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- [00:00]
A
The other thing on the sentiment is it's fundamentally true. It makes sense. We're like in the eye of the storm. Like we truly are in the eye of the storm. Anybody that's here better get comfortable because it's probably going to go lower. And so the point is that between that AI and that liquidity cycle, and then also just the notion of whatever happened post 1010 in this retracement crypto being dead, everyone's just wondering, like, what the hell is going on? And nobody expected, including myself, to be in the middle of summer in the 50s. Um, but this is also why you make the money, because you get paid for the volatility. But you know it's going to go back and hit all time highs. It lives in a certain world where you need a finite, scarce asset.
- [00:42]
B
What you're telling me is that music
- [00:44]
C
is about to stop and we're going
- [00:46]
B
to be left holding the biggest bag
- [00:48]
C
of odorous excrement ever assembled in the
- [00:52]
A
history of that business. 1974-1987-9297-2000, whatever.
- [01:00]
C
We want to call this all just the same thing over and over. We can't help ourselves.
- [01:05]
B
I say when we sell.
- [01:08]
A
Hey, okay.
- [01:09]
B
I say when we sell.
- [01:14]
C
We are back. We are back. It is the last trade. We have Brian and we have Michael. And this is actually our second attempt. The recording just crapped out a few minutes in, so we're back a second time.
- [01:28]
B
You crapped out. I blame Jackson.
- [01:30]
C
It's my fault. But good to see you guys looking forward to this conversation.
- [01:34]
A
The audience deserves to know the truth. Jackson's computer got overloaded. He was getting liquidated in his stretch position. He was looping via Robinhood into ap, Dyx or whatever. He got liquidated, was clicking the wrong button, exited out of the application. So now we're recording again. But, Jax, we're not going to hold you to it.
- [01:55]
C
Well, that doesn't fit with the narrative. It stretches an institutional product for trapped capital. That's not me.
- [02:02]
A
It's true. So you were one of the smaller percentages. Your buddy Andy Edstrom had a very good tweet about wondering about the deleveraging, if it always happens on Wednesdays or is it a different day? So he just knows to plan ahead because this is a regular occurrence. These are just structural deleveraging.
- [02:21]
B
This isn't Shout Out Andy. Shout Out Andy. Been right about a lot over the past year.
- [02:26]
A
It says tact is important. He was a little more diplomatic than we were in calling some of the stuff out. So people naturally took a little break version, but water only goes downhill, guys. We'll talk more about it later.
- [02:39]
C
Look, right before we get into this opening clip here, I just want to say if you like the show, please like comment. Subscribe. You may have noticed that the full intro song is back, and that is only because a number of you have requested that in the comments over the past couple of weeks. And so I do read the comments. I respond to most of them. If you're, if you're not going to be nice in the comment section, I may not take the time to respond, but you can still leave the comment. That's all right. You know, if you want to be. You could be constructive if you want to. If you want to have some mean comments, you're free to have them. But I'm not going to respond to them. But let's get into the show. I really don't know what to think about bitcoin right now. I don't know about you guys. I know our buddy Philippe Lafont, who's Brian's friend from CO2, talked about him on the show last week or sorry, last year. We're going to revisit some of his comments that he's made more recently and he doesn't know what to think of bitcoin. And the reason why we're starting with this is because it really describes where a lot of market participants sit. Today is quite a confusing time. And so let's hear Lafont comments and then we'll have some signal and maybe some noise to talk about here.
- [03:46]
D
I don't know what to think about Bitcoin anymore. One thing I was wondering with bitcoin is there was a time when there were very few IPOs. Part of it is I think the public markets are a little bit broken with so many index funds and stuff. Everybody thinks the same. Thus nobody really wants, you know, new IPOs. I wonder if bitcoin was a little bit sort of the off ramp for everybody that wants to have something a little bit more speculative. Yeah. Now that we have these big IPOs on one side and then we have stablecoin on the other. And stablecoin involves the word stable. So if you really want to just put your money offshore, put your money in a new system, you can go through stablecoins. Frankly, stablecoins more or less are already paying interest. I don't think they really are, but there are schemes where you get these rewards and stuff like that. So if you want just a stablecoin, you can, there's fabulous IPOs coming out, there's SpaceX, there's going to be some AI and I just wonder like, well, where is bitcoin now and the purpose of bitcoin? And a little bit what you need to believe is almost this maximum maximalist view about bitcoin. Like when I speak to people about bitcoin, it's a bit like a cult. You're either in or you're not. So that's just my new thoughts on bitcoin. I'm a little bit more worried and I would rather bet on is space going to quadruple over the next 20 years.
- [04:48]
C
Brian, are you worried? I want to hand it over to you first because when we first discussed Lafont's comments on bitcoin last summer, he had quite a different take on the asset class. And so a lot shifted. And I'm curious what you make of that.
- [05:03]
B
Yeah, I mean, I'm not worried, but I guess I understand why he's worried and it has to do with what his comments were a year ago. So that was, I looked it up, it was like June of last summer. Bitcoin was about $110,000. And he was on various podcasts on CNBC, on Bloomberg, talking about how he had revisited bitcoin. He had ignored it for a long time. He could no longer ignore it. Price was ripping. That kind of makes sense. But he even mentioned he couldn't sleep at night because he didn't own any of his institutional funds or portfolios. So I don't know if he ever bought personally. If he did, he probably bought somewhere around the top of this cycle. And he had a pretty constructive thesis on it. He was saying it's small relative to gold and all these other store value assets, you know, room to grow into this monetary asset. And now what he's saying is he's unsure about it. He's unclear. And I think this is just characteristic of like someone who's new to the asset, who doesn't really deeply understand it, has sort of a cursory thesis on it. And then when there is volatility to the downside, they are easily shaken out because they don't have a view of it as better money as this long term structural force. They view it very much like just any other investment. And that's, that's true of a lot of the trad five people that come into the space. They tend to view Bitcoin as just an investment, not as a better form of money. But it's interesting because I think also what he Says there, there's a lot of things in there. But you know, his reason for that, like his explanation doesn't even make sense. He's saying like, oh, bitcoin existed as this thing because it was this speculative outlet when there's always speculative outlets. Just because SpaceX is IPOing right now doesn't mean that for the past 17 years there haven't been alternatives for people to speculate. So I think that is kind of a fallacy. And then the way he talks about stablecoins also just points to how he doesn't understand this stuff because he's saying they're stable, they're outside the system, which we know is not true. So there's a lot of fallacies baked in there. But I think it's just, it's characteristic of a guy who didn't go super deep, got caught up in sort of the exuberance of last summer and now is a little worried.
- [07:26]
A
Yeah, I mean there's two aspects to this. Like independent of the sentiment, it's worth obviously chatting about that. That's why we're here. But like, I'm curious just from your background at BBH and like his track record, how do you like reconcile or chalk up his investment acumen for the past 25 years? And is it his team? Like what is it? Because you referenced everything he said didn't really make sense. It was a bunch of superlatives. Like he was just speaking loosely around all these things and you. And it's the same thing of like it goes back 12 months ago. He's loosely talked about Bitcoin because it was the thing to talk about. And it reminds me a little bit not to pick on her because I think back in the day maybe it was a little different about Cathie Wood and Ark. Like they go out and they talk about the hottest thing, but he says Space and like SpaceX and like anybody can talk about that in that form. But it's like what's your actual long term thesis? So just curious because it feels like that guy, if you put him in a room with like a 22 year old out of, you know, MIT or Stanford, that understood kind of where the market's going without quote unquote, trade or invest him over the course of the next like two to four years just because they have a better pulse on the market. And talking through this, it makes me think of maybe the markets just move so fast for some of these investors that they haven't been able to keep up with where the industry's Going so their mental models aren't perfectly there.
- [08:41]
B
I think that's part of it. I would also say, you know, I think CO2 has done very well over the past, call it decade or so, but prior to that. So when I was at bbh, one of the first years I was there, so call it 2014, 2015, we had an investment in CO2 and they had actually been underperforming for about five or so years. So this stuff comes in waves. It's not like he's hit everything over the past, you know, 20 to 30 years. He's done very well lately. But like, who hasn't if you've been in tech. Right. Over the past ten years or so. And so I would say he's a trader, he's a technologist, but we see this all the time where like, because bitcoin is this alien thing that isn't just a technology, it's a money. You have to go deep on the money side of things to really appreciate it and then also be able to withstand the volatility. And not because that's where, that's where he gets hung up, is like, oh, it dropped 50%. Like, is the technology broken? It's like, no. Like it's a new money that's monetizing in real time. This has happened before. You know, if, if you had been here for a little bit longer, this wouldn't necessarily shake you out. But because his mental model is technology and investment and sort of speculative buckets, if you will, he gets wrapped up in bitcoin just being another speculative investment. And so I think that's partly what he's missing. And you know, it's few and far between the guys that come from that world who are able to take that long term, fundamental view on it.
- [10:11]
A
Yeah, I mean, and it makes sense that we don't hear it a lot, simply that really get it because of its radical nature, kind of flips upside down the way they made all their money. So it takes a lot of candor and like, you know, introspection to be like, okay, this thing is actually going to play out long term. So going to the sentiment, I think there's two core things to highlight here. The first one is this is the importance of putting anybody on the pedestal because I think we're also guilty of it when PTJ or whoever comes out and then they come out six months later and like, I sold it all because it's failed. And we're like, ah man, we thought you had us for a second. But it's one thing to highlight it and I think there's a, a version of highlighting it because the industry is progressing, it's opening up the aperture for others and then there's another thing to highlight it because you really like put your pocketbook behind what individuals are saying and you ultimately tie the credibility or the thesis to one individual. And I think we see this time and time again, whether it's what happened in 2020 with the dad stuff or different institutional allocators or the crypto stuff. When it comes like AI as an example, there's no shortage of thought leaders that are talking about how you need like tokens for AI and we know it's not true. I think that that's like just a core pillar of really finding the information and triangulating for yourself. Because this will just continue to happen net. New people will come in and they'll have institutional pedigree, they'll have notable name brands, whatever it is. And then people just like buy without fact checking or doing the diligence, just go along with it and it gets a lot of people in trouble and then it just propagates and it continues and then you end up in the space that we're kind of in right now with this whole digital credit narrative. The other thing on the sentiment is it's fundamentally true. It makes sense. I think like hit that clip was so perfect impression for how everyone feels right now because no, we're like in the eye of the storm. Like we truly are in the eye of the storm. And anybody that's here better get comfortable because it's probably going to go lower. This is more speculative, but I don't necessarily know how MSTR gets away with unscathed before the market goes back up. There's just too much elephant in the room, too much air sucked out of like, what is he going to do? There's a lot happening there. And so the point is that between that AI and that liquidity cycle and then also just the notion of whatever happened post 10:10 in this retracement, crypto being dead, everyone's just wondering like what the hell is going on. And nobody expected, including myself, to be in middle of summer in the 50s. But this is also why you make the money, because you get paid for the volatility if it was always up into the right. That's how you get in trouble with the speculation because everyone thinks they're a genius. Is part of the trial by fire is you on the at on 120 and 150. The reason you don't sell is because you remember 58k and that you didn't sell then. And so you know that, you know there's a, there's a greater path there. So somebody like him and others that just got in, they're wondering what the hell is going on and rightfully so. And I think the last thing is this kind of ties into what we've been saying for a year plus is that bitcoin has fundamentals and you can underwrite them. That sure it can go lower, but you know it's going to go back and hit all time highs. It has certain properties, it lives in a certain world where you need a finite scarce asset. But when you start to look at other assets that didn't necessarily have those fundamentals but had narratives, that's what people are puking out right now. That's why MSTR is trading at under a hundred dollars. Because people are looking at is this thing going to unwind? It's funny, I didn't even think of it until right now. I talked to somebody yesterday when I was bringing up stable coins in Terra Luna with the genius act and about algorithmic stable coins not being in there. And the guy was like, oh, you don't have to tell me about Terra Luna. This was a lawyer, like very prominent person that's like helps people in the space with all sorts of things related to regulations, money transmission, et cetera, et cetera. And he was saying that he aped into Terra Luna and had like a 40 to 100 bagger and thought he was a genius and it reverted back down to a dollar. And what he did was he doubled down and basically doubled his position because he was like, how can this go? And he basically lost it all. It went down to a penny. And he's like, I'm sitting on like 6 million Terra Luna, you know, called him shares. But it's this idea that the risk isn't like where bitcoin goes to 45 or 55 or 16 and then back up to 120. It's literally zero. And everyone just needs to take that into consideration when they're speculating on, especially like crypto or proxies on bitcoin.
- [14:42]
C
Yeah, I think you both made some excellent points. One of there's a couple of challenges I think that exists in the sentiment currently. And Michael, the last piece that you described I think hits the nail on the head for a number of reasons because there's still very, very much a lack of understanding of bitcoin versus the rest of the crypto space. And it's very possible, and we've seen historically that a lot of the hottest cryptos of previous cycles never recover anywhere close to their previous all time high. So they're just essentially impaired assets. People hold bags of them kind of hoping, hoping, hoping that one day there's going to be some sort of super cycle in the crypto market. We know very well that's not going to happen. And so there's a lot of impairment in the crypto space. And it's hard to. If you're an outsider looking in and you don't understand any differences between bitcoin and the rest of it, it's hard to make a case for why bitcoin could potentially recover from this. Right, that's one piece. Brian, you mentioned the moneyness aspect of bitcoin compared to just let's say investment opportunities speculation in the context of what Lafont shared on that clip. Unfortunately, I mean, I don't know if the moneyness actually matters all that much to investors like him. And so ultimately bitcoin has performed well and has been sought after for being the fastest horse. I mean, Michael, you mentioned Paul Tudor Jones. That's one of the, the famous clips of him talking about bitcoin in the context of the money printing in 2020. He saw Bitcoin as the fastest horse in the race with zero interest rate policy, with all of the fiscal liquidity. And you can make the case that that's not true right now. It doesn't mean it won't be true in the future. But I think that's really dampened the sentiment, especially when you consider the fact that a lot of the narratives or quips in the bitcoin space that historically held true, such as just hold for four years or longer and you're in the green, no longer hold, you know, they don't hold true anymore. We're trading below the previous all time high. Even on a five year basis, it doesn't look too great. But you could still make the case that even with bitcoin's downside volatility, there's a lot of upside to be had. We talked about it, not on the podcast, but we talked about it on some internal call this week. And if you look at any sort of DCA calculator, we have one on the onramp terminal you can get access to. But if you look at any DCA calculator out there, even with bitcoin trading the way it has the past five years and where it is today, it's almost on par with the S&P's performance. If you were DCA in 100, let's just call it a hundred bucks each week into S and P and bitcoin, the past five years, you've pretty much netted out to the same return. Yet you have the S&P 500 at all time highs and you have bitcoin deep in a bear market. So Brian, you mentioned a few weeks back just on bitcoin's downside, volatility. We're talking about it with Chris Kuiper. It's actually something that you can take advantage of. Right. And so if you don't actually try to time things and you just stay allocated and you have that DCA established, then it tends to turn out okay. And then the last piece I would flag as well from friend of the show and firm Frank Frank, a fetter on X is if you look at the 200 week moving average historically that's been a really compelling time to be buying bitcoin and we're right in the thick of that at the moment. So, yeah, I mean it's, it's a challenging time for sentiment, I think mostly because there's no. Michael, to your point, there's no clear reason why bitcoin is trading as poorly as it is, especially in the context of everything else. And then the other piece is just when narratives break down that have historically held true and historically have given people hope through the bear market, those are not holding up anymore either. And so it's just like we kind of find ourselves in a no man land situation currently. So what we're looking at here is a chart of Bitcoin's drawdowns. 10% below, 20% below, 30, 40, 50% below all time highs. And what those returns have been one, two and three years later if you bought the dip. So with bitcoin trading down over 50% at this point, now is a great time to be buying. If you think that this will hold up historically and I'm doubling down, now's a great time for me to continue to allocate. These are cheap sats and if you feel the same way on Ramp Finance is live, you can Sign up in 10 minutes and you can start buying bitcoin immediately. And so if you do so, use the code paper on signup and we will deposit 50,000 sats into your account after you make your first bitcoin purchase on the platform. Again, that is code paper. All right, back to the show.
- [19:03]
B
Yeah, a couple things. I'm glad you pulled out the DCA comparison because that is important to contextualize where we are in the sense that, you know, as you described, if you were dcaing into either Bitcoin or the S and P, you're basically in the same shape on a, on a backward looking five year basis with the, the core caveat that Bitcoin is 50% below its all time high and the S and P is near all time highs. And so on a risk adjusted basis going forward, Bitcoin's much more attractive in that sense and you still have the same sort of starting principle if you've been doing that for five years. Um, so that's one thing. The other thing I wanted to go back to is what you said around, you know, the lafonts of the world, not caring about the moneyness aspect of Bitcoin. I think that's fair. But to put a finer point on what I meant, like that's why he doesn't have a great thesis on the asset. Like if he did understand and appreciate the moneyness, even if you view it as an investment, as part of a broader portfolio, it allows you to see through the volatility because the thesis itself, the moneyness thesis, is completely unchanged if not strengthened. Like debasement, inflation. We know all of these things are only persisting. None of that's changed. I think there's some hit to the narrative in terms of Kevin Warsh. This guy's going to come in, he's going to tame inflation. That's bullshit. That's not going to happen. So the moneyness angle is actually really core to having a strong long term thesis on the asset. And so you can have both thoughts in your head. You can say this is an investment, I have it alongside my SpaceX allocation. But you can also appreciate it for what it is. And that knowledge is actually what allows you to hold through the volatility and not sell when it's down 50% because the actual fundamentals around it are unchanged and strengthening.
- [20:54]
A
Yes. Since we're chart maxing we got to bring this up. This is a, you know, the narrative we're talking about four years is liquidity. And then where we sit, I don't even know if this is accurate because it looked like the top, this is for Magoo and it looks like there's just like an arrow that was painted at the top. But it, I'm fairly certain directionally it's correct that money supply has increased where Bitcoin. And we've seen that divergence along with like equities since 1010. But yeah, I think like to your point about the DCA and just looking
- [21:25]
B
back,
- [21:28]
A
we're such in a like high time preference, quick cycle of 12, 24 months when you just look at the history of Bitcoin in 17 years and you pick the time frame, as long as you're DCA over a course of X number of months, years, you end up in the green and the principles still haven't changed where you're effectively getting more bitcoins per dollar. I think it's interesting like where you hear from certain like astute investors how they see the IPO and the IPOs that are happening in AI as a bubble and they're, they're, but they're playing it because they know the market. It's like momentum trading similar to people that reminds me that try to trade crypto to make more bitcoin. It's like the guys like Lafont that don't even understand necessarily to your point what money is and how money works. It would just benefit them to be a better investor because then at least they would rationally understand kind of like why their bubble exists and then even ultimately cycle out of that. Because if you're getting SpaceX multiples and you can take some of those gains and cycle into bitcoin, Bitcoin's not going to sit here forever. You're able to really capture that. But yeah, it's an interesting situation.
- [22:37]
B
I've long stood, this is the only
- [22:40]
A
thing I have to stand on. Where we're at is that we just have the regulatory apparatus working behind the scenes when it comes to the easiest one to point to a Schwab turning on, you know, whatever 10 to $20 trillion they manage in trading. But we know Morgan Stanley, we know BlackRock just launched another ETF, there's clarity act on the docket in July that I've just long held the belief that this period was meant for a lot of the plumbing and regulatory clarity and apparatus from tax where we're seeing like what's going on in different states to be put in place and on the other side of that is when we will see the price appreciate. And so that's how I look at, you know, where we're at today. And kind of that's how I like reconcile or orient to where we're at in the market and why we're sitting, you know, in between 50 and 60K.
- [23:30]
C
Yeah. Brian, I want to pivot to something that you mentioned earlier. It's timely because you said that it's all bullshit or Something along those lines when you talk about Warsh and kind of the play there. So I wanted to just pull up this Bloomberg article titled the Debasement Trade is Unraveling and Kevin Warsh is one big reason. The gist of it is that you all may remember a few months ago, before Worsh was confirmed to become the next Fed chairman, there was a lot of discussion around Warsh is a puppet for Trump. He's going to be lowering rates, yada, yada. And, you know, he's come in, he's held firm, rates have remained steady. And then now rates are expected to go up instead of go down. Now we'll see how that plays out, especially because now that things are softening with the Middle east and there's less energy pressure from an inflation perspective, maybe not immediately because it's lagging, but eventually we get there. There may be the, let's say the COVID to kind of reverse policy and go with rate hikes sometime in the future. But, Brian, I'm sure you can articulate this better than I can, so I'm curious why you say that. It's, it's kind of B.S. and what's your read on what's happening here and what do you, I don't know if you had the chance to read this, but if so, what did you make of this article? I did.
- [24:45]
B
And, and I think, I mean, it has to do with, effectively, you know, what we talk about a lot when it comes to the Federal Reserve, the tea leaves and basically posturing. And so I wrote about this last week in our newsletter, but Kevin Warsh had his first FOMC meeting last week, I guess, and his comments were pretty interesting in sort of the respect that it was a pretty strong divergence from Powell and really all past Fed presidents in that he was really sort of walking back forward guidance and basically abstaining from, you know, doing, you know, he himself did not do a dot plot projection, which all the Fed governors do in terms of where they think rates go in the future. And so he was really sort of abstaining from making any future calls. And so people, people I think initially read his words and listened to his words and thought that they were more hawkish in the sense that this guy was historically a hawk. People thought he was going to be a dove and cut rates because he's Trump's puppet. But I think what he has to do is he has to establish credibility. I think that's what his first meeting was. I even think that's what articles like this are Attempting to do. It's attempting to establish his credibility as someone who's not a puppet of Trump and is willing to go by the data, not be too forward looking and really absorb what's happening in the market and make the right decision. And, and really with the goal of like, you know, combating inflation, which you, he's talked about this as like, you know, he's doing a whole re underwriting of how the Fed and the Fed works and how it interoperates with treasury. But as we know, like it's, it's an immovable object or, you know, nothing stops this train. Like anything he's going to do is not going to stop the fiscal deficit situation, the $40 trillion of debt. And so it all is, at the end of the day, posturing. And I think his initial comments and some of the analysis and sort of market color like we have on the screen is really an attempt to give himself some credibility so that eventually when he does need to cut rates, because ultimately like we can't have rates this high or even higher sort of in perpetuity because then the interest expense on the debt just becomes completely unwieldy, even more unwieldy than it already is. And so the quagmire that they are in is that inflation is sticky and persistent. And we did have this crisis, which I wouldn't say we're out of the woods of just yet, but you know, the, the sort of impetus is now rates might even go higher because we have this pressure in terms of the energy crisis and inflation's not going away. And so I think this is all posturing and I think eventually he has to cut rates, eventually there's easing. And the other way to look at this too is there are sort of stealth QE operations going on in the market since last December. December. And so while the posturing and the forward facing view is, you know, we might have to hike rates and we're going to tighten things up and get inflation under control, there are aspects of easing already going on and the long term structural story here is that rates will have to come down. And so that's why I kind of just say it's all bullshit because all of this stuff is, is posturing and projecting an image and projecting credibility at the end of the day.
- [28:14]
C
And I might just add as well, Brian, that this is a great counter signal when you see headlines like this, the debasement trade is unraveling. So when the debasement trade, which was everything about gold and Bitcoin ripping, was ripping that was probably the time to if you're, you're trying to time the markets, it's probably the time the exit. And now would be the time to accumulate when you have these hit pieces on Bitcoin and gold as asset classes and then also directly supports. I think what Mark Yusko made a great point on last week on the show is investors are the only cohort of people that run away from sales. So I think, if anything, this is really solidifying the case that we've been making right now that it's a deep value territory. You typically want to be buying things when they're hated and when pieces like this are being published. And then the other aspect of this as well that I thought was just worth calling out is Besant gave some sort of speech recently at the Economic Club of New York, and he was talking about essentially the gist of everything comes down to the bond market, right? So they have to be wary of any sort of the treasury. And the Fed work very closely that they'd be very, very wary of anything that's happening in the bond market. Because if you're not paying attention to that, you could easily lose control of the bond market. You could easily lose then faith in the US treasury and eventually the dollar as well, if that's not mitigated. And so to your point, Brian, it's a lot of posturing, it is a lot of confidence game and showing that we're going to support the dollar's value, we are going to be tight on inflation, we're going to get all this under control. But then the last piece I tied into as well as we don't need to watch the clip, but this is from Novogratz and Scaramucci's podcast, and they're just talking about the general structure, structural dynamic that needs to exist where you need to have inflation that's persistently higher than where rates are over the long term to get rid of or at least reduce the debt overhang. And so that's the playbook that has been previously ran. I think a lot of people forget that because it was from the 1940s or the 70s. And so most people who are allocating capital today are not students of history, and they are only operating in an environment that they have, you know, operated in, call it the past 10, 20, 30 years. So there's a lot that could be unpacked there. But these are some of the threads that I was thinking about ahead of recording. These are all kind of interconnected, but sometimes it can be hard to see that if you're not actively looking for these sources.
- [30:41]
B
Agreed.
- [30:44]
C
All right, so I want to pivot into something that one of the most, let's say most loyal fans of the show is actively asking for. Signal versus noise. We don't need to name. We don't need to name who the fan is, but we want to talk about some newsworthy topics and riff on if there's signal or noise. I want to first call out, I think we should talk about Stretch. We have to talk about what is happening there. I think we can talk about it objectively and we can talk about it without disparaging, disparaging anyone. Not that I think we have done that historically, but look what's happening there is a little bit of a mess. If I were to pull up the price. Currently we're on the brink of Stretch breaking through into the 70s. So right now it's trading at about $80. If you look at the one month return here, it's down about 20%. So about $20 from par of 100. I'd be curious if you guys think this is signal or noise. What are you paying attention to? What are your general thoughts on this? How. How would the situation resolve?
- [31:51]
B
Mike, you want to take.
- [31:55]
A
Yeah, I mean, I just think that the biggest thing of confidence, I think, I don't know, it's deep. They're, you know, lowered so many times they've taken hits. But I think it was like three, four weeks ago when it hit me that there was serious impairment. Because when I look at an asset like this or anything related to digital credit or digital asset treasury companies, it was a narrative trade based on the momentum of bitcoin and then really micro strategy and how can I get into the next one? If you think about it, it's eerily similar to crypto in like 17, specifically that cycle where bitcoin ran and then you had these ICOs that came behind because everyone felt that they missed either MSTR or they missed bitcoin. And so how can I get ahead, especially when it's in a brokerage. And I think that narrative has it propagated at the time fairly well because there was a lot of influencers and thought leaders in the space sharing it. And as the price has kind of liquidity's come out of the space, you've seen the price retrace from Bitcoin into these other assets. And individuals have felt more compelled to start speaking up. And in parallel to. And this is speaking up as far as educating and objectively talking about how these constructs may not actually be real or theoretically exist into perpetuity. And the best example of this is like Bitcoin. There's no shortage of people that talk about Bitcoin, but they fairly are misinformed or uneducated. I mean, there's no smart people that are out there explaining Bitcoin because once they've done the work. But this is fundamentally different where you see a lot of very intelligent individuals, people that have educated the market for their whole careers or most of bitcoin's life, and then now they're explaining how this doesn't like stand up. And so the point of all of that is you have this asset that people were buying retail, was speculating, buying for the dividend, interest, et cetera. And it's moved away from par. It's continued to move away from par, specifically also with microstrategy diluting common shareholders. And now the education's out there, the understanding is out there. And so you have this true confidence crisis where now everyone's starting to understand what's going on and that they're effectively potentially going to be holding this bag of whether it's the common equity or something that's trading below the hundred dollars they expect it to. And I don't see how you can get that back up. Because once you've like pierced that armor, what is the mechanics? There's no mechanics because now with the accelerator, additional financial engineering, you have something that has to get hit at this point, whether it's the common equity, the dividends, the preferred equity or the btc. And then it gets talked about a lot. It's like they can sell the bitcoin, but it's like nobody ever talks about the second and third order effects of a. The whole thesis was to hold Bitcoin. But then if you're tanking and you're just actively selling bitcoin, it's reflexive to the downside because now you're hitting the stock which helps you raise the capital and then you're hitting the preferred as well because of the confidence. And you just have this like downward spiral. So I just think it's, it's high signal because it's the market just telling you that it's treating this stuff like junk.
- [34:59]
B
Yeah, I mean, I would, I would also err on the side of signal. And it's, you know, it relates to, to the research that we put out, I would say close to a month and a half ago now in terms of that sort of ratchet dynamic, specifically as it relates to stretch and in terms of the tools that they have in the toolkit are basically at odds with each other. So the common. If you're going to dilute common shareholders to raise a USD reserve to pay stretch dividends, that's counterintuitive. If you need to go into the BTC reserve to pay those dividends, that's not great. It has that reflexive component to the common and probably the preferred ultimately. And you know, the way that people have talked about stretch in particular over the past week or so, again, I mean, like the proponents of these things, is that, oh, it's this free market asset, it's not a stable coin, it will naturally come back to par without any interventions. It's just not true for a number of reasons. And Saylor's telling you as such, because he raised cash over the weekend to try to quell things. Now it went From I think 85 at the end of last week up to 89 or 90 on Monday, and now it's back down to 80. So those extra two to three months of cash reserve that he raised over the weekend didn't do anything to quell sort of the fear or concern around this thing. And so he diluted common shareholders really for nothing because it didn't work. And the only other mechanism that people point to is, oh, you just raised the dividend. It's like, okay, but there's no end in sight to that because then if you raise it and then let's just say for sake of argument, it goes back towards 100, well, then if it d, you know, if it depegs again, you just keep raising. So you just raise the rate to infinity. Like it doesn't make sense because then your, your dividend obligations in fiat terms are just compounding and compounding. And so, yeah, I mean, I don't really have a ton more to say about it other than, you know, this was the point of our research. It wasn't an attack, it wasn't nefarious in any sense. It was really just, let's lay out the risks of these things objectively because, you know, we looked around the room a few months ago and nobody was really talking about it. Although it was the hottest thing and people were heralding it as the best thing to ever, ever to happen to Bitcoin without talking about the downside potential or the risks of it. And so that was really all we wanted to do. And hopefully people read that and appreciated it.
- [37:30]
A
Well, we have had folks read that and have appreciated either by selling or not getting involved and buying Just spot bitcoin. I do think the two things to add are there's a common sentiment or narrative of like, what's the angle? Or why is this coordinated? And the angle is just baked into the truth. Like the research we've been doing for three or four years is just highlighting the status of the market. And so you don't need to coordinate when it's just the fundamental mechanics of the. The product are impaired. The other side to it is like, I would speak for myself and probably everyone here is we would love for these products if they actually did what they said they would do, meaning keep par and bring in institutional capital and go to hundreds of villains and trillions of dollars. We would love for them all to exist because it pumps our bags, it brings more capital in. The point of us talking about this was because we sit in the rooms with these individuals, we sat in them outside of this space, and this is not how they were going to allocate, it's not how they currently allocate to bitcoin. And a lot of that marketing narrative was just fundamentally not true. And, and then it gets propagated because people haven't sat in those rooms, they don't work on this stuff day to day. And so then you just hear it continue to go. It's like a, a lie. It starts like once it gets 10, 10 rows down to the 10th person, it just ends up as this like Frankenstein version of how digital credit is going to solve the world's problems. For bitcoin, it's just fundamentally not going to occur that way. And so that's the other missing piece, is that there's some like, random narrative or how we win because strategy loses. It's like, no, we all take the hit. But there is also realistic version that you want better market structure and more reliable because as quick as these things can go up, they can go down. We talked about this with the dat trade 12 months ago and this is what we're going to see. And it's really sad, but it feels like there's an elephant in the room where something big has to happen with Saylor and MSTR for the price and the structure to be healthy long term. Because objectively speaking, imagine going into a pension, institutional allocator, sovereign and, and you sit with this like 4 to 5% ownership with one individual that has a structural impairment potentially with his asset, and now you want to go put on a position, but you're worried if he's going to have to puke up 300,000 bitcoin it's just a real problem and nobody talks about that or at least assesses it as an objective potential problem. It's just like no hand, wavy. Like, you know, we don't have to go into some of the ways that it's discussed, but I think those are just important to call out. Because if in a world where there was a trillion dollars that could come into these things and this is how institutional capital would allocate to bitcoin, albeit it's just not what's happening. We've seen it.
- [40:03]
B
Yeah. I mean, I think there's a few ways that this potentially resolves and I think what the DAT proponents are still just kind of hanging their hopes on is that bitcoin just starts going back up again. There is a path, I suppose, where everything's fine if bitcoin were to just start going back up again. But because of that perception and that elephant in the room, it's, it's, there's this, you know, reflexivity in the sense that that's less likely to happen because of this construct.
- [40:33]
A
Yeah, it's a. Well, real quick, it's a great point because if you think about it, I was thinking about this earlier when we were talking about entry positions, we're in a nice spot. When you think about bitcoin getting to 120 and real smart money looks at retracements, whether it's 10%, 20%, they find their position. They're also looking at the market and they understand this is a structural problem. So why would they ever step in to come in at 58 to get it, you know, to move the market versus wait for this to resolve itself to get an entry point in the 30s or 40s. I'm not saying that's exactly what's going to happen, but that is also that like dichotomy that exists with the version that saves them is the, the thing that saves them is the thing that will. They are the thing that will prevent themselves from being saved. Because like they're just hanging out there with this huge bitcoin balance structural problem that if you don't do anything, they're going to have to puke out this bitcoin. Right. Because it's the only way you can get this thing figured out is you have to sell some bitcoin to be able to like sure. Up the balance sheet from the preferreds and potentially buy back one or the other. Because I think now they're below whatever the quote unquote MNAV is that they officially calculate.
- [41:38]
B
Well, that's the other thing is the metrics themselves have shifted. And that's, you know, if you want to point to something that's actually arguably nefarious about this whole thing, is that the M nav calculation has changed over the past 12 months. What's also changed, or at least has always been disingenuous in how they calculate their Sharpe ratio. They calculate it in a way that no other investment professional has ever calculated a Sharpe ratio. Now putting that aside, I would say the only other out is getting ahead of this and literally selling billions of dollars, tens of billions of dollars potentially of bitcoin winding down the preferreds and just sort of like starting fresh to some extent. Now, yes, that would like tank bitcoin's price, but at least then the elephant's out of the room. And I think that that is probably a pretty low likelihood scenario just given who Saylor is and who we all think he is. That, you know, I would imagine he has probably has too much pride to do that at this point. But, you know, I think that that would actually be arguably the most sensible and logical thing to do at this point.
- [42:45]
A
I haven't done a tweet on this because it's not worth the engagement, the negative engagement. But when you think about KPIs moving, it just eerily reminds me of WeWork and Community Adjusted EBITDA because you live through these things, just pattern recognition. You have this whole construct in financial engineering and then the way to continue it is you have to start to propagate until just the whole house of cards comes falling. And when I heard the C, E, B E or whatever, and then that's like you just go down this whole matrix of calculations to get to what their version of MNAV or to your point, the Sharp ratio, the la. And the last random thing is there's this whole like notion that all this stuff was supposed to get institutional allocators in because of the volatility and these are like the most volatile assets on the planet Earth. Like it just none of it makes sense at all.
- [43:39]
C
Yeah, my bull case is US government takes equity ownership of strategy.
- [43:45]
A
That's.
- [43:45]
B
I guess that's the third path.
- [43:46]
C
Yeah, I think that would be.
- [43:48]
B
Maybe that was the plan all along.
- [43:50]
C
Yeah, I mean that's why. Yeah, that's why the strategic Bitcoin reserve hasn't actually happened yet, Brian, because we're, we're waiting for this all to play out first.
- [43:57]
A
Well, like I. There's a non zero chance that happens, but I'm fairly certain if that happens Bitcoin's in 20 to $30,000 territory. Because think about from the point that we sit today to the point that the US government has to step in to purchase, to quell fears. That narrative hasn't even started. Like the, the US government for all intents and purposes from the normies mind does not care anything about bitcoin. There's only like a small faction that's looking at SBR and strategic and whatever. So you would have a lot more pain and then a lot more, you know, he doesn't have an insane amount of outstanding debt that you would need to step in for like bonds to be secure. So like what would be the real rationale? Because there's not like a strategic imperative for the, for the US to be ahead on bitcoin. Like I know in our small bubble it is, but you have consumer sentiment that would have to be okay with the US stepping in to help this asset that's investing in a speculative asset.
- [44:46]
B
Counterpoint, Counterpoint. They did something similar with Intel. No one gave a shit about intel. And I think intel's up like 300%.
- [44:53]
A
Well yeah, but the, the counter counterpoint to that is it's Intel. Like we need microchips. Like we need actual stuff for AI and the, the race against China. And I guess maybe that ties into.
- [45:01]
B
We need better money though. Our, our money is broken.
- [45:04]
C
I see it as. Not according to. I would just see it less of a bailout and I would see it more as some sort of way that opportunity seizure. Yeah, it'd be like. It would be an opportunistic investment. It wouldn't be bailout because the US government thinks that bitcoin deserves a bailout. I think it more would be to your Point, Brian, the U.S. government has a different playbook now. We talked a little bit about that with Matt Dines, but looking to monetize the asset side of the balance sheet. So you could in theory buy distressed assets like strategy that have, that are trading below their net asset value, acquire all that bitcoin and then you could in theory do bit bonds or do something like that. Like that's what ultimately a lot of the people in the gold space talk about too. Right. Requiring gold or having a revaluation. The gold held on the US treasury balance sheet I think is marked at like $40 an ounce or something.
- [45:55]
B
Right.
- [45:56]
C
So there's different types of financial engineering that could take place, but ultimately I don't know how it resolves the current stretch situation just because of the reasons you laid out already. It's just kind of a conundrum where you're like raising money to shore up cash to pay these dividends and then you gotta increase the dividends to get more investors. And then you have to just like at some point there's a.
- [46:20]
B
What if he sold bitcoin, wound down the preferreds and then took whatever cash was remaining and just bought all the other debts so then he could recoup some of the bitcoin by just buying the other DATs that are all at like 0.5m nav. Yeah.
- [46:37]
C
I mean any of this is theoretically possible. I guess that's the point is there's speaking out loud. There's a lot of uncertainty about what. But I agree with you, Michael. I mean, it is sort of an elephant in the room situation. Just because if you are paying attention to this and there is an overhang and there is uncertainty about, okay, what's going to happen to this corporate holder of 800,000 bitcoin. Maybe I'm going to wait and see what happens because I don't necessarily want to be buying at these levels if there's going to have to be some sort of larger market sell to shore up capital, instill confidence. Because yeah, there's really not any way to get out of this without the bitcoin price going much higher in short order. And I don't really see any catalyst for that happening.
- [47:18]
A
Yeah, and I mean, I think it's probably pretty true, even though this would be argued that the whole DAT experiment is an objective failure simply when you look at the amount of people underwater. And the only reason why people are able to argue that it isn't is because they go back to MSTR and people being up when I call it the Immaculate Conception of like August of 2020, when he. Or October, I forget the exact month it was Q3 or Q4 of 2020 when he put on the position in MSTR RIP. But that's like going back and saying, because we're in this downtrend in bitcoin, you know, over its history, it has thousands of percent appreciation. Like very few people got in at a penny in bitcoin. So they're feeling it. And in this example, like it was only insiders at everything else downstream of MSTR. MSTR people got into it their IRAs, they couldn't buy ETFs, and so they're in those gains. But then everyone else that followed suit, there's like 80% of people in MSTR underwater and then it's probably like 99% of people in every other dat and they're still propagated as these like financial products that will always exist. And it's just like the most insane part to me is that they, they don't have a justifiable reason for existing. You can just go buy the ETF without the drag.
- [48:32]
C
Yeah. So just in the context of all that, I mean now's such a great time to buy. We're trading below 50% below all time highs. You can see this chart here. Typically if you're buying 50% more off the all time high, the returns have been pretty attractive from a 1, 2, 3 year basis after that. And so with On Ramp Finance being live, I'm just curious if you guys have any thoughts in terms of how people could take advantage of this.
- [48:55]
A
Yeah, it's a great call. It reminds me of the use Go pod last week where he referenced the only thing investors are bad at is buying a good sale and Bitcoin at 50% off. Specifically this chart showing the return after one or two years. There could be a better time to sign up for Onra Finance specifically with the code that you have.
- [49:12]
C
Yeah.
- [49:13]
B
Speaks to the long term orientation that's required for this asset. But also if you look at really any metric in terms of bitcoin and the territory it's in right now, it's massively oversold. And pretty much any time that people are accumulating at these levels, it turns out well, one, two, three, four years ahead. So great time to buy and you can do it with Onramp Finance. Free to sign up.
- [49:36]
C
It's free to sign up. Takes 10 minutes. Let's use code paper. If you sign up using code paper and you will get 50,000 sats deposited after you place your first bitcoin purchase on the platform. Yeah, let's get through, let's get through a few other topics here. Signal versus noise. We can make these ones quicker. Got a tweet here for Macroscope, so I'll read it out for anyone who's not on video. From its top in 1974 to its bottom in 1976. Gold dropped about 50% from its top in 2025 to today, Bitcoin has dropped about 50% from 1976 to 1980. Gold rose 750%. And so that's the main gist of it. Historical analogs are often posted on Twitter. They should not be interpreted as predictions, just frameworks for investors to keep in mind if broader conditions start to line up. Brian, signal or noise?
- [50:35]
B
Yeah, I would say this is Signal in the sense of. I don't think this is like prescriptive or predictive as he describes, but it reminded me of effectively whether it's the 70s or the Weimar Germany chart of there's going to be volatility along the way of a new money monetizing in real time. And if you understand that and you understand the principles and the foundations and the fact that those things that make Bitcoin a good money are completely unchanged, then that's how you ride out that volatility to the other side. And so whether it's gold in Weimar or it's gold in the 70s, I do think there's interesting parallels to what we're seeing with Bitcoin now. So yeah, that was my main takeaway. I do think it is somewhat signal.
- [51:26]
A
Yeah, I would go same. I think Macroscope's pretty prescient with his calls. And I think when you see this much liquidity and inflation, you just get dislocated from the fundamentals. And I know this is a little cope, but I'll still say it. It's like I feel, I can't help but feel as we sit 50% off or greater with all the plumbing we've seen and all the structural problems we've seen from a dollar perspective and inflation, how when this thing goes you're just like in a different side of it specifically from the memetic nature and narrative that's a huge part of this is the market doesn't they get gaslit into believing there's not an inflation problem. And IPOs and SpaceX and people with excess liquidity are chasing there with a huge lack of fundamentals. And this is off the backs of I think like 10 to 20% retracement in SpaceX yesterday that just on the other side at this point there's a 750% increase in gold between those four years. I can't help but feel like we will see the returns, they'll just be a little bit more skewed to a certain timeframe than like how it's leveled out over you know, four year time frames that we've historically seen in Bitcoin.
- [52:35]
C
Yeah, I think this one skews toward noise for me. I generally think Macroscope is a very high signal account on X. But I don't know. I've heard this one, I've heard this parallel in this take for a number of years now. And I don't necessarily think that the 1970s lineup all that much to where we are today. But I generally think That, I mean
- [52:58]
B
the inflation numbers kind of do in terms of like the double, the double peak and monetary asset becoming recognized for
- [53:08]
C
what it is they do in that sense. But I think, I think for what is being described here, or at least the parallel that's being described here, when you point out gold rising 750%, I think for Bitcoin to have a really significant increase in its price in a short window of time, so in this case it was four years or five years, I think it would require something of COVID level intervention which I just can't see. Like, you know, Larry Lepard talks about the big print. I don't see that as happening. I don't see any catalyst for that happening in the short term. Not to say I don't think it happens at some point because we know that over time the system requires more and more liquidity injections and they grow in magnitude each time. So I think that there is some inevitability to it, but I just don't know if we're quite there yet in terms of like, I wouldn't necessarily hang my hat on a parallel like this over the next couple of years. It may take longer to play out.
- [54:08]
A
Yeah, I mean, I think they counter and I, I don't have monetary history of like the 70s, but coming off the gold standard, if you look at like the time frames with years where whether it wasn't understood inflation or what was the vehicle and how it was dampened and other sovereigns or institutions were allocating to gold and then it ultimately ripped. If you think about. I don't know if we have the links, but our buddy Josh Fear had some really good tweets and he's super connected. Yeah, this tweet about central bank tells the story. A new paradigm of gold is here. It's not a trade. And then he had another one referencing he had some like inside intel. Yeah, Central banks now on more gold than US dollars. Gold is the only neutral asset that they can hold and distrust is festering. Their accumulation plans are about to ramp up now that some of the hot money spec investors were flushed out. I know this firsthand. The point in sharing that was that we know this trade is happening. We know sovereigns are accumulating at a scale that we've never seen before. Now the price has retraced a bit, but it's still sitting at insane numbers that that narrative will like come out. You can only keep the beach ball underwater for so long. And so I think that's the core angle that he's coming from is that this trade is on. It's just what happens in the middle. The short time frame is kind of irrelevant versus structurally what happened and that was what happened with gold because we went off the gold standard.
- [55:30]
C
Yeah, fair points. All right, let's get into this one then. Brian, this was one that you flagged. We're looking at a chart here of hyperscaler free cash flow projections. So you have Amazon, Microsoft, Google Meta and Oracle. And so you have their total free cash flow projections kind of falling off a cliff here in 2026. And then the other part of the chart is showing the overlay of the S&P 500 continuing to climb to all time highs. You see a divergence of free cash flows dropping or projections dropping off a cliff While S&P 500 is at very lofty valuations. Brian, what do you make of this?
- [56:06]
B
Yeah, I mean it kind of potentially answers your question around like what, what causes some level of crisis or deleveraging and it's this bubble popping. So the reason that free cash flow is nose diving there is because all of these hyperscalers are taking out obscene unprecedented levels of debt to finance capex and the infrastructure build out for AI. Now does it all end up working out? I mean I guess potentially there's a path where they become super profitable and the all the capex is worth it and none of it blows up. But if you scroll down in the comments there, I think there was a good reply by the original poster. On one hand I scales are redirecting more operating cash flow into capex which mechanically pressures free cash flow and leaves less room for buybacks that's bearish for the stocks at the margin. On the other hand, if the capex continues to earn high return on invested capital it should show up later as above trend revenue free cash flow growth. So that's the big if, right? Like if the capex continue can continue to have a high return then this could all work out and this could just be a near term sort of no nose dive for free cash flow because they're taking out all this debt right now. But then it says the whole AI bottleneck trade is downstream of that assumption. If the return stays high, the build out can continue. If it doesn't then the spend has to slow otherwise you know, all this debt blows up. So I mean that's a big unanswered question I would say in my mind about all of this and whether that would lead to some sort of massive deleveraging and even if that's just in terms of the stock market. Right. Like Jackson, we always talk about the Fed, it's not exactly technically their mandate but if there was a massive correction in the stock market that could itself lead to some sort of easing structure because you know, whether it's entitlements, tax receipts or just the average person being heavily invested in these indices, that would be pretty important sort of to society at large. And so I think you, you would see some sort of intervention at that point.
- [58:18]
A
Yeah, I think like to be honest here I'm coming to the conclusion like there's all the options are on the table, we don't know which way it goes and I don't even know if the market does in the sense of we could have this huge deleveraging sort of crisis like 08 all the capex spend. But I can kind of start to see the other side of it where there's just a trade being taken by these large hyperscalers where they're effectively taking out the debt. And this goes back into the fiscal dominance aspect where the note holders of that debt will get paid back, but they'll get paid back in negative real terms while their equity will appreciate. Because if you go back to the amount of compute needed for the cycles to get on the frontier edges and all these firms are going to need to embed AI across their products that the only way to succeed and maintain their dominance is to be at the frontier of that AI like wave and how they were going to integrate it. And so their stocks, they'll probably reduce their headcount, they'll increase their margins, prices will go up. Right. Just from a GDP perspective because maybe not in real terms but in negative terms in dollar amount like those, everything will move up into the right, so their equity value will increase and then they'll just owe that debt back. It's kind of the equivalent of like taking out a home mortgage and you're consistent like at that lower debt like I could see that also playing out here. But there's also the option or wild card that we just delever the whole thing and everyone just gets left holding the bag on that debt.
- [59:48]
C
I think it's noise if the intention of this chart is to suggest, I'm not necessarily sure if it is, but if it were to suggest that free cash flows of these companies going down is indicative of the S&P 500 going down because on the chart you can see there's a nice correlation between the S&P 500 growth and the total free cash flows growth of These businesses. I would say that the s and P500 has perfected number go up technology and it will remain that way for a while just because of the incentives that Brian, you pointed out, but we've talked quite a bit about on the show. So you just have the passive flows. You have. The s and P500 is effectively the de facto savings account of the country. You have people in power that have a lot of their wealth tied in equity markets. And so there's incentive to always continue to prop that up. And so I don't know how this necessarily resolves. I'm not as sharp on the hyperscaler side of things as you guys are, but I generally would take the other side of anyone whoever is implying that the S and P is going to have a long, sustained, deep bear market just because there's essentially a mandate for that not to happen, at least for a while. Like there's going to be at some point a turning of the tides and, you know, younger people will be in office and there'll be different incentives that they want to anchor to. But for right now, the S and P is kind of the, the thing that nobody's allowed to touch. It needs to continue to go higher. It doesn't matter who's in office. So, yeah, I mean, the only thing
- [61:15]
B
I would say though is like the S and P, yes, all those things are true, but it's so heavily concentrated in these companies that are listed there that like what happens at those companies does ultimately matter. And it arguably matters more than it ever has because of the concentration.
- [61:31]
A
Yeah, but I think that's like by design because I think there's, there's two aspects to it. The point that Jackson shared is super relevant and valid and not even call out. It's the other side of what you were talking about with the debt and interest rates is like tax receipts. So, like those things like are heavily skewed to. You have a retracement and then you just kind of end up in a recession. But then the other side of it,
- [61:52]
B
my point is like, that would be the bailout. That would be the intervention to keep.
- [61:56]
A
To keep it going.
- [61:58]
C
Yeah, to keep these companies going, you mean?
- [62:00]
B
Correct.
- [62:01]
C
Yeah, I mean that's fair. Look, because like the s and P500 is the economy, Michael, if that's what you're alluding to. Because.
- [62:07]
A
Well, yeah, I mean, it's the government, effectively. Like, it's, it's. We're pretty, pretty close. When you think about
- [62:14]
B
50% stakes in all these companies. Yeah.
- [62:16]
A
When you look at Google Meta. Like these companies, Amazon, they're effectively tied. We just did it in a different way. And you see this throughout the easy two examples that ever top of mind because of what's going on. It's like stablecoin Circle and Tether or you look at AI in the frontier labs with anthropic and OpenAI. People propagate all these different things in front of the market that they're competing in. And behind the scenes, I think a lot of them are a lot more friendly. And so I think these companies, they're just centralizing more capital into them and they just make them too big to fail. And then the government naturally, and I think we've seen this since Cambridge Analytica all the way to Covid and, and the ability to influence how they present whatever their product is. So I, I think this is just already where we're at. And so based on all of that, I think we're saying the same thing, that these assets will not for any duration of time, you know, take any more than like a 10% retracement.
- [63:12]
C
Right. And I just want to emphasize the one point you didn't fully finish is that these companies, like people talk about The S&P 500 is not a representation of the economy, which is true. Like you have this divergence, you have the K shaped economy where you have the top 1% or top 10% are doing very well. You have boomers that have 50% of the total wealth and then on the flip side you have the bottom 50%, which are arguably probably in the worst economy, at least in recent decades. But The S&P 500 is the economy to the extent if you have a sustained bear market. Michael, to your point, it has a direct impact on tax receipts, not only from capital gains, which is a smaller percentage of tax receipts, but you have the top 10% of the people in the US that drive 50% of the consumption and consumption is 2/3 of GDP. So that, that's kind of. My broader point here is that this will always have intervention, there will always be stimulus, there will always be a reason for this to continue to go higher for the foreseeable future just because there's so much concentration and there's so much riding on the success or the. Yeah, the success of these companies and just the index in general. So my opinion, it doesn't really change until you start to see a more significant transfer of wealth from baby boomers to millennials to gender Z, et cetera. And again, there will be different incentives for that. Time. If we have a little bit more time. If we have, like, five to 10 more minutes, I think there's two more I'd like to pull up. Does that work for you guys?
- [64:44]
A
Yeah.
- [64:44]
B
Yes, sir.
- [64:45]
C
All right, so we got one here. Trump directing government dollars and time to quantum security could be a boon for bitcoin. So this is a article here from the block, Michael. This is something that you flagged. And then to complement that as well, you have coverage from the team at TFTC talking about the executive order directing a national effort to build the first quantum computer powerful enough to initiate the era of quantum AI scientific discovery. The target is 2028. Michael, what are your thoughts here? Is this signal or noise?
- [65:21]
A
I don't know, man. I find it interesting that, you know, I'm cynical enough to see, like, when something like this comes out, it's meant to be seen. And so bitcoin is so small that I can't say that this has anything to do with bitcoin. It's just curious around, you know, just the notion of quantum in the past, call it 12 months, how it's picked up so much of the mainstream attention. And so I don't necessarily know. I've made a clear thought of, like, what is the angle from the admin and us, and we all talk about the difference between the narrative between us versus China, and I feel like that's a big part of it. But I don't necessarily know what the core angle is of a national quantum initiative and how that changes really, anything that would have happened in the free market with firms working on this. I think maybe just talking through that, the biggest flag, and I would say it's a signal for paying attention to is just the government intervention across markets, because historically, like, a way of market would work is if this was a true problem, you would have companies that would be out there, they'd be providing services, and they would be. They'd stay alive if they were providing good services. And this was a real threat. But if the government needs to step in to provide that, I don't know.
- [66:46]
D
It's.
- [66:47]
B
It's.
- [66:47]
A
It's interesting.
- [66:50]
B
Yeah, I'm gonna go. I'm gonna go noise on this one for a few reasons. One, I think anything coming out of this administration or Trump has lost. Lost credibility in terms of being high signal. I think they say things. They don't necessarily follow through with them. And so on that hand, I would say it's noise. And then. Did you guys see the clip of him talking about this?
- [67:16]
C
No, I Didn't catch it.
- [67:16]
B
He completely butchered the word cryptography. He called it cryptography multiple times. So for that reason as well, I'm going to go ahead and say this is noise. Trump has no idea what he's signing. Someone just put this in front of him and said, hey, we need to be on top of quantum enabled scientific discovery. And then he says some things about it.
- [67:41]
C
Cryptography. I'm going to say it's noise as well. I don't really have any good takes on this one, but I figured we should cover it since it came up. All right, last one to round it out. Maybe the best one of the day. Mark Zuckerberg, Meta. They want to build prediction market app like Poly Market and Kalshi. Gentlemen, what do we think here? Do we like more prediction markets? Do we like less of it? What do you make of this headline?
- [68:09]
A
I thought it was interesting that they're starting with like a points based system. So it's not real, like monetary value.
- [68:15]
C
Yeah. It says the app would probably rely on a video game like point system instead of money. According to one source, though, Meta has not ruled out eventual use of real money betting.
- [68:24]
A
Yeah, I mean, I think eventually you end up with real money. I think like we really discount the level of confidence of that guy. But also like meta and their influence on society when you think about the number of users they have and the scale that they can get to. So I would say this is like the signal that relates to the thing we talk about, of the speculative markets. We talked about it with Yusko, just how crazy it's gotten where the DraftKings and all the different adjacent firms are in your face no matter what you go. You see them on billboards now, they're part of like interactive sports where the actual reporters or the commentators will bring it up as part of like the, the marketing, which we actually need to get good about here is throwing out what we do. But point being is that you just, I think this is just, you know, they're like Apple, right? They wait till the market does something at scale, they see how it works and then they go and embed it into their, you know, hundreds of millions, if not billions of people. And in terms of meta, and then they get real distribution and they, they can do what works.
- [69:34]
B
Yes. But also like they burned tens of billions of dollars on the metaverse. So it's not, it's not a sterling perfect track record of capital allocation.
- [69:44]
A
Well, so if you look at it through that lens, which I would say is the 2D lens, the 3D lens of my understanding of meta all was related to rebranding because of the Cambridge Analytica situation. And so in that world, and if you look at their stock from then to now, if that', roi, then it was a very well run amount of capital because you need a justification around switching the name.
- [70:08]
B
That's an expensive, expensive name switch operation.
- [70:11]
C
But you.
- [70:12]
A
But didn't their valuation probably like go into the tunes of trillions sends the. What are they?
- [70:18]
B
I think it would be higher if they didn't waste all that money on the metaverse. Like it wasn't just the name switch. Like they actually tried to make the metaverse a thing.
- [70:26]
A
But I'm saying you can't just switch the name if you don't put something behind it.
- [70:31]
C
Like if we went in the event through line to the metaverse though, you can imagine a world where everyone's just plugged into permanent underclass, plugged into the metaverse. You're gambling your tokens, your video game tokens or your real money on the prediction markets and you eat your slop. I'm not going to say what type of slop it is, we all know what it is. But yeah, I don't know. This is, I think signal just because it is gambling and gambling is one of the fastest growing financial sectors. And so this is going to be, I mean, if the metaverse is a terrible ROI for the business, I would say that prediction markets, if it's executed and landed properly, it's probably a good roi. Just because I don't see any reason for gambling to decrease in popularity. If anything, it's just going to be, you know, we have some probably rough years or decades ahead. We don't really know how this all plays out, but we clearly know that there's a lot of people that are struggling. And the same reason why crypto and the meme coins had product market fit in the past was because people like to gamble on things that they think they could get 100x or a thousandx. It's just escapism, it's financial nihilism and prediction markets, one shot at that. And now crypto, meme coins, all that stuff is, is done, but now you just have this new form of gambling. So yeah, I think there's signal to this for, for firms that are looking to get, looking to take advantage of the financial nihilism trend.
- [71:58]
A
There's one other angle. It's a little out there, but it kind of highlights where I think, I don't know if you were on the call Jackson but we recorded with Odell and maybe it was the end of last year, early this year and we talked about prediction markets and I personally couldn't like reconcile why they were getting their like lift at this current time because they've existed for a while but like you had regulatory clarity, you had the amount of capital, it's been to the tunes of like 5 to 15 billion dollars and specifically those two firms, Kalshi and Polymarket. And it felt like there was something else there when you talked about like maybe it was like disintermediating like certain sovereigns, you know, throwing out certain propaganda, like just different things. But the point in that is there could be something there with the amount of users and influence that you can actually get real insane sentiment analysis based on playing the gamification of putting these products in front of people from think about how many users there are, how many of those people work at certain places. And so if you take that just a step further, there's a notion of Google just existing. A huge component of it was to index the world's information because it needed to train AI. And there's this idea that some of the models are slowing down or getting. They're not as good because a lot of the content they're trading on is AI created. And so the point being is, well, how can you move away from that? Well, if you can get real world like bias and gamify them speculating on what are the future things to happen, whether it's online, whether it's in a social group, that could be an interesting angle for them to try to source better data. Because I think that's ultimately where everyone realizes as much as the hyperscalers and capex and infrastructure is mattering, the data is really the moat because you can commoditize tokens and inputs outputs like you know, sovereigns will be able to do it because they're energy resources but you can't really commoditize. I think that's why X is so valuable is consumer sentiment and attention. And that's like the last piece I think when you think about AGI is you need to get to the very edges of how people interact and speculate and like form theoretical and game theory like decisions. Anyway, that just came to me.
- [74:07]
B
I don't know if that. No, actually I agree with that and I think you're right in the sense of what you said earlier around like the massive installed user base and then plus the at least to start sort of like point system like that would actually that could Create a flywheel where more people are likely to do it if they're not putting money on the line and then they're just giving Zuck their data and insights and biases for free.
- [74:31]
A
Yeah.
- [74:33]
B
Yeah.
- [74:34]
C
Good points. All right. Well, gentlemen, I think that rounds out this episode of the last Trade like and subscribe.
- [74:42]
A
Are we rolling out prediction markets? Jackson's rolling out prediction market. If this bitcoin thing doesn't work out, he's gonna. He's gonna run the hey, man, I
- [74:49]
C
gotta buy a house. So whatever it takes at this point, if I have to take advantage of people who wanna bet on prediction markets, then I guess it's gonna come to that.
- [74:58]
B
If you made it this far.
- [74:59]
A
50% off sats sign up for on Rent Finance. Buy some bitcoin. We'll figure out a new unique codes. I think we got to come up with some unique codes for bigger discounts on trade if individuals are listening. People didn't like Stretch. STRC wasn't a.
- [75:14]
C
It was.
- [75:14]
A
It wasn't popular. I mean, it was used, but it wasn't popular on Twitter. So maybe we need to do something a little bit less charged, like mstr.
- [75:22]
C
All right, until next time.
- [75:24]
B
Thanks, boys.
- [75:25]
A
Good stuff.
- [75:26]
B
Thanks for listening to this week's episode of the show. If you found the information valuable, please share the episode with a friend or leave a rating on your favorite podcast app. All the links we discussed in today's show will be in the show notes inside your podcast app. Before we finish, a quick reminder that On Ramp Media is for informational and entertainment purposes only, and nothing should be construed as investment or legal advice. Regardless of where you are on your bitcoin journey, we'd love to hear from you. Visit onrampbitcoin. Com Contact to schedule a consultation with one of our private client advisors.