[00:01:26] Joe Carlasare: Hey Preston, what’s going on?

[00:01:28] American Hodl: Good to be here. Good to be back.

[00:01:30] Jeff Ross: Thanks for having me. It’s going to be fun.

[00:01:32] Preston Pysh: It’s going to be fun. Lots to talk about here last week. Let’s just kick it off into high gear. Cause last week I’m looking at two massive, massive announcements. The first one being the custody that the SEC is giving to BNY Mellon. And then the other one is now we can do derivatives on top of iBit.

[00:01:53] And the, is it just iBit or is it all the ETFs that they’re allowing this? Do you guys know?

[00:01:58] Joe Carlasare: Yeah, for now it’s iBit, but now it’ll be all of them eventually.

[00:02:01] Preston Pysh: So, you know, I’m reminded of this clip that I don’t know, it was like a year, a year and a half old with Saylor. He was on, in some spaces and he said, there’s three things that are going to take Bitcoin to a multimillion dollar price point in USD terms.

[00:02:19] And those three things, the first one was the change in the gap accounting treatment, which happened, I don’t know, about a year ago, the approval of an ETF, which happened about nine months ago, and then banks being able to custody Bitcoin. So last week, and he’s not even talking the derivative options being traded on top of it, but with the custody now being approved for BNY, it seems like they’re doing like some type of test run.

[00:02:45] The SEC gave them some type of approval. What are your thoughts? Is this a big deal? Are we making a big deal out of this? Let’s just go around the horn. Anybody want to start?

[00:02:55] Jeff Ross: Well, so is it a big deal? For sure, right? This is all inevitable. We all knew this was coming. Everything that’s happening and that’s going to happen continues to be inevitable.

[00:03:03] We’re watching Wall Street embrace Bitcoin fully. We’re watching the SEC start to embrace it. We’re watching the regulatory framework get built up around it. The financial rules get built up around it. It chaps the hides of lots of true Bitcoiners, right? They’re very concerned about, is it stealing the soul of Bitcoin to have Wall Street so involved and can they do something deleterious to the network because of this, that remains to be seen, right?

[00:03:28] But to me, this is all just as expected. So it’s kind of exciting. Like if you’re into price going up, number go up, and I’m sure we’ll get talking about our bullish sentiment a little later in the show. This is all very encouraging. This is going to increase the volume. It’s going to increase the interest for Wall Streeters to get on board.

[00:03:45] Having options available to trade is a super important next step. It basically means that Bitcoin has moved up a level in the maturity scale. And the seriousness of it as an asset. So I think it’s all really natural. I think there’s going to be snafus along the way. I think there’s going to be people who can abuse it, right?

[00:04:01] There’s always bad apples that might do bad things with this. They may manipulate the price that everybody always talks about price manipulation. But in general, it’s good because it adds a ton of volume in general. And when you have a lot of volume, the big institutional investors like that, they don’t want to come in with a billion dollar buy order and just jack the price up 20, 000 because they want to buy or they want to sell.

[00:04:23] When you have these much larger pools of liquidity, this much higher volume, that means institutional investors and endowments and other big hedge funds and things will be much more interested in Bitcoin as an asset. So I think it’s a net good in general for Bitcoin.

[00:04:38] American Hodl: Yeah, the way I look at the options announcement recently, and by the way, I was thinking about the same tweet, the spaces that you had referenced with sailor.

[00:04:45] And I think if he had had a little more, you know, just slightly more prescience there, not that he didn’t already have a ton, obviously he nailed it, but like he probably would have put the options, you know, treatment in as the fourth thing. Right. Yeah. And for me, this options market is just this big amplifier for the Bitcoin price.

[00:05:03] I mean, it’s like this massive capital unlock for the smart money. There’s a lot, I mean, there’s so many different things we could talk about with it. And like, I don’t fully understand a lot of it. So I’d love to get like Joe’s take on it. Cause I think he understands the plumbing of the options markets a lot better than I do.

[00:05:16] But you know, just something that comes to the top of my head is that, you know, Bitcoin now is more competitive with real estate because you now have different cashflow strategies using covered calls and et cetera. Yeah. But you don’t have to deal with the underlying headache of real estate. That’s just one of like many different options that this unlocks.

[00:05:32] And I think it’s just going to be a massive, yeah, it’s a massive amplifier. And it’s, it’s like a 10 X in terms of inbound liquidity for Bitcoin. So, I mean, to me, it’s like wildly bullish and I don’t know that we’ve ever seen an options market, like the one we’re going to see on Bitcoin. I think it’s going to be wild, both directions, upside and downside.

[00:05:48] Preston Pysh: I will say this Hodl. So I was interviewing Saylor in Madeira. This is I think February of 2024. And on stage he was saying that within, I think he was saying like within nine months to a year that derivatives were going to get approved on top of the ETFs and it was going to be a massive, massive big deal.

[00:06:08] Because of the amount of liquidity, the amount of volume, the amount of reinforcement of all the legacy dollars and legacy Fiat system, basically plugging itself in, not just the ETF was like plugging it in and then all of this was like plugging 40 other cables into this thing in order to just kind of like add a whole new layer of access.

[00:06:31] To Bitcoin. You need to go back and listen to his real comment. Not my, my Jerry rigged interpretation of it, but that’s what I remember him distinctly saying back. And I want to say it was like February of this year, but Joe go ahead and take it away.

[00:06:44] Joe Carlasare: Yeah. So options for those that are unfamiliar, that may not be as savvy in terms of the old school derivatives type systems that we have in the legacy markets.

[00:06:52] They provide contract exposure, right? There’s a reason you call it an options contract is derivative exposure where you can either establish long exposure or you can protect yourself against downside exposure via put options. These are extremely attractive to institutional investors because they let them calculate defined risk benefit reward, right?

[00:07:09] Rather than just going along only exposure, rather than just buying the spot exposure, what they can do with an options contract is they can do a variety of different things. They can do a cross asset exposures, right? Long equity, short Bitcoin, short Bitcoin, long equities, hedge the books, however they want.

[00:07:22] And it provides much more flexibility that you’d want if you’re trying to build out, you know, cross asset allocations. So from the standpoint of Bitcoin, it’s extraordinarily interesting, right? Because you have the first finite asset. That we have, and you have the attraction to ETFs and Dr. Jeff is exactly right.

[00:07:37] What you’re effectively doing is you’re pouring in leverage into the space. You’re letting it be attractive to a lot of institutional investors who would not feel comfortable just having naked long exposure into Bitcoin. We’re not just want to buy the spot, right? They want to have that hedge, even if they want to just get a long exposure.

[00:07:52] They can’t risk the downside of a 20 percent negative move in Bitcoin. They can hedge that with a spot position. And the interesting thing about that is, and this is the real story. I think if you are buying options, say there’s overwhelming demand in the options market for calls or for longs in any way in the market, What has to happen is the market makers then have to effectually position against the imbalance, right?

[00:08:13] So if there’s a long exposure, they have to be positioned short to correct the imbalance. Same is true, right? If there’s a ton of call selling, right? And I hear people really eager and salivating at the idea to sell calls against their spot iBit position, right? The dealers actually have to bid that. So it’s interesting, right?

[00:08:29] Like, they actually have to go into the supply, buy the iBit share, which then in turn buys the Bitcoin. So you have this reflexive loop. All of it, in many ways, tampers down volatility when there isn’t a balance in the market. So you might not see as painful of the drawdowns. You might see somewhat more capped upside.

[00:08:45] But what that effectively does is it provides a more institutionally safe investment. Right. We’re like in 2017 market where you had just the spot exposed. You want to buy Bitcoin? Sure. There was GBTC, but a lot of people just buy the spot exposure, right? There wasn’t an easy way until really the CME futures launch to get derivative exposure and to hedge.

[00:09:03] So you see these rapid swings up to like 19 six at the end of the year. Now you’re going to have a lot of institutions that can play that and that can tamper tampon down the volatility and it makes it more attractive. Now, some people want to say, Oh, that means you’re not going to have these blow off tops.

[00:09:17] I strongly disagree with that because there are plenty of options markets where, you know, for example, Jimmy, right. Where there was massive market demand. You saw that thing just get bid and go to the moon, right? Options do not necessarily mean that you can’t have an absolute run in the market. What we’ve seen in the spy, for example, and QQs.

[00:09:36] If you look at the zero DT expiration options contracts, those have actually moved the market significantly. There’s many days where zero DTs are moving the market more than actually spot bidding. So it is like pouring gasoline on a fire. I think it’s really exciting. And I think it’s exactly what institutions want to get at least excited in the spot exposure.

[00:09:53] Preston Pysh: How long until you can do this on some of the other products? Not just iBit, you think Joe?

[00:09:58] Joe Carlasare: Well, my guess is they will all launch together. There’s a couple different layers they have to go through, just because the FCC approved it. You also have to get some CFTC approval. So, we’re still a little confused as to when they’re actually going to launch.

[00:10:09] Eric Valchunis, I think, was speculating. He’s the Bloomberg analyst. That it was going to be a couple months. My source tells me it could be a little quicker than that. Six months we could see, or six weeks, excuse me, we could see them launch. And I would place a heavy pepty wager that many of the spot ETFs will launch with options on the same day.

[00:10:25] Preston Pysh: Wow.

[00:10:26] Jeff Ross: And if I can jump in one of the things that’s exciting as a fund manager myself, I, you know, I run a small fund. I’ve been waiting for this because what this does then is it opens up the possibility within my fund, which is based at interactive brokers. So in a standard brokerage account, if we do get another peak, if we have this exponential move higher into 2025 and say, Bitcoin goes to 200 or 400 or 600, 000 or whatever it goes to, instead of having to sell everything and take that massive tax hit, what I can do is go out.

[00:10:53] And by puts as Joe was talking about, right. And I can hedge my exposure to the downside without having to sell and hold on to the assets that I have. So, and a lot of institutional investors are going to do that same sort of thing. If you don’t have to take that big tax hit at the end of a bull cycle, that’s pretty exciting.

[00:11:08] So

[00:11:09] Joe Carlasare: just one thing to round out this conversation, some people might hear this and they make it all excited about selling call options against their Bitcoin and getting all levered up with those. There are many call option type ETFs that are in the market. I know Dr. Jeff knows some of these, they will actually try to generate the income and they’ll make money from the call option sales, right?

[00:11:27] The reality is many of these products have underperformed just by and holding the equity ETFs, right? So if you’re doing that, it’s kind of a way to get Bitcoin exposure, but you’re capping your upside to some degree. When these, when Bitcoin goes on these absolute tears, sure, you get your premium from selling high implied volatility contracts at 10 percent out of money.

[00:11:45] You’ll capture that premium, right? But then when you get Bitcoin going on a tear, you’re going to miss out on that upside and you’re gonna actually underperform. So anybody thinking about doing this, just be careful. You could potentially miss out on some of the most epic Bitcoin runs that we could see coming.

[00:11:58] Preston Pysh: How do we communicate the importance of still buying your own coins and taking self custody? Because I think in the coming four years to especially eight years, the way that a majority of people are participating in the markets are going to be through these ETF vehicles. What’s your point of view?

[00:12:17] Explain your point of view on this.

[00:12:19] American Hodl: That is a really hard predicament, pressing that question you just asked, because I mean, it’s two totally different types of Bitcoiners, right? So you got the guys who bought Bitcoin when it was 5, and they’ve been holding onto it for dear life, and securing it against cyber threats, and using their cold card, and their multi sigs, and their geographically distributed this and that, and you know, practicing OPSEC, Then on the polar opposite end of the bell curve, you got the guy who got rich off the Fiat system.

[00:12:44] Who’s got a hundred million dollars with Goldman and he can just call them up and be like, yo, I’m already trusting you with a hundred million dollars in this relationship. Pick up some Bitcoin for me. You know what I mean? And that guy is not going to be interested in taking custody of his own keys because there’s a slew of problems that come with it.

[00:12:57] I mean, there was just a social engineering attack for 250 million, like 4, 000 Bitcoin. These kids who were in LA and Miami got this guy who was a Genesis creditor. It was a single, a single Bitcoin whale to give up 4, 000 Bitcoin, just via a social engineering scheme where they called him up and pretended to be Google and Coinbase and Kraken and whatever they pretended to be.

[00:13:18] We’ll learn the details later. Through the FBI, but a lot of people look at that, especially people with real money and they go, that’s a headache. That’s a headache, you know, and I don’t want to deal with that headache. And so, because I don’t want to deal with that headache, I’m just going to continue path of least resistance.

[00:13:32] I’m going to continue trusting my broker, who I already know and like, and who I believe has my best interests at heart. That’s the path I’m going to take. So it’s just two ends of the bell curve. I think Bitcoin’s going to sort of bifurcate in that sense that like the Bitcoiners that have their keys, like myself, are never going to get rid of them.

[00:13:46] And the Bitcoiners that are just now entering the market are probably never going to take a custody there of their coins.

[00:13:51] Jeff Ross: And I’ll just throw that in there just to piggyback on what you said. This is like a first world problem, right? I mean, Americans, we’re into Bitcoin for the profit. Wall Street’s going to come in because they want to make a lot of money, right?

[00:14:01] They see this asset that has historically high returns, incredible sharp ratio, risk adjusted returns. They want a piece of this action and they’re going to get into it for the first time in this cycle. And that’s what’s going to really help propel the price higher. You start talking to people like Alex Gladstein and people who are in other countries and in developing nations, they’re not in here to make a million dollars on a quick hit, right?

[00:14:20] They’re not going to be selling options, trading options. They’re not going to be buying calls on Bitcoin. They’re using it as life support to get away from their government fiat currency and to maintain their purchasing power. So this is like a completely just foreign discussion to people like that.

[00:14:33] And so that’s to your point, how to like, why are you in Bitcoin? There’s so many different reasons why people are in Bitcoin, and it can vary by geography, it varies by your income status, all these different things, your experience. And so I think that what I love about Bitcoin, though, is all of this nonsense that’s just gonna happen because of Wall Street getting on board and driving the fiat price higher.

[00:14:53] It’s going to help people all around the world who are, you know, sitting in Africa right now, and they only have just a couple sets to their names and they’re just barely trying to make it. And this is going to help increase the value of the entire network and it will benefit those people as well. So that’s a good thing.

[00:15:06] Joe Carlasare: Yeah. I’ll just say, I think that we’re thinking far too limited. We’re not thinking big enough with respect to these ETFs. My particular view is by the end of the decade, you will see a seamless integration between Bitcoin and most financial services, including brokerage accounts. I think you’ll be able to deposit Bitcoin in your brokerage account.

[00:15:22] You’ll be able to buy any security with it. And I think the ETFs will be a revolving door where you can port some of your wealth to the ETF if you want. You’ll be able to withdraw in kind from bitcoins by ETFs. There’s no technological reason why that can’t exist. It’s a regulatory bureaucracy, legal headache, which those are the easiest ones to fix.

[00:15:38] The tech is easy, right? If you’ve got, you know, three, four, 500, 000 in an ETF and that becomes a million and you want to port some 200, 000 worth of Bitcoin out of there, I think that they’re going to open those up at some point by the end of the decade. And it’s not going to be as bilateral as we think that, oh, you either have to have all your keys or all of your point in when you custody provider.

[00:15:57] I think you’re going to be able to move back and forth seamlessly integrating between it. I think every bank’s going to be able to custody it. I just think we’re just early days and it’s going to take, you know, six, eight more years.

[00:16:06] American Hodl: So Joe, I have heard from people like sources inside BlackRock that they’re expecting in kind treatment within the next two years. So not even six to eight.

[00:16:15] Joe Carlasare: Well, that’s different. So you’ve got two different things, right? Right. And this is really, there’s a ton of confusion on this and what you’re talking about is correct, the in kind contribution, but those are from authorized participants. So right now, the way the trust acquires the iBit or other trusts require the Bitcoin, they go through the authorized participants and right now it’s through cash creates, right?

[00:16:34] Cash create system is what the SEC was insistent on. They did not want people to be able to port their Bitcoin from the authorized participants into the ETF structures. Some people say that was just a, you know, proverbial screw you to GBTC, but we’ll leave that aside. But however it shook out, it shook out now where there’s cash creates for the shares.

[00:16:51] That is expected to change within the near term. What I’m talking about is a little different. I’m talking about Dr. Jeff Ross has X amount of shares of iBit. And he wants to convert 40 percent of those shares into spot Bitcoin. There is no technological reason why those shares could not convert and move into spot Bitcoin with a withdrawal minus the fees or whatever processing transaction you need to have.

[00:17:11] So you can have something you can’t do with GLD, right? Unless you are significant with size and the, the gold ETF the GLD, the main gold ETF, you cannot withdraw and take the gold. Okay. For obvious reasons, right? It’s really hard and difficult to transport the gold. There’s no reason that can’t happen with Bitcoin and Bitcoin spot ETFs.

[00:17:29] American Hodl: Yeah, the big winner in me is very conspiratorial. When I hear you say that, because I think, well, why the hell would they want to let people take Bitcoin out of what is effectively a government honeypot? I mean, come on, let’s be real. BlackRock is like a financial terrorist organization. I won’t say terrorists, but they’re like financial, like, you know, operatives for the U S government.

[00:17:47] I mean, they’re juiced in, right? Like the Winklevoss twins do an ETF. And they wait in the line for 10 years being like, please, sir, fill my soup bowl with just whatever you can spare. And then BlackRock files and six months later, there’s ETFs galore, right? So to me, I think that if the government is smart here, they’re going to want to trap as much Bitcoin as they possibly can.

[00:18:07] And they would stop that sort of revolving door, like you put it. Although that said, if you want to get as many Bitcoin as you possibly can into these ETF products, you would allow Bitcoiners to put their Bitcoin in and be able to margin against their Bitcoin, because that’s very tantalizing to be able to do because you don’t have to sell your Bitcoin and you can start using it to purchase things that you want.

[00:18:27] So I don’t know. We’ll see how it all shakes out.

[00:18:30] Joe Carlasare: Yeah. The only thing I’ll say is that the market factors could influence BlackRock’s decision. You know, if they’re losing market share, If you get some smaller players to launch an ETF that allows you to withdraw in kind in Bitcoin, if that came to market, right, I would doubt more money would flow to the bigger players.

[00:18:45] I think at least you’d capture a significant market share from the smaller players. And we see this, right? There’s a reason why all of the brokerage houses drop fees. Robinhood started as an upstart, right? And then everybody followed suit. They all drop fees. You know, you would make the same argument, but why, why should Schwab and Fidelity And these bigger players, why should they have fees on transactions?

[00:19:04] Well, because the upstarts come and the upstarts start to cannibalize their efforts. And this is why like even GBTC, right? GBTC had to launch the mini Bitcoin, the BT symbol BTC, because they couldn’t compete with fees with BlackRock and the other providers. So I think it happens naturally as new participants come to the market and they say, Hey, we want a portion of the Bitcoin spot market, and we’re going to be better.

[00:19:25] We’re going to be, we’re going to have on chain addresses for all of our Bitcoin. We’re going to allow withdrawals. It seems right for takeover. If you actually bring a product to market, that is better.

[00:19:33] Preston Pysh: Joe, I’ve got a question for you. Just today I read BlackRock amends their custody agreement with Coinbase.

[00:19:38] Filed it with the SEC. As detailed in the SEC filing, the amendment updates the section 2. 1 of the custodial service agreement. Coinbase custody now must process withdrawals of digital assets to a public blockchain address within 12 hours of receiving instructions from the trust or its authorized representatives.

[00:19:57] What’s happening here? Why are they updating this to 12 hours? It used to be 24 or 48.

[00:20:03] Joe Carlasare: I think it was 24.

[00:20:04] Preston Pysh: It was 24.

[00:20:05] Joe Carlasare: I think it’s just for the sake of efficiency. They wanted to move quicker. I mean, it’s a good thing. It’s positive, right? Yeah. We want to supplement real and on a faster basis. And I don’t view it as anything nefarious or negative.

[00:20:14] I just think it’s more of a faster way of updating the instructions where they’re giving the addresses to the institutions or authorized participants. And they’re trying to fulfill balance requirements. Okay.

[00:20:24] Preston Pysh: Is this because they’re getting a little bit of slippage or just.

[00:20:27] Joe Carlasare: I haven’t heard that at all. First off, we hear all the time about these rumors that I categorically reject that BlackRock or other ETFs do not have the Bitcoin. I think that is preposterous. Putting that aside, my view is that they’re just trying to be more efficient and they’re trying to get hold of the Bitcoin on a faster basis, which is a good thing, right?

[00:20:45] Preston Pysh: Any other thoughts on this one?

[00:20:46] American Hodl: Yeah. When I read it, I just viewed it as black rock dictating terms to coinbase for, like Joe said, for greater market efficiency. Like they were like, all right, listen, like speed it up. Like 24 is too slow. We’re black rock. We say 12, it’s 12. I mean, like that’s, that was the takeaway I had from it.

[00:21:01] Preston Pysh: What do you guys think about now that BNY Mellon is going to start doing custody services, do you see them starting to eat into some of the Coinbase custody?

[00:21:10] American Hodl: You would think that 10 years from now we’re not going to live in a world where Coinbase has control of as many coins as they currently do as a custodian.

[00:21:16] Right now that is a risk, like The centralization of coins at a single custodian. I think Fidelity’s the only ETF provider that’s not Cusing coins with Coinbase and then iBit and Grayscale and a few others are. Some of the smaller players are. So there, it’s a real central point of failure there. Now, like I’m sure that the keys are in Multisig, et cetera, but still there, you know, there’s some process at Coinbase that is the central point of failure.

[00:21:41] So, yeah, I would think that just as a differentiation point in the markets that you’ll want to have different, like for me personally, I, you know, in my retirement account, I bought Fidelity instead of iBit because I like the fact that Fidelity is doing their own custody. Right. I also don’t like BlackRock because of ESG and a bunch of other reasons, but you know what I mean?

[00:21:58] That was calming to me as an investor. And I know people who did, you know, half and half, they were like, I’ll buy half iBit and I’ll buy half Fidelity because of the custodial risk. And so I think we’re going to see more of that Bitcoin separate. And yeah, why wouldn’t it go to sophisticated players like BNY Mellon or JP Morgan Chase or whomever, right? Gets involved.

[00:22:16] Preston Pysh: Isn’t it interesting that a lot of the ESG stuff is really starting to spin the other way? Like I just read this week, And it seems that AI is really kind of driving the trend reversal where everybody’s like, all right, well, we need lots of energy. So now all of a sudden we’re all about nuclear, right?

[00:22:33] The Microsoft, I guess, is firing up three mile Island again, or whatever. I mean, it’s pretty fascinating to see it all taking place right now. And great for Bitcoin that. I guess everybody looks at AI and they’re saying there’s a use case. There’s no use case with Bitcoin mining. So they weren’t on board until AI came along. But I think this is really a good development for Bitcoin to continue to scale and for more energy to come online.

[00:22:57] Yeah, absolutely. I mean, because basically what they figured, what big tech has figured out is that if you have an LLM model. And you can throw the most amount of power at it. You win, which, what does that sound like as Bitcoiners?

[00:23:08] It sounds very similar to the way Bitcoin mining works. I mean, there’s no direct output there. They believe it’s going to be a winner take most or a winner take all market, which is probably correct. And so, you know, I think it’s great that they’re subsidizing nuclear power and they’re using their political connections to get it done because we were not able to get it done at all.

[00:23:24] We’ve been, we’ve been on this beat for 10 years and nobody cared about us. We were just like the weirdos in the corner. But when Bill Gates is like, we need to build power plants, suddenly, you know, it starts happening, which is fantastic. I also think like, you know, ESG sort of went away as like a, it was a zero interest rate policy phenomenon, like the minute ZERP ends and all of a sudden, like we can’t be mandating, you know, political ideology to companies for whatever reason.

[00:23:48] Okay. Anything else on the ESG part before we move on guys?

[00:23:52] Jeff Ross: All I’ll say with that is the, to me, it’s very clear that the Overton window is shifting, right? Yeah. I think it’s gone about as far left as it could go of all the socially acceptable topics like ESG, like, I don’t want to get into all that right now, but I think we’re starting to shift back towards the center again.

[00:24:08] And to Hodl’s point and to your point, Preston, we just realized, look, we did these unreliable renewable energy sources. They just don’t work. They’re super crappy. Brownouts are terrible to live through. We actually need legitimate baseload energy. And nuclear is awesome, you know, and so it’s starting to shift and now it’s socially acceptable for people on the left to talk about that and to say those things.

[00:24:28] So I can’t believe it took this long because it’s been really annoying, but I’m really excited to see that we’re finally moving back to the center for these topics. So that’s all I have to say.

[00:24:36] Preston Pysh: I want to talk about this SAB 121. SAB stands for Staff Accounting Bulletin 121. I’m assuming Joe, you’re really well versed on this.

[00:24:45] Effectively, just to kind of simplify this for folks. So if banks are going to custody and obviously BNY Mellon, I don’t think falls under this with this announcement this past week, but banks, if they’re going to custody Bitcoin or any type of digital asset, they have to treat it as a liability on their balance sheet.

[00:25:04] And then they have to have cash reserves or some type of asset to offset this liability that they would be holding on behalf. So let’s say they have a hundred million dollars of Bitcoin that they’re custodying. They then have to have a certain amount of assets in excess of that hundred million dollars that they would be custodying to offset that quote unquote risk on their balance sheet.

[00:25:26] So SAB 121 is trying to, there’s a lot of banks, a lot of bankers that are trying to get this overruled so that the treatment isn’t that it’s held as a liability on their balance sheet. Interestingly, Basel three came out, I want to say near the beginning of this year, and it specifically broke out two different groups.

[00:25:45] You had group one, you had group two, and basically they’re saying that crypto assets need to have a A 1, 250 percent risk weighting. So in the example I used earlier, if you’re squatting on a hundred million dollars worth of Bitcoin, you basically have to have 1. 25 billion of assets on your balance sheet to offset the custody of that a hundred million dollars worth of Bitcoin.

[00:26:11] So this makes it impossible for banks to want to touch it. There’s been a lot of Howard Lutnick, who is from Cantor Fitzgerald, has come out. He talked a lot about this openly in a couple different interviews saying, there’s no way we can get banks to ever touch this for all these reasons that I just described.

[00:26:29] Joe, I’m curious, First of all, did I get that right that my description is that I

[00:26:34] Joe Carlasare: don’t see it’s connected to the story we just talked about to be a BNY Mellon. Okay, because they actually got the exemption from SAB 121. Okay, so just for your viewers and listeners, the backstory starts with the SEC basically puts for this bulletin.

[00:26:51] Okay, staff counting bulletin 121 and this imposes these restrictions on custody arrangements for various institutions. Okay. And then at that point, there was widespread sort of animosity towards this, so much so that they actually got a bipartisan bill passed by some Democrats through the Congress, sent it to Biden’s desk, and lo and behold, it gets vetoed.

[00:27:13] Okay. Disappointment. Right? Then you get this exemption from it, where they point to various, there was a speech actually, that’s the big news, right? Where you got a speech basically from one of the head regulators saying, we’re going to grant an exemption to be NY Mellon. And the question becomes, why? And there’s collaboration agreements they’ve signed with state regulators and other institutional custody risk management controls that are in place.

[00:27:35] But the long and the short of it is, they’re already pivoting away from the requirements of SCB 121, which is extraordinarily unpopular. So much so that it had bipartisan support to repeal. So the question is, where do we go from here? You know, BNY Mellon was able to successfully navigate the FCC’s requirements to get this exemption, which is not really fair, and people are crying, well wait a second, you’re again picking and choosing favorites, you’re not giving this to other major players, people like Custodia Bank and others that are trying to, in good faith, comply with the requirements.

[00:28:03] You’re picking and choosing winners. Once again, SEC, which is not your role is supposed to do, supposed to be agnostic as opposed to banking and institutions, supposed to have a level playing field for consumer protection. You’re not doing that. So the question is in the new administration, whether it’s a Harris administration or a Trump administration, will you get a repeal?

[00:28:21] Finally of 121 and I for one think you do I think regardless of the administration that takes a hold I think you do get a repeal just because there’s broad bipartisan support for it and I still am confused That’s why the biden administration felt the need to veto it in the first place considering, you know Even people like chuck schumer voted for the repeal that is so, you know from my standpoint here I think this all goes away.

[00:28:41] I think obviously if Former President Trump captures the White House in November. I think that is going to be almost a done deal that 121 goes away. Harris administration is going to be a little bit different, probably less likely. But overall, I think there’s enough bipartisan support and there’s enough of Wall Street money behind it.

[00:28:57] That’s the key. Wall Street money and influence lobbying to eventually get it to go away.

[00:29:02] Preston Pysh: What do they have to match it with? So I’m assuming they’re still listing it as a liability, but how much assets do they have to have, let’s say if they have a hundred million dollars worth of Bitcoin on their balance sheet that they’re custodying.

[00:29:14] Joe Carlasare: Well, this is the confusing thing because they haven’t been really clear about it. We only have this speech, right? Where they have said that they qualify for the exemption, but we don’t know what the specific factors that they’re looking at that, you know, they’re all soft, right? It’s kind of, we don’t know under the hood what specifically led them to that variance.

[00:29:29] They call it variance from the requirements. So I wish I could give you a more direct answer. I know I have clients that would love to have a more direct answer on it, but unfortunately we don’t, we, with the sec, it’s always sort of, you know, tell us everything and we’ll, you’ll hear from us at some point down the line.

[00:29:43] Which is very frustrating, right? That’s not a good way to conduct major policies, specifically in areas as important as Bitcoin.

[00:29:49] Preston Pysh: So the question really becomes like, so why do you think that it was declined? Is it just to give them a headstart over everybody else? Is this, I would imagine it’s very political.

[00:29:59] I mean, what’s the tinfoil hat rationale behind these actions? Cause the actions don’t make any sense whatsoever.

[00:30:05] Joe Carlasare: I mean, look, when I need a tinfoil hat answer, I go to American huddle. That’s just generally where I try to

[00:30:12] American Hodl: get. The government’s not an efficient Joe. How dare you say that by the way, somebody will knock at your door shortly.

[00:30:19] And also they love you and want what’s best for you.

[00:30:23] Preston Pysh: Well, we’ll see, you know, I don’t really know what to make of it. It seemed like it came out of left field. Were you expecting that this week? I was not expecting this at all. Yeah.

[00:30:32] Joe Carlasare: Many industry participants were taken off guard by it. I mean, it seems strange.

[00:30:37] I do know that there was some signaling from the fed. The fed had issued a non objection letter to be in line, which is interesting why they would do that. I’m not quite sure. But yeah, I’m sure we will find out in the coming weeks and months. I think some of the most interesting news of the week came, I don’t know if you guys saw the threads about Silvergate, right?

[00:30:57] And some of the affidavits that were filed and declarations on that and how we know now definitively that Silvergate was taken out back and shot because it was pro crypto. So we learn these things after the fact and I’m sure there is a story here that has yet to be reported that we will learn after the fact.

[00:31:12] Preston Pysh: Yeah, so for people that aren’t tracking back when a silver gate went down, there was a lot of debate as to whether it actually was short on capital and that they went through bankruptcy or they were purposely killed because they were basically the banker to all these businesses that are dealing in crypto.

[00:31:28] And this past week, there’s been a lot of evidence that came out that it was actually the latter is that they were in fact killed by the government on purpose and that they actually had liquidity to service all their obligations. So Nick Carter had a major role in first reporting on it. And then I know this week he was putting out amazing content.

[00:31:49] I think Caitlin was also putting out some stuff with respect to that. What I find so really frustrating is for Caitlin. Dotted every I crossed every single T for years. I think what was the bank originally? It wasn’t custodian bank It was originally guys remember the name. Oh, yeah. Yeah. It’s been a while.

[00:32:07] Yeah, it’s been a while But like I mean, it’s like four years ago. She was Maybe even longer on that But anyway, so my point is is that she’s been at this for a really long time trying to get a Fed master account the irony That she’s saying, yeah, I’m going to fully reserve everything. And then basically saying, well, we can’t have one person like doing things honestly here and everybody else is fractional reserved.

[00:32:31] So they slow rolled the approval. Then they just flat out declined and said, it’s not approved. And then they go this week and approve, you know, BNY Mellon to basically provide custodial services. So she was pretty vocal, obviously online about a lot of this for good reason. And I can only imagine, you know, the case that she has against the Fed, but I guess from my vantage point, it’s like, Well, they, in a way, because they slow rolled it and whatever shenanigans were played in the background, you’re still going to end up losing regardless of how good your case is, because now they’re all in this game and you’re still not, or you’re starting, or even if they gave her approval, now you’re starting from like zero and like flat footed and they’re all just off to the races.

[00:33:16] So it’s really insanely frustrating to see like that level of corruption playing out and. You know, I’m very comfortable saying that I think you all three would agree. It’s just total government corruption in that particular case.

[00:33:29] Joe Carlasare: Avanti Bank was the one you’re talking about. Avanti,

[00:33:31] Preston Pysh: Avanti. Avanti Bank.

[00:33:33] But that was renamed into Custodia Bank. Here’s where I’m going with all this. Sorry I’m talking so much. What I find so fascinating. Is I did an interview with Paulo from tether. They’re now at 119 billion of assets under treasuries that they’re squatting on. And they have tokens that are issued on top of this.

[00:33:55] I can’t say I’ve audited. One to one, but I’d be pretty shocked at this point that for the number of bear markets that they’ve gone through and how they’ve continued to hold their peg that they’re not backed the fact that you’re kicking off a 5 percent coupon on, you know, three month money, and then he’s plowing that into Bitcoin, which then hasn’t had a compound annual growth rate lower than 25 percent over any four year period.

[00:34:19] Tells me that he’s probably deeply over collateralized on the assets, the 119 billion of assets under management. And what I find fascinating is effectively he’s doing fully reserved banking, right? Like we look at Silicon Valley bank, how long ago was this now? Two, almost two years ago. Almost two years ago, right?

[00:34:38] Yeah. Two years. Yeah. And everybody ready to poop their pants, whether they were going to get bailed out By the central bankers, or they were going to get their 250 K FDIC check, even if they had 10 million on deposit, that’s the fractional reserve game. And you look at now some of these stable coin issuers and it almost, and I’m going to get a lot of crap for this, but.

[00:35:01] It almost feels like that might be safer because it’s fully backed and fully reserved a hundred percent versus these fractional reserve banks that are being kept out of this market because they’re not allowed to custody. I see Joe’s disagreeing and I want you to disagree.

[00:35:15] Joe Carlasare: I actually agree, but I think that I have to be whipping boy to play devil’s advocate here for the Fed.

[00:35:22] And we can talk about that if you want. I hate fully reserved banking operations, right? Okay. Okay. So let’s, again, this is not Joe’s view. I have full disclaimer, so don’t add me, but I’ll just say, okay. So the whole premise behind the entire system, right? Is credit creation. Credit creation is the heart of the system.

[00:35:39] So if you have a fully reserved banking Institute, you inhiBit credit creation.

[00:35:44] Preston Pysh: Yeah.

[00:35:44] Joe Carlasare: So fed oppose the fed opposes that largely because in their mind, in times of market turmoil and times of downturn, their influence, their transition mechanism precedent to affect monetary policy is muted. They do not have the ability to play on the levers of monetary system to incentivize.

[00:36:01] In other words, they would say it’s inflexibility to borrow. Another term from a recent debate we’ve had all over Twitter is they would say you have created an inelastic money supply with a fully reserved banking system that is pernicious to our system. That inelastic system says that in times of downturn, we do not have liquidity tools to incentivize and restart the system.

[00:36:22] The system freezes up like a patient going into cardiac arrest and it dies. So from their perspective, they think that these types of ideas are dangerous. They actually undermine their authority and their ability to control the system, right or wrong. That’s their thought process. The inflexibility that is associated with full reserve back systems.

[00:36:39] Is what is, I think, in their mind, a threat to the stability of the greater monetary policies.

[00:36:45] Preston Pysh: I totally agree with what you just said. That’s how they view it. I

[00:36:48] Joe Carlasare: don’t,

[00:36:48] Preston Pysh: I don’t, no, no, no. I’m saying I agree that from their vantage point, that’s how they see it, right? This is a threat against them and the way that they implement policy.

[00:36:58] If you would allow fully, of course, I don’t want that. I think that’s, it’s a way to mask the printing is what it is, because you’re just doing it through the credit creation. But I’m curious if you guys this is the question I had, do you see tether and circle basically doing like an end around fully reserved banking?

[00:37:17] And they’re doing it in a way that the fed really doesn’t understand that that’s what they’re providing in their service. And it’s interesting because they’re really not playing by the rules, but then you have people like Caitlin long that are out there, like knocking on the front door at the fed and saying, Hey.

[00:37:34] I’m willing to do all the paperwork. I’m willing to do all this stuff. And because she’s willing to play by the quote unquote rules and be fully reserved, they’re basically saying, yeah, you’re trying to play a game that’s unfair and you’re trying to play it fairly, like get lost.

[00:37:47] American Hodl: Yeah, there was a Willy woo tweet tweeted recently.

[00:37:50] He said BlackRock has 19, 800 employees and it has 10. 4 trillion AUM, which is 10 percent of the world GDP. And they make 5. 5 billion profit. Tether has 50 employees. They have 119 billion AUM, which is 0. 1 percent of world GDP. And they make 6. 2 billion in profit.

[00:38:09] Preston Pysh: An extra

[00:38:09] American Hodl: 700 million more than BlackRock does annually.

[00:38:14] So like the, but the thing is that. 10. 4 trillion AUM for Blackrock. That’s the actual key number. Cause that number says I’m in the club. Not only am I in the club, I’m a big part of the club, right? Tether, I think is too big to fail at this point. I think tether is going to be, I think they’re going to bring tether into the club.

[00:38:33] That’s what I think is going to happen. But this like sort of shadow banking system with stable coins, I don’t think they’re going to be able to end run around it for that much longer. I think basically like if you’re big enough, You’re going to be offered a seat at the table or a half seat at the table, at least.

[00:38:47] And if you’re smaller, you’re going to get clipped. That’s the way I see it happening.

[00:38:50] Preston Pysh: I think this is why the SAB 121 thing is such a big deal is because I think these too big to fail banks are looking at the old legacy fractional reserve banking system. And they’re saying, look at these guys over this rag tag team of call it a hundred people.

[00:39:07] They’re making more profit than BlackRock in the last 12 months. We want to play that game. We don’t want to, you know, have to obey these 121 rules. We want to be able to play in this stable coin market and back. We’ll buy all the short duration issuance you want U. S. government. And we’re just going to issue a coin on top of it and, you know, Keep the coupon, right?

[00:39:30] Or at least most of it. And I think that that’s kind of the game that they’re trying to get into. I think the big banks are trying to get into the game that tether and circle and others are playing. And it’s fascinating to me because they’re wanting to undo the fractional reserve game that they’re so well versed at.

[00:39:48] And. One other thing that I find fascinating about this is think about their revenue for like, if you’re a traditional banker and a Max Kai said this to me when I was doing an interview, he said, think about traditional banking and fractional reserve banking. If you take a 10 deposit and you can lend out a hundred, you’re making revenues off of the hundred that you’re lending out the percentage of the interest off of the 10 that’s on deposit.

[00:40:12] He’s like, so you’re collapsing multiples. If you start. Fully reserving everything because you’re not going to be able to lend out 10 times as much and it was a really interesting comment And you can see how they’re kind of if you’re a legacy banker You’re at odds with you want to be still playing this fractional reserve game because you’ve got multiples of 10 on The deposits that you can lend out and the money that you can make off of it But at the same time, you’re looking over here at this guy who’s like eating your lunch from a profit standpoint with a hundred employees and he’s fully reserved.

[00:40:44] So it’s, I don’t know. It’s really at odds. He’s the legacy system. And I think where we’re all going with. Stable coins. I don’t know. What, what are your thoughts guys? What do you think, Jeff?

[00:40:55] Jeff Ross: Well, love it or hate it. Tether is just an astonishingly good business model. And I wish I would’ve thought of it first.

[00:41:00] And it’s so interesting to think about it. The difference between going out and building a business and then asking him, asking for permission versus doing it to Caitlin Longway and doing everything by the book and asking him for permission and just getting stonewalled the entire way along. I feel so bad for Caitlin because she works so hard and she’s trying so hard to do what’s right and she just keeps getting stuff.

[00:41:22] American Hodl: Yeah,

[00:41:22] Jeff Ross: you know, it’s really frustrating to

[00:41:24] American Hodl: watch. This is also the why I don’t invest in lawyers. No offense, Joe. Sorry. Lawyers are too bound by the rules of convention. You know what I mean? You know,

[00:41:33] Preston Pysh: Okay, here’s where I want to go next. So, And when I look at Tether, a majority of these tokens are issued on Tron, okay?

[00:41:42] Some are issued on Ethereum. Some are issued on Solana, I think. So where I want to go with this is when I look at these other quote unquote blockchains, and we all, we’re all hardcore Bitcoiners here. It seems that the sole purpose. Of these other blockchains that we all know are centralized and from different degrees, right?

[00:42:04] They’re all centralized in different ways. And they’re very different than Bitcoin with respect to being able to run a full node. And like actually governments, if they really want to shut down any of these things, they can go in there and they can lay the screws to these very centralized servers that are running.

[00:42:19] All this massive amounts of data that are, you know, these ones that I just named. In addition to that, these stable coin issuers are highly centralized themselves. I mean, I was doing an interview with Paul, like if somebody comes knocking at my door, I have to oblige. I have to answer this. I’m controlling a ledger of how many coins are issued against these treasuries that I’m buying that some bank is custodying.

[00:42:44] So it seems like this whole hodgepodge of quote unquote crypto, if I had to say what the point of all of this was, as we were banging our heads and trying to fight this battle for a decade at this point, it’s to basically tokenize fiat, right? It’s to tokenize the dollar. It’s to tokenize the Euro. And beyond that, it doesn’t really appear to have much of a use case.

[00:43:06] Now people are trying to tokenize real equity. There’s a company called Stalker that is doing that in Europe, which is really an interesting discussion. There’s some other, you know, edge cases, but for all intents and purposes, I’m curious if you guys agree with this. It seems like the whole point of all these other blockchains is to tokenize the dollar and to expand the dollar’s reach and to make it more saleable and immediately settling all around the world.

[00:43:30] Would you guys agree with that?

[00:43:31] American Hodl: I mean, I think that the coins that did well, realized that early on, like tether realized that early on and did really well. And at any given time, if you go look at the top 10 digital currencies, like half of them are digital dollars. And the other half are just trying to put up a narrative front to appear credible enough as a challenger to Bitcoin to soak in enough liquidity.

[00:43:51] So that they can abscond with the funds and then basically slow rug where you sort of sunset the project in public by saying, Oh, we’re doing ETH2. What happened to ETH1? It’s dead. So yeah, I think basically that is what’s going on. And I think the U. S. government really doesn’t have a problem with it.

[00:44:08] They just have a problem with who the players are. They’d like to switch some of the players out. Like they want BlackRock to be one of the players. And speaking of BlackRock. BlackRock is heavily interested in RWA as real world assets. And the reason they’re probably going to be successful at them, or at least moderately successful with them is because you can get around the Oracle problem.

[00:44:27] If you’re BlackRock by just being the Oracle, we’re the Oracle, we’re BlackRock. We’ll tell you what’s what, you know, so you don’t have to do the same sort of. Left hand, right hand, slight of hand that goes on in cryptocurrency or with algorithmic stable coin or any of that stuff. You can just straight up say, we’re the authority and this is what it does, you know?

[00:44:46] Joe Carlasare: Yeah, I view it as all being traced back to the exchange activity, okay? So, if you look at the idea of cross border payments, remittances, peer to peer transfers, all that, it accounts for less than a fourth of the overall volume for the stable coins. The vast majority of the stable coin volume is on chain or is is on exchange activity, right?

[00:45:03] So people trading Bitcoin, ether, other alt coins, and they’re trading them against the dollar pairs, right? The peg tokens. So they can hedge in and out of volatility. And why are they doing that? They’re doing it because a lot of the quote unquote crypto exchanges cannot deal with the regulatory environment.

[00:45:19] So they are forced to not have banking accounts. So most notably Binance and others, they only deal in stable coins because that makes it harder, not Impossible, but harder to shut them down. So the entire stable coin market developed largely as a product for these casinos to fund them and allow trading activity where people could get in and out of these various tokens or assets into something more stable and hedge that volatility.

[00:45:40] So although there is in the emerging markets there’s obvious uses for cross border payments and remittances, it still makes up overall a minority of the overall volume for the stable coin market. So it all goes back to the exchanges. And I look at it mostly as just how do we create exchanges without having to have bank accounts frozen.

[00:45:55] And the obvious answer was the stable coins. You create a buffer where you have these centralized entities tokenize the dollar so that you can get in and out of assets for trading purposes.

[00:46:03] American Hodl: I think Joe gave a very charitable explanation to, you know, I would say they were straight up for evading taxes.

[00:46:10] That’s what they were for. I mean, talk to the average crypto trader. They have a erroneous belief that if they go from Bitcoin to a stable coin to Monero back to a stable coin, that there were no transactions that were traced that were taxable. In that chain, it’s like, no dude, they were all taxable.

[00:46:29] Preston Pysh: Each one of them.

[00:46:29] Oh boy. Yeah. That’s trouble. Something interesting seems when you’re looking at a theory, Ethereum has been getting destroyed lately in price terms, right? In dollar terms against Bitcoin and others. It was interesting. I remember this back and forth that I had online. This was probably four to six years ago.

[00:46:50] I’m thinking with Adam back and Adam said to me, you know, very casually, he’s like, well, now you have a Solana and now you have Tron. And it just seems like they’re just a lot better from a fee settlement standpoint and a speed of settlement standpoint, and they’re all centralized. He’s like, so if you’re going to cheat, you might as well just cheat better than the other ones.

[00:47:14] And it seems that Ethereum is kind of caught in this situation where they were still trying to be decentralized. I mean, it was proof of work for a very long time. When did they come off? When did they go to proof of stake? Like 2022 or? 20 years ago, three years ago, they moved from proof of work to proof of stake.

[00:47:35] So they were still trying to keep it together and still trying to be decentralized. But these other ones came along. We’re like, yeah, well, we’re not actually decentralized. We just say that we’re faster, we’re cheaper, and we’re going to win because that’s what people actually want. And they don’t really, they really don’t care whether we’re decentralized or not.

[00:47:52] The government doesn’t seem to be shutting us down. So we’re just going to. Continue to cheat, right? It’s all legacy thinking, right? The best ones that cheat are the ones that win. So I guess it’s interesting to me to see Ethereum really losing a lot of market share right now because they just didn’t cheat well enough or they weren’t.

[00:48:12] Am I framing this correctly or am I kind of out to lunch? What do you guys think?

[00:48:16] American Hodl: Well, I, I think one thing you were keying on there is that the main difference between Ethereum Ethereum enforces a lot of the cost of running the system on the users and Solana enforces a lot of the cost of running the systems on the developers.

[00:48:29] And obviously if you’re trying to create consumer applications, which one of those is going to have more buy in, it’s going to be the one that doesn’t penalize consumers, right? So, I mean, that’s the main reason why this Solana and Tron and whatever are doing better than Ethereum. And I think Ethereum is, I’ve thought for a long time that it’s like a slow rug and that, you know, Vitalik is looking for a way out.

[00:48:49] I mean, a lot of people got rich off of it and like good for them and now they can ride off into the sunset and buy Bitcoin and stop going to their weird conferences where they dance around on stage and sing and sing. Okay.

[00:49:02] Preston Pysh: Anything else there? Are we good?

[00:49:04] Joe Carlasare: I think we’re good. Yeah. I mean, I think it’s.

[00:49:05] That’s the spot on. I mean, at the end of the day, right? Most of these chains are for minting useless tokens meme coins, right? And trading them between one another. And if you can do that cheaper and you have the backing of VCs, which Solana has a ton of make no mistake. They have a ton of very important firms backing the operation, right there.

[00:49:23] So they’ve got the institutional side behind them. Plus they’ve got the cheaper product. So it seems like a real recipe to steal market share from ETH.

[00:49:30] Preston Pysh: All right. Final topic. 50 BIP cut this past week. We have been tightening, we’ve been, from a global liquidity M2 standpoint, have been going sideways for what, two years now guys, and I just saw that global M2 broke out, and we have the Fed cutting, I just saw tonight that China is aggressively adding liquidity into the market.

[00:49:57] I’m throwing this over to Jeff. He’s been very quiet. This is the topic he loves to talk about. Where are we at? Are we gonna continue to chop sideways or are we about to break out into a bull market? Jeff, what’s happening?

[00:50:06] Jeff Ross: The bull crab market is over. Oh wow. And we declared it. It’s the bull market officially.

[00:50:11] So we have, for all these reasons, we’re talking about liquidity is breaking out. Global. M two is rising. It doesn’t really matter what most people are US-centric. But what, when you’re talking about global assets like Bitcoin, which is the premier global asset. You want to see global M2 monetary supply rising, and that’s where you have the strongest correlation.

[00:50:30] When the Fed dropped by 50 bps, other central banks are dropping as well. That’s lowering the cost of capital for people, right? So for people in the audience who don’t know this, right? Like the prime rate is what most variable shorter term borrowing rates are based off, and the prime rate is based off the federal funds rate.

[00:50:48] So when the Fed funds rate dropped from five and a half to five, the prime rate dropped from about eight and a half percent. to 8%. And if you have something like a HELOC or credit card debt, or you’re a small business with small business loans, those kinds of things, that means literally the next day your rates dropped by about 50 bit 50 basis points.

[00:51:06] What does that mean you have more cash in your pot, your cash flows just instantly improve, right? I have a HELOC, my cash flows just improved a couple days ago. That’s fantastic. And they’re going to drop they’re probably going to, I think they’re going to do a couple of 25 bit. Cuts in November and December.

[00:51:20] So it’ll be a full like 100 basis point cut by the end of this year. That’s my take on it. That’s real money. So what that does, that means you have more money in your checking and your savings account or in your money market fund or in your CD. That’s what globe, that’s what M2 is, right? It’s the cash that’s floating around.

[00:51:36] It’s checking savings accounts. It’s a retail. Money market funds and CDs. And so that just means that supply is rising. That means just regular people all over the world suddenly have more cash. And what do they do with that? Yeah, they pay their bills. That’s going to be a bit of a relief for them from a consumption side.

[00:51:53] But now they have more money to play with. And that’s why you start seeing the risk curve. People start to move out on the risk curve when this starts to happen. And I think what we’re starting to see and if you look at past cycles, obviously, well, how do I talk about this all the time? It feels just like it did back in 2016.

[00:52:07] It feels just like it did back in 2020. When you have that kind of everybody’s just chomping at the bit. They’re just getting so impatient. I see people bailing. They’re like, I thought Bitcoin was awesome. I thought you said it was going to go up and I bought in at 55 or 60k and it’s just still sitting at 60k, 58k forever.

[00:52:23] I hate this. And they’re bailing and I’m like, please, please don’t like this is when you want to be in right now. And so I think that the next 13 months we’re doing this on September 23rd. I think the next 13 to 14 months are just going to be lit and we’re going to start slowly at first. And then I think we’re going to get that exponential move higher as people start getting confidence.

[00:52:42] The other thing I think people aren’t realizing. is there’s doom and gloom recessionistas all over the place still. I listen to them every morning. They’re good people. They’re smart economists, and they’re wrong. They’re just totally wrong. We are not headed into a recession. I think GDP is going to surprise to the upside.

[00:52:59] I think manufacturing is going to start shooting higher and quickly. And once everybody figures that out, and we see that economies are actually starting to grow again, especially here in the US, it’s just going to be off to the races and it’s going to be bananas. So I’m very much looking forward to 2025.

[00:53:13] Preston Pysh: Joe, do you agree with that?

[00:53:15] Joe Carlasare: Yeah, I mean, look, I think it’s, it’s very hard for me to listen to recessionistas with some of the economic data we have. You see several cyclical sectors, which have been lagging, right? But overall aggregate growth, which is how you measure a recession has been robust, right?

[00:53:31] You see unemployment, which is significantly below the 50 year average, hovering right above the 4%, 4. 2 percent actually ticked down last data point we had. You see that now we’re in an environment where inflation has effectively cratered, right? And you basically have seen inflation come down by the government standards at around 2.

[00:53:48] 5. If you believe the private sector data, like we’re well under 2%, we’re well under the target. So why shouldn’t the Fed cut? I mean, honestly, the Fed, I was surprised they cut 50. I think that perhaps the deflation out of China. Is perhaps scaring them more than people expect. But reality is you look at the inflation data, they’re at target minus OER, which is the single laggard that’s holding up the basket.

[00:54:10] And that’s going to take time to come down. So what is the reason for not cutting? And I was saying this months ago, like they probably should have cut it. The last meeting, I think it would have been better for them to cut 25 and 25 again. But I think they wanted to come out knowing that they’re going to have to wait until November for the next meeting to do a cut.

[00:54:24] And they wanted to come out and signal that the cutting cycle is here. And what I will note is that if you were following the rates market, if you were following the bond market before the fed did anything right, the two year, the 10 year, most of the curve already told you that cuts were coming. They dropped significantly.

[00:54:38] Mortgage rates reached a significant low, even before the first cut. So the transmission mechanism by the time the Fed is acting is really delayed. They’re really just following what the market had already done and already signaled with cutting rates, which is responding to the inflation impulse. So to me, I think it’s positive.

[00:54:53] I still am frustrated beyond belief. I want to pull out my hair when I hear these things about, Oh, well, whenever the Fed’s cutting the stock market’s about to implode and go down 60%. I see these ridiculous charts and I’m sorry for getting worked up, but they’re infuriating where you see 2008.

[00:55:08] Preston Pysh: We’re at all time, we’re at all time highs right now.

[00:55:11] And if you think it’s going hot, it’s going to rip. We’re going to have a melt up from here.

[00:55:15] Joe Carlasare: I don’t necessarily believe in the melt up thesis. I think you could do very well. You know, 15%, 20 percent move, mostly because some of these guys, the melt up guys have been calling for a melt up for like, you know, four years, there’s guys on Twitter that have, have said this, but I mean, look like this is an environment.

[00:55:32] Where inflation has come down, you’ve had effectively a Goldilocks scenario where real growth remains above trend, nominal growth remains significantly high. You’ve got household net worth at all time record highs. Where is the weakness coming from? Explain, now obviously something can happen, right? You can get a catalyst any day.

[00:55:49] You can get something to, You know, come out of left field and change the game. And that could be a significant headwind for the U S economy. But it’s not, I find it very difficult for, to look at some of these examples where an unemployment goes shooting up and people pull up a chart of 2020, or they pull up a chart of 2008, where you literally a contagion in the banking system, like the banking system was on the ropes, ready to fall apart.

[00:56:09] And they’re going to say like, Oh, well, that’s going to happen next month. Next month, we’ll tune into this program. And all of a sudden there’s going to be 25 million Americans out on the street, eating cat food under a bridge. Like that just seems very unlikely. Hodl.

[00:56:21] American Hodl: Well, you know, listen, Preston, Jeff and Joe are much smarter than me, especially about economics.

[00:56:26] And they really get in the weeds with these kind of guys. And they argue all the finer points.

[00:56:30] Joe Carlasare: No, I mean, like guys, you go back a little over a month ago. You could go on Twitter and there were people talking about great depression, like events from the yen carry trade blowup. I mean, I, I know Dr. Jeff heard some of these people, like,

[00:56:44] American Hodl: I can’t, I’d love to hear his thoughts about it.

[00:56:46] Oh, that was, that was a, that was a hilarious weekend. Everybody was an expert on the, the yen carry trade. It was amazing. Tell us all why we were all gonna be doomed,

[00:56:54] Joe Carlasare: You know, and then a week later, okay, we’re off to all time highs .

[00:56:57] Preston Pysh: Like, it wasn’t even a week later, it was two days later. It was two days later, it was like Monday hit.

[00:57:04] And I mean, it looked like Armageddon Tuesday, I think was bad. And then Wednesday we were back to where we were at, like the market bid, whatever percent it was crazy.

[00:57:15] Joe Carlasare: So what I would love to hear your take Preston, what message do you think that’s sending? I mean, if you look at these broad ray of at markets and you see them sending the message, what do you think they’re, what is the signal?

[00:57:25] Preston Pysh: I don’t know. I think they’re going to plug any type of liquidity gap immediately. Like I don’t, and this was the crazy part with that one. I don’t even know what they actually did. I would assume they opened swap lines, but I, I didn’t read that anywhere in the wall street journal or anywhere, right? Like what did they do to plug that to stop the unwinding that was happening?

[00:57:44] I mean, it is aggressive. Those two days were really aggressive. What did they do? I don’t know. Do you guys know?

[00:57:51] Jeff Ross: I don’t know. I just think some trades unwinded and the markets settled at the new level and now we’re carrying on as usual.

[00:57:57] Joe Carlasare: Yeah. I mean, there were some public reports about some of the BOJ finance ministers saying that they were prepared to hold off on future hikes and you know, that’s a really interesting subject, right?

[00:58:06] The fact that. There’s still potential out there for hikes with Japan, right? Like further BOJ hikes to defend their currency, which if you go back six months or a year, right, all you heard about was when is the yen going to stop selling off against the dollar? Now it’s the exact opposite. What is the dollar going to find a bid against the yen, right?

[00:58:22] And I think there’s reasons for driving that. One of which is, you know, the Fed ending, entering a cutting cycle, which was well telegraphed. And then the BOJ saying, we still are concerned somewhat about inflation. We want to continue to hike. So that differential is driving that action. And, That leverage unwind is not a systemic risk.

[00:58:39] In my mind, it’s more of an isolated risk for traders. Like those traders in a mechanical way have to close their positions and sell down to draw down their margin effectively.

[00:58:48] Preston Pysh: Well, in general, I think everybody’s bullish for the coming year. Like Christmas of 25. If we are, you know, fourth quarter.

[00:58:56] Quarter of 25. If we’re recording where you think we’re talking about not the 58 K gang, we’re talking about the 580 K gang. Is that what’s what, what do you guys think?

[00:59:06] Jeff Ross: Can we run sticking with my, this is the, I’m breaking all the Cardinal rules. You don’t pick a date and a price, but I’m doing both. I’m saying at Halloween of 2025, we’ll be at 475K.

[00:59:17] Preston Pysh: Whoa, that’s really, Jeff, I’m surprised you’re saying this. Okay, I like it.

[00:59:21] Jeff Ross: I’ve been saying this for like a year though, this is nothing new.

[00:59:22] Preston Pysh: Wow, okay, 475, Halloween 25. Okay, Joe.

[00:59:27] Joe Carlasare: I have no idea. I’ve had this hat, I don’t know if you can see it, probably blurry. You’re getting blurs.

[00:59:33] Yeah, so I have had this hat. Let’s see. It’s a Bitcoin 100K hat right here. I have wanted to put this on since 2021. I got this as a gift from a client and I really hope I can wear it in the next year. That will make me happy. If I can wear the 100K Bitcoin hat, that’s a victory.

[00:59:49] Jeff Ross: Joe, I’m going to guarantee that you’re going to wear the hat in 2025.

[00:59:52] Joe Carlasare: I’m not going to take it off once I get it.

[00:59:55] Preston Pysh: Hodl. Do you remember this guy? Parabolic Trab from the 2017 cycle and his shorts were going to a hundred K back then. Go ahead. Hodl. What do you think in the coming year?

[01:00:07] American Hodl: Well, I already, I have promised a hundred K by this Thanksgiving, or I will eat a pumpkin pie and pumpkin pie is disgusting.

[01:00:16] Okay. It’s the grossest food. It’s just a dirty gourd. You know, it’s horrible, horrible. All you pumpkin pie people are communist. Hey, we need to kick you out of America. Okay.

[01:00:28] Preston Pysh: This is how I feel about, this is how I feel about sparkling water, but this is a whole another topic.

[01:00:34] American Hodl: So yeah, I told somebody if we don’t hit a hundred K by Thanksgiving, I will eat a whole pumpkin pie by myself. This Thanksgiving.

[01:00:41] Preston Pysh: Hold on. Doesn’t Peter have a bet with like Mike Green or something this year to hit a hundred K. I think he does. I think he does. I don’t know. Maybe he won’t.

[01:00:51] American Hodl: Usually, historically, we do get bullish towards the end of the year. I think we have a bit of an overhang on taxes, which will settle out mid October, because crypto people are just total degens, and they don’t pay their taxes until the last possible minute.

[01:01:05] And I know because I’m one of them, right? And it’s like, we got that coming up mid October. And then you always get the Thanksgiving effect where people are telling their family is about Bitcoin and people start getting bullish, et cetera. And like, I don’t know, things just tend to ramp up towards the end of the year.

[01:01:18] I mean, that happened in 2020. It happened in 2016. I don’t see a reason why it wouldn’t happen again this time around. And then going forward, like Christmas time of 2025. I’m just as bullish as Jeff. And I do think that there’s a possibility that we take out this sort of higher lows thesis. You know, there’s always some sacred cow to be killed in Bitcoin in terms of narrative.

[01:01:38] Last time it was never below the prior all time high. Well, we took that one out. Yeah, we did. We went down to 15 and I cried a little bit, but I got my big boy pants back on and I was, I’m doing okay now. But, you know, after I got done wiping my eyes with Kleenex, I was looking forward to the next cycle and I said, what’s the next sacred cow that we’re going to get rid of?

[01:01:55] And I think maybe it’s higher lows. All right. Sorry. Yeah. Diminished return. Diminishing returns. Yeah.

[01:02:01] Preston Pysh: You know what the Hodl, I think you might be right on that one. I would not be surprised. I hope I would not be surprised if you were right on that one.

[01:02:07] American Hodl: And so if we do get to a level, let’s say, here’s how I anticipate it going.

[01:02:11] We get to this level that’s like 180, 200 around there, right? Yeah. And everybody goes, right, this is it. We did it. This is the new all time high. I’m diminishing returns,

[01:02:19] right? Yeah, yeah. I’m gonna sell. I’m gonna sell a

[01:02:20] bunch of my Bitcoin. Look at me, I’m so smart. And then boom, it catches a crazy bid. It goes up to 500, and then everybody’s going, oh my God, I gotta get back in.

[01:02:29] I gotta get back in. This is going to a million dollars.

[01:02:30] Preston Pysh: It’s gotta go to 580. It has to go.

[01:02:33] American Hodl: Well, and then once people pile back into the trade, that’s when you could get a real crazy problem going up because that’s when you could legitimately take a run at a million dollars because I mean, sitting on the sidelines, like if you got out at one 80 and Bitcoin goes to 500, you can’t sit on the sidelines, especially if you’re a longterm modeler.

[01:02:52] No, no way. Right. So like, to me, I think if we do take out the diminished returns narrative, we could legitimately take a run at a million dollars and I, you know, it’s either going to be one or the other. We’re either going to stick low at like 200 or we’re going to a million.

[01:03:05] Joe Carlasare: Well, what do you do? Any of you think that there’s a possibility that we go higher and in the six figures next year and then go higher the following year and then go higher the following year?

[01:03:13] Because that’s usually my base. I mean, when I think about it, that’s my base case. I don’t believe. I think that people are screwed up from the collapse in the crypto markets, FTX institutional collapses in 2022. And they believe that the 80 percent drawdown is guaranteed. I don’t expect that this time.

[01:03:27] Preston Pysh: Not with the wild card is what happens with the derivatives, what happens with the ETFs, what happens with these really large institutions that are just showing up. And James lavish says this all the time. He’s like, they don’t care what the price is. They’re just being told, Hey, I need, you know, this many millions or this many billions.

[01:03:45] Of allocation into this thing, go get it. And I don’t know, I think it’s, yeah, it might be a little bit different, Joe. I don’t know.

[01:03:53] American Hodl: I would love to be of the same opinion as you, Joe, but I’m just not, I think three greens, one red is an immutable law of the universe where your cycle is real. You know what I mean?

[01:04:02] Jeff Ross: I think in, in Joe, to answer your question. If Global M two, you know, I’m very simple minded. If Global M two is still accelerating higher, then I would say it can keep going up in 2026. But I think we’re just gonna follow the cycle again. I think that’s, and it’s gonna roll over. I think it’s gonna roll over and then I’m gonna start telling everybody to get cautious and I’m gonna turn into mean, and Dr. GaN.

[01:04:23] Joe Carlasare: Well, why do you think Global M Twos gonna, sorry, I gotta hear this. Why, why do you think Global M two is gonna decline in 2022?

[01:04:27] Jeff Ross: ’cause it always, it’s just everything is cyclical and so it can’t keep going up for, it just just doesn’t go up in a, up into the right path. It’s always, it goes up too far too fast.

[01:04:36] And then it’s going to roll over and then all the risk assets are going to follow and Bitcoin will lead the way. That’s what I think.

[01:04:41] Preston Pysh: I’m with you, doctor.

[01:04:43] Jeff Ross: I hope not though. I would love it, Joe. If you’ve talked about this before, I would love it. If it went up to like 75 K at the end of this year, and then the end of 25 was like 120 and then at 20, 26, it was like 150, like that would be fantastic, would be trading it.

[01:04:57] You’d just be riding it higher.

[01:04:59] Joe Carlasare: Everybody points to the equity market as being driven by the liquidity cycle. And you had a, you know, 20 year bull market in the equity market. Obviously you have sell offs and drawdowns, but you have a solid bull market that’s continued basically since the great financial crisis.

[01:05:12] Preston Pysh: Yeah. But M2 was going up that whole time, Joe.

[01:05:14] Joe Carlasare: Right. So why would Bitcoin sell off?

[01:05:16] Preston Pysh: I think all Jeff was saying is you might get a respite for a year or two.

[01:05:20] Jeff Ross: I, yeah, I’m a huge believer in this secular bull market continuing. I’m talking about, well, I think we can get a 75 percent drawdown though. I think if we go up to four, we hit my four 75 K target.

[01:05:30] I’m going to be telling people, I think it’s going to go down to 75 K in 2026.

[01:05:34] Preston Pysh: I mean, huddle saying it’s just one red dot. He’s not saying it’s two red dots, right? It’s just one red dot, a big deal. Yeah. It hurts. This is real analysis here, Joe.

[01:05:46] Joe Carlasare: Yeah. Well, you know, that’s the meme that’s going to die. It’s going to die this time.

[01:05:50] Preston Pysh: We’ll see. We’ll see. I like the confidence.

[01:05:53] Jeff Ross: We make two promises to you. One is you’re going to get to wear your a hundred K Bitcoin hat this in 2025. I hope so. Hono, you’re going to be wrong. You’re going to lose another bet for being too bullish too soon. You’re going to eat a pumpkin pie and I want to watch that.

[01:06:03] You should film that.

[01:06:04] Preston Pysh: I mean, I like pumpkin pie, but the way he was describing it, it sounded disgusting.

[01:06:12] Jeff Ross: My last thing is if we do get 475k in 2025 in fourth quarter, I am going to be using those options and I’m going to be buying What’s at that point,

[01:06:22] Joe Carlasare: You know, how expensive that’s going to be.

[01:06:26] Jeff Ross: That’s what I love about options. If it’s ripping higher, buying puts is going to be dirt cheap at that moment, because everyone’s going to be buying calls.

[01:06:35] Preston Pysh: Cause they’re going to be listening to people saying, there’s going to be a lot of all that’s priced into that. Yeah. You’re right. Yeah. Everybody’s going to want the long.

[01:06:42] American Hodl: Yeah. I’m going to do the dumb thing and just Hodl my way through, you know, up to a million down to 75. I’m just going to huddle. You know?

[01:06:51] So that’s what I’ll be doing.

[01:06:52] Preston Pysh: You and me both.

[01:06:52] Jeff Ross: That’s what I do personally, by the way, I’m two different people when I’m a fund manager and when I’m just myself. Right. Yeah.

[01:06:57] Preston Pysh: Yeah. All right. Let’s wrap right there. Guys. I can’t thank you enough. This was so much fun. I’m glad we just let our hair down there at the end and just kind of had a little bit of fun.

[01:07:07] Hodl. Where can people find you?

[01:07:09] American Hodl: I’m on Nostr. Check me out on Nostr. I don’t know how to give you the end pub or whatever. Just figure it out. You know, it’s complicated. You’ll get there.

[01:07:15] Preston Pysh: Just look at how many followers he has and if he has a bunch, you’re probably looking at the right guy. Jeff Ross, and we’ll have a link in the show notes to primal or wherever you want us to link to, but I’ll have a link in primal, Jeff?

[01:07:26] Jeff Ross: Saying for me, I’m just, and so people know I’m only on Nostr now. So if you see me anywhere else on telegram or LinkedIn or Twitter, it’s not me. So it’s a scam.

[01:07:35] Preston Pysh: Two for two on Nostr only wow. We’ll have your link, primal link. So people know where you’re at on the Nostr. Joe, are you only on the Nostr?

[01:07:45] Joe Carlasare: I’m not only on Nostr, I’m also on Twitter. Also known as X at Joe Carlasare.

[01:07:49] If you have a litigated dispute, you can reach out to me. I am almost at a hundred percent crypto cases and new cases being generated. I try to get rid of some of my old ones, but that’s awesome. So any litigated disputes in the broader mining space or crypto space or Bitcoin space, I’d love to help you and just Google my name.

[01:08:05] You’ll find my website, but yes, I am on Nostr, but I do not post enough. I’m told that I should be more active, which I will make a New Year’s Eve resolution to do this year and probably do it. I love it.

[01:08:16] Preston Pysh: We’ll make sure you do that in the fourth quarter update. So, gents, this was awesome. Thank you so much for your time.

[01:08:22] I really, really look forward to doing these every quarter and you guys are amazing. So, appreciate all of it.

[01:08:28] Jeff Ross: Thanks Preston.

[01:08:29] American Hodl: Thanks guys.

[01:08:30] Outro: Thank you for listening to TIP. Make sure to follow Bitcoin Fundamentals on your favorite podcast app and never miss out on episodes to access our show notes, transcripts, or courses, go to theinvestorspodcast. com. This show is for entertainment purposes only. Before making any decision, consult a professional. This show is copyrighted by The Investor’s Podcast Network. Written permission must be granted before syndication or rebroadcasting.