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The Wolf Of All Streets
Bitcoin: Is The Bottom In? $250,000 By The End Of 2025?
01:01:08
Bitcoin: Is The Bottom In? $250,000 By The End Of 2025?
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- [00:01]
Scott Melker
Bitcoin opened the day Yesterday at almost $95,000, dipped below $90,000 while we were recording Macro Monday, which I bought live on Macro Monday and then ended up closing the day right back where it started. Leading traders, investors, enthusiasts, wondering, is the bitcoin bottom in? Are we heading back up? Was that the moment? We're going to discuss that today with the boys from March Public, of course, Tillman and Andrew and Jeff park from Bitwise. We're also going to talk about targets for the end of the year and everything happening surrounding the bitcoin market. Let's go.
- [00:45]
Andrew
Let's do, let's go.
- [01:00]
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 just go ahead and bring everybody on now. Andrew, Jeff and Tillman. Jeff was supposed to be here at 9:15 because apparently he has children that are more important than the program and was going to drop them off at school, but he showed up and then Tillman was waiting in a room by himself, apparently thinking that he needed to be let in. Showing you the deep complexity behind producing a YouTube show, guys. Every day, every day, we all made it. 906am Bitcoin trading at $96,000. Tears, people are distraught. It's all over. Going to 75,000.
- [01:47]
Andrew
We survived the bear market of 9:30am January 13th. I mean, we all survived the bear market at 89,000. Happy here and moving forward.
- [02:01]
Scott Melker
Yeah, I mean, you just take a look at this candle here yesterday. This is what I was kind of talking about at the beginning. It's absurd. Beautiful, right? You had price trading as high as basically 96. Dropped all the way down and right back to where it closed. For those who are technical traders, that's a reversal signal. Generally. As long as you get some confirmation with the green candle today, you can see though the 50 ma here is still acting as resistance. Hey, who cares, right? Let's talk about fundamentally why this is all happening. Jeff, I'd love your take first because I know that you're deep in the weeds of watching everything behind the scenes, all the metrics, the options flow, what happened here. I'm not surprised by the way. We got a huge bounce, at least on the first test under 90,000 because there had to be a lot of liquidity sitting there waiting to buy.
- [02:43]
Jeff
Yeah, that's right. I think there's always going to be people who are going to buy bitcoin every time it dips anything with bandwidth below 100k because they're going to assume it's going to go back to 100k at some point. So it almost becomes a self fulfilling mean reversion trade. And that magnet actually gets stronger as bitcoin goes even lower. So there's a wall of money. I call them kind of the folks that have always like a limit order if you will, on the bitcoin trade and their brokerage accounts that ibits of the world now allow that presumably those types of investors didn't exist before. Look, I think the reality is there are a lot of concerns nonetheless as to what the next three months is going to look like. 2025 is off to a pretty difficult start all things considered. Global bond yields are in a pretty unusually challenged place. And at the crux of the issue is really the strength of the dollar. I think many people have already been focusing on how much of a universal chaos agent a strong dollar can be. But it really underpins a lot of the global carry trade in the ways that we know how cross border flows work. So a strong dollar is the biggest chaos agent. And the thing that I often wonder about is the opportunity cost of capital for bitcoin when other things become very volatile. So what I mean by this is bitcoin, one of the best features about it is volatility. People are attracted to the possibility of those types of returns. And if you take a step back and tell, hey, actually now you're going to have other things that are super volatile, including long duration bonds, equities, of course, other markets. That means relatively speaking the competition for that attention for volatility is worse for bitcoin. And I think there are ways in which we have to acknowledge capital still as finite and capital will flow into other opportunities. And so.
- [04:46]
Scott Melker
Finite he says. Tell that to Jerome Powell. No, I'm kidding.
- [04:50]
Jeff
Yeah, let's see. Until Bessing comes in and starts issuing long duration coupon bonds again, which we need. This is all part of the issue that I think Janet Yellen has put us through by changing the issuance calendar. But what I mean to say is Trump is a volatile president. We know he's going to introduce volatility and at some level volatility is competitive to bitcoin. So that's something that I always think about. In the backdrop, there are many reasons to still believe will continue to go up. But in the short term, the strength of the dollar, rising 10 year yields, resetting people's expectations on what that terminal 10 year rate can be is I think a moving Target. If you actually look at the agency mortgage bonds, implied 10 year targets, which removes some of the technical distortions of the supply demand curves related to the actual native bonds, it's a lot higher. I think it's about five and a half percent. So we're already kind of over the true 10 year yield as implied by perfect market to be beyond 5, which means we can really imagine it could go a little bit higher. And those things I don't know if has been totally priced in for people coming into 2025 since the end of last year.
- [06:03]
Scott Melker
What I find interesting obviously is that we have a historical inverse correlation between the DXY, obviously, or $ strength generally, and risk markets. But since September, when the dollar actually bottomed, I mean you can take a look at the chart, I won't pull up all of them, but I've mentioned this before, you had a bottom right around 100. We've done nothing but rage on the dollar versus basket of currency. In that time stocks have raged and Bitcoin went from like 50 to 108. So there's a clear disconnect here into what historically happened. So why now are we getting back to that point where this dollar strength is so competitive, I guess to risk assets? And is it because the yields are also doing what they're doing? I mean, I just tried to figure out why there's been this disconnect in this sort of September to January period.
- [06:53]
Jeff
Yeah, my instinct is, and we had a bit of a pivotal wake up call through December and really even early January, which is that the Fed is actually losing control. There is the term premia that has now been rising perpetually in a way that I don't think people anticipated. If you asked people what they expected for most of the long term yields to affect and the ways that it flows down to consumers. Right. Whether it's your credit card financing or your personal loans or mortgages, you probably did not anticipate those things to be a higher cost of capital as we were cutting rates and those types of things. I think Scott, you alluded to some of this as well, is super counterintuitive and shows you that there's a little bit of that loss of control in which the Fed can't actually exert the long end of the curve. People know this Fed can only do what they can on the short end. And the long end is actually challenged by true supply demand dynamics between those buyers and sellers, especially as it relates to our foreign investors. And there's less leeway for the Fed to control that and what you're seeing actually is that there's a loss of confidence in that power vacuum almost of the central bank of the United States being able to exert some ability to control these yield dynamics. And anytime there's an absence of a power dynamic, it introduces volatility because people can't anticipate how other central banks will then behave. And those types of characteristics I think just introduce uncertainty in the way that it can be a little bit more self fulfilling than not. So we really have to imagine it can go a lot higher.
- [08:31]
Scott Melker
Yeah. And Andrew, we were told not to fade the Fed, right? But it seems like markets are fading the Fed.
- [08:36]
Andrew
Yeah, I mean the numbers, the numbers bear themselves out, you know, don't fade the Fed. And then it goes the opposite direction. It's a really, it's a interesting dynamic in a, in a moment in time, right, because we've got dramatic regime change in a large subsection of our quote unquote bitcoin and crypto world. And then we've got all these macro things that are happening that Jeff just did a great job of explaining and where, where will those meet? What will be the outcome of those things happening? Right, so we have significant adjustments and changes on the regulatory side. We've got the SEC losing time after time after time in court. We've got adjustments to federal regulatory agencies associated with guardrails for crypto that are widening by amounts that we couldn't have imagined while at the same time we've got the DXY nearly at 110. When, when that happens, you know, what are the previous cycles where it's even approached at? You have also, and to Jeff's point, how does it trickle down to retail? You know, you now have some, you know, information and podcasts that are, that are quote unquote nearly as popular as this one. Starting to talk about what, what's going on with rates, where, where rates headed. Why has there been this, you know, big difference in what the Fed is doing versus actual real rates and, and who is it affecting? And so, you know, starting 2025, there's some real crosswinds, right? We'd love to have only tailwinds, but there are some crosswinds that exist here. I do think though, in the medium and long term, you know, Bitwise's study that they just put out associated with financial advisors and their thoughts on crypto and digital assets and all that stuff, that's where the real tailwinds are and that's where the real momentum is. That stuff is really Compelling stuff. I think that they've put out a good portion over the last few days in the last week or so.
- [10:41]
Scott Melker
Yeah, that's where I default to the signal versus noise. I mean, we, we do a show every day. We're forced to talk about it. You know, obviously we had this dip yesterday when DXY hit 110 and yields hit 4.8. But does any of that matter when you have these fundamental tailwinds for this market, which, let's be honest, is still exceptionally small. I mean, today or we're going to be talking all day on shows everywhere, on CNBC and such. Stock market today, dow S&P 500. Nasdaq set to open higher after subdued PPI reading. So today it's all about the fact that PPI did not come in hot. But we got CPI tomorrow we had job numbers last week. We got the CIA, the doj, the FBI, I don't know. And they all conflict. And it all conflicts, right? Jobs are strong, unemployment's down. Won't put, as we always say, we live in the upside down from Stranger Things. I don't know anymore. When good news is bad news, bad news is good news. I mean, Tillman, like, does any of this shit matter when you're just going to have extra billions and billions and billions of dollars of buying pressure into a scarce asset?
- [11:42]
Tillman
I look at it as a distraction, personally. I mean, I'm a technical trader at heart. And so when I see the V recoveries that we've seen, the last two price dips, I think there's like Jeff was mentioning a pocket of money that needs exposure to Bitcoin. I mean, Jeff, excellent description of the macro environment. My question always goes back to how many participants do we have now versus how many will we have? And I saw an article this morning talking about two potential executive orders being issued on day one of Trump's presidency, specifically relating to crypto. I don't think we have market saturation in Bitcoin anywhere close to what we have in any of the other markets. So the exposure push is still going to be, in my opinion, the major push from all the big money players. And then if you talk about the retail side of it, the conviction I have in my heart is that Bitcoin will be held by banks at a retail level in Trump's presidency. I see Bitcoin desiring everyone that's really in the driver's seat wanting to provide yield to average holders. And I think that's coming. I think it's coming to your corner bank. I think that will be part of the legislation that he pushes through. And I think that's going to be, you know, rising tide floats all ships. I think we're going to get a, a larger and larger portion of the automatic buys that are associated typically with your 401k IRA accounts. And I think you're going to see that level continue to rise over time. So, you know, when I see all of the headwinds facing one direction, but in a very short period of time, winds are swirling, that looks like to me a shakeout that, that seems like large players need positions. And when you drop the price as drastically as they did, as quickly as they did, look at the last three or four drops, they've been single bars down. I mean, just like God candles to the downside. And then these recoveries that are just systematic buys essentially, that, that bodes, in my opinion, well for positive price action. I'm not saying that it'll be immediate, but I am saying that when, when everyone at, you know, in the administration is talking about executive orders and putting crypto front and center of the, of kind of the campaign for the next four years, it's hard for me to believe that that's not going to have an overwhelming effect on people's participation.
- [14:41]
Scott Melker
Yeah, just for a little bit of clarity, this is something we've talked to death on this show. Obviously, SAB121, which was the. It's not even a law. Right. It was a counting bulletin from the sec. But back then, before Chevron was overturned, you were allowed to just say something at a regulator and pretend it was a law. But SAB121 effectively was the memo that said that anyone custodying Bitcoin had to have it listed as a liability rather than an asset on their balance sheet. Meaning that if a big bank wanted to custody Bitcoin, they had to have an equal amount of cash to offset the Bitcoin. So what custodian in the world is going to take 10 billion or 20 billion or 30 billion from an ETF and then try to raise 30 billion to put on the other side of the balance sheet, impossible. So we know that that actually passed. The repeal of it passed with bipartisan support. And then Biden famously vetoed it. Right. Which left a lot of people wondering, why the hell would you veto something? And then the more curious part of that story is that bank of New bank of New York Mellon then got basically didn't apply to them an exemption. So not to be choose winners in the United States or anything, but Giving a wholesale reversal of this in an executive order would mean that was a very long winded way of saying the big banks are going to be able to custody Bitcoin or participate in this. Right. And to me that is exceptionally important. We also know he could have an executive order on a strategic reserve. Quite a few other things. I mean, Jeff, that's what I'm saying. It's like, yeah, yields are high, but tailwinds, man.
- [16:14]
Jeff
This is true. We're also excited to have our, I guess, America's first crypto president. And yet when I look at these news flows, the thing that I worry a little bit, the dynamic here is like the 7 to 1 repeal is almost not even a crypto issue. Scott, you kind of hinted at it, but it was actually just a bad due process with tons of things that hinge on illegality that should not have ever happened. So that's like a very low hanging fruit like that shouldn't even be applauded as like a win for crypto in my opinion. In fact, I would say for me at least personally, the moment I lost kind of faith in the leadership of the direction of the Democratic Party for last year would have been when Joe Biden overturned it. Like that is unspeakably unnecessary. And so there are some low hanging fruits like this that I think we want to celebrate. But we really need to see more crypto friendly agendas come through too. Like SAP 121 is basic accounting. Change with FASB is basic. Like those things are table stakes. What we really need is actually more clarity on whether people will be interested in stablecoin adoption bills. I actually think there are still lots of conflicting arguments as to whether that is pro or negative to dollar reserve systems. And so there's more important things that I'd love to see substantial conversations on. Also the other dynamic I worry a little bit about is as much as we want there to be a crypto agenda in the White House, I think we should all accept that it's probably not going to be their first priority if the world implodes in ways that there are other things that are really, really serious. You can't imagine if there is a global financial meltdown that Trump is still going to talk about crypto. No way. It's a bull market kind of correlation policy that's path dependent. So in some sense I think that's why when yields blow out or dollar strengthens beyond means with a true shortage that creates financing issues. It's a worrying thing for crypto not just because it's unrelated to crypto, but it just means there's going to be less prioritization for those things. So I think there is a little bit of that path dependency that's always being priced in with crypto as well.
- [18:35]
Scott Melker
Yeah, I've been saying that over and over again is that we're sort of Bitcoin at 108 certainly. I don't know about it 96. But it was priced to perfection for all the news that's been happening. Right. It was like percent and Atkins and RFK and Musk and Ramswell. I mean literally like bitcoiner after bitcoiner after bitcoiner being appointed. Now you need to see them do something in the first hundred days or it's going to be a massive letdown. Not saying that that matters long term because we know that they will eventually do something. But to your point, like if Los Angeles is burning and we start to get a threat of nuclear war somewhere, then stablecoin legislation might not be.
- [19:12]
Andrew
Short term. You know, Jeff is right on many fronts. But long term, four years is an absolute eternity in crypto. All right, an absolute eternity. So if you have a massive paradigm shift as it relates to leaders, to the different cabinet positions, the economic positions, and then a president that is pro bitcoin, pro crypto, again, just a reminder, the guy showed up at the bitcoin conference. I mean that still blows my mind, still blows my mind that the guy.
- [19:48]
Scott Melker
He left with about 50 million bucks.
- [19:50]
Andrew
Yeah, true.
- [19:53]
Scott Melker
Not being cynical.
- [19:54]
Andrew
I'm just saying to me, you know, over the next 12 to 36 months, the difference between the last 12 to 36 months couldn't be more stark. Right? Yeah, more stark. While at the same time there are short term concerns, you know, over the next 90 to, let's call it 120 days associated with a little bit of micro macro stuff moving around that Jeff's done a good job of, of, of discussing here. So yeah, it's, it's an interesting time. While at the same time, you know, putting yourself in position when there are again, to Tillman's point, when a dip like yesterday happens down to 89. And it's hilarious if you're looking at the 15 minute, how skinny and long that can. That candle, you know, wick is down to 80 quickly it was eaten up, I mean just, just gobbled up like crazy. And then I wake up this morning and I turn on Trading View and we're popping to 97. Right.
- [20:54]
Scott Melker
Just a reminder, I was literally on the show and people were like Scott looks really distracted at the end. I was like, yeah, I had to literally, like, open up my screen. I had to like, I bought Solana Bitcoin right there.
- [21:06]
Tillman
Yeah.
- [21:07]
Jeff
Can I. Can I add one more comment to that, Andrew? And I want to just riff a little bit on what Tillman was saying too, which is, you guys are both absolutely right. There's idiosyncratic drivers for bitcoin regardless of the global macro backdrop. This is 100% true. One thing I think that represents that investment for Bitwise in the product lineup is that we are going to launch the Bitcoin standard etf, which will start trading in March. I don't know if you guys have seen the prospectus there, but essentially it is an ETF that is buying public equities that have bitcoin as part of the treasury reserve in the Treasury. So it's like microstrategy. Plus a long tail of global companies that are involved in wanting bitcoin on their balance sheet. I think even yesterday I saw maybe Bumble had bought bitcoin on their balance sheet. And there are more companies like this that are coming through that is growing that pipeline of candidates. So these are flows. These are flows the same way that corporates can create flows, the way retail can create flows, the way institutional investors can create flows. And one big bet I think that we as a firm have made is that the corporates are next and that they have opened their eyes to seeing the possibility to be another idiosyncratic actor bringing flows into the system this year more strongly than ever before.
- [22:21]
Tillman
Well, to manage the volatility and, you know, the, the macro environment. There's. The way I look at it is, is there's a dashboard right on, on the car or the spaceship, whatever reference. And up until this point, there has not been a bitcoin leverage on that dashboard. It's been all the same financial instruments that have been around for 50 years. There hasn't been an alternative that provides companies and nation states this disproportionate risk reward ratio that doesn't really exist in any of those other asset classes. And so to me, it's about will they pull the lever? And how meaningful of a percentage does that account for in the, in the bitcoin universe? And you're talking about so much money on the other side that's attached to every other lever. Every other lever on the dashboard is getting pulled with extraordinary liquidity behind it. And so if you just take a fraction of that, even if they just try the lever and they see the benefit of the lever, the question in my mind is, is how much money is going to flow from those other levers to bitcoin specifically? Aggressively. Are, are they going to follow in the steps of like Michael Sailor and try to make their destiny really attached to that, that one lever and you know, to, to. I think the more desperate you are, the more you will apply to that lever. And I think even Michael Sailor has said that bitcoin saved him. He did it out of desperation at the beginning, but it worked. And now he's, you know, in a different place than he was then and he's kind of paved through the jungle of no congestion and shown everyone. We can build an eight lane highway here, guys. Let's, let's do it. So the, you know, to, to Jeff's point, I do think corporations have seen the light and is, even if they put 2% of all of their cash reserves into bitcoin, there, I don't believe that, that there is a strong enough macro wind to fight that. I, I think the, the amount of liquidity that will flow into Bitcoin compared to what's already there is going to be substantial.
- [24:45]
Scott Melker
I do not think we're going to get another Michael Saylor though. Right? I think that Michael Saylor has shown us the most aggressive possible, possible path. There can only be one. I think even the miners that are trying this, their notes are somewhat popular, but I think he's showing exactly what can happen if you take the dampened version of this strategy, like you said, and just do the 2%.
- [25:06]
Tillman
Right, but what, what about a failing company or a dinosaur company, a legacy company like Facebook? Look at what Mark's done and Zuckerberg's done over the last two weeks.
- [25:15]
Scott Melker
Yeah, he dressed up, he dressed up like Elon Musk and became.
- [25:19]
Tillman
Desperate times call for desperate measures, Scott. You gotta save. You gotta save.
- [25:24]
Scott Melker
Who does his PR and how can we hire them? Because like he literally did all the shit and then he's like, I can't believe they made me do this. As if there's no responsibility on his end for allowing it to be done.
- [25:36]
Andrew
Well, let's go back, let's go back a decade and look at some companies that could have dramatically benefited from implementing a bitcoin standard blockbuster. A company like Eastman Kodak, a company like BlackBerry. Okay. I mean, honestly, like these companies died because they didn't adjust from a technology standpoint in a meaningful way. And tech overtook their brands and killed them. Right.
- [26:03]
Jeff
Well, there's, there's certainly a financial component I Think the financial component can be two ways. One is of course the growth of the asset will help you recapitalize if you believe in bitcoin. The other part I think that people speak about a little bit less is actually it makes your stock much more difficult to short. If you have bitcoin in your balance sheet as some component which is actually just a positive EV thing that you should do as a cfo. Actually if you look at Tesla, which was one of the most heavily shorted stocks in history, the moment they adopted bitcoin, you can see over time from then on short interest would collapse. And it's because people don't want to be short things they don't understand. And so that removes some aspects of that type of trading behavior. That's a great thing for a public company. The other thing I would mention is not financial, it's actually social. There are certain companies that are young and millennial leaning, Gen Z leaning that would benefit heavily from the free publicity that comes from embracing bitcoin. I think I saw yesterday there was a distillery roll up conglomerate type that adopted bitcoin. Think about how much more booze they're going to sell to now. People who love bitcoin just because this company distinguished itself versus other inbevs of the world that they're not participating in the story. That kind of consumer loyalty, that fandom that comes from free branding by attaching yourself to the future is not a, is a financial one, but it's also a cultural one. And I think more companies have opened their eyes to that possibility that we're going to see not just failing companies but also growing companies that are trying to find some arbitrage.
- [27:40]
Andrew
Jeff's bitwise thunder yesterday. His colleague Matt put out a, you know, put out a paper yesterday that, that corporates buying bitcoin is not just a trend, it's a megatrend. Right. You know, I don't know what the difference between, between trend and megatrend actually is.
- [27:54]
Scott Melker
It means bigger. It means a trend that's bigger.
- [28:00]
Andrew
To what level I'm not sure but.
- [28:02]
Tillman
You know, sounds good.
- [28:04]
Andrew
I like megatrend just means more bitcoin on balance sheet. That sounds good to me.
- [28:09]
Tillman
It's the difference between huge and huge. Okay, Jeff, that was brilliant insight by the way. I don't hear much people talking about it, but what you're saying is absolutely true and it's something. Think about that dynamic that you just mentioned. Grows your top line while protects your downside at the same time. One swing of the sword and you're getting benefit on top side and protection on bottom side. That there again, I don't think there's another lever on the board that has that type of action and I think a lot of people are going to be interested in pulling the new leverage 100%.
- [28:49]
Jeff
It's the golden sword and the golden armor.
- [28:52]
Tillman
Exactly, exactly.
- [28:55]
Scott Melker
Dude, Bitcoin's awesome. You guys describe it. I just want to smash the buy button again on bitcoin while we're here, which you can do every single day with arch public, but we'll get to that later. Hey, but I want to get to the topic at hand here, right? Is the bottom in? I guess because I think we're still in the middle of a range as I showed this article. I mean seems that traders are betting on the fact that that was it. Right. That maybe the trip to 75k was overblown and then the backside of that, if the bottom is in, when can we make a new all time high and are we going to go full Tom lee and see 250k by the end of the year? Andrew, I think you actually were debating somebody on you posted, I guess everyone's bitcoin predictions. Yeah, a bunch of somebody I don't remember jumped in and was like, none of these people matter. And you were like literally. You were like literally everybody on Wall Street.
- [29:49]
Andrew
Yeah, people listen to Bernstein, people listen to bitwise. Like, you know, people listen to Van act. Those are all people that I listed, you know, some way, shape or form in that list. And by the way, I mean Tom Lee set off some alarm bells yesterday by saying, well, maybe we go into the 70s. That's another great opportunity to buy into 2025. Maybe when we go to the 50s, a huge opportunity because I still think we go higher. So yeah, you know, is the bottom in? You know, that's an esoteric question that I can't answer. But at the same time, you know, we've seen every time that we've had these moves down, there's aggressive buy pressure that immediately comes in. I, I don't know. I mean, is there a world where we get into the 70s? Sure, there's a world where we get into, into the 70s. It's, it's hard to, to, to see what that looks like and make that case right now for me at least. But at the same time, you know, if some of these, you know, macro issues that Jeff has talked about get a little bit more difficult, maybe there's some, you know, negative type of news associated with global geopolitical stuff going on. Sure, we could, we could push lower. But at the same time, again we have all of these larger macro things happening in the background where corporates are buying bitcoin, nation states evaluating bitcoin, bitcoin strategic, yada, yada yada. All the stuff that we've talked about here. It's, you know, is the bottom in. I don't know. We'll find out soon enough.
- [31:27]
Tillman
Well, I, I think that question honestly is loaded to begin with, I don't think.
- [31:32]
Scott Melker
What do you mean? Are you accusing me of having a clickbait YouTube title?
- [31:36]
Tillman
No, no. Most people use that terminology, but I, but the bottom is, is always associated to a time frame. Unless bitcoin ends tomorrow. What we, what time frame are we judging on the bottom? To me, I, I see that volatility is good. Good for bitcoin, good for accumulators. It's we cans going to strong hands and the strong hands now are corporations and larger buyers. So the question is, is when do they satisfy their fill in owning a X X number of bitcoin? And I don't think we even understand how much buying pressure is pent up underneath bitcoin's price compared to other cycles that we've gone through. And you know, if it crashes the 70, my prediction will be it'll be a V recovery right back to 95 and there'll be a lot of weekends flushed out and a lot of new buyers that now have a larger percentage of their net worth associated with bitcoin are stored in bitcoin. So, you know, again, it's just like when are you. When today is the. What's the bottom today, what's the bottom tomorrow, what's the. It's. In my opinion, it just doesn't work. Looking at bitcoin like that. The rising tide floats all ships. More and more liquidity is going to come into this lever. Why? Because it offers advantages and differences than any other levers on the board. And we are just starting that. And so I just find it really, really hard to believe that Trump isn't. I know he's got bigger fish to fry, but he has to incorporate this. This has to be a part of it.
- [33:19]
Scott Melker
Get Mexico to pay for a wall. I mean, we haven't even started the things like what are we going to even do when we own Greenland and Canada? I. It's like it's hard to even keep up. It's. How can crypto fall into the we're going to take Canada over agenda? No, but listen, we Talk about this sort of bid, you know that, this constant institutional bid. I don't know if you guys saw this news. Italy's largest, largest bank of test that buys Bitcoin for 1 million as a test. Bro, send your test my way. You guys can test with my account if you'd like. But you know, this is just another example. It's not huge, but they're saying, hey, we own 11 bitcoin. We wanted to see what happens. We have an intention of growing this stack. These are just little, little stories. But eventually it's just going to kind of be everyone to your point. But Jeff, what I want to talk about. So a, I remember Hunter, the CEO obviously bitwise, tweeted something yesterday the other day, said, listen, like ETF buyers are diamond handed, right? And we've seen that we generally just keep having positive flows even on bad days and weeks. So people are buying. Those people don't generally sell depending on who they are. If you're an institution and you're just buying bitcoin, you're not panicking to get a 10% drop because you just did the years of due diligence to even approve this, right? And it's just that you're adding it because of the. Actually if it goes down and other things go up, that's good for your portfolio, right? Because it's got this idiosyncratic behavior. So I think it's a different kind of bid that we've had in the past because they're going to be diamond handed to one degree. But then there's something you said earlier which is really interesting about the volatility. I would imagine as these institutions that diamond handed buyers come in, it has to dampen volatility because it becomes an asset for everybody and people are just holding it. I actually had a conversation yesterday with Luke Stryers, the CEO of Deribit. We have 85% of the options volume. We haven't even talked about what happens when we actually get a mature options market on all of this and what that does to volatility because it's just not even a thing. And that like if you look at any asset in the United States, Tesla stock, all the actions and options, not on the underlying spot, buying and selling of Tesla, right? That doesn't exist even in the United States with bitcoin. Yet he was saying right now he's like they were creating, they were working on creating a button on terabit for the carry trade. He said, we literally just press buy and there's your 10 or 11% annualized, done. 0 risk, period. You don't participate in the upside of Bitcoin if it goes to a million bucks. But whatever bitcoin you locked up, you're making 11 or 12% this year, right? I mean, that doesn't exist for most assets still. Yeah, no.
- [35:54]
Jeff
And it's precisely because of the volatility within Bitcoin that can provide those types of yields that other assets cannot. That's the link between rates and volatility that Bitcoin is bridging. There are two developments there, I think, since the last time we chat. One, we saw CBOE actually come out with options products that you can actually trade with customization that creates OTC like features that is still essentially cleared. Those are huge because it allows structured products to come to market. The other thing is that NASDAQ and BlackRock actually filed with the SEC to increase the position limit to a much larger number. That actually I think is still conservative at 250,000 relative to what it could afford. It's a start. And that thing is, those are all necessary ingredients to create, as you described, that vibrant financialization of Bitcoin products. The product that actually I think I'm really intrigued and excited by is the type that you just mentioned, Scott. Where can you take bitcoin risk and actually not participate in the downside and only get the upside? And that class of category does exist. They're called principally protected buffered notes. And those products actually kind of only really work when you have a high interest rate environment because you're essentially using the premium that you're giving up to then go ahead and buy call spreads on the underlying. So if you price out those notes, you can tell investors bitwise clients, for example, that you can now be long Bitcoin, but you don't have to ever lose money. You only get upside. You might not be up 100%, but maybe you'll be up 12. And if you're okay with being up 12 in a year, but zero downside is that an interesting product. And for those folks, they might actually say, look, I can put my money in the money market fund and earn for four and a half, or I think bitcoin is going to go up anyway. And so maybe I can double my money market fund type returns by taking a little bit of incremental risk, which is to then get to 12. So you introduce a whole new set of buyers that are then going to come out and what are they doing? Actually, they're actually selling calls on the upper end, right to call spread. So those kinds of things introduce new risk profiles for options trading and market making that create different types of trading behavior. So I think that's the story of 2025. If 2024 was the year of the Bitcoin Spot ETF, 2025 for Bitwise and our issuers in the crypto community will be the year of financializing it beyond that to more products that are useful to the broader wealth and management community.
- [38:30]
Tillman
I couldn't agree more and I would go one step further and say that if you even look at the disconnect between spot BTC and the products that we are creating around btc, I think there's a lot, there's a story to be told there. These single candle dips that we're experiencing is the last four have been on Saturday and Sunday. And I think that that's not by accident. I think that the heavier the flow of liquidity into the products that you're mentioning, and I've said this multiple times, I think the most important part of the bitcoin community right now are folks like Jeff who are creating products. They're productizing bitcoin in a way so you can buy covered calls and you can do all of this sophisticated. It's not. So it's the same old, same old game that we play on all the other asset classes is just coming to bitcoin. But you know, if, if I look at the volatility going forward, I think the volatility is going to mainly be focused on the weekends when those products aren't for sale and it's, and it's easier to move the price because you don't have Wall Street's money flowing into the, to the asset class.
- [39:46]
Scott Melker
Yeah, all the dudes who've been moving bitcoin price since it existed are going to have to operate on Saturday and Sunday instead of Wednesday hit Thursday because. Right, but, but I think you're missing the real point, Tillman, which is that all the volatility that's dampening in bitcoin is going to accrue to fartcoin.
- [40:02]
Andrew
But by the way, you know, just a reminder that, you know, your typical, you know, PWM private wealth management client, Morgan Stanley, you know, is not the same guy that, that bought Nvidia, you know, 82 and has just been riding the lightning, you know, up to, up to whatever the number is now that type of client is looking for products just like Jeff described. Well, I get 4 plus percent on my money market or I can get 12% on this product with, you know, a little extra risk. Those are the types of plays that a guy with 25, 50, 75, 100 million that has got their money custody at Morgan Stanley or JP Morgan private bank. Those are the types of strategies that they employ to just add a little more juice, you know, on an annualized basis to their portfolio. They're not launching 30% of their, of their, you know, their portfolio into spot Bitcoin or in the spot, anything frankly. These are the little, these are the moments that they play a new asset and they play it in a very strategic, careful way. And so you know, these types of products are going to be in 2025. There's going to be, you know, an undergrowth, you know, amongst the forest of these types of products that over time will end up having more and more sway over quote unquote spot Bitcoin.
- [41:28]
Tillman
Well and I think it goes back to the single thing if I said that, what's the word for 2025? It's yield. All of those products have one thing in common, they provide yield on top of carry value. And so if you look at you know, even the banks implementing a we will lets you deposit Bitcoin. What is that about? It's about producing yield on the back of Bitcoin. I just think 2025 is, yeah, it's going to be all yield driven. It's, it's like how, yes it's great that this assets performed like it has 40 plus percent year after year for the last 16 years. But where's my cash value? Where's my yield for owning this asset? I think that's, that's coming now.
- [42:08]
Jeff
It's here trivia question for you guys. Do you guys know what the best performing ETF was last year?
- [42:15]
Andrew
No.
- [42:16]
Scott Melker
Was it not ibit?
- [42:19]
Jeff
So most of us would guess ibit and actually I would agree partially. It's true. As a passive spot tracker, IBIT was in fact the best crypto ETFs sorry ETF. But as a category actually the best performing ETF was the Nvidia covered call strategy. So going back to what you were saying Tillman, the ability to capture yield on high volatility assets on top of maybe the boost that comes from the underlying if you actively manage it. Well now if you sell bad calls then you won't participate in the upside.
- [42:46]
Scott Melker
So you're counting on a human there.
- [42:49]
Jeff
Yeah, yeah, exactly. Professional, who knows what they're doing to do it for you. You can actually outperform the spot too. And so that's actually why Bitwise, we also filed for three covered call ETFs that will come live in March. There's a Coinbase cover call strategy, there's a microstrategy cover call strategy and potentially one in the mining space as well.
- [43:07]
Scott Melker
So those are product. Oh, sorry. So did Nvidia covered call ETF outperform Nvidia?
- [43:14]
Tillman
No.
- [43:15]
Scott Melker
Okay, so the best ETF but didn't outperform the underlying stock. So it's the same thing. You're not, you're, you're allowing yourself to have sort of a guaranteed yield and earning without participating necessarily in the parabolic side of the etf. Right.
- [43:27]
Jeff
Which is why, you know, partially, you guys are all correct in saying crypto Bitcoin ETFs were still the best performing ETF from a passive tracker basis.
- [43:35]
Scott Melker
That's really interesting. I didn't know that you guys were launching those. So can you launch those on spot. You said Coinbase, Microstrategy and what else?
- [43:46]
Jeff
And we have 1:10 to 5 for a mining company as well.
- [43:50]
Scott Melker
So they're still on publicly traded equities rather than on bitcoin or bitcoin ETFs themselves. Yeah, interesting. So the moral of the story, as I listen to everybody talk here, is that whether it's yield, that's 2025 or nation state adoption, corporate adoption options, we're literally just at the point where. Or SAB121 for example, which you said that shouldn't even be like that's a non event because it shouldn't have been there in the first place. We still, besides even the upside of everything we're talking about, we still have the upside of just catching up and getting the same, basically getting the same products and ideas and credit that any other market has. Yeah, me. That's the story is like you can still front run bitcoin getting obvious things that exist in every other market.
- [44:39]
Andrew
Yep, that's correct. Speaking of yield, by the way, and we were.
- [44:47]
Scott Melker
Are you about to start talking about Arch Public? Because I can. Yes, Jeff. Go live his life. Jeff, we're gonna go let you live your life for the next 10 minutes while we, while we talk about Arch Public's new stuff. Bad guys. Jeff is amazing as you can tell. You should be following him. Your, your name is down there in the description. But I'm gonna go. What, what's your. I want to say it's DGT 10011, right?
- [45:08]
Jeff
That's right. Always fun to be here guys.
- [45:11]
Scott Melker
What's 10011?
- [45:14]
Jeff
Well, DGT is an acronym for Delta Gamma Trading. I think those who trade derivatives might see those in their P L Attribution tool. It's an homage to that. And then was actually my zip code in Chelsea. But I thought it was clever enough that it looked kind of like.
- [45:28]
Scott Melker
I didn't know if it was that or if like you were like. It was like a homage to like the future of quantum computing and no longer being ones and zeros. I don't know.
- [45:36]
Jeff
We'll see. It could morph into that in the future.
- [45:38]
Scott Melker
We'll see Smart. With all those ones and zeros. It could be anything you want it to be. Guys, give Jeff a follow. Check out everything Bitwise is doing. Jeff, thank you so much, man.
- [45:46]
Jeff
Thank you so much for having me. See you guys again soon.
- [45:50]
Scott Melker
Oh, look where our face has got huge. We're gonna go small fit, big face, small. Guys, I am. You guys don't know this? Yeah, I have a producer, but I'm in control. I can do anything I want at any moment. I can do that. I did that. So listen, let's talk about this. Obviously. I actually wrote about it in the newsletter today. Something that, I mean we could talk about anything you want with Arch Public, but obviously we have the Bitcoin algorithm we've talked about with Gemini many, many times. I know you have Solana and Ethereum coming with that, but that just basically dollar cost averages into Bitcoin and finds you the best price in any time period. Which of course can mean 1, 2, 3% benefit to buying at slightly better prices over time. We all understand what Michael Saylor is doing it. This is just doing it more efficiently. But now you have a bitcoin algorithm, arbitrage strategy, some eye opening numbers, 234% annualized returns, 11 annual cash flow. Maybe I'll just leave this up Tillman. Just, just break this down for me. How.
- [46:51]
Tillman
Yeah, this is a case study about a new algo that we've created that allows you to determine what percentage move is required for you to either enter or exit a position. So you can not only dial the percentage move, but then you can dial the exact capital allocation that you'd like on both the buys and the sells. So it creates this opportunity where you can be buying twice as frequently, but when the right percentage happens, you can it will automatically sell a, a certain amount of capital. And so there, there you can fine tune this in the exact same way that Jeff was talking about where you can dial in exactly how risk adverse you are. So if I want to Be very, very risk adverse. I'm going to focus on strategies or I'm going to focus on specific variables that allow more cash return and less accumulation of bitcoin. Whereas if I want to dial it up and really, you know, focus on accumulating bitcoin, then I can dial the cash benefit down or the arbitrage or the trading activity down and focus more on the buys. But this, this is a tool that is, it's, it's as flexible as any human being would ever want it to be. You can literally dial it to your preferences, put in the allocation that you want, put in the accumulation values that you want, set it and forget it and let the automation do its job, which is monitoring the markets for movement without you sitting in front of your computer.
- [48:23]
Scott Melker
I figured this was just like buying those sweet premium, selling those sweet premium Korean kimchi premium bitcoins like SBF used to apparently do back in the day to make that FCX fortune. So not doing that.
- [48:35]
Tillman
No, no, no. It's a completely customizable solution to essentially focus on producing yield off your bitcoin stack, but also accumulating more bitcoin.
- [48:46]
Scott Melker
It's funny, by the way, when we talk, we just had that conversation as a side note like about volatility and perhaps the volatility on bitcoin coming down. Anyone who is here, like, you know, I kind of started in 16, 17. There was that moment when bitcoin hit the all time high of 20,000, which by the way, it's such an arbitrary. If you actually look, I exchange. But like there was a moment I remember and if you had had money in all those accounts, like when bitcoin was like 15 grand in some countries and 20 grand in others. Yeah, talk about insane. Like, because, you know, like they were going nuts in, in South Korea, they were buying it up. I think it was probably 23, 24 at some point. If you were looking at prices in South Korea, I mean, it was really an insane time. I used to take Litecoin, I think it was Binance, Bittrex and Coinbase and there was roughly a 4%, 4 to 5% difference day time. Unfortunately, I didn't have much money to do it and I had the, the to wait, you know, the 30, 40, 40 minutes for it to go. But I would just circle them around with cash on one and be buying on one and selling on the other and just making 3, 4% on every single trade indefinitely for like a period of 10 days.
- [49:52]
Andrew
Yeah, if you've been around long enough. There were There were, there were serious moments where there were big differences in price just on exchanges. Forget about the actual, you know, countries, but there were major differences in, in, on exchanges.
- [50:08]
Scott Melker
Imagine buying Bitcoin at a 10 discount on Kraken to Coinbase for 25 minutes.
- [50:14]
Andrew
Those moments existed like that. That was a real thing.
- [50:17]
Scott Melker
If you had size, man.
- [50:19]
Tillman
Well, just look at how, look at how mature we are as a market versus back then. I, I still think the same dynamic exists. I just think it's now between over overnight and after hours and, and during the day. And the, the larger the product line like Jeff is talking about that is created, the more liquidity flows into those products and at a very, very quick pace, the spot market price will actually become the tail and the dog will be the derivatives and, or the product market or the Wall street product productization of Bitcoin. And I think this is the year for that. That's really where we're seeing the most inflows. If you look at ETFs, why would you want to own spot Bitcoin as a corporation with all of the headache and the liability that comes with it, when you can buy an ETF just like you do any other day of the week and it doesn't change your modus of operandum at all. Like you can literally implement it with the same, you know, prudence that you do with everything else without any of the scrutiny that comes along with holding it, you know, in a cold storage wallet. So I think as those, those that desire grows for those product lines, we're going to see a shift between, you know, the overnight exchanges, all of the crypto exchanges really being the driving force behind the price of Bitcoin to, you know, really what Wall street says the price of Bitcoin is, which will be a narrowing of the, the spread, right? We're going to see a shrinking of the spread, which is good. Market makers are efficient, they want tight spreads. But it also will leave great opportunity for massive moves in the overnight when Wall Street's asleep. And you know, that, that to me is where people will find the accumulation. And that's what looks, looks different to me than the last couple cycles. It's a different, you know, Monday morning wakes up, what does Bitcoin's price do? And we saw it this morning. What did it do? It's climbing. It's not climbing because they, they bought at the dip. It's back over where the dip started. They're, they're buying because there's a constant inflow. Is the bottom Line cheap.
- [52:38]
Scott Melker
Would like you to know that all men want tight spreads. So sometimes it just hits and I couldn't help it. Like my every part of me said don't click that.
- [52:53]
Andrew
The 22 year old version of your brain says I must click.
- [52:57]
Scott Melker
See what I don't know. I think our audience probably skews generally towards our age. So they know. But for those of you who are young, and by young I mean anything, basically younger than me, 48, like you don't change.
- [53:15]
Andrew
Yeah, yeah.
- [53:16]
Scott Melker
I remember being like 22 and I was a senior at Penn and like there was these two guys who had been in our fraternity who are like 24 and would come around and I was like, get these old men out of here. Like what the hell are these 24 year olds who aren't married yet with kids doing hanging out with college people. And then at 40 you're like, man, I would. I'm gonna go back and check in in my reunion and see what's happening in fraternity.
- [53:43]
Tillman
Yeah, getting old isn't for the faint of heart, is it? No.
- [53:46]
Scott Melker
Yeah. You're saying you're sick like 97 of the time. So I know that that's true. Lucky love says so. Yesterday it was 80k next and today it's 250k. I don't know if you guys have ever seen Fast Times at Ridgemont. Is it Fast Times original Hobbs, that you fast? Yeah, Life comes at you fast. Yeah, yeah. You never know any different day. But yes, I will admit that less than others. I do try to get you to watch by saying dumb in the titles.
- [54:12]
Tillman
Let's look at that that comment real quick and say, okay, what's the downside risk to a move to 80? What's the upside risk or what's the upside potential to move to 250 sounds pretty good to me still, I mean if we drop to 80, say 50 in that equation. Still still sounds good to me.
- [54:29]
Scott Melker
You know, Harris Bueller's day off. God, I'm so dumb. Ferris. Life comes at you fast. I mean I knew it was.
- [54:35]
Tillman
God, see, it was one of the classics.
- [54:37]
Scott Melker
I botched that one. I botched that. Abe Froman, sausage king of Chicago. I know that. So listen, we are, we already made it to 10:00. But anyway, I'm going to bring up Arch public here. You guys should be checking this out, obviously. So wait, when is that launching and what else can people do? Give us the three minute. Like what else should people be doing? We updated that at the end of the year. The portfolio that we had the 10,000 portfolio close at 13,535% gain. Basically two downside trades at the end. It happens. But so, I mean, we've got a lot of lot going on here and I don't want them to miss it.
- [55:09]
Tillman
Yeah, we'd love to demo the software. We're all about teaching people how to use it and understanding it. And the more you put into it, the more you will get out of it in terms of value, because. Because there's a lot of features that you can spend a long time learning. So we love educating, we love talking to people about what their overall strategies look like. It helps us in our endeavors and in what we're trying to accomplish, which is to create, again, the best products that help both retail and institutions accumulate and buy Bitcoin and get in at the best price, but also provide them some flexibility as it create. As it pertains to creating yields. So we'd love to demo the product we've actually got. If you want to go to the Bitcoin algorithm button right there and click it, you can download it for free. I think it technically costs $0.01 because that's what PayPal requires. But, you know, download it, try it, call us, let us walk you through a demo. You know, we can share screens and go through settings and show you how to pull historical reports. And then once you get the hang of that, you're going to play with it like a toy, like a new toy, and you're going to find the settings that really speak to you and see the historical performance behind those settings and draw a lot of confidence from that. But then the benefit is really not having to monitor and not having to go through the emotional swings of monitoring a position and having essentially set the rules before the emotion becomes a factor. And I can't tell you how valuable that has been in my life. If you can remove emotion from trading it, it's a significant value not only in the potential gains that can be made from, you know, avoiding making bad decisions, trading when you shouldn't trade, but also just the quality of life. Like, who wants to sit at a computer all day and wait for the dip to buy? You know, this is like having a. A fishing line with a bobber in the lake and you just come back when the bobber's underwater and start reeling in. So it's, it's a. It's a different type of technology than most people have ever seen before. Trading automation is here to stay. It's here to stay for both institutional and retail and we're trying to create the most cutting edge products that help people achieve what they want to achieve with those tools.
- [57:34]
Scott Melker
Andrew, any final thoughts?
- [57:36]
Andrew
Yeah, I mean, I would just say in the previous slide, you know, it's, it's very difficult to find the upside associated with bitcoin and you know, the buys and sells on our arbitrage play and also have, you know, yield associated with cash. The arbitrage strategy as it relates to our bitcoin algorithm does both of those things for you. That's something that we'll talk about if you, you know, come to us and create a meeting. We'll show how and why it does that. But you'll be hard pressed to go looking for a product out there in the market that is going to capture the returns associated with, you know, bitcoin just as an asset, but also contribute on an annualized basis, you know, cash returns and yield on behalf of bitcoin as well. Very, very hard to find that if you're a retail individual with 50 or 100k that you want to deploy with bitcoin, as we just talked about with Jeff, that's very difficult to find. Even if you're a high net worth institutional type investor out there right now, they've yet to create it. So, you know, we have tools that allow you to do that and that slide showed that we'll, we'll show you more of it.
- [58:44]
Scott Melker
We did it. We all showed up. We had a show. It was great. I enjoyed it. Jeff is like the smartest guy ever.
- [58:52]
Tillman
Oh, man, is he ever. I would not want to get into a debate with him.
- [58:56]
Scott Melker
I love really smart guests, but I hate feeling stupid publicly get these people, you know, like when he's talking, it's like, you know, it's like A Beautiful Mind where like you could just see the, the formulas in the background appearing on Windows and stuff.
- [59:16]
Andrew
Well, I have more of a, you know, instead of Beautiful Mind, I'm like the guy coming down the staircase and what's that was it. And you got all the, all the math. You know, it's not the smart version. Beautiful Mind is the smart version. It's Hangover is the dumb version.
- [59:29]
Scott Melker
Oh, yeah, you guys are beautiful. Beard. We are. We were a wolf pack of four today, though. That was pretty good. I honestly, man, I pride myself on movie references and I'm not gonna sleep tonight because of Ferris Bueller. That was so dumb. Every line of that. I know every line of that damn movie. And, and a Fast times at Ridgemont High.
- [59:52]
Andrew
Yeah, Dick in our in our world, 40 year olds. We should know nearly every promising line in Ferris Bueller's Day Off. Like, how many times have we actually seen that movie? How many times but in true form.
- [60:05]
Tillman
I mean, when you get old, you start misassociating things so you might remember them, but you won't remember what movie it's from is the point.
- [60:13]
Scott Melker
I'm not. I'm not going to get over it.
- [60:15]
Tillman
48'S the new 60.
- [60:17]
Scott Melker
There's losing millions there's in my life there's losing millions on Voyager. Yeah, wrong quote and the balance of the scales tell you embarrassing is the question. All right, I gotta go to Twitter spaces. Andrew, you want to go on Twitter spaces?
- [60:35]
Andrew
Yeah, sure.
- [60:36]
Scott Melker
I could use. I could use your help.
- [60:38]
Andrew
Yeah. Okay, buddy.
- [60:39]
Scott Melker
I'll see you guys in 10 minutes. Tillman, you're always welcome to but you never show up. So it's fine. You're gonna go hunting or skiing or. Right, guys, we'll see you later. That's all we got for the show. Check out Arch Public. Goodbye.
- [60:51]
Andrew
Let's go. Let's do.