Why Everyone Is Wrong About Bitcoin

A worldwide figure. So, it's better than just looking at the US. And indeed, the 2017, you remember how I was saying the Federal Reserve was declining their balance sheet? It's true. Yes, it is also other central banks cutting their money supplies to be worried about all the inflation they created during the pandemic, but it's also them losing value against the dollar. Things do line up. But I think, and this should like kind of like you said, Smitty, and which I totally agree with, like it should give people a lot of comfort. On average, if you were to just buy $100 randomly, the same amount of times, uh, your final portfolio value would be about $14 million. That's the average. You heard it here. Chance to pump.

>> Exactly.

>> There's You're saying And there's a chance.

>> We might bullish.

>> There's a chance.

>> Guys, welcome back to another show. Today is Wednesday and you know what it is. We have a fantastic guest. First time on the show, but second time on the channel. Matthew, welcome to the Mondays, my friend.

>> Thank you guys. Appreciate it. Glad to be here with you and get to meet you in person in Amsterdam.

>> Exactly. It was great. Really glad you are joining us today. And of course, the one and only Smitty. How you doing today, my friend?

>> Hey, I'm doing wonderful. Yeah, I'm I'm super glad to be on the show as usual with two OGs, but uh you know, Matthew is a particular particularly special OG that I've been tracking for a while. I'm a huge fan of of all of his work and uh crypto voices and everything. So, thank you for joining us, Matthew.

>> Yeah, likewise, Smitty. Uh my pleasure, man. really appreciate you guys reaching out and happy to do it anytime.

>> Guys, exciting news. December 8th and 9 will be attending the Bitcoin conference in Abu Dhabi. If you're coming, please stop me, say hello. Let's connect in real life. In the box down below, you'll find a 10% voucher. Use it. Get your ticket before it's too late. By the way, if you're enjoying my content, it will mean a lot if you could help me by subscribing to the channel and push the like button to support my journey. Thank you. Go and give Matthew and Smitty a follow. By the way, the new logo is an absolute killer. I love it. Well done.

>> Ah, thank you.

>> Okay, as custom, we're going to go through the famous trading channel. By the way, guys, none of us are traders, so don't take any of these as an advice, but I think it's interesting to check the monthly candles and see how Bitcoin is behaving. We are now into a point where we would like to see a bounce of course, but um like I say all the time, none of this is financial advice. Matthew, I don't know if you do any trading, but we just find the data interesting to observe.

>> Same. Yeah. as well as fear and greed, right? So, this is particular interesting to me. I don't know if you guys feel the same, but now we've been into a fear actually extreme fear for quite a bit. So, I don't remember dropping this much this fast. So, probably that's why the market is reacting like this.

>> I always feel like there's a bit of a mismatch with that dial and how I currently feel, but I wonder how that applies to guys like you, I think, who have been in Bitcoin longer than I have. But it certainly doesn't feel like it should be extreme fear because if you look at the history right we're used to 60 70 80% draw downs and a 20 30 35 is kind of part of the course.

>> Of course fear and greed is not the only indicator and you know using that to buy and sell wouldn't be 100%. Wise even though I've seen some statistics about if you buy at certain fear there is kind of a return every now and then. I don't do short term, but looking at fear and numbers than where we are now, it feels like 2025 was in essence a bare market. It's very unusual.

>> Yeah. No, it certainly is. I think everybody was just expecting higher highs and the four-year cycle in prior 4-year increments was, you know, that was this was the crescendo. This was the top. And, you know, Wall Street is fully in now. People were expecting this stuff on my streams as well. You know, I do this most days still. And I thought it would be, you know, just one of these funny times where we'd be just counting, okay, how many days have we been, you know, above the 80th, 90th percentile in a lot of different metrics. And uh indeed, we're below the mean, we're below the regressions, you know, we're we're quite uh the regression trend lines. So, we're quite uh in a different spot than I think a lot of people expected. And you know I also think that everybody's very quick now to uh evaluate you know week to week dayto day these sort of changes in my view. I don't know. So I I think a lot of these signals I I don't pay too much attention to them. Everybody's ready to to change their sentiment you know week to week and you know who knows what's going to happen next week. We just don't know.

>> Yeah. I think more more people it's like in a a build of anxiety you know. I think a lot of it probably ties back to the cycle narrative and the fact that we're extending now beyond what a lot of what the the timers said that we were supposed to be doing by now and the price expectations. We haven't really had that release valve that kind of like gets, you know, rips the band-aid off and then we're back into they're much more sensitive now, I guess, is the right way to put it, right? Because they've just been dra getting dragged along with this crab call action for so long. They've been told there's a lot of volatility in Bitcoin. They've been told there's a lot of upside volatility. this kind of two steps forward, one step backward action. Everybody's kind of, like you said, they're zooming in. They're paying a really close attention to the short-term price action, which if you've been in long enough, you know, there's no hope in doing that, right? There's no hope in trying to track where it's going to go in the short term. And I think I think a lot of us talk about that a lot on our channels.

>> Those OG holders or whales or whatever you want to label them, they probably are expecting the cycles to be over by the end of the year or maybe over already. October 6 for them was the top. And some of them they've sold and who blames them? Like if they bought Bitcoin at $1, I mean 100,000 seems very attractive, right? So no blame there whatsoever. But what's interesting is to see because I don't believe the top was in yet. So it would be interesting to see what their behavior is going to be like when the price is going to pump again. Are they going to FOMO back in and then the rugpool comes in? Because the market likes to punish the majority of the participants. So there's going to be a battle between the OG who they sold because they thought the bull market was finished and maybe the institutions or whoever is buying at that point. So I agree with you guys. I think the crazy part is we dropped towards the end of the cycle and now maybe people are seeing and are connecting those two information saying ah because 30% corrections are normal in Bitcoin but when they happen at the end of a cycle this is probably why we've seen so much fear right.

>> Yeah. I am curious. You just said you don't think the cycle is over Mr. M. or when do you think it's going to uh be another opportunity because there are plenty of people as evidenced by this index as well that have called the top in.

>> I'm going to swing a very controversial opinion. I don't think actually cycle ever existed. I think it's all about liquidity. So whenever the market has liquidity, the market goes up and vice versa. So I'm expecting the US pivoting. I mean I was reading the other day that the odds for a red cut in December is really high. Trump wants to give $2,000 to each American. So those have to be factored in, I believe. So next year we will see definitely a movement to the upside and maybe the cycles I know we say this all the time this time is different the cycle is broken but I don't know man I mean the data points are not too many to say we have those cycles we are just label things as we go I think we will see corrections as well as pumps along the way we will see dumps of 30% 20% and then pumps of 40% 20% so I don't think cycles have any more relevance but to answer your question I think we will see definitely a new alltime high in 202 26. But again, I don't know squat. I don't have a crystal ball. And I buy regardless. If the price goes up, I stack SS. If the price goes down, I stack SS because even in my time frame, four years, it's too short.

>> I think I saw something recent. I think it was Max Kaiser saying that ultimately in the end that Bitcoin is sort of a riskoff asset. And I I think I agree with that statement, especially with where we're going to see it going. In that sense, we're sort of early, right? because we get really caught up as as humans, as emotional beings. Um, we kind of get in the investor short-term mindset and we get excited with these bull runs, these bubbles. I think those are going to, you know, as as the as the capital pool deepens and broadens, I think it's going to diminish over time. I think we all talk about that. Again, as when we're in the sort of doldrums, we have nothing better to do than to look at the short-term price action. So uh in the short term also you mentioned liquidity and so I think the macro backdrop what you said is absolutely correct and this cycle one of the big realizations in my mind other than sort of the power law stuff which is the stuff I'm most compelled by ultimately is this this tiein with the macro backdrop. So to the extent that we have these cycles I think you're right I've been saying I don't think that these are actually Bitcoin cycles. I think that there's more fuel to add to the fire when when we go through. So that's the risk on yeah risk on nature of of the system that we're seeing there. And I don't think it's anything more than that. And so if you look at the macro backdrop, we kind we've had swings back in the right direction, but it's kind of stalled out, right? You can look at the yield spread, you can look at liquidity, you can look at PMI index. Um they're they swung back in the right direction, but they haven't they haven't gone back into territory where we would consider this an economic expansion. And so I think you're exactly right. you can tie that you can correlate that to uh these macro indicators gold copper gold ratio very nice correlation with those so yeah I think that that's probably the best the strongest hypothesis for you know why why we tend to get more blowoff top type of action when we have conditions like that and right now we haven't swung back completely in that direction so that makes me sleep even better at night, you know actually understanding that

>> my view is uh I'm sympathetic to your guys's view but it's probably a little bit different you know I've said it uh I I think to you Smitty uh on maybe it was a Twitter spaces but the power law as we know the power curve is very strong. It's very uh you know it's like a black hole kind of type thing and there's a lot of comfort that we can take in it. If you try to overlay that with say the money supply, of course you can generally say like the money supply goes up and Bitcoin goes up, but is not true across the board, especially for the big currencies, you know. Um, and an example would be when Bitcoin was booming in 2017, the Federal Reserve was uh didn't print money for 3 years and was actually declining its balance sheet at that time. It's true that 2021 lined up very well, you know, with all of the madness around the pandemic. But even now, in the last 2 3 years, central banks around the world again have been really pulling back that liquidity that was pumped in from the pandemic. And Bitcoin has gone up over the last two years in the same performance as gold and tech, you know, which have went 40% a year. All of them actually Bitcoin a little bit more uh a lot more actually if you compare it to gold. because it's about 3x. If you bought Bitcoin and you bought gold 3 years ago, you would still have 3x more wealth uh in your Bitcoin.

>> That's a really interesting Sorry to interject there. I think that's super interesting. I don't think we have a good enough. I'm I'm wondering what's in your brain about because it has

>> it's not like it's completely flatlined. It's not it's not like it's been at power loss support for example, right? It has

>> has had some returns like you said over the last couple years. Why do you think that is despite that sort of like lower liquidity environment?

>> Yeah. No, I mean, it's a really good question. I think if you go back and zoom out like I said about the 2017 top that we have in Bitcoin or the boom whatever you want to call it. Some people only call one of the tops or booms and busts whatever. I think that it's the power law that's the most important thing with Bitcoin. It's the you know it's this network adoption curve. It's this sort of faster at the beginning then more sustainable slower growth. That's just what's really driving Bitcoin adoption beyond everything else. Although I certainly will, you know, ad admit or agree that as Bitcoin gets bigger, the liquidity and the cycles in the macro will match say the Bitcoin what could happen in the Bitcoin cycle. But I really haven't, you know, I haven't seen enough to sort of square that yet. And then another weird example is if you just look at gold and Bitcoin directly compared, you know, to each other. Gold is about, you know, it's about 20 ounces of gold per Bitcoin right now, which is super low, like at the 10th percentile level, but it was under 10 ounces of Bitcoin per gold. Did I say tens of Bitcoin? 10 ounces of gold per Bitcoin 2 and a half, 3 years ago. So, Bitcoin is still more valuable in terms of gold, even though gold has had an enormous run. And you know I think there's it's hard to sort through all of it but I would say certainly the the the macro geopolitical stuff it has made gold run you know we interviewed Mark Fabber four years ago and he's a famous western bear Asian bull and he was just so mad as a lot of gold bugs are mad like just say like gold price is just really you know it's lagging you if you can imagine like four years ago this is already 10 years sideways movement so gold price is just lagging you know so much interest is going into crypto you know crypto because he's using that word uh as I would use it in a negative connotation, not not talking about Bitcoin. So, I think there's a lot of so sort of pent up demand that's that we're seeing here in gold because of the macro picture. If you view it through the the Bitcoin lens or Bitcoin in terms of gold or Bitcoin in terms of dollar, you're you're still going to see something that's pretty close to the power law, right? Close to the power curve.

>> Oh, 100% agree. Yeah. Yeah. People start kind of mixing up narratives a little bit. I think I think I fundamentally believe that the the power law is what's driving the action there. And like you said, we're not we're not that far below like what percentile are we at right now? 40th roughly. I mean, we're right there kind of in the middle of the channel. Yeah.

>> On on USD. Yeah.

>> On USD. Yeah. And then gold, of course, we're sitting at the bottom, which is which is uh because of the ob the runup with gold, but even then hasn't hasn't broken the power law, right? In fact, I think that's probably going to prove to be stronger than ever going forward. But if you look at the correlation between say like these manufacturing indices like things that sort of track productivity economic productivities let's use that term the bubbles themselves I think to me what's amazing is is the tight correlation with there and you can look at multiple of them and what you'll see is that it's been for many of those metrics it's been an anemic last three years in fact if you look at like uh the PMI I was showing this uh a lot on my my my account we've been in technically the longest running contraction defined by that PMI in its history since like 1948. So, and it's defined by sitting below that 50 mark. So, production um supply chain managers and things like that are seeing they're not seeing as many order intakes and things like that relative to their costs as they were a few years ago. Although that trend is slowly it's crab it's actually literally crab crawling back its way into the north of 50 range. And I just think that's so interesting because we're the prices we're I mean most of us were kind of expecting to be in the upper or closer to the upper percentiles I think with Bitcoin, you know, still tracking that power law just like it always is going to be. U so I just think that that's that's really interesting and you see something similar with the gold and copper copper gold index ratio rather. But yeah, we'll we'll see how it plays out. My expectation though is that it's going to be there's going to be a lot of factors that that start driving. Now M2, you track M2 like nobody else does out there. And I I would love to deep dive on that more because you see a ton of I what I would suspect you would even think it might be misinformation around the correlation with M2 and people using charts wrong and you know committing committing uh chart heresy and I I think that you see this M2 Bitcoin price correlation chart then it's like completely diverging and I haven't done a deep dive or post on this or anything like that Matthew but what's wrong with the way that they're doing that analysis? Are they I suspect that they're doing some gymnastics to sort of like align axes and like but that those posts kind of go super viral. So what's going on there?

>> Sure. Sure. I can show this if you want. I have three simple indicators here. Right. This is the base money supply which is in the dark green. Broad money supply which we'll just define in a second. And then Bitcoin. All right. So let's let's just take out broad and let's look at base really quick. So, this is the one that I've been tracking the most for the longest time. This is a worldwide figure, so it's better than just looking at the US. And indeed, the 2017, you remember how I was saying the Federal Reserve was declining their balance sheet. It's true, but other central banks were also still increasing. So, you can still kind of see that it was going up as, you know, Bitcoin peaked in 2017. But still, it's very small as a proportion of the money supply. It was very small. You know, as you see, it was we were 20 trillion here in December 2017 and Bitcoin was peaking at, you know, 300 billion, right? Crypto market as a whole, I think got over a trillion, but that was obviously a bunch of coins as everybody knows that were completely ridiculous.

>> Matthew, is this compiled by is this all the M2 supplies compiled by you and put together as a metric?

>> This is not M2 yet. So, this is uh this is base money. It's kind of blocked by our uh thumbnails, but it's just just so you see the it's called base money or monetary base. It's the central bank money. So this is the money that the actual this is what really the printing press is. This is composed of two things. It's the actual physical cash that everybody you know sort of understands right and it's bank reserves which is like every financial institution in banks account with the central bank. That's how they settle liabilities with each other. And the ratio is about 2:1. Onethird of the total is cash. So at this moment for example when we got up to 30 trillion during the pandemic all right you can see there it's 30,000 billion 30 trillion 31 trillion that was 20 trillion in bank reserves and 10 trillion in physical cash and the physical cash by the way that number is about stayed the same. It's even slightly growing. Then you can see we've come down. Everybody's been worried about inflation in the central banks. they at least talk to it and they have indeed all over the world been declining or at least flat on their balance sheets. But also another phenomenon which is I'm trying to figure out another way to to show this. I mean I have all the the growth rates but what you also see here when you see this green world-based money supply falling over the last 5 years from 30 trillion to now it's 27 but it it went down to uh you know 26 25 here. What you are seeing there is yes it is also other central banks cutting their money supplies to be worried about all the inflation they created during the pandemic but it's also them losing value against the dollar. So, it's one of these Wickkinstein ruler things, right? You can't exactly show a worldwide inflation figure. But in any event, it's true. It money supply generally grows and Bitcoin generally grows. So, that's true. But, you know, Bitcoin's been growing a lot in the last 2 years and the money supply has been stagnant. This is the central bank, the core of the monetary system. At the end of the day, this is the most analogous money supply to Bitcoin. I could estimate closer to today, but I actually think money supply is is not really a Ford indicator so much. It's it's something it's kind of a forward indicator, but it's mostly just see where we are. Is the money supply growing or not? For what I'm about to show you in the next currency stock, we can't even get the data. Like I'm not going to get the September data for what is the true US broad money supply until December. So, it's really crazy, but and that's only September data, you know, third quarter data. But anyway, if you just see here, by by June, we're at $2 trillion Bitcoin and 27 trillion on the monetary base. Okay, so under 10% under 10%. But still, it's a great accomplishment. This is what Bitcoin has done. But that's, you know, that's Bitcoin's most apples to apples money stock comparison. I can put this money stock in. And this is the broad money supply globally. A lot of people are throwing around M2 a lot because that's kind of the biggest money supply that the Federal Reserve publishes. But M2 the big problem there first of all is that M2 we should just define what it is. M2 is broader deposits for financial for the financial system that are primarily for retail for retail. It's not even for institutional. So savings deposits time deposits that are for retail customers retail money market funds. That's what M2 is. It's broader deposit type instruments for retail. It's not even for institutional which is going to be the hot money. So for the institutional money like institutional time deposits, institutional money market funds, repurchase agreements which is a gigantic market that is in the M3 money supply and the Federal Reserve hasn't even published it since 2006. But you obviously should look at that because that's a global money supply. And so they do have data where you can get most of the data, but again, like I said, it's so slow. We have to wait till December, like early December to get September's data, Q3 data. So it's a very, you know, if you want to do it right and actually see like the big sort of landscape, it's a slowm moving thing. And people that are saying like, oh, you can sort of stagger, you know, US M2 10 weeks to the Bitcoin price, I just have a hard time believing those sort of oracle things because first of all, you're only looking at the US. And second of all, it's not the apples. It's first of all, the apples to apples money supply to Bitcoin is this. It's the base money supply. This broader money stuff is all sorts of stuff. I mean that can you know then you start to think about your your liquidity your margin calls on exchanges uh your open interest for options and futures on Bitcoin or whatever any other pair ETH BTC or whatever or stable coins all that riffraff is not base money that would be in what is the broader >> money supply the the light green so just there's a whole like kind of taxonomy thing there and it's not you know a lot of it you can find on my website a lot of the breakdowns of this but in general we can say yes the money supply grows most of the time Bitcoin grows most of the time and so we can say that but I just I don't actually think the correlation is as strong as a lot of people uh are giving it harder

>> this sort of view and the way that you're able to share this in real time is so educational and useful so I really appreciate this and uh the fact you can you can jump on a show like this and just walk us through this and explain exactly what you're talking about but yeah I the visual when you and the fact that you can jump between different you can add different metrics on there and you can switch between log and linear I think if you look at is there any way can you switch to log scale for the bitcoin on here I don't know if this is helpful at all and then if you remove the the world I mean sorry the broad money and you just look at the base money it seems peakier or it seems like there's more what I'm it's like less smooth right so if you're going to try to tease out just by eye this is totally by eye visually you can see that there's some tie in there. But yeah, I I now that we're are in institutional mode though, what's interesting to me here is that you see some of the trend changes here. But since this quote unquote cycle, 21 22 to today, look that same there's the same I'm just noticing patterns here, right? The at the base money is declining for the last few years with these little these little mini cycles. We've been crab crawling forward and up to the right with Bitcoin, although not explosively. I don't think that that's a coincidence, right? With all the instit more much more of institutional buyin in the last few years, the ETFs.

>> Yeah, I I agree with you. But here, imagine this. If I just take this away now, you see a power law, right? You see the power curve. Like, it's

>> it's a lot of noise. And I look, I've been following both of these for seven years, so I'm I'm not trying to necessarily uh favor one or the over the other. Like I totally understand that. Yeah. You know, we had a huge boom. We went from 20 trillion in central bank money before, you know, in February 2020 to 30 trillion by mid 2021. So it was massive. It was massive. And you can see, you know, we had the meme stock trading. We had everything going on at that point. It's it it things do line up. But I think and this should like kind of like you said Smitty and which I totally agree with. Like it should give people a lot of comfort that Bitcoin has another trend which is in my opinion much more powerful and much uh different than the rest of the Trafi world and that's that very interesting power law.

>> It's such an interesting perspective because it's something I actually never I always have my bullish goggles on and I look at Bitcoin driving the oil market. But like you like you mentioned Matthew, it could be the other way around. It could be that gold is catching up with with Bitcoin which has gone almost for a 10x if you think about the 15,000 bottom we had a few years ago and gold is catching up. The M2 is catching up. Definitely an interesting perspective. What are you expecting coming in next?

>> I have a a response but Smitty you go first and then I'll put a different uh chart in.

>> I'll go ahead and step into the hot water first. Right. So I I want to say B because of exactly what's being displayed right now by Matthew's curve by Matthew's visualization here that I am always bullish. It's like when the price dropped from it's we're now it's 30 something% down from our last all-time high and I've been tracking the all-time highs and the patterns there. I I can't be more excited and more bullish about where we are because of my ability to to access these lower prices. So I I think I just I'm kind of a permable like that. It it would take I think it would take and I haven't even been in the game for that long compared to a lot of a lot of you guys. But could I see us going down further? You said the next 2-year window. So, this is this is total speculation what what I could see the road map ahead again. So, like I don't I don't put too much stock in this. I mo I all the stock I put in is in what Matthew's showing the power curve. But that said, if I gun to my head, I think that the next year kind of like deep into 2026, it's wouldn't be too unlikely for us to be experiencing a bit of a higher level of pain. And I think that there are I call these these economic dampening factors. There's a there's a timeline to when we're going to start to see economic kind of the engine start starting to rev up again, so to speak, especially here in the United States. I think it's when that happens is when all the the investment money, the investment environment is going to become a lot more attractive for uh institutions. Uh retail is going to start to see that going to start the FOMO sort of feedback loop is going to start getting going again. I I sort of could see us trending down uh or either crab crawling or even the price trending down a little bit more and not starting to reach all-time highs again until mid 2026, perhaps even late 2026. But I think what's amazing to me about that is it would completely destroy like we were talking about the past uh kind of four-year cycle narrative. Uh and I think would would bring some vindication to that. But could it happen a lot sooner than that? Uh sure. Um I just think right now what I see Trump doing with the tariffs, I saw something about even increasing tariffs again. I think there are going to be some continued dampening factors I'll say. But I think as soon as I don't I don't I don't expect another two three two three four uh year uh sort of down bare market. I think that that's less likely. I think it's I'm sort of bullish that we might start to see alltime highs again in the next over the next year sometime.

>> I'll get into the water too because I did ask the question so I need to get into the water myself otherwise I wouldn't be a fair fair host here. Then I'll let you buy your clothes.

>> Water's great. Jump on in.

>> Exactly. So $100,000 is too much for majority of the people. I think retail impacted the price when we had 3,000, 10,000, 20K. Now they're probably thinking, ah, you know, I missed it. I missed the train, which is not financial advice. Big big mistake. I think I think now players are are different. So the game has to be different. And either way, the cycles have been broken because a if we would have seen $200,000 Bitcoin by now, okay, then I would have expected a 70% correction, of course, because we gone into the banana zone and we pumped and everyone followed into it. many institutions because retail I don't think they can play this game anymore. They'll go into some sort of another narrative like memecoins and NFTts because they are more quote unquote affordable. We haven't gone there yet. And if you count for inflation, by the way, $126,000 was nothing compared to 70k we've done previously, right? So I think the game has changed and now we have institutions, we have Black Rockck, we have Bouella, we have Sailor, we have so many different people coming in and saying, "Hey, I want to play the game

>> that I struggle to understand that we're going to follow this narrative. Oh, it's going to be bullish and then bearish and then we're going to pump and we're going to the cat is out of the sorry the bunny is out of the hat sort of say." So and I know we say this all the time, right? This time is different. This time is different. But if there was a time for this to change, and it will at some point because it's not going to continue to these four year cycles forever. I don't know. I feel like this will be the perfect time for us to literally demolish or break free from those man-made cycles. I don't know, Matthew how you feel.

>> I'm with you.

>> Uh again, sympathetic and I'm not I'm just too wimpy with this. Again, you know, as you know, I make all the Midwestern disclaimers, not financial advice, but if we look I feel like I'm the last man standing when it comes to this, but because a lot of, you know, in our space, right, Smitty, I've seen a lot of the power law people say that it's over. A lot of people say it's over, the four-year cycle specifically, which which you addressed as well, Mr. M. So, it's not that I want to say definitely we're going to pump, but I still want to say just even just for the fun of it, like why say it's over until it's over? It's it's happened, you know, twice before in December. Well, you could argue November really, but still December for sure in 2017. It's only late November. And look, I I thought I was going to be having fun on my streams like talking about, okay, how many days were we above the nine here, right? Uh, in 2020, I I thought that's all I would be talking about right now. And we're not. Okay, we're not. Everybody's mad. Everybody's upset. But that also tells me, look, I mean, the herd can sometimes be wrong, as I think one of you just mentioned. Why not just wait and say it will be over. Let's declare the four-year cycle dead in January or February. It's it's a very wimpy call on my part because I'm not saying for sure it's it's not dead, but I just I don't want to say that it's not dead. That's what I'm I'm trying to say right now.

>> I think to be much more certain, we have to wait until sometime next year to actually to revisit it. I think you're right. Yeah.

>> that's the right actually. I agree.

>> And who who knows? I mean, it could we could have fun here in the next uh two months. And I mean like 2021 with that double top threw a lot of people for a loop.

>> You know, no one no one said it's going to be easy. Well, actually, a lot of people say it's going to be easy, but no one, you know, no one should feel that it's anything should be gifted to them or uh it should be easy here. The power curve is a great source of comfort as you guys know. And yeah, we're low. We're extremely low in gold terms, but you know, if we if we get back to the mean or or the OS by the end of the year, that's 125K, right? As you see there, it's 125K. If you if you measure by uh multiples over under the trend, as I usually show, that's 250 2x basically. The 90th on a quantile, which is here, is 200. So, whatever, call it what you want. This this is a little bit slightly different calculation, but gold is so far undervalued as we started to talk on the show, Bitcoin ter in terms of gold. Even if we got back to the gold trend by the end of the year, which is 60 ounces of gold per Bitcoin, I mean, that would again spell at $4,000 gold, you know, 250 or more Bitcoin price. All of that is probably too optimistic. I understand. I agree. But I don't know. I'm just looking at the statistics. I'm thinking about this. Everybody's very quick to to to put that four-year cycle to bed. And I would just be happy if it if it if it was not if if it just threw everybody for a loop. And who knows, by maybe by February we're ripping. It's not a cult. It's I know it's a very wimpy thing to say, but it's just statistically.

>> But it does make sense. Yeah. No, I understand.

>> Well, if we're if we're ripping in February, isn't wasn't the top supposed to be like now or like October, November?

>> I would say by December for sure. I mean basically it's always been you know it was it's always been November or December in the prior four years. So it should be now it should be

>> 76 days or whatever. Yeah.

>> Right. Right.

>> Yeah. It depends on how you measure it. For example this cycle for the first time we've gone to a new alltime high prior to hinging. So people are measuring left and right. But like Matthew is saying if you want to be 100% certain you can say by the end of the year that would be a super I agree conservative way to measure it. Like they say in France, if one president, so if I was the president, if I was the market maker, what I would do is exactly this. I would make everyone think we have >> done what we should have done. So people are selling. OG whales are selling. Then I'll pump the market next year and I'll pull the rug when people are going to think we're going to go to 200,000. So now I think we are playing into a different league. And even though I understand what you're saying, Matthew, I'm not disagreeing with you. I can't say also for certain that the cycles are over because we are still technically into one of them right like it's difficult to say now oh everything is gone and it's finished no we are still following the cycles I understand but it's exciting to figure out what was going to happen in the next I mean look at November and December even October everybody was expecting myself included a fantastic month whether we had retober and whatever moonvember we are down 20%.

>> So, >> Bitcoin is behaving differently regardless. And even if 126 was the top, well, then the correction has been >> also weaker because I I'm sure you guys agree with me. If we have not gone to $200,000, if we have not seen that banana zone, well, that means we are not going to see like a 70% drop. That would be bizarre because we haven't seen Yeah.

>> the pump, right? So, either way,

>> yeah, I think that's Yeah, that's I think the most important point. I I really have a hard time seeing like getting back down to the you know below the 10th percentile you know on on the on the quantile we got close to the zero right in 2022. So then if we are only correcting 30 or 40%. So things have changed one way or another. Yes, of course we might be in the same kind of time frame but percentage wise we've gone if 15,000 was the bottom of the previous cycle and 126 was the top and then the bottom might be 70 or whatever it is. Well, things have been different.

>> Yeah. I think it's a for me it's just an if I I would still say we have a chance to pump again in the next month or two, but that that's all I'll say.

>> You heard it here. Chance to pump.

>> Exactly. There's we're saying and there's a chance we may bullish there's a chance

>> I don't know if we have enough time to talk about this but I think what would be super interesting to maybe put our heads together on Matthew and I don't I don't know if you ever talk about this on your channel as bullish as I so just to be super clear I'm super bullish I'm a power I mean I'm a power law analyst I can't not be bullish and we we dig deep into the math and statistics around it and we we have our case pretty well proven out I think and it's only getting stronger look at the R squ on that you see it on the screen I think that one thing that is that that uh Bitcoin has never experienced is a global financial crisis, right?

>> Which it was actually born out of and also just so happens modern quantitative easing was essentially invented out of and uh and what I can't help but notice is something that has happened multiple times throughout Bitcoin's history is that QE is has actually been implemented multiple times and this massive money printing bailouts, you know, whatever, you know, has happened multiple times. And so it's it's sort of from what I can tell over the last 16 years, we haven't allowed ourselves economically to fall into sort of a true what am I trying to say? We're masking up the recessions that we sort of should be sort of falling into. If you look at the productivity meas uh metrics, I don't know if there are any thoughts you have about that. Like if there was something that came along like an everything crash, right? People don't know which direction AI is going to happen is going to go. uh even the best analysts out there, I think it's like they have no crystal ball on this whether that bubble's going to pop. Um you see it you see uh real estate metrics uh in the United States, you see that their housing prices relative to income is at an absolute all-time high. It's looking like it it only has down to go. There's a lot of indicators and you look at look at the Warren Buffett metric, right, with cat holding cash. What do you guys make of all these things where it's like what would what would Bitcoin look like if we were to like don't you think that would kind of be the the true test of this power law the resiliency behind the network uh and all this stuff or do you guys ever think about that?

>> I do. I think that that's a great question for this current time because yeah we've we've been long now uh since we've had like another global crisis and AI I do actually believe will be a part of this one way or the other. I I said on, you know, Fred uh Krueger says something this morning like people don't really know how impactful this is going to be. And I agree. I mean, I see it. I use I use AI a lot for my stuff. It helps a lot. And I think what you could see like 2008 was a clear mismatch of assets and liabilities and a just a pure credit bubble, right? And and bust a credit boom and bust. And it was not like just in the United States. The United States exported that all around the world. Although it was kind of born in the United States, you could argue with our mortgage back securities and stuff. This time it might also be born in the United States with the AI stuff, but everybody's picking it up even faster. You know, as we talked about, sentiment moves week to week so fast. I do think it's possible that you could see two two converging vectors of prices movements. It's it's a it's a deflationary shock to the labor market and a uh inflationary shock to the energy market because I mean AI it's possible AI can just drastically lower the cost of so many things like so many desk jobs and eventually non-esk jobs. People always thought it was going to be the truckers that were going to go out of business but it seems like it's going to be the coders at least for now. We'll have to

See. Those are two really weird vectors. And then, of course, what's the solution to those things always politically is to print more money. In this case, nobody's going to have a job because AI is doing everything, possibly is one scenario. And then so the solution is UBI, right? It's a universal basic income, more money printing, more subsidies, more SNAP plans, and of course, that's an inflationary response. So presumably, Bitcoin will do well there. So that would be what I would say. But again, I'd go back to the the thing to sleep a little bit better at night. Bitcoin still follows, follows, follows a power law for network adoption. So let's hope Smitty it's not too much of a divergence from that if and when this crisis comes.

"That's the answer I was looking for, Matthew. Thank you. I'm glad that you ended with that part."

Yeah, it'd be kind of, I mean, I if there was going to be something that would uh, I mean, look at the V, look at COVID, it was like a little mini test, right? Of what, what we might be able to see with the bottoms. And and you had that up before, and we scratched, what, what percentile did we get down to that year?

Yeah. In Bitcoin, uh, we got down to the zeroeth. I mean, like literally the 0.1th percentile.

Under, under one percent.

Yeah. Yeah. This is on the C, the another analysis was to say maybe just the tenth. But yeah, depending on the analysis, probably close to the all-time lows.

Yeah. I think another uh way to unpack what you just said, or another way I think about it, is that we now have these tools that that the government has, that the Fed has, that the central banks have to essentially get us, you know, further and further into debt when things like that happen over time. And it's kind of, it goes right back into the the broader story, which is like, why the money keeps expanding because, you know, it's, it's there are economic, there are changes to technology, there are changes to the economy where the government says, well, we're going to have to just, you know, not let this thing completely implode due to deflation and instead, we're going to have to go the opposite way and use inflation to solve all of our problems. So it's just a more extreme example of that. I guess we've been using that in spades since I, since '08 and or '09, and I guess there's no reason to think that they would do anything otherwise if we were to, you know, and maybe it's just going to happen more frequently as time goes on.

I agree with you. I think that's a good look at it. Yeah.

I'm kind of in between you guys. Like I agree that we have never seen Bitcoin into a crisis, but still, I strongly believe people use Bitcoin as a risk asset. So if there was a kind of a bad, terrible moment into the economy, many would sell. Many. So we would see a drop, I would imagine towards that moment, potentially followed by the most epic green candle rally you can possibly imagine. But there will be a fear moment because people would sell Bitcoin before, sell gold, or before they sell their stocks, or before they sell anything else. So the price would reflect. I think.

You can look at gold like, uh, I could pull it up, but whatever. It's like gold went down for two months, maybe two or three months during the GFC, and then it went back up. So that's a possibility for Bitcoin too.

Interesting. Interesting. Since the collab I did with you, Matthew, I did another sort of, I like doing these experiments, right? Where you run the numbers, you can run, uh, you can, you can backtest things, but I wanted to run a simulation of that. Okay, so you have, you've got the, well, our icons are blocking it, but you had the first percentile. What I often use for my support line is the fifth percentile. And it seems a little bit arbitrary, and it is a little bit arbitrary, but I use that as a, I call that my support line that I use for a lot of my analyses. A, because you still go under that line statistically, relatively pretty rare to go under that, right? So by definition, 5% of the time. So you're only under there a matter of days on average per per year, if that. But the other reason that I use that is because you're just above when you look at the the math, the first, second, third percentile of the data, they don't actually fit a power law as well as if you start to get to the three, four, fifth, and then it's, then you're in this regime of kind of like, uh, fourth or fifth percentile all the way up to like the 50th percentile. You fit a power law really well. So it tracks, tracks with a similar growth rate and a similar trend line, uh, really well. So anyway, that's why I use a fifth percentile. But the study I did was using these percent, these these quantiles, quantile regression, and this again should give people more hope, right? So if we, if we in the near term take a big dive and we start to reach those lower quantiles that Matthew was showing, the study that, um, and you could pull it up anytime now if you want, Mauricio. So if you look at that, that very top, the top plot, right? Um, I kind of highlighted in blue. It's a little hard to see here, but every time the price dipped below that orange line, which is the fifth percentile, if you, if you had foreknowledge of this power law back then, right? And and the fifth, and therefore the fifth percentile of the power law, and you just waited. And I'm not saying that this should be the actual strategy, but it's, it's to highlight sort of an extreme. The, the extreme is to highlight the, the great opportunity that comes when you start to hit these levels, actually, as an investor. So, you hit the fifth percentile, and what this simulates is you put in $100 into Bitcoin right there. Buy $100 worth of Bitcoin every time. And over its life, over since 2015, that's happened about 237 times. So what I did was I took that simulation, right? If, if the Bitcoin price hit the hits the fifth percentile, you put in $100, you invest $100, then you kind of just track the portfolio, track the final savings all the way up to today. And then as a comparison, if you were to just buy at random times using the same amount of money, uh, using $100 each. Um, so it's a little bit like capturing every possible DCA, DCA scenario at every different sort of time interval, with $100 each. And you do that also starting from 20, from 20, beginning of 2015 all the way to today. What that show, what you actually get is a cool distribution. I ran a thousand different randomized, uh, simulations of that. And if you look at the middle plot, if you scroll down just a little bit, you'll see that there's a, there's a, actually, just go to the bottom. The middle one is cool, too. But if you go to the bottom, you get this distribution. It's like a fairly normal looking distribution because it's randomized. On average, if you were to just buy $100 randomly, the same amount of times, like the same number of times, 237 times over, uh, the course of the last 10 years or so, uh, your final portfolio value would be about $14 million. That's the average. If you were only to use the fifth percentile as a buying threshold for those $100, you know, apens, then it would be $3 million today. And even if you were, so if you look at the normal distribution of that, kind of looks like like a normal, normal bell curve. If you were the luckiest person in that entire cohort of a thousand, a thousand people buying at random times, basically the best you could possibly do is end up with a final portfolio amount of about 1.7 million. But there's very, very the the amount of people actually accomplishing that at random would be like 0.1, by definition, I think 0.15% of the people. So extremely rare. The vast majority of people are going to be somewhere between, you know, one and 1.4, 1.5 million. So you're essentially on average two, two and a halfxing your gains if you, and again, not saying you should only buy below that threshold, but I think the takeaway is if you think back to Matthew's tracking the quantiles of the power law, I think it's a good tool, right? Not for trading, but for looking for when you're sitting, you're starting to trend below say 50th percentile towards those low, the the lowermost quantiles closer to what I would define as sort of support, that that's a, it's a good idea to start probably buying in a little heavier. So that would push you at at minimum, that would push you up further up the x-axis on this final portfolio amount in the different scenarios, perhaps getting multiples on what what, um, you would do if you were just randomly DCAing.

I love that. That is awesome. You know what would be awesome to see as well? You always do these really interesting little scenarios. I really like this presentation. It's really, really good. Uh, if you could translate that three, so that three mill, what is, go back down, Mauricio, what's the, so three versus 1.2 too, right? So, what would be the average daily rate of return? And and I always like seeing it the annualized. So, like what would be the, not even annualized, but literally the annual. So, if you had.

If you just took the rolling annual returns, I'm also trying to think if you could see this in a time series because according to the power law, they're going to be higher obviously if you bought the dips 10 years ago compared to now. But if you could just plot in a very simple like, what's your average daily return? What's your average annual return over time? Of course, they're going to, it's going to decline, but that would be cool just to see that number. It should be, I mean, it should be the same. It should be two, 2.5x higher. So, whatever. If it's, if your average now is doing the doing the DCA is whatever 40%, then this should be, you know, 120 or 110, whatever it is. That would be interesting because you and I would think, I'd have to, I can't do this math in the top of my head, but proportionally I would think that the scenarios would be similar, but the, of course, the the returns over time would be going down. Yes. Uh, like if you were to start later, and maybe even what I want to do is kind of make some assumptions about volatility going forward without without saying like, this is where the tops are going to be, kind of track that, you know, and we have been, car, a lot of people have been doing great characterization of the volatility, project that forward, and then see what the the outcome might be looking forward instead of just because this is all kind of like a looking back test. So that's another thing I do.

Yeah, that's very cool. That's, uh, I mean, that's just again, another fantastic data point for Bitcoiners. I mean, uh, you just can't get any better than that in any other asset. It's unbelievable.

Yeah. You know what's really funny? I absolutely adore this and I love the the fact that I'm always surrounded by super smart people. You guys, data, I have traders in my life. I just buy every month. I'm doing the dumbest thing, like the most simple strategy ever. Bull market.

Well, you're getting that green line. You're getting the green line that Smitty just drew you.

Exactly. Exactly. I I bet you're a little bit higher on that on the pile in that in that green pile. But to be honest, I mean, I don't talk much about my own strategy here, but I I've been DCAing for like a long time. But what I find myself doing is that during these crab crawl moments where I'm just like, I don't know what's going on, I still also find myself if I have some dry powder laying around, I'll just throw that in as well. Where I was getting, I wasn't doing that as much though when we were like running up closer to the all-time highs. I got to admit, around then I was just letting my DCA go. You know, I buy on a daily basis. These tools can are good like what-if scenarios to see if you, if you were to do like the one that we did with together, Matthew, Matthew came up with this great idea that that I posted a couple weeks ago, which was like, what if you like, what if you were to buy in 20% higher and 20% lower, uh, from today and then projected forward to see what the performance would be like? That was the basic idea, right, Matthew? Uh, and I was like, "Oh, this would be great for most people because like I, some, you know, a lot of people probably want to are wondering like, well, what if I, what if I screw this timing up to to a large extent? You know, what, what how am I going to fare, uh, down the road?" But the nice thing about the power law is that it can help you a lot, but it almost seems to like if you screw it up, if you're if your time preference is low, right? If you're looking at a 10-year window, you can't really mess it up that badly. So, that was a cool analysis, too.

You did all the real work. I was just, uh, I was I was traveling so I couldn't, I wasn't buying my desk.

You came up with the idea. Yeah, that was fun.

There it is. This one. Yeah.

Yeah. There we go. Yeah. Got that nice Porkoploolis logo on there.

Exactly. My old.

My old logo.

I will leave the old trial in the comments. This was fantastic. There's definitely moments where increasing or decreasing your DCA makes a difference. I mean, no financial advice, but make sure you buy. That's the most important thing. Then you can decide to tune it in and out depending on how the sentiment is. But the most common mistake I see from people, they don't even buy. Oh, I'm waiting until we're going down to 70. Right?

I wouldn't do that.

Oh my gosh. Yeah. I I have friends that Yeah. They're just Yeah. It's That drives me crazy.

Time in the market beats timing the market. So, it doesn't matter. Like, don't marry anyone.

You don't have to put the whole farm in at once, but like, just, Yeah. Like, just start, uh, accumulating.

Yeah, I think that's that's right.

But guys, honestly, Matthew, pleasure having you on the show. Definitely have to do this again. So, I'll definitely ping you for another invite. So, thank you.

My pleasure. Anytime. Anytime, guys. I'm I'm, uh, ready and willing. And Smitty, always great working with you. You have excellent, excellent, uh, visuals that everybody can, I think, and I hope take comfort in that. That's what I try to do on my stream every day is just like, it kind of keeps me sane just to keep looking at the numbers again and again, and hopefully the people that tune in feel the same. So,

You add a great value to the community. Uh, Matthew, thanks for everything you do. Everything that you that you do that you touch seems to sort of, uh, have some magic in it. So, thanks for joining us today.

Too kind.

If you wish to have us on your stream, I'm I'm inviting myself. Happy to crush it when anytime, anytime you want.

Good. Good. Definitely. Totally. Totally welcome. Very.

Fantastic. And guys, make sure to go and follow Matthew and of course Mitty. In the description, you find all the links. And thank you so much for watching. We'll see you next week. Cheers.