
  And that's another fear.
• 46:38
  Driving into a recession, that means that deficits blow out.
• 46:42
  It's really bad for borrowing.
• 46:44
  And then it means that, you know, we have to put out even more debt to pay for that gap in spending for the government.
• 46:54
  and then interest rates go up.
• 46:57
  And it's just, it's this vicious cycle that,
• 47:00
  I guess today's word is vicious,
• 47:01
  but it's that cycle that, you know,
• 47:05
  that they obviously want to avoid.
• 47:09
  And that's why you get like today,
• 47:11
  after, even after Wors did,
• 47:15
  he had his press conference,
• 47:16
  you have Bissett out there saying that,
• 47:18
  you know, right now we're getting an energy supply shock.
• 47:22
  He said this and he said,
• 47:23
  the Fed ought to be looking at that and have an open mind about it, which feeds right into
• 47:28
  Lynn Alden's argument that we are firmly in fiscal dominance. Why does she say that?
• 47:35
  Because you've got the U.S. Treasury directing the Fed to say, hey, be careful. Don't make it
• 47:42
  worse for us, you know? Now, I don't think he's directing him, but he's saying it out loud, which
• 47:48
  is wow you know yeah um so excluding like black swans are you thinking your site's still set on
• 47:55
  sort of four or five six hundred k bitcoin in the next few years yeah i would say that we're
• 48:00
  going to top out somewhere around 29 early uh to mid 29 it's my guess um and uh i think it would be
• 48:09
  you know my base case would be somewhere around four or five hundred thousand then um now let's
• 48:14
  come down it's come down from uh from two years ago and i thought that we would be hitting a
• 48:20
  million dollars somewhere around 2030 2031 but i think that's going to be the next cycle
• 48:24
  and and once we do get four or five hundred thousand um if that's where we end up in that
• 48:30
  i mean danny we're talking about big numbers here i mean you know 300 it could be 600 who knows
• 48:36
  but my base case is around four or five hundred if we do hit that i do believe we have another
• 48:41
  regular drawdown. And that's going to be a 60, 70% drawdown. It won't be 70, 80, 90%,
• 48:50
  but I do think it matches kind of what we, it's probably going to be bigger than this last one,
• 48:56
  because it will be a larger deviation from the mean on the upside, which means that you'll have
• 49:03
  a larger deviation on the downside, or you'll have that larger number total peak to trough,
• 49:10
  because you'll have your typical drawdown on the downside.
• 49:15
  And so the peak to trough will be larger.
• 49:19
  That makes sense.
• 49:19
  I'll take three, four, five.
• 49:20
  I'll take any of those numbers.
• 49:21
  They all sound good to me.
• 49:22
  That sounds great to me.
• 49:24
  Can we talk a little bit about what Walsh did earlier today, your time?
• 49:28
  Because he came out, they didn't do anything with rates,
• 49:31
  which I think everyone expected.
• 49:32
  But the interesting thing was there were two descents, I think,
• 49:36
  two people that wanted to hike rates in the committee.
• 49:38
  So do you want to just fill everyone in with what actually happened today?
• 49:42
  Yeah.
• 49:42
  So if you look at, they always put out a statement.
• 49:47
  So the Fed always puts out a statement that is a red line from the last statement, basically.
• 49:54
  And so I'm sharing all kinds of stuff today.
• 49:57
  I'm feeling, you know, I'm in a sharing mood, Danny.
• 50:00
  Let's go.
• 50:02
  So this is the statement that they put out.
• 50:05
  right so when you the first thing that happens is you hear okay what did they do did they raise
• 50:11
  rates lower rates stay the same what happened okay so they they they held steady they didn't raise
• 50:17
  they didn't lower um fully expected it was low very low probability they're going to raise rates
• 50:22
  okay so then the next thing you do is you say okay what the press release say and this is the press
• 50:27
  release it's very short like this was two or three times this size when powell was out there
• 50:33
  the wordy lawyer, the wordy attorney.
• 50:36
  Is this because they don't want to do forward guidance anymore?
• 50:39
  That's what he says, but everybody's out there still talking,
• 50:41
  and he even admitted that, you know?
• 50:44
  It's like, there, it's, okay, we're going to come to that.
• 50:48
  But yes, that is a very big part of all of this,
• 50:52
  is that he wants to get out of the game of forward guidance.
• 50:55
  But he also recognizes that without forward guidance,
• 50:58
  you know um the market is is kind of uh unleashed to do its own thing and he wants he also wants to
• 51:07
  control that narrative too you can just tell by his words and now other the other governors and
• 51:14
  officials are out there every single day okay so what's important about this well first of all
• 51:19
  the you know they maintained okay that's obvious um you know that's that's an easy red line
• 51:26
  this one was interesting so he said economic activity is expanding at a solid pace last
• 51:33
  meeting and now this time they said strong pace that's a that's a that's a like a more powerful
• 51:42
  word than solid yeah strong pace okay huh now we're going to come back to that one because
• 51:50
  this was interesting so now you said okay the accumulation of more information basically they
• 51:55
  And as I said, they want more information
• 51:59
  to help determine the next meeting,
• 52:03
  is what they're saying, basically.
• 52:04
  more information before we do anything.
• 52:06
  So we're gonna hold Pat.
• 52:08
  We're not gonna do anything until we get more information.
• 52:10
  Okay.
• 52:11
  Voting against the policy action
• 52:12
  with Lisa Cook and Beth Hammock.
• 52:15
  No surprise here, Lisa Cook.
• 52:17
  Interesting.
• 52:18
  Because this is kind of a switch for her.
• 52:21
  But why would she make that switch?
• 52:23
  Why is she become more hawkish?
• 52:27
  Wouldn't she just love to raise rates
• 52:29
  right before the election on Trump?
• 52:33
  You know, wouldn't she?
• 52:35
  So is she a Democrat?
• 52:36
  Trump is trying to, he has to have her removed.
• 52:40
  So remember?
• 52:42
  So we won't get into all that.
• 52:44
  I'm, you know.
• 52:45
  So there's some politicking in here.
• 52:47
  Yeah.
• 52:47
  So, and then I think there's maybe some politicking here.
• 52:53
  Like to say, hey, look, economy's doing great,
• 52:55
  but we don't need to do anything.
• 52:57
  Wait, you're kind of talking out of both sides of your mouth there.
• 52:59
  The economy's doing great.
• 53:00
  It's expanding at a strong pace.
• 53:03
  while inflation is well above the target.
• 53:07
  Inflation is 3.7% versus the target of 2%.
• 53:10
  Okay, so that's the first thing.
• 53:13
  Do you look at this, you kind of scratch your head.
• 53:14
  You're like, strong pace, but they held pat.
• 53:17
  Okay, and then that was mildly interesting,
• 53:20
  but that's about it.
• 53:21
  No real big deal there.
• 53:23
  Okay, so then you get into the Q&A.
• 53:25
  Well, can I just ask one quick question on that
• 53:27
  before we got into the Q&A?
• 53:28
  How unusual is it to have dissenting votes in this?
• 53:31
  Well, it used to be highly unusual, really unusual to have dissenting votes. But the last few meetings, we've had dissenting votes. And so, which, to me, I feel like that is a healthier Fed.
• 53:50
  you know that means they're actually debating you've got people who are willing to say no
• 53:54
  um whereas you know past chairs have almost insisted that hey we got to all be on the same
• 54:03
  page here it's got to be unanimous so um but it's becoming more regular so that's that's interesting
• 54:11
  is it is it uh politically driven because you know let's face it there's no arguing that trump
• 54:20
  is an extremely, you know, he is a kind of person that, what's the word I'm looking for?
• 54:32
  He's possibly the most polarizing figure in the world right now.
• 54:35
  That's it, yeah.
• 54:36
  He's extremely polarizing.
• 54:38
  Sorry, it's late here.
• 54:39
  It's getting to the time where my brain shuts off.
• 54:42
  But yeah, so, you know, but he's polarizing.
• 54:46
  Of course, you're going to have some politically driven stuff.
• 54:48
  um so to answer your question but then you get into the q a and here's the you know he gets up
• 54:56
  there he's like one question each that's it if you ask two questions i'm going to choose which
• 55:02
  question to answer you know so very like hard line on that he keeps saying we don't want to be
• 55:08
  up here giving a ton of guidance we want to just be we want to do our job and not you know um be
• 55:13
  moving markets of course the market moves the moment he opens his mouth they're like okay is he
• 55:19
  is he dovish hawkish what what kind of what kind of hold was this which is just a ridiculous thing
• 55:24
  like well this was a hawkish hold oh come on like really like that's what does that mean
• 55:30
  what does that mean so anyway so the long and short of is he mentioned that two percent target
• 55:38
  over and over and over again.
• 55:40
  But the reality is he didn't come out saying,
• 55:45
  look, we held, but we were really close to,
• 55:48
  you know, raising here.
• 55:50
  And we know we need to raise.
• 55:51
  He didn't say that.
• 55:53
  He said, we need more information to decide.
• 55:55
  Why did he say that?
• 55:56
  Well, because of the energy impact to these prices.
• 55:59
  That's why.
• 56:00
  And he's like, I think without energy,
• 56:04
  you know, Scott Bessette is right.
• 56:06
  That without the spike in energy,
• 56:08
  it wouldn't be as bad.
• 56:10
  And of course it wouldn't be.
• 56:11
  You could see in the numbers, you know.
• 56:14
  Doesn't mean that the inflation is not still
• 56:16
  above that 2% range.
• 56:17
  It is, even with the energy impact,
• 56:20
  it still is above it.
• 56:22
  But I don't think it's that far above
• 56:23
  where it needs to be.
• 56:25
  Like the rates don't need to be
• 56:27
  much further above this to compensate for that
• 56:32
  or to account for that.
• 56:34
  So anyways, you saw on the market
• 56:37
  that the market kind of responded with,
• 56:40
  Bitcoin was like, ah, okay, okay.
• 56:42
  They're not coming out guns a-blazing.
• 56:45
  They're not gonna be raising rates in our face for the next,
• 56:48
  you know, there's still only a couple of rates
• 56:52
  that are, that rise, you know, raises that are in the books
• 56:56
  that are penciled in for next year.
• 56:59
  You know, one in December,
• 57:01
  maybe another one early next year,
• 57:03
  and then kind of hold.
• 57:04
  it's not a lot of i mean 50 basis points is not that big of a deal you know yeah 25 basis points
• 57:11
  is almost nothing so um so it kind of calmed people down i think and now we're going to get
• 57:17
  the reaction the markets tomorrow so but i mean it seems like everything really hinges on the iran
• 57:22
  situation and if there was some kind of resolution there oil prices presumably come down and then
• 57:27
  the game is kind of completely changed at that point but i don't know if this is silly but
• 57:31
  if Trump wants to have any shot in the midterms,
• 57:35
  surely he has to try and bring that
• 57:36
  to some kind of conclusion very quickly.
• 57:38
  I don't know if he will be able to or if he can.
• 57:40
  I think he's already conceded
• 57:41
  that he's not gonna be able to get out of there.
• 57:43
  And so, you know, there have been reports
• 57:46
  that were ramping up our military presence there.
• 57:49
  You know, so I would have thought,
• 57:54
  and I actually said this.
• 57:55
  I said this months and months ago.
• 57:57
  I said, first principle, he's not gonna continue.
• 57:59
  He's gonna get out of this way before midterms.
• 58:01
  Man, you cannot predict what that guy's going to do.
• 58:05
  And he's polarizing and unpredictable.
• 58:08
  It's just reality.
• 58:10
  And so will the Republicans suffer for it?
• 58:14
  Likely.
• 58:16
  We're likely going to suffer a number of seats.
• 58:19
  And whether the Democrats sweep because of it,
• 58:22
  if they do, it's because of that.
• 58:25
  People vote their wallets.
• 58:28
  they just if they're getting killed at the pump and at the grocery store and on their car insurance
• 58:35
  and all that they're going to be like and people say okay you say well why how does car insurance
• 58:40
  like that doesn't like energy doesn't affect that sure it does because who like how do you sell car
• 58:46
  insurance with people and you had to pay employees and wages have to go up to compensate you know and
• 58:52
  So it's slower.
• 58:54
  It's much faster at the pump,
• 58:55
  but it's still, it makes an impact.
• 58:59
  So obviously when Walsh was brought in,
• 59:02
  the idea, sort of the thought process
• 59:04
  was that rates were going to get cut.
• 59:06
  That's what Trump wanted.
• 59:07
  He brought Walsh in to do that.
• 59:09
  And so far we've had at least one rise, one hold,
• 59:13
  and it looks like it's going to be
• 59:13
  another rate hike in December.
• 59:16
  Why?
• 59:17
  Like, why is he not playing the game?
• 59:19
  Okay, well,
• 59:19
  Well, Trump is out there, so much of this is political, right?
• 59:25
  Trump is out there saying, the Fed's got to lower rates because we need mortgages down.
• 59:29
  We need car loans down.
• 59:30
  We need borrowing rates down for the American people.
• 59:35
  They can't get a mortgage if it's at 7% or 8%.
• 59:37
  Okay, that's great.
• 59:39
  What happens if the Fed lowers rates?
• 59:41
  We know this.
• 59:43
  The Fed lowers rates in the face of high inflation.
• 59:46
  What's going to happen to the mortgage?
• 59:48
  The yield rise on the 10-year.
• 59:49
  Exactly.
• 59:49
  We saw it right when they were clearly political the last time they did this, when Powell was
• 59:56
  lowering rates right before the election.
• 1:00:00
  I see what you're saying.
• 1:00:01
  So there almost like a paradox here where they lower rates but yields rise therefore mortgages actually go up not down Correct And he of course of course Warsh and Besant have had conversations about this with
• 1:00:16
  Trump. And that's not collusion, really. It's just like they're-
• 1:00:20
  It's cunning.
• 1:00:21
  Yeah. They're like, dude, if we lower rates here, that's not going to help.
• 1:00:26
  You know, go ahead and bash me. I don't care. And, you know, and he's got, he's out. We have
• 1:00:33
  we have dissenters you know like we have we have a a free fed and so now trump can say oh we got
• 1:00:42
  we've got you know hardline democrats on the fed that that want to raise rates to hurt me you know
• 1:00:48
  okay whatever so um but yeah that's why and so they're not going to play along meaning
• 1:00:56
  with lower rates, it could have the opposite effect and it could make it worse.
• 1:01:04
  So they're stuck in a position now where whether they lower rates or raise rates is
• 1:01:08
  potentially bad for inflation.
• 1:01:10
  Correct. They're stuck. They're stuck. And then you could have a situation where you have the
• 1:01:17
  economy rolling over because AI starts taking a bunch of jobs. And in that transition,
• 1:01:26
  you lose a bunch of jobs, people try to figure out what they need to do. Like, there's a transition
• 1:01:31
  period. I don't believe that it's catastrophic. The AI is taking everybody's jobs. Oh, my God,
• 1:01:36
  everybody's going to be, you know, unemployed. No, I think that there could be a situation where
• 1:01:42
  you have transitions. And so instead of, you know, instead of being the operator of a horse and buggy,
• 1:01:50
  you got to turn around, you got to figure out how to be an operator of a taxi cab. It's different.
• 1:01:55
  different skill set, different hiring process, and you'll have to figure it out. But
• 1:02:00
  not a perfect example. But what I mean by that is a change in technology doesn't necessarily mean
• 1:02:06
  you're going to lose all these employment, but it just changes it. Yeah. But there will be a
• 1:02:11
  transition period. Okay. So now you got to slow down there at the same time that we're still out
• 1:02:15
  in the Middle East in this conflict and bombing Iran. And God knows what happens with the Strait
• 1:02:24
  of her moves, oil rips up to $200 and prices are screaming and you're back to 1980.
• 1:02:33
  And so you'd say, well, in 1980, they just squashed demand.
• 1:02:38
  It was easy.
• 1:02:39
  They raised rates to oblivion to 16, 18, 20% and they squashed the demand.
• 1:02:46
  Well, we've all seen that chart of the inflation, how it's tracking exactly like the 80s, right?
• 1:02:52
  70s, 80s.
• 1:02:54
  But we didn't have the debt problem then.
• 1:02:57
  We didn't have the debt problem.
• 1:02:58
  So we have $13 trillion of debt to refinance next year.
• 1:03:03
  Debt and interest payments that we have to refinance.
• 1:03:07
  And we have to basically finance with debt, more debt.
• 1:03:11
  Refinance it, okay?
• 1:03:15
  And $2 trillion plus of deficits.
• 1:03:19
  So you have $15 trillion that you're going to refinance here.
• 1:03:21
  Can you imagine if the Fed raised rates to 15%? Not to 20, but say they raised to 15%
• 1:03:29
  because inflation got out of control. Inflation gets up to 7, 8, 9, 10%. Can you imagine? I mean,
• 1:03:36
  on $15 trillion, if you raise rates by another 5%, that's $750 billion that you're adding to
• 1:03:48
  the deficit. They just can't do it. They can't do it. So what happens then?
• 1:03:57
  Well, man, tough situation. You have inflation. You better own assets.
• 1:04:06
  You better own assets. What kind of inflation are you talking about? Like high single digits,
• 1:04:12
  double digit inflation? What do you think is the most likely outcome?
• 1:04:15
  Who knows? I mean, it depends on how bad the conflict is and how bad energy prices get and what happens to supply chains. You know, if it gets high enough, then goods and services start, they constrict, right? So you get fewer goods because the manufacturers are like, well, I can't make as many because it costs so much.
• 1:04:35
  um so there's not as many prices go up it's just you know it feeds on itself so um it all depends
• 1:04:42
  it really does but back in 19 i can tell you it was painful it was brutal man we sat around i cannot
• 1:04:49
  tell you how many times i heard we can't afford that we can't afford that we cannot afford that
• 1:04:53
  what do you think we're the rockefellers money grows on trees these are all the things that
• 1:04:58
  they said in Gen X.
• 1:05:00
  All my Gen X friends remember all of these sayings
• 1:05:04
  because pretty much every middle-class family
• 1:05:08
  was saying, we can't afford that.
• 1:05:11
  Are you kidding?
• 1:05:11
  We can barely afford gas this week
• 1:05:13
  and we can't even get it next week
• 1:05:15
  because we have an odd number
• 1:05:19
  at the end of our license plate
• 1:05:20
  and we're rationed out.
• 1:05:22
  We can't get gas for another two weeks.
• 1:05:25
  It would be painful, man.
• 1:05:26
  It would be scary.
• 1:05:27
  It sucked.
• 1:05:28
  It was brutal.
• 1:05:30
  I remember them, like, my parents are like,
• 1:05:32
  they were trying to refinance a house
• 1:05:35
  because, you know,
• 1:05:36
  just to get us into better schools.
• 1:05:41
  And man, they're like,
• 1:05:44
  mortgages are 20%.
• 1:05:45
  But do you still think that money printing in some way,
• 1:05:49
  whether that's QE, yield curve control,
• 1:05:51
  whatever format it happens to be, is inevitable?
• 1:05:54
  And then the question I want to ask with that is like,
• 1:05:56
  how long do we have before Money Printer has to turn back on?
• 1:05:59
  Right.
• 1:06:00
  That all depends on the severity of a drawdown
• 1:06:02
  and the cause of it.
• 1:06:05
  But, you know, for the people listening and saying,
• 1:06:08
  so what, $100 trillion of debt, who cares?
• 1:06:10
  You're never going to repay it.
• 1:06:11
  Right.
• 1:06:12
  But you are going to pay the interest on it
• 1:06:14
  and you have to constantly refinance all of that.
• 1:06:20
  So where are interest rates, you know?
• 1:06:22
  So if you got interest rates at 5%,
• 1:06:26
  And we've got $100 trillion of debt,
• 1:06:29
  even just $80 trillion, you know?
• 1:06:31
  You're talking about $4 trillion of interest payments.
• 1:06:34
  $4 trillion.
• 1:06:35
  I mean, like, this is-
• 1:06:37
  And we're talking about getting to $80 trillion
• 1:06:38
  within 10 years.
• 1:06:40
  But that's also inflationary.
• 1:06:41
  Think about it.
• 1:06:42
  Where's that money going?
• 1:06:44
  That money's going out to the borrowers, right?
• 1:06:47
  So who are the borrowers?
• 1:06:48
  The asset owners, right?
• 1:06:50
  So, right?
• 1:06:52
  So like that, it's, uh, it's going to be a very, I'm sorry, who are the lenders?
• 1:06:58
  Sorry.
• 1:06:59
  So, you know, so the borrower is the, is the treasury.
• 1:07:04
  And so they, that money just feeds back into money market accounts.
• 1:07:09
  Um, you know, your, your investment account that all your cash is sitting in is getting
• 1:07:16
  those money market rates and they're buying T-bills for them.
• 1:07:19
  so anyway um but your question was about when does the money printer get turned on
• 1:07:26
  well tell me what the tell me what the drawdown is tell me what the the the either the shock to
• 1:07:33
  system is or the uh disruption to the system if you have a if you have a a drawdown like
• 1:07:43
  we had September 2019,
• 1:07:45
  which was not a drawdown in the market,
• 1:07:49
  but it was a shock to the credit markets,
• 1:07:53
  which is the repo.
• 1:07:54
  Yeah, we talked about this,
• 1:07:55
  the repo market shock.
• 1:07:57
  Well, a shortage of dollars
• 1:07:58
  and the need for more liquidity.
• 1:08:02
  Well, then the Fed comes in
• 1:08:04
  and just starts doing QE at a pace
• 1:08:07
  that is commensurate with the need for the liquidity whatever that need is which is not that big You could see it when you go and look at the expansion of the Fed balance sheet
• 1:08:24
  Man, I really am in a sharing mood here, Danny.
• 1:08:30
  So if you, let me pull this up so you can see it.
• 1:08:33
  Okay, so if you look back at that time, here's the expansion of the balance sheet when you had the repo crisis in 2019, September 2019.
• 1:08:46
  It was pretty gentle during the repo crisis, then you have COVID.
• 1:08:49
  Yeah, pretty gentle, pretty gentle, pretty gentle.
• 1:08:51
  Lockdowns on COVID, my God, here come the money bazookas.
• 1:08:56
  Completely different.
• 1:08:57
  So what's the, I have to understand what either the shock or the need for liquidity is.
• 1:09:05
  If it's a credit crisis that's run-of-the-mill kind of vanilla, this was serious.
• 1:09:09
  Don't get me wrong.
• 1:09:10
  They turned around and pumped liquidity in quickly.
• 1:09:14
  They stopped QT and started QE like in hours.
• 1:09:17
  But that was a serious situation.
• 1:09:19
  But it's nothing like this.
• 1:09:22
  So, you know, that's really what depends on.
• 1:09:26
  Do you think that could be a form of yield curve control?
• 1:09:29
  Like we see rates now in 10 years across the world,
• 1:09:31
  like I think almost everywhere is above 5% now.
• 1:09:34
  Like what number does that become an issue?
• 1:09:36
  And do you think that's the most likely place
• 1:09:38
  they step into the market and try and juice things?
• 1:09:40
  Yeah, a lot of people say there's a line in the sand
• 1:09:43
  that's been drawn that, oh, it can't go over 6%,
• 1:09:45
  it can't go over 7%, whatever it is.
• 1:09:47
  I don't know where that line is.
• 1:09:49
  You do the math though.
• 1:09:51
  There's a line somewhere where they're like,
• 1:09:53
  oh, we got to stop.
• 1:09:54
  But what I think is we're already at the line of nervousness, which means that that's why that's why Vicente is out there buying bonds.
• 1:10:04
  OK, it's not a lot. He's buying five, six billion dollars of bonds a week, whatever.
• 1:10:09
  Not that big of a deal. OK, added up over the course of a year.
• 1:10:13
  It does add up. It's not nothing, you know, two hundred fifty billion dollars worth of bonds or whatever.
• 1:10:20
  but it's not nothing but it's not a lot you know um so but what is he doing he's adding liquidity
• 1:10:29
  to the market by taking out illiquid bonds that cause volatility in the market and it's just
• 1:10:36
  and you wind up putting you wind up putting paper uh securities in the market that are much more
• 1:10:42
  tradable um so it's just healthier for the market healthier for the overall treasury market
• 1:10:47
  he already called it you know quasi twist because you you've got the you've got him out there
• 1:10:56
  um doing that while the the short-term rates are going up while basically what they're doing is
• 1:11:03
  they're they're using short-term treasuries the t-bills to finance the government while they're
• 1:11:12
  buying. So they're selling those while they're buying the longer term bonds, the illiquid bonds.
• 1:11:20
  It's a quasi, he said quasi twist, I think was exactly what his words were,
• 1:11:26
  maybe six or eight weeks ago. So that's what they're doing. And it's a tiny amount.
• 1:11:34
  the Fed is out there. They had been putting liquidity into the market, raising the bank
• 1:11:43
  reserves. So we don't have a repo crisis again, like we saw in 2019, they're getting ahead of it.
• 1:11:49
  So that's the point. So the line of the sand is kind of, I think it's, we're in that, that we're
• 1:11:57
  in the area. Okay. So it's not really that we're on that beach. We're, we're currently on the beach
• 1:12:03
  that they're concerned enough
• 1:12:05
  that they're out there doing some things,
• 1:12:07
  talking a lot about it,
• 1:12:09
  managing the expectations,
• 1:12:13
  even though they say they're not going to.
• 1:12:15
  Vicente is out there every day.
• 1:12:17
  He is out there every single day talking.
• 1:12:21
  Yellen was out there a bunch
• 1:12:23
  because we had a crisis.
• 1:12:25
  But other than that,
• 1:12:26
  do you remember a treasury secretary
• 1:12:28
  out there talking so much,
• 1:12:32
  managing this?
• 1:12:32
  like they're out there and so um you know i think that line in the sand is really more of an area of
• 1:12:40
  the beach and we're in it and they're just trying to get ahead of it and say okay we're going to
• 1:12:44
  manage this trust us we're going to manage this have confidence in this paper we're going to
• 1:12:49
  manage it and then um when you get um a flight to safety like you got when ai uh stocks had drawdown
• 1:12:58
  recently in the last few weeks, then you get a flight to safety on the long bond, like we talked
• 1:13:04
  about. Pretty good trade. Long term, I would not want to hold these things for 20 years, but
• 1:13:09
  20 days on a trade on this, it's a flight to safety. It's what it is. And so that's what you
• 1:13:16
  saw in the 10-year. And so that's kind of where we're at. And so what's the sort of key takeaway
• 1:13:21
  here? Is it that things are very hairy right now, intervention in some form, who knows when and how,
• 1:13:27
  but intervention in some form is coming
• 1:13:28
  and you better own assets,
• 1:13:30
  you better own Bitcoin.
• 1:13:32
  Yeah, there's two things.
• 1:13:34
  Intervention is already happening
• 1:13:36
  on a very small amount.
• 1:13:38
  It will get a large intervention
• 1:13:41
  if we have some sort of event.
• 1:13:44
  That's number one.
• 1:13:46
  Number two is at some point, Danny,
• 1:13:52
  in the future,
• 1:13:52
  and I don't know when this is.
• 1:13:54
  And again, I'm not a doomer.
• 1:13:55
  I don't think it's tomorrow.
• 1:13:58
  Larry thinks it's on a shorter timeline than I do.
• 1:14:00
  Larry Lippard, who wrote the big print,
• 1:14:03
  he believes it's on a shorter timeline than I do.
• 1:14:08
  Is it in the next three years?
• 1:14:10
  I don't think so.
• 1:14:11
  Is it in the next 10 years to 20 years?
• 1:14:13
  Man, Jamie Dimon said it today,
• 1:14:18
  and this is the punchline,
• 1:14:20
  is that the United States is in an enviable position
• 1:14:24
  of having the world reserve currency.
• 1:14:28
  But that is not something that is a requirement.
• 1:14:34
  That is not ordained to us, the United States,
• 1:14:40
  to have that power of currency.
• 1:14:45
  And at some point, let's pretend, Danny,
• 1:14:49
  that we do get an explosion of deficits and debt,
• 1:14:52
  and you get to $100 trillion a lot faster than, you know, 2040,
• 1:15:00
  let's say it comes in early 2030s,
• 1:15:02
  if something happens and you get an explosion,
• 1:15:05
  at some point you get a loss of confidence in the U.S. paper
• 1:15:09
  and you don't want to lend to the U.S. government anymore
• 1:15:13
  because you know that the dollars that are coming back
• 1:15:15
  are significantly lower purchasing power
• 1:15:21
  than they did when you lent them out.
• 1:15:22
  And at that point, the loss of confidence occurs.
• 1:15:26
  No currency has existed forever.
• 1:15:30
  It just hasn't.
• 1:15:30
  So you are talking about the end of the dollar,
• 1:15:32
  at least as we know it today.
• 1:15:34
  And so when you said,
• 1:15:35
  Larry thinks this is happening on a shorter timeframe,
• 1:15:37
  you don't know if it's next 10, 20, 30 years.
• 1:15:38
  Is that what you're talking about?
• 1:15:39
  The end of the dollar as we know it?
• 1:15:41
  I'm talking about the end of, yeah,
• 1:15:42
  the end of the dollar as you know it
• 1:15:44
  through the debt-based system that we're on.
• 1:15:49
  What does that mean?
• 1:15:50
  I think it's a lot of chaos, and I don't know, you know, there's a lot of other currencies that will be in trouble before this.
• 1:16:00
  Oh, yeah.
• 1:16:00
  The euro is straight up the middle.
• 1:16:03
  Basically, every other currency except maybe the Swiss franc.
• 1:16:05
  I don't know, because they're not part of the euro.
• 1:16:09
  But you know there will be a fight for the global status and I don know what that ends up being there may be we may not have a global reserve currency anymore at that point But the reason for it is the debt It because there a loss of confidence in the debt
• 1:16:26
  If you don't want to hold the debt, then you're not going to hold the dollars.
• 1:16:30
  So good reason to have money completely outside of the system.
• 1:16:34
  Good reason. Is that why that scares them? Maybe. Maybe it is. And by scare, you know,
• 1:16:42
  I think there's a lot of people up in DC who just don't understand it. There's plenty of people,
• 1:16:47
  clearly there's plenty of people in Europe who don't understand it, um, who are in, who are in
• 1:16:51
  the ECB or, um, you know, so does that mean that they're going to fight it? Well, I think we're
• 1:17:01
  past that point. I truly believe that we're past the point of governments fighting this thing.
• 1:17:06
  could it be susceptible to a you know some sort of quantum attack the moment that quantum is able
• 1:17:15
  to do it is that like first on the list maybe but that would come from a nation state player that
• 1:17:21
  that was worried about it and did not have it cornered enough to use it for its own good
• 1:17:28
  And meaning if the U.S. had a reserve, a Bitcoin reserve, then they would likely want to see Bitcoin survive because it would help the balance sheet of the United States.
• 1:17:43
  And that would help the debt for a long time.
• 1:17:45
  um but uh you know i think that quantum and ai i i heard lynn say this in a snippet somewhere
• 1:17:58
  um and i think she's exactly right that uh lynn alden for people who are listening who don't know
• 1:18:04
  um i think that and she said ai threats have basically leapfrogged quantum um recently and
• 1:18:14
  to any existing protocol and system.
• 1:18:19
  And so you're seeing it real time now
• 1:18:23
  where JP Morgan and other banks are like,
• 1:18:26
  oh, you can't have agents doing banking business for you.
• 1:18:29
  That is not safe because they don't trust
• 1:18:34
  the agents won't go in and wreak havoc
• 1:18:36
  and somehow get into the system.
• 1:18:39
  And whether it's steel money or whatever,
• 1:18:42
  that would to me that would be the first attack vector which is banks i mean people are going to
• 1:18:48
  want people's money they're not going to bitcoin's much harder to uh to steal like you you have to
• 1:18:54
  you have to somehow socially engineer an attack which is what what basically happened well
• 1:19:04
  cold card is a different issue but with with uh um the ledgers right they basically they they got
• 1:19:13
  into the distribution supply chain and supply chain so um but anyways so i think i think that
• 1:19:21
  would be i'd be much more worried about having a lot of cash sitting in a bank than i would um
• 1:19:26
  having it on a bunch of cold wallets or um you know in uh in bitcoin somewhere you know in a in a
• 1:19:33
  in an account that is a custodial account somewhere
• 1:19:38
  with multi-sig protection.
• 1:19:44
  If you take all this to account,
• 1:19:47
  $80,000 Bitcoin sounds cheap as hell.
• 1:19:49
  Really cheap.
• 1:19:51
  And that's the thesis.
• 1:19:53
  And every time that I get fatigued with it
• 1:19:57
  and like, what is going on here?
• 1:19:59
  I just think I don't have a better place to have my main investment vehicle, especially with the hedge fund.
• 1:20:09
  Like, I think this is, I don't see how this fails, especially with everything we have going on here.
• 1:20:18
  But remember, there's a lot of distraction out there, Danny.
• 1:20:22
  um you know uh microsoft did a study back in 2015 and if i remember correctly um a goldfish
• 1:20:33
  i'm gonna look this up so we get this right uh a goldfish uh here it is has a nine second
• 1:20:43
  attention span. Okay. And so Microsoft, Microsoft did a study years ago. I think it was almost
• 1:20:54
  10 years ago that human attention span had dropped from 12 seconds in 2000 to eight seconds.
• 1:21:05
  Damn. We're below the goldfish.
• 1:21:06
  We're below the goldfish.
• 1:21:08
  So the distraction level on these things is, it's relentless.
• 1:21:14
  I'm not on TikTok, but I know people who are addicted to it.
• 1:21:19
  Nobody in my family is, thank God.
• 1:21:20
  But it is just scroll, scroll, scroll, scroll, scroll.
• 1:21:24
  Hours and hours and hours at a time.
• 1:21:27
  People are so distracted.
• 1:21:29
  And they're distracted with either that
• 1:21:31
  or just trying to make enough money to survive,
• 1:21:34
  to pay their bills, pay their mortgage, pay their insurance,
• 1:21:36
  pay for the food, pay for the gas.
• 1:21:38
  They're distracted with that.
• 1:21:40
  And I mean, it's not, they're focused on that
• 1:21:43
  and not focused on anything else.
• 1:21:44
  They don't have time to focus on
• 1:21:45
  what's the best place to have my money,
• 1:21:48
  which is why you and I are doing this work
• 1:21:50
  to make it really easy for them to just listen to this
• 1:21:52
  while they're working out and get an idea
• 1:21:55
  of how serious the situation is
• 1:21:57
  and why our thesis is that Bitcoin is the best place to be
• 1:22:03
  for the next 10 years.
• 1:22:04
  And guess who agrees with us?
• 1:22:06
  JP Morgan. Let's go. It kind of gets back to the start of the conversation when we're talking about
• 1:22:12
  a lot of people becoming fatigued with Bitcoin. I understand why. And I think so much of that
• 1:22:16
  distraction that you see online, like algorithms, a lot of that's engineered. And now's not the time
• 1:22:21
  to be fatigued. Now's the time to lock in. I think we're still so early. We're so early in
• 1:22:26
  the Bitcoin story. I think price is going a lot higher. I agree. It's been a good episode. I
• 1:22:32
  appreciate you, James. Tell everyone where they go to read your newsletter. It's one of the best
• 1:22:36
  one's out there. Thank you. It's called The Informationist. And I talk about all these things
• 1:22:41
  in very approachable language. Not AI. I write every word. I do use AI to help me research some
• 1:22:48
  stuff and to make charts, graphics. But beyond that, I really like the process of writing it and
• 1:22:58
  making it easy for people to understand. And that you can find it just at jameslavish.com. There's a
• 1:23:03
  free version that comes out every month. And there's a paid version that you get all every
• 1:23:07
  Sunday. So, and then if you're an accredited investor and you're interested in Bitcoin and
• 1:23:14
  investing in the Bitcoin space, I've got the Bitcoin Opportunity Fund that I'm co-managing
• 1:23:18
  and we're open and we have a second fund that is open for new LPs. And so if you're interested in
• 1:23:27
  that and you think it might be right for you, just go to BitcoinOpportunity.fund and reach out
• 1:23:34
  to us and we can get on a call and talk through it and make sure that it's something that would
• 1:23:38
  be appropriate for you. We don't think it's appropriate for everybody, but it might be
• 1:23:42
  for you. And we're always looking for good LPs. But yeah, I appreciate you having me on, Danny.
• 1:23:50
  It's always good to talk to you. You know you've got an open invite, man. It's always great. And
• 1:23:55
  like that's exactly why i love the newsletter is it is super approachable even for for normies like
• 1:23:59
  me so go subscribe um thanks james it's been awesome i will definitely speak to you again soon
• 1:24:05
  likewise likewise thanks for that let's go