How liquidity cycles drive Bitcoin and markets, with Scott Melker

Transcript

I think we're watching the rails of the next financial system be laid in real time like right in front of our eyes. Everybody has come to understand through the Genius Act and any and using them that stable coins are just a superior way of transacting value, right? So everything being built in the stable coin space is just a leap in innovation and a purpose use for blockchain technology. It's faster, cheaper, and easier. And everybody likes that. Swift. All these systems are just broken. They're old. They're antiquated. And something had to come and replace them.

And we're seeing that >> the market is chopping sideways like a lumberjack laying down. But somehow risk assets keep putting in new all-time highs. Trump fired a Fed governor and pal has suddenly become open to interest rate cuts all while maintaining a hawkish tone. Hello and welcome to Milk Road Macro, the podcast that reminds you that macro is big enough for everybody to be wrong. I'm your host, John Gillan. Today is Wednesday, August 27th, and we are joined by the Wolf of All Streets himself, Scott Melker. Scott is one of my favorite creators in the space, huge conduit for Alpha. Scott hosts the Wolf of All Streets podcast and is the author of the Wolfen newsletter on Substack.

Scott is a crypto OG and his Macro Monday show is one of the best resources for views and news on all things macro. Today, Scott is going to break it all down for us. So, if that sounds good to you, make sure you like and subscribe. Share this episode with someone who would enjoy it. And as a reminder, our Milk Road macro research team lives and breathes macro. Every month, we drop a sharp, no fluff report that really breaks down what matters. Our last report had over 40 different charts and translates it all into plain English so anyone can understand, breaking down the entire macro picture and giving you a sense of what's going on. If you want to get in on the alpha, join our pro community today. Link is below in the show notes. Uh, and today's episode is brought to you by Kinjun, our wonderful

sponsors at Kinjun, the verified distribution protocol, changing the growth game. support them as they support us. And without further ado, welcome to Milk Road Macro. Scott Milker, how you doing? >> Lumberjack laying down. Can we just make this into a dad joke podcast? Go back and forth and see who wins by the end because that one had that one had me. I'm almost 50, you know. That played right into my wheelhouse. >> Thank you. I appreciate the compliments. High praise coming from you. Uh we'd probably get more views if we just did dad jokes for 40 minutes. >> Um >> yeah. Well, I so I'd like to start today with some of the big news that's going on in macro. Um, Trump fired Fed Board Governor Lisa Cook for alleged mortgage fraud. She, to her credit, has has not taken this line down. She's come back

and said, "He doesn't have the authority to fire me. I'm going to continue doing my duties." The question I want to ask is, "What happens now?" But I don't think anybody knows what happens now. So, just what's your take on this? How is the market going to digest this news? Is this a nothing burger or should we be watching for for shock waves from this? >> Well, I I don't think that it's a nothing burger, but I don't necessarily think that we're going to see price movement as a result of it. I think that with every news headline we get in the current environment, it's important to zoom out and see what it actually means in context and why it's happening because it's really really really really hard not to get caught up in the everyday headlines which never actually matter. I think what matters right now

is that Trump, whether he has the authority or not, he's setting the table for a major change in the Fed with time and certainly by May when Powell is on the way out the door. I don't necessarily agree with this move. I don't think it's a good precedent for a president to be firing Fed governors. I think that there are better processes in place to do that. I think she's innocent until proven guilty because this is after all the United States of America. And I do question whether he has the authority without the clear evidence. So I think this is more about a signal to the market. The same thing is showing up at the Fed building and putting Powell in an awkward situation or saying he should be fired and he's an idiot and saying that he's going to fire him and he's not going to fire him. This is all

about the liquidity fire hose that Trump wants to see next year. >> Yeah, I agree with that. And I think you know you said it correctly. I think that one way or another by May of next year, Trump is going to get a majority in in influence a majority on the Fed board in favor of his agenda and influence over the policy there. Um so we are going to get rate cuts either in September or May it's coming. Um and what do you think that this shift in policy is going to do to the markets and then you know like the other thread here is Fed independence is being challenged, right? How big of an issue is that? Does that shake investor confidence in US markets?

Like how do you see this playing out as this moves towards May? I think that by three days from now, everybody forgets what happened and we move on to the next ridiculous story. I just don't think that people have the attention span for long-term thinking on any of these news stories. But I do think that once again, if you zoom out, it's somewhat ridiculous that we talk daytoday about whether the Fed is going to cut in September, whether Powell sneezed or coughed in the wrong direction or winked an eye in a secret way during his speech that should give us an indication of his hawkish or doveist tone. The very fact that the tone of a man giving a speech should be what moves markets is patently absurd in its own right. And when you

zoom out, the most important point is whether it happens in September, October or December, whether predictive markets are right about the odds of rate cuts, which by the way, they've been saying are coming for three and a half years at 100% certainty as of a week ago and have been wrong almost every single time. So, nobody knows what's going to happen anyways. We do know what's going to happen, which is that in May, Trump's going to put in a puppet and we're going to get rate cuts. So, I think that any smart money knows that. So markets are already pricing in the fact that rate cuts are coming. So short-term moves may be determined by whether it's in September or in May. But we are going to get a Fed that does Donald Trump's bidding come next year. So rate cuts are

coming. Whether they're necessary or not is a topic for another day or for the next question. I have no idea. But right now I think that markets have priced in that cuts are coming. And so whether it's today or tomorrow is a bit irrelevant. Yeah, I so I wanna I I think I might ask a followup question about that, but I really want to come back to um Pal's comments at Jackson Hole. Obviously, like you said, I agree it's kind of ridiculous that the the tone of an old man giving a speech at Jackson Hole moving the global markets is is a wild reality to be living in. Um but nevertheless, that that's what happened.

Um but the the reason for his change in tone is what I thought was was interesting to me. He seemed to be suggesting that softening of the labor market was was what was driving this change for him. Do you think that that's cover for him caving to political pressure or do you think that pal really thinks that there's a risk in the labor market labor market we might be you know teetering towards a su a recession and rising unemployment >> there's so much to unpack so I think that we can start at the baseline of trusting the numbers which I don't right because we've seen downward revisions on every labor number for years now including during the Biden administration it's very hard to trust the data unfortunately and we know that the Fed is always looking in the rearview mirror

and never looking out the windshield to see where they're driving. So, that's another challenge. That said, if we started a baseline of we believe the data or at least we believe that the Fed believes the data that they're looking at to make decisions, we've had some pretty aggressively negative signals in the job market over the past month, let's call it. So, I don't think it's cover. I think that the Fed has a dual mandate that people forget about and the stock market and its prices have nothing to do with it as much as that's what we hear from the government. The Fed's job is to keep inflation down or let's be more accurate to keep manageable or tolerable in inflation at a level that has been arbitrarily set as acceptable 2% which by the way comes from New

Zealand many years ago and has nothing to do with reality and pal can't even tell you why the rate is 2%. But the other part of their mandate is a strong job market. So if one of those things seems to break in either direction, the logical move or whether you believe this should be or not once again, but the move that they have in their tool bag is cutting rates. So I think that regardless of where they're at on inflation right now, if they really believe that unemployment is about to spike and that jobs are problematic, they're going to have to do something about it.

>> Yeah. And I think that that kind of really uh captures the the predicament that Pal is in, right? Like we see the labor market suffering and inflation has not really cooled to the the as you said admittedly arbitrary target that he has. Um and so he's trying to balance between these things. Uh and to be honest, I don't know why he hasn't resigned. If I was getting this much flack as an economist, I would >> I know why he hasn't. I mean, I don't think that he's Listen, I I am no fan of the Fed. I'm a Bitcoiner. I think the Fed is a corrupt organization. It's like, you know, I go pretty deep down the rabbit hole of it basically being a private banking cartel that's controlling monetary policy. That said, once again, in a vacuum, it's kind of been a soft landing, right?

I mean, uh, markets are at an all-time high, jobs are pretty strong, inflation has come down, whether you believe the numbers or not. Transitory inflation on the way up, complete misstep. The Fed always is late, and I think that's what people are reacting to here. But right now, he hasn't done the worst job possible or what we would have imagined. Nobody wants to be in his shoes. We're gonna have stagflation, right? I mean, there's a situation where he if he does one thing, part of their dual mandate goes bad. If he does the other thing, part of their dual mandate goes bad, right? So, if you had to if I had, you know, gun to a head gun to my head, take a guess on how the Fed approaches this, it'll be through optics. They'll say, "Well, two to three% inflation is a really solid target instead of 2%."

Right? And we'll start to get a floating rate in the future of two to 3% and people will scream about it for a week, but then they'll say, "Oh, look, a squirrel or Taylor Swift's getting married to Travis Kelsey. Holy shit." And they'll forget that now the inflation target is 3% and not 2%. And they'll go on with their lives. And like everything else, it'll be completely normalized. So, if they can not get inflation all the way down to two and just admit that inflation's going to be slightly higher, they can probably pull some levers and deal with the job market and people will say, you know, they'll throw mission accomplished behind them on the aircraft carrier even when the war is just starting and call it a day.

>> Well, that that's uh yeah, you know, I appreciate the cander around these things. I think a lot of people like couch these things in terms that like kind of conceal the truth of what's going on, but just like the the the plain analysis there I think is really helpful. Um they are going to try to like declare victory no matter what happens, right? Um the the image that comes to mind for me is that there's a story in the Magnificent 7 that Steve McQueen tells about a guy who falls off a building and at every floor as he goes down the building, people keep hearing him say, "So far so good. So far so good." And that's the way I think the Fed has been pitching this soft landing thing. It's like, "Hey, so far so good."

Right? Um, but >> to be fair, we were supposed to get a recession like 40 times >> already and we have it. Well, maybe we have and we just redefined recession. >> That's the problem with all these conversations is that nobody is operating from the same baseline beliefs or data or assumptions. And so it's very hard to parse these things because there's plenty of people who could say we had a recession or we're in a recession for various reasons when we had GDP slowing for multiple quarters and such. But he just changed the definition or you know he just kind of moved the goalpost now now recessions are illegal you know so we can't do that.

>> Exactly. Yeah. So okay so this is exactly this is the last question I had on this topic of macro and the fed there's this widening gulf in in macro analysts I I see uh in terms of like perception of the situation. Some people are very bearish saying that you know like calling for a recession every every few weeks. Some people are saying that AI has changed the landscape and that we're in this new paradigm where we're going to continue to grow, you know, run the economy hot, grow our way out of the debt and they're calling for like, you know, the mother of all bull runs. What's your take on this widening gulf between these two camps in the macro space? Because I know you have a lot of conversations around macro like where's this phenomenon coming from and and how do you make sense of all this?

>> Well, I think a lot of the polarization in the macro space actually comes from what we just discussed is that the Fed is boxed in. So there's no good decisions for the Fed. And so whatever they do could be good or bad for markets. And when you start to also then get this lack of trust in the system or in the data and all those things, you get a lot of people who scream bloody murder that this is all fake and it's a Ponzi scheme or a house of cards and has to collapse. And then there are others who believe it and think it will continue up forever. And then there are actually others who say, "Hey, this is completely manipulated in our favor." So they're really good at pushing this market up even when things are bad, right? So I think different people from

different eras and different schools approach the market with a different lens. And there are very valid arguments for the, you know, mother of all depressions or the meltup crackup boom of all time before that happens. What we do know is that depressions and recessions do come and are not in fact illegal. And you know, you can look back to sort of Talib's idea in antifragile that if you don't burn the underbrush that eventually the fire is going to be much bigger when you let it go. And I think that we're letting the underbrush grow in a sea of massive problems. That said, markets can remain irrational much longer than you can remain solvent. So would it be surprising to you after the levers they've pulled for all these

years that they could just keep pushing and pushing and pushing and pushing? I will say that there was a moment where I thought with Doge and this sort of austerity vibe that we had going on that maybe they were going to actually kind of let the market drop for a while, certainly after the tariff collapse, right? And that they could maybe clean a few things up before midterm season and then they would ramp the market back up, add the liquidity and they kind of gave up even on the Doge side of things and have not let the market really breathe. we do know that they're going to want a lot of liquidity and the market doing very well when it comes to midterms in a year.

>> Yeah, I think that that's one guarantee that we do have. So, I think for the audience listening, you know, like there's there's a lot of things that Scott described here about um the potential crash, the potential boom. The most important thing, I think, is to just pay attention to what does happen. Don't be dogmatic about what must happen and then challenge your preconceived notions. Right? whichever camp you're in, you're going to benefit from hearing more from the other side just to have a more circumspect and complete view of the macro picture. Um, so thanks for that, Scott. I appreciate the insight there. I I want to move on to to Bitcoin. I know you're, you know, kind of a respected, uh, figure of authority in the digital asset space. Your latest Wolfen Substack report, uh, which was fantastic, by the way. I recommend everybody follow there if you're not.

Um, you broke down a report from Bitwise, uh, titled Bitcoin long-term capital market assumptions. Um, I want to just get your thoughts off the top. What about this report stood out so much to you and why did you want to write about this one specifically? >> There's there's quite a few reasons. I mean, every once in a while you find something written or some research that brings your feet back to the ground, right? And I think when you're analyzing the Bitcoin and crypto space, just like we're talked about before, on a day-to-day basis, it's easy to lose the forest for the trees and start to really dig into things that don't matter, right? to separate signal from noise I think is very very difficult and they have a knack I think for zooming out

exceptionally well and painting a much larger picture and obviously they're a respected institution yes they have a vested interest in being bullish on crypto and on Bitcoin but I think that they're pretty honest and relatively unbiased and do a great job and and what they laid out we don't need to get into really the nuance or the specifics I don't think but it was a perfect example of why Bitcoin is so important using data uh projecting forward based on what's actually happened and understanding fundamentally not because of a line on a chart or because of something you read on crypto Twitter fundamentally why Bitcoin should continue up and should continue to perform so well you know you can look at the historical you know kagger of uh Bitcoin for example I think their claim

I don't have it pulled up but that Bitcoin would be 1.3 million by sometime in 20 2035 maybe and I think it was based on a 28% you uh annual growth rate which is low for Bitcoin. It actually reflects the fact that Bitcoin volatility will probably be dampened by institutional adoption as as it matures more. Obviously, you should see uh the return the downside should be less but the upside should also be less on a year-to-year basis. But projecting that forward based on 15 years of history is not crazy, right? But they also went pretty deeply into how the previous cycles have looked and what they think previous uh what they think future cycles will look like. Uh it was just a really engaging report that laid out in

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Yeah. So I think that this is something that's happening too as this asset class matures is that we are getting more institutional grade minds and research and analytics coming into the space and sort of presenting that thesis in a in a more grounded way like you said. So I I I I enjoyed reading a lot too. Um so appreciate the thoughts on that. In the subsec article you wrote um you said that the four-year cycle is the most important thing anyone can be discussing right now. So I thought it'd be a good idea to discuss it with you. Um why do you think that this is so crucial right now? What exactly about it makes it so important at this m moment in history?

>> My belief on the four-year cycle has been healthy skepticism for I would say the last year, but if it ain't broke, don't try to fix it. And things looked like they were still echoing or rhyming from previous cycles. But now I lean towards Bitwise's opinion and my own that the four-year cycle as we've known it, or at least for the fundamental reasons that we believed it was a thing, is dead. And so I was one of the bigger proponents for the four-year cycle up until, you know, perhaps when Trump was elected and things change there. But for those who don't know, the four-year cycle is based on the idea of the Bitcoin having when the new supply coming onto the market is cut in half.

It becomes effectively twice as difficult to mine Bitcoin. And of course, in a nent asset class, when supply is reduced, if demand even stays the same, number go up, right? So it's basically a built-in up only mechanism for that part of the cycle. But when you consider the very transparent demand that we now have from treasury companies, micro strate I mean Michael Sailor himself makes the idea that reduced supply matters moot because he's buying so much more than even the number of that reduced supply. And Bitcoin now is big enough that I don't think it's driven by that. And if you look historically at the four-year cycle, yeah, the having is really important, but it also aligns with global liquidity

cycles, election cycles, which we know dramatically affect markets. So, there's a lot more going on, I think, than just this one thing. And to be quite frank, if you believed in the four-year cycle, the ETF approvals preempted the cycle by setting an all-time high way before there should have been in Bitcoin. But we coped through that and found ways to justify that as still part of the cycle. But if we really believed in the four-year cycle, it's not just about Bitcoin, it's also about the altcoin market. And that should have been absolutely flying in the first two quarters of the year. And it just didn't. So, you know, you can't really look at this and say that it's repeating history at this point. And I think that's a good thing, right? Because it also means, hey, let's not look forward to an 85% draw down just because it's

that year in the cycle, which we've seen every single time. Once again, I think with the dampening volatility to the upside, we also we should have much shallower corrections. It will be a little more reflective of what's happening in the macro picture probably, although I believe it's a largely uncorrelated asset. But the reason I think it's so important is because so many people still hang their hat on what's coming because of the four-ear cycles of the past. Like if you're a deep believer in the four-year cycle right now, you are 100% convinced that all of your altcoins are going to like 100x in the fall, right? that in November that thing you've been holding for 5 years that's been down only is magically going to make a new all-time high and I think you should be very very careful because it's a very different

asset very different environment. >> So I think I really appreciate you being willing to be open-minded to changing your view on this is where I want to start. Right. I think a lot of people get very dug in and entrenched in a in a take about anything about Bitcoin, crypto or the market. Um, so just the fact you're willing to revise your view on that is is really um just admirable. Um, you know, look, my view on this is that something you touched on about the global liquidity cycles being what's actually driving the four-year cycle in Bitcoin. I think that's that's really true. The election cycles, there are other cycles. I did an interview with uh Chris Kyper um who is a uh you know researcher at Fidelity Digital Assets.

Yeah. Just the other day. So encourage the audience to check that out. But I asked him about this specifically too. and he said that um the the the global equities markets and the US equities markets are not immune to this sort of cyclical patterns and and you can see this all the way back to the 70s. So he says like you know if a multi- you know hundred trillion dollar you multiple hundreds of trillions of dollars market is also still having some of these cycles that will still play out somewhere in crypto as well. It's just the drivers have changed and so I think you know the so you may okay great I >> we still have seasonality I mean we like I said the there there's no question that elections affect markets right I mean there's there's no effect there's no question that liquidity affects

markets the question is was it the Bitcoin having that was doing it or was it the fact that there was also an increase in liquidity in elections within six months of the having every time >> right yeah and that that's what I think is the the takeaway that I'm trying to get at here is that the assumption that a lot of people have had about what's been driving the Bitcoin cycles was that it was about the having or something endogenous to Bitcoin when in fact I think it's actually been exogenous factors. Um the line from the Bitwise report that I wanted to call out we believe that Bitcoin's historic four-year cycle is no longer relevant although we caution and this is what you're saying that Bitcoin is still subject to significant draw downs based on market movements and changes. So that's that's kind of the idea I wanted

to to get to here. Um, okay. So, they also say in this though that they don't, >> by the way, just quickly, I don't I don't necessarily think that we won't get huge draw downs >> because I do think that uh the crypto industry has an incredible ability to kick own goals and shoot ourselves in the foot at the hottest moments. And there are things happening in the market that concern me that I do think could wildly wildly increase the chances of a major draw down. But >> yeah, deploying more capital steady lads. Um, so you we can we can maybe come to that later. I don't want to spook everybody right now because I think there's enough uncertainty in the market. Things are fine.

>> Um, yeah, right now everything's great. Um, okay, let's uh let's let's just ask this question. So, we've been talking about cycles and how crucial this is. >> Everybody right now is asking if Bitcoin had to top has topped out at 124K. I've seen a lot of people wondering this mainstream tradfi and and regions and and crypto natives alike by every available metric like onchain metrics and and past indicators of the top there's been no evidence of a top. So why is it that everybody right now is wondering if we've topped what what is driving this in the market right now? Why?

>> So Cointelegraph, I think it was Cointelegraph or CoinDesk. I don't want to misquote it, but they ran an article the other day that basically said is the top end at 124,000 and they pointed at 30, I think, classic indicators that are used to indicate market tops and it was like over 30, right? So like not a single one indicated that we were at the top. So I default to that being a pretty good numbers. If you're asking the question why people think we've talked, it has nothing to do with Bitcoin and everything to do with human stupidity and psychology. There's two ways that people end up exiting a market. And everybody talks about the capitulation at the bottom that forms a bottom and you know causes markets to eventually rise. Like price gets so bad, there's so

much pain that the moment you eventually finally decide to sell, you're part of the bottom. Like we all know that, right? So let's just call it price based capitulation. Something gets too painful and you eventually sell. The one that very few people talk about that's much much more insidious and much more common in crypto because everybody is operating on FOMO and up only and if there's not a new all-time high in a week it's dead is timebased capitulation and it happens every summer even every summer in the most bullish cycles. 2021 is the banner year for crypto right everybody looks back on 2021 as the year that uh you know crypto went wild the biggest bull market. Bitcoin was like 65,000 in May and 13 days later it was 30,000 for 16

days whatever it was like it and spent most of the summer in the 30,000s after making an all-time high of 65,000 in the best year that we had. So like summer doldrums are a real thing and markets consolidating are a real thing and people lose their minds when things don't go up even if they're not going down because it's a matter of patience. So there's the timebased capitulation somewhere deep inside yourself. You have to always believe in crypto from PTSD and events of the past that the top is in and you need to be ready. But the craziest thing is that all of those people who are screaming that the top is in, I guarantee 99% of them haven't sold.

>> Yeah. I think that people just like to panic and they like to not feel alone when they're panicking. Uh yeah, look, the seasonality of of $112,000, dude. Like go back a year and if I tell you in a year Bitcoin will be $112,000, will you be bearish? It's so absurd. >> Yeah. Sorry, I didn't mean to interrupt you. >> Yeah. No, no, it's fine. I I think that reframe is really important, right? Like we're only a few percentage points off the all-time high and yet everyone is is is panicking like like the sky is falling. Um okay, so I I want to kind of like So we've we've we've talked about cycles. We've talked about there will be draw downs but maybe not at least 90% corrections from the past. Um bit Bitwise in their report said that they are forecasting as you said a 1.3

million Bitcoin by 2035 which is great. Um but for those of us who are still living in 2025, not 2035, um what should we expect from Bitcoin between now and the end of the year? Like what is your forecast for the for the rest of this year and into 2026? What are you expecting to happen? >> I think the fall will be more volatile because of all these kind of macro factors and just the fact that so many people either expect it to be over as we talked about or and so many others are calling for $200,000 Bitcoin. So my inclination is that in situations like this like this both shorts and longs will get liquidated. So we'll see a little bit of both, right? Maybe a bigger draw down somewhere in there that nobody expects. Bitcoin goes down below 100 or something and shakes out the

believers and then rockets to 200 once uh the non-believers then rockets to you know 150 185 when all those people are out of the market and coins go from weak hands to strong hands. So, I expect volatility, but I do expect much higher prices at some point this year. So, that said, I don't think 124 is the top for 2025. Listen, I could be wrong. And and to be quite frank, if Bitcoin was sitting at $75,000 in November, I would not be that surprised. Like, I don't think it's going to happen, but like I can't say it's not. Or 100 or 88. 75 would be pretty aggressive, but 74,000 that was an all-time high that you we were just back there a couple months ago. We went up to 105, down to 75, up to 124.

You know, none of that should surprise you. Like I said, in 2021, it went from 65 to 30 in two weeks. >> Yeah, the the volatility of Bitcoin is a gift to the faithful, as Michael Sailor says, but it also is a source of anxiety for people who are maybe not used to it or not expecting it. Um, so yeah, I think that there's a lot of room both to the upside and the downside that this market could move to, which wouldn't surprise me. And like I said, it still wouldn't break the long-term structural bull bull market support that we've established. Um, I want to turn now to the the like the macro picture around regulation and the Trump administration, particularly as it relates to digital assets because I think this from the macro perspective has been the biggest thing that shifted. Um, and there's

been, you know, a lot of positive things, but there's also been a lot of things that are concerning. Something that's like in the headlines this week that kind of like I want to get your take on because I don't know how I feel about it myself. Um Bo Hines was the executive director of the White House uh crypto council. Uh the administration gets into office. He's kind of like the big the big leader of this thing with the White House. We're only a few months into the administration and he announced he's leaving to go take a role at Tether. Uh this move surprised me. I think it surprised a lot of people. How important is this change? Is this sending a signal? Like what what what's your read on this?

>> There's no signal on the Washington side. The signal is that Tether is very serious about lobbying and being compliant in the United States and hired a superstar to make sure that they get their foot in the door. Right. So, this is more of a Tether story uh postgenius act than it is anything that's happening in Washington. I mean, Bo, I love I think he's amazing. He's a great spokesperson. This guy just pulled the power move of all time. He went from a relative unknown certainly in the crypto industry, right? Came in under David Sachs. Even at the time, people kind of said, "Who is this guy?" He had run for Congress, I think, in North Carolina and lost, but certainly wasn't a big player in the crypto industry. Got this huge crypto position at the White House under Sachs. He rode the wave for a few months

and was able to completely wash his hands of politics and Washington and nonsense and get a huge highpaying job in the crypto industry. The guy is literally living the dream. I don't think there's much signal here. I think that the dude just chose to, you know, like you talk about like these people who didn't sell the top. He sold the top of being in that job and cashed in, right? And so I just think it's amazing and Tether's very lucky to have him. I think he's the perfect hire for them. It shows that Tether alongside their relationship with Caner Fitzgerald and Lutnik is very serious about making sure that they remain the key player in the stable coin market in the United States and beyond. So Hines is a notch in the belt for that. And I can't even imagine

what he's getting paid versus what his salary was two months ago. >> Yeah, I'm sure. >> Who wouldn't take that that move? That's that's what I'll say. I think this is the story of a guy, not a story of Washington. >> Well, I think so. There's a it to me it's a microcosm of a bigger story and it's something that's concerning me and I want to get your thoughts on this. So, this idea of this revolving door between the crypto industry and the administration, right? So like um I think that a lot of people in the digital asset space are very grateful to have an administration that's willing to make policy, right? As opposed to the prior administration that was kind of like outlawing it in the United States's jurisdiction. However, u there's been a lot of things that the Trump administration has done to sort of let's

say favor themselves, enrich themselves, give themselves some benefit from this. Um there's the meme coins that Trump did. There was a announcement this week of a a new spa with with Crypto.com that the Trump media organization's involved with. Uh yeah, obviously World Liberty Financial is a big project that's coming. Do you think that this is like a net benefit for the digital asset space or is this like more of us like sacrificing reputation? Like how compromising is this for the digital asset space or or do you think this doesn't matter? >> I think a lot of that depends on midterms, which is kind of an interesting take that many probably haven't taken, but people forget that the anti-crypto army is certainly uh hibernating, but it's not dead and it's led by Elizabeth Warren. And if the

Democrats swing the Senate, and by the way, it's very rare for one party to keep everything in the midterm. So, you can expect that Congress or the Senate will turn blue. Elizabeth Warren becomes the chair of the Senate Finance Committee again. The most powerful person in finance in the United States government effectively would be once again the leader of the anti-crypto army. So, you can't get complacent about that, I would say. So listen, if she ends up back in power or there's a, you know, powerful like uh tailwinds for the anti-crypto movement, all of this Trump stuff is going to be the fuel for that fire 100%. Like certainly the memecoin, I think that was an abomination. I've

spoken about that. I spoke about it the day it happened. It was very unpopular take because he was so popular and we were so excited to have him in crypto. But like launching a memecoin when the SEC isn't looking two days before you go into office when you would be violating the president presidential emolement clause and putting in a ceiling for the entire market on basically what was possible at a time when there was so much scrutiny was just brutal right and you know the family themselves I think they've been relatively transparent about it I don't know what happens behind closed doors world liberty financial certainly like you know what they're buying and what they're selling their wallets are pretty doxed everybody's is tracking that.

But I think the Trumps are making a hell of a lot more money in crypto than real estate, right? So there's there's something there. That said, I think it's a huge net positive because with that comes favorable legislative and regulatory environment. And that's not just because of enriching themselves. So even if you're most cynical view of Trump is that all of that is to enrich themselves. If you've been a part of this industry or asset class and seen what's happening, it's also most of it is also actually sensible and has pushed the needle on regulation legislation that has to happen for an industry that's now this big. And Atkins and Pur and FAM and Quintens and all these people that are in positions of power, they weren't put there because they're pro- crypto. They're put there because

they're smart. And because they're smart, they're pro- crypto, right? Right. And so you have very intelligent, very well-versed in the industry, but very knowledgeable and successful people in all of these roles. And being a Bitcoiner sometimes comes along with those things, right? And so I I think that uh even at the most cynical view, it's been a massive net positive for the industry. I would just caution that once again, it doesn't always stay that way. So if you're cheering these things now, they could come back to bite us in the ass uh down the road. I mean the CRO treasury company fine whatever but like Bitcoin treasury companies aren't doing six seven8 billion deals right we're seeing very serious companies do

treasury deals on other assets that are topping out at a billion$1.2 2 billion. This is a eyeopening number. They're going to control effectively the entire supply of this token. And not to mention, nothing against Crypto.com, but they had their own controversy around this token recently when they had effectively burned a huge part of the supply, which was one of the main motivations for people to invest in it. And then they decided to just like bring that supply back out of nowhere as a marketing budget, right? Shows you the difference between decentralization and centralization. Certainly. And I mean, you know, listen, the the Trump media is not creating a Kronos Treasury company because that's the asset they believe in the most.

>> I think that may be the best best way to summarize the whole situation. Like, yeah. So, look, I I think my take with a with a token that they can end up with a huge supply of because of the poor mechanics that just happened with the token. whether I I'm not saying that's like malicious, but like they're doing it for money. >> Yeah. >> Right. They're doing it to make money. >> Here's the the thing I want the audience to understand about this is that there's a double-edged sword to this. Obviously, Scott's correct. The the huge benefit of getting a positive and like clear regulatory environment is is a really important net benefit for the industry.

But don't get complacent, right? Like there are still risks here. There are still like the the hibernating anti-crypto army. um this is not over until a lot of these things get codified in law. Um so there's just like a lot that's still going on in terms of the the regulatory environment, the legislative changes to to like so sort of like poor cement um for this industry to stand on. And we we'll see how that all plays out, right? Like I I don't know if these things are going to blow up in Trump's face or not or if they're going to blow up in our face or if everything is just going to work out great and we'll all keep whistling on past the graveyard. But um yeah, there's there's there's a lot that's still going on in terms of firming up the regulatory framework in the United States. To that

end, and we're coming up on time here, so I want to just get you some thoughts on this in general. The SEC has launched Project Crypto to explore tokenization of asset markets. The CFTC is also doing a crypto sprint. Um, Fed Governor Bowman has urged banks to begin engaging with crypto technologies and exploring this. Uh, and then Wyoming has launched their own stable coin, which I think they had to change to like frontier coin. They've had some regulatory things with this, whatever. But my my my question here is that there's a lot of prototyping. There's a lot of like signaling that we're going in the direction of digital assets of tokenization. How real is this and or is this all just going to be like some some you know like lip service and like virtual signaling like >> okay I think we're watching the rails of

the next financial system be laid in real time like right in front of our eyes. Everybody has come to understand through the Genius Act and and using them that stable coins are just a superior way of transacting value, right? So everything being built in the stable coin space is just a leap in innovation and a purpose fit use for blockchain technology. It's faster, cheaper, and easier. And everybody likes that. Swift, all these systems are just broken. They're old. They're antiquated. And something had to come and replace them. And we're seeing that. And so when you see this kind of Cambrian explosion in stable coins, including at the state level, which is really a huge story, I think that that's very powerful. I mean Ed Lutnik I think commerce saying that

they're going to start putting data trade data on the blockchain. There are really a lot of great uses for this technology whether that's investable to the average person to actually make money on it which is we know most people are here for speculation. I don't know that you can make huge money on the stable coin wave beyond like having been a part of the circle IPO or something but you know I do think that we're literally seeing a technological shift you know alongside AI and other things that are happening in the world. But this is real. I mean, tokenization is coming. Black Rockck's been talking about this for years. We got so like wrapped up in the fact that the ETF got approved, but in the same annual letter in March before the ETF got approved, Larry Frink wrote an entire section on the tokenization of everything and that

being the future. And they're doing that on Ethereum. Like Black Rockck, JP Morgan, these players, they're not like making subtle small moves that they don't believe will be impactful in the future. So, this is the way that markets will clear. This is the way that value will be transacted. It's happening and they're clearing the path for it and hopefully they'll codify that in law so we don't have to worry about it being reversed. >> I think one of the most bullish days in my life was when I was sitting at the global town hall meeting when I worked at Black Rockck and I heard Larry Frink he's like 15 feet away from me. He said I think there is room for Ethereum to grow drastically and there's a need in the market for an Ethereum ETF. Um so I agree with you. I think there's a lot of

of of real serious people and players taking this seriously. So I want to get your thoughts on this, right? We've seen Bitcoin's investment thesis sort of validated by the market. Obviously, this tokenization thing is happening. It may take time. Whatever form it takes, we'll have to see, but it's happening. Who who are the benefit beneficiaries from this? Because like you said with stable coins, unless you were in on the circle IPO, there's not really a great way to get exposure to that directly. Like who are the beneficiaries of this? Is it going to be Ethereum? Is it going to be the broader altcoins? Or are these like stratified companies going to try to keep this value in house, build their own L1? How do you see that playing out in terms of the value there? I think you just touched on one of the bigger stories

that's coming and that we don't have an answer to your question necessarily yet. So, I love Tom Lee what he's done for Ethereum, but he created a narrative around Ethereum when he said Ethereum is the next Bitcoin that I actually think is relatively false because he used the momentum of the Genius Act. Wall Street was looking at stable coins and he said Ethereum will go up because stable coins will be so popular. Right? Great narrative. Incredible for them to understand. Brilliant. But the fact is stable coins are pretty well distributed across networks. And if you're looking at Tether like half of the action is on Tron, right? Not on Ethereum. Ethereum has the other half almost, right? I think Aptos is third, but stable coins are going to be

everywhere. And so that narrative is not really captured by any singular L1. I think that value will be spread out. And then you had the announcement recently that Circle was launching their own layer 1. So clearly, Circle has realized they have an overblown stock valuation in a world where there's going to be a lot of competition and are going to need to find a hell of a lot of ways to make money to keep their stock up and we're going into a lower interest rate environment. That's the untold story of stable coins right now is that these guys have tremendous businesses because interest rates are from four to 5%. If we go back to Zer, they make no money.

None. Like literally zero. like their income will go down you know 75 not zero but 75 80% if uh treasury is yielding 1% instead of four and a half percent. Right? So they have to capture this they can't let that go to a decentralized network. Also to be fair if you're peggy in accounting at a random company in Omaha, Nebraska and you're 74 years old and your company says we're going to use stable coins instead of whatever system you've been using. and you accidentally send $500,000 from an Ethereum address to a Salana address because you're Peggy from accounting and you're at the uh you know at the verge of retirement, you can't call the Ethereum Foundation and get your transaction fixed, but you will

be able to probably call Circle and get your transaction reversed. So for a lot of very serious use cases, it's going to require for better or for worse extreme centralization, customer service, and all the things that are needed to be a viable and that would have to be on their own blockchain probably, right? And so I think that that what you described is kind of going to be the major story of the future whether we can capture value as individuals or whether it's just going to end up being the big players in Wall Street that do it. Will it be the main, you know, will it be State Street and Bank of New York Melon and not Micro Strategy or even like Aubra and Lein and people all the great companies in crypto that are offering yield? Like is that just going to go to

the banks and then it's going to become banking and you'll get your 1% and they'll be making four and a half percent. Right? I I think that that's a viable sad uh future, but if we completely get co-opted uh that could be really problematic. So, I think that there's going to be incredible things built on blockchain that retail can take advantage of, but I think that the big narratives, Wall Street's definitely going to attempt to capture. >> Yeah. Well, I think wherever Peggy from accounting ends up is going to be the place to be. Um, so I No, I think this is an interesting idea, right? Because like a lot of the crypto native people have been saying that we're going to destroy Wall Street and replace it with, you know, totally public blockchains. A lot of the Wall Street people are kind of betting have been rather kind of

betting that this crypto stuff is going to go away. Something that you know my my old colleague at at Black Rockck Ravi Mitchnik has said is that the reality is what we're seeing is a hybridization of the two. And so you know I I pitched this idea to to Lynn Alden and she hated it but I think there's some value in it. Um which is that there are there are uh there's there's Peterbuilt, there's Ferrari, there's Toyota, there's a lot of different there's John Deere, there's a lot of different cars that run on combustion engines, but they don't have to put each other out of business. So I think because there's so many different use cases for digital assets, there's going to be a huge addressable market and the right solution for Peggy from accounting might be different for the one for you and me versus the Bank of

England. So it's just going to be interesting to see, you know, which niches of the market get get adoption for which change, you know, where where product market fit happens. And there's no way to tell yet. We'll have to kind of see how that all plays out. And this is why I think uh macro is so important and why this conversation, this dialogue between digital assets and macro is so important because they're they're both informing and supporting and influencing one another. And just like you said, I don't think the Fed is going to cut rates to to 1% or zero again. But if they did, that would really disrupt a lot of the stable coin issuers. So, you know, we'll have to see all these things shake out. Um I I just want to thank you for the the thoughts and insights on this. I've really enjoyed your Macro

Mondays program and like I just want to kind of end with Yeah, exactly. What are your thoughts on that? It's the best. It's the easiest week hour of my week. I show up, I say an intro, I maybe ask two questions, I just let a bunch of people who are smarter than me talk. It's best. >> What What has been some of your major takeaways from that? I guess like because like I I I've been listening for a long time. What are some things that you've learned from that that have surprised you that come out of those conversations? Well, first of all, I think that the reason it resonates so well with people and has become by far my most popular show is because people love the push and the pull and they actually love the debate. So, as much as we have this like for those who haven't

watched, you know, it's myself, Dave Weissberger, Mike Mcloone, and James Lavish. James and I are like color com James is just like the brilliant voice of reason. I'm kind of color commentary and Dave and Mike just fight like cats and dogs, right? And uh you know Mike being I would say extremely bearish. He's the head of commodities at um Bloomberg. He used to be a very big Bitcoin bull and he's just now very bearish in all markets. And Dave is quite the opposite. And people just love that sort of controversy and fighting. What I found interestingly I think anecdotally from my audience and from having these channels for years is that that's where the that's where I need to skate because that's where the puck is going. It is going to macro shows that

incorporate Bitcoin or exactly what you and I are discussing right now. And it is leaving far behind the memecoin speculative avatar on crypto telling you what token to buy degeneracy of the past. I think that's a big part of the market. It will remain there, but it's being marginalized as real money and real people come in. And that's the audience that I'm really focused on. So beyond the insights they give every every week which are incredible like my real takeaway is that my fans are now guys like me. When I go to a conference now it's not like some kid who says that was a great trade you gave me which it would have been in 2020. Now it's someone who's like you know man is awesome. I've

got 3% of my money in Bitcoin. I've been dollar cost averaging like you guys talk about. I'm really excited about the future. I'm trying to ramp up to 10%. Thank you so much for the information and convincing us to get our feet wet. Right? And so I think what Macro Monday has taught me is there's a lot of people out there who are very interested, very smart, and just want to get started or have gotten started and are looking to ramp up, but they really just want Bitcoin and ETFs and a few select assets. And it's just not my audience just isn't the crypto audience anymore. I think we've been in this generation doing this educational process to convert speculators into investors. And in prior

generations, it was trying to convert savers who didn't trust the financial system from like the Great Depression and things, converting them into investors. And so now, you know, so that that that's a big reason why I wanted to do this show and why I'm so glad to have you on. I hope we can have you back again soon. I really enjoyed this, Scott. Uh let's end with this. Where can we send people to find more of you and your work online? Uh the best place to find me is on X at Scott Melker as you can see it right down there below. Everything else is branched from there. You know I do a daily crypto town hall on spaces uh which is to to my knowledge the biggest show in crypto kind of anywhere. You know doing 100 200 300,000 people a day listening in uh with the

recordings. And you know much like Macro Monday that show has matured. It started as you know it's myself, Mario Knoff and Rand Nuner but it's just myself. they've they haven't showed up in in basically a year because they're busy with other things. And as a result of that, it's become no memecoin degeneracy and the same kind of people we have on Macro Monday having conversations about the government and institutions and such. So I I think that that's been really great and there I get to talk to nine or 10 guests a day, right? So we're getting a lot of insight, a lot of push and pull. Uh and everything else branches off, right? You can find my YouTube at Scott Melker um where I do a daily 9:00 am show. I do still the original OG long form podcasts come out on Sundays and those are like my last week was Lyn

Alden, right? As as you mentioned, I basically talk about crypto with people smarter than me all day. Like I'm, you know, I barely have time now to be on this side of the conversation. So, it's really fun for me when I can because I'm spending so much time asking people questions instead of answering them. >> Yeah. Well, that's how you get smarter and that's it's a big value ad you're creating for the space. So, thanks for being here, Scott. Uh, and I hope we have you back again soon. >> Thanks, John. >> Thank you everybody for joining us today. This has been another episode of Milk Road Macro. Uh, stay safe, stay educated, stay informed, stay bullish, and we hope we will see you back here again soon for the next episode of Milk Road Macro. Thanks for being here. Bye.

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