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The Wolf Of All Streets
Bitcoin Hits $106K: Record-Breaking Rally Ahead Of Crucial Fed Announcement | Macro Monday
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Bitcoin Hits $106K: Record-Breaking Rally Ahead Of Crucial Fed Announcement | Macro Monday
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- [00:01]
Scott Melker
Bitcoin hit $106,000 yesterday, making new all time high after new all time high before a slight retrace today. The bitcoin gold ratio also hitting new all time highs, which always makes for spicy conversation. On macro Monday, we have drones circling New Jersey apparently here to buy all of your fart coin. It should be fun today. Guys, we've got a lot to talk about. Let's go.
- [00:28]
Dave Weisberger
Let's do.
- [00:43]
Scott Melker
What is up everybody? I'm Scott Melker, also known as the Wolf of all streets. Before we get started, please subscribe to the channel and hit that like button. Going to bring on the gentleman, Dave Weisberger, clearly on vacation. James lavish and Mike McGlone. Good morning gentlemen. The drones are here. The aliens are circling and they want all of your fart coin at a 848.22 million dollar market cap, making it, I don't know, one of the top few hundred.
- [01:14]
James Lavish
But will they buy it? Will they buy it in a multiple of book value? That's all I want to know.
- [01:20]
Scott Melker
But I mean, you know, we, we know that sailor will probably announce another micro strategy buy today. Maybe not adding. He already did announce it. He did?
- [01:29]
James Lavish
Yeah, he already announced it.
- [01:31]
Scott Melker
So how much did he buy today?
- [01:33]
James Lavish
So he owns a total of, let's see here, 439,000 bitcoin now. So he tapped the ATM and did it again.
- [01:44]
Scott Melker
Okay, so what did he buy today? I didn't even see today. It was, I saw him teasing yesterday.
- [01:51]
James Lavish
I'll pull it up right now. Pretty wild. So I mean we, you kind of knew it was happening, right? Yeah, I mean he lived another 15,000, 350 or 1.5 billion.
- [02:04]
Scott Melker
He was buying it five, I think five Mondays in a row that he's done over at least over a billion dollars in purchasing. We shared sort of the stats I think last week, which was that it took a year to buy the first hundred thousand in two weeks to buy the third or fourth hundred thousand, you know, from 300,000 to 400,000. I mean, this is insane. Fart coin, obviously a joke. I don't think we'll be getting a company buying far coin and adding it to their balance sheet. But I do think that it, you know, is a worthy conversation for the clear sort of excess and insanity of a bull market in crypto. I mean, Mike, we've got to tee you off with far coin, right? As much of as hilarious that is. You're talking about something that's almost worth $1 billion.
- [02:48]
Mike McGlone
Well, we a little pre show we enjoyed talking about this. I think it's the aliens and the aliens have come down. They' they finally oh those, those humans have finally figured out real money. And then just like humans do they get a little extreme like you know I'm going to put my kids college funds into well I'm sorry my kids are out of college, my grandkids college funds into Dogecoin at 60 billion market cap so it sits entertaining. But I like to point a tilt over. I'll tilt over to the meeting this morning. You might want to know some of the facts because there's one key thing that flipped that hasn't flipped in years and that is our chief equity strategist Gina Martin Adams. She's. I've never heard her this pointed out. This is just silly the extremes that the expectations earnings for next year are just compared to last year's the expectations were very low. Her quote was earnings expectations are just way too optimistic. She thinks that we're going to have a difficult environment for stocks at the start of 2025 and that completely makes sense. There's so much optimism for this new administration which we all know low regulation, cutting out the waste and everything but usually means initially tariffs. You usually have just a little bit of a correction. So I'm still hoping and seeing at some point maybe we're going to get this paired where we can see the equity market go down in bitcoin to prove to us that it's not just piggybacking on that $13 trillion that was added to the total market cap of the stock market cap this year. That's almost half the US gdp. It's the most in history. So I just have to revert back. Is this 1929, 1928 or 1927? I think in terms of speculative excesses and the best place you can go for that is the altcoins. Now I definitely don't want to tee off Dave too much but maybe we should tee off Dave because this might be our last error. Look at that smile. But bitcoin is great and everything but from my standp I'll end with this. The stuff I'm looking forward from a macro standpoint is we are. If I talk about any commodity the word glut starts. You start with crude oil. We don't have to dig into details and you just lean over to why. Let's look over the China 1.73. That's the 10 year note yield in China. The CGB. Now I traded JGBs in the 90s or late 90s Japanese government bonds. I remember the same thing. They just weren't as volatile. They just didn't go straight down and yield. They knocked around because people like me were trading them. You can't do that. So the second largest economy is heading towards severe recession. We see pretty severe layoffs in Volkswagen and Europe heading towards recession led by Germany and commodities. My point is if we have this normal equity market correction, say 10%, that'd be great. It'd be nice to just get that over with. Pre Q1 number one, next quarter Trump gets it over with. What does that mean for everything? I think what I see is severe deflation forces from commodities. And the key question will be how can Bitcoin respond to the environment? Now I fully expect Foley's price is supposed to go to 140,000 instead of 60,000 which would be the first standard deviation move based on 40% volatility or so. So it's going to be a great start of next year. But we have to admit this has been one of this is actually in terms of adding accumulating wealth, it's in terms of dollars. It's the best year in history of stock market. $13 trillion.
- [05:53]
Dave Weisberger
Awesome.
- [05:53]
Mike McGlone
Why expect retail sales to be strong next week or this week and we.
- [05:57]
Scott Melker
Have a Fed rate cut.
- [05:59]
Mike McGlone
Yeah, exactly. So here's the thing and it's probably going to be one of those, I just love this term, a hawkish cut on expects. Mr. Paul is going to come out and say yeah, I knew that would get Dave going because you're cutting rates. It's silly and James would be on it. But you know, they expect that probably make a sign that's probably going to be tilting towards not it's towards the end of cutting rates. But to me it's all about, you know, if the equity market keeps going up, they're cutting rates in that environment. Yeah sure they're going to goose it, but how much do they goose? And they've goosed it. Markets look ahead, goose it to some of the highest levels. You have to really go back to late 20s in many measures.
- [06:33]
Scott Melker
But inflation is also rising. And assuming that we're going to see a mass firing of government employees, we know that unemployment will also be rising.
- [06:42]
Mike McGlone
Well, that's the thing about inflation, the thing I've been like when you have market cap to GDP at two times most in about 100 years and stock markets going up, it's silly to expect CPI inflation measures to go down. I mean it's the animal spirits and the wealth Effect is about the greatest in history. And that's a wonderful thing. And that's why, you know, we look for alternatives. Now, bitcoin's been a great alternative, but Shibu Inu and Doge. Good luck with that one.
- [07:09]
Scott Melker
Dave, should I wrap the present so you can unpack?
- [07:13]
Dave Weisberger
No, it's all good. I mean, look, what is amusing to me is every time Mike talks about uses the word deflation in environment when every central bank is printing money, I think Milton Friedman is rolling over in his grave.
- [07:32]
Mike McGlone
Commodity prices are deflating. So back to you.
- [07:35]
Dave Weisberger
Sure. And that's important because there's two types of commodities as we know. There are industrial commodities and there are commodities that people buy and accumulate as a store of value. Gold is on the outs, but it's still there. And it's going to be there for years. But it trades differently, which is why the gold silver ratio is towards the top of its channel, not towards the bottom of its channel. And that's not really all that surprising. But I think that what you're seeing in bitcoin is fascinating and different. And let's make this point. The price setter in bitcoin for most of its history in every other rally has been the crypto community getting all charged up and pushing bitcoin up. Then they get tired and they say, oops, I need to look for the next shiny new object, whether that be a fart coin of the day or whatever. And so the marginal price center moves into what we call alt season. Today, the marginal price setter continues to be people who realize, hey, wait a minute, I got to get me some of this in my portfolio because I am underexposed to bitcoin as a store of value. And look at the potential explosive upside. And so you have a lot of patient accumulators. And we've talked about this a bit before, but I think in the same week, and you can't ignore it, that BlackRock has basically told people, put it as 2% of all your portfolios. Now, they're not talking to people like us. They're talking to people that wouldn't know what bitcoin is. And they go, isn't that magic Internet money, sir? When the financial advisor explains it to them and they go, oh no, no. And so they start explaining it. And so you're seeing something very, very different. In fact, the marginal seller of bitcoin at these prices is still the crypto community. That's why, unsurprising, we've had n number of weekends in a row where Sailors bought bitcoin, the prices rallied, and then Monday, it kind of cools off a bit after Sunday. That is not the traditional bitcoin behavior during bull cycle. Scott, you said it was, but I don't remember it that way. I remember weekends being fairly volatile during most bull cycles, but I think in this particular case, people are just kind of trained to fade it. Just like whatever the opening of microstrategy is going to be today. On the inclusion in the NASDAQ 100, generally you short something at the inclusion. I'm not sure I would short microstrategy. I think there are. You know, I don't like bungee jumping either. I'm not a skydiver, you know, packing my own chute. And I think that it's probably in the same level of dangerousness to do that. But generally having traded index inclusion events for most of my adult life, I would tell you that the general point is you short the actual inclusion price. For those who don't know. What happens is every index has a different time period. Sometimes it's close on Friday, sometimes it's the open. It doesn't matter. But when the actual price at which an asset is included in the index, in this case the QQ, the NASDAQ 100, that's the price that the index fund owns it at. And so what do people do? They try to buy a little before then it gets jammed up onto that particular auction print. Because the way stock markets work, there's an auction on the open, there's an auction on the close. That auction, you can be what quants would use the word deterministic about it. You would say, okay, this is the price you know it's going to enter at. And by the way, this morning we have to talk about my percentage. I haven't even looked. But it'll happen while we're on.
- [11:07]
Scott Melker
James wrote an entire newsletter on it. So we're going to get there soon.
- [11:10]
Dave Weisberger
Okay, cool. You have these animal forces going. I look at farcoin and I laugh. But as I scroll down to see farcran, I see the coin that makes me wonder what the hell this market is about. Can anybody explain why the old FTT and it's down today, but it was up over a billion dollars last week. Why would FTT token the remnant of a dead exchange? The settlement has already been agreed. There will be no new one. Why does that have a billion dollar market cap? To me, that's almost as dumb as back in the day. For those who remember, any viewers that bitconnect when coinmarketcap was calling it a scam for 2 months, was over $1 billion before it eventually crashed. Why the hell is FTT worth a billion dollars? So, you know, in crypto, to understand Mike's not wrong, there's a ton of excess. When you see things that are clear, not just zombie coins, we're talking literally preserved in the ice. Coins with values that are larger than a lot of businesses. You know, there's still a lot of speculative excess in the market. That said, I don't think bitcoin is even close to speculative excess. I still think it's 5 to 10x undervalued, and that's why its price dynamic is different. And there are a lot of projects out here that make sense and there's others that you ask questions of people I've never seen anything quite like it. I'm going to pick on them because I actually know that, you know, I know Justin and Ando. Ondo is a really interesting project. Right. You know, a lot of people say it's a great project and it's going to do all sorts of things in real world assets. I asked a question and got crickets as a response, and I will continue to do so. If you're a token holder of a governance token, what economic rights does that token give you and why would anyone pay for it? So let's say Ondo becomes the proud owner of a $10 trillion ecosystem. What does owning the token do for you? That the answer is it gives you a substantive participation in the 10 trillion trillion dollar ecosystem, then by all means buy it. If on the other hand it gives you nothing, then what are you buying? You're buying a governance token so you can govern something, but you can't participate in the economics. What's the worth of that? We're plumbing new models and those models are going to ultimately change. And I think a large part of what's happening in the market is Bitcoin is going up, Ethereum is lagging, but people are starting to come on the train and say, wait a minute, guys, there's some real value being locked here. There's some demand for the token. Solana is massively underperforming, despite it having a lot of utility, and then other coins are starting to percolate up. So we have a very interesting market to talk about. But on the macro side, I think that the bitcoin use case and the bitcoin story needs to be divorced from a lot of the other stuff that's going on, because Bitcoin if anything, I hate to say it, it feels cheap at these levels. It really does to me. And that's very different than looking at the speculative excesses that are undeniable across the crypto verse.
- [14:10]
James Lavish
There's a lot to unpack there. Let's talk first. The. All the altcoins that have no value, the things like far coin and whatever people are. I mean, that's clearly just the casino side. Why, why is that happening? Is it because there's just excess capital in the world? Is it because there's so much money out there that people. This is where I think some of the economists are getting this wrong, where they're like, well, just, you know, there's so much money out there that people are driving up the, the values of these things. No, that's not what it is. They're betting on them because they need something. They need something to catch up. They feel so far behind that they're gambling. That's literally a casino that they're gambling at and saying, I need to make 100x my money. Why is Solana and Ethereum and those are underperforming because they're not going to give me 100x. So I might as well either own some Bitcoin and then fart coin or whatever the heck it is. Dog wi fi hat because I need something to get me some. I need to catch up. I can't keep up and it's driving me nuts. So I've got to do something. So I'm just going to gamble. And that's what people are doing, in my opinion. I don't think it's because it's just this grand excess of money. I think people are using credit cards and debt to do it. I don't think it's a. It's a. It's a bunch of just, you know, excess capital that people are sitting around and like, hey, you know, my Costco bill is low this month, so I'm going to go and put 500 bucks into dog wi fi hat.
- [15:34]
Scott Melker
No, they're saying they think they can take that hundred dollars and turn it into a hundred thousand and change their entire lives. And what's a hundred dollars?
- [15:42]
James Lavish
Exactly. It's the opposite. It's. My Costco bill is so high that, screw it, I'm gonna take 100 bucks and put it on this lottery ticket and hope it wins. You know, that's, that's from, from my understanding what I'm watching that. That seems to be the overwhelming kind of theme there. Okay, so that's Number one, number two, bitcoin. Let's talk about bitcoin and what this is. We're at a spot here now where it's really important to understand. And Scott, I shared. Crosses his, his chart that he shared with me gave me permission to use this widely. So Jesse's chart here. And you see Sailor put this up. This is, this is really important. And this, this is. Mike, where you've been talking about this for a long time. We've been talking about. We expect it to happen. We may be at the beginning of the stages of this. Which is what? That's where bitcoin is now starting to eat into the other asset values. Right? Meaning it's taking market share from them, wallet share from them. And so it's not just that there's excess capital out there and it's following the expansion of the money supply, but it's also taking money out of where the one place that we're seeing a mass amount of money being taken out. We, we believe that gold is being demonetized. We believe that bitcoin is becoming, you know, really becoming the, the that ultimate digital gold and then some. We, there are many reasons why it's even better than gold, but let's just put that there and say that I believe that it is demonetizing gold as we speak. Okay. So the, the second place that we're seeing it demonetize and it's just a tiny sliver right now, but it's happening is that big gray box in the middle of the bond market. And you're watching it happen as these public companies. And right now they're just bitcoin companies. It's just Microstrategy and Marathon and Riot and Semler Scientific and some others that are going out there and they're issuing, they're issuing debt and they're using, well, Semler's issuing stocks. That doesn't really count. But they're issuing debt and they're buying bitcoin with it. You know, so they're, they're literally. So people are then buying big. They're buying bitcoin instead. You know, so they're using bitcoin, their Treasury. So you've got those, those companies using bitcoin, their treasury. And that's. And that's going to take market share away as people realize that, oh, bitcoin is something I want to have my treasury instead of Treasuries, US Treasuries. That's going to eat into that big gray box. It's a big deal. And so is that happening, it's just at the very, very, very beginning stages, but that, that's where the big switchover will occur, in my opinion. And so the question is, is Bitcoin still just the tip of the risk spear, as we've all said, for many, you know, for a number of years here, and it's just, you know, a volatile version of the, of the nasdaq, or is it actually starting to become that true store value that people realize, like Dave was saying just a minute ago, that institutions are saying, I need a, I need an allocation to this thing. Anything half a percent, something quarter percent. I got to start dipping my toe in and putting this in my portfolios. Because the risk is becoming, oh, how did you not have any, how did you not have any bitcoin? You're managing my money. How did you not have any bitcoin in the portfolio? This thing is, it's up tenfold in the last few years, and now it's going to be up tenfold again in the next number of years. How did you not have any? And so that's really where the, that's a big switch over. Are we there yet? I think we're getting there. Not fully yet, but we're getting there.
- [19:29]
Scott Melker
James, what's interesting is that as these institutions eventually eat into their bond portfolio to buy Bitcoin, the adoption of stablecoins will probably counteract the selling of those Treasuries by stablecoins, buying them. What's the state market caps now? Over 200 billion. Right, right. And tethers at 140. I mean, that's 40 more than. I don't remember when we were talking about them breaking 100, but it wasn't that long ago.
- [19:56]
James Lavish
That's right. That's right. And we have, and, and you know, Scott, we even talk about the, the rumors or, you know, rumors. I don't know if there were indications or verifications that Trump is looking to start a bitcoin reserve on day one through executive order. And that's something that, I don't understand the rules around that Maybe Dave understands them better, but that is something that is, that is wild and will have an impact. There's just no doubt about it.
- [20:27]
Scott Melker
Dave, do you know anything specifically? I've heard the same thing, obviously, but I don't know what the mechanics of it are.
- [20:33]
James Lavish
I don't know the mechanics of it. But if he can use an executive order to, to protect the currency, the US Dollar, then that, I mean, that's.
- [20:42]
Dave Weisberger
Just, it's not even clear to Me that he needs an executive order to do it. It would be besent at he needs to get his people in charge of Chesapeake Treasury. It's not entirely clear what the Treasury's powers are because frankly, we know the Treasuries, I don't think never see there was an executive order of them to buy mortgage backed securities when they did quantitative ease. So who the hell knows what that is? I mean, the executive order could be done for sure and you know, someone could challenge it in court, but who's going to stop them? I mean, come on, you know, you have to have someone who's going to sue against it. And they may do that symbolically. I mean, I personally think that the smarter trade rather than doing the executive order immediately would be, hey dude, go buy some. So we'll look like, we'll look like heroes and then do the executive order. But I guess we'll find out, right? The most important question is, is the Biden administration actually selling any of that bitcoin that Trump promised to hold? I mean, nothing would surprise me about this administration. I called the Biden administration because I don't think Biden has anything to do with anything that's going on right now. I don't know that anybody believes that. We actually have the president running the country. We have a committee, and we don't even know who was on that committee. You know, and you talked about the drones, but I mean, have you ever heard of anything like this before? You know, where nobody, nobody knows. And one of the things for bitcoin that is interesting and you can't deny it, is bitcoin is an asset that effectively is. I mean, I don't like the word vote because I think it's a bit too strong, but it's something that people buy when they distrust governments. And so when you think when people are starting to worry about space aliens, or is it, you know, is it a foreign power? Is the US government spying its own citizens? Are they looking for, God forbid, weapons of mass destruction? You know, I've seen all sorts, some crazy theories. People start getting angst about their government. Well, what's the one asset that is considered to be a quote? Well, as I said, vote against not trusting the government. And so it's not ridiculously surprising that bitcoin is doing well. But look, the rest of the markets are ignoring this. And it feels like the beginning of a sci fi movie where stuff's happening and people are looking at it like, remember Independence Day? People kind of partying on rooftops saying hey, come get us aliens. This is going to be great. And then of course they get blown to bits. I'm not saying that's going to happen, but it feels very, very strange. Right? And strange is not until something bad happens. Strange is not bad for bitcoin. It's not bad for a lot of things. So yeah, I mean there's a bunch of cross currency.
- [23:22]
Scott Melker
I want to talk about microstrategy, but first I want to talk about the Bitcoin reserve. Matthew Siegel tweeted this and now it's going viral with Cointelegraph. I'm not sure if you guys saw this, but let me show you that. Let me just bring up the chart. So there's a lot of assumptions here, which is kind of wild, but this is basically saying that the. By 2050, if we have a bitcoin reserve that is proposed by Cynthia Lummis, it could cover 44% of the national debt. The assumptions here though is that CAGR of Bitcoin is 25% a year. Might be aggressive as volatility decreases through 2050. And starting with 37 trillion in debt, 5% added to the debt yearly, basically you end up with a 44.4%. Of course Bitcoin's starting price of 2025 here is also 250,000. Okay, that's maybe absurd if we're at 250,000 when this starts next year. The idea here though, that if you look at the theoretical compounding rate of Bitcoin and a reserve versus a theoretical compounding rate of US debt, you could end up with bitcoin eating into that massively. James, I mean, do you think that 5% increase in the debt seems conservative to me at this point.
- [24:36]
James Lavish
Yeah.
- [24:37]
Scott Melker
That also seems as aggressive as the bitcoin part is the debt increase of 5% a year seems.
- [24:42]
James Lavish
But the funny thing is with the debt increasing 5%, yeah, that's probably low. But the Bitcoin 25% CAGR is, that's probably, you would say if you're looking at all of the different models and all the diminishing levels of returns, whatever, because each cycle is a lower level of return. Okay. But if the United States adds bitcoin as a reserve asset, it becomes a self fulfilling like 25 might be low, likely below.
- [25:22]
Scott Melker
Yeah. For those who don't know, CAGR is a compound annual growth rate. So I looked it up. But bitcoin from the very beginning, if we can count that. I don't think you really can, but it's 244.63% per year. Then I put it in since 2016. It's still 99.41% a year.
- [25:39]
Dave Weisberger
Right.
- [25:40]
James Lavish
And this is not a gimmick. This is, it's on the table. Okay. The bill still does not have a co sponsor. It's early stages. It's a lot of talk about it. Symphony Lummis has been talking about it quite a bit and trying to get some, gather some support around it. Clearly, the Trump administration is supportive. It's just a question of just how much support they would get in Congress or if they'd have or if they would. If Trump would do something unilaterally, that would be likely smaller just to start. So it's hard to say and we're going to find some things out. But the one thing is that this is a structural, fundamental change in bitcoin support from the last administration, the one that we have sitting there, that we don't even know who's running this government right now. And the new one that's incoming, it's a structural change for bitcoin. It's extremely positive. So you can't ignore that. That's just a piece of reality that you have to pay attention to. What happens with the money supply? Where are rates going? The interest rates are this morning. The Fed funds futures are saying that we're going to have, it's a 97% probability. We're getting a cut on Wednesday of 25 basis points. Then it's a very low probability, it's 70% probability that we're getting one in January. So that it sounds like this is the expectation. So, Mike, when you're talking, your morning meeting and talking about the hawkish cut, this is what you're talking about. So this is where the Fed comes out, Powell comes out and says, we're going to cut. But we're then leaning into a pause because we're probably at a neutral rate or whatever. We're close and we're going to watch. That's the hawkish cut. And so, but even then, you look forward and you're still getting a 50% chance of a cut in, in, in March and Then another, almost 30% chance of a cut in June.
- [27:43]
Scott Melker
So, but those, that, that, that could change with one like strange sneeze by Powell at this meeting.
- [27:49]
James Lavish
Right, Mike?
- [27:49]
Scott Melker
I mean, if he, sure. If he has a twist to the left or something, that goes down to 1%. Right.
- [27:55]
James Lavish
But the expectation is the rate to go down to 4% by the end of next next year, you know, so. Or even lower. 3.75 or something. So another full percentage rate of cut. We'll see. I mean, it really does depend on where the unemployment rate goes and if. And if. Because that's what they're staring at now. Like we. Like Dave said earlier, inflation is kind of ticking higher again. How much higher, it's hard to say. And how much that has to do with eggs or housing or, you know, car insurance. I mean, like, it's. The components now are swinging this thing around because they're having massive swings in individual components. So it's hard to say. But I would expect the unemployment rate to tick higher pretty quickly going into February, March, and literally going to fire everyone.
- [28:46]
Scott Melker
Right, Mike? I mean, if they do. I mean, that's the thing.
- [28:50]
Mike McGlone
They don't have to. Yeah, it's a little trick of running a business, as you've done before, we all know, is you don't have to fight. Just here's the rule. You're coming in five days a week. And the subject, no choice, right?
- [29:03]
James Lavish
Yeah. No work from home. You're seeing big companies do it and they start with that. They don't have to pay severance. It's just start there, you know.
- [29:10]
Mike McGlone
So we had a thing here that there was a trend. I noticed that, you know, I've always been in the office type. I have to speak to be around people. And so I came back right away. That's what helped get me to Miami. But they started some here. I just noticed an algorithm. People were being let go, were the ones who generally weren't showing up, like, all right, fine, it's simple. No. No judge is going to support a complaint. Doesn't show up. So it's an easy thing to let the attrition kick in. The key thing I think that's most important here is we are sensing. I'm sensing extreme bullishness. When you see a market that can't go down, there's nothing but upside and has a lot of if statements because of a new. A new administration. But one thing I have to push back a little bit. This is not just the previous administration. It was a Trump administration to remember. Moochin. Right before the end of the Trump administration, what did he. He tried to push back on stablecoins or something? It was just they were so against crypto. So one thing that's impressive about that is no zeal, like a convert. They've completely converted. Mr. Trump has. But now it's just that the things I've noticed in life, when you have people like the President's son pointing out a million dollar bitcoin and Michael Saylor making fun of the best investor in history for holding cash. I push back and my contrary nature shows up from being commodities. Like yeah, good luck, go ahead, buy all the bitcoin you want at these levels. I just point out these, you know, you nailed it James at 50 and you did too Dave, just a few months ago, but now at 100. I get the long term, we've talked about the long term forever. But this needs, I'm worried of the purge which always happens when you have extreme bullishness like this. And that's a no known, everybody knows how bullshit is. So as a trader you're supposed to I think lay back and there's always an option strategy that can help you be involved if it keeps going up. This is just from a macro standpoint. And to push back on Dave's statement about deflation, go to China, second largest economy, second. What is this almost two years now of PPI declining. Those of us who remember this happening in Japan, it's just getting started. And this is global. So that's why the whole world's dependent on the US going up. And that's why I can't write a metals outlook anymore without pointing out the bitcoin. Before I didn't have to. I can't write crude oil anymore without writing point out the bitcoin because if it goes down and the stock market follows, which I think is indicative of everything, you know, it's the tide going out. But that's why we need to see the, see the proof. And so far it's, everything's making record highs and that's mostly because the world changed on November 5th. But now we'll see the action and that doesn't start until, for another month.
- [31:35]
Scott Melker
I mean bitcoin is, did hit $106,000 yesterday. I mean I get that the S and P is also rising, but I mean, you know, the same, we said that at 30, we said at 50, we said at 70, we said it at 90. Now we're like 110. But I guess, yes, everything keeps going up. But I still think all bets are off if we get a reserve or something like that. I mean it's a good statement.
- [31:58]
Dave Weisberger
Yeah, it is, yeah.
- [31:59]
Scott Melker
You know, but I don't view that one as priced in by the way, Mike, you know, so I, I don't, I mean I don't think the expectation that it will be approved. I think people still don't expect it to actually happen. In this.
- [32:12]
Mike McGlone
So I, one thing I have to admit about that is remember the book the Bitcoin Standard by Safety Nomics? It came out 2018.
- [32:19]
Dave Weisberger
Yeah.
- [32:20]
Mike McGlone
I mean he predicted what's happening and central banks buying it. At some point I completely disagree to first and then within a year I'm like, yeah, you're right, it's going to go there. But now it's just, I have to just have to mention a little bit of caution, that's all. It's just so bullish.
- [32:33]
James Lavish
Are central banks out there yet? We don't know. You know, but that will be an interesting dynamic because it, what is priced in, Dave, is a percentage of likelihood that it will happen. You know, just, it's just a probability. You know, whatever that sliver is, it's keeps being priced in. So you know, a 5% probability that it, that it hits a million dollars in the next few years, well that's getting priced in a little bit. I don't know how much that's where it's going to actually go if and when this does happen, if the United States announces it, I don't, I mean good luck trying to figure that out. It'll be price discovery. So but that would be dumb for them to just come out and announce it instead of actually doing something in the background and accumulating first.
- [33:27]
Dave Weisberger
Look, nothing, and I mean no asset goes immediately to where you think its value should be. Right. Never happens. And so I am very nervous when everyone is bullish except for the fact that people are talking bullish but acting like maybe I should take profits here. And so you get this dynamic that's going on and I think it's extremely interesting that bitcoin to demonetize gold. The most conservative estimate of that is 60 to 70% of gold's value is monetary versus investors stock bill. And 60 to 70%, let's just take 60, means that somewhere in the neighborhood of $10 trillion is the market cap that of gold, that is its monetary value. That's still a 5 expert here in Bitcoin price, full stop. Yet I and everybody else that I know of that made bullish pronouncements, said we're not going to even get to half of that this cycle with all of this. That's sort of, I'm basically defining for you, not priced in. Remember bitcoin is an idiosyncratic single asset. So you can't look at it the same as you would an index of lots of assets, which is different. And so you need to understand that that is Extremely important. If you look in the Internet bubble, for example, and this went for years, we're talking. There is a very large difference between the. Okay, look at Cisco, which was the bellwether for that, in terms of the infrastructure underneath the Internet. And look at Net Taxi. And Net Taxi is like fart coin. Cisco is like where Bitcoin was, Cisco still exists. Now, did it get ahead of itself? Was there one analyst on the planet who could justify Cisco's valuation at its peak based with anything presuming other than they think about 10 years of potential growth, which of course ignored everything else that was going on and potential competition. That dynamic is different with Bitcoin. You can be an analyst and say, well, wait a minute, I think that the fundamental valuation of bitcoin is going to be north of 10 trillion, based on that chart that you had. None of those trees grow to the sky. Stocks in that bubble had that sort of analysis. Now, does that mean it's right? No. Does that mean it's necessarily going to happen? I think it will, but that doesn't matter. You know, it's a question of which we are all trying to determine its path. When you have a group of people who are analysts who look at this, whether it's Mark Yusko, who's been saying this for years, Michael Saylor, who goes completely to the far right tail of good distributions, but you have people who are justifying an asset price that are many multiples of where we are now. That is something new. Don't pretend that there were analysts who were saying that Cisco was going to go to be a $10 trillion company in 2000 based on any sort of analysis. It just didn't make sense that people were saying it, but it's different. So I keep coming back to the fact that Bitcoin is, and we all know that I say it too often, is an option. What is the strike price of that option? The strike price is, at a bare minimum, is 60 to 70% of gold's market cap. And so are we more likely? Yes, we are more likely. Is that priced in? No. Does that change anything that Mike was talking about, about the stock market being at ridiculous excesses? Does it change anything about people betting on various and sundry memes, whether it's fart memes or dog memes or cat memes? No, it doesn't change any of that. Those are very different. And so I think it's important to contextualize the bitcoin rally inside of what is the fundamental analysis that people are actually doing when they're buying and holding it. And it's different. It is undeniably different. And that's why I look at it. That's this time in history is different. Because God knows we're going to see the same sort of crap at some point. This house of cards that's built on the fiat economy is going to go boom. Now, is it going to go boom in a spectacular flame out? Well, only if these really are aliens with the drones and this and that. But most likely what will happen is we'll get a correction and the money printer will jam up again, et cetera, et cetera. But let's see what happens. And I don't know the answer.
- [38:16]
James Lavish
Yeah, in that case, though, of course, the bitcoin becomes the store of value. It becomes that, look, I've got to have something to protect myself against the QE Infinity. When does that happen? Well, you know, we saw it happen in the great financial crisis to some degree. We saw it happen to a greater degree in the, in the lockdowns from COVID and you know, the next time, what's the event? Who knows what the event is? Hopefully it's not an event. Hopefully it's not a 20 to 30% market correction on some sort of black swan, you know, because that would be painful for everybody. But if it is, if we have a black swan event like that, I would bet everything that we're going to have massive money printing. I cannot see us get out of it any other way.
- [39:04]
Dave Weisberger
I posted it, I tweeted it, posted it, whatever you want to call it. On X this weekend, someone said, ask the question, if the market crashes, what will happen to bitcoin? And my answer was straightforward. It was, it will, of course, on the day that it crashes, go down and then when it will recover off the bottom. And the global financial crisis took three months, but gold made massive new highs way before the S and P made new highs. And gold led the market higher based on that same thing. Cycles get shorter and shorter as people try to anticipate this.
- [39:37]
Scott Melker
This is the bitcoin gold ratio, by the way.
- [39:40]
Dave Weisberger
Right. And I don't need to jump up and down and talk about it. We all know what's happening, but I think this is just the beginning. I mean, I'm basically calling for it to basically go almost parabolic at some point. And yeah, I think that is highly likely, but because as a general feature of something bad happening. But I think there's one piece of news that we need to talk about that if you look at Vivek his posting over the weekend. I think it's very important because he made an interesting statement, one that I thoroughly agree with, but I'm surprised that he actually said it, which is that the most important thing about Doge isn't necessarily cutting the budget deficit based on spending, but by empowering economic growth by cutting regulations.
- [40:27]
James Lavish
Yeah, that's a big part.
- [40:28]
Dave Weisberger
That is an extreme.
- [40:29]
Scott Melker
What happened with Chevron, by the way, that theoretically already started with all the Supreme Court decisions before Doge even was.
- [40:35]
Dave Weisberger
Yeah, but you gotta have an army of lawyers to go to the supports to get him gone. What he's basically saying is, listen, we're going to start cutting regulations. This is a very big deal. I mean, I don't care which think tank you talk about, you can't find a single one that doesn't think that's a very big deal. And if. But what's a big deal out about this that people haven't connected the dots on is what he's basically saying is, listen, we know that even if we cut $2 trillion out of the federal budget and got rid of all the discretionary spending and all the excesses, we still have a deficit. So deficit's bigger than that. The only way to get rid of a deficit is to do. And you've heard me say this on this program many times, the only path out is to. At the same time as you streamline the government is hypergrowth. It's the only way. Now, am I saying it's going to happen? Am I talking about how is that investable? Well, at least this is going to develop over months, years actually. But a recognition from the people who are actually doing it that this is the goal matters and you should invest accordingly. So investing without, if you're buying, if in the stock market, in anything that doesn't have exposure to potential hypergrowth from deregulation, well, that's going to be a main investing thesis over the next couple of years, so just watch out for that. And that's. Crypto is definitely impacted by that. What I mean by impacted by it, I mean you're going to. I think the biggest theme you're going to see in crypto that's going to emerge, and I've said this before, but I think his statement makes me make even louder is a shift from bullshit memes in an economy that's a casino to is there a use case for opening up open source and for incentivizing value creation? Because value creation is going to be made legal. And I don't think There's a person even in the crypto world that knows what happens, where we go from complete hostility to complete welcoming of that use case in crypto. And I don't believe most of the tokens that we have, save for a few of the layer ones that ultimately win, have anything to do with what I'm talking about. I do not think that, with all due respect, if I want to get people to go crazy here, you know, just pick on XRP or pick on Shiba Inu or pick on whatever dog with hat, it doesn't really matter. I don't think these are the coins that are going to be valuing. I think they're going to be. American companies are going to say, you know what, we can list a crypto that will help us build a usable usability network. We can do this. I don't think anyone has seen anything like that before, so figure out where that's going to go. But the Vex words are very important here. They see hypergrowth as important. They see getting rid of regulations that are stopping it as important. So expect that sort of growth dynamic. And that to me matters.
- [43:33]
Scott Melker
Should we talk about Micro Sailor and MicroStrategy being added to the NASDAQ? Because I'm sure we have some pretty solid takes on that. Obviously, to enter the NASDAQ 100 exposing Bitcoin link stock to billions in passive investment flows. James, this was the topic of your entire newsletter yesterday. Yeah, I mean, for the.
- [43:53]
James Lavish
Nice. Well done. So for the, for the listeners on the show here, why it's important is, you know, when you get, when you have a company that's included and just to get super basic here, for people who don't even understand how this is, why this is impactful, when you get included in an index like this, then something. Nothing magical happens with the index. It's just that now for all of those funds that are passively tracking these indices, right? So with, you know, with the S P, you're gonna have the, you're gonna have the different. You're gonna have the Fidelity funds and you're gonna have other, you know, mutual funds, and you've got the S P, you've got the Spiders, which is the spy, and that's an ETF. So you've got ETFs and you've got passive mutual funds or mostly passive mutual funds. And then you've got some mutual funds that are less passive, more active, but they generally hold most of the indices in their portfolios in some way, shape or form, in different weights, maybe but what's important about this is that MicroStrategy getting added to the NASDAQ 100 means that anybody who it means that the ETF, the QS must own that percentage of that expected percentage of MicroStrategy. So James Safer did an analysis on this and I think he got the 0.47% of the NASDAQ 100 indices and that comes out to be about $2.5 billion of purchasing on that. So I think that's what the number was. Right. You can just keep right around there. Yeah, so, and so that's what's important about this is that it's not, it's significant because it validates that MicroStrategy is one of these large companies. It is following all the rules and regulations, it has grown to the size where it should be included and now it is going to be included. And so that's a big deal. So it's $2.1 billion of buying for all those ETFs that have about $450 billion of AUM collectively. So that's important. Another thing that's important about it that people aren't really thinking about, maybe the bitcoiners are thinking about it is well, MicroStrategy is going to be in the queues. That means that anybody who owns a queue now owns a derivative of Bitcoin. Everybody's owning bitcoin now and that's the significance of it. So people are now saying, well geez, I own the Q's, I already own a little bit. Build a little bit of bitcoin, maybe I should add the real bitcoin. They'll go out there and start buying the ibit. You know, it's just an, it's a switch in mentality. But the structural change is that this means that MicroStrategy will be added to all of those passive funds and it does mean buying. Now. The question is that Dave brought up earlier. Typically you short the actual inclusion because there's a run up ahead of it. That's typical. Whereas I think MicroStrategy, you know, you could look at the price of MicroStrategy and say yeah, there was a run up ahead of it, but was that. Yeah, it's because he continues to leverage the balance sheet, balance sheet to buy bitcoin for free, you know, and it's still trading at a fully diluted. If you take all of the shares that are outstanding, that would be outstanding if every single one of those converts was, was converted into common stock is trading at 2.5 multiple to the underlying Bitcoin. It's been trading at a 2.5 multiple for the underlying Bitcoin for well over a month now. So this is not what is creating that demand. It's still in that range.
- [47:39]
Scott Melker
Does it matter if bitcoin goes to 75 or 60 or 50?
- [47:44]
James Lavish
Of course, of course, yeah. I mean this is gonna, it's gonna follow it, but if it stays at 2.5 ratio, it's gonna follow it dollar for dollar. Right. So it's just a question of how, how much that ratio move. So percentage, percentage, percentage for percentage. So what's that, Scott?
- [48:02]
Scott Melker
I was gonna ask Mike actually, or either of you, but I, I haven't been around that long, but I can't remember a time when this ended up in an index because it's obviously not based on the fundamental business of the company or at least what it originally was. Right. I mean this is a pretty, I guess doesn't matter maybe, but this is unique. Right. It's not their software business. Isn't the reason that they're getting included as a tech company right. In the, in the NASDAQ 100? It's not really a tech company at all. When you look at the, the, at the size.
- [48:38]
James Lavish
Well, you could argue, yeah, that's it is a technology company because of the software. You know, that's a couple million a year. Yeah, it's de minimis. But it is paying, it is paying for the debt. So you know, that's one side or.
- [48:54]
Scott Melker
You'Re just saying, isn't it interesting that what's effectively, you know, a Bitcoin ETF, a levered Bitcoin ETF you could say is being included in the NASDAQ 100.
- [49:03]
James Lavish
Interesting.
- [49:03]
Scott Melker
I mean all these tech companies.
- [49:05]
James Lavish
Yeah. And I'd like, I'd like to hear what Bloomberg was saying about if anything so far.
- [49:10]
Mike McGlone
Well, just as we were speaking, a headline that's came out in a Bloomberg was Bitcoin at 100,000 lures long term crypto holdouts to invest. Stuff that you've talked out forever. But you look at Microstrategy basically have about a 2 to 3x beta to Bitcoin. So if it's what, 3 to 4% of Qs, then you already have a pretty good exposure to Bitcoin. It's just because of the beta, because if Bitcoin's up 100%, Microsoft 2 to 300% and of course then the downside. So does that mean if you're a Q guy, make, hey, cool. I've Been trading Q's forever and I've been wanting to buy bitcoin. They just did it for me. Maybe I don't have to go out and do that, take that risk. So it's one thing that can't think about. It's just that it's also has about 2 to 3 beta to the S&P 500. So it's good leverage.
- [49:56]
Scott Melker
Mike, I doubt there's people who would do this on the flip side of that, but there's also people who despise bitcoin and want no exposure to it and now are going to have forced exposure through buying the Q's or you know, having exposure to the NASDAQ 100. I don't think they'd pull out as a result. But there is a theoretical.
- [50:13]
Mike McGlone
No, I'm not saying pull out. You have a good decent exposure means that are they going to go buy. I bet if you already got the exposures through qs, you're doubling down on a pretty risky asset which is guaranteed to go up according to some people you talk to.
- [50:25]
Dave Weisberger
Never use the word guarantee.
- [50:28]
Scott Melker
But I.
- [50:29]
Mike McGlone
Got you fired up on that one.
- [50:30]
Dave Weisberger
Yeah, but I think there are a couple of other things going on this morning that are worth looking at. So bitcoin is just under 106. A second ago was 105-891055, whatever started.
- [50:42]
Scott Melker
This show at like 104.
- [50:44]
Dave Weisberger
Right. So Bitcoin's moving higher. Microstrategy is still is a small fade off of its open. Not surprising. But I do want to point out, because I pointed out every week it's important is to look at the funding rates on bitcoin which are still hovering right around normal at 0.01 and right there. The last few times when bitcoin ran to all time highs, those funding rates were north of three times that and to as much as 10x that this is spot buying. It is not speculation. Crypto speculators are buying fart coin, they're not buying bitcoin. And we're seeing it. And it absolutely matters if you're trying to understand what's going on in the short term and supply demand dynamics. And so we have to be cognizant of that microstrategy being included in the nasdaq. There's some substantial buying there, but the big one is the S and P. And that is in my opinion exceedingly unlikely. I know that people keep getting excited about it, but I just don't see it. I just don't see it happening. I don't know who's running the S and P committee these days, but they have an enormous amount of discretion. And there are a lot of big companies. I can remember pretty much every new technology company took multiple years before they got included in the S and P and had to grow to be at enormous size before they got there. So, you know, take that with the grain of salt that it is. But as a result, I don't think that any of the dynamics that we're talking about are likely there. Now if you want to understand what's at stake once something does get put into the S and P, at that point 24% of the equity is going to be held passively because that's the number there's so much money either indexed or closet index to the F. You're shaking your head because it's ridiculous and you shake your head because they think my math's wrong.
- [52:40]
James Lavish
Man, it does scare me a little bit. The amount of money that's in ETFs, the passive flows. It is a little bit frightening because of the, you know, what it could trigger.
- [52:49]
Scott Melker
But that's why I always laugh when people are like, Vanguard owns 12% of MicroStrategy or like BlackRock owns 15% of the Bitcoin miners.
- [52:58]
Dave Weisberger
Like, okay, well over 24% of the US stock market is held in indexed money, whether it's indexed in the sense of the Vanguard, which is the largest mutual fund, BlackRock, which is the largest ETF, state free ETFs, state free funds or money that is a component of self run portfolios of pension funds that are indexed. It is big number and I think we are a long way from MicroStrategy being there. I think that if that did happen, we would be talking about completely different price levels. So if someone really believes it's going to happen, be contrarian. It has some major implications because what would Saylor do with all of that excess supply? He'd use it to buy more Bitcoin. And so it then becomes a demand push instead of a demand pull. Is that likely? I think the answer is no. In fact, I'm almost screaming no, because I just think that the people who are doing it understand what's going on and that won't happen. So it also matters that you have to look at the float. I don't know what the float of MicroStrategy is these days and how much is locked in, but the S and P committee cares about that as well. And I know this because when I was a Solomon Brothers, we sold the S and P, our float weighted methodology for building indices. So there's a lot of stuff when you're talking about passive that needs to be broken down. But honestly I think that it's going to be noise and no one's going to talk about it for much longer. I think people will be talking about that whether it's 2.5 to 3.0 to 2.2, whatever the ratio should be for MicroStrategy. Just remember people are buying MicroStrategy in their retirement funds because they want to have a levered plate of bitcoin that isn't likely to get liquidated. Right. They're not looking for 10x or 20x. They're looking for, you know, as you said, 2 1/2x. Right. That's what they're looking for. And is that smart? Well, I'll leave that to everybody to determine what's smart, but that's what it is.
- [55:04]
Mike McGlone
So Dave, you guilty, you nailed it. I did and it became overweight so I just had to lighten up a little bit. But those of us who are early now, that's why it looks like it's. That's a good problem for those of us who are early. But the rest jumping on now so. But yeah, you're right, that's what I did because I couldn't buy bitcoin at Bloomberg.
- [55:24]
Scott Melker
It's interesting though, we've had these trades, right Mike, because you were very aggressively pointing out that the best trade was going to be GBTC when it was right. And now you had GBTC as the best way to take advantage of the discount and basically make more than the appreciation of bitcoin. Now you have MicroStrategy. Isn't it interesting that we keep having these sort of of proxy ways that you can get more put upside on bitcoin.
- [55:49]
Mike McGlone
Well, glad you pointed out that's the difference now is that was those are great contrarian type trades. Only a few of the hot money in the world were involved. Now microstudies, it's such a extreme premium to bitcoin. If rational investors are not going to buy that, they'll do the R maybe in shorts hasn't worked. They'll buy something that's just by G.B.T. s or IBIT or even Bitcoin. Now because you're getting that actual asset versus something that's trading two times leverage. It's like kind of in a bull market. You got to be careful.
- [56:16]
James Lavish
You all are missing something though on MicroStrategy and that is that he is on his way to owning a million Bitcoin. And imagine if you had a million bitcoin on your balance sheet. What could you do with that? That's the question. You could become the largest bitcoin financial company. You could actually become something different and end up getting kicked out of the NASDAQ 100 because you become a financial company company. You know, like this is a, this could be a very big deal. I, I expect it to be a very big deal as long as what we expect to happen and bitcoin continues to gain support, get, you know, grow in value and grow organically. And I, I believe that that is what opens up doors for micro strategy that people are, are just completing discounting to zero. They're, they're, they're. All they're seeing is a levered bitcoin purchasing play and that. He's thinking far beyond that. And that's, that's the question. Where does that, where does that go? And that, that remains to be seen. But I don't think it should be discounted to zero. A discount to zero. That should be something you're thinking about in the future.
- [57:25]
Scott Melker
Yeah. How did it become 1001? I do not know. But here we are, gentlemen, at the end of another incredible macro Monday. Absolutely the best hour of the week. I'll be here next week. Will you guys be here next week? It's Christmas week. Then we got New Year's week. This is that weird time of year where nobody works.
- [57:42]
James Lavish
I'm going to be off, markets open. Mike's there. I'm there. Dave's there.
- [57:47]
Dave Weisberger
Yeah, yeah, we're not, we're not leaving. We're going to hang out in Miami which, you know, a lot of people pay a lot of money to come there during those weeks.
- [57:55]
Scott Melker
So it's amazing. All right, guys, well, thank you so much. Thank you to everybody as usual, all for watching. We will in some form be back next week. See you guys later. Thanks, James, Dave, Mike, have a good one.
- [58:10]
James Lavish
Let's do.