Transcript
Speaker: Welcome to a new episode of the InSilico Terminal podcast. My guest today is, your name is Felix, right? Yeah, yeah, proper name is Felix. yeah Online name, Fijo.
Speaker: Fijo, okay. I wanted you to say it before I like try it. I feel like every anytime i I kind of like fuck up the guest's name or like they're they're like difficult to pronounce, so... Yeah, I've had that a lot because it's not even a real word. It's like a mix of my first name and like last name. So yeah, it's not a real word. And a lot of people have different ways of calling it. But in my head, it's like Fijo. So go with that. Yeah.
Speaker: And you're you're the the host of the Forward Guidance podcast. So you're kind of on on the other side of ah this. And instead of being a host, you're a guest. Have you done like a lot of podcasts before you from the other side? of Yeah, quite a few. Yeah, I like it a lot. um I don't know, like Podcast hosting is always kind of really intense because you're always listening while also thinking about the next question and like trying to navigate things. you know this like i it's It's really enjoyable to go on somebody else's show and just be able to just kind of sit and think about my own thoughts and and go. So I like doing them. It's fun. And it's ah it's a nice opportunity to... expand a bit longer on like my own opinions and things. So yeah, I always like doing them. um
Speaker: Yeah, definitely a fan of of what you're doing here and in Silico in general as a terminal. It's a really great product. So yeah, cool to cool to see what we you got going on. I can definitely relate. I've done, I think only one podcast I've probably never got released as a guest, but like being a guest is way more chill. You don't have to think about stuff so much. You just sit and hang out and just say stuff that sounds maybe smart if you're lucky. And yeah. yeah So like what what is what is your what do you do except for the podcast? the Podcast is like your main thing. And then you're at Blockworks.
Speaker: Yeah. So I'm the and'm the head of content at Blockworks. So do a lot of that in my day job. um manage our different podcasts that we have there, newsletters. we We do three different conferences a year across the world. So in New York, London and and Singapore. So work a lot on the the programming there and the agenda and the speakers and and our our content strategy there.
Speaker: Yeah, and just kind of everything there. And then also, yeah, part of that is my own podcast there, Forward Guidance, which really focuses on the intersection of of macro and crypto and and more so all the time, AI as well. I think the three spheres are there's a lot of interesting intersections. So do a lot of that. And then I've always been into trading and in markets. So always busy doing that on on my own side, like just trading my own book. um Plenty of like, yeah, macro trades, crypto markets.
Speaker: Yeah, always always been a user of perp exchanges and that sort of thing. Do a little bit of angel investing as well. Pretty much like, yeah, just every version of it. um Super into. How long have you been doing all of this?
Speaker: um Since I got into investing and trading in like twenty in 2016, I was studying business in my undergrad and at the same time got got super enamored with that, but didn't have much capital at the time at all. So it was just kind of learning the rest, which is probably a good thing because I spent a lot of time learning about markets and investing. i was Initially, I got into value investing actually, which was interesting. So I was super into the whole like Buffett school of thinking and security analysis and all of that. Did that for a long time.
Speaker: Also got caught up in a couple of what was like the the retail trader that you know places of the day. like ah I'm Canadian, so at the time, weed stocks were going off because we got legalized in was a 2018 or whatever. So there's this huge boom, huge bubble in it is just like total scams everywhere. Super inflated earnings. I learned I learned that day very quickly about sell the news because I owned a bunch of the wheat stocks into legalization being announced. And that was just like the absolute Pico top of the whole thing. And it is down only every day. So so learned a lot of lessons there. But thankfully, my my stack wasn't too big then. So it is good good How did the value investing go? I feel like i've never been in this crypto space. This is kind of like a thing that's dead. We don't really talk about it. and or In the economy in general, like value investing isn't really a thing anymore and crypto people have no relation to it. So how did that go?
Speaker: Yeah, it's actually interesting. it's It's sort of the indirect way of how I got into first like macro and then also crypto and Bitcoin as well because I was... I was trying to learn all this stuff about like the right quote unquote right way to do things and the value companies and to read the 10 K's and all that. Um,
Speaker: And one, you know markets are a lot more efficient now. And like you know if you just look like at a chart of like growth stocks versus value stocks over the last 30 years, value has just been horrendous. The only time it ever does well is on like a you know big big ah you know factor rotations where where people are like closing out their growth and maybe they're short ah value. And then that that's like the only meaningful rotation you see. so Yeah, like for the most part, a lot of these stocks are are cheap for a reason. Like there's just so many value traps now, like, you know, you see these stocks where it's like sub 10 PE and you know, all the value bros get super excited, but like generally speaking, um, it's cheap for reason. Now I think there is still some opportunity in like the super small, so small caps that are like too small for meaningful analyst coverage of like, like from investment banks or funds or whatever, because you just,
Speaker: you know, can't get meaningful. So I still think there's some edge to be found there, but for like stock picking, but for the most part, honestly, you know, a core function of of value investing is understanding like what discount rate you're applying and the cost of capital. And it was, it was really interesting at that time. so this was like, I don't know, 20, 2018 ish was when I was, you know, starting to actually learn a bit more about like Bitcoin and and macro because, you know, at that time,
Speaker: it was pretty ripe in the age of like you know zero interest rates, QE, all of that. And just more and more came to the understanding that a lot of what we understand is the discount rate um for how to value investments. QE has been a meaningful manipulation of long-term interest rates. So if you're manipulating that, like the discount rate underlying a lot of how things are valued gets skewed, which is why there's been like, and you can make the argument of so much misallocation of of capital chasing like long duration growth stuff. um
Speaker: So that was sort of the first realization. And then here in 2018, was really starting to read some of the Like I read the Bitcoin standard when it came out and that sort of thing. And that really started to shape my understanding of contrasting how the world looked like from a top down level versus like value, which is like bottom up. And then started to realize that it works a lot better for my brain. Definitely more of like a top down thinker. So that led me down, down the, you know, pursuing macro and and crypto. And yeah, first started with Bitcoin after learning about like, yeah, i reading the Bitcoin standard and those kind of books, which
Speaker: um you know got me hooked in and then have just really evolved my my thinking ever since. And you know always been active on on whatever is is happening on chain and crypto as well ever since. And yeah, just enjoy enjoy finance and markets and just being being wherever there's something new and interesting basically.
Speaker: Do you feel like macro has um become easier to apply to crypto? Because I can imagine like a couple years back when it wasn't as correlated as it is now before the ETF and stuff. And now it's very correlated with the whole world of finance. So has it helped you to be better in the markets as time pass on?
Speaker: I actually found it's a bit harder now. Like the the, I would say the best time of it was like, obviously 2021, you know, when Paul Tudor Jones is talking about the fastest horse and like, you know, we're doing QE infinity and and throwing money out of helicopters. Like obviously that is primed for prime territory for, for being super bullish Bitcoin. But ever since like,
Speaker: ever since we got a lot of inflation in 2022 until now, like we haven't had those clear cut liquidity impulses of like QE or, you know, zero interest rates. Like it's been more these indirect impulses, whether it's stuff like the Treasury is doing in terms of like how much debt they're issuing or or what the composition of the debt is or yeah, just like weird stuff like that, where I would say that the correlations between those impulses and Bitcoin are definitely a lot more spurious at the same time that the the the bids into, say, Bitcoin of ETFs has just been a lot more idiosyncratic, i would I would say. So yeah, honestly, and then like Sailor too, of course, like the the stuff he does with MicroStrategy, like I just feel like it's almost gotten harder over the past few years. So yeah, it's it it was like the key way that I viewed markets for a while and in Bitcoin. but
Speaker: Yeah, it feels a bit less so right now, but maybe that, you know, these things change, like, you know, correlations are always Bayesian. So maybe it evolves, but right now it feels like it's ah quite, quite muted.
Speaker: do you think it's going to stay that way? Like, are you planning to, are you like adjusting the way you look at crypto markets a little bit going forward? Or do you think it would return to that previous period? Um,
Speaker: don't know like the the question underneath that is like do we do we go back to a world of like zero interest rates or like qing i don't know i i've had moments where i've i felt like that was gonna happen and then other moments where i've realized that like we are in a secularly different regime now like you know we had that basically like a 40 year bull market in bonds as interest rates came lower. And it's it's clear that ever since like 2021 was the the bottom in those interest rates. And it's just been a clear shift since. So I don't really know. um
Speaker: i think in general, like crypto markets are just so yeah disconnected from macro beta now, like, you know, if you just separate out Bitcoin from everything else, like the rest of the the crypto market is just, you know, the whole long tail of altcoins are just so idiosyncratically exposed to either the lack of meaningful value accrual or just the terrible emission schedules of them. Just like these very like crypto specific things. And just like this question of, okay, you know, obviously we've had the roadmap of revenue generating coins like Hyperliquid and that's all well and good, but that that poses a big question for the rest of the the landscape, which is like, what is the role for things like governance tokens? And I think those are, those questions are just a lot more dominant than macro factors. Like,
Speaker: um Obviously, no though over the last year, equities been doing super well, largely just because of this this AI trade, but that hasn't flown through into like, even though people want to go speculate on things, they're not speculating on the the kind of useless governance token with endless emissions. Yeah, it's just such a such a larger dominant factor than than those macro factors, I find.
Speaker: What do you think? i feel like before maybe last year, like before October 10th, basically, the the macro kind of made sense for for bit Bitcoin for me, from like my my limited understanding of a macro podcast listener. It's like like in 2022, they raised interest rates, all the markets went kind of down and then Yeah. We reached this this bottom level, everything went up together again, blah, blah, blah. But ah last year, a big theme was the rise of gold or like into this year, which everyone thought this is the basement trade. This is what Bitcoin is for. Bitcoin is digital gold. is is what it should do.
Speaker: And then it didn't do what we all expected. What do you think was the reason for that? Um, yeah, so I think the, the base and trade idea got really mischaracterized.
Speaker: If you, if you look at what was the meaningful driver flows for for gold, it was actually just mostly the Chinese central bank buying and the Chinese and like Chinese individuals and families buying. It wasn't.
Speaker: Like if the debasement trade, like how do you define that? if it's If you define it as lower dollar, like that wasn't really happening, but then you can make the argument, which is that look like if you look at that chart of DXY, like that's comparing the US dollar against other fiat currencies and maybe all fiat currencies are getting debased. But I don't know. I think it was like price action was doing one thing and then we tried to find an explanation for another. And I think i think there was
Speaker: distilled explanations, which is that look like you could make the I mean, there is a geopolitical aspect to it, which is that in some ways Bitcoin got Americanized or Westernized through the adoption of, you know, Trump, the Trump administration being super positive in Bitcoin and talking about, you know, like we're going to have, you American made Bitcoin and that sort of thing. The natural reaction from from China could be to and you know, lean the same way into gold. Yeah.
Speaker: And so you you you saw the central banks like to buy it a bunch. So I think it was just a simple fact that at the same time that China was was buying a bunch of gold was also the time where that big rotation from the Bitcoin ETF had mostly played out.
Speaker: you know Most of the people that had wanted to buy Bitcoin now had, you know if if they wanted to own it, they had plenty of ways to own it. So like you can make the argument that anybody who wanted to own it can know own it versus like a few years ago, where was a bit harder for for certain folks. So um yeah, I feel like it was just this,
Speaker: everybody saw the price action and tried to apply this simple debasement trade thing. And i you know there's definitely moments where I sort of fell to to the allure of the simplicity of that idea, but yeah, I just don't think it it fully made sense. So you know if you if you remove that factor of like what China was doing,
Speaker: You could make the argument that that gold would have just kept chopping around similar similar to Bitcoin. yeah And then you know over the last couple of months, it makes a lot of sense for for for gold to be struggling because basically ever since Kevin Warsh came in from the Fed at the same time that the Iran war started and oil went up a bunch and we went from like you know, the race market was pricing in multiple cuts by the end of this year to now multiple hikes, like that is going to cause it, that's going to cause real rates to go a lot higher. And like one of the most longstanding correlations is if real rates go up, gold goes down. And so that's sort of the the opposite of the debasement trade. So, you know, if, yeah, if you remove the whole China flow thing, it almost feels like it all makes a bit more sense.
Speaker: What do you think are the most important macro data points or the ones that you value the most? Because they're like, if you don't really know too much about it, for me personally, I've, uh, was never really too much into economics before was into crypto and trading and stuff. So like understanding how bonds work kind of took me a while to like properly conceptualize the, the relationship between the interest rate and then like their own price or whatever. And there's like so many metrics, there's CPI and PCE and,
Speaker: the the interest rates and real rates and all of that stuff. What do you think is actually like important from that and or important for crypto? Yeah, it is like, I've been through this,
Speaker: long journey of overthinking macro data. I would say I started off in thinking, okay, you know Fed balance sheet go up, good for good for Bitcoin. And then you know you over just like go through this deep journey of analysis paralysis, of overthinking everything, like looking at, yeah, to your point, like real rates, you know CPI, jobs data, like industrial output, PMIs, everything. And for sure, I was through a phase for a long time of just,
Speaker: over being over-indated with data and sort of come back to a bit more of a couple of simple factors, which is, i think one is, yeah, like the liquidity impulse from monetary policy. um So obviously things like lower expected,
Speaker: interest rates, like short term interest rates. I think that one gets misunderstood a lot because people will look at just the actual change, like the Fed cutting rates by 25 basis points and then thinking, okay, that makes Bitcoin work. But really it's the changes in expectations. So like you just look at the past few months, like we went from expectations of cuts to expectations of hikes and Bitcoin has performed terribly since then. yeah so So more so that's a big one for sure. Obviously,
Speaker: you know, QE and that sort of thing is is really great for for financial assets. And then I think the other big one is is fiscal impulses. So, you know,
Speaker: a deficit a fiscal deficit is basically like a surplus to the rest to the rest of the world i'd like the to the private sector like the here if the us government is running deficits of seven percent of gdp that means that the other side of the balance sheet is is a boon um effectively so like if you're running wider deficits and then i would say that's a big one um and obviously you know big big bills that get passed related to that, to that budget deficit, like the big, beautiful bill, depending on different, like how that trickles through into the economy.
Speaker: um You know, like obviously decreasing tax rates is going to be positive because people more money or are giving people more tax credits and that sort of thing. And then the last one, which is the one I think you know, what I was mentioning that the the impulses have been a bit more indirect over the last couple of years is stuff like the the issuance of treasury debt and understanding like how much duration am I issuing into the market? Like am I issuing a lot like tilting more towards treasury bills that have zero duration and are basically like cash like versus if I'm issuing a 30 year bond, that's treated a lot more like a risks asset. And you know if you if you subscribe to the argument that
Speaker: the private sector can only absorb so much duration, um which like some people think matters, some people don't. Like if you talk to MMT people, like modern monetary theorists people, like they will tell you it doesn't matter. um If you talk to others, they'll say it does matter. So if you subscribe to the idea it does matter, i sort of lean that way.
Speaker: Knowing how much is, how much of that deficit is getting funded by by short-term duration, bills versus bonds. You know, that's been the big lever that initially Janet Yellen was pulling over the in like 2022, 2023. And Scott Bassett has continued to do that, even though he was a critic of it. He he kind of, before he got nominated, was writing op-eds saying how bad that was. And he's continued to do it, which just shows that the incentives, like, you know, it's easy to criticize from far away, but when you're in the seat yourself, in the hot seat, like you act differently. So yeah yeah, those are the main ones. Stuff, yeah, like obviously short term, you know, if you get like, ah if we're worried about inflation and then you get a hot CPI print, obviously risk is going to puke. um
Speaker: But generally speaking, that that only really matters for like a few day period unless it really changes the rate of expectations of of of what the Fed is doing. um Yeah, so it depends on your time horizon. Like I i typically trade like a I don't know, 46 month time horizon. So those short term data points, even though they're, they're interesting, like I try not to over.
Speaker: overweight single releases. I'm definitely guilty of of having done that in the past where it's like, oh, we got this one hot jobs report. you know I got to close everything or whatever depending on what's. Yeah. So tried to tried to simplify after like going through the motions down the rabbit hole of like literally just being inundated with data, trying to just find something that works. Yeah.
Speaker: yeah that makes sense how how do you express your trade trades so you have like a portfolio and then just like spot allocations to different things and you like weighted differently depending on how you see the market um yeah so to kind of walk through what i've done in the past year so so when you know when when crypto is in a bull market is doing super well like i have had slash have had a lot more on chain and doing whatever's happening there whether it's like you know, whatever's the hot topic of the day or, you know, just trading on hyper liquid or that sort of thing. um
Speaker: Always have a bunch going on there, but like, I don't know, late 2024, I withdrew like quite a bit substantially and moved that into, i'm mostly trade on interactive brokers. Like that's my main brokerage account. So, you know, now these days, especially over the last year, with just like how much more interesting equities have been versus like crypto. I'm a lot more tilted towards like the vast majority of what I what i do and own is is through my own yeah interactive brokerage account. And then within that, like I'm always, i think it's really important to just have
Speaker: I'll preach this, but I'll say that I'm also really guilty of of messing this up. But like, I think it's really important to have a certain basket that is like long-term boring index ownership of like SPY and that sort of thing. And like, that's your baseline beta and just like do not touch it for 30 years and just let that compound. And then, you know, maybe the, the remaining stack you have, then you actively trade that and try to outperform markets and and run that up. And, Um, I'm always of the mind of, you know, I think as, as short term traders, especially if you're using leverage, you always have to make a decision like, okay, if I have X amount of dollars in this perfect change, do I just try to run this up as much as I can over the next year? Or is it every time I double the stack, I take that double and and put it into boring index exposure. i try to do that as much as possible. and And so that's what I did too. On like a, on a longer term crypto cycle was like, okay, like
Speaker: know, it's been a good couple of years. I'm going to try to withdraw as much as I can here and then leave a bit left and just see, you know, when things get exciting again, whether to try to run that up again. And yeah, kind of, kind of feels like it's the early innings of, of some interesting things happening again. So yeah, I'm more focused on, even though like I have much, much less on chain trying to, yeah, i think through opportunities of, of running that and then still having Yeah, I would say the interactive interactive broker side of things is more like macro specific, the ETF exposure. And then still like over the last six months or so, there's been a lot of interesting like AI trade stuff. um
Speaker: But then even that it gets a bit more fluid because like you know, with, with all these tokenized equities and like, you know, you can, you can, I can do these trades on perfect changes and then also within my brokerage account. So that's been kind of cool to be able to have, you know, maybe just like, yeah, spot shares in the brokerage account and then maybe some, some leverage position on chain. So yeah, kind of a bit of everything, but that's, that's the gist of it.
Speaker: For this longer term basket, are you like a proponent of American exceptionalism? Like, would you just say put it all into Spire and Elstack or whatever? Because I think, I'm not sure like how how it is right now. I have not paid that much attention to it recently, but like at the beginning of last year, I think in this period when um It was last year, right? Like the dollar went up a lot or went down. I can't actually properly. The dollar went down 10% the rest of with the world was doing really well. Yeah. So then people were kind of in in this modus of thinking of like, hey, should we weigh more in like European indexes or Asians or whatever? Is American exceptionalism little bit over or like not as set in stone as you think it is?
Speaker: Yeah. i I think a lot of that was also rhetoric around tariffs and what was going on there too at the time. I mean, look, i'm I'm Canadian and I have as much wealth as I can in US dollars and US equities. um i idea I'm definitely tilted more towards the idea of of of American exceptionalism over else. um I, but, but that's also because if I'm trying, but that's also because I'm an active trader and if I have a, if I have a tactically bullish view on the rest of world, like I was, i was super long Europe equities that time last year during that, because I had this tactical view. So. I don't, yeah, i and until I see any reason to be invalidated on that idea, i just try to, yeah, just own like a, yeah, like an SPY.
Speaker: But I know there's a lot of people that, you know you can always just do like a total world index ETF, that sort of thing. um But I don't know. Yeah. try Try to just not think about that too much. Like yes, in the short term sometimes there's times of like, yeah. But again, like I told, like I said at the beginning, this is what i'm preaching, but just like, sometimes I just, you know, I have emotion. it's just like any human and I, I fuck it up sometimes too.
Speaker: Do you also look at the lots of other countries, macro data, like you you said before, what is like relevant for the US and of course the US is like the biggest market and stuff, but then from time to time the yen carry trade pops up and it's like threatening to destroy the whole economy or whatever. And China is more relevant and stuff like that.
Speaker: oh Yeah, Japan, I look at a lot. I think it's important to know what's going on there. To your point, because of that, because of the yen carry trade has just been so predominant. um And they're just, you know, one of the longest standing largest buyers of U.S. Treasury debt. So, yeah, they're interlinked in a way that you just have to look at it.
Speaker: um Europe, I look at a bit too, mostly because like of, you know, the second largest reserve currency would be the the euro. So it's important to understand like where you think the euro is going, especially you know yeah the DXY is largely, i think it's like 56% euro is the basket or something like that. It's it's big.
Speaker: So really, like if you're trying to understand having a bullish or bearish view on the US dollar because you're trying to understand risk, um you probably have to have some sort of perspective on the Euro. so i So I look at Japan, I look at the Euro. I i i stay away from China, honestly. like i I don't know enough. it's the The data we get from there is who knows what's true or not. there's Yeah, there's a lot smarter people out there that have really interesting commentary on China, but i just yeah it's it's too much for me. So I just try to almost pretend it's not there. um Yeah, so mostly yeah im mostly like Europe and and Japan. um
Speaker: Canada, obviously a little bit just because I live here and understand like what's going on in the country, but that yeah, that's mostly the gist of it. I think it's important to look at, at Europe and Japan for sure.
Speaker: I want to talk a bit more about like what is going on or what has been going on this year because this has been quite a year with lots of relevant macro events, especially like for for crypto as well. We had the Iran war first, which is kind of like apparently going like happening more again now after it was already resolved. So it's like maybe it's just a forever thing we have to look for with all the other. stupid wars and then we had the the sailor situation do you know a bit more about like the the whole sailor thing i feel like it's kind of died down from the hype like two weeks ago we're like hey he's gonna be liquidated and everything is going to zero now it's kind of just business as usual and nobody really cares anymore is that like a threat do you think that's ah an imminent thing we have to be aware of or um yeah so on the sailor thing microstrategy
Speaker: he He got too far over his skis for sure over the last six months. Whether it's just, you know, obviously this this stretch product, I think it's, It's an interesting idea that was taken to too much of an extreme. you know he He really you know bet everything on this hope that if we can you know just issue as much as possible and bid Bitcoin as much as possible, we can we can break break through new all-time highs. And so I think he he went for it and it didn't really work out. And then then there was ah a couple other
Speaker: you know bad bad decisions that were made. Like he he bought back a ah couple billion, I believe, of of the convertible debt that wasn't you know due until 2028. And like a lot of it is zero coupon debt. So you know there's questions of OK, well, look, like if you're trying to pay out a ah you know, an annual dividend of 10, 11% or whatever it is on stretch. But then you have all this cash reserve, a couple of billion that you're putting towards these convertible bonds. Suddenly, you know, those that are on the stretch are saying like, hey, what the hell? Like what the what's covering this dividend payment? And it's like, okay, well, if you just you just if you just took all your cash or like most of your cash reserves and bought that that convertible debt,
Speaker: um what's going to serve as this dividend? And then the question arises at the same time they start talking about, you know, moving the goalposts of talking about selling Bitcoin. um And then, yeah, I just felt like the the market had to price this like left tail but potential of of selling Bitcoin. And, you know, markets, especially in a state of panic like that, will not always think totally rationally. And then, you know, you have liquidations on top of it as well. Like there's probably some some levered capital within, within the stretch products. So all that to say is that, you know, there's obviously some bad decisions that were made or, or too risky or invalidated ones.
Speaker: Um, this isn't made by, by chat GPT apparently. Yeah, yeah, exactly. Um, and you know, they had to course correct, but there's, there's nothing too specific to the fact of them being liquidated necessarily, like,
Speaker: I mean, they would look they would just liquidate Bitcoin, which obviously there is that but there is that potential of this consistent spiral where you know they have to sell more Bitcoin to fund more. So so there is that. But um I mean, time and time again, the the person who gets fleece is the one that owns the the MSTR common equity. like he's he just He just issues more shares and he's issuing shares at at MNAVs that he said they would never do. And it's actually just been worse for like Bitcoin per share. So yeah you know the I think a lot of the issues have been abated for a little while now at the cost of the common equity holder. So I think, um yeah, I mean, understand where you are in the capital stack. If you're ah if you're a common equity holder, you're the lowest per year you're basically exit liquidity for for him, um to tap especially now that he's shown his cards that he will happily do this even um
Speaker: you know, even when MNAV is below one, which is, you know, bad for for everybody who bought into the thesis. So, you know, I'm and i'm happy that the market didn't fall apart.
Speaker: But ah yeah, we just kind of kicked the can and we'll probably just keep doing that. I don't know. I mean, yeah, it's tough. It can stay stupid for for longer than we we can stay sold. I think it's kind of true that what Bitex has been saying recently, because like below 60K, there is Sailor Thought, Quantum Thought, and all of this stuff, which seemed to be really relevant as as the war was a bit more escalatory. Obviously, like the war is a big factor, and then Quantum was like this this huge thing that apparently was right before a doorstep, which everyone has forgotten about already again, because it doesn't really so really that much a thing as we expected.
Speaker: Reflexivity is so interesting like that because like yeah those, those quantum issues are real and they haven't been solved at all. Yeah, that's true. Because, yeah, because, because price is higher, it's like, it's fine. And then if it goes lower and, and it's so interesting how oftentimes like the lower price was also around the time that like Google is posting these like quantum papers and everybody's freaking out. So I don't know. I mean, I think you just have to decide whether you're, you're worried about those things for the price or for the, for the network and the industry. Like, I think you should still be concerned about, know,
Speaker: quantum solutions if you're caring about the industry and the future Bitcoin. But, you know, if you're a trader, like obviously when you see that much hysteria, you you probably want to fade it, even though you can be like fundamentally concerned. And like, I think people mix those up a lot.
Speaker: Yeah, that's true. Definitely. I think right now we're at a very interesting point in in macro, because I feel like we're at a bit of an inflection point where this AI trade is kind of like,
Speaker: the semiconductor and Micron and whatever is is kind of dying down a bit. And then we're kind of realizing like, hey, maybe Anthropik and OpenAI don't actually have that much of a mode on the market because the Chinese models are actually really good and like cheaper. And then we also have a change in in the FET chair because Walsh is now there and Paul is still, I think, on the board but doesn't have the FET chair role anymore. And then Walsh is like,
Speaker: ruining her in the podcast by removing forward guidance and wanting to like cut all the all the race but still has to appease all of these other people but we're still like in this new regime of like first of all fat uh chair regime fed guidance or whatever and then also that the ai trade is kind of like seems a bit more over and money might be flowing like towards other states but what do you think about all that Yeah, i think I think the Fed side would be a lot more clear cut if the Iran war actually was ending like we thought it was going to be two weeks ago. yeah um Yeah, the stars for me were really lining up that you know we had priced as much hawkishness as what was realistic, you this idea of max hawkishness. like If you're pricing in multiple hikes by the end of this year,
Speaker: um based on this idea at the same time that the war is potentially resolving itself and like oil is going from 120 bucks to 70 bucks like it did like obviously that's going to be make for a very you know disinflationary force um at the same time that like this amount of hikes are priced into the curve so you can make the argument that the only direction is towards dubbishness um so that whole framework i was like really compelling to me but now Obviously, this MOU with with Iran is is is torn up and you know strikes are happening again and the home use is straight of home use is closed again. it's It's not great, especially because you know the two main reasons that oil is able to come down so much is one, you know oil oil inventories were able to be drawn down to a huge degree, whether that was the SPR, like the Strategic Petroleum Reserve or just general you know inventories across the world. Um, you know, if you look at seasonality of, of inventories now on those charts, like we are, that's been drawn down. Like, luckily this, this war, I mean, it was probably intentional, like at the end of February, were at the highest of the year of inventories. Um, so top of the range. And then that just got like, you know, just like
Speaker: drawn down like crazy and now we're below the five-year ranges of these inventories so that's kind tapped the s spr you can there's a little bit left in there but you can't you can't empty the s spr to zero it it's like physically not possible apparently um otherwise it like reserves break or something like the the storage tanks something like that i don't know that's good oil and but but just know that it can't go to zero um so so that's tapped out and and then the other big one was trying to they had a bunch of, they had been importing a bunch of oil in the lead up and stockpiling it. And then, so so they stopped importing oil during that period as well. And that was something that the oil analysts really missed. So all of those things have already played out in the first phase and now we're going into this next phase and now it's like a bit more concerning at the same time that everybody thinks like, oh, there's no way like oil is going to rip again. So there's some concern there that is making me a bit more uncertain about the future. Um, what's that?
Speaker: on the um On the AI side of things, yeah, I think obviously that's my perspective is a lot of the easy money has been made on these bottleneck trades.
Speaker: And obviously memory has done phenomenal. and I got pretty long on that and at the end of March, early April and and wrote a lot of it. And then you know I still have a bit left, but my opinion is that, yeah, a lot of that easy money has been made. And now you know we went through that phase of just outright frenzy. And now suddenly you're seeing either improvements in terms of token efficiency. So the demand side of the curve in terms of memory and then the supply side, like we're starting to see announcements of either substitution effects in terms of like, you know, Apple's talking about trying to have like Chinese memory within their phones and that sort of thing. So like, obviously when you go from, you know, perfect scarcity and bottleneck towards these marginal changes, like you need to, that's obviously gonna put in a short term top. So, you know, still have a small bag, but I think a lot of that easy money has been made and and so much of that speculative capital has gone into there at the same time that, you know,
Speaker: crypto, you're you're starting to see these interesting like negative news failures where like the micro strategy thing, right? Like everybody was in in hysteria and we just, we, we couldn't like drop below the previous low. So you're starting to see these, okay, like bad news sort of bullish price action is really interesting at the same time that there's like no leverage in crypto. There's no interest. Everybody's all on this other side. So I, yeah, I'm definitely a lu more constructive on, on the crypto side right now than the AI. And I think there's, there's some likes to it depending on what happens with, uh,
Speaker: with their round one and in the macro factors that's sort of the uh you're proposing bullish opium here that the bottom is in and the memory money so some of the memory money might flow back into crypto i think so we're gonna see it in our prices yeah um obviously you can take that around within a lot of different ways like i'm I'm certainly not going to short memory. I still own, I just own 10% of what I did three months ago, but I still own some. um And I'm just looking to buy more crypto. um
Speaker: You know, mostly just like, you know, the simple stuff like Bitcoin, Hyperliquid. I'm not getting too crazy, but yeah, it just feels... It feels very under-owned at the same time that and and unexposed to the whole like questioning of the value accrual system of of AI that everything is built on top of. like yeah To your point, if if these open models are, and if Kimi K3 is this powerful, you know what does that mean for the margins that are dependent on it for the frontier models and then the hyperspace? There's this like these layers. um
Speaker: Now, obviously, like if that whole thing falls apart, NASDAQ is going to go down 30%. That's going to bring down everything. It's not like like margin calls don't care about whether a certain asset class is exposed or not. You know you just got to sell first and ask questions later. So obviously, you got to underwrite that risk, but that's how I think about it. Yeah.
Speaker: That kind of makes sense, like being cautiously bullish here. feel like especially like flow-wise a little bit. I look at markets that it a bit more on a lower time frame than it seems to be. We've tested the bottom like so many times now and then there are not that many sellers left, at least right now. And then there is a good case to be made that we like the path of least resistance at least is just a little bit more up. It's kind of a question like, can we actually start a new bull market from here or is this just like a summer range bounce? Yeah, which is probably more likely.
Speaker: Yeah, I think the catalyst I'm eyeing up is this Clarity Act situation and what happens there. well what What do you think about that? i've I've seen you post about that today and I've like ah seen people post about it a couple of times. I never like i don't i don't read anything about like stuff like that. so what's What's your view on that? Do you have like any expert opinions for us?
Speaker: Definitely not expert opinions, but opinions. Better than mine. No, I think... um no i think So so what what needs to be said is that like Clarity Act approval will not lead to like a one-to-one bid into these coins that exist today necessarily.
Speaker: um But what it will do is that there's certainly like large amounts of institutional capital that is just... not interested in in participating or or necessarily bidding until there's clarity on Clarity Act. like you just what What is the Clarity Act actually about? like What are the core points that are... um So so like the whole dual approach to regulating crypto has been the Genius Act, which was about stable coins and payments and all of that. And then the other side was Clarity Act, which is the market structure bill, which is just like you know, clarity on on what's a security or not, you know, tokenization, how do you issue tokenization? What can tokens represent? Is it more equity like and in those sort of things? So I'm certainly not ah deep in the weeds like like others, um for sure, but but it's basically just the clarification on what what what's the you know what's the rules of the of the game here like what are
Speaker: what styles of tokens can we issue and that sort of thing? And like, what is a security or not? And if it is a security, what does the disclosures look like? What's the disclosure standards and that sort of thing. So there's just like a lot of this stuff that it would make no sense for certain portions of capital to get ahead of until they know what those rules of the game are. um so I think for that reason, there's just this a lot of pent up interest that is just waiting to see what happens or not. um But but the the confusing thing for that is that a lot of this is, you know, like there's this, you know, you see stable coin usage go up only every week, but at the same time, you know, useless governance tokens go down every week. Like there's just this, the excitement and the interest in the adoption from the rest of the world is not occurring to most tokens other than things like, you know, hyper liquid and usage are there. But so,
Speaker: So I just, I just view it as a catalyst basically where there's just like either suppression of interest, um, that they can serve as this catalyst to go higher. But, um, you know it's not like this one-to-one thing where, you know, okay, clarity act design. Now we can all bid every coin. Like there's, yeah there's obviously gonna be a bit a bit of that, but I think it's just more so adoption of the industry.
Speaker: So it's mostly probably like not going to lead to a huge alt season, but like if there's more clarity on on rules in general, then it makes more sense for institutions and people that like need this clarity to like invest in Bitcoin, Ethereum, and hype, just like the major...
Speaker: The majors and also for new, I think new token form factors to be yeah released. So, so this is why like, I like some of the majors and stuff like hyper legal that have cleared product market fit, but yeah, I think it's about waiting to see what those new versions of tokens come out. Like it's going to be the all cleared, I think launch new versions of of projects and tokens and, and innovate on that now that you know what the boundaries are. So it's like, yeah.
Speaker: I'm really bullish on the tokens that don't exist that may be announced in a year from now, if that makes sense. That makes sense yeah. Yeah, but but the stuff today, you know, like 90% of it is just kind of useless.
Speaker: So this is potentially good for my perp dex points that will teach you. Yeah, for sure. he's past the saturday Yeah. Yeah. Um, and, and yeah, you know, if you look at production markets of, of whether it passes or not right now, like it was at like 30% odds.
Speaker: a couple days ago, there's starting to be some improvement. like what thing that like what what What are the factors of it passing or not? Or like what is the timeline? Yes, it needs to pass the Senate.
Speaker: And because it's not part of like a reconciliation bill, they need, I believe, 60 votes. So basically, they need buy in. The Republicans need buy in from the Democrats for the bill. um And they're they're you know largely aligned on most things, except for these ethics provisions, which relate to whether people in the in the current you know in current politics are allowed to trade or participate or raise in crypto or not. like You can probably guess about who I'm talking about and what projects. yeah but um
Speaker: Anyway, yeah, so the Trump administration basically has has not wanted that, obviously. But apparently over the last 24 hours, they've they've you know come to the table and said that you know we're we're in agreement of these ethics provisions, apparently. So so's it's basically dependent on that. like yeah you know The Democrats don't want to support something where Trump and his and his boys can do what they've been doing. Yeah.
Speaker: So if they can clear the ethics ethics provisions, the Democrats will support it and then it can pass. So it all depends on that. Yeah. um And, you know, and when I hear people that are tapped into what's going on in D.C., that all really needs to happen in the next month or so, because then they go into recess and then when they come back, it's going to be midterms. And then midterms is, you know,
Speaker: who knows what's gonna happen. yeah So really like, yeah, it needs to happen in the next month or so, or else it probably won't happen for another year. So yeah, it's it's looking better than it did two days ago. But yeah, when when something is priced like that for failure, like obviously if it passes, like that's just you know that's just trading, like you know it's gonna be positive for markets no matter what even, yeah. So so I view that as like the key catalyst here for the next bit.
Speaker: That's actually a really good information. Like that made me understand it way, way better. And I just find it incredibly hilarious that this is actually like, what what is, what is holding up to be like, is's amazing is the president allowed to like scam us even more than he already did or or he that does he yeah have to himself like bag a little bit more?
Speaker: Yeah. Yeah. It's, it's wild. and I mean, obviously it applies to the rest of like any politician, but I mean, that's obviously where it's being hung up. So yeah, it's funny. Are they allowed to enrich themselves even more at our cost? Can we keep launching Trump coins? like
Speaker: what do What do people, since you talk to so many people on on the macro side, and I feel like most of the people that you talk to on the podcast are not really like crypto, like they they may have like some views on it, but they're mostly like economists and stuff like that, or like macro traders, focused traders. What do you think they their views on on the crypto market currently are? did Are they like are't even interested in it anymore or is has the attention like totally moved to AI?
Speaker: No, I think a lot of us moved to AI except for things like stable coins and how that impacts. like There's actually um this is one guy, David Beckworth, who runs. He's like, he worked at the Treasury. He's like a really classic like crypto or sorry, macro economist person. He runs his own podcast and everything. And I've had him on the show too. and He's very focused on what are some of the macro impacts of these crypto innovations on like things like, yeah, like debt issuance policy at the Treasury and and and that sort of thing. So there's a lot of interest in that and then understanding, yeah like what is the impact on the demand for US debt because of stablecoins if they go global? So there's a
Speaker: There's a lot of excitement and interest there and understanding what that does to for YALI demand for debt and therefore yields and that sort of thing. But outside of that, i would say not, they still viewed mostly as just kind of grift, maybe except for this whole idea of like 24 seven.
Speaker: a tokenized equities and and like what was going on with, you know, there's a lot of hype around the these pre-IPO perps and that whole thing, like with SpaceX and and if you end like Cerebris and stuff. So I think i think there's interest there. um But I think there's also people that say like that 24-7 markets is is stupid and it's just going to lead to like more illiquidity um and and that sort of thing.
Speaker: But aside from that, I think, yeah, there's a lot of question marks around the role of Bitcoin, question marks around just like pretty much everything else. Yeah. And, you know, like maybe I would say parts of the criticisms are are kind of warranted. um
Speaker: But yeah, the the other parts, like for sure, I would say stable coins is something they're most interested in. The Sablecoin thing is interesting because there was this discourse, as as you just mentioned, that kind of has like died down a little bit more as well. But like... um no one No one really... but did This has always been the the thing about macro when you first get into it and why people are in crypto and whatever because there's like all of this debt and we don't really have like population growth and stuff anymore. Everything is very leveraged and unless AI becomes God, the economy can't really like keep going anymore because we don't we're not really like able to pay any of this back in a proper way. So they either...
Speaker: like there's going to be some huge crash or like bitcoin will outperform inflation or whatever which both hasn't really happened and what what it seems to be happening if from from my perspective is kind of just like inflating away the debt slowly over time behind closed doors kind of like accepting that the inflation target is now three percent instead of two percent for like a longer amount of time and um yeah Yeah, but but what what what do you what do you think about that? like that there's not goingnna be Is there going to be like a huge thing which will change global finance forever at some point? Or we we will we just like slowly fade out in this, don't know, going into debt and stable coins and like maybe a new currency or whatever? Yeah, I think the answer is just like the boring in between of those two things. like
Speaker: this idea of hyper Bitcoinization or like a crack up boom or, you know, we go into hyperinflation. Like, yeah I don't think that's going to happen. um I also don't think we're going to have like a ah debt bust or the US defaults on debt or or anything like that.
Speaker: It's sort of in in the middle, which is what you described, which is like, I call it and others call like financial repression, which is that, you know, things like manipulating the duration of debt in in the world, like i was talking about, um stuff like that. And just, you know, if you let if you let and inflation be just a bit above the cost of of the interest for the for the treasury, like that'll lower the debt ju GDP levels. like 2022 and we had all that inflation, the dirty secret, like ah Luke Roman talks about this a lot, but the dirty secret is that like that GDP levels actually went down quite a bit during that year. like we We did see a meaningful delevering because you know nominal GDP rocketed up because inflation was high. So then suddenly like your debt loads came low. So I think it's just this this slow steady state of like, yeah, like
Speaker: you know, potentially letting inflation get be like 3% now and being a little bit above um but the cost of interest of of like of the US government and just slowly delivering like that.
Speaker: um But obviously, you never know what's there's these X factors of, of yeah, like AI and productivity booms. And you know, if, if we see a productivity miracle or if you know all jobs go away and everybody's unemployed, like that's obviously super deflationary. So there's those X factors, but yeah, I think really in practice, it's like,
Speaker: Obviously, when and when interest rates were zero for 20 years or whatever they were, everybody saw how much debt was coming up. And was like, look, we can't raise interest rates or else the system is going to break. And a I was certainly guilty of that thinking a couple of times and yeah had to reevaluate, which is that, like look, it's ah it's not that simple. um you know, you you do, the MMTRs are correct that you need to look at US debt, like government debt differently than private sector debt. yeah um Because they can just print and, and the you know, especially reserve currency. So yeah, I think there's, you know, people have been people have been talking about that levels longer than I've been alive. So I think, yeah, you just gotta, you gotta, you gotta to see, you know, how things are actually playing out empirically.
Speaker: Which we should probably be grateful about to like a certain extent because if if we would get this hyper-Bitcoinization hyperinflation word or whatever, it's probably like terrible for for everyone except people that own Bitcoin. in you And even then, it's like probably a total economic collapse or whatever, which no one really wants. And right now, even even if it's like, there's still a problem because you know, AI might replace like jobs and stuff, or maybe there's a higher risk for political extremism because ah lower classes that don't own assets in this inflation regime are actually kind of screwed over.
Speaker: But it's still way more stable and offers more like good way of life and opportunity and everything than like other alternatives that are not so good Yeah. Yeah. the The slow financial repression is definitely the most like societally palatable approach versus like aggressive delevering, delevergings or you know, civil revolution, like French revolution. Yeah. and Like there's, you know, what we're what we're going through has happened in history before and there's been different approaches to it. I think financial repression is, yeah, probably the most stable version of it. um
Speaker: But it can get unstable really easily. You know, like yeah if if if the if the you know lower income class get fed up enough about inflation and see the wealth, you know, the rich getting richer, like you know yeah civil upheavals happen throughout history it can get unstable really easily yeah do you think the stable coins uh can actually make a dent like a substantial part in like that decisions or like be a bias of that that actually make a difference on a big level not really like maybe a little bit um
Speaker: it It all depends on like foreign adoption of stable coins. Like domestically, it doesn't matter because yeah it's just a swap. Like, you know, if you're if you have money in your bank account at a US s bank and you decide to put that in the stable coins, like net-net, it's just a swap of, of yeah you know, one T-bill for another T-bill that's backed by, you know, that's backing a stable coin instead of your your, you know. deposits at a bank. so So that doesn't actually really change it. It depends whether there's somebody in Argentina who has decided that they want to own more stable coins because it's more stable than their than their Argentinian currency because of high inflation there. So it comes down to that. So I think that can
Speaker: um that can be a meaningful uptick in demand. But in terms of like debt loads, what matters more is probably Yeah, the interest expense on the federal debt um and like we and therefore where interest rates are on it. like that'll So you know it's it's's it's it's a substantial, but it's also not enough, I would say.
Speaker: Do you think Walsh is going to do anything crazy towards that? Like he came in as kind of this Trump puppet and he's going to cut all rates and whatever. And then at his first meeting, he basically i had to come out and say, Hey, not everyone really wants to do that. And I'm going to do all these task forces. i don't really know what they're supposed to do, but yeah, I think he, uh, I don't think it's a hawk, but he's very, he wants a reform of like how the fed communicates. Um,
Speaker: Yeah, so i like i yeah I was quite skeptical of him, but now a bit less so. And I think he has some here's some really good points. Like last week, Governor Waller came out like the day before CPI print and was talking about, like look, if CPI is hot, like I'm going to want to hike in the July meeting, gave this forward guidance. And then lo and behold, the CPI print was ice cold. So you know his speech led to a big sell-off in bonds because they're like, oh my god, like hikes in July, nobody's talking about this. And then lo and behold, it was actually cool. um
Speaker: And then that sell off and bonds reversed the next day. And it's like, okay, what was ah like what did we really achieve here with this Ford guidance? Like we just made more more volatility. So stuff like that, I think is like really good for him to revisit you know how the Fed communicates. So yeah, I think it's just gonna be kind of like boring academic reform stuff like that. Like yeah, working groups and that sort of thing. i think like,
Speaker: Yeah, I think in terms of this idea of like either hiking rates a bunch or cutting rates a bunch, I think like, yeah, it's just going to be more steady than what people expect.
Speaker: And after all, like even if he changes the communication, they would still have to like communicate in some way because that's kind of like the main job of what they do. Yeah, exactly. Yeah, just maybe the frequency of it might be a bit different.
Speaker: Yeah. Yeah. Maybe to to end this off, is there anything that you find particularly interesting in in crypto right now yourself? Like anything that you that you look forward to it that could like Ignite the the next bull run apart from like Clarity Act stuff. Obviously we have Hyperliquid and stablecoins. Is there anything else you find interesting? Perp Dex's prediction markets? um Yeah, Perp Dex's for sure. i think like, but I think again, that's A lot of the growth in perps has just mostly been, like in some ways, regulatory arbitrage. like
Speaker: CFD markets have existed for a long time. It's just they're not allowed in the US. um So now like if US people can kind of trade perp exchanges, which is like quite similar to CFD. But obviously, there is some on-the-margin improvements in how perps work versus CFDs. like I'm sure your audience knows this very deeply as as users of InSilco.
Speaker: But i yeah, I think there's still some really interesting stuff that can be done there for sure. um Stablecoins, of course. Prediction markets is is quite ah like I'm not really interested or care about the retail side of things, but I think there's interesting ideas for being able to hedge like very convoluted things for like like companies and stuff like, you know, when if like an airline company needs to hedge their their fuel costs or whatever, like they only have a certain amount of ways to to hedge that.
Speaker: And, you know, sometimes it might not be like the perfect hedge, but you know, if you, you can just, you can basically hedge anything, right? Like any sort of potential outcome for anything. So I think that's quite interesting on the prediction market side of things. Um,
Speaker: It's lot of growth in like vaults. that's That's quite interesting. Like I know some big like, you know, some asset managers start thinking of vaults as sort of like the next iteration from ETFs in terms of of ownership there. So, you know, nothing like... like What are vaults? Like what is a vault specifically in this case?
Speaker: basically like yield curators on yeah it's yeah it's a bit out of my wheelhouse like i i don't really do much in d5 but um yeah basically you have these yield curators it's just like a fancy crypto way of saying asset managers um yeah yes and so and if you can do that in like a much more capital efficient manner i think yeah seems like there's there's a lot of excitement there from the asset manager side of things but i haven't haven't dug into it like terribly deeply it's definitely Yeah, a bit more out of my wheelhouse. But yeah, that's the main thing. I think like nothing net net super new quite yet, but yeah, trying to stay focused and not get too cynical or burnt out about everything, you know, as you do in bear markets. Yeah, trying to stay focused on it. I feel like we've done a good job here. From my own sentiment analysis of the podcast, over the last couple of months, they have progressively gotten little less bearish over time.
Speaker: Yeah, that's good. Yeah, trying to do the same thing. Yeah. yeah Yeah. Awesome. Is there anything else you want to mention? or No, no, thanks. So yeah, like i said, name of the podcast is Ford Guidance. um Go check it out. Yeah. Always talking about macro crypto. I can recommend this food. Yeah. I like listening to it. Appreciate it. Thank you.
Speaker: Cool. Thank you very much for for coming on. This has been very fun. I hope you enjoyed the road of Yeah. Thanks for having me. I enjoyed that lot. Yeah. All right. Thanks.
