山寨币见底了吗？| 1000x

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I think that this recent move washed out all of the end-of-year sellers, and people are going to rebuy come January 1. I'm not bearish. The cycle is not over. I'm not in the habit of making bold predictions like that all the time, but this is, in my opinion, a no-brainer point to get in the market and just ride it up.

All right, welcome back to another 1000x podcast. This is going to be a fun one. A lot of stuff has happened in the markets since we both said that we were bullish as fuck. Clearly, the market didn't really agree with us.

1. Saylor Moved The Bitcoin Market

One thing that I'll point out is that, while this is obviously hindsight talking, it's very clear now that a substantial portion of the move above $100,000 was driven by Michael Saylor just jamming it in. He got an average price of $106,000, and that's insane considering the fact that we traded above $106,000 for, like, 30 seconds. I think it was 24 hours that we traded above that price. So, kind of insane. He clearly just jammed it super hard near the highs, and then once his bid went away, market structure deteriorated a bit.

2. Altcoins Start To Outperform

Now we're stuck in a kind of interesting zone where BTC is holding $90,000. I'd say that the bottom of the range is $90,000 to $93,500, and we're hovering at that level right now, but alts are doing really well. Today, for example, ETH/BTC is up almost 4% off the lows. That structure looks really good to me. Everything else has started to look good, and the thing that we've been calling for for a while is that, at some point, probably toward the end of the year, you're going to start to see alts pick up. Seasonality just tends to be very, very good for altcoins post-mid-December.

I think we're going to see that play out because everyone crowded into the Bitcoin trade because Michael Saylor was backing it, and now there are a lot of reasons to suspect that he might not be backing it for at least a month, courtesy of the blackout period. That's going to lead people to bid alts, and it's going to lead to relative outperformance by ETH.

One thing that has been really bad for ETH is that the main buyers have obviously been buying Bitcoin. Now that the main buyer is out of the market for a bit, the ETH/BTC ratio can readjust itself, and the flows will start to average out more. I think that means we probably see ETH/BTC above 0.04 in the next few weeks. I think that's a really good trade, along with a lot of the strong alts that you see today.

The next move from BTC, I'm not really too confident in right now. Jonah, what are you thinking about the markets here?

This sell-off was not in my bingo card. I was buying all the way up, still buying on the highs—not much as far as my portfolio is concerned, but just nibbling away at the market.

What's expected is the idea that when bull markets start to get white-hot, they get super volatile. This isn't the craziest pullback in the history of pullbacks. This is 10% to 15% at worst for some of the majors. What triggered it? It was really a Fed-type event.

I don't think that this is anything out of the ordinary. One thing I would note about December as a general trading month in anything—not just Bitcoin or crypto—is that it's an illiquid month. Institutions generally have closed up shop for the year. Traders aren't taking a lot of risk trying to gamble their entire year in the middle of the last week of the year. Most participants with the big bucks are on the sidelines or protecting P&L.

Then you're left with, usually in commodity markets, CTAs. Those are the algorithmic shops that trade no matter what time of the year it is or what hour of the day it is, and they're big. Usually, you get these bigger, momentum-type, exacerbated moves.

To me, it's not that surprising that you have this Michael Saylor character who's the whale in the market. Everybody else is pretty much taking it easy, and when he stops buying, you get a big pullback.

I hadn't really noticed what you were saying about alts until just now, which I think is actually a really intelligent comment. Perhaps it's because not all alts are performing right now. Doge, Telegram coin—some alts are just—

Yeah, there are—

Right?

I think there are select alts that are outperforming. What you just said kind of clicked a puzzle piece into my head.

A lot of the exacerbation of the alt move—when BTC was trending down, alts were nuking. BTC was down 3% one day, and alts were down 15% to 20%. I think a reasonable percentage of that selling was probably because people were protecting their P&L. A lot of people have made a lot of money this year, and they didn't want to get that washed out. They didn't know where BTC was going to go, but it was looking weak, so they just full-stack sold all of their alts at the same time.

There was zero liquidity in the market to take the other side because people aren't gambling into year-end. These alts got completely washed out of sellers, in my personal opinion. I just don't see where the selling comes from for a lot of these things at this point. If anything, this is where the buying starts.

I tweeted something. I said, “I'm bullish on alts heading into the new year. Just be patient, pick your spots, and make sure your buying is done by the end of the year.” I'm still 100% on board with that. You probably should be buying alts right now. Basically, anything that's been strong, you want to start either legging into or, at this point, pushing your chips in, because I think Q1 is going to be really good—even relative to BTC.

If you want, you can say, “Okay, maybe I don't know where the market's going, but I'm bullish on alts.” Maybe you want to short some Bitcoin to hedge your alt exposure if you really care. But I think that this recent move washed out all of the end-of-year sellers, and people are going to rebuy come January 1.

I'm not bearish. The cycle is not over. I'm not in the habit of making bold predictions like that all the time, but this is, in my opinion, a no-brainer point to get in the market and just ride it up.

If you really think about why it sold off, there are a few reasons. One is that sellers obviously stopped buying during the blackout period that people have been talking about. Two is the Fed coming off a lot more hawkish than people expected. I think both of those things have now been completely digested by the market. Anyone who would have sold because of those two things is out now.

The Fed being hawkish on the general markets and saying, “Okay, well, we shouldn't be cutting that fast,” means that any downside in the equity markets will just reflect an actual slowdown in the economy. It will reflect that, at this point, we're at equilibrium. It will reflect bad things that are happening, and right now no bad things are happening.

In fact, I think January 20 is going to be a great day, because a lot of regulations are going to get repealed, and the market is going to go back to humming the way that we expected it to.

This was as close to a clear bull-market washout event as I've seen in a long time. It's just so clearly, to me, a bull-market washout. You also have a lot of people saying, “Okay, that was it. Pack it up. It's over. We're not going back up.” I think a lot of people capitulated on this, and now is not the right time to capitulate. That's my two cents on the matter.

Yeah, Avi, I think that's a great take. I agree with pretty much everything you said. In fact, I'm probably going to go and buy some more crypto after we hang up the phone here.

What you described as a bull-market washout, I agree. It literally looked like the textbook says it's supposed to look. You run up on euphoria, nothing really relevant changes, but you get one little negative piece of news, and anybody without a lot of conviction probably hits the sell button because there are a lot of unrealized profits out there.

People want to protect those profits into year-end, to my point about risk aversion. Nobody wants to ride this thing down to $40,000 before the end of the year and just have a terrible 2024 when they could have had an amazing 2024.

3. The Fed Reset The Market

Let's talk about the Fed for a second. They just came out jawboning more hawkishly than people expected—than the Fed watchers expected, than the interest-rate markets expected. This wasn't the announcement of a new hike cycle. It was more like, “Hey, we're not just going to be cutting with reckless abandon next year. We don't really have inflation under control the way we'd like to, so we're just going to be mindful of that.”

Mm-hmm.

I read the Fed minutes, the side-by-side minutes, in this awesome piece that I follow called The Daily Shot, which is just like pictures every day.

I love it too, by the way.

I follow The Daily Shot as well. Sometimes it's just too much to absorb.

Daily Shot's awesome. Yeah. You can scroll through the part about South Korean electricity prices, but the Fed stuff digests it pretty well for people like me. So to me, it didn't seem like a massive paradigm shift the way that 2022 was. In 2022, we went from zero interest rate policy, ZIRP, to, “Okay, I guess that era's over. The 35-year-long bull run in bonds is over,” right? And that was a big, seismic shift for all markets, and there was an ongoing question mark around what the Fed was going to do with rates, because Powell didn't really telegraph that clearly, whether he was just going to hike to some crazy level or whether the hiking was over. Markets were scared. Bitcoin took a big hit as a result of that.

This time, it's abundantly clear they're not going to go into another hike cycle and send short-term interest rates up to 8% or 9%. That's just not happening. It's more like, “Okay, we're not going to cut it down to zero,” but markets are already pricing that. So to me, anybody who went and sold—anybody who was bullish on crypto for all the reasons that we talk about on this podcast and then went and sold because the Fed said something hawkish, or because they heard something hawkish on X—I think anybody who's doing that is kind of lettuce-handing a pretty important opportunity in crypto markets. I think this is a pretty decent chance to get long ahead of what I perceive to be a rip-roaring 2025.

Yeah. I think you hit the nail on the head. It's important to contextualize why the market did what it did. A lot of times, the market will make decisions on a short-term time frame based on what the Fed says. Very rarely does the Fed impact the trend of the market. It only happens when there's a paradigm shift in the Fed's approach to the market based on data that they ingest, right?

In November 2021, they said, “Finally, inflation is not transitory. We better start taking this seriously. This requires a rethink of our entire strategy toward how we manage the markets and how we manage our economy. We need to raise rates.” And that was something that had just never really happened before in the last 15 years, when they made that decision. What we see today, exactly as you said, is not a paradigm shift. It's not them saying anything is different about the market; it's actually just adjusting their approach.

And you can make an argument: Okay, well, maybe the market was rallying exclusively because they thought the Fed was going to be extremely dovish for the foreseeable future, and therefore the market was just rallying. And now that they're not just giga-doves, the market's going to reverse. But I don't think the market was rallying because the Fed was dovish. The market was rallying because the economy's doing well, and that hasn't changed. Yes, it got a boost from that, and yes, there's a slight amount of brake applied to the upward trend.

We are going up because people are making more money, because wages are going up, because companies are making more profits, and because we're heading into a new regime under Trump that's going to be even more business-friendly. None of that has changed. The only thing that's changed is that the one piece of the puzzle—how much gas the Fed is willing to pour on the fire—has changed. And what's clear is that the market has digested that and said, “Okay.”

So what you get in those types of scenarios is a reset, right? You got a pretty big reset. Nasdaq went down 5%, actually more—I think almost 10% from high to low. And now you just resume the upward trend from a lower base. That difference and that time period are what's priced in now. So, okay, we're right now 5% lower than the highs because of what the Fed did, but it doesn't mean that the market's going lower, because everything else that was driving it higher remains the same. And so you have to think about the components.

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With Bitcoin, you obviously have one additional component, which is that it's rallied a ton. Well, two additional components. It's rallied a ton because Michael Saylor is buying a ton of Bitcoin, and that's out of the market for some period of time. And so you have to say, okay, you adjust your upward trajectory for at least the next month or so. And then you have that Bitcoin was going up because of the strategic Bitcoin reserve and because of the Trump trade.

Now, at this point, I think the people who were looking to sell closer to the January 20 inauguration are probably out of the market, right? If you had that trade on from the election expecting to sell into January 20, this reset—this weakness—was probably your time to sell. Unless we rip higher again into January 20; if we're trading back at $110,000 into January 20, maybe take it off, but I don't think at $90,000. Because the selling in that area has been absorbed.

4. The Strategic Bitcoin Reserve

And then there's the strategic Bitcoin reserve, where I think Nic Carter came out and said it's very unlikely that it happens. I think that—

Who is Nic Carter? Does he matter?

He's pretty clued in. He's a really smart guy. He's got a large audience. He's close with a lot of people on the inside. He's influenced crypto policy—not substantially, but enough to say that I think he matters. I respect his opinion, and I like him as a guy.

Now, what his take is basically: The U.S. government doesn't buy stocks. The U.S. government just buys its own instruments, and Bitcoin is not an instrument of the U.S. government, so the hurdle rate to actually go buy this thing is pretty damn high. And the political pushback they would get is—

Sorry, go ahead. I didn't mean to interrupt you.

Is pretty damn high. And that's kind of similar to the argument that I used to make against you, Jonah. But I still think that the game theory—I mean, what it starts with is Trump just not selling any Bitcoin that the U.S. government accumulates, and then over time it changes. And the nice part about it is there's no moment during the first 90 days of the administration where it gets thrown out the window. So the hope remains. The hope remains until Trump comes out or someone in the government comes out and says, “This is not happening.”

Yeah.

And I actually think it's very unlikely for that to be the case. There'll be indications that it may or may not happen, but I think it's very unlikely for a government official to come out and say, “Sorry, this is now completely off the table. We are not doing this.”

Yeah.

There might be some obfuscation: “Yeah, we're thinking about it. It's not ready right now; in its current form, it doesn't make sense right now,” which would obviously send the market lower. But it's not going to be decided.

Yeah.

So it's not going to be a hard no, which leads back to the point of, okay, well, that's great. That's just an additional bullet point. Bitcoin always needs something, right? Bitcoin very rarely rallies without something that gives people hope for why it would go higher. And whether that hope is real or not, what matters is that it exists, and the fact that I don't think that it goes away makes me very bullish, kind of regardless of what happens. Does that make sense?

Yeah, it makes total sense. As they say in the game of chess, the threat is more powerful than the action, right? And I think that's what's going on with this strategic Bitcoin reserve.

Correct.

Now, I disagree with Nic Carter. I think they will create one, even if it's just appropriating the Bitcoin currently held—like the Silk Road Bitcoin currently held by the U.S. Marshals—and putting it on the U.S. Treasury's balance sheet. But if Nic's argument against a strategic Bitcoin reserve is that the government doesn't buy non-U.S.-government-issued securities, and Bitcoin does not count as a U.S.-government-issued security, I think that's kind of a stupid argument, because the government buys non-U.S.-government-issued currencies and commodities all the fucking time, right? They hold gold. They hold euros. They buy oil.

Mm-hmm.

We import billions and billions and billions of dollars' worth of commodities from all around the world and stick them on the government's balance sheet for various reserve purposes and government programs. The government is a huge consumer of steel and copper. There are endless amounts of money getting spent—

Mm-hmm.

—on currencies and commodities. Whether you think Bitcoin is a currency or a commodity is relevant to this conversation because reserves exist for both currencies and commodities—government reserves. So I think that if something's as geopolitically relevant as Bitcoin, there will eventually be a pool of it sitting around on Uncle Sam's balance sheet somewhere.

Now, how does it happen? Maybe Trump doesn't get up on stage, take his pants off, and scream, “We're making a frigging strategic Bitcoin reserve, everybody. Yeah. Send this thing to the moon.” It probably doesn't go down that way. But if the threat is more powerful than the action—if the idea that the U.S. may have to accumulate hundreds of thousands of Bitcoins somewhere is a big threat for every other country that's thinking, “Hey, my currency might not be as interesting as Bitcoin,” or, “Hey, I might need some of this Bitcoin for global trade,” or, “Hey, I'm holding a bunch of gold. I'd rather hold Bitcoin because there's a generational shift going on”—and the U.S. government is threatening to establish an SBR in the near future, if I act after they act, I'm probably getting 1/3, 1/5, or 1/10 as much BTC for my unit of fiat as if I act before they do.

So I think that just the threat being on the table probably yields some sovereign buying. We've seen random, unsubstantiated, possibly real, possibly fake news on X about how the UAE has accumulated tens of billions of dollars' worth of Bitcoin already. Maybe this stuff doesn't happen out in the open. Sovereigns have a varying track record in terms of their reporting of how much gold they purchase and how much oil they purchase. It's not the most transparent process, these reserves.

Ultimately, I do think they will be created, and I think that even if they aren't, that threat is gonna put a floor under the crypto space in 2025, much like the deregulatory—

Yeah.

—action bill.

I think that point is where I land on this: it's the threat, as you keep saying, that buoys this thing. At some point, what happens is it gets to a price where it's not gonna go higher than that unless it actually happens, because it requires a tremendous amount of buying. But $90,000 is not that point.

One way to think about this is that without any indication that the President of the United States likes Bitcoin, that we might have a strategic Bitcoin reserve, that other countries might be accumulating tens of billions of dollars of this, or that it's become very clear that the administration is extremely pro-crypto and extremely open to good regulation about this, Bitcoin got to $75,000 in 2021. Right now, Bitcoin's at $90,000. So you're telling me, given all of that amazing stuff that's happened, Bitcoin should be $90,000 relative to where it was in the past? The only way that you can really value this thing is relative to where it's been. That doesn't make sense. That's not the equilibrium price. There's no way around that.

Obviously, I think the equilibrium price is more than 20% higher than that. Yes, that was a period of peak mania. Even then, this year we ranged between $50,000 and $74,000 for BTC, again, without any of that. So I think what's clear to me is that, at least in a bad world for Bitcoin—which it was about 6 months ago, prior to the Trump election—fair value for BTC is somewhere between $50,000 and $70,000.

So now, in an amazing world for Bitcoin, I don't think fair value is $90,000. I think that is at least twice that, at least in my opinion. Maybe the new range is $100,000 to $140,000, if you wanna think about it that way. That's how I'm approaching it when I think about “cycle top.” When you think about it from that perspective, I don't think euphoria's over.

With all of this new development, if I believe that the base price of BTC should drift toward $100,000 to $140,000 based on where it was previously during periods of euphoria, why can't it go to $200,000 or $250,000 and then come back down to that level?

Yes.

You’re talking my language. I love that.

I’d probably—

Yes.

—I’d probably sell everything that I owned at $200,000 per Bitcoin because I think that would be euphoria without an actual SBR. But I think we get there in the next year, in a period of euphoria, and then it sells off and settles at a much higher price than it was settling at in the summer of this year because, candidly, the fundamentals are better.

So, no, it's just crazy. Maybe I'm delusional, but it's crazy for me to think about the fact that we could have all of these inflows and all of these amazing things that have happened for BTC, only for it to go back down to $70,000. I don't think so.

I don't think so either.

If that happens, then I'm gonna switch careers. Get me out of this thing.

Hope you keep your podcast—

Because I clearly just don't understand it.

No, look, there's so much to talk about in what you just said. First, if anybody's not delusional, it's you. I have a tendency to get delusional. I'm a momentum trader. You're more of a range trader at times. I know you know how to ride a momentum trade very well, but you also like to get in and out of stuff, and you like to buy dips and sell pops. So I don't think you're delusional here. I think you're being extremely rational. It's part of your process to evaluate the market this way.

Avi, I think that with Saylor not buying and the Fed doing what they did, if this had happened in March or February, instead of trading from $108,000 to $93,000 or $94,000, we'd be trading down from $108,000 to, like, $103,000 or $104,000. I think it's just that we're in a very illiquid time of year, and there are very few people out there willing to plant the flag in the week between Christmas and New Year's who are gonna come in and just drink all of this up and buy all the Bitcoin that just got sold by the people who are waiting for I don't know what.

Basically, consider this a holiday gift out there if you're still bullish. Merry Christmas. Happy Hanukkah. I think this is a good time to get long. The follow-up question is, what do you get long? Do you get long meme coins? Do you get long Bitcoin? Do you get long ETH? Do you get long Solana? Do you get long some other part of the long tail of altcoins out there?

You get long the stuff that's been doing well.

Yeah.

That's my take. Here's one way that I judge a trend in this market. Pull up—there's actually a great trend indicator that I use called the EHMA, the Exponential Hull Moving Average. Set it to 180 and put that on your chart. That actually tends to be very well respected by things in crypto.

Additionally, I've found that the 20-day moving average is very good for short-term trades. Then you obviously have the 50-day, which I think is good as well. The way that I would figure out what to buy if I'm a trader is that I would look at stuff that's still above those moving averages, and I would try to buy it when it hits those moving averages or gets into that zone. It's not always clean. It might go down 5% and then up 5%, but as long as you don't get 2 daily closes below it, I'd buy that.

Look for alts that are still in trend mode. Aave is a great example of an alt that's still in trend mode. Ondo is a great example of an alt that's still in trend mode. Even LTC is a great example of an alt that's still in trend mode, holding that EHMA on the 1-day.

Then think about what sectors will do well. Basically, I'm betting again that ETH is gonna do very well in Q1. My bucket looks like ETH plus all of the strong alts that are in the ETH bucket, like Aave, Morpho, LINK, that kind of stuff with some ETH beta. Then I think about AI coins, so what's strong in the AI coin world? Look at the moving averages that I just mentioned to figure that out. I like dino coins because I think retail comes back in. So what's strong in the dino coins?

You like the strong dino coins, though. You don't like all dino coins.

Exactly. The strong dino coins. Litecoin, for example, has a potential ETF coming. That's pretty good. I like that a lot.

I'm still not 100% fully allocated to my positions because I wanna chip away. If we get anything illiquid happening over the next week or so over the holidays, I like to buy that.

But things like Virtuals, for example—I had a bid out for that. It got to $2.00. That was an amazing buy. Now it's up 35% since then. There are still a lot of ways to make money in this market. Just don't be afraid.

Yeah, I think that, at least in Bitcoin, I don't really like to buy dips. I don't like to buy sell-offs. I don't like to catch the falling knife because the asset is so reflexive that everything I could've said about how this is a screaming dip to buy could have applied at $100K or at $93K. I could have bought at $100K and had it slice all the way down to $93K.

You bottom-ticking Virtuals, maybe you've got some sort of magic secret sauce. But for me—

Mm-hmm.

It didn't trade far below $2.00, did it? That was a pretty excellent buy.

It wasn't a bottom tick. I think—

No. Because I'm looking at the candles here. It traded to—

No. I didn't buy at $2.00. I bought about $2.20.

Okay.

The $2.00 to $2.30 area was where I bought.

Yeah.

That's still an insane buy. That was just pure charting. That bid actually—and this is something that you guys should just do—you never know if they're going to get hit, obviously. But just chart out some levels on the stuff that you really like, then be patient, and oftentimes it will get bid, especially during crazy moves over the last week.

Virtuals, for example, traded down to $2.00. I think I got nuked on the buys initially because I had set it for the $2.33 area down to the $2.24 area, just looking at it right now. That's the area that I was looking to bid, and then it got nuked, and now it's at $2.78. But I held on because I'm bullish on Virtuals. I think that it's a good product.

A good way to try to trade these things is—actually, on Virtuals, just to take a step back for a second, it was pretty new, so it was hard to get the right moving averages on it. But at least in terms of order blocks and horizontal support and resistance, it's, okay, where are you buying this thing eyes closed and just saying, “Okay, I want to own it?” You can use horizontal support levels to figure that out, and then just leave your bids. I left that bid there when Virtuals was trading at $3.00.

Hm.

I had a bid that was—

You got whacked.

Basically 30% below where it was, and it got filled, right? But that's just how you have to think.

And not in a long period of time either. You got filled—

No, but that's kind of—

You got filled quick.

That's how you have to think about trading these alts: because they're so volatile, you just have to wait to get filled on them. You cannot chase them unless you're trading on a day-to-day timeframe. You have to wait to get filled because psychologically it's going to go against you, or statistically it's going to go against you because it's super high volatility if you try to buy it on the way up.

Psychologically, that's very difficult because you're like, “Okay, did the trend break?” But if you buy it when it's falling into you, that's a lot easier psychologically. So, as a discretionary trader—

That's an important distinction. I agree that you should dip-buy on a scale. Set levels and chip away at your bids for something with 300% annualized volatility, something crazy—an altcoin like Virtuals.

Mm-hmm.

For Bitcoin, I don't like doing that. For Bitcoin—

No, no. It's different. Yeah.

I don't like trying to get cute with trying to dip-buy Bitcoin and then miss it. I prefer to wait for it to bottom out, then start to steadily rally again, and then I like to buy the recovery, because I tend to look at Bitcoin like—

Yeah. The issue—

Yeah.

Jonah, the issue with that strategy with altcoins is that the recovery can take place and fully price in within a few days.

Yeah. It's too quick. It's too volatile.

Bitcoin can rip for weeks.

Yeah. Or years. We're 2 years into this.

Yeah. Or you buy the BTC breakout on Trump's election, and it rips for basically a month straight, right?

That's a trade we talked about on this podcast, too. We said we were going to do that.

With alts, it happens really quickly. That's a big issue: you have to understand that and then take advantage of the volatility. You're bullish on something, you think it's going to go up, but if you buy it on a +20% day, then, because it's so volatile, the probability that you're going to be able to get filled lower than that price is pretty darn high, normally. It's just—

Yeah. That's a good lesson. So don't FOMO into crazy volatility. Your differentiator is the volatility. If the altcoin volatility is insane, you probably shouldn't be FOMOing into rallies, right? You should probably be setting levels lower.

I agree. Now, where this is obviously different is after a very long period of low volatility in alts. If it breaks out, sure, go buy it, right? If you've gone sideways for, I don't know, a month, 2 months, 3 months, there's reasonably low volatility in the market, and then you get a high-volatility breakout move, you can go chase that.

What I'm more talking about is an environment like this: Virtuals has gone up from $1.80 to $3.00. On that way up, if you're at $2.50 and it's already up 100% in the last month and it's clearly in a trend, it's super high volatility. It'll pull back to the trend baseline. Obviously, like I said, if it's gone sideways for an extended period of time, maybe it won't pull back.

You kind of have to figure out—it's like the difference between trading a breakout of a range versus trading a trend, right? This is just how I tend to think about things.

You know what this would've applied well to? This would've worked really well for Hyperliquid, right? Hyperliquid is an asset that was trading at around $2 a token, then it ripped up to $25, I think, after the airdrop.

You couldn't log on to Twitter without seeing 100 posts about how great Hyperliquid is and how it's going to replace Solana and Ethereum and Bitcoin and Microsoft and Apple and just be the next big thing. A lot of people FOMO'd into it on the highs, just like, “I have to buy it now. It's never going to go down again,” after it had just 10X'd.

Then immediately it nuked 30%, just like Virtuals.

Yeah, it's one of those things. People are the loudest when things are going up. Hyperliquid's actually tough because it's still doing very well. But I remember the day that everyone was freaking out about it. I think it topped at around $28 and then went back down to $20 to $22 over 3 days.

It's basically just as simple as this: if you're FOMOing a lot, buy 20% of your position and then set bids lower.

Yeah.

Because it's very likely that you'll get filled. Now, the one time that wasn't true with Hyperliquid is that it did go from $13 to $24 in a straight line. There were literally no dips on that thing. But at the same time, I view that particular piece of price action as a relative outlier to what we're—

These things are so gnarly.

Yeah.

Setting limit bids is—

And Virtuals is up 20% today. It's nuts. I love it.

I love Virtuals.

I love it.

We're going to have to talk about agents later on in the podcast. But before we do, I think part of the reason why you get these moves in crypto is because, let's say that your preferred centralized exchange doesn't list the latest and greatest altcoin that you want to buy. You're not really going to be sitting at your desk; you're buying it on-chain, basically. If you can't buy it off-chain, you're going to buy it on-chain.

You can use Jupiter if you're on Solana, or Aerodrome if you're on Base, or maybe you just do it natively in your Phantom wallet—

Or MetaMask or Rabby or whatever. You're just used to swapping stuff and trading on-chain. The user experience is getting way, way better for that. And on-chain trading isn't intuitive on a lot of these platforms when it comes to leaving a limit order, right? Like, shout out to our sponsors, Definitive—you can leave a limit order or do a TWAP with those guys on-chain, and that is the smart way to trade. That is a really intelligent thing that people should be doing. But if you're not using a product like that, if you want to buy Virtuals on-chain because you're not hooked up to the exchanges that list Virtuals, then, unless you're using one of these newer, Definitive-like platforms, the only way to leave a limit order is by sitting around and watching your screen until it dips, and then submitting a market order when it dips. You are the limit order. You're literally—your brain is in the order book, and that can be pretty exhausting and, frankly, not that practical for people.

That's why crypto trades the way it does. It's just a lot of retail guys aping into stuff, using market orders on-chain on the highs, or puking out on the lows. That's an opportunity for smarter traders who want to take their time and trade more intelligently, the way institutions do. But institutions aren't trading these assets yet. So, yeah, I guess it's nuanced, isn't it?

Yeah.

It is. It is. One thing I'm excited about is how that's going to change a lot moving forward. One discussion I was having, I think, on Twitter was around the future of crypto trading. It was because people were going back and forth about Hyperliquid and talking about Hyperliquid this, Hyperliquid that. It's Binance, it's this, it's that. It's amazing.

Then somebody chimed in and said, “Yeah, but it's a decentralized exchange. How big could it really get?” I do think that over the next 2 years, especially because of all the regulatory clarity, we're going to see decentralized exchanges eating into the market share of centralized exchanges. You can do everything on them that you can on a centralized exchange, but your money is more free and more capable.

One of the reasons why people stuck to centralized exchanges is exactly everything that you just said: You just couldn't do things easily on decentralized exchanges. But that's changing, and it's changing very quickly. I think what that means is that if you want to bet on a sector growing pretty substantially, that's actually a pretty good sector to bet on at this point.

Do you have to KYC to be on Hyperliquid?

I don't believe so.

Man, this is my big question about it. I kind of want to agree with what you just said, but my hot take would be that Hyperliquid is successful not because it solved something that centralized exchanges haven't, but more because it isn't requiring you to do something that centralized exchanges require you to do. So if Hyperliquid gets too big, I don't really see that continuing.

Yeah. I think at some point they're going to have to KYC people. With that being said, that's not the only reason why it's better, right? I mean, your capital is easily seen across the entire crypto universe.

For example, if you have a position on Hyperliquid and you make a tremendous amount of money on it, and you don't want to cash it out but you want to do something with that P&L, then you can borrow a little bit against it in a future world really easily. Whereas on Binance, that's going to be a lot harder, right?

Yeah.

Because something like Aave could, in the future, treat that position as genuine collateral that it could take over, and then you can go borrow against it. There are a whole bunch of different things that it unlocks when your capital is on-chain and accessible by other products that you're never going to get with a centralized exchange.

So I think even if you do introduce KYC, the future is still decentralized exchanges. No question.

I agree with you for AMMs, because I think AMMs are a better way of pricing new and/or illiquid assets than anything else. But I think for CLOBs—centralized limit order book exchanges like Hyperliquid—the jury's out.

Now, mea culpa here. I'm raising my hands, and I'm going to admit something. Avi, you and I did sort of a deep dive on a couple of projects 6 or 7 months ago. We did Ondo, we did Ethena, we did Hyperliquid, and a couple others.

Hyperliquid—I missed the boat. I got it wrong. I looked at Hyperliquid, I did the work, I read the docs, I did my deep dive, and I concluded, “Wow, this is a really slick user experience, but it doesn't have enough validators to be considered anything other than a centralized exchange.” Even if it were super decentralized, who cares? The world already has 100 CLOBs that work great. Why do we need 101?

I probably should have seen that they weren't requiring KYC, because that alone is worth billions to an exchange. I also should have looked at their tokenomics a little bit more closely and realized that they just buy their own $HYPE back with their trading fees, which is kind of a way of passing revenue through to users in a way that isn't illegal. So that's smart. Binance doesn't do that. They don't buy Binance stock with their Binance coins.

You know what's disgusting? We talked about Hyperliquid on the podcast 8 months ago. Neither of us profited from it in any substantial manner because, I mean, it was basically that. I don't know if we mid-curved it. Maybe that statement is mid-curving it.

No, no, no. Thinking about something is mid-curving a coin. I hate this mid-curving thing.

I mean, the issue was that I'd seen this play like 100 times. Right? GMX existed, and it was the top decentralized CLOB for ages.

Serum.

A lot of these things came and went, and I think I missed that it was the right time. Not only that, it captured the attention of the right people. A lot of people I know who used to trade on Bybit started trading on this thing.

The team was very willing—and this is important—to serve their users, and they were clearly dedicated to their users in a way that no other crypto product was or is, candidly. They were willing to give away so much of their wealth to crypto users. They were willing to pay so much attention to what those users wanted and build things for them, and I think that's underrated.

That's why I think a lot of projects are going to try to emulate that moving forward, because it's clearly been so successful. Here's something really simple: Hyperliquid gave a lot of its token to the users of Hyperliquid because it was kind of like giving a bunch of people addicted to a casino casino chips.

Yes, technically they did give them money, and technically they can go take that money and do whatever they want with it. I would almost guarantee you that a lot of people used that money to gamble more on Hyperliquid.

Oh, without question. Also, if you traded $1,000 worth of notional on Hyperliquid pre-airdrop, the amount of airdrop tokens you would have gotten for that, with Hyperliquid at the highs, was worth more than $1 million. If you're some degen who was trading on Hyperliquid before it was a thing, back 8 months ago when we talked about it, those people are definitely trading that money on Hyperliquid, for sure.

Yeah. I don't know how long that million dollars is going to last you.

And that's kind of how Aerodrome is eating Uniswap's lunch. They're just extracting less and sharing more with the community.

I think after people discussed tokenomics in 2021, it was kind of a big yawn because the only thing that mattered in 2021 was, “Are you long with all of your net worth and then some or not?” Who cares about the details?

I think finally crypto has entered the era of tokenomics, where you have to look at projects. Obviously, you have to make sure that the user experience is shiny and cool, and that it's in the right place at the right time. But the tokenomics—are they extractive, or are they accretive to the users of the product?

If they're accretive, then the project is going to survive. If they're more accretive than everybody else who's doing the same thing, then maybe that project will start to eat some market share.

I like your point about DEXs, Avi. I think that's really cool and important. I'm gonna keep monitoring Hyperliquid, even though I was the biggest skeptic of yet another exchange. I obviously think that Hyperliquid's airdrop was a massive success. But I wonder how—I’m gonna monitor it. I don't think—I think it's too late for me to buy it. Or maybe it's time to just drop in some bids 30% to 50% below here and see if I get hit.

Think about it, Jonah.

That's—

You gotta think about it.

This is an interesting conversation. We've got a few other things to discuss before we wrap the pod. We have to talk about agents, and then maybe we should talk about—I don't know if you want to or not—but OpenAI is talking about releasing ChatGPT 403, which supposedly is PhD-level computer science genius. It scores insanely well on coding exams, orders of magnitude better than anything out there today. It scores orders of magnitude better than anything out there today on math exams. This thing is just—people are talking about, hey, maybe artificial general intelligence has been achieved.

I think there are some market implications for insanely good chatbot AI out there, including in crypto. So maybe we should touch upon those two things—agents and AI—before we wrap.

Yeah. I mean, the agent thing is really just—I’m becoming more and more bullish every day that I spend on this. The primary application of AI to date has been primarily a passive application of AI, right? You interact with the AI to go do things for you. You go to ChatGPT to ask it questions. You ask it to analyze data. You ask it to generate charts. But you have to come up with the question. You have to come up with the subject. You have to come up with the framework. You have to come up with everything. Whatever you're doing with AI, there's a lot of actual work that you have to put in to make it valuable to you.

That means AI is very valuable to some people who can do that, and to some people who don't know the right questions to ask, it's actually not that valuable. Even to somebody like me, sometimes I'll know the right questions to ask, and sometimes I just won't do it.

Agents change this because they take AI and make it from something that's passive into something that can be active, right? You can create an analyst to go actively look at the market and actively give you ideas consistently every moment of every single day with good analysis. You can run a hedge fund off of active AI agents. That's really, really, really powerful in a way that I hadn't appreciated before until I started using them.

It makes me think that companies can be run a lot more cheaply. There's gonna be a lot of cost-cutting that goes on over the next, call it, 2 years as these things continue to get better. That's gonna be amazing. This has been the flip, where you take AI from something that's a good passive tool to something that can now emulate a human that is active and can add value to your life in ways that you didn't actually think about before. That's pretty damn cool.

I hope our AI bot gets smarter. This has actually been a little annoying because it's clearly still in the early days. I mean, the infrastructure—

Have you noticed that it's gotten smarter since last week? I've been tweaking it, though, Avi. Every week I promise to make this bot better.

Yeah, it's better.

I have some news for you.

Did you see the edits that I did as well? I tried to change the bio around it to yell at it to do more specific stuff.

Yes. I did see that, and basically we got help from the Virtuals team in terms of how to frame our ideas about how the agent should behave, how to give it examples, and how to formulate syntax within the agent JSON file.

Basically, every single week we're gonna make this better. I saw your edits. You saw mine. This thing was dumb last week when we announced it, and now it's just—

Yes.

—dumb. But it's less dumb. So we're gonna keep making it better every week. I hope, you know, let's call it a side project, Avi. Our main project is our trading activity. Our second project is this podcast. Maybe our third project will be just making this agent better week by week. We're gonna keep in touch with the community on it and keep improving it. But one thing that was kind of funny, some news for you. Before this pod, I was, um, on a call with, uh, you know, the, the name shall go unnamed, but we're gonna be working with a, a pretty awesome major s- partner/sponsor starting in 2025. Very exciting. You know, we're gonna reveal the details of that later. Um, and somebody on the call was like, "Hey, wouldn't it be cool if In our product that our customers interact with, you could open up a chat window and interact with the 1000X bot, the 1000X agent, that sort of sees your, sees what you're doing in crypto, ingests price feeds, ingests news, and can talk to you about what you're doing within the context of what's going on in the broader market, and make suggestions and talk to you ideas. I mean, so it'd sort of be like your, your sidekick, right? But not in a, not in like use- not to use your word, Avi, not a reactive sidekick, a proactive sidekick, something that's just like aware and talking to you about what you're doing. And I thought that's, that's kind of awesome. Like, I would've loved to have this as a trader my entire 20-year career as a trader. I would've, you know... I, I have worked with other traders on my book who've, you know, constantly brought up amazing ideas. I've been in teams where people bring stuff up. I've managed people who come up with good ideas, analysts, p- PMs who report to me. Like, it's... Or, you know, in the early days, like, I was the, I was the agent. I was the bot who made suggestions to the senior guys. But, like, this, this could truly decentralize finance. This could take, like, institutional, like, Soros-level markets intellect and put it into the hands of everybody, even if you don't know exactly what to ask and you don't have the right mentors or rabbis in the industry, you know?

It's gonna be amazing. I'm psyched, which is why we're working on this thing. Maybe this thing that we're working on, this 1000x agent, could be that. What if we just make this the best damn analyst in the world? It would be pretty sweet.

Let's keep working on it. Let's not give up.

Obviously. Why would I ever do that?

This one is too cool. This one is too cool.

This one's sick.

I think that one of the friends of our podcast said the best tokens over the long run will be the tokens that AI agents transact in, and I wanna get your take on that, Avi. Which cryptocurrencies—well, eventually, AI agents can just talk to humans about their trades and their ideas or whatever. Which—

They're gonna transact in probably USDC. That would be my guess.

What about—

There's kind of no reason for them to transact in anything else other than USDC, in my personal opinion.

Why not Bitcoin? Why not Virtuals? They're gonna touch all of these different—

It's just less liquid than the U.S. dollar. More stable. Maybe Bitcoin. Bitcoin could be good.

Bitcoin could be a good one. Yeah. I mean—

That would be pretty sweet. But it kind of reminds me of the old IOTA project, because in 2017 I sort of fell down the IOTA rabbit hole. Bless my heart back then. I wasn't a smart guy.

Their entire pitch was that they were gonna be the currency that machines transact in. What became very clear is that there's kind of no reason for machines to transact in anything that isn't the base, major base currency, as long as it's digitized and able to be transacted on their network. If they can communicate it to each other, why not?

The argument back then was there was nothing that they could communicate the dollars on other than Tether, and Tether was kind of a scam back then in people's minds. So everyone was like, "Okay, we're gonna create the cryptocurrency for the machine." The reality is that it's just gonna be whatever rail.

That doesn't mean that the things that enable these agents are not gonna be extremely valuable—

Yeah.

—which is very likely gonna be the case. If you think about it, there are gonna be companies like Virtuals that are just agent creation.

That's what they do. Their job is agent creation, and in order to create the agent, you have to buy into their ecosystem, right? It's really hard to describe this other than: if you want to write something down and send it to somebody, you buy into the Word ecosystem. You download Microsoft Word and use it because that's how you communicate with people, right?

It's kind of the same thing for Virtuals. This is what's going to create these agents, and if you want to interact with these agents, you want to use these agents, you have to buy into it. Instead of paying a subscription service, you have to buy into Virtuals to do it.

Yeah, but creating the agent, as we're learning, is hard. So maybe agent creation is the new marketing agency. Avi, maybe you and I should start Mad Men 2.0, and we should be people who help other people create agents.

Wait a second. That's actually brilliant.

Yeah, because marketing—

That's true.

This is the future of marketing. That was your comment, so I was thinking—

Mm-hmm.

If Nike wants an agent, they're not going to build it themselves. They're going to hire a marketing agency, like they do for all of their other ads. Why not be the Mad Men of agents and have tokens attached to them so that communities can get involved and feel incentivized?

I think, more broadly speaking, though, if I were an AI agent—

Mm-hmm.

I'm certainly not, but if I were a machine, I would want to transact in a token.

We don't know that. One day, we will have our AI agent on this podcast, and we will create an AI model of what it'll look like. It'll look like a combination of me and Jonah. We'll use our voices, combine them, and it will just talk. That would be pretty creepy, but pretty cool.

Watch out.

Can you imagine that?

No, I'm trying to, and it's just making me crack up.

A literal virtual co-host. I mean, that's pretty cool. I think it's going to happen. Give us 6 months, guys. We'll get it done. You heard it here first. In 6 months, we're going to have a third virtual co-host.

Okay.

For at least 1 podcast.

So if I were a virtual co-host, crypto trader, stand-up dude, I would want to transact in and hold Bitcoin instead of a stablecoin because Bitcoin has the best Sharpe ratio. If I were this value-maximizing robot, I would want to hold the thing that offers the best return per unit of volatility. That's why I would want to own and transact in Bitcoin rather than USDC.

You know what? I think that's a very respectable opinion. So in the future, everything will be run by virtual AI agents. Everything will be paid for in Bitcoin. You will all be millionaires many times over, if you're not billionaires, because the U.S. dollar will be worth nothing. This is a beautiful future that we've envisioned for ourselves.

I love it.

Truly.

Luckily, none of this is financial advice, and everything we say is obviously not going to happen.

It never seems to.

Except for that Bitcoin.

All right.

All right, Avi.

All right, Jonah.

Great talking to you.

This was fun. This was a good one. This was a really fun one.

Thanks again. It's always great. I learn a lot.

All right. Take care.

Later.