Massive Selloff, Mamdani Wins, & Jonah Ditches His CryptoPunk

So all of these megatrends are intact, and if you look at all of them, it's kind of hard to be bearish. But short-term, my gut—I don't have a system like you do right now—has been kind of confirming what you've been saying over the last few weeks, which is that, short-term, we're in for some serious problems in this market.

Very exciting—we've wanted to have you on the podcast for a very long time. Welcome, Max Bronstein: Gigachad, turbo crypto trader, extremely successful guy.

We get our listeners attacking us every time we try to go too much into biographies and lore, but basically, Max started his run writing newsletters for Bitcoin Magazine. Then he was at Coinbase Ventures. Then he crushed it during DeFi Summer, and the rest is history.

He's currently launching Mainframe Capital to sort of institutionalize his crypto trading mojo, and he's one of the, let's call it, top 3 people that I talk to about crypto when I'm trying to figure out what I want to do. So it's super exciting to have you on the podcast, and we can just shoot the shit and talk markets today. Appreciate you, Max. Thanks for coming on.

Yeah, of course. Appreciate it, Jonah. It feels like I'm calling into my favorite radio show. Long-time caller here. Big fan of the podcast. Big fan.

Long-time listener. First-time caller.

Long-time listener. Yeah, yeah.

1. Crypto Meltdown

Welcome to the show, Max. Thanks for calling in. Lots going on.

Happy to be on.

Lots to talk about in crypto markets. I don't even know where we should start. What are you thinking? What the hell just happened, and what are you thinking? What are you doing here? Everybody's panicking.

Yeah. I mean, a bit of context on how I view the market and how we at the firm make decisions. Obviously, I have my own fundamental beliefs on where things are and what the bigger picture is, but we do things with a bit of a systematic overlay, more or less, which you obviously appreciate when you can outsource some conviction to numbers and an algorithm instead of your own discretion or emotion.

So, I don't know, there is a lot going on. I was kind of buying the dip yesterday purely on the basis that our systems said, “Hey, on a fairly high-time-frame basis, that was an extreme.”

High time frame meaning what—long-term or short-term?

Usually weeks to a month or so.

Long-term.

Yeah, that was obviously quite a big dislocation. You kind of saw it yesterday: ETH and Solana—those were big breakdowns. A part of me is thinking that some of these higher-time-frame structures are actually pretty broken, which is cause for concern because I think the biggest mistake I made last cycle was not respecting Bitcoin's downtrend when it started.

A lot of us fucked that up.

Yeah, obviously market structure is a lot different this time. Not that humans are any different, but our systems kind of said to get long, essentially, last night around—I think, let me see—Bitcoin around $101,000, and then ETH around $3,200.

So we picked up majors exposure and then actually a good bit of Plasma yesterday. I was able to get some at $0.27.

2. Plasma Long?

I think that thing is just absolutely hated. And again, when the systems say go, it's sort of nice. One thing I remember, I was watching actually about Plasma: does your system ingest funding rates? Are you getting long Plasma when basis is negative? Or does basis feature into your systematic model?

Basis does, but it's actually more for Bitcoin and ETH basis. Plasma, funny enough, trades generally with a positive basis just because you have a lot of farmers who are farming the yield and selling it off.

The interesting thing about Plasma, though, is if you look on a circulating basis, the OI-to-market-cap ratio is actually quite high. I think it's around 0.45 to 0.5. But it's doing a lot of volume, so it's turning over a lot.

Usually, the coins where you see a high OI-to-market-cap ratio are super-low-volume coins where nothing really happens. But on this one, there is a lot of open interest, and this thing is doing a lot of volume. So my guess is there's definitely a lot of offside positioning, and you can even see it qualitatively. You look—you hop on Twitter or X—and every day it's just, “I hate Plasma. I'm losing money on Plasma.”

So it's kind of fitting when we do get these trend reversals, and that's really what our systems look for.

But when you scooped up Plasma and when your system said to buy, I guess we could—I mean, you don't want to divulge your secret sauce—but I love systematic trading. I haven't been deploying it recently, but it was sort of how I made most of my career, as a systematic trader, because I lack conviction as a short-term trader.

What you were saying is that your system kind of tracks breakouts or trend-channel breaks, whatever. At $0.27 on Plasma, if that's the first time your signal fired, that $0.27 was still in the midst of a violent downward trend channel. You bottom-ticked it there, almost. I guess it did trade down to $0.24 or $0.23, or whatever, but that's not a trend break. That's just amazing timing.

So it actually fired on the way out, after it had already bottomed. You can use the signals on a relative basis. Let's say Plasma over ETH, or over whatever majors, and similar signals, right? So we're able to find—or at least make picks on—what we think will be the best performers.

But obviously, there's discretion in all of this, right? You have to be tapped in. You have to know how hated it is. You have to go—

Semi-systematic.

Yeah, exactly. It's quantamental, you know.

3. Bull Trend Still Intact?

Yeah, we'll get into that in a second, I guess. Okay, so I'm just looking at charts here. That's why I'm not staring at the camera. Looking at the market, just talking to you over lunch or talking to you, as we do, on Telegram or over the phone, you've been kind of bearish for a few weeks at least.

My approach to the market has just been: I am not going to trade this thing short-term. I do not know what's going on right now. Every single medium- and long-term feature of this market flashes bullish for me.

Let's start with rates, right? Fine, the interest-rate geeks are saying that Powell is doing something that's less dovish or more hawkish than they expected, so they're all running around like a bunch of chickens with their heads cut off. I don't know whether the hell that's real or not, but just generally, zoom way out: the direction of travel is from higher rates to lower rates, not the opposite. So I'm comfortable there over the medium to long run. I don't care. We're not going back into a hike cycle.

Geopolitically, we're probably closer to the 8th inning rather than the 2nd inning of Ukraine-Russia. When that ends, lots of deflation, asset prices rip.

AI, I think we're probably closer to the 2nd inning than the 8th inning of this insane bubble. And so that's both bullish for asset prices, bullish for crypto, and also deflationary because Fortune 500 companies can eke out more return on equity with fewer employees by just having ChatGPT answer basic questions instead of an army of super-expensive middle managers—and maybe even white-collar work at the lower levels, too. We'll see.

What else? Bitcoin—or crypto—is legal now. How about that? It's been legal for not that long, and, as we know, maybe you could talk more about this because I know this is a core part of your thesis, but if you look at parallels in the airline industry, the oil and gas industry, and other industries that have been blessed with deregulation, it's not like it just sends 700% overnight after laws get passed. It takes a couple of years for the money to filter into the ecosystem.

And so, aside from the Bitcoin-as-an-alternative-reserve-asset megatrend, you also have the blockchain-disrupting-financial-plumbing megatrend that just kicked off. So all of these megatrends are intact. And if you look at all of them, it’s kind of hard to be bearish.

But in the short term, my gut—I don’t have a system like you do right now—has been confirming what you’ve been saying over the last few weeks, which is that we’re in for some serious problems in this market. I don’t know why. You seem to know why.

The only thing that I did was clean up my book, which is what I do when I start to get uncertain over the short term. I sold my CryptoPunk. I cleaned up a bunch of line items and rolled them into BTC. I sold some shitcoins and put them into cash.

Pretty much the only positions I have now are in crypto. I have lots of positions outside of crypto, but in crypto I have Bitcoin, Aerodrome, Hyperliquid, and you and I both have a bunch of locked-up XPL that we can’t sell. You seem to be trading it actively, and I’m not.

So that’s the end of my rant-question. Put it back in your court. Whatever my gut was telling me, your mind was telling you too, and you clearly are able to articulate it. What made you bearish? What made you freak out? What can our listeners take away? And are you bullish now, short term?

Yeah. So, bullish short term, but again, that’s more based on the system. If that were to tell me otherwise, then I would, I guess, flip to more neutral.

In terms of what got me worried, again, the system actually flashed some pretty big warning signs when we went back up to 125. The backdrop is just interesting because I agree with you, actually: the setup is there in terms of these institutional rails. I agree. I think money is going to get easier.

I don’t really agree with the debasement narrative because I think debasement is a slow process, and people obviously get ahead of their skis. But with Bitcoin, there’s just not really that many floating around. So supply is tight, and there are so many ways now for big money to buy it.

But again, in the 125 area, above 120K, my thesis was that it was going to be short-term distribution. And again, I agree with you on the long-term prospects. But for probably a lot of your listeners and anyone managing, say, a fund in the space, you’re more allocated to crypto as a part of your net worth. So taking on that volatility is a lot harder.

If you’re diversified and a normal adult, like you are, I actually think you don’t even really need to worry too much. If anything, if it goes lower, it’s great; you get to boost your stack.

But I guess the few things that I’ve been worrying about are, from a chart perspective, you’ve got kind of clear distribution above 120K.

Distribution just means selling.

Just selling and no follow-through from buyers. Sellers are clearly overpowering buyers in those areas. And these OG whales have been quite transparent in their sales. It’s been in your face. They haven’t been hiding it.

You have Galaxy—

Tweeting about it.

Yeah. 80,000 Bitcoin. You have this guy Garrett Bullish or whatever, who offloaded, I don’t know, a few billion. And you see all these on-chain trackers.

To me, there is just this clear situation where, if you’ve been holding from 2013 or 2011 onward, you got to 100K, 120K, you have all these institutional on-ramps, you have the president of the United States having his entire net worth in crypto and kind of grifting around it—it’s not the worst time to take some chips off the table. It’s a natural spot.

I saw this article, which a lot of people saw, on “Bitcoin’s Silent IPO.” I agree that’s sort of what’s happening, but I don’t really interpret it as bullish in the short term. To me, it’s actually a short-term headwind, if anything. You have clear selling pressure.

And yes, IBIT is absorbing a lot of this, but I wouldn’t say IBIT has an extremely sophisticated investor base. There are a ton of retail traders in there, obviously, along with a lot of 401(k)s and pensions—slower, long-term money. So I think Bitcoin at these prices is interesting for slow money.

The October 10 event—I was a bit back and forth on this, actually. In the beginning, I thought this was a big clearing event where a lot of people essentially just lost their coins, and it would actually be much tougher for them if prices ran back. But clearly, there have been residual effects. I don’t think this is anything like FTX or anything like that. There’s no big credit event here. Maybe there are these small one-offs, but that’s it.

So it was a mix of the system saying, “Hey, above 120, there’s just clear distribution,” and a bit of PTSD, I think, from the last cycle too. When that happens, people just tend to get lazy and sloppy and hold risk elsewhere.

And I think we actually talked about this last weekend, or last week at lunch, right? Bitcoin is in such a buy-the-dip mode because it’s been so strong that, if it is going to go down, it’s probably going to happen quite quickly. You’re seeing that more this cycle too, right? The drops just kind of happen, momentum accelerates to the downside, and then it stops and we sort of chop around.

So I don’t know—it was a long-winded way of saying I’m bullish at the moment. But I’m not that focused on Bitcoin. I think from here you’re seeing somewhat diminishing returns relative to what you can get in the rest of the market.

On a buy-and-hold basis, maybe not, because you’ve talked at length about a lot of the problems with alts. But just because of how volatile they are, I think if you have good systems in place and good discipline, you can make way more money in other parts of the market.

Bitcoin to me is almost like just this part of your portfolio that you don’t really touch. But I don’t see a lot of relative upside personally.

4. Bitcoin vs Alts

Okay, so let’s talk about just Bitcoin as a buy-and-hold asset. The way that I made money as a commodities trader was to wait until crude oil would get undervalued relative to where I thought it should be on a 1- to 3-year time frame, and then I would buy as much of it as I could and just try to survive. That was my strategy.

That involves overcoming psychological hurdles that, for some reason, 99% of people just can’t do, right? Most people need to short-term trade and get in and out. I would just try to hold a core position from historically undervalued levels and then weather the volatility.

I try to do the same thing with Bitcoin, except Bitcoin is not a mean-reverting asset. I think we’re sort of in a megatrend to $1,000,000 a token for reasons previously discussed.

Again, the elevator pitch is that the fiat experiment started in the early ’70s, when Nixon took us off the gold standard. It went well for a few decades, and now it’s going poorly and will continue to get worse. So that’s my general belief in Bitcoin, and it probably applies to gold too, but gold is a little different, certainly from Bitcoin.

If I believe that, I want it in my portfolio. For short-term trading, I like to outsource to a system because I don’t believe in watching the screens all day anymore. I’m just too freaking old for that.

So I guess in the short run we should probably discuss what assets are good to buy and what risks there are in the short term for Bitcoin.

I think we’re in the clear. To be fair, I thought we were in the clear after October 10. I thought, after all those liquidations, come on—nobody who’s left is short here.

Everybody's been blown out or taken profit. The market is clean. We can continue rallying, and I was just so wrong this time, though. The selling you're referring to—these OG whales getting out—they're not going to be unloading, you know, like, 10 yards of crypto on everybody's face. If we're trading $90K, $80K, or $70K—

Yeah.

Again, as a young options trader, the way that you learn to understand how the Greeks work—your risk metrics like delta, gamma, vega, theta, and so on—is that you mentally stress-test things by taking them to the extremes. You're like, “Okay, dollar-yen is trading at 100. Will I have more theta on my option for a 100-strike call or for a 105-strike call?” Well, I can't visualize that intuitively, so let me ask myself: would I have more theta on the 100-strike call or the trillion-strike call? Oh, the trillion-strike call is worth zero. It'll be worth zero tomorrow, so there's zero theta on that. There's lots of theta on the 100-strike call.

Okay, so I guess the closer the strike is to at-the-money, the greater the theta. You know, that's how you learn options trading, and I do the same thing to try to understand crypto dynamics. Okay, there's a lot of OG selling at $125K. Would there be a lot of OG selling at $300 per Bitcoin? No. So where do I—I guess it's not a constant phenomenon that we should just accept going forward. It'll definitely peter out below, I think, $100K. I think that's a psychological level.

So Bitcoin, I'm not too worried about. It's the altcoins—the ones that have been lifted by DATs—that I'm starting to freak out about. I think the trade for altcoins is to wait for the first altcoin DAT to blow up, watch what happens to the price action on that alt, and then identify the next 10 altcoin DATs that will follow suit. It's not like those coins will be down 10% in a few nanoseconds on the news; you'll probably have a chance to short them after the first altcoin DAT blows up. So I'm scared of DATs for alts. If you're looking to get long alts, to summarize—

Aren't you worried about that too? Which ones would you be looking at, basically?

5. DAT Concerns

Yeah, you bring up a good point. I was actually just thinking of it in terms of what had me a bit cautious, and we've talked about it: it's these DATs. There are actually more of them for Bitcoin, obviously, by notional, and when I just took a pass at it—I'm looking at it now—even with the big dip to $75K, I think a lot of the up move in Bitcoin was obviously driven by likely Saylor. If you look at his purchases after the election and at the beginning of the year, they were quite sizable. We were talking about 10,000 to 20,000 Bitcoin every week or so, and now it's all sub-1,000.

Then, obviously, you had Metaplanet and a bunch of others that really started kicking off around the tariff lows. In my opinion, a lot of the buying pressure that got us up here was from the DATs, and you're seeing that their ability to raise cash is now gone. A lot of them are trading under 1 mNAV. I think Nakamoto bought the highs, and Metaplanet recently raised debt to get its mNAV back up to 1.

But when I was thinking about putting it into context, I'm like, “Okay, so we had billions of dollars of debt buying, and we're kind of unchanged on the year.” To me, that is a symptom of something. I could see it as being bullish, obviously, right? The supply is being absorbed. But you have—

If it were OGs selling to new Gs, I'd bid; it would be fine. But it's a wealth transfer from steady hands—

To DAT holders—

Fair-weather friends, right?

Exactly. Exactly. And a lot of the DAT fundraising—the people investing in a lot of these PIPEs—wasn't coming from a sophisticated capital base. It's just crypto VCs that were obviously like, “Okay, we can't make money on altcoins, so now let's buy these DATs,” because their performance was good.

So, to me, again, these whales are essentially selling into DATs as their exit liquidity, which is not great. It's very typical toppy behavior. In terms of altcoin DATs, honestly, you only really have ETH and SOL, I think, with meaningful size. Other ones—AVAX has kind of already collapsed. I'm just taking a look. Even the TAO ones raised, I don't know, maybe $20 million.

So, I think the altcoin ones are actually quite small in size and not that systemic. The size is really in Bitcoin and ETH. SOL a little bit too, but those are quite small. And, yeah, that is part of the cautious side: these DATs can't raise any more money. There's no demand, and to me, they were a big driver of price.

So when that one's gone, you need to find a new marginal buyer, which obviously can happen. I think, in terms of trading, you've got to be open to changing your mind. So, if MicroStrategy gets included in the S&P 500, or if his STRC offering is able to raise more money and grow demand in the preferred, that would obviously flip my view and mean we can go higher.

But that was a big part of it, right? It was just clear that they weren't really able to raise more cash. And even the Solana raise—the likely Forward Industries buy at up to $250—was one of the easiest trades I've really ever seen. You could see everything. They started buying around $190, finished at $250, and they told you how much they were going to buy—I think $1.5 billion.

Wait, sorry, they bought Solana on-chain?

Sorry, not on-chain. You could see the transfers going from the broker—or, I think, from Galaxy—to their custodian. You could just see it all happen. It was like, “Hey, they just bought $200 million,” and it was just the easiest trade. I mean, that's dumb, but it would have been unfathomably dumb to buy it on-chain instead of on—

Yeah, that would have been dumb.

Binance or whatever. Yeah, I still don't understand why people trade OTC, but I guess—

Yeah, you're supposed to trade OTC if you want to keep your flow relatively off the market, in stealth mode.

Yeah, or if you have an issue with KYC on an exchange.

Sometimes it's nice to just trade by text, you know. You don't want to do anything.

Just trade by text, but it defeats the entire purpose if your trades are then telegraphed to the entire market. That's ridiculous.

6. Trading Charts

And Solana's had a move, hasn't it? It's gone from $250 to $150 in a straight line. I think their average buys were around—I want to say—$220 or $230. So, yeah, pretty staggering drop, and it's kind of like a sign of—

It's a sign of where things are. I don't know. I—

Chris Burniske put out his thoughts, and I kind of agree with him.

He's been bearish.

Yeah, he's been bearish. I kind of agree, but I'm looking for reasons to go against him again. Right now, it's just like, hey, the system said buy, so buy. But I do think the charts are kind of broken. I don't love just going off charts because it can be a fool's game sometimes, but, big picture, I think they help you understand when to press and when to play a bit more defense.

Yeah.

It's funny, when you talk about trading charts. When I was in my first year in the game, in 2007, one of my mentors showed me a bunch of charts, and he said, “Would you buy or sell these charts?” I had a good answer for each one because, in college, I was kind of a chart—

Jonah the chartist—

Chart aficionado, as many first-time traders are. Then he admitted that he had just created them all with a random-number generator in Excel, and I felt stupid.

That doesn't necessarily mean that charts don't offer value. They do, but they don't offer that much value. Basically, the value that a chart offers you is that it reveals whether an asset is trending up, down, or sideways. It also tells you whether the levels you're buying are historically high, historically low, or historically meh.

And that's kind of, I think, pretty much the end of it for me in terms of how useful that is. You do need to know if there's directionality or not in the market. But—

These charts now, they look like they're not trending, and that's the problem, right? That's what makes—

I agree with you. I agree with you, too, on charts. You should not weigh them the most, because I think this time around, if we don't break out or break down like we did before, when the chart looks really bad, it's more likely to be close to a bottom at this point. That's how it trades.

I was looking at ETH yesterday, and it was just going down in a straight line at $3,100. It couldn't look any worse, but then obviously we're 10% higher. I think it's been a feature this cycle where, if you are looking at charts, it should really be dailies and weeklies. You just want the big picture.

You don't. It's not predictive of anything.

7. Crypto Big Picture

Exactly. Yeah, I think, big picture, right? Bitcoin—I refuse to sell my Bitcoin here. I don't care if the OGs are selling. I think they're wrong. I don't give a crap if they're posting that. Dillweed guy Mert from Helius posted a video from a year ago of Peter Thiel getting bearish on Bitcoin at $65K last June, and that's making the rounds on Crypto Twitter right now.

Oh, was it at $65K?

Yeah. It was because it wasn't fulfilling his ideals. Obviously, I don't agree with that sort of thinking, because just because Peter Thiel sold his Bitcoin, is out, and is now bear-posting it doesn't mean that it can't go higher.

And so what if the libertarian ideals of the OG Bitcoiners have been, let's say, betrayed by the new entrants, like Larry Fink and Donald Trump and the institutions? That's not bearish. The anarchists have less money than the institutions by 5 orders of magnitude, so who cares if the institutions come in? Our bags are all going to get pumped higher.

And peer-to-peer, you can still put money on a cold wallet, stick it up your ass, and flee the country without it getting discovered just as easily as before. You can still transfer value outside of traditional financial and institutional rails just as easily as before. The ideals of Bitcoin are still there; there's just more money coming in from institutions.

So I don't believe the whole narrative that because OGs are selling, Bitcoin has to die. The opposite is true, and people are just coping. The older crypto natives are coping with regard to ETH and Solana.

I'm worried about ETH. I don't think it's investable right now because the future of ETH, to quote our friend Kyle Samani, is Base, right? And I don't know how building on Base accrues value to ETH. And then Solana—

Solana always has a way of coming back stronger than ever before, so I certainly wouldn't write it off. But what's confusing is that all of the institutions seem to be building on Base, not Solana. So I just can't help but wonder where Solana fits into the—

Basically, the picture of institutional adoption that's theoretically going to drive the next wave higher, right?

Yeah. I don't know.

One thing I actually do think is more bullish for Bitcoin: I think Avi likes to talk about this. I actually find the bear targets are pretty low—or pretty high.

Yeah.

Like, $70K—look, again, if you're all in, a 30% drop is going to hurt. You obviously should not be all in. You should be smart about risk management, but a 30% drop in Bitcoin is not that bad. And you're likely getting, depending on where market conditions are, either a V-bottom or a long, just-grinded-out bottom. The grinded-out one would hurt.

But at $70K, you probably wouldn't be sitting there for longer than a couple of months. So, for long-term investors, I actually agree. I don't think the downside targets are that scary from here.

On the alt side, I don't know. I don't have any, I guess, convicted thesis on where this goes, because, for ETH—I mean, look, ETH—everyone wrote it off, and then it went up 3 times just based on how it trades. Though, it's a tough one. It's just huge. It takes a lot of money to move it, and I'm not really sure where that next big marginal buyer is.

Tom Lee essentially said they want to get to 5% of ETH. I think they're closer to 3%, so that's a huge buyer that's just stepping up. Obviously, he can evangelize the network and they can do things, but it's going to be tough. Markets obviously just want to know: who's going to buy this? Who's going to buy my bag after me?

And the value accrual for ETH at the moment—nothing has really changed in terms of its store-of-value properties, but it's kind of inferior to Bitcoin. I actually haven't been keeping too much track of on-chain fees. The whole narrative he's going after, right, is the home of stablecoins.

I do agree institutions are much more likely to have liquidity on ETH. But I agree with you: it could be Base. It actually could be their own L2s. The cost of rolling up your own chain just keeps getting lower, and it keeps getting—

Plasma. Yeah. And if you're a big corporation, you want to own the sequencer fees. You want to milk that cow. You don't want to send it back to ETH. And I think L2 fees are super, super low.

Solana is also an interesting one because, yeah, I mean, that, too, is a super-low-fee chain. On just an economic level, I don't really see where a lot of the value is. But to be fair, Solana has kind of been the home, in my opinion, for new, younger entrants; that's where they onboard into crypto, and there's obviously a lot of value there.

I do think that the ecosystem has been super extractive, though. And so I don't know. I guess one of my core theses, though—and we're rambling a little bit—is that I am very bullish on this internet capital markets idea.

I don't know where it's going to live, but Avi and I actually wrote a blog post in 2019. We said stablecoins are eurodollars 2.0. We said this is technology for the U.S. to export the dollar to the rest of the world. And obviously, that bolsters demand.

I think the U.S. government, at least under Trump, is definitely going to use DeFi to export our capital markets, because I'm a very big believer in the big repatriation trade. Over the last 40 or 50 years, money has just flowed into the U.S., and I think it's slowly going out for a lot of reasons, mainly populism, trade policies, and a lot of uncertainty.

8. Ads (Kraken, Peaq, Katana)

DeFi is a way to export our stocks, bonds, and real estate to the rest of the world because we do need more bagholders to replace the foreigners who are going to sell. So, to me, internet capital markets is a government-mandated initiative, and you'd never want to fade that.

9. Creating Internet Capital Markets

All right. Yeah. Internet capital markets. You know, it's funny: I guess in most countries, it's easy to send a stablecoin or fiat payment on Zelle or whatever the U.K. or Australian equivalent is. People kind of take for granted that money movement has been solved. It really hasn't, right? Because on the back end, everything still settles T+2.

And in a world of 0% interest rates, who cares? But in a world of 4% interest rates, if you have $50 trillion tied up in that T+2, getting the T+2 down to T+10 seconds or 5 seconds makes a big difference. A lot of capital gets unlocked.

And even more so, we talk about this on the pod from time to time. If I want to send you $1, that's trivial and easy and instant. If I want to send you 1 share of an S&P 500 ETF—one share of my S&P 500 ETF—that'll take 3 weeks and 2 hours of phone calls from people asking why and scratching their heads.

Being able to move non-stable value—I can see why boomers would say that's not important. Why would you ever need to transfer a share of your ETFs or your IBM stock to somebody else?

But as the dollar goes to hell, because they just keep making more of it and spending more than they take in—they being the governments of the world—eventually, I think the S&P 500 is probably a better denominator for global trade, or maybe even Bitcoin, than the USD.

So why would you want to have your money held in dollars in a checking account earning 2 basis points? That's a waste for you. You should have all of your money in the S&P 500, and then only when you swipe to buy your coffee should the S&P 500 get converted to dollars, or the S&P 500 get transferred directly to the coffee shop if that's how they want to preserve value in their treasury instead of having it all inflate away to zero. Money just feels like—the freaking tuna sandwich we ate last week costs, what, $35? It's a joke.

10. Jeeting Out of CryptoPunks

Since COVID, money has just become something ridiculous and hard to understand. It's not me being elitist about it. Everybody's new best friend, Zohran Mamdani, just got elected on that kind of freebie platform because inflation has been so painful for people across every category.

So I guess we have a few things to talk about. We have to talk about Mamdani because this is a political shift that may impact crypto. I cashed out my Punk, which got some engagement online.

I don't know. You're a Punk holder. What do you think? Where should we start?

I think I have mine offered. I love my Punk, but I don't know. My almost-thesis on Punks is that I don't think the average ones should ever trade above $1 million. We actually talked about this: I think Punks are much more tethered to dollar prices than to ETH. They're just priced in ETH, but I think people think of them as dollars.

I think people buy them with fresh dollars. So if I can get half a million for that, to me, I'm like, my golden rule is that you always leave the last 2x for someone else. You don't need the last double.

Before we go to him, can I just explain why I sold my Punk?

You said something. You said, “I love my Punk.”

And I loved my Punk, but after 3 years of rocking it, I just didn't care anymore at all. It didn't mean anything to me. It wasn't special.

I have plenty of artwork that's worth a lot less than what I paid for it. That's how cars work.

Yeah, you have a nice art collection. I love my vehicle. I love my art, but it's all worth less than what I paid for it, and I don't care. I'm keeping it forever. With the Punk, I'm like, I don't even like this anymore. I don't even feel cool rocking a Punk as a profile picture.

My entry price was $700,000, and my exit price was $195,000. So technically, I lost about half a million on that trade. But I did still sell it for roughly $200,000. Just so people understand the math: if I hold a Punk, I don't have that $200,000. If I sell the Punk, I get $200,000 right away that I can use to do other things with, like buy assets I like.

A $500,000 loss in a high-tax jurisdiction where I live gets me $200,000 of that straight back into my pocket via the tax loss. I can write it off against other gains. Now, if I didn't have gains, I wouldn't be able to do that. But luckily for me, this incredibly disastrous CryptoPunk trade is not the only trade I've ever done.

For all you people out there making fun of me on the internet, it's worth thinking about tax losses because that's actual dollars in your pocket. So basically, having a profile picture as a Punk was costing me $400,000. By selling it, I now have $400,000 worth of liquidity that I didn't have before.

Totally.

That's a nice chunk that I could put into Bitcoin on a dip and maybe double it somehow, or triple it if I put it into the right altcoin. The alts I'm looking at—I like HYPE on dips because there's a buyer of HYPE that isn't retail. The buyer is the Hyperliquid Foundation when it uses its fees to buy and burn HYPE.

Hyperliquid is a super interesting one for me because it more or less spawned a new category within crypto. I do think that could become a $1 trillion category: essentially, doing financial services fully on-chain. The on-chain Binance was always the holy grail.

What's interesting, though, is I feel like it's so owned, which isn't a bad thing. It's kind of the same thing for Bitcoin. The biggest risk I see is that Jeff and the Hyperliquid team aren't really doing any lobbying whatsoever. Their only real pull with the government is probably through Paradigm or—I think a16z bought a bunch, right?—so they have those venture capitalists that can lobby.

11. Hyperliquid Debate

It's hard to imagine that the centralized exchanges aren't trying to force some KYC stuff on it. I don't know. It could be a mid-curve take, right? It is super strong, and I think bringing equities on-chain is great. But to me, there's this moment, and I actually think the long-term capital gains on the airdrop are probably the thing people will overlook the most. The unlocks, I think, are not that big of a concern.

Basically, don't buy in March or February.

No, no, no—from the airdrop. It's actually coming up, I think, in about a month.

Oh, you think people are going to sell it right away?

Well, because the way they did the airdrop was actually pretty genius. They structured it like it was a trade, more or less. So you didn't have to pay short-term taxes if you didn't want to; you could just hold it for a year, which I'm sure a lot of people did. It was actually great for recipients—way more tax-efficient.

It's one of these interesting ones. We talked about this: I do like going for things that are more overlooked and less consensus, but honestly, in this market, that's probably not the way to go. The thing about HYPE is that you can still win even if it's consensus, because as long as it's still used as a product, the fees get passed back to you.

It's like Meta stock or Nvidia stock being overowned. Everybody owns it, but it still goes up because they perform. That's something about Hyperliquid that I like.

12. Long-Term Theses in Crypto

But I guess I'd be worried that, to your point about regulation and lobbying, it's unlikely. Yeah, it's unlikely, honestly, I think, now. I don't know if you saw Trump's comment about CZ, where he was like, “I don't know.” So it's less likely?

So I guess one of the things we talked about in one of my theses going forward is that there aren't that many long-term investable things in crypto at the moment. There are 4 primary use cases, I think, that are $1 trillion markets in 10 years. You have store of value, which has been proven out; privacy, I think, will be a big one; this on-chain finance; and then, more or less, distributed resources. I think Bittensor is the best example of that.

The thing that HYPE benefits from is that it is one of the only investable assets. One of the biggest things I've noticed is that retail, at this point, is not willing to buy anything with a cap table for an extended period of time. One of the best things about Hyperliquid is that it was all airdrop. There were no VCs. That makes it stand out so much more from the pack.

Crypto venture is not in a good spot. I think it's actually much better for liquid investors because the only real remedy for this is for projects to start ICOs at much lower valuations. Otherwise, there's just no recovering. The market will adapt.

Well, that's what's happening with CryptoPunks, right? Lower valuations—CryptoPunks are rapidly converging to the price of normal art. So we're seeing the compression trade happen in one sector of crypto called NFTs. Why shouldn't the compression trade happen in others? The corollary to your theory about there being very few investable assets is that there are many good shorts, right?

It's a tough game, though.

And it's like you just make no money. I do it, obviously, but it's always— the only way to get more returns is if you add leverage, and that's just such a dangerous game. The math just doesn't work out in terms of managing the collateral.

I had a good one on WIF. I had a good short on that because basically, the Sphere came out and they were like, “We never talked to these guys. We don't know what WIF is. Sorry. There's never going to be a hat on the Sphere.” And then WIF went down like 5%—I'm short—and then it went down 50%, almost overnight.

I haven't really done a lot of shorting because I think you need to monitor it more actively than I'm willing to in my old age. What I think is interesting about shorting is that your boy Flood was victory-lapping his—whatever it was called—the Kingmaker portfolio, where it's long HYPE, long BTC, short garbage like Aptos, Worldcoin, all this random, obviously never-going-to-happen type stuff.

Aptos is the funniest. Mo gets his unlock, sells it, and just quits. Why on earth would you ever be long Aptos? No matter how good Aptos is looking here, you want to be short that. So, it's tempting to short. It's just, you kind of can't.

Yeah.

You know, even Solana is tempting to short because it's obviously not going to fulfill its internet capital markets promise. But to your point about it onboarding young users, Solana is kind of the Nickelodeon of crypto, or the tween people of crypto. You're really dating yourself here, Jonah.

13. Clippers Game

Well, Nickelodeon still exists. It's funny. Speaking of dating myself, I went to a Clippers game last night with my son just to take him out, and I wanted to cover his eyes during the section where the cheerleaders dance in the middle at half court.

What do they do that's crazy these days?

They spent $2 billion on this mega arena, the most modern, nicest arena I've ever seen in my life, in the middle of Inglewood, which is, you know, Long Beach, Inglewood, right? That's what Inglewood was when I was growing up. And I go, there's this $2 billion arena surrounded by Inglewood.

I go in there, and they definitely preserve the local culture with the way that these Clippers dancers dance. It was a mixture between TikTok break dancing and straight-up Inglewood street life. I wanted to cover his eyes. It was hilarious. Anyway, that made me feel old.

The best part in the dome is you just see Steve Ballmer going crazy.

That's the best part. I didn't see Steve Ballmer going crazy, but I wish I had. Speaking of people, the mayor of New York is 7 years younger than me. What the hell is going on there? This is your town, Avi.

14. Mamdani Mayoral Win

I just bought the top. I feel like I just bought the top on New York. I moved here, I guess, more recently.

I was there with him in the Bloomberg years.

Yeah, I watched his speech. We'll see.

I don't know. I'm kind of hoping that—I think he'll be ineffective in a lot of his policies, and it will kind of serve as an example of a socialist regime not working. But the more sober side of me thinks it's a sign of the times. You can hear in his speech the kind of examples he uses are the people he's appealing to. That is who's hurting the most.

And, not to get too political, obviously a lot of the immigration policies in these liberal cities are not what I would choose. That's kind of where we are, so it's definitely a bad mix. I'm hoping he'll be ineffective, but there's obviously a lot of subtle things he can do to make life, I guess, a little less safe.

Yeah. And I think in terms of just how that matters to the listeners of our podcast, probably most of whom don't live in New York City, what does it mean for asset prices that Mamdani is now the de facto leader of the Democratic Party in the United States of America and the global epicenter of capitalism, the beating heart of America's economy, right?

Obviously, we're sitting here glibly talking about flipping JPEGs for 6-figure losses and art collections. I recognize that I'm pretty thankful to be in this situation, and it's mostly luck, to be honest. Just luck of the draw.

I will say, from my personal perspective, I wouldn't want to live in New York City if Mamdani is the mayor. But I listened to his acceptance speech about how now this is politics and power for the people whose knuckles are burned from working in kitchens, whose fingers are calloused from stacking Amazon packages.

The way that I relate to that community is that my father was the number-one union labor lawyer in the United States of America for about 25 years. He argued 4 cases in front of the Supreme Court. I grew up in basically a communist household in Berkeley, believing in a lot of Mamdani's policies because my parents indoctrinated me with them.

We had the swag at home to prove it: picket signs from the USX-Posco steel picket, with bullet holes in them. Real, real battles of American labor. At my dad's funeral, there were thousands and thousands of people at the Palace of Fine Arts in San Francisco. César Chávez, whom he represented, and farm workers were crying, “Thank you, Victor Van Bourg. You gave me a life. You gave me dignity.”

This was the working community, my people. I said my last name on a bus once, and some guy who was covered in paint said, “Excuse me, do you know Victor Van Bourg?” I said, “Yeah, he's my father.” He said, “Oh my God, please tell him thank you. I have a pension because of your father.” Real working men and women were helped by my dad.

I grew up in this world that Mamdani is talking about. Obviously, I rebelled, and I'm a crude oil and cryptocurrency trader now, so I don't think he'd be too proud. But at the same time, tying this back into the broader theme, these people need help. The economy has just left hundreds of millions of people behind.

That's part of the appeal of crypto: you can escape via this asset class in a way you couldn't just via the old-school way of getting a job, getting a government job, and living the American dream off of that. The problem is that I don't think any of Mamdani's policies are going to work. You don't solve income inequality by redistribution. You solve it by giving bargaining power to the workers and giving them equity in the value that they create.

That's kind of the way Vitol gave me equity in the value I created for them, and the way that trading companies are sort of socialist economic microcosms within a broader capitalist system. Workers probably should have more equity in the value that they produce. So, I think basically Mamdani is a redistributionist. He's not a collective-bargaining guy. I think they're two very distinct ideologies.

As far as tying this back into your bags, our bags, redistribution historically precedes asset-price depreciation 100 times out of 100. So, if Mamdani is the leader of the party and this is the way Democratic politics are going, this isn't a labor movement that's going to solve workers' problems via legal action the way my dad did.

This is a redistributionist movement, like what Pol Pot was probably after in Cambodia, or any of the other people that led their economies straight to hell—the Kim family in Korea, or whatever. Basically, my take is to watch the Democratic net favorability rating of the party. If Mamdani remains the standard-bearer and that starts to become nationally favorable, then it's time to pretty much liquidate your asset holdings and sell.

Meanwhile, if Gavin Newsom becomes the standard-bearer and the Democratic favorability rating rebounds, that's okay because Newsom is more of a mainstream politician. What do you think?

I don't know. I tend to be optimistic, or try to be optimistic, about these things and think it'll be kind of confined to New York. I do think it makes sense to just—and I think this is why Zcash has been going up—you definitely want some Zcash or just Monero stashed away. I don't have any of it, for context.

Wait, why Zcash? Why?

Privacy coins.

But couldn't you just use an exchange? An exchange is as good a mixer as any. Couldn't you just put some Bitcoin through a centralized exchange, then offboard it to a cold wallet and hold that?

You could.

Why do you—what problem does Zcash solve that you couldn't accomplish just with Bitcoin? You can, I mean, just obfuscate, obviously.

Where's the fun?

Greater obfuscation, fine.

And the movement of them—and the exchange is a central point of failure, obviously. I don't know, but actually she could. If AOC's president in 2028, she hits up Binance. I think it's a super-low probability.

I think it's higher than people think. “There should be no billionaires” could easily turn into “There should be no people with more than $5 million,” and they could track your assets pretty easily.

Look, we've obviously seen this. It kind of does obviously feel like history's repeating itself.

My bet is that humanity just keeps progressing at such a fast rate that it's never going to be as bad as it was before. And I think general intelligence is—

General intelligence keeps going up and up. So do our standards of humanity.

15. Where Does This All Go?

I don't think it'll get there. I do think the bigger point, though, that you mentioned is that a lot of these people who are left behind—the jobs they would want, or the jobs that would essentially get them a more equal playing field—AI is taking those jobs away. A lot of this information work is going to be automated away, and so that's the bigger issue.

I actually think it's better for, I guess, our bags or our asset prices, right? Because I don't really see a situation in which the government is going to have to support this in one way or another. AI is only going to grow.

It’s like a national security moment at this point, and I think for the government to justify its investments in AI and bolstering our level of intelligence, it’s obviously going to have to support the people that it’s kind of disenfranchising. So, on the big picture, I agree: asset prices up. Short term, AI makes every company in the S&P 500 more efficient—more EBITDA per employee—so asset prices go up.

But eventually, I think Mamdani is the canary in the coal mine, and Zcash too, for: Hey, people aren’t just going to tolerate this. People at both ends of the wealth spectrum—the top and the bottom—are going to have some issues when the poorest people, the neediest in society, are being asked to tolerate higher bills and higher unemployment, and the people at the highest echelons of wealth in society are being asked to tolerate more of what feels to them like unfair redistribution. You’re sort of seeing the fuse get lit at both ends.

So, to your point about leaving the last 2x for somebody else, I think there’s another 5x in Bitcoin right now, frankly, in the period of time before we get redistribution on the national political agenda, at the earliest. So I think we’re safe for now, but you really do have to have your finger on the trigger at some point in the future.

I’m pulling up a tweet that a friend sent me yesterday. It’s from this guy. I didn’t realize he was at Base. It was Antonio García Martínez. He essentially just draws parallels to Chesa Boudin and San Francisco.

He just makes the argument: Look, the lower class is actually going to feel the pain of this, right? Because the upper class has the means to essentially insulate themselves from all these issues, right? They can afford housing wherever. They can get private security. They can move. Capital obviously is more able to move than people. And so, a lot of these issues will actually be burdened by the people he’s trying to help.

[Speaker?]

I really like him. I would recommend everybody go and buy his book, Chaos Monkeys. He used to work for my boss at Goldman, so he describes that trading-floor zeitgeist very well. We follow each other on Twitter. I think he’s a really brilliant commentator of modern times, and I couldn’t agree more with what he said.

16. Final Thoughts

A user just put in the chat here: “Cryptoorm: Max, how much do you bench?” So, this is another important question we have to cover before the end of the pod.

Do you mean a one-rep max or a 5x5? I need—

Let’s hear about your 8-rep set and your single-rep max.

It’s honestly not that impressive. I feel like I used to be in way better shape in college. For 8 reps, like 195, and then for 1 rep—

Like 225, 235. I peaked out in high school. I could bench 250 for 1 rep, and now I probably can’t even. I was like a 180-type set guy, and now I probably can’t even do a third of that. I’m like a Zohran Mamdani-level bench bencher, but I get that—

My peak was definitely sophomore year of college. You need a gym buddy. That’s what keeps you accountable. If you have a friend that you go with, you’ll push it way harder.

I would be gym buddies with you. We’re crypto buddies. We push each other harder to make money in this market. We even kind of look similar in a vague kind of way on this pod.

The juxtaposition is shocking here.

Yeah, you’re obviously younger and better-looking.

The folks at Blockworks are saying, “We want to—we’re looking for new podcasters. We want to start more crypto podcasts, and it can’t just be another crypto news podcast. Come with fresh ideas.” I obviously proposed the idea of Telemundo-style, D-list anchorwomen from Bogotá, Colombia, doing crypto news topless in Spanish. That got shot down, unfortunately.

So, let’s put the ball in your court. Max, what is missing in the world of crypto podcasts? What kind of content do you think the audience needs at this point that isn’t out there?

I think you guys are actually kind of touching on it, but I think it needs more—I don’t know. I’m trying to think. We have, I think, obviously, really good news roundups. There are a lot of actually good technical deep dives. I don’t know. I’m biased. I think probably just more investment-related content.

Maybe we’ve got to get you on the show more often. Maybe just do some Max time every week. I really enjoyed this.

Yeah, likewise. We can definitely pencil in some time. It’s good to get our Telegram and phone conversations out to the public.

Yeah, for sure. Man, these are crazy times. Good luck, everybody, navigating this. This is wild. Anything else before we jump? I’ve got to go in a minute or 2. Sorry.

No. All good. Be smart. Stay safe and go get ’em. It’s good times.

All right. Let’s end it there, Max. Great talking to you. Thank you so much for joining.

Yeah, appreciate it. Thanks for having me on.