A (5:32)

Okay, so, but then just it sounds like that makes you more bullish for

C (5:35)

the rest of the year from here. Sorry, I guess I just explained where we are to now without the forward looking part I would say, you know, I think at this point we, we have seen a ton of selling take place. I think a lot of the, you know, systematic selling has probably already already taken place as we've gone down and basically a straight line from, from 125 to, to 60. I think the biggest driver of bitcoin is, is real interest rates. If you look at, you know, 2021 or 2017, this was a huge kind of tailwind for, for bitcoin. And if you look at, you know, kind of like the year over year change or however you want to plot it out, you can see that this is a, this is a big driver of Bitcoin's price action. Historically, when we look at, you know, like the 2020, 2022 to 2025 period, I think a lot of that was the institutional adoption, ETF flows, etc. But we didn't have that tailwind from real rates going down. I think now, at least on an interim basis, on top of a lot of the forced selling having taken place already, et cetera. And you are starting to see, dare I say, some bitcoin relative strength over the last day or two where you think Bitcoin would be down more today. I think the outlook for real rates is skewing. In Bitcoin's favorite, if you have inflation picking up, warsh is expected to be cutting. I mean Trump put him in the chairman seat literally for the sake of cutting. So you kind of have this setup where the Fed is going to be cutting rates towards the back half of the year once Powell is out. At the same time, we've seen, based on ISM and other economic readings, we're starting to see the economy re accelerate and commodity, we've seen commodity prices run up and now this geopolitical uncertainty on top of all that, I think that's a recipe for lower real rates which should be a tailwind to bitcoin or at a minimum give it some type of relief rally maybe on a midterm basis. So that's how I'm thinking about things as we head into the middle of the year. But from there it's hard to say. So many moving pieces at the moment.

A (7:47)

And Joe, what about you? What. You know, I, I guess it is a two part question as well, pointed out that, you know, I'm sort of wondering like what you have thought of its price action so far this year, especially amidst, you know, what happened last weekend and then, you know, how that sets us up for the rest of the year.

B (8:04)

Yeah, well, brought up a great, a bunch of great points I think, you know, whenever you have kind of negative sentiment, but the price is kind of holding, right? Or you have a little bit of uncertainty and the price seems to be kind of holding, right? This uncertainty with a, you know, war in a region, you know, I don't even know if you can call it much of a war or more of a, you know, a planned, you know, removal of someone in a country. And then you've got, you know, the price kind of moving up a little bit here, moving back, moving up, but not, I would say, any sort of major volatility. You know, we're back up to 68 here. You know, there were some talks around how, you know, people can mine Bitcoin for $1200 a coin in, you know, Iran and what, what would they, you know, how would that change anything? I don't really think that that's going to have any sort of effect. I don't know why any of that would, would change. But I think the, the overarching sentiment change that I'm feeling in the market is that there seems to continue to be negative kind of sentiment, but the price seems to be holding where before even good news, the price would be dropping. Right. And so I think that's the, the kind of the big difference in the sentiment of the overall market that we're seeing. I mean, that's what we look at, you know, at Lunar Crush is we're trying to understand like what people are feeling in a broad scale, like how, you know, what do 50 million people think about this? Right? And so that's kind of the, the small change that I've seen in the sentiment is that people are bullish again. There's, you know, I would say bitcoin and then kind of the broader altcoin market. You know, you're seeing some new projects being launched, you're seeing, you know, capital being raised. You're just seeing a couple more sparks that are out there. I think we're finally kind of seeing this convergence of AI agents and crypto happening. Right. So I think that that's going to take on an interesting form there. There's going to be, you know, companies that are going to be launched and trading models and you know, prop trading firms that are agent driven that are being launched. And what is that all going to mean, you know, for the activity in the market? What's that going to mean for you know, stable coins which a majority of this is going to be transferred and moved around with. But then also what does that mean for risk assets where people want to see, you know, alpha and they want to, they want to actually see some appreciation in their capital. They're going to be wanting to invest in these projects. So I see a lot of those kind of small, just on a small scale, some of those things happening, which I think is the driving this underlying, I would say know, holding for bitcoin. You know, it's. But we're by far from like over performing in any way, shape or form. And then some of the stuff that will was tapping on a little bit here, you know, with rates potentially coming down, I think, you know, we had like a, a zer period, you know, where things were just kind of going crazy. When you have all this money influxing into a system, yes, you're going to see this kind of crazy appreciation. You know, rates are, you know, it's still 6% to buy a house, right. Rates are kind of, you can tell that the banks are trying to get competitive a little bit there and they're trying to kind of bring rates down. You know, people are sitting on a ton of cash in their money markets, right. None of that money has flown back into, into risk assets. It's going to have to. And I think like a big wild card here is, you know, Trump got elected on the backs of bitcoiners, period. Right. And we really haven't seen anything, you know, that would say, you know, hey, here, you know, we're going to try to help you. I know he's pushing right for the, the strategic reserve, but I think we need, and I think he will do something big this year with regards to bitcoin. And I think he has to just based on that, where the cards have all fallen, right. And when you look at even some of the, I think the people that, you know, some of the, some of the DATs and you know, some of the bitcoin strategic reserve companies that have been out there that have helped, you know, with that, specifically people like maybe Anaka, right. Like a lot of these people helped lift some, lift someone up to literally get elected the President of the United States of America. But, you know, it does feel like it's been a little bit of a one sided deal thus far. I think they know that and I think they're taking their time and I think that's fine. But I think we're going to probably see something big. I know they're trying to push with the Clarity act and I know, you know, Coinbase is lobbyists and they, they want what they want and I think that's fine. At some point we need a deal, but I think that there's going to be something big there. So I think the, the tailwinds of the economy, you know, AI's injection into everything is really interesting. Right? Like that's probably all we're going to talk about, you know, for the next like 18 months of our lives, is how that's changing everything and how we're all adapting to it. But I think if it makes what you're working on better in a way, and I think it does make crypto better, that it's going to be really interesting.

A (12:44)

Okay, and just one quick question about the sentiment piece. Did you interpret that as like that means we're at the bottom if bitcoin is at this price, but suddenly sentiment is like more positive than it's been? Is that how you're looking at that?

B (13:00)

It definitely feels like we've bottomed. Right. Based on even risky risk on tight news is not pushing bitcoin down where even before extremely bullish news would push bitcoin down. It means it was out of favor and people didn't want to buy it at that time, at this time now it's like, it's, it's kind of like shrugging off all this news or any sort of geopolitical, you know, uncertainty that's out there. And so that just kind of tells me that I think people are buyers again.

A (13:32)

Okay, so I do also want to ask about something that's a little bit, I think, puzzling. You know, it's long been said that bitcoin is digital gold, but I'm sure you know that right now bitcoin is not acting like digital gold. Gold is acting like gold. And bitcoin, I don't know what, what is it acting like or what do you think this means for bitcoin's digital gold narrative to watch this price action?

B (14:01)

You want me to, I can hop it first. You know, I, I think, man, if I'm Peter Schiff I'm a happy guy over the last like 12 months, that's for sure.

C (14:10)

Right.

B (14:11)

But it, you know, he's, he's right right now. It doesn't mean he's right long term, but it probably feels good to be right right now. I bet. You know, it's. I think this was a really interesting lesson that we learned is that it's still early. Right. There's still. Even though we got this ETF and we thought we were fully institutional and mainstream and it was going to be amazing. And you know, bitcoin's the new gold. I think bitcoin is the new gold is a great narrative. You know, that a lot. I would say the big exchanges were pushing to try and get institutional players to understand what bitcoin actually is, when in reality it still kind of trades like the most volatile, like, you know, tech stock, you know, which is fine. And I think it just means that we're still a little bit early on it. But, you know, when people want to flee to something, they, they fled to gold. But it's, you know, even holding the actual physical asset of gold is not like a plus for people.

D (15:06)

Right.

B (15:06)

Then you have to like sell it somewhere or it's heavy, you can't move it. The people that did well were the people that bought the like an ETF of gold, which is like a digital gold. Right. So it's like that's kind of like the juxtaposition of, of that. But I just think it's something for people to bet on, you know, when things go awry. Right. Just like prediction markets are. Yeah, it's just, it's just a fake thing that's digital that's out there that people agree on that they can invest in, which in a way, like you could say bitcoin would be that too. Yeah, I know.

A (15:38)

I was just going to say people would say the same thing about bitcoin.

B (15:40)

Right, Right.

A (15:41)

Well, what do you, what do you think?

C (15:43)

I think, I think you bring up a good point, Joe, about the transportability of, of gold. You know, I think right now I've, I've numerous friends over in the Middle east, specifically over in the uae, and some of these guys are looking to maybe, you know, switch locations for the next week or two. And you know, I'm not saying that any of them are, you know, has, have a ton of physical gold or something, but just in theory, if you, if you were some like wealthy person in like this region of the world right now, and you're like, hey, I wanna I wanna move, you know, bring my assets and you know, get out of Dodge for two weeks. You can't just take all your gold and move, you know, but you can just grab, grab your bitcoin wallet and do that. So I think that's a great point. I think, I think the big thing is just gold has been around for thousands of years. It has, you know, this huge Lindy effect. It's, you know, throughout history, always been a store of value. This is something that people have always flocked to as, you know, a safe haven throughout history for a variety of reasons. It is, you know, provably, physically scarce. Also, you know, we have to keep in mind that the people that are allocating large sums of money are quite older than somebody like me or even Joe. So I think, you know, these people don't have a, you know, level of comfortability with owning digital gold. And you know, bitcoin has been around for a little bit, but it's only been around for 15 years. And so I think in the, in the grand scheme of things, it really boils down to, you know, kind of the Lindy effect that gold has and you know, the long history it has of being a store value asset, whereas bitcoin just doesn't have that. It just, it hasn't been through numerous, you know, tests of geopolitical tensions or periods of inflation or deflation or, you know, whatever other reason that people flock to a safe haven asset. So while I absolutely fundamentally believe that bitcoin is a better version of gold than, than what gold is, I, you know, while, while that is, you know, on one side of my head, the other is, you know, I'm aware that maybe for the next, you know, whatever it is, you know, next decade or so, you know, the people that are at the helms of allocating capital don't see bitcoin as this safe haven. And that's okay. That's not to say over the long term that it can't be as bitcoin is around for longer. Also, you know, there's this huge wealth transfer that will take place. You know, wealth inequality is the worst that it's ever been, but you know, people are going to live forever, not to be morbid, but in 20, 30 years that wealth is going to transfer down to younger generations that are at the helm of allocating capital. So I think part of it is just, it'll just take time. But I think it's very evident that the bid from gold has been from mostly central banks, sovereigns, et cetera. Gold Typically is very correlated to this real interest rate thing that I was just talking about a moment ago. Almost tick for tick throughout the last 50, 75 years follows real interest rates. But after 2022, after the US froze Russia's FX reserves, I think that started to be a huge signal. I think that was a strategic mistake, personally, to pull up this nuclear button of using the financial system against Russia. But right after that, you started to see gold, as it trended up, decoupled from real interest rates. I think that's a. That's a very clear signal that people are. People are buying gold because of, you know, this kind of like, central bank diversification, you know, whatever you want to call it, you know, people viewing maybe the US as slightly less of a safe haven on the margin, you know, the culmination of these things. But that. That hasn't. That hasn't been to the benefit of. Of bitcoin, unfortunately. But again, I think over time, as that wealth transfer takes place, at some point it will get treated that way.

A (19:46)

And what do you guys both think about this notion that we've seen on Twitter that the quantum risk that bitcoin faces is also depressing the price? Do you think that's true or not true?

C (20:00)

I think it's a little true, but I think that people just kind of ascribe things to the price, right? Like, the price does something, and then everybody's like, oh, this is. You know, this is exactly why it may be a factor. You know, maybe. Maybe sovereigns were somewhat disappointed or, you know, that had been dipping their toes in the water, you know, supposedly, or whatever other large entities maybe had started buying some bitcoin. And then, so I wasn't really behaving like gold. And then on top of that, you know, there was this quantum thing, and they're like, all right, forget it. Like, let's just get out of this for now. I think it maybe plays a role, but I think people are probably, like, making it a bigger. Bigger thing than it is and just kind of, you know, putting a. Putting a narrative to the. The price.

A (20:40)

Joe, what do you think?

B (20:41)

Yeah, I think the last time we heard anything interesting on Quantum was when Google came out with a report, and in their actual published report from the company, they said that they did a calculation that, you know, in this universe, you know, the universe that we have is not even been around long enough for them to complete that calculation, so that they think that some of that calculation was done in other dimensions. Right. So I think. I think we're. That's where we are with, with Quantum. So like, I think anyone that you know is on Twitter specifically, you know, probably doesn't have a good grasp on exactly the effect that it, it's going to have on Bitcoin specifically.

A (21:20)

Okay. And will, so I know you can't stay with us for the full hour, so I did want to ask you about a piece that you wrote recently which covered like different economic and technological pressures that you see as bearing down on Gen Z. And actually also I would say from the Citrini article, we know maybe it's not only Gen Z, but talk a little bit about, you know, what these changes are and how you see that as affecting, you know, what would be the typical path to success for a zoomer like you.

C (21:54)

Sure, yeah. I kind of put this together because I hadn't written in a while and I also had just kind of a culmination of thoughts, just you know, talking with, talking with my friends who a lot of them, you know, excuse you, kind of on the younger age of the end of the spectrum about a lot of these ideas. I think it affects, you know, people in the US or your young people in the US as well as people around the world. But the idea here, and we could probably do a 30 minute segment, so I'll condense this down into 5, 10 minutes max. I basically wrote through a lot of the issues that, you know, the younger generation is facing. I think every generation, you know, faces a slew of issues, you know, their own unique, unique set of challenges. I also think that Gen Z has a lot of things that, you know, are to their favor. You know, unlimited access to information on the Internet, AI, you know, the standard of, you know, the average median, median and average standard of living continues to go up both in the US and around the world. So I'm not to say that like, you know, oh boohoo, boohoo, the zoomers. But I do think that there's this set of issues that they kind of face. So, you know, overall, when you look at like the big picture, that wealth continues to get concentrated and you know, wealth inequality continues to grow, that's mostly, you know, skewed towards asset owners, non asset owners, but that's also become this kind of older and younger generation thing. So there's different measures. You can look at it, but the one I put in here is just the percentage of net worth held by older people. The amount held by people under 40 is the lowest it's ever been therefore above 40. But specifically when you get above the age of 55, it's 75% of the nation's wealth is held by this disciplinary cohort of people. So you've got this underlying thing of this huge amount of wealth inequality. I think a lot of that has been driven by monetary policy. The bailing out of the financial markets in 2008, which was kind of to the short term benefit of asset holders. I also put in here the offshoring of labor and included manufacturing jobs. So you can see after NAFTA and then China entered the WTO in early 2000s, the manufacturing jobs in the US completely dropped off a cliff. So, you know, that's, that's one thing. The other one I put in here was the government backing of student loans. So I think this, this one kind of ruffles some feathers, but I think basically the government should not, you know, I'm aware that the government enabled a bunch of people to, you know, attend university that wouldn't have been able to otherwise. But it's my view that I think the, you know, deprivation of the student loan system was ultimately to the detriment of new students and to the benefit of universities and also to the detriment of taxpayers. Over time, we've seen the cost of tuition continue to go up. You look at debt for student debt as a percentage of the median salary fresh out of school. That's gone up only over the last 50 years since the government started subsidizing student loans. I think in a perfect world, and the privatization of student loans, the bank underwrites you as if they underwrite any other loan. They look at the, you know, your ability to, you know, do well in school and get a job after. They look at, you know, the type of degree that you're getting and then they underwrite you based on that. Whereas the government just has been writing, you know, blanket loans to everybody based on whatever tuition. And it's very clear that there's a big bifurcation in the ROI by degree number one being computer science, engineering, nursing and computer science. Maybe now as well as finance, you know, maybe we'll, we'll get hurt by AI. And then when you get into kind of more of the, you know, the fine arts, the philosophies, the sociologies, films and media, you know, there's just very clear, it's just the data have negative roi. So it doesn't make sense that the government, I think, is doing this blank underwriting of everything. And then the, the monetary debasement piece I put in there, another one I think is important is the amount of time that companies are spent in the private market and the lack of price discovery in public markets. So go back to like the 1980s, you know, you could have bought Apple pretty cheap. I think this as a penny stock or you know, Amazon in the early 2000s. I just don't think that there's as much opportunity to get exposure to great American companies at cheap prices. Or at least, you know, we kind of have this fractal that's come about where you know, the company IPOs bleeds out for two years and then kind of, you know, finds a bottom and then continues up. But most of the price discovery leading up into the IPO process has all got shifted into the private market. And you know, we said with Anthropic and OpenAI and SpaceX which is going to supposedly IPO at like almost $2 trillion. And you know, I think that's to, I think that's the detriment of the average American. You know, I think it'd be good if everybody, you know, and I understand why there's investor protection laws, but it doesn't make sense to me why you have the proliferation of sports betting which has now got fully integrated into entertainment networks as well as prediction market advertisements getting shoved down the throats of zoomers. I think if you're going to enable these things, then from a double standard standpoint, you should also be allowed to invest in these great private companies in the US and if you're able to get these people more involved at an earlier stage, then it would be to their benefit wealth creation for everybody as well as just, you know, aligning people with, you know, the long term, you know, fruits of the country. And that also ties into the wealth inequality piece, you know, getting, getting priced out of assets because of the backstopping of the system, etc. And then the last one I put in here was the, the rise of AI and robotics, which I don't really need to get into, you know, the AI models. If you look at it, you know, on, on like a, you know, time action, you know, amount of time spent per action basis that the models are basically, you know, going exponential. And then at the same time we're, we're expected to see, you know, the build out of humanoid robotics. China is ahead of, seemingly ahead of the US for now, but over the next, you know, 10 years, 10, 15 years, I'd expect that that would also ramp up as well. So you have, you know, the combination of those, those two forces. So you know, if you, if you want to go into the, into the depths of it. Feel free. It's my pin tweet. But that's kind of the high level of the issues. And then I just, you know, put for, you know, potential things that people can do as a zoomer to, you know, combat some of these issues and set yourself up for success. I just put, you know, assess your degree deeply. Does it have like real roi? You know, for example, I dropped out of school. I, you know, frankly did, didn't, you know, do my best work in high school and didn't set myself up to go to a great university. And I had, I was very fortunate with the Twitter stuff and had a personal distribution that I could use to, you know, build, build a business or you know, meet people etc and find employment opportunities. So I'm aware that I'm, you know, like a one off thing, but you know, I dropped out of school largely because I just realized that, you know, the, the ROI wasn't, wasn't really there, at least, you know, based on where I was going to school at the moment. The other thing I put is embrace AI. You can basically have a code anything now. Pretty much almost anything that touches software will probably be somewhat displaced by AI in the next couple years. And then I also just put seek to build advantages in personal distribution. If you can build out niche social media presence, that'll be a huge competitive advantage. If code is basically getting commoditized and the competitive advantage becomes distribution and the final ones. I just said stay nimble and pay attention. And the world is rapidly changing.

A (29:48)

Yeah, the two things that struck me were the bit about the student loans because, yeah, once you kind of like guaranteed these colleges they were going to make money no matter what, like it just in a way like kind of created a grift, which I had never really thought about until you pointed. I read that I don't know if this is like a common thing that, because, you know, I tend to really pay attention to crypto and not so much the wider world of finance. Maybe other people already had seen that, but that was new to me. But the other one really was like, I remember that Jeff park came on the show and he talked about how, you know, I forget what he said. Like, I think it was like before, you know, some, some world war or, I don't know, it was like a long time ago, like the 1920s or whatever. But he basically said that like at that time most businesses were like small businesses. Like very few people worked for these gigantic corporations and stuff. And like when I read your essay, I was like, oh, this could lead us to go back to that where everybody kind of, you know, has their own little business and it's just around them and like their AI agent or multiple agents or, you know, whatever, and there's less of this, like, gigantic corporation type of job. So. And anyway, well, that was super interesting. Thanks so much for sharing. I know you have to run, so I'm just so happy that we got to hear your insights and we will catch you next time.

C (31:14)

Sure. Absolutely. I don't think I've done a podcast in, I don't know, three or four months at least, so you should do more.

B (31:20)

Will, that was really good, man.

C (31:21)

Thank you.

D (31:22)

Thank you.

C (31:23)

Hopefully I'll talk to you guys for longer, but appreciate you having me on and I'll be back soon.

A (31:27)

Okay, great.

C (31:29)

Thanks, guys. Have a good one.

A (31:30)

Thank you. So next up, everyone, we'll have part two of our discussion, and that will continue to cover where the bitcoin markets are headed. But first, we're going to take a quick word from the sponsors who make our show possible. Step into a new era of wealth. Discover Nexo, the premier digital wealth platform. Manage your crypto portfolio with confidence and control. Receive interest on your digital assets. Borrow against them without selling. Trade a wide range of cryptocurrencies all in one platform, now available in the US with 30 days of exclusive privileges for new clients. Experience wealth club premier access, enhanced interest rates, reduced borrowing costs, and crypto cashback on swaps. Get started today@nexo.com Unchained. Quick note before we continue with today's episode. Bits N BIPS now has its own dedicated home. We're spinning off from Unchained and launching a standalone podcast and YouTube channel focused on the Fed macro AI and how it all collides with crypto. If you want to keep up with our weekly live streams and Macro meets crypto breakdowns, make sure you're following Bits and bips directly. We won't start publishing until March, but getting set up now means you'll be ready on day one. You can find the new Bits and Bits channels at unchained crypto.com bitsandbips. You can also find us by searching Bits and Bips on YouTube, Apple Podcasts, Spotify, or wherever. You listen back to my conversation about the bitcoin markets, this time with Marcus Wu, market strategist at Delphi Digital, joining me. And Joe. Welcome, Marcus.

D (33:09)

Nice to have. Nice to be here. Thanks for having me.

A (33:12)

So we've been discussing what's been going on with the Bitcoin price and we cover so many things. But I'm just curious what, what's top of mind for you when you're watching this price action amidst you know, obviously war and also these rumors around Jane street and you know, people talking about the ism metrics or you know, bitcoin miners maybe like bitcoin miner Mara maybe starting to sell some of its bitcoin or at least considering it, et cetera, et cetera. So there are so many things. The fear and greed index is obviously very firmly in the fear range right now. So what are you watching?

D (33:51)

Yeah, sure. So I'd like to touch on a little bit more about the Jane street piece. I think it's interesting how this news gets released when bitcoin is down like almost 46% from its all time high. I mean, it's just a coincidence, right? Like a lot of people are attributing the current, you know, small upside move for bitcoin to Jane Street. But I think it just so happens that Jane Street's news gets released near the bottom range. Right? So that could be easily a bottoming process from this news itself. And, and then this, this to my view ties over to what we're seeing in, in the Middle east right now. Just like similar to how bitcoin has topped in the past. We, we got a slew of good news last year and bitcoin's price didn't move anywhere. Right. We were hovering around 125 range. We had a lot of positive movement on several fronts such as the, you know, more, more direction under Clarity act and we didn't see any move continuing the, the to go to the upside. So I'm seeing similar things to the downside too. We had this new tensions come up this week and bitcoin has held steady above the 60k range. This to me is also like just some signs to look for in terms of the general local strength I call it in bitcoin's market right now. So that to me is pretty surprising.

A (35:21)

Okay, so I did actually want to ask a little bit about the Jane street thing. I had, I had actually meant to ask Joe about it when Will was here. Well, Joe and Will, but it didn't get a chance. You know, that came out and then created a huge stir, you know, went super viral. And you know, just to fill in anybody who didn't see this on Twitter, basically the theory by author Justin Beckler was that because Jane street is an authorized participant for the Bitcoin ETFs, he wrote, quote, the firm has every incentive to use its privileged position as an authorized participant to suppress the spot price, trigger liquidations and harvest the spread. And what he was pointing out basically is like, it has to make certain disclosures, but overall those dose, those disclosures don't show what its real net exposure is to Bitcoin. So he was kind of like pausing that they're sort of like dumping on the market to profit. But a lot of people who are much more, or I shouldn't say much more, I just mean they're very knee deep in the ETF world, like Eric Balchunas of Bloomberg Intelligence, who He just covers ETFs, and then some others, like Jeff park from Procab, Rob Haddock from Dragonfly, they all said this didn't seem plausible to them. But what was interesting is like, even when Jeff park wrote his response, he wrote, quote, no AP explicitly suppresses the bitcoin price. What the AP structure can suppress is the integrity of the price discovery mechanism itself. That was interesting because he's basically saying, well, actually he finished it. So he says he asks, quote, whether a regulatory framework built for traditional ETFs is the right one for an asset whose entire value proposition rests on being outside the reach of exactly these institutions. And that was fascinating to me. Yeah. So curious to hear you guys. Like, do you guys think this theory is plausible or do you agree with, like, I think a lot of people that it's not or I don't know. What, what are your thoughts?

B (37:38)

I mean, you know, when you look at any Wall street firms, you know, especially ones that are involved in, quote, like market making, right. They're, they're making the markets. They're the ones that are creating the order book. And you know, they're, they're still competing, but if you do, if you do it right, I mean, you're, it, it is an infinite money glitch. Right. And so I, I think, you know, is it plausible that a company that is one word away from Wall street, you know, maybe acted in a way that they shouldn't have? I'm not implying that they are even at any point. You know, I know it's still going to be under investigation, but the history of Wall street is that they cut corners and, you know, they're trying to find any way possible to make a profit. Right. We saw this obviously in 2008, you mean the downfall of these major huge institutions that no one would have ever thought. You know, we're, you know, it was a, basically a collaboration between, you know, ratings agencies and Creating collateralized debt, everything. Right, We've seen that already. So is it. Do I think it's beyond them to, you know, manipulate an asset that can be manipulated? Absolutely not. Right. And when I say them, I don't mean Jane Street. I just say mean Wall street or anyone that's trading. So if there are, you know, I. I don't think a suit would be brought forward in a way if there wasn't like some there. There. But again, we just. We just don't know, obviously, until things come out. But that being said, you know, there. There was definitely. And everyone. I mean, every, you know, podcast I went on, all the Twitter spaces, you know, I've done a ton of like, the town hall Twitter spaces that are out there. And for months, everyone's like, like, what is happening?

D (39:18)

Right?

B (39:19)

Everyone was like, this is so confusing. You have like a. Like, everyone under the sun just scrambling to, like, buy bitcoin to buy the ETFs. Everyone, you know, is doing this and, you know, somehow the price is falling, right? Somehow.

A (39:34)

Wait just for the time frame. Are you talking about only post 1010, or are you talking about even before 1010?

B (39:43)

Even before it took a minute. I think the dat rush drove Bitcoin up to that one kind of 26 mark. But even before that, we were kind of hovering in some of these states and we're like, what? Like, how is this even possible? Like, who is selling bitcoin right now? And so if they found some. Some sort of way or some trade that was out there to, you know, hey, if we dump at this point, we can push the bots to do this and we can make this spread. Of course that's what they were doing, right? Whether or not, like, it's illegal, right? Like, it's not. It's probably not illegal to know that, hey, if you're selling and triggering the market to do a thing, right? Like, I don't think that's insider, but again, like, what did they know? Who were they talking to? I'm sure there's a lot of emails that have been gone through, but, you know, is. It's great to have people, if they're. If they are acting like that, out of the market. And so I think that's why you saw the price actually move up, because people, the market might have agreed that something was happening that they weren't comfortable with, and now maybe they're a little bit more comfortable with entering the market, knowing it's not being manipulated.

A (40:42)

Marcus, what? What do you think?

D (40:45)

I generally agree with what Joe Said hot take here. I think 1010 would have happened in some way or another, regardless of what Binance did or whoever was responsible for it. I, I think, for example, companies like Jane street can do what they do because a narrative exists, right? And we have seen like massive selling pressure coming from bitcoin OG holders. So I, I mean I do believe that there may have been some sort of price oppression going on with what change was doing. But you know, we just looked at the facts here. Like ever since we've peaked in, in October, there's just been massive amounts of selling. So I think Jane street was able to write this narrative wave of, you know, this cascading of like bitcoin sellers and then find spots of weakness to, to, to do what Joe was talking about. But I do think where we were at in October left us in a pretty precarious spot, right? We, we generally saw macro conditions not as strong as before, and liquidity wasn't flowing in crypto, right. So like it or not, whoever was responsible for 1010 I believe would have manifested one way or another, right? Be it finance or some other event triggering this massive liquidation. Because I, I do think back sometimes and think back, like, what would have happened if 1010 didn't happen? Like where would crypto be? But I, I, I slowly came to the realization that maybe the question is not what if 1010 didn't happen, but what if something else replaced 1010 entirely? Because if there's an exploit to be found, like it or not, this is crypto, it's open source, whatever, somebody would be there to extract value. So I think building off from here, we're generally in a healthier spot than we were in October. But yeah, that's my view on Jane street and stuff.

A (42:32)

Yeah.

B (42:32)

Another piece to it really quick is, you know, like this is like Terraform Labs and Terra Luna going after this, right? And so, you know, that I think that's even the bigger question for everyone is, you know, did something happen there which, you know, eventually created a downfall? And you know, if we don't have Terra Luna happening right, then maybe we don't have FTX happening, right? Fdx, you know, has a liquidity problem. But you know, they did invest in Anthropic and Robin Hood and at, you know, if they, if the lawyers didn't take their billion dollar cut and they just let it fly, right it, we, they would have everyone that owned anything. FTX would have like a 10 or 20x by now and then a lot like, we don't know what would have happened? So it's like that's a, that's an alternate like universe. Like we don't live in that universe, but I think that's kind of where a lot of people in crypto are kind of like, wow, we like, we might just be living in an entirely fraudulent system. Right. Like that, that you know, for, from outsiders. And so it's an interesting thing to think about. Obviously, you know, we are where we are today. And yes, I completely agree anything that can be exploited will be exploited in, in the system, but maybe it would have just not happened in such a, you know, waterfall effect on some of these days. And I think that's the, the scary part for some people in crypto. You know, if the stock market starts to fall, there's breakers that go off. It can't, you know, everyone take a deep breath like, you know, are you sure you want to be selling everything that doesn't happen in crypto? Right. It is just a cascading domino effect when things happen, which is I think is good. You know, I think too big to fail is not a great thing for society in, in whole. But you know, that, that's just the market that we're in.

A (44:17)

Yeah, yeah. I mean, I, it's like, it's funny for me. So I, you know, I mean all of this also is happening around the same time as like the whole Epstein files thing and all that. And I sort of feel like, so I can look at people like Eric Balchunas and I'm like, okay, this guy, he's been covering ETFs for so long. Like, you know, he doesn't see this and I can give a certain amount of weight to that. But then, you know, when you see such huge revelations coming out about some of the most publicly visible people on the entire planet who have been holding up some kind of charade or whatever for decades. Like you're just like, okay, well how much, you know, credence do I give to the so called experts who think they know what's going on? Like, you know, so I'm not saying anything about the, the Jane street rumors themselves so much as just like I almost feel like we live in an environment where you just, you end up questioning so much how, how can you know what you think you know and how much of what you think you know is actually true? So, so those are, you know, some things that I think are just sort of in the zeitgeist and maybe fuel the virality of theories like that. But one other thing that I wanted to pick up on from what Marcus said, which was so interesting, was just this thought experiment of what if 1010 didn't happen. But like, what's interesting to me is like it would have happened in some respect, right? Like there would. Because, so if we didn't have like those mispricings or whatever on, on Binance, it just would have been smaller. So like, instead of what, what was it like? Was it $190 billion in liquidations that happened?

D (46:10)

Was that 40, 40 billion? That was, I think.

A (46:14)

Oh, sorry, it was 19 billion. Not, not 100. I was like, okay, 19 billion. Thank you for jogging my memory. Anyway, point is, just so you know, then what would it have been like? Would it have been 3 billion or. You know, I, I don't know what. I, I don't even know if anybody's tried to do a calculation like that. But, but the point is just that, yeah, it sort of feels like there, there was some sort of comeuppance for, for crypto that would have happened, but due to, you know, some. Yeah, it's funny, I was going to use the word errors and then I remembered because Binance had publicly signaled that it was going to change how it was price. I don't even remember all the details. It was like something about how they were pricing something, something and in a way that provided a window when, you know, the person who made a lot or the entities that made a lot of money from. From that were able to make even more than they probably would have otherwise. So anyway, all I'm trying to say is, you know, first of all, let's just focus in on 1010 a little bit. So as I'm sure you're well aware, there's been 5 million theories about what happened since then. And I'm curious to know what you think happened and how quickly you think Bitcoin will recover.

B (47:42)

Go ahead.

D (47:44)

I think so, about 10:10. I think what happened just based off the sequence of events was that Binance said that they were going to upgrade their USDE contracts. Like they were migrating from an old version to the new upgrade. So they let everybody know that this is the period. I think it's internally. It wasn't even public news that they're going to do this upgrade. And just based on theories, right? Some somebody or some group got knowledge of this upgrade and was able to exploit the USD contract by, by de packing it basically. And that caused the whole charade that we know about that, you know, some of the blue chip assets like, you know, like XRP and a bunch of other stuff dropped like 40 to 60% in just like a handful of minutes. I think because of that, that really caused a lot of problems and that really unraveled like what everybody feared the most.

C (48:39)

Right.

D (48:39)

Like nobody's actually buying your your bags. Like the demand for these are just market made, right. Like it's just bots or companies trading back and forth to generate, to simulate like this assets we're trading. So I think that really opened everybody's eyes for the first time. Like holy, you know, maybe get buying like illiquid coin with a lot of money isn't the best idea. So that in my view was number one, capital destruction. A lot of people got liquidated. Number two, it opens people eyes to, you know, see what, what, you know, without these market makers, what volume would there be? And number three, if you look at a lot of these charts that put in this massive October 10wick, a lot of them actually came back down to retest the wick. So, so I remember my experience 10 10, I was actually on a plane and that liquidation happened when I was flying. So thankfully I had wi fi and my exchange allowed me to actually put some orders in to buy when the 1010 Wick actually happened, which I was pretty fortunate. But it's in my view that whoever was able to buy those 1010 wicks, you know, like, you know what they said, like you got to fill the wick. So, so somehow or another I think these market makers or whoever's responsible for pricing these, these assets or contracts sort of drove price down back to those wicks because you can't just let people ride away with what, 5 to 6x gain in such a short time. So I don't know if you take a look at all these charts like Pump and several others, most of these charts are back at the 1010 Wicks where we actually filled the wick and some of them are even below so going on.

A (50:21)

So that's why you think that bitcoin has just been dropping and dropping and dropping since 10 10. So I don't remember what was the low of the WIC.

D (50:33)

Bitcoin's low for 1010 wasn't even close to where we are right now. Bitcoin hit, I think around 100 and then it bounced from there. Yeah, it bounced from 104 to 115 and then from there we fell off the cliff and we just rolled over. I'm talking about the altcoins because the altcoins had like the catastrophic drawdowns. Yeah, okay, but where we go from here for Bitcoin, I think we range for a while. Like I built some models around this to try to see where we are at in a current cycle.

A (51:04)

Wait, is this the same as your allocation framework or different?

D (51:07)

Yeah, yeah, this is the game theory

A (51:09)

model that I'm building. Yeah, describe this.

D (51:12)

Yeah, so I basically built a model that uses game theory to look at bitcoin's on chain metrics. So what this does is basically let us know. In, in game theory there's two modes. It's cooperation mode and then there's defection. So when, when we're cooperating technically what, what classifies cooperation is generally low volatility and a bunch of other on chain metrics that signifies to signals to people that you and I are working together. So the base assumption is that Bitcoin is a scarce asset and corporations and hedge funds and important people want to buy more of and in order for them to buy more Bitcoin they have to work with one another. Because if you don't work with one another, what's going to happen is you're going to have massive price spikes. So in game theory, in different regimes, right, based on people's preference, you either cooperate to buy Bitcoin cheap or you defect. Which means I buy bitcoin first and then because I buy bitcoin and you're afraid that my buying would spike coin despite the price of the coin, you front run me. So both parties just front run each other and that's why we see those massive spikes. So anyway, in this model corporation is low volume, defection is high volume and right now we're in defection. So in each regime there's different ways of trading it. So in defection regime because it's high Vol. And what I found is that in this regime it's very mean reverting. The average mean return for this regime is around 0%. But then we have very wide standard deviation bands. So that basically just means that price is going really nowhere. So in order for us to go back into cooperation, we have to first exit this regime in defection. And then there's all the numbers on that what's the average time for defection to end, blah blah, blah. But TLDR is cooperation has to first persist and that persistence I found is to be around the 20 to 30 day mark. So right now we're nowhere in corporation, we're still in defection. So that leads me to believe that there's still some more time to go before we, we actually see like a Meaningful rally doesn't mean we can't have a relief rally. It just means for the rally to be sustainable and believable, it has to be in a confirmed cooperation phase, which takes time.

A (53:24)

And I. Yeah, wait, so I'm sorry, go ahead and finish your thought there.

D (53:30)

No, I was just going to say, like, I have a research piece coming out soon via Delphi, so if anybody's interested, that's where I dive into the mechanics and the math and all this stuff.

A (53:40)

Okay, well, you said that you're using on chain metrics and obviously now we know that a lot of the activity is not happening on chain and there's like derivatives in the mix. Like there's just. And people are talking about this, about how this is just creating some difficulty for the bitcoin price. So how kind of confident can you be that the on chain metrics are going to be useful? Or how do you think about that issue that we have this whole other world that's not happening on chain that's affecting the bitcoin price?

D (54:15)

Yeah. So for the on chain metrics, I look at a bunch of stuff like oi, oh, I open, open interest volatility, I look at exchange balances, what a whale wallet's doing. So, and then this is not just from a day to day. Right. There's like a normalization period that I apply. So this goes back, you know, a couple months. And I've looked at this data for the past six years. So this model is built on six years worth of data. And you know where, where this model goes, like there's still some limitations. Right. Like you just said, what if the US just passes more laws on perp dexs in the US and push perp dex volume over to those centralized exchanges, then we won't have those kind of tracking available. So there are still limitations in this model. But just based on what I've found, these on chain metrics are still providing a wealth of information that we can look at. We usually see when on chain balance spikes two or three days prior, price that follows usually is to the downside, like that relationship still hasn't changed. Like we've seen big sellers selling on Coinbase and Binance. Those, those sellers have to deposit bitcoin onto those exchanges. So you can still run away from that part unless you know, they're trading paper bitcoin or something.

A (55:31)

Oh, got it. Okay, that makes sense. And then one other thing that I was going to ask you was so is this something where like, it's just more for research purposes or Is this something where like people can use some kind of dashboard or. Yeah, like what format. Format is gonna, is it gonna take.

D (55:55)

We have. So I have the dashboard live on Delphi site and it's free for everybody to go visit. I'll share the link with you later. And what I'm personally doing is building trading strategies and deployment strategies, basically allocate allocation strategies on top of this regime. So the first layer is just identifying where we are at right now. What regime is Bitcoin operating under. The next layer is to then layer on. Okay. If we understand that Bitcoin is in a defection regime, we do not want to be holding spot Bitcoin for a long position. You want to do that when we are in corporation. So where in defection is scalping so you can make use of when Bitcoin's price is way above the standard deviation returns and you can take a long or short and write it back to the mean. That's totally fine in that regime. So that's what I've been working on for the past half a year or something.

A (56:45)

Okay, wow. So interesting. We're at time, but I had one last topic. I don't know, do you guys have time to just cover this? I wanted to talk about what I was going to call the AI apocalypse. Do you have time for, I don't know, 5ish more minutes?

B (56:59)

Yeah, sure.

A (57:00)

Okay. Well, I'm sure you saw the Citrini article. You heard about blocks, layoffs. You know, everybody says this is sort of like the first big public company to do massive layoffs due to AI. And I was wondering like, you know, how you're looking at all of this and how you think this will affect crypto.

B (57:22)

I think it's going to have a huge effect on everything. You know, our personal lives, work lives, corporations, you know, building everything. You know, when everything kind of really changed when the, the most recent models changed from Claude in December, that's really when everything kind of started to change. And you know, people were all of a sudden kind of messaging saying like hey, can you build this little thing? And else. And it would like come back pretty good and you know it would have like colors and you can like click, click around and you're like oh my gosh, this is crazy. And then the implementation of CLAUDE code locally on your computer, obviously the open claw thing went, went crazy. That's just really CLAUDE code like on the cloud, right? No, nothing big there, but it did just go crazy because a lot of like virality over on nx, but Ultimately, it's just Claude has been kind of the huge breakthrough recently. But I would say every founder and CEO that I know, you know, has now gone from, you know, typing on the computer 95% of the time to talking to it 99 of the time. You know, they have found incredible ways to create efficiencies at their businesses. You know, a great example would be there's like this company called Whisper Flow. They've raised like $81 million from like, Andreessen and everything else. And you could just, you know, tell Claude to rebuild that and it's, you know, cost you 50 cents and you're done in like six minutes, right? And then there's like all the. That's like that entire company. It's like you're just really hoping. I'm sure there's a lot there. There's a bunch, probably a bunch under the hood. I don't know. But, like, that scenario is happening all across different, you know, any reporting tools that you have, right. Like, you're just kind of hitting your, like, your original systems and grabbing the APIs, and now you're just kind of like talking to your computer, telling it to create these things. So the efficiencies are there now. I know a lot of people think that there's not going to be a bunch of layoffs from this and that we're going to create this kind of AI utopia. I think we do, but I think it's going to be really rough in the interim. And I think Jack's way out ahead of it at Block and he's making those cuts. But I think other companies have been making those cuts in different ways. Like Amazon kind of tried to force everyone to go back to the office, but really they just made you go to a wework near you that was like, kind of annoying and hoped you quit. You know, there was like a lot of, like, that stuff going on as well. So I think it's. It's happening. But I think this next 18 months is going to be really dynamic for AI. And I think, you know, I think crypto is actually built for this in a way. You know, there. There's a been a couple really good articles about, you know, whether or not your business is going to survive this. You know, does it make your product better in some sort of way? Right. Can you build upon it? Like at Lunar Crush, we have all this amazing social data and now we can unlock it with AI and people can query these massive data sets and they never could before. Before you'd have to Create this UI in your own specific way and talk about the colors and where you want the buttons and all of these things to showcase a cool view for someone to understand what's happening in the market. Now someone can ask any question on Earth and have a perfect, beautiful representation of what that is. I mean, even. Or before this, I just sent a little HTML file about your topics and questions and it was like, whoa. And that's all real time. So it's just going to disrupt everything. And anyone that I know that is interested in this and has started to use it is never going back to the old way of working. And even Will, who was on here before gave that great talk about zoomers and the disruption there. And I'm really hoping that that generation takes that in stride and they really continue to use it.

A (61:06)

The one thing I was wondering is, I think it was you who, before you mentioned this, will really push the adoption of stablecoins. So I guess I'm just wondering, will it really benefit crypto or maybe it does, but not until two or three years from now. I don't know. That's the one thing.

B (61:24)

It's sort of quick. Yeah, sorry to kind of jump in, but I, I think it has a, like, in the short term, Stable Coins, smart contracts. These things are programmable and I think you can build really cool interesting things. Like, you know, people will build, you know, automated funds or they'll, you know, there's all this cool stuff with agents that are now trading, you know, on hyper liquid. And they're kind of going back and forth with these models and they have their own strategies and they have their own context. Like right now you probably wouldn't give open claw access to your bank account. Right. And I don't even know if like Chase is going to create like a perfect API that I can then move money in and out constantly. And then what is the. Another big thing would be like, what is the tax consequences of something like that? So I think that they're just far away from adoption, where stablecoins and DEXes are primed and ready for the agent takeover. And, you know, if you're like me and, and the other people that are working like this today, you know your head's going to explode when you realize what's possible, you know, six to eight months from now. And it's changing so fast. So yes, it's going to be super disruptive, but I think it will ultimately be bullish for everyone. But I think that there's going to be a 12 to 18 months of some, or maybe even a little bit longer of headaches. I mean, when you see someone like Elon Musk, you know, the sunsetting the Model S and the Model X to even go and build robots now, right? Like the Model X, like, you just like, tell it kind of where to go and, like, it opens the door and like, drives you to where you want to go. He's like, nah, we don't need that product anymore. It's like the most amazing product on Earth. And he's sunsetting it because he's like, oh, this other thing's going to move faster. Like, that's what's going to happen is these, like, huge, big decisions by CEOs to transform the way that people work.

A (63:09)

Yeah, Yeah. I think the one thing that you said about. Sorry, I just lost my train of thought about the AIs is that. Oh, oh, just like, you know, when it comes to crypto, I worry that there was going to be so many mistakes along the way. There was already that one where it gave away like a quarter of a million dollars by accident because the decimal was wrong. And so, like, it's one of those things where you kind of make this calculation of like, oh, this seems like a really good thing to experiment with. But then it's like, if it goes wrong, it can go, like, really wrong. So, Marcus, what about you? What are you thinking about how this will affect crypto?

D (63:54)

There was. You brought up a pretty interesting point I saw on X. I think it was last week. There was an account that was able to convince one of the agents running one of their tokens to. To donate like 30% of its token supply to him. And, you know, it's a typical, like, oh, my dad has like, you know, cancer, please help. And then the bot was like, sure, here is 30% of the supply. And obviously the guy dumped it.

A (64:19)

That was the one. Yeah.

D (64:21)

Yeah, but I. So there are some speculation that was, you know, people were hypothesizing that this was all a marketing stint, you know, and that the dev wanted to exit. But I don't really know what the truth is. But to your point, you know, there is some sort of risk here that, that people are obviously not flagging. But yeah, going back to your question about AI, and I like to touch on the block thing for just a couple minutes. I think what block did was, was, you know, people on X are saying block has been bloated for a while, right? And we see the numbers and yeah, I know block has been bloated and it's Been like that for a couple of years. But then you got to ask yourself how many other companies that are like, like Block, you know, that has hired a bunch of people that has resisted not firing and then now that Block has developed its own AI in house tool called Goose and that actually enabled them to automate a lot of the processes. So there was a very good X post on somebody who works in Block. He was basically saying that this tool that they have developed basically streamlined about 70% of their workflows. So if you're a software dev, all you gotta do is, you know, ask the in house tool and they'll build it for you. And it does code testing, it does deployments. So you got to be, we got to be asking ourselves like, how many companies have seen this playbook play out? You announce massive layoffs, you get your stock popping 20 on the news and you just gotta, you know, some CEOs are going to be like, hey, is this a viable strategy? Could we actually build our own in house AI tool and save some of the cost and streamline some of our workflows? You know, I think there are going to be people considering this. And, and to Joe's point, I think the unemployment side of this is still pretty much not talked about. Right. Like I, I, I still do think there's some churn that that's going to be had in, in the market and where this goes in the long run. Yeah, maybe it will help create more jobs like the Internet did or, or like the railway did. But as of now, it's much easier for a company to replace some, somebody with AI then create more jobs with, in this current market posture. So that's just my 2 cents on the whole block thing. Now to crypto and AI, I think crypto and AI isn't, you know, like, I think I agree with what Joe has said. There's a lot of developments on the agents front and you know, AI agents are not going to go through like a gated bank account or something to help you transact. Now maybe that could work in the future, but as of now, the open source, open network blockchain is probably the answer for now.

A (66:58)

All right, well, yeah, this has been such an interesting conversation. Thank you both so much. And yeah, it is just so interesting because it just feels like so much stuff in the world is just converging. It's like we covered the war in Iran, we covered gold, we covered kind of intricacies around how Wall street and markets work, covered AI and generational stuff. It just feels like it's all coming together in an interesting way. But thank you both so much for coming on Unchained.

B (67:34)

Thank you so much for having me,

A (67:36)

and thanks to everyone for tuning into this live stream. We will catch you tomorrow.