Markets Ripping, Bitcoin All-Time High, & What's the Trade?

We had the de-risking for 2 months. We've shot back up. Respect the breakout, man.

I think that's what it is: you just have to respect it.

Have some respect.

And the rest of the market looks so good.

All of this is pointing toward—

Moonboy mode in crypto, which has that tingly feeling. I wasn't expecting it, but now let's play for it.

What's going on, Jonah? Hope you had a good week.

Yeah, same to you.

I hope you repented for all of your sins, of which there are many.

I did. I repented.

One thing you realize when repenting is that you're piling up sins even when you don't realize it.

I know, right?

Intentional ones, unintentional ones. That's what we do: every year, we go in and repent for our sins to hopefully have a good year. And, man, is this year off to a good start.

Welcome to October, Avi.

Welcome to October. The whole "sell on Rosh Hashanah, buy on Yom Kippur" trade worked ridiculously well once again. We're at all-time highs for Bitcoin, things are ripping left and right, and the market's just looking good. Even when you hear all this gloom and doom out there—people asking, "What if data comes in bad? What if the Fed doesn't cut rates fast enough? Does the government shutdown matter?"—the market's looking good, man. The market's looking good.

I'm loving it. I wasn't expecting it. That's the thing. I was medium- to long-term bullish, but I didn't have a good feel for what was going to happen in the short term. We talked about it, right? You buy with both hands if it goes below $100,000, but why would it do that? Where is it going to go—$105,000, $102,000? Does it stabilize there for a couple of months?

$125,000—basically all-time highs within a week of local lows—was not on my bingo card. I think what's driving this, if I really try to pick it apart, is that the sell-off was exactly what it looked like: just a little liquidation, a little flush. When positioning gets clean, like it did after FTX—that's the canonical example—things stabilize for a bit and do nothing, and then they just keep pumping again because the mega-trend is alive.

The world is moving toward crypto for all sorts of reasons. I think there was just nothing that bad happening that could have kept crypto down, and the rally picked up faster than you or I would have imagined with a pretty clean positioning base. I think what's so cool about this is that we get to say, "October shit's real."

Yeah, I mean, it's looking really fantastic because of all that de-risking you were talking about. We'll just start with Bitcoin. I want to point something out: if you guys are watching and you're able to go to the chart, basically, we sold off from the last time that we punched all-time highs at $124,000 in mid-August. We had 2 weeks of selling off, then a little bounce, and then we retraced that bounce. I think that's when people started to get really nervous, including me and Jonah.

1. Respect the Breakout

When we were trading at $114,000, we were thinking, "Okay, look, just tactically, maybe we get down to $105,000." We got down to $108,000 from there. There was a small move, and this is key when it comes to trading BTC: whenever you get a substantial amount of de-risking and you get people calling for sideways or a down move, or for the market not to do well, and then Bitcoin rebounds a down move very quickly, that's a pretty good sign that you're going to rocket up.

A lot of those people that just de-risked—if you de-risked recently, you're a lot more likely to buy back in quickly because you're thinking, "Oh, shit. Did I really make a mistake?" You had that one day, Thursday, September 25, where you got that 4% move down in 1 day, which is a reasonable move for BTC, and then you basically recover it in 1 candle.

When that happens, I think—I mean, this is what we were talking about last week—that move happened very quickly. Maybe it's time to get back in. I think that's what forced a lot of people back into the market, and that is what sets up for all-time highs. That's what sets up for a really face-ripping rally: when you get this period of consolidation, but then you resolve upward.

If you go back to the weekly time frame and look at it, it's kind of the same pattern that occurred on the daily time frame over the last month. You had effectively a 2-month period of de-risking from the beginning of August up until the end of September, and then in 1 week you recovered all of that de-risking. That sets up for $150,000 to $160,000.

It reminds me a lot of the ETH rally. If you remember, ETH had shot up a decent amount. It went to $3,700, and then we were both like, "Okay, we're tapping on $3,700 again. Now is a good time to go buy it on the breakout because this market is respecting breakouts." Then it went from $3,800 all the way up to basically $5,000.

That's a good trade. That's the way that I view this Bitcoin chart right now: we had the de-risking for 2 months, we've shot back up, and it's time to respect the breakout, man.

Have some respect.

And the rest of the market looks so good. Gold has been an absolute ripper over the last 2 months, up 20%. As you know, a lot of people compare Bitcoin to gold, and the more gold goes up, the more ceiling there is for BTC to go up. It looks better on a relative basis.

I have a lot of thoughts on that, by the way.

And we should get into it. But basically, I don't see a threat to the market right now. I was in the camp of maybe we don't do it immediately, so it happened a lot faster than we were originally talking about on last week's stream. We were both very bullish, but maybe it takes a week, or maybe 2 weeks, 3 weeks, whatever, to work through the supply.

Just sit there and be patient.

That's always my favorite thing: when I get into a trade and I'm like, "Okay, got to wait this out. Got to sit here and be patient," and then you don't have to be patient at all.

Yeah. I mean, this is amazing. This is like break out the champagne amazing. I was not expecting this, but I'm positioned for it. Like you said, just like, "Oh, wow. Thank you."

And by the way, look at that BNB chart. It's drifting on a parabola.

Great, straight parabola.

Looks like the Asians are awake. Aster is back at $2.

Mantle is doing very well. It's the Biden equivalent of BNB. As you know, we put on that BNB trade a while back. I think you can probably just sit in it for an extended period of time. I'm sitting on my hands. My portfolio has not changed a huge amount over the last month or so, I'd say.

2. Bitcoin vs Gold

That's good. Yeah, let's talk about Bitcoin and gold for a second. I'm going to share my screen here and show some TradingView fun. This is BTC versus gold, a very important chart right now. I'm going to extend it back to, let's say, 2020.

The reason why this is an important chart is because when you're long Bitcoin, you're not really 100% sure how much of your price appreciation is just dollar debasement and de-dollarization versus how much is actual crypto adoption. It's an important distinction because we can sit here and pat ourselves on the back, feeling smart about crypto taking over the world, when realistically, maybe if you look back in 2020, like early 2021, crypto wasn't taking anything over.

It was just Joe Biden and company printing trillions of dollars, and Bitcoin kind of protecting you. But it was really the dollar going down, not Bitcoin going up. Maybe Bitcoin was going up on some hype too, with some momentum and some FOMO.

But if you take out the hype and the FOMO, and you're denominating Bitcoin in gold, you get a much clearer picture of what Bitcoin's actually doing relative to gold. It's a digital version of gold. You went from 5 or 6 on the chart in 2020 to, post-crash, 12. Pretty decent, right? It more than doubled in price, but a lot of it—this big explosion in the 2021 era—was hype, and the real de-dollarization thing. Maybe the dollar depreciated by 50% or something.

That's what Bitcoin kind of tells you on the Bitcoin-to-gold chart, going from 6 to 12 or 5 to 12. Where I'm going with this rant is, let's zoom in more. Let's start in 2023, when assets had kind of stabilized and the Ukraine war had become kind of a permanent part of the picture. I think January 2023 onward represents the paradigm that we're in now in both Bitcoin and gold, right? I'll explain what I mean here.

Bitcoin is in the post-FTX era. We've worked through the concerns of Terra Luna. We've worked through the hype of that 2021 froth. We're in kind of a stable-adoption, grind-higher phase for Bitcoin. Gold is also in a new paradigm. Ever since the Ukraine war broke out in 2022, gold flipped. It used to be a risk-off asset that people would buy when they were panicking about risk assets.

Now gold has transitioned to a new steady state where it's basically a diversification hedge, a dedollarization hedge, something that China will feel comfortable putting a big balance sheet into because they don't want to hold as many U.S.-denominated securities. Again, we've talked ad nauseam about this, because the U.S. stole Russia's dollars as punishment for the aggression in Ukraine. Now, anybody else who's thinking of doing something that the United States might not like, they're going to try to diversify out of dollars into what? Into gold.

So gold's a dedollarization hedge. Bitcoin's in its kind of enlightenment phase. This is the new trend, right? Both assets have stabilized. This is the paradigm. So let me draw a trend channel on it.

If I just sort of mark the lows of this channel here on the Bitcoin-to-gold chart, and I mark maybe some of the highs, realistically, where we're at now, we haven't even really bounced off the lows that much. Let me do a regression trend just to extend this line a little forward. Basically, where we're at now is sort of the lows of the channel, trading around 32. If it were to go back to the middle of the channel by year-end, that kind of looks like 40 on the chart, right—the middle of this trend channel. So BTC-to-gold should go from 32 to 40.

If I just do the back-of-the-envelope math real quick, 40 divided by 32 times the current price—it's currently trading at about $125,000 a token—that gets me to like $156,000 a token. If we just revert to the middle of this trend by year-end, gold doesn't move, which is a pretty big if. It looks like it's going to keep sending.

I think just denominating Bitcoin in something other than USD is important to abstract away all the noise around dollar debasement, rate cuts, et cetera. To me, if gold continues rallying, we're looking at $160,000 to $170,000-plus by year-end. If gold were to just flatline here, I mean, mean reversion alone, I think, brings Bitcoin to $150,000 to $160,000. So that's kind of how I'm looking at it, just from another perspective, to sanity-check all of the thesis. So far, everything looks good.

I think that's great, and I also think that wherever you chart Bitcoin—chart it against gold, chart it against NASDAQ—try to understand basically where flows have been going and what flows could revert back into BTC. I think that, especially with gold ripping so much, there are a reasonable amount of people, including myself, including you, that probably own both, and there has to be some level of rebalancing.

I know myself, I've been chipping away at gold to rebalance into the rest of my portfolio, including BTC, because gold has just run. My gold and silver positions—I think my silver position is up 40% in the last few months. Obviously, I'm going to rebalance that into Bitcoin, right?

3. This Rally Has Legs

Yeah. So basically, what I think is happening right now is—look at NASDAQ. NASDAQ's up 18% year to date. Equities are ripping. If you actually go look at Tesla, go look at Robinhood, a lot of money has been made this year. Robinhood continues to rip, which I think signals that there's still a tremendous amount of speculative money basically willing to make bets on the future of crypto.

For Robinhood to go up 30% in the last month and Bitcoin to stay stable, I don't think makes sense, because it's kind of the same type of buyer. It's the people that are willing to bet on inflows into crypto, because Robinhood generates so much of its revenue from trading crypto. It's implausible, I think, for Robinhood to be up 30% and for crypto to be down. Robinhood should come down if that's the case.

And so what it's telling you is that there's still a lot of these buyers. Flows into the Bitcoin ETF have been pretty good. What makes this better, in my personal opinion, is that it doesn't seem to be the DATs driving this rally in a meaningful way. I mean, MicroStrategy bought, like, what, 200 BTC—

MicroStrategy loses 200 BTC behind its couch cushions. A couple of hours.

They're not jamming the market here, which means your fellow apes are jamming the market.

Yeah.

4. Ads (Kraken, Peaq, Katana)

Much nicer to be in a trade with fellow apes than it is to be in a trade with MicroStrategy.

5. Is it Finally Alt Season?

Wait, wait, Avi, talk about this. It looks like Bitcoin's outperforming everything right now. Is that going to trickle through to ETH and then alts like it usually does? Is ETH the catch-up trade?

See, I don't know if I would agree with that, because ETH is up 4% today. Bitcoin's up 1.5%.

It still hasn't broken all-time highs, though. Bitcoin was up, you know, but I think today, because Bitcoin has managed to get above all-time highs and people are itching, you can get some alt outperformance. I mean, there's been a lot. You're asking again—we get this question a lot: When's alt season? Dude, Zcash doubled in a week. That was crazy, by the way.

Why? I saw that.

I did not see that necessarily coming.

Because Zcash has always sucked, and then it will rally super hard close to the end of a cycle, which is not a great sign. If you look at every other time Zcash has rallied extremely hard, you're kind of close to the end, basically.

No.

Yeah. That's probably one of those top indicators that you don't have enough backtested data to trust, though. Normally, it'll run for a few weeks, and then that'll top it out. But what's interesting about that move is that the quote-unquote reason that it's moving is all just cope. It's probably moving because a couple of people decided to buy it, and it doesn't take that much to move this thing because it doesn't trade that much, and then it just kind of spiraled out. A lot of people have been posting these super-long theses on Zcash.

What, after the rally or before? I would guess after.

Always after.

It is. And this, by the way, is true.

So I'm not here to knock the theories. The theories are actually very accurate. It is the best privacy coin out there, and privacy is extremely valuable. Bitcoin is not private at all, in any way, shape, or form, which is one of the reasons why I always liked Zcash, in the abstract. I've never owned it, but I've always liked it in the abstract because it is the most meaningfully private coin out there.

It does have genuine, groundbreaking technology, and it is the only way to hide what you're actually doing. If you choose to hide what you're doing financially, you can do that with Zcash. I don't see why the world would just suddenly wake up to this and start going, "Oh my God, we really need some Zcash right now." But what it tells you and me and the audience is that it seems like it's alt season, man.

Yeah, I agree.

And these things give you an idea about the zeitgeist of the moment, which is, wow, maybe things are about to get insane. Remember when, 4 or 5 weeks ago, I was talking about how things, in the final leg, get insane? It’s stuff like this, and this is probably the beginning of the insanity. There will be an end to the insanity, but I tend to agree with Paul Tudor Jones: this type of market ends in a blowoff. I don’t know exactly when or how or where, but I do think we get that.

This is exciting. As for Zcash, it’s probably just like somebody made some money and wants to move it privately. It’s like a one-off. Somebody probably moved a lot of money into Zcash to transfer it somewhere suspicious, right? And you could never have profited from that trade because, in order for you to do so, you would have had to have been basically sitting in this terrible investment for years in order to profit from this one pop.

So if everybody’s coming out with a thesis now, post-rally, it’s a bit of a joke. It’s not a good way to trade. You can all feel very good about missing Zcash because this wasn’t predictable. But like you said, Avi, it definitely telegraphs some froth in a way that the DATs don’t. The DATs were kind of like financial structuring that helps certain types of participants access crypto who couldn’t otherwise, with regulatory or institutional loopholes getting threaded that way. Whatever. This is different. This is like, okay, maybe we start to get an alt season here again.

I personally find it very difficult to invest in alts. I’ve had some big winners and some big losers this year. I’m not really confident investing in alts right now because, with Bitcoin sending like this and with my confidence so high in Bitcoin, it’s not like I’m just starting with a clean slate here. The opportunity cost of investing in something other than Bitcoin is extreme right now, given that Bitcoin is just looking so good.

So I think you want to dabble with alts with a small percentage of your portfolio, which is what I’ve been doing, just to keep your finger on the pulse of the market and get these signals from various things. But of the 10,000 top alts, it feels like 9,000 of them are just doing nothing. And maybe on a given day—

Mhm.

—maybe 500 are rallying slower than Bitcoin, 400 are rallying a bit faster than Bitcoin. Maybe just a couple of them are doing something meaningful enough relative to BTC that they actually make airwaves and news and get mindshare.

But the problem with that is, when you invest in an alt that’s just popped because everybody’s talking about it and putting out their thesis, you’re already behind the curve. These cycles don’t run in these altcoins right now, and that’s a bit concerning for altcoin investors. What’s a better trade right now than just holding Bitcoin with 3x leverage? That’s what I’m struggling with. I don’t know.

Well, look, if I’m going to make the case, I think that during this—if Bitcoin goes to—okay, if Bitcoin goes to $150,000, what’s that? That’s a 20% move from here.

That’s not crazy.

6. Is Bitcoin Vol the Trade?

So if you do it on 3x leverage, maybe you can make 60% on your capital. It’s like, okay, fine. Is that interesting if Zcash can go 100% in a week? I mean, look, it’s a podcast called 1000x, Jonah. How are we going to get that 1000x right now?

I don’t think Zcash is going to go 2x in a week again. I don’t think it’s going to double from here.

I do think that there are assets that will, though. That’s the thing.

Of course.

Zcash is more likely to go back down after whoever put money in takes out. This is the environment when I think you can sort of press your advantage.

With BNB and with Mantle, somebody put out, I think, a very reasonable thesis that we’ve talked about tangentially before, which is, look, at the end of the day, it’s about flows. It’s about where’s the money coming from? Who’s buying, and who’s selling?

When there’s a lot of money chasing after speculative assets, and if you’re a trader and you want to try to make money, you’ve got to think about what’s going to benefit the most from this type of market environment. It’s the things with restricted supply right now. So things like BNB, things like Mantle—things that have been around for a while that don’t have a ton of sellers to offset the buyers.

I think that’s another reason why Zcash can move 100% in a week: you don’t have people sitting in that thing looking for 20% moves. I mean, the thing was just washed of every seller. Anyone that held that thing is a true believer—not true now, obviously, because there are a lot of people who have bought into it.

But I think if you’re going to be actively trading right now, which I think a huge proportion of people watching this want to do and are, now is a good time to start looking at maybe some alts that haven’t moved, that have more restricted supply. I wouldn’t buy VC coins here. Your ENAs of the world are probably not going to rip hard, but the assets that I mentioned, I do think there’s a good shot that we get a significant movement.

And not only that, looking outside of crypto, Robinhood has outperformed massively. Robinhood is up a huge amount. Uranium, since we talked about it, is up 22% or 23%, and I think it will continue to do extremely well.

Check out Galaxy.

7. Don’t Sleep on Galaxy

Galaxy did—I think they launched a really cool product today with GalaxyOne. Basically, they’re launching their own version of Robinhood. They’re launching a brokerage. It looks like it’s the first truly fully integrated brokerage where you can buy stocks and crypto and move assets around, because on Robinhood you can do it, but the fees are ridiculously high.

If you want to go buy crypto, for example, you’re paying up the ass to do that on Robinhood. You’re paying a lot of money. It’s over 1% most of the time relative to what you can get on Coinbase. So I’m hopeful about this GalaxyOne product. It turns Galaxy into even more of a meme stock.

Yeah. Galaxy has the potential to just completely disconnect from fundamentals and go berserk, if it hasn’t already.

Well, it’s basically doubled off of the recent lows in early September. So in a month, it’s up 74%. I mean, that’s pretty damn good, Jonah.

That’s amazing.

What more can you ask for? And I still don’t think it’s a particularly crowded trade. So when we’re talking about stuff outside of BTC, I think there are clearly good investments out there still.

Oh, I agree. I wasn’t saying there weren’t. I love Galaxy, and I’ve been talking about that one for a while.

One of the users in the chat, Newtype, writes, “Who is Galaxy partnering with for that brokerage, or did they build it from scratch?” It’s a good question. Why would it be that Galaxy is the only one that can build this and not Robinhood or Coinbase? Why can’t Coinbase add zero-fee stocks? Why can’t Robinhood add basically almost-zero-fee crypto? What is it about Galaxy that’s so special? I don’t know. That may or may not even be worth looking into because it may just become a meme, like you said.

Well, you know what GalaxyOne really is. It’s kind of funny because maybe some people don’t know this because they’re newer to crypto, but the guy running the GalaxyOne product is this guy named Zac Prince. Zac Prince is famous for one thing: building BlockFi and then having it blow up in a massive way because they offered a ton of leverage to people running the GBTC trade. It completely nuked the company.

Before that, BlockFi was a really good company. They were amassing huge amounts of deposits and a huge amount of traction. Zac is a really good operator. I think he took way too much risk his first time around, and he’s probably learned how not to do that this time. That would be my guess.

When I look at GalaxyOne, I see a redemption for BlockFi. It’s like the BlockFi founder’s redemption arc. And I think the only thing that gives me pause is that, in the announcement, they say Galaxy can offer 8% on cash because of their $1.1 billion lending book.

I’m just like, yo, love to hear that. No—

But knowing people at Galaxy, I do think they have a good risk team. They’re much, much, much better at risk than any firm was in 2022, when everything blew up. I mean, there are actual real people there, as opposed to a bunch of young guns just slinging risk left and right.

So I have more faith in them, and I think that they can bridge over TradFi and crypto. On the crypto side, at least, Galaxy has its own desk, right? They’re able to go buy and sell crypto for you.

Galaxy is a—

Sorry, go ahead.

On the TradFi side, I’m not sure, but I’m sure they have some good banking partner that’s allowing them to buy and sell stocks.

To me, Galaxy is just a compression trade to the market cap of Coinbase or Robinhood. Galaxy trades at a $14.85 billion market cap, and Coinbase trades at—let’s see—the market cap. Coinbase trades—what the heck? It’s Coinbase’s market cap. I’m struggling here. Coin—oh, I see what I did wrong. Coinbase: $98.65 billion.

So, yeah, I don’t know. Maybe it’s a 6x-er from here if it becomes a meme stock. And don’t sleep on the data center biz either. AI can continue to become a silly, silly space with multiples that make no sense relative to revenues. Galaxy has a data center. It’s got crypto.

It trades up more than Bitcoin on days when Bitcoin is up, and it trades down less than Bitcoin on days when Bitcoin is down. So this one is just like—you probably want to continue riding it if you hopefully got some size on. Maybe that’s how we earn the name 1000x in our podcast, Avi. We just jump from one 2-bagger to the next 2-bagger over and over.

8. Sizing is Everything

And over time, I mean, that’s the key. And don’t forget: sizing matters a lot when it comes to this stuff. For example, when I look at my portfolio, I want to make sure that if I think something has a good chance of 2x-ing, then I make meaningful money from that. It doesn’t really matter if I put 1% of my portfolio into something and it 2x-es. It matters if I put 10% of my portfolio into it. Sizing is everything on this.

And the way that I would think about it—I mean, there have been a lot of studies on this. The Kelly criterion, obviously, is sort of the gold standard, but to put it in easy-to-understand English terms for you guys, at minimum, if something is going to 2x and I have 60% to 70% confidence of a 2x, I’m putting in at least 5% of my portfolio to this thing—at least 5%. And if I’m 75% confident, I’m probably putting in 10% of my portfolio to this thing, because you aren’t commonly coming across things like that.

What’s interesting is, if I think something is a 10x but I’m 50% confident, I’m also probably putting in 5% because the confidence level is lower but the return target is higher. One thing that’s interesting also: Robinhood in my book is 5% of my overall book because I think that there’s a reasonable chance that in 5 years it 10x-es from where I am, but I’m 50% to 60% confident that it does that.

Yeah. I mean, one thing that I like about that framework and the way of thinking about it is that you’re never really putting 50% of your portfolio into one of these flyers, right? You’re putting 5% or 10% of it into it, and then if you lose that 5% or 10%, or you lose most of it, you can stop out and survive. Whereas, if you make a lot of money on it—let’s say you double or triple that—you put 10% of your portfolio into something and you triple it, you’re probably not just hanging on to that for dear life. You’re like, “All right, let me just roll this back into BTC and keep going.”

On the flip side, let’s say that you allocate 10% of your portfolio for active trading on riskier bets, and then you just lose all your money after 6 months or a year. It probably is a signal that you kind of suck and you should stop and just reevaluate or rethink things for a while. You shouldn’t just allow the total portfolio size to continue dwindling from wherever it started: okay, then there’s a 10% hole, then a 20% hole, then a 40% hole. That kind of playing on tilt is what a lot of bad traders do. And I think we talk about winning and rolling gains back into the sure thing, which is Bitcoin, but we should also address that if you’re losing, you’ve got to respect that you’re not seeing the ball clearly and do something about that too. Otherwise, you risk ruin.

Although, look, I do subscribe to the idea because, at the end of the day, this is how I made my money: if you’re highly confident in something, you’ve got to take the risk and bet big.

Highly confident for me was when, post-FTX, I went 100% in. I just put every dollar I had into Bitcoin. I just went all in on Bitcoin, right? I was super convicted in this thing. I was putting my money where my mouth is. If I’m going to tell everyone that I really think Bitcoin is going to change the world, I might as well buy a ton.

9. Diversification vs Concentration

I don’t think right now is necessarily the time to go super heavily concentrated in anything. I think you can do it in Bitcoin still because I think Bitcoin is still a surefire bet. I think you can probably even do it in Bitcoin and ETH. If you have a $10,000 portfolio, you should not be diversifying, in my personal opinion.

Diversification, the 5% to 10% positions, and managing them—that’s for people who want to grow their wealth but don’t want to see massive P&L drawdowns. You want to grow and you want to keep making money, but you don’t need to crush it, right? If you have $1 million or $2 million, that’s when you can think about diversification. If you have a small portfolio—basically below $100,000—you need to create wealth by concentrating your portfolio in the stuff that you really think is going to do well, and you just need to weather those drawdowns because it really shouldn’t impact your day-to-day life.

For me, for example, I don’t really do that anymore because I run off of my trading income. I don’t have a job. I worked at hedge funds. While I was working at hedge funds, I would be 100% all in because I had another source of income. Now that I don’t have any other source of income, you have to be a little bit more careful with it. If you have income and you’re bringing it in, and you have a portfolio that, if it goes down by 50%, your life’s not going to drastically change, that’s a different position. If my portfolio goes down 50%, I’m kind of like, “I don’t know—it’s not going to be good for me.”

Right, right now.

If you’re not in that position and you’re making money—let’s say you make $80,000 a year and you’ve got $10,000 in savings—this is a moment. Be concentrated in something that you believe in. Try to make some money. That’s at least my take because I do think that there’s a concept of log wealth.

I think once you hit $10 million, anything past that—like $10 million to $50 million, in my opinion—doesn’t really change your life that much. Your life changes again once you get to like $100 million or $200 million, and I know we’re talking nonsense here, but the marginal value of every dollar from $10,000 all the way up to $1 million is massive. Then it starts going down, and then it starts going down even more. The marginal dollar after $5 million to $10 million is like whatever. If you’re a humble, normal guy, it’s not going to change that much.

10. How & When to Take Risk

Yeah, I think you made a really good point there about how to balance your work and your portfolio. One of the biggest trades I’ve ever done in my life was—I did not go in immediately post-FTX. I did not go all in on crypto because I was working in crypto, and I was pretty much balls long at work after FTX. We took our assets off FTX a couple of hours before they halted withdrawals. We were kind of the Bubba Gump Shrimp Company after that huge storm hit, because everybody else had been totally annihilated and we were still going strong. So I was balls long at work, and I had a lot of exposure to that.

But then when I ended up leaving institutional crypto trading, like you did, because you don't really need an institution to make money in crypto, that's when I went all in. I basically sold my position at work, monetized that just contractually, and then replaced it with risk in my PA. I did the calculation and posted it on Twitter, and basically the way that you do it is you just look at what your after-tax returns are going to be for X dollars of institutional investment versus Y dollars of PA investment, because there's different taxation. You're going to have a bonus payout at work or whatever.

I basically reverse-engineered how much principal I would have to invest personally to achieve the same returns as work. Then I put more in because I didn't have that wrong-way risk where, if Bitcoin goes to zero, then I lose both my job and all of my money at the same time, which is a pretty bad situation to be in.

So basically, what I would recommend for a lot of crypto traders out there is: you don't need to be a full-time crypto employee to make money trading crypto. You can just do whatever you want and then plow that money into a portfolio that actually gives you a lot more risk-taking opportunity, because you have income that's not correlated with crypto. The worst possible thing you can ever do in any business interaction is be a forced seller or a forced buyer of something illiquid.

Your career is basically a very illiquid asset. It takes months or years to ink a good deal or interview, or build your way into a position of power, influence, and wealth. Basically, if you're running out of money at the same time as you're getting fired, you're a forced seller. You're in this desperation mode in an illiquid space—your career—where you have to really try as hard as you can to force your way in, force a square peg into a circular hole, and it doesn't work.

So, yeah, I think the best diversification is having non-crypto income to plow into crypto. And, yeah, like you, I took some profits on the way up, but not after a good long while. I basically ran it up. So I think from here the question is: what do you do? You and I are talking about putting 10% of our portfolio into this or that alt, but if you're 24 and you have good income and you've got a nice stash, you could definitely go bigger on high-conviction bets.

I think one bet that I like over the long run—I think now that XPL has puked this much, it's starting to look good again. I think Plasma could potentially take over a significant chunk of the financial ecosystem globally, and I think that might be a 10-bagger over the medium to long term. But you have to stomach some insane volatility to capture that. What do you think?

Yeah, look, I'm with you. I think we're in for a pretty incredible ride for the next 2–3 months, and you kind of just need to eat the volatility and get through it, you know.

Yeah. You know, gold is 10 times bigger than Bitcoin. If gold can move 20% in 2 months, let's see what Bitcoin can do. That's basically where I'm at, and I think I'm reasonably convicted in this. One way to play it is to just start buying upside calls on Bitcoin, because what tends to happen is that calls are, I think, the most mispriced right after a big move, because Bitcoin is very, very reflexive as an asset.

And so when it breaks out, calls don't immediately reprice. The vol does not immediately jump 10, 20, or 30 points.

It should, though. I bet it does on IBIT.

Because the breakouts are not massively violent. No, I mean, the vol—we can take a look—but Bitcoin's up 1.4% today. Now, the thing is, the way that people think about this is: if the implied vol is 60, what is that talking about? That's a 3% implied move a day, right?

Yeah, yeah, because you take the square root of 365 and divide the implied vol by the square root of the number of trading days in the year. So, 365—252 in the case of a stock, whatever.

Yeah. So that implies a 3% move a day. Now, that seemingly might be too high of a price to pay if Bitcoin's moving 1.5%. But if Bitcoin moves 1.5% a day in the same direction, which is up, then options—you take advantage of the gamma. Basically, you could get a massive leverage position. So it's not always about the vol, right?

But even then, the vol stays lower. If you think that Bitcoin has an 80% chance of going to $150K in the next month, then vol is massively mispriced. The gamma is massively mispriced. The whole structure—you’re getting very cheap leverage.

Yeah, I agree with that. And so what I'm saying is, when you get a breakout like this, Bitcoin does tend to move aggressively, and options are a great way to voice that opinion, actually, because you tend to get there reasonably quickly. Bitcoin is probably not going to grind up over the next 3 months to $150K. It'll probably get there in the next month if it gets there at this point.

I mean, it just rallied almost $20,000 a token. This is insane. I'm foaming at the mouth here. I'm so excited. I agree with you: if you expect markets to move fast, buy options. If you don't, sell options. And I expect this market to move fast.

No, the breakout, the move, the gold move, the equity markets, the random little things like Galaxy stock doubling and Zcash doubling—all of this is pointing toward moonboy mode in crypto, which has that tingly feeling. I wasn't expecting it, but now let's play for it.

I still struggle with alts. We own our Ls on this podcast. I want to be transparent about what I'm not getting right. I don't want to just sit out here and pretend that I'm nailing everything. I'm really nailing 90% of my crypto portfolio being in Bitcoin. That's awesome. But I have a lot of internal dialogue over whether I should be ramping my Aerodrome positions or buying some PUMP.

11. Anything Better Than BTC?

All of these things—I'm still actively debating. So ultimately, maybe Bitcoin calls are the way to do it, or maybe just Bitcoin with leverage. What's a December expiry? I think that's actually a pretty reasonable way of doing it. If you have a smaller portfolio, you could buy some longer-dated Bitcoin calls, like maybe buy some March of next year.

What's a December $150K call in Bitcoin?

Hold on. It expires December 26, the day after Christmas: a $150K call. Which one is okay, on the left?

Yeah, dude. I mean, vol's 40%.

Okay, so you're paying 50 vol for a $200K call at the end of December. I think you probably maybe want the $150K.

I think you want the $150K. And that's trading at 2,000. Basically, if you lift it, you're paying $2,900. Maybe that's what you do if you have a tiny portfolio: you just buy some December $150K calls and try to 3-to-10x your money there.

What I would probably do is, if you were to get—I mean, look, I don't like advocating trading options because I think they do take complicated structures. I think outright, you can reallocate some of your portfolio, but if I was actively trading options, I might actually do this trade. I might buy a 1-by-2, so buy some of these $150K calls and sell the $200K calls, because there's a 10-point difference involved there. I think that's a pretty reasonable trade.

I would not sell an option on Bitcoin for $350. That's the dollar value of the $200K call. I think if Bitcoin rips to $175K, that $200K call isn't going to be trading at $350 anymore. It's going to be trading at something like $5,000, and you're going to get your eyes ripped out on mark-to-market.

I've had, as an oil trader, I've had—I really don't—

Yeah, I just really don't think you're getting above $200K this year.

I don't either, but you'd have to stomach some insane mark-to-market being short the $200K, right?

So maybe just a call spread if you—

I think, yeah, I think a 1-by-1 call spread. You could definitely bet on Bitcoin hitting $180K by year-end. So if you buy the $150K call right now and it settles at $180K, you've 10x'ed your money. That's a good outcome for some asset that—

That is a very good outcome.

And it's on the table, per the gold chart that I just showed. Let's say gold rallies another 10%. Bitcoin just mean-reverts to the middle of its range, its trend channel versus gold. You're there. You're at $180K. You've 10x'ed your money with an options strategy. That's what I think.

12. Final Thoughts

Anyway, I gotta run. Avi, I know we're in the middle of a good session here. This was an hour. It always flies by talking to you.

Yeah, likewise. Maybe go buy some options later today.

Would you use Deribit, or would you go IBIT options?

Probably IBIT options.

Yeah. Just have to work out the 150 equivalent.

Anyway, guys, this was a pleasure, as always. Next time, we'll do more questions. I think we were just rolling, so this is fun.

This is awesome. Sorry, I have to jump. Really appreciate everybody who tuned in, and we'll get this episode out as quickly as possible. Great talking to you, Jonah. You're the man.

Adios. Take care. Later.