The Mark Moss Show Feb 04, 2022

at Dylan Leclair Underscore. Man, you gotta fix that. Uh. He's a he's a market analyst, Bitcoin magazine and U t x O Management. Um. He does amazing um on chain analytics. And he's got a good macro game as well. And UM, Dylan's young. He's young, but he is smart. He's put the work in and so that's what I said. Bitcoin is difficult to understand, but you gotta put the time.

And I've had people ask me like, hey, explain bitcoin to me, like I'm five and in two minutes and I'm just like, dude, like that ain't gonna happen, like I can. You gotta commit the time to it, and Dylan, you definitely have thanks for joining me today. Mark. Be happy to be On. Uh. Yeah, I mean definitely have to have to take some time. And I think both of us have probably spent a few thousand hours thinking about this thing. So happy to happy to dive in.

Here is it? What would you agree that? Um? Almost the more that you learn, the more you realize that you still don't know. There are no experts in bitcoin. Uh. And it's probably just you know, the amount of like disciplines it takes to understand bitcoin or really just kind of understand it from a certain angle. But you know, whether it's finance, the history, the history of money, economics,

computer science like cryptography and that that whole history. Uh, you know, there's there's no one the energy revolution that's happening with bitcoin mining. Like if you claim to be an expert on bitcoin, you're life you're lying because this this is a different beast. But yeah, I mean I've I've put him a little bit of time in terms of trying to understand the finance side of it, you know,

economic side of it. And I have to say it's a little bit surreal being on because I've learned a lot about kind of finance and Nikon from from your YouTube videos. Thank back in the day. So I appreciate it, Thank you, thank you. Yeah. I love. I love to focus on As you said, you kind of named all those different disciplines that you kind of have to know. I kind of like the political and like the historical side of things. Um, and so that's kind of where

I focus. And you found yourself liking the analytics side. And uh, that's cool. Right. It's like this thread that kind of weaves through society and and it and it kind of intersects all of us differently, and that's that's good. That's important, right, And we can all kind of hit these different areas. So you're kind of on this analytic side, um, which I want to dig into. Um. But but but but why why analytics for you? Like, h were you like a math nerd? You don't look like a math. Yeah.

Definitely definitely was the numbers guy growing up. Um, but really kind of just stumbled upon bitcoin more from like the finance side of things. I was I wanted to be. Uh. I was just good with numbers in high school and

I'm like, all right, well i'll do business. Um. And so I started reading about the stock market and really just like very very simple things um and stumbled upon cryptocurrency bitcoin, didn't didn't know the difference in in late I'm still in high school at this point, UM, and just from a financial assets side of things, not like had had no other kind of computer background or even

like monetary economic background. It was just like, oh, this is a thing that trades on charts, and I'm eighteen seventeen, eighteen years old and it makes sense. Uh and dove down it like down in the rabbit hole, really really hard. Uh. And kind of the transparency of bitcoin, the you know that the analytic side, I mean, the whole network is

completely auditable. UM. That was very interesting to me as well as being kind of from the finance side of things, like I went to one year of university setting UH finance and economics at UH the University of Vermont Business School, UM, and I dropped out to pursue bitcoin because it seemed like it was this this area that you know, it was an arena of ideas and credit it didn't matter

one bit. And I was like, all right, well, you know, why am I trying to get some some business degree when I'm like spending all my time learning and thinking about this thing. Anyway, you don't need any sort of credentials or or degree. You just you know, put out put out content or or not even put out content. But just like again, it's their arena of ideas. This is everybody is trying to provide value here. Yeah, this

is where the world is shifting right now. I was on a on a Twitter spaces with Preston Pitch and somebody was saying, Hey, we need to figure out ways that we can go educate all these lawmakers and stuff and educate people so they can really dig into bitcoin. And Preston said, I'm not interested in that. He's like, I put out content. If you want it, it's here,

come and engage with it. He said. But this is really going to be a shift in the world because what we have, this system, this feat money system we have today is built off elitism. Right, if you can be close to the money supply, you can be And I used the word elitism like I wouldn't hire any of them to run in my run work in my business. Um, they have no quality skills. But because they're close to

the money, so why they're good of politics? They can get ahead and Um, what's what we have now is we have the shift to meritocracy right where our hard work and our effort can get us ahead. And so that's what Preston was saying, is like, look, my content is there. If they want it, they can come get it. But what we're seeing is we're ending the money printer elitism and those people are not going to get on the new program. And so we're gonna see wealth shift

to people who are putting the work in um. And I love that perspective. That's kind of what you did, Dylan. I mean you, uh, you you found something that you're interested in. You dug in and and and Yeah, to be good at something you have to put that time commitment in which what you did and in college gets you to think general about everything, right like uh, forty you're a dabbler, forty five minutes here, forty five minutes there, an hour or they're kind of a thing. So um,

So you look at the Entian data. Now you mentioned it's the only Bitcoin is the only thing that has an audible like auditable data. Um. And that's pretty interesting. So when you look at financial markets, if you're studying energy markets, oil markets, stock market, etcetera, you don't have the data that you have with bitcoin. Is that maybe

something that kind of attracted you a little bit? Yeah, I mean I really just as I came to understand the properties of bitcoin and and the things like you know, running a node, what is a node? How the bitcoin network operates? Absolute scarcity? Why has that never been a thing before? How did bitcoin solve that? How did Satoshi Nockamoto solve that problem of the double spend problem, of

of absolute scarcity, of digital scarcity? Um? And so when I came to understand all those things, I was really kind of my mind was blown, and I realized I needed I was in college. I was like, I need as much bitcoin as I can. So I dropped out and I didn't do a bitcoin job I had. I was just like, you know, passionately reading and learning in

my free time. But I was like doing manual labor, Like I wasn't doing bitcoin analysis or anything full time remotely, Like I was listening to podcasts of Mark Moss and Preston Pitch while I was while I was wiring outlets. Like it was like a very you know, humbling kind

of uh you know, nine twelve months. But um, as I kind of consumed all that information free, I was I started to uh contribute a little bit more and more, and Twitter d M turned into a role kind of um doing some of the stuff that I really like. But in terms of why it fascinated me, um, I don't know. Just like the on chain kind of analytics and it gets a bad rap or I think maybe recently,

especially in draw downs. The thing that launching analytics is so cool, uh, is that well, one, if you're just talking about price, it could be about mining, hash rate, literally any of the economics of the Bitcoin network, transaction fees, like, it doesn't have to be price analysis. That's one in terms of watching analytics. And two is that we can

we can quantify supply side dynamics. And so if you look at like any any of the parabolic bitcoin runs throughout history, it got to a point where the supply side had increased so much there were so like the hogglers of last Resort, Like you can feel that when people are like I'm not selling, I'm buying more with on chain instead of it being anecdotal, you can see it and it's and it's verifiable and seeming like, oh my god, Like of the bitcoin supplies is by people

that haven't spent it in six months and so like any marginal buyer comes in, like we go parabolic when a wall of money hits not a lot of supply, and with on chain, we can like literally see that accumulation of the years of accumulation and then like a six to twelve month bull run where all of this kind of hoddle supplied distributes and so like I'm just naming an example, but it's really fascinating for the first time because we can see all of this happen, uh,

and with full transparency and then mutability, like it's it's there, it's recorded forever. Um. If you ask how many U S dollars are in circulation, No, it's credit based, right, there's there's euro dollars, there's it's it's all fractional reserved, like no one knows how much gold even even like like sometimes it's like in the equity markets, it's like how many shares are outstanding? No one don't even know. Like GameStop had more shares shorted than there was shares

that's standing. It's like how does that happen? Um? So with bitcoin, right, the trends, like that's just the transparency of it all and the analytics side. That framework kind of fascinated me. So, UM, I want to talk about what are maybe some of the one or two or your top favorite UM indicators to look at on chain. UM, I want to talk about how we look at those and kind of differences and and what they really mean.

And then I want to take that and then look at that and compared against this macro backdrop that we have going on with the Phoedero reserve and these FED meetings they had this week and this kind of stuff. UM, I'm in the studio with Dylan Leclair. You're listening to the Mark Moss Show talking about bitcoin, talking about on chain data with Dylan Leclair. UM, we'll be back in

a second. Do not go away, all right? You are back listening to the Mark Moa Show and we're talking about bitcoin and cryptocurrencies in this decentralized revolution that is happening right now. I am UM in the studio with Dylan Leclair. You can find him on Twitter at Dylan

Leclair Underscore and UM. He's a market analyst with Bitcoin Magazine looking at specifically mostly on chain data, which is uh, looking at the data about coins moving, how old there are, things like that and there's a lot of information we get from that now, Dylan. Um, before the break, I said that I was hoping that maybe you'd give us maybe your top couple things that maybe do you think are important or that people should look at, Like maybe it's m v r V or something like that. Do

you have a couple like that? Yeah, I mean you're that on the money that That was the one I was going to throw out. So with bitcoin, right the full transparency of the network, we can essentially see what coins moved when, and we can match that up with what the price of bitcoin was when that like what what was bitwin trading at when those coins are technically they're called u t xos when they moved. Um. So we can see like do things like say, what's the

average cost basis of every coin in the network? Um? And so right now currently that average cost basis bitcoin like the on chain average price when bitcoin was last moved. So that means you look at a coin and the last time it moved and what the price was when it got to that wallet or that address. Yeah, exactly. So if you want to think of it, maybe this is an easier way to think of it. So there's a market cap is circulating supply times the current price.

What we what we can do is we can have what's called the realized market cap or it's called realized cap, where it's the circulating supply and the price the coins last moved. But for every individual coin, every single setoshi, we can see when it was last moved with with perfect record, and so the where the market cap is, say what is it today, seven hundred billions something around there, uh seven billion, The realized cap figures like fourty um and so we can see so that translates to like

thirty six thousand dollar bitcoin dollar realized price UM. Just it's the same metric divided by circulating supply, and we can just like do things like take a ratio of those two metrics price versus. That's almost like if you want to think of it as like the intrinsic value or the subjective value of the network from every hoddler, we can kind of see the bull and bear cycles play out with this with the ratio of these two metrics.

With that what's it called market value to realize value, you brought it up first, you know your stuff, and the r V ratio you can kind of see these bull and bear cycles where price runs way way ahead of its on chain basically like on chain cost basis on chain value. Uh. And as as more money comes in and more those coins kind of get further distributed,

what happens is that that realized cap rises. So, if you like, if you're thinking of bitcoin as an asset monetizing just to centralized monetary asset, air dropped under the world and No. Nine, what's been happening since? Well, people say it's it's it's so volatile, But if you just look at realized price, it's in a log scale, it's going it's just bending upwards, flatlining for a couple of years, bending upwards, flat laning for a couple of years, and

it's pretty remarkable to see. Uh. And it kind of strips away from that day to day volatility that that people, you know, that gives bitcoin kind of a bad rapp to people that aren't too aware of what's happening. So if I take that data that m v R V ratio um and I look at that data, um, what does it tell me? So it says, Okay, the realized value or the market cap value or whatever, last time those coins move is at um. So that's kind of

like that sets the floor. So that means most people are sitting in profit, most of those coins are in profits day. And so then maybe you would extrapolate that to say that, um, until bitcoin breaks below that level, UM, there may not be this increased pressure to sell. Yeah. So bitcoin is dropped below it's it's realized value only like I think three or four times in history, and they've basically it's been um, it's not the exact you know, didn't bottom tick exactly at one point. Oh, and that

that market value to realize value ratio. But really anytime it's dropped below it's realized price and v r V below one, it's been a generational buying opportunity in a bear market. And so if we want to think of it, like what's the lowest bitcoin you can drop, Well, no one knows, but if it God's twenty four thousand, you're buying it at the in terms of it's like relative valuation, you're buying it at like the first percentile of of

if historical valuations. UM. And so that's just kind of how you can think of it in terms of relative value. And during bull markets, that'll that'll go out to five, six, seven times. It's it's realized price or it's like true price if you want to think of it like that. So you can just kind of see like relative market valuations compared to like historical values. Okay, so um in March when bitcoin just dropped right off of a cliff, Um, what did it go down to thirty or something like that?

Was it below that level? It was I think the realized price there was like about dred so um, and and it was basically flatlined. It was also reached like about four thousand at the top of So even though bit win drew down in this huge boon bus, that realized price actually like it topped out around January and was flat for a couple of years. So it did drop below that in the in that March flash crash,

which again marked generational body. So um, this is just one metric, but we kind of see, like you can you can really visualize well with this ratio the boom and bus cycles, bitcoins monetization phases. So how close are we to that generational buying moment at this point? As or huthing, it would be like, yeah, it's around two thousand and and you know, I doubt we get there unless we see some huge macro economic liquidity shock um, which honestly might be possible with with the FED trying

to taper this, you know, bond market ponzi. Essentially, I don't know how far they get, but that's kind of more of a macro discussion less than an on chain discussion. Yeah, I want to jump to that, but before we do, is there one other indicator or on chain metric that you like to look at a lot? Yeah? I really like looking at Glass now classifies or quantifies long term and short term holders. It's kind of this arbitrary threshold

that's not so arbitrary and it's more statistical reasoning. But long term holders a hundred fifty five days and the coin waits into that um into that value as a long term holder. Long story short. You can see during bowl and bear markets this huge kind of accumulation phase by long term holder um as coins age into that bucket, if you want to think of it like that. But you can see during consolidation phases or bear markets, long

term holder supply just bends upwards. You just it's basically like no one's selling and and and you know this group of people around the world that's continually growing. They continue to buy. Uh. And during during bull markets or when bitoin goes parabolic, you see some of those coins distribute.

But it's really interesting because eventually it gets to a point and whatever that point is who no one knows, but the dollar BTC ex change rate eventually gets to the point where there's a supply squeeze, like and that's kind of a meme like, oh, this's is on chain, it's a supply squeeze, But the reality is, UH, it's all supply and demand. And if we see this supply side, which on chain quantifies, continue to grow, eventually there's that marginal seller becomes exhausted and so we kind of see

some of that accumulation starting again. UH. And for the last couple of months you saw more of a distribution effect that macro fears kind of scared everybody way, but it's just you know, if you look at those charts over time, and I try to post some of them my Twitter feed, the long and short term holder supply, it's relative supply and all of that is just you see the bull and bear markets in the data, in the accumulation and distribution, UH, and why the bull markets

eventually happened. That's kind of that wall of money. It's not a lot of supply the bitcoin. So those are probably my two favorite metrics. UM. You know, you can look at the rate of change of long term and short term holders, or the total supply relative supply, that sort of stuff. So I want to ask you, UM, one of the biggest pieces of fud fear, uncertainty, doubt that I hear people throw out on on on bitcoin

is that UM. Yeah, it's all concentrated at the top. UM. Right at the most most of the bitcoin is owned by a couple of addresses, and so somebody who looks at all the address data, I want to I want to have you answer that, UM. And then I want to get into UM, like I said, some of this macro stuff and see maybe what the macro backdrop looked at some of these other cycles UM and data and where we are today and what you think about that. And you're listening to the Markmas Show. We're talking about

big coin, talking about the decentralized revolution. I'm in the studio with Dylan Leclair. We are talking about on chain data really of bitcoin, and then we're compared to the backdrop. I'll be back with more. Don't go away, all right, welcome back. You're listening to the Mark Moss Show, and we're talking about bitcoin. We're talking about this decentralized revolution that we are witnessing right now. I'm in the studio with Dylan Leclair. He's a market analyst with Bitcoin magazine

U t x U x t O Management. Um, he's kind of a we don't like. We don't like labels and bitcoin, but I'd say he's a he's a specialist, we'll call it that. And looking at this unchained data now, Um, you were explaining two of your favorite indicators to look at, m v r V and long term versus short term holders Hoddlers. Um, I was gonna ask you about a piece of fud real quick, which is um that all the majority of the bitcoin is held by a couple of addresses. UM, give us the short version and why

that probably is not true or is it true? The first thing to know is that one address does not equal one person. Uh, and oftentimes actually the biggest addresses. Although it's it is true that there are some some people out there with a lot, a whole lot of bitcoin. Um, just from understanding that and and not losing it in the early days. Uh, the reality is that these huge,

these huge addresses. I mean, there's two point five million bitcoin on exchanges, and so you see a lot of you know, the biggest addresses are actually um, not one person, but like ten thousand people, a million people, millions of people. You know, no one knows bitcoin is just as pseudonymous, so you can you can see a lot of these

addresses are are exchange balances. And when anyone presents the data in kind of a malicious way saying x amount of bitcoin is held by the top x amount of addresses, and it's a really shocking number, the reality is that bitcoin is probably uh, you know, on behalf of tens of millions, hundreds of millions of people. If you just think about say gray scale bitcoin has six thousand bitcoin and their trust, but that trust is owned by institutions and retail investors and and all the like. So I

think that's the food there. It's it's a little bit uninformed. It's like saying, uh, the Federal Reserve owns of all dollars. You know, that's almost like probably more accurate if you're thinking about food m yeah, good point. Um. All right, so I want I want to kind of take so the on chain data, I guess um indicators usually are like lagging indicators, so they tell you what happened, but

they're not always leading telling you what will happen. UM. Would you label on chain data as a lagging indicator or do you think there's a way to use it as a leading and more of a predictive indicator. Yeah, I mean I would say it's both. The thing about on chain is um it can be a leading indicator in terms of like so we can take some of these this data on the supply side data. Uh um, you know, I just kind of gave the most basic one,

but we can. There's all sorts of kind of top slash bottom indicators, and what they do is really just try to quantify like risk reward in terms of like allocating to bitcoin. Um. So obviously, like, uh, what happened in the past, there is no indication of what's gonna happen in the future, but you can kind of see with a lot of these on chain metrics, like a relative when it's good to buy bitcoin versus when it's not,

and it's good all the time. If you bought bitcoin, if you bought the local top quote unquote of any of the past bitcoin bubbles except you know the Uh, then then you're doing you're doing all right. Uh. There is no top ultimately in bitcoin, I believe, and it's all just local tops. But you can kind of quantify like Hoddler conviction and you can run and say relative to price and come up with, uh, you know, a ratio of how attractive it is or a metric of

how attractive it is to allocate. And so that's just one of the things with on chain data, and we can quantify the supply side so when like you know, the supply side dynamics are are very attractive, still needs demand to come in, but we can we can see when those times are, which is one of the cool

things about it. You know. Um, a lot of people say that like historically speaking, which we don't have very much historical precedents, but um, about eighteen months after the having cycle seems to be where the top is, and um, November is the top as of now. We never know

the top until we look backwards on it. And I guess there's as you said, local tops different time frames, Um, but it looks like November was the top at least for now um and it was eighteen months after the having anything in on Chane data that that says anything about that, Yeah, if anything, I think the both, like all of really price action was driven by I mean, there was capital influence, but the tops and local bottoms

were exacerbated by derivative price action. So uh, this isn't really on Jane data, but it's a big part of my day to day analysis is what's happening with Basically UM derivative bets on on the bit wins dom markets and so like you can for instant take your bitcoin and you can acquire that our margin or leverage it's called in the bitcoin market on top of that and bet on the price of bitcoin to go up or down. And that's basical that's what's called the bitcoin derivative. It's

a futures instrument UM and a bitcoin. There's quarterly futures, so you can buy, say I'm gonna bet that the price of bitcoin is going up in you know, April, but it's also perpetual futures. It's basically a never ending futures contract that rolls over UM and so so like you know. That's that's where a lot of the volatility

comes from. It's more so about traders were very very leverage long paying annualized rates just just to be long bitcoin on margin, and then at the bottom you were getting paid in in like say July when bitcoin is twenty nine thousand. It was the traders were so far positioned the other way that you were getting paid like

a annualized rate to long bitcoin. So like these are some of the things where like you know, the data, the past cycles, the litter just like the coded into the bitcoin source code, like that, the having event where the blocks stuffs he gets chopped in half. Those things can't really predict all of this kind of human greed and emotion that's coming. Like that's in the crypto native asset class as well as like just kind of like

it's development as a macroeconomic asset class. Right, Like this recent sell off, the correlation within the NASTAC it's been near one to one for about a couple of weeks um, and so that there's a reason for that. Yeah, So I just want to remind everybody as we're talking about these indicators, there's never one indicator that's conclusive you need to look at a bunch of different indicators from a bunch of different places to try to get the best

idea that you can. And when you see a bunch of indicators from a bunch of different places all saying the same thing, it gives you a little bit more confidence. But even still then it's anybody's guess about the future. Now, um, jumping out a little bit. So we have this on chain data and leading lagging indicators, but then we have this Federal Reserve and this macro environment that's going on. The Fed met this week and I think kind of

came out pretty hawkish, said they're sticking the course. You know, they're gonna taper, finished tapering by March, and then they're gonna start raising rates. Um. And that seems to have a big effect. So then, um, do you think that is? You know, at this point seems like it's what's driving the market. As you just said, I mean this this liquidity, it's kept the ratio of the you know, SMP pretty close. Yeah, I would think that. I mean what you saw is

basically everybody kind of risked off. After Powell comes off and says, yeah, we were wrong, we were very wrong. Inflation is not transitory, and it's in their mandate. You know, that's there's an employment mandate and inflation mandate. We can debate the merits or or just like you know, of those two mandates and how effective chasing those two are.

And I think we both say it's probably uh, not effective at all, um, and actually like it's pretty pretty bad that that we have essentially planned uh kind of economy around these two variables. It's horrible regardless, Uh, I think what we see here is that a lot of people are fearing um, basically a deflation event or a disinflationary event in terms of like the overall credit in the system, right, like what is March of what is two thousand eight? What is that? In terms of like

why did that happen? It wasn't just people people started to sell because they were scared, No, it was like more of a mathematical driven thing in terms of the fiat units in the system and the obligations to dead obligations against that. Right, and like when financial assets fall and there's a lot and there's an asset liability mismatch on everyone's balance sheet, well there's a de leveraging event and it just cascades until the FED backstops at all

and kind of comes in. And so I think ultimately we're going to see another one of those. Is that in two Who knows? But I think in terms of the FIAT environment, we've never been in a worse place in terms of how much debt is out there that did g d P. You can look at interest experience. I mean the national debts twenty nine trillion. Global debt to GDP is probably around fo. We're in a debt spiral.

There's no way to ever pay it back because ultimately, like money is created through lending up, if we're going to see another deflationary event, how do you protect yourself against infinite counterparty risk? And if they reinflate the system after that, how do you protect yourself against the delustion inflation risk? And I think we both kind of have come to an answer there. Yeah, that's a great question

that we will answer in just a minute. Because there is a deflationary crash, but there's also an inflationary crash, and most people don't realize that. They just look at their asset prices falling, but they could also inflate. But then the purchasing powers decimated, so those both both can happen. You're listening to the Mark Mo Show. We're talking about bitcoin, the decentralized revolution. We're talking about on chain data with Dylan Leclair. We're gonna be back and talk about how

to protect yourself with more. So don't go away, Hey, welcome back. You are listening to the Mark Ma Show and we are talking about bitcoin in the studio with Dylan Leclair, talking about on chain data and the macro environment. And so before the break, Dylan, you were saying, how, um, you know, we're We've never been in a worse situation. Um. The FEDS tools of interest rates and monetary supply are

kind of done. I mean interest rate through zero or negative in most parts of the world, and we have so much debt we don't have to do with it. Dollars of global debt has been created the last twenty months, twenty four months, and it's almost like, you know, they keep the if you look back through the last thirty or forty years, Um, it's like the markets keep trying to de leverage and then they just keep pumping them

back up. And they try to deleverage, they pump back up, but every time they pump back up, it has to get bigger. And now that debt is just so big they can't manage it right, And it's like, uh, it's like so high that when the top moves, it starts getting out of control. And it seems to kind of be where we're at. Um, you had said that, well, you don't you know that there's going to be de leverage at some point. We don't know when. I think that's the question, right, Um, and then maybe there's some

ways to protect ourselves. So how do you think through that? Yeah, I think ultimately and this comes this is kind of a completely different discipline than bitcoin itself, but more of a monetary history kind of things like ultimately, I think we're at the end of the near the conclusion of

a long term debt cycle. So people kind of pittively understand like the dead cycle, or more so like the business cycle, right like, Okay, there's a boom and then a bust like that just happens, like people don't really question it. But these things, it's not like human productivity just dropped by ten in a in a year on a given year just out of randomness. It's it's it's more so it's it's a boom and bust in the credit system. It's a credit bubble and then ensuing uh, deflation. Right,

it's an inflation and deflation. And then so if you just look at say like the ten year treasury or like interest rates the FED, the FED set interest rates over the last fifty years, you'll see you'll see a pretty clear pattern of just lower highes um. And so what's this kind of showing is literally the debt cycles in action, and now at zero, we seem to be at the conclusion of this. Right, the FEDS balance sheet is ballooned since oh eight because there's no other interest

rates were already at zero. So we've been at a decade at zero, FEDS balance sheets at eight trillion and growing um. And this is a global phenomenon. So what's the conclusion of a debt cycle look like. Well, it's either a deflationary collapse back onto some sort of hard backing where most of the people that thought they had an asset lose it um. But now with FIAT there is no backing. So it's either a deflationary collapse where everything unwinds to zero. Literally like the asset side of

your balance. It's falling, so you sell assets, your liability side is growing as a relative size, and it just cascades throughout the whole global economic system. Well that doesn't seem really politically feasible over a long term time frame, right, Like we can we can we can see this happening over a couple of months. But ultimately there will be a backstop because there has to be, right, just incentives are aligned for their to not let the system collapse.

But if it does, you have you have some sort of thing you can fall back upon. But if they don't and they come in, they step in and they print and they expand the money supply because they have to, because that's how a fiat credit system works, well then there's the delution effect. Right, things are getting more expensive around you in that currency terms. So with bit colin,

we kind of have the best of both worlds. We have an absolutely scarce monetary asset that is essentially engineered with how they pin mining works and how the supply istates works, engineered to increase its marginal costs forever or as long as hash rates increasing, as long as there's an economic consentive to mind bitcoin, which there is a strong one. Monetize any waste energy around the world and

you can turn it into money. Um So, Bitcoin is engineered to be harder and harder to produce essentially forever. And at the same time, we have a native property right system built into it where you can actually self custody your own asset. You don't need to trust a bank, you don't need to trust the government, you don't need to trust the third party intermediary. Um So, in a

deflationary event, in an inflationary event. If you want to view these outcomes as binary, uh, you're doing you're doing yourself. You know you're doing pretty well if you hold bitcoin. Uh. And that's why I think, and I've been kind of pushing this framework that everybody should hold at least a little bit um if you want to secure your wealth and time into the future. Yeah, you know these boom and bust cycles as you talk about these these credit cycles, Um,

it's all fed driven. So if you go back and look at charts, I mean you can look back through hundreds of years and there's always booms and buss because we're humans, human action, human nature. Um. I love an ll ice cream. I want be all ice cream every day, but today I just want chocolate. I don't know why, right, So we we things go in and out of favor, we change our minds. Um. So so you know, well, shoot, we made too much of an ill ice cream. Now

we don't have enough chocolate. And so there's there's a natural cycle. But if you look back through a hundred of years, you can see that it stayed, you know, in a pretty small channel. But right at at at um when the Federal Reserve was created, I mean, they've just gotten bigger and bigger and bigger if you look

at the markets compared to gold anyway. Um. And so the the boom and bust cycles are because they they dump a bunch of currency units into the system and it creates this big boom and then they kind of gets too overheated, so then they suck it out and then it just pulls it back down and then they have next time they have to put even more in and it gets bigger, and so each one just gets

bigger and bigger. So what I would just say is that, um, while it is a little bit natural, because like I said, human nature, UM, it's gotten way exaggerated because of the photos and The problem is that we don't know when they're going to decide to suck the money out of the system. Right, So, like we've done the best that we can, and we've tried to keep our head afloat during that inflationary growth um, and then and then all of a sudden they can just pull it back out. UM.

So shoot, I guess either way we're protected with bitcoin. UM. At this point, we're stuck trying to be a psychic because like, I don't know what they're gonna do. Right, at some point they're going to have to step in and pump it back up. But will that be at drop? That's kind of what history tells us, right, will it be a drop? So if you had to, if you had to consult your crystal ball, Dylan, which I know you don't have one, I wish you. I'm sure you wish you did. Uh. What do you think? What do

you think happens over the next year two years? I think you know, if you're just looking at historical equity valuations, we're still at outrageously high equity market to just GDP readings,

I think it's like a hundred or something, pretty pretty crazy. Uh. And yeah, we live in a globalized world, so there might be some flaws in the reading, but just you know, whether it's a pe rate here, right, we're historically overvalued, and equities we saw we saw this year there's a hundred billion dollar car maker with zero revenue like this is this is the type of thing you see at

the end of everything bubble. So in terms of how far conequities or even like say housing, you see mortgage rates start to go up at the FED stops buying mortgage rate uh mortgage backed securities, which they've been doing at a forty billion a month clip for the past like sixteen eighteen months. What what you know? What happens after that, Well, we'll have to see. But I think at a certain point as a pain threshold in markets where uh, it kind of cascades and gets out of control.

And so I think the Fed doesn't wants to wants to kind of let the market deflate a little bit, let let it pull back more So with just words, right, they haven't even cut interest rates yet, haven't even hyped interest rates. They're still at zero and the markets freaking out that they might go to fifty basis points, which is kind of laughable in real terms. But I think

ultimately real yields can't go above zero. And so if the bomb market starts to sell off, if literally every asset sells off, we're gonna see some really wacky stuff happened. I mean, we're in late stage FIAT in in my humble opinion, just in the historical terms, we've never been in a bigger, bigger global everything asset bubble ever um, And so I guess you kind of have to think to yourself, what's the other side look like? And trying to you know, interpret what tide Drone power wears on

a Wednesday is kind of tough. But if you understand the endgame, uh, and where this is all going in terms of you know, we're going to tell our kids one day that, yeah, the whole world watched her own power or one guy say what the price of money was going to be next week. Um, that's gonna be obsoleted eventually, But it's a process, and so you know, keeping that long term vision uh in mind, Uh, I

think is important. And you know there's gonna be volatility, not just in Bitcoin but in everything as this this everything a bub both the tracks and expands and and it's like almost like a system kind of dye. Yeah. Yeah, that's a good point. Um. The one thing that we also also have to keep in mind is that the law of diminishing returns kicks in and so in the

Kinsey And system of this uh non never ending monetary stimulus. Um, there's a Kinsey And multiplayer, which basically means that what they're trying to do is if they lose a dollar from the economy, they want to borrow fifty cents to get the dollars growth. Once a nation gets over to GDP, that multiplayer goes down to a sense where they're not

getting enough growth anymore. So now for fifty cents are getting cents of growth, and then fifty cents of growth, and then finally they're getting for fifty cents are getting thirty cents of growth, and then they're just digging themselves deeper in the whole. So it's not like they can just keep this going forever. At some point the music stops and that they just don't get that growth. So Um, anyway, interesting stuff, Dylan, thanks so much for listening. You're listening

to the Markma Show. We've been talking about bitcoin. We've been in the studio with Dylan Leclair. You can find him on Twitter at Dylan Leclair Underscore and uh he's he's a contributor market analyst for Bitcoin Magazine. Does great work. You should give him a follow. Um, that's what we got for you today with bitcoin and you know how to protect yourselves. Thanks for listening.