山寨币见底了吗？| 1000x

I think 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 into the market and just ride it up.

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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. One thing that I'll point out is that it's very clear now—obviously, this is hindsight talking—that a substantial portion of the move above $100K was driven by Saylor just jamming it in. He got an average price of $106K, and that's insane considering the fact that we traded above $106K for, like, 30 seconds. I mean, I think it was 24 hours that we traded above that price.

It's kind of insane. He clearly jammed it super hard near the highs, and then, once his bid went away, market structure deteriorated a bit. Now we're stuck in a kind of interesting zone where BTC is holding $90K. I'd say that the bottom of the range is $90K to $93.5K, and we're sort of hovering at that level right now.

But alts are doing really well. Today, for example, ETH/BTC is up almost 4% off the low, and 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 tends to be very, very good for altcoins post-mid-December, and I think we're going to see that play out.

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 go bid alts, and it's going to lead to relative outperformance by ETH. One thing that has been really bad for ETH is that, obviously, the main buyers have been buying Bitcoin. Now that the main buyer is out of the market for a bit, the ETH/BTC ratio can readjust itself, the flows will start to average out more, and 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.

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

This sell-off was not on 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 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 was really a Fed-type event, so 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 not just 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, so most participants with the big bucks are sort of on the sidelines or protecting P&L.

Then you're left with, usually, CTAs. Those are the sort of algorithmic shops that trade no matter what time of year it is or what hour of the day it is. They're big, right? 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 an intelligent comment. Perhaps it's because it's not all alts that are performing right now, like DOGE and TON. Some alts are. Yeah, I think there are select alts that are outperforming. What you just said clicked a puzzle piece in my head.

I think a lot of the exacerbation of the alt move—when BTC was trending down, alts were nuking. BTC was down like 3% one day, and alts were down 15% to 20%. 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 basically 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, as you said.

These alts just 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.

I think 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.

I think 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 into the market and just ride it up.

If you really think about why it sold off, there are a few reasons. One is obviously Saylor stopping 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 2 things is out now.

The Fed being hawkish on the general markets and saying, “Okay, we shouldn't be cutting that fast”—any downside in the equity markets will just reflect an actual slowdown in the economy. It'll reflect that we're at equilibrium at this point, so it will reflect bad things that are happening. 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's 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 2 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 buy some more crypto after we hang up the phone here. What you described is just a bull-market washout. It literally looked like the textbook says it's supposed to look: you run up on euphoria, nothing really that relevant changed, but you get one little negative piece of news and anybody without a lot of conviction probably hits the sell button.

There are a lot of unrealized profits out there, and people want to protect that into year-end. To my point about risk aversion, nobody wants to ride this thing down to $40K before the end of the year and just have a terrible 2024 when they could have had an amazing 2024.

Let's talk about the Fed for a second. They just came out jawboning more hawkishly than people expected, than the Fed watchers expected, and than the interest-rate markets expected. This wasn't the announcement of a new hike cycle. This 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.”

I read the Fed minutes—the side-by-side minutes—in this awesome piece that I follow called The Daily Shot—

I love it too, by the way. I follow The Daily Shot daily. The Daily Shot's awesome.

Yeah, no, you can scroll through the part about South Korean electricity prices, but the Fed stuff digests it pretty well for people like me. 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 is over. The 35-year-long bull run in bonds is over,” right? 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, and 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 8.5%.

Like, that’s just not happening. It’s more like, okay, we’re not going to cut rates down to zero, but markets are already pricing that. 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 sold because the Fed said something hawkish, or because they heard something on X—I think anybody doing that is handing away a pretty important opportunity in the 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. That only happens when there’s a paradigm shift in the Fed’s approach to the market based on the data that they ingest.

In November 2021, they finally said, “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.” That was something that had just never really happened before in the last 15 years.

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. You can make an argument that maybe the market was rallying exclusively because people thought the Fed was going to be extremely dovish for the foreseeable future, and therefore the market was just rallying. Now that they’re not just extraordinarily dovish, the market is going to reverse.

But I don’t think the market was rallying because the Fed was dovish. The market was rallying because the economy is doing well, and that hasn’t changed. We’re going up because people are making more money, wages are going up, companies are making more profits, and 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 one piece of the puzzle: how much gas the Fed is willing to pour on the fire. What’s clear is that the market has digested that and said, “Okay.” What you get in those types of scenarios is a reset. You got a pretty big reset. The 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, is what’s priced in now. We’re 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. You have to think about the components.

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With Bitcoin, you obviously have one additional component: 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. You have to adjust your upward trajectory for at least the next month or so.

Then you have Bitcoin going up because of the Strategic Bitcoin Reserve and because of the Trump trade. At this point, I think the people who were looking to sell closer to the January 20 inauguration are probably out of the market. If you had that trade on from the election expecting to sell into January 20, 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 you sell at $90,000, because the selling in that area has been absorbed.

And then there’s the Strategic Bitcoin Reserve, where I think Nic Carter came out and said it’s very unlikely to happen.

Who is Nic Carter? Does he matter? I saw that.

Yeah, he’s pretty clued in. He’s a really smart guy with a large audience. He’s close with a lot of people on the inside, and 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.

His take is basically that 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. The hurdle rate to actually go buy this thing is pretty damn high, and the political backlash they would get is pretty damn high.

That’s similar to the argument that I used to make against you, Jonah, but I still think that the game theory starts with Trump just not selling any Bitcoin that the U.S. government accumulates. Then, over time, it changes. The nice part about it is that there’s no moment during the first 90 days of the administration where it gets thrown out the window. The hope remains until Trump, or someone in the government, comes out and says this is not happening.

Yeah, and I actually think it’s very unlikely that a government official comes out and says, “Sorry, this is now completely off the table. We are not doing this.” 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 that.

They might say, “We’re thinking about it,” or, “It’s not ready right now,” or, “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, so it’s not going to be a hard no.

That leads back to the point that Bitcoin always needs something. Bitcoin very rarely rallies without something that gives people hope for why it would go higher. Whether that hope is real or not, what matters is that it exists. The fact that I don’t think 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.

Correct. I think that’s what’s going on with this Strategic Bitcoin Reserve. I disagree with Nic Carter; I think they will create one, even if it’s just appropriating the Bitcoin currently held by the U.S. Marshals—the Silk Road Bitcoin—and putting it on the U.S. Treasury’s balance sheet.

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 a stupid argument. The government buys non-U.S.-government-issued currencies and commodities all the time. They hold gold, they hold euros, and they buy oil.

We import billions and billions and billions of dollars’ worth of commodities from all around the world and put them on the government’s balance sheet for various reserve purposes and government programs. The government is a huge consumer of steel and copper. It’s endless amounts of money being spent on currencies and commodities.

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

How does it happen? Maybe Trump doesn’t get up onstage, take his pants off, and scream, “We’re making a Strategic Bitcoin Reserve, everybody. Send this thing to the moon!” It probably doesn’t go down that way.

But if the threat is more powerful than the action, the idea that the U.S. may have to accumulate hundreds of thousands of Bitcoins somewhere is a big threat for every other country thinking, “My currency might not be as interesting as Bitcoin,” or, “I might need some of this Bitcoin for global trade,” or, “I’m holding a bunch of gold, but I’d rather hold Bitcoin because there’s a generational shift going on.”

If the U.S. government is threatening to establish a reserve in the near future, and I act after they act, I’m probably getting one-fifteenth as much BTC for my unit of fiat as I would if I acted before they did. I think 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 reporting how much gold they purchase and how much oil they purchase. It’s not the most transparent process.

Ultimately, I do think these reserves will be created. Even if they aren’t, that threat is going to put a floor under the crypto space in 2025, much like the deregulatory environment.

I think that point is where I landed on this. It’s the threat, as you keep saying, that buoys this thing. At some point, it gets to a price where it’s not going to go higher than that unless it actually happens. So 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 the administration is extremely pro-crypto and open to good regulation, Bitcoin got to $75,000 in 2021.

Right now, Bitcoin is $90,000. So you’re telling me that, 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 you can really value this thing is relative to where it’s been.

Yeah, that doesn’t make sense. That is not the equilibrium price. There’s no way around that. Obviously, that was a period of peak mania. Even then, this year we ranged between $50,000 and $74,000 per BTC, again without any of that.

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. In an amazing world for Bitcoin, I don’t think fair value is $90,000. I think it’s at least twice that, in my opinion.

Maybe the new range is $100,000 to $140,000, if you want to think about it that way. That’s how I’m approaching it when I think about the so-called cycle top. From that perspective, I don’t think euphoria is 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?

I’d probably sell everything I owned at $200,000 per Bitcoin, because I think that would be euphoria without an actual Strategic Bitcoin Reserve. 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 this summer, because candidly, the fundamentals are better.

It’s crazy for me to think that we could have all of these amazing inflows and all of these amazing things happen for BTC, only for it to go back down to $70,000. I don’t think so. If that happens, I’m going to switch careers. Get me out of this thing, because I clearly don’t understand it.

No, I mean, look, there’s so much to talk about in what you just said. 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 things, buy dips, and sell pops. 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.

I think that if Saylor not buying and the Fed doing what they did had happened in March or February, instead of trading from $108,000 to $93,000 or $94,000, we’d be trading from $108,000 to $103,000 or $104,000.

I think we’re in a very illiquid time of year, and there are very few people willing to plant the flag in the week between Christmas and New Year’s who are going to come in and drink up all of this Bitcoin that just got sold by people who were waiting for I don’t know what.

Consider this a holiday gift. If you’re still bullish, Merry Christmas and Happy Hanukkah. I think this is a good time to get long.

Then I guess the follow-up question is: What do you get long? Do you get long meme coins, Bitcoin, ETH, Solana, or some other part of the long tail of altcoins? Do you get long the stuff that’s been doing well?

That’s my take. Here’s one way that I judge trend in this market. Pull up a great trend indicator called the EHMA—the Exponential Hull Moving Average. Set it to 180 and put it on your chart. It 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. You also have the 50-day moving average, which I think is good as well. The way I would figure out what to buy, if I’m a trader, is to look at stuff that’s still above those moving averages and 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 chart.

Think about what sectors will do well, too. I’m betting again that ETH is going to do very well in Q1, so my bucket looks like ETH plus all of the strong alts in the ETH bucket—Aave, Morpho, Chainlink, that kind of stuff—with some ETH beta.

Then I think about AI coins. What’s strong in the AI-coin world? Look at the moving averages I just mentioned to figure that out.

I like dinosaur coins because I think retail comes back in.

What are the strong dinosaur coins, though?

Exactly—the strong dinosaur coins. Litecoin, for example, has a potential ETF coming. That’s pretty good, and I like that a lot.

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

Virtuals, for example: I had a bid out, and it got to $2. That was an amazing buy. It’s up 35% or 40% since then. There are still a lot of ways to make money in this market. Just don’t be afraid.

I don’t really like buying dips in Bitcoin. I don’t like buying sell-offs or catching the falling knife, because the asset is so reflexive. Everything I could have said about how this is a screaming dip to buy could have applied at $100,000 or at $93,000.

I could have bought at $100,000 and watched it slice all the way down to $93,000. Bottom-ticking Virtuals is maybe some sort of magic secret sauce.

It wasn’t a bottom tick. I bought around $2.20. That was the area I was looking at.

Still insane.

I had a bid out from around $2.33 down to the $2.24 area, just looking at it right now. That’s the area where I was looking to bid. It got nuked, and now it’s at $2.78.

I held on because I’m bullish on Virtuals. I think it’s a good product. A good way to trade these things is to chart out some levels on the stuff you really like and then be patient. Oftentimes, you’ll get filled.

On Virtuals, it was pretty new, so it was hard to get the right moving averages. But in terms of order blocks and horizontal support and resistance, you can ask, “Where would I buy this thing with my eyes closed and just say, ‘I want to own it’?” You can use horizontal support levels to figure that out and then leave your bids.

I left that bid there when Virtuals was trading at $3. I had a bid roughly 30% below where it was, and it got filled. That’s just timing. Either you do that, or you chase them.

That’s how you have to think about trading these alts. Because they’re so volatile, you have to wait to get filled. You can’t chase them unless you’re trading on a day-to-day time frame. 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 the volatility is so high.

If you try to buy it on the way up and then it goes against you, that’s psychologically difficult. You’re asking, “Did the trend break?” But if you buy it when it’s falling into you, that’s a lot easier psychologically as a discretionary trader.

I agree that you should dip-buy on a scale. Set levels and chip away at your bids for something with 300% annualized volatility. For Bitcoin, I don’t like doing that. I don’t like trying to get cute by dip-buying Bitcoin and then missing it. I prefer to wait for it to bottom out, start to steadily rally again, and then buy the recovery.

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

Yeah, Bitcoin can rip for weeks. We’re 2 years into this. You buy the breakout after the Trump election, and BTC rips for basically a month straight. That’s a trade we talked about on this podcast, too.

With alts, it happens really quickly. You have to understand that and take advantage of the volatility. You’re bullish on something and think it’s going to go up, but if you buy it on a 20% day, the probability that you’ll be able to get filled lower than that price is pretty high.

That’s a good lesson. 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. You should probably be setting levels.

I agree. The obvious exception is after a very long period of low volatility. If it breaks out, then sure, go buy it.

If you’ve gone sideways for a month, 2 months, or 3 months, there’s reasonably low volatility in the market, and then you get a high-volatility breakout move, you can chase that. What I’m talking about is an environment like this, where Virtuals has gone from $1.80 to $3.

On the way up, if you’re at $2.50 and it’s already up 100% in the last month and clearly in a trend with super-high volatility, it’ll pull back to the trend baseline. Obviously, if it’s gone sideways for an extended period of time, maybe it won’t pull back.

You have to figure out the difference between trading a breakout of a range and trading a trend. This would have applied well to Hyperliquid. Hyperliquid was trading at about $2 a token, then ripped up to $25 after the airdrop. You couldn’t log on to Twitter without seeing 100 posts about how great Hyperliquid was and how it was going to replace Solana, Ethereum, Bitcoin, Microsoft, and Apple and become the next big thing.

A lot of people FOMOed into it on the highs. They thought, “I have to buy it now. It just went up 10x, so it’s never going to go down again.” Then it immediately nuked 30%, just like Virtuals.

People are the loudest when things are going up. Hyperliquid is still doing very well, but I remember the day that everyone was freaking out about it. It topped at around $28 and then went back down to $20 or $22 over the span of 3 days.

It’s basically as simple as this: if you’re FOMOing, buy 20% of your position and set bids lower, because it’s very likely that you’ll get filled.

The one time that wasn’t true with Hyperliquid was when it went from $13 to $24 in a straight line. There were literally no dips on that thing. At the same time, I view that price action as a relative outlier.

Setting limit orders on Virtuals 20% lower today is nuts. I love Virtuals. We’re going to have to talk about agents later on the podcast.

Part of the reason you get these moves in crypto is that your preferred centralized exchange may not list the latest and greatest altcoin you want to buy. You’re not going to be sitting at your desk saying, “Yes, I’m buying it on-chain.”

If you can’t buy it off-chain, you’re going to buy it on-chain. It’s frankly pretty easy to ape into stuff using Jupiter if you’re on Solana, Aerodrome if you’re on Base, or just natively in your Phantom wallet, MetaMask, Rabby, or whatever. You’re used to swapping stuff and trading on-chain. The user experience is getting much, much better.

On-chain trading isn’t intuitive on a lot of these platforms when it comes to leaving a limit order. Shout-out to our sponsors, Definitive. You can leave a limit order or do a TWAP on-chain, and that’s the smart way to trade. It’s an intelligent thing people should be doing.

But if you want to buy Virtuals on-chain because you’re not connected to the exchanges that list Virtuals, you can’t leave a limit order unless you’re using one of these newer platforms. The only way to leave a limit order is by sitting around and watching your screen until it dips, then submitting a market order when it dips. You are the limit order. Your brain is literally in the order book.

That can be exhausting and, frankly, not very practical. That’s why crypto trades the way it does. A lot of retail traders are aping into things using market orders on-chain at 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.

Institutions aren’t trading these assets yet, though. So I guess it’s nuanced, isn’t it?

It is. One thing I’m excited about is how much that’s going to change moving forward.

I was having a discussion on Twitter about the future of crypto trading. People were going back and forth about Hyperliquid—“Hyperliquid this, Hyperliquid that. It’s Binance. It’s this, it’s that. It’s amazing.” Somebody chimed in and said, “Yeah, but it’s a decentralized exchange. How big could it really get?”

Over the next 2 years, especially because of all the regulatory clarity we’re going to see, I do think decentralized exchanges are going to eat into the market share of centralized exchanges. You can do everything on them that you can do on a centralized exchange, but your money is more free and more composable.

One of the reasons people stuck to centralized exchanges is exactly what you just said: you couldn’t do things easily on decentralized exchanges. But that’s changing, and it’s changing very quickly. If you want to bet on a sector growing substantially, that’s actually a pretty good sector to bet on.

And do you have to do KYC to be on Hyperliquid? I don’t believe so.

My hot take is that Hyperliquid is successful not because it solves something that centralized exchanges haven’t solved, but because it doesn’t require you to do something that centralized exchanges require you to do. So how big could it really get?

At some point, they’re going to have to KYC people. But that’s not the only reason it’s better.

The fact that your capital is easily seen across the entire crypto universe is important. If you have a position on Hyperliquid, make a tremendous amount of money, and don’t want to cash it out but do want to go do something with that P&L, you can lend against it in a future world very easily.

On Binance, that’s going to be a lot harder. Something like Aave could, in the future, treat that position as genuine collateral that it could take over, and then you could borrow against it. There are a whole bunch of things that become possible when your capital is on-chain and accessible by other products that you’re never going to get with a centralized exchange.

Even if you 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 or illiquid assets than anything else. But for centralized limit-order-book exchanges like Hyperliquid, the jury’s still out.

Mea culpa here. I’m raising my hands and admitting something: Avi, you and I did a deep dive on a couple of projects 6 or 7 months ago. We did Ondo, Ethena, Hyperliquid, and a couple of others. I missed the boat on 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 more closely and realized that they buy back $HYPE with their trading fees, which is a way of passing revenue through to users without violating securities laws. That’s smart. Binance doesn’t do that. They don’t buy Binance stock with BNB.

What’s disgusting is that we discussed Hyperliquid on the podcast 8 months ago, and neither of us profited from it in any substantial manner.

It was basically that we mid-curved it.

Thinking about something is mid-curving it. I hate that term, but I’ve seen this play 100 times. GMX existed and was the top decentralized perpetuals exchange for ages. Serum existed. A lot of these things came and went.

I think I missed that it was the right time and that it captured the attention of the right people. A lot of people I know who used to trade on BitMEX started trading on this thing. The team was very willing to serve its users, and that’s important. 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 attention to what those users wanted and build things for them. I think that’s underrated, which is why a lot of projects are going to try to emulate it moving forward. It’s clearly been very successful.

Especially products that require users to stay engaged. Hyperliquid gave a lot of its tokens to users because it’s kind of like giving a bunch of people addicted to a casino casino chips.

Technically, they gave them money, and technically, those users can take that money and do whatever they want with it. But I would almost guarantee that a lot of people used that money to gamble more on Hyperliquid.

If you traded $1,000,000 worth of notional on Hyperliquid before the airdrop, the amount of airdropped tokens you would have gotten, at the highs, was worth more than $1 million. If you were some degenerate trading on Hyperliquid before it was a thing, I don’t know how long that $1 million is going to last you, but those people were definitely trading that money on Hyperliquid.

That’s kind of how Aerodrome is eating Uniswap’s lunch. They’re extracting less and sharing more with the community.

After people discussed tokenomics in 2021, it became a big yawn, because the only thing that mattered was whether you were long with all of your net worth and then some. Who cared about the details?

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

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

I like your point about decentralized exchanges. I think that’s really cool and important. I’m going to keep monitoring Hyperliquid, even though I was the biggest skeptic of yet another exchange. I obviously think the Hyperliquid airdrop was a massive success.

I wonder where it goes from here. It might be too late for me to buy it, or maybe it’s time to drop in some bids 30% to 50% below here and see if I get hit.

We have a few other things to discuss before we wrap the podcast. We have to talk about agents, and then maybe we should talk about AI. OpenAI is talking about releasing o3, which supposedly has PhD-level computer science capabilities. It scores insanely well on coding exams and orders of magnitude better than anything out there today on math exams.

People are talking about whether artificial general intelligence has been achieved. There are some market implications for an insanely good chatbot AI, including in crypto. Maybe we should touch on those 2 things before we wrap.

The agent thing is really just this: every day I spend on it, I become more and more bullish.

The primary application of AI to date has been passive. You interact with AI to get it to do things for you. You go to ChatGPT to ask it questions, analyze data, or generate charts. But you have to come up with the question, the subject, the framework, and everything else. Whatever you’re doing with AI, there’s a lot of work you have to put in to make it valuable.

Agents change that because they take AI from something passive and make it active. You can create an analyst that actively looks at the market and gives you ideas consistently, every moment of every day, with good analysis. You can run a hedge fund off active AI agents. That’s really powerful in a way I hadn’t appreciated until I started using them.

It makes me think that companies are going to be run a lot more cheaply. There’s going to be a lot of cost-cutting over the next 2 years as these things continue to get better.

This is the flip: you take AI from something that’s a good passive tool to something that can emulate an active human and add value to your life in ways you didn’t think about before. That’s pretty damn cool.

I hope our AI bot gets smarter. It’s been a little annoying because it’s clearly still in the early days. Have you noticed that I’ve been tweaking it, Avi? Have you noticed that it’s gotten smarter since last week?

Every week I promise to make it better. Did you see the edits I made, too? I tried to change the bio.

Interestingly enough, I’ve seen it do more specific things. We got help from the Virtuals team with how to frame our ideas about how the agent should behave, how to give it examples, and how to formulate the syntax within the agent’s JSON file.

Every single week, we’re going to make this better. I saw your edits, and you saw mine. This thing was dumb last week when we announced it, and now it’s just dumb in a slightly less dumb way.

We’re going to keep making it better every week. Let’s call it a side project, Avi. Our main project is our trading activity, our second project is this podcast, and our third project can be making this agent better week by week. We’re going to keep in touch with the community and keep improving it.

Some news for you: I was on a call with a major partner we’ll be working with starting in 2025. Someone on the call said, “Wouldn’t it be cool if, in our product, customers could open a chat window and interact with the 1000x agent?”

It would see what you’re doing in crypto, ingest price feeds and news, and talk to you about what you’re doing within the context of what’s happening in the broader market. It could make suggestions and talk through ideas. It would be your sidekick—but not a reactive sidekick. It would be a proactive sidekick, aware of what you’re doing and talking to you about it.

I thought that was awesome. I would have loved to have that as a trader throughout my entire 20-year career. I’ve worked with other traders on my book who constantly brought up amazing ideas. I’ve been on teams where people brought things up, and I’ve managed people who came up with good ideas—analysts and portfolio managers who reported to me.

This could truly democratize finance. It could take institutional, Soros-level market intellect and put it into the hands of everybody, even if you don’t know exactly what to ask and don’t have the right mentors or advisors in the industry.

It’s going to be amazing. I’m psyched, which is why we’re working on this thing. Maybe the 1000x agent could become that. What if we make it the best damn analyst in the world?

Obviously. Why would we ever do anything else? This one is too cool.

A friend of our podcast said that the best tokens over the long run will be the tokens that AI agents transact in. I want to get your take on that, Jonah. Which cryptocurrencies will AI agents transact in?

Eventually, AI agents will be able to talk to humans about their trades and ideas, but they’re probably going to transact in USDC. There’s no reason for them to transact in anything else.

Why not Bitcoin? Why not Virtuals? Why not some other token? They’re going to touch all of these different assets.

They’ll probably use something less liquid than the U.S. dollar, but maybe something more stable. Bitcoin could be a good one.

It reminds me of the old IOTA project. In 2017, I fell down the IOTA rabbit hole. Bless my heart—I wasn’t a smart guy back then. Their entire pitch was that IOTA was going to be the currency machines transacted in.

What became clear was that there was no reason for machines to transact in anything that wasn’t a major base currency, as long as it was digitized and could be transacted on their network. If they could communicate it to each other, why not?

The argument back then was that there was nothing they could communicate dollars on other than Tether, and Tether was considered a scam in people’s minds. So everyone said, “We’re going to create the cryptocurrency for machines.” The reality is that it’s just going to be whatever rail works.

That doesn’t mean the things that enable these agents aren’t going to be extremely valuable. They very likely will be. There will be companies like Virtuals whose entire purpose is agent creation. In order to create an agent, you have to buy into their ecosystem.

It’s hard to describe, but if you want to write something down and send it to somebody, you buy into the Microsoft Word ecosystem. You download Microsoft Word and use it because that’s how you communicate with people.

That’s what Virtuals is for. It’s going to create these agents, and if you want to interact with and use those agents, you have to buy into Virtuals. Instead of paying a subscription service, you buy into the ecosystem.

Creating the agent is hard, as we’re learning. Maybe agent creation is the new marketing agency. Maybe you and I should start Mad Men 2.0 and help people create agents.

That’s actually brilliant. This is the future of marketing. 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 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?

More broadly speaking, if I were an AI agent—and I’m certainly not—if I were a machine, I would want to transact in and hold Bitcoin instead of a stablecoin. Bitcoin has the best Sharpe ratio.

I would be a value-maximizing robot. I’d want to hold the thing that offers the best return per unit of volatility. That’s why I’d want to own and transact in Bitcoin rather than USDC.

One day, we’ll have our AI agent on this podcast. We’ll create an AI model of what it looks like. It’ll look like a combination of you and me, and we’ll use our voices. We’ll combine our voices, and it’ll just talk.

That would be pretty damn creepy, but pretty cool.

Can you imagine that? A literal virtual co-host—our virtual co-host.

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 for at least 1 podcast.

If I were a virtual co-host, crypto trader, and stand-up guy, I would want to transact in and hold Bitcoin instead of a stablecoin. Bitcoin has the best Sharpe ratio, so I’d want to hold the thing that offers the best return per unit of volatility.

So in the future, everything will be run by virtual AI agents, everything will be paid for in Bitcoin, and you’ll all be millionaires many times over, if not billionaires, because the U.S. dollar will be worth nothing.

This is a beautiful future that we’ve envisioned for ourselves. Luckily, none of this is financial advice, and everything we say is obviously not going to happen.

It never seems to—except for that big one.

All right, Jonah. Great talking to you. This was fun. This was a really fun one. Thanks again. It’s always great, and I learn a lot.

All right. Take care.

Later.