崩盘前，再向上冲一把？

You need to whet people's appetites, and then you get a little pullback. Everybody who missed the first rally starts freaking out and goes, “Well, I’m sure as shit not missing this one.”

Yeah.

That’s what causes something really stupid, and then it kind of unravels. That’s my mental framework for how the next few weeks are going to play out.

1. Jewish Rage Bait

It’s been a bit of a slow week. We’re kind of treading sideways, Jonah. We went up, we went down—

But we’ve been getting engagement on Twitter by rage-baiting people. That happened.

Yeah. You know what’s funny? It wasn’t even intended to be rage bait, although I knew I would get some rage for the tweets. If you’re interested in market talk, we’re probably going to spend the first 5 minutes talking about the tweets that Jonah and I put out that lit a fire about Jews. It tends to bother people for some reason.

Both Jonah and I are Jewish. We both apologize for that. Over the weekend, we both noticed a massive uptick in not just Jew hatred, but general hatred on Twitter. I think Twitter has become a very angry place. There seem to be a lot of angry people on there.

Ryan Selkis is actually what started this, and I’ll divulge an interesting story about Ryan Selkis on this podcast. It’s not defamatory; it’s just true. About a year ago, we both went to the Trump NFT dinner, before he was posting crazy conservative stuff online. He had just started to do a little bit of it, and then this kind of sent him over the edge.

I was actually sitting with him at the table when Donald Trump called him up. He looked at me with huge eyes and said, “What’s going—like, what?” He had no idea he was about to be called up. Trump says, “Ryan’s been instrumental. Why don’t you say a few words?” And he basically says, “Thank you, Trump, but I want you to be president.” It wasn’t anything special.

He comes back down, looks at me, and says, “I think I was put on this planet for a mission.” I was like, “Okay. Yeah, that was really cool. You just got called up with the president.” And he looked at me with the craziest fucking eyes I’ve ever seen in my entire life. I was like, “Oh, no, you don’t understand. I’ve been put on this planet for a mission.” That’s when I knew he was a little bit off his rocker.

Then, over the last few weeks, he started tweeting about how the Jews are declaring war on America. Jonah called him out on a tweet, calling him “Skinhead Elmo,” which is great branding. I basically retweeted that and added a little bit of my own flavor, explaining what people who hate Jews—and who also generally spread hatred around to other races, people, and sexes—do.

They apply different standards to everybody. They’ll apply a standard to Jews, Black people, or Asians that they don’t apply to their own. Then they hone in on it and only see that.

One great example is CBS. There’s that infographic that gets sent around about all of the Jews who work at CBS and in the media. There’s an infographic of 50 Jews, and then when you actually look at the employment numbers—at how many executives exist at media companies—the number is around 7,000. These companies are huge. Of course there are going to be Jews working at these companies.

Anyway, I kind of lit the internet on fire, and Jonah and I are not political commentators. We can get political every now and then, but politics, I think, has been shoved into basically anyone who’s on Twitter. Politics has been shoved into your face over the last 2 or 3 years, since Elon Musk bought the platform.

Elon’s done some great things for the platform. I think this is one of the bad things: politics is bleeding everywhere on it. I just hope that we’re kind of here so that you can escape the rat race and not get rage-baited by what perceived groups of people may or may not be doing, getting really angry and worked up about it. Escape the rat race, make some money. Nobody’s holding you back.

There’s no secret cabal of people plotting against you, or us, or anybody. Everybody’s just doing their own thing and trying to make their way in this world. There’s no reason to spread hatred, I guess.

I appreciate that message. Thank you for suggesting we talk about it, because for me, when you look at Twitter, it’s a fantastic source of trading information and a fantastic source of general knowledge. If you want to learn about something or catch breaking news, it’s kind of the place, especially for some of the more market-impacting news that takes much longer to filter through to mainstream media outlets.

We’re all there. We’re all watching it. We’re all trying to escape our wealth trajectory by staying plugged in through Twitter. Of course, there’s going to be a portion of Twitter that tickles that funny bone in your body and makes you upset, enraged, outraged, or whatever.

But I think, for me, what happened was that it permeated through to the crypto trading part. Before, it was compartmentalized. There was the crypto news, there was the global news, and then there was the stuff that kind of pissed me off.

Watching a formerly respected—very respected—member of our crypto analysis and trading community completely become a raging Ku Klux Klan-level anti-Semite and blame the Jews for America’s ills, you know, I’m a Jew. My kids pledge allegiance to the flag every morning in school. I love this country. I work hard to make it better. I pay my taxes. I don’t appreciate that.

Beyond just me complaining about this one guy going crazy, I think there’s a broader theme. We are now in the era of AI, and on Twitter, it’s easier to lose your bearings. If the Rothschilds were a prominent Jewish banking family 100 or 200 years ago, or whatever it was, that does not mean that “the Jews run the banks.”

Avi and I fall within the broader set of Jews. We don’t run anything other than this podcast. It’s pretty annoying to hear that stuff. If it were just annoying, it would be fine, but it’s kind of a mind virus that’s now infected people I used to listen to. I would just like to say my piece and say, “Please stop.” We’re good people. Don’t stereotype us and make us into some sort of loathed minority.

Anyway, zooming back out, this is the kind of thing that probably wouldn’t have happened if markets weren’t slow.

2. Markets Going Sideways

Yeah, that’s fair. If markets were ripping, I don’t think anybody would be talking about this. To be completely honest, we’re coming up on week—what is this? This is week 6 of sideways.

Yeah, starting on Monday, July 14, we’ve been sideways. Thursday, July 10 was the wick that brought us to these levels. If you look at something that’s really been going, like Hyperliquid, the first move up to current levels was back in June—now 37 days. It’s been 37 days of sideways, and I think people are starting to lose it on Bitcoin.

3. Bullish LINK?

Now, while Bitcoin’s gone sideways, obviously ETH has been trending up and trending up in a straight line. That’s been very exciting for people. There have been some good ETH-beta trades out there. You called out AERO; that was good. Aave did well for a hot second there and then retraced. LINK has done extremely well and was pointed out earlier as ETH beta.

Let’s talk about that at some point. The LINK chart does look very good and, to be honest, it fits into the thesis of the quote-unquote institutional rally because a lot of people know about it and it’s been around for so long that people on Wall Street kind of know it exists.

In theory—no, not just in theory; in actuality—it fulfills a very important part of the crypto ecosystem by providing oracle data. So it has a real job. It’s well known, and I think it’s part of that ETH-beta bucket.

But it’s not just a dinosaur coin that’s going to rally because institutions are familiar with certain dinosaur coins. I did a little digging on LINK, and if you go on DeFiLlama and look up their actual revenues, it’s pathetic. It’s something like 5-figure revenue, but apparently most of their oracle revenues, which is their big business—they’re an oracle—are off-chain.

So supposedly, there are big companies off-chain paying them off-chain dollars that we can’t track for their oracle services.

And I don't know. Maybe this is something for the community to help us answer. Maybe somebody can help figure out how to track that because, unlike publicly traded equities or privately traded companies, where there is some telemetry into what's going on, here it's like they say they're doing a lot of revenue providing oracle services, but you have no idea and you have no way of knowing.

They don't do token buybacks, to the best of my knowledge, so you can't track buy-and-burn. It's ultimately just this nebulous business—with quotation marks around the word “business”—doing potentially large, potentially very small revenues. We don't know. And so, to me, it's not quite yet an investable thesis for the long haul, but I'd certainly buy it for a trade just because it's one of the things that seems to be performing in a momentum market.

So, if we start rallying again, maybe LINK should be on the list of things you hold for a week or two, or a month or two, up there with some of the other momentum names we've been talking about.

4. This is Your Alt Season

Yeah. And I think that's an important thing to point out: you do have to—this is the period of time that I've talked about before in the past. This is your alt season. This is what it's going to look like moving forward. And what I've said over and over is that it doesn't last that long.

In my personal opinion, we probably have 3 more, maybe 3 to 4 more weeks of this before you get some sort of implosion in the alt market, if it's not already underway, which I don't think this is. I think this is a pullback, and we'll get into that later. But I do think that you have to be nimble here.

If you're trading around the LINKs, the ETH betas of the world, you just have to be taking profit on 15% to—you know, take a third profit at 15%, a third profit at 30%, and a third profit at a 50% move. You can structure the trade as you want, but basically, if you're buying any altcoins in this particular environment, you should be taking profits aggressively.

Because this is the environment where you get these completely inefficient pops from people who are kind of doing what you're doing, which is playing the rotation, but just getting in at a worse time than hopefully you did. Hopefully you're buying on days like today and not buying on days when they're up 15% or 20%, right? That's sort of the goal, right? Everybody wants to buy it when it's going up. Nobody wants to buy it when it's going down. And that's because that's how crypto works.

And that's kind of what's happening in ETH now. You're seeing a lot of people call for it to be over. Meanwhile, ETH touched basically all-time highs and then retraced 10% into a reasonable support level, with treasury companies still buying. So, I'm not particularly worried about this pullback. I think that we probably get another leg up, at which point I'd be a net seller of crypto on the next leg up.

Because I do think that it gets—this was the tasting pump for alt season. The next—

Michelin-star tasting pump.

Yeah, exactly. The way that I always think about it is that you need to whet people's appetites, and then you get a little pullback. Everybody who missed the first rally starts freaking out, and they're going, “Well, I'm sure as [__] not missing this one.”

Yeah.

5. How to Manage Your Capital

I like that framework. A couple of things. I normally hate buying sell-offs in crypto because I've been burned so many times trying to catch a falling knife, and then crypto just goes so much lower. But if you zoom out, we're still in a white-hot bull market here, even if it's stabilized a bit, especially for certain tokens. So, oscillation around that upward trend is probably okay to trade around.

Meaning, on a day like today, for a token that I'm kind of long but still feel nakedly underexposed to—in my case, it's Aerodrome—I have some, but I don't have enough. This is probably a good day to buy. It's not really catching a falling knife. It's more like just getting in, playing for a reversion to an upward-sloping mean, right? And so I kind of like that. I hadn't thought about it.

Then you bring up two more things—two more comments on what you just said. Another point you made is about how you want to sell or reduce exposure to crypto during the next turbo pump. And I kind of agree, but the way that I would reduce exposure would be, I would probably just get rid of all the leverage that I have on and consolidate all coins back into Bitcoin because I still think Bitcoin's got some room to run.

I wouldn't consolidate into dollars unless I was planning to buy it back lower, which is more active than I like to be, just being me in a high-tax jurisdiction. And then the final point that I wanted to talk through with you: basically, this cycle, for the last year, I've been playing with a strategy that's kind of risky that I haven't really talked about, but I'm going to try to justify why it's less risky than other ways of trading. And I want to get your take, Avi.

So, putting fresh capital into crypto—for me, crypto is kind of a roach motel for money. I don't really pull money out of crypto. I did once, when I sold a bunch of bitcoins for $300 a token back in 2013, and I'm burned from that. So, I haven't really withdrawn crypto into fiat in a major way, other than occasional profit-taking. More often than not, I'm putting money in.

On these fresh all-time highs, I don't like to put fresh capital into crypto, but there are so many things I want to buy that are higher-beta tokens, and I don't like rotating either because then I have to realize capital gains on Bitcoin. So, one thing I've been doing—and I did this with a couple of tokens that we've talked about on the podcast, most recently with ETH and Aerodrome—is, instead of pumping fresh capital into my portfolio or wiring money in, I've just bought with margin. I've used my existing tokens and margin-bought ETH, margin-bought Aerodrome, and margin-bought a couple of other things.

Isn't that the same [__] thing as putting in fresh capital?

Not really. Closing a levered position is as easy as clicking X on the user interface of one of these exchanges. I've done that before. And you're never going to lose more than you already have on that particular venue, right?

So, what you're risking isn't fresh capital that you've put in from other sources. You're just—

It's the same risk profile.

To me, it's the same. It's the exact same thing.

Not exactly, though. It's really nuanced. It's not that complicated, but let's say that I have $1 million worth of crypto on Kraken and I buy some more on margin. The most I can lose is $1 million, right? I'm not going to go into debt with Kraken. Whereas, if I go and buy $200,000 worth of additional tokens with fiat that I wire to Kraken, then the most I can lose is $1.2 million. So, it's a downside-limiting exercise. Would you disagree?

Yeah, I would disagree with that. Basically, I think you're right in an absolute sense, but I think you're wrong just from a risk perspective. When you use margin, you're increasing your risk profile. And so it's actually likelier that you'll lose money in that scenario than by putting in fresh capital, because you do have a liquidation price, right?

Yeah, of course. And so basically, what I'm doing is—I agree with you that I'm taking more risk than I would if I were pumping in fresh capital because I can get liquidated. But for very short-term trades that I'm monitoring closely, I'm comfortable taking that risk because I'm in a lower-downside scenario.

The only reason to do that is the friction of moving capital around. I wouldn't—

You kind of hit on it, too. That's the real reason. I wouldn't necessarily say that I think it's the exact same thing.

From my perspective, you're making the same financial decision. If you're buying $250,000 of an asset in any way—whether it's cash, you get a loan, or you mortgage your house to get that $250,000—at the end of the day, you're still putting an additional $250,000 of value at risk in this asset.

Yeah, of course. It's the same thing to me. The only thing is less friction, and so I wouldn't say it's safer either. Safer is definitely not the word that I would use.

Okay. Maybe let me call it psychologically easier for me to manage. One, because of the friction. Two, because I feel very happy to close a levered position, but somehow I'm just really terrible at pulling fiat off exchanges and wiring it into my bank account, putting it back into something low-risk like T-bills or the stock market. I just don't have a good track record of doing that.

Maybe I should just stop fucking around this alt season with these tokens on margin and put more cash into this to play it, and feel comfortable sitting on cash on a crypto exchange. But I have this problem where once I put cash on a crypto venue, it very quickly turns into crypto.

It just kind of stays there, and it's kind of like you get addicted to the trading of it, so it's very hard to pull it out. I know I sound stupid, but I'm just looking for ways around this problem.

From a psychological standpoint, I do understand what you mean because I also do that. If I have money in crypto, it's very rare that that money in crypto comes out of crypto. I actually just recently did this, for example: I put ETH on Aave and borrowed against it and paid an exorbitant rate, but that's fine because it was short-term.

It's still exorbitant. I thought it was 3%.

For an overcollateralized loan.

It's more expensive than punting on perps. It's just that I don't have access to—

You can margin in the US. You don't have to trade perps.

Yeah, but I probably should have just borrowed ETH, I guess.

Yeah. Basically, I find that it's very easy for me to click the X button and market-order myself out of levered alt trades before I get into trouble, or just take profit and do whatever—roll that money back into Bitcoin. But for some reason, psychologically, I just cannot. I lack the discipline to hold USDT on a crypto exchange and not have it somehow turn into crypto after one of these conversations, or to wire money off.

Sorry, I'm just having a moment where I realize I might be fucked because I borrowed USDC. Why don't I just borrow ETH?

ETH is definitely cheaper to borrow.

Yeah, I'm aware. Anyway, I just naturally defaulted to—

We just lost Avi for the next 10 minutes. I'm going to be talking to him, and he's going to be like, “Yeah, yeah,” with a 3-second response time as he goes and DeFi's his way out of this.

Yeah, that was fucking stupid of me. Anyway, moving on. Moving on. Moving on.

We own our Ls on this podcast. We own our Ls.

We'll never lie to you. You just get the unfiltered truth, even in the moment when I open my eyes and realize, “Why did I do that?”

Yeah. For me, it's less risky to use leverage because I'm stupid. Look, we're just normal people screwing up in public to try and solicit information and learn as we go here.

All right, what do we talk about now? Do we talk about these treasury companies driving ETH and how to track that on various dashboards that are out there? Because to me, that's the end of this bull—this alt season—is when those mNAVs go below 1.

6. DATs Sizzling Out?

I'll put a feeler out there. If there's anyone tracking these ETH treasuries, let me know. Do you know of any that exist?

Well, our friends over at Blockworks Research have published a dashboard with an mNAV chart. I can share it.

Do they have ETH, or is it just Bitcoin?

They have ETH and BTC. Let me share my screen. Window: Treasury Companies. Share. Okay, you see that?

Yes.

Let me maximize it.

Can you get out of this longer time frame and just show the last month? There's a huge spike, and I want to get rid of that. What I want to see is what the trend is looking like. The trend is looking bad.

Yeah, the trend looks bad. All of these—SBET, BMNR, which—

We may be toward the endgame of that, according to the—

Yeah, BMNR just pumped a little bit. So—

Basically, the magic number is 1 here. That's the difference between a premium and a discount. It looks like the green one, BTCS, was at a discount for a while, but the purple one, SBET, just crossed over the threshold into discount.

I think the whole market is exposed to the Bitcoin DAT treasury companies, but alt season is exposed to this. This is the chart that kind of leads it all. Once we see these things start to trade at a discount, which they kind of are—

No, I mean, they're not trading at a discount.

A couple of them are, right? What does it mean when this green one is trading at 0.87? Is it a discount? Am I reading it wrong? It's not even trading at NAV. Let's do this—this is enterprise value. Let's do market cap. Let's do market cap.

Okay, look. The market cap of SBET right now is $2.865 billion.

Yeah, and the total amount of capital that they have is $3.3 billion of ETH.

Yeah, so Blockworks Research is right. This is a straight-up discount.

And it was trading at a premium as recently as last week, so that just dropped. Let's get out of this one. You can click on Bitcoin, too, and there's a bunch of them here. You have to click on market cap to get them all. Let's get past this crazy spike. It's not looking so hot. Even MSTR—

That's actually a very good point. How many people are talking about this right now? Let me look up “SBET discount” on Twitter. Either we're horribly misunderstanding something, but I don't think so.

No, I don't think we are. This is a discount. There's another one you could look at called Strategy Tracker that has other ones like Metaplanet. You can see the trend. This is grotesque.

Obviously, the trap you don't want to get caught in is, “Oh, look, it's been trending down from 12x NAV to 3x NAV during the middle of that crazy tariff macro crisis, and then it all just bounces right back up with the market.” This is different because this time the premium to NAV is leaking steadily lower every single week, despite the fact that we're in a bull market and there's no exogenous crazy tariff crap driving things.

So you're getting a really pure-play look at the health of the treasury company ecosystem here, which now, I guess, the bulls out there will say, “Well, Jonah, Avi, why does it matter if these things go to a discount? Unless they're forced to sell, the token prices should just keep going up.”

It's because they can't buy more, or it's going to be very hard for them to raise capital to buy more when they're trading at a discount. The way they buy more is if they have warrants issued—cash warrants issued—and the ETH price goes up, so equivalently their market cap goes up and hits the strike price, and then they get those warrants issued. But they're not going to be able to raise debt to do it.

Yeah.

So it's going to be a bit tough. Obviously, you're going to see the buying stop. The buying clearly hasn't stopped yet.

At least SBET seems to be buying. BMNR hasn't; they stopped buying for a little bit. Their NAV is going down. From the last reading, from August 13 to August 15, it looks like their NAV came down a bit. Obviously, it's because ETH came down a bit, but also because—

They're not actively purchasing huge amounts of ETH right now.

So it is a little bit of a worrying trend, and that's one of the reasons why I think, again, we get potentially a last gasp. At least I'm betting on that next push up from the people piling in who sort of missed the first one.

And then it starts to unwind. By unwind, I don’t mean all of that $10 billion of Ethereum that is now in these companies is going to come out, because that’s not really how it works. They stop buying, and all the people who were buying ahead of them—basically front-running these guys—also stop buying. And then who’s left to buy ETH?

7. Is ETH Move ALL DATs?

Despite what all the people celebrating ETH on Twitter are saying, the only reason people are buying ETH, which I will reiterate, is flows. It’s because of this structure. Without this structure, ETH/BTC would be below 0.25, in my opinion. It would be totally trashed, and it’s heading there anyway. Sorry.

You mean you don’t believe in the “ETH is money now, ETH is the future, ETH is finance” narrative? You think it’s really just the treasury companies?

Look, I missed the first trade, and everybody in the comments is going to be angry at me.

I missed it too.

Because I missed it. But what happens is that we missed the technicals of ETH, and then we flipped. We flipped late, but at least we caught a 25% move in that flip. That’s what you do as a trader. You’re not going to hit every single fucking trade. It’s just not happening. You’re not hitting every trade. You just try to figure out where your edge is.

I clearly didn’t have an edge in the first 2x on ETH, but at least we had a little edge in this last 25%. And I’m telling you, I do think I understand what’s happening now. People are not buying ETH for any reason other than, “Hey, these treasury companies were able to raise money from Wall Street to buy ETH. Let’s run this trade.”

People are buying Bitcoin because they view Bitcoin as a genuinely useful geopolitical asset for the future, and they realized that you could make a lot of money with these treasury companies. Then somebody called up all of the people who missed the Bitcoin treasury game and said, “Hey, guys, we can probably run this back with number 2, ETH.”

It doesn’t really matter that ETH sucks. What matters is that you missed out on the BTC treasury trade. Why don’t you get in on this trade and make money? That’s what’s happening. That’s very much what’s happening.

That’s $10 billion of ETH that was bought by these companies. I’m going to assume at least $10 billion of front-running, so that’s $20 billion of buying. That’s what sent ETH here.

Oh my God.

Right. That’s why ETH is here. Not—

I put out a little bit of a rage-bait tweet to test that hypothesis. I said that these treasury companies have nothing to do with price action right now; this is all a deregulation trade. I don’t actually believe that. I just kind of believe it.

I think that, basically, treasury companies are a symptom of the broader deregulation trade. But I do believe that they are driving price action. I was just playing with words a little bit by saying that it’s deregulation that’s driving the price action, not the DATs—even though deregulation is manifesting itself as DATs being possible, and then DATs are buying, which obviously impacts price action. So I was kind of playing with words. People really vehemently disagreed with me, including friend of the pod Fejau.

Let’s assume you’re right. Let’s assume you’re right that this is really what’s driving the price of ETH up and, to some extent, Bitcoin, but let’s mostly focus on ETH. Then you also said something else, which I kind of disagree with: that even if these premiums turn into big discounts and this treasury phenomenon collapses in price space, it won’t really impact ETH that much. I respectfully want to challenge that. So here we go. Let me challenge you.

You threw out the number $20 billion, right? That’s a steady inflow of $20 billion over basically the last month and a half. That clearly offset a lot of selling, and it maybe even fostered some more buying, too. But let’s just say it hasn’t. Let’s just say it’s only $20 billion worth of inflows, $10 billion of which are from the treasury companies.

Now, let’s say that the investor base willing to buy ETH DATs at a premium to NAV has been tapped out. They’re not buying anymore. Let’s say the buying just stops—the ETH buying just stops—because these treasury companies aren’t raising fresh investor capital at ridiculous valuations to buy ETH.

So maybe that’s what we’re starting to see now. The price levels off around $4,000 a token, but the price of the DATs starts to go down. While I agree that, in the short run, the price of ETH can’t crash if the treasury companies simply go from buying lots to not buying any, I do think that the price of the treasury companies—their stock prices—can crash very quickly.

Let’s say you’re holding Metaplanet. Let’s leave MicroStrategy out of it. Let’s say you’re holding one of these ETH DATs. Do you really want to stand in front of the bus while ETH is going sideways and the mNAV just keeps trickling lower—the premium to NAV? No, you’re going to get out.

These are people at pod shops like Citadel and Millennium who can’t buy ETH or the ETH ETF. They’re just buying DATs instead because they’re equity traders, and it’s been a good trade. They’re not loyal people. They’re just going to get out to avoid the bus. All the retail traders are going to get out, too.

I bet it’s not going to be like Lehman Brothers, which went straight to zero and went bankrupt. I doubt that these companies are going to have solvency problems, but I could see the discounts going as deep as Grayscale did—as GBTC did—which I think went down all the way to 55% or 60% below spot.

Yeah, it was like 50%.

Man, that was such a great trade. At some point, these are also going to be a fucking screaming buy.

Yeah, that’s what I’m thinking. It’ll be a screaming buy. But let’s finish the thought very quickly, and then I want to hear your take. The DAT trade is not to short these things or short them versus ETH. The trade is to wait until they suddenly cascade down to distress levels and then rerun the GBTC playbook all over again. It might happen at a 40% discount this time because people have seen it already. Anyway, sorry. Go ahead.

8. When to Buy DATs?

I agree with you. Guys, just to reiterate, that’s kind of our job here. Our job is not to come in and give you guys a trade of the week, like, “Buy this meme coin, sell it at plus 20%.” It’s to try to set you up for these kinds of home-run trades that maybe don’t really—I mean, they happen once a year, maybe a few times a year. You kind of see them coming, but unless you’re prepared, you can’t take advantage. That’s going to be a home-run trade at some point.

These treasury companies are going to get forced liquidations, and people who really just need to get out are going to sell. Maybe they overleveraged themselves. Maybe—I don’t know if this is true. I have no freaking idea if this is real. But what if there’s an entity out there that has looped this? It bought a bunch of MicroStrategy, borrowed against MicroStrategy to buy another Bitcoin treasury, then borrowed against everything to buy an ETH treasury, and then it all liquidates itself.

I’m not saying that’s happening, but it’s not improbable that there’s some weirdness going on in this market. That’s where all these people are getting the money from. Some of it, I assume, is borrowed money; some of it, I assume, is real money. Some of these companies, I assume, are good. But it’s going to be a very, very, very good trade to buy at some point.

Anyway, I’d probably scale in from a 30% to 40% discount. I also think that’s just a better way to hold ETH or Bitcoin.

Correct. That’s a better way to hold ETH or Bitcoin. Even at a 20% discount, I’d probably buy it. I’d have to look at the structure of some of these companies, but, for example, if Nakamoto went to a 20% discount, I’d probably buy it there. If Metaplanet went to a 20% or 25% discount, I’d probably buy it there. Those two, I think, are structured okay.

The structure is so critical, and I’ll tell you why. Now I get to pull out my old analogy from Lehman Brothers. Back at Lehman, when it went bankrupt, the teams that survived and got acquired by Barclays—we used to talk about this, especially us on the credit side, which is where I sat at the time. We created this—or maybe we didn’t create it, but we used this saying: You don’t go bankrupt because you’re insolvent. You go bankrupt because you’re illiquid.

What does that mean? If you’re insolvent, in the sense of the expression, it means that your liabilities are greater than your assets. You just owe more than you have. But you can be fine in that scenario for decades. Just look at the United States of America.

Maybe that’s a bad example. Basically, if you can service your interest payments on your debt, you’re good.

You're not going to go bankrupt.

Mhm.

But you go bankrupt if you're illiquid. Meaning, a bill hits your mailbox that you can't pay because it'll take you 100 days to sell some asset or unwind some structure in order to get the money to pay that bill, which is due in 50 days. That's when you go bankrupt. So you really have to assess whether these treasury companies are insolvent, illiquid, or neither.

The beauty of GBTC was that there were a couple of beauties to that trade. The first was that the price of Bitcoin was low, so you could feel confident that the whole market was probably going to appreciate over the long run. The second thing was that they were neither illiquid nor insolvent. GBTC's bills were probably a few employee salaries and fighting off legal boogeymen, and it could easily service those with whatever it was, the 2% fee it charged on all the Bitcoin it held in its trust. It could just sell that Bitcoin, pay all its bills—illiquidity, zero; insolvency, not a problem.

With these treasury companies, some of them—especially the ones trading at a steep discount to NAV that rely on equity financing—may very well be insolvent. While they're not illiquid in the short run and probably have enough money to cover their bills for now, they might become insolvent and illiquid pretty quickly. You can't just bottom-drawer this the way you did with GBTC, look the other way, live your life, and then check your portfolio in 2 years and feel smart. If you pick the wrong one, you could be totally right about the trade—getting ETH at an amazing discount—and you just picked the wrong horse, and it dies underneath your feet. The rest of the race is going on, and you're just sitting there underneath a dead horse.

Yeah, no, no, no, I'm with you. It's very, very important to pick the right one for every single thing that you just outlined there. Maybe next time on the pod, what we'll do is a little prep for you guys, because the more that I think about this, the more excited I get about this particular trade. I can't wait to do it.

These are tasty trades.

Let's come back, and we'll let you guys know what we think the best-structured ones are on the next podcast so that we can all get on this trade together.

MicroStrategy is the most obvious one because it's so battle-tested, right? But MicroStrategy might not actually trade at a discount.

9. Saylor the GOAT?

I mean, put it this way: if it does, that's a screaming trade right there.

Sure, for sure—if it does.

How much is Saylor up, by the way, on his Bitcoin? What's his unrealized P&L?

I don't want to misstate this. I think it's 27 billion. That's insane.

Holy.

27 billion.

What's his strike price? What's his average fill?

Freaking insane. He only has 8.21 billion of total convertible debt, with an annual interest payment of 35 million.

Move over, Warren Buffett.

That's freaking amazing. That's so good.

He's done so incredibly well. Wow. I'm honestly in awe. Me too.

I'm in complete awe that he's managed to pull this off. Well done, Saylor.

Hats off to you,

Big man.

10. One More Leg Higher?

Yeah, seriously. No, this is going to be good. Another thing—I want to go back to what I was saying before. I don't think we're done yet. I don't think we're at the end. I think we get another leg up, and I think if you're not buying here, you're probably making a mistake. I'm definitely buying here, shoving it a little bit more on this pullback, and looking for the next rally. But it is also true that when ETH rallies and when the altcoins rally, we're close to the general cycle end—not just the alt end.

Yeah. So it's very possible that I was of the opinion that we would get a slow summer, and that's been true from the Bitcoin standpoint. Obviously, it's not true from the ETH standpoint—we had quite a busy August. But from the Bitcoin standpoint, slow summer and then a pickup in September and October.

I think it's possible that over the next 3 to 4 weeks, we get a nice rally everywhere. Bitcoin doesn't get above 120 for an extended period of time. We wash out after that, boom, to around 98 to 102, which would feel like absolute death for people. Then we go sideways for a bit, and then we go up.

That's my crazy take. You probably hit 100K again, go sideways for a bit, and then go up.

Maybe there's a way to bet on that with a series of parlays, and then it's just—

I think it's going to be really happy, really good for the next 3 weeks, then really bad for a little bit, and then really good again.

Yeah, that makes sense. That's my path for you. You know what—

As a trader, if you're buying these levels—because people always say, “You guys told us—although you said A, then it retraced”—let me just reiterate: if you're buying here, you're selling at plus 15, you're selling at plus 30, and you're selling at plus 50. Then you're out.

You know who you kind of are echoing here, or maybe he's echoing you? A friend of the pod, Roshan Patel, very smart guy, great trader. He put something out this morning that I really liked. He said, “For what it's worth, the one thought I felt compelled enough to physically write down from the journal was, ‘ETH pumps hardest last.’”

He says, “While I don't think we've necessarily topped cyclically, we're pretty darn close, and taking less overall risk moving forward makes way more sense,” which makes me feel stupid for fiddling around with margin at these levels. We have another leg. It's often the most parabolic.

That part makes me feel smart for fiddling around with leverage at these stages, because usually when you're in the 8th inning time-wise, you're in the 3rd inning price-wise. You can get away with playing with a smaller capital base. But then he talks about DATs being all the momentum.

11. Crypto Return Thresholds

He said, “A huge part of this willingness to flip and cut”—and this is the critical part of the tweet—“is that the traders of crypto here have way lower return thresholds to feel good.” Put it this way: they buy something, it nearly triples, then it drops 20 to 30%. They don't care if it could double from there. The return was objectively good enough. Time to move on.

These aren't delusional moonboys. None of them are holding this stuff for the absurd price targets on CNBC. They are not believers. I think that's critical, right? We have to step back and, in comparing this to previous cycles, recognize that this isn't like the beating heart of crypto being the online retail degen who's going to feel bad about selling a 3-bagger because somebody else held it for 10x or 100x.

We're dealing with people with deeper pockets, bigger treasuries, and lower return thresholds. So it kind of makes me scared.

Or, in other words, we're dealing with freaking weaklings. We're dealing with paper-handed losers. If any of you just got into crypto in the last few years and you're looking for 20% on your money, you're a fucking loser.

At least look for 30. Anyway—

The registered investment advisors, when it comes to retirement, will cite the 3% rule or the 4% rule: your portfolio has to generate 3% after tax per year in order for you to retire, and you should spend 3% of your net worth every year. This excludes real estate.

Which means, I think, that for most people to accumulate that much money—so they can basically service their entire life's worth of spending at only 3% of their portfolio per year—you've either got to sell your tech company, be an early employee at somebody else's tech company that becomes a unicorn, or be an astoundingly successful finance person if you want to hit escape velocity in your 30s or 40s in crypto.

That's why we're here.

Yeah. Anything else? We good?

I think we're good, man. That was great. It's good talking to you, as always.

Yeah, likewise. I feel both smarter and stupider somehow.

12. Final Thoughts

I definitely feel stupider solely because I borrowed USDC instead of—

I feel stupider because I admitted my brain glitch, Snow Crash, when it comes to leverage. But smarter because I learned from you about the market.

Smarter because you said, “Aren't the borrow rates like 2.5%?” I was like, “It's 6.5%.” Wait.