A Paradigm Shift: Chaos Fuels BTC’s Fire | Avi Felman, Jonah Van Bourg

Transcript

my end of year price target for 2026 is 150k that I think is is very cheap should I'd even bump it up to 20 20 25 at this point and the reason that I think it's achievable is because you now have an entire population the wealthiest country on the planet primed to understand bitcoin's value in a way that they have never been primed to understand this episode of Empire is brought to you by quick node quick node is an end-to-end blockchain development platform that makes building web 3 apps super easy no matter what you want to build you can effortly develop any application by leveraging their elastic

apis go to quicknote.com use code to Empire you'll get a free month on their feature back build plan that's right go to quicknode.com you'll get a free month to start playing around you'll hear more about quick node later on the show our guys welcome back to Empire Jonah Avi good to have you guys how you doing hey it's great to great to be here thanks for having us back thanks for having us back Hannah nice to see you yeah you too all right guys so I want to um here's like my vision for this conversation I think there's already been a lot of podcasts about like contextualizing macro and like why did svb happen and kind of what's going to happen with this credit contagion I want to try to draw a line from that kind of stuff well I want to figure out how to draw

this like through line from that into crypto and I think the place to start is a question for you Avi um when I look at the market and I'm not as deep into the market as you guys are there's like two very conflicting signals one signal is that the FED everyone kind of expected the FED to hike again later in the year um the other signals like the two-year is going down suggests the FED might pivot the two-year cross the FED funds that's like pretty good sign that the FED is gonna kind of turn around here um there's like this rush into in demand for for safety into the two-year and things like that but then you have like inflation data coming in hot and so like I think there's the big question in the market today is like what is the Fed gonna do and I'm curious and then that

obviously trickles down into the risk assets like Bitcoin and Ethan stuff like that so Avi what how are you thinking about this right now I think it's a I would I would reframe that as like what is the Fed gonna do into what it tan the FED possibly do right so it's it's kind of interesting uh you know the the rates the move-in rates could be attributed to the FED cutting it could be attributed to a Slowdown in growth expectations you know that it could be attributed to a rising risk of a severe recession versus a mild recession that people were that people were thinking of uh and so I'd say that this is this is a very very uncertain macro environment in the short term

because really what we use we need the data to keep coming in and for us to get a little just just a better grasp of what's of what's going on but one thing that has been happening very constantly in this market over the last year is that these things tend to get priced in very quickly so the Vol of s p is up a ton relative to Historic standards uh the Vault I mean Bitcoins bitcoin's been whipping around up not relative to Historic standards but it's it's been it's been weapon around and what what's actually happening right now uh is that you're getting these narratives and these moves

priced in very very very quickly so I look at where rates were three days before svb went down and a day after svb went down and it was a complete and total shift it was a massive ship and so what that tells you is that where the market is today it's not really telling you anything really interesting because it actually keeps changing so drastically and so dramatically every you know week week to week you know two three weeks before in in the beginning in the beginning of fed uh you had a nine percent chance of the FED hiking 50 bips in their March

meeting and then at the beginning of March you had like a 70 chance of them hiking 50 dips and then now you have effectively a potential no hike priced it well those are the like looking looking at the market to give you Direction into what the FED is going to do has not been particularly useful right it just it's changing so constantly and so what we've been focused on and what I've been focused on uh when it comes to trading and when it comes to investing is understanding relative to expectations what what do we what do we think what do we think is going to happen so right

when it was priced at nine percent the risk of a 50-bit pipe well what what do we think what do we think about that how is the market positioned for that we thought the market was way under position for the risk of a 50-bit bike and when it was at 70 we thought the market was way over position right so it's actually about where people are putting their Capital relative to you know your own your own expectations and really looking hard at when the market when you think the market is raw and coming to your own when you're on conclusions because effectively the market has been wrong a lot over the last eight weeks the market is like consistently wrong all right and that that that's what we're seeing in the series

Jonah what what yeah what's your take on this yeah I mean it's it's funny you mentioned interest rate volatility Avi um it's you know I'm not an interest rate options Trader but I I speak too many of them and I'm being told that the volatility you're seeing realized volatility in short-term interest rates is 3x what was realizing during some of the worst moments of the financial crisis in 2008 so you know there's a bit of a reflexive mechanism right the fed and the banks that are you know teetering right now are all sort of very focused on this short-term interest rate Market in order to inform their decisions when you have that kind of volatility it's you know volatility driven by everybody wondering we're trying to price what the FED is going to do and what's going to happen next with

this banking crisis the institutions themselves that that are you know causing this volatility you're also watching it and being reflexively impacted by it so it's a bit of a spiral in in some respects uh for for investors if you get caught the wrong way on it um ultimately the way that it's feeding into crypto from from my perspective is liquidity is getting worse um capital is scarce as a result of suddenly becoming more difficult to access banking um trading firms require Capital to provide tight liquidity so bid ask is wider that again reflexively creates a more volatile gapier more liquid Market more opportunity to get it right but

equally a lot of risk and a lot of transaction costs to get in and out of Trades and ultimately I think the most interesting feature of all this chaos was that during the you know the weekend after silvergate and svb went about went down you saw Bitcoin at each really start to rip I mean that just shows you that when there's a flight to Quality and a run on the banks you know crypto crypto has sort of entered a new paradigm it's it's exited the Paradigm of strong macro correlation and it's entered a new Decor related Paradigm where it represents a you know a different type of Diversified risk asset once again I think that's super relevant I think

that's you know when when you get one of those Paradigm shifts in in the way of Market trades there's there's usually a pretty exciting entry point for for something lucrative yeah I'll I'll I'll I'll push back I'll like give you a little poke on that which is that um I think these things can exacerbate moves in the short term but Bitcoin was also following equities on the on the way on the way back up a little bit but it's radically outperformed equities and so I think what like even relative to Historic expectations and so what I think you get when you get these narratives like a bank you know Bank bank failures leading people to go go look at crypto

you're effectively pouring fuel on the fire for a move when risk moves as opposed to hey this is going to cause a decoupling between risk and Bitcoin it actually in my opinion probably will over a six to 12 month time period And I I liken this back to uh you know back to 2021 like if I'm going to make a analog to the crypto markets it's like the same same way that uh from Jan of or sorry from like March of 21 to April or sorry to uh July of 21 Bitcoin went up a ton to 60k came back down to 30 Went to went to 40K so kind

of like chopped around in actually like a 30k to 60k range and while that happened Solana went from 20 to 200. right but the moves were actually correlated month month over month right it's like it would just so happened that Solana would go up way more than Bitcoin when Bitcoin was going up and then when it came down you know it tend it like came down a lot but it ended up because of those up moves outperforming over time even even during period of flat Behavior I think that's probably what we'll see from Bitcoin is that you have this fuel on the fire now people are now sitting here they're thinking to themselves hey uh if I mean this is actually kind of interesting that like the type of person

that had their money with with svb that got rugged by them is actually a type of person that would be very likely to come into crypto because they're generally further down the further down the risk Spectrum so they're looking it's like okay if I can't trust Banks if we're literally going to a potential banking crisis um which I don't necessarily think we are in uh in a grand way but it does like break open the possibility of well maybe I can't trust my bank which is very powerful which is a very very powerful tool well of course fuel in the fire so when Bitcoin starts going up people start piling into it they start going okay I don't wanna I don't wanna I don't want to be on the sideline hey this might actually be a safe place so I guess to round up to round up my I still

think we're tied at a bit to risk assets but over a six to 12 month time period I think that Bitcoin can radically outperform because of this new narrative that's emerged hmm mechanically how does this translate um like how does this price transmission happen is it big macro that's trading Bitcoin right now because they're like the kind of left bell curve take like oh ooh banking system collapses Bitcoin might rip or is it another left bell curve take like uh the FED is probably gonna slow like maybe it's less likely that the FED hikes so I don't know risk assets start ripping and Bitcoins like farthest out on the risk Spectrum so they start buying Bitcoin or is this just crypto native funds getting excited again and piling

back into Bitcoin like what what's this price action actually looking like I would think it's macro funds and crypto funds uh I would think it's you know smart macro thinkers and people who are deeply experienced in in the microeconomics of crypto who are buying this I mean if you look at what price action has done since uh March 10th right the s p is unchanged effectively maybe up one percent um crypto's up or Bitcoin alone is up 25 from that day like these are these are Big divergences in you know these two asset classes and obviously contact the context for that is interest rate volatility so there's no question that macro funds are saying

hey Bitcoin and crypto in general this is a provenance hedge right if you if you put your deposits at a bank it is it doesn't matter if it's Silicon Valley Bank or JP Morgan your job is not to analyze that bank's balance sheet and think about whether your deposits are safe or not that's that's an Investor's job as a depositor you just dump it in there right um and then one day if you wake up and say hey I actually thought I had money and I don't um well maybe I do but the FDIC owns my deposit now and I'm stuck in their receivership procedure for nine months that's not ideal either so anybody who's keeping cash at a middle tier Regional Bank anybody who's looking at the broader macro

picture and trying to think about what an unfurling of you know smaller Banks might mean for the economy and for fun you know flows and funds which is macro guys really um you know Bitcoin even if one percent of that Community decides to stick a little bit more Capital into Bitcoin which you can store on your Ledger Nano and keeping your fault um and you own it not unless you lose the keys of course um you know I think that's it's I think those sorts of thought processes are probably going through the minds of people who are trying to you know for a career being deeply analytical about what this actually means what this what this banking issue means yeah it's what's kind of interesting

here is that all right two years ago three years ago whenever I would talk about Bitcoin as as a monetary asset and you know I think that's where this discussion is mainly focused on right now just because of because of current events obviously crypto is much more than that but as as you know as a as a baseball well why does why does Bitcoin have value and my conversations would always start like this they would always go well you as somebody that's in the first world that's in the US you don't need to worry about it as much but there are countries around the world where Banks fail frequently their countries around the world that experience High inflation rates their countries around the world where you can't trust your government or

your central bank to manage monetary policy effectively and today you don't have to qualify that with that with that first statement as much right I still have infinitely more trust in the FED in the US government to manage the dollar than I would you know I don't want to insult anybody or name countries but as you know for countries that don't have this effective effective monetary policy but it's it's one of those it's it's one of those Paradigm Shift moments is as Jonah said where if you're sitting here in the U.S now that's something that unfortunately you have to think about so as much as we don't want depositors to be investors we

don't want depositors to have to worry about that we don't want that mental cognitive load on these guys then people haven't you you have you you unfortunately have to think like that and it actually goes back if you really you know dig deep well it goes back to the FED raising rates right in an unprecedented fashion so svb through their money into 1.68 yielding MBS for 10 years because at the time the Fed was sitting there saying inflation is transitory and don't worry we're not going to raise rates that's not happening and however naive it was at the time they trusted the Fed

inflation stressatory very unlikely to raise rates okay we're gonna listen to you guys and we're gonna go put our money at this because we don't think that there's a 10 Sigma move on the horizon and in a you know world where mistakes happen in a system that is as fragile as the one that we have you have to take Subs to protect yourself right and what are those steps well maybe bitcoin's one of them and so that is the path of logic that a lot of the smartest guys in the room are taking right now a lot of the macro funds are realizing that a lot of the high net worth individuals are realizing so you just walk down that logic path and you come to the realization relatively quickly that our system is imperfect and when you're faced with an imperfect

system you need a hedge yeah and hedging you don't need to you know it's not like if your portfolio is 60 stocks 40 bonds and then you you look at this and think gosh yeah things could get a little hairy beer I need to move move into Bitcoin you're not going to go from 60 40 stocks bonds to you know 10 stocks 10 bonds 80 Bitcoin and Eve right all you have to do is move a little bit of your money into Bitcoin or ease or both uh for the asymmetry of of these fat right-tailed assets to protect you if something crazy does indeed happen um so it's not like we're expecting you know the macro Community or Pension funds or real money to just start pouring Capital into into crypto

but we're expecting it to trickle in pretty sadly and you know the feds between Iraq and a hard place right now they have they have the supply side inflationary Crushers and a banking crisis like it's you know they sort of have to pick what they want to fix they can't fix both problems at the same time and that's you know Avi you actually tweeted it it's uh pretty pretty hilarious and super on point tweet rero saying hey Bitcoins Bitcoins trading like it's an alternative banking system or something and you know at the end of the take kind of it so but do you really think that so obvi that I mean but what what you guys are saying really resonates with me I don't know if you guys remember when says casares he started Zappo which then gets old to coinbase became coinbase custody

but he I remember he had this line I forget when I heard it like 2015 or 16 or something he said uh Bitcoin makes an incredible amount of sense to folks outside outside of the United States because uh their government oftentimes doesn't work and their banking system doesn't work the reason big Bitcoin is uh the United States is the hardest country in the world to explain Bitcoin is because your money works and your government works or your banking system works your and your government works and so I think like that that obviously resonates with me it resonates with the three of us but for these big macro funds it likes uh part of me is a little bit skeptical that that's why they're buying Bitcoin here a part of me thinks that like

they're just looking to get out on the risk Spectrum again and you know yeah I mean the the easiest way to look at it is okay like gold Goldman has a has a high retail interest basket yeah barely it's not it's like up like two percent right you go go look at like the arc funds go look at Tesla yeah go look go look at like you know tech stocks right that it's very clear to me that uh the majority of money that's driving Bitcoin it's not like and you saw this in the beginning of January but so the beginning of January everything ripped together you just you know ripped with Bitcoin like Arc ripped everything that

you would assume when people are like okay we're risk on let's go get let's go get long all of that stuff ripped alongside of Bitcoin and that's not true this time all right Bitcoin is actually I mean what what's actually ripped relative to Historic standards but gold and Bitcoin so that tells you something a little bit different yeah right we know why it's Gold's ripping and it's uh China China by I'm a young who knows maybe maybe they're letting some of the 10 trillion worth of US dollar denominated Securities roll off investing that into things like gold and hey maybe Bitcoin it might not be publicizing that that investment decision but you know if you're

it the dollar the user experience of the dollar is deteriorating right if the fed and the treasury were just stable custodians providing predictable you know open banking access and a really a really well controlled two percent inflation Target I think people would be happier to use the dollar instead you know the institutions in Washington some of them at least are weaponizing the dollar requisitioning the dollars that other governments thought they had particularly Russia and so you know I think a lot of people running running governments that oversee you know billions of citizens are are starting to say hey maybe I should diversify a little bit maybe this dollar might not be as stable as we thought forever maybe something that

a little bit more immaculately conceived like Bitcoin can can protect one percent to my portfolio better than U.S treasuries uh would have done I don't know if it's an interesting it's an interesting question you asked the piano about like are macro funds actually buying because because Bitcoin is a solution for emerging markets like maybe not but we're in a different Paradigm now as obvious we're talking about it's like there was the 2010s where it was just a hunt for yield right oh a money losing startup that uh you know basic like we work sure whenever we'll put money in it now we're not in that Paradigm anymore we're sort of we're at the beginning of the super cycle of some sort of future of money and a clearly unpegged

inflation uh regime so what does that mean I think macro funds are hunting for the assets that are going to perform in that Paradigm and bonds aren't one of those assets anymore so and Jonah I've been wait I've been waiting for the word super cycle to come back man and I'm I'm happy you dropped it so um Avi do you think we are setting up for is this a monster Bitcoin rally that is upon us or is this a nice little Bitcoin rally Fades off into a little eth rally into alts and it's a nice nice little bump yeah on the on the short term by that's actually what I think like over the over the next three months that that is what I think but what this does is the same thing that kovid did in March of 2020. which is that it shifts

people's mindset to be a lot more open to crypto than it was previously so that when the time is right they will start flooding it my end of year price target for 2026 is 150k that I think is is very cheap should I'd even bump it up to 20 20 25 at this point and the reason that I think it's achievable is because you now have an entire population the wealthiest country on the planet primed to understand bitcoin's value in a way that they have never been primed to understand it before and so regardless of what happens like let's take a scenario where this is it

Credit Suisse against bailed out everybody ends up happy there's not a single other bank that fails everything goes back to normal we get a mild recession the FED starts cutting risk starts ripping right all of the quote unquote narratives Bitcoin fade away Bitcoin does extremely well in that scenario still because when it's risk on the population has been primed to think of Bitcoin as a as a real asset now in many ways as an asset that can actually potentially have value right and so if this hadn't happened then we probably would have gone up less when the met when the macro environment ships and risk and risk comes up so the way that I the way that I think about is like this

is this is this is fuel for the eventual explosion of BTC and eventual eventual adoption of BTC it just ratchets up that adoption curve right and and interestingly enough as as that adoption curve ratchets out you know all super cycles that we talk about in a Commodities Market are driven by Demand right the the big one in oil that happened in the 2000s was because China opened up and started consuming a ton of Commodities in Bitcoin I think we all you know obviously this is the Empire podcast we all agree that demand for crypto is going to go up over time that you know it's got a killer app already but against that backdrop you have something that you know almost never happens in commodity markets which is in 2024 the supply of Bitcoin is going to

get cut in half right it's not even a constant supply side pictures I was going to ask another yeah and then well where's half the Bitcoin like I don't know I think it at some point you have to look at the last three of these things and the price action that occurred after them yeah for also for just throw a liquidity perspective right now Jonah if I wanted to go buy 100 million bucks of Bitcoin how much do you think I'm moving the price depends how sloppy you are Abby yeah you're a careful guy I think you'd probably move it by one percent is not that much money to move uh 400 billion dollars 100 million is moving them is moving the price of one percent

in this market right now absolutely um that's more than I well maybe you know during some of the battleship liquidity like Ultra stable environments of of maybe last summer um maybe 25 bips 30 bips but right now good luck like yeah it's a remarkably low amount just one percent so all it takes is a you know a couple large players just start allocating the kickoff sometime moving out which I think is actually what happened which is why Bitcoin rallied so hard from 20K to 26 it was very likely a few large players have decided to allocate I think that they're they're as far as I understand it and actually John

would have better insight into this given given where he sits uh post svb there were a lot of macro funds hitting up desks asking them about Bitcoin now whether they bought or not uh you know I think I think they I think they did but the the interest has gone up tremendously uh since uh since SBB went down now I'd go I still don't necessarily think that starts an immediate run I'm still on the you know side of we kind of need risk to be okay Deborah I don't think bitcoin's hitting 30k of s p rates 3 700. it's just very unlikely from from my perspective but it does set up uh for Bitcoin outperformance over time I was gonna say Ali you know

um if you hit the nail on the head there uh we when you're a liquidity provider you have some people that are you know consistently trading with you consistent counterparties you have some people that show up once in a blue moon and then you have the people that come out of the woodwork pretty much only when something extraordinary is going on and you realize that you're just their backstop um provided you're still around which a lot of trading firms uh aren't anymore after the events of the last year but it's funny we got in in that last bucket of you're our backstop we're not really your friends but we just we need you right now like we've had more of that inquiry in the last week than we had during FTX which tells you something tells you a lot Abby how does this think

and then John I want to get your take on the same question too like how does this uh impact how you think about other narratives in crypto like the alt L1 trade or uh even just like eth BTC has been falling a lot like how does this change how you think about ether l2s like would love to get your thought on I know you play a lot in like sushi and stuff and you know kind of different protocols and yeah how does this change how you think about this stuff yeah I'll say that uh I'll talk about BTC for a second I think the the story of this year when it comes to Majors is Supply so on the BTC side you have the mount Cox coins that are coming out you've got this 40 000 uh BTC there'll be auctioned off by the auction off by

the state on the east side you have the unlocks the unlocks from Shanghai um that are around the corner although actually I don't know if you guys saw this but uh Lido well unfortunately won't be ready to process withdrawals uh which is which is contributing to I think a little bit of heaviness on Lido um which you know I I do I do think it's a it's a little it's a little silly like the entire point of light out is to stake eath so that was that that was that was unpleasure but uh you know so I think what what we're seeing right now is we're seeing mainly well two two things uh one there was that on on eth there was that story on uh that New York AG came out and they

actually had two three paragraphs I don't know why they thought youth might be a security and then also you have the the fears the fears about Shanghai which I think are both contributing to BTC auto performance and then you have uh on the on the bot on the buy side people are the the type of person that's entering crypto right now that's driving prices or everybody that we've just talked about so it's the people that are buying Bitcoin because it's a monetary based asset and they're not black ethereum right it's not the Silicon Valley folk that are buying ethereum because it's going to be the platform for every new application that's built in web3 which I think was a lot of the app performance before it was these like Tech Focus guys now that participant in the market are these macro Focus guides right the

or girls uh buying buying Bitcoin and you know it's it's right now eth just has a lot of headwinds because of that because Bitcoin has the narrative and eth has the supply coming coming live in Shanghai now at some point gox is going to start Distributing and at some point I think the supply the supply for Bitcoin starts to starts to come alive a little bit more and then if BGC can start to start to outperform but you know I'd say I'm tactically bearish BTC for the next two months and then I'll probably flip tactically bullish on underneath on each BTC you know I think this is definitely the most Bitcoin denominated I've been in a while and anecdotally

that actually isn't true for a lot of crypto natives yeah Jonah agree or disagree with that I agree until the having comes up and then you probably need to be short BTC again um see that's a very good point so I think what's interesting is normally when crypto pukes Bitcoin dominance Rises because Bitcoin is the you know the Bellwether space and sort of the the biggest adoption I think it would be really telling if you get a a powerful rally in crypto where Bitcoin dominance increases I think that tells you that maybe some of the the froth and the heat in web 3 is cooling off a little bit and Bitcoin is sort of proving its macroeconomic and

geopolitical value to a broader participant based than you know young people who are passionate about web3 and all of its profits which which I believe it has but you know the Gartner hype cycle where are we on that right now for web three probably cooling off a bit and I think Bitcoin is coming out of a trough of disillusionment into you know I think a demand-driven um you know steady long-term uptrend with plenty of like immediate term chop and dips to buy hopefully this is this is this is wild job and I think you know just looking at my screener here my dashboard um I don't think that this you know this year looks like previous crypto years where you see you know Bitcoin and

Heath rally and then you know you get a follow through with kind of a levered alt up trade um there's some real Divergence if you sort by year-to-date returns dominated in eth is a pretty spectacular Divergence of returns amongst you know a lot of relevant tokens it's not just like alts are trading like this levered eth bucket anymore they're the wheat is getting separated from the chaff right now 100 but that's also what makes it great for active Traders and I think we have this uh on our previous our previous cast but there there's there's a real um there's a real tightening in the market happening right now where people are pulling their money from Bad Assets and putting them in good assets and those

Bad Assets tend to just Decay over time because you have I mean crypto again is Zola uh like I think the entire Market this year and last year has almost always been the supply store you have you have teams that are unlocking you have investors that are unlocking and the only people that aren't selling are the people that really believe in the product and so because retail is not on the market anymore there's not this large organic demand that can absorb you know tens of millions or hundreds of millions of dollars that are being emitted by the investors and by by the team and so what you get is you get this Decay from projects that are bad and you get a basing from projects that are good where the team and investors are willing to hold on because they actually believe in

the product long term and that's really good that's really good for crypto and to go back to your point Jonah about btcd this is a very calming and like nice to see btcd go up on this rally it's like okay like they're that to me what it means is that there's real money coming in right uh you know and and I think at some point in the future this this will just always happen once Bitcoin gets to a certain level and it gets high enough my bet would be 40 to 45k then you start to see some really crazy then you start to see your five x's in a week then you start to see uh you know a lot of a lot of retail come back come back in the market and maybe

you start to see the trash start to Rally more aggressively than than the stuff than the stuff that's good uh but for the time being that's actually this is actually a really great environment you know for fundamental investors too right so you you can actually go look I have projects that are doing good stuff I mean you know there there's an L2 building built building on building on BTC stacks and you go look at them their transaction counts are up and down ever since ordinals came out uh their user interfaces you know for a lot of the protocols that are being built on pretty pretty solid the full disclosure we we do own it uh you know and it's it's these things it's like okay well things are actually developing things are actually things are actually getting used there's uh there's there's a real

progress that's being made and that's a that's a that's a beautiful thing to see what do you think Bitcoin dominance ends at it's at what 45 now somewhere between 45 to 50 now maybe yeah I know I I think um I don't I don't like calling specific levels because I think it's very it's very context dependent on how we how we there um but my my view on bitcoin dominance would be that effectively until either Bitcoin trades 30 to 35 in the short term or we get past Shanghai uh and we start

worrying about Mount gox unlocks um those are the two things that are gonna that are gonna top btcd so like if we get to 35k in the next month two months then I'm probably calling a top one btcd or if we're in August of this year I'm probably calling a top load without Bitcoin and 35k I'm probably calling the topic btcd all right quick break from the show there is this kind of overused cliche saying in crypto but it's true bear markets were building and everyone tells you that never knows it what people don't know is that if you're building apps in crypto and building apps in web3 without using quick node you're building on hard mode so quick note is is this amazing blockchain

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short-term selling negative or eth long-term bullish I mean the way that they've designed Shanghai it's it's kind of hard to pull too much eth out of out of you know this basically the pool and stay deep that's out there it can't be withdrawn quickly if there's congestion in the cube to to withdraw like there's a limit to the there's a bottleneck in that pipeline to its yeah so you know I think it I don't really foresee a massive dump occurring on Shanghai I think you just sort of watch the congestion cues and trade accordingly I I don't think it's it's the sort of event everybody's making it out to be in terms of a big price mover I don't see a lot of volatility around that yeah

I want to give you guys a take on things other than than Bitcoin and Ethan one of them is uh usdc and the peg you start to see different I think it was like Jane Street and Dr I think you guys were dumping a little bit Jonah um or drw maybe I don't know I might be totally botching the uh uh who this was but anyway some institutions were that I that I think held a lot of usdc were starting to dump it and my if I'm trying to like think about the second order impacts of this once you have something like usdc where the peg is broken I would think that maybe there's like for some of the heavily regulated institutions from a compliance perspective they Maybe Can't hold it anymore um I could be totally off there but I'm curious to get your guys's take like

what are the long-term implications for something like usdc since this depending event yeah sure I mean we traded a ton of usdc during that you know just over it's basically over the last week and I think you know crypto Twitter will identify one of our wallets and say Hey you know drw did X Y or Z that they're never getting a full picture so right it's you know it's it's if if they see us selling a bunch of it um they're probably just missing all the usdc that we're buying on the other side from other people um in different wallets it's super confusing to to do that on chain kind of forensics but you don't know whose wallet is but um at at a macro level what we saw in usdc when it depeged there was

selling of usdc at a time when the FED wire closed and the 24 7 banking solutions that Trad Phi has basically set up to service crypto banking needs over the weekend cryptobacco needs are usually stable coin related were um Signet and set which belong to signature and silvergate which are suddenly you know banks that went from being not that risky to kind of scary to to park your catch on either of those those 24 7 banking networks uh as that you know going into that weekend when the FED wire closed so if you can't wire cache and Stables are your source of liquidity and you're concerned that that usdc may have you know perhaps a problem

on their hands due to Silicon Valley Bank um you know holding some of the few sdc's deposits um you know you're going to see a lot of selling right and we traded billions of dollars worth of these tokens ultimately the the liquidity that companies like Cumberland drw provide during those times end up Shoring up basically minimizing the volatility in those deep pegging events and usually the deep that the peg is is retained quicker the more liquidity there is so imagine if there were no liquidity providers figuring out ways to wire catch put up Capital take risk buy you know discounted stable coins whose ballot sheets are just fine during times of Crisis the price would

jackknife a lot lower on all that Panic selling so ultimately uh we weren't we were dumping it we were just providing two-way liquidity which we think contributed to a faster reversion to the mean which is apparently yeah I I think on on when usdc it was kind of it was It was kind of interesting to me I mean I I put out I put out a tweet that did some preliminary math on it before then about the statement that they had 3.3 billion with it with svb uh and even after that 3.3 billion dollar hole was disclosed which is about eight percent it what was what was odd to me was that like even in the worst case estimate you were probably looking at at 75 recovery

from ssvb you know maybe maybe 70 75 and what was very odd was that usdc traded to like 88 cents because that's way way below family yeah market value from from my perspective uh and so I think it was a lot a lot of it was just Panic um and then even once even even once the the the backstop was announced it took a bit to fully fully repack I mean it was trading at 97 cents and that was you know it was it wasn't an immediate immediate reversal and so I think um you know in terms of will institutions touch usdc moving forward I think they will because I think this this was this was a bit of an

unprecedented unprecedented thing uh and also usdc is so ingrained into crypto and as a regulated institutioner you really going to switch to tether or if a new stable coin comes out are you really gonna bet that that new Sable coin is going to do a better job of managing risk than usdc which is probably put up like probably the most stringent risk uh you know they're probably tackling this stuff with full force right now they've probably hired a bunch of people to go monitor this 24 7. they're probably going to be the flightiest people you've ever met which is a good thing by the way um you know so I I I think that from an Institutional perspective your choices

either kind of use usdc which is still the safest stable coin from from my opinion today uh spent you know post uh post svb and or don't touch stable coins in crypto which by the way is is a reasonable thing to say uh you know maybe you don't want to touch stable coins stable coins and crypto anymore maybe you're worried about that than you are about eth um one one thing that was interesting is that uh liquidy traded really well because liquidy is a is a token and full disclosure we don't have any uh liquid liquid is a token that allows you to Mint a stable coin purely backed by eth it's like the biggest actually decentralized simple coin that's not backed by by usdc anyway and the thing

just ripped so the girls would just be a product Market fit for these types of things uh where you know the risk and the risk is the price of Ethan that is easily controlled for more or at least more easily controlled for than not knowing who you know the banking partners of these these stable coins are so there's there's a there's a little bit there's a little bit of that that might find a find a product Market fit but I don't view this as the end for usdc by but by any by any means and I also think that it's it's times like that that offer really fantastic opportunity in the market to have some have some balls and make and make a bat right I mean you at usdc trading trading at 90 cents you know obviously this is a hindsight

um but you could just look at my public Twitter feed and the math that I did the fact that I was telling people that really shouldn't be trading below 90 cents yeah you know that that that's opportunity right there no I agree with you I mean those are the times that hardened hardened protocols right like you think about March 2020 that flash crashed down maker made it through and like yeah you could you could argue that that really hardened maker that they that they made it through that D5 has been looking amazing throughout all this but it almost feels like Trad Phi is is failing crypto at the moment it's uh you know the Silicon Valley Bank just rugs circles deposits Circle does a fantastic job by the way that is a top-notch team those guys are professionals they made it risk better than anyone in stable

coin industry they're incredible um it's pretty interesting to see the the tables turn of it I'm good I'm just happy that the you know the FDIC stepped in yeah agreed agreed shout out to the circle team um I know we only have a couple minutes left here guys any any other trends that you guys think are interesting outside of kind of the majors that you're paying attention to obviously I know you posted about some alts the other day um you mentioned Stacks you did some stuff with sushi a couple months ago like what what are you paying attention to that you find interesting either from a trading perspective or just crypto interest well from uh from from uh trading from a trading perspective I'm honestly focused a lot a lot on just the volatility of the majors there's been a lot of

opportunities and also in uh in Bitcoin and the ethereum options I think one thing that I've mentioned on a on a few podcasts is that uh you tend to get uh you know pretty depressed vault uh because the structural nature of the phone market right now is that they're just a bunch of sellers so for example when Bitcoin was trading 20K always in the 50s that was a steal right that was that was an absolute skill like that that dislocation just just didn't make sense so I think the options Market prevent presents a reasonable amount of opportunity right now uh I also you know I'm directionally very bullish on defy in general because I think like when you think about Bitcoin as an alternative

banking system defy or like the actual like that that's actually where the banking system can be can be replicated uh BTC is is a great asset to hold I've got all the functionality of a bank account uh and all the functionality of the financial system exists exists in D5 so I think the recent crises are just as good for D5 long term as they are as they are for Bitcoin the first it's going to be good for Bitcoin then it's going to be good for D5 yeah and so we're looking at you know I think uh there are a lot of protocols that are working that are working very hard that are working very hard right now there's some verticals are not working hard at all uh and so you just find the find the ones that are working hard and you you're short the ones that are now

um that's a good take I mean I guess I've kind of the boring answer to your question yeah I know I I guess the the craziest altcoin that I've been you know looking at recently is gbtc grayscale Bitcoin trust it's uh the discount has ripped from minus 46 all the way up to 30 back down to 40 I mean if you if you look at this in terms of annualized percentage returns of these moves gargantuan and given that you know the product Market said Bitcoin um that that's sort of manifesting itself in this in this market Paradigm combined with uh all the legal and Regulatory Nuance behind

that particular trust um you have you know to code obvious some some real vaults trade I also think the options Market is is probably one of the most interesting places to to get involved in crypto trading right now um it's interesting to me as a you know former options Trader to watch people continue to batch out calls with with Reckless abandon against their their Bitcoin like their eats like trying to earn a little bit of extra yield without seeming to realize that press free yields have gone up so they should theoretically be demanding more carry for their options selling than than the let's look at it it's like there's less than a vol differential between implied and realized right now

they basically selling it out at fair value so probably option buyers out there the audience it's pretty interesting stuff lots of Leverage in in a good way in your favor last question here just actually on The Leverage side of things I feel like a lot of the collateral I think you could make a fair argument that a lot of the last cycle was just a bunch of collateral uh and like Leverage floating around in the system this cycle um the like off chain leverage so the you know the block files and Celsius is and the Genesis of the world like aren't really here anymore what do you think the just leverage space and like collateral looks like in the in the next cycle like how is it different than the last cycle

well I think for one you're going to see uh you you you're going to see some serious competition from actual Prime brokerages in space from traditional Capital markets like traditional Capital yeah I I you know I I think that there there's a lot that works right now I mean you talk to almost every bank they have a crypto team now and some of the banks are actually kind of pretty far along in the process um I think they're just waiting they're waiting for regulatory Clarity which is by the way probably the largest topic that we didn't hit on this podcast so love to talk about on another broadcast at some time because it's very very I mean maybe once you guys bring back a thousand X then uh you can talk about it then but but yeah I I I also I also think

that you're probably just going to see less what yeah you're going to see less Electric in the system yeah and that's leverage doesn't combine well with with this kind of volatility it stops people out but yeah you know Commodities are a very leveraged product because they're all futurized and traded on exchanges where collateral is centrally managed and cleared and guaranteed and like you said obvi I think I think we're getting towards that model and and once you can feel confident in uh the security of the repository of your assets then you start to feel comfortable Levering them up a little bit yeah that's good Fellas any last thoughts well I it's always fun talking to talking to both I always conversation so I appreciate you having us on the

podcast ditto let me guess you're well fellas [Applause] [Music]