Podcast Title: The Wolf Of All Streets
Episode Title: Bitcoin & Stocks Crash, Gold Hits Record: How April 2 Tariffs Could Shake Crypto! | Macro Monday
Release Date: March 31, 2025
Host: Scott Melker
Guests: Mike Mlone, Dave Weisberger, James Lavish

Introduction: Market Anticipation Ahead of April 2 Tariffs

[00:00] Scott Melker:
Scott Melker kicks off the episode by highlighting the impending "Liberation Day" on April 2, when new tariffs are set to be implemented under the Trump administration. He emphasizes the market's unease due to the high level of uncertainty surrounding the event's outcomes and its potential impacts on various asset classes, including stocks, cryptocurrencies, and Bitcoin.

Tariffs and Their Predicted Impact on the Market

[01:12] Mike Mlone:
Mike Mlone delves into historical tariff changes, referencing Anna's comments based on her experience with Trump's Council of Economic Advisors. He outlines the escalation of U.S. tariffs from 1.5% to 4.5%, with predictions to reach 10-15% by year-end. Mike warns of significant downside risks to the S&P 500 due to these tariffs and discusses the expected payroll numbers, suggesting that data weakness is unlikely until the fourth quarter. He also notes a concerning trend of downward earnings revisions across 22 out of 26 industry groups, marking this year as one of the worst for momentum in two decades.

Notable Quote:
"She doesn't think the Fed put and Trump put are likely until another 20 or 30% in the stock market." — Mike Mlone [01:12]

Market Reactions and Futures Trends

[02:34] Scott Melker:
Scott observes a notable downturn in market futures, with Dow futures dropping 300 points and S&P futures down over 1%, while Nasdaq futures decline by 1.5%. Interestingly, Bitcoin shows a slight uptick since the onset of these market shifts.

[03:02] Mike Mlone:
Mike confirms that Bitcoin has dipped approximately 2% from its Friday mark, aligning with the current market turbulence.

Notable Quote:
"Bitcoin's hanging in there. I'll take it." — Scott Melker [33:28]

Bitcoin vs. Gold: Analyzing the Bitcoin-Gold Ratio

[04:28] Scott Melker:
Scott raises questions about the significance of Liberation Day and its unpredictability, inviting James Lavish to share his insights.

[03:27] James Lavish:
James Lavish expresses skepticism about Trump's intentions, suggesting that the tariff announcement might lead to prolonged uncertainty rather than immediate clarity. He emphasizes the negative sentiment in the market and the potential for delayed weakness in payroll numbers.

[08:35] Scott Melker:
Scott introduces the Bitcoin-Gold ratio as a key metric, suggesting that Bitcoin is approaching a cycle high.

[10:54] Scott Melker:
Dave Weisberger provides an in-depth analysis of the Bitcoin-Gold ratio, highlighting Bitcoin's increasing hash rate and its implications for Bitcoin's value as an energy-backed asset compared to gold's traditional use as a jewelry material and monetary asset.

Notable Quote:
"Bitcoin is backed by energy and what it can do in the energy sector. It is non-trivial in the extreme." — Dave Weisberger [49:02]

The Basis Trade and Federal Reserve Strategies

[10:55] Dave Weisberger:
Dave introduces the concept of the "basis trade," explaining its mechanics involving hedge funds going long on U.S. Treasuries while shorting futures of similar duration. He warns of the dangers of leverage in these trades, suggesting that another liquidity crunch could trigger massive unwinding, adversely affecting the repo market and overall treasury stability.

[15:25] Scott Melker:
Scott solicits opinions on Dave's explanation.

[15:28] Mike Mlone:
Mike draws parallels to the 1998 Long-Term Capital Management collapse, emphasizing the risks of over-leverage. He advocates for focusing on long bond futures and gold as safer assets amidst potential market corrections.

Notable Quote:
"We are so over leveraged now, we're deleveraging the system and I do expect that." — Mike Mlone [23:30]

Regulatory Battles and the Future of Stablecoins

[08:35] Dave Weisberger:
Dave shifts the conversation to the regulatory challenges facing stablecoins, likening the debate to fractional reserve banking. He argues that allowing yields on stablecoins could drive a shift from risky banking systems to more fully collateralized models, leveraging the internet's speed and information flow.

[28:38] Scott Melker:
Scott counters by questioning the necessity of volatile tokens like XRP for cross-border payments when stablecoins offer a pegged alternative.

[28:58] Mike Mlone:
Mike concurs, questioning the need for tokens in volatile environments and advocating for the use of stablecoins instead.

Notable Quote:
"Why do you need a token for something that's highly volatile and you can use a stablecoin." — Mike Mlone [28:58]

Leverage in the Crypto Market and Institutional Adoption

[24:55] James Lavish:
James challenges Mike's assertion about over-leverage, citing MicroStrategy's substantial Bitcoin holdings against its debt, arguing that their debt is carefully managed and not immediately threatening.

[26:20] Dave Weisberger:
Dave counters by highlighting the speculative nature of many crypto investments, noting that entities like GameStop have significant cash reserves but lack the leverage to sustain massive crypto downturns.

Notable Quote:
"Bitco, it's, it, it is this. And it's, you know, when you look at technicals, it almost seems because..." — Dave Weisberger [49:46]

Federal Reserve's Potential Interventions and Market Stability

[43:06] James Lavish:
James reflects on possible Fed interventions in the basis trade, suggesting that the Fed might consider taking trades off hedge fund books to stabilize the market, akin to a QE (Quantitative Easing) without direct money printing.

[45:21] James Lavish:
He further elaborates on the potential for a rapid market correction, questioning whether such volatility can be managed without severe economic repercussions.

Notable Quote:
"They're considering taking these trades off the hedge fund books and backstopping it completely." — James Lavish [10:56]

Divergent Views on Bitcoin's Resilience and Future Trajectory

[20:48] James Lavish:
James disagrees with Mike's pessimistic outlook, asserting that Bitcoin's adoption as a superior asset to gold is resilient and unlikely to experience extreme downturns. He maintains that institutional backing and broader understanding of Bitcoin's utility provide a strong foundation against significant market drops.

[32:08] Scott Melker:
Scott questions Bitcoin's recent performance, noting its worst first quarter since 2018 and deviating from historical four-year cycles, indicating potential misalignment in market expectations.

[37:45] Scott Melker:
Scott highlights that Bitcoin has had its worst quarter since 2018, with significant drops in Bitcoin and Ethereum, challenging the notion that Bitcoin is outpacing the S&P 500 solely due to leverage.

[52:15] Scott Melker:
Scott touches upon the technical indicators, suggesting that Ethereum's drop to $1,000 would be disastrous, reflecting on the overall bearish sentiments in the crypto market.

Notable Quote:
"Bitcoin is hanging in there. I'll take it." — Scott Melker [33:28]

Conclusion: Navigating the Bear Market Ahead

As the discussion wraps up, the panelists reflect on the complexities of the current market environment influenced by impending tariffs, regulatory battles, and the intricate dynamics of the crypto sector. They acknowledge differing perspectives on Bitcoin's future and emphasize the importance of strategic trading and diversification in mitigating risks.

Final Notable Quote:
"We are so financialized that we would go into depression here." — Dave Weisberger [35:38]

Key Takeaways:

• Tariffs' Escalation: The increase in U.S. tariffs under the Trump administration is poised to create significant market uncertainty, potentially leading to downturns in the S&P 500 and altering investment landscapes.

• Bitcoin vs. Gold: While Bitcoin is gaining traction as an energy-backed asset with growing institutional adoption, its relationship with traditional assets like gold remains complex, especially in volatile markets.

• Basis Trade Risks: The leveraged basis trade employed by hedge funds poses systemic risks, potentially necessitating Federal Reserve interventions to stabilize the market.

• Regulatory Environment: Ongoing battles over stablecoin regulations could reshape the financial sector, pushing towards more collateralized and transparent models.

• Crypto Market Dynamics: Over-leverage and speculative investments in cryptocurrencies like XRP and Ethereum heighten the risks of significant market corrections, despite robust adoption indicators.

• Federal Reserve's Role: Potential interventions to mitigate financial system risks highlight the delicate balance between market autonomy and regulatory oversight.

This episode offers a comprehensive analysis of the intertwining factors affecting the current financial markets, with a particular focus on the implications of rising tariffs and the evolving role of cryptocurrencies within the broader economic framework.