This is the time which bitcoin would typically peak. We're in the latest stages of the bullmarket. This is not where easy gains are made anymore. Momentum destruction underneath the surface of the price has been the marginal buyers, being Bitcoin treasury companies and the ETFs. We will see massive
volatility expansion at certain times. You'll start to continue to see our performance from some of the other crypto asset for the bitcoin treasury companies well managed one, they'll be like a delineation and you'll start to see sort of a divergence.
Bitcoin is commodity with no common issue or a pre mine, but also with a fixed supply. And then you have these assets like ethereum that doesn't really have a known supply. From the treasury standpoint, how does it make sense to buy an asset that's not clearly defined has no fixed supply.
Yes, sir, I mean.
We're going to jump right in with my friend Jimmie Cowty is the chief crypto analyst over at Real Vision. They do amazing work and especially what I love is the work on global liquidity on macro. We're going to
dive into the four global equity cycle. Is the bitcoin four year cycle intact, are we gonna peak at the end of this year, what will the price of bitcoin be, what's gonna happen with bitcoin treasury, companies with digital asset treasuries like Ethereum, the crypto market, and so much more. It's an amazing interview. Let's go ahead and jump right in, and don't forget to hit subscribe on that channel so you don't miss more of these. All right, let's go, Jamie,
Thanks for joining me. I have been looking forward to this conversation and we just spent so much time talking off offline, but let's just jump right into it. I have a bunch of topics and questions for you, but anyway, thanks for coming on. Appreciate it.
Yeah, thanks Mak. I'm glad we finally got to do this. It's been a couple of months in the miking.
Yeah. Well we tried to hook up in Australia last year and then yeah, we're trying to connect here. But you know, I love the research that you do. I love the research that you do and real vision does I know in the bitcoin space a lot of people just don't like raw Paul, and they don't like real vision. But I think I think you guys do great work there. I'm not gonna buy your NFTs, but I appreciate that. I appreciate the macro research.
I don't know ye all right, I know rale of those NFTs.
But let's just let's jump right at the top and try to understand where we're at in the cycle where we're going macro for your cycles, Global equidy, bitcoin, crypto, bitcoin, treasury companies, dats all that. So let's let's start at the top though. So you know, I love the macro research that you guys do. Why don't we just start off? Can you just frame out where we're at right now? This is nine fifteen, We're about a couple of days away from Jerome Powell to FED making some of a
big announcement. Where are we at in this macro cycle right now? Frame it up?
Yes, sir, I mean we if people are following sort of the stationary models for crypto, then we're at pika cycle right. This is the time which bitcoin would typically pake and we'd be sliding into a bear market sort of by next year. Now, this cycle has been very, very different. We can talk about what a cycle actually means in crypto because it does mean different things to different people, but also people are now hyper sensitized to
the word cycle, and therefore everyone talks about it. This where I think we are, though, is at the We're in the latest stages of the bullmarket, Like this is not where easy gains are made anymore. Bitcoin is six x from the lows in twenty twenty two, but I
still think there is more upside. And the reason why I think there is more upside for bitcoin and for other crypto assets is that, you know, we've had a extraordinary or a very different period coming out of the coming out of the last bullmarket, which was really just a hangover from the excess liquidity that was pumped into the system because of the COVID madness. So the fallout obviously has been higher consumer price inflation, but also a deficit in the US and in most West and governments
that has exceeded the growth in economic growth. And therefore, you know, you've got a problem with too much debt, not enough liquidity. A business cycle, which is incredibly important and ties into the cryptocycle that has been more or less been in sort of has flatlined, hasn't really been an expansion phase. It's the longest period where the business cycle has remained all the ism has remained under fifty, but that has changed the I guess the duration of
the cycle. And therefore we're at a point now where it's clear that the business cycle is starting to improve. Corporate earnings are you know, dramatically improving. Positioning in risk
assets if you look at equities is not ephoric. And you've got this problem that the central banks are patently aware of that they have a system which is incredibly indebted within amount of debt has increased way more, and then the liquidity they've allowed back into the system through interest rate policies or through central bank balance sheet activities, and I think that gives us a liquidity impulse in upsurch towards the end of this year and into next year.
So my view is that we this you know, this market extends into sort of the first half of next year, and then it's sort of anyone scares as to where the peak might be. But we at real Vision have the frameworks basically to outline probabilistically when things are going to turn right.
Would you say that things would you say that global macro markets fundamentally changed in two thousand and eight, so we got the introduction of QE, we got all the central bank balance sheets have been overly extended, levered up at this point, and it looks like, in my opinion, you know, previous to two thousand and eight, they sort of allowed the markets to sort of deleverage, which they tried to do in two thousand and eight and things fell apart too fast, and they said, oh, we can't
do that, right, we levered the system back up, and since then twenty nineteen, obviously twenty twenty, the banking collapse in twenty twenty three, any time there's been even the slightest hint of some sort of deleveraging. The bank's collapse in twenty twenty three, it took six days to get a bell out, and it just seems that now the system has become so levered up. But not just that, the appetite, the willingness to allow any deleveraging has also changed.
The amount of tools that they've implemented to prevent that de leveraging have been radically changed, especially since COVID and you mentioned the amount of deficit spending and debt spending that's really driving the market. So do you think that you know, this four year cycle could be changed based off of the government's ability to stop adding liquidity or wanting to stop adding liquidity, or willingness to Is it like almost like a policy thing.
Well, I mean I always talk about investing as really playing like this game of chicken with central banks, Like we know that, we know what the game plan is, and so I think that they're always going to step in. And now you've got the government, you know this, We're in a sort of fiscal dominance regime. That's been a
that's been the shift. I think that's probably most important to understand in terms of cycle work, because if you think about cycles being driven by liquidity, yes, the bitcoint harving definitely drove cycles, but it's become less and less important. But it also just happened to coincide with this cycle, which the liquidity cycle, which tends to operate in a three to five year time frame. Yeah, everyone says it's like four years, but really, why is it on a
three to five year time range. It's because it's based on the duration of the debt at the sovereign level. Now sovereigns will take out will fund themselves through an array of different maturities, but were sort of the average has been around this sort of three to five period. That's just what has looked like a four year cycle, which was attributed to the bitcoin harving cycle. I think it look I think it was always there. If you
go back to nineteen ninety eight. There was a recent report which I think you that you got as well, which I published, was looking at sort of what happened in ninety ninety eight around LTCM. The central banks have always been willing to step in, but they the events were so infrequent or relatively infrequent as compared to it today, that they were generally slower. But they show they always showed their true colors. I mean, they've got this dual mandate,
which I think is a facade. The actual mandate is to ensure that there is no default of the system yep right, because they are in the case of the US, there definitely a private entity. It's different setups around the world for other central banks, but essentially they're they're just to prop up the banks, the commercial banking sector. So the cycle itself now is because of fiscal dominance, is
morphing again. And this is a This is work that you know, we're looking at Rale's definitely looking at it. You know, Ral and I do independent researcher but it's all on the real Vision platform. But we have sort of the same frameworks that he's informed me so much in my process over the years. But I was having this conversation with him just the other day. It's like, you know, now, that's so much of the liquidity is now being driven out of the Treasury by issuing short
term debt. What does that mean for the liquidity cycle? The traditional liquidity cycle where you know, they used to operate on a fairly standard maturity sort of program and we could sort of time it within sort of three to five years, and it's changed. And so I think that not only was the excessive reaction to COVID the reason why we've got an elongated cycle this time around, but also now the US since twenty twenty two, with the Treasury doing what it's been doing, you know, maybe
these cycles get shortened. Maybe there's more volatility because once you start stuffing in all the debt of the short term at the short end, Yeah, stable coins are great. That's going to find a whole new bunch of buyers for the toxic debt of the US. But anything that goes wrong, you know, is much more it's susceptible to cause flash points in the in the financial system because they'll need to be very very quick to step in,
even more so and even more unorthodox than before. So the Fed's just basically tied to the US debt wagon at this point.
So they are you seen something changed in two thousand and eight and it's.
A and eight when basically the US government took on the debt of the private of the banks.
So with the short term debt that we have building up, and there the leverage has been built up that can't unlever their willingness to act potentially anything, any disruption that comes, they're going to step in right away, just like we've seen in the past, and that could disrupt these cycles as we've as we've known them.
Yeah, I mean, I just think that what the Treasury has done is new and that needs to be incorporated in sort of forward thinking about what cycles will look like. But like the trajectory doesn't change.
Because it's not just the it's not just the US Treasury, right because like in London, for example, the BOE has been cutting rates but like the long end is blowing out, right, So we see other other central banks that are like getting maybe losing control of their bond market. Japan's having a problem with theirs, and so what happens then they have to start printing to control that long end of
the curve. And and anyways, that's kind of some of the some of the things that I'm thinking about, Like, I feel like the cycle is an effect until it's proven to be otherwise. But there's a lot of things that are happening that seems like maybe it just won't play out exactly click we thought it did before.
Yeah, well it's already that's already proven to be the case. If you held the view going into this year or this circle was that it was going to be a standard four year cycle.
Right, So as you said, I think when you first kind of opened up, you said, I forget the word that you use. But if you looked at these things kind of frozen in time, we should be peeking right around here somewhere in the next month or two. But these are moving targets, right, And so it's like, well, let's just see what happens in Q one and we'll let you know in q one sort of what the
policy is at that point. Every day we see headlines about inflation and dead and diminishing control over our own money.
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Yeah, I mean, look, I don't think that's you know, the same like the risk models that I have built around bitcoin. You know Dydite's screen euphoria. We had euphoria in sort of Q four of twenty twenty four. So look, if the cycle ends, we'll all look back and say Q four was really the top in the un chain data and all the risk metrics in the same way as May of twenty twenty one was really that was the real top of that cycle because it took out
all the momentum and so yes, we went higher. But you know, there isn't really in this the most recent run up to one hundred and twenty five thousand in bitcoin, there wasn't really a there wasn't screaming euphoria.
One of the.
Reasons maybe we can get into as to why there's been sort of I guess momentum destruction underneath the surface of the price has been the marginal buyers being bitcoin treasury companies and the ETFs peeking into that cycle and then then basically you know, declining quite rapidly since then. So that is that is the critical swing factor for bitcoin.
But that will follow the liquidity cycles, SORR. If liquidity picks up, the ETF buys will return, the bitcoin treasury companies will see maybe not fooling m nabs, maybe expansion, who knows, but their capacity to buy and become, you know, and get more involved in buying bitcoin will increase.
I want to definitely get back into that topic a little bit more, but before we do, I'm curious what you think about bitcoin's KAGAR. So depending on what time period you take a look at, right, maybe it's a fifty to sixty percent annual compound and annual growth rate over the last three years, three to five years, maybe eighty five percent if you go back five years plus.
The general rule of thumb seems to be that the law of large numbers says that that number continues to decelerate, and we go from eighty to sixty to fifty to forty to thirty, et cetera. What do you think about or have you thought about the potential for Kagar to
actually start to reaccelerate again. And the reason why I asked that is if you think about like traditional assets that would be probably started from venture capital round and they've got all the private equity money in before they go public, and then you start having retail, which is small incremental money that kind of comes in, and so as the asset gets bigger, it's big checks first, small checks later, whereas like Bitcoin seem to work the other
way around, where it was little checks in the beginning. And today to your point that you just brought up about the bitcoin treasury companies, now we have billions of dollars of buyas coming in at a time, and so now with the treasury companies, with the institutions, as you mentioned, the detfs, with even sovereigns coming in, could we be sort of, you know, looking at technology with an S
curve type format. Could we sort of be in that pair of ball at phase with the big checks coming in that could potentially invert bitcoin and see that Kaggar start to accelerate it again a little bit.
I think what's offsetting that hypolthsis mac is that you've got now you know, in the early stages ying spot buying only and you had sort of the uniqueness of the hardcap as well with the declining inflation rate, that was perfect for parabolic rises, especially when it was just the plubs us buying it. Then as more as the as the network evolved and I guess more sophisticated players.
The futures, the options, et cetera.
Suppressing the volatility. So you know, I even look at the the research that I do. I look at the elasticity of bitcoin to changes in liquidity, which is, you know, anyone who says there's a perfect metric or perfect correlation in financial markets doesn't nate certain financial markets because markets
are nonstationary. But at least historically and still today, the relationship with liquidity is statistically extremely significant, but it is moderating over time, and so looking at sort of just the last couple of years, bitcoins elasticity to the changes in liquidity is less this cycle than in the last cycle,
but not by a massive amount. And just where we are in the liquidity cycle is typically when you start to see a real uptick, and therefore the elasticity generally expands also during this period, but more so in the same sort of scenario from previous cycles. So I just look at that and I think, Okay, you've got suppression of volatility, and you've got just the maturation of the market and the sensitivity of the asset to the drivers
of the price starting to decline. So I am in the camp that we start to see k gars moderate over time. But it's going to be interesting because there will be explosions of volatility in and along the way. And if you look at like, you know why you invest in the S and P five hundred from a traditional portfolio management standpoint is that you stay allocated because if you try to time that market, generally like nine percent of the returns come from like ten trading days
in the year. Same applies for bitcoin, and we will see like massive volatility expansion at certain times, like we saw in twenty twenty three with the bank bailout, and the first time that bitcoin basically gave the signal that this is a systemically integrated asset with real risk of
characteristics because the interbank market exploded. Bitcoin always fell in those scenarios, it didn't that time, So it was another sort of proving point, and I think we'll see a lot more tests like that where Bitcoin will show that it is truly a risk of affort asset and sort of shrud the criticism that it's just a you know, it's a risk asset correlator to the Nasdaq, which is not true.
Yeah. I mean, certainly, in the last five years, the sharp ra show has been much better than US treasuries, and we can see how since the introduction of the ETFs, the volatility has really come way down, so as it's like we could just continue just sort of being boring and just continue creeping.
Higher and higher and higher.
You know, maybe you mentioned the global liquidity and some of the elasticity that sort of diminished their real vision. Ral talks a lot about global equity flows and sort of this potentially whatever eight to twelve week lag that Bitcoin might have to that global equity move. And so when you look at this global equity move right now and then adjust for this lag, I mean, it looks like there should still be a pretty another big leg up in front of us.
Yeah. Yeah, I mean the problem with using the lags is that markets on nonstationary, so change of its time, but directionally it should play out unless there's something fundamentally different about this asset that we're not aware of, and that it's not tied to, you know, the increase in marginal new units of currency in the in the financial system, which I don't believe to be true. Sorry, that the problem is that twitters as attached itself to this chart.
I think it's been in the most shared chart of twenty twenty five, and it's fixated on the on the lags. You know, Rawl said this many times and I would certainly say it as well as like, if you're trying to invest on one chart with one correlation fixed with a fixed timeline that's been working for the last two years,
then you're gonna you're gonna come on stuck. Yeah, but yeah, you're right like that that the divergence between the two is as expanded, and it's not just M two, which I think is the most shared sort of version of that. It's total global liquidity. So you know, you're looking at central bank balance sheets, you're looking at the impact in the shadow banking market and everything else.
So when you look at that, and to your point, certainly don't don't just focus on one indicator, But if you look at that plus a handful of other indicators that are commonly used, like MVRV scores for example, or even if you want to look at Fibonacci lines, which I don't really put a lot of credit towards those things, but you look at some of these Neurpal scores or whatever, it does sort of look like Bitcoin is maybe halfway through its cycle. Like from a is it expensive? Is
it cheap? You look at the M two lag. If you look at again these types of indicators you mentioned that, you know, from a static time frame like October November sort of peak from a timeframe, but from a like I said, all these on chain indicators, et cetera, it looks like maybe we're like halfway through. And so again
that's from a static view. Now we could see Bitcoin go on a thirty forty thousand dollars rip, which would then put it to the very top of the top of the peak real quickly, which then maybe does make me think, well, maybe it does hit that M two lag. We do pop up, We do end up magically right in November here at the at the top of the at the top of cycle.
Right.
Yeah, I think the best thing for bigcoin, if you're in it for the long hole is that you get sort of a moderate increase, because it's when Bitcoin goys parabolic that you generally find the crescendo top because that's what encourages over positioning, increased leverage, which always gets unwound. And if it's unwound at a time and global liquidity is starting to slow or decelerate, it doesn't have to top. Global equidity can expand well beyond a Bitcoin peak, and
it has in the past. It's really about that subtle change or that rate of change. But if you have the ingredients of a parabolic rise with a massive explosion and open interest and mvrve goes up, which is all the unrealized profit in the network, then you have the
ingredients to form a top. This peak has been you know, we saw you for it tops in intermediate or mid cycle tops in Q one to twenty twenty four, and I was calling it out then in Q four of twenty twenty four again, which I was calling out again, which no one was willing to listen because the timing of financial contnitions to the US dollar and liquidity was just not supporting it. But you know where global liquidity is today and where it kind of needs to get
to to stop anything from happening. Is still a fair way away. So it's I think that the trend itself is looking you know, it's tired because it does rely on liquidity. But we haven't seen a far ad powerbolic rise that would just take the wind out of the sales for the rest of the cycle.
One more question about this and then we're going to move to a different subject. But Trump is the force to be reckoned with. He has been very aggressive towards Jerome Powell at the FED, lower rates, lower rates. He calls him names like too late, et cetera. Right, He's been extremely vocal. He wants rates, I don't know, three and a half points lower than where they're at today.
It looks like potentially Power is going to cave. Maybe we get a couple of rates cuts this year, but it seems like one way or another, Trump's are you going to get his way? We know Power will be out next year. He'll replace him with a dove and he'll probably get his way, and maybe this time next year rates are three points lower in that scenario hypothetical, would that be enough the US acting alone to influence the direction of that global liquidy.
Oh massively, because if the dollar continues to decline, and so it's already had a pretty historic move in twenty twenty five from sort of one oh seven and I think it got even high. It's down down ninety seven. That's a big move, and the dollar it doesn't look
like that move is over. But if the US were to aggressively cut and I think the more important than the interest rate moves is the balance sheet moves like they're they're still doing QT now that the margins it's fairly small relative to where it was in the past, but it's still tightening the balance sheet, which is putting pressure on the financial system, and so that if there's a pivot there, it would be very meaningful for total
global liquidity. It's driven by the dollar, it's driven by balance sheets, is driven by volatility in the in the treasury market. So all those things would be very very supportive. But it would also give other central banks to cover to do more. So China wants a you know, basically the US to continue to do so that gives them cover and takes the pressure off off their currency as well.
They already have been aggressive, they need to be a lot more aggressive, arguably, and I think the US move would just provide the cover and it would be it'd be open season again and would get a pretty big impulse.
So again we'll pivot from here. But I just I think Trump seems to get his way. He's a forest and I'm guessing he's going to get a fed chair and that he wants seeing as he gets to elect them, and we could see a sustained draw down all the way through next year. The Dixie is is low, as you said, but it's still historically pretty high, so I mean we have quite a bit of room to come down. That's what he wants. We'll see. So these are move I'm going to just put a pin in this for everybody.
These are moving targets. You can't ask anybody to predict where this comes out. These are moving targets. We look at it, you know, as these indicators roll out, I want to jump into the next thing. Obviously staying on bitcoin for a minute. But one indicator that I think is sort of ridiculous, but it seems to work is bitcoin dominance. And I say it's ridiculous just because like today on coin Mark in twenty seventeen, if I can remember,
it was like two thousand cryptocurrencies. Today on coin market cap is like nineteen million, So it's like every time one new gets created, it brings bitcoin dominance down. So it seems like kind of like an irrelevant metric in my opinion. But that being said, in June, around what June thirteenth, June fifteenth, we saw bitcoin dominance drop ethereum,
and really maybe a better indicator is ethereum. Bitcoin ethereum seemed to take off with the right of ethereum dat and then all the bitcoin proxies as they call them, all the bitcoin treasury companies all sold off at the same time. So while I like to think the indicator somewhat irrelevant, it sure seemed to indicate quite a lot here what's going on with that.
So bitcoin dominant is really like to the point that you're making about sort of the explosion in supply are
in the sort of the old coin crypto universe. Yes, all of that takes attention away and distributes attention, which I guess you know, makes it harder like if it was a more concentrated space, But like that's just the better or for worse, it's just a reflection of the growing adoption and expanding footprint that crypto has in the economy and in the lives of individuals, especially younger generation. The bitcoin dominance chart is really a I wouldn't think about.
I wouldn't think in terms of like the explosion in supply of all the the you know, the worthless mean coins and all that sure crap. But it's really a reflection of large caps in crypto versus bitcoin. So it what it shows is is Ethereum and the other large caps starting to outperform. And the pattern plays out almost every cycle once you get once you get to the point where you know the business cycle, the economy is growing,
corporate profits are expanding and they're beating expectations. Margins are improving, cap x is improving. Generally, you have a broadening out of risk. It's just human nature. And so whether you sort of see value in some of these other large caps, you do find at this point in the cycle is when they start to outperform. And that's what we started to see in sort of July, and you could see
it in the ETF flows. There's basically a flip that happened, and I think, you know, it was it was clear that ethereum relative to bitcoin had also become undervalued, and so whether that continues over time, it usually starts to It usually signals the last part of a bull market because as that risk gets broadened out, and then you know the increase in sort of a tension that it goes across the crypto ecosystem. It brings sort of reflexivity that brings us closer to a top, and then everything
underperforms in the next bear market. Now, maybe these assets don't underperform as much in the next bear market because there is legitimate adoption taking place as much as there is fuck ay going on in the activity and data. It's unquestionable from my standpoint that adoption of blockchains is proliferating at a real clip, and therefore, you know what
happens in the next bear market. I don't know, but like the volatility is so much high, you have to make sure that you're thoughtful around your position sizes if you do want to go into that spies.
It seemed back back to your point about this end of the business cycle and the money sort of moving out on the risk curve, which of course makes sense. It seemed like you know, a couple things. So like number one, like when you're an institution that wants to place a billion dollars, I don't think you can put a billion dollars into Sibi NU. Right, So it's like it seemed like the bitcoin treasury companies were sort of like that next speculative play, right, a more volatile play
than bitcoin. So bitcoin's a one x there are three or five x kind of a play, right, So it's sort of like the same potential volatility crypto returns, but in a regulated body. And it seemed like a lot of those crypto digons, the bitcoin degens latched onto all of these bigwoin treasury companies that were up, I mean half a dozen of them more up were up you know, three thousand percent, five thousand percent, eight thousand percent. Right.
Metaplanet was the very best performing stock in the world last year. Equity. Yeah, but then when you see bitcoin dominance roll over, like they all just fell flat on their face. And so to the point that you're making about it moved further out the risk curve. I don't know if that's necessarily accurate, because, like I would say that those companies were pretty far out the risk curve.
Yeah, well, I mean that so there was I think that mini, that mini bubble that took place inside the bigcoin ecosystem that drew in maybe capital that would have found its way into the wider crypto economy and some of these other smart contract platforms and applications, but actually
found themselves in the bigcoin treasury companies. But that also let you know, that's also reflexive as well, So there was an increase in supply of these companies and attention and all is good once the demand is there, and that becomes the new marginal buyer and driver of the bigcoin price, even more so than the ETF flows at least there was in Q two and parts of Q
three this year. But if there's amount of compression, it just becomes harder to maintain the buying velocity, and then you sort of get that reflexive move where you've got less at the margin buying from that segment, and that slows down the price. Appreciation markets are a funny thing. They're like they're you know, they allocate capital, you know, in ways that you perhaps can't sort of foresee.
They're not rational.
It's sort of like a mini it's a mini. It's a microcosm of like what's happening in previous cycles.
Yeah, you know, while while your point makes a sound, I mean, obviously those bigcoins social companies were buying an enormous amount of bitcoins specifically, I mean micro strategy most of all and Metal Planet were buying a lot as well, and the atfs were also buying a lot. But no matter how much they were buying, the price didn't seem
to be going up. In combination with that, it seemed like there was enough sellers for as much additional buying as there was, right so, but we did see the buying. We saw a couple of times, was it eighty thousand bitcoin in a single day got dumped in and absorbed, you know, with only a couple of points being moved here and there. But you know, my main thing.
That peak in like Q one was off the charts. Yeah, I mean what macro strategy were in terms of the marginal buyer. And then really in a que too was the new treasury companies. I don't know if we can ever see that. You know, it's not so much how much they were buying, it's the rate of change or the acceleration of the buying at that point in time that it was like the most interesting and that peak if you look at it on a just a rate of change basis, was off the charts.
Yeah. Although when you can look at like Bitcoin Treasuries dot net and see all the public traded companies with bitcoin, and if you take out the top couple, I mean really just take out micro Strategy and take up metaplanet. The buying. Sure, the rate of change was a lot, like companies were going from two to four to twenty four to one hundred, so the rate of change what they call the bitcoin yield, was dramatic, but it was like you bought twenty four Michael Strategy was buying you know,
fifteen thousand at a time or whatever. It's a little bit different, but my interest is mostly there. So let me see if you can tell me the future. Where where does this go? I mean, do you think that you know, at the lead stage of the cycle bitcoin dominance returns, do you think money comes back to some of these proxies or was it sort of like this, Uh, you know, obviously with crypto we have these bubbles, these cycles.
If you will, do you think this is like, you know, first part of the cycle, shake some of the players out, and then build up energy for the next one. What do you think happens when bitcoin dominance returns and what kind of time frame we're looking at.
If liquidity is rising, bitcoin will rise. But I think we're in that stage of the cycle where your start just continue to continue to see outperformance from some of the other crypto assets. It's just the way it generally plays out. I think for the bitcoin treasury companies, the will managed one. There'll be like a delineation and you'll
start to see sort of a divergence. If you look at all the bitcoin treasury companies in terms of percentiles of their m nabs, you'll see more of those companies start to drop into the bottom percentile. And that bottom percentile in terms of m NAV will go from like you know, one m NAB today or less down too point eight or less as they get sort of more and more distressed or out of favor, and so they'll
just have to be a consolidation. And we'll look at this period in the next cycle and see much less companies that are pursuing this strategy, and you'll start to see the winners more clearly affirmed. I guess by the market because you know you're involved in this space and you know that well, I would imagine I'd like to actually find out from you what you think about this.
But there's definitely going to be some acquisitions, scooping up, going into sort of the the next bear market, and consolidation in the space because you'll basically have the opportunity to buoy bitcoin at a discount. So I think that's yeah, that's how I see it playing out.
I mean, certainly it's going to play out that way. But we're talking very broadly, right, So certainly there will be companies who find themselves at a point in the road where they can't raise any more capital, they're trading below that asset value, and someone's going to come along make them an offer to give them an equity deal buy out, and they're going to take it. So of course that's going to happen. Will that be the majority? Probably not, not this early in the game, of my opinion.
So a couple things. So number one, these are equities. So just because the equity price drops, the market cap drops, and they're below one time zim nav not ass a value forverybody, so they're keeping up Why does that mean I have to sell my bitcoin?
So what it? It's not buying Yeah, so what right?
Like, I have my business, I'm generating revenue. I'm gonna keep buying bitcoin. I still have my bitcoin. So what Michael Saylor told me, he said, like, what's the worst that can happen? The worst that can happen is I can never raise money ever again. And I'm a one hundred billion dollar company growing at sixty percent. That's the worst, right. So with our company with Satsuma, right, we raised enough
money to buy a two thousand bitcoin. I don't know what you put the long term price target of bitcoin, but in my opinion, that's about two billion dollars worth of bitcoin in five or six years of just NAV alone, even if we never raise another penny again. Two billion of NAV. Now in the US, we have a word
for them, We call them unicorns. If they reach a billion dollar val less than I think it's zero point zero zero two percent of companies ever make it to a billion dollar valel So what's the worst that can happen? We're a two billion dollar company in a couple years, right, So what's the shakeout? Why do you have to sell right, So why are you distressed? So certainly, what's going to happen in the space. I don't see it, but it
is going to happen. Is the nature of the game is I have to apply leverage, which is how I can earn that increase now. And some companies are too far behind, so they're going to use more leverage than they should be, and they're gonna take a bad deal. It's gonna be short term. It's gonna be a two year debt term obligation. They can't keep up with the debt. It comes due at the bottom of the bear market.
They're forced to liquidate. Certainly, that will happen. I haven't seen that really built up yet, and I'm sort of in tune with a lot of the companies here. It will happen. But I just think about that, and certainly to your point, yes, we'll see those those acquisitions happen. I think it's a little bit early for that.
Oh yeah, yeah, No, we're talking way down the line. I think this is a golden opportunity to get in and acquire bigcoin and put it on the balance sheet and maximize the opportunity while their conditions were good, and I just think that you know that even if this sort of gold rush is over, so to say, and that there's delineation, was the right thing to do. You were using the capital markets to acqui the most important global asset of generations.
But I think I think Jamian just just to also expand this a little bit, just I mean, it's a fun conversation to have, but I think there's a lot of tools at your disposal. So you think about, like if the capital markets close off to you, right, for example, and certainly in a massive liquidity crunch, and the whole market sells off back to twenty twenty two or orse, you know, twenty twenty or something like that, certainly it could be hard to raise liquidity. But for the most part,
like there's an I don't want to say unlimited. There's a lot of money available just in taking convertible debt. For example, We're talking billions and billions of dollars sitting there. I mean, we had people begging us to take their convertible debt and we were like, nope, we're not taking it. So like in a bear market, we could use debt, we could get it turned out of three years or four years, right, I mean, we believe in the long term. Obviously, none of this works if you don't believe in the
long term case of bitcoin. But sure, I'll take zero percent debt for four years. I'll roll the dice on that, right, So like we have that at our disposal. There's all types of options. There's bonds, there's bitcoin bonds that are being rolled out. Obviously, there's additional raises which get tough in a liquidity cycle. There's equity raises you know at the market offering, which are tough when your ymnats get compressed, you know. And there's there's prefs and all different types.
Is there's a whole bunch of tools that are available for good companies for good companies, that's right, So it'll be it'll be interesting. I don't believe. I don't believe that. I think it's if you look at Metaplanet, which is the first company that was able to duplicate the strategy. They've had just in the last twelve months alone, they've had twelve draw downs or I'm sorry it was about eighteen months and last eighteen months, I've had twelve drawdowns
of twenty percent or more. Seventy nine percent was their most profound draw down last year, their duration of lasted anywhere from twenty days up to four months. One hundred and nineteen day was the longest duration they've had. So instead of like one cycle every four years, they have like six cycles a year. And the m NAB isn't the most important metric. I think a lot of people
put too much under that number. So for example, you could have bought Meta Planet last year at seven times and made a ton of money, and you could have bought it two months ago at three and lost your ass right, So it's like the MNAB doesn't mean everything. But you know, again, they had a seventy percent draw down last year and returned to thousand after that, so I think, you know, it's just part of the cycle. It's they're extra volatile. That's why people buy them for
the extra volatility. So it'll be interesting. But what do you think about the dats and these are the digital asset treasuries, And let me let me frame up why my audience obviously knows. For four years I wrote cryptocurrency research, I decided to be bitcoin only. I don't spend a lot of time focusing on cryptocurrency anymore. It's all just bitcoin, right, So I can't debate nineteen different, nineteen million different cryptocurrencies.
But I was in London two weeks ago and I met somebody that's launching a Salona treasury, and you know, I kind of told you before recording. He told me, you know, he doesn't even know the bowcase of what he's doing. But here's my thought on this. When I think about a Salona or or an Ethereum treasury, so you know, bitcoin is a commodity, right, It's there's no common issuer, there's nobody that pre mined it, nobody has that control of it, and it has as a has
a fixed supply right twenty one million. So I could see how a company would put a commodity on its treasury that'd bud goal, I'd put oil something like that.
But if you think about like Ethereum's bowl case, for example, it's like the World Computer, Right, we're gonna put everything on top of it, and we're gonna do all the smart contracts in this World computer, and Joseph Lubin and Metallic and Consensus, you know, they can control this algorithm and they're going to keep it working and blah blah blah whatever, right, the votes and all that. So it's
like a tech company. So it's like it's like Apple, Like Apple's three trillion, so like their market caap potential is three trillion, like so like Bitcoin's going for money five hundred trillion. They're a tech company number one, number two. Like again, it makes sense to put like a commodity on my balance sheet, But why would I put a tech company, Like we don't see typically companies putting other
equities on their balance they're not allowed to. But it wouldn't really make sense to put Apple under your You wouldn't create a treasury company around Apple maybe. And then and then the third point I'll ask, and then I'll let you kind of respond to these. The third point is then back to you know, again, bitcoin is commodity with no common issue or a pre mind, but also with a fixed supply. And then you have these assets like ethereum that that doesn't really have a known supply.
And so I'm just curious, like, you know, I think you sort of believe in also those types of treasuries as well, but like maybe you can film me in on the bowl case and the other guy couldn't.
Yeah, well, I think, you know, so the way hard frame Ethereum and these other smart contract platforms is that they are platforms, the application platforms, which is just essentially a derivation of a tech of a tech company or a new type of tech company. So it requires a different framing when you're looking at them as an investment. And I think that Bigcoin obviously has owns that commodity framing because of the supply schedule and because of the
level of decentralization. Now with Ethereum and the Solanta and all these other platforms, you've got a case to be made that actually, you know, they are going through an adoption curve which is going to be pretty dramatic over the next couple of years. And I think that you know, with the amount of with the amount of adoption that
they've already gained, and that's putting aside. I guess the activity metrics which we do trackers on train analysts in the space, which I think is a lot of it is gamed, and you're talking about the treating, yeah, wash trading, but also just you know, there's activity, there's cyble, you know, attacks,
and like there's tons of stuff that inflate numbers. So you have to look at it sort of more holistically, but it's undeniable that you're seeing adoption and now you've got basically integration with the financial system with stable coins, and stable coins are going to move on blockchains. Blockchains have facilitated the need for the US government to find new buys of its debt, and so whether we like it or not, these platforms are going to facilitate a huge amount of global commerce.
Let me ask you about that. So yes, I one hundred percent agree with you. The number one stable coin and not buy a little bit, but by a lot. Seventy five percent of the market share is Tether. Pollow from Tether is a bitcoiner and they announced just a few weeks ago they want to move it all over to the bitcoin blockchain. They're moving into RGB number one, number two. We've seen some of the other players and new entrants are building their own blockchains, so they're not
going to use Salona or a theory or Bitcoin. They're going to build their own. So it seems like it seems like the exist that the dominant player wants to move to Bitcoin not ethereum, and then the new entrants want to move to their own platforms.
Yeah, so is the argument, is the argument whether you should buy ethereum is one of these other platforms, or is the argument a blockchain is going to increase in terms of total usage.
I was more thinking about just from the treasure you standpoint, where like, how does it make sense to buy an asset that's not clearly defined, has no fixed supply. That's what I was kind of trying to think. Understanding from a speculative standpoint is one thing, Creating a treasury company around it and raising money in public markets seem to be like a different animal for me.
Yeah. Look, I mean it's I know where you're coming from, Like, it's I think it's a changing of investment philosophies all around. So let me give you an example of what I mean here. The Swiss National Bank, the same bank started buying Apple and tech stocks back in twenty sixteen. That was that seemed crazy, right, But they understood the debasement game, and so they thought the best thing they could do with their asset, with their with their reserves was to
put that into tech stocs. And that proved to be an incredibly smart move worked from unfortunately not mirrored by a lot of other central banks. So I mean, where is the where is the growth happening in the global economy right now if you look at you know, the legacy financial system or the crypto economy, the crypto economy
is exploding and putting all the gaming aspects aside. Settlement values on blockchains are growing at seventy eight percent compound for the last five years, and that was really before government said, hey, stable coins are okay. Now the question of like whether he wants to take a investment punt on Ethereum versus Solana or versus I guess any stripees,
new platform or new tether blockchain. That's more like a a investment decision with which is a lot of risk and therefore it becomes very tricky for these digital asset companies. And there's a lot more risk there with a platform that's in a hyper competitive space where there's basically no barriers to entry. It's just opened his open software that
anyone can fork or replicate. But there's also a thing called network effects, which are very hard to budge, and so there is there's definitely network effects exhibited through you know, the top smart contract platforms. But the you know, we'll see in five years time, what the right smart contract platform is or has been the best performer, if at all.
I mean, I put bitcoin at the center of my entire investing world because it is in my eyes, and I think in the eyes of even sovereigns now it is the emergent global reserve asset, and it is the It is the clear leader and will continue to lead. But I do look at those other platforms as investment punts.
But when you start looking at the digital asset companies in that space, you can argue that the high quality ones come first and then like it starts to tail off, and then you've got added risk that bitcoin doesn't have because it is not a fix. It doesn't have the
characteristics of the monetary network of bitcoin. And the other thing that we don't mention, we haven't mentioned yet, is that the reason why bitcoin is not only because of its monetary properties is a sound investment with lower risk of sort of downside over the long term, is because of the energy aspect. It is gobbling up excess energy
around the world. Is now strategically important for companies that actually understand how to drive value for their citizens that they bring bitcoin mining into their economy, and they subsidize it and promote it because not only will it monetize excess energy, it will drive investment in a space which is directly linked to AI and so like that, our
whole aspect just supports that network growing even faster. So is this I guess, to come back to the original point, there is a lot more risk, a lot more uncertainty in putting any other digital asset on the balance sheet. But still there's an argument to be made that the underlying smart contract platform assets themselves, the ones with network effects, will continue to outperform or you know, outperform tech stocks
for instance, maybe not Bitcoin, but should do well. And you know, you allocate with the right sort of position size to that because of the volatility and the uncertainty.
Yep. Yeah, And that's a question that I kind of always come back to, you know, in regards to the equity side of these things. Is like, as a bitcointerer or is like, is this going to be a bitcoin? But most of the world doesn't think that way. They're just like, does it beat the S and P find under, does it beat inflation? And so they're sort of like building out their basket sort of a.
Thing like that.
Man, There's so many other things that we could dive into, but I think I think we're probably just going to wrap it up right there, Jamie. But I would like to do this again sooner, maybe on the next report that you have out, will come on and talk about the report, and I wanted to get in some other topics such as talking about location sovereignty, so maybe we'll table it for another talk again. Like I said, your
research is amazing. Just tell everybody what kind of stuff you do and where they can find it.
Yeh. So I'm the chief crypto analyst at Real Vision and we've got a platform which is basically pretty much focused on all the exponential technology plays, but primarily crypto and how that plays into the whole macro framework. The business cycle analysts analysis that Ral does and Julian does is by father the best but business cycle analysis out there. I focused, you know, strictly on macro and crypto. So if you're interested, check us out.
Yep.
We'll link to that down below, and he shares his reports with me. I've done some YouTube videos, so just look out for that. I always link back to that. Jamie. Thanks so much for taking the time, appreciate it.
Thanks again, mat I love it.