Markets Outlook: Trader Warns of 'Pandemonium' if Bitcoin Breaks This Critical Price Level

Podcast: Markets Outlook by CoinDesk
Host: Jen Senassi
Guest: Don Kaufman, Co-founder of TheoTrade
Date: October 3, 2025

Episode Overview

In this episode, host Jen Senassi sits down with Don Kaufman of TheoTrade to dissect the latest developments in the crypto markets, with a particular focus on Bitcoin's recent rally past $120,000. The conversation explores the increasing correlation between crypto and traditional markets, the risks surrounding key price levels, and how proposed government fiscal measures could impact the industry. Kaufman brings detailed trader insights and warns of potential “pandemonium” if Bitcoin breaches critical support, all against the backdrop of macroeconomic and political uncertainty.

Key Discussion Points & Insights

1. Market Climate: AI Bubble, Gold Outperformance, and Crypto’s Role

• AI & Equities Bubble: Kaufman observes a continuing squeeze in AI-related equities, clear signs of a “bubble” that could persist longer than anticipated.
• Gold’s Performance: Gold is noted for outshining both the S&P 500 and Bitcoin on a year-to-date basis. Despite Bitcoin’s strong recent performance, it lags significantly behind gold’s returns.
  • Quote [01:48]:
    “Bitcoin has ripped in the last couple of trading sessions, but it still pales in comparison. Right now it's about half the return on a year to date basis that gold is seeing.” — Don Kaufman

2. Changing Nature of Bitcoin Trading

• Correlations Soar: As crypto becomes accessible alongside stocks, options, and futures on mainstream trading platforms, Bitcoin’s price action is increasingly correlated with high-beta stocks like Tesla and Nvidia.
  • Quote [02:38]:
    “You literally have to lump crypto and specifically bitcoin in with that. And as I said, it's changing the nature of the beast.” — Don Kaufman
• Blurred Lines Among Asset Classes: Kaufman stresses that the once-clear division between asset classes is dissolving, with crypto now actively traded by the same cohort speculating on volatile equities.

3. Bitcoin’s Critical Levels: Warning of Pandemonium

• Government Shutdown? “Nobody Cares” — Except for Key Price Levels: Despite the U.S. government shutdown, speculative activity continues in both AI equities and crypto.
• The $110,000 Line in the Sand: Kaufman identifies $110,000 as a crucial Bitcoin support level.
  • If this level is breached, he predicts “pandemonium,” with an accelerated sell-off down to $100,000, sparking panic among traders due to Bitcoin’s relatively illiquid exit routes compared to other assets.
  • Quote [04:21]:
    "You start to break under 110,000 in Bitcoin and it can turn into pandemonium very, very quickly. You know, a fast sell off to 100,000. And I think that's the point where trade starts to literally panic in this marketplace." — Don Kaufman
• Unique Market Dynamics: The guest notes Bitcoin’s “one door in, one door out” dynamic, lacking the risk mitigation options of equities.
  • Quote [04:52]:
    “When you start focusing on bitcoin, as I said, there's like one door in and one door out. The derivative side of it hasn't really grown to the liquidity yet. And I get real nervous in situations like this.” — Don Kaufman

4. Year-End Outlook: Seasonality vs. Macro Risks

• Seasonality Might Not Save Bitcoin: While Q4 usually favors crypto, Kaufman warns that a prolonged government shutdown will induce S&P 500 volatility, likely dragging Bitcoin with it rather than triggering a safe-haven bid.
  • Quote [05:58]:
    "We're not seeing... this asset reallocation... meaning that nobody's getting out of the S&P 500 and diving into bitcoin... I'm really setting aside any seasonality effect." — Don Kaufman
• Current Rally Deemed a Squeeze: The upward movement to $121–$122k feels unsustainable, more like a short-term squeeze than a fundamentally driven rally.

5. Policy Impact: The Potential of a “Tariff Dividend”

• Trump’s Proposed $2,000 Payout: With news of a potential $2,000 “tariff dividend” to Americans, Kaufman expects a positive short-term impact on crypto and altcoins—akin to COVID-era stimulus—but warns of significant inflationary risks and a hawkish Fed reaction.
  • Quote [07:24]:
    “Let's start on the fact that, yeah, this would actually be a positive for crypto. There's no question about it. Where the negative comes in... this is just pouring fuel on an inflation fire.” — Don Kaufman
  • Quote [07:52]:
    “Fed is not cutting anything. If they actually believe that the administration is going to be putting capital out on the streets in the near term... it could be a very good thing [for crypto].” — Don Kaufman

6. Digital Asset Treasuries and State Adoption

• Little Impact on Altcoins: The trend of sovereign digital asset treasuries is a long time coming, but Kaufman doesn’t see it as a game-changer for altcoins—it's more about increased government tracking and eventual movement into stablecoins.
  • Quote [09:08]:
    “This is all about, in my opinion, them actually tracking, you know, capital on a much more grandiose scale. And that's not going to have a dramatic impact... for altcoins.” — Don Kaufman
• Needed Tech Upgrades: He criticizes banks’ outdated infrastructures and believes digital assets will modernize cross-border transactions.

7. What Traders Should Watch

• BTC’s Correlation with High-Beta Equities: Kaufman is closely monitoring the flow between Bitcoin and stocks like Oklo, Nvidia, and Tesla—spotting that the same traders are active on both sides.
  • Quote [10:52]:
    “The same people that are trading bitcoin are buying calls every morning when the bell goes off in something like Broadcom or Tesla and Nvidia. And it's absolutely fascinating to me because this... bitcoin, as I said, is no longer this autonomous asset class.” — Don Kaufman
• Order Flow Patterns and Volatility Feedback Loops: Volatility in U.S. equities will likely send ripples—potentially shockwaves—through the Bitcoin market and vice versa.

Notable Quotes & Memorable Moments

• On Traders' Current Mindset:
  • [03:53] "See, nobody cares [about the government shutdown]." — Don Kaufman
• On Policy and Inflation:
  • [07:24] "This is just pouring fuel on an inflation fire." — Don Kaufman
• On Bitcoin's Changing Character:
  • [02:38] "It's changing the nature of the beast.” — Don Kaufman
• On Bitcoin’s Key Level and Panic Scenario:
  • [04:21] "It can turn into pandemonium very, very quickly." — Don Kaufman

Key Timestamps for Important Segments

• 01:23 Don Kaufman describes current market focus (gold, AI, and Bitcoin)
• 02:29 Explains why Bitcoin lags gold and details rising market correlations
• 03:53 — 05:44 Discussion of Bitcoin bust scenario around $110K and why it could trigger panic selling
• 07:00 — 08:25 Impact of potential “tariff dividend” on crypto and macro policy consequences
• 08:38 — 09:50 Explores state-level digital asset treasury moves and stablecoin implications
• 10:03 — 11:11 Deeper into order flow, correlations between crypto and big tech equities

Final Thoughts

Don Kaufman’s appearance on this Markets Outlook episode offers a cautious but nuanced view of Bitcoin’s furious run above $120,000. He urges traders to remain vigilant about the $110,000 level—which, if breached, could trigger volatility and broad panic. Crypto’s fate appears increasingly intertwined with macro narratives, U.S. equities, government policy, and even the results of high-profile fiscal proposals. The episode provides actionable insights for traders and investors aiming to gauge risk, time the market, or just understand the evolving dynamics between digital assets and traditional finance.