← The Wolf Of All Streets
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- [00:00]
A
Morning everybody.
- [00:01]
B
Welcome to Crypto Town Hall. Every weekday here on X at 10:15am Eastern Standard Time for full transparency. Dave and I are both in the glitch. We cannot really see our speakers. So we don't actually know who's on stage. So to the speakers who are on stage, feel free to jump in anytime because we. You probably are speakers, but we don't know it.
- [00:30]
A
Yeah.
- [00:30]
B
Okay. There's Iago. I know that voice anywhere.
- [00:33]
A
Yeah, that's a good idea. I. I see. I'll tell you what I see. So you don't have to roll call. I see cj, Dan Amateo, Nicholas Yago. Lou lawyered. And actually I don't see lawyer as a speaker, but I saw him give the thumbs up.
- [00:47]
B
So Dan Mateo, Nicholas. I definitely got nothing on that.
- [00:52]
A
Yeah, lawyers here.
- [00:53]
B
All right, welcome everybody. Okay, so we're going to do our best obviously to moderate this. I think the, the story of the day obviously is price action. 1.1 billion liquidated in 24 hours on crypto pullback. I'm pretty astounded that we can have 1 billion liquidation days just a couple weeks after we liquidated 20 billion. But here we are, Bitcoin trading pretty much right back to before the liquidation event.
- [01:19]
C
Right.
- [01:20]
B
I mean I haven't honestly been taking too deep a look at the charts, but it's actually up in the last 24 hours, if only slightly. So non events back to 110. Bunch of people lost their money. Is that the story here, Dave? You're always looking at it. I mean, what's the open interest look like? Plus, don't. We also had 31 billion in expirations today, which we talked about before, which was the biggest ever. So a lot of volatility was sort of anticipated here.
- [01:45]
A
Yeah. And I've made the point to people, you know, everyone knows about Max Payne, but understand that on expiration days, round numbers become magnets until the expiration is over. So 110 being a magnet, being the roundest of round numbers or the second roundest, I guess 100 would be the rounder is a completely predictable response. You know, short term trading. There's a lot of different factors that go into short term trading. And we understand it. You know, I. I think Texas West Capital made a really good point. You know, the other day. It was that as long as people are willing to ape in on 50x leverage, every time they think it's starting to break out, there's going to be. First of all, it will exacerbate volatility the break, the move higher will be slightly higher than one would expect because that's just more money going into the market. And then when no one follows them, they get liquidated.
- [02:38]
C
Boom.
- [02:39]
A
It creates non constructive price action. Every time that happens, you get more and more people who capitulate and give up. And there's no scientific way of saying this, but I've seen way more chatter on X about people saying, I've had it, I can't take it anymore, it's not going anywhere. Understand? Whether it's a V the reason V bottoms happen, or people everyone sells at once, the reason trends and ranges break is because people decide, okay, I'm done with this. So what you if you based on that, ask yourself a very simple question when you want to place your bets or understand where you're going to be. Are there more people at this point saying, I'm tired of buying, I'm liquidating, I'm done. I'll wait for the market to prove it to me, in which case that sounds like a bottom capitulation. There are more people saying the opposite. People saying, okay, you know, I've seen the selling and I'm done. I'm going all in right here. Right? You know, which generally you see at fomo, you know, this feels much more like bottoming behavior than it feels like topping behavior. But you know, what the hell do I know? I mean, for all I know, you know, most everything being bought is on leverage and we see this stuff in the leverage. So it's a really interesting question. I thought that was a pretty salient point. I've also seen a far higher acceleration of just really, really ignorant borderline dumb takes lately in terms of why bitcoin will drop. Blah blah blah blah blah. We could go through all of those and generally you see really bad takes in fud accelerate at bottoms, not at tops. And you see the mooning ridiculous. Everything is great. Sunshine and rainbows and unicorns at top. So we're seeing a lot of unicorn stuff in the plumbing underneath crypto and you were talking about that with nlw on your Friday 5 this morning. But I'm not seeing any, I'm not seeing anything any real bull posting except for people like Saylor and he's been consistent all along. Anyway, that's probably too long with salute. I'm sure some people here I must have triggered somebody with something with some of that.
- [04:53]
B
I will just say, and we mentioned it yesterday, crypto, fear and greed and S and P. Fear and greed. Actually I haven't looked at the crypto. But S and P, fear and greed at an all time high was at fear. So that's certainly not toppy. You would expect a massive greed to signal top. So also to your point, if we're talking about bottoming or topping and you know this, I'm not saying, you're not saying this, but we're just sideways. I mean 110k is kind of where we've been for a very long time, right? Give or take 5 or 10%.
- [05:25]
A
And it never surprises me every time this happens, every time it happens, the it starts to. You get an acceleration in fear and loathing, acceleration and despondence. It's like, oh, this is going to go anywhere. And those are the people who are in this market trying to make a quick flip. And when you're trying to make a quick flip, you got a problem. And let's not forget the event that happened two Fridays ago took billions of dollars out of the hands of people who are biased long and put them into the hands of people who are biased short. And if anybody who expects that, that wouldn't have an impact because I said it at the time and I said I had no, and I was blunt, I had no clue. Still don't have an idea of when, when, when that, that effect is dissipated. But that was a big event from a speculation point of view. And so yeah, I mean that's where people like James Wynn, he said he called, you know, our mutual friend Joe Carlos or a completely delusional bull. He insulted Grant this morning. Gary, your brother, you know, basically saying, well, he's in a bubble anyway, so what the hell does he know? And James Wynn is, you know, look, I'm not going to say he's a clown. I mean his, his public Persona is a clown. His, the comments he makes are dumb. But he's putting a shit ton of money behind stuff. So who the hell knows what's really going on? But the arguments are just bad arguments, you know, he made up.
- [06:52]
C
Right?
- [06:53]
A
Yep.
- [06:53]
D
Just. Sorry to interrupt, but can you just explain one thing to me? And maybe it's obvious, but how does, you know when, you know, people get shorted out, how does that end up in the hands of the shorts?
- [07:05]
A
Well, the shorts made money. I mean, it's a zero sum game, dude. It's, you know, if you see $19 billion in liquidated assets, right, you know, who do you think is making is, is making the profit? The people who were short on the other side. Every derivative contract has a, has a long and short so those the shorts made made tons of money. Now, admittedly, and the people who shorted.
- [07:26]
B
Probably made a ton of money at the bottom with their spot longs that were sitting there that they pushed price into. But hey, that's right.
- [07:33]
A
Yeah, that's probably true. Now what we don't know and the reason why, I have absolutely no clue, Louis, as to why you can't really estimate because a lot of the money wasn't made by shorts per se. It was made by the exchanges who liquidate people at the absolute bottom. And we know, it's funny, here's the stat that I think people would find amazing. So we all heard about auto deleveraging and Binance's sellers. What people don't understand is 70% of the ADL sells that happened were at the almost pico bottom of the move, meaning, I mean, the buys, the people who are short. So people who are short, they said, oh well, you're short, you got your shorts liquidated. Well, yeah, except for your short. You literally bought back in your short 70% of it at the absolute bottom, which meant it was a good trade. And overall, the people who got bought in probably did pretty damn well in where they bought in. And yes, you know, there were, there were others who had to get compensated. But understanding that that dynamic matters. So people who were generally short did very, very well. Now the question, but they were doing.
- [08:39]
D
Well before the capitulation when people got shorted out liquid, when people get liquidated, didn't that go into the hands of then, you know, people who wanted to buy?
- [08:51]
A
I don't see how. I mean, if you're, if you're a perma bear, you're not changing. If you are a trader and you said this is a buy and you're trading the range, then ask yourself, are we at the bottom or the top of the range? Right. You know, if we're at the bottom of the range, then yeah, they may flip to buy. We don't know. I mean people don't, don't public. The only. It's very, very rare that traders actually tell you what their positions are when they're doing it, if they're doing it as part of a Reddit group or whatever. You know, you hear it. I mean, it's a lot of traders move like weather vanes and certainly the influencers on crypto Twitter. I mean, fuck. I mean, you know, I can't tell you the level of annoyance it is to see join my group we or making money on this because. And meanwhile the same people were saying go long right before it crashed or go short right before it rallied. So I, I have no idea what I, what I will say is, generically speaking, the, the people who are biased short did much better than people who are biased long. And that, that's the only point I'm making, Lou. I'm not. There's nothing definitive in any of this. It's just that happened. But that was weeks ago and we might be done now. Amateo, I see your hand up.
- [09:59]
E
Yeah, I was going to see if you had any idea of this, Dave, but with the kind of volatility we're seeing in other assets, obviously Bitcoin isn't that volatile, respectively, and how precise some of these liquidation events seem to be. What's your gauge on how much of this is human driven versus algorithmic and agent?
- [10:20]
A
Oh, I think it's mostly human. I mean, you know, there, there are, there are people who run algorithmic, you know, trading strategies, and there's two types of algos, just to be clear. There's implementation algo, like my company, the one that I founded, Coin Routes, which is basically answers the question I need to do. I need to buy this, I need to sell this within this time frame, do it the most efficiently. Those that. There's a lot of that that's growing more and more, but that doesn't drive markets because you still have. The primary decision is I want to buy this or sell this. Then there are people who are running mechanistic trading strategies, quantitative trading strategies, and there are definitely some of those, and they're out there trading, but they're definitely at. They are dominated by spot buying from ETFs or ETF, you know, retail, whatever, and. Or other traders in the markets. Now, people often confuse other things. People often confuse market makers who use lots of algos, but what their algos are, are to keep themselves in balance. And so if you see what looks to be algorithmic selling of spot, it might be because they have gone, they have been forced to be long via an OTC trade in an option or some other derivative.
- [11:35]
B
They're maintaining a spread, not trading per se.
- [11:37]
E
Correct.
- [11:38]
A
And so while in equities, it's a relatively small percentage, but meaningful, in crypto it's a smaller percentage is pure algo. So everyone who thinks that computers are dominating this stuff, they're not. They're certainly. Look, I worked for arguably one of the largest algorithmic trading firms on the planet in Two Sigma, right? And you know, and yes, and there's Two Sigma, there's Renaissance Citadel has, has a lot of it, there's a bunch of others. But the volumes from that side are dwarfed by the volumes by Virtu and Citadel's market making operations, which really are more about spread. So the question is, is no, that it's not. It's not that. At least I don't think so. I don't think that's a large piece of any of this. I mean it's, it's certainly meaningful, but it's not dominant. Thanks, Dave.
- [12:29]
E
Absolutely. Very clearly, Dave.
- [12:31]
B
I can't see any hands, any.
- [12:33]
E
Anything.
- [12:33]
B
I thought I saw something fly up from CJ before.
- [12:38]
A
Yeah, I don't know. I mean the other thing. Yeah, yeah, there's a bunch of topics. I see Yahoo's Yago's hand. So I won't, I won't push the conversation of the direction Yago. Why don't you go ahead. Maybe you can.
- [12:49]
D
Yeah.
- [12:50]
C
I want to try out the theory with you guys that I've been considering recently, which is we've been seeing now reduced volatility in bitcoin for a while and especially over the last few months, trading in a very, very tight band. And one explanation that we've had is, and that I've espoused myself is that what we're seeing is on the one hand a slow introduction of institutional capital into the space, but it seems almost like perfectly balanced with people who are rotating out because there's reduced volatility and because they've made substantial capital over the last five, and really in particular 10, 15 years. And this theory, while I think it's definitely borne out by the data in broad terms, the fact that there's this like perfect balance doesn't really make sense in and of itself. And so it occurred to me, I think that there is a additional component here which I, I haven't really heard anyone else speaking about, which is that I think we're on the precipice of an extremely important moment. Everyone has always expected bitcoin to exist within its, you know, what is only happened three times. But we talk about it as like the traditional four year cycle. And that four year cycle were to exist would be ending sometime between now and the end of the year. And people, there's a huge amount of fear, especially amongst experienced participants in the market, that just on the basis of that, that timeline which has been so remarkably consistent in the past, we should have a peak very, very soon and then the price is going to crash. And so I suspect that there's a large amount of participants in the market who are very much in a wait and see moment. And almost nobody wants once, certainly no one experienced and that's where most of the capital is, wants to move into the market now and sort of be the exit liquidity for everyone else. If indeed we still have a four year cycle. Now if what I'm saying is true and if, if, if this is really sort of like the dominant mind frame for most people looking at the market and I think if you, if you reflect on it a bit, most people have been thinking about this in terms of where are we in the cycle, then that would suggest two things. One, we are not going to see significant price increases until the end of the year. And potentially a little bit beyond that. We might even see a, a drop off just out of the fear that it might happen towards the end of the year, beginning of, of, of of January. But if we don't, if we get past that point, we will for the first time ever have an actual confirmation that the four year cycle is no longer the valid way to be thinking about this is no longer the correct framework. And I think if that, if, if that is what is sort of maintaining the price and status in stasis right now, then that would point to the January February timeline as being potentially set up for a move which is going to take almost everyone by surprise.
- [16:33]
A
I think there's a lot of, of truth in what you said. I've been saying similar things which is, but I don't know about, I don't, I hate picking specific dates because it's really, it's hard to say. But the crypto community writ large four year cycle myth is driving a lack of, of speculative follow through for sure. Right? So a lot of the largest players are like, okay, they're hearing that it doesn't make sense anymore and mathematically it makes no sense. Let's just get that out of the way. The size of havings no longer are dominant and so it shouldn't matter. And we're seeing S and P and other markets make new high after new high which says they don't give a crap about what crypto thinks in four four year cycle terms. But whatever, I think that you're right. I think it drives a lot of action. The question is, and this is always the question, have the people have all the four year cycle proponents already shot their wad? Have they sold what they're going to sell or are they still waiting, holding out hope and kind of hedging themselves? And if you knew the answer to that, well Then okay, then you know how to trade. And if the answer is they've shot 75% of it, 25% more you expect over the next couple of months, then your January, February thesis is absolutely right. If they're done well then no, then we could have a really interesting November, December. If they're not even close to done, then it might take a lot longer or whatever. Because the one steady thing we know at least in bitcoin is there is a consistent bid from institutions who are way underweight what their, their own gut is telling them they want. And that's not even counting sovereigns like France. Right. You know, people don't talk about it very much, but when you have, you know, a major country saying, you know, we think we should have owned 2% of the Bitcoin supply, well that's definitely not in the price. So there's a lot of that. And so yeah, it's a really important question. Rialgo and I think the mental model is absolutely right.
- [18:37]
E
Yeah, I think that's really insightful. Yago and Dave, I mean I think that there is this tension that's being held between this perception of the four year cycle and I think the distinction there, Dave, is like, yeah, there might be all sorts of legacy vintage bitcoiners who are going, look, this is fine for now and I'll de risk this sort of just in case. But when I look forward to next year and I see that we've got more rate cuts coming, we have QE starting and we have what's going to clearly be some kind of crazy Trump fueled print into the market, do we expect that to just take us mega bearish? I mean, I don't see any with the lack of volatility in bitcoin, the other way to say that is like the consistent demand despite any kind of headline, despite any kind of downward pressure is sustained. And so I think what we still have is not a clear risk on signal. And I think that there's a very strong chance that all indicators are pointing towards next year, us getting a risk on signal. And I don't see, and I do think that that signal in and of itself can take a lot of people by surprise by saying, wow, the four year cycle did not hold up this time and look where we're at. And if that's the case, it's important that we're prepared for that possible outcome.
- [20:14]
A
Yeah, I saw Lou's hand up. You still there?
- [20:19]
D
Yeah, I was just going to say that from my perspective, the macro thing that's going on really is this move from retail enthusiasts and archives, whatever you want to call it, to institutions. And I really think the institutions are broadly far less interested or focused on cycles. And I think people are cycling out, we're over 100,000 and eventually the people are going to cycle out and we're going to start moving it.
- [20:51]
A
Yeah, I think that, look, there are two things to know about what we talk about when we say institutions. Thing number one is they're, the way they accumulate assets is very different than the way the crypto community has accumulated assets in the past. Institutions tend to be methodical, they tend to participate based on volume. I'm not going to say they're price insensitive. They're not. They are price sensitive. And at certain amounts, certain limits, within a day, you know, 2, 3%, they tend to say, okay, you know, we'll wait for tomorrow and see if this cools off. And that is a different dynamic than fomo. The second thing to know about institutions are the reason there's institutional money is not only from pension funds, which are actual institutions with boards, et cetera, but also aggregators. I mean, when people talk about BlackRock, I find it hysterical. Some of the worst takes on this platform, I mean, and I mean really bad takes are, well, BlackRock is doing this and BlackRock is doing that. And we hear this constantly. And Scott, you and I always make fun of these idiots. Most of BlackRock's buying and selling has nothing to do with anybody at blackrock at all. It's their clients. And, and we're talking hundreds of thousands of clients operating as a crowd. So that, that's really an important thing. Anyway, CJ I see your hand.
- [22:17]
F
Yeah, great, great combo this morning. Good morning, everybody. I think that the four year cycle is going to be disproven and we are kind of. And that's because of the institutions stepping in the big base layer of demand that's growing out and ultimately it's the maturation of the marketplace. But two signals that we can keep an eye on. If you're worried about the four year cycle, just remember that the psychology of the market almost never fails.
- [22:45]
D
Right?
- [22:45]
F
So as Dave was saying in the beginning, you're going to get these stages of depression and you know, ultimately that will transition up to euphoria. And that never fails. And right now we're climbing a wall of worry. People are worried about the four year cycle, they're worried about Bitcoin going down. There's not max bullishness, there's definitely no euphoria. In the marketplace. And then the other thing that we can keep, keep an eye on are the funding rates. So when the funding rates get ridiculously extreme, we know that the path of least resistance is going to be the opposite of the balance of those funding rates. So for people who are in the space and wondering, you know, what signals can I look for, what can I watch for? I think the psychology of the market cycle is probably one of the most effective signals that we can keep our eye on. And when everybody is super, super bullish, we know that, you know, makes some sense to trim some off the top and, and have some money to, to buy an upcoming dip. But when we get through this four year phase where people are starting to realize, wait a second, the bid on bitcoin is there, the bid on bitcoin is real. This wasn't speculators just waiting for some Q4 pop off. These are our long term accumulators. Then I think we're going to see a rush of capital flow back in on top of what Amateo was saying with all of the macro conditions, which is why I know people don't like and enjoy the macro as much. But you know, to me it's, it's an interesting concept because when they, when the Fed started talking about cutting rates, excuse me, hiking rates in 2022, there was smart money pre positioned itself, but the big moves didn't take place until the rate hikes actually started happening. What's interesting this time around was we started talking about the cuts and we've had a few and people are still in disbelief. They still don't, they still don't believe that the rates are going to go lower. Even though Powell's going to be replaced, Trump's going to put in the printer, we have to run the deficits. So I think these kind of common sense narratives to people who have been in the marketplace for a while are not so common sense to the wider marketplace. But when they do become common sense, Bitcoin is going to move in a way that allows it to keep its top spot as the best performing asset in the world.
- [25:05]
A
I Love that. Take C.J. that says it better than I was saying it. So thank you for that. I think that unless there's other. I think it's worth talking a little bit about microstrategy and what Saylor was saying yesterday because there were some interesting nuggets in there. Scott, you agree?
- [25:22]
B
Yeah, I didn't listen to the entire earnings call, but I saw a bunch of the quotes and quips and obviously I spoke to him on Monday, which I think was a bit of a prelude to what he was going to speak about in the earnings call.
- [25:35]
G
Right.
- [25:35]
A
But I mean, there are two, two nuggets in there that I think that people don't really appreciate. And probably the most important one was that he was happy. And, and you know, about the fact that S and P gave him a credit rating. And people, anyone who read the S and P report knows that the report was, was ridiculous really in terms of.
- [25:57]
E
The way it said it.
- [25:58]
A
But effectively they gave him a crappy credit rating because they said there's lots of risk. Now, I will tell you why they did forget their words because they explained it really badly. What they basically said is, listen, his average buy price for Bitcoin is 70,000. We've been told that 70% drawdowns are possible in this market. We've seen it happen before. Therefore, you know, in a 70% drawdown, there's obviously going to be major credit issues, etcetera, yada, yada, yada. So what does this mean? Well, it means a couple things. First of all, the longer we go without massive drawdowns, the better his credit rating will get. And the higher the price of bitcoin goes, the better his credit rating will get. It becomes a reflexive, you know, basically an accelerant. Now, why does his credit rating matter? Well, because the better your credit rating, the better margin you're going to be able to do in financing activities in the transition to not just a capital stack on bitcoin, but really, really being able to disrupt the financial industry by becoming what people like to call a bitcoin bank. And so if you want to understand why MicroStrategy might outperform Bitcoin in a rally, this explains it. And there are a lot of people who have said, well, empirically, the last couple of times, bitcoin rally, it hasn't been done. It. I'm talking about a sustained rally. Though in the case of a sustained rally, their quote M nav will go higher. And this is why. And it's very clear. And that to me is the easiest way to explain, probably easier than he explained it, what the investment case is. I mean, I assume you talked about some of that. I'm sorry, Scott, I have to tell you, I didn't watch your interview with him, but is that jive? Does that make sense to you?
- [27:52]
B
Yeah, I mean, my takeaway from speaking with him obviously is that he's carefully directing the narrative to a bigger and broader audience and has identified the digital credit narrative as the one that's going to matter. You know, I think he's pounded the pavement enough on Bitcoin over the years. He's not particularly interested in talking about the performance of MicroStrategy stock, I think. And C.J. obviously you're very deep in this, but I think he's realized that for the average investor, a 10% yield or, you know, 17% adjusted after taxes is really compelling in an environment where rates are about to drop and go to, you know, 1, 2, 3% for mutual funds and bank accounts and it's worth. And when it comes to the credit rating, he did mention that, I think he viewed it as a milestone that a Treasury company can get a credit rating. He didn't really particularly care when we spoke about it, about what that rating was. And actually I think he called one of them STRD or something. He called it a intentional junk bond or something passively in our conversation. So he's admitted that, you know, with strk, strc, strd, all the strs that some are created for people with exceptionally high risk tolerance and volatility and some as he's created more and more and more have, you know, lower yields, but more, less volatility and are more safe. And he even said to me, I wish I had learned all the lessons the market has taught me when I issued the first three. But by the time I got to strc, I understood what the market wanted.
- [29:38]
F
I have to tell Dave, I did get a chance to watch that one. And if you guys are here in this space right now, right after this space, the first thing you go do is watch Scott's interview because it's one of the best I've seen on digital credit. It was an absolutely amazing conversation and you are going to come out smarter after listening to it. And most importantly, I think you might understand where technology is going to evolve. Finance and money, right? We all know that this technology is being adopted and integrated. It's kind of hard to put your finger on how is it going to change my life and where is it going to have the biggest effects. And I got to speak with Saylor at BTC in dc. You know, he was talking about digital credit. I'm talking about bitcoin powered finance. It's such an interesting concept because digital credit is solving a cash flow problem, right? It's solving the problem of negative real interest rates. It's paying at a, at a price that can actually give you a positive rate of return. It makes, being a saver makes sense. Again, and this is why people are talking about the, all the money in the, in the, in the money market funds, the $7 trillion as the rates go down, those people are no longer incentivized to be savers, they're incentivized to be investors. So they, they stop saving and they start investing and that pushes up prices. Well, this digital credit is a savings vehicle. It leveraged savings technology to create a savings vehicle that creates a real positive rate of return. It makes saving make sense again. And what's interesting about the different issuances is that you can be a low risk saver, a medium risk saver or a high risk saver. And before it's just like you're either a saver or you're not. And now you can actually choose which risk dynamic you want in your savings vehicle, which is a really interesting concept. And of course it pushes up those rates because of the cagr of Bitcoin. That's digital credit. And on the flip side with Bitcoin powered finance, which he said, keep calling it Bitcoin powered finance, we have to want to keep these two verticals separated and understood. Digital credit fully backed by Bitcoin. Bitcoin powered finance pushing Bitcoin into traditional products like the Bitcoin powered mortgage, like Bitcoin mortgage insurance, Bitcoin auto insurance, and finding a way to sustainably lower interest rates. So it's like this Bitcoin credit paradox where we can leverage Bitcoin as a savings technology to create a real positive rate of return and we can leverage Bitcoin as a pristine collateral to integrate into traditional credit products to get lower sustainable interest rates. I've never before seen or understood how an asset could create higher interest rates and then also at the same time lower interest rates. Bitcoin is really starting to show its use case and that is really I think what's pushing institutions for long term accumulation. They see where it's going and they see the value prop of the solutions that Bitcoin solves.
- [32:38]
A
Yeah, I see Yago's hand up. I have a comment. But Yago, why don't you go first.
- [32:43]
C
To my mind, the fact that strategy got a credit rating and actually a higher credit rating than what I was anticipating is probably the biggest risk recent news by far and, and it has very, very important implications. I, I was expecting a lower credit rating and the reason is that the rating agencies are inherently conservative and they're also not pricing the risk of your current debts, they're pricing the risk of your potential future debt. Right so once they've given you a rating, you can potentially go out, use that rating, get more debt. And the, and when you look at a company like Strategy Strategies operating business basically doesn't exist. They don't have, you know, they talk about earnings per share but they don't have a traditional revenue driving machine there. What they're doing is they're able to accumulate Bitcoin at lower costs per share. So it's a very, very unorthodox business. The fact that they got a credit rating at all and it wasn't the lowest junk credit rating is I think phenomenal and is likely to allow them to continue to climb that credit rating. If they get to an investment grade credit rating, they'll be able to borrow at extremely low rates and buy Bitcoin. It's going to be, you know, the best business ever. Right now it's at a fantastic business, but it's going to get even better. The second reason it's super important is because the next opportunity for strategy to get listed into The S&P 500 index is in December. And without and a company without a credit rating getting listed. It's just one more reason why they potentially couldn't qualify because fundamentally they more than qualify and should already have been added to the S piranha. My sense is that it's extremely likely now that they will get added to the S&P 500 and that as a result there's going to be a huge amount of catch up where passive investors index investors are going to need to suddenly acquire large amounts of those shares. And so I think that what we could be looking at and sort of this connects also to what I was saying earlier. Come this, come towards the end of December, there's an extremely high likelihood that we see microstrategy added to the S&P 500. We see substantial capital flows into strategy as a result. We see the premium on their share price to the BTC nav starts to increase again. And at the same time we're going to start hearing what I think is going to become a chorus of people saying okay, the four year cycle is officially dead. And, and that's going to become a major narrative in my view. And so I think you've got these two very, very positive, relatively short term triggers which have nothing to do with macro and have everything to do with the particular setup of our market structure right now. Then finally you add to this the fact that sort of Bitcoin has a lot of catch up growth to do to both Nasdaq and Gold. I think that there's, you know, I'm very pleased that everyone is so pessimistic because I think there's so many reasons to be optimistic.
- [36:10]
A
Yeah, I, I agree on so much of that and have many comments, but Nicholas, I see your hand up.
- [36:15]
H
Yeah, I gotta bounce to a meeting here in a couple minutes but I just wanted to hop in here real quick because you know, I, I'm, I'm a tech guy first and foremost and so don't understand really like much about the markets. And I just gotta say like coming in to, to these conversations and especially like this one with, with C.J. yago and you Dave, like I, I come out of it with so much better understanding of what's happening. And I just had to say thanks before I left because it's just been a phenomenal, a phenomenal chat. It's just really awesome to, to hear everybody's analysis and perspective of where we're at and where we're going. So came in kind of feeling lukewarm, leaving bullish. Thanks so much, Dave.
- [37:00]
B
I think that David had his hand up before.
- [37:03]
A
Okay, I didn't see that, sorry.
- [37:06]
I
Oh, no worries.
- [37:08]
G
I thought I might as well give.
- [37:10]
I
Some color on some other dats. I was at a conference yesterday run by Think Equity which is a mashup of a bunch of, I don't know what we call on the traditional street bucket shops from other, from older years and they hosted so they generally, you know, get involved in Think Equity does in, in smaller cap, micro cap companies and then they had an entire sleeve of companies in the digital asset space which they've helped raise pipes for, converts for and then ATM as well. I met with sharplink, Bitmine, Ethzilla, Zero Stack and Empery Digital. I will tell you right now the universe of people of investors in these companies are not distinguishing one from another. I definitely think MicroStrategy is in a different class. The investors that it has are very different. The base that it has, the reason for existence that it has, has, the growth trajectory that it has is very, very different than all these others. But all these others as well are very different flavors of dad. And right now the community of people that is largely invested in these, in these companies is a singular community. And they're invested for either being able to arb out some sort of, you know, spread they believe that exists at times between share price and underlying, or they view it as a quick trade kind of a pump and dump type scheme.
- [39:05]
G
You know, we'll see how many of.
- [39:07]
I
These get to critical mass. And when I say critical mass, I mean that a, the market pays attention, what the nuances and differences are between them. And also at the same time, the equity research coverage community takes them seriously enough to go ahead and publish on them. As of now, like I said, I think they all get lumped together, even though they all think they have a very different recipe for the future. It was particularly interesting. Two of the five that I met with, I met with people that had not been at these respective companies for more than a week. And the bulking up of staff is, you know, because they've been able to raise hundreds of millions of dollars in a very, you know, compact period of time. The bulking up of staff of all these companies seems to be in, in hyperspeed. How, you know, well, that works. How long does it take for them to, you know, work together? And in fact, you know, for a lot of them, it's window dressing. At the end of the day, it doesn't take more than two and a half people to run these companies in all honesty, unless you have an another operating business on the side. But if you're just a pure dad, you don't need throngs of people running around, especially if you're just trading in and around, one token. But in any event, they're all bulking up. They're trying to get formidable in the eyes of their investment community and in the eyes of the street. And it'll be interesting how they go ahead and develop over time. I'm sure a lot of them do not want to be presenting at a Think Equity conference next year. They'd certainly much rather be at a more formidable, you know, equity conference. But it was, it was enlightening and eye opening to speak to these companies.
- [41:00]
A
Yeah, it feels like they're fighting the last war. I mean, I'm trying to figure out why a Treasury company needs more than two or three people in the company, unless they're doing what strategy is doing, which is creating and innovating new financial products, in which case you absolutely will need lawyers and strategists and, you know, et cetera, et cetera. I mean, it's just, it's, it's just, it's a classic, you know, burn mechanism. And it's why they're going to all trade below. They're going to trade and everyone that's in that, that you just described should all be trading with an M Nav below one for sure. In which case the, the sole question is, you know, what's the point. And you know, it's, it to me it's, it's like, it's like the last war. I mean I don't think there's euphoria anymore there but you know, who the hell knows? I mean, Amateo, what do you think?
- [41:49]
E
I don't know if the euphoria is still there. I thought that breakdown, the update was great. I wanted to speak to something that I thought was interesting as you're talking about like staffing and the one thing I didn't catch the whole sailor call, but the one thing that I did catch is that they're working on expanding their marketing team and that everyone can expect a lot more marketing out of strategy. And I just thought that this was a really compelling concept because usually when Saylor moves everyone else follows where like there's a reality here that's forming where these DAT companies, they have their, you know, cfo, their, their corporate level management and just asset treasury management. But now that they're also going to have marketing arms where they're going to be out there doing all sorts of marketing and probably trying to get some kind of conversion down for the amount of money they spend in their marketing and the amount of value that they can accrue to the DAT and that they can then use a lever up to to buy more assets. So I just thought that that flywheel is starting to really come into focus which is going to be necessary as the DAP world becomes more competitive and just as a marketer, it's kind of wild to see that start to come to fruition.
- [43:05]
G
I will tell you my takeaway by.
- [43:07]
I
The way, with respect to marketing is that Tom Lee has blown everybody away.
- [43:14]
F
Right.
- [43:15]
G
And rightfully so.
- [43:17]
I
Right. Tom Lee is way more entrenched with investors worldwide institutional than anybody even sailor.
- [43:27]
F
Right.
- [43:27]
G
He's got a long history and if.
- [43:30]
E
Anybody'S gonna do, I mean all of.
- [43:32]
B
Them literally reading his words to determine where markets are going and now he starts talking about Ethereum.
- [43:37]
G
So and it's been going on for years before fund Strat JP Morgan, like he's a known commodity and there are a lot of people that I met.
- [43:47]
I
You know, around bit mine that simply followed him in.
- [43:51]
G
Joe Lubin though certainly does not have that same pull when it comes to sharply and I think, you know, Saylor may be reacting a little bit to the success that Tom Lee has had which has been astounding honestly because he's not running it day to day. He, he's not the CEO of the place. He's Just running around raising capital and he's able to make calls to institutional investors to explain to them how this works.
- [44:19]
A
Right.
- [44:19]
G
Remember, Sharp Link is the, what they have done so well is the pipe, you know, deals and the fact that they are able to, you know, not let the street know always how many shares are outstanding, how much ETH do we really own? Like there's a little bit of a nod, nod, wink, wink. If you're in the deal, you got in a form, the next deal, get in an eight. Like there's a lot of, you know, we can make a lot of money here on a not particularly, you know, rocket science of a trade and, and you could do it in size. And so he's been incredibly good at.
- [45:02]
I
It at a certain point.
- [45:04]
G
My guess is is he's getting close to his 5% target on ETH.
- [45:09]
I
Right.
- [45:10]
G
Total outstanding. The question is, is when it gets there, you know, what, what is, what is the next step for that? Dad? I think it's almost can become as interesting as, as micro strategy.
- [45:23]
A
Two totally different.
- [45:24]
G
I mean yes, they're accumulation strategies, but obviously, you know, the functionality of ETH.
- [45:30]
I
At this point versus you know, Bitcoin is different.
- [45:34]
G
And what you do with both Min Monster holders on a go forward basis.
- [45:40]
I
Is, is curious to me.
- [45:42]
G
But it seems to me that there are, you know, pretty good and interesting.
- [45:46]
I
Lottery tickets on both MicroStrategy and on Sharp Link simply because Tom Lee was able to get so big so fast.
- [45:56]
F
Yeah, well, you know, he has to be a good marketer to have an ETH Treasury. I don't understand as somebody who has participated in the ethic ico, I do not understand how an inflationary asset with infinite supply that when traffic gets busy maybe there's deflation. You know, since the onset of Ethereum there's been a 60% supply inflation. And since the switch from proof of work to proof of stake, to be fair, that issuance has gone through periods of deflation and inflation with about a half a percent cagrade. So you know what, that's, what's the next step?
- [46:33]
G
I'm with you.
- [46:34]
F
Right.
- [46:34]
G
I understand the arguments and the pushback. He is not singing that tune. As you can imagine, the tune he's singing is tokenization of every asset under the sun. And it's gonna happen on eth. That's the tune he's singing. And he's getting a lot of, you know, at least temporary acceptance. Again, a lot of people that are in the original issuance of a lot of his securities don't hold for very long. They trade out of it. And so his ability to just turn on the money printing machine is really what's been, you know, unbelievable. I understand the concerns fundamentally around Ethereum, but frankly, his, his call for the financial, I mean, the digitization of every single financial asset algorithm out there. Oh, and by the way, there are a ton of people echoing that strategy. Inclusive of people in the White house, inclusive of BlackRock. I mean, you couldn't have louder, bigger voices, you know, making those calls. And for him that's enough and for his investors that is enough.
- [47:45]
F
Yeah, it makes sense that they're going to be quick in and out because they will realize what the rest of us realized after the launch of DeFi and the 2020 DeFi summer that we all went through. What they didn't realize yet is that although the narrative is true that everything is going to be tokenized and put on chain, Ether can't support that wholly. And that's why today, you know, Bitcoin is sitting considerably higher than its previous all time high. And Ether has only gone 1.8% above its previous all time high and now sits below its previous all time high. Because they decided to compete with Bitcoin as money instead of to be the gas to power the smart contracts for real world tokenization. So they went the money path and to compete with Bitcoin rather than the gas path to be a complement to Bitcoin and to real world assets. And I do think you're right. The traders are gonna, are gonna get in and they're gonna get out real fast when unfortunately they have to come to the same realization that the rest of us did. Which is it. ETH cannot facilitate the tokenization of every single asset in the world. Which is why we have Solana and BNB and all of these competitors. These competitors are of eth's own making. Ether decided to go the money route that what they should have did was a thousand to one split in the middle of the D5 boom summer 2020. They should have said, you know what, for every Ether you have, we're going to give you 1,000 more Ethereum. And you know what that would have done? It would have lowered the price down to $4, making it a lot more affordable for people to get in. The same way a stock split works psychologically. And then more importantly, it would have lowered gas fees. $100 gas fees to provide liquidity into a liquidity pool would have now been a 10 cent fee. There would have been no demand for competitors. But instead the foundation decided it wanted to become money, it decided it wanted to have a deflationary component and to compete with Bitcoin as a money rather than be the gas that it was designed to be, that it was sold to us to be in the ico. And unfortunately I think people who are in this short term trade are going to figure that out a lot sooner rather than later. And if you're, if you're in the DAT space, I would, I would ignore the digital assets and, and simply focus on Bitcoin. It is in my opinion the only long term sustainable treasury asset that makes sense that a business can be built off of.
- [50:07]
A
Well, I think there's a couple things. There's so many things here. The first one is no, there's a second thing that makes sense. A company that is actually going to build operational products off of a blockchain, having a, being a strategic owner of that blockchain makes enormous sense. Now I'm not saying any of the current DATs in any of the other chains are doing that, but to the extent they do that, that would make sense and you'll see it. The second thing that I think matters here is there's a massive difference between marketing, what Saylor is doing and what Tom Lee is, et cetera. I don't think Saylor is hiring marketing people to market MSTR stock, which I think he is hiring market people to sell all the new products, including strc, you know, all the strs that he is selling. In the same way BlackRock has marketers to market their funds because effectively those products are asset gathering vehicles that are, they're not the same as a 40 act fund because the regulatory structure is different. But more or less they are the same as what the marketing department of ETF is issuers do. So power shares, you know, everyone knows they're the ones that do the, the inverse and regular multi, you know, leveraged ETFs. They have a marketing staff, right? I think that Sailor hiring a marketing staff to promote his products, which will allow him to attract capital eventually at lower interest rates, is a smart move. But that's not the same thing as promoting the actual stock. So if you're hiring marketing people to promote the stock of a Treasury company, that's, I think that's a cry for help as opposed to a positive move is you're hiring marketing people to market new innovative products that need explanation to all the financial advisors out there. If you think of what Matt Hogan does at Bitwise, not just Matt, but the whole team, they're explaining I mean, he is out there talking to pools of capital to explain the value proposition behind BITB and Bitcoin because he needs to. Because they don't truly understand it. I don't think very many companies are hiring people to explain to them by they buy their individual stock price, but selling financial products, well, that's different because that is essentially what they're doing. So I do think that is a distinction. I mean, David Toehl, you.
- [52:33]
G
So I, so, so I will, I.
- [52:36]
I
Will just tell you what the reality is, which is the people that I met with, at least a couple of them were investor relations people for these companies. And yes, they are out there to peddle the equity of their, of their debts and that's what they get paid to do. One guy was hired. This is like, I don't know, he's a tech dude. He's been an IR guy for two other tech companies public, and he's now doing this. And then another guy was like picked off from like Falcon X or something. And yeah, that, that, that is, that is what that.
- [53:15]
G
Listen, this, the community of people here.
- [53:21]
I
Are not, I'd say largely Trad 5.
- [53:24]
G
People that these stocks are being sold to. Trad 5 folks. If you want to sell your stock to a tradfi person, you need to.
- [53:34]
I
Operate the way Tradfi does, which is you have an IR guy that takes care of your securities marketing and you.
- [53:41]
G
Know, not necessarily only your common stock, but every other flavor you've got in, in, in. In your, in your quiver. And you might be right with respect to Saylor. He's got a lot more and a.
- [53:55]
I
Lot more interesting flavors to go out there and sell.
- [53:59]
G
And, you know, their underpinnings are certainly much more, I don't know, fundamentally distinguishable than the garbage, I'm sorry to use that word, Then, then the crazy range.
- [54:11]
I
Of stuff that these DATs do, whether it be converts, ATM stuff, pipes, what.
- [54:16]
G
At the end of the day, it's.
- [54:18]
I
All, you know, it's all a shell game on the same security. But, but yeah, I mean that this.
- [54:25]
G
This is what they do.
- [54:27]
I
Love it or hate it from a fundamental perspective, I think as a person.
- [54:31]
G
In the space, I love it.
- [54:33]
I
Right.
- [54:34]
G
At the end of the day, eventually, somehow, some way, people need to get educated. They might get the wrong education to.
- [54:42]
I
Start or somewhat flawed in terms of.
- [54:45]
G
Who'S pitching them, you know, that education. They'll come around.
- [54:49]
I
Maybe they'll lose a ton of money, as C.J.
- [54:52]
G
Said, you know, and, you know, it'll.
- [54:55]
I
Be a rude awakening and an expensive education.
- [54:58]
G
But at the end of the day they'll get the education, they'll get the entry into a space that they weren't otherwise entered into.
- [55:07]
A
That makes sense. I think that you kind of talk this topic, you know, out. I mean, Scott, what do you think? Is it time to close it?
- [55:14]
B
It is. It's Halloween, man. Let's go trick or treating.
- [55:19]
A
I'm actually flying. Gonna spend the weekend in New York with my. With my wife and see a couple of shows. So, you know, we'll. I'll see you from a hotel on Macro Monday.
- [55:28]
B
On Monday could be worse. Sounds great. Thank you everybody so much. That was an incredible conversation. Some of my favorites, obviously on stage, participating in it. You guys are legends. We will see you back on Monday for the next crypto town hall. Travel safe, Dave.
- [55:43]
A
Thanks. Bye, guys.
- [55:44]
B
Bye, guys.