So what has been the ramifications of this in terms of the institutional circles and Bitcoin being listed by JP Morgan?

I mean, if you follow what JP Morgan's been doing, rather what they've been saying or Jamie Dimon's been saying, I mean, they've been into blockchain tech since 2019, right? So they launched their own JP Morgan coin in-house as a kind of enterprise blockchain solution, I think back in 2019.

Then they launched it on base as a kind of public blockchain coin, right? now they they've they've launched it on ethereum mainnet but i mean they've been working on this whole story for the past uh seven years or so so like my general saying is don't listen to what they say watch what they do right and so i i mean you've just shown the these performance expectations and uh i think your headline was like even in a conservative kind of even with a conservative estimate, Bitcoin comes out on top, right? And that's the most important headline because we all, I think we all agree on the fact that it's very conservative because even the power law model implies like, I think close to 40% CAGR over the next 10 years, right? But my gut feel is they probably couldn't show this to institutional investors because they wouldn't believe them, right? Because that bar chart would be even more outrageous.

Not like, oh, Bitcoin comes out on top, comes way above all other assets.

And Bitcoin is this kind of elephant in this kind of performance room because, and that's what's been, what has actually enabled this kind of arbitrage of Bitcoin treasury companies.

Because they're arbitraging the traditional financial world, which was like single digit returns over the next 10 years against Bitcoin was like high double digit returns.

And so, yeah, but my hunch is they've adjusted this kind of estimate to the lower end, to the very low end.

Yeah,

What is really difficult to modi-- to, to, to, uh, to modelize is, uh, on one side the behavior-- the future behavior of Bitcoin, and on the other side, the future behavior of, uh, the discretionary part of the equation.

I just want to highlight an interesting kind of mismatch between a strategy's issuer.

I mean, it doesn't have like an issuance rating for Stretch, right, and all the individual issuances, but we have that issuer rating, right, of B minus by S&P 500.

If you assume this kind of issuer rating for Stretch and all the other issuance, is that I think there's still an interesting kind of mismatch between the dividend deal or the yield and general interest rate that they're paying to investors and their credit risk, right? And I, I've prepared a, a, an interesting chart that I've...

Uh, uh, it's a bit outdated.

It's like a month old, and we know yields have gone up since then.

But you, you can actually plot different securities based on yield and rating, right? And what you can see here, so Strategy's here, the, the green dot, STRC.

So, uh, speaking of, uh, of the Fed rate hike and, uh, the macro outlook, maybe you, you have some insights for us on, on that, on that front as well.

Can you give our audience a little bit of an understanding of why these yield rates matter and why we're seeing them hit these highs that we haven't seen since the early 2000s?

Yeah, very good question.

So starting with my personal big picture view on markets.

So, I mean, you could argue that fiscal policy is already easy, right? You've seen this bond buyback announcement by a percent, right? Doubling of bond buybacks.

You've seen the TGA announcement that they want to use $1 trillion in the treasury general account to buy back bonds, right? Trump wants to hand out stimulus checks to every American after the midterms, maybe, right? And so on.

But you could definitely argue, okay, fiscal policy is easy.

At the same time, monetary policy is on a collision course with markets.

What are we in for?

yeah with that let's welcome in the man himself andre dragos head of european research at bitwise thanks for joining us andre um we're a big fan of your research we cite you all the time on this show so happy you're here but but let's start with that latest one your rule of thumb says 80 basis points in 20 trading days means trouble for stocks the tenure has jumped about 40 basis points this month alone so how close are we to your danger zone

I mean, the key question is, of course, when will the Fed pivot? Because I think that's the ultimate domino to fall for Bitcoin to enter a genuine and sustainable bull market.

Because if you look at fiscal policy, fiscal policy has already eased.

If you look... at percent bond buyback doubling, the TGA announcement, the stimulus check announcement.

You could argue fiscal policy is already easy or the expectations are already easy.

But as far as monetary policy is concerned, the Fed, but including other major central banks, they're still on a collision course with markets, right? And I think the moment the Fed and other major central banks may halt hiking rates or even pivot, I think then it's all systems go for the bull market.

I think Bitcoin already started sniffing this out with the percent buyback announcement.

So how much does today's market look like that era and how reliable are those data points for investors today?

[chuckles]

Um, but I think, um...

I just, uh, I just made a, an interesting analysis, um, because the key question is wh- when does essentially monetary policy turn dovish again? And, and I think some kind of accident in the bond market, some kind of bond market capitulation could be that kind of catalyst, right? But I think, um, until that happens, you need to see some kind of contagion to the equity market, because we all know the moment the equity market, uh, becomes wobbly, right, and you see corrections and even, uh, bear markets in the equity market, there's like a higher chance for a recession because of wealth effect, and most of the spending in US essentially depends, even consumer spending, uh, depends on, on the wealth effect and the stock market ultimately, right? And so, uh...

And I actually d- dug into this, was like a more, a more kind of spontaneous analysis yesterday.

I asked myself, "Okay, what kind of a yield spike is actually necessary to create a 10% plus correction in the SV 500?" And it's, it's, uh...

So I, I ran through different combinations of both a change in the US 10-year yield historically and, um, and the speed, right? And what kind of timeframe this actually happens.

And it turns out a, a kind of, um, risk signal is when the US 10-year yield rises by approximately eight... 80 basis points in the 20-day trading period.

But if, if, if someone maybe on your team, Andre or you or Max, if you wanna go first and kind of talk a little about how your guys' approach works, what, what are you studying, a- and give us a, a kind of a picture with that.

Uh, I'm very curious to get one of the best minds in the game's thoughts on why we finally surged past $85,000 and, uh, what the main reason was for this.

this.I mean, um, I think it was clearly spot driven, which is a good sign.

You want to see spot demand driving prices higher.

Usually it's, it's, uh, I'd say it's better than a kind of derivatives driven rally.

But of course, um, uh, th- these kinds of spikes to the upside, they tend to be amplified by of, uh, short liquidations in futures markets and so on.

And also, uh, uh, option gamma hedging, right? So g- uh, dealers buy more options, right, to hedge their gamma exposure.

And so that has also driven prices higher.

Did it come out the blue for you? Um, you guys are, Bitwise are so dialed in, I would imagine that maybe there were some sort of indicators that were suggesting something like this might happen.

Is that something similar to what you're thinking? Or where do you think we are at? Is it actually happening? Might it actually be happening? Or can they kick this can even further down the road?

I think what's happening right now, so going back to China just a little bit, I think what is happening right now with these overcapacities is they export a lot of it, right? And that's why very cheap electric vehicles and so on end up in Europe, right? That's why we had to impose tariffs.

That's why the Americans had to increase their tariffs, right? It's leading to this kind of...

Yeah, overcapacity in China, but it has to go somewhere, right? And they decided to export a little bit.

And so it's somewhat deflationary for our markets, right? Which is good, but at the same time, it's crushing our own domestic production and so on, right? And that's why you get these kind of geopolitical tensions, right? From this overextension of credit in China, right? Essentially, right? And populist rise and so on.

But I think what's happening in the US right now, I mean, I think the elephant in the room is, of course, fiscal debt.

They've just crossed $40 trillion.

At least that's my understanding of what actual credit should be.

in the overall market sort of conditions, and it's, it's really hard to make sense of that.

Yeah.

So I, I need a bit more time to elaborate, but I, I, I think it's definitely worth it.

So, um, so in order to reconcile these kinds of divergences, I think it's ab- it's about leads and lags.

So I definitely think that Bitcoin's this kind of canary in the coal mine, right, uh, that anticipates, uh, tightening financial conditions and also like easing financial conditions in advance, right? So that means in this case, it's leading.

That means, so this drawdown in Bitcoin is actually signaling, oh, global money supply will roll over.

It's not leading.

Mm.

How have you seen the last 24 hours, and how has that impacted the crypto markets in particular?

I mean, the good news is that, uh, Bitcoin and other major crypto assets have remained relatively resilient, right, despite this kind of increased volatility.

And, um, I do think Bitcoin will, and, uh, other major crypto assets will continue to consolidate because the Fed still has this tightening bias despite the fact that they didn't, uh, raise rates, right, this time.

But I do th- I do expect them to raise rates in S- September because, um, uh, if you look at, for instance, three-month T-bill yields, they're already more than 25 basis points away from the midpoint target rate.

And if you look across the whole Treasury, uh, yield curve, right, you've seen, uh, s- substantial increases at the low end, especially in 30-year yield to, to essentially highest levels since 27... almost 20 years, right? And so, yeah, I think the bond market's already pricing in anticipating rate hikes, right? And I think, um, the most important bit of that, uh, FMC meeting wasn't the press conference by Wash itself, but the fine print, right? If you look at the number of dissents, and you just mentioned it, right, uh, was among the highest in two decades, I think.

And so I think, uh, below the surface there is pressure, upside pressure building for more rate hikes, uh, within the FOMC.

And so I think, um, it speaks volumes in terms of this kind of tightening bias, and as long as this tightening bias remains unresolved, right, I think Bitcoin will continue to consolidate.

... what are your general thoughts now on, on the price of Bitcoin, where it's been trading? Do you think there is potentially more deeper downside, uh, before we kind of move on from the depths of this bear market?

I think, um, you know, seeing Bitcoin dip below the $60,000 mark and now back up over 60,000, uh, maybe you wanna break it, break it down for us and tell us what you think has been, uh, driving this sort of volatility and, uh, this rebound up over $60,000.

Reason for, for this downside is, um, the volatility in TradFi, right? In traditional financial markets.

Um, I think there are increasing worries about the AI bubble, right? And it is, it is a bubble, right? If you look at valuations, uh, across, uh, SAMIs, but like the stock market in general, it's at either at dotcom levels or even higher, right? Record highs.

And, um, record valuation in itself, they're not like the necessary conditions for, for a crash, uh, or the sufficient condition for a crash, but definitely the necessary condition.

But I think what's the sufficient condition is essentially tightening monetary policy, right? And I think since, uh, Fed's de-debut as the, as the new Fed chair, uh, Warsh's debut as the new Fed chair, I think that's increasing...

There are more question marks around the path of, uh, US monetary policy, and it looks like he's surprisingly hawkish, right? If he's committed to bringing down inflation back to 2%, core inflation back to 2%, I think that could create more tightening financial conditions down the road.

And this, this is definitely headwind for, for the traditional stock market and with, like, high valuations, but also for Bitcoin.

How are you seeing that play out in the sort of, um, you know, in the context of over $4 billion in ETF outflows over the past kind of six weeks?

Why don't we

do a medium version if that's possible? Yes, of course.

So let's talk about my private experience first.

So private experience essentially since 2014.

And first institutional experience actually started in 2018 when I was working for a medium-sized family office in Germany.

And that was when this kind of retail hype happened back then, right? ICO hype.

And so everyone wants to know about blockchain tech, Bitcoin.

Has anything changed?

We can always revisit

it in depth.

Yes.

Yeah.

Thank you for the invitation again.

Yeah.

So, yeah, my name is Andre Dragos.

Why is that?

What are you thinking on those?

I think the elephant in the room is obviously Thresh trading below par.

I mean, it is somewhat connected to the fact that deals have started going higher because of sovereign bond risk, because of the rise in inflation, because of energy prices and so on.

Straight up a move, essentially.

And also sovereign debt risk in Japan and so on.

And so I think the relatively high dividend yield of stretch has become less attractive, right? Like relative sense, gotcha.

Relative sense.

Where are you at on AI productivity? I think usually

don't need

the SPR, at least not immediately, because if you just look at the amount of buying by ETFs, I've just tweeted it out.

Over the past five trading days, US-bought Bitcoin ETFs alone bought 31,000 ETFs.

500 bitcoins, right? It's crazy.

It's like 15 times the amount of new supply within five days, right? And we know MicroStrategy, they've just bought 11k bitcoins.

Corporates, they've been buying around 70k since the beginning of this year.

So there's a huge supply deficit.

Maybe just one