← The Wolf Of All Streets
The Wolf Of All Streets
Bitcoin To Explode To $1 Million by 2028! $2.4 Million Coming By 2030?!
00:13:18
Loading summary
Transcript1 lines
- [00:01]
Host or Presenter
That's dope. Let's do We've got big bitcoin price predictions, 2 trillion in stablecoins according to the treasury, and a billionaire hedge fund leader predicting the end of the global monetary order. Kicking off today we have the big Think piece for the week. For the past few years, Ray Dalio has been pounding the table that the world order is shifting. And this week's update really put a fine point on the issue, with the legendary investor declaring that it's really too late to do much about it. One of the striking things about Dalio's essay, which he published on X, was that he's been studying these global shifts for years, maybe even decades. Almost none of them have gone smoothly. They're almost always filled with strife, disaster and catastrophe. And yet still he seemed to believe that calm, orderly and agreed upon restructuring was possible. And even now, as he feels like that is less possible than ever, his big rallying cry from this week's essay was that rather than scattering the global order to the wind, the Trump administration should bring everyone to the table and figure out an intelligent and cooperative solution. Looking back over the first 100 days of the administration, there seems to be very little sign that this will take place. Within the first few weeks in office, Trump had already kicked off a trade war with Canada and Mexico, who are of course, America's two largest trading partners. And although there have been walk backs and compromises, the genie cannot be put back in this bottle. This was on full display during this week's Canadian election, with Trump very clearly turning the sentiment against conservatives and helping to deliver a fourth term for the incumbent Liberal Party. And this, in fact, was another big theme of Dalio's writing this week, that it's impossible to unbreak the global world order. Dario wrote that trust in the US As a reliable partner is, is already eroded and the world will begin turning away. And looking elsewhere, he even suggested that we would see nations rerouting around the US But Dalio is not arguing that this is entirely something of this administration. Instead, he argues that this has been a long time coming. If you think back to the beginning of the Biden administration, one of the big themes of that presidency was winning back global trust. We had the theme of friend shoring, re establishing trade and defense relations throughout the world and projecting a sense that diplomacy was back in the US Foreign relations playbook. Now, one might quibble about how effective the strategy was with two major conflicts kicking off under Biden, Taiwan still very much under threat. The point is that the Biden administration was at least trying to get cooperation and a commitment to uphold the rules based order. That is of course not true under Trump. And just like this show, Dalio is not really trying to make a point about whether that's good, bad or otherwise. The point that he's trying to make is that what's done is done. And as he put it, it's too late. The changes are coming. Moving on to less highfalutin and more very practical topics this week we saw the first sign of tariff trouble starting to hit the real economy with a weak GDP print dipping into the negatives for the first time since 2022. Now one of the things that we've discussed all week is that it's not necessarily as clear as it seems, and that there is a lot of noise with this signal. The stockpiling of imports caused a big drop in GDP that may or may not normalize during the next quarter. The same effect was seen in the consumer sector, with some amount of front running tariffs adding a boost to what was pretty weak consumer spending data. Probably the clearest data points this week was that job openings are down significantly and manufacturing has fallen off a cliff. Where I think this gets really interesting is gaming out how the macro data will weigh on the Fed's rate decisions moving forward. The next Fed meeting is scheduled for next Wednesday and markets are currently pricing in just 5% odds of a cut, essentially zero chance. From where I'm sitting, that seems right, and you can easily imagine Powell making his way through the press conference, acknowledging each data point and presenting a very good reason to discount it. Core CPI inflation is still running at 2.8%, and the Fed just doesn't have a clear signal that they need to cut due to labor market deterioration. And while this week might have been an extreme example, it demonstrates why the Fed is known for being late. We are undoubtedly going through an economic shock at the moment, and that's likely to become more clear as the ships stop arriving from China over the coming weeks. Port activity on the west coast is already starting to slow down, and earnings calls from retailers this week were uncertain at best. The problem for the Fed is that they aren't going to have data in hand until we're right in the thick of whatever comes next. Even if Powell guides towards a probable cut at the next meeting, that's not for seven weeks. Meanwhile, the end of the second quarter will only be two weeks away. If GDP has fallen off a cliff, we still might not be certain about it by the time the Fed meets in June. This is Kind of part and parcel for the Fed at this point. When crisis hits, even if it's extremely obvious, there's usually a complete failure to respond in the moment. Back in 2020, on March 3, the Fed made an emergency rate cut of 25 basis points, bringing rates to 1%. At that point we already had a confirmed outbreak of COVID in New York and other cities around the globe were on lockdown. Two weeks later, rates were cut to zero and it took another four days for emergency bond purchases to begin. By then, markets were already in free fall. The same was true back in 2008, the day after Lehman Brothers declared bankruptcy. In September, the Fed held rates steady. Three weeks later, they came in with an emergency rate cut. It took until November before they introduced QE and until December to finally take rates to zero. The point is that even in the clearest moments of crisis, the Fed is biased towards waiting for the data for the moment. It's unclear how bad this economic shock will actually be, so I would not expect Fed policy to spring into action quickly. Historically, what that means is that the Fed will miss the moment to get ahead of the crisis and instead have to come in afterwards and try to clear up the message. Now, interestingly, this week also saw a ton of sky high price targets for Bitcoin. The most bullish, of course, was Ark Invest introducing a new model that discounted lost Bitcoin, which projected as their bull case $2.4 million bitcoin by 2030. The basic gist of their approach was that they were arguing that most supply models aren't doing enough to take into account lost coins. And when you factor that in, it really changes the likely outcomes. Still, that's about 2030, and for a prediction that's a little bit more here and now. Standard Chartered came out forecasting a rally to 120,000 by the end of the second quarter, which gives just two months time for Bitcoin to move 25% higher. And then there was Arthur Hayes. The Bitmex founder took the Stage at token 2049 to declare that it's time to long everything and that Bitcoin would hit a million dollars by 2028. Now, Arthur's prediction is worth dwelling on for a moment because it's the one that provided a mechanism for getting there. Arthur was not arguing that this price target is going to be achieved by a bunch of institutions or corporates coming in and buying bitcoin. His prediction was premised on liquidity coming into the system. An ever loving boatload of liquidity. He laid out the idea that treasury buybacks and maturity changes affect the amount of liquidity in the system. He suggested that Janet Yellen had pumped around 2.5 trillion worth of liquidity into the system with treasury operations from the bottom in 2022. Hayes believes that Scott Besant is about to do the same, but pretty much whether he wants to or not, his view is that economic conditions are looking pretty rough and the deficit is going to blow out as the economy and therefore tax revenue decline, much to Elon's dismay. We're already kind of seeing it. Government spending actually rose over the past quarter as Doge did its thing. We've had one big scare in the treasury market already as the tariff announcement shocked the world. The treasury itself has already announced that they're looking to make quote unquote enhancements to their buyback program. In short, the cracks are showing up everywhere. Now, to be clear, Arthur's prediction is straight up Moon math. It's difficult to predict where Bitcoin will be in a month's time, let alone three years. But the point is that liquidity feeds into bitcoin prices and Arthur thinks he sees a wave on the horizon. Maybe he'll be right, maybe he'll be wrong. But there is a certain narrative power that comes from getting up on stage in Dubai and screaming Bitcoin to a million dollars with haste. And honestly, that's not a bad way to think about these sky high price targets. They're not really about the number and up to a certain point they're not even really about the reasoning. What they do is give people an anchor point and permission to think much bigger. I think there's good evidence that this happened during the last bull run. The laser eyes till 100k meme got started early in 2021 and for so many people something just felt right about 100k that cycle. It didn't mean anything practically, but the meme gave voice to a common belief that Bitcoin was worth much more than where it was trading. That is of course, the power of these price targets as well. They grab headlines and spread the understanding that Bitcoin is currently available at a discount to where it's headed. Next up we have a set of stories that on the one hand seem small, but I actually think deserve a little bit more attention. First we had Nexo returning to the US after two years of a regulatory timeout. If you word around, in the last cycle, Nexo was a big retail facing crypto lender and basically the one big one that didn't blow up. Their business model was pretty simple. Take crypto deposits from retail customers and pay them yield from lending it out. The second story was Coinbase upping the limit on their Bitcoin backed loan product in response to strong demand. We don't know all the details, but it seems like Coinbase themselves is lending USDC against Bitcoin now up to $1 million per customer. Now for many, the idea of crypto lending brings up a lot of ptsd, but let's assume for the moment that these are over collateralized loans with reasonable risk frameworks in place. Remember, the problems with the last cycle didn't purely come from lending against crypto. They only really caused problems as we found out how much had been lent to certain crypto funds with zero collateral. The reason these stories matter is that there's been a huge credit drought since 2022. Completely understandable. After a major credit crisis nearly destroyed the industry, it made sense that no one wanted to lend. But without credit, the institutional activity in the space became way more difficult. Market makers became far less active, and the crypto funds needed to take their leverage way down. To give a sense of how big the drought was, Galaxy Digital recently did a study on CEFI lending markets. They found that credit peaked at 35 billion at the beginning of 2022 and by the end of that year it fell to around 7 billion. At the end of last year they only measured it, rebounding to 12 billion. Obviously a huge gap from where things got to the last time around. Now, I am definitely not suggesting that we should go back to the conditions of 2021 and I'm not even really taking a position on whether credit is good or bad. It's just an observation that it's accelerating at the moment. Alongside the news from Coinbase and Nexo, we're also starting to see on chain credit pick up over the past month and it feels to me pretty likely that operating in a credit drought has put dampers on this cycle, especially for crypto native firms. So could we see some new bullish excitement? So could we see some new activity as credit expands? That is what I'm going to be looking for. Lastly, this week had a ton of news about stablecoins, which continue to be one of the biggest themes in crypto this cycle. We had former Congressman Patrick McHenry say that it's go time for crypto legislation and that stablecoins are going to be the first out of the gate. We've also had big announcements from Stripe, Mastercard and Visa all signaling they're moving into stablecoin payments in a big way. And those shifts were already coming. But this felt like the week where things moved from the planning and announcement phase into the execution phase. We also had tether reinforcing that they are going to launch a US domiciled stablecoin and giving a timeline to get it to market by the end of the year. And in the middle of all of that, we had a report from the US treasury that said that stablecoins could be a $2 trillion market by 2028. To unpack the report a little more, this was part of the minutes from the Quarterly Borrowing Advisory Committee meeting. This group includes major Wall street firms that provide guidance to the treasury on how they should handle their debt issuance. Presumably the materials are presented to treasury staff, but that's probably not that important. The important point is that both Wall street and the treasury just attached a market value to the stablecoin opportunity and it's really, really large. There's currently around 250 billion worth of stablecoins in circulation. So everyone basically agrees that an eight fold increase within three years is reasonable. That's essentially the same amount of growth that stablecoin saw between 2020 and 2022, but starting from a much, much higher base. For the treasury, they now completely understand the stablecoin narrative. Their report talks about stablecoin reserves representing the marginal new buyer of U.S. treasuries and tokenization having the potential to make the treasury market function more smoothly. They're also alert to the supposed risks with a section about stablecoins potentially competing for bank deposits, driving lending rates up and taking cheap funding away from banks. Still, the major point is definitely that the banks are all clearly aware that this is a gigantic market that's going to continue growing at a rapid clip. Just from this week's news, it's obvious that every major payment provider is adding stablecoins into their infrastructure as fast as possible. And once stablecoin legislation passes, in whatever form it ends up taking, we're going to see every bank in America rush to get their stablecoins to market. It remains to be seen how that's actually going to work out. I still get cold shivers at the idea of the bank of America issuing a stablecoin that gets huge adoption in defy. So maybe stablecoin issuance doesn't actually mean a ton of liquidity coming into the crypto ecosystem, but whatever happens, this is a completely new frontier for the crypto industry and it is definitely a trend to watch. So with that, we wrap the Friday 5. There is definitely an attempt and a desire for everyone to find bullish signals and it's making the vibes a lot nicer than they were a couple of weeks ago. For now, that is going to do it. For this episode of the Friday 5. Until next time, be safe and take care of each other. Peace.