Breaking Down The Bitcoin Drop

He's a strategy commodity strategist at Bloomberg Intelligence. Mike, what do you make of the trading here today? I'm just looking at my g I P function for bitcoin and it it hit thirty thousand and then it bounced right back up pretty significantly. What do you make of the trading today? I completely agree with Kathy Wood that this is a capitulation. It's a market backing up to decent support levels in a significantly fundamental boolmarket. So let's look

at the iteration is going forward. This is more macro economic at the moment. At the moment, to me, the bigger issue here is mean version in the stock market. Bitcoin has just been the high beta indicating it. And then you also can see that and the rest of the cryptosy're down almost double how much bitcoin is today. Look at the iterations going forward. If this document goes down and stays down for a while, it's a virtual guarantee that there's only one thing the Fed can do.

They have to buy more bonds. What is that good for bonds? Gold and bitcoin? They will be the primary beneficiary. So I think the key point Cathy would make made about deflationary trends. To me, that's the biggest fact that it's really kicking in here. Why is crudel down five percent? Because the only thing that's been holding up is this

writing right rising this this rising tide. Enough the tide starting the EBB, we're gonna see who's not wearing clothes, and I think it's gonna be bitcoin, golden bonds to benefit again. For you know, A key thing to leave you on is I think we're gonna look back at this and say that that joke coin, that Hustle doage cooin, it marked the peak of speculative froth in virtual all global markets. What what is driving this talent? Can we look across because you can track which wallets are, you know,

trade in cash. People say it's anonymous, but it's really sued pseudonymous. Is there any way to know who's pushing these prices down, how it's happening, Well, it's that's um. It depends on why you want to know. And and one thing, Matt, I've always looked at it from a markets guy, beating a new traded pits, I look at and that is trying to define exactly who is doing it, and wise is less important than figuring out what's the purpose and what's going on. And to me, the main

thing that's really happening this is massive speculative leverage. Long is getting hit in their stops. And you know, as an ex trader and speeding trading, pitt And traded with a lot more leverage in futures. And you see most markets, you know, leverages down there in the pay trading pits one minimal. You know, have a little sympathy for speculators getting stopped up, but oftentimes they mark the peaks and the trolls. And that's what I think is happening now.

And then when you know the dust settles, we're gonna see the fundamentals kick in, and that's where I see bitcoin versus everything else. Now, theorium is okay, but then there's a ten thousand other cryptos. Now we all know from the dot com bubble there's pretty good signs of speculam excess. But then there's only one digital goal in the world going digital. And by the way, Bitcoin still up in the year. I guess how much Tesla is down? Matt.

Can't you picture Mike McGlone in commodities pitch trading? Absolutely? I also would love to be there myself. I mean, that's those were the days. I wonder if we still have the same kind of commodity pits, are the same kind of open outcry trading anywhere in the world. Is it dead everywhere? It's dead everywhere. But I'd like to say the five years I spent in the Chicago Board

of Trade is more than anything I learned. Isn't an m B A c F, A FRM, all these all these degrees we get, It's just there's nothing like being around five thousand people every day and just knocking around markets. This is what fascinates me in terms of what's going on right now with bitcoin, because I've seen, you know, a crash from a thousand and we we wrote these stories about how the masses got pulled in and now it's all over and the fat lady has sung and

I saw the crash. It's seventeen thousand and everyone. We wrote stories that said, this is it. We called the game. It's over now, and we're doing that again today, which makes me sort of simultaneously laugh and and puke to some extent. But what I what fascinates me is the mechanics of what's happening here. Who's selling? Why are there margin stops, you know, our margin calls, um, you know forcing this liquidation? Are we seeing any big whales get

out of um? You know, wallets that haven't moved forever? Is this all retail? Is this institutional? Are people selling short? Like? This? Is what I wonder about what's going on right now? Well that's the key thing, man, And I'd love to see people selling short of bull market get backing up the good support with fundamentally good drivers. So I think that should continue and for a little while. But this is how you make bottoms in markets, as fowers who's signed?

Oftentimes you find that out later when the markets already recovers, so it's kind of hard to tell now, but I fully expect this is it is the speculat access is hitting their stops. And by the way, you know, that's oftentimes we used to say that in trading of bits, Hey, where's the stops? Because you want to hit them, and that's when you know where you get. You run through the prices and then you put in the bottom or

a peak if it's in a bowl market. Right now, it's just I think putty near a bottom in a bowl market as you just run through these these people got a little too bullish around sixty and probably getting a little too barrish around thirty. Hey, Mike, you know, let's put this technical trading or this capitulation trade aside for just a moment. If I'm a fundamental investor, what are the next data points I should be focusing on

for bitcoin? Well, I think the next key thing is I think it holds around thirty a douta gets much below and then to see how it gravitates. The key thing I'm looking at is the macro. How does this stock market resun respond to this? Is the stock market continues to show just too Maybe you have a normal temperacent correction which used to be history. What does that mean for the iterations from the macro And to me, that's where the bitcoin is different from all the cryptos.

It is macro and macro only that's what matters the most, and to me, that's what's gonna matter. So as far as technical levels, a lot of times this is like this to me is kind of like noise in the

big picture. If you look back at this from the future hypothetically five years so now we're going to look back at this, it's like, Okay, finally we had some time for this, that massive rallying and stock market just to mean revert and normalize a little bit, and it made everything kicking, like the FED and mask and fiscal monical stem monitory stemas has to pick up. And then we see these predominant deflationary forces, like look at crude oil.

It just probably peaked around seventy and guess what, in ten years, we're not gonna be using much of it. We're all we're driving electric cars. But that's the key thing where bitcoin s up comes in. It's set rapidly advancing technology and innovation, reshaping the world with Catty Cathy Woods touts on this is part of the whole world getting banked. And by the way, there's no the monetary powers policy is fixed. You don't have to worry about

more bitcoins coming on. To me, that's what's gonna come on. As far as levels, they're kind of noise, but you know, getting back above fifty I think will be the next key threshold. Sustaining above below thirty and b m of a problem for a well, but for me, the last thing I want to do is focus on the day trade. It's the macro and the bigger picture. I think we're more likely to head towards a hundred um than sustained

below thirty this year. Agree with you a hundred percent, But you know, it's the day traders and Wall Street bets that get the headlines. Um, it's the momentary moves that spur people to to call the game. By the way, Elon Musk, I don't know if you saw this, Mike that he just tweeted it, but uh, he just tweeted that he has that Tesla has diamond hands, which is, for those who don't know kind of Wall Street bets Redditt jargon for someone who absolutely refuses to roll over

and sell. He will not capitulate. It's kind of what he's saying now. But you can never trust Elon, or at least I think crypto investors won't won't be able to trust him Um to stick to his word, because he seems to go back and forth. He seems to waffle on his commitment to crypto and to bitcoin. And it's also I think interesting that he embraces DOES because serious crypto investors are sickened by DOES, or at least

embarrassed by it. Wouldn't you say, oh absolutely, I look at the whole Doge saga and him getting instead of right live is We're gonna look back at that and from the future and say, okay, well that was the peak in speculative accesses and all those ten thousand cryptos that don't really matter anymore. Now there's only like ten that really matter, Bitcoin and Theoryum and then a few others. And you know, I look yet, right now, let's just

let's fixtion and put an iteration on this. Let's say, by you know, end of the year, we sustain above fifty thousand. What does that mean? Bitcoin just survived another of the thousand cuts. It's it's with it's hit, it's it's been hit, hit, hit it for ten years. Markets are used to this, and if you're allocating to the space, you should be, you know, a small percentage your portfolio expected to drop fifty and if you don't, then you're

too overweight. But give it five ten years and it's it's a major ten x. And if it doesn't continue being the digital version of gold, well the world's going digital. Something else will and it's just a matter of time. Bitcoin has already won that race. So I look at it as bitcoin and gold together. It can analyze gold without it, and this type of dip. I expect them

both to appreciate out of this. Most notably if we see, let's say the stock market actually goes back to unchanged on the year, just imagine the iterations from the FET What do you, Mike, doesn't give you any concern here that the Elon Musk of the world can have such an outsize impact on this security it Maybe we're peak

Musk hitting Peak Musk was Senterate live. But the key thing is also I like to say the fact that the world's largest automaker by market cap is allocated to this digital reserve asset makes significant sense, but it's also might be marking a peak for death sla. I mean, who else can in the world cannot make electric cars? I mean everybody can know. I drive a Chevy Volte. I love it because I don't have range anxiety. And of course it's it's it's a poor man's teslas, so

maybe it's peaked. Dude, I love it. I love it too, I gotta tell you, Um, I have always loved that car. And beyond the specific Chevy Vault, hybrids are the answer. I don't know why anyone has to be dedicated to a battery battery electric vehicles, and now we're going off on a tangent here. But for me, um, why not have a range extend or as BMW calls, you know their three cylinder engines that they throw in the I

eight and the I three. Why not have that extra security and you can use the battery most of the time, be good for the environment most of the time. When you need it, throw in a little bit of internal combustion. But Matt, I think that's very relevant to the current topic. It's called innovation and rampidly advancing technology disrupting what's happening. So right now the infrastructure is just not there for all electric cars. The infrastructure is still not there for

digital asses. We don't have an e t F in the U S. And guess what, it's a matter of time. The rest of the world has proven there's no problem with e t f s. By the way I used to run, you know, I remember in the natural gas ETF it went to zero and some things like that. So to me, what you're we're in the midst of rapidly I think when the most significant periods of history of technologies taken over pressuring inflationary forces, and we're seeing

a little bit of that normalization today. Bitcoin is part of it. It's just this is part of that adjustment. I think we're gonna look back at this in the future when there's e t F so and when the Baltil the in bitcoin drops to about the same as goal, which it probably will because it gets what. Only thing that's uncertain is demand, and um all car cars will

be electric. But I'll end on this one key point just because of efficiency that you mentioned in cars, total consumption of U S liquid fuels is exactly the same as it was twenty years ago. Yet GDP and production is increased over that's just efficiency. Now everything is going electronic, and it's an electrification, digitalization, decarbonization. It's all kicking in. Everything gets more efficient. You know, you might not eleven

gets forty miles a gallon now it's pretty insane. UM, the way you drive it, well, no, not the way I drive when my wife drives in. Mike, thanks so much for joining us. I really appreciate it. I know you're super busy today. You can see Mike's work UM today on the t live blog. We've out of a top live blog which is excellent and excellent way to follow events like this. UM. Just type t L I V go on your Bloomberg terminal to continue keeping up with what's going on. Big point. Also, I hope I

can get Mike and my television program later. I'm on Bloomberg TV at one pm for people. I'm gonna have my people talk to his people and see if we can get him. We have FED minutes will be released today two pm Wall Street time, and I think most observers are going to be, you know, taking a look at how the FED of views inflation. It has been fairly consistent across the board saying, Hey, this inflation that you're seeing in the economy is transitory, uh, and it

should not be a concern for this economic rebound. But that's clearly one of the key issues that the market is focusing on. Now, let's bring in our good friend, Danielle DiMartino Booth. She's a CEO and director of Intelligence for Quill Intelligence. She's also a former advisor at the Dallas Federal Reserve and a Bloom Opinion contributor. Also is the author of the book entitled fed Up, An Insider's take on why the Federal Reserve is Bad for America. Danielle,

thanks so much for taking the time here. What are you going to be looking for here as in these FED minutes later this afternoon. Well, first of all, thanks for having me this morning. And you know, I will be tuned in to what Clarda mentioned a few days ago, and and that is that he's going to be attuned

and attentive to incoming data. You know, being a former FED insider, it's not on on hood of for the minutes to not two changes in between the end of the meeting and the time that's passed since then, and you know what, what we can say is that there's been a lot of mixed messaging. We started to see the commodities complex come off of its highs. This is going to be very reassuring for anybody inside the FED

who's sticking to their transitor um narrative. But by the same token, there is an undeniability about the stickiness in some of the prices that we're seeing. So you don't buy the transitory narrative. Although I will say, if I look at the commodities complex right now, uh, there are some serious red arrows everywhere you look, just today, right and one day. Of course, a trend does not make But you don't think that this inflation we're gonna see

is only a momentary. Well, I think that there are certain areas that are showing again stickiness we're seeing We're seeing that in steel and iron ore in specific pockets. Um. But I'm actually in the camp that does not believe in the inflation expectations narrative because it's got such a

tight correlation purely with the commodities index. So I prefer the Cleveland said inflation gauge, which which takes into context labor costs, and if you look at the Atlanta FEDS that have kind of a real time labor gauge, it really isn't flashing red just yet. And you know where I live in Texas. Next week is the last week of school. We've got a ton of high school students who are going to be hitting the labor market, and wages are a lot higher than they've been in past summers.

They might think of doing things other than being a lifeguard because there there might be enough of a poll for low skilled positions, especially the five thousands that are open among manufacturers. They're mostly low skilled positions, but these kids can make a lot over the next three months

between Memorial Day and Labor Day. That's a great point, Danielle, because I guess we've had the news you know, earlier in the week about McDonald's raising it's you know, minimum wage, the thirteen dollars in Amazon to fifteen dollars and even Bank of America talking twenty five dollars here. Is that just kind of anecdotal news in your mind, or is

that indicative of made some wage inflation creeping into this economy. Well, again, we're not seeing it picked up in the aggregate measures just yet, can we have to remember that there are still so many small businesses in this country that can't afford to compete with the larger big box retailers the banks of America. As you say, so, we're definitely seeing a grab for labor. What we don't know is what the other side of September six looks like when these

UM supplemental unemployment benefits expiring. We've already heard from Joe Mansion, who is arguably the most powerful person inside the Beltway, that he's not going to sign on for an extension of the extra three dollars per week. So again, we've got two two flows into the labor market between teenagers

and one stag of back to school. You're gonna have millions of Americans who are who are going to be faced with the choice of, well, gee, I might have to go back to work because I can't make as much. I can't sustain myself anymore. On these unemployment benefits will be reopening nationwide. Yeah, I got it. Just a minute left here, Danielle. But a question from a financial professional, a listener who who also has seen you speak in

the past and appreciates your UM your views. He he wants to know if you think any other central bank will blink before the FED, or does the FED have to move before the rest of the global central banks do it? Oh, gracious, We've already heard from the Bank of Canada as well as some of the emerging markets

for dilful one. We know that other banks are going to start the tapering process, and they've indicated that they're going to do that, while the SET is maintaining that they're not thinking about thinking about the taper discussion Rob Kaplan, you know, notwithstanding so uh no, I I think it's feasible that the FED not be first out of the gate. That would be abnormal. And so you think and even the important, the big ones like the e c B in the Bank of England could move first. That's a

different story. You know, they're the level of quantitative easing that they're pumping out. John Authors had a great call up few days ago. It's it's higher than it was when the pandemic first hit. When you're talking about the ECB and even even the FED and the Bank of Engment, I don't know. I I still send a lot of reticence on the part of the Big four Central Banks. All right, Daniel, thanks so much for joining us. Daniel DeMartino booth there. She is the CEO of Quill Intelligence.

Of course, she's a former advisor at the Dallas Federal Reserve as well, also a Bloomberg Opinion contributor, as is John Authors. You can find columns from both of them. Just type O, P, I, N GO. I want to talk about what's going on in retail. You have a slew of earnings yesterday and then a slew today as well. Let's bring in Ty Lopez to see winners and losers. Are executive chairman of Retail e Commerce Ventures. Um, Ty, what do you think now that we've seen UH Target,

t J Max, Lowe's, Home Depot, Macy's, UH Walmart? Where do you think? Which business do you think is best poised to succeed in a reopening? Yeah? Thanks for having me. I would say the better question is what's not going to do well? Not much. I just read an interesting report by Adobe on a calm and U. For example, ten of Americans had who are now shopping a calm had never bought anything at the beginning of the pandemic. That's thirty million new people entered just because of the pandemic.

So that momentum, I mean, this thing's wild clothings up for us. We're in all kind of we on radiosheck, electronics, all this stuff. We haven't seen anything, uh do anything but surge. So I think there's probably some B two C stuff, maybe something that supports commercial real estate. That's about the only thing I know that's getting hit right now.

So it's a great time to be in retail, especially if you have that a calm, you know, if you have the flair for e calm, by the by the way, your business, so you invest in companies that have well known brands but didn't do great as brick and mortar stores. You mentioned radio shack, but also Model's, um uh one, linens and things. Yeah, so so how is that going? Then?

It's been you know, we started buying before the pandemic and it was going well then and this thing has just super truck what would have taken until happened last in the last twelve months without a doubt. So there's been just we fought forwarded ten years. As I said, thirty million people according to one survey in the United States. That's just the US and of course e calm is very easy to go global with, so you have of people in the UK had never shopped a calm before COVID.

So everything is just pointing to of course we knew this was going to happen. If you we would all predict our great grandchildren would be completely digital and how they do things. Well, guess what it happened right now. So you op to wait for your grandchildren to live that life. You're living it right now, alright, Ty, So as we think about retail one of the key issues here and it's probably been accelerated because of the pandemic, and is uh acceleration and e commerces? Are there still

too many stores out there? Um, you know a lot of it's right sized itself. I think you see everybody from Victoria's Secret down has kind of right size their stores. Um, will probably start for one, will probably start opening stores back up. All right, all right, Ty, thanks so much. We're gon have to leave it there because we have some breaking news here. Ty Lopez, Executive Chairman, Retail e

Commerce Adventures. We appreciate that. A risk off day today, We're sure, particularly you look at some of the cryptocurrencies again, uh, you know, it's Bitcoin is off about twelve percent now, having Uh, it's declined from earlier in the day, so perhaps a little bit of a correction there. Let's get a sense of, you know, kind of how we should step back here on days like today and maybe take a look at the bigger picture. We can do that today with David Could. He's a founder, CEO, and chief

investment strategist for Mainstay Capital. David, thanks so much for joining us. A great day to chat with you, given what's going on in the markets here. So let's take a step back. What do you make of the markets here today, the equity markets, the crypto markets. Uh. Is this just kind of a healthy pullback or is it

something more? Well, we've had a good run here from you know, really over the past twelve months in the markets, and and we we were rolling here into May with the markets at all time highs, margin debt at all

time highs, and we're seeing a day here. I think it's uh triggered by this massive sell off in crypto, but we're seeing some certainly risk off across the board, and I think some of that's to be expected, but you know, it is giving investors a chance to take a look at their portfolios and understand how they're allocated and where they might want to be allocated. And we think this is an opportunity to take a hard look at that. Certainly, uh in the crypto space for seeing

uh some massive sell off and bitcoin, etherium and so forth. Well, we're seeing sell sell offs across the board, really, David. I mean if I look at UM, well we've got a GMM Global Macro Movers function on the Bloomberg and there's just read across the screen. Equity index is selling down four x, UM is selling off, and it looks like UM pretty much everything against the dollars down. Commodities, we have copper down, w t I, soybeans, um, iron, ore all selling off. You know, where where do you

take advantage of this? If if you want to, if you've got dry powder cash to put to work, where would you put it? So? You know, today, notwithstanding, we think that it makes sense for investors to continue to look at the value trade, value oriented stocks and those

reflation or inflation trades. Uh. You know, technology was clearly a place to be last year, but our our mantra has been to continue to rotate into value and we still think it makes sense to do that, even the in in commodities for that matter, some of the e t F E t f s like c M, the direction commodity strategy XLB, the spider material select sector, even though we've seen lumber, which had gone to astronomic levels, has had a significant correction here uh, and some of

the commodities have corrected. Going forward with the inflationary pressures, with the demand that will still be there. UH, we think it makes sense. And those areas helped to diversify our stock portfolio in past days and weeks. We've seen good diversification benefits with our stocks. We think that makes sense to continue in the value trade because we've literally seen a route in tech stocks, so we think that

continues to make makes sense for investors. All right, David, just real quickly, UM, what's your sector that you guys are most excited about? Right here, right now, thirty seconds? Right now, We think that it makes sense to value oriented stocks UH, Infrastructure plays et f s like PAVES, the global x US US infrastructure e t F UH, and then the small cap, MidCap, large cap value intiiculcally

oriented stocks. You can get that through E T F s uh like the Piece or US small cap cash cows the A L F H. Those plays make a lot of sense right here, David, thanks so much for joining us, David could la. They really appreciate your time and your insight, especially on a day like this. This is Bloomberg. Thanks for listening to the Bloomberg Markets podcast. You can subscribe and listen to interviews with Apple Podcasts or whatever podcast platform you prefer. I'm Matt Miller. I'm

on Twitter at Matt Miller three. Pet On Ball Sweeney I'm on Twitter at pt Sweeney. Before the podcast, you can always catch us worldwide at Bloomberg Radio.