Why this crypto bull market feels so different: James Lavish

Transcript

I want to get your thoughts on Q4. JP Morgan uh in their writing about the debasement trade think that said that they think it could push Bitcoin to 165K this year. Um and like I said, Paul Jones is calling for sort of a blowoff top. I'm curious what your mindset is going into Q4. I know you don't like short-term predictions, but do you see Bitcoin at 150K, at 200K? Do you think 165 makes sense? What are your thoughts for for Q4 as we see this sort of adoption and new wave of capital start to come in for the first time? Yeah. So, uh, I look at, so first of all, I've been talking about Bitcoin getting to 150 to 180 for a long time, for years here, and and I figured sometime in the fall. I thought it was going to hit 150 to 180 sometime in November. I guess it

it's not out of the question here, you know. I mean, Josh Man thinks it might go to 444. I don't I don't know about that. But um I do think that we're going to see an expansion uh in in the price of Bitcoin here because we're seeing an expansion liquidity. And what's happening is you've got the central banks are easing. You've got you've got the the Fed is now easing and you've got some factors here that are going to cause it to continue to ease. You've got China who is expanding on their u liquidity and their money supply and that is going to start feeding into risk assets around the world. Japan has been uh if you're watching Japan, they have a new prime minister who was just elected that is uh

akin to Trump and the thought there is that liquidity is not going to stop in Japan and even though they are in a precarious position of being the largest buyer of their own bonds, the largest owner of their own bonds, having done yield curve control for many years here and now sitting at a a spot where their yields have spiked up significantly and um and so what's going to happen there? Well, the the idea is that the thought is that look, this is the this has been the carry trade for the world where you can borrow cheap, borrow yen cheap and turn around and buy risk assets around

the world. it's just access to capital at on on the cheap and the you know the think is that that's going to continue now with with her in place. So that's a big deal. Another big deal is that you know as we've seen the the just this der of volatility in both stocks and bonds recently that's that means there's access to more capital because it requires less collateral to borrow against. So that's an expansion of liquidity. If you then I I talk about Michael Howell a lot uh crossber capital. He's got a great um liquidity uh measure that he likes to uh look at that I think is is probably the best the

best that I have access to in the world. I I really uh I really um you know uh respect the work he's done. I don't know exactly what his calculations are, but I know what's what's in what's in the pot. And uh and so things like bond liquidity, bond uh volatility, uh you know, shadow banking, meaning hedge fund and private capital, uh you know, um central bank, the QE, QT, like all that stuff is in there. And that's really the measure beyond M2. M2 is one like big factor in it. But then overarching all of that is just we're a world built on debt, on leverage, on borrowing. And

that's what's going to keep driving this. And I believe that that's going to keep expanding through this year and into next year. And uh and that cycle of liquidity is just continuing up here. And it's going to probably top out sometime next year. So the answer is I have high degree of confidence that we're going to continue to expand. Do we have a blowoff top? Well, it would seem that that's where the market wants to go here. Uh, just if you look at the emotion of the stocks, if you look at the psychology of them, we just keep reaching new highs. It feels like we're going to get to the point here of just absolute ridiculous FOMO across the board. I don't know when that is or, you know, how that plays out for Bitcoin, but it it just feels like that. It feels like I feel the the the echo of 1998

1999 here where you had all those internet stocks and um you know they were it was just madness. You're too young to remember this but it was just you would buy you know you would buy an Amazon or a Google it would be up 20 30 40% in a day. You're just like wow do I sell it? What do I do? And then it's up another 40% the next day. You're like oh my god like what is like this is just insane. um especially the smaller ones, not the bigger ones like those. But so the problem with the market is that the breath is very very consolidated with the AI um you know the mag sevens. It's uh it's a that takes up the the vast majority of the of the index now and it's that's um that's a little bit

worrisome. uh and you know but the if you look at the indicators of what's going on and where the Fed is right now which is a big that's they're a big driver of liquidity I just expect liquidity to expand going into this this quarter and uh and so I would I'm continue to be long I have hedges on in case we have some sort of black swan event we can do you know but um by and large we are we are still invested.

>> So, one of the first guests I had on my Milk Road Macro podcast was Michael How. So, if anybody missed that episode, I I suggest you go back and check it out. Um, but I think that's a great place to start from is that liquidity point of view and then this idea of concentration. I had Jordi Visser on last week and he talked about that concentration in AI as well. Um, so yeah, just again a lot of really helpful perspective on that. Um, I want to ask your thoughts on something here. Uh, the Bitcoin bull run that we've been in this time has felt much different in many ways than prior bull runs. there's been a lot less euphoria and I think a lot of people especially viewers of this channel, people who are in our Milk Road Pro community, um, crypto investors in

general are feeling like we've been in a steady grind, but we haven't really had much of like a big massive breakout. How are you thinking about this change in dynamics? How are you thinking about this in terms of like how the market is treating this asset class differently? Is this a sign that it's maturing or are the big returns gone from Bitcoin and crypto and those days are kind of behind us? How do you think about this changing market dynamic we've seen? >> Yeah. So, there's a few things to unpack there. Um, first of all, the you the the old thinking or the the um the traditional thinking on Bitcoin, traditional, it's only been around 15 16 years, but was that as you get through these mic market cycles, these four-year

cycles, they were attached to the uh the supply. So um the mining and and the reward and and the having every four years well that that is absolutely I I believe that is absolutely the huge driver beginning in the in the first few cycles. But now as we get along here and that uh that reward becomes less and less uh important for just the number of bitcoin that are out there um and just as a percentage of the the new supply it it just becomes it's not as important.

What is important is the hash rate and the cost to actually mine these things. number one, access to energy, too. Um, which they're finding all way all kinds of ways to um to mine for just pennies um and you know um per kilowatt. So, that's one thing. But really the big driver of this of this latest cycle I think is is getting much much more closely tied to what we just talked about the liquidity and global liquidity and expansion and contraction of that liquidity and money supply. And so uh and you're seeing that kind of uh in real time on a lag. What do I mean by

that? Well, when you look at somebody like Michael Howell's work, he'll plot the liquidity and then he'll plot Bitcoin on a 10 or 12 week lag behind it because it takes that long for it to for that liquidity to um to to see itself to see the liquidity driver in the price of Bitcoin or in the price of gold. So, it's a little bit different than than securities. So, that's one thing. Um, the other thing is if you look back at uh at the four-year cycle, what's interesting is that it matches up perfectly with our presidential cycle.

And this last president presidential cycle was extremely important. And what I mean by that is that we had a quite an antagonistic u cabinet uh previously and and and administration as a whole uh through Biden and his administration and particularly uh the psychopath out of Massachusetts Elizabeth Warren um and her anti-crypto army. Um, I can't imagine a worse senator in the in, you know, for the citizens of of Massachusetts, but they keep electing her for God knows what reason. Um, you know, just lining her pocket every year

in her insider trades. But anyway, so the interesting thing is that when we had that election, you could see the run-up to it and people realized that Trump was really gaining momentum here, that the mainstream media was completely wrong, that he had a lot of support and suddenly the that quiet support he has was getting more and more emboldened. Flash forward today, it's very emboldened. But the the the thing is when when I when I launched my fund, the Bitcoin Opportunity Fund, John, which was right before the election, it was in 2023.

And we we experienced firsthand what would what became known as chokepoint 2.0. And for your viewers who don't know what that is, chokepoint 1.0 under the under the Obama administration went after uh industries that they didn't like. um you know, things like um firearms, guns and ammo, pornography, you know, and what they said was if you're a bank and you're doing business with these uh with these companies, with these outfits, that we're going to come after you. And so that was known as chokepoint 2.0. It was pretty much uh behind the scenes and you know they they they just choked off all of these uh all of these businesses by the access to

actual capital through the banks. If you don't have bank capital, bank access, then you know well no surprise that something like Silk Road would uh you know pop up. But flash forward to the Biden administration and and Elizabeth Warren decided she didn't like cryptos and so she was going to go after the crypto companies, the crypto bros. And so any business and any bank that was doing business with them was going to be uh scrutinized and you know possibly have these long drawn out uh audits or whatever it may be, sanctions, quiet sanctions. And so um and we experienced it. So when we were raising our fund, we we call it the Bitcoin

Opportunity Fund and so and it's Delaware, you know, um it was it was formed in Delaware. Uh so we're a US-based company under Delaware rules and operating in Nevada under Nevada rules and all above board, all you know, we did all our registrations with the SEC above board. Everything's everything's laid out to see, but because we had Bitcoin in the name of our fund, just we're just a traditional hedge fund investing in Bitcoin companies, you know, and but banks refused to send wires. They uh they would uh delay them. They debanked a couple of people who were trying to send

money to us. Um and then they just cancel them. They would just cancel wires that were sent. And so, uh, flip flip to the 2024 election when, you know, we get a new administration and suddenly all of that the the SAB 121 was repealed fully. You know, if for going back to the the people who don't know what that is, uh, a little bit more just a little bit deeper here, John, SAB 121 was when the when the SEC did an endzone run around Congress and decide they're going to do an accounting bulletin that basically said if you if you're a bank and you're uh and you're

doing business with cryptos, uh you're you're holding uh Bitcoin for a customer, then you have to put in your balance sheet as a as a liability. And it was just it was messy. And so nobody wanted to do business with uh with any crypto companies, any Bitcoin companies. And so uh Congress got angry because they saw it as an endzone run. They're like, you can't just do a bulletin. Like this needs to be legislative. So they overturned it, SAB 121 through a vote. It got to Biden's desk and he vetoed that overturn and said, "No, we're going to keep it in place." Well, one of the first things that that Trump did when he came in is he said, "Well, we're going to undo that veto. We put in a new uh we put in a new commission, the SEC, and

they issued something called SAB 122, which overturned 121 and said that it's okay for banks to start doing business." So, why do you think it's so is it surprising now that you have JP Morgan and Morgan Stanley suddenly saying, "Maybe you should own some of these." Oh, and by the way, we're going to be offering this through our platforms. Come on. So, um, but we've had one wire that had trouble in the last, you know, since the election and we we we launched a new fund, uh, Bitcoin Opportunity Fund 2 and we've had one wire that was that we had trouble with and it was coming out of Canada and so it's uh it's it's completely switched and it's and so that's been a big deal. Yeah.

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