Is The Bottom In For Alts? | 1000x

I mean, I think that this recent move washed out all of the end-of-year sellers and people are going to rebuy come the 1st of Jan. Like, I'm not bearish. The cycle is not over. And, you know, I'm not in the habit of making bold predictions like that all the time. But I mean, this is like a, in my opinion, no-brainer point to get in the market and just ride it up.

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All right, welcome back to another 1000x podcast. This is going to be a fun one. A lot of stuff has happened in the markets since we both said that we were bullish as fuck. Um, clearly, clearly the market didn't really agree with us. I mean, uh, one thing that I'll I'll point out is that, you know, it's very clear now— this is obviously hindsight talking— but it's very clear now that a substantial portion of the move above $100K was driven by Saylor just jamming it in. I mean, he got an average price of $106,000, and that's insane considering the fact that we traded above $106,000 for like 30 seconds. I mean, I think it was, um, I think it was 24 hours that we traded above that price. So kind of insane. Clearly just, you know, jammed it, jammed it super hard near the highs, and then once his bid went away, market structure deteriorated a bit. And now we're stuck in a kind of interesting zone where BTC is holding that 90, you know, I'd say that the, the bottom of the range is 90k to 93.5, and we're sort of hovering at that level right now. But alts are doing really well. So like today, for example, ETH BTC up almost 4% off the lows. That structure looks really good to me. Everything else has started to look good. And the thing that we've been calling for, for a while is at some point, probably near towards the end of the year, you're going to start to see alts pick up. Just seasonality tends to be very, very good for altcoins post mid-December. And I think we're going to see that play out because what's happened is that everyone crowded into the Bitcoin trade because Michael Saylor was backing it. And now there are a lot of reasons to suspect that he might not be backing it for at least a month, courtesy of the blackout period. And that's going to lead people to go bid alts and it's going to lead to relative outperformance by ETH. One thing that has been really bad for ETH is that obviously the main buyers have been buying Bitcoin and now the main buyers out of the market for a bit, that ETH/BTC ratio can sort of readjust itself and the flows will start to average out more. And I think that means we probably see BTC above 0.04 in the next few weeks, and I think that's a really good trade along with a lot of the strong alts that you see, that you see today. But the next move from BTC, I'm not, I'm not really too confident in right now. Uh, Jonah, I mean, what are you thinking about the markets here?

Well, this sell-off was not in my bingo card. I was, you know, buying all the way up, still buying on the highs. Uh, not much as, as far as like my portfolio is concerned, but just sort of like nibbling away at the market. Now, what is sort of expected is that the idea that, you know, you, when bull markets start to get white hot, they get super volatile. And this isn't like the craziest pullback in the history of pullbacks. This is like 10%, 15% at worst for some of the majors. So like, and what triggered it, it was, it was really like a Fed type event. So basically You know, I don't think that this is anything out of the ordinary. I think that one thing I would note about December as a general trading month in anything, not just Bitcoin or not just crypto, it's an illiquid month. Like, institutions generally have closed up shop for the year. Traders aren't taking a lot of risk trying to like gamble their entire year in the middle of the last week of the year. So most participants with the big bucks are sort of on the sidelines or protecting P&L. And then you're left with like, usually, you know, like in commodity markets, it's CTAs. Those are the sort of algorithmic shops that trade no matter what time of the year it is or what hour of the day it is. And they're, they're big, right? So usually you get these like bigger momentum type exacerbated moves. So to me, it's like, not that surprising that you have this Michael Saylor character Who's the whale in the market? Everybody else is pretty much taking it easy. And when he stops buying, you get a big pullback. I hadn't really noticed what you were saying about alts until just now, which I think is actually a really intelligent comment, perhaps because it's not all alts that are performing right now, like Doge, Telegram Coin, like some alts.

Yeah, I think there's select, there's select alts that are outperforming. What you just said just kind of clicked a puzzle piece in my head. I think a lot of the, the exacerbation of the alt move— I mean, when BTC was trending down, alts were nuking. Like, BTC was down like 3% one day and alts were down 15 to 20. I think a reasonable percentage of that, a lot of the selling was probably because of people were protecting their P&L. I mean, a lot of people have made a lot of money this year and they didn't want to get that washed out and they didn't know where BTC was going to go, but it was looking weak. And so they just basically full stack sold all of their alts all at the same time, and there was zero liquidity in the market to take, to take the other side because people are gambling into year-end, as you said. And these alts just got completely washed out of sellers, in my personal opinion. I just don't see where the selling comes from for a lot of these things at this point. If anything, that this, this is where the buying starts. And this is, you know, I tweeted something, I said I'm bullish on alts heading into the new year. Just be patient, pick your spots, and make sure your buying is done by the end of the year. I still— I'm still 100% on board with that. I think that you probably should be buying alts right now. Uh, basically anything that's been strong, you want to start either legging into or just at this point kind of pushing your— pushing your chips in, because I think Q1 is going to be really good. Yeah, even relative to BTC. So if you want, what you can do is you can say, okay, maybe I'm not— don't know where the market's going, but I'm bullish on alts. Maybe you want to short some Bitcoin to hedge your alt exposure if you really care. But I mean, I think that this recent move washed out all of the end-of-year sellers and people are going to rebuy come the 1st of January. Like, I'm not bearish. The cycle is not over. And, you know, I'm not in the habit of making bold predictions like that all the time. But I mean, this is like a, in my opinion, no-brainer point to get in the market and just ride it, ride it up. Because if you really think about why it sold off, right, it's kind of a few reasons. One is obviously sellers stopped buying in the blackout period that people have been talking about. Two is the Fed. The Fed coming off a lot more hawkish than people expected. And I think both of those things have now been completely digested by the market. Anyone that would have sold because of those two things, they're all out now. And so the Fed being hawkish on the general markets and saying, okay, well, you know, we shouldn't be cutting that fast. Now, any downside in the equity markets that it'll, it'll just reflect an actual slowdown in the economy. Um, it'll, it'll reflect that, you know, at this point we're at equilibrium, so it'll reflect bad things that are happening. And right now, no bad things are happening. In fact, I think Jan 20th is going to be a great day because a lot of regulations are going to get repealed and the market's going to go back to humming the way that we expected it to. This was as close to a clear bull market washout event that I've seen in a long time. I mean, this is just so— yeah, it's just so clearly to me a bull market washout. You also have a lot of people that are, okay, that was it, pack it up, like it's over, uh, we're not, we're not going back up. I mean, people— I think a lot of people capitulated on this, and now is not the right time to capitulate. It's my two cents on the matter.

Yeah, Abhi, I think that's a great take. I agree with pretty much everything you said. In fact, I'm probably going to go and buy some more crypto after we hang up the phone here. I, I, I think this is about as like what, what you described is sort of just a bull market washout. I agree. This, it literally looked like the textbook says it's supposed to look. You run up on euphoria, nothing really that relevant changed, but you just got one little negative piece of news and anybody without a lot of conviction probably hit the sell button because there are a lot of unrealized profits out there now. I, you know, and people want to protect that into year-end. To my point about risk aversion, nobody wants to, nobody wants to ride this thing down to $40K before the end of the year and have, and just have a terrible 2024 when they could have had an amazing 2024. Um, to, you know, let's talk about the Fed for a second. They just came out jawboning more hawkish than people expected, than the Fed watchers expected, than the interest rate markets expected. This wasn't like the announcement of a new hike cycle. This is more like, hey, you know, we're gonna, you know, we're not just gonna be cutting with reckless abandon next year. We don't really have inflation under control the way we'd like to, uh, so we're just gonna be mindful of that. Like, I read the Fed minutes, you know, the side-by-side minutes, and this awesome piece that I follow called The Daily Shot, which is just like—

I love it too, by the way. I follow The Daily Shot every day, and It's just sometimes, sometimes it's just—

Daily Shot's awesome. Yeah, no, I mean, you can scroll through the part about like, you know, South Korean, you know, electricity prices, but, you know, to the Fed stuff, like it digests it pretty well for people like me. So to me, it didn't seem like a massive paradigm shift the way that 2022 was. Like 2022, we went from zero interest rate policy, ZIRP, to, okay, I guess that era is over. The 35-year-long bull run in bonds is over, right? And that was a big, you know, seismic shift for all markets. And there was sort of an ongoing question mark around what the Fed was going to do with rates because no, like Powell didn't really telegraph that clearly, whether he was just going to hike to some crazy level or whether he was, whether the hiking was over, you know, markets were scared. Bitcoin took a big hit as a result of that. This time, like, it's abundantly clear they're not going to go into another hike cycle and send short-term interest rates up to 8-9%. Like, that's just not happening. It's more like, okay, we're not going to cut it down to zero, but, but markets are already pricing that. So to me, it's like anybody who went and sold— anybody who was like bullish crypto for all the reasons that we talk about on this podcast and then went and sold because the Fed said something hawkish, or so they heard on X, um, I think that, you know, anybody who's doing that is kind of lettuce-handing a pretty important opportunity in crypto markets. Like, I think this, you know, this is a pretty decent chance to get long ahead of what I perceive to be, uh, you know, a rip-roaring 2025.

Yeah, I think, I think you hit the nail on the head. It's important to contextualize why the market did what it did. A lot of times the market will make decisions on a short-term time frame based on what the Fed says. Very rarely does the Fed impact the trend of the market. It only happens when there's a paradigm shift in the approach of the Fed to the market based on data that they ingest, right? So in 2021, November 2021, they said, finally, inflation is not transitory. We better start taking this seriously. This requires a rethink of our entire strategy towards how we manage the markets and how we manage our economy. We need to raise rates. And that was something that had just never really happened before in the last like 15 years, right? When they, when they made that decision. So what we see today, exactly as you said, it's not a paradigm shift. It's not them saying anything is different about the market. It's actually just adjusting their approach. And you can make an argument, okay, well, maybe the market was rallying exclusively because they thought the Fed was going to be extremely dovish for the foreseeable future, and therefore the market was just rallying. And now that they're not just giga doves, the market's going to reverse. But I don't think the market was rallying because the Fed was dovish. The market was rallying. Yes, it got a, it got a boost from that. And yes, this is a slight amount of brakes applied to the upwards trend. The market was rallying because the economy is doing well and that hasn't changed. We are going up because people are making more money, because wages are going up, because companies are making more profits. And because we're heading into now a new regime under Trump that's going to be even more business-friendly. None of that has changed. The only thing that's changed is that one piece of the puzzle— how, you know, how much gas the Fed is willing to pour on the fire— has changed. And what's clear is that the market has digested that and said, okay. So what you get in those types of scenarios is you get a reset, right? You got, you got a pretty big reset. I mean, you know, Nasdaq went down 5%, actually more, I think almost 10% from high to low. And now you just resume the upward trend from a lower base. And that is like that difference and that time period and difference is what's priced in now. So, okay, yeah, we're right now 5% lower than the highs because of what the Fed did, but it doesn't mean that the market's going lower. Because everything else that was driving it higher remains the same. And so you have to, you know, think about the components.

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With Bitcoin, you obviously have one additional component, which is it's rallied a ton. Well, two additional components. It's rallied a ton because Michael Saylor is buying a ton of Bitcoin and that's out of the market for some period of time. And so you have to say, okay, you just adjust your upward trajectory for at least the next month or so. And then you have Bitcoin was going up because of the strategic Bitcoin reserve and because of the Trump trade. Now, at this point, I think that the people that were looking to sell closer to the January 20th inauguration, they're probably out of the market, right? Like if you, if you had that trade on from the election expecting to sell into January 20th, well, this reset, like this weakness was probably your time to sell. Unless, you know, we rip higher again into, into Jan 20th. Like, if we're trading back at $110 into Jan 20th, maybe take it off. But I don't think at $90K, because that, like, the selling in that area has been, has been absorbed. And then there's this strategic Bitcoin reserve, uh, where I think Nick Carter came out and said it's very unlikely that it happens. I think that—

who is Nick Carter? Does he matter?

Like, I saw that. Yeah, he's, he's, he's pretty, he's pretty clued in. He's a really smart guy. He's clued in. He's got a large audience. He's a smart guy. He's close with a lot of people on the inside. He's influenced crypto policy, not substantially, but enough to say that I think he matters and I respect his opinion and I like him as a guy. Now, what his take is, I mean, it basically just— why the US government doesn't buy stocks. You know, the US government just buys, buys their own instruments and Bitcoin is not an instrument of the US government. And so the hurdle rate to actually go buy this thing is pretty damn high.

And the political buyback that they would get is— sorry, go ahead. I didn't mean to interrupt you.

It is pretty, is pretty damn high. And that's kind of similar to the argument that I used to make against you, Jonah. But I still think that the, the game theory, I mean, what it starts with is it starts with Trump just not selling any Bitcoin that the US government accumulates. And then over time it changes. And the nice part about it is there's no moment during the first 90 days of the administration where it gets thrown out the window. So the hope remains. The hope remains until Trump comes out or the government come, you know, someone in the government comes out and says this is not happening.

Yeah.

And I actually think it's very unlikely for that to be the case. You know, there'll be indications that it may or may not happen, but I think it's very unlikely for a government official to come out and say, sorry, this is now completely off the table. We are not doing this. You know, you know, it might have some obfuscation. Yeah. You know, we're thinking about it. Where, you know, it's not ready right now in its current form, doesn't make sense right now, which would obviously send the market lower. But it's not, you know, it's not going to be decided. So it's not going to be a hard no, which leads back to the point of, okay, well, that's great. That's just an additional bullet point. Everyone in Bitcoin, it always needs something, right? Bitcoin very rarely rallies without something that gives people hope for why it would go higher. And whether that hope is real or not, what matters is that it exists. And the fact that I don't think that it goes away makes me very bullish, kind of regardless of what happens. Does that make sense?

Yeah, it makes total sense. As they say in the game of chess, the threat is more powerful than the action, right?

Like, correct.

And I think that's what's going on with this strategic Bitcoin reserve. Now, I disagree with Nick Carter. I think they will create one, even if it's just appropriating the Bitcoin currently held, like the Silk Road Bitcoin currently held by the US Marshals and putting it on the US Treasury's balance sheet. But if Nick's argument against a strategic Bitcoin reserve is that the government doesn't buy non-US government-issued securities, and Bitcoin does not count as a US government-issued security, I think that's kind of a stupid argument because the government buys non-US government-issued currencies and commodities all the fucking time, right? They hold gold, they hold euros, they buy oil. We import billions and billions and billions of dollars worth of commodities from all around the world and stick them on the government's balance sheet. for various reserve purposes, um, and government programs. Uh, the government is a huge consumer of steel, of copper. Like, it's, it's, it's endless amounts of money getting spent on currencies and commodities. And whether you think Bitcoin is a currency or commodity is relevant to this conversation because reserves exist for both currencies and commodities— government reserves. So I think that if something's as geopolitically relevant as Bitcoin, there will eventually be a pool of it sitting around on Uncle Sam's balance sheet somewhere. Now, how does it happen? Maybe Trump doesn't like get up on stage, take his pants off and scream, we're making a friggin strategic Bitcoin reserve, everybody.

Yeah, send this thing to the moon.

Like, it probably doesn't go down that way. but you know, if the threat is more powerful than the action, if that, if the idea that the US may have to accumulate hundreds of thousands of Bitcoins somewhere, like that's a big threat for every other country that's thinking like, hey, my currency might not be as interesting as Bitcoin, or hey, you know, I might need some of this Bitcoin for global trade, or hey, um, I'm holding a bunch of gold. I'd rather hold Bitcoin because there's a generational shift going on and the US government is threatening to establish an SBR in the near future, if I act after they act, I'm getting probably 1/3 or 1/5 or 1/10 as much BTC for my unit of fiat as if I act before they do. Right? Like, so I think that just the threat being on the table probably yields some sovereign buying. And, you know, you, we've seen random unsubstantiated possibly real, possibly fake news on X about how the UAE has accumulated tens of billions of dollars worth of Bitcoin already. Um, maybe this stuff doesn't happen out in the open. Sovereigns, uh, have a varying track record in terms of their reporting of how much gold they purchase, how much oil they purchase. Um, you know, it's, it's not the most transparent process, these reserves, but ultimately I do think they will be created. And I, I think that You know, even if they aren't, that threat is going to put a floor under the crypto space in 2025, much like the deregulatory—

yeah, I think that, that point is where I land on this, is it's, it's the threat, as you keep saying, that buoys this thing. And at some point, what, what happens is it gets, it gets to a price where, yeah, it's not going to go higher than that. Unless it actually happens. So it requires, you know, a tremendous, tremendous amount of buying. But $90,000 is not that point. I mean, one way to think about this is without any indication that the president of the United States likes Bitcoin, that we might have a strategic Bitcoin reserve, that other countries might be accumulating tens of billions of dollars of this, that it's become very clear that the administration is extremely pro-crypto, extremely open to good regulation about this. Without any of that ever happening, Bitcoin got to $75,000 in 2021, and right now Bitcoin's $90,000. And so you're telling me, given all of that amazing stuff that's happened, Bitcoin should be $90,000 relative to where it was in the past. And by the way, that's the only thing— the only way that you can really value this thing is relative to where it's been. Yeah, that doesn't make sense. Like, that's not— that is not the equilibrium price. That's— it's just not, you know, there's sort of— there's sort of no way around that. Obviously, I think the equilibrium price is more than 20% higher than that. I mean, yes, that was a period of peak mania, even then, okay, this year we range between $50,000 and $74,000 per BTC. Again, without, without any of that. And so I think that what's clear to me is that at least in a bad world for Bitcoin, which it was about 6 months ago prior to the Trump election, fair value for BTC is somewhere between $50,000 to $70,000. So now in an amazing world for Bitcoin, I don't think fair value is $90,000. I think that's at least twice, at least in my opinion, twice that. So maybe the new range is $100,000 to $140,000 if you want to think about it that way. But that's how at least I'm approaching it when I think about quote unquote cycle top. And so when you think about it from that perspective, I don't think euphoria is over. And so, yeah, with all of this new, with all of this new development, if I believe that the base price of BTC should drift towards $100,000 to $140,000 based on where it was previously during periods of euphoria, why can't it go to $200,000, $250,000 and then come back down to that level? Yeah, you know, I'd probably, I'd probably sell everything that I owned at $200,000 per Bitcoin because I think that would be euphoria. Without an actual SPR. But I think that we get there in the next year in a period of euphoria, and then it sells off and then it settles at a much higher price than it was settling in the summer of this year because candidly, the fundamentals are better. And so, no, I mean, like, it's just crazy. Maybe I'm delusional, But it's crazy for me to think about the fact that we could have all of this amazing, you know, like all of these inflows, amazing things that have happened for BTC, for it just to go back down to $70,000.

I don't think so. I don't think so.

Like, if that happens, then like I'm going to switch careers. Like, get me out of this thing. Hope you keep going. Because I clearly just don't understand it.

No, I mean, look, like, okay, so first, there's so much to talk about in what you just said. Um, the— I, I— if anybody's not delusional, it's you. Like, I have a tendency to get delusional. I get— I'm a momentum trader. You're more of a range trader at times. I mean, I know you, you know how to ride a momentum trade very well, but, you know, you also like to get in and out of stuff, and you like to buy dips and sell pops. And so I don't think you're delusional here. I think you're being extremely rational. It's part of your process to evaluate the market this way. Um, Avi, I think that with Saylor not buying and the Fed doing what they did, if this had happened in March or February, instead of trading from $108 to $93 or $94, we'd be trading We're down from $108 to like $103 or $104. I think it's just we're in a very illiquid time of year and there are very few people out there willing to plant the flag in the week between, you know, like Christmas and New Year's who are going to come in and just like just drink all of this up and buy all the Bitcoin that, that just got sold by the people who are Waiting for I don't know what. So basically, consider this a holiday gift out there if you're still bullish. Merry Christmas, Happy Hanukkah. This is, um, I think this is a good time to get long. And then I guess the follow-up question is, what do you get long? Do you get long meme coins? Do you get long Bitcoin? Do you get long ETH? Do you get long Solana? Do you get long some other part of the long tail of altcoins out there?

You get long the stuff that's been doing well. Yeah, that's my take. I mean, look, the way that— here's one way that I judge a trend in this market. So just pull up, uh, there's actually a great trend indicator that I use called the EHMA. It's Exponential Hull Moving Average. Set it to 180 and put that on your chart, and that actually tends to be very well respected by things in crypto. Additionally, I have found that the 20-day moving average is very good for short-term, for short-term trades. Um, and then you obviously have the 100— sorry, the 50-day that I think, I think is good as well. And so the way that I would figure out what to buy if I'm a trader is I would look at stuff that's still above those moving averages, and I would try to buy it when it hits those moving averages or gets into, into that zone. It's not always clean. It might go -5%, +5%, but as long as you don't get 2 daily closes below it, um, you know, I'd buy that. So look for alts that are still in trend mode. So like AAVE is a great example of an alt that's still in trend mode. Ondo is a great example of an alt that's still in trend mode. Even LTC, uh, is, is a great example of an alt that's still in trend mode, holding that EHMA on the, on the 1-day. And then think about also like what sectors will do well. So basically I'm betting again that ETH is going to do very well in Q1. So my bucket looks like ETH plus all of the strong alts that are in the ETH bucket like AAVE, Morpho, LINK, that kind of stuff with some, with some ETH beta. And then I think about, all right, well, I think I like AI coins. So what's strong in the AI coin world? Look at the moving averages that I just mentioned to figure, to figure that out. And then I like dino coins because I think retail comes back in. So what's strong?

Strong dino coins though. You don't like all dino coins.

Yeah, exactly. The strong, the strong dino coins. I mean, like Litecoin, for example, has potential ETF coming. That's pretty good. I like that a lot. I'm still not 100%, you know, fully allocated to my positions because I want to chip away. Like if we get any, you know, low liquidity, like if we get anything illiquid, happening over the next, call it, you know, week or so in the holidays. And I like to, I like to buy that. But, you know, I mean, things like, I mean, Virtuells, for example, like I had a bid out, I had a bid out for that. It got, it got to $2. That was an amazing, that was an amazing buy. Now it's up for like 40% since the third, 35% since then. I mean, you know, there's still, there's still a lot of ways to make money in this market. Just don't be afraid.

Yeah, I mean, I think that I don't really like— in Bitcoin, at least, I don't like to buy dips, as in I don't like to buy sell-offs. I don't like to catch the falling knife because the asset is so reflexive that, you know, everything I could have said about how this is a screaming dip to buy could have applied at $100K or at $93K. And so I could have bought $100K and had it slice all the way down to $93K. You know, you, you bottom ticking Virtuals is, you know, maybe you've got some sort of like magic secret sauce.

It wasn't, it wasn't, it wasn't a bottom tick.

I mean, it was like, I think it didn't trade far below 2, did it? I mean, that was—

I mean, I didn't, I didn't know. I didn't, I, I didn't, I didn't buy 2. I bought about 220.

Okay, because I'm looking at the candles here, it like traded 220 to 230. Yeah, there's an area that I That's still an insane—

I mean, that was like just pure charting. And, and, um, like, I mean, that bid actually— and this is something that you guys should just do— you never know if they're gonna get hit, obviously, but just chart out some levels on the stuff that you really like and then just be patient. And oftentimes it will get bid, especially during like crazy moves over the last week. I mean, Virtuals, for example, I think it— yeah, it traded down, it traded down to $2. Um, I, I think I, I mean, I got, I got nuked on the buys initially, uh, because I had set it for like that $2.33 area down to the $2.24 area. Just looking at it right now, like, that's the area that I was looking to bid, and then it got nuked, and now it's at $2.78, but I held on because I'm bullish on Virtuals. Like, I think that it's a good product, um, you know. And a good way to try to trade these things is, uh, I mean, I actually— on Virtuals, just to take a step back for a second, it was pretty new, so it's kind of like hard to get the right moving averages on it. But at least in terms of like order blocks and horizontal support and resistance, it's like, okay, well like where, where are you buying this thing eyes closed and just saying, okay, I want to own it? Uh, you can use horizontal support levels to figure that out and then just leave your bids. I left that bid there when Virtuels was trading at $3.

Hmm.

So I was— I had a bid, got whacked, like basically 30% below where it was, and it got filled, right? I mean, but that's not in a long period of time either. Like, you know, but that's kind of— yeah, but that's how you have to think about trading these alts is, is you just— because they're so volatile, you just have to wait to get filled on them. You cannot chase them unless you're trading on like a day-to-day time frame. You kind of just have to wait to get filled because psychologically it's going to go against you, and they're like— statistically it's going to go against you because it's super high volatility if you try to buy it on the way up. And psychologically, that's very difficult because you're like, okay, did the trend break? But if you buy it when it's falling into you, that's, that's a lot easier psychologically. So that's an important thing as a discretionary trader.

So like, you know, I agree that you should, you should dip buy on a scale, like set levels and chip away at your bids for something with like 300% annualized volatility, something crazy, some altcoin like Virtuuls. For Bitcoin, I don't like doing that. For Bitcoin.

No, no, it's different.

I don't like trying to get cute, trying to like dip buy Bitcoin and then miss it. I prefer to wait for it to bottom out and then start to steadily rally again, and then I like to buy the, uh, the recovery because I tend to—

yeah, the issue— yeah, Jonah, the issue is with that strategy with altcoins is the recovery can, can take place and fully price in like a few days. Yeah, it's too quick. Bitcoin, Bitcoin can rip for weeks.

Yeah.

And so, yeah, sure, you buy the break—

we're 2 years into this.

Or like, you know, you, you buy, you buy the breakout on the Trump election of BTC and it rips for like a month straight, basically, right?

That's a trade we talked about on this podcast too. Like, we said we were gonna do that with alts.

I mean, it happens really quickly. That's, that, that's a big issue, right, is you have to, you have to understand that and then take advantage of the volatility. You're bullish on something, you think it's— you think it's going to go up, but if you buy it on the +20% day, then because it's so volatile, like, the probability that you're going to be able to get filled lower than that price is pretty darn high.

Normally, um, it's just a lesson, you know, it's like, and FOMO into crazy vol— like, your differentiator is the volatility. If the altcoin volatility is insane, you probably shouldn't be FOMOing into rallies, right? You should probably be setting levels.

I, I agree. Now, where this obviously is different is after a very long period of low volatility in alts, if it breaks out, yeah, sure, go buy it, right? Like, if you've gone— if you've gone sideways for I don't know, a month, 2 months, 3 months, there's reasonably low vol in the market, and then you get a high vol breakout move, you can go chase that. What I'm more talking about is in an environment like this, it's okay, Virtuels is going— has gone up from $1.80 to $3, to $3. Like, on that way up if you're at like $2.50 and it's already plus like 100% in the last month and it's clearly in a trend, it's super high vol. Like, it'll pull back to the trend baseline. Um, obviously, like I said, if it's gone sideways for an extended period of time, maybe it won't pull back. But, you know, so you kind of have to figure out— it's like the difference between range— like trading a breakout of a range versus trading a trend, right? This is just You know what this would have applied well to?

This, this would have worked really well for Hyperliquid, right? Like Hyperliquid is an asset that was trading like $2 a token, then it ripped up to $25, I think after the airdrop. And you couldn't log on to Twitter without having 100 posts about how great Hyperliquid is and how it's going to replace Solana and Ethereum and Bitcoin and Microsoft and Apple and just be the next big thing. A lot of people FOMO'd into it on the highs, just like, I have to buy it now. It's never, you know, after it just 10x'd, it's never, it's never going to go down again. And then immediately it nuked 30%, uh, just like virtuals.

So yeah, I mean, it's, it's like, it's like one of those things. I mean, people are the most loudest when things are going up. Hyperliquid is actually tough because it's still like, it's still doing very well. But I remember like the day that everyone was freaking out about it is the day that Yeah, I mean, I think it topped at like 28 and then went back down to 28 to 22 in the span of, in the span of 3 days. I mean, it's basically just as simple as, yeah, okay, maybe if you're FOMOing a lot, like buy 20% of your position and then just set bids lower because, you know, it's, it's very likely that you'll get filled. Now, the one time that wasn't true with Hyperliquid is it did go from $13 to $24 in a straight line. Like, there were literally no dips on that thing. But at the same time, I view that particular piece of price action as a relative outlier to what we're— to what we're talking about.

Yeah, setting it— setting limit bids.

Virtual's up 20% today is nuts. I love it. I love it.

We're going to have to talk about agents later on the podcast. But before we do, I think part of the reason why you get these moves in crypto is because let's say that your preferred centralized exchange doesn't list the latest and greatest altcoin that you want to buy. You're not really going to be sitting at your desk like, you know, you're buying it on-chain basically. Like, if you can't buy it off-chain, you're gonna buy it on-chain. And it's frankly pretty easy to ape into stuff, uh, you know, using Jupiter if you're on Solana, or Aerodrome if you're on Base, or maybe it's all— you just do it natively in your Phantom wallet or MetaMask or Rabby or whatever. Like, you're just used to swapping stuff and trading on-chain. Like, the user experience is getting way, way better for that. And on-chain trading, like, it's not intuitive in a lot of these platforms how to leave a limit order, right? Like, shout out to our sponsors Definitive. Like, you, you can leave a limit order or do a TWAP with those guys on-chain, and that is like the smart way to trade. That is a really intelligent thing that people should be doing. But if you're not using a product like that, if you, if you want to buy virtuals on-chain because you're not hooked up to the exchanges that list virtuals, you can't— unless you're using one of these newer, you know, definitive, like, platforms— the only way you leave a limit order is by sitting around and watching your screen until it dips and then submitting a market order when it dips. Like, you are the limit order. You're, you're literally— your brain is in the order book, and that can be pretty exhausting and frankly not that practical for people. So like, that's why crypto trades the way it does. Just a lot of people, a lot of retail guys, like, aping into stuff using market orders on-chain on the highs or puking out on the lows. And that's an opportunity for smarter traders who want to like take their time to, to leave, you know, to trade more intelligently the way that institutions do. But institutions aren't trading these assets yet. So yeah, I guess it's, it's nuanced, isn't it? It is. It is.

I mean, one thing I'm excited about is how that, that's going to change a lot. Moving forward. One discussion that I was having, I think on Twitter, was around the future of crypto trading. It was because people are going back and forth about Hyperliquid and talking about Hyperliquid, this Hyperliquid, that it's the Binance, it's this, it's that, it's amazing. And then somebody chimed in and said, yeah, but it's a decentralized exchange. Like how, like how big could it really get? And I do think that over the next 2 years especially because of all the regulatory clarity, we're going to see decentralized exchanges eating into the market share of centralized exchanges because you can do everything on them that you can on a centralized exchange, but your money is more free and more capable. And one of the reasons why people stuck to centralized exchanges is exactly everything that you just said. Like, you just couldn't do things. You can't do things easily on decentralized exchanges, but that's changing and it's changing very quickly. And I think that what that means is that if you want to bet on a sector growing pretty substantially, like, that's actually a pretty good sector to bet on at this point.

And KYC to be on Hyperliquid?

Don't believe so, man.

I mean, this is, this is my big question about, like, I kind of want to agree with what you just said, but my hot take would be Hyperliquid is successful not because, um, it solved something that centralized exchanges have— haven't, more just that it's not requiring you to do something that centralized exchanges require you to do. So I mean, it's a little bit too big, uh, I don't really see that.

Yeah, I mean, I, I think that at some point like they're going to have to KYC people. With that being said, that's not the only reason why it's better, right? I mean, the fact that you can— your capital is easily seen across the entire crypto universe. So like, for example, you can't— if you have a position on Hyperliquid, and you make a tremendous amount of money on it and you don't want to cash it out, but you want to go do something with that P&L, then you can borrow a little bit against it in a, in a few, in a future world really easily. Whereas on Binance, that's going to be a lot harder, right? Because, you know, something like AAVE could in the future treat that position as genuine collateral that it could, that it could take over, and then you can go borrow against it. And there are a whole bunch of different things that unlocks when your capital is on-chain and accessible by other products that you just are never going to get with a centralized exchange. So I think even if you do introduce KYC, it's still like the future is still decentralized exchanges. No, no questions asked.

I agree with you for AMMs because I think AMMs are a better way of pricing new and/or illiquid assets than anything else.

But I think the—

I think for CLOBs, centralized limit order book exchanges like Hyperliquid, The jury's out. Now, mea culpa here, I'm just raising my hands and I'm going to admit something. Avi, you and I did sort of like a deep dive on a couple of projects 6 or 7 months ago. We did Ondo, we did Athena, we did Hyperliquid, and a couple others. Hyperliquid, like, I missed the boat. I got it wrong. Like, I looked at Hyperliquid, I did the work, I read the docs. I did my deep dive and I concluded like, wow, this is a really slick user experience, but it doesn't have enough validators to be considered anything other than a centralized exchange. And even if it were super decentralized, who cares? Uh, the world already has 100 clubs that work great. Like, why do we need 101? You know? And I probably should have seen that they weren't requiring KYC because that alone is worth billions to an exchange. I also should have looked at their tokenomics a little bit more closely and realized that they just buy their own $HYPE back with their trading fees, which is kind of a way of passing revenue through to users in a way that isn't illegal. So that's smart. Binance doesn't do that. They don't like buy Binance stock with their—

you know, you know, it's, you know, it's disgusting. We discussed we, we talked about Hyperliquid on the podcast 8 months ago. Yeah, I mean, neither, neither of us profited from it in any substantial manner because, I mean, it was basically that we— I don't know if we mid-curved it. I think that— I mean, maybe that statement is mid-curving it.

No, no, but thinking about something is mid-curving, and I hate, I hate this.

I mean, yeah, but like the issue was that It was like, I've seen it. I, like, I've seen this play like 100 times. Yeah, right. You've had— GMX existed and it was the top decentralized, like, club for ages.

Serum.

And then I just—

they come and go.

I mean, like, a lot of these things, they, they came and go. And I think I missed the— it was the right time. And not only that, it kept— well, it was the right time, it captured the attention of the right people. Like a lot of people that I know that used to trade on Bybit started trading on this thing and that the team was very willing and this is important, was very willing to serve their users.

Yeah.

And were clearly dedicated to their users in a way that no other crypto product was or is, candidly, like they were willing to give away so much of their wealth to crypto users. They were willing to pay so much attention to what those users wanted and build and build things for them. And I think that's underrated, which is why I think that a lot of projects are going to try to emulate that moving forward, because it's clearly been so successful, especially products that require— like, I mean, here's, here's something like really simple. Hyperliquid gave a lot of their token to the users of Hyperliquid, because it was kind of like giving a bunch of people addicted to casino chips.

Yeah.

Like, yes, technically they did give them money, and technically they can go take that money and do whatever they want with it. I would— I would almost guarantee you that a lot of people use that money to gamble more on Hyperliquid.

Oh, without question, right? Like, also, like, it is— if you traded $1,000 worth of Notional on Hyperliquid pre-airdrop the amount of airdrop tokens you would have gotten for that with Hyperliquid on the highs was worth more than $1 million. And if you're some DJ who's trading on Hyperliquid before it's a thing, like back 8 months ago—

yeah, I mean, that, that, that, like, I don't know how long that million dollars is going to last you, but those people are, you know, definitely trading that money on Hyperliquid for sure.

And You know, that's kind of how Aerodrome is eating Uniswap's lunch. Like, they're just extracting less and sharing more with the community. I think, I think after kind of like people would discuss tokenomics in 2021 and it was like kind of a big yawn because the only thing that mattered in 2021 was are you long with all of your net worth and then some or not? And who cares about the details? Like, I think finally crypto has entered the era of tokenomics. Where you have to look at projects. Obviously, you have to make sure that the user experience is shiny and cool and that it's in the right place at the right time. But the tokenomics, like, are they extractive or are they accretive to the users of the product? And if they're accretive, then the project is going to survive. And if they're more accretive than everybody else who's doing the same thing, then maybe that project will start to eat some market share. So, like, I like your point about DEXs, Avi. I think that's really cool and important. Important. I, I'm going to keep monitoring Hyperliquid even though I was like the biggest skeptic of yet another exchange. I obviously think that Hyperliquid's airdrop was a massive success. But, you know, I wonder how— it's one, it's one I'm going to monitor. I don't think— I think it's too late for me to buy it. Or maybe it's time to just drop in some bids 30 to 50% below here. See if I get—

think about it, Jonah.

That's, this is a, this is an interesting conversation. So we've got a few other things to discuss before we wrap the pod. We have to talk about agents and then maybe we should talk about, I don't know if you want to, or I don't know if you do or not, but OpenAI is talking about releasing ChatGPT-4.03, which supposedly is like PhD-level computer science. Genius. Like, it can— it places— it, it scores insanely well on coding exams, orders of magnitude better than anything out there today. It scores orders of magnitude better than anything out there today on math exams. Like, this thing is just— people are talking about like, hey, maybe artificial general intelligence has been achieved. And, you know, I think there are some market implications for insanely good chatbot AI out there, including in crypto. So maybe we should touch upon those two things before, like agents and AI before we wrap.

Yeah, yeah. I mean, the agent, the agent thing is really just— I'm every, every day that I spend on this, I become more and more bullish. The primary application of AI to date currently has been primarily a passive application of AI. Right? You interact with the AI to go do things for you. Uh, you go to ChatGPT to ask it, to ask it questions. You, uh, ask it to analyze data. You ask it to generate charts, but you have to come up with the— I mean, you, you have to even come up with the question. You have to come up with the subject. You have to come up with the framework. You have to come up with every— any, like, whatever you're doing with AI there's a lot of actual work that you have to put in to make it valuable to you. And that means to some people, AI is very valuable that can do that. And to some people that don't know the right questions to ask, it's actually not that valuable. Um, even to somebody like me, like sometimes I'll know the right questions to ask, sometimes it just won't do it. And agents change this because they take AI and they make it from something that's passive into something that can be active. Right? You can create an analyst to go actively look at the market and actively give you ideas consistently every moment of every single day with good analysis. Like, you can run a hedge fund off of active AI agents. And that's actually really, really, really powerful in a way that I hadn't really appreciated before until I started— until I started using them, which just makes me think that, um, you know, it's going to be companies can be run a lot more cheaply. It's gonna be a lot of, lot of cost cutting that goes on over the next, call it 2 years, as these things, as these things continue, continue to get better. I mean, that's gonna be amazing. But this has kind of been the flip where you take AI from something that is a good passive tool to something that can now emulate a human that is active and can add value to your life in ways that you didn't actually think about before, that's pretty damn cool. I hope our AI bot gets smarter. This has actually been a little annoying because it's clearly still in the early days. I mean, the—

have you noticed that I've been tweaking it though, Avi? Have you noticed it's gotten smarter since last week? Every week I promise to make this—

did you, did you see the, the edits that I did as well? I tried to Yes. Change the bio.

You know, interestingly enough, I've seen—

to yell at it to do more specific stuff.

What I did see that, and basically we got help from the virtuals team in terms of like how to, how to frame to the agent our ideas about how the agent should behave and how to give it examples and how to formulate syntax within the agent JSON file. So like, basically every single week we're going to make this better. I saw your edits, you saw mine. This thing was dumb last week when we announced it, and now it's just dumb, you know, like, but less dumb. And so we're going to keep making it better every week. And I, I hope, you know, let's call it a side project, Avi. You know, our main project is our, our trading activity. Our second project is this podcast. Maybe our third project will be just making this agent better week by week, we're going to keep in touch with the community on it and keep improving it. But one thing that was kind of funny, some news for you. Before this pod, I was on a call with, you know, the name shall go unnamed, but we're going to be working with a pretty awesome major partner/sponsor starting in 2025. Very exciting. You know, we're going to reveal the details of that later. Um, and somebody on the call was like, hey, wouldn't it be cool if in our product that our customers interact with, you could open up a chat window and interact with the 1000x bot, the 1000x agent that sort of sees your— sees what you're doing in crypto, ingests price feeds, ingests news, and can talk to you about what you're doing within the context of what's going on in the broader market and make suggestions and talk to you ideas. And it should sort of be like your, your sidekick, right? But not in a, not in like, use not to use your word, Avi, not a reactive sidekick, a proactive sidekick, something that's just like aware and talking to you about what you're doing. And I thought that's, that's kind of awesome. Like I would have loved to have this as a trader. My entire 20-year career as a trader. I would have, you know, I have worked with other traders on my book who have, you know, constantly brought up amazing ideas. I've been in teams where people bring stuff up. I've managed people who come up with good ideas, analysts, PMs who report to me, like it's, or, you know, in the early days, like I was the, I was the agent. I was the bot who made suggestions to the senior guys. But like, this, this could truly decentralize finance. This could take like institutional, like Soros-level markets intellect and put it into the hands of everybody, even if you don't know exactly what to ask and you don't have the right mentors or rabbis in the industry, you know.

Yeah, it's, it's gonna be, it's gonna be amazing. I'm, I'm psyched, which is why we're working on this thing, because maybe this thing that we're working on, this 1000x agent, could be that. Like, what if we just make this the best damn analyst in the world?

Let's be honest about it. Let's not—

I mean, obviously, yeah, why would we— why would I ever do that?

This one is too cool. This one is too cool. Yeah. Um, and I guess, like, I think that, you know, our friend, uh, one of the friends of our podcast said the best tokens over the long run will be the tokens that AI agents transact in. And I want to get your take on that, Abhi. Which, which cryptocurrencies eventually, like AI agents can just talk to humans about their trades and their ideas.

I mean, they're going to, they're going to transact in probably USDC. That would be my guess. It's like, there's kind of no reason for them to transact in anything else other than USDC.

Why not Bitcoin? Why not virtuals? Why not? You know, they're going to touch all of these different—

just, just less, less liquid than the US dollar. More stable. Maybe Bitcoin. Bitcoin could be good.

Bitcoin could be a good one.

Yeah, that would be pretty sweet. But I mean, you know, that it kind of reminds me of an old— the old project, the IOTA project, because they in 2017 sort of fell down the IOTA rabbit hole. Bless my heart. Back then I wasn't a smart guy. And their entire pitch was that they were going to be the currency that machines transact in. And then what became very clear is like, there's kind of no reason for machines to transact in anything that isn't the base, like a major base currency, as long as it's digitized and like, and is able to be transacted on, like on their network. Like, if they can communicate it to each other, like, why not? Right? And the argument back then was there was nothing that they could communicate, you know, the dollars on other than like Tether. And Tether was kind of a scam back then in people's minds. And so everyone's like, okay, we're going to create the, the, the cryptocurrency for the machine. And the reality is that it's just going to be whatever rail. That doesn't mean that the things that enable these agents are not going to be extremely valuable, which is very likely going to be the case. I mean, right, like if you think about it, it's like these— they're going to be companies like Virtuals that are just agent creation. Like, that's what they do. Like, their job is agent creation. And in order to create the agent, you have to buy into their ecosystem, right? It's like, I don't really know how to describe this other than, um, you know, if you wanna— like, if you want to write something down and send it to somebody, buy into the Word ecosystem. You'd like download Microsoft Word and you use it. Because that's how you communicate with people, right? It's, it's like, that's kind of it for, for virtuals. Like, these, the, this is what's going to create these agents. And you want to interact with these agents, you want to use these agents, you got to buy into— instead of like paying a subscription service, you got to buy into virtuals to do it.

Yeah, but like, creating the agent, as we're learning, is hard. So maybe like agent creation is the new marketing agency. Like, Avi, maybe you and I should like start Mad Men 2.0. And we should be like people that help other people create agents. But to your point about— that's—

wait a second, that's actually, that's actually brilliant.

Yeah, because like marketing, this is the future of marketing.

Really, really damn smart.

This is the future of marketing. Like, that was your comment. So I was thinking like, you know, Nike— if Nike wants an agent, they're not going to build it themselves. They're going to hire a marketing agency like they do for all of their other ads. So like, why not, why not be the Mad Men of of agents and have tokens attached to them so that communities can get involved and feel incentivized. I think more broadly speaking, though, if I were an AI agent and I'm certainly not, but if I were a machine, I would want to transact.

We don't know that. One day, one day we will have our AI agent on this podcast and we will create an AI model of what it'll look like. It'll look like a combination of me and Jonah, and we'll use our voices, we'll combine our voices and that, and it'll just talk. That would be pretty, pretty damn creepy, but pretty cool. Just, just— can you imagine that?

No, I'm trying to, and it's just making me crack up.

Um, like a virtual— like a, like a literal virtual— like, it's like our virtual co-host. I mean, that's pretty cool. I think it's gonna happen. Give us, give us 6 months, guys. We'll get it done. You heard it here first. In 6 months, we're gonna have a third virtual co-host. For at least one podcast.

So if I were a virtual co-host slash crypto trader slash, you know, stand-up dude, I would, I would want to transact and hold Bitcoin instead of a stablecoin because Bitcoin has the best Sharpe. And so I would just, if I were like this value maximizing robot, I would want to hold the thing that offers the best return per unit of volatility. Um, that's why I would want to own and transact in Bitcoin rather than USDC.

You know what, I think that's a very respectable opinion. So in the future, everything will be run by virtual AI agents. Everything will be paid for in Bitcoin. You will all be millionaires many times over, if not billionaires, because the US dollar will be worth nothing. This is, this is a beautiful future that we've envisioned for ourselves.

I love it. Luckily, none of this is financial advice, and everything we say is obviously not going to happen.

Oh, it never seems to.

Except for that Bitcoin. All right.

All right.

Great talking to you.

This is fun. This is a good one. This is a really fun one.

Thanks again. It's always great. I learn a lot.

All right. Take care.

Later.