The perfect storm for a crypto bull run with Kyle Reidhead

Transcript

GM good morning welcome to the milk row show The Daily crypto show that's as satisfying as finishing a plate of Grandma's freshly made cookies I'm your host Jay Hamilton and today we're analyzing the recent decline in the US dollar and discussing what is the impact that we expect that to have on markets in the coming months and why we feel like it's so bullish for your bags here to gu us today is milroad co-owner Kyle rehead now before we jump into today's show I just want to give you guys all a big thanks yesterday was our biggest episode ever and that all goes to you for listening and for subscribing and right now if you subscribe to our

Channel by the end of August we're going to hook you up with a chance to win some sweet prizes check the show notes to find out what you can win and make sure you subscribe to our YouTube channel or wherever you're listening if you're not already subscribed get ready because your reward farming game is about to level up introducing gain powered by kelp your dgen cier gain is an automated Vault launched by kelp that maximizes rewards for eth users it offers oneclick access to airdrops and points from leading l2s like Linea scroll car and more here's how it works head over to milkroom SL kelp gain and spot airdrop

gain get a complete overview of how your assets are deployed and the rewards and points you stand to gain with just a few clicks deposit eth r s e or liquid staking tokens into the smart Vault that's it the best part once you deposit your issued liquid token AG eth enabling you to participate in defy on Pendle Spectra lra splice and others gain is already live and you can go check it out for yourself today just head over to milro Kai welcome back to the show let me start by asking you to give us a little bit of context here around what is going on with the US dollar over the last

couple of weeks can you explain what the Dixie is as well just for those who don't know that term and then let's start to talk about what we see as the impact on the crypto markets yeah absolutely so we've talked a lot about interest rates and liquidity over the last few weeks here on the show and this is just another indicator that helps you kind of understand what this liquidity and what these interest rate moves can do um and so the Dixie is basically a measure of the US dollar versus a basket of other Fiat currencies so let's say the Euro and the Yen Etc all into one and so essentially the Dixie is just a measure of the US dollar and its strength versus other countries so when rates are high in the US and they're not printing a whole lot of money the dollar

tends to do very well right because think about it um if rates are high that means that you can hold US Dollars put them in us treasuries and earn currently today 5.25% that's pretty darn good right you don't really need to take a lot of risk in the stock market hoping you'll get seven eight nine% a year which is by the way what most people get I know in crypto we want a 10x every single year but a 10% is pretty good but if you can get a 5.25% with zero risk that's pretty darn good and so when rates are high the dollar tends to do much better it means risk assets do much worse it's why when the dollar is high crypto doesn't do as well and we'll show you a chart that shows us so clearly um but then when rates get lower when we

start printing more dollars we put more dollars in um the ecosystem in the in the economy then the dollar gets a bit weaker right and that means people are getting out of it because well I don't want to hold my dollars in treasuries when rates are 3% or 2% right I want to go put them in the stock market or in real estate or something else where I can get a better yield and so the dollar tends to go down uh and so over the last uh you know little while here we've had the dollar doing quite strong and it looks like Anyway the dollar is begin to break down at least the Dixie is beginning to break down versus other Fiat currencies and this could mean really really big things now basically all this is saying is the same thing as we've always been saying which is rates

are coming down liquidity is going up the Dixie is just another indicator of that but there are some very very clear correlations which we'll show you in just a second amazing that perfectly leads into the next question here I've got a chart up on the screen of the Dixie versus the total crypto market cap Kyle when we look at this chart what are you seeing on this chart we're sharing the Dixie here and every time that it goes down and I don't mean like down like a little bit like a percentage point or something but it's going down big times let's say it's going down from 110 or 108 down to like 90 or 85 these are big big moves in at least in currencies uh and so in the Dixie every time that that happens crypto and stocks in general go on a massive massive Bull

Run so if we think of the 2020 end of 2020 and 2021 Bull Run look at what happened we had a massive drop in the Dixie it went from about 104 103 is down all the way to 88 okay massive move and that was when we just went on that crazy Bull Run uh and sorry that was in 2017 uh if we do the same thing back in 2020 2021 we went from again around 103 this time down to about yeah 90 and same thing we had that crazy run 2020 2021 and then if we look at when we topped out and bottomed out of the bare market and crypto back in like end of 2022 again we had a massive rund down the dollar was up at 116 it was or the Dixie was there and again that took us

uh a massive run in in crypto back in you know late 2022 early well I guess all of 2023 was the same thing the dollar was just breaking down the whole time now we've sort of ranged in the dollar for the last you know let's call it um for basically all 2024 it's been up it's been down whatever but if you go to the other chart um Jay we can see that we've just sort of broken down from this trend that we've been in for the last like let's say a year or so and if we break below that it looks like the do or the Dixie is about to go much much lower let's say maybe into the 90s uh and maybe lower if that happens you bet your bottom dollar no pun intended that we are going to go into a massive Bull

Run and the same thing what's interesting is when you look at this chart the Dixie is breaking down the same time the M2 which is global liquidity is breaking up right we've talked a ton about global liquidity they tend to go hand inand and so what's interesting though is looking at Global liquidity is kind of hard it's difficult uh metric as we talked about indicator to find because you there's just so many ways that you can sort of look at it the Dixie is very easy you can open up trading view just Google it you know Dixie price and you can watch it live all day and you can see that when the Dixie is starting to break down when it's going lower typically risk assets start to go up there's a very clear correlation here and we've seen it over multiple Cycles here in crypto and so

the other side of the coin too is when the Dixie starts to do well they call it the dollar wrecking ball so whenever the dollar is like hey I'm going to go on a bull run which happens you know every four years at least in these Cycles but it happens a lot in history when that dollar goes on a bull run it's very normal to call it the dollar wrecking ball you'll see back in 2022 when we were in that bare Market there's so many videos on YouTube called the dollar Wrecking Ball and it was the same thing it was the dollar was going up and so risk assets were out everyone's leaving risk assets and going into the dollar we talked about it actually back then uh on the pot and so um obviously we're going the opposite way of that right now which

means we're very bullish but it's a great indicator to just watch the Dixie and see what happens because if this thing breaks and continues now obviously it's down below that trend line that we just showed in the chart there doesn't mean it's going to confirm that but if it does and we start to see it going below 100 down in the 90s this is going to be very very bullish and this is the banana Zone we always talk about just another indicator to understand that this obviously feels good um what do you think when you project this out as you said Dixie trending down what does this say to you about the US economy and how they will respond and how this will impact the markets yeah I mean the Dixie is kind of

a you could think of it a little bit forward thinking like we haven't lowered rates yet but the dollars already starting to break down why well it's because we gota wait till September for the FED to to lower rates but everyone's pretty convinced that it's going to happen and so people are already starting to put on that trade they're moving out of the dollar getting into risk assets to get ahead of what is about to happen here with interest rates right so it's just a clear sort of Forward Thinking indicator I guess on what's going to happen with rates what's going to happen with liquidity uh and so as we see the dollar break down it's pretty obvious to me that risk assets are going to do well it's that banana Zone he always talking about again it takes time the Dixie and currencies they

move slow so like just because it's broken down that line in crypto when we break a trend line it's like tomorrow you're down 20% or you're up 20% depending on the way you broke out it's not how it works in in Forex in currencies so like this is a long slow trend line it'll take probably 12 months six months whatever it is for this to break down and get all the way to the 90s right um hopefully if it jumps all the way down in the 90s tomorrow you bet everything's blowing up and it's going to be a big problem so we're going to hope this is a slow decline down which it generally is again if you look at the charts we showed it takes time for these to unfold but it looks like that's the direction we're going um we'll see what happens though if we step back what does

this mean for the US economy does this mean that this could push the US economy into a further recession and if so how do they respond yeah I mean I don't know that the us is going to go in recession I think we talked about this last week of are we actually going to go on recession or not I feel like that was just like that one week where everyone was just kind of losing their mind after the end carry trade unwind everyone was like okay we're going to recession everything's screwed we're all we're all messed and it feels like even just a week from that now people are kind of like ah maybe we're not going to be in recession it's actually all not that bad and so like I don't know that we will go into a recession to be honest I don't

know that we can go into a recession um and there's a few reasons why I believe this um let's sort of talk about was it last week or two weeks we talked about Boomers how inflation works and all that kind of stuff I think it was last week now two weeks ago so people always ask why do you have so much conviction that Global Equity is going to go up and interest rates are going to go down and the dollar is going to go down and we're gonna go into this bull market I've been saying it for forever I think Lark says it a bunch of people on the show say it why do I really believe this I mean one you can look at the charts that just showed you it kind of looks like that's what's happening but in my opinion even with all the bad news or the scares of

maybe we're going to go recession and this isn't going to happen I just don't think we have a choice but for this banana Zone to happen and there's sort of three reasons why why I believe this um one I think the US has to lower rates and print money I just don't think there's any other way around it which automatically just weakens the dollar and lowers the Dixie and I think the reason that they have to do this is one if we look at the interest payments that the government has to pay on their debt remember the government is trillions of dollars in debt right or the FED um and they also have to pay interest rates on that 5.25% it's not just us citizens that have our mortgages go up right and our loans on our credit cards and our cars go up this happens to the fed and

the government as well and they are a lot more in debt than any of us are at least I hope so uh and so there are tens of trillions of dollars in debt and so if you look at the debt payments on just just interest so this isn't anything to do with paying back the principle of the debt but just interest payments it's a trillion dollars right now I think what is it quarterly or is this annualized I can't remember but we're over a trillion right now in Q2 2024 we're 1.08 n okay and that's trillions of of that they have to pay an interest payments last quarter and that's going up massively and that's happening because rates are so high and so they literally can't continue to keep rates aside because they cannot afford their own debt and so that's one metric it just shows you they have to lower

rates there's nothing they can do about it not only they have to lower rates they also don't make that much money so they also have to they also have to print money so you already know that just for them to do that they have to do it now if they went into recession imagine what this does to that number so they have to pay a trillion dollars in interest payments that doesn't even count their principal plus all the other crazy government expend that they have to pay for how do they pay for that well the government revenue comes from what taxes and you get taxes in sort of three ways let's say income tax spending on goods and services and capital gains right three taxes it makes up from this chart here uh 93% of all revenue of the government is from those three things

what happens when you go into a recession well unemployment goes up and if it goes up too much you have a bunch of people that aren't working which means they're not making income tax and so there's a big hit to the the revenues of the government okay when you're in a recession people stop buying things and so there's another hit to their revenues and then the last thing is if you let markets go down so if markets go down big time let's say the stock market goes down I don't know 50 60% like they did in 2008 well now your cap gains tax which is also a massive amount right companies and people selling their their stocks and making money on that that's a huge Revenue driver of the government if we go into a recession all those things go down massively and so the revenue

goes down huge and so they have no choice but to pump markets so that we don't go into a recession which is why we haven't been in one since 2008 because the government realized we could just print our way out of this okay and so their interest payments are too high and so they need to lower rates as is and they're going to need to print money to pay for that and then you have a third one which I think is probably the biggest and if we think about the way the world works right now U it's funny it's kind of we'll go off of our story of back when the Boomers were entering the workforce let's talk about the Boomers now leaving the workforce right so around 200 I guess it was eight I think the Boomers started to get to the age of 60 where they started being able

to retire and what happened is at the time when they were all working the government started this idea of a pension right if you guys pay a little bit of your income every month into this pension thing we'll invest it for you and over time it should grow and then you can retire and then you can just take a bit of money from your pension every month and that's how you'll make your income so you don't have to work when you're 60 or 65 or whatever age it is okay so great it's worked for a long time but all of a sudden the largest demographic in the world back in around 2008 started retiring and over the next 101 15 years they all retired not all of them but a lot of them retired and so the amount of people that we have that are not working in this world at least

in the US is massive okay and the only way they make money at least most of the ways that they make money are two things one their pensions and then they have usually most Boomers bought real estate so they own real estate that's where all their savings is is in real estate their home and then it's in their their pensions which is basically the stock market right so whenever you put money into your pension they're they're essentially investing the S&P 500 and like kind of spreading it across the the economy and so if you think about this for a second the entire Savings of the pension for all the people that are retired right now so basically if they don't have this pension they don't live because they can't buy food they can't pay their mortgage they can't pay whatever the heck they need to pay for

right and so all of it relies on pension which all of that relies on the stock market and so you start to think here can the government really let the stock market go down 50% absolutely not because if the stock market goes down 50% the Boomers have no more money left what are they going to do if their entire net worth goes down 50% from a this like crazy recession or a big selloff like we had in 2008 I just don't think we can do that anymore back then wasn't as bad because everyone was still working right and the and the debt wasn't as big the interest rates weren't as high the interest payments weren't as high but now it's like there's just so many things saying we cannot let the market go down we cannot let our world go into recession because the whole

system breaks if we do that and if Boomers all of a sudden can't get access to their pension or also you think about they leave interest rates High the real estate market is getting crushed right for not printing money lowering rates all of a sudden their house is not worth anymore and they don't want to sell their house because they're not going to make any money off of it right there's no one there to buy it anymore and so the the government actually has a almost like a mandate to make sure that the stock market continues to go up that's why this is such a good investment to just invest in the S&P 500 the NASDAQ or new tech like we want crypto which is the fastest horse right so if we start to think about this we just I don't know that we can allow there to be a

recession anymore it just I think it collapses the entire system and I don't mean like a short recession or a small one it could probably be fine but a 2008 like recession where everything the stock market was down 50% I just don't think we can do it it's just not going to happen there's just no way and then on the other flip end of it is like we also can't let the the dollar spiral out right so they have to just keep printing money to pay for their debts because they can't default if they default the dollar becomes useless and then we go into hyperinflation and like goodbye US economy so like our only option is we have to keep printing money and so when people say how do you know that there's going to be another bull market it's because there's just not another option

the only other option is a complete disaster and a global meltdown and there's just no way that any president or Fed chair is going to ever let that happen so you you can there's two sides to the story either we have a global meltdown or you get the bananas own your choice and I'm telling you right now especially an election year the president the Fed chair they're going banana Zone every single time and so that's where I that's how I bet the the system it sounds so obvious when you say like it's a host of cards and it's all it's a system that is so fragile and their only way is to keep building on top of the House of Cards because they can't let it all fall down and as you said affect all of these people that rely upon their pensions in order to to

live as they are retired uh what do you think are the what do you expect to happen over the the next few months like is there a trigger that you're looking at what are the timelines around um these next moves up that you think could come because you did say the dollar does move very slowly this is an immediate thing is this going to be a slow event or it I think it's I mean I don't know if you look at the chart right now the Dixie it's been collapsing pretty big over the last little while here now it's done it a few times in the last like two years so we really need to see it break through but it is like I think we're sitting at 101.1 right now and we were 101 Point like four or five just the other day and

uh and crypto is is up big time from it we're up 4% on bitcoin and 3% on eth right now so it's reacting to the and I think um I think that's going to be the trend over the next little bit we were so inflation heavy for a little while there and then we were looking at liquidity I think you're going to hear a lot about about the Dixie over the next little bit if that starts to come down because that starts to come down markets just change completely right it's such a big deal when the Dixie comes down it's it's such a because the dick the dollar is a is the global Reserve currency it's it's kind of in everything it's in every ecosystem it's in every country it's all around the world and so when the value of that thing moves over let's say six

months a large amount it changes a lot in terms of imports and exports in terms of how markets work uh and so I think it's going to be the big thing that really moves markets right now and if this thing breaks and continues to go down and we see the the Dixie break a 100 um I think the banana Zone's starting so we'll see what happens I don't know how long it's going to take to get there um but it's I think we just had the FED fed minutes are coming out whether it's today I'm not sure but I saw some stuff on Twitter just before we started recording of it looks like the FED is pretty much in agreeance that they're cutting in September and so um I think we're going to hopefully front run that and September is going to look pretty good for us the only thing that

still makes me unsure why I wouldn't like go long on my Longs is because of the election uh Harris seems to be very anti- crypto uh and so that's getting a little a lot of people pretty sketchy there's talk about her I don't know increasing tax rates and all these things that just people don't love and generally don't do so well for the stock market um but I mean I think it's going to be fine I don't really care who wins I think either way we're going to go into a banana Zone um because we just have to as I just explained but I just think that worrisome there leading up to to November 6th um could just hold us back from going full banana um but I think um I love saying it's so much fun but I think I don't know I think

September's be pretty good as long as we see this Dixie continue to go down so my all eyes on Dixie right now is what I think all eyes on Dixie the US can't go into a recession the banana zone is inevitable ban zone is I hope we at some point we it's I don't know it's kind of fun actually the banana is actually a lot of fun so I love it you know what we need we got to get through the Boomers man the boom this whole thesis that I have is all around the Boomers going through life they've just changed markets so much um and who knows what's going to happen with our pensions by the way if you're hoping for if you're like 20 and you're hoping for a pension 40 years from now when you retire you need a backup plan which is really what

crypto is and getting in before the bananas on which is why we are so adamant about not [ __ ] this up because if you want to buy a home like it's so hard to do that coming in as a 20-year-old even 30-year old [ __ ] it's hard right unless you are making a [ __ ] ton of money which is not that easy to do these days unless you run your own business right so it's really tough to catch up and get in on these markets because real estate's just so expensive now and it climbs so fast which is again as a result of these markets and if you think you're getting your pension like I just I don't see it I don't know how that's going to happen now I'm sure something else will come in some sort of like Ubi that hopefully comes because of

crypto I don't know um so I'm not saying this I'm like I'm not a doomsday Guy saying like you're you're [ __ ] 60 years from now or 40 years from now but if I'm young I'm learning to invest first thing because like I'm just not trusting that I'm getting this pension because I don't see how we can pay all these Boomers because the other problem is the Boomers generally back in the day you would retire at 60 you'd die by 80 now they live till 90 95 100 because we have all these medications that just keep people alive you know we're just a bunch of zombies out there at 90 years old so like that that's taxing on the Healthcare System it's so expensive and like I'm grateful for it right you get to be with your family and your your grandparents much longer but it's it

means a lot more debt and so it means more printing and um it makes for a mess in the system so uh you need to I just I can't stress enough that you need to take advantage of these banana zones it's short like let's say the banana Zone starts in September or October it lasts till like like I don't know if we look at last cycle we really took off in I think it was October maybe November of 2020 and and if you don't count the second sort of like Peak that we had in crypto which was like we went the first Peak bit Bitcoin hit 64k the second Peak it was like 69 so it's like whatever and it was all propped up because of FTX uh and so like it was like eight months you know from November to May or whatever yeah what is November to May so like

it's not long and so if you're not allocated before that you're really gonna miss out Kai I didn't even have to ask you a question at the end there you just you just went on a great rant everybody listening in tell me if you know maybe we should just have more shows where Kyle just shows up and goes on Rants and I don't even I just sit here listen yeah just it's all on your own Acappella uh everybody you gotta learn to play violin and you can just like stream along a nice little violin for me the violin yeah the violin if you can and then I'll just I'll speak to the violin I cannot definitely not any insurance can you play anything not well okay not reliably well at all uh I could I could have a good conversation that's

all I'm good for no no musical gifts here I'll hit the dance FL though uh everybody that's listening in I want to remind you one more time if you subscribe to our show right now by the end of the month you can win some really cool prizes check out the show notes to learn more about what you can win we're giving away hundreds of dollars in prizes uh and it also helps the show huge uh also let us know what you thought about today's show give us a review give us a like give us a comment if you want us to talk more about the Dixie as Kyle said something that we think we're going to be talking about more in these coming weeks keep you guys updated but things are looking quite good remember none of this is financial advice investing in crypto or any asset

is risky do your own research and only invest what you can afford to lose thanks so much for listening and everybody have a wicked awesome day [Music]