← The Wolf Of All Streets
The Wolf Of All Streets
Bitcoin Whales Dumping As Liquidity Crisis Hits | Willy Woo Reveals The Endgame
00:47:32
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- [00:00]
Host
Today we are joined by Willy Wu, one of the most respected on chain analysts in the world to talk about where Bitcoin is headed next.
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Willy Wu
Well, it's wait and see, but I'm just looking at Bitcoin and it's structurally starting to look weaker and weaker into this bull market.
- [00:16]
Host
We dig into liquidity cycles, investor flows and why whales are unloading coins at these levels.
- [00:22]
Willy Wu
The reality is we're in a fiat world and everyone needs fiat to live apart from these hardcore bitcoiners that are using sats.
- [00:29]
Host
Willie explains how Bitcoin is acting as the ult canary in the coal mine for global liquidity and what that means.
- [00:35]
Co-host
For the next phase of the cycle.
- [00:37]
Host
We also get into the bigger picture. The Fed election cycle, debt, gold's rise and how stablecoins are reshaping markets.
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Willy Wu
If bitcoin goes from 100,000 to a million, that means tether is going to increase because it's the other side of the book. Tether is the gateway to our crypto ecosystem. Everything's traded against it. You work that out and it works out that tether can displace China on the short daily T bills. So now you get a situation where the US government's dependent on the growth of Bitcoin to remain solid.
- [01:07]
Host
Willie shares his candid take on whether Bitcoin could eventually decouple trade like digital gold and what institutional adoption means for.
- [01:15]
Co-host
The future of crypto.
- [01:16]
Host
If you want a clear eyed look at Bitcoin's make or break moment and.
- [01:20]
Co-host
How it ties into the broader economy, this is a conversation you don't want to miss.
- [01:26]
Willy Wu
That's dope.
- [01:40]
Host
This episode is brought to you by Binance, the world's number one crypto exchange, trusted by over 270 million users worldwide. Start your crypto journey with binance@binance.com Finance.
- [01:54]
Co-host
Is not available in prohibited countries including the U.S. check its terms for more information www.finance.com en/terms. So Willie, my crystal ball is broken. Where's bitcoin going next?
- [02:07]
Willy Wu
There are no crystal balls. There's no crystal balls, Scott? Yeah, no, no one knows exact but you know, we can look at liquidity, we can look at overall structure. How price responds to it is up to obviously the market and individual participants and how it actually moves. So you know, it's late cycle, liquidity is waning. You know obviously capital coming into the system is, is what moves it and I would say prices has run up but as of maybe six months ago, the liquidity powering it is said to drop away while the price momentum continues. Generally that that gives us a signature of where we are into the, the bull market. I would Note that in 2017 it said that that process started at about two and a half thousand dollars of Bitcoin and it ran up to 20,000. So the tops of a cycle is very unstable, right? It gets very volatile. A lot of kind of euphoria happens. We haven't reached that stage yet. But the interesting thing for me right now is that we are getting a pattern where the, the countdown typer is timer started. You know, in the 2017 bull market. The last cycle, 2021, we had this point where the flows in Bitcoin, while positive, started to decline and the flows into Ethereum increased, creating a divergence. And that marked the end of the fundamental cycle, the fundamentals powering the cycle. So that seems to be happening right now. Ethereum did climb exceed Bitcoin's inflows and it's starting to just roll over right now. And the other thing that's happened right now is that the flows into Bitcoin didn't make a higher high to confirm the 120 range. Generally each new all time high Bitcoin makes and consolidates to a level you get a higher influx of investors and investor liquidity to push it up. This one did not have that. So we're kind of in a bearish divergence where the 120 level is not validated by investors. And in the last cycle that was kind of around April and it was. And if you remember we went from 60,000 to 30,000 and that was the spot kind of investors like not really validating the, the price levels. And then we had this kind of blow off where it went to 70,000 and that was driven by paper.
- [05:09]
Co-host
So right now 65 to 28 to 69. Good times.
- [05:14]
Willy Wu
Yeah. Yes, 69. Right. So that, that was. Right now we're in that situation where this same structure is forming. Obviously every cycle is different. But the question in my mind is do we get this sort of, is this, do we get a investor recovery? Do we get higher high in the flows of capital and therefore validating that structures supported by investors or do we actually, you know, basically the investors are slowly walking away here and we might get another sort of run up by paper investments, a lot of derivative action. So I'm just sitting here watching this.
- [05:58]
Co-host
How do you track the flows? Like is it a personal indicators that you have? How do you actually, you know, track that? By what metric and you know, what tool do you use?
- [06:09]
Willy Wu
For that, well, you can track the.
- [06:14]
Co-host
Spot buy across exchanges, a mix of all the above.
- [06:18]
Willy Wu
You can use the UTXO model, right. And you can look at the prices of which coins moving from one wallet to the other and you get a snapshot of when coins moved in, therefore their cost basis and the cost basis of the new investor coming in. And so realized cap, for example, that's the on chain metric measures how much capital has, has come in through that type of arrangement. It's an estimation. We don't know exactly if it's the, a new investor, it might be the same guy rotating wallets and so forth. These ways you can filter it. But effectively we're looking at on chain measuring. This cohort, this cohort is using wallets moving cold storage, therefore they're not actively trading, therefore you can call them an investor. And so yeah, using, using on chain metrics you can measure or estimate the flows. Right. That's what I call capital flows coming into the system. That's relatively easy to do. These other things you can look at which take into the, the pricing structure and volatility, which is a bit of a secret sauce and sort of overlay that on top of the on chain description, which is investors, you know, a lot of these, the action is happening on exchanges that can only be picked up by pricing action. So between the two of them you get a good idea of liquidity and where the flows are going. And also you can measure for other networks like Ethereum and Solana and so forth. So you can see the, the rotations between the two.
- [07:49]
Co-host
Yeah. So we have this interesting scenario where as you put it, liquidity is somewhat dried up or at least flows into Bitcoin. But there's a macro expectation that since M2 has risen, Bitcoin will continue to follow those M2 flows and that we're likely to get fed rate cuts in the coming week and a half and that could also increase liquidity. So it seems like you have a macro picture. Now we can discuss whether that's an accurate macro picture or not, because that might be an interesting conversation. But there's certainly sentiment that there's going to be a lot more liquidity entering the system generally.
- [08:22]
Willy Wu
Yeah. And for sure that that is going to bolster confidence that currency is being debased and a lot of liquidity, new money is injected in the system, cheap money and generally that lifts things in a liquidity cycle. Turns out the liquidity cycle is four years. It's superimposed to Bitcoin cycles, superimposed onto the halvening Bitcoin was created. Yes. And the election cycle and I suspect that it is soft influence from the election cycle that is soft influencing the Fed even though it's meant to be firewalled, that is creating this sort of Fed policy of a four year cycle of liquidity. That's just a theory, I have no proof. But the thing was Bitcoin was invented in effectively published in 2008 after the World financial crisis when the Fed was injecting massive amounts of liquidity to soften this crash. Right. And Bitcoin has really never had a really full on test of a business cycle downturn. We've had liquidity cycles of four years. But have we had a full on business cycle downturn? Covid you could say maybe those economic indicators showed that. But you know the Fed printed early, even before the COVID price affected crash in the market. So that case I think it was staved off because a massive amount of liquidity was it 20, 30, 35% debasement. There was some ridiculous amount of money that was unprecedented that was injected and we had the run up from the last cycle. This time we have a business cycle downturn we expect and leading indicators are showing that and the Fed should be injecting capital. And that also happened in 2008 World Financial Crisis. They were injecting capital in the system, the markets were crashing. That was their job to buffer that crash. Because the you know, directive of the Fed is to maximum employment. So it's not always the case that you know, lower interest rates create market go up and so the question to ask is, is this leading or lagging in this time?
- [10:43]
Co-host
I usually cut interest rates when something breaks. Right. Not because stock market is at all time high and things are great.
- [10:51]
Willy Wu
Yeah, it's a, it's a weird one this time I think we're all a little bit confused and well, let's wait and see. But I'm just looking at Bitcoin and it's structurally starting to look weaker and weaker into this bull market. And you know I work with Swiss block, they've been running the the numbers for over a decade on Bitcoin and measuring it and altcoins and their data shows that Bitcoin is leading liquidity. In fact it is the most sensitive asset, global asset, you know, global macro asset, gold stocks, whatever, real estate, it's most sensitive to liquidity. And so you could be, you could call it the canary in the coal mine. And yeah, by the way, swissbok is the people that bought you Glass node and the onchain metrics, because they were trading this in 2006, so 2016. So it was very early this, this data. So anyway, let's wait and see. But the underlying investor fundamentals is currently sort of in a make or break zone and it's repeating the last patterns of like, you know, the top. We did have, you know, a higher high and we can have this paper run up, but let's just watch it. It could recover, you know, if investors really come in the next three weeks. But it's a little bit weak on my side. I think we've had a run to 120. How high will it go from here? 140, 160, I don't know.
- [12:25]
Co-host
Yeah, I mean that could all happen in a week, right? Fly up. This is bitcoin, right? Get a 40, 50% move in a week or two and then full euphoria and see in a couple of years, nothing would surprise me.
- [12:42]
Willy Wu
That's last cycle certainly happened. 20, 70 happened all the time. I'm not sure about the cycle. It looks pretty flat. The amount of capital, capital that needs to move Bitcoin at 120 is quite different, you know, than last cycle where it was 10,000, you know, then became 20,000. So it's significant. And then you got these whales selling into it recently. And every bitcoin they sell, it's 120,000. They has to buy each one of them before we're good.
- [13:15]
Co-host
You know, I think there's a report that there's been 115, 120,000 coins from Whale wallets sold just in the past month or two.
- [13:25]
Willy Wu
Yeah, a month or two. There's some decent selling, some serious selling.
- [13:29]
Co-host
From people that had diamond hands and never intended to unload a single bitcoin, if you ask them. Right. So I'm not saying they know something that we don't. I think there's just a serious point where your wealth is so high and so great that you just take something off the table regardless of the asset. But we've never seen that level of whale selling at prices like this ever.
- [13:52]
Willy Wu
Yeah, I mean, absolutely. Like last cycle, I remember whale, you know, a friend that said, I'm selling and I think it was around 50 or 60, something like that. It's like this is generational wealth for me. I would just take it off the table. And that happened to be, you know, like he wasn't doing on. He really totally was expecting a hundred thousand, but it's like, I'll Take off table right now and it actually crashed in 30, you know, and it went to 70. But it was the price point where I guess maybe there's a whole bunch of whales that bought in roughly that time and that was the price point. And so maybe we're in a similar situation, who knows, you know.
- [14:35]
Co-host
So considering the cycles still rhyme to some degree. Right. As you said, every cycle is not exactly the same. But what we haven't really seen this cycle is the rise of the altcoin market. Certainly not where you could just throw a dart and expect anything you hold to go up 10x. Do you think that in this last phase of the cycle, if we get it, that we will see that movement? Or do you think that it's really limited to whatever's available on Wall street at this point? Right, because we'll get a Solana ETF and we have treasury companies and so there's pretty transparent large buyers of some of these coins, but the rest of them are seemingly just stuck in the mud.
- [15:17]
Willy Wu
Yeah, I certainly the altcoins have competition in the form of publicly traded equities, wrappers around bitcoin now and now wrappers around digital assets. So certainly that takes some of the heat. I mean right now over the past month we are seeing rotation to Ethereum and we saw that pump then the Solana had a little bit as well of capital rotation. Right now I think it's around the mid caps that's getting a lot of the capital rotation into. So we are sort of seeing this, but it's certainly nothing like the past cycles. It's like elsewhere beta. Right. And now suddenly you can get beta on even bitcoin treasury companies and like some meta planet going, was it adxn, nav and everything going to the moon? We're seeing that in the treasury companies. So part of me wonders how much of real capital is coming in because of the same guys that are moving capital from.
- [16:15]
Co-host
I was gonna say, I wonder if some of those whales who sold for 120,000 tokens have actually just moved their tokens into a Treasury company, cashed out on the stock market at a multiple and called it a the day.
- [16:27]
Willy Wu
Yeah, right. Like I imagine a lot of that stuff happened early because it's, it, you know, it's getting a little bit risky to do that later in the cycle. But yeah, I think the, the, the sort of beta game which is kind of, you know, it's a plain chicken. You know, it's like this thing's going to run up. Who's going to get out first and suddenly we can do it with securities. It used to be with altcoins. So it's a bit different this time. But is the real fundamental is real capital coming in? Which it is, but it's not at the scale of the previous cycles relative to its market cap.
- [17:08]
Co-host
It's interesting because you have all of these treasury companies that are transparently raising money to buy Bitcoin, but a lot of them haven't even gotten clearance to buy. It's sort of cryptic as to who's done what, but you would think that there's this tremendous amount of demand. I guess on the optimistic side, you can say if there's been 120,000 coins sold and we still are at 112k or so as we're recording this, that's pretty good news. But you know, we're going to need a hell of a lot of buying to push to much higher prices. And have they bought? Are they going to buy? Are they going to end up having to puke if we go down and never even get to buy because their M Nav will be at a discount?
- [17:48]
Willy Wu
Yeah, yeah. It's a, it's interesting times. Interesting instruments right now. Certainly when the bear market hits, I, I think, you know, you're not allowed to.
- [17:59]
Co-host
Bear market's gonna hit Willie. There's never going to be a bear market again. They're illegal now.
- [18:03]
Willy Wu
All right. That's right. Oh, sorry. That's right. Some people believe in the super cycle. And I also said the last cycle. Last cycle. And then I kind of talked about this cycle. But I don't think that's going to happen anymore. I think we're just going to get a beer market. We're going to get a beer market. But this time I think it's different. Right. It's different in that we don't have the structural weakness as much as we did last bear market. There was a whole lot of. Obviously everyone saw it in 2022, then ending with FTX blowing up, but taking with it most of the big boys along the way, including Genesis trading. Yeah, and, and so there's, you know, I'm, I'm laughing now, but I was so disgusted. I felt like leaving the, the industry. It was terrible, but we don't see that this time around. But I think right now I think that it's the, the macro markets are going to have a downturn and it's going to bring us down and we're, we're more sensitive to liquidity. So we'll have multipliers on, on the downward league as well as with the upward league. So I think a normal cycle, you.
- [19:13]
Co-host
Know, assuming we do get this bear market, if the volatility will be dampened or at least the amount of drawdown, like you know, if our entire cycle here was 69k previous bull market high to 125 or let's even say 130, 140, whatever, if that happens. But we also just get a 50% drawdown instead of an 85% drawdown on the downside this time.
- [19:38]
Willy Wu
Yeah, that would not be nice. That would be really nice. I mean I'm kind of bidding on. I mean, who knows. But like I, I think we'd get. Yeah, I think we get down to below 40 at a guess. I think we get down below 40 actually. But I don't know, who knows? Like the main thing for me to look at is not to guess at the crystal ball at the high. I think no one can guess the high if you get it, if you're lucky. Because the tops very volatile, unstable. Because when, when liquidity drops away, you're just trading on just momentum. There's no liquidity buffer to hold that price up. So it could whipsaw because demand's dropping and it's pure speculation and that's very volatile. If you get the exact high, that's luck. The, the bottom is a lot easier and more stable because liquid is coming in and you can see it, it just sort of stops the volley, compresses because buyers are coming in, you know, buffering it. And when you see that, then that's the time to come back in, nevermind what the price is. I think knowing these price predictions are not really what you want to look at. You really want to look at the flows of capital when they're coming in, where they're waning and what the investors are doing. Yeah, and you can get led astray with, you know, looking at just the targets.
- [21:01]
Co-host
Yeah, so you said with pretty solid conviction. You know, we'll get sort of a macro bear market and bitcoin will go down with it. Do you think that there's a impending catalyst in your mind or it's just the normal cycle? I also agree obviously that we're seeing irrational exuberance in macro markets generally. Right. We see gold flying. That should be a signal that everything else should be going down. But they're all kind of just climbing this slow wall alongside gold, which we've never really seen before. And it just seems like nothing is as it should be for a Bull market, but we're still in one.
- [21:41]
Willy Wu
Yeah, yeah, yeah. When investors are really moving to gold, there's a lot of faith in the system that is dropping. So I don't know. What was the question?
- [21:53]
Co-host
Yeah, I'm just saying, like, do you think there's some catalyst that would send us into this bear market? Because, you know, we kind of joke now that it seems like they've pulled every single lever to keep things propped up, but gold is sniffing it out. What's going to be the thing that sort of, I guess turns it for macro markets generally. But also, do you think, you know, we have some sort of smaller FTX style blow up on the bitcoin side? Maybe a Treasury company?
- [22:17]
Willy Wu
No, I just think it's, it's going to be macro and I think maybe the tariffs really properly kicking in May, may be enough to, to kick it off. Yeah, we've had a bull market for a long time. Right. If you look in the. Not, not bitcoin, but since 2008 and there's a lot of debt in the system, I don't know if the U.S. government can stay solvent, you know, panning five, 10 years in the future. And I don't know, to me it feels like since 1971 to 2025. What is that? That's, it's over 50 years of, of government plugging holes from their overspending because they could. So somewhere along the way you cannot continue debase. You can see it in the fabric of society. You can see it in, you know, the average person, Mrs. Jones, you know, can she buy, can she afford? You know, it sounds like 15 of Americans are really struggling to put food on the table with two people working in the family. It's, it's getting out of hand. The fabric is going to fall apart. And so I don't know, like we're 55 years into this and you know, Lynn Orden would say nothing stops this train. They're going to continue print and this train's going to go off a cliff. And so how close are we to going off the cliff and people running to gold? Seems like there's some fears right now. Last time we had that was world financial crisis for was it four years to 2012. We thought, I remember trading those, those days and we thought the whole system might fall apart. Like actually the banks would stop and we wouldn't be able to get, you know, food on the supermarkets because there's no one could actually, you know, the supply chain breaks down. So the question is how close are we to that. And these are things I think about in the longer term scheme of things.
- [24:29]
Co-host
I guess the question then naturally there is if gold sniffing it out and many believe that bitcoin would behave like digital gold. Is there a chance in your mind that if we really start to see, well, start to see the debt continue to spiral out of control? Because we know that it already has. If bitcoin could actually switch narrative, not drop with the rest of the market and actually trade like gold.
- [24:56]
Willy Wu
I think that is certainly possible and I think, I believe it will be. But bitcoin's what, barely over 2 trillion. So it's one tenth the size of gold. And so it's like, you know, think of a boat that is a super tanker and then think of a boat that's 10 times smaller. It's going to get buffeted. Yeah, it's going to get buffeted. And so bitcoin needs to grow and needs to grow a lot bigger before it becomes stable. And it can be that sort of more stable asset. It's only just beginning. It's the newest macro asset in 150 years. And it's tiny. But the trading at scale, meaning it's over a trillion dollars, but it's tiny. The next ones are like, you know, you got FX markets, you've got, you know that is 100 trillion. You've got gold, 20 trillion, you've got real estate, 250 trillion bond markets. How many trillions is that? Hundreds. Hundreds of trillions. 300 trillion.
- [25:57]
Co-host
Yeah.
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Willy Wu
It's like we're talking, you know, big boy club and we're like the new sort of baby in town. And it's going to be pretty volatile. It's going to be pushed around a lot for a while, maybe a decade.
- [26:12]
Co-host
145.1 trillion estimate on the entire global bond market. That's pretty big compared to 2 trillion.
- [26:20]
Willy Wu
Yeah, yeah, it'll take 10, 10, 15 years unless you know, something breaks. Everyone runs away to bitcoin. But it'll take time. I think we bit conditioned from 2017 and prior to. But these things move really, really quickly. But we're in a different game now. We're in the trillions. And so you get the odd person that says bitcoin might hit 2 million and then you go wait a minute, you mean it's going to be like half world of gdp, half of all equities on the planet? Double two and a half times gold in this bull market. You know you're getting into the limits of the size of the economy here. Now, so it'll take time.
- [27:11]
Co-host
Remind me when you got into Bitcoin.
- [27:14]
Willy Wu
2013. Near the top, actually, dear Cat Bounce. So, December. Yeah, December 2013.
- [27:22]
Co-host
So when you started, did you ever think that conversations on podcasts would be about BlackRock and a Bitcoin president and the president's family launching tokens and mining companies and bitcoin treasuries and meme coins? How far off your bingo card is the 2025 that you envisioned when you started?
- [27:49]
Willy Wu
Yeah, well, I didn't have any understanding of any of this. Right. Like even financial markets then. I was more of a tech guy and I just thought, see, look at the MP3s. They went from MP3 encoded downloads by a few people on the Internet and now we've got the ipod and now that's mainstream enough. And it took 12 years and I figured, gee, 2013, this feels like ripping a CD onto MP3 and uploading to websites that other people download illegally. And it felt like that kind of thing. And it wasn't ready for prime time, but maybe 12 years, you know, 2025, it would be mainstream. And I didn't know what that would look like. You know, I'm not a finance guy back then, but more or less it's kind of hit it. So it's hard to think about the details, but on the broad strokes, time wise, it was about right. I think that's why I kind of bought one Bitcoin because I didn't want to be pissed off if that happened. And I saw it and then I walked away and carried on doing my thing until much later to really research it, but that was it.
- [28:59]
Co-host
So I guess a broader question is this level of government adoption sort of personal profit from the president, do you see it as a net positive for the asset class? Do you see any hidden traps there? I can tell you my, my view is that obviously having like positive legislation versus the last four years in a positive view is, is good, but that the family involvement maybe is not as good. So it's, it's a bit of a, you know, a difficult question. But I mean, yeah, I mean, persecuted at all times for being in the asset class.
- [29:37]
Willy Wu
Yeah, I know, it's, it's, it's made it like seeing this cycle. I think Larry Fink was the big one. Yeah, because Larry Fink is like, you know, he's, we're talking about decades of, of, of stability here with BlackRock, you know, where the president is a four year term thing. And I wonder how much, you know, an opposition would try to turn over, you know, what has been done so far. But you know, I think what's happening right now is, and I said it a long time ago, before the election cycle, three years before election cycle. I said it's really, you know, it, the point, the, the thing is there's enough wealth in this industry that you can lobby and, and effectively fund, fund politicians on policy. And I think that's what's happening. Right. I think that there's a number of like, you know, I think Coinbase was, was very, very particular like very visible on that. They were very much showing the list of the senators that were against and pro stuff like that. So I think that, that, I think a lot of that is, is, it's the, the cohort of bitcoin and crypto voters have grown in, in the, in the, in the, in the population. So it's, it's got its own defense through the political system.
- [31:06]
Co-host
What else is on your radar? Like, you're obviously an active trader. How are you approaching markets in general? Is there anything that you're really excited to trade in this environment?
- [31:19]
Willy Wu
Yeah, I try very, very short term. It's almost like market making sort of stuff. But then I also, yeah, it's not quite arbitrage. You know, I sort of like try to buy the dips and you know, mean reverts up a very short term tactical. It kind of looks like a market neutral yield. The long term stuff is mainly I really want to make sure that I'm in cash. Don't tell the Hodlers, but I think the Hodlers are onto the right thing to hold. But I've always done best when I move to cash and just sit out the mayhem. And maybe I'm wrong, maybe I'm wrong. Maybe this wishful thinking that we had a beer market and it goes up forever. Laura. But like that I'm looking forward to, I'm looking forward to a bearish market also. And you know, it's usually the long term trades that are the best, like you call them investments. I'd say moving out, moving back in. And you know, I'm, I'm a builder, I'm building stuff. Most people don't know what I'm building, but I am building stuff in the bmo.
- [32:36]
Co-host
You hit it here first.
- [32:38]
Willy Wu
Well, we've already built the Crest line of products, which is three institutional funds that get you yield on US dollars, one which gets you yield on bitcoin, one that's institutionally sort of hardened to work with a Swiss private bank for their Investors. So this is like you could think of it as like, you know, all these earned products, but this is how it's actually done. They would give the money to a whole bunch of traders and try and trade it. Like there's a whole institutional thing about it. And it's a funder fund. So that's been last three and a half, three and a half years. And that's my learning and trade fight. And now I'm moving into building, let's call it a credit fund. So basically tapping tradefi and grab capital, fiat capital and giving it to bitcoiners, right? Lending it out to bitcoiners who want to use their bitcoins and doing it in such a way where they have a private key on their collateral so they know it's not no hanky panky, it's not being moved around, it's not being rehypothecated. So I want to get a profitable business that's working to make use of this bitcoin and have bitcoin self custody because this is the type of lending we'll do and I want to promote self custody. So that's what's lighting me up right now. Haven't announced the product and they say.
- [34:10]
Co-host
That all the builders relish the bear market because everything calms down and you can actually build in a bear market when everybody's not insanely euphoric looking at prices. So I can understand why you'd be looking forward to a bear market in that perspective. I also like it's so triggering to obviously bitcoiners when you talk about looking forward to a dip. I don't know if I look forward to a bear market or not, but I still have cash and I would prefer to buy bitcoin lower than now if possible. I don't know why that's such a jarring sentiment. If you're not selling tomorrow, shouldn't you want lower price?
- [34:49]
Host
If you're one of these people who.
- [34:50]
Co-host
Says I'm going to hold forever, shouldn't you just want a permanent bear market to give you tons of time to buy a bunch of cheaper coins?
- [34:57]
Willy Wu
Well, maybe not permanent but like I know that if like the, the true bitcoin is like I, I remember the seeing the price pump, right? And I think it pumped to a hundred thousand or something. I was like from 70 and I was like damn, it went up again, you know, and because when you're sure the trajectory you kind of like the lower prices because you can stack more. And so I think we should celebrate it Coming back down because it's another opportunity. Yeah. Like if you're confident in what you bought, if you've done the research, then every bear market is great. You can wind back time, you can wind back the clock and get some more.
- [35:39]
Co-host
Right. So clearly you're focused on building institutional grade products around this. So naturally you believe that that's where the puck is moving as far as where the big money is going to come. Right. So who do you foresee when you're building all these things as your potential customers? Where do you think that money is going to come from?
- [36:03]
Willy Wu
The, I mean look how I answer this is the, the money that we're seeking fiat, right is, is going to come from trade fire traditional investors who want Yield on their U.S. dollars. And currently the market for U.S. dollars in our industry varies between 10 and 16%. All right. That's well above the risk free rate. It outperforms SP 500 and with zero volatility, zero drawdown. So it's incredibly great for them. And so that's one customer. The other customer is the bitcoiners who are getting 20, 30, up to 80% annualized return on their Bitcoin over a four year cycle depending on where they put it in the cycle. So it makes sense for them as well. Just you know, those two should load balance. Bitcoin's multi trillion dollars and it's getting bigger and it should get to the tens of trillions, it should get to the twenties of trillions and there's infinite fiat being printed and the fiat in the system is 100 trillion. And I think that like this is great. We've got a business here for multiple decades and I want to empower the bitcoin ecosystem, make it use. I believe that we've got two choices right now. We're going to move towards central bank digital currencies basically lock in this fiat debasement forever into a totalitarian sort of pretty nasty 1984 scenario. Or we have fair money and a lot of this burns to the ground and we have freedom and so freedom of our finances. So those, it's bifurcating and I know what side I'm picking and I want to empower that side. So it's mission driven as much as anything.
- [37:55]
Co-host
I'm trying to find the quote. I don't have it right in front of me but literally today a Russian minister said that he was outraged that the United States was going to basically use stablecoins to like I wish I had the exact words but basically to just shove all our debt into stablecoins and distribute it around the world to effectively, you know, democratize our debt around the world and get out of our debt problem. Because you really, it is interesting though because every time someone buys a stable coin, they're kind of passively buying a treasury or buying a treasury for them to do it. So you talk about someone in Venezuela sending 20 bucks to someone else in tether. Tether is buying, you know, 16 or 14, whatever the number is, dollars worth.
- [38:39]
Willy Wu
Of that to happen, supporting the U.S. government. You know, it's like great, you know, like China is no longer buying. In fact they're selling. And so someone's got to displace it. And it turn out if tether goes, if bitcoin goes from 100,000 to a million, that means tether is going to increase. Because it's the other side of the book. You know, tether is the, the gateway to our crypto ecosystem. Everything's traded against it, you know, the major, major markets on binance and defi. So you work that out and it works out that tether can displace China on the short dated T bills. So now you get a situation where the US government's dependent on the growth of bitcoin to remain, you know, solid. Siren. It's ironic. It's ironic.
- [39:28]
Co-host
Pretty astounding that the two killer use cases so far for blockchain technology are obviously Bitcoin, which is probably the greatest chance at hedging against the fiat nonsense and actually owning the future digital reserve currency. And the other one is digital fiat. To make fiat, the thing that bitcoin was created basically against spread around the world. Right?
- [39:54]
Willy Wu
Yeah, it does make sense though because you need an on ramp, right? You need an on ramp. And because banks never gave that on ramp, tether came birthed into existence and they sort of maybe abstracted that layer, juggling all the banks. Who's going to work with us, who's going to work with us? And so that became the Omram and they did that very well. They did an amazing job over the, you know, whatever it is, 12 years.
- [40:21]
Co-host
I don't think anything stops stablecoin adoption. It's such an incredible tool. And now that obviously it's been legislated, I think we're just going to get a, the growth of the existing ones, but we're going to just get more JP Morgan and Citibank and, and Western Union coins and stable coins in every corner of the globe. I wonder if we'll actually see successful stable coins on anything other than dollars. Though, because we really haven't yet.
- [40:52]
Willy Wu
Yeah, yeah, yeah. It's all around the US Dollar, isn't it? That's the other one.
- [40:59]
Co-host
Tether has euro back stable coins. But at the end of the day, when you're in some country, I guess, looking to use a stable coin, you'd rather trade a dollar than a euro, right? So interestingly, wouldn't make, would it make.
- [41:15]
Willy Wu
Sense to like, you know, you use the base layer of US Treasuries and US dollars. You know, if you've got a big, big sort of base there. Well, I mean, hedging is pretty cheap, isn't it? Wouldn't, wouldn't you be worth just doing an FX hedge? Maybe not sure.
- [41:33]
Co-host
Anyway, that's interesting, but I guess it just proves because bitcoiners, myself included, would say, ideally you would want people all over the world to run to bitcoin. But the thing is they still want dollars. And so like dollars are still way better than anything else other than bitcoin. So they rush to dollars and stablecoins give them the ability to do that. I've heard some crazy stories. I had a friend in Argentina and he said that I guess pre stablecoin that you would go to the black market to get cash in dollars and you would pay 2.3x premium to get it, but someone would basically send you money, a bank wire or something. You would get it in your bank account, you would cash out, go buy dollars, then you go back to the same bank and put the US dollars into a safe deposit box at the bank instead of into a bank account. So you basically use the bank as a depository for the safe deposit box with cash that you paid too much for to avoid being in your own currency.
- [42:32]
Host
Well, stablecoins do seriously solve that.
- [42:35]
Willy Wu
Yeah, it does. It does.
- [42:36]
Co-host
Yeah.
- [42:39]
Willy Wu
It's a great invention. Right. The reality is we're in a fiat world and everyone needs fiat to live apart from these hardcore bitcoiners that are using sats. And I don't know, you got to be a bit of a ninja to figure out how to do that. I've met a few, but it's not easy. It's not fully.
- [42:56]
Co-host
And there's, there's always a, there's always a way, but it is still very, very difficult to live your life entirely in sats.
- [43:04]
Willy Wu
Yeah, yeah. So I mean that's, that's the reason why, you know, dollars exist, stable coins exist and so forth.
- [43:11]
Co-host
So, yeah, I guess bitcoin can be your savings account and stable coins can be your checking Account you're spending and save in bitcoin and spend that dirty, fast digital fiat.
- [43:26]
Willy Wu
Yeah, pretty much. And I think it's also an emotional buffer. You know, like when the price really crashes, you can get excited because you can sort of rotate some of your buffer in or at least you've got Runway. I think like being too heavy In Bitcoin, like 99%, you can freak a bit because you can't spend your bitcoin. You've got to rotate it to US dollars or whatever the fiat is. So then you buy and it doesn't feel good to sell the dip. You know, you don't want to sell the dip. You want to have some buffer building.
- [43:59]
Co-host
So you can take a loan against it and never have to sell it. I mean, that's the end.
- [44:02]
Willy Wu
Exactly. That's, that's the whole point of it. That's the whole point of it.
- [44:06]
Co-host
So listen, you kind of alluded to the fact that we'll get a bear market. Inevitably that means we get another bull market. But when you started throwing out, you know, Bitcoin at $2 million or higher, how much of the global economy that becomes. Do you think that there's a ceiling in your mind to bitcoin price? I mean, you know, we hear this bitcoin will be a million by 2030 or 14 million by 2040. These huge monster numbers in your mind. What do you think is a reasonable, I won't call it forever top, but where does the, you know, how high can it go before it so big that the volatility is just dampened. And it, by the way, it would have to kind of stable out to be the global reserve asset. So that's not unreasonable.
- [44:47]
Willy Wu
Yeah, I look first, the price target is kind of like the wrong approach because it depends on the debasement. So unit account is you, you're measuring it in US dollars which is being debased and the unit account is distorted. But so I think of it in terms of the pools of capital. I generally money is one to one match with GDP and it seems like it's pretty close to one to one match with all the publicly traded equities around 100 and just over 100 trillion. So I think that would be a pretty good sweet spot. If bitcoin becomes the new money, then that would be, you know, equivalent to world GDP. 100 trillion. Maybe that's 200 trillion. Maybe it's, you know, a, you know, a gazillion like 500 trillion. You know, if AI, you know, the AI wave and you know, like all sorts of. Who knows? We hit the singularity in 2027 and. Jesus. So hard to think of in dollar terms. But I do think it's fair that money should be one to one match with world gdp, because that's what you're trading against. And then you've got to think about how much of that capital in real estate is just store value versus actually living in. How much of that would bitcoin take and so forth. So on the optimistic, I would think double world gdp. On the pessimistic, I think something like gold, which is one fifth of world gdp. One fifth of world GDP to double world GDP is the zone.
- [46:38]
Co-host
I'll take it. So anywhere from a million or $2 million of Bitcoin to a gajillion deflated US dollars worth of bitcoin?
- [46:48]
Willy Wu
Yeah, something like that, yeah. I'm the same way, being it's not useful, everyone, right? It's just like point of view.
- [46:57]
Co-host
It targets to 50 years in the future, should be super inaccurate and loose. And anyone who's telling you with conviction that they know where they're going is nuts. Yeah, I know. It's literally past midnight for you, man. And, yeah, I got to go run and get my kid. So I appreciate you staying up and taking the time. Willie, any final thoughts before I let you go?
- [47:17]
Willy Wu
No, no thoughts.
- [47:20]
Co-host
We nailed it, man. Go to bed. Thank you so much, Willie. I'll speak to you soon. All right.
- [47:23]
Willy Wu
Thanks, Scott. Cheers. Have a good one. That's dope.