The Reality of Bitcoin's Election Correlation | The Giver

after Elon Musk mentioned Doge for the first time, people bought Doge solely on the speculation that he might mention it in the future and then outperformed for months. And that, I think, can happen again with Trump.

Effectively, what I think meme coins do is meme coins produce uncorrelated returns with respect to being a store of value relative to everything else goes on in crypto.

So if everything looks euphoric, you have to ask yourself not is it euphoric, Ergo, be bullish? That's the wrong question. The question is like, is it going to get more euphoric or less euphoric?

All right, awesome. Looks like we're live. We've got a very special guest for you guys today. We've got the giver, LazyVillager on Twitter, who is known for some pretty amazing and in-depth posts, which is rare for the Twittersphere, rare for CT. Normally it's to shitposts. Um, you know, I've been following him for a while and I've always appreciated the approach that he takes to the market, which is extremely thoughtful and genuinely rare. And so we're here to talk about how we can make the most amount of money possible by actually thinking about our problems. Thank you for joining us, Jonah. What's with the John Deere hat?

Well, while we're waiting for the giver to get his shit together. Let me tell you about my John Deere hat, which is in stark contrast to your Harvard Business School hat.

So please note that it says Harvard Business School Dad.

Okay, so maybe you've got some, some man children you want to tell us about, some biological freak stuff going on. Anyway, um, my John Deere hat, I got it at Man Camp. Uh, which in the era of cancel culture got renamed to Human Camp. Um, but basically Man Camp is an event that my buddy hosts every year. It starts at Lake Geneva in Wisconsin. You drink beers, go tubing, do America stuff, and then we drive pickup trucks out into the wilderness to my buddy's, um, father's farm in northern Wisconsin, shoot guns, drive John Deere tractors around, cut down trees. Build fences and just basically do what in the past would have been called man stuff, but now it's just human stuff. And I got this hat and just being kind of a West Coast liberal city kid, I feel cool when I wear this hat. I feel like American. Yeah.

Yeah. Yeah. Like a real American. So you wear that around the mean streets of London?

Meat Street to London. What's John?

Bread, red-blooded.

Hey, John, there. Hey, we can hear you.

Okay, I closed out like 50 browsers. I think it was a technical difficulty. It's my bad.

I mean, honestly, why would you look at porn when you can just pull up TradingView and look at the Bitcoin chart? I mean, that just doesn't make any sense. Bitcoin chart, that's better than anything I could be watching. I mean, It's like a— it's truly, truly a beautiful, beautiful looking chart. Flows, flows are looking good. Altcoins are doing poorly, which is a great sign. Uh, you know, I, I'm— I, I know, I know I'm normally the resident, the resident bear, and I still advise, you know, not, not to ever go like ridiculously levered, but I mean, basically ever since we flipped $60K, and it's been— the market's been different. You're seeing flows into the— you're seeing real flows into the ETF, uh, you're seeing the narrative shift pretty tremendously in favor of Bitcoin and in favor of crypto because equities are punching all-time highs. People aren't worried about data as much. People aren't paying attention to every tiny little bit of information that they can get. About the economy because things seem to look good. And the way that I always think about it is, you know, when you're in crypto and you trade crypto, there's this specific flow of money. And the flow of money is Bitcoin does well, and then it goes to altcoins. And that's what happens on a macro level too with the equity markets. Equity markets do well, people want to keep outperforming, they go down the risk curve. They push money into Bitcoin. And I think that's a little bit of what's happening. I mean, it's a combination of that and a one-to-one correlation with the odds of Trump getting elected. And what you are seeing right now is you're seeing that traditional finance, like all of your funds out there, are figuring out, okay, well, if we think Trump is going to win, where are we putting our money? And Bitcoin is the answer. I mean, look at, look at the CME futures. Open interest is at the highs, and the reason is because people are crowding into the trade.

Where's basis right now?

It's a good question.

Don't know.

Um, there is no bad— like, I agree with you, there is no better Trump trade than Bitcoin. I think Bitcoin's like an easy two-bagger, uh, which, like, which— and you can deploy a lot of capital there, which— so if you're a TradFi guy just go and buy iBit. And like, you know, you just brought up the ETF flows, they're massive. 11th of October, $250 million. 14th of October, $550 million. 15th of October, $400 million. 16th of October, $458 million. Like, these are mega numbers.

And there's—

sorry, go ahead.

Yeah, I mean, I didn't have a long rant on this. I was more just thinking like, if you're sitting in a trad fi seat and you see Trump's odds going up, like, you could put $50K to work on PolyMarket, or $500K, or you could put, you know, like literally $50 million, $100 million to work in a Bitcoin ETF. I think that's what's going on here.

I mean, 100%. There's actually one stock that I, I like to look at as a Trump proxy, and I think it trades pretty aggressively with Trump odds, and that's the GEO Group, which is— it's basically, uh, GEO. I'm not advocating for it, I'm just saying that it does trade very closely with Trump odds, and that's because Uh, they run a lot of the— I mean, they basically run detention centers at the border, and they get a lot more government funding when somebody like Trump is in charge than Camel. So that has also traded extremely well. It's basically traded with BTC. And what that tells me is if all of the Trump trades are trading like BTC and BTC is trading like the Trump odds. That's really what's driving this move. That is the whole— that's the whole thing right now, is that people are allocating because of Trump. And so the way—

yeah, we can hear you, Giver. You're back.

Hey.

All right, I'm on my phone, but it seems like I'm still lagging. I, uh, it's my— I'm not sure if it's the Wi-Fi or StreamYard just might be too high-res for me.

High-res for your no image?

For my, yeah, for my, uh, iPhone, for my iPhone X.

Well, honestly, like, we're, we're in iPhone X.

So you're telling— sorry, you're telling me I've been taking advice from somebody on the internet that uses an iPhone X? You don't have enough money to upgrade and I'm supposed to be listening to you? What the fuck is going on?

I'm a frugal guy.

I'm like, Jesus, Jesus Christ.

Yeah, the guy saves his CPU budget for mining whatever it is that you were mining.

I mean, look, like, look, I'm pretty sure even Warren Buffett has something. What does he drive? His Toyota Camry. And he has like one sandwich a day from McDonald's, but he probably, probably has an iPhone 11 or better.

It's an iPhone. It's an iPhone XR. It's an iPhone XR. It's, uh, let's give it some credit.

I had one of those. No, no, this, this is great. We can hear you now perfectly, Giver, and I appreciate your, uh, I appreciate not like falling for the Apple shill of every single upgrade cycle. What I actually missed phone-wise, I had a BlackBerry Pearl. That was my second favorite phone. And then my favorite phone was when I was a kid, we had this like, you guys may remember this. It was like a landline, but it would allow you to roam away from the base station. Like kind of, you know, you would extend the antenna way up and walk around the house. Those things were cool. I miss those.

Yeah, I had a BlackBerry as a kid. And then I loved it. I love the QWERTY keyboard. And then I think I got an iPhone for my birthday, for my 18th birthday. And then, and then I've had 2 iPhones since. I get an iPhone usually every 5 to 7 years, I think.

Nice. I mean, that's pretty solid. You know, I appreciate the frugality. It's good. It's good. You don't see that very often in CT. I will say that I never had a phone with a physical keyboard. So I don't know what you guys are talking about. Went straight to the touchscreens. That's why my brain is so fried. That's why I'm built for this. 'Cause since the beginning, just been fed straight dopamine.

I played, I'm a big gamer. Oh, well, I'm not much anymore, but I was a big gamer when I was in school. So I would always play on like my 10-year-old laptop because you can run League of Legends fine. Like, League of Legends is a very low-performance game, so I would always just never upgrade, and I could never play any of the games my friends were playing because they could never make the CPU requirement.

So how'd you get into crypto? What would— like, tell us your crypto journey.

Yeah, sure, happy to start. Um, so I would say in 2020, 2021, I would say mid-2021, um, just by circumstance, it was just through a colleague of mine effectively told me, like, hey, like, there's this group of guys where, you know, we talk about markets, we talk about finance, talk about crypto, um, you know, I think you'd be a good fit. And then I was like, okay, well, I don't know anything about markets, I'm not very keen on markets, um, you know, I'm just gonna— I just want to stick to what I know, which is at the time, um, you know, was still on the sell side. And so, you know, got, got in there, and then at that point I didn't know much, so I just pretty much looked at CoinMarketCap or CoinGecko or whatever site I was using at the time, and then I just DCA'd. But where I DCA'd, it just happened to be the summer of 2021, just by pure luck. So it was when prices had largely crashed. I remember something I distinctly remember is I was buying Polkadot at $10. And then, you know, and I wasn't, you know, I wasn't trading, right? I was just DCAing, being kind of like a, you know, quote-unquote long-term investor. And then I got— I started getting really busy again in, in, uh, around, around September, October. I didn't really, um, you know, monitor the performance of my portfolio. And then by, I want to say, end of October or November of 2021, I click open my portfolio and I'm just up a ton of money, right? Like, I remember Polkadot, I think it was at like $60, and I remember DCA into this at like $10. And I was like, what is going on? Like, I don't know what's happening, but I'm up a lot. And so, you know, in the journey, in the search for wanting to better understand what was happening, I checked out Reddit, I checked out Twitter, I checked out a little bit. And then, you know, browsing through crypto Twitter, I think the first few people that I followed just happened to be guys like Satstart, Darren Lau from NotFreeLau. And then I just, you know, by getting very interested by what was happening with DeFi. I thought it was super, super cool. And so I started writing about DeFi myself. I remember just one day randomly, I learned about OHM. I learned about treasury-backed tokens, and my mind just natively jumped to the possibility that there was some degree of intrinsic value. Looking back at this now, what a funny thought, right? There was some degree of intrinsic value with appropriating kind of a valuation based off of kind of the underlying reserves backing an OHM token. And so I wrote about that on Twitter. It was my first post ever. I randomly, you know, not randomly, there was some thought that went into my name or my pseudonym, but, you know, I posted it and then overnight it got 1,000 likes. And it happened to share a lot and I got like 2,000 followers in one evening. And, you know, I just from there on, you know, I started writing about stuff as kind of a passion project on the side.

It's pretty exciting. I respect people like you who are able to just grab a bunch of engagement from like kind of go from zero to 60. It took me, it took me a year of like bragging about myself and my, my job title on LinkedIn and promoting myself from a large account to gain a foothold into people's mindshare in terms of thoughts about crypto. So it speaks like— I enjoy your post too, like I— it speaks to your, your writing and analysis abilities, um, that you were able to kind of hit the ground running like that. It's extremely rare. So then what happened to your bags in 2022? Did you just absolutely carded out or did you dodge the bullet?

To a little bit of both to some extent. So I actually, maybe just on your point around there, I think initially when I thought about branding, I mean this, I think even today, like exceptionally even more so this year, like my Twitter account is somewhat of a challenge to myself on, you know, if I have kind of what it takes, I'll just put it that way. Sometimes even on Telegram or other venues other than Twitter, I'll purposely be anonymous or at least not brand myself because I want to be evaluated on the merit of my thinking. And sometimes people can be biased if they know who you are. Maybe they'll be too happy to agree. And so this entire journey, I would say from 2021, I've been treating it as a way to express kind of my thoughts and see whether they hold up in the market's eye. And so from writing about OHM tokens, I really just, I was so enthused by what was going on around that time. I thought DeFi was the next big thing. I mean, to some extent I still think so. I mean, when I learned about rehypothecation through an app like Abracadabra and Magic Internet Money and a lot of the stuff Daniel Lester was building, I was, I was completely enthralled. I thought, wow, this is completely inaccessible outside of this little crypto sphere on the web. I remember I was shorting Luna and I was making just all the way from like 100 because I think I was very early on to shorting Luna. And because I didn't know anything about risk management or, or sizing or really anything, like I actually knew nothing, um, I was, you know, putting on big leverage and I was shorting every, every spike. So from $100, I shorted it to maybe like $75, and then I took all the money off. And then when it went to $70, I thought, oh wow, this is going down more. So I, I reloaded my position at $70. And then it went to $50,000 or $45,000, and then I took chips off, and then at $40,000, I jammed it all in again. And so I made like, I want to say, $250,000 in the span of a few hours. And then I remember reading GCR's tweet at that time, and he said around $30,000 or $40,000, I vividly remember him saying, okay, I'm closing out my bet. Like, there's still more to go, but I don't you know, I don't— it's going to be a crowded trade eventually, and I don't really want to compete against these people when it's going to get choppy. And I thought to myself, well, this guy doesn't know what he's talking about. He's— there's so much more room to go. And so I just kept jamming money in, 40 to 30 to 20, and then I just got crushed. So all that money that I made that day, it just completely zeroed out. Like, I lost all my unrealized gains, or realized unrealized, unrealized gains. I lost, I want to say, half my net worth at crypto that I grew at that time. And then through just the brutal reality of being in a down spiral with owning illiquid assets, some of the NFTs I owned, those down spiraled too. And then I eventually found myself in a very compromised position where I didn't have enough liquidity to support some of the positions that I had opened from naively trading some of these assets, and I just got zeroed out. So I still had a little bit of money, and then with a little bit of money, which is effectively the principal that I trade with in crypto, I— that was still on FTX. And so then effectively through FTX, I got zeroed out there. And so this entire saga ends with having made no money during the 2020 and 2021 cycle.

That's a pretty amazing, amazing story just because I think you clearly articulated how you learned the lessons. I think a lot of people end up learning lessons like that, but it tends to be from the long side, not necessarily the short side. I think there are very few people that get burned in crypto first on the, on the, on the short side. So that's definitely, definitely an interesting story. And it does talk a lot about the irrationalities of the market and just understanding you know, how to— how you extract money from this market can sometimes be divorced from, you know, long-term reality. And in fact, it often is divorced from long-term reality. So, you know, whenever I read your post specifically, there's a lot of thought that goes into these posts. There's a lot of analysis. There's, you know, sometimes a good amount of, you know, math involved in this analysis. But often when you produce content like that, you're implicitly thinking longer term because short-term moves in crypto tend to be extremely, extremely noisy. And so I'm curious, like, how you, how you balance that now? Like, how have you learned from that experience to balance the fact that oftentimes when you think deeply, you're implicitly thinking long term, uh, but obviously crypto moves pretty violently short term?

That's a great question. I think the first thing that is a helpful leg to answer this is that over time, and as I've gotten more senior in my career, and then I pivot to the buy side in traditional finance, and, you know, in terms of developing some acumen there, something that I've, I'm very conscious of today is that there is a very large divorce between thinking about an asset or an instrument between a private market and the public market. And crypto definitely fits into the latter. And so one of my biggest learning lessons from the previous cycle, and even one from maybe even you could even say earlier this year, and it's not novel, it's just that markets can remain irrational longer than you can remain solvent. And so especially in a crypto class, especially an asset class like crypto where there's an incredible amount of reflexivity and hype. What I thought would be a more strong, you know, fundamental lens of approaching assets maybe in the last cycle, you know, it didn't— I learned it the hard way and it didn't pan out the way that I thought it would. So very clearly to me, that was an indication back then that I haven't solved anything, that I was still missing something. And it's back to the drawing board because I made no money. And although I was right at certain points, I was also very wrong at certain points, and it didn't really feel like I had an edge. And so, similar to playing poker, which I did a lot of in my 20s, there's just no point in doing something to me if I don't feel like I can express an edge over it. And I think earlier this year, that was kind of the first time in my life where I had thought that public markets were really interesting. Up until this point, I would say with most people in private equity or on the buy side, okay, let's, let's, yeah, let's, let's, let's maintain it for private credit and private equity today. I think most 9 out of 10 people probably couldn't even tell you what the forward PE earnings for the S&P 500 are. There's a big chasm between evaluating something from a, okay, what should this be worth and what is our willingness to pay for it and what have people paid for in the past, which typically tends to be the precedent used in developing a mental model in the former. And then the latter, which, you know, it has a lot to do more with capital consolidation, you know, economic theory.

So let me, let me just generally just dive in on that for a second. It sounds like you're— you were an investment banker and now you're in private equity because you said you went from the sell side to the buy side and you're talking about equity valuations, but you're not a trader. So I don't want to dox you too much. Is that— is it okay to talk about it? That way.

Yeah, that's right.

Okay, so, okay, so I mean, I've rubbed shoulders with a lot of your, your folks from my career, and I find that if you go into investment banking and then private equity, like, you get the smartest, best-educated, most brilliant thinkers, but there tends to be a lack of, um, you know, I'm just speaking as a trader from the other side of the fence inside of these institutions. Like, there, I've noticed that that crowd tends to have a lack of risk tolerance. So I would like to commend for growing the, you know, cojones to go and try and, you know, roll the dice with your own money in crypto and, and, and sort of self-teach yourself the art of trading. I think it's super interesting. Now let me just ask you, on, on what you just said, talking about public equity market valuations, private equity market valuations, and crypto kind of all in one, one, uh, conversation. So let me try to tie those strands together. What is your edge in private equity valuation and what is your edge in crypto? And are those two edges related?

I would say the edge that I'll take from, from my world is perhaps a more rigorous understanding of, of just the backbone supplying what an asset should be worth in a theoretical realm. And that can often be helpful in creating a floor or a ceiling on, on, on guiding toward a range and then understanding where one should be in that range. And if it is time or what is what, what could catalyze dislocation in or out of that range is probably the hard part to learn with public markets and what I've strived to get better at this year. I think it's probably the way that I put it.

I think this is why we love your tweets, because we in the crypto world are so used to this mid-curve meme where it's like, oh, doing work is stupid. We don't need to invest time in understanding valuations. Just hold on for dear life and everything works out, haha, yay. But it doesn't, right? Like, the market's getting more mature and more, you know, complex, and we need these frameworks. So, you know, I want to poke— and maybe Avi, you do too— like, let— maybe should we try to figure out what the giver's frameworks are for ETH, for Bitcoin, for public markets? What do you want to talk about?

Yeah, I, I think that— I think that makes sense. I do want to touch on a point that you said, which I think is I mean, I mean, even just core to this podcast and the discussions that we have here, Jonah, when you think about why that mentality is so prevalent in crypto, like, why is the mentality of you don't have to do work, you just have to think— like, don't think, just allocate— it's prevalent because crypto is a growing asset class. And the reality is that the vast majority of people can't think clearly or effectively. It actually is very difficult to do that. And what your advice to them would be in a different asset class would be don't trade, right? If you're not good at trading, then don't trade. And in crypto, there's a difference because there's— it's a rising tide lifts all boats, right? If you have decided to allocate your time to an asset class that inherently you think will grow year over year, then yeah, sure, you can actually make a ton of mistakes and get bailed out as long as you're playing the game and you don't blow up. Then sure, you might actually make more money trading because if you're just early to one thing once, then you make 10x your money and that, that can feed a lot of losses, right? And so I think that's why that mentality is prevalent. But the reality is that crypto and trade— every market goes through a period where it is easy and then it gets much harder as smart people come in. And so the question is, as you're going through this transitionary period, which my opinion, we're doing right now. How do you maintain your edge, right? Like, how do you start to flip from going, I'm just betting on a growing asset class, to, okay, I can generate edge here because there's still a lot of inefficiency, there's still, you know, the smartest people in the game aren't playing it, and I can generate alpha and I can have a smooth P&L curve. Uh, how do I actually get there? Like, how do I, how do I do that? And it's through this type of conversation and process, right? It's through thinking, okay, well, if You know, should I be long or short Bitcoin? Well, these are the 10 things that you need to look at and you need to think about, and then you place them in context and then you make, you make your bets, right? Um, so maybe, maybe we can start there with BTC, just something concrete. When you're evaluating Bitcoin, I mean, you sometimes post long, short, left, right. What are you, what are you actually looking at? Like, how do you, how do you start to form a thesis on where Bitcoin is going?

It's a good question. I don't even know if I've very consciously thought to myself this, so this will be my first attempt at explaining it out myself. I think that at the core, let's start this. The core of all these assets, it is, it's just a very natural supply-demand curve, right? And then, you know, where price meets happens to be where the equilibrium sets. And certain movements, like, you know, like a standard microecon 101 class, certain movements can shift either a curve right, left, where price matures or meets at a different point. And I would say today, and over these last 4 to 6 months as I've tried to think more classically about markets. I don't even— I would say like I don't even look at really a lot of the stuff that other people look at, to begin my train of thought. So for example, with Bitcoin, when I was thinking about China, when I was thinking about the 50 bps rate cut, when I was thinking about even this last week and how this will go into the, into the election, I start with kind of a hypothesis around where, where I think central theory is in terms of how positioning is being aggregated from consensus. And then I ask myself, Is there enough volume? Is there enough flows or capital to support consensus today without new money coming in? And if I think the answer is no, then I will probably start to do some work and look at— I'll look at, you know, I'll pull up Velo, I'll look at OI. But I think I got asked a question like this on the stream the other day, like, how much do I— or sorry, on the What's My Edge podcast. Which was, how much do you trade off macro? And my answer to that was, if the weight that I assign on macro is the inverse of how other people are looking at it. So if someone, if the rhetoric happens to be that a certain event like FOMC or CPI or jobs is very important, then I will personally probably flatten risk into it or take a contrarian view that it's not influential and start a position there. And I think what I love about crypto markets specifically more than other public instruments, and especially against, you know, private equity, put it this way, markets are very snappy. I think you can ascertain quite quickly whether or not you are right directionally. And sometimes it'll take a little bit more time, but compared to the life cycle that you can make a bet on in the private realm, which can be extended artificially through bankruptcies and restructurings, etc., like that. With stuff in crypto, you will pretty much know within like a week or 2 weeks or even maybe at max a month on whether or not the bet you're making is correct.

Okay, so just, just, just ask you a question on that. What's— if you're— if that's your edge, your next kind of like your 2 weeks, 2-week window is sort of where you feel, you know, in your comfort zone.

Yeah.

And you say that, you know, on this podcast we like to talk all the time about how the news itself doesn't matter, it's the second derivative of the news. So if everything looks euphoric, you have to ask yourself not, is it euphoric, ergo be bullish? That's the wrong question. The question is like, is it going to get more euphoric or less euphoric? We talk about this all the time. So right now, you know, you kind of mentioned it too there. So just, you know, it's kind of tying those two conversations together. Uh, things just really started looking up for crypto, right? Um, crypto's a Trump trade, Trump's odds are, are on the, on the rise, we're starting to feel good here, um, everybody's getting excited and piling in. You mentioned, uh, you know, you mentioned something within the context of FOMC and rate cuts and how you wanted to fade that sentiment, which sort of speaks to my second derivative conversation. Are you, are you looking at this and saying like, hey, it's going to be pretty tough for inflows to confirm the level of current euphoria, so I'm selling into this pop? Or are you, are you like, hey, this is the real thing, like it's time to get even longer here? What do you— how are you positioning yourself with your, you know, sort of edge and your time horizon?

So the quick succinct answer is that I am net short. My interesting— which, um, I formed 2 days ago exactly on the dot. And I haven't spread this publicly. I've mostly discussed this with maybe like 2 or 3 friends. So last week, I believe, when price was still circling the low 60s due to possibly the US government selling, a lot of reasons why price can chop in the 60s, which is the range we've been bound in for God knows how long. I didn't really have a view at that point in time. Like, I was long to start— sorry, I was short to start the month, and then I got long around National Week because I thought that there could be— you could kind of scalp a nice domestic kind of Chinese markets opening that could tie in, you know, easing effects or in people's mind to buy up Bitcoin as a risk proxy. And then I flattened out and wasn't really, you know, I've been secularly short some alts for quite some time now that I'm still holding on to those positions. But other than that, I was still like, I was very, this is probably the lightest I've been in my book. I want to say for 3 months, 3 or 4 months, I didn't have a view because I had a lot personally, I had a lot of uncertainty around what the Trump run-up could be like and how that would manifest. And so didn't have a view. And then when we went below 60 to 59, I started shorting very lightly, you know, very, very lightly on Ethereum and SOL because I thought that, you know, from a pure mechanical perspective, you know, possibly a little bit more downside to scalp off of. And then we raced, you know, to $62K. And, you know, I was still monitoring. I wasn't really sure what was going on. And then over the weekend, we went very quickly from 60, 61, 62 to I want to say like 64 or 65. Like, I remember I was working out actually, I think it was like 1 or 2 AM when that happened on Sunday. And everything followed, like Ethereum and Solana followed too. And again, I was still a little puzzled, you know, wasn't adding on additional exposure because I wasn't really sure what was going on. And so it took a few days to— and then I, you know, I looked at I still, given the uncertainty, wasn't outspoken about what was going on. And then as the following days led up, I looked at more data points and just somehow there was like a light bulb moment for me where I think I just put 2 and 2 and 1 together. And I think what is happening today, and I'll try to distill this, I think we are in a chicken or the egg. Situation right now with respect to Bitcoin and crypto assets. And what I mean by that is I think the very popular rhetoric that you see echoed in that Bitcoin is a trade that has divergent outcomes based on the outcome of the election, which I think is somewhat lazy analysis in the sense that, you know, let's just put some numbers out there, right? If Trump wins, we're going to $100K. If Kamala wins, we're going to $40K, right? And then we're kind of at—

I agree with half of that. I don't think we're going to $40K if Kamala wins, but interesting to hear your take. Go on.

Sure.

Yeah.

But so that, that is like, I think that is the, the, the, you know, it's, it's, it's sentiment, right? It's some sentiment that is at least, you know, shared. And my view is that it is somewhat of the, of the reverse. Which is the money that is flowing into Bitcoin. It is unscrupulous execution, right? And it's come very erratically. And at first you had majors follow with algos and perps trending. But on Monday, when I realized that other assets had started eroding in terms of the ratio against Bitcoin. And I looked at the Donald Trump Media Entertainment Company and realizing that it had grown from $10 to $30 in the span of 2 weeks despite no new guidance. I look at a few other things and I came to the conclusion that Bitcoin is simply being used as a hedge, a liquid hedge, or a risk proxy to manage election risk going into the election. And so therefore it is a chicken or egg situation where I think independence of whoever wins, this mercenary flow driven by a new class of buyer that we haven't seen that much this year is going to take off that capital regardless.

Because I see—

can you, can you, can you clarify who you think of as the new class of buyer?

Sure. Yeah.

How do you mean?

So, so I think of Bitcoin— or sorry, I think of digital assets today. I think today there are 4 sets of buyers. I think the first set is someone— is the very common— it's the speculator, right? It's someone— it's a class of participants that has historically been dominant. I would say even last cycle, maybe like 75% plus of the base was this player. And they are typically responsible for very deep troughs and very, very high peaks. And of course they are very present today. I think the second bidder is a new bidder, and they are the passive capital bidder, and they are ETFs, and to some extent, SAILOR. And I think it's worthy distinguishing them because I think that these guys are generally price agnostic with a healthy time horizon because— and this is an assumption I'm making, of course, this is not proven— But the assumption that I'm making is that these bidders are, you know, looking for diverse exposure. They have been conditioned by financial advisors over the last 20 to 50 years that when you invest in something like S&P or equities or, you know, obviously something much more volatile like crypto assets, you should have a longer time horizon to be able to realize that 6 to 8% annualized gain on like on equities, right? And so to accept for something like Bitcoin, the, the same logic applies. And, and so I think that is very visible because they've been— ETF buyers have been very supportive of price in the 50s, in the 60s, independent, I would say, of where the chart looks like. Whenever we've had a long liquidation event, these guys have come— they have largely stepped up this year. The third cast are the carry bidders. So this is like where I would qualify someone like a Millennium, where their presence is likely someone who is— they are also similarly price agnostic, but they are very rate sensitive such that they are probably doing something where they might be buying iBit, but they might be short CME futures and they're effectively doing the Athena trade in real life. And so they don't— these 3 bidders so far, I would say, don't move the needle They're not moving the needle this month. The ones who are moving the needle are the event-driven buyers. And this is the type of participant that I think was responsible for the Grayscale ETH discount closing in one day from the 19b-4 announcement in July. It's the same bidder that put on a lot of OI when there was initial rumor, initial, you know, kind of rumor milling around the strategic reserve asset from Trump.

Basically listeners of the 1000x podcast, the event buyers of crypto assets and crypto-linked assets.

Correct. Exactly. And these guys are— they're not sticky. They don't— they are here to monetize. Either they're here to monetize a naked view on how Bitcoin will do into the rally, or they are using it to hedge. For example, like if they are You know, for example, if you are a public risk manager and you have liquid positions in industries that are going to benefit on a hair of a swan and you're looking for a Trump proxy, is it easier to invest in something like Bitcoin, which has a lot of deep liquidity and is, you know, general, and you could kind of sell out of this position whenever you want, or maybe some, some industry or a company that you just don't have enough time to get up to speed around? Coal or energy or something that is maybe very unfamiliar and not possible to buy in your mandate. So I think, therefore, this event-driven bidder, this forecast, they are not sticky. That capital will unravel. And most importantly, right, this is the most important part of this thesis. This is not capital that recycles into the ecosystem. It is static. It stays in iBit, it stays in Xianming, it stays in Bitcoin, and it doesn't recycle elsewhere. And that is my explanation of why you have erosion in alts, ETH, and SOL against Bitcoin. Because if this was truly, let's say, a risk-on buyer, someone who's here to speculate on the outcome of the election is going to be there afterward, or someone who is simply interested, who got reawakened into Bitcoin and wants exposure. Then you would see more diverse buying, especially in something like ETH, right? Look at the BTC inflows that have occurred.

That makes sense. And, you know, I follow, I follow the logic of the argument. I do want to offer two pieces of pushback just to see how you respond to it. Sure. The first, the first is that, yes, we've seen, we've seen a lot of mercenary capital. Before, right? We've seen a lot of prepositioning for things like the Trump conference, for the Bitcoin ETFs. A lot of these, a lot of these moves were driven by a massive increase in CME open interest, and that's generally TradFi coming in, pushing up the prices and speculating. The question is why, right? Like, why are they doing this? Are they doing it solely because they want to bet on Trump winning and just on the day that Trump wins, then the entire thesis has played out? Or are they betting that Bitcoin is actually going to flourish under a Trump regime? Right. And if it's the latter, then they probably actually hold their positions and they could hold it for a multitude of reasons. One of the things that I was talking about before is that when— if Trump does get elected, You have this Doge-like quality that attaches itself to Bitcoin. And what do I mean by this? After Elon Musk mentioned Doge for the first time, people bought Doge solely on the speculation that he might mention it in the future, and then it outperformed for months.

Right.

And that, I think, can happen again with Trump. It'll fade over time as it did with Doge, and it'll come back down and the speculators will wash out. But at least for the month post a Trump presidency, there's going to be rampant speculation. I mean, maybe even until inauguration, there's rampant speculation that he may say something about Bitcoin, and you don't want to sell out because there's, there's this ever-present black swan. And then at some point that diminishes, as it did, as it did with Elon. And so I do think that there is, there is a big right tail here for Bitcoin, and with that right tail comes interest. And so once you— if, if let's say we take this scenario for granted that they don't immediately exit their positions on, on a Trump presidency and Bitcoin sustains itself above $70,000, above all-time highs, that's, that tends to be when new people come into the market. One of the reasons that we haven't had a massive bull run, uh, across the board is because Bitcoin hasn't sustained a price past its all-time high for a long enough period of time, right? It's just it just hasn't. Basically every time it makes a new all-time high, it comes straight back down. And so right now we're close enough that if there's sustained price, price action past an all-time high, we stay there for more than a month, then new people come in because they see the headlines of Bitcoin making new all-time highs. Now this is, this is a little bit of a weakly held argument. I'm more in your camp than what I just said, but this is the counter-argument that I'm making to myself. And I haven't actually come to a conclusion. I mean, one of the things I read once in a trading book somewhere that I love is exploring alternative hypotheses is the bedrock to good thinking. And so, you know, I like to do this. But yeah, I'm curious what your take is on that.

I think it's a reasonable pushback. And I think that that is why I am long Bitcoin and short everything else rather than just being naked short, because I do think there is a degree of echo chamber that can manifest in Bitcoin. I just think that— I think the reason— okay, so I think, as you mentioned, right, price begets narrative in that sense that price is a signal in and of itself. And I agree with that. However, I think an alternate approach to this is that it's just looking at the total amount of money that is here to actually support all these assets. Compared to 2021. In 2021, I think the peak crypto total, right, total one, was somewhere around $2.7 trillion. And that was an era where we had significantly more leverage. We had COVID stimulus checks, we had 0% interest rates. And why this matters, and they actually— I was also on like kind of the back end of real easing that was happening with COVID-induced policies, right? And why this matters is because if you have someone who has $100,000, they can very easily take out many forms of debt, which have seemingly no opportunity cost. They can buy Bitcoin or Ethereum, rehypothecate that capital at 90% LTV, take out $90,000 or $85,000, buy an NFT, buy something else, recycle that inward, and then price is growing. So you're, you're creating a larger buffer against your loan and you're able to get 2 or 3 times your starting capital. As an ultimate destination. So price can be very reflective in an arena like that. However, this year and this era, which has been, you know, much, very choppy as you describe, there is very little— there's been very limited new capital that has come in since January, February, March. And for that capital to come in, Right there, the conditions in which that needs to manifest, I don't believe reside on simply Trump becoming president. I think it requires, you know, probably more stabilized financial conditions and equities. I think that capital is coming out, right? I think the cost basis of this capital, I would measure it as being anywhere between 61 to 63 and a half. If Bitcoin hits $70,000, that is a 10% gain on a 3-week trade. That money's coming out. I would argue that.

Let me ask you a question. Let me ask you a question. How many of your TradFi peeps are hedging equity positions with Bitcoin because of the— because of Bitcoin's link to an election outcome? Like, have you spoken to anyone who's actually doing this? Because I— to me it sounds a bit crazy. I'm not, I'm not, I'm not discounting your thesis. I'm just more like, I'd be stunned if somebody was like long and long some random industrial stock that would get nuked on a Kamala win— or sorry, some random industrial stock that would get nuked on a Trump win because of tariffs and is long iBit as a hedge. It just seems like You talk to people who are doing stuff like that?

I would say there's a yes and no, which is people are acutely aware of the election and what benefits from a win, whether or not they are taking that position themselves, either at a professional level or on a personal PA perspective. I haven't asked, but I think you can, I think a very keen proxy towards this to generate it is something like The Donald Trump Media and Entertainment Company. I think that's a very good proxy because that is effectively a meme coin in the real world to proxy a win for Trump. Or Polymarket as a way to generate interest, which I think the gap has widened to be— I could be incorrect, but I think there's like a 20% difference now between the two. And so betting markets are very viral today. They're very there's a lot of life behind them. And all these different avenues in which you can bet on a Trump win or potentially de-risk into— for example, like, let's say Bitcoin hits $70,000 or $71,000, you've made 10%. Why roll the dice now when you've already— when you're up in what seems to be a very reasonable return in a trad setting on potentially a lot of liquidity, right?

I agree with you. Like, anybody who's just like— anybody, any trad fi person who's just flipped a quick 10% return at scale on one of their hedges is likely to take it off. I agree with that. Where I, where I'd humbly disagree with you is the idea that this sort of like election hedging community that you bring up, which, you know, probably exists— I hadn't really thought of it before, so it's interesting— like the extent to which they'll matter if Trump wins. Um, oh, we just lost, just lost the giver. Basically what I, what I was thinking was if Trump wins, there's going to be an overwhelming, um, tsunami of buy-side flow from new communities of people who are just interested in having exposure to the space on the basis of, you know, perceived friendly, uh, you know, friendly regulatory environment and, you know, perceived kind of reflexive inflows. I think like anybody who's long as a hedge and, you know, pitching out of their hedge on a win, like that flow is going to be spit in the ocean compared to the, the new invest— this is basically the new investors that are going to come in, the new long-term holders.

Yeah, I, I think, I think the difference is it just, it just takes time. And going back to the original discussion that we had when we were on stage in Utah, it's, I think on a Trump election you get, you get a move up very fast and then it gets sold into, because I think, I actually do think it takes time for people, for people to come in.

And when you, are you gonna have the balls to like fade a Trump rally if he wins? Like on election night? Oh, it's, it's just rallied 30%, but it's going to sell off as people take profit, so I'm going to take profit too. Like, I wouldn't have the cojones to do that.

I wouldn't— I mean, look, look, look, from October 10th to October 16th, Jonah— October 10th to October 16th, there's been $3.5 billion added in CME open interest. I mean, some of that's coming out.

Yeah.

And that, I think, I mean, basically—

So why is your signal when the CME open interest starts to drop, like, get out the way, basically?

Look, yeah, when that starts to— every time anyone in the crypto market has always been on one side of it. I don't think there's a single person in crypto that says that, you know, 24 hours after the Trump election, we're going to be down. That's got it. Like, come on, that's got to be a warning sign for you. Community, right?

Like, it's not though, it's not though, because there's got to be— for every crypto person that we know, there's literally 1,000 non-crypto people out there who are going to be like, oh, Trump won, maybe I should buy some Bitcoin now because it's safe to do so. We're not talking to that community, right? They're flat. Like, they have no— they have no coins, you know.

I, I, I tend to believe that this is all— that this pool of capital is always overestimated. Always.

Okay.

Okay, that's just, that, that's just my, you know, that's just my belief. I also do think that the short alt trade is really tough because I think that a lot of alts should do extremely well under a Trump regime. And so I think that there are definitely certain alts— I mean, you can probably still short Worldcoin to zero. I think that's fine. Um, I do think that things like Solana probably do get a bid. Post-Trump victory.

Because what's interesting though, I think, is if that is the case, then those bets should be manifesting in line with the growing, the widening odds of Trump winning, right? Like, I did a study that used July, August, and June as a time frame, and I regressed Trump's odds changing on the polling market against Bitcoin price action. And there was very— there was a very weak linear case. And so to the extent that you believe that there is reflexive behavior that centers around a Trump victory, and okay, let's, let's say that that is, you know, maybe that can't be looked at over a long period of time, but maybe, you know, you make the argument that over a very short period of time, perhaps that can manifest. Okay, let's say I believe that. That, then we should be seeing that resonate with the alts that should do well, which is stuff like the DeFi bucket, stuff like Solana. These should be risk-on proxies as second-order derivatives for Trump. So in the situation we're in today, there's two outcomes based on the lack of appetite to support those flows. For me, the first is, is that they are underpriced, widely underpriced, and that they are good longs to make at this point in time. The second outcome is that the money that came in is not willing to bet on other markets and there is a lack of crypto native capital at this point to put on in making that bet under a Trump win. And I think it is the latter. And the way that I get more comfort around the latter is that when you look at all these long liquidations that have happened this year, of which there's been an abundant amount, right? Every single time that we try to take some decay, there's been a lot in the last 2 or 3 months. You know, there's the Germany, there is the ETF unwind and the displacement of ETH money. There's been the, you know, shorts even got eviscerated in terms of the move from Others from $175 to $250 that I wrote about in August. And then just very, even very recently, there was, you know, there was kind of the, you know, I call it the cross-panic bid unwind. And Joe Jonas, you actually talked about this, honestly. Your thread is what kind of gave me a little bit of creativity from that, which was you were long oil and short Bitcoin around the Iran-Israel you know, the war.

I nailed that one.

A lot of capital.

That was a fade.

Oh, you nailed it.

I'll give myself credit on that one. A lot of people have gotten totally chopped on this, this whole summer of up, down, up, down, and, you know, early fall too. Confidence is low. Um, I, I take your point about Polymarket having a low correlation with Bitcoin. That, that's interesting. But I think both you and I can kind of agree that correlations can change, and maybe Polymarket's going to be pretty correlated with, uh, with Bitcoin going forward. To your point about hedgers and kind of to our general 1000x viewpoint on, you know, Trump means Bitcoin number go up, Kamala means number go down, at least for a while. But like, let's— before we, before we get too much deeper into this election stuff, which we've talked about ad nauseam, let's give, let's give the people what they want to hear. Everybody wants to talk about the GOAT, the dollar sign GOAT. Um, That— well, okay, just in case you've been living under a rock, there's an AI meme coin now, which is like, you know, a confluence of, um, everything that people are looking to FOMO into. Marc Andreessen gave $50 grand to a robot, and the robot made a meme coin, and now the meme coin is worth, you know, 100x what it was worth 5 days ago, and everybody's getting all excited. Do you think we see like a, you know, give or— Avi, do we see like a white-hot— the GOAT, let's get an opinion on the GOAT between now and the election, and an opinion on meme coins, Solana, and this stuff in a Trump win scenario versus Kamala.

I mean, do you want to go first? Or—

yeah, yeah, I mean, look, it's great, great question, Jonah. Thank you for asking me about GOAT. Look, sometimes you have these things that just capture, capture the moment, like capture the zeitgeist. I mean, do I think that GOAT exists in a meaningful way in a year? Very unlikely. Uh, do I think that it can get to 2 billion in a short period of time? Potentially. Uh, I'll be honest with you, like, the way that I view memes is very much so like, what is the actual popular appeal of this thing, right? An AI-created meme coin. I just don't think it has mass appeal in the same way that a cute dog in a hat does. Like, you know, just shoot me. But I mean, it's like a very clearly crypto-oriented, like, tech.

I think, I think this meme— I agree with you, but I think this meme is exactly like Boden. And I would have bought it if I hadn't moved all of my Solana onto a centralized exchange to do all the active trading that I've been doing recently. Like, I, I have none on-chain to go and buy GOAT, and I shoulda. But like, I view GOAT as this— the same thing as Boden. We're gonna get this wild arc up to, you know, some stupidly large number, and then it collapsed back down to zero for exactly the same reasons that you just mentioned, Avi. Like, I think that I mean, like, listen, listen, that, that—

I think the Bowdoin chart, you're right, I think the Bowdoin chart and the GO chart are gonna look very similar.

Yeah, they're like— there's like an oh my God moment for both of them, but like literally no cultural staying power.

Yeah, I mean, and that doesn't mean you can't make a ton of money on it. It doesn't mean it can't go to a billion. I do think that in general, I mean, meme coins are just so very clearly here to stay. You know, funds are allocating to meme coins. Now it's kind of nuts just across the board. It's just the best gambling ever. I mean, the, the only two meme coins I personally own, I mean, I actually, you know, I'm not going to mention them because I don't like mentioning small caps, but I, I do think that kind of regardless of where Bitcoin trades, as long as it trades above $60,000, you're going to have, you're going to have some months where sorry, weeks where meme coins rip. So I mean, that's just my answer on this.

So the short answer is that I think Go will do very well. And so this last 24 hours, I compiled a series of thoughts outlining, I think, the conditions in which meme coins do well and their usefulness in terms of Effectively, what I think meme coins do is meme coins produce uncorrelated returns with respect to being a store of value relative to everything else that goes on in crypto. And so if you regress, for example, Solana price against Bitcoin, which I did since 2021, R-squared is something like 0.6. And that is when you capture Solana's price all the way going from $1 to $200 and then back to like, you know, $150, which is this year, right?

That's a good point, actually. I never thought about meme coins being like uncorrelated with the—

but what's important is that that correlation, which I tested, it grows with size. And so, so Solana, if you look at its correlation this year, like year to date, the correlation with Bitcoin is like 0.8 R-squared. But if you look at Solana in 2023 against Bitcoin, when Solana was smaller, it was like $20, right? Correlation was 0.7. And then when you look at it from 2021, it was 0.6, which means that, which indicates that as the size of Solana has grown larger, its correlation to Bitcoin has grown deeper. And so I tested this with some of the meme coins that have went from zero, quite literally zero, right? Zero to being very big, effectively $1 billion. I looked at MOG, PopCat, WIF, and Pepe, and I came to two novel conclusions, the first of which being that the statistical covariance between these assets was the lowest amongst PopCat. And PopCat has taken the longest time to develop. It's spent the most amount of time this year in a smaller window of size, right? Sub $500 million, sub $200 million. I don't know what the exact inflection point is, but then I also realized through looking at these charts, each one of these seemingly incredible meme coins that have come from, you know, from, from the, from optically coming from nowhere, once they reach their all-time high, or once they reach a high, they have never been able to surpass that again. These meme coins have reached their largest valuations in critical periods of macro uncertainty. And what I mean by that is WIF had its run from $0 to $2 billion, or $2.53, from December to March. Where there was skepticism around whether or not the BTC ETF would, would keep capital abundant, right? Whether or not these, these passive bidders were here for real. And during BTC's incredible run-up from $49,000 to $73,000, WIF did very well. And then ever since then, WIF's never touched that point again. And then Pepe comes in and hits $6 billion, goes from $3 to $6 billion during April and May. Around the uncertainty around the Israel-Hamas war. MOG and MU are able to go and double their valuations around the uncertainty around the ETH ETF in July and August. And PopCat runs to $1.50, eclipsing $1 billion for the first time in September, where there is uncertainty about the rate cuts. And granted, this is a very small sample size, But to the extent that we can find a replicable process with meme coin selection and identification, we are in a very critical period today where there's a lot of uncertainty around the Trump election.

I think that's well articulated. And when it comes to market sizing, I think only time will tell. And time is what we don't have left, unfortunately. But Giver, I really appreciate it. You coming on the pod. This was really fun.

Appreciate it.

Love, love listening to smart people. This is, this is a great conversation. Um, we gotta have you back on sometime.

Thank you for having me. I appreciate it. And, uh, sorry for the technical difficulties.

No worries, I've had plenty of those myself.

Helium.

All right, nothing with financial advice. Uh, we're all idiots. We just know each other from Twitter. Don't listen to us. Anyway, till next time, thank you. Thank you, everybody.

Adiós.