0:00

You're listening to Tip,

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Hey

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everyone. Welcome to this. Wednesday's release of the podcast where we're talking about Bitcoin.

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My two guests today are some of the youngest and most talented thinkers in the Bitcoin space and that's will Clemente and Dylan LeClaire.

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Both of these gentlemen are rising stars within the community for their contributions to on chain analytics and analysis.

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They both have incredible articles that have been featured by some of the biggest Bitcoin publications.

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And on today's show, we talk about the derivatives market and how it influences the market cycles, what it might mean moving forward with respect to volatility, some of their favorite on chain metrics, why some of those metrics are, or aren't important in certain circumstances and much, much more.

0:41

So get ready for this really fun conversation with will.

0:44

And Dylan, You

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are listening to Bitcoin fundamentals by the investors podcast network.

0:53

Now for your host Preston pish.

1:07

Hey everyone. Welcome to the show. Like we said, in the intro, I'm here with will and Dylan and Maya.

1:12

My, you guys are like the Wiz kids of Bitcoin.

1:16

I mean, it's crazy to me how quickly I think that's the thing I keep telling myself is I just look at your age and I say, my God, I didn't, I didn't know this stuff that these guys are talking about like five years ago.

1:29

Like, I look at where you guys are at and it's like, how in the world can they possibly know what they know at their age?

1:35

And it's just a little mind blowing to me.

1:37

So I guess that's my first question is like, what has allowed you guys to be able to just turn on the afterburners to catch up with people?

1:47

I mean, it has to be technology that's, that's assisted in your ability to find key people or whatever it might be to accelerate that.

1:56

But like, dude, it's crazy Pressing

1:59

like first and foremost, you obviously, I had had a huge impact on both Dylan and I, like, I remember it's really strange being on this podcast because I remember about a year ago I was working at Michael's and I had like an overnight stocking job and I would come in and I would listen to your podcasts.

2:16

I would come in at like two or 3:00 AM and I would just chain listen to it until like nine, 10:00 AM when I got off the shifts.

2:23

And at this time it wasn't even Bitcoin.

2:25

It was, you know, you're talking about, it was like, you know, our first 25 episodes.

2:30

Yeah. You're talking about all the Warren Buffett stuff.

2:32

I got out security analysis, big debt crisis.

2:36

I see, I love this. I didn't know you were into the value side of it will.

2:40

Yeah. Yeah. At first I came into it that way.

2:41

I got like a zero to one by Peter teal, all these books like you recommended early on and yeah.

2:48

I mean, aside from like you specifically, like just in general, I think the internet has a huge part to do with it.

2:54

You know, I've learned way more on the internet.

2:57

I'm sure Dylan agrees, you know, then I, I probably would have, otherwise I learn much more through podcasts and YouTube than I did in all my school combined.

3:06

I wasn't always great in school, but it's funny, like you find something you're interested in and you know, you kind of go down the rabbit hole and lead yourself through that.

3:16

Yeah. I mean, I think like we have more content than ever before, and it's like, if you're interested in something, there's no excuse aside from maybe like becoming an engineer or something in medicine for you not to be able to teach it to yourself.

3:27

And so, especially with finance, I mean, there's all kinds of content out there for you to consume.

3:32

Now, Dylan,

3:34

I agree with, and I relate to almost all of what will just said.

3:38

I honestly, in 2018, my first, like I was always a math guy.

3:42

I tried science out, just wasn't a big fan.

3:46

And I was like, all right, I'll I guess I'll use my love for numbers to kind of crunch some numbers in the business world, whatever that means.

3:52

And so I should probably learn about investing in all of this.

3:55

And one of my first things I did was I literally went into the podcast app and looked up investing, investing podcast.

4:01

And there, there, you guys were cute.

4:04

I also a little bit of SEO to that as far as naming conventions.

4:09

Yes. But yeah, I mean, you nailed it there.

4:11

Yeah. And so I went down, I mean, I was, I was learning about like the, I guess like a Fiat world and, you know, the kind of the central bank, monetary system and, and all of that as I was at the same time in parallel, just I had a Twitter account earlier.

4:25

And so I wasn't active on it, but crypto Twitter, Bitcoin, Twitter, I found the kind of the Bitcoin quarter that specifically, but, you know, they were very active and passionate.

4:34

And I first stumbled upon this at 3000 at the bottom of the bear market.

4:38

And you had these, you know, this group that drawn down 85%, you know, and they're just allowed obnoxious, but they were convicted.

4:46

And I was like, you know, these people, maybe they're not crazy.

4:48

Maybe they there's some there's something, you know, there's something more to it.

4:53

And so I just kind of passively learned about Bitcoin and kind of the legacy system and in tandem up and through my freshman year of college, 2020, the second semester of that was COVID and they kicked us all, basically kicked us all out and send us home.

5:08

And then I was kind of right at the tip of like going down the whole rabbit hole of Bitcoin and then COVID comes, they print a bunch of money.

5:17

I have so much spare time on my hands and my zoom classes that are taught by like boomer professors about investing and economics were like awful.

5:26

And I was like paying for this and it was so, so I dropped out and just decided to like, I needed SAS.

5:33

That's what I, I viewed it, the opportunity costs in Bitcoin, especially after like I read Jeff Booth's thesis about like technology, dematerializing everything.

5:41

I was like, okay, well I kind of all put it together.

5:44

I was like, okay. I think the opportunity cost of everything is Bitcoin and information is free and abundant.

5:49

So what am I doing?

5:51

And, you know, I guess like 18 months later, we're here just talking about talking about Bitcoin and we just hang out on Twitter all day.

5:58

But really I think just Internet's like the arena of ideas as you know, the most awesome thing it's credentials don't matter here.

6:04

It's just what you can bring to the conversation.

6:08

Amen. To that.

6:09

And to add onto that, I think too, like, I mean, Dylan I's platform is, which has grown like more than I think either of us could've ever imagined.

6:19

I want you to hit on this because learning through this many people will like you've had, I don't even know what your follower count now is, but I know it's a lot like your, what you're over three 50 or 400 or something like 400,000 people following you specifically the learning threshold that has gone up because you have so many people that are cuing you in different directions.

6:40

Some of it's just, you know, people just, I see all different types.

6:44

I know you guys see all different types, but there are people that will throw things your way that you would never have learned or seen if you didn't have such a massive platform of people following you.

6:56

So talk to us about some of the things that you've learned through, through that.

7:00

First of all, just being able to reach out to people and ask questions is, is the first benefit of that.

7:06

I'm grateful to be in that position. Now I can just reach out to pretty much anybody on Twitter and they'll most likely respond cause they get the notification now just because I have, you know, large follower base or I can tweet at somebody.

7:17

But yeah. And just in terms of like posting things in the, in the feedback, like I can put out, you know, a chart or a metric or an opinion on something and I have hundreds or thousands of people that are criticizing it sometimes not in the, in the nicest or most respectful way, but you know, I think part of it is being able to kind of pull the maybe disrespect or like rudeness out of a comment and being able to say, okay, well maybe they didn't deliver this in the best way, but what they're actually saying has some merit to it, or, you know, aside from aside from the bad apples, just in general, you get people that will give you their feedback, right?

7:54

I'll post, you know, a lot of the stuff I'm posting is like market related content to Bitcoin.

7:58

And so I put out an opinion and people say, well, you're not looking at this, this or this, or with this metric, which you also need to consider is that this might be skewing the data.

8:08

And so sometimes just putting out an idea or kind of framing something in an open-ended way is the best way to learn.

8:15

Like I posted something last week and I said, do you think over time Bitcoin's volatility increases or decreases.

8:21

And I got fricking sailor commenting on it and giving me his opinion and it's without that platform that I have now, I mean, there's no way I would be able to get some of these insights.

8:30

And yeah, like that to me has been the coolest thing is, is asking, you know, when we're talking about it, just being able to learn, asking questions is huge.

8:39

That's, that's been my biggest asset is over the last couple months, I've kind of evolved in my learning just from like a pure market standpoint.

8:46

Like I did not at all predict the may crash.

8:50

I got into Ancienne analytics, like a couple weeks before that it was complete new over the summer.

8:54

I got really kind of upset at myself because I missed that whole move really kind of grinded out my understanding of all that stuff.

9:00

And through that, I really kind of built a community if you will, of different people that were interested in it through telegram, also in Justin, in DMS.

9:10

But you know, now I'm in some of these telegram groups and like I remember early on you talked about the book, the seven habits of highly successful people.

9:18

You talk about like masterminds.

9:19

These groups that I'm in are essentially that where it's like all these people that are specialized in this one thing.

9:25

And we're all kind of putting our heads together to come to the best conclusion.

9:29

It's like 15 or 20 of us different fund managers or just independent on chain researchers.

9:34

And we kind of all are, you know, just like bouncing ideas off of each other.

9:39

And I think people more than anything, I mean, books are amazing and books can, can help you understand a lot of things, but bouncing ideas off of people and just asking questions.

9:48

I've learned so much through that just early on, just reaching out.

9:52

I mean, that's how, that's how I got originally noticed by you.

9:55

Was I tweeted out to you, I put out this article when I had like 300 followers and I, it was like Bitcoin's role in the financial system and I tagged you.

10:04

I tagged Dylan actually. And you Crushed

10:06

it, crushed the article.

10:08

I appreciate It.

10:09

And I didn't really think anyone was going to respond, but then you retweeted it.

10:13

Oh my God, Preston pitch retweeted my article.

10:16

It was like freaking out.

10:17

And then from there, you know, it was just, I was like, okay, well, this is how you reach out to people.

10:22

I just started adding, tagging people and everything.

10:25

Whenever I have questions now, like I just reach out to fund managers or different, you know, reach out to like Lynn old.

10:32

And if I have a question about macro or different like crypto fund managers about, you know, some of their opinion on the market over the next couple months, and it's just like, people are the biggest alpha, not just in markets, but just in, in understanding things in general, If

10:46

you can handle the trolls because there's trolls, especially at the level of followers that both of you guys have, if the individual can handle it and they can ask the right questions, it's just insane.

10:57

It's insane.

10:58

What you can learn. And you, you mentioned the idea of a mastermind.

11:01

People in the past might have a mastermind of five people and some of them might not even be experts really kind of in what you're interested in learning about, but with Twitter, I mean, if you got 400,000 followers or whatever it is you guys got, I mean, you can uncover just anything and you can ask questions like, all right, I'm interested in learning about this.

11:21

What's the best book on the planet for that.

11:24

And you'll get a hundred different book recommendations from wherever, right?

11:29

Like it's just crazy.

11:32

We are not the best app for doing this stuff.

11:35

I mean, especially being a, being a big winner on Twitter, I think I started actively using my Twitter account in like may of 2020 about posting about Bitcoin and following like plebs on Twitter, just like hardcore, like Bitcoin maximalists, like interacting with them happens.

11:49

People are pseudonyms, you know, where the cartoon character has their name.

11:54

Yeah. Because you have people like, it's so funny when you see like Janet Yellen and she'll tweet out something or some, some credentialed check mark.

12:02

And I say that now just recently, recently getting a check, but you know, they're getting ratioed by a pledge with 300 followers, who's destroying their, their argument with just, you know, first principles, reasoning.

12:15

And now that we got high bandwidth spaces, like I get onto these spaces, spaces are amazing.

12:20

And you're talking to somebody who doesn't even have a picture on their profile with five followers.

12:26

And they're like some of the most intelligently crafted arguments and points and critical thinking that you've ever heard.

12:33

Like it's just mind blowing how much talent is out there.

12:37

If you're willing to ask the question or, and just make yourself vulnerable, I guess, to, Hey, I don't know what this is, but help me understand like what different ideas there are around it.

12:47

So I guess going back to the original question, like, how are you guys able to catapult yourself to such a high level of understanding and an influence in the market in a constructive way?

12:57

And I mean, it's really, you guys have been asking amazing questions.

13:01

You guys have been posting like awesome content, but you've also been open to the criticism to adjust it, to update it, to let me Dylan, you and I were having a DM about this and this, this was actually my next question.

13:15

I think about this metric, this long-term holder versus short-term holder and how I just love, absolutely love this chart.

13:23

And I know both of you guys have coordinated different ideas around this, this chart, but Dylan, explain this chart to people what it is.

13:30

And I mean, the performance on this, we'll post this out after we're done with this interview, or one of you guys can post it in the comments or something when this, when this interview airs.

13:39

But talk to us about what this is, this idea, The

13:43

core kind of thing about Bitcoin on chain analytics and what makes us so like different than anything we've seen before, I guess like public blockchain, like ledgers.

13:51

I mean, there, there are other other letters, other cryptos, but Bitcoin chain and specifically like Bitcoin and the UTX.

13:57

So set, you know, sotoshi kind of airdropping this thing onto the world in 2009.

14:02

I mean, basically you can see, like you have a real-time property rights for, you know, this global monetary system that's growing organically.

14:09

And so you can see basically like Bitcoin's market price is $10.

14:13

Well, you can see like that, you know, the average Bitcoin was traded for $3.

14:18

And so, you know, we're not, we're not talking about $10, but you know, when you're looking at say price today at 60,000, well, the realized sprays basically like the on chain cost basis for that, like everybody on the network is like 24,000.

14:30

Like at $1.2 trillion market cap realized cap is like 450 billion something around there.

14:36

And so you can kind of see the transparently, like, you know, these things was on chain.

14:41

And so the chart I showed you was the short term holder cost basis versus the longterm holder cost basis and glass nodes, quantification of that.

14:49

There's some statistical threshold that as is 155 days, but it's essentially the longer a UTX.

14:55

So, or a longer a Bitcoin has held the less likely it's going to be spent into the future.

14:59

And that's true when analyzing the entire UTX set over the course of Bitcoin's history.

15:04

And so while it seems kind of arbitrary, it's not, and we can do some pretty cool things with analyzing the trends of these long and short term holders.

15:12

And so what you kind of see is during bull markets, the short term holder cost basis, basically new money, new capital, you know, coins that are being, you know, transferred over short time spans on, on the network.

15:23

The cost basis of those coins is getting bid up while a long-term over cost basis is, is flat.

15:29

And essentially it's because, you know, hoggers stackers set the floor in bear markets.

15:33

The holders of last resort that's Satoshi accumulators of last resort is what's puts a bottom on this Bitcoin price.

15:40

And because of its absolute scarcity, you know, as people kind of discover that Bitcoin is the best monetary asset the world has ever seen, because that's a fact basically, you know, they want to secure an allocation and they have to bid up the price of this assets and dollars to acquire it.

15:56

And so you see that, that that bull market trend is essentially short term holders increasing against long-term holders, eventually Bitcoins price action, going parabolic incentivizes some of the network participants to take some chips off the table.

16:10

And so you see that in each exocet with all these coins that haven't moved in a long time hitting the market or making an odd chain transaction.

16:18

And so while some of those may not be economic sells in the sense that, Hey, I just transferred some of my, my funds from one wallet to the next.

16:27

But when you see at the top of bull markets is a lot of these coins coming, like coming on to the market or moving on chain all at once, especially old coins.

16:36

And so from there, you see that trend start to change where you see a lot of long-term holders, their coins are moving into the short-term holder cohort they just spent.

16:46

And so that long-term cost basis starts to appreciate in a really, really fast manner at the same time where the price action just went up 20 X, a hundred X, whatever the multiple is, you know, that marginal buyer just gets exhausted.

16:59

And so that's when you kind of see the cyclicality, the reflectivity work in the other way, and you see you, you see these seemingly random boom and bust over the course of Bitcoin's history.

17:08

That aren't actually all that random.

17:10

It's just, you know, the, the natural, like kind of cyclical volatility of the monetization of this asset.

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All right. Back to the show.

20:26

If we could just back up for a second.

20:28

So like realize CAC is essentially the market capitalization of Bitcoin based off of when a coin was last moved.

20:36

So th the way to think of this as like Roger veer who bought Bitcoin, whatever at like a dollar, right?

20:42

Let's say he bought a hundred thousand dollars Bitcoin at $1.

20:47

Okay. And he hasn't moved those coins whatsoever.

20:48

That's now like who've done the 2017, but yeah.

20:53

So, so now that, you know, in market cap terms, that takes up a whatever 6.1 or whatever, Bitcoins at $6.2 billion chunk of market cap.

21:02

But if he hasn't moved those coins in realize cap, he still only adding a hundred thousand dollars to that.

21:09

So it's essentially, you're looking at the amount of value that is stored in Bitcoin, or in other words, for people who are familiar with like technical analysis, you're looking at an on chain V1.

21:20

So in a volume weighted average price of Bitcoin, and this was originally conceptualized by pier Rashard and then Nick Carter actually created the metric.

21:30

And so peer shark came up with the idea way back in like the Quinn's early days, Nick Carter actually presented it, created the metric at a conference.

21:37

And, and so that was where realized cap was born.

21:40

And so realize cap itself is useful aside from looking at it in more granularity, because in bear markets, whenever the market cap goes below, realized cap by definition, the market's in capitulation, right?

21:54

Because it's below the average cost basis of all the investors in the market.

21:58

And so then what Dylan said, like w w what Dylan did, like he said, was take this a step further, and then using blasto touristic of the short-term and long-term holders comparing the two.

22:09

And then if you actually run the ratio between the two of those as well, you get, you get an interesting cyclical oscillator, but one, one other thing that Dylan didn't hit on that I think is important to understand is that there's this natural dynamic between short-term and long-term holders.

22:23

And so what you see is that the long-term guys scale into the bear market.

22:28

They don't perfectly time the bottom, so they don't bottom tick perfectly, but they scale into the bottom of the bear.

22:35

And then they scale out into the major bull rallies that we have.

22:39

So they, they buy into weakness or scale into weakness, and they scale out into strength.

22:44

And so you see this natural dynamic where into the bear, all the short term guys leave all the speculators, get out of the market, or they age into long-term holders if they stay on, if they stay in the market.

22:57

Right? And so over time, obviously you have more and more people that come in, because number go up is basically the best form of marketing for Bitcoin.

23:06

So you have over time, more short-term holders come into the bear market, become long-term holders into the bear.

23:12

I mean, they come into, into the bull market and then turn into long-term holders into the bear.

23:16

But you also see the long-term guys, as Dylan touched on, come in and step in and kind of set that floor into the bear market.

23:22

And so you see this natural dynamic, where if you look at the two of the charts, they go the complete opposite directions they converge, and then they disperse into the, into the bull market.

23:33

And so Dylan took that a step further by looking at their cost basis, and then the behavior of the two of those.

23:39

And, and there is, there is a lot of signal in that short term holder cost basis itself is actually really interesting metric it's.

23:47

The short term holder realized price has been a really interesting level that Bitcoin prices historically reacted with right now, that's at $53,000, which is interestingly right around that kind of trillion dollar market cap, which you also see, it's kind of been aligned in the sand for investors through when you look at like transactional activity and on chain volume, you see that's kind of aligned in the sand there.

24:11

So there's some confluence there, but in bull markets, what you see is that price tends to bounce off of short-term holder realized price, which is another interesting variant of that.

24:21

But yeah, that was an awesome metric created by Dillon.

24:24

That takes two of those concepts realize price, which is the on chain cost basis or average cost basis of investors on chain with that kind of cyclical behavior that you see between those short and long-term holders.

24:39

Dylan, I'm curious if you've run the numbers.

24:41

So when you sent the chart back to me, I said, can you just put this in a green and a red status of like, I own it, or I sold it and I'm, and I'm out of the market kind of scenario, very binary scenario.

24:52

I'm curious what the outperformance is.

24:56

Have you calculated that?

24:59

I actually haven't, I should back test.

25:02

You need to figure that out. And then when we air this, I want to be able to tell people what it is.

25:06

And I know it's, it's better than Bitcoin itself, significantly better Launching

25:11

to some fascinating, because I mean, you have this, I'm just repeating myself, but you have this transparent ledger of ownership for monetizing on, on every single balance sheet, whether it's whether someone likes it or not, you're not insulated against Bitcoins monetization.

25:27

So you need to get this.

25:29

I mean, eventually you're going to need to denominate your balance sheet in Bitcoin terms.

25:34

It's just whether you've realized that and accepted it yet.

25:37

And so being able to kind of track this live and see every single, you know, every single Bitcoin owned on the network now in full transparency, it's pretty fascinating.

25:47

And just now I think we're just scratching the surface on kind of all of this stuff, The

25:53

glass node metric for longterm holder versus short-term holder, help us understand what that cutoff is like, what timeframe are we talking here?

26:02

Yeah. So it's 155 days.

26:04

And so the reasoning is as Dylan kind of touched on what you see is that as a coin is held in a wallet, the longer it's held in a wallet, the less likely it is to be spent.

26:14

And then the glass nodes kind of run some statistical studies to look and say, okay, where's that cutoff that the likelihood of them spending those coins really cuts off the most.

26:24

And that's right at 155 days, which is also five months.

26:28

So I know for a lot of the hardcore Bitcoin max, he's going to be like five months.

26:33

These guys are wimps. That's nothing, but it's just, when, when you kind of back tests D behavior, that's where you see the likelihood of those coins being spent cuts off the Most.

26:44

So this is one of the reasons I liked that chart so much my opinion.

26:48

So we're in a little bit of a sell off right now.

26:50

I think the price went up to close to 68,000.

26:52

It's down there 60,000 right now there's whales out there and these whales can move that price more than I think a lot of people realize, and not only can they move the price, but they can move the price at times when you're maybe least expecting it.

27:08

Or you just, you don't know what their reason for a sell or a buy necessarily is.

27:13

And then the leverage that's in the market, just kind of extension rates, whatever it was that they were doing, or just kind of pushes it in the up or down direction, even more.

27:22

So my personal pain is somebody who's kind of trading this thing in a day for day kind of way, or like in a very short time horizon.

27:30

I don't have the metrics.

27:32

And I guess I'm speaking more for myself.

27:34

I don't have enough confidence in being able to trade that, especially in a way where I would be able to outperform the tax burden that's associated with every one of those sellers.

27:44

So Preston pitch, right.

27:47

I am a much longer time horizon looking type person.

27:51

And this goes back to probably my buffet days and just kind of like how I invest in equities.

27:56

And so when I buy something like I'm really looking for something that I can own for a year plus at a, at a minimum.

28:02

And so when I looked at the chart that the two of you have have put out there and Dylan has really kind of refined when I'm looking at that chart, I'm saying, this is something that kind of meets that time horizon, where the whales in the market, aren't going to be able to kind of bump me around and kinda mess up whatever it is I'm trying to do, because it's just too big of a macro theme.

28:25

And the markets moving in, in hundreds of billion dollar type waves.

28:29

And so when I'm looking at that and I'm saying, Hey, if, if I'm going to, and I'm not wanting to sell, but if I'm going to stock pal Fiat or cash to buy at an opportune time, this past event would have been a great scenario where this metric that we're talking about right now, you would have been stockpiling cash.

28:47

You would have not been buying more Bitcoin and you would have probably nailed, like literally nailed the living hell out of the bottom of this recent six month downturn that we had.

28:57

And if you would have stockpiled your free cash flows for six months and inserted it into the market, right.

29:01

Then I see this metric as being just extremely valuable for that type of investor.

29:06

And that's how I am. That's all I'm going about it.

29:09

At least That's one of the most, the most fascinating thing is you have this, you know, the on chain stuff, it's kind of like, you know, these large macro trends.

29:16

And then at the same time over laid on top of it.

29:19

And you know, it definitely impacts the price a lot over the short-term.

29:23

It matters far more is this derivatives market.

29:26

And essentially what you have are these completely free and open and wild west public capital markets that are, that are being built out all over the world.

29:36

And they're, you know, on chain settled monetary asset and this, this and open decentralized absolutely scams monetary asset can be as is being traded with, with fully functional derivatives that are settling billions of dollars a day.

29:51

And so what if I told you, when this metric flipped and you started to see kind of, you know, all these long-term holders, you know, selling at once and at the same time, you could have just gone one X net short, or, you know, one X short on these derivatives where you're basically holding.

30:07

If you're, if you're one X short with Bitcoin as collateral, your Bates, you're basically holding a synthetic dollar.

30:13

So if you want X on a derivative X short, a derivatives exchange, you're talking to like, like putting the, putting that.

30:20

And so at the same time, as, as the market is convinced, we're in this new paradigm and I get it like when Bitcoin rips and it's, it's, you know, when Bitcoin passes a hundred K like we're all going to be euphoric because that's been this kind of eye in the sky target for awhile, and it's gonna feel good.

30:35

But you know, when at the same time at, you know, everyone's euphoric and sentiments at all-time highs and all these coins are coming out of the market, you can get like 50%, a hundred percent annualized at times, just going short on the perps.

30:48

And it's because the euphoria, the sentiment everybody's levered long on the derivative side of things.

30:54

And the way that these say that the perpetual swaps work is it's tethered to the spot index.

30:58

It's tethered to the spot price with that funding rate.

31:01

And so if the derivative bulls want to bid up that price, all, all they want, that's great.

31:06

But that funding rate is going to go so high that, you know, it's going to basically cost them a hundred percent APR on an annualized basis, which was, which was kind of where it hits some kinds of the cop on like by bit Binance, these exchanges that were all using Bitcoin as collateral to long Bitcoin.

31:22

And they were paying 75%, a hundred percent annualized rates to do it.

31:27

But, but the problem with logging Bitcoin with Bitcoin is that if the price goes down while your position goes down at the same time as your collateral value, and that's kind of why you saw that, especially harsh drawdown to 30 K, I mean, we went from 40 to 30 in about two hours.

31:43

And

31:43

so

31:43

like,

31:43

that's

31:43

why

31:43

you

31:43

see

31:43

those,

31:43

those

31:43

dislocations

31:43

and,

31:43

and,

31:43

you

31:43

know,

31:43

those

31:43

major

31:43

volatility

31:43

kind

31:43

of

31:43

blow

31:43

ups

31:43

is

31:43

because

31:43

it's

31:43

free

31:43

and

31:43

open

31:43

and

31:43

you

31:43

have

31:43

all

31:43

these

31:43

kinds

31:43

of

31:43

derivatives

31:43

layered

31:43

on

31:43

top

31:43

of

31:43

it,

31:43

but

31:43

that's

31:43

what

31:43

makes

31:43

it

31:43

so

31:56

fun. I think what Dylan just touched on is really important to understand.

32:00

One of the, one of the more bullish kind of setups for Bitcoin is, is the percentage of futures contracts that are currently margined with crypto, which I know that a lot of people don't like that word, but crypto versus USD or stable coins, and the reasoning is what Dylan just alluded to was the convexity that these contracts have.

32:21

So essentially if you're longing Bitcoin with Bitcoin as collateral, that's awesome when the market's going up, because you not only is your P and L decreasing, but your collateral is increasing in value as well.

32:32

Well, as soon as the market starts to turn against you, it goes to the complete opposite direction because not only is your PNL decreasing, but your collateral is also decreasing in value.

32:41

So you're even more likely to get stopped out or liquidated or freak out and sell for that matter.

32:45

And then conversely, when, when more the market is margin with stable coins or USD, those contracts are more likely to be squeezed to the upside.

32:54

And the reasoning is because if you're short with Bitcoin as collateral, and let's say the market starts going against you, not only is your P and L decreasing because you're short, but you also don't have this inadvertent hedge that you do when your margin with Bitcoin, because if you are in a short and then starts going against you, well, yeah, your P and L is going against you, but your collateral is increasing in value.

33:15

So when you see a larger portion of the market being collateralized with stables or USD versus crypto, and that puts us in a more healthy state, it means that a we're less likely to have this convexity to the downside and be shorts are more likely to be squeezed.

33:32

And so currently the percentage of total futures open interest that's margined with crypto is down from like 70% in April.

33:41

Now it's down to like, I think the mid forties, Dylan, maybe you could correct me if I'm wrong, something like that, but what's Elma almost half of what it was earlier this year.

33:50

And so to also touch on what you've mentioned a second ago on the short term, timeframes price is very much driven by a, the derivatives and then B price levels.

34:00

So if I'm analyzing the market and I don't, I don't day trade and Dylan doesn't either, but when we're kind of trying to understand what's going on in the market, because we both have like market intelligence newsletters, and we kind of need to understand, like what's going on, what you can look for is these dislocations between the derivatives market and price.

34:18

And then as well as you can look at order books are another thing.

34:22

And then just straight up price level. Some people live and die by just looking at price levels.

34:26

And they, they just look at price action, where funding really comes into play is as Dylan mentioned, it's, it's, it's the peg for perps to the spot index price, which is essentially just this weighted average of all the major spot exchanges weighted by their volume.

34:42

And so whenever funding is positive, what it means is that the perpetual contract is trading above the average spot price.

34:50

And so usually what that means is that perpetrators are more aggressive relative to spot.

34:55

They can also mean that the spot price is trading.

34:59

The spot is selling off stronger than perps.

35:02

And then conversely, like if you have negative funding, it can mean a, that spot is buying while, while perps are shorting.

35:09

But it can also mean, let's say you had this big leverage cascade right in, and you get a bunch of longs that are liquidated well, by definition, that's going to drive the purchase price lower than the spot price.

35:21

So there's a bit of nuance there, but generally whenever you have prolonged Ty funding, that means that tray traders have been greeted for awhile in the market where this is really where this really has signal and where this is really actionable because we had high funding earlier this year for months for like two or three months, we had, we had to get, we had to get reset like one time.

35:42

Everyone's like, oh, this is a new paradigm.

35:43

Funding can just be positive forever.

35:45

Obviously that wasn't the case.

35:47

When you look on the kind of the intraday timeframes, where this really is actionable is when there's a dislocation between the direction of funding and the direction of price.

35:56

So an example would be, if you start to see this actually happened and not to show myself, but I posted about this, like when we came off of the summer, Los you remember we had this really big, short squeeze and price drove up to like 48 K on Binance.

36:10

We came up, it drove up at, I think it was like the first week of August or something like this.

36:16

What happened was his price was grinding up.

36:18

Meanwhile, you had funding coming, driving down.

36:21

So essentially what that was saying is that the spot market was buying and perps were so used to fading every single rally, they were raking in money, fading every rally for the last three months.

36:31

And they're like, okay, this is like the last three fake-out rallies that we've had.

36:35

And so they were just fading it, they got squeezed.

36:38

That's one way that it can have a signal.

36:41

The other way would be the complete opposite.

36:43

So instead, if you see funding increasing while price is decreasing.

36:48

So what that means is that traders are essentially leveraged, longing to dip.

36:53

And so if you're seeing price continue to grind down while, while the perpetual swap funding is, is increasing, that means that essentially the spot market is driving price down and perpetrators are, are leveraged, longing the dip.

37:06

So whenever you see these dislocations, that's when you tend to see these things get resolved in the direction of price.

37:12

And then you can also look at that with a bit more granularity in terms of specific exchanges.

37:17

So like, oh, kind of rule of thumb is like whenever by bid is doing something that generally gets faded is by bits like a primarily like retail driven exchange.

37:26

So when, I mean, one example, going back to that short squeeze from the end of summer, you saw by bit was fading.

37:32

The rally really aggressively.

37:33

Like I forget it was like 70 or 80% negative, 70 or 80% APR.

37:39

And then meanwhile, you had like FTX and debit, which tends to be where smarter capital is.

37:44

They had positive funding. So you can, you can look at these dislocations as well to kind of get a good picture on, on what's perhaps going to occur.

37:52

And then, and then last thing would just be going back to what we touched on with the convexity or, or the more, the higher likelihood of, of stable coin USD contracts being squeezed.

38:03

You can look at are the contracts that are being opened coin or, or stable margin.

38:09

So, you know, ideal scenario for the bears would be prices grinding down.

38:14

And meanwhile, you have a bunch of coin margins, open interests, and, you know, funding is mooning.

38:21

That's like, okay, you have all these perpetrators that are leveraged, longing the dip, trying to catch a falling knife.

38:26

Meanwhile, the spot market is just fading this, and this is what happened also on that move down in may.

38:32

I remember when we moved out, when we had massive flush to 30 K the night before, and I'm not saying I called the initial move down, but I remember the night before we had that last kind of capitulation leg down to, to 30 K, I remember looking at my phone and seeing that funding was rising.

38:50

And I was like, oh God, like, this is not good because price was just absolutely nuking.

38:55

And everyone was trying to catch a falling knife.

38:57

And usually the way it goes is that you have to see these guys completely get wiped out.

39:02

You know, these traders completely give up on trying to leverage along the dip.

39:05

And then, you know, usually you start to see funding stay negative and that's when price then begins to kind of grinder or consolidate out if that capitulation area, As

39:15

you guys are describing this, I'm sure most people who are hearing this are saying, this sounds really complicated.

39:20

This sounds really involved.

39:21

But as I'm listening to this, it sounds like, and we'll, you talked about this a little bit, that what happens on the upside is almost identical on the downside as far as how the leverage is kind of forcing the, the price action to kind of stay past Buyers

39:38

or sellers. That's Right. That's right.

39:40

So when you think about this, leverage all these leveraged markets that now exist the perps, I don't think there's, I still don't think they're available here in the U S but everywhere else in the world they are.

39:52

When we think about that, is this causing the price to become more volatile or is it causing the price to normalize to whatever the actual price action was going to be in the first place with, with less volatility?

40:05

How do you guys see that taking place?

40:09

I think it's option one. I mean, it's, it's basically some whipsaw and Bitcoin has some sort of collective intrinsic value, maybe intrinsic values.

40:16

So it has some sort of subjective value for everyone around the world.

40:20

And that values is basically going up.

40:23

Like it has been going up in a straight line more and more people come to understand Bitcoin and subjectively value it.

40:30

But, you know, underneath the surface, you have, you have all the, you know, the volatility enhancing things like leverage coin margin, all this stuff that we'll dug into, it's essentially, it's just, it's just late layering on directional bets, which causes the market just that is a website around.

40:45

And so I think the most exciting thing about this is that, and it's a thing pressing that I I've seen you, especially the last month just nail into is like done with centrally planned, you know, cost of capital academics that are just clueless bureaucrats that have some sort of power in this incumbent system, these 20th century institutions.

41:07

So don't just completely completely incompetent.

41:11

And so here, we just kind of have this open source, decentralized software.

41:16

That's just take, talk next block in a completely, just Emotionally

41:24

It's mechanical sometime in the next 10 minutes, there's going to be a block and there's going to be property ownership, transferred on an immutable ledger.

41:30

And so you can do all this stuff on top of it, the BTC USD price.

41:34

I think it's going to be increasingly volatile actually over the next decade, as a, as a result of this incumbent system, basically eating itself as it continues to just kind of delever and then have to get, get bailed out and pumped up with more stimulus.

41:49

But yeah, I mean, Bitcoin is just kind of doing its own thing.

41:52

And then, you know, you don't really have to care about all these bureaucrats and, and everyone else.

41:57

If, if you just passively allocating to Bitcoin, this is kind of solving for itself.

42:01

The cost of capital. Now with these Bitcoin derivatives, yes, it's volatile.

42:05

It's variable the APR, the cost of capital and Bitcoin markets, but it's free.

42:09

I mean, if you want a long Bitcoin, if you want to get stable coin liquidity in Bitcoin markets and crypto markets, do you want to borrow against your Bitcoin?

42:18

Well, you can do that. Sometimes you can do that 20%.

42:21

Sometimes you can do that at 5%, but the cost of capital is not set by the fed funds rate anymore.

42:26

And that's the most exciting thing.

42:28

And increasingly more and more people are realizing that, Just

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Can I sing my song All

45:49

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45:53

This is another thing too. It's like, if you get liquidated, no one's coming to save you.

45:57

Right? And in fact, The people on Twitter, they're just tap dancing on your grave.

46:01

Will They're buying your long liquidation.

46:04

Yeah know, I think this kind of is a bit more philosophical, but you know, I think the long liquidations are kind of a beautiful thing because it kind of reinforces this concept that we now have in this, in this kind of free and open market that you have personal responsibility.

46:17

If you make this decision to leverage and take a directional bed and think that you have some kind of edge in the market, and then you can outsmart the market, well, you're going to be held accountable for that.

46:29

No matter which way that resolves, I think that's a beautiful thing.

46:33

And so like you have all this stuff going on in the derivatives market and, and the way I kind of view it as like the Ray Dalio, like long-term debt cycle thing, you know, like the visually has where it's you have this long-term kind of thing that kind of moves up into the right.

46:47

It fluctuates. But then you have these short-term cycles that kind of move around the, the major long-term thing.

46:52

And so, like, I think first of all, you have this real hardcore base of hot blurs that are in this asset, and you can see that non chain data.

46:59

If you look at the entities with 0.1 to one, BTC, their holdings are literally up into the right, no matter what, they uptake a little more in the bull markets, but even in the Bayer, they don't even budge.

47:12

They just go up until the right and you take like the portion of supply held by entities with less than 10 BTC over time.

47:20

That's only increasing. And so you have this, that's talking about a whole nother discussion about the supply distribution.

47:25

And we can talk later about, that's a bunch of nonsense by people saying like a certain, you know, a bunch of Bitcoin is held by a small portion of people, but over time you have this hardcore base of people that are just stacking Bitcoin, no matter what.

47:36

And so you have that paired with kind of the, the long and short term holder behavior that we talked about, and that's kind of Bitcoins longer terms, cyclical behavior that you kind of see as kind of outlines the behavior of Bitcoin's price action.

47:50

And then meanwhile, on the, on the short-term timeframes, you have all these aches that are coming in on leverage and driving the pricing, right?

47:57

It's like, we're on this rocket ship and then you have these apes coming in and we sh we have to shake off the apes through the liquidations.

48:03

And so that, that's kind of like the mental framework I have for it is that at the end of the day, adoption for Bitcoin is only increasing.

48:10

And that's only going up into the right.

48:12

And we have fluctuations between some of the behaviors we touched on earlier.

48:15

And then on the very short term timeframes, we have all this stuff that's generally driven by the derivatives behavior.

48:22

And so for long-term holders, none of this stuff matters.

48:25

You just keep buying. And that goes to the very broad cyclical behavior that we talk about.

48:31

Bitcoin is that adoption is up into the right, all of these different metrics we talk about even just like the number of entities on the network, that all this stuff is up into the right.

48:40

But when you, when you look zoom in on these shorter term timeframes that, you know, that's, that's, what's really driving a lot of this stuff.

48:47

I've seen a couple of these kind of like poster or memes on Twitter, where it's, it's showing you like this is Bitcoin, you know, zoomed in.

48:54

And it's like really choppy. This is Bitcoin zoomed in a year out.

48:58

It's like, kind of, it's kind of cyclical.

48:59

And then this is Bitcoin on a 50 year time horizon, right?

49:03

And then you just see like this Fs curve.

49:05

And so for the longterm holder guys, you know, this stuff might be interesting.

49:08

You might want to understand what's driving the price action, but at the end of the day, none of it really matters because adoption for Bitcoin is only increasing.

49:16

And you can see that as well in the data.

49:19

I love that point. And the point about the number of users is just up into the right, is the part that I think is just insanely important for people that are maybe looking at this from the outside and just saying, I don't get it.

49:31

I don't understand why anybody would pay attention to this.

49:33

It's just imaginary magic money.

49:34

And that's the thing that I think is just, you just can't unsee what that chart looks like.

49:40

Yeah. Well, I love those points. I'm curious what you guys think about the ETF specifically, the spotty ETF that was just declined by the sec.

49:51

I don't really think the name was surprised by that.

49:53

And you kind of saw that through the market on kind of intraday reaction to it where the spot ETF rejection actually kind of marked the intraday bottom on that day, because I think, I don't think anyone was really surprised or any sophisticated investors at least were surprised by seeing that get rejected.

50:07

I think that's something that most of the market probably isn't expecting to see for at least another year out or so.

50:13

So yeah, I mean, I'm not really surprised to see that.

50:16

Obviously we would love to have a spot Bitcoin ETF, and I think you'll see massive inflows to it whenever it is approved.

50:23

But, you know, I don't, I don't think it was surprising to see that get declined.

50:27

I think a Barry's definitely up to something.

50:30

I think Barry's watching these ETF rejections and kind of taking notes and kind of tweaking his, his approach for converting grayscale to an ETF.

50:38

But I guess, I guess time will tell what that, Hey,

50:41

I, I noticed your frog meme of Berry the other night.

50:44

I

50:44

almost

50:44

shot

50:44

my

50:44

drink

50:44

out

50:44

of

50:44

my

50:44

nose

50:44

when

50:44

I

50:44

saw

50:49

that. I mean, I guess the question is why are they waiting?

50:52

Or like, what are they protecting?

50:53

They're not protecting anyone from anything, I guess.

50:56

I mean, I guess, I guess Gary gets there, wants you to hold your own keys is what I gather.

51:01

You could make the argument that for the people that don't maybe have access to buying spot, they're actually doing a disservice and they're actually adding, cause they're forcing them into a product into an ETF product that is futures based and doesn't have good tracking error or has very bad tracking error.

51:20

I think the features each F is a terrible product for anyone who's looking terrorist and Bitcoin longterm because for anybody who doesn't, who isn't really familiar with futures and futures, isn't my expertise.

51:30

But essentially what happens is every time, every time it gets a month, then they have to roll the contract to the next month.

51:36

And so over time, whenever the futures curve is in contango, what's happening is they're selling the current one and buying the next month contract.

51:46

And so you're basically taking the hit on the difference between those every time they roll it over each month.

51:52

And so the only people that are really benefiting for that are the people that are coming in, in this kind of market neutral way and buying spot, selling the future.

52:00

And they can kind of capture the difference between the two because the, the curve is, is getting bid out into contango Preston.

52:07

I know you love that word contango.

52:11

I think that's going to apply much later in the cycle, but I think it's going to be the thing that ultimately just takes the thing to an unprecedented level.

52:19

And it never, Is there any merit to the U S holding off on it because they just know how much capital is going to flow in.

52:26

And they know the state of like, I mean, maybe that's just a little too, like out there in terms of, No,

52:31

I don't think that's dude, I don't think that's out there at all, but I don't think you're ever going to hear anybody, especially from the sec, come out and say something like that.

52:38

So, no, I don't think that's out there at all that all Dylan, I

52:44

mean, yeah, I guess just in a world where pressing you've racked on the bond market, more than anyone, but you know, how do you keep the thing glued together if they, you know, on the same rails, have, you know, the escape valve and for awhile, I mean the escape valve has been out there for a decade, but you know, there, there has been a lot of, a lot of trouble to kind of access it and it hasn't, it's been more of a niche retail thing.

53:05

And now just like recently over the last year or two, it's become more institutionalized and accepted, but I mean, for, for, you know, the, the trillion dollar, 10 trillion, not pools of capital, they still can't buy it.

53:15

And, you know, like as a, as a retail individual, like selfishly great, you know, like, but yeah, I mean, there is definitely some, some, I think there's, it's, it's more than just investor protection.

53:25

If, if Gary Gensler, whoever else was parenting that.

53:29

So I actually have a question for the two of you.

53:31

So I'm trying to think of in the next five or 10 years, do you see Bitcoin's volatility increase or decrease?

53:38

And so I tend to think that decreases because you have just this new kind of market participant here that they're not going to chase the price up.

53:47

I think you saw that over summer, that's kind of why you had this like prolonged kind of rounded bottom, where they had these bids sat at the bottom of, of, you know, 30, 32 K and they didn't chase the price up to the top of the range.

53:57

They just slowly waited for price, come back down and hit those bids.

54:00

And you saw that wheel accumulation on chain.

54:02

And then conversely, earlier this year we had these patients, sellers that kind of form this rounded distribution top.

54:08

And so moving forward, I think there's a, there's a really strong case that we see decreased volatility, but conversely, there's this chart and, and Dylan, you posted it a couple months ago and Preston, I remember seeing you retweeted and it's the German mark measured in gold, the chart that we've all seen that, you know, it just absolutely goes parabolic, but you're actually looking at the volatility that occurred during that, that period of time.

54:32

And it's, it's really aggressive.

54:34

You saw these massive 50 to 80% whipsaw moves, which is essentially just the collapse of the currency, getting reflected in the pricing of that asset, which in that case was gold.

54:45

I actually tweeted this out to, to sailor.

54:48

Sailor said that he didn't see it playing out that way, but I'm why do you think He

54:53

said that? I asked that question for a reason.

54:55

So love Michael Michael has a stupidly massive position, not stupid in the sense of like he's being, I think he's being extremely smart, but his size of his position is just astronomical.

55:09

Right? If you had a position that size, what would you be publicly saying, knowing that every politician in the United States or wherever is listening to you, are you gonna go say, yeah, you know what, I think this could bring down the whole financial system.

55:22

I think this could turn into a why Mar Germany chart.

55:25

I know I wouldn't be saying that if I was him, Michael

55:29

keeps talking about the dollar and I, I completely agree with you Preston.

55:33

He's saying Bitcoin is not an attack on the dollar while literally conducting the largest speculative attack on the dollar in Bitcoin terms.

55:41

Maybe I think we've ever seen publicly and it's completely the right decision to do it.

55:46

He's calling the capital markets bluff.

55:49

But I think in terms of volatility in purchasing power terms, Bitcoin's volatility is going to continue to decrease.

55:56

It's going to appreciate the upside by orders of magnitude, but in terms of the day-to-day week-to-week month-to-month volatility and purchasing power terms, I think in 2030, if essentially, maybe 2035, whatever the timeline is essentially going to be appreciating by a few percentage points a year based on human productivity gains, but in terms of BTC USD volatility for the next decade, I think you're basically going to see this everything bubble continue to unwind and re kind of hyperinflate and you know, on the asset side of things, and now it's happening in this broad money supply, it's hitting the CPI gauge.

56:33

Now you're going to see that volatility expressed as Bitcoin goes from a $60,000 asset, it's going to go to a 500,000 and a million.

56:41

And eventually that volatility and the Bitcoin derivatives market, when the Bitcoin derivative longs get liquidated, the equity market index will draw down in tandem because it's, it's basically going to be the most pure form of the Fiat everything bubble that we've ever seen.

56:57

And I think we're still in the price discovery, motive, Bitcoin, where it, the monetization is still, you know, it's still a very small percentage of the population and the global capital market assets, but as it increasingly consumes all of it, it's like, you know, basically the Fiat, the Bitcoin price will be like just a measure of how much the fed and other central banks are going to print.

57:16

Right. And you know, they're going to continue printing for as long as they can maybe in, in fits and starts.

57:20

But I think the volatility will only increase in that sense.

57:25

I saw this article earlier today that was sent to me and it was, I think it was saying like ECB was basically like inadvertently blaming crypto for some of the inflation or something like that.

57:35

And, you know, I was just thinking like, this is just the start of these kinds of narratives.

57:40

As we start to see Bitcoin's monetization really accelerate.

57:44

You're going to start to see these people that are hanging on to the ship as it's sinking.

57:48

They're going to come out and say everything under the sun, including, oh, well, these Bitcoin guys are the reason why the system is collapsing.

57:57

Right? And that that's going to be kind of, I think that the last narrative that we see before the demise of the dollar.

58:03

So as far as volatility going up in the next five, I really think the timeframe here of this thing really starting to just, just literally go to the moon is probably five years.

58:14

People that are saying that it's going to take 15 or 20 years.

58:17

I'm just like, you obviously don't understand where the bond market is today.

58:21

And I find that the timeline, I think is way more based off of the macro backdrop than necessarily the having cycle of Bitcoin.

58:32

I think that that's just keeping it kind of plugging away and it's, it's just every time that having event happens, what it's really doing is it's locking in more trust.

58:41

It's locking in more people that trust it more than the old system, but where the old system looking at Bitcoin versus the older system where that's going to really kind of just totally break down is when the old system gets so mutilated that nobody wants to participate in it because they just know it's just a total fantasy land farce manipulated to the nth degree type system.

59:05

And I think you're already kind of getting there right now.

59:08

When I look at like the bond yield curve and in Europe, dude, it's done it's toast, the whole thing, all durations, it's just totally toast.

59:17

And now you're watching like the 30 year to like they're 15 or 10 year is starting to penetrate the resistance line that you've had for literally decades.

59:28

Yeah. I mean, that's insane. It's totally insane.

59:30

You're not quite there in the U S with the government issued debt here in the U S but when I kind of model out where I think those yields are moving like this coming summer, the summer of 22 into the fall of 22 is where I'm seeing the U S bond yield curve is going to get quite interesting.

59:49

So five years from now, I mean, and where do they go from there?

59:53

They can't go anywhere from there, like the free and open markets already selling off and the bond market on those longer durations, it's selling off like crazy.

1:00:01

And the fed hasn't even moved. They're still stuck at zero.

1:00:04

And so now the market's totally wagging their tail.

1:00:06

And it used to always be the exact opposite where they would for they'd have their forward guidance.

1:00:11

They do it for months and months, half a year or whatever.

1:00:14

Then they'd finally move at a quarter basis or 25 basis points and everything would kind of gyrate around and then they'd wait for the next big forward guidance, but this is way different.

1:00:25

This is way different. The supply chains are jacked.

1:00:28

I kind of suspect that as these things really kind of get into the final phase where they really start to die, it's in a supply chains because all those price signals that cost the capital, like you had mentioned will, it's just totally mutilated it's toast.

1:00:41

And so these companies that have like all these contracts for commodities, that in a lot of cases are from fixed price terms that are three-year contracts for $50 million worth of this part, a hundred million dollars worth of that part.

1:00:55

Right. And then they have to assemble it and then they have to, and you keep going up that supply chain, any little disruption, downstream wrecks, havoc on everything that has that part that opens up as you go further up the supply chain.

1:01:07

I mean, we're there, we're seeing it.

1:01:10

You're seeing all the reports now that like nobody expects this thing to remedy itself in 22.

1:01:14

And I expect it to actually, and I don't wanna sound like a pessimist here or like an alarmist, but like I expect this to get way worse.

1:01:23

I think it's going to get way worse.

1:01:26

The craziest thing is seeing, and I agree, Preston, the craziest thing is seeing white house officials or, you know, some senators.

1:01:33

And they'll say this new stimulus has new $2 trillion stimulus attack.

1:01:37

It'll fix the supply chain issues, which were caused by Keynesianism to, Hey, we're going to go stimulate and throw a bunch of new money at goods to stimulate the economy, quote unquote.

1:01:48

And it's like the solution to increasing the money supply by 30%.

1:01:53

And seeing all of this crazy inflation is to print more money.

1:01:57

And it feels like I'm, it feels like everyone's still plugged in.

1:02:02

And I'm just like, how do you measure inflation?

1:02:04

And it's like, how is no one else seeing this?

1:02:07

I mean, and increasingly people are, but they're still, you know, the wall street guys that have been in the system for 20, 30 years.

1:02:14

I mean, there's a lot of people that have an irrational amount of trust and then come in just incumbent institutions, I guess I would say.

1:02:22

And thank God, you know, that we have this, this thing that doesn't require any trusts and we can verify ourselves and run our own nodes and hold our own keys and move anywhere in the world who, with all our wealth in our head.

1:02:33

I mean, the time like this without Bitcoin, I would be, I would be quite pessimistic if I can't lie, I'll

1:02:40

have to say is, you know, our purchasing power is increasing though.

1:02:46

I had a buddy sent me a message like, Hey, I'm talking with this hardcore value investor.

1:02:49

Like, what would you ask them? And I said, oh, that's easy.

1:02:52

I said, how in the world is he doing an IRR calculation?

1:02:55

When we just had a CPI print of 6.2% cause any stock, I don't care what it is that you pull up.

1:03:01

I mean, you're getting IRR of 3%, 2%.

1:03:06

Right. And you just had a CPI print of 6.2 and it doesn't look like any of that's going to change.

1:03:10

And so like my question to these people doing these equity valuations is like, okay, so what do you do when you got a negative 400 basis points spread between which you are finding the value of what it's trading for on the open market versus just inflation alone, not even talking about operational risk or anything else that's associated with.

1:03:29

It's crazy. Like, I just don't know how people can walk around and have their blinders on that strong and not start asking a whole lot of questions.

1:03:38

Hey, is there a metric that you two disagree on?

1:03:42

Because I know you guys talk all the time.

1:03:45

Yeah. I don't, I don't really think there's too much that we disagree on just because we're texting pretty much every day.

1:03:51

So we were pretty much always bouncing ideas off each other.

1:03:53

And if there is anything like that, we pretty much kinda like, you know, flatten out that kink whenever it, whenever it occurs.

1:04:00

So, yeah. I don't really think there's anything to be honest.

1:04:03

All right. So how about this? What is the most misunderstood aspect of on chain analysis that you think the mainstream Bitcoin Twitter folks don't understand or misunderstand?

1:04:15

I know what my answer is.

1:04:17

I want to hear what you guys got.

1:04:20

I think it's the fact that it should not be used on the very short term timeframe.

1:04:24

I think whenever we have a short-term drawdown, I usually get people mentioning, oh, but that's supply shock though.

1:04:31

What happened to that? And it's like, okay, when we're talking about, when we're talking about a supply shop, we're talking about the amount of available supply that to be bought is, is decreasing.

1:04:41

And that doesn't necessarily mean that we have the other side of the equation, which is the demand.

1:04:46

And so the way I kind of think of this is that we have the fuel kind of laid out via the supply side, and we had this through the end of the summer, but you also have this, the other side of the equation, which is the demand that has to step in.

1:05:00

And so oftentimes, you know, there, there can be these discrepancies or, or divergences between what happens with the price and what's going on with the supply dynamics.

1:05:10

One, one example would be over the summer, you had a, through a metric that I created with a Willy woo called illiquid supply shock, which compares the highly liquid in liquid entities.

1:05:24

So these are in layman's terms, just entities that sell a lot of the coins that they take in and comparing that to the illiquid entities.

1:05:31

So people that take in and hold at least 75% of the coins they take in.

1:05:36

So they take in four coins, they hold at least three out of the four.

1:05:39

So you had this really strong divergence between the two and seeing that, you know, it didn't necessarily mean that we were going to see price appreciation within days, right?

1:05:50

It just meant that in a broader sense, over the next couple months, as demand steps in, as long as you don't have more supply becoming liquid, then eventually you're going to see the marginal bidder having to bid the price up because there's not as much available circulating supply.

1:06:07

Like for example, like this metric, it seems kind of counterintuitive, but when you see supply becoming illiquid, it doesn't always translate to price action immediately.

1:06:17

But when you see supply becoming liquid, it, it does because if you just think from first principles, what that means is that supply that was previously held by entities who don't sell are now moving their coins, usually onto exchanges to be sold.

1:06:30

Versus if you're seeing supply get locked up, that doesn't necessarily mean that the marginal bidder is stepping in aggressively to bid the price up.

1:06:38

So, I mean, that's just one example, but I think in general, on analytics, we have some shorter term metrics that we look at.

1:06:46

But generally when I think of what's the sweet spot for this type of analysis, it's really kind of three to six months out.

1:06:52

That's where I think we kind of have the best hit rate when you back test some of these things.

1:06:58

For example, like the liquid supply shock ratio.

1:07:00

I mentioned since 2018, that has about a 91% correlation between price on kind of a week to week interval.

1:07:07

So like these things don't always translate immediately to price because as we mentioned, I look at it as on chain is kind of this underlying broader kind of behavioral cycle where you have the derivative stuff that's really key.

1:07:22

And also we talk about like price levels and watching like the order books, all of these kinds of things really impact the price on the very short term timeframe.

1:07:31

So that'd be my answer.

1:07:33

I would agree on that. I think, I think one of the things that as someone that wants to accumulate more Bitcoin as I would, you know, I would consider myself basically to be a Bitcoin maximalist.

1:07:43

And I prefer honestly like monetary rationalist, maybe in the sense of like monetary maximalism.

1:07:50

I, in the sense that I think Ben, you know, money's a winner take all dynamic and Bitcoin has already won in the sense, you know, from a game theoretic perspective.

1:07:59

But I think the fascinating thing with on chain is I'm looking to increase my stack as much as possible.

1:08:05

And so there's times in the, you know, in the Bitcoin kind of cycle where like at the top and say 2017 or 2018, there could still be capital flooding like into the network to buy Bitcoin allocate to Bitcoin.

1:08:19

But price could be drawing down a lot where at the same time you can have price bidding up to insane levels, going parabolic with the same amount of capital flowing in.

1:08:29

And it's just because of the on chain on chain quantifies is the other side of the equation, like we've touched on is the supply and what it's moving the characterization of a Bitcoin bull market or a flexive one is that, you know, there's this huge wave of demand crashing into a tiny, like pinhole of available supply.

1:08:47

And so it's like, you know, like the movie theaters on fire and everyone's trying to run out and I guess maybe the movie theater on fires is Fiat, but everybody's trying to run into, you know, the available free floater Bitcoin that's, you know, basically ever decreasing, but it's variable in the sense that, you know, one to three to six month timeframe where you have, you know, old coins, maybe taking profits and whatnot.

1:09:08

So we can kind of see that from an on chain side of things, which makes it really fascinating.

1:09:14

Well, and that both of you guys, I agree with you a hundred percent.

1:09:16

So my frustration when I'm on Twitter is the timeframe that I operate is just these really long timeframes.

1:09:23

Like I'm looking for in short term for me as a year.

1:09:26

So if I'm posting on something I'm and I'm saying, Hey, this thing's about to, you know, Bitcoin's about the, make a run.

1:09:32

I'm saying like in the coming months, right?

1:09:35

Like I'm saying like the next three months later Parabola,

1:09:38

and you did that parabola with the upper and lower bands, I didn't even know it was like middle of summer and you posted 20

1:09:46

or whatever. Yeah.

1:09:48

Yeah. And you posted it in like linear terms, the, the parabola, and it just looks so stupidly, it looks, you look like the biggest, like moon boy permeable.

1:09:59

And you're like, listen, this, this having mechanic it's happening, whether you like it or not, quantitative tightening look at past cycles were going up in log terms.

1:10:08

Here's what I'm thinking.

1:10:09

And for like, for months on end, as Bitcoin was ripping past 20,000 all time highs, it was, it Was

1:10:17

Nailed it. And so, you know, that, that sort of stuff like, you know, Bitcoin, it, like, it feels like people have already figured this out.

1:10:24

It feels like, oh, the havings coming. Everybody knows what happened.

1:10:26

What's going to happen. But like no one knew what was going to happen outside of like the internet nerves that are, that are paying attention to this thing.

1:10:36

But I can't imagine what it's going to be on the next having of it.

1:10:39

But can you imagine, like how many more, I just look at how many people have kind of come into the space just in the last two years that weren't, they were nowhere to be found back in the 2017 run.

1:10:50

I mean, it's just diapers.

1:10:51

No,

1:10:51

I'm

1:10:55

serious. There's just so many people that have kind of come on in the last year and a half that had added so much tremendous value.

1:11:00

And I just can't imagine how many more people they're going to tell how many more people are going to show up when we get to the next having event.

1:11:08

And assuming the bond market doesn't like, literally just explode, right?

1:11:14

Like I just, this thing is gaining steam and it goes back to Will's comment.

1:11:18

He had like, look at the user adoption rate up to the right has been for a decade.

1:11:24

Hasn't slowed down.

1:11:26

Like if you were looking at a company and you're looking at their top line, or you're looking at like how many more users are signing up for quote unquote, Facebook or Twitter or whatever, it was like, everyone be like, well, I've got to own that.

1:11:37

But for some reason, because this thing is quote, unquote, competing with government money.

1:11:42

Like it's almost like, oh, well, yeah.

1:11:44

I, I understand all those metrics, but there's just no way because they they're coming to it with the opinion that there's just no way.

1:11:50

And I'm like, that's their argument. It's like, you might want to pull on that thread a touch more.

1:11:56

I think like one other thing is, is like the barrier to entry to understand Bitcoin now is way lower than it was years ago.

1:12:03

I mean, we have so many podcasts now.

1:12:06

I can't, I mean, I can't even listen to it on my hand.

1:12:09

Yeah. There's no, there's no way that you kind of have to pick and choose now what you want to listen to and, or about your Own

1:12:15

ego. That's what it's about. It's about your own ego.

1:12:18

Oh my God. Amen to that.

1:12:19

And it's amazing how Bitcoin will just, it will expose that so fast.

1:12:26

I mean, I've, I've seen it so many times over the, just the last five, six years.

1:12:30

It was just like these people come into the space and just like, if you have an ego, this thing just rips you apart, like instantly They

1:12:38

doubled down, They doubled down.

1:12:39

And it's just like, there's too many people that know too much about like all the different arguments around this.

1:12:45

That is crazy.

1:12:47

I got a couple questions on this one for you guys taproot with the impact on, on chain data and analytics.

1:12:57

I think, I think there's a bit of a misconception here.

1:12:59

So like the only way it really affects us is in the sense that when I'm saying us it's, it's the people actually doing the heuristic sight glass, I mean, Dell and I really just reading charts, but it affects the ability to identify the difference between a multisig transaction and a normal transaction, as well as a lightening transaction and a regular transaction.

1:13:18

So it doesn't actually affect our ability to analyze a lot of these metrics we're talking about.

1:13:24

But in terms of distinguishing between those, those multisig enlightening transaction, it does.

1:13:29

So for, for some of the lightening data, it affects it a bit, but also it's not going to affect things when you're looking at like capacity or number of channels or number of nodes and all those kinds of lighting metrics.

1:13:42

Do you guys, have you guys have any channels that you've opened up?

1:13:45

Yeah, I got about 55 lighting channels.

1:13:48

Oh, that's right, Dylan. Yeah. Yeah. I think we, we have a channel, right?

1:13:51

We have a Channel.

1:13:53

What am I, what am I asking here that I opened it?

1:13:57

Or did you open it? I don't know. We both opened one.

1:14:01

Yeah, we did. That's a whole, that's a whole other rabbit hole and it's pretty fascinating to go down about the disintermediation of, of not only, you know, central banking, but all these kinds of rent Seeking

1:14:11

payment processors, like visa AMX, all that.

1:14:15

So I had a chat with a peer, a shard just like probably two days ago.

1:14:18

And I said, Pierre, what if I open a channel with somebody else?

1:14:23

And that person decides to close the channel three months later.

1:14:27

But the Bitcoin that I use to open that channel was purchased.

1:14:30

Let's just say to use an exaggeration, let's say it was, it was Bitcoin that was purchased at $10.

1:14:37

Right? And the price now is $60,000.

1:14:38

And let's say I opened the channel for a full Bitcoin with this other node.

1:14:42

I don't even know who they are, but then they closed the channel.

1:14:44

They force closed the channel. I said, now I've got other, other channels with other people.

1:14:48

So my balance, if, if I was routing payments through my node and let's say all that, that one full Bitcoin was on my side, on my node side.

1:14:57

But through routing transactions, it all got pushed to this other person.

1:15:01

And then they closed the channel.

1:15:03

I said, what's my tax responsibility because the on chain layer, one looks like I sold my one Bitcoin to that person.

1:15:13

Right. Pierre started laughing and he's like, did you have no tax burden?

1:15:16

I said, hold on a second, hold on a second.

1:15:18

If somebody was doing analytics on layer one and they saw when that one coin was purchased and they saw that the coin is now in the ownership of another dress that I don't control.

1:15:30

It looks like there was a sale where there would be a $59,800 gain for that transaction.

1:15:42

Right. Even though my net balance on my note is still one Bitcoin, because if it flowed through my node and out to the other person, I still have a, a Bitcoin on my node.

1:15:52

Right. But for like, what Are

1:15:55

you implying Creston?

1:15:57

I think knowing that, and I'm not trying to raise a concern or like, I'm not trying to raise something that I just, I don't think anybody's considering, like the ramifications of that is as maybe we go into laws, restrictions to tax responsibilities, like for people that are just running a node right.

1:16:18

And opening channels.

1:16:19

But yet my net balance hasn't changed whatsoever.

1:16:22

Now the, when I'm looking at it from just like an intuitive standpoint, like, I don't feel like I have any type of tax burden because my net balance hasn't changed at all.

1:16:32

Right. But if you're using layer one transactions to make decisions as to whether you need to ping somebody for a payment for of a capital gains, like you can see where the confusion would arise.

1:16:45

Yeah. I just don't think the current system, in terms of like the regulatory structures set up for this new system that we're heading into, I think there's a lot of discrepancies and we just need more Bitcoin friendly people in the regulatory landscape.

1:17:00

And I raise it more for it. Like, let's say, I know there's their senators and representatives that follow my accounts.

1:17:06

I'm sure maybe they listen to some of the shows.

1:17:07

And I think this is a really important thing for people to think about when they hear that's one heck of a quandary to be in.

1:17:14

It was like, I didn't sell anything.

1:17:16

Like I still using the one Bitcoin example.

1:17:19

I still got the one Bitcoin on, on the node, but somebody else has the original one that I purchased from one at whenever.

1:17:26

Right. And there's, it might look like there's a capital gains, but there isn't.

1:17:29

So like people who want to come in and try to regulate this space aggressively and quickly are totally misunderstanding.

1:17:37

Like how, like important it is to not get that wrong.

1:17:41

Because if you do get it wrong here, like there's going to be other countries that get it very right.

1:17:46

And they're not going to be stifling.

1:17:49

What, what eventually you're going to have to go back to anyway, they're just not going to trip and fall in the process, The

1:17:56

sovereign individual with the whole like regulatory Arbitrage

1:17:59

thing. That's exactly right.

1:18:01

And game theory kicks in and all that.

1:18:04

Sorry to go off in that direction. This is interesting.

1:18:06

I've never thought about that. It's an interesting thing that just kind of popped up this week.

1:18:09

And I was talking to Pierre.

1:18:11

I mean, he's, he is very involved in lightening development with crack and, you know, I was just asking him, I was like, Hey, so how do you think about this?

1:18:19

And he's just like, Could

1:18:22

you see the news that, and I I'm 99% sure this was released that lightning or that tether will be coming to lightning.

1:18:32

So hold on. So what does explain this?

1:18:35

I don't understand what you mean.

1:18:37

So there was a new Bitcoin company, I think off the top of my head.

1:18:40

I forget it was John Carvallo.

1:18:43

Yeah. That famous like interview with Roger Vera, when he, Roger was like, flipping off the camera, John, I'm going to, I'm going to fumble this whole, this whole company.

1:18:51

So check it out. But the, the tethered to CTO Powell, I have, gosh, I'm, I'm bad with names at the moment, but the guy that basically runs tethered and Bitfinex is like technical side of things that around the space for awhile there, basically, I think they announced that they're going to bring, you know, because tether USBC, they're using all these different blockchains, like tether USB-C has a theory, ERC 20 rails.

1:19:17

It has Tron TRX rails try sending a stable coin on, on the, the Ethereum blockchain the other day.

1:19:24

It costs him $25, but that's a different, that's a different topic.

1:19:27

But basically I think you're going to see eventually you're going to see either it's going to be some sort of synthetic stable coin, USD value that's pegged.

1:19:36

And there's going to be kind of like counterparties on both sides of this, almost like in a derivative type way.

1:19:41

And they're going to see dollar, you know, synthetic dollar settlement on, on lightening rentals.

1:19:47

Because again, like Jack Mueller's hammered this point home all the time.

1:19:50

He's like he settled basically free.

1:19:53

I mean, it's not free, but we settled basically Free

1:19:55

relative to everything else.

1:19:58

Like precedent. If, if, if me and you were sending payments to each other every day, well, we can set up a public lady channel, but we can set up a private lightning channel.

1:20:04

You ain't even, no one can see this it's over tour and we're just streaming value to each other.

1:20:09

And we can do it a million times a second if we haven't had the bandwidth to do it, you know?

1:20:14

So I mean something like, you know, whether it's tether or whether it's, you know, another kind of stable coin or someone that comes down the line and then settle synthetic dollars, euros, yen, whatever it is, it's all gonna come to lightning rails.

1:20:27

And I think this is for me in intermediation of, of kind of all that and the Lexi financial system, where I send funds to go buy Bitcoin on Coinbase.

1:20:35

If I want to do that. And it takes five days for me to be able to withdraw that to Quinn.

1:20:39

But as my bank transfer slow, like that's, that's all coming to an end faster than most can imagine.

1:20:47

You have an article on that. I would love to read it and share it for people.

1:20:50

If you can find one, we'll have that in the show notes.

1:20:53

This is the, this is the hardest question I got for you guys.

1:20:57

Will, were you expecting the rap video from me?

1:21:02

I was always dying when I saw that dude, check this Out.

1:21:08

We have no idea how hard I worked on that.

1:21:10

That's what I was going to say though. The real, the real funny part is just when I was thinking, like he busted put like 45 minutes or an hour into this video, it was More

1:21:20

than that. It was, oh, wow.

1:21:21

I

1:21:21

think

1:21:21

it

1:21:21

was

1:21:21

a

1:21:21

Sunday

1:21:26

night. And you had your posts and I was just laughing.

1:21:30

Right. And I was like, I can bang something out.

1:21:32

And I was looking at the time and it was, I don't know, it was like seven o'clock or something like that.

1:21:38

It's like, I don't have anything like very rare night where I don't have anything on my plate, the knockout.

1:21:42

I was like, you know what? I'm just going to have a little fun tonight.

1:21:45

Let me see what I can do here. And I think it was like 11 o'clock when I finished up.

1:21:49

And I was like, oh, here we go. And I just posted it.

1:21:52

And like, I got no response from you.

1:21:54

And I was like, how is he not responding to my rapid?

1:21:59

Yeah. So I saw it the next morning. I was like, how did I not see this?

1:22:02

And then, and then people, people started, you know, I retweeted it.

1:22:05

And then people were like, oh my gosh, this is hilarious.

1:22:08

Like, I think I laughed for a good two or three minutes straight.

1:22:11

And it was, it was like, the editing was on point to like the lyrics itself were, were pretty funny, but just like you had yourself edited in the, in the car and it was hilarious, man.

1:22:26

I had so much fun guys. This has been so much fun for me.

1:22:29

Will I remember the first text message you sent the first time we chatted the first article, you were like, Hey, can you read this?

1:22:38

And if you like, it retweet it, like, it is just so exciting for me to see you to add so much value to the space and get recognized for it.

1:22:48

And then just take it to a whole new level.

1:22:50

It is just so much fun to, to be an observer of this.

1:22:54

And if there was any type of small part that I played, like, I'm just, I'm just thrilled.

1:23:00

I'm thrilled to be a part of it.

1:23:03

And I just cannot even imagine where you, you are, you two will be when you're 30, 40 years old.

1:23:10

Like I just cannot imagine where you guys are going to be.

1:23:13

Thank you for making time.

1:23:16

This is a, it's surreal.

1:23:17

It's pretty surreal.

1:23:19

Just like, I mean, we, we talked before, I think, you know, we were interacting with you like in February, March and like, yo, what was your story?

1:23:27

You know, I'm always like, yeah, this is this guy Preston a lot.

1:23:31

And I was like, oh my God. Say him. So, you know, it's pretty cool.

1:23:34

You know, being here late 20, 21 talking to you on the, on the, in famous investors podcast.

1:23:41

Yeah. But before, before we got on here, me and Dylan were chatting for like 20 minutes.

1:23:44

We were just like, this is nuts, man.

1:23:46

I can't believe we're about to get on this podcast pressure.

1:23:48

This is so crazy. Like, Well,

1:23:51

we need to do it more often. You guys, I mean that your comments, your knowledge, how in the hell do you have this knowledge at 20?

1:23:58

I can't even understand how you would have this knowledge at 20, but we need to keep doing it.

1:24:04

Thank you. Legal to drink. We got to get a drink. Hey.

1:24:06

Yeah. You know, I should've had a drink here tonight and just been, you know, showing off in front of you too.

1:24:12

Okay. Thank you so much, Preston. I really enjoyed this.

1:24:15

This is, this is amazing.

1:24:17

We definitely met. Did you guys go into Miami?

1:24:19

There

1:24:19

you

1:24:22

go. We're going to hang out in Miami.

1:24:23

Are you 21 in April?

1:24:25

I can be.

1:24:27

Does it matter?

1:24:27

All

1:24:27

right

1:24:31

guys. Thank you so much. Oh, I want you guys to be able to provide a handoff wheel.

1:24:35

You're working on a podcast. You just interviewed plan B and Willy woo.

1:24:39

Tell people what you have going on.

1:24:40

And then Dylan, you, you followed up.

1:24:43

Thanks for the plug. Yeah. So I kind of had all the content stuff at block where through a little branch, we call a block where intelligence.

1:24:49

So we have a, a newsletter, which I send out to about, I think we just passed 53,000 subscribers.

1:24:55

That's like a weekly kind of market overview based on, on chain as well as we have some, some big one related equity content.

1:25:03

And we just hired on Joe Burnett, who is like, I, I capital on Twitter to do some, some mining content as well.

1:25:10

And then we have a podcast that I interviewed different people in the space every week.

1:25:14

Preston, we gotta get you on there. Maybe some time next month.

1:25:17

Awesome. Yeah. And then as well, we do like a weekly, like kinda market overview in video con and video version as well.

1:25:24

So I'll feel free to check any of that stuff out if you're interested in, in any market related stuff.

1:25:29

And then I'm on Twitter at w Clemente III, Dylan.

1:25:35

Yeah. I saw I'm working with Bitcoin magazine joined there and about March right now, I'm heading the deep dive.

1:25:42

So we, we also put out content, Bitcoin content, you know, legacy finance stuff on chain, derivative markets.

1:25:49

We do that on a daily basis and we have, you know, pre and paid tiers.

1:25:53

So we send out like, you know, an email, a market update a week to just everybody.

1:25:57

And we, you know, also kind of just like doing stuff with Bitcoin magazine, like hopping on spaces, podcasts, all that just recently joined kind of a Bitcoin kind of a Bitcoin fund where we try to implement some of the stuff we talked about today.

1:26:10

So I started to work with them a little bit, but yeah, I mean, appreciate you having me on, I guess, you know, give me a follow on Twitter and my DMS, which are, you know, kind of flooded, but I'll try to get back to you if you know, to give back a little bit, you know, if you have any questions or whatnot, you know, reach out, but you know, again really appreciate you having a song press.

1:26:31

And this was a blast. Absolutely.

1:26:32

All right guys, until next time, if you guys enjoyed this conversation, be sure to follow the show on whatever podcast application you use, just search for.

1:26:42

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1:27:04

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1:27:06

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1:27:27

You're listening to TIP. Hey, everyone. Welcome to this Wednesday's release of the podcast where we're talking about Bitcoin. My two guests today are some of the youngest and most talented thinkers in the Bitcoin space, and that's Will Clemente and Dylan Both of these gentlemen are rising stars within the community for their contribution to on chain analytics and analysis. They both have incredible articles that have been featured by some of the biggest Bitcoin publications, And on today's show, we talk about the derivatives market and how it influences the market YOULL, what it might mean moving forward with respect to volatility, some of their favorite on chain metrics, why some of those metrics are or aren't important in certain circumstances and much much more. So get ready for this really fun conversation with Will and Dylan. You are listening to Bitcoin fundamentals by the investors podcast listening to Bitcoin fundamentals by the Investors Podcast Network. Now, for your host, press the link. Hey, everyone. Welcome to the show. Like we said in the intro, I'm here with Will and Dylan and My My. YOULL guys are like the Wiz kids of Bitcoin. I mean, it's crazy to me. How quickly? I think that's the thing I keep telling myself. Is I just look at your age and I say, my god, I didn't I didn't know this stuff that these guys are talking about like five years ago, like I look at where you guys are at and it's like, how in the world can they possibly know what they know at their age and it's just a little mind blowing to me? So I guess that's my first question. It's like, what has allowed you guys to be able to just turn on the after burners to catch up with people I mean, it has to be technology that's that's assisted in your ability to find key people or whatever it might be to decelerate that, but, like, dude, it's crazy. Press and, like, first and foremost, you obviously had a had a huge impact on both Dylan and I. Like, I remember it's really strange being on this podcast because I remember about a year ago I was working at Michaels and I had, like, a overnight stocking job And I would come in and I would listen to your podcast. I would come in at, like, two or three AM, and I would just chain listen to it. Until, like, nine, ten AM when I got off the shift. And it at this time, it wasn't even Bitcoin. It was, you know, you're talking about It it was, like, you know, your first twenty five episode. Yeah. You're talking about all the Warren Buffett stuff. I got out security analysis, big debt crisis. See, I love this. I didn't know YOULL were into the value side of it, Will. Yeah. Yeah. At first, I I came into it that way. I got, like, zero to one by Peter Teal, all these books, like recommended early on. And, yeah, I mean, aside from, like, you specifically, like, just in general, I think the Internet has a huge part to do with it. You know, I've learned way more on the You know, I've learned way more on the Internet. I'm sure Dylan agrees, you know, than than I I probably would have otherwise, you know, I've learned much more through podcasts and and YouTube than I did in all my school combined. I wasn't always great in school, but it's funny, like, you find something you're interested in and, you know, you kinda go down the rabbit hole and lead yourself through that. Yeah. I mean, I think, like, we have more content than ever before, and it's, like, if you're interested in something, there's no excuse aside from maybe, like, becoming an engineer or something in medicine for you not to be able to to teach it to yourself. And so especially with finance, I mean, there's all kinds of content out there for you to consume now. Dylan? I agree with that and I relate to almost all of what Will just said, I honestly, in twenty eighteen, my first Like, I was always a math guy. I tried science out. Just wasn't a a big fan. And I was like, alright. I'll I guess, I'll use my my love for numbers to kind of commercial numbers in the business world, whatever that means. And and so I should probably learn about investing in all this and what one of my first things I did was I literally went into the podcast app and looked up investing investing podcast. And there there you guys were. cute. I also a little bit of SEO to that as far as naming Was a little bit of SEO to that. So as far as naming conventions, yes. But yeah. Then you nailed it there. Yeah. And so I I went down I mean, I was I was learning about, like, the, I guess, like, the Fiat world and the, you know, the kind of the central bank monetary system and and all of that as I was at the same time in parallel just I had a Twitter account earlier, and so I I wasn't active on it, but Crypto Twitter, Bitcoin Twitter, I found the kind of the Bitcoin quarter specifically, but, you know, they were very active and passionate. And I first stumbled upon this at three thousand at the bottom of the bear market. And you had these you know, this group that had drawn down eighty five percent, you know, and they're just loud obnoxious, but they were convicted. And I was like, these YOULL, maybe they're not crazy. Maybe they there's some there's something, you know, there's something more to it. And so I just kind of passively learned about Bitcoin and and the kind of the legacy system in in tandem up and through my freshman year of college twenty twenty. The second semester of that was COVID, and they kicked us all basically kicked us all out and sent us home. And then I was kind of ray at the tip of, like, going down the whole rabbit hole of Bitcoin. And then COVID comes, they print a bunch of money I have so much spare time on my hands and my Zoom classes that are taught by, like, boom professors about investing in economics were, like, awful. And I was, like, paying for this. And it it was so so I dropped out and just decided to, like, I needed sats. That's what III viewed it the opportunity cost in Bitcoin, especially after, like, I read Jeff Booth thesis about, like, technology, dematerializing everything. I was like, okay. Well and then I kinda won't put it together. I was like, okay. I I think the opportunity cost of everything is bitcoin and information is free in abundant. So what am I doing? And, you know, I guess, like, eighteen months later, we're here just talking about talking about bitcoin and We just hang out on Twitter all day, but, really, I think just Internet's, like, you know, the arena of ideas is with, you know, the most awesome thing is credentials don't matter here. It's just what you can bring to the conversation. Amen. Amen to that. Yeah. And to add on to that, I think, too, like I mean, dealing on a nice platform is which have grown, like, more than I think either of us could have ever imagined. I want you to hit on this because learning through this many people will, like, You've had I don't even know what your follower count now is, but I know it's a lot. Like, you're what? You're over three fifty or four hundred or something like four hundred thousand people following you specific the learning threshold that has gone up because you have so many people that are queuing you in different directions. Some of it's just, you know, people just I see all different types. I know you guys see all different types. But there are people that will throw things your way that you would never have learned or seen if you didn't have such massive platform of people following you. So talk to us about some of the things that you've learned through through that. First of all, just being able reach out to people and ask questions is is the first benefit of that. I'm grateful to be in a position now. I can just reach out to pretty much anybody on Twitter, and they'll most likely respond because they get the notification now just because I have, you know, the word follower base, or I can tweet at somebody But yeah. And just in terms of, like, posting things and and the feedback, like, I can put out, you know, a chart or a metric or an opinion on something and I have hundreds or thousands of people that are, you know, criticizing it, sometimes not in the in the nicest or most respectful way. But, you know, I think part of it is being able to kinda pull the, maybe disrespect or, like, rudeness out of a comment and being able to say, okay. Well, maybe they didn't deliver this in the best way, but what they're actually saying has some merit to it. Or, you know, aside from aside from the bad apples, just in general, you get people that will give you their their feedback. Right? I'll post you know, a lot of the stuff I'm posting is, like, market related content to Bitcoin. And so I put out an opinion and people say, well, you're not looking at this, this, or this, or with this metric, what you also need to consider is that this might be skewing the data. And so sometimes just putting out an idea or kind of framing something in an open ended way is the best way to learn. Like, I posted something last week and I said, Do you think over time Bitcoin's volatility increases or decreases? And I got freaking sailor commenting on it and giving me his opinion. Yeah. And it's without that platform that I have now. I mean, there's no way I would be able to get some of these insights. And, yeah, like, that to me has been the coolest thing is is ask, you know, when we're talking about it just being able to learn, asking questions is huge. That's that's been my biggest asset is over the last couple months, I've kind of evolved my learning just from, like, a pure market standpoint, like, I did not at all predict the the May crash. I got into OnChain analytics, like, couple weeks before that. It's complete new over the summer, I got really kind of upset at myself because I missed that whole move, really kind of grinded out my understanding of all that stuff. And through that, I really kind of built community, if you will, of of different people that were interested in it through Telegram, also in just in in DMs. But, you know, now I'm in some of these telegram groups and, like, I remember early on YOULL talked about the book, the seven habits of highly successful people. Yeah. You talked about, like, masterminds these groups that I'm in are essentially that where it's like all these people that are specialized in this one thing and we're all kind of putting our heads together to come to the best conclusion. It's like fifteen or twenty of us, different fund managers, or just independent on chain researchers. And we kind of all are, you know, just like bouncing ideas off of each other. And and I think people more than anything. I mean, books are amazing, and and books can can help you understand a lot of things, but bouncing ideas off of people and just asking questions I've learned so much through that just early on, just reaching out. I mean, that's how, that's how I got originally noticed by I mean, that's how that's how I got originally noticed by you. Was I tweeted out to I put out this article when I had, like, three hundred followers. And I it was, like, Bitcoin's role in the financial system, and I tagged YOULL tagged Dylan, actually. And you crushed it. You crushed the article. I appreciate it. And I didn't really think anyone was gonna respond, but then you retweeted it. Yep. Oh my god. Preston Pitts retweeted my article. He was like freaking out. And then from there, you know, it was just I was like, okay. Well, this is how you reach out to people. I just started adding tagging people and everything. Whenever I have questions now, like, I just reach out to to fund managers or different, you know, reach out to, like, Lynn, old. And if I have a question about macro or different like crypto fund managers about, you know, some of their opinion on the market over the next couple months, and it's just like, people are the biggest alpha, not just in markets, but just in, in understanding things in general, if I have a question about macro or different, like, crypto fund managers about, you know, some of their opinion on the market over the next couple months. And it's just, like, YOULL are the biggest alpha, not just in markets, but just in in understanding things in general. If you can handle the trolls, because there's trolls especially at the level of followers that both of you guys have. If the individual can handle it and they can ask the right questions, it's just insane. It's insane what you can learn and you you mentioned the idea of a mastermind. People in the past might have a mastermind of five people and some of them might not even be experts really kind of in what you're interested in learning about. But with Twitter, I mean, if you got four hundred thousand followers or whatever it is you guys got, I mean, you can uncover just anything. And you can ask questions like, alright, I'm interested in learning about this. What's the best book on the planet for that? And you'll get a hundred different book recommendations from wherever. right? Like it's just Right? Like, it's just crazy. We're not the best app for training and doing this stuff. I mean, especially being a being a big winner on Twitter. I think I started actively using my Twitter account and my May of twenty twenty about posting about Bitcoin and following, like, pledge on Twitter, just like hardcore, like Bitcoin, maximalists, like interacting with them. Half these people are pseudonyms. YOULL know, with a cartoon character as a name that are It's really a scene. Yeah. Because you have people, like, it's so funny when you see, like, Janet Yellen. And and she'll tweet out something or some some credential, you know, check mark, and I say that now just recently recently, yeah, but but know, they're getting ratioed by a pledge with three hundred followers who's destroying their their argument with just, you know, first principles reasoning. And now that we got high bandwidth spaces, like, I get onto these spaces. Yeah. Spaces are amazing. And you're talking to somebody, who doesn't even have a picture on their profile with five followers, and they're like some of the most intelligently crafted arguments and points in critical thinking that you've ever heard. Like, it's just mind blowing how much talent is out there. If you're willing to ask the question or and just make yourself vulnerable, I guess, to, hey, I don't know what this is, but help me understand, like, what different ideas there are around it. So I guess going back to the original question, like, how are you guys able to catapult yourself to such a high level of understanding and and influence in the market in a constructive way? And I mean, it's really you guys have been asking amazing questions. You guys have been posting, like, awesome content, but you've also been open to the criticism to adjust it, to update it, to I mean, Dylan, you and I were having a DM about this, and this this was actually my next question, I think. About this metric, this long term holder versus short term holder. And how I just love, absolutely love this chart, And I know both of you guys have coordinated different ideas around this this chart, but Dylan, explain this chart to people what it is, And, I mean, the performance on this. We'll post this out after we're done with this interview. Or one of you guys can post it in the comments or something when this when this interview airs. But talk to us about what this is, this idea, but talk to us about what this is, this idea. The core kind of thing about Bitcoin OnChain analytics and and what makes it so like different than anything we've kinda seen before. I guess, like, public OnChain, like, ledgers. I mean, there there are other other ledgers, other cryptos, but Bitcoin entrepreneurs specifically like Bitcoin and the UTXO set, you know, satoshi kinda airdropping this thing onto the world in two thousand nine. I mean, basically, you can see, like, you have a real time property rights for, you know, this global monetary system that's growing organic. And so you can see basically, like, Bitcoin's market price is ten dollars. Well, you can see, like, that, you know, the average Bitcoin was traded for three dollars. And so, you know, we're not we're not talking about ten dollars. But, you know, when you're looking at, say, price today at sixty thousand. Well, we realized price, basically, like, the on chain cost basis for that, like, everybody on the network is, like, twenty four thousand. Like, a one point two trillion dollar mark cap. Realized cap is, like, four hundred fifty billion, something around there. And so you can kind of see the transparently, like, you know, these things have gone OnChain. And so the chart I showed YOULL was the short term older cost basis versus the long term older cost basis. And and glass notes quantification of that. There's some statistical threshold that is is a hundred and fifty five days, but it's essentially the longer UTXO or a longer a Bitcoin's help, the less likely it's gonna be spent into the future. And that's true when analyzing entire UTXO set over the course of Big West history. And so while it seems kinda arbitrary, it's not, and we can do some pretty cool things with analyzing the trends of these long short term holders. And so what you kind of see is during bull markets, the short term older cost basis, basically new money, new capital, coins that are being you know, transfer over short time spans on on the network. The cost basis of those coins that it's getting bit up. On a long term, over cost basis is is flat. And essentially, it's because, you know, hoggles, stackers, set the floor in bear markets, the holders of last resort that's satoshi accumulators of last resort is what's puts a bottom on this Bitcoin price. And because of its absolute scarcity, you know, as people kind of discover that Bitcoin is the best monetary asset the world has ever seen, because that's a fact. Basically, you know, they wanna secure an allocation and they have to bid up the price of this asset paying dollars to acquire it. And so you see that that that YOULL market trend is essentially short term holders increasing against long term holders. Eventually, Bitcoin's price action, going parabolic, incentivizes some of the network participants to take some chips off the table. And so YOULL see that in the DJXO set with all these coins that haven't moved in a long time. Paying the market or making an transaction. And so while some of those may not be economic sales in the sense that, hey, I just transferred some of my my funds from one one wallet to the next. But what you see at the top of bull markets is a lot of these coins coming like, coming on to the market and are moving on chain all at once, especially old points. And so from there, you see that trend start to change where YOULL see a lot of long term holders. Their coins are moving into the short term holder cohort they just spent. And so that long term cost basis starts to appreciate in a really, really fast manner. At the same time, where the price action just went up twenty x, a hundred x, whatever the multiple is, that marginal buyer just gets exhausted. And so that's when you kinda see the cyclicality, the reflectivity working the other way. And you see you you see these we seemingly random boom in busts over the course of Bitcoin's history that aren't actually all that random. It's just, you know, the the YOULL, like, kinda cyclical volatility of the monetization of this asset. Let's take a quick break and hear from today's take a quick break and hear from today's sponsors. We live in the age of subscriptions. How many subscription services are you paying for month? Do you know subscriptions add Do you know? Subscriptions add up up? And sometimes we don't notice the monthly deductions from our bank sometimes we don't notice the monthly deductions from our bank accounts. In fact, I'd even argue that these companies are counting on the fact that we don't. 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That's rent, t o retirement dot com slash TIP, or call one eight hundred 3116781. That's one eight hundred 1. To learn more about how you can get started investing in some of the best cashflow markets to learn more about how you can get started investing in some of the best cash flow markets today. All right. I want to tell you guys about a new podcast that I absolutely love and it's called the, so what by Boston consulting group, if you're unfamiliar with Boston consulting group, they're one of the biggest consulting firms in the world with almost 9 billion in revenue, and they work with the biggest companies on the I wanna tell you guys about a new podcast that I absolutely love, and it's called the so what by Boston Consulting Group. If you're unfamiliar with Boston Consulting Group, they're one of the biggest consulting firms in the world with almost nine billion in revenue, and they work with the biggest companies on planet. So you really want to pay attention to their so you really want to pay attention to their insights. What really hooked me was the episode uncertainty advantage, where it talks about scenario planning and other exercises to plan for an uncertain future. Pretty sure we could all use that right Pretty sure we could all use that right now. Award winning British journalist, Georgie Frost, interviews the leading thinkers and Duhrer at BCG on the trends, developments, and ideas that will shape and disrupt the future. Topics range from global warming COVID nineteen business resilience and social and equality to the influence of digital technology on everything. This is not your typical business strategy podcast. So listen to brand new episodes of the, so what from Boston consulting group on apple podcasts, Spotify, Stitcher, or wherever you get your So listen to brand new episodes of The So What from Boston Consulting Group on Apple Podcasts, Spotify, Stitcher, or wherever you get your podcasts. Alright. Back to the show. If we could just back up for a second. So, like, realize cap is essentially the market capitalization of Bitcoin based off of when a coin was last moved. So to the way to think of this is like Roger Vaire who bought Bitcoin whatever at, like, a dollar. Right? Let's say he bought a hundred thousand dollars at Bitcoin at one dollar. Okay. And he hasn't moved those coins whatsoever. That's now, like He moved on to twenty seventeen, but keep but keep going. Yeah. So so now that, you know, in in market cap terms that takes up whatever six point one or whatever Bitcoin's at six point two billion dollar chunk of market cap. But if he hasn't moved those coins, in realized cap, he's still only adding a hundred thousand dollars to that. So it's essentially you're looking at the amount of value that is stored in Bitcoin, or in other words, for people who are familiar with, like, technical analysis, you're looking at an on chain vWAC so in a volume weighted average price at Bitcoin. And this was originally conceptualized by Pierre Richard, and then Nick Carter actually created the metric And so Pierre Stark came up with the idea way back in, like, pick one's early days. Nick Carter actually presented it, created the metric at conference, And and so that was we realized cap was born. And so realized cap itself is YOULL, aside from looking at it in in more granularity, Because in bear markets, whenever the market cap goes below realized cap, by definition, the market's in capitulation. Right? Because it's below the average cost basis of all the investors in market. And so then what Dylan said, like, what Dylan did like he said, was take this a step further and then using blast outsuristics of the short term and long term holders comparing the two. And then if you actually run the ratio, but between the two of those as well. You get you get an interesting cyclical oscillator. But one one other thing I that Dylan didn't hit on that I think is important to understand is that there's this natural dynamic between short term and long term holders. And so what you see is that the long term guys scale into the bear market they don't perfectly time the bottom, so they don't bottom tick perfectly. But they scale into the bottom of the bear, and then they scale out into the major older alleys that we have. So they they buy into weakness or scale into weakness and they scale out into strength. And so you see this natural dynamic where into the bear, all the short term guys leave. All the speculators get out of the market, or they age into long term holders. If they stay on if they stay in the market. Right? And so over time, obviously, you have more and more people that come in because number go up is basically the best form of marketing for Bitcoin. So you have over time more short term holders come in the bear market become long term holders into the bear. I mean, they come into into the bull market and then turn into long term holders into the bear, but you also see the long term guys as Dylan touched on come in, step in, and kind of set that floor into the bear market. And so you see this natural dynamic where if you look at the two of the charts, they go the complete opposite directions. They converge and then they dispersed into the into the bull market. And so, dealing took that a step further by looking at their cost basis and then the behavior of the two of those. And and there is there is a lot of signal on that. Short term holder cost basis itself is actually another really interesting metric it's the short term holder realized price has been a really interesting level that Bitcoin prices historically reacted with. Right now that's at fifty three thousand dollars, which is interestingly right around that kind of trillion dollar market cap, which you also see has kind of been align in the sand for investors through when you look at, like, transactional activity and on chain volume, you see that kind of aligned in the sand there, so there's some confluence there. But in bull markets, what you see is that price tends to bounce off of short term holder realized price, which is another interesting variant of that. But, yeah, that was an awesome metric created by Dylan that takes two of those concepts realized price, which is the on chain cost basis or or average cost basis of investors on chain with that kind of cyclical behavior that you see between those short and long term holders. Dylan, I'm curious if you've run the numbers. So When you sent the chart back to me, I said, can you just put this in a green and a red status of, like, I own it? Or I sold it, and I'm and I'm out of the market kind of scenario, very binary scenario. I'm curious what the outperformance is. Have you calculated that? I actually haven't. I should back test those. You need to figure that need to figure that out. And then when we air this, I wanna be able to tell people what it is. And I know it's it's better than Bitcoin itself significantly better? I'm not even so fascinating because you I mean, you have this I'm just repeating myself, but you have this transparent ledger of ownership. Yeah. For for x-ray guys monetizing on on every single balance sheet, whether whether someone likes it or not, you're not insulated against Bitcoin's monetization. So you need to get or I mean, eventually, you're going to need to bet denominate your balance sheet in Bitcoin terms. It's just whether you've realized that and accepted it yet. And so being able to kind of track this live and see every single, you know, every single Bitcoin owned on the network In full transparency, it's pretty fascinating. YOULL just you know, I think we're just scratching the surface on on kind of all this stuff. The glass node metric for longterm holder versus short-term holder, help us understand what that cutoff is like, what timeframe are we talking glass node metric for long term holder versus short term holder, help us understand what that cutoff is. Like, what time frame are we talking here? Yeah. So it's a hundred fifty five days. And so the reasoning is as Dylan kinda touched on, what you see is that as a coin is held in a wallet, the longer it's held in a wallet, the less likely it is to be spent. And then glass nodes kinda run some statistical studies to look and say, okay, where's that cut off? That the likelihood of them spending those coins really cuts off the most? And that's right at a hundred fifty five days, which is also five months. So know for a lot of the hardcore Bitcoin Maxi, it's gonna be like five months. These guys are wimps. That's nothing. But it's just when when you kind of backcast the behavior, that's where you see the likelihood of those coins being spent cuts off the most. So this is one of the reasons I like that chart so much. My opinion, so we're in a little bit of a sell off right now. I think the price went up to close to sixty eight thousand. It's down there sixty thousand right now, there's whales out there. And these whales can move that price more than I think lot of people realize. And not only can they move the price, but they can move the price at times when you're maybe least expecting it, or you just You don't know what their reason for a sell or a buy necessarily is. And then the leverage that's in the market just kind of accentuates whatever it was that they were doing. Or just kinda pushes it in the up or down direction even more. So my personal opinion is somebody who's kinda trading this thing in a day for day kinda way or like in a very short time horizon, I don't have the metrics and I guess I'm speaking more for myself. I don't have enough confidence in being able to trade that, especially in a way where I would be able to outperform the tax burden that's associated with every one of those sellers. So press the fish. Right? I am a much longer time horizon looking type person, and this goes back to probably my buffet days and just kinda like how I invest in equities. And so when I buy something like I'm really looking for something that I can own for the year plus at a at minimum. And so when I looked at the chart that the two of you have have put out there and Dylan is really kinda refined, when I'm looking at that chart, I'm saying this is something that kind of meets that time horizon where the whales in the market aren't going to be able to kinda bump me around and kinda mess up whatever it is I'm trying to do because it's just too big of a macro theme and the market's moving in in hundreds of billion dollar type waves. And so when I'm looking at that and I'm saying, hey, if if I'm going to then I'm not one to sell. But if I'm gonna stock how fiat or cash to buy at an opportune time, this past event would have been a great scenario where this metric that we're talking about right now YOULL would have been stockpiling cash. You would have not been buying more bitcoin, and you would have probably nailed, like, literally nailed the living hell out of the bottom of this recent six month downturn that we had. And if you were to stockpile your free cash flows for six months and insert it into the market right then, I see this metric as being just extremely valuable for that type of investor, and that's how I am. That's how I'm going about it at least. Preston, the most the most fascinating thing is you have this you know, the on chain stuff. It's kind of like, you know, these large macro trends. And then at the same time, over late on top of it and this, you know, it definitely impacts the price a lot over the short term. It it matters far more is this derivatives market. And essentially, what you have are these completely, you know, free and open and a wild west public capital markets that are that are being built out all over the world and the, you know, on chain settled monetary asset, this this free and open decentralized, absolutely scarce monetary asset can be is is being traded with with fully functional derivatives that are settling billions of dollars a day And so what if I told you when this metric flipped and you started to see kind of, you know, all these long term holders, you know, selling ad once And at the same time, you could have just gone one x net short, YOULL one x short on these derivatives. Where you're basically holding, if you're if you're one x short with Bitcoin as collateral, you're based you're basically holding a synthetic dollar. So if you want x on a derivative what x on a derivative change. You're talking, like, perms, like, putting the putting the whole point of view. And so at the same time as as the market is convinced we're in this new paradigm and and I get it. Like, when Bitcoin rips and it's it's, you know, when Bitcoin passes hundred k, like, we're all gonna be for it because that's been this kind of I and this guy target for a while. I'm just gonna good. But, you know, when at the same time, YOULL know, everyone's euphoric and sentiments at all time highs, and all these coins are coming out of the market, you can get, like, fifty percent, a hundred percent annualized at times just going short on the perps. And it's because the euphoria, the sentiment, everybody's levered long on the derivative side of things. And the way that these say the perpetual swap work, is it's tethered to the spot index. It's tethered to the spot price with that funding rate. And so if if the derivative bulls wanna bid up that price, all all they want. That's great. But that funding rate is gonna go so high. That, you know, it's gonna basically cost them a hundred percent APR on an annualized basis, which was which was kind of where it hit sometimes at the top. I'm, like, by bit finance these exchanges that were all using Bitcoin as collateral to long Bitcoin, and then they're paying seventy five percent, a hundred percent annualized rates to do it. But but the problem with long and bitcoin with bitcoin is that if the price goes down, well, your position goes down at the same time as your collateral value. And that's kind of why you saw that, you know, especially harsh drawdown to thirty k. I mean, we went from forty to thirty in about two hours. And so, like, you know, that's why you see those those dislocations and then, you know, those major volatility kind of blow ups It's because it's it's free and open and you have all these kind of derivatives layered on top of it. But that's what makes it fun. I think what what Dylan just touched on is really important to understand one of the one of the more bullish kind of setups for Bitcoin is is the percentage of futures contracts that are currently margined with crypto, which I know that other people don't like that word, but crypto versus USD or stable coins. And the reasoning is what Dylan just alluded to was the convexity that these contracts have. So, essentially, if you're longing Bitcoin with Bitcoin as collateral that's awesome when the market's going up because you not only use your P and L decreasing, but your collateral is increasing in value as well. Well, as soon as the market starts to turn against you, it goes to complete opposite direction because not only is your P and L decreasing, but your collateral is also decreasing in value. You're even more likely to get stopped out or liquidated or freak out and solve for that matter. And then conversely, when when more of the market is margin with YOULL coins or USD, those contracts are more likely to be squeezed to the upside. And the reasoning is because if you're short with Bitcoin as collateral, and let's say the market starts going against you, not only is your P and L decreasing because you're short, but you also don't have this inadvertent hedge that you do when your margin with Bitcoin, because if you are in a short and then starts going against you, well, yeah, your P and L is going against you, but your collateral is increasing in And the reasoning is because if you're short with Bitcoin as collateral, And let's say the market starts going against you, not only is your P and L decreasing because you're short, but you also don't have this inadvertent hedge that you do when your margin with Bitcoin. Because if you are in a short and then starts going against YOULL, yeah, your P and L is going against you, but your collateral is increasing in value. So when you see a larger portion of the market being collateralized with stables or USD versus crypto, that puts us in a more healthy state. It means that a, we're less likely to have this convexity to the downside, and b, shorts are more likely to be squeezed. And so currently, the percentage of total futures open interest that's margin with crypto is down from, like, seventy percent in April Now it's down to, like, I think the mid forties still, and maybe you could correct me if I'm wrong, something like that. But with almost almost half of what it was earlier this year. And so to also touch on what you've mentioned a second ago, on the short term time frames, price is very much driven by a, do derivatives, and then b, price levels. So if I'm analyzing the market and I I don't I don't day trade, then that billing doesn't either. But when we're kind of trying to understand what's going on in the market, because we both have, like, market intelligence newsletters, and we kinda need to understand, like, what's going on. Yeah. What you can look for is these dislocations between the derivatives market and price, and then as well as you can look at order books or another thing. And then just straight up price and then just straight up price YOULL. Some people, you know, live and die by just looking at price levels and they they just look at price action. Where funding really comes into play is as Dylan mentioned, it's it's it's the peg for Perps to the spot index price, which is essentially just this weighted average of all the major spot changes weighted by their volume. And so whenever funding is positive, what it means is that the perpetual contract is trading above the average spot price. And so YOULL, what that means is that per traders are more aggressive relative spot. They can also mean that the the spot price is trading this spot is selling off stronger than Perfs. And then conversely, like, if you have negative funding, it can mean a, that spot is buying while while perps are shorting, but can also mean, let's say YOULL this big leverage cascade, right, and and you get a bunch of lawns that are liquidated. Well, by definition, that's gonna drive the per price lower than the spot price. So there's a bit of nuance there, but generally, whenever you have prolonged high funding, that means that trade traders have been greedy for for a while in the market. Where this is really where this really has YOULL and where this is really actionable because we had high funding earlier this year for months for, like, two or three months. Yeah. And we had to get we had to get reset, like, one time. Everyone's like, oh, there's a new paradigm funding can just be positive for Emma. Obviously, that wasn't the case. When you look on the kind of the intraday time frames, where this really is actionable is when there's a dislocation between the direction of funding and the direction of price. So an example would be if you start to see this actually happened and not to show myself, but I posted about this like when we came off of the summer lows, remember we had this really big short squeeze and price drove up to, like, forty eight k on binance. Yeah. It came down. Yeah. It drove up at I think it was, like, the the first week of August or something like this. What happened was is price was grinding up. Meanwhile, you had funding coming driving down. So essentially, what that was saying is that this spot market was buying and Perfs were so used to fading every single rally. They were breaking in money, fading every rally for the last three months. They're like, okay. This is like the last three fake out rallies that we've had. And so they were just fading it. They got squeezed. That's one way that it can have signaled the other way would be the the complete opposite. So instead if you see funding increasing, while price is decreasing. So what that means is that traders are essentially leveraged long in the dip. And so if you're seeing price continue to grind down while while the perpetual swap funding is is increasing, That means that essentially the spot market is driving price down and per traders are are leveraged longing the dip. So whenever you see these dislocations, that's when you tend to see these things get resolved in the direction of price. And then you can also look at that with a bit more granularity in terms of specific exchanges. So, like, a kind of rule of thumb is, like, whenever Bibbit is doing something that generally gets faded, is Bibbit is, like, a primarily, like, retail driven exchange. So one I mean, one example with going back to that short squeeze from the end of summer, you saw Bibbit was fading the rally really aggressively. Like, I I forget it was, like, seventy or eighty percent negative seventy or eighty percent APR. And then meanwhile, you have, like, FDX and Derivat, which tends to be where smarter capital is. They had positive had positive funding. So you can you can look at these dislocations as well to kinda get a good picture on on what's perhaps gonna occur. And then and then last thing would just be going back to what we touched on with the convexity or or the more the higher likelihood of stable coin USD contracts being squeezed, you can look at or or the contracts that are being opened coin or or stable margin. So, know, ideal scenario for the bears would be prices grinding down. And and meanwhile, you have a bunch of coin margin open interest and, you know, funding is moving. That's like, okay. You have all these perpetrators that are leveraged long in the dip. Trying to catch a falling knife, meanwhile, the spot market is just fading this. And this is what happened also on that move down in May. I remember when we moved out, when we had massive flush to thirty k, the night before I'm not saying I called the initial move down, but I remember the night before we had that last kind of capitulation leg down to to thirty k. I remember looking at my phone and seeing that funding was rising, and I was like, oh, god. Like, this is not good because price was just absolutely nuking and everyone was trying to catch falling nice. And usually the way it goes is that YOULL have to see these guys completely get wiped out YOULL know, these traders completely give up on trying to leverage long to dip. And then, you know, usually you start to see funding stay negative, and that's when price then begins to kind of grind or consolidate out of that capitulation area. As you guys are describing this, I'm sure most people who are hearing this are saying, this sounds really complicated. This sounds really involved. But as I'm listening to this, it sounds like And Will, you talked about this a little bit that what happened on the upside is almost identical on the downside as far as how the leverage is kind of forcing the the the price action to kind of stay a force buyers sellers essentially. That's right. That's right. So when you think about this leverage, all these leveraged markets that now exist The Perps, I don't think there's I still don't think they're available here in the US, but everywhere else in the world they are. When we think about that, is this causing the price to become more volatile? Or is it causing the price to normalize to whatever the actual price action was gonna be in the first place with with less volatility. How do you guys see that taking place? I I think it's option it's option one. I mean, it's it's basically, some whipsaw and Bitcoin have some sort of collective intrinsic value, maybe intrinsic value. So it has some sort of subjective value for everyone around the world. And that value is is basically going up for like, it has been going up in a straight line. More and more people come to understand Bitcoin and subjectively value it. But, you know, underneath the surface, you have you have all the, you know, the volatility enhancing things like leverage, coin margin, all the stuff that we'll dug into. It's essentially it's just it's just lay lay layering on directional bets, which causes the market just that is whipsaw around. And so I think the most exciting thing about this is that and it's a thing, Preston, that I've I've seen especially the last month, just nail into, is, like, done with centrally planned, you know, cost of capital academics that are just clueless bureaucrats that have some sort of power in this incumbent system. These twentieth century institutions, so dumb is completely incompetent. And so here we just kind of have this open source decentralized software that's just take talk, next block, Either completely just Or unemotional way. Yeah. Unemotional way. Yeah. It's mechanical sometime in the next 10 minutes, there's going to be a block and there's going to be property ownership, transferred on an immutable mechanical. Sometime in the next time it's gonna be a block and there's gonna be property ownership transferred on an immutable ledger. And and so you can do all this stuff on top of it, the PTC USD price. I think it's gonna be increasingly volatile YOULL over the next decade as a as a result of this incumbent system basically eating itself as it continues to just kinda delever and then have to get get bailed out and popped up with more stimulus. But yeah. I mean, Bitcoin's just kinda doing its own thing and then YOULL don't really have to care about all all these bureaucrats and and everyone else if if you just, you know, passively allocating to Bitcoin, sits kind of solving for itself. The cost of capital now with these Bitcoin derivatives? Yes, it's volatile. It's variable. The APR and the cost of capital in Bitcoin markets but it's free. I mean, if you want a long Bitcoin, if you want to get stable coin liquidity in in Bitcoin markets and crypto markets, do you want to borrow against your Bitcoin? Well, you can do that sometimes can do that at twenty percent. Sometimes you can do that at five percent, but the cost of capital is not set by the Fed funds rate anymore. And that's the most exciting thing and increasingly more and more people are realizing that. Let's Just take a quick break and hear from today's take a quick break and hear from today's sponsors. 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But, you know, I I think the long liquidations are kind of a beautiful thing because it kind of reinforces this concept that we now have in this in this kind of free and open market that YOULL have personal responsibility. Amen. If you may if you make this decision to leverage and and take a directional bet and think that you have some kind of edge in the market and then you can outsmart the market. Well, you're gonna be held accountable for that no matter which way that resolves. I think that's a beautiful thing. And so, like, you have all the stuff going on in the derivatives market, and and the way I kind of view it is, like, the Ray Dalio, like, long term debt cycle thing. You know, like, the YOULL has where it's you have this long term kinda thing that that kinda moves up into the right, it fluctuates, but then you have these short term cycles that kinda move around the major long term thing. And so, like, I think, first of all, you have this real hardcore base of Hoggles that are in this asset. You can see that non chain data. If you look at the entities with point one to one BTC, their holdings are literally up into the right no matter what. They uptake a little more in the bull markets, but even in the Bayard, they don't even budge. They just go up until the right. And you take, like, the portion of supply held by entities with less than ten BTC, over time, that's only increasing. And so you have this that's talking about a whole another discussion about apply distribution, and we can talk later about that's a bunch of nonsense about people saying, like, a certain, you know, a bunch of Bitcoin is held by small portion of YOULL. But over time, you have this hardcore base of people that are just stacking Bitcoin no matter what. And so have that paired with kind of the the long and short term holder behavior that we talked about. And that's kind of Bitcoin's longer term cyclical behavior that you kind of see as kind of outlines the behavior of Bitcoin's price action. And then meanwhile, on the on the short term time frames, you have all these eights that are coming in on leverage and driving the pricing. right? It's like, we're on this rocket ship and then you have these apes coming in and we sh we have to shake off the apes through the It's like, we're on this rack shipped. And then you have these apes coming in. We we have to shake off the apes through the liquidations. And so that that's kind of like the mental framework I have for it is that At the end of the day, adoption for Bitcoin is only increasing. And that's only going up into the and that's only going up into the ring. And we have fluctuations between some of the behaviors we touched on earlier And then on the very short term time frames, we have all the stuff that's generally driven by the derivatives behavior. And so for long term none of the stuff matters. YOULL just keep buying and that goes to the the very broad cyclical behavior that we talk about Bitcoin. Is is that adoption is up into the right. All these different metrics we talk about, even just like the number of entities on the network, that all this stuff is up into the right. But when you when you look Zoom in on these shorter term time frames. That, you know, that's that's what's really driving a lot of this stuff. I've seen couple of these kinda like poster or memes on Twitter where it's it's showing like, this is Bitcoin, you know, zoomed in and it's, like, really choppy. This is Bitcoin zoomed in a year out. It's, like, kinda kind of cyclical. And then this is Bitcoin on a fifty year time horizon. Right? And then you just see, like, this FS curve. And so for the long term holder, guys, you know, this stuff might be interesting. You might wanna understand what's driving the price action. But at the end of the day, none of it really matters because adoption for Bitcoin is only increasing and you can see that as well in the data. I love that point. And the point about the number of users is just up and to the right is the part that I think is just insanely important. For people that are maybe looking at this from the outside and just saying, I don't get it. I don't understand why anybody would pay attention to this. It's just imaginary magic money. And that's the thing that I think is just YOULL just can't unsee what that chart looks like. Yeah. Well, I I love those points. I'm curious what you guys think about the ETF, specifically the spot ETF that was just declined by the SEC. I don't really think the name was surprised by that, and you kind of saw that through the market on kind of inter day reaction to it, where the spot ETF rejection actually kind of marked the inter day bottom on that day. Because I think I don't think anyone was really surprised or any sophisticated investors at least were surprised by seeing that get rejected. I think that's something that most of the market probably isn't expecting to see for at least another year out or think that's something that most of the market probably isn't expecting to see for at least another year out or so. So yeah. I mean, I'm not really surprised to to see that Obviously, we would love to have a a spot pick on ETF, and I think you'll see massive inflows to it whenever it is approved. But, you know, I don't I don't think it it was surprising to to see that get declined. I think Barry's definitely up to something. I think Barry's watching these ETF rejections are kinda taking notes and kinda tweaking his his approach for converting grayscale to an ETF, but I guess I guess time will tell with that. Hey, I I noticed your frog meme of berry the other night to see a week. I almost shot my drink out of my nose when I saw that. I mean, I guess the question is, why are they waiting? You know, like, what are they protecting they're not protecting anyone from anything. I guess, I mean, guess guess Gary Gatson wants you to hold your own keys is what I gather. You could make the argument that for the people that don't maybe have access to buying spot, they're actually doing a disservice and they're actually adding, cause they're forcing them into a product into an ETF product that is futures based and doesn't have good tracking error or has very bad tracking You make the argument that for the people that don't maybe have access to buying spot. They're actually doing a disservice and they're actually adding because they're forcing them into a product, into an ETF product that is futures based and doesn't have good tracking air or has very bad tracking air. I think the future's ETF is a terrible product for anyone who's looking tariffs in bitcoin long term. Because for anybody who doesn't who isn't really familiar with futures, and futures isn't my expertise, but essentially, what happens is is every time every time it gets the month, then they have to roll the contract to the next And so over time, whenever the Future's curve isn't contango. What's happening is they're selling the current one and and buying the next month's contract. And so you're basically taking the hit on the difference between those every time they roll it over each month. And so the the only people that are really benefiting for that are the people that are coming in in this kind of market neutral way in buying spot, selling the future, and they can kinda capture the difference between the two because the the curve is is getting bit out into contango. Preston, I know you love that word Cascango. I I think that's going to apply much later in the cycle, but I think it's going to be the thing that ultimately just takes the thing to an unprecedented that's gonna apply much later in the cycle, but I think it's gonna be the thing that ultimately just takes the thing to an unprecedented level and never. Is there any merit to the US holding off on it because they just know how much capital is gonna flow in and they know the state of like, I mean, maybe that's just little too, like, out there in terms of No. I don't think that's dude, I don't think that's out there at all. But I don't think you're ever gonna hear anybody, especially from the SEC, come out and say something like that. So, no, I don't think that's out there at all, that all, Dylan. I mean, I I guess you're saying the world where pressing you've you've dragged on the the bond market more than anyone. But, you know, how do you keep the thing glued together if they, you know, on the same rails have, you know, the escape valve. And for a while, I mean, the escape valve's been out there for a decade, but, you know, there there has been lot of a lot of trouble to kind of access it, and it hasn't it's been more of niche retail thing. And now just, like, recently over the last year or two, has become more institutionalized and accepted But, I mean, for for, you know, the the trillion dollar, ten trillion dollar pools of capital, they still can't buy it. And, you know, like, as a as a retail individual, like selfishly, great. You know? Like but yeah. I mean, there is definitely some some I think there's it's it's more than just investor protection if if Gary Gensler, whoever else is parodying that. So I actually have question for the two of you. So I'm trying to think of, in the next five or ten years, do you see Bitcoin's volatility increase? Or decrease. And and so I I tend to think that it decreases because you have just this new kind of market participant here that they're not gonna chase the price up. I think you saw that over summer. That's kinda why you had this, like, prolonged kind of rounded bottom where they had these bids set at the bottom of, you know, thirty, thirty two k, and they didn't chase the price up to the top of the range. They just slowly waited for price, come back down, and hit those bids. And you saw that wheel accumulation on chain. And then conversely earlier this year, we had these patient sellers that kind of form this rounded distribution top. And and so moving forward, I think there's a there's really strong case that we see decrease volatility. But conversely, there's this chart, and and and Dylan, you posted it couple months ago and and Preston, our membership, you retweeted it, and it's the German mark measured in gold, the chart that we've all seen that, you know, it just absolutely goes parabolic, but you're actually looking at the volatility that occurred during that that period time. And it's it's really aggressive. You saw these massive 50 to 80% whipsaw moves, which is essentially just the collapse of the currency, getting reflected in the pricing of that asset, which in that case was You saw these massive fifty to eighty percent whipsaw moves which is essentially just the collapse of the currency getting reflected in the pricing of that asset, which in that case was gold. I actually tweeted this out to to Sailor. Sailor said that he didn't see it playing out that way. But why do you think he said that? I asked that question for a reason, so love Michael. Michael has a stupidly massive position. Not stupid in the sense of, like, he's being I think he's being extremely smart. But his size of his position is just astronomical. Right? If you had a position that size, what would you be publicly saying knowing that every politician in the United States or wherever is listening to. Are you gonna go say, yeah, you know what? I think this could bring down the whole financial system. I think this could turn into a a Weimar Germany chart. I know I wouldn't be saying that if I was him. Michael keeps talking about the dollar and and I I completely agree with Preston. He's saying Bitcoin is not an attack on the dollar while literally conducting the largest speculative attack on the dollar in bitcoin terms. Maybe think we've ever seen publicly, and it's completely the right decision to do it. Yeah. He's calling me the capital markets bluff. But I think in terms of volatility, in purchasing power terms, Bitcoin's volatility is gonna continue to decrease. It's gonna appreciate the upside by orders of magnitude. But in terms of the day to day, week to week month to month volatility and purchasing power terms, think in two thousand and thirty, it's essentially maybe two thousand and thirty five, whatever the timeline is. It's essentially gonna be appreciating by a few percentage points a year based on human productivity gains. But in terms of BTZ USD volatility, for the next decade, I think you're basically gonna see this everything YOULL, continue to unwind and re kind of hyperinflate, you know, on the asset side of things and and now it's happening in this broad money supply, it's hitting the CPI gauge now. You're gonna see that volatility expressed as Bitcoin goes from a sixty thousand dollar asset. It's gonna go to five hundred thousand in a million and eventually that volatility in the Bitcoin derivatives market, when the Bitcoin derivative longs it liquidated, the equity market index will draw down in tandem because it's it's basically gonna be the most pure form of the fiat everything bubble that we've ever seen. And I think we're still in the price. Just a remote of Bitcoin where the monetization is still, you know, it's still a very small percentage of the population and the global capital market assets. But as it increasingly consumes all of it, it's like, you know, basically the fiat, the bitcoin price will be, like, just measure of how much the Fed and other central banks are gonna print. Right? And, you know, they're gonna continue printing for as long as they can, maybe in in fits and starts. But think the volatility will only increase in that sets. I saw this article earlier today that was sent to me and it was I think it was saying, like, ECB was basically, like, inadvertently blaming crypto for some of the inflation or something like that. And, you know, I was just thinking, like, this is just the start of these kind of narratives as we start to see Bitcoin's monetization really accelerate, you're gonna start to see these people that are, you know, hanging on to the ship as it's sinking. They're gonna come out and say everything under the sun including, oh, well, these Bitcoin guys, they're the reason why the system is collapsing. Right? Yeah. And that that that's gonna be kind of think that the last narrative that we see before the demise of the dollar. So as far as volatility going up in the next 5II really think the time frame here of this thing really starting to just just literally go to the moon is probably five years. People that are saying that it's gonna take fifteen or twenty years. I'm just like, you obviously don't understand where the bond market is today. And I find that the timeline think is way more based off of the macro backdrop than necessarily the having cycle of bitcoin. I think that that's just keeping it kind of plugging away, and it's it's just every time that having event happens, what it's really doing is it's locking in more trust. It's locking in more people that trust it more than the old system. But where the old system looking at Bitcoin versus the older system where that's gonna really kinda just totally break down is when the old system gets so mutilated that nobody wants to participate in it because they just know it's just a total fantasy land farce manipulated to the nth degree type system. And I think you're already kinda getting there right now. When I look at like the bond yield curve in Europe, dude, it's done. It's toast. The whole thing, all durations, it's just totally toast. And now you're watching, like, the thirty year to, like, their fifteen or ten year is starting to penetrate the resistance line that you've had for literally decades. Yeah, I mean, that's insane. It's totally insane. You're not quite there in the US. With the government issued debt here in the US. But when I kind of model out where I think those yields are moving, Like, this coming summer, the summer of twenty two into the fall of twenty two is where I'm seeing the US bond yield curve is gonna get quite interesting. So five years from now I mean, and and where do they go from there? They they can't go anywhere from there. Like, the free and open markets already selling off in the bond market on those longer durations. It's selling off like crazy and the Fed hasn't even moved, they're still stuck at zero. And so now the markets totally wag in their tail, And it used to always be the exact opposite where they would before they'd have their forward guidance, they'd do it for months and months, half a year, whatever, then they'd finally move it a quarter base or twenty five basis points and everything would kind of gyrate around and then they'd wait for the next big forward guidance, but this is way different. This is way different. The supply chains are jacked. I kinda suspect that as these things really kinda get into the final phase where they really start to die, it's in a supply because all those price signals that cost the capital like you'd mentioned will. It's just totally mutilated. It's toast. And so these companies that have like all these contracts for commodities that in a lot of cases are firm fixed price terms that are three year contracts for fifty million dollars worth of this part. Hundred million dollars worth of that part. Right? And then they have to assemble it and then they have to and you keep going up that supply any little disruption downstream. Rex havoc on everything that has that part that opens up as you go further up the supply chain. I mean, we're there. We're seeing it. You're seeing all the reports now that, like, nobody expects this thing to remedy itself in twenty two. And I expect it to actually and I don't sound like pessimist here or like an alarmist, but like I expect this to get way worse. I think it's gonna get way worse. The craziest thing is seeing, and I agree, Preston, the craziest thing is seeing white house officials or, you know, some craziest thing is seeing and and I agree president. The craziest thing is seeing White House officials or, you know, some senators and they'll say, this new YOULL, this new two trillion dollars stimulus impact. YOULL fix the the supply chain issues, which were caused by panzanism to, hey, we're gonna go stimulate and throw a bunch of new money at goods to stimulate the economy quote unquote, and it's like the solution to increasing the money supply by thirty percent and seeing all of the crazy inflation is to print more money. And it feels like I'm it feels crazy to me. Yeah. Yeah. Yeah. It feels like everyone's still plugged in. And I'm just like, how do you measure I'm just like, how do you measure inflation? And it's like, how is no one else seeing this? mean, and increasingly people are but there's still, you know, the Wall Street guys that have been in the system for twenty, thirty years. I mean, there's a lot of people that have an irrational amount of trust and then come in just, you know, incumbent institutions, I guess, I would say. And thank God, you know, that we have this this thing that doesn't require any trust, and we can verify ourselves and run around nodes and hold around keys and move anywhere in the world with with all our wealth in our head. I mean, the time like this without Bitcoin, I would be I'll be quite pessimistic if I can't lie. Hey. All I have to say is, you know, our pushing power is increasing, though. It is. I I had a buddy sent me a message like, Hey, I'm talking with this hardcore value had a buddy sent me a message, like, hey, I'm talking with this hardcore value investor. Like, what would you ask Like, what would you ask him? And I said, oh, that's easy. I said, in the world is he doing an an IRR calculation when we just had a CPI print of six point two percent? Because any stock I don't care what it is that you pull up. I mean, you're getting IRRs of three percent, two percent. Right? And you just have a CPI print of six point two, and and it doesn't look like any of that's gonna change. And so, like, my question to these people doing these equity valuations is like, okay. So, what do you do when you got a negative four hundred basis point spread between which you are finding the value of what it's trading for on the open market versus just inflation alone. Not even talking about operational risk or anything else that's associated with it's crazy. Like, I just don't know how people can walk around and have their blinders on that strong and not start asking a whole lot questions. Hey, is there a metric that you two disagree on? Because know you guys talk all the time. Yeah. I don't I don't really think there's too much that we disagree on just because we're texting pretty much every day. So we we're pretty much always bouncing ideas off each other and if there is anything like that, we pretty much kinda, like, you know, flatten out that kink whenever whenever it occurs. So, yeah, I I don't really think there's anything, to be honest. Alright. So how about this? What is the most misunderstood aspect of on chain analysis that you think the mainstream Bitcoin Twitter folks don't understand or misunderstand. I know what my answer is, I wanna hear what you guys got. I think it's the fact that it should not be used on the very short term time frames. I think whenever we have a short term drawdown, I usually get people mentioning Oh, but that supply shock, though. What happened to that? And it's it's like, okay. When we're talking about when we're talking about supply shock, We're talking about the amount of available supplied to be bought is decreasing, and that doesn't necessarily mean that we have the other side of the equation, which is the demand. And so the way I kind of think of this is that we have the fuel kind of laid out via the supply side. And we had this through the end of the summer but you also have this the other side of the equation, which is the demand that has to step in. And so oftentimes, you know, there there can be these currencies or or divertances between what happens with the price and what's going on with the supply dynamics. One one example would be over the summer YOULL had through a metric that I created with Willy Wu called illiquid supply shock, which compares the highly liquid in liquid entities. So these are in layman's terms just entities that sell a lot of the coins that they take in. And comparing that to the illiquid entities. So people that take in and hold at least seventy five percent of the coins they take in. So they take in four coins, they hold at least three out of four. So you had this really strong divergence between the two. And seeing that, you know, it didn't necessarily mean that we were gonna see price appreciation within days. Right? It just meant that in a broader sense over the next couple months, as demand steps in, as long as you don't have more supply becoming liquid, then eventually you're going to see marginal bidder having to bid the price up because there's not as much available circulating supply. Like, for example, like, this metric, it it seems kinda counterintuitive, but when you see supply becoming illiquid, it doesn't always translate to price action immediately. But when you see supply becoming liquid, it it does. Because if you just think from first principles, what that means is that supply that was previously held by entities who don't sell are now moving their coins usually onto exchanges to be sold versus if you're seeing supply get locked up, that doesn't necessarily mean that the marginal bidder is stepping in aggressively to bid the price up. So, I mean, that's just one example, but I I think in in general, OnChain analytics we have some shorter term metrics that we look at. But generally, when I think of what's the sweet spot for this type of analysis, it's really kind of three to six months out. That's where I think we kinda have the the best hit rate. And when you back test some of these things, for example, like the liquid supply shock ratio I mentioned, since twenty eighteen that has about a ninety one percent correlation with between price on kind of a week to week interval. So like these things don't always translate immediately to price because as we mentioned, I look at it as on chain is kind of this underlying broader kind of behavioral cycle where you have the derivative stuff that's really So, like, these things don't always translate immediately to price because as we mentioned, I look at it as on chain is kind of this underlying broader kind of behavioral YOULL. Where you have the derivative stuff that's really key and and also we talk about, like, price levels and and watching, like, the order books. All these kinds of things really impact the price on the very short term time frame. So that'd be my answer. I would agree on that. I think I think one of the things that that's YOULL one that wants to accumulate more Bitcoin. As I I would, you know, I would consider myself basically to be a Bitcoin maximalist. And I prefer honestly like monetary rationalist, maybe in the sense of like monetary I prefer honestly, like, monetary rationalist maybe in the sense like, monetary maximalism in the sense that I think Ben, you know, money is winner take all dynamic. And Bitcoin has already won in the sense, you know, from a game theoretic perspective. But I think the the fascinating thing is on chain is I'm looking to increase my stack as much as as possible. And so there's times in the, you know, in the Bitcoin kind of cycle where, like, at the top and say, twenty seventeen or twenty eighteen. There could still be capital sliding, like, into the network to buy Bitcoin, allocate to Bitcoin for price to be drawn down a lot. Where at the same time YOULL have price bidding up to insane levels going parabolic with, you know, the same amount of capital flowing it. And it's just because of the on chain what on chain quantifies is the other side of the equation like Will touched on is is the supply and and what it's moving. The characterization of a Bitcoin bull market or a Flexible one is that, you know, there's this huge wave of demand crashing into entirely, like, pinhole of available supply. And so it's, like, you know, like, the movie theaters on fire and everyone's trying to run out. And and I guess, maybe the movie theater on fires is Fiat, but everybody's trying to run into, you know, the available free float of Bitcoin. That's you know, basically ever decreasing, but it's variable in a sense, you know, one to three to six month time frame where you have, you know, old coins, maybe taking profits and and whatnot. So we can kinda see that from an on chain side of things, which makes it really fascinating. Well, and that both of you guys, I agree with you a hundred both of you guys, I agree with you a hundred percent. So My frustration when I'm on Twitter is the time frame that I operate is just these really long frames. Like, I'm looking for, like, in short term for me is a year. Yeah. So if I'm posting on something, then I'm saying, hey, this thing's about to, you know, Bitcoin's about to make a run. I'm saying, like, in the coming months. Right? I'm saying, like, the next three months later. Is that parabola? YOULL do that parabola with the upper and lower bands. I don't even know. It was, like, middle of summer, and you posted it back in twenty or whatever. Yeah. And you posted it in, like, linear terms. The the the parabola. Yeah. And it just looks so stupid. Yeah. It looks you look like the biggest, like, moon boy permeable And you're like, listen, this this happening mechanic, it's happening whether you like it or not quantitative tightening. Look at past YOULL, we're going up in in long terms. Dear's what I'm thinking. And for, like, per month on end, as Bitcoin was ripping past twenty thousand all time highs, it was it was it was on the money. Yeah. And he nailed it. And so, you know, that that sort of stuff, like, you know, in Bitcoin, like, it feels like people have already figured this out. It feels like, oh, having's coming. Everybody knows what's happening. What's gonna happen? But, like, no one knew what was gonna happen outside of, like, the Internet nerves that are that are paying attention to this thing. But I can't imagine what it's gonna be on the next having of it. But can you imagine, like, how many more I just look at how many people have kinda come into space just in the last two years that weren't they weren't nowhere to be found back in the twenty seventeen run. I mean, it's just Dell weren't diapers. No. I'm I'm serious. There's just so many people that have kinda come on in the last year and a half that have added so much tremendous value. And I just can't imagine how many more people they're gonna tell, how many more people are gonna show up when we get to the next having event. And assuming the bond market doesn't, like, literally just explode. Right? Like, just This thing is gaining steam and it goes back to Will's comment he had. Like, look at the user adoption rate. Up to the right, has been for a decade. Hasn't slowed down. Like, if you were looking at a company and you're looking at their top line or you're looking at, like, how many more users are signing up for quote unquote, Facebook or Twitter or whatever it was. Like, everybody be like, well, I've gotta own that. But for some reason because this thing's quote unquote competing with government money, Like, it's almost like, oh, well, yeah, III understand all those metrics, but there's just no way because they they're coming to it with the opinion that there's just no way. And they're like, that's their argument. Like, you might wanna pull on that thread of a touch more. I think like one other thing is, is like the barrier to entry to understand Bitcoin now is way lower than it was years think, like, one other thing is is like the barrier to entry to understand Bitcoin now is way lower than it was years ago. I mean, we have so many podcasts now. I can't I mean, Yeah. You can't even listen to my hand. Yeah. There's no there's no way that you kinda have to pick and choose now what you wanna listen to and Or about your own ego. That's what it's about. It's about your own ego. Oh my god. Amen to that. And it's amazing how Bitcoin will just it will expose that. So fast. I mean, I've I've seen it so many times over the just the last five, six years of just like these people come into the space and just like, if you have an ego, this thing just rips you apart, like instantly. And then They doubled down, they YOULL down. And they doubled down. And it's just like, there's too many people that know too much about like all the different arguments around This is like, There's too many people that know too much about, like, all the different arguments around this that is crazy. I got a couple questions on this one for you guys. Taproot with the impact on on chain data and analytics. I think I think there's a bit of a misconception here so like the the only way it really affects us is in the sense that and when I say us, it's it's the people actually doing the heuristics at Glass. I mean, Dell and they're really just reading charts. But it it affects the ability to identify the difference between a sig transaction and a normal transaction as well as a lightning transaction and regular transaction. So it doesn't actually affect our ability to analyze a lot of these metrics we're talking about. But in terms of distinguishing between those those multi and lightning transaction, it it does. And so for for some of the lightning data, it affects it a bit, but also, like, it's not gonna affect things when you're looking at, like, capacity or number of channels or number of nodes and all those consolidating metrics. Do you guys have do you guys have any channels that you've opened up? Yeah. Yeah. I got about fifty five learning channels. Oh, Oh, that's right, great. Yeah. Yeah. I think we we have a channel. Right? We have a channel. Like, we got three million stats. What am I, what am I asking here that I opened at my What am I asking here? Did I open it or did you open it? Or do no. No. We both opened one. Yeah. I think so. Yeah. We didn't. That a that's a whole another rabbit hole. And it's pretty fascinating to go down about the disintermediation of of not only, you know, central banking, but all these kind of rent seeking payment processors, like, Visa, AMEX, all that. So I had a chat with Pierre Richard just like probably two days ago. And I said Pierre, what if I open a channel with somebody else. And that person decides to close the channel three months later, but the Bitcoin that I used to open that channel was purchased let's just say to use an exaggeration. Let's say it was it was bitcoin that was purchased at ten dollars. Right? And the price now is sixty thousand dollars. And let's say opened the channel for a full Bitcoin with this other node. I don't even know who they are, but then they closed the channel. They forced closed the channel. I said, now I've got other other channels with other YOULL. So my balance, if if I was routing payments through my node and let's say all that that one full bitcoin was on my side, on my node side, But through routing transactions, it all got pushed to this other person and then they closed the channel. I said, what's my tax? Responsibility because the on chain layer one looks like I sold my one bitcoin to that person. Right? The air started laughing. He's like, did you have no tax burn? I said, hold on a second. Hold on a second. If somebody was doing analytics on layer one, And they saw when that one coin was purchased, and they saw that the the coin is now in the ownership of another address that I don't control. It looks like there was a sale where there would be fifty nine thousand eight hundred dollar gain for that transaction. Right? Even though my net balance on my note is still won Bitcoin because if it flow through my node and out to the other person, I still have AAAA bit point on my node. Right? But for, like, What are you implying, Preston? I think I'm no. And and I'm not trying to raise a a concern or, like, I'm not trying to raise something that I just I don't think anybody's considering, like, the ramifications of that as as maybe that we go into laws, restrictions to tax responsibilities like for people that are just running a node. Right? In in opening channels, but yet my net balance hasn't changed whatsoever. Now the when I'm looking at it from just like an intuitive standpoint, like, don't feel like I have any type of tax burden because my net balance hasn't changed at all. Right? But if you're using layer one transactions to make decisions as to whether you need to ping somebody for a payment for the capital gains, like, you can see where the confusion would arise. Yeah. I just Yeah. I don't think the current system in in terms of, like, the regulatory structure is set up for for this new system that we're heading into. I think there's a lot of discrepancies and we just need more Bitcoin friendly people and and, yeah, regulatory landscape. That's and I raise it more for, like, let's say, I I know there's there's senators and representatives that follow my accounts. I'm sure maybe they listen to some of the I'm sure maybe they listen to some of the shows. And I think this is a really important thing for people to think about when they hear that's one heck of a quandary to be in. It's like didn't sell anything. Like, I still you know, using the one bitcoin example. I still got the one Bitcoin on, on the node, but somebody else has the original one that I purchased from one at I still got the one bitcoin on on the node. But somebody else has the original one that I purchased from one at whenever. Right? And there's it might look like there's a capital gains, but there isn't. So Like, people who wanna come in and try to regulate this space aggressively and quickly are totally misunderstanding, like, how like important it is to not get that wrong. Because if you do get it wrong here, like there's gonna be other countries that get it very right, and they're not gonna be stifling. What what eventually you're gonna have to go back to anyway? They're just not gonna trip and fall in the process. Because back to, like, the the sovereign individual with the whole, like, regulatory arbitrage thing. That's exactly right. And the game theory kicks in and all that. Sorry to go off in that direction. It was interesting. I've never thought about that. It's an interesting thing that just kind of popped up this It's an interesting thing that just kinda popped up this week, and I was talking And Pierre, I mean, he's he is very involved in lightning development with Kraken. And, you know, I was just asking how I was like, hey. So how do you think about this? And It's just like Chris. Did you see the news that and I I'm ninety nine percent sure this was released that lightning or that that tether will be coming to lightning. Tether you have to be hold on. So what does explain So what does explain this? I don't understand what you mean. So there was a new Bitcoin company, I think, oh, got it. I've come ahead. I forget. It's John Carvaldo. Yeah. That famous, like, interview with Roger Verre. When are you Roger who's, like, flipping off the cameras? John, I'm gonna I'm gonna fumble this whole this whole company. So check it out. But the the tenant is CTO. Powell gosh. I'm I'm bad with names at the Clemente, but the guy that basically runs Tethr and Fit Fornex is, like, technical side of things. Been around the space for a while. They're basically I think they announced that they're gonna bring, you know, because Tethr, USDC, they're using all these different OnChain like Tethr USTC has Athyrium ERC twenty rails. It has tron TRX rails. Try sending a YOULL coin OnChain the Ethereum blockchain the other day. It cost him twenty five dollars, but that's a different that's a different topic. But basically, I think you're gonna see eventually, you're gonna see either it's gonna be some sort of synthetic, stable coin, USD value that's pegged. It is gonna be kind of like counterparties on both sides of this, almost like in a derivative type way. And they're gonna see dollar, you know, synthetic dollar settlement on on lightning rails. Because, again, like, Jack Mollers hammers his point home all the time. He's like, we YOULL basically free. I mean, it's not free. But we settled basically Free relative to everything Relative to everything else it is. Yeah. You know, Like Preston, if if if me and you were sending payments to each other every day, well, we can set up a public lighting channel, but we can set up a private lighting channel. Meaning, it's no one can see this. It's out of over tour, and we're just streaming value to each other. And we can do it a million times a second if we have that the bandwidth to do it, you know. So, I mean, something like, you know, whether it's Tethr or whether it's you know, another kind of stable or someone that comes down line and then settles synthetic dollars, euros, yen, whatever it is. It's all gonna come to lightning rails. And think disinter me in remediation of of kind of all that in a LeClair System where I send funds to go, you know, buy bitcoin on on coin base. If I wanna do that, it takes five days for me to to be able to withdraw that to coin because my bank transfer is slow. Like, that's That's all coming to an end. Oh, yeah. Faster than most can imagine. If you have an article on that, I would love to read it and share it for YOULL. If you can find one, we'll have that in the show notes. This is the this is the the hardest question I got for you guys. Will, were you expecting the rap video from me? Man, I I was I was dying when I saw that. You guys have no idea to check this out. You have no idea how hard I worked on that. That that's what I was gonna say, though. The real the real funny part of that. It's just when I was thinking, like, he must have put, like, forty five minutes or an hour into this video. Oh, it was more than that. It was -- Oh, wow. -- it was it was in everything. I think it was a Sunday night and YOULL had your post and I was just laughing. Right? And I was like, I can bang something out. And I was looking at the time and it was I don't know. It was, like, seven o'clock or something like it's, like, I don't have anything, like, rare night where I don't have anything on my plate to knock out. I was like, you know what? I'm just gonna have little fun tonight. Let me see what I can do here. And I think it was, like, eleven o'clock when I finished up. And I was, like, oh, here we go. And I just posted it and, like, I got no response from you. And I was like, how is he not responding to my And I was, like, How is he not responding to my rap video? Yeah. So I saw it the next morning. I was like, how did I not see this? And then and then people people started, you know, I I retweeted it and then people were like, oh my gosh. This this is hilarious. Like, I think I laugh for a good two or three minutes straight. And it was it it it was, like, the the editing was on point too. Like, the the the lyrics itself were were pretty funny, but just, like yeah. Just, like, edit it in the in the car and yeah. That's hilarious, man. I had so much fun. Guys, this has been so much fun for me. Will. I remember the first text message you sent the first time we chatted. The first article, you were like, hey, can you read this? And if you like it, retweet it? Like, It is just so exciting for me to see you too, add so much value to the space and get recognized for it. And then just take it to a whole new level. It is just so much fun to to be an observer of this and if there was any type of small part that I played like I'm just Wait a big part, Chris. I'm just thrilled to know. I'm thrilled to be part of it, and I just cannot even imagine. Where you you where YouTube will be when you're thirty, forty years old. Like, I just cannot imagine where you guys are gonna be. Thank you for making sure you have it on there. Oh, it's surreal. It's pretty surreal. Just like, I mean, we, we talked before, I think, you know, we were interacting with you like in February, March and like, yo, what was your just like I mean, we we talked before, I think, YOULL know, we were interacting with you, like, in February and March and, like, yo, what was your story? You know, kinda calling to film always. Like, yeah. Listen. This this guy Preston a lot. I was like, oh god. Same. So, you know, and it's pretty cool, you know, being here late twenty twenty one talking to you on the in on the infamous investors podcast. Yeah. But before before we got on here, me and Delom are chatting for, like, twenty minutes. We're just, like, This is nuts, man. I can't believe we're about to get on this podcast and press and this is so crazy. Like, well, we need to do it more often. You guys I mean, that your comments your knowledge. How in the hell do you have this knowledge of twenty? I can't even understand how you would have this knowledge of twenty, but We need to keep doing it. Thanks. We're legal to drink. We gotta get a drink. Hey, yeah. You know, I should've had a drink here tonight and just been, you know, showing off in front of too. Hey. Thank you so much, Preston. I really enjoyed this. This is this is amazing. It's a blast. We definitely need a blast. Did you guys go into Miami? Yeah. I'll be the same. There you go. We're gonna hang out in Miami. Are you twenty one in April? Yeah. I can't be. Doesn't matter. Alright, Thank you so much. Oh, I want you guys to be able to provide a hand off. Will, you're working on a podcast. You just interviewed plan b and Willy Woo. Tell people what you have going OnChain, and then Dylan, you you followed up. Thanks for the plug. Yeah. So I kinda had all the content stuff with Blackware through a little branch we call a Blackware intelligence. So we have a, a newsletter which I send out to about I think we just passed fifty three thousand subscribers. That's like a weekly kind of market overview based on on chain as well as we have some some big one related equity We just hired on Joe Burnett who is, like, IAI Capital on Twitter to do some some mining content as well. And then we have a podcast that I interview different people in the space every week. Preston, we gotta get you on there. Maybe some time I love next month. Awesome. Yeah. And and then as well, we do, like, weekly, like, kind of market overview in in video con in in video version as well. So, oh, feel free to check any of that stuff out if you're interested in in any market related stuff. And then I'm on Twitter at YOULL Clemente III dylan? Yeah. Hi. So I'm working with Bitcoin magazine, joined there in about March. Right now, I'm heading the the deep dive. So we we can also put out content bitcoin Clemente, YOULL know, legacy finance stuff, on chain derivative markets. We do that on a on a daily basis, and we have, you know, pre and and paid tiers. So we send out, like, you know, an email market update a week to just everybody. And we, you know, also kind of just, like, doing stuff with Bitcoin magazine, like, popping on spaces, podcasts, all that. I just recently joined kind of Bitcoin kind of a Bitcoin fund where we try to implement some of the stuff we talked about today. So started to work with them a little bit. But yeah. I mean, appreciate you having me on, I guess, you know, give me a follow on Twitter and my DM's which are, you know, kind of flooded. But I'll try to get back to you if, you know, to get back a little bit, you know, if you have any questions or whatnot. You know, reach out. But, you know, again, really appreciate you having a song, Chris, and this is a blast. Absolutely. Alright, guys. Until next time. If you guys enjoyed this conversation, be sure to follow the show on whatever podcast application you use. Just search for we study billionaires. The Bitcoin specific shows come out every Wednesday, and I'd love to have you as a regular listener. If you enjoyed the show or you LEARN0107 something new or you found it valuable, If you can leave a review, we would really appreciate that, and it's something that helps others find the interview in the search algorithm. So Anything you can do to help out with a review, we would just greatly appreciate. 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