Transcription
What's up everybody? It's LG Ducet here and welcome to the Milk Road Show, the daily crypto show that tries to find a trend in a market that wants to go nowhere.
Today is November 24th, 2025. We've got David Dong, head of institutional research at Coinbase back on the show and since our last episode with him, crypto has not bounced. It has bled. Bitcoin has dipped way below key support bands. Uh the ETF flows have kind of turned a little bit cautious, a little bit uptick, but not very good. Uh and and volatility has gone absolutely crazy. Coinbase Research is all over this. Although David did recently record a podcast titled No Man's Land in reference to the market, but he claims he is more optimistic than that title suggests.
So today, I'm going to grill him on that. I want to know what he's writing about, what they're researching, and honestly what Coinbase thinks is going on with the market.
Before we start, listen, our research team eats, sleeps, and dreams crypto so you don't have to. Every week, they drop a report on what matters. And last weekend's pro report, well, it was all about the profit uh the profit AI wave and what's happening with the Nvidia earnings and how that's going to affect the rest of the market. So, if you want to check that out, get that deeper insight, you want that edge, go check it out. It's in the show notes. Milk Road Pro is what you want to be signed up to.
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David, welcome back, man. Welcome back in these interesting times.
>> Hey, LG. Thanks.
>> It's good to have you. Uh, listen, we got to go right to it because when I was when I was kind of checking out your your your last bits of content, I did find a podcast from Coinbase Institutional that was titled No Man's Land, and that was the title of the episode. What do you mean by that in terms of uh positioning and liquidity and price action? What are you talking about with no man's land?
>> Yeah, so this is now about a week old and you know this market's moving so fast that a lifetime passes over a week. But what we were referring to was the fact that if we're looking at where a lot of the accumulation was done for Bitcoin specifically, it was done around that 98 to $100,000 per uh per Bitcoin level. So, after we broke that key level, and you know, we've broken several since then. We broken like that 100,000, we broke the 90,000 threshold. We were basically saying like it's very unclear where the floor for uh Bitcoin prices at least really kind of lands because it's below here we're well past the 200 day moving average. We're well past the point where short-term holders, long-term holders all have accumulated their Bitcoin. So I think this is kind of the question mark that a lot of people have like where do we kind of go from here? Are we going to find stability? Is there any clear floor that we can kind of look to?
>> What are the what are the most uh important indicators for you? Because you know on the show we've covered everything, right? And we had like Michael Nat from the DeFi Report last week talking about all these charts and all the all these um pieces about the dollar that to him indicated a potential downturn like two months ago. So for you at this point, what are you looking for in terms of what the most important like maybe technical indicators are or macro indicators? What does that look like for you?
>> Yeah, number one on my list remains liquidity. And when I say that, a lot of people think about the M2 money supply index. And I don't disagree with that, by the way. I think that M2 money supply is a critical piece of information when I'm trying to figure out where Bitcoin's going. And if you want to understand where like the rest of the market complex is going, i.e. what's going to happen with altcoins, you really do need to first understand what's going to happen with Bitcoin. Now, the problem with that is a lot of people either take the US M2 money supply or they use global money supply and they just kind of overlay it naively with Bitcoin prices or an index of their choice. And I push back against that because that doesn't tell you where liquidity, the pockets of liquidity that really drive the crypto market are really going. And if you look at a more customized global M2 money supply index, which is what we do, and we basically weight the distribution of that liquidity more towards those markets that matter. And you know, like I think some of your listeners may be aware, for example, like this is traded more heavily in South Korea than it is in India, for example, like things like that. Those kind of decisions matter when you're trying to figure out how to customize this. And then you also have to like figure out how long does it take for that liquidity to actually make its way into markets. And we ran an aggression analysis. You know, we looked at it at 30, 60, 90 days, etc. And basically we found out the highest regression uh kind of pattern shows that the 110day lag is optimal for this.
Now, I bring this all up because when we saw back in September and October that this was pointing south, we were kind of worried, but we were also saying like, well, it doesn't make sense because the macro factors actually seem very supportive crypto prices at the moment. We're looking at where things are going as far as, you know, equity prices, the risk, other risk assets, things like that. It seems like if anything, it should be continuing to to move higher. Obviously like it's played out the way our our liquidity index has kind of reflected and the good news is that that's showing that it's going to inflict higher in December. So there is that downturn. It doesn't tend to be this shortlived and I think that there are some strange dynamics going on with M1 M2 money supply out of Asia that you know I'm happy to kind of talk to but I think that some of those things are driving some strange dynamics. But the bottom line is it was supposed to come down at least on a lag basis uh in November. But I think that coming into December and there's a lot of factors that support this. The fact that quantity of tightening is going to end on December 1st. The fact is that I think the markets had it wrong about what the Fed was going to do on December 10th. Um, of course now it's the probabilities of pricing higher, but I think that those rate cuts are going to come in. So I think all this lines up to actually seeing a potential recovery as we get into December.
>> David, you said something in there about the uh maybe you can clarify this for me. The regression that's 110 days. Can you just expand on that a little bit and kind of circle back and explain it with a little bit more depth?
>> Yeah. So simple like linear regression analysis on trying to figure out okay what is the right way to lag this? Should I be looking at M2? Like how long does it take for before this liquidity gets into the market? Does it take you know five days as like as as you know like new money comes into the market as central banks print more cash whatever like does it take five days 10 days like how long does it take for you to get money out of your pocket and say like you know what this I need to like start putting this money in risk because it's doing nothing for me right now and I brought this up on the show before about like you know like money market funds for example there's still around $7.5 trillion dollar worth of capital sitting in money market funds but what does it take for you to kind of get out of that and move into something else because at a certain point 5% seems okay to get paid but 4% maybe a little bit less so 3% a lot less attractive by the time you get to around 2% you're like well crap I'm not even getting enough to cover myself for inflation I can't be in just money market funds anymore I can't just be in cash I need to be buying equities I need to be buying crypto I need to be buying something that gives me a higher return to compensate me for that so how many days does it take for me to get from point A to point B. And I don't I do not have the nuances of like what motivates people like from a behavioral perspective to like actually get from point A to point B. But what I can tell you is that when we run a regression analysis to say how long should that be generally it seems that the highest correlation coefficient we get is associated with 110 days. So around that 110 day mark that's the point at which people actually start to move that capital and you see that reflected in the prices of a lot of these risk assets i.e. Bitcoin.
>> and when you say people who do you mean?
>> so it's pretty broad because M2 is a broad money indicator so it does include both institutions as well as retail. I cannot give you more information on that because I don't have it. Um, but I do think that this speaks to not just people at the corporate or like money manager level, but also you and I like I think that this is kind of like very very broadbased. So people who would deploy that into C into ETFs or who would potentially buy Bitcoin or whatever other crypto asset uh natively like on an exchange. So I think that you know we do not have the full information on what that is but we can say that like this affects probably the largest kind of opportunity set that we get in our economy.
>> Okay. Okay. So so is it is it is it is it retail participants looking at that or is it more institution? I guess that's kind of more what I was asking right because maybe it is you're saying maybe it's not people like you and I but even these terms I'm saying is it's not really something that retail is as aware of. Right. So, I'm just trying to figure out who is it that's making those moves and kind of waiting for that.
>> Yeah, I'm starting to lose touch with like where who's looking at this and who's not. I mean, once upon a time I thought that a lot of retail people do not give them credit for because I think that often times people assume that retail is broadly naive money whereas institutional is smart money. And I don't think those terms apply anymore. I do think that there are a lot of retail players who actually look at some of these indicators. Uh maybe they don't have a Bloomberg terminal, maybe they're looking at it on some other platform, but certainly I think that these things are a lot more accessible than they were previously. AI is probably responsible for a lot of that as well.
>> What is a metric then, David? Um, we're talking about things that you do look at. What's something that you see on the timeline or you see from Coinbase customers or from podcasters like me? What is something that people are hung up on in the last like 6 weeks that you think is completely irrelevant to what's actually happening?
>> 100%. A lot of people are hung up on the four-year cycle. Do I think that's not relevant?
>> No. I I do think that it's relevant to an extent, but I think people give it a lot more credit than it actually deserves. Certainly, what we're seeing in terms of ETF outflows, in terms of uh a lot of digital asset treasuries who are not buying right now and might be actually playing more defensively because they're getting more pressure from their investors given that MNAPs are compressing. I think those things matter a lot more and that has a lot to do with the broader risk environment because you see this in tech names, you see this in quant names on the equity side as well. I would say that a lot of people expect think that things look overvalued and this was evident in some of the earnings releases that we got from Meta, Microsoft, places like that where previously uh they were rewarded for taking additional capex and after like the last like earnings report they were punished for it because a lot of people do not believe that the risk the return on their investment looks as attractive as it once did. So, I think these things are what's really driving the markets. Whereas the four-year cycle, I think that it's relevant from a psychological perspective. Obviously, there's a lot of people in the crypto space uh who are used to it. We don't have a ton of evidence about it. And this is the problem. Like, as a former quant, you know, you have like very very limited statistical evidence of this stuff like barely 15 years because not all of that data was liquid enough to kind of count towards actually being utilized in that way. But that means you had like three cycles like that you could really think about that were maybe potentially relevant because you know you're you're taking it from the point of the Bitcoin having and that's not a ton to go on. Like if if I said you're like dude like three times this happened already it's a sure bet. It's like you would be like David you're you're crazy like just because it happened three times doesn't mean that's going to like always happen. That's just not how life works. Um, but I do think that some of the those dynamics have changed like you know once upon a time I would say the uh like like Bitcoin miners were a much more relevant uh you know representation of the discretionary selling that gets done in the space but because of DAS because of ETFs they were almost fully absorbed and then some. Now we're kind of coming back the other way and now because you know TRDFI is more skittish about this stuff. You've seen the alpha of some ETFs. You've seen DATs not really participating, not really buying here. And as a result, I think that some of that selling pressure has now come back in a way that we weren't anticipating before.
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>> I just have one more question about the cycle because I think it's it's such a funny thing, but it's almost one of those things where it's like until disproven, it almost feels true even though it's it's silly in a sense, right? It happened three times. That means it can only ever happen. That can only be the only explanation, right? It doesn't really make sense. But we had this top that now we're far away from. And until we go back to that, I how how do you disprove it, right? Um my question for you about that is let's say, you know, you're you're painting us an optimistic picture. Let's say we have this bump back up in December and and into the new year we come back up. If we if Bitcoin never hits another all-time high, like let's say it comes back up to $200 below the current all-time high in Q1 and then floats there for a long time, comes up and down, and then doesn't come back around for it doesn't break the all-time high for another 3 years, would you consider that a four-year cycle?
>> I mean, if you have to put a label on it, I think that people will do so. Again, I wouldn't I I like I hesitate to do so because I don't think that it's solely about looking at like where the price, you know, the entry and the exits of these things. And I I point this out because we we've seen in previous cycles is that like there's so much other factors going into this that we can't really even be sure that it had solely to do with the technical dynamics, i.e. the supply demand dynamics of the having that really kind of drove those prices higher and lower. Take 2016 2017 for example when we had Brexit like if you were an investor and you were concerned about you know where things were going with that and I'll admit like I think I got Brexit wrong. I didn't think that it would they would have ever kind of like shot themselves in the foot in that way but it happened. But if you were looking for protection or you're looking for ways to kind of diversify yourself because you know the sterling is uh collapsing then perhaps you would have bought some more bitcoin and you know we saw other uh periods of the having kind of coincide with like US government shutdowns things like that. I mean like there could always it's hard to do it with back testing to like get full assurance that this was solely related to just the pure supply dynamics of Bitcoin itself. I mean that's just tra that's just finance in in a nutshell. I mean like it's always hard to disentangle like where the the full effects are. But because of that I've just can never be sure that when I'm looking at something like this. I'm not saying it's not a pattern. It's a pattern. It's just not one that I think can be purely justified by justly dynamics internal to Bitcoin itself.
>> Yeah, that makes sense. David, I I want to move on to um I guess maybe some of the more about the stuff that you guys have been writing about. But before we do that, I just want to ask you, I guess kind of uh you know, a question that ties into the fear that we're seeing in the market right now. Is there anything that you would label as potentially giving us another cascade down? Is there is there anything that you're looking at that's like if we don't hit this or we don't stay above this level or this doesn't happen like a rate cut for example we are going down another 10 or 20%?
>> Yeah. So you know like we generally are not allowed to talk about price levels uh at Coinbase or at least not externally but I will say that you know like I looked at 90 as a very big psychological level when that dropped. I didn't see a lot of room for people to kind of, you know, buy back in below like, you know, 80, I'm sorry, below that level until we reached somewhere between 80 to 85. And I think that's kind of what we're seeing right now. We hit that 80 to 85 range and that was where we started people saying like, hey, maybe things are attractive to actually buy the dip now. And I don't mean that to suggest that people should just blindly buy the dip. Like I mean quite frankly like I think that you really need to wait for high volume reclaims of those key levels uh maybe like a turn in the ETF stable coin flows before trying to like kind of re-enter here. But again I do think that conditions look a lot better uh in December. So already this is probably why people are starting to look at this and kind of saying like you know what maybe like um within that that 80 to 85 range things are looking a lot better. maybe we should kind of incrementally step in here. And I think that's probably true of institutions who I think are the main players here. Uh but probably some retail players as well. But to your question, what's going to drag us lower? I think that now if the Fed doesn't cut rates in December, the good news is that for the most part, people were already kind of skittish about that already and a lot of that concern was priced in. So even if the Fed doesn't deliver that cut, I think that if they come out and their comments suggest that a Fed put could be in play, I think that would be enough to drive a Santa rally. So I'm not necessarily kind of like like needing just a cut. Like I think my cut would be great because then it would validate like what my view is. Like I had a former boss who used to say like bull markets do not die of old age. They are slaughtered by the Fed. So that's is kind of what we're seeing right now because of the hawkish tone that we saw from Powell at the last meeting because of the kind of the hawkish tone we got in the minutes and then the quick reversal like just on Friday when we saw Williams come in with a very dovish kind of kind of commentary. I think that this is really what's driving the markets and why things have been so chaotic. But given my view is that the Fed is going to continue with rate cuts. Perhaps if it doesn't happen in December, it's going to happen in the first half of 2026. I don't think that we're at the end of like a positive news for the market yet.
>> What are you What are you going to name this dip? Let's say you're right. This is a good estimation. We we we bounce back up in April. We had the tariffs. What What is the name of this one?
>> Yeah, this has been the toughest part labeling this because this is a over three standard deviation move in Bitcoin. And uh just so you appreciate how big that is. I mean we saw like a one standard deviation move in US equities. So it's it's still bad, but like three standard deviation moves. The only other times we've seen this I mean we've seen this a few times now in our history. But the last few times that we saw it was as you mentioned in March 2025 because of the concern around tariffs. We saw this back in November 2022 uh when FTX blew up. We saw this back in May 2022 when Teral Luna happened. So this is a meaningful like move and a lot of it had to do with the fact that excess leverage just got built up in the system between February and August because during that period actually I'm sorry like around April through through August over that period of time we saw that leverage and I compare this relative to the total crypto market cap shot up to around 10% of the total crypto market cap. I mean that's that's huge. Like back in 2022, this only went as high as like 6%. Um, so we were already like very very very like taking a ton of leverage when we're looking at pers, when we're looking at options, derivatives, and that all has come down to around 4%. So we have cleaned up positioning quite spectacularly. um meaning that you know I was still calling for this to kind of take a few months to kind of clean up and I think that's still true but if we're talking at least from a pure positioning perspective it doesn't seem like there's a lot of longs in the space and it doesn't necessarily pay to be short anymore. So we're probably in a good place to at least see things kind of forming a bottom here. Again, it's very hard to tell whether we have reached the bottom, but I think that like going forward, I think this is kind of what we're getting at the moment. Uh I think that in the low liquidity environment with US holidays coming up this week, I think very likely that if we get positive news coming on December 1st and December 10th coming from the Fed and monetary policy more broadly, uh I think that this could start to support markets.
>> So, everybody gets to tell gets a chance to tell their their extended families to buy the dip this week. That's
>> four years ago they we we they were told to buy the top, but now they get to buy the dip. The same price for Ethereum, too.
>> I never do that. I never do that because I don't want to get myself in trouble. I never do it on anyone's show and I definitely don't tell my family members to do that.
>> Why? That's that's the sage advice. Yeah, that's that's that's the that's the veteran advice right there is just don't even say anything to your family. Um, I like that. Okay, David, my next question for you, and this is something, you know, we talk about at Milk Road a lot. We even launched a separate CH channel about AI as a risk asset. Is AI kind of stealing a crypto's thunder a little bit? Like, is is plowing into this potential AI bubble? Is that becoming now the riskier trade than crypto and that that people have appetite for?
>> I mean, this is a super interesting question because I think there are two big effects from AI. And the first one's the one you talked about which is is it attracting capital away from crypto or other risk assets. And to an extent I have to say yeah you know like I think that there's definitely something going on in terms of the people who play in crypto are also playing in tech names and and and AI stocks and quant stocks and other things. Um, and the capital tends to be a lot more fluid now than it used to be there. And I wouldn't necessarily phrase it as oh it's stealing crypto's liquidity or it's it's taking money away from that but certainly if we assume liquidity as a finite pool of capital I think that you have to assume as well that like if things are impacting things on the AI name i.e. like people saying like okay is Xname like overvalued I think that that's also if you know your profitability there is getting affected then it's also going to affect your desire interest and our ability to actually play in crypto as well but the other thing is I think it's AI more broadly is having an impact on the US economy and maybe it's probably happening having an effect on the global economy and what I mean by this is you know I had a colleague who sent me the other day this this news story about like oh like um Amazon is laying off X number of workers. I don't remember the number anymore. I want to say it was like 100,000 or whatever number of like
>> 600,000 or 300,000. It's just like an ungodly number that you didn't even know Amazon had that kind of staff,
>> right? Um, and I mean there are of course, you know, people who believe that a lot of that had to do with overhiring during the pandemic and other things, but also is AI playing a factor. The concern about it is that of course we were always thinking that AI was going to start displacing jobs. We've seen a lot of that happen on the entry level side of things but this is now affecting white collar workers, middle management. Uh and those are you know what I would say like have a lot of the buyers that we have seen for crypto and risk assets more broadly. I think there's a stat out there that say that like the top 10% of all Americans actually own 89% of the stocks uh that are available out there. So it's it's it's a crazy stat when you really think about it. But more to the point I would say like is this creating a K-shaped dynamic in the economy? But K-shaped dynamic what I mean is this is not a new concept. This actually came out I think during the pandemic. uh the the idea of a K-shaped economy that like you see like um people on the higher tier really accumulating all the flows uh all the benefits of a lot of uh what we're seeing in terms of the the the production the output of the economy. But now if those buyers which have definitely contributed towards crypto's rise if they're getting affected because of layoffs or other things will we see a detriment to uh crypto's prospects? Now, I ran a simple kind of regression analysis on there. We don't have enough data to go on because you think about it, chatbt has only been around since November 2022. So, we've have like three years of data. Most of the stuff is monthly data. That's like 36 data points. Really doesn't tell you anything in terms of like whether it's driving it one way or the other. I think that's the good news. But I would say that increasingly we have to start thinking that like a lot of the more the value of AI is going towards the corporates i.e. like productivity is becoming a lot better. Like you know I've talked about it before in the show. I think that like this is what's uh going to support the US economy because productivity kind of moves in these 15ear cycles and we've been at the start of one since you know 2020 2021 and it's really starting to pick up steam now. Will this disproportionately however impact workers and not just on the lower end of the spectrum but on the higher end your tech names your people in finance people who honestly trade the crypto stuff. Now I think that's going to be an open question. I don't have the answer right now. It doesn't seem like it for the time being which means that my thesis about you know the the the capital sitting in money market funds or sideline capital moving back into the space could still be true. And I think that's going to be true over the next three to six months, but then we'll have to reassess. We'll have to keep watching whether these things are going to manifest in a way that could be detrimental to risk more broadly.
>> David, you wrote uh you guys write a fantastic weekly newsletter, a lot of great content coming out of it. Coinbase Institutional. So, I recommend everybody here check out, I guess, Coinbase.cominstitutional. Is that is that the right website to to find the work?
>> Yes. Um, so right now we're sending all our research out to Coinbase One subscribers and institutional clients, uh, 7 days early. Uh, but like after those seven days and they get it via email, uh, then it appears on a website.
>> That's right. Okay. Your latest one, which came out, I think just on Friday, uh, is titled Weekly the Age of Anxiety. Um, and in here you've got a lot of great data that I kind of want you to walk us through and it kind of recaps a lot of what we talked about today, but I think it's a good way to kind of like set us off here. Um, and I think the big summary to me from this, uh, is that it really feels like you you center on the fact that the market might be mispricing that December, uh, Fed meeting, right? And it see it it felt a little bit like that's kind of what you were focusing on here, but I want to hear from you and want you to kind of walk us through your thoughts on this one.
>> Yeah, absolutely. And the market has moved so quickly because when we wrote this on Thursday night and we were even looking at it on Friday morning, markets were still pricing in 22% chance that we would see a 25 basis point rate cut on December 10th. I looked at it this morning and we are now up to a 75% chance uh that the Fed will cut rates on December 10th. And I think that that like change is it's no accident that at the same time uh markets have repriced the possibility of a cut on December 10th. Uh that we're also seeing that we've kind of bounced back uh on Bitcoin crypto prices more broadly. And that's why I think we've found a little bit of stability here. Again, still a little bit early to kind of call like that, you know, things are completely all clear, but certainly the reason we thought that this was happening is because one, we're in a data vacuum. We have to acknowledge the fact that we are not ever going to get BLS data like Bureau of Labor Statistics data. So, we will never know what happened in October. But, we got some data on September. It wasn't particularly meaningful in part because it showed a surprise higher on non-farm payrolls for example for September. But again, that job print is kind of irrelevant given what the Fed's decision needs to be based on beyond which they made their eighth revision lower in terms of jobs and the unemployment data itself uh presented a pretty mixed picture. But CPI data, I mean that we're going to get some PCE data, I believe, coming out on November 26th. Uh then we're going to have CPI data that's coming out on December 10th, the same day as the Fed's FOMC meeting. Now the problem is how important is this going to be? Because so far what we've been seeing on the private side of things and we're looking at now Cass, we're looking at like uh trueflation data for example and it's showing if anything that the disinflationary trend that we were calling for like months ago is starting to kind of play out like things like tariffs pretty irrelevant. I mean we've said it on I've said on your podcast before but like now we have a paper coming out from the Federal Reserve Bank of San Francisco saying the same thing. They said if anything when we tend to see impacts like tariff tariffs tend to be disinflationary not inflationary. So I think that if this was the Fed's big concern I think that if anything what we're seeing from private statistics from private data it's saying that these numbers should actually support a rate cut. So, I think that in line with what uh Federal Reserve Governor uh Williams said on Friday and you know, he tends to be on the dovish side compared to like Susan Collins or others who are on the hawkish side which we heard from the week prior and we, you know, because we're in a data vacuum, we're just kind of like chasing right now. We're like, oh, she said this, he said that. Like, let's follow it. But looking at the data, it suggests that a cut should still be coming.
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>> Why is why is crypto so tied to macro now? That might be the the dumbest question I've ever asked, but it's something where I feel like anytime we talk about crypto now and especially in this current climate, we we have to talk about the macro. The only thing we can look at as indicators outside of the general technical analysis, right, is these macro things. Has it always been like that or am I and am I just only clueing into that now or is this now is this now forever the like currently the story for this cycle for for Bitcoin and crypto?
>> Macro is definitely dominant right now, but I wouldn't say it's always retains the same level of importance. I would say that it's always important. I always look at macro, but that's also how I trade. And this is kind of why I caution people when they take any advice from any talking head. Like you need to know what the person's time frame is. What is their trading horizon? My horizon typically is, you know, like 3 to 6 months up to a year. And I'm trying to like like make a profit over that period of time. I'm not trying to turn a profit within a week or a few days. Um, given that that is how my what my trading horizon is, generally I rely on macro as a way to kind of anchor me because I want to make sure that if I get the the anchor the the macro variable right, then I think that for the most part I can trade through any period of volatility and still do fairly well by the time my horizon kind of expires. Other people are just trying to make a buck over a few days or a day or 24 hours. So you know like they have a different kind of set but if you have a longer medium to longer term time frame like I do I would say a macro is very important because right now we're seeing that like based on the macro factors we've gotten on monetary policy this has been pressuring dollar higher over the last 6 weeks 2 months and this is really what's been hurting our space. Does it always work that way? to some extent the dollar is the what we trade against uh for the most part for most of these currencies. So that's what I need I think anyone needs to kind of pay attention to but we've seen regimes in the past where the dollar has been stronger and bitcoin or other crypto assets have still done well. So it's not always a permanent effect. You need to kind of look precisely of what's actually going on and why it's driving it. Right now, macro is driving it because of the government shutdown, but in weird ways. Because of the government shutdown, we haven't gotten the economic data we needed. No one's models have worked properly because we're just trading in the data vacuum. And as a result, you've had to rely on other things to kind of compensate for it. Um, and I think consequently we've dependent a lot more on macro but in these kind of like nebulous ways of like well I don't have BLS data so I need to substitute with ADP or this or other things and you know the data honestly has been telling you different things like for a while there ADP was actually pointing lower and like bureau labor statistics data was pointing higher on the jobs front then of course we got that big revision a few months ago where we're like okay BLS data was just completely off and yeah, jobs were bad. So, I would say that like those kinds of things do matter. We're just kind of in this regime right now where because uh the Fed is so important to how much liquidity is going to be unlocked. What's been happening with and I don't think a lot of people pay attention to the nuances of this. what's been happening on the reverse repo facility uh which has created strange effects on or volatile effects on the overnight interest rates that has also contributed to problems with a breakdown in liquidity for larger players who need to borrow in order to fund trades. So I think this is why all of a sudden macro has taken a pronounced position inside of our models and inside of the way we need to think. But it's not always. It's not an always thing.
>> Okay. Last question for you, David. You mentioned uh a little while ago during the show that you are a former quant. What if you were if you were still a quant now? I guess I can't really tell the difference between like what you're the incredible work you do now and being a being a full-time quant. I want to know what that means, but what what would you be what what else would you be looking at now if you were still a quant as you put it?
>> Okay. What I mean by that was when I started my career and it was 20 years ago now for the first 5 years I was a quant researcher a quant strategist uh which mess I was hired on specifically to build models and think about it but it was a very very different world than it is today because I will tell you that like 20 years ago when we were thinking about what a quant quote unquote is in the financial world I was doing like PCA analysis I was just doing like simple like black shield modeling for options and trying to figure out what are the what's the best like option structure to actually trade this stuff. So then I was kind of like looking at like all right like is it straddle strangles try to be looking at calendar plays and just kind of like doing throwing the whole like you know kitchen sink at a problem and trying to figure out what the solution is. Today being in quant is a very very different world because I mean we have the power of AI but also like we realize now that you know iterate it iteratively like you can do do more things with the tools we have like back then the tools we use were Excel today the tools we use are like Python and other models. So you can build a man for feature importance charts like within an hour you know like even like five years ago by the way I built one of these like when I was like trading emix income and it took me like a week to two weeks to build out a full model now I can do it with AI in an hour and I'm like yeah that's the right code for this or if you want you know like this is we're in a completely different place now uh I would say so that's kind of how I qualify quantan like I'm much more for a macro strategist these days. By which I mean I think more about like the macro factors are driving this. Like I don't do like a crazy analysis. Anyway, long-winded way of saying like what am I looking at right now? At least if I was thinking about it from a quant angle. Um, I would say that something I look at pretty heavily I I would think about the systematic leverage ratio that we have in there. Think about the open interest dominance over Bitcoin. Uh so what I mean by that is I've looked at open interest on the altcoins versus Bitcoin open interest as a ratio to understand like where's the breaking point because for a while there that was as high as like you know like 1.7 and typically when it breaks that 1.2 two threshold that means like things have gotten like too frothy and that happened by the way like right before October 10th happened and that was something we had been monitoring and then it broke it decisively and it never really kind of came back down in a in a in a way that I felt comfortable with and of course the deleveraging kind of happened. We're in better place now for that. But that's definitely a key ratio that I think that people should follow up on. Um, and again some of the macro like dynamics like uh you know M2 money supply I think that's really important but also digging in further because you know for example in China right now M1 versus M2 money supply it's very odd like M1 is dropping but M2 was increasing typically these things should be moving the same direction. Why is that happening? I think digging into a lot of these concepts from a quant perspective is definitely relevant to try to figure out and unpack like what could be happening in our space.
>> Awesome David. Thank you for the answer and thank you for the uh the background check on on what you your former life and how how hard things used to be for for uh the kids today will never appreciate how hard it was to be a quant back.
>> My day we use Excel and VBA. We didn't have Python packages.
>> Oh, that's great. All right, David, thank you for coming on the show. If you guys want to check out David, uh his exhandle is David Dwong, but where the I is one. So, you can check him out there. Uh and coinbase.com/institutional is the site. sign up to the newsletter if you're a Coinbase one subscriber as well. You get it you get it before everybody else. So very a lot of great information there. David, we will see you again, I believe, before the end of the year hopefully uh to talk about talk really dig into 2026 and what we're expecting there. So I'm I'm keen to have you back on the show.
>> Yeah, really appreciate it. Thanks so much.
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