speaker-0: Good morning and welcome back to another episode of Bitcoin and Beyond. And what an extraordinary time we live in. While we're all scrolling to see what's going to happen with the Iran-Iranian strikes and with the tankers burning off the Gulf and with oil blasting past $100 a barrel, and then we're starting to see cost of living and cost of food increase because of the cost of energy. What we're not seeing is we're not seeing the crash of Bitcoin. It's refusing to crash. In fact, it's trading broadly around 65 to 70,000. Now it's above 70,000 Bitcoin. This is not what many are expecting. And so today we're going to discuss why Bitcoin is acting like this and why we see it moving forward different to how some of the cynics are seeing it. Welcome along, Greg, and good morning to you.

speaker-1: Good morning to you Derek and good morning to all our loyal listeners.

speaker-0: ⁓ the geopolitical noise. It's pretty strong. None of it is positive. Clearly stating a risk off environment. The gold hawks are excited about gold going and continuing to go up in value. Although many say it's been overbought. Where do you see us right now as a recap? You know, late February, early March.

speaker-1: Yeah, well, I mean, let's go back to the night of the attack. was our time, obviously. was on a Saturday, February the 28th, and you had that major coordinated US-Israeli airstrikes hit Iran, retaliation from Iran, know, missiles, drone attacks, disruptions to the Straits of Hormuz. And you had the inevitable flow on effect with that once the weekend had passed. And in fact, we actually touched on this last week, oil surged. But it was surging at a time when all of the major exchanges were closed. It was actually surging on hyperliquid, which is a decentralized exchange that trades perps. And in fact, you can trade gold and oil on hyperliquid any time of the day, 24 hours a day, seven days a week, three, six, five days a year. when markets eventually opened, oil wobbled, stocks fell as well, and fear gripped everything. And now in terms of Bitcoin, it was the only major asset trading that that they're during that time really. it did have that brief panic sell down to the 60,000 K lows. think maybe 60,900 at the worst. But by early March, it's already clung back hard, overtaking 69,000, 71,000, touching 73,000 highs. And as of today, it's hovering around 70, 71,000 up from the weekend lows. And that's despite no clear end to the conflict at the moment. Everyone expected a bloodbath in crypto and instead we're actually seeing resilience.

speaker-0: Why are we seeing a disconnect to what used to be, well, of recent times, was a very close correlation to risk on. And that correlation, unfortunately, wasn't in the way we wanted it, which was purely correlated to risk on assets versus inversely correlated to it.

speaker-1: Yeah, I think, you know, most traders are glued to the headlines, seeing images of sinking ships, burning cities, escalation and fear. That's all noise. That really doesn't drive markets. What we're saying is something shifted in positioning over the last two weeks. And that's part of Bitcoin's maturation as an asset, is that there are far more derivatives or synthetic Bitcoin out there that people can trade. you watch the options very closely like we do, You notice that the options skew, tilted bullish, the shorts got uncomfortable and the gamma dynamics started to favor the upside. In fact, perp funding actually incentivized holding longs. There was negative perp funding because people were so short. So it actually incentivized people to go long. So this creates structural momentum in their own right. They're basically self-reinforcing squeezes that ignore news flow because news flow is just noise. And then you look at the technicals, the risk reward signals and the flow data all point to all point higher. And I think the lesson here in a derivatives heavy market like Bitcoin now is that positioning trumps narrative every time.

speaker-0: Yeah. mean, it's interesting to put in the timeline of Bitcoin's existence. We often refer to it at the moment as a rapidly growing and somewhat grumpy teenager in the fact that it's trying to find its path forward. But we have to realize that nearly 60 % of its trading turnover of recent times has been institutional. And we also have to realize that this 21 million tokens that was the underlying position of Bitcoin, no more than 21 million ever. Well, yes, but it's getting three, three and a half X number times the number of Bitcoin are getting traded fairly consistently on derivatives. So not the underlying physicals, but that's early days because gold is up towards somewhere between 20 and all the way to a hundred X, the number of the amount of Bitcoin, sorry, derivatives. They're getting traded on a daily basis, oil, some 10 to 15 times. In other words, The derivatives market is growing, it's very active and it's going in a direction that is going to see a lot more of it. And I guess that means that you're going to be seeing that market really perform and become volatile in these times ahead. I mean, what's the real price action at the moment when you're starting to see, you know, four and a half, 5 % dump on strikes and then recovery wrapped around the chaos that's occurring around us. Over to you, what are your thoughts?

speaker-1: Yeah, I think I'd sort of go back to work that BlackRock did a couple of years ago and really sort of positioning Bitcoin as a defensive safe haven on the basis that it was not, its fortunes weren't tied to any one country, to any one country's interest rates or economic policy or growth outlook or anything like that. And they did the analysis that showed that when geopolitical events happened, Yes, Bitcoin did tend to react quite aggressively onto the downside when those events first came out, you the sticker shock of that event. And that's something that we've continued to see because Bitcoin trades as we know 24 hours a day, seven days a week, which means it's very easy to short Bitcoin on any sort of available exchange. If your normal market isn't open and you're worried about the value of your positions on Monday morning, you can just short Bitcoin and you can hopefully make some money out that when the markets open on Monday and it offsets your loss on your other position. So it's always been viewed as that sort of very high risk, ⁓ highly leveraged risk on asset. But the work that BlackRock have done and Bitwise have now since done very, very similar work is that when you're in those environments where geopolitical risk index is above the 50th percentile, so in a period of elevated risk above the normal level of geopolitical risk. And what is the new normal when you're talking about, you know, President Trump in the White House and Xi Jinping and Netanyahu and everyone else, what the new level of normal of geopolitical risk is. Every time that Bitcoin is, that level of risk is above the 50th percentile, i.e. slightly more risky than normal. Bitcoin does tend to actually perform really well over a five day to one month timeframe. So I think that works from Bitwise, which I said has followed on from BlackRock, really sort of backs that up. And you see the evidence from the tape. mean, Bitcoin's outperformed the S &P 500, the NASDAQ, even gold and silver in spots in the last few weeks. And I think that sort of, can go back and you can find some correlations there with Russia, Ukraine. In 2022, you had that initial dip for Bitcoin and then a 30 % rally in a month. So, you you've probably seen more here about war spending talk, you know, how much the US has burned in billions. I think the, I saw a quote the other day that they'd burnt about half the value of the Bitcoin treasury that they hold already in the amount of money they've spent on this war thus far. what that could mean in terms of a potential deficit liquidity and what Trump's quick end hints at, you know, terms of risk on assets. But I think even without all of that, Bitcoin held because the positioning was aligned towards a bullish stance. Derivatives data show that either conviction, calls were rotating in, probabilities for 80,000 plus by quarter ⁓ were jumping on platforms like Deribit and Polymarket. you've really sort of seen that that change in structure occur in the past few weeks.

speaker-0: So then what's your opinion of Bitcoin as far as becoming a mature asset? And maybe balance that into where it is in this proposed cycle that everyone talks about and that of recent times people are convinced that we're in its downward cycle market. Mature asset, but still in a cycle.

speaker-1: Yeah, I think that it's becoming digital gold in these stress tests. Each test gets thrown at it. I think it's coming through and it's not coming through unscathed. sort of, it's coming through with its battle scars, right? So I think importantly is it's uncorrelated when it matters and it's really sort of flow sensitive to the mature market. So ⁓ I think, you know, it's really, it's really It's developing, but it's sort of, it's still finding its feet in terms of this institutional adoption that we've seen, because it's, this is a market that's always been historically dominated by retail. know, large whales holding positions and retail that sort of gets futtered in and out, you know, scared into selling and whatnot and sort of selling high and sorry, selling low and trying to buy back in, buy back. And I think that market sort of really shifting and it will take time. I think Bitcoin will go through another iteration of personality when it really does sort of show that it is truly a form of digital gold. We know we're yet to see that. And I think part of that will also come from the investor base as the baby boomers inevitably move into retirement and on their wealth to the next generation. I think you'll see future generations be much more comfortable. I'm preferring to invest in digital gold than they would be into real gold. And look, it's been interesting that the spike in volumes you've seen in Iranian crypto markets and what this has shown is when the shit hits the fan, you can't take property with you. It's very hard to move gold, but it's very, very easy to move Bitcoin. And I think that that's something that the markets never really fully valued. Bitcoin for that reason and I think it's starting to at the moment.

speaker-0: super insightful because people will often say that if you do have a derivatives overlay of say 100 to 1 in the form of gold, then why don't you just transfer a derivative? No, because derivatives are connected to exchanges that are connected to banks and your bank may no longer be connected if it's a stage of war. So Bitcoin is ⁓ truly separate from all of these structures. You really can walk across a border. with a million dollars worth of Bitcoin and absolutely no one would know. Whereas if you walked across the border with a million dollars of gold, it's likely you might not be alive on the other side of the border. And these are things that, that's the things that people often think, you know, forget about as you're saying. And the other thing is just demographics, as you've said. The wealth right now is still contained in the 60 plus year old bracket. And you've seen them go to gold in a very large way and you've seen gold's capitalization grow considerably. We both agree that at some time in the future, possibly not far away and progressively, that you'll get next generation coming through. they're back to that, know, gold is just a boomer rock. Why would I invest in it? Digital assets are something I understand. So we still believe in that narrative going forward that is going to head towards gold. as the digital asset of gold equivalent. If it does, the way, gold's capitalisation is about what at the moment,

speaker-1: I think it's about $35 trillion at the moment. it's, US dollars. So it's a pretty, it's a pretty big asset class.

speaker-0: And Bitcoin, think is about 2.3, 2.5 trillion. Is that right?

speaker-1: It's yet 35. No, you're way too optimistic. It's 1.4.

speaker-0: ⁓ it's calculating all the digital asset market. Yeah.

speaker-1: Oh, okay. I am just looking at Bitcoin. All of that, entire market's 2.3, but I'm just looking at Bitcoin because that's what we really care about. don't care about that.

speaker-0: In regards to this discussion, absolutely. So 1.3, 1.4 trillion dollars, extraordinary when considered the might and size of Bitcoin, of sorry, of gold. What's going to happen when people say I've done very well out of gold, I might move some of my assets across to Bitcoin. What does it take to move the price of Bitcoin, do think?

speaker-1: Yeah. look, it's worth emphasizing that I would hazard a guess and it's a pretty easy guess to make that the bulk of those people are earning their gold through ETFs, right? They're not physically hoarding it in their backyard and buried six feet under in their backyard. They're doing it through ETFs. Now, what also trades on an ETF Bitcoin? So that's a very, very easy transition. It's not like someone needs to dig up their gold, take it to a person that will buy the gold from you at a fair price and not knock you on the head at the same time. Give you US dollars that you then have to, or whatever it may be, that you then have to get into a bank to then get it onto an exchange to then go and buy Bitcoin. And that's incredibly complicated and it's not going to happen. It's trading on an ETF. They sell the gold ETF and they buy the Bitcoin ETF and the Bitcoin provider has to go and buy the equivalent amount of Bitcoin that has been put into his ETF. Simple. So you could see, you know, if you only see one trillion of that market cap flow from gold to Bitcoin, once they call it one and a half trillion out of 35, that's a doubling in the Bitcoin price immediately. You know, that's back to the previous all time highs. If you saw five trillion come out, which is, you know, still not a lot in terms of the 35 total, that's a significant increase in the Bitcoin price. you know, at some point in time, I think you will see that shift occurring.

speaker-0: And as you say, you can't underestimate how easy it's going to be to use the same platform with a number of keystrokes and be exit gold into Bitcoin. And I think you'll see some extraordinary, extraordinary growth of price when that occurs. Simple logic suggests that, but on the way through, there's a great deal of volatility and there's a great deal, I guess, also of market inefficiency and growth in the overlying derivatives as we've discussed. And then there's the average person that's sitting thinking, when is the moment to buy Bitcoin? And now we're never giving advice. We're just discussing our thoughts on it. Over to you on both of those. What do you think the volatility opportunities are and when is the right time to buy Bitcoin?

speaker-1: Yeah, I think, I think I would say don't focus on the news headlines. That's noise. It doesn't give you a good indication of where Bitcoin's going. I think you need to shift your lens as an investor. You need to be aware of that derivatives market. You need to check that options skew, what the perp basis is doing, what the funding rates are doing before reacting to the next headline. And you can use flow, you can use tools like a flow dashboard or systematic signals if you can. But I think All of this boils down to, again, this is not investment advice. You should be prioritizing accumulation over panic selling. Yeah, that should be the ultimate, the ultimate goal. let's look at ⁓ the chief marketing officer of Bitcoin, Michael Saylor has just bought, I think was another 5,000 Bitcoin recently. ⁓ could be well, not wrong on that number, but he's now has. Close to 700,000 Bitcoin. you know, what's interesting is that his buying plus the moves into the ETFs are counted for about three and a half times the daily Bitcoin, sorry, the weekly Bitcoin mining supply. And what's interesting is that the Bitcoin network is just this week mined its 20 millionth Bitcoin. There's only one million Bitcoin left. You Michael Saylor has 700,000. I imagine he's probably thinking about doubling his holding. How much of that extra million is Michael Saylor trying to target? You know, the real balls out there are saying, well, maybe we see Saylor and ETFs and other digital asset treasury companies buying 10 times the Bitcoin supply every week. Well, you know, where's that other nine times the supply going to come from? Well, it's going to come from these, the retail sellers. you know, I would say, And as I said, prioritize that accumulation over panic selling is unprecedented demand for Bitcoin. Yes, I know there's lots of derivatives out there and synthetics, but ultimately there are only 21 million Bitcoin out there. And that's ultimately what you want to hold a piece off.

speaker-0: So that's dollar cost average. In other words, just keep acquiring. So to finish this off, I mean, we've got these shocks coming towards us. ⁓ know, I think everybody's looking for an answer about where they should put their money or what should they do. But maybe it's not money that's the important thing. Maybe it's a state of mind. What are your thoughts?

speaker-1: Yeah. Well, I just say stay data driven. Don't get emotional about headlines and noise. If the positioning stays bullish, then the next leg higher could surprise everyone again. You know, there could still be weakness. We're not calling the bottom in Bitcoin here at all. We're just talking about where the positioning currently sits, but yeah, stay data driven, be unemotional, accumulate when you can.

speaker-0: It makes good sense to me. I've got to say, I agree. It's the times like this that it's very hard to keep your head while all about are losing theirs, but make allowance for their doubting too, which is the Rudyard Kipling opening line. so, but it's important that we do that. And if you do do that, we believe there's extraordinary opportunity that sits in front of us. So thanks again. Hey, for those listening, by all means leave comments at the base of the, of this YouTube video or send emails into us. We're always interested in your opinion. I attended a one hour macroeconomic discussion today and the gentleman had a very strong opinion on Bitcoin. And as you can imagine, it didn't meet his normal lens of trading. And so it just goes to show you that there's still a great deal of people out there that don't understand, don't understand what Bitcoin's metrics are and don't understand the generation that's coming. We are believers and we hope you are too. Look forward to seeing you in about a week's time with an update on what we think is happening in the world and how we're dealing with and working with Bitcoin. Bye for now. See you, Greg.

speaker-1: Terry, I've.