Transcription
The main question of the war in Iran, who actually controls the Strait of Hormuz? President Donald Trump says that the US may actually be in control. "And who's in control of it? Will Iran still be able to control the flow of oil?" "Uh, be jointly controlled?" "By who?" "Maybe me. Maybe me." "The United States," "me and the Ayatollah, whoever the Ayatollah is, whoever the next Ayatollah."
And this has markets in a spiral with gold officially in a bear market, down 22% from all-time highs. But the bigger story might just be what Bitcoin is doing under the surface. Nick Batia thinks he sees a signal. A signal that Bitcoin is bottom. A signal that stocks may underperform. A signal that Bitcoin may be ready to break out. A $2 billion asset manager says that the smart money has already been buying. And if he's right, the next move in Bitcoin could catch a lot of people flat-footed, but not you. We've got a lot to cover. This is Dante Cook with Bitcoin Simply. Let's go.
Everybody wants to talk about CPI, rate cuts, Trump, the war in Iran, the Fed. Nick Batia says that the real trigger that happens in markets is always something else. Defaults. That's the thing that creates the volatility. And when defaults start hitting the system, there's nothing that's actually safe. So if you can't pay back, not only do you know you default on the debt, but the bank that is issued to you or the mortgage-backed security holder that owns part of that mortgage is going to suffer impairment. "Mhm." That's why the Federal Reserve bought so many mortgage-backed securities between 2008 and 2012 because if there were defaults in the system and the banks were going to take those defaults, then the whole system does collapse.
We are in a $350 trillion debt-based system. $350 trillion in debt. "Just numbers you can't comprehend." And you know, my students have to think in trillions. That's what we do every, every single class. We show charts and we're comparing this 7 trillion line item to this 38 trillion line item to this 64 trillion line item in the Eurodollar system, 15 trillion in on, uh, in offshore dollar deposit claims, but another 60 trillion in FX swaps claims. These numbers are large. 350 trillion, the quarterly number that comes from the International Institute of Finance, it's a very large number, but the system is built to roll over that debt. "That's where the liquidity framework comes from." What is the capacity for the system to roll the debt over? And when that gets hit, defaults, financial crisis, central bank bailouts, you go back up, and that's just the system that we live in.
"That's the shift." And when that starts to happen, everything starts to get repriced. Not just stocks, not just debt, all collateral. And that's where things get really interesting for Bitcoin. Nick Batia believes that Bitcoin is going to eventually take a slice away from treasuries to back the US financial system. That's a massive statement. US treasuries are the bedrock, the sacred cow. But in recent days, we've seen how they've been weaponized against the United States. That's why Bitcoin has a future role as collateral in the United States banking system. When you think about what is the base for future, future collateral and future banking, Bitcoin has, has a role there. And you can see it like I can see the path to the United States trying to direct capital into Bitcoin instead of into treasuries to make it less vulnerable to the rest of the world owning treasuries. But that doesn't mean that treasuries will be, will not take the same place within the financial system. "If the market starts to question sovereign collateral, well, we don't need Bitcoin to take the whole market, just a little slice. And if it does, that changes the monetary stack forever."
In that conversation between Danny and Nick, he said something that I loved. In the environment right now where people are uncertain about what's going on with Bitcoin, he smashed buying Bitcoin. "I'm very bullish on Bitcoin. Um, I started stacking again. Um," "Let's go." "You know, not to overshare, but like as a business operator, I've been investing in my company." "Mhm." "And I haven't been investing the marginal dollar in Bitcoin for a couple years. So, it feels really good to buy Bitcoin again. Um, I think it's positioned really well." "These prices are just too good." Yeah, it's one of those things where you just kind of have to smash. He doesn't smash buy because he's emotional. He has a liquidity index that he follows religiously. If you followed his work, he thinks the market is underpricing Bitcoin's future role in light of what's going on with stocks right now. Bitcoin is a macro trading asset that leads to indicators from other markets. And so, Bitcoin went down first and now we're seeing a rolling over in stocks. But this is the setup that he's talking about here. I'm very hesitant to get too far ahead of ourselves because I think there's probably multiple reasons. One, that it dropped 50% just before it, which, I mean, how many sellers were really left? But is it even a sign that it's becoming more of a safe haven asset in these sort of big geopolitical events? "No, I don't, I don't know." "I, what I think is that it was just leading." "I think that's, I think it's still very macro driven." "Mhm." "I think the correlation, well, I don't think the correlation with the stock market is still very high, but now you see Bitcoin going up, stocks going down. So people are like, well, how is it still correlated?" Cuz there's a little bit of decoupling. The way that correlation is calculated is you look at daily returns and you compare them to each other. So on days where one goes up and the other goes up, that's a positive correlation. The, if you look at each day of Bitcoin's down move, it did match a lot of the stock move, only that stocks, when it went back up, stocks stayed flat and Bitcoin was going down. Now stocks have come down a little bit. So I really believe that Bitcoin is still macro driven. And our liquidity index gave a sell signal on January 14th. That applies to both stocks and Bitcoin. Bitcoin reacted right away. It's down about 20% from that January 14th level. And stocks stayed flat, but now they're going down and showing more weakness. So, I do think Bitcoin is leading. And that's why I'm, my bias right now is to believe that the bounce that Bitcoin is showing is foreshadowing volatility coming down, which will boost TBL liquidity, our index roll it back up and trigger a buy signal sometime in the next few months.
Bitcoin can stay correlated for a long time until it doesn't. And when it breaks loose, it really breaks loose. And that's why people who really understand it don't sell it because you could sell Bitcoin at the wrong time. Instead, borrow against your Bitcoin. Ledn has been the leader in Bitcoin-backed loans and they allow you to borrow against your Bitcoin stack that you've been stacking religiously after you've smash bought like Nick Batia instead of selling your Bitcoin. Borrow with rates starting at just 12.4%. There's no credit checks and you can repay and retop up your loan at any time. Go to learn.ledn.au/simply to get started. And quick reminder, if you're going to own Bitcoin in this environment, don't own paper Bitcoin. You need to actually control it, not an exchange controlling it on your behalf. Self-custody your Bitcoin the right way by working with a team member at The Bitcoin Way. They help individuals and families learn how to secure their Bitcoin and secure their future sovereignty. Your keys, your Bitcoin, your way. Go to thebitcoinway.com/partner/dante-cook.
Former Notre Dame CIO and two billion dollar asset manager Mark Yusco is saying the same things that Nick Batio was saying. He's saying that the bottom is in and that smart investors have already been buying. The worst of the selling has occurred. I totally agree because what happens in these, in these cycles is when the price is below fair value, investors buy. That's what we do. That's our job. We buy things below fair value. And that's what happens during winter. The investors begin to nibble and, and that's what causes spring, right? So today we are well below fair value. 70 fair value is in the 80s. So, you know, people start to buy. We're buying again. And then what happens is when you get, you know, start to move, the price starts to move, when you get into crypto spring, then the traders come back and it starts to move again. And, and then the hedgers start to sell because if you're mining Bitcoin and the price is below your total production cost, you're probably not going to sell it because you need to cover your cost. So, you're going to hold it a little bit. You're going to hope the price goes up. Well, then when the hedgers start selling, the speculators have to take the other side of that trade. That's all a speculator is, the opposite side of a hedger. And then ultimately, as the price gets higher, this is where the humans are going to human. Then the leverage comes in and the gamblers come in and that's what causes these parabolic moves and that's what causes the cycle and the peak and then, and then the crash. So we're a long way from that. So I do think we're close to the end of the unwinding of all that leverage. There wasn't as much leverage this time. We got to 1.5 times fair value in October. So we didn't need to correct as far this time. So we probably have seen the lows. Probably.
"That's when turning points happen. They're ugly, boring, confusing until they aren't. And Bitcoin is the cleanest dirty shirt. Nothing looks pristine in the world right now. Not stocks with high AI valuations, not treasuries, not long-term or short-term debt, and not global growth. But Bitcoin is differentiated."
"I think we finally found a reason for why Bitcoin could be a differentiated asset, which is what happens when you don't trust the US markets. There's nowhere else to go. You kind of look for that cleanest dirty shirt. And I think finally that could actually be Bitcoin. And some of the reports that we've been seeing is some of the wealth in the Middle East is actually looking at going into, uh, blockchain-related assets and digital assets like Bitcoin because they're, don't know where else to go. They definitely don't want to go into the USD right now. They don't want to go into gold. That's also a lot harder to do. And so those really easy to access crypto on-ramps are actually potentially helping get that Middle Eastern wealth into blockchain. And that is also potentially propping up some of the Bitcoin prices we've seen most recently."
Bitcoin doesn't need the world to be perfect. It doesn't need conditions to be perfect. That's why they call it the honey badger. It just doesn't die and it just doesn't quit. It just needs the alternative investments to continue to disappoint and to have uncertainty. Do you have certainty in bonds? Do you have certainty in treasuries? Do you have certainty that AI won't wipe out jobs? Do you have certainty that the capex and opex investments into AI are actually going to pay off? No. There's no certainty anywhere. But one thing is for certain. Bitcoin is something that can't be killed and is a fixed asset in a world of volatility and uncertainty. And when the defaults happen, that's when the rise happens faster than anyone can believe. I think people are going to be flat-footed for what's about to happen next. But not you. Because as you've listened to this show, not only do you stack Bitcoin by buying on an exchange, but you own a Bitcoin mining machine. You don't host it yourself. You didn't pick the machine yourself. You don't do the maintenance yourself because you've outsourced to a partner like SAS Mining. They handle everything for you. The miners, the maintenance, the hosting. They just send Bitcoin directly to your wallet. Check out SAS Mining with the QR code on the screen. This is Dante Cook with Bitcoin Simply. Happy stacking.