← The Wolf Of All Streets
The Wolf Of All Streets
Gold Up, Stocks Down, Bitcoin Flat And Uncorrelated | Crypto Town Hall
00:53:55
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- [00:01]
Host
Morning everybody and welcome to Crypto Town Hall. Every day here on X at 10:15am Eastern Standard Time, at least every weekday. We have once again a day where the stock market is seemingly under pressure. NASDAQ 100 down roughly 2% last I checked. And bitcoin once again somewhat shrugging it off flat, doing very little, but clearly not trading in lockstep with what's happening in the markets. Dave, let's start here. What do you, what do you make of the price action or lack thereof for bitcoin?
- [00:38]
Dave
Well, it's constructive. I mean, you know, it's you, we talk about this all the time and you and I both, both know my opinion on the notion of bitcoin as beta to the stock market is, is literally absurd. But I think it's really important when you look at today's action to look at two things. First, gold. Gold. Gold is as Peter Brandt, who joins us from time to time on the space and is my favorite technical analyst. He sees gold as clearly showing signs of entering the blow off top phase of its rally. Gold doesn't go as parabolic as bitcoin or does, but a move in a $20 trillion asset of the size of this is quite material and it is definitely symptomatic of people losing trust in fiat and seeing what's going on there. Mark is here and he can talk about, I think his analysis is spot on in terms of the liquidity that's likely coming. And you're seeing that in the bond market not doing much, but gold going crazy. I think that's very symptomatic of that. At the same time, alts are following the Nasdaq and that kind of makes sense in a sort of a way. The NASDAQ is down because Nvidia basically told people, hey, listen, these tariffs are going to cost us money. What a surprise. Now does that change anything in its long term cash flow? No, but you know, investors are going to take, you know, take that and say, well, okay, let's slam the stock. And so that's exactly what's happening. You know, it really boils down to a very simple question. Will this trade war prolong itself for a long time or is this a lot of posturing and they're going to come to an agreement? And it really is that. And we've seen this story before. I think people are starting to become afraid that this time there won't be an agreement in the next few months and it's going to drag on and it will impact corporate profits.
- [02:30]
Host
I mean, I Think there was news that Japan was coming to the table for negotiations on a new trade deal. But you could argue that China is really the big elephant in the room. And we just went over the top again with a threat of 245% tariffs on certain things. It doesn't seem like China is ready to blink, right?
- [02:47]
Dave
I mean, look, I'm going to say it again. China is the only country in the world with refining capacity for rare earths. And the reason that's true is because rare earths produce in refining, rare earths produce enormous amounts of toxic waste. And you can say whatever you want about us building our capability, but unless we find some places where people are willing to have thousands of pounds of dovetail, you know, tons actually of toxic waste, or we figured out a new way to do it in a way that isn't going to damage the environment, you know, we have a problem and they know it, and so we're more likely to blink than they are. But at least that's my, my opinion. And unless we can figure out another source of that, because at the end of the day, that is the building blocks for all of modern technology, including, by the way, green energy, because you can't build a windmill or a solar panel without them.
- [03:42]
Host
Buzz.
- [03:44]
Buzz
Yeah, I wanted to. To go back to the take on gold. I had somebody ask me last week if the Democrats had won the US election. They asked me what I thought the price of bitcoin would be. And I thought about that a lot. But my, my answer was that the price of bitcoin might actually be the same as it is today without that pump to 108k. And when I was looking at the ratio of bitcoin to gold as well, I was looking at the ratio in October 2024 to now, and the ratio of bitcoin to gold is actually relatively the same. So my question to you, Dave, would be, can we kind of make the same argument to gold that. That bitcoin actually is performing similarly to gold, just in a different pattern due to the speculative nature of basically the election?
- [04:34]
Dave
Well, two things. First, there's no, in my humble opinion, there's no fucking way that's true. I think most of the buying that we've seen in bitcoin is coming from investors who wouldn't be in bitcoin were it not for the election, because the industry in the United States would have been destroyed by now. If you saw Nick Carter's article from yesterday about what happened to Silicon Valley bank and how that effectively killed signature, our industry was basically tossed to the curb. And four more years of Warren and Gensler would have forced bitcoin out of the United States. Would it eventually have bubbled up? Yeah, absolutely. But it wasn't going to happen soon because there's a lot of buying that's coming either in anticipation or from people in the United States who control vast amounts of capital that realize bitcoin is a strategic asset, that it would have been pilloried were that not the case. So that's just a pipe dream. Now, that said, your point about gold is well taken. I think bitcoin, once the price setters move from being the crypto speculators towards those patient investors, at that point bitcoin will start to perform more like gold. The only problem with that is it will has a lot of catching up to do because bitcoin is not even close to gold's market cap. And so you have that dynamic going on. As long as bitcoin is treated like an asset on its own terms, kind of in a vacuum, then you kind of expect this sort of price action. As soon as bitcoin starts to gain momentum towards being digital gold, at that point, you could see what that's when you start to get those parabolic potential moves, whether it's Josh Mann or Larry Fink or whoever that's talking about how that could happen. But yes, I think that it's what you're seeing is the buyers on the margin for bitcoin are steadily accumulating, and that's a lot like gold. The difference is in gold, there aren't any. There's no speculative sellers.
- [06:31]
Host
Zach.
- [06:33]
Zach
Hey, what's up, guys? Yeah, so I wanted to kind of speak to what's going on with kind of Trump's plan for strategic reserves a little bit that came out recently. And then at the same time, there was some interesting news that came out with China as well. So I don't know if you guys saw this, but there's some speculation that maybe a portion of the revenue in from tariffs could be used to create the bitcoin stockpile or strategic reserve, which is interesting, right, because it's newfound money. It's not like recycling old money, which I think that could be one of many strategies. But interestingly enough, at the same time, China is selling seized crypto. Of course, China holds 194,000. BTC to the United States is like 200,000. I mean, they're basically neck and neck top holders. But it's interesting because on one hand you got Trump trying to accumulate perhaps by way of tariffs. And then you've got China, according to Reuters, they're using private firms to sell crypto to cash, to fund, you know, public budgets. I just didn't know if anybody had any thoughts on that. Is that. Am I looking too deep at that, or is there something interesting there?
- [07:48]
Dave
I didn't.
- [07:48]
Zach
I just wanted to bring that up.
- [07:49]
Host
It's a worthy topic, Zach. I think so. It was Bo Hines, obviously, that said that I haven't seen it really mentioned beyond that level. And I think there's a pretty big consensus that using tariff revenue would be probably better spent to deal with the debt than to buy bitcoin. But I guess we'll see what happens there. I can't speak to the Chinese selling, though, and I hadn't seen evidence of that, so that's really interesting. Also, I think it's important to note we still don't know how much bitcoin the United States has. And we're, I think, 30 to 50 days now over. I think it's 30 days over the timeline that was given for that audit, which we haven't seen, which is a little bit shocking. And also I think worth noting that even if we do hold about 200,000, half of those clearly belong to Bitfinex. Right. Because the Bitfinex made all of their investors whole. That was hacked and should be returned to them. So I would say the United States, in ways of what they actually have, is probably half zillion. Go ahead.
- [08:50]
Clinton
Yeah. I think the misunderstanding about China here is that China owns, historically and still owns assets via its citizens and via companies owned by its citizens. So China might not declare that it has certain amount of crypto held directly by it. But as China demonstrated with Jack Ma with several instances, China is a state where its citizens, whenever they have companies overseas and they're holding whatever China would see as strategic to it, when it's time to move on, on the assets, they will. And this is what needs to be understood. So the next question would be how many Chinese citizens that are members of the party run the crypto industry? And it's probably 60% of the crypto industry is run by members of the Chinese Communist Party that run the crypto industry. They're located all over the world. They might have second, third citizenships, but they're still members of the parties and their families are member of the party. The family lives in China and have very tight connection to Chinese and, and this is their right. I mean, we cannot remove this from. To the. From them. They have the right to to, to, to have allegiance to their, to their, to their mother country. Right. So the fact that you have the fact that China does not hold directly bitcoin and does not publish that it holds bitcoin exactly like the US has to do. It's because the US Has a lot less reach when it comes to the free prop. To the, to the personal property of its citizen. The US Cannot seize an American citizen just because he's American. China can. So that's, that's. This is, and this is one of the misconceptions that we have about China. Every single China is one of those states that, that its citizens have allegiance to it. Secret, secret allegiance, public allegiance, whatever allegiance. It is there and the link is there and China knows that it has access to all the crypto it wants. Right? So, so it doesn't have really to hold. As long as China produces very good entrepreneurs that built very good companies for, in which people hold and deposit bitcoin. China is, has control over a lot of the supply of the bitcoin. That's why you don't see them deploying this as a strategic plan. That's what I have to say.
- [11:23]
Host
Anybody else, specific thoughts on bitcoin in China and the United States, or should we talk more generally about China and the United States? Mark just jumped down. I was going to ask him this question. Henrik, what do you make of the current status of this trade war? Do you think that either is likely to blink soon? Do you think it's a negotiating tactic? Where do you stand?
- [11:46]
Henrik
Oh, coming from the, from Denmark, coming from Europe, it's difficult to say what, what happens with, with that. But, you know, as I see it, I think we are, yeah, we're definitely seeing some kind of a tactical move, trying to negotiate through force or something like that. That's how I see it. And yeah, again, I don't think anybody will benefit from this in the long run or even the medium run. So I think there will be some kind of agreement at some point. So that's at least what I'm waiting for. And I can't see this carry around for four months or anything like that. I think it will be resolved, but I may be naive.
- [12:23]
Host
Mark, what do you think?
- [12:27]
Mark
Yeah, I think there's going to be resolution, but I think the damage is done. The thing, the two areas I point to is first said Atlanta GDP now which we're all waiting to see if it materializes. But for the team, you know, Dave is talking about gold at the outset here. That atlant GDB Fat and you know, people, you know, flash the signs if you have seen that number as low as minus 3.8 for Q1 and I think somewhere between like two and a half, 2.3 now. But gold's imports drove that number like 80% of that negative number. The largest move that in GDP now is history outside of I think Covid. So that's the number one thing that we're going to have a negative quarter. So that's one of two. And do we have a recession? The other one is the cost shift to Germany and Europe. That's done. So I think there's a 20% inflationary ratchet caused by tariffs that will not be rolled back even if we get a quote resolution. And he says just kidding, you know, plugging the electrical thing back in like in that movie airplane when they were trying to land it in in that crash landing scene. So I, I, I think you can't have it back the way it was. We still have an interest expense issue and that's not going away. How do we get rates down to 3.8% which is where they have to go in order to have minimal increase in interest expense. No idea how we get that without a recession.
- [14:01]
Host
And we have pal today. We have pal speaking today at 1:30.
- [14:04]
Dave
Right?
- [14:05]
Mark
Yeah. And so I'm going to say that that is going to be the most innocuous speech that he can give. There's no way he can say we're entertaining unless Scott or anyone here thinks differently. We're entertaining. Yeah, yeah. There's no way.
- [14:23]
Host
Yeah.
- [14:23]
Mark
So that's, that's my thought is, yeah. Is, is that there's going to be a permanent hurdle or a speed bump in our economy and trade that's going to be borne by companies and consumers for the foreseeable future after this.
- [14:38]
Host
Matteo, I know you had your hand up. Go ahead.
- [14:41]
Matteo
Hey, yeah, I agree with that sentiment. If you pay attention to social, there's just so many small businesses that are putting up notices that they're being forced to raise their prices as a result of tariffs and trying to get the inventory off their shelves. This is pretty notable. I mean this is already starting to be felt. I think it's kind of interesting that we had like the anti war mandate from the Trump administration then start to leverage a global trade war with like every country, but specifically China. For an administration that really prided themselves on like sitting down and talking with people who didn't agree with them, I think it's really important that they resolve this situation with China because This is. These back and forths are getting crazy. There is a report supposedly from Reuters that China, local governments sold or planning to sell 15,000 BTC worth about 1.25 billion. I think that anything coming out of China has been continually hard to verify. We always get these posts that say China says. It's like, who says that? I think that this is becoming extremely muddled. So I think something that's really clear signal is, is very important for the markets at this time because we're just getting a lot of hearsay, a lot of speculation and it's really hard to verify. But what we do know is that small businesses and consumers are feeling the shock. And I think this will only continue.
- [16:18]
Henrik
Yeah, and I agree with that. But I think the point here is also that if you look in the greater economy and you look to the housing market, for instance, you will see actually that there's been a slowdown in the economy for quite some time. And I think that what we see now here with the tariffs coming in as well, they will have us, you know, on a single product, you know, and the initial impact will be inflationary. But the bigger pressure on the consumer will be that you simply have to shift away from these, you know, lower, less, less expensive products that they can buy from overseas and then into more, you know, expensive ones that will probably be produced in the US and you know, the whole bigger macroeconomic picture will simply be then that you have the housing market that has been slowing down for quite some. And then you'll see also that the demand also for, you know, products will be, will be moving down and there'll be a pressure on the economy. So we are definitely moving into a phase there where the economy will be slowing as a, as a, you know, as a consequence of this. Obviously we would probably have been moving in that direction either way, you know, even without the tariffs. But I think this is something that can put kind of a fear into consumers and holding back some more, which is absolutely not what we want to see if we want to avoid any kind of economic downturn.
- [17:35]
Host
Marcus, you're given 100. Do you obviously agree there.
- [17:38]
Mark
Yeah. That you know, we go back to the consumer and the comment by. Was it dalio about the US having 1% unicorns, 10% of the population drafting off of them. That's where all the wealth creation, innovation and growth is happening. And then you have 50% of the country with a sixth grade education talking about AI and, and where we're going to go with that. So kind of looking at that From a current standpoint, look at all the credit card balances increasing and increasing in rate. Who's the credit card company that's buying? Discovery Capital One. I mean, their model is like a sausage factory. They're just squeezing people, cutting off when it gets too bad, taking assets. It's a wonderful business, but we're not looking at the other end of it. You know, people are finding themselves at a very high rate. So I, I agree that any price increase there's very, the marginal impact is, is the consumer is very sensitive, is my point. And when you look at the Fed data on credit card balances and charge offs, you're going to see that.
- [18:56]
Host
Does anyone want to take the other side of the inflation argument with tariffs? Because I've seen some very ardent defenders of this will not be inflationary.
- [19:10]
Mark
Bueller, anyone?
- [19:12]
Host
Yeah, man, I'll take it.
- [19:15]
Dan
I'll have a go. Yeah, I mean, look, if you look at the inflation numbers that just came out of the UK and just came out of Europe, the lower inflation is going lower, you know, so the numbers there seem to indicate that it's going lower. One of the things that Trump and his supporters have said is that inflation, the effects of inflation, not necessarily inflation itself, but the effects of inflation could be offset by the reduction in taxes. That's not going to reduce inflation. I agree, but the effects of it are that oil is lower. Oil is a big driver of inflation that's trending lower the risk of a recession. People are delaying purchases and reducing their outgoings. The wealth effect of everyone seeing their 401ks and their stock market portfolios being wiped out means people have less discretionary spending or if they have the money, they're not spending it. So they're also delaying purchases or not making purchases. There's a lot out there to say the direction of inflation not going up is a viable path. Come to my head. I would say that, yeah, I don't think inflation is going to rip anywhere near like the numbers that people have been saying. I would not be surprised if we see inflation back at 3% by the end of the year, 2% by the end of the year. If you look at truflation that tracks inflation. They've been saying the real rate of inflation has been really, really low for a while and the official numbers haven't caught up. So I would definitely take the other side of that. I will take the other side of that, that I think inflation is going to be lower than people are projecting.
- [20:54]
Host
Yeah, I think that that can go both ways. Jump to the panel. But we can say that inflation has been going down, but the tariffs haven't kicked in and could be inflationary. So I think we can kind of have both sides of that. Right, Henrik, go ahead.
- [21:08]
Henrik
No, I definitely agree with Dan there. I think also that it's a misconception to see that this will actually increase inflation. Actually I think it's hugely deflationary and maybe I didn't get that expressed just before. I think that you're seeing that the consumers will be pulling back and when they pull back, that is actually the real driver of inflation. And absolutely also agree with that in terms of oil and in terms of IFC rent prices and so on. So what we are seeing is that we already had that slowdown on the economy with the housing market. We can look at the housing market is like frozen solid and at the same time now there'll have people starting to fear that you get inflation and that will then keep their money in their pockets, which is then decreasing the consumption in level, which is deflationary. So I'm 100% on Dan's side there saying I don't think talking about inflation at this point here is looking at the wrong direction. This is deflationary. And I think that the Fed is very much aware of that. And also if it starts to when labor market is also starting to cool off, which I think we'll see in the coming months, well then it'll be even more so. Definitely. Also on the more deflation, disinflation, deflationary wagon as I see it here.
- [22:23]
Dave
Dave was that Dave? Yeah, well, it's the type of inflation that matters and there's a lot of cross currents. I've had been having these arguments for longer than most of the listeners have been alive. I really distinctly remember in 1983, post Volcker having discussions with macroeconomic professors about this. The goal of the government is to maximize asset inflation while creating minimized consumer inflation. The problem with the tariff situation is a shock to the system, which goes directly to consumer inflation first. So things like you were talking about, I mean that first world problem, I know, but like, you know, my pool service for my house in New Jersey, tiny little pool, you know, 20ft long. It went up from, you know, $2,400 to $3,300 to service it for a year, you know, for the summer. That's a huge increase. And it's because of all the pool chemicals and all the other stuff that we import. You know, that's a major shock to people. And that's going to cause people to pull in their horns because they have to. People are going to be making decisions, they'll be able to afford it. That said, it's kind of a one time shock. If you look at the sentiment surveys, consumer sentiment surveys were I think last month or the most recent one was the literal biggest drop that we've seen. And I think that included Covid because the way consumer sentiment was, that is a huge deal because what really drives inflation and what happened in the 70s was inflationary expectations went absolutely crazy. So people who look at this and say, well this is going to be like the 70s, we're going to get stagflation. I mean maybe, but not the same because the inflationary expectations in the 70s were huge. People were demanding wage increases, strikes were all over the place. And so that filtered through the economy. That's not happening now. There's like none of that people don't expect. People expect higher prices on things they have to, they have to buy, but they don't expect that they're going to make more. And so it means that's why truflation is showing what it's doing. On the other hand, the government wants to see the long bond go down. They want that consumer inflation expectation to be lower and they want people to buy it. And we know they want any inflation that happens to go into assets. Well, what's the lever there? It's liquidity. And Mark, I'm teeing you up now, but you did a little piece this morning and your hand is up. Great. So you should talk about it. You know what's going to happen in terms of liquidity because really if you're listening to crypto Town hall, what you really care about is your bags. We all know that.
- [25:06]
Host
Right.
- [25:07]
Dave
And, and that you know, the M2 drivers and the drivers of getting liquidity into the market is what people really care about. So Mark, go for it.
- [25:17]
Mark
Sure. And, and this is Pal mentioned it, you know he, in one of his two or three town halls that he's doing, I think it was in Argentina. We have the tools and then ask what they are. Well, we have them and I think the slr, it's been talked a lot. That's one of the easier ones to do where they suspend the leverage ratio and allow banks to purchase it. Then it's not really on the Fed's balance sheet per se. So that's, that's one thing the, you can't tame the beast in the back end. They can do all they want the front end, but they're going to have to be buying some longer dated Treasuries. They can't do everything in the front end. The front end is bid. T Bills 1 to 3 year Treasury ETFs have seen inflows at multiples more than they took in the prior 3, 612 months. So the front end is bid, but they still have to do the back end. And if they, if that thing fluctuates the move index and the 10 year is Besson's report card and that guy's competitive. So expect something regardless of what happens to tariffs to tame. And the other part about inflation, I hear you guys about oil, tremendous deflationary impact. But Even in the UK today that 7% number on rent is kind of persistent. It's decelerating, but it's increasing and it's 7% in, you know, year over year increase. And I think that the basket that people have of CPI of rent and owner's equivalent of 35% is a frac is a fraction of the reality. The majority of people are paying 50% in rent. So that 7% increase is just chewing away value. And again, back to credit cards, they don't have any liquidity. So I see two inflationary deflation, inflation and I'll stop there. Thanks guys.
- [27:20]
Host
As Dave said, since this is crypto town hall, people obviously are concerned with their bags. And Dave, as we know, that's highly correlated to this liquidity. So I guess the question if we all expect that Powell is not going to cut and nobody's anticipating massive QE at the moment, where is that liquidity going to come from? Clinton, you can go ahead and take that one or give whatever comment you were going to.
- [27:46]
Gav
Yes, thank you very much. You know, we're talking a little bit short range and long range on your conversation. I think long range, I think Trump has a significant tax strategy which is shocking, actually. I mean we're talking today is the day after tax day. But you know, the Secretary Lutnick is talking about no taxes on incomes under 150,000, not clear whether that includes Social Security, Medicare. He's talking, the Secretary of Treasury is talking about reducing corporate taxes below 15% which is radically low and lower than the OECD standards. And Eric Trump is talking about eliminating capital gains tax on all cryptocurrencies that are US based. And all of these things affect us as crypto investors. And I, you know, I'm trying to pull the threads together, what they're trying to do. I believe what we're going to see is a lot of proposals next year from the Republicans about these very topics. And it's going to be an election year topic that, you know, you basically, if you vote Republican, you're slashing your income taxes. If you vote Democrat, it'll be more of the same. And I think the pressures that have been discussed on the consumer are going to be all the more acidated next year. And so it's going to be an extremely compelling argument that the Republicans are going to have to say, if you vote us in, we will slash the income tax. And that would of course be starting to happen in 2027. When that happens, that's an immediate pay raise for everyone. Let's just, you know, let's say your tax rate is, you know, 20. Let's just say it's 25% for conversation's sake. Not to mention federal or estate taxes, but you're getting 25% pay raise in your take home pay and your employer, it doesn't cost him a dime. So everybody's a winner and costs stay low to the consumer. So this is going to be extremely attractive. I think it's a very compelling political case. But I think it's also going to be now question is, is that inflationary? If you want to have that discussion, I'm not so sure. One of the issues one of the person's brought up, you know, what's the purpose of government? Well, I think what this move here about eliminating income tax is basically saying the purpose of government is not to suck off the, the wealth of the people to feed its existence. And it basically is a pushback on that, putting more money into people's back pockets in a very dramatic and significant way. The moment Congress and the president sign off on reducing income tax, the next week on your paycheck, you're going to have more money. I mean, it's, it's very compelling. When this happens, it's going to put significant, be a significant attraction for people from foreign countries to want to move to the United States to work, which coincides with Trump's intention of trying to bring more business to the US and it'll put radical pressure on foreign countries to slash their own tax structures, which are typically taxed higher than the US Already. So it's going to be, you know, how that affects the economy is going to be incredible. And it's going to be very dramatic. I mean, we're talking about the restructuring of the financial system. If, if Trump is successful in these changes he's making.
- [31:15]
Host
Yeah, Clinton, I think those, those are Great points. But the issue is that Lutnick seems to be out on an island with those ideas and they seem to conflict directly with what percent is saying about these being negotiation tactics and Elon Musk out there saying we need to have free trade with zero tariffs.
- [31:33]
Dave
Right.
- [31:33]
Host
So I think the problem has been the sort of confused messaging from both sides. I don't see a way where they raise enough with these tariffs and that, that eliminates. True. I mean, and to be quite frank, we need to worry about the debt. So if anything, and they were trying to raise more money, you would, you would raise taxes and tariffs to service the incredible debt load. So it just doesn't make sense to me. It's over my head.
- [32:05]
Gav
Well, the things that Trump has said during the election was basically zero, no tax on this, no tax on that. And I think he lets the various secretaries say what they want as trial balloons to stimulate people's interest. I think that's, I mean, he's certainly clever enough and a marketer. So I think that I think we should accept these as trial balloons. And they're, I mean, we, they had floated the idea of the savings from doge. No, we'll give everybody a five thousand dollar stimulus check. You know, you haven't heard that one for a while. I mean, they're floating these, these test balloons out to see what happens.
- [32:42]
Host
Stupid. When you have $36 trillion in debt.
- [32:45]
Gav
I would say so I think it really remains to be seen. In order to make their case next year in the election, they have to prove that they've slashed immense amount of waste of poorly spent money, which is what the DOGE has been working on, and can slash a significant amount of the employees in the government to reduce the cost of it. I mean, right now we have roughly a $6 trillion a year budget. We have the IRS brings in, which is the revenue supplier of the government, that only brings in about 5 trillion. So they need to slash 1 trillion just to get balanced. Can they slash more? You know, hard to say where the dust settles, where it's going to be next year, but it's going to be a very attractive conversation. I think it puts the whole topic of inflation and personally, I think if they go with the whole elimination of capital gains, which I don't think they can eliminate capital gains unless they eliminate something for the lower income people, because 75% of all capital gains are for the top 1%. So I think those two kind of go hand in hand. If that does happen, if they do, I mean, come up with A zero capital gains on US based blockchains. This is, this is going to be a dramatic effect. It's going to. Basically every asset in the world is going to get tokenized in the U.S. all transactions will happen in the U.S. and U.S. will become the unquestioned ever financial leader of the world. And when that happens, all assets are us. US will then turn into the. It already is the biggest tax haven in the world, but it's going to become the all time greatest tax haven in the world if they slash income tax because then they won't tell foreign countries about who's buying and selling in the US So it will track more business in its tax haven status as a bully.
- [34:33]
Host
It'll probably also have massive selling of bitcoin. Massive selling of bitcoin.
- [34:40]
Gav
But yes, well, yeah, I think it'd be. Jerome.
- [34:42]
Host
Yeah, yeah, massive. If all of a sudden capital gains taxes were gone. Dave and then Henrik, then Amateo.
- [34:50]
Dave
So I think there's zero chance of any of that happening because it all has to go don't go through Congress. It's not something the President can do. So what could happen though is there's some grand bargains out there that people are kind of mumbling about. But nothing's really happened yet that the. And you only hear any of this until next year. So let's just understand that because this year is the year for messy trial balloons getting doing the shit they need to do. In terms of Doge, what. What's really surprising is he hasn't been able to get Congress to codify any of the DOGE stuff. We're still dealing with all these federal lawsuits. So, you know, that's kind of a big deal. But there is an answer here. And the answer is a grand bargain where they enact cap, where they cut the capital gains tax rates and maybe have graduated rates depending upon what sorts of assets they are, US versus non US et cetera. I don't think blockchain is gonna pass muster for that. For the exact reason that you just said. Clinton. It would be an arbitrage. Everyone would tokenize an asset just to get lowered to capital gains rates. I don't think that's gonna happen. But what will happen in all likelihood is they will start taxing loans against appreciated assets at the capital gains rate and they'll cut the capital gains rate. The net effect of that would be massively revenue positive and that is decreasing the deficit because the vast majority of capital gains are from billionaires who don't actually sell their stock. And so they can calibrate that to be revenue positive. That was.
- [36:22]
Host
Ackman floated that. Right. We discussed that before, but that was one of Ackman's tweet storms.
- [36:27]
Dave
He's not alone, though. The point is the people in D.C. people in D.C. are aware of this stuff. And so these are the sorts of policy wonky things that are underneath the surface. The other one is eliminate stepped up basis and drastically cut the inheritance tax or maybe even get rid of the inheritance tax. Because if you. And for people who don't know what that means right now, what happens is if you're a billionaire, you borrow against your stock, you die. The person who gets to inherit your stock now gets it at the cost that it currently is and they can sell it without tax consequences and pay off your debt. That's ridiculous. That is actually the only topic.
- [37:04]
Host
Buy, borrow, die. Buy, borrow.
- [37:05]
Dave
I probably agree with Elizabeth Warren on, and maybe the only one I agree with her on that is a billionaire tax loophole and that is insane. But at the same time, the inheritance tax kills family businesses and small and farms, etc. Etc. And there is definitely an undercurrent in the administration to get rid of that. Now you could do all of that and that would once again be revenue positive and pro growth. You know, these are the sorts of things that they're gonna, that they're gonna ultimately settle on, but they need Congress to go along with it. And things like no tax below a certain, you know, basically raising the minimum deduction, you know, no tax on tips, that, that kind of thing. No tax on overtime, that sort of stuff, those populist notions. My guess is that they do propose that and they. And they use some of the revenue from the stuff I'm talking about to get there. You're not going to hear a damn thing about that until close to a year from now, because they want that going into the election. You know, that's. It's a sad fact, but, you know, everything matters. They need a bigger. They need not to lose Congress because if you lose the Congress and you're the Republicans, you know that nothing, everything draws to a stop because a Democrat Congress will spend their entire time trying to impeach Trump. In fact, they're going to campaign on it. Their only campaign issues that they have and have had for the last two years or three years has been fighting Trump and abortion rights. That's it. Of course, if I were in the Republican Party, I would take away both. I would take away abortion rights as a topic too, but that's A topic for another day. They're not going to do that. So that's the stuff you have to deal with. And in the meantime, we have this food fight going on in the administration that causes markets to go up and markets to go down based upon who's saying what. I mean, we've seen that. Right. But you know, it really what will actually end up mattering is the tax policy is all this other stuff and the liquidity that will come in. Will the Federal Reserve blink? Will they see economic numbers that allow them to do so? Will the inflation effects in expectations and future expectations be enough for them to inject liquidity, cut rates? I actually think they're not going to cut rates, but I do think they're going to pump liquidity, which will be fine from an asset point of view.
- [39:15]
Host
Henry?
- [39:18]
Henrik
Well, I hate to be the boomer here and also maybe not understanding the U.S. you know, quite as intense intensely as the rest of you guys here. That seems like, but, but again, I think that the whole thing that you will see a new world arise where, you know, income tax below a certain level will not be needed and there'll be, you know, a supply, substantial amounts coming in from tariffs or and things like that. I think I, I honestly don't believe in that. I first of all, tariffs have shown historically that they will not, probably will not generate revenue. So anything that, you know, does generate any surplus revenue from what you have seen from the, the, you know, the, the system that you had before, if you go back to the, to the whole tariff situation around in the 30s also, you saw exactly that, that even though there was, you know, a lot of tariffs in introduced, you saw actually that the revenue, the total income to the government was actually declining. So I don't believe in that. And I think also that if you look into the, if you look at the fiscal deficit that you have in the U.S. at this point, starting to talk about reducing taxes here, you need to be very certain that this doesn't develop into inflation. And the problem is that for a long time we have been in a lot of money have been introduced to the system into the economy through all quantity of easings and whatever have we. And this has put a potential time bomb into the system, into the economy, which means that if you at some point start to also now have more fiscal stimulus that like what we had in Covid also then inflation will become a problem because people are going to spend that money. And the problem is that there is a demand and a supply and if demand goes up and the supply can't follow for many reasons. Also because of tariffs or because of maybe less trade in the world. Then you'll have inflation in introduced to the system again. So right now I don't think inflation is a problem, as I said. But if you do start to do and you know, fiscal stimulus, that is a fiscal stimulus. If you reduce taxes like that on the, on you know, lower incomes or something like that, that will trigger inflation as well. There's no free lunches in the world. That means that even if you reduce those the taxes, it's not like, you know, wealth will fall down, there'll no mana come from sky. That means that people will spend more the bigger, you know, pressure on the supply chains which then means that there will be price increase price increases which is inflation. So I don't think that there is any something new coming to the system here. And I think this is. There are trial balloons going up. Yes. But I think by the end of the day, and maybe I'm a boomer, it will have to be about, you know, a sound solution where you know, taxes are paid and it's a, you know, and the revenue needs to come into the, to the, to the, to the government in some form.
- [41:59]
Host
Amateo then. Mark?
- [42:02]
Matteo
Yeah, it's hard for me to not think that all this tax conversation is just wishful thinking, especially since Congress has to be involved. I don't know, I just hope we get a simplification of the code. That's all that matters to me because I think everything else is just speculative. I don't think that the Fed has a mandate. They're pretty unwavering towards this mandate and everything that I've seen of Powell and we'll see today. But it's pretty clear that they look at tariffs as potentially inflationary. I haven't seen deflationary comments from Powell or the Fed in addressing this. Maybe in a little bit of gdp, but not an actual felt inflation and market conditions. But I would say that I think one of the headline news of the day is bitcoin dominance just skyrocketing to 64%, 69% if you remove stable coins, we're getting close to 70% here. We haven't seen these levels since the last time we hit a level like this was six years ago in 2019. So I mean we could still definitely have some room to go here. But I think we're hitting a place where bitcoin dominance gets a little overextended. It could just lead to a chopping range. Obviously I Don't expect like a ton of alt movements unless we get a different liquidity environment. But I think we're getting to a place that in a few months time could be setting up for an interesting place in terms of a trend reversal or market condition change. I don't know exactly what's going to spur that with so much tension being held. But it's fascinating nonetheless to see this performance of bitcoin dominance.
- [43:54]
Dave
Go ahead, Mark.
- [43:56]
Mark
Yeah, great point on the bitcoin dominance and that's the story that I would have gotten this wrong seeing the tape. I would assume bitcoin would have traded down without a demonstrable pump to liquidity. That I think is coming not just from China and Europe but eventually to the US because of the main point I'm bringing, I'm going to go back to inflation deflation for a second. The reason we're going to have the pump is because we're talking about the wealth effect from equities going down. Besson said we can endure this. It's a long term investment. He's saying don't look at the tape, don't look at the S P. You know, we're going to be making changes to our economy to help Main Street. I, I still don't know how that happens without a deficit. The deficit through the first six months of the fiscal year March 31st was over 1.3 trillion. Now I know we get tax receipts this month, but you're still talking about a 6.2%, 2024 deficit. It's got to be at least seven, seven and a half percent this year. I don't see how any of this occurs without an increasing deficit. And that's going to be part of the liquidity pump is just simply the TGA drawing down, pumping in. Even if the Fed doesn't back off its $5 trillion or billion dollars of treasury purchases a month that it's still doing. So we're still between a rock and a hard place. Bessant needs to get rates down. I don't know how he does that without crashing the economy. And that's his main job. 10 trillion refinanced in the next 12 months. I, I think he's going to fail. I, I don't know how he does it. So I'll bags go higher. I agree with the bitcoin dominance. It's the, it's the quiet signal out there that none of us would have expected. I, I think and if some people said of course I did, God bless you. But I, I think this is a tremendously constructive signal on their dominance in a downtape zion.
- [46:02]
Clinton
Yeah on the bitcoin dominance thing is that's for me that's a big signal that we basically Bitcoin has shifted from being for being the highest allocation to the lowest allocation because the nature of the holders have. Has changed. Today institutions allocate a very little percentage of the overall portfolio to Bitcoin and new buyers of bitcoin allocate usually very small proportions of their portfolio where in the previous cycles it was more correlated obviously to alts etc because most participants were crypto maxis basically and bitcoin was the highest allocation. So it moved quite a bit and it moved quite a bit in bear market and people divested in bear market and was little bit. There was a little bit more. Now most buyers are in set it and forget it mode. So this is why I see that there is a continuous accumulation of the asset and then the assets is completely decoupling from the alts. The other issue that we have right now and I think in previous three cycles we really didn't have is the high fragmentation of the liquidity. I mean this time around when it comes to alt we have. We have a huge fragmentation of liquidity and which, which means that that basically there is a lot less liquidity to go around for many of. Of of the other projects and and frankly they all suffer one common thing. I mean they suffer user acquisition, user retention, meaningful use cases that will make those user sticky and that will bring participation from in a nature perspective. So they're all speculation. A lot of them is speculation game. Even the infrastructure ones, you know, unless you have meme coins or other kind of. A very kind of side side side applications they don't have really like meaningful usefulness. So that's, that's the issue basically. And I think bitcoin has demonstrated now that basically graduated from that category. Just one question to specialists here on the US specifically. Do you guys see some type of. Because the Chinese narrative is we don't care if we lose the 15 or whatever percentage export share that we have with the US that's the kind of the official narrative. Do you think China will start divesting from US asset at any point? And how, how would that impact the US economy immediately? Would it be like a quiet divestment or would it be like a silent type of divestment? If there is.
- [48:50]
Dave
If. I don't think there's a chance in hell of that because it doesn't make sense. You know, it's not Just US consumption. It's also US multinationals that sell globally. And you know, it's look, global trade is like a pile of spaghetti, you know, and these guys keep talking about pulling one strand at a time and expecting nothing else to move. It's very interconnected. And so it is not good. The statement someone made before that this isn't good for anyone, we understand it. What really what this administration is trying to do is to encourage investment in new roboticized factories that won't employ as many people as people think, but will employ more than the doomsayers talk about. So it's always a matter of degree. I just want to go back to bitcoin dominance for a heartbeat because frankly I think that trying to take the other side of the bitcoin dominance trade now is catching a falling knife and it's for a reason. Bitcoin is because of the nature of the people buying it. Most of the people buying it are looking at Bitcoin as more correlated to gold. And in fact it's surpass gold. It has, it literally is account, it's beta to the stock market is getting lower and lower and probably will go negative. Altcoins on the other hand are like tech stocks. In fact they are right, you know, if you believe they're, you know, whether it's their tech platforms or not tech stocks. But most of them forget memes for a heartbeat. But whoever wins, whether it's Solana or Ethereum or Aptos or SUI or Avax, it doesn't matter. In the layer one wars, that's a question of what will be the infrastructure to power the new economy. It's not a terribly different conversation than will be. What will Nvidia get to in terms of its domination of AI, etc. Etc. So on a day that NASDAQ sells off a couple percent, Bitcoin is up a bit and the altcoins are down. That's not surprising. And don't fight that now. I'm not saying that that will continue, but it's just you can't. We're in a new paradigm, right? And everybody who's been investing in bitcoin from the beginning, I don't care who you are, and I'm late to the party. I didn't start until 17, so I'm relatively late invested in bitcoin and the notion that at some point point Bitcoin will become start to be viewed as sound money and all the crypto people, and this is the whole maxi versus non maxi, which I always think is kind of Silly. There are many crypto assets which are going to get valued like tech stocks. And tech stocks are often valued on stories. They're pre revenue stories or post revenue stories. They're still stories. And so that's what's playing out here. That actually is one of the most logical things that's going on in the market today, in my opinion. Opinion. But it means that looking at Bitcoin dominance, so we've looked at it in the basis of cycles, etc. Etc. Doesn't make sense. One last thing. Someone asked me yesterday about Ethereum and they said, well, Ethereum go up or down. And I said, well, will Ethereum win and actually be the world computer that is the dominant platform for re automating the financial markets on a blonde blockchain? The answer is yes. Ethereum will certainly rip higher at some point. If the answer is no and they don't continue to gain momentum post their merge, Ethereum is going to still $200 billion asset. $200 billion asset implies something happening in the future because you can't justify it any other way. And so it really does matter and when. And that's the biggest single driver in Bitcoin dominance. The Bitcoin Ethereum ratio is now well below 0.002. It's at what point? 0018. Let me look at it. Right. Where are we right now? On my screen? Yeah. 0.001878. So you know, it keeps dropping and that matters. And that's where your Bitcoin dominance is coming from.
- [52:39]
Host
Gav, you joined kind of later. Any thoughts here? Not sure. He can hear. Gorav can hear. Well, I can't hear him. Can you? Anyone?
- [52:55]
Henrik
Oh, yeah, I can. I can. I didn't realize when was I promoted to a speaker? I was just here to listen to the banter.
- [53:02]
Host
I did. Did. I saw you on stage and figured you had requested, but it seems like.
- [53:09]
Henrik
There was a link that I clicked. Okay. Anyways, what are we talking about, gents?
- [53:15]
Host
Oh, well, we're right at the end anyways, so I don't need to throw you into the fire here. Fantastic.
- [53:22]
Henrik
I would happily be on the side and listen to this time. Usually I'm a. I'm a loud voice, so save yourself.
- [53:29]
Host
Love it.
- [53:30]
Mark
Let's. Let's.
- [53:31]
Host
Whenever you have.
- [53:31]
Henrik
Whenever you have the mantra banter, that's when you bring me up at this point.
- [53:35]
Host
Oh, yeah, well, we'll do that one again maybe in the next couple days. All right, everybody. Gaurav, thank you. Thank you to our incredible panel. We're going to go ahead and wrap and come back tomorrow, 10:15am Eastern Standard Time for another crypto Town Hall. Give everybody on stage a follow and thank you all for listening. We'll see you tomorrow. Bye. Great.
- [53:54]
Mark
Thanks, all.