I mean, I think,, the powers that we may try to avoid the word depression for as long as h anly possible until we’re so stuck deep in it, if we ever do reach that point., look, I love throwing out terms like bear market, cuz I’m a smooth brain trader like that,, in this short term window and the pullback that we’ve seen in Bitcoin.
Do you think that Bitcoin is in a bear market right now? Or do you think. This could be a moment where we’re gonna start to see that separation from the general market.
We’re 75% off the highest. My brother this certainly isn’t a bull market., not with that attitude. Yeah. I mean, if this is the lows and great, you know, and,, you know, I’ll happily,, I’ll happily, you know, ride that, ride that up.
But, I, I don’t think we’re outta the woods yet., would be happy to be wrong. I mean, you’re seeing like a lot of, a lot of, kind of under the surface acc ulation. Right. But Bitcoin is like as an absolutely scarce asset,, and very, you know, in elastic, right. It’s it’s supply and elastic relative to demand.
It’s only a couple hundred thousand Bitcoin can send the market up, up or down. Right. So prices set at the margin., and if you just think about marginal buyers versus marginal sellers, obviously the last six months have brought a ton of just indiscriminate selling., but when you’re looking at the marginal buyer,, the pledges are certainly buying.
But if you think about the average PLE or the average market participant that has no Bitcoin exposure,, traditional legacy funds are risk off, they risk adverse, and they certainly don’t wanna be speculating on an 80 vol asset. Maybe a little bit of exposure here, there dipping their toe in right legacy participants.
I think with a new basal, requirements or the new basal, What is it called regulations? You know, banks can have 1% of their assets in Bitcoin now, which is great. I don’t expect, you know, banks to come, just start Aing into Bitcoin right away., but that’s, that’s good news., the, the, kind of the, the gap,, earnings,, accounting is the gap accounting,, for corporates is still very,, is, is just not ideal.
Right? So, mark-to-market losses,, but not mark to market gains., so, you know, if you buy Bitcoin at 20 K and it goes to 10 K, you have to, you have to take a hit on your earnings. Like you’ve seen that with MicroStrategy, so that’s still not ideal., and just in general, like I, and I’ve said this on previous streams and, and not to be pessimistic,, but.
In the crypto space broadly and Bitcoin’s obviously not isolated from it. This, this last two and a half months has been a huge black eye., and so really kind of any, any participants,, serious participants that, that, you know, would wanna get involved,, you know, have, have a whole lot to kind of sort through,, following this aftermath and.
There’s kind of a lot of just, you know, opaqueness that, that people maybe previously didn’t didn’t think was out there., so, you know, I think we’ll obviously Bitcoin, we’ll get to the other side of this and, and it’s still,, a legitimate macro asset, but just in terms of, you know, the start of a new bull market coming to coming forth,, and, and, you know, all time highs by, you know, whenever, it’s I think people should just, you know, taper their expectations a little bit because we still have some, some kind.
Clunkiness to sort through from the macro perspective. And also just from a, from a regulatory perspective, like I’m, I’m not one to call for regulations. And I, I certainly don’t like big government, but just in terms of sophisticated market participants, getting involved in this space,, the last two months have certainly not been,, you know,, advantageous to, to the effort there.
[00:38:29] P: Wait, but do you think, are you saying that that is related to regulation and that regulation would help there?
[00:38:35] Dylan:, I mean, you know, I, I I’m a little conflicted because you know, part of the, the, you know, ANCO capitalist libertarian in me says, you know, abolish S sec, not actually calling for abolishing SCC, but like, you know, I, I do have that, that,, that libertarian kind of free market mindset.
But at the same time you have legitimate fraudsters, like Celsius and Alex Masinsky. And, and it looks like a lot of the three arrow stuff. And, and the whole Luna debacle. And, you know, whether that’s a legitimate, honest effort at something,, unique or not,, is another debate, but just all of this has, you know, kind of, and, and also like the, the kind of the dollar,, the dollar banks, right.
That weren’t actually, you know, these, these kind of,, digital banks that weren’t actually banks and they were just. Aping the Treasuries into UST. Right? All of this stuff is, is, basically begging regulators to come in and, and,, and enforce,, with a, with a heavier hand. Right. So,, I don’t know if it would’ve stopped it or not.
I don’t know if the S sec didn’t do its job. Good enough. Like, I, I certainly am not calling for garyinsler to, to regulate more., but I just think. It’d be foolish to think that more regulation isn’t coming on the other side of, of, you know, the craziness of the last two months, unfortunately, or fortunately.
[00:39:57] Q: Okay. So we’re gonna abolish the S E C., what about the fed? Do you wanna get rid of the fed ?
[00:40:04] Dylan: I think eventually, I expect Bitcoin out outlast the fed , but we’re not there yet. We’re just, it’s just,, you know, that’s the reality. I mean, you can certainly abolish, abolish the fed with your own full note and audit your monetary policy.
But in terms of the Bitcoin exchange rate,, you know, that is most definitely not isolated from the actions of the fed,, and it would be foolish to think otherwise.
[00:40:27] Q: So I wanna show on slide n ber 10, the. Bitcoin and Dixie year over year change chart., this, I found super, super fascinating where it almost seemed as though the peaks in Bitcoin, when it was reaching all times, highs was actually correlated with when the Dixie was making new lows.
Let’s talk a little bit about that. What does that actually mean? And could the value of Bitcoin really be derived almost in the same way where. As earlier we talked about the Dxy, it’s not necessarily that the dollar was getting stronger. It was just all these other currencies that were measured against the dollar that were getting weaker in the same way, the dollar, which all of us are in the U.S. and American.
So excuse and forgive me to any of our foreigner, viewers and guests., this reads to me like the Bitcoin price was actually driven more by dollar weakness than anything else. Is that a fair conclusion?
[00:41:26] Dylan: No, I mean, I wouldn’t, I wouldn’t say that. I mean, obviously Bitcoin,, has its own kind of adoption cycles and waves, but I think,, certainly the, the cycles and, and the, the kind of the monetization bubbles, if you will, of Bitcoin are aided by easy credit,, and, and kind of,, these, these credit cycles. So dollar weakness,, is kind of,, traditionally, or if you just look at like the past, you know, decade or. Has been accompanied with,, these kind of,,, kind of upswings and growth and credit cycles,, and easy monetary policy. And so kind of when money’s easy, when money’s cheap, you’re gonna see.
And basically that’s, you know, it’s just like liquidity is, is very available., you know, Bitcoin crypto sees a, you know, kind of a huge upswing and, and kind of,, a new, I don’t know, a, a new cycle. Right. And so, and, and when conversely, when the dollar is strengthening,, and, and you see global liquidity pulling back,, and you know, a deceleration of credit growth, or even an outright contraction of credit growth,, you’re gonna see stuff.
Crypto like Bitcoin,, you know, takes a big hit, right? So if you look at, I like to just like the last two years,, because I think Bitcoin is, even though it’s still very immature, I think it’s matured a lot more than it’s, you know, 20 15, 20 16, 20 17,, cycle., if you look at the last two years of, of Dixie and BTC,, and inverse the charts and throw BTC in log scale,, just to see a little better.
It’s like pretty, pretty similar chart., and so I think that’s certainly telling,, and obviously, you know, the dollar can, can strengthen,, or, or weaken and, and those foreign currencies kind as well., there’s, there’s a bunch of variables there,, but you know, the dollar rules, all,, which is, which is why it’s, it’s such a significant chart and why I, I pay attention to it.
[00:43:19] Q: So the dollar will rain Supreme for some time, what are some events that you are keeping an eye on that will further weaken the dollar?
[00:43:29] Dylan: Personally I’m of the opinion., and this is, you know, I’m not expecting an imminent pivot and monetary policy. I think,, you know, anybody that’s kind of, you’ve been expecting to pivot every month of 2020, then you’ve gotten your shirt ripped off.
I mean, long term investors are, you know, unbothered. And I think that in the long term. Investment thesis of BTC is completely unchanged and, you know, potentially even strengthened,, through all of this craziness., but,, really I’m of the opinion that this, and, and at what level, and at what scale is, is anybody’s guess, I certainly don’t know, but I’m of the opinion that all of this craziness leads inevitably to the,, to the fed, turning to yield curve control in some form.
So whether that’s, you know, monetizing the, you know, treasuries at at 3%, Or, you know, 2% or 0%., I I’ve, I mean, we’ve seen interest rate policy,, you know, as a tool,, be used by the fed until the great financial crisis where quantitative easing became the primary tool., now, you know, post COVID, they, you know, QE, infinity, they monetize corporate debt.
Inflation’s raging. So they’re, they’re, you know, they’re having to try to walk that back. But I think inevitably whether it’s something in the Euro dollar system,, you know, whether it’s something in international markets, Maybe the, the legacy,, or the, you know, the, the banking system, although that’s, you know, from what I, from what I see, and from what I hear from other smart people is a lot stronger than, than the great financial crisis.
I think inevitably that the fed just due to the, the, kind of the, the size of our,, of the us debt load,, the size of the Euro dollar system and just, and just, you know, the cost of kind of rolling this debt over in, and just the sheer size of the us entitlements,, and, and, you know, kind of fiscal obligations.
The Fed needs to, to monetize, the us debt, especially also, if we’re talking about dollar strength, the, the more that the dollar strengthens, the more that, again, that, that foreigners have to sell dollars, nominated assets of which the largest of those, those asset buckets is us treasuries is us debt.
Right? So, the more that the Fed tightens the paradox. The more that they’re gonna have to pick up the slack,, from, from, you know, kind of buying,, buying the U.S. debt because foreigners are selling it off to cover their, to cover their debt loads,, in dollars. Right? So the U.S. fiscal outlook, and the, and the debt burden is in, is in a worse spot the stronger that the dollar becomes.
So I think,, I’m kind of, of the opinion that the Fed will obviously pivot. If that wasn’t in implied already., but I think the end game here is, is yield curve control, similar to what,, the ECB and the BOJ are doing., whether that’s, you know, implicitly or explicitly,, you know, that the us is going to in some form and it’s gonna be some weird form of acronym, and it’s gonna be some, you know, obscure facility that may, that sounds super complicated in the Plex, but it’s gonna be some form of, of debt monetization, and it’s gonna be, you know, another form of money for, to Gober.
I think that’s, you know, when the case for Bitcoin., you know, an absolutely scarce monetary asset that’s, you know,, with no counterparty risk is, is going to, you know, once again,, once again, shine,, we’re not there yet, but I think that’s, that’s, what’s coming and you know, that could be six months, 12 months, 18 months. I really don’t know.
[00:46:43] Q: Or according to the,, chart, we were looking at the Euro dollar curve. It’ll probably reverse sometime around December of 2022 and start changing in 2023. But what do I know?, I want to go over open interest with you before I let you go back to doing what you do best,, slide 11.
And this is the middle., the middle of the top chart in particular, where you’ve shown an arrow pointing up., can you just touch on what you’re seeing, what you’re paying attention to here?
[00:47:15] Dylan: Yeah, I mean, we’ve, Bitcoin’s been in a range it’s like 22 5 to,, you know, I mean the, the lows were like 17 five, but,, you know, 19 18 5. Then in that range we’ve seen open interests, like sky rocket. So the lows were pretty, pretty heavily shorted., you can see that with the funding rate, but,, I’m kind of, I kind of expect whatever way equities go.,, Bitcoin is gonna kind of we’re, we’re consolidating in this range, but over the next say month or two,, equities are also kind of trading in a range, whatever way those go.
You see just such a massive buildup of open interest and again, like for every short there’s a long, so if there’s around, you know, 260, say 260,000 BTC worth of stable coin margin, open interest, those are just agreements to buy and sell, and you know, buyers and sellers meet. So there’s always an equal amount of shorts and longs.
But you know, if unlike spot Bitcoin where you can just lock Bitcoin away, cold storage and never sell it., open interest, you know, a derivative contract, a Fu futures contract., if you, if you buy a futures contract, you eventually have to sell it,, especially for like a perp, right? For a perpetual futures contract.
What we’re talking about in particular. And if you short, you eventually have to cover, there’s no way. You can say you could, you could short dollars, you know, by selling dollars for BTC, which is not technically shorting, but you could sell dollars for BTC and never cover. Right. But with a, with a derivative contract, you always have to exit your position.
So there’s just been a huge, like a huge build up of open interest. You’re just seeing like stablecoin margin, open interest, sort it to all time, high levels, especially as a percentage of, of market., and so I kind of expect over the next month or two,, while we’re still chopping around this range, right?
Like the range high is at 22, 5 22 6 today. Got, got invalidated pretty hard, whatever way equities go next. In my opinion, you’re, you’re gonna see a pretty VI,, violent move,, from BTC, whether that’s higher or lower,, because of just how much open interest has, has built up in this range over the last two months, a lot over the last.
This is obviously a more price action, technical talk., but that’s, that’s kind of what I gather from, from all this OI buildup is that whenever the, the true range is broken and it’s probably gonna be, you know, as a result of, of equity market,, or legacy market volatility,, I think that’s, you know, that’s where you see a massive move and it could be lower and it, you know, potentially could be higher as well, which would certainly not be a, not be a bad thing for, for us BTC holders, but that’s what I’m looking at.
[00:49:51] Q: All right. My final question for you is, are you actually bullish or bearish then?
[00:49:59] Dylan:, I mean, I’m, I’m long term bullish. I’m not, I’m not too bullish,, over the next, you know, whatever,, a couple weeks months,, maybe maybe quarter. So I still think there’s downside., I, I do have some cash. I, you know, mostly from shorting all coins over the last couple months here, but, I’m, I’m waiting to deploy that.
So, you know, if the lows are in great,, I gotta purchase in at 17 eight,, and we’re happy for that to be marked the bottom, but,, I think that, you know, we, we potentially have some more downside here, so.
[00:50:34] Q:, Dylan, it’s always a pleasure getting to hear your perspective. And of course,, nothing said here should be deemed as financial advice.
Everyone should be going and doing their own due diligence. If you listen to a couple talking heads online or on Twitter, you’re fucking idiot who deserves to get wrecked. I don’t make the rules. I just share them., Dylan, do you mind just sharing with everyone Bitcoin magazine pro I mean, we pretty much have gone over the latest issue you guys released on Friday.
Do you wanna just share a little bit more about maybe what you’re cooking up?
[00:51:05] Dylan: Yeah, sure., most of what we talked about today is, is kind of just running through,, previous issues of, of Bitcoin magazine pro, which is a Bitcoin focused newsletter, obviously by the name., but we, we like to cover,, all the, all the, kind of the, the.
Happenings in, in global macro,, in equity markets,, we cover Bitcoin matting,, with, with particular focus about once a week or so., so yeah, I mean, we, we, we put out free issues. We put out, we have a paid tier as well., but,, Sam and I,, Sam rule who’s, who’s out today,, with some family stuff, but,, we’re kind of the, the engine behind this and we have a great team supporting us.
Check that out. The Lincoln is in my bio,, but we’re putting. For the most part daily content, kind of around all this stuff. So if you, if you like to talk today, if you liked,,, what you saw, if you’re watching on YouTube, then, then give it a check out and appreciate everyone that tune.
[00:51:58] Q: I cannot stress how much signal comes out of this newsletter, how much I learn on a regular basis by subscribing there’s a free tier.
It costs you nothing., but your time and your time will be well spent by reading the words that Dylan and Sam and their team put together. So highly recommended. If you are not already subscribed to pop on over and subscribe to the free tier, it’ll start there., and of course, just a reminder to everyone listening, both on YouTube on Twitter,, Bitcoin Amsterdam is coming up.
Ticket prices will be going up on Friday, so be sure to lock it in. I am deep into the negotiations of trying to convince everyone at Bitcoin mag. Okay, cool. CKS outta the spaces. I am really trying hard to be able to smoke weed with you guys at Bitcoin Amsterdam. So buy your tickets and we’ll have a blast.
It’s gonna be the first. Bitcoin are the biggest Bitcoin conference in all of Europe, shoot us DMs with people you’d like to see talk, shoot us DMS with people or events or things that you’d like to see happen. There sound money Fest will be going on in Amsterdam of all places. Oh my God. I may never come back from that trip.
Lock in your tickets before ticket prices go up. And of course that’s a wrap P how’s that sound as a wrap. We good.
[00:53:15] P: Fantastic.
Let’s call it. We’ll see you all tomorrow. Same time, same place.
