#1045 Dylan LeClair On How Bitcoin Humbled Everyone

Dylan LeClair is the Senior Market Analyst at UTXO Management, a digital asset fund investing in the analog to digital transformation of money and the emergent financial system. In this conversation, we discuss how everyone was reminded about Bitcoin's decentralized market, why Bitcoin's price could continue to drop, and why Bitcoin is historically undervalued right now. Dylan joins us every Tuesday on "The Best Business Show." To see the video with the corresponding charts that Dylan references throughout the interview, go to "The Best Business Show: LIVE" YouTube Channel ======================= FTX. US is the safe, regulated way to buy and sell Bitcoin and other digital assets. Trade crypto with up to 85% lower fees than top competitors. There are no fixed minimum fees, no ACH transaction fees, and no withdrawal fees. FTX. US is also the only leading exchange that supports both Ethereum and Solana NFTs. Download the FTX App today and use referral code “Pomp” to earn free crypto on every trade over $10. The more you trade, the more you earn. ======================== BCB Group is the leading payment services partner for the digital assets industry. BCB Group provides payment services in 30+ currencies, FX, cryptocurrency liquidity, digital asset custody and BLINC, which is BCB’s free, instant settlements network for the BCB client ecosystem. Find out more by visiting bcbgroup.com/pomp ======================= Coinchange is an automated wealth management platform that earns daily compounded yield for you. Earn up to 10% APY on a risk-mitigated basis – your payout doesn’t depend on the volatility of the market and there are no lockups or minimums. Register now at coinchange.io/pomp and get a welcome bonus of 40 USDC when you fund your account.

• 0:02Speaker 00

  What's up everyone, this is Anthony Pompliano. Most of you know me as Pomp. You're listening to the Pomp Podcast, simply the best podcast out there. Now let's kick this thing off. Dylan Leclerc is the Senior Market Analyst at UTXO Management. He also writes a newsletter with Bitcoin Magazine. In this conversation, we talk about Bitcoin, on-chain metrics, we talk about Bitcoin's price, the market structure, and what to expect in the coming weeks. I really enjoyed this conversation with Dylan, and I hope you do as well. Before we get into this episode, though, I want to quickly talk about our sponsors. This episode is brought to you by FTX US. FTX.us is the safe, regulated way to buy and sell Bitcoin and other digital assets. You can trade crypto with up to 85% lower fees than top competitors. There are no fixed minimum

• 0:47Speaker 00

  fees, no ACH transaction fees, and no withdrawal fees either. FTX.us is also the only leading exchange that supports both Ethereum and Solana NFTs. Download the FTX app today and use referral code POMP to earn these free crypto on every trade over $10. The more you trade, the more you earn. Go download the FTX app today and use referral code POMP. This episode is brought to you by BCB Group. With a dedicated focus on institutional payment services, BCB Group provides business banking, cryptocurrency, and foreign exchange market liquidity for many of the world's largest crypto-engaged financial institutions. BCB Business Accounts allow businesses to load fiat currency and cryptocurrencies for

• 1:27Speaker 00

  payments, operations, and trading purposes. BCB's clients can trade FX and cryptocurrencies quickly and at scale with market-leading value. BCB's Blink network is the European crypto industry's first instance settlements network, and one of the first real-time payment networks of its kind to allow free, real-time transactions across fiat and digital currencies. BCB's vision is to empower the global financial revolution through sustainable and innovative banking. You can find out more by visiting bcbgroup.com/pomp today. Again, if you want to learn more, go to bcbgroup.com/pomp today. This episode is brought to you by CoinChange. CoinChange is an automated wealth management platform that earns daily compounded yield for you. They've got sophisticated algorithms

• 2:10Speaker 00

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• 2:51Speaker 01

  Anthony Pompliano runs Pomp Investments. All views of him and the guests on his podcast are solely their opinions and do not reflect the opinions of Pomp Investments. You should not treat any opinion expressed by Pomp or his guests as a specific inducement to make a particular investment or follow a particular strategy, but only as an expression of his personal opinion. This podcast is for informational purposes only.

• 3:15Speaker 00

  Next up, we have Dylan Leclerc. Dylan, how are you? Hey, BCB. How's it going, man? I'm doing fantastic. I have, I have seen your Twitter skills drastically improve over the last few weeks and I have a starting question. I don't think I've ever asked you before. When you wake up, what is the first thing you go check? Is there a data point? Is there a platform? Do you go to Twitter? Like, what do you do first thing in the morning when you wake up and you're like, I gotta figure out what the hell's going on? Admittedly, it's not the best habit. I probably open my phone and scroll Twitter for a bit, but I've been trying to get a better morning routine going. But yeah, probably Twitter, check, check some macro data. I usually wake up before the markets open, but yeah, just check futures. That's, that's my life nowadays.

• 3:58Speaker 00

  I, I think a lot of people like to maybe virtue signal that they keep their phone in a different room. They don't check it when they wake up. Every person I know, they check it when they wake up and it's probably not healthy, as you mentioned, but it is interesting that you go to Twitter first before you go look at any other data points. Is there a data point that you look at once you start looking at data outside of Twitter? Like that you're like, this is the thing Is most important right now to give me a sense of what's happening. Yeah, I mean, checking the futures markets, obviously Bitcoin trade 24/7. I mean, in particular, watching watching currency markets nowadays and rates. What's happening, I think you talked about it a little bit earlier in the show. With the Euro, with the dollar strength against really every major currency in a lot of emerging markets.

• 4:43Speaker 00

  It's it's quite amazing to watch. So that's that's what I'm watching a lot nowadays in regards to the macro. And, you know, obviously, the Bitcoin market's chugging along 24/7, 365, so no shortage of, you know, kind of volatility and, you know, fun market moves there. Absolutely. We got a couple of charts that you that you want to talk through. The first is the Bitcoin supply that is in profit, the percent of Bitcoin supply and profit. It's a seven day moving average. It's down. Shocking. What is this showing us? Yeah, so today's show, I thought I would, you know, we've talked a ton about macro in recent months. We've also talked a little bit about on-chain on derivatives, about the counterparty risk and the contagion.

• 5:24Speaker 00

  I think we're just going to strip a lot of the narrative back, a lot of like the, you know, the macro environment back and just look at previous Bitcoin cycles. I think it's because it's so much fascinating that, you know, there is this big narrative, the price action is ugly. There's certainly been a whole lot of forced selling and forced liquidations. But if we just go back and look at previous Bitcoin cycles, obviously, this this current crypto Bitcoin cycle was an order of magnitude or, you know, a lot larger than than the previous cycles. But in relative terms, it's actually not really anything new in terms of what we've seen previously. So today's today's kind of show is going to be focused around some of the on-chain data and just looking at, you know, if this Bitcoin cycle, this bear cycle is, you know, compares to that of of previous ones,

• 6:09Speaker 00

  which obviously a limited sample size, only about three or four in Bitcoin's history. You know, what can we derive from that and what may the future hold? Obviously, you know, past, you know, kind of what happened in the past doesn't translate directly to to future outcomes. But it can, you know, it can give us a guide to what's happening. So, you know, current supply and profit nearing that 50% level, right? We're starting to see. You know, the vast majority, actually, the average Bitcoin holder is underwater. So we're going to cover realized price in a second, but that realized price is essentially the average cost basis of every coin on chain. That's like $22,000 today. So at $20,000 Bitcoin, at $19,000 Bitcoin, your average holder is underwater. And we've seen that in basically capitulation periods or the depths of bear markets.

• 6:53Speaker 00

  And so this is just kind of one of those gauges. I mean, you could have no idea what's happening in the macro environment and say, hey, you know, this is a pretty typical boom-bust cycle for Bitcoin. So it's kind of fascinating to see it all play out in a macro downturn. And so when we start to look at those past cycles on this specifically, obviously, we're close to that green area. We are not in it yet. In the past, we have gone into it. Is your expectation that we have to revisit kind of the depths of those drawdowns? Or do you think that, you know, this time could be different? And we may get close, but not actually have to get that level of kind of sell down on this metric? Yeah, I don't necessarily think technical analysis on a lot of these indicators is like, you know, the most important factor.

• 7:35Speaker 00

  It's just really just kind of contextualizing that, hey, Bitcoin's down 70% or whatever it is from the all-time highs. No, it's not going to die. Yes, there are a lot of coins and a lot of purchases that are underwater. No, this is not, you know, atypical from what we've seen in previous boom-bust cycles. And this kind of steady bleed, well, I mean, a lot of it was forced selling, but I kind of believe that we're going to see more consolidation, maybe even further downside and more pain in the market. But it's completely natural. It's a purge from weak to strong, from impatient to convicted. And this is what kind of sows the seeds for the next bull run. This is exactly what we did in 2020 or the years post-2017 bull market.

• 8:17Speaker 00

  And, you know, Bitcoin died at $3,000 and people forgot about it and, you know, kind of kicked it out. And what happened next, right? It rallied and it didn't die, somewhat surprisingly, to all the skeptics. So we're in kind of the, we're kind of in the later stages of this kind of cleansing. I wouldn't call it maybe, I'm not trying to call a bottom here. And certainly, the macro environment is, you know, I'm expecting to deteriorate further. This is just, you know, the whole point of this exercise is just to kind of highlight that in Bitcoin's history, this is, this is nothing new regardless of the kind of dynamic macro backdrop we see. Got it. And so when we go and we take a look at the drawdown from the all time high, we can go all the way back to, you know, maybe it's like late 2011, early 2012.

• 9:00Speaker 00

  There was a 93% drawdown. We've gotten 2015, 84, 85% drawdown. 2019, kind of end of 2018, there was that 84% drawdown. And then since then, it looked like there'd been less severe drawdowns, right? So we're kind of like, we'll call it 85 to 95% in previous bear markets. We got a 75% drawdown for COVID. We got a 50% drawdown last summer after the China ban of miners. But the current one has been 70%. How do you contextualize kind of what looked like maybe less volatility to the downside in some of these market downturns? With the longer term trend of, you know, 85, 95% drawdowns in Bitcoin's price? Yeah, it's pretty fascinating because kind of, you know, after 2020, we saw, you know, the money printer go bird narrative.

• 9:44Speaker 00

  Bitcoin breaks 20,000, absolutely flies. And a lot of market participants, myself included, were debating whether, hey, is this time different? Is Bitcoin at a, you know, just surpassed a trillion dollar, you know, market cap at 50,000 or so? Is this time different? Are we going to see less volatility to the downside instead of 80% drawdowns? Are we going to see 30%, 50%? Like what does, what does Bitcoin hold as it continues to kind of mature as this global macro asset? And funny enough, that just that thinking and that kind of reinforcement to the upside led, led a lot of market participants from miners to funds,

• 10:22Speaker 00

  to, to really even like the retail participants to these lending platforms to kind of lever up in a way that actually presented some asymmetric downside risk. And so, you know, this kind of seemingly like black swan event where Bitcoin goes straight down for the last six months with really no bounces, just kind of consolidation periods in between. I think it was almost reinforced or a little bit caused by a lot of these market participants who have even, even like experienced Bitcoiners, who have been, who have seen cycle after cycle. Thinking that, hey, maybe this time's different. Maybe Bitcoin is is mature. It's not going to draw down seventy, eighty percent. So they lever up. And all of a sudden, you know, price responds to the downside in it. And it causes this kind of forced liquidation and forced selling. That's that's somewhat relentless.

• 11:06Speaker 00

  Um, so it's going to be really interesting to see just, you know, how far it takes or how how low Bitcoin goes before it bottoms. Uh, is is, you know, seventy-five, eighty, eighty-five, ninety percent possible? A hundred percent? I mean, Bitcoin can always go down fifty percent from its current level. And I think, uh, not just having that that probabilistic thinking, uh, will will do you a big disservice. Cause it, you know, you never want to become a forced seller. Like, that's the number one rule here. So, uh, you know, I would say now is not the time to add to leverage. Don't try to catch knives. It'll be, in my opinion, it'll it'll be clear, uh, when the time is to, you know, go a little bit out on the risk curve, uh, in in Bitcoin terms, if you want to do that. Uh, but for the meantime, you're seeing miners with a lot of pressure. You're seeing a lot of fund redemptions. Really, any bounce is just kind of shorts closing.

• 11:51Speaker 00

  And, uh, you know, and some scalp longs. No one really wants to take any risk here, especially kind of the TradFi world. So, uh, I think just, you know, I don't know exactly how far we'd go from the all-time high, whether it's eighty, eighty-five, et cetera. But, uh, it's just interesting that a lot of market participants thought this time was different and Bitcoin humbled everybody, it seems. Bitcoin humbles everyone over and over and over again, which is, I think, what makes people so intellectually interested in as well. Uh, you've got the Bitcoin market value to realized value ratio here. What is this showing us? Yeah, so we talked about this one a lot. Uh, it's kind of a a simple framework of the average cost basis. But really what we're trying to do here is map out what previous bears look like. So we have this average cost basis. It's actually way less volatile, uh, to the upside and downside than than Bitcoin itself.

• 12:35Speaker 00

  It's kind of like, it's like if you have a moving average, but it's like the best moving average you can have because it accounts for every single coin, right? So it's like a very, uh, kind of natural or very organic, uh, valuation framework for Bitcoin. Uh, and if we want to just go to the the next slide, uh, slide number four, uh, this is actually showing the the drawdowns of realized, of realized price or realized market cap. The realized market cap is just the aggregate price of every Bitcoin when it was last moved. The realized price, just the average price, right? It's market cap versus price, same as a standard market cap and price. But what you can see here is that realized cap or the realized price draws down a lot less than actually the market cap does, right?

• 13:15Speaker 00

  So instead of these 70, 80, 85% drawdowns, what you're seeing is really only like 25, 20%, 15% drawdowns. Currently, we're at, I think, a 10% drawdown from its all-time high in kind of this average cost basis or aggregate market cap, on-chain market cap, right? So this is, I think, a much better way, and it would be a lot healthier if market participants and people buying Bitcoin, you know, had the realized price displayed on their ticker or on their chart or on their phone, right? It would lead to a lot less panicky investing and decision-making. But this is, I think, the kind of the best way to look at Bitcoin and evaluate its cycles.

• 13:57Speaker 00

  So if we go back to three, what we're seeing here is that Bitcoin bear markets, right? How long does Bitcoin trade under that kind of that realized price, that realized cap? That, if you want to call it fair value. And so previous bear markets, we saw 215 days, 384 days, 134 days in 2018, 2019. And right now, we've been under that kind of valuation for about 30 days. So obviously, the macro environment's different than all of those previous cycles. We know that. Obviously, Bitcoin's a lot bigger than it was in previous cycles. We know that as well. But just if we're looking at the history of Bitcoin and we strip away all that noise like we're talking about, you know, we can expect to see, you know, a few months, maybe up to six months, even a year,

• 14:38Speaker 00

  of just kind of chop below this cost basis, below this kind of average price as these coins are transferred from weak to strong. And so it's a very natural process, and it takes time. And so I think we've seen, for the most part, we've seen a lot of that price-based capitulation. Bitcoin's down 75%. I think really now we're starting, we're kind of in the beginning innings of the time-based capitulation, where market participants are bored, the speculators are leaving or have already left, and Bitcoin's, you know, out for dead again. And so, you know, this is just the time for builders, it's time for stackers and hodlers, and, you know, and in the long run, it's very healthy. And a big opportunity. The builders, the stackers and the hodlers. I love that. When you mentioned fair value and this idea of kind of like the realized price,

• 15:21Speaker 00

  is that probably the best comparison of, you know, you get all these like value investors. They say, I want to buy assets for less than they're worth. And they are super patient. They acquire as much capital as they can in the good times. They wait for kind of blood in the streets and then they strike and they try to buy these assets for less than they're worth. Is that kind of how to think about like realized price and what we're talking about here of in some ways Bitcoin when it trades underneath this historically, again, can't promise the future, but historically it has been trading for less than its worth based on the market. And therefore it's been a good time to start to acquire it. Yeah, I mean, that's how I think about it. When I talk to kind of like, talk to some funds, talk to some like, you know, traditional investors and they're saying like, how do I think of this? There's no intrinsic value, you know?

• 16:02Speaker 00

  I understand that just based on the asymmetry, based on the understanding in recent years that this thing isn't going away. Like I want some in my portfolio. When do I buy? When do I start adding to a position? Like I'm not, I'm not a zealot. I'm old. I don't want a huge part of my portfolio in this thing, but I want some, right? So how do I think about it? And I would always love to realize price and this market value to realize value ratio and say, okay, you know, there's, there's no promise of, of, you know, up only from here or future returns, but like a pretty good time to buy is when, when the average, you know, the average holder, the average Bitcoin investor is underwater, right? That's when you, that's when you see the capitulation. That's when you see, you know, this, this asset, this network is left for dead by the mainstream media.

• 16:46Speaker 00

  It's, you know, it's, this industry is now once again a laughing stock, right? So I think Bitcoin can obviously go lower. And if we go to slide seven, I show the, the price drawdown below the realized price. So just in terms of like kind of potentializing how much lower it could go than this, than this kind of fair value, it can go a lot lower, right? In 2012, we saw it go like close to 50%.

• 17:10Speaker 00

  And so it can still draw down a lot. Sixty percent, forty percent, thirty percent. It can still go a good amount below that level. But really, that's like the ultimate, ultimate buying opportunities is below these kind of this realized price is fair value. And the long-term investors, the value investors should really kind of understand this framework as something that, hey, Bitcoin's not going away. We want to buy when, again, there's blood in the streets. Do you anticipate that the realized price could make a massive downturn? Like, pretty much, it's usually kind of flat to up, just given the way that it's calculated. As kind of like a type of moving average, if you will. Is there a world where we could see it materially go down?

• 17:53Speaker 00

  Like, could we see realized price go down twenty percent of the actual realized price? Not where the price of Bitcoin is trading below the realized price, but like realized price actually go down like that? Or is that less likely, just given the dynamics of the market and kind of how that's calculated? It's definitely, it's definitely possible, and, you know, currently around ten percent below, below its all-time high. It goes down or trends up based on whether, whether coins are being spent, right? If they're like spent, I mean, being moved from the, from the last time they were there, moved on chain, at a profit or a loss. And so, obviously, there's a little bit of noise in the metric, right? If I transferred coins to cold storage, and then I just reshuffle them to a different, you know, cold storage or a multi-sig wallet, and I'm not actually spending them, but it's moving. The realized price says, hey, like, that's an economic spend at a profit or a loss.

• 18:36Speaker 00

  But, kind of in aggregate, on average, it's a pretty useful tool, right? So like, obviously, not every spend is economic. But, realized price could, you know, in theory, go down twenty percent, twenty-five percent, like it has in previous times. If we see a lot of still kind of higher buys, right? People that have bought at sixty thousand, fifty thousand, forty thousand. A lot of these, these coins have already capitulated. It's why we've seen the realized price go from, say, twenty-five K, which it was hovering around for a while, to now like twenty-two. But it can still go lower if more, if more kind of previous top buyers capitulate, right? So, I think for the most part, anybody that's here and hasn't kind of capitulated or hasn't been a forced seller, is kind of just in it for the long haul. That's usually why we see Bitcoin bottom.

• 19:18Speaker 00

  It's kind of a sunk cost fallacy to say, hey, like, my average buys is underwater. I'm just gonna, I'm just gonna hold on to saying ride it out. Funny enough, not funny enough, but uh, for the first time ever, actually Bitcoin's below its 200 week moving average. So what does that mean? Uh, the average four year DCA for like the first time in Bitcoin's history is underwater. So like, just in terms of, in terms of sentiment, in terms of just like historic levels of, of down only, uh, we're, we're there, we see it. Uh, certainly it doesn't mean that more downside can't happen. Um, and everybody needs to be prepared for it mentally. But, uh, you know, in terms of, of long-term asymmetry, never mind the short to the immediate term. Uh, you know, this is going to be looked back on as, as one of the best times to, to buy Bitcoin, I think over the next three to six months.

• 20:01Speaker 00

  Yeah. And so when you start to look at, uh, maybe the on-chain metrics, things around the Bitcoin market. There's been a number of commentators, uh, and analysts who have said, look, we can do all this analysis. But the macro environment is this like hangover, uh, on it. How do you think about balancing those two, right? So the on-chain metrics are saying, hey, look, we're, we're trading below realized price. There's been this significant drawdown historically, some of the drawdowns have been more, some of them have been around this level. Uh, and I think most people, if they just were evaluating that data set, would be pretty excited right now. If your goal was to acquire, uh, more Bitcoin. But the macro seems to be like this huge question mark. And so like, how do you think about balancing those two?

• 20:41Speaker 00

  Yeah. So I've always kind of thought of the, the on-chain as like this, this long-term, maybe not even, not even quarter to quarter. Like year over year, cycle by cycle to cycle, uh, type framework, right? You can kind of get a general sense of when things are overvalued or undervalued. But yeah, the macro is definitely the driver. I, I am of the opinion that we're, we're headed for kind of some, some point of singularity where, uh, you're seeing all this craziness, all this upheaval, all of this unrest, uh, you know, politically and socially around the world, uh, and economically, right? The, the Eurozone is a total mess. Uh, the Japanese yen is melting down, the dollar soaring, soaring higher. Credit markets are, are melting down.

• 21:22Speaker 00

  Um, I think in terms of the equity markets, the first leg of the drawdown was all of that duration, right? So yields went from basically zero to, you know, two, three, uh, three and a half percent. And so what did that do? It crushed the kind of the multiple side of the stock. Uh, now equity markets, the next big concern is the consumer's been getting killed because of inflation. Right? So now the earnings are that kind of, uh, are the, the next leg down. I think it was first it was about duration. Now it's about earnings. Um, so I, I still believe and, and why I still have some cash on the side is I believe that we have, uh, we're going to reach kind of this, this correlation to one moment. Right? Obviously Bitcoin's correlated to the, to the Nasdaq, to the S and P 500, to equity indices.

• 22:03Speaker 00

  Uh, and when, you know, those are down, Bitcoin's down more. And, and recently when those are up, Bitcoin's been kind of just sitting flat, which is a little worrisome. But I still think we're going to see this, this huge, whether it's a limit down day in equities, uh, or some, you know, credit market breaking or some, something breaking in the currency markets. Uh, we're going to see something in the financial system break and that's going to be the cost for a Fed pivot. I think a, a soft landing is somewhat laughable. And so that's why I still have some kind of buying power on the sidelines because it's completely exogenous to Bitcoin itself. And, you know, the Bitcoin network is at a hundred percent uptime. Nothing has changed about the underlying thesis. Uh, but it's not insulated against these, these broader markets, right? Bitcoin is still just a drop in the bucket in terms of the global financial assets.

• 22:46Speaker 00

  Uh, and when the bond market's gurgling and something breaks, then, you know, the liquidity, the liquidity effects of, of that are obviously going to make its way into the Bitcoin market. So Don Chain is a useful framework for, for, you know, six months, a year, four years, right? It's this, this kind of cycle by cycle. Like is it undervalued? Is it a little bit overvalued? Should I wait? Uh, but the, the macro right now is, is obviously the driver. I think really every asset on the planet is, is a kind of a function of the liquidity tide being pulled out. Or, or being pushed, you know, kind of pushed onto land. Right before we started recording, there's a video that started to surface, uh, on Twitter of Vladimir Putin. I don't know where he is, but he's giving a, a speech and we'll trust that the translations are correct. It's a big if, but it, it appears to be correct based on the people who are, are tweeting it.

• 23:31Speaker 00

  Um, and he's talking about the end or the crack in like this liberal world order. He's talking about the American, uh, kind of pursuit of dominance globally. And really a transition into this like multipolar world. And his point was like, hey, once we invaded Ukraine, that basically said the US was going to sanction us. And when they did that, that was going to be really kind of a milestone moment in the global order, because now you have multiple countries that are trying to almost play, you know, who's ally am I going to be? What currency am I going to use? He didn't mention Bitcoin at all. I don't think he's really talked that much at all

• 24:13Speaker 00

  about Bitcoin, cryptocurrencies, any of that stuff. What's your take on like his theory? And then is it just like, oh, the natural conclusion is that Bitcoin ends up being really important in that world? Or do you think there's another way to kind of look at Bitcoin with the backdrop of maybe the world is changing on a geopolitical stage? Yeah, I think Bitcoin is definitely kind of in the backdrop, right? It's maturing. It's still very, very nascent. And geopolitically, it's still kind of this thought experiment, right? I mean, we're seeing like small countries like El Salvador be like, hey, you know, this is good money, but you know, it's not, it's not significant whatsoever in terms of, it's also just not big enough, right? It's $500 billion. Like, it's not big enough for global oil trade or global commodities trade at this moment. I think it does get there. But

• 24:55Speaker 00

  what Putin's saying, and I will preface this with saying, I'm not some, you know, decades-long geopolitical expert. I just like to listen to really smart people. Peter Zeihan, who's been on your podcast, Luke Roman, these guys are really, really smart thinkers. And it's been their job for the last decade to kind of map out and decipher these huge shifts that we're seeing. And basically, I think what Putin did was he, he basically called checkmate on the, on the Western bond market and financial system, right? He saw inflation was at, you know, decade highs, five, six percent and said, all right, you know, we're going to invade Ukraine. But it wasn't really about the, the kind of, you know, the physical land, even though that played an effect. What it was, was the Western countries sanctioned

• 25:36Speaker 00

  And he said, all right, Europe, uh, if you want to play games, we'll play games. Um, you have to buy, you have to buy, uh, oil and, and your gas in rubles. And we're gonna, and we're gonna start demanding payment in rubles and we're not gonna use the dollar. We're gonna de-dollarize and we're gonna buy a bunch of gold. And we're gonna, and we're gonna basically, cause we have all these commodities, we have all these natural resources. Uh, we're gonna, we're gonna send inflation higher. We're gonna, and we're basically gonna checkmate the Western world, uh, into playing by our rules, not, not your rules. And so you, in, you've seen trillions upon trillions, tens of trillions of dollars wiped out, uh, from Western capital markets. Uh, and Russia is also feeling a little bit of pain, but they're, you know, among the best, uh, situations or, you know, kind of geopolitically to kind of,

• 26:20Speaker 00

  uh, just man this one out. So it's, it's a really fascinating game of chess. Obviously, uh, you know, Western hegemony as, has favored a lot of people and it's also kind of, and, uh, it's disadvantaged a lot of people in, in the U S and globally, right? We've exported our inflation and how it, our, uh, domestic manufacturing for the last forty years or so. So there's like, these are really big shifts, uh, the, the dollar hegemony, the dollar, uh, as a kind of a world reserve currency. Uh, so there's a lot of pros, there's a lot of cons. And I think while the, although it's, you know, while the Dixie's at one oh eight, it's, it's foolish to say, hey, the dollar's, you know, dollar hegemony is done, the dollar is going away. But, you know, these are the kind of moves that, you know, looking back a decade or so, say, hey, like, you know,

• 27:05Speaker 00

  March of twenty twenty two, or whatever it was when Putin invaded Ukraine and kind of gave these speeches. Yeah, that was, that was a moment, like, that was a big moment in time. And I think, you know, it kind of, it, it just shows that, that trust is a, is eroding or has, has already eroded around the world, right? That the kind of the, the thesis for Bitcoin is that it's a decentralized, trustless currency, right? You don't have to trust your counterparty. Sovereign debt is, is completely requires trust, right? So the West froze Putin's reserves. They said, hey, your, your surplus is not yours. It's actually ours and it's an I O U that we're not paying. And so something like Bitcoin, a bearer asset, right? Putin has a lot of gold, right? It's a, it's a physical bearer.

• 27:46Speaker 00

  Asset, the tangible asset. Well, Bitcoin's a digital bearer asset. It's a commodity with a production cost similar to gold. So while I don't think Putin in Russia is gonna, you know, ape into some Bitcoin tomorrow, uh, the thesis of Bitcoin, you know, a digital, a digital asset with, with no counterparty risk and a rising production cost is very, very powerful. And I think over the long term, a lot of nations are going to wake up to the game theory, but I think we're still very early. And when you see that happening, like I think of, uh, maybe the population in three buckets. There's like, I don't know, over fifty, fifty-five, kind of the baby boomer generation. Then you get like the millennial generation and then you get, I don't know, maybe people under the age of eighteen. Right? Is, is there a thought process of the psychology?

• 28:29Speaker 00

  Uh, we see it with Bitcoin, right? Just younger people, uh, although it's a generalization, they tend to be more open-minded about, uh, new technology and things like Bitcoin. But they also almost haven't seen the world get shaped into the geopolitical stage that it is today. And so they're like naive to it to some degree, or, or maybe just don't have the, the historical context. Like, how do you see that playing out? And maybe even like with some of your friends, uh, who are, you know, your age, older, a little younger, whatever. Like, what is that conversation like? Or are they literally just like, dude, I don't even know what's going on. Like, I'm, you know, trying to go find the party on Friday night and could care less. Yeah, there's, I think there's a little bit of both. Uh, you know, some people are completely naive to it and, and honestly ignorance is bliss. Um,

• 29:10Speaker 00

  I think also, you know, there's this kind of big shift, especially like in the, in the Western world and the United States where we've had, you know, this, this pretty big privilege. Uh, you know, the, the trifling dilemma and, and kind of this, uh, this strong dollar, uh, is, is, is, you know, helped kind of the, the coastal elites and the college educated, but it's, it's, it's hurt a lot of the, like, again, like I said, the domestic manufacturing. And so for like, you know, uh, the, the, the college scene, right? Like, obviously, um, that's, that's kind of this, this Western financialized bubble of, of just pulling spending forward and, and, you know, we'll, we'll, we'll pay it off later. And, and it's kind of this, this privilege that a lot of the world doesn't really have.

• 29:48Speaker 00

  Um, and so I, I think that, you know, like, also like the climate protests, right? A lot of people don't even understand how critical, uh, fossil fuels and. And oil is to literally every single thing they use in their daily lives. So there, there is a little bit of like, I think naivete to that. And, and so I guess I don't really have a great answer for you there, but I just, you know, in terms of like the geopolitical landscape, I think. Nobody really has an appreciation for just like how big of an inflection point in history we might be in. Uh, in terms of like, you know, this long-term debt cycle, uh, the, you know, the kind of the changing world order that's been in place since 1940, right? These are like huge geopolitical shifts that occur once every century or so.

• 30:29Speaker 00

  Maybe like, you know, occur, occur once, uh, you know, every 500 years, like, you know, empires rise and fall. I'm not calling for the, the fall of the US empire, but there's so many things that are like flashing red saying, hey. You know, these are, these are big, big signs that we can't ignore any longer. Yeah. What are you looking forward to over the next couple of weeks? Is there, is there like a milestone? Is there a data point? Is there some, uh, uh, event, maybe just even like a CPI reading? What, what are you looking forward to, uh, given the Bitcoin market? Yeah, uh, I mean, CPI is important, but I think, uh, for the most part, we're kind of expecting a hot print. Uh, but commodities have fallen off, inflation expectations have fallen off.

• 31:08Speaker 00

  So I think it's probably going to be for the time being, the last of the, the, the very, very, you know, scalding hot inflation prints. Really, I think what's, what's a bigger, uh, in terms of equities, in terms of Bitcoin in the markets and liquidity in general. Is, is the corporate earnings coming up? So, uh, earnings season, um, that'll be very important. Uh, we'll see what, we'll see what happens there. Uh, but I think more so just kind of, uh, understanding that the trend and a lot of the, you know, the don't fight the Fed trend. Uh, the Fed is, is telling you what they're, they want to do. They want to destroy demand. Uh, they want to send asset prices lower and they want to, they want to, you know. Clamp down on the inflation expectations. So I'm expecting a strong dollar.

• 31:47Speaker 00

  I'm expecting kind of weakness in, in risk assets, uh, and for, for really any balances to be kind of sold off very quickly. Um, you know, would, would be happy to, to be proven wrong there as a, as a holder of Bitcoin. But I, I think that, you know, it's, it's just, it's good to kind of, you know, have some, some expectations for what's going to happen in the future. And to not be disappointed if they don't turn out. So expecting some more downside, ready to buy blood. And I think it's going to be another six months or so of kind of ugliness in markets. But really, actually, it might happen further, just at the pace that everything is happening, right? You're seeing just things accelerate very, very quickly. So it's completely possible and probable that something just breaks earlier than that and causes a pivot.

• 32:31Speaker 00

  But until we see some really calamity in financial markets, I think the trend is lower and more pain in the domestic and global economy. Where can we send people to find you on the internet or sign up for the letter you guys put out? Yeah, you can find me on Twitter at Dylan with a underscore. I post about Bitcoin, should post a little bit, post about geopolitics and economics. And I'm really just learning on there. Like, I obviously don't have the answers to everything. And I love to just hash it out with really smart people. And that's kind of how I've done the bulk of my learning is just in public. So it's kind of a fun, fun place to be.

• 33:08Speaker 00

  I write for Bitcoin Magazine Pro, have a newsletter there where we talk about a lot of the more in the weeds and depth stuff about the Bitcoin market. And so we cover the macro stuff, we cover what's happening in global markets, but really kind of a specific focus on Bitcoin with some of these more in-depth analytics like we talked about today. So that's what I do. Appreciate you having me on as always, Pom. It was good to go back and forth with you and hope you're staying safe out there, man. Somebody said that you look like you had to sell all the paintings on your wall because you're trying to buy more cheap Bitcoin. And then somebody else also said they appreciate really smart people. So I appreciate you coming on.

• 33:49Speaker 00

  And anyone who doesn't already, highly suggest you follow Dylan on Twitter, closing in on 200K. So it just keeps growing and growing and growing. So congratulations, my friend, and we will talk again in a few weeks. Cheers, man. Thanks. All right, later. Thanks so much for listening to today's episode. I really hope you guys enjoyed this one. Make sure you subscribe on Apple, Spotify, or your favorite podcast player. And if you're looking to try to transition to get a new job in the Bitcoin or crypto industry, we've got you covered. Head over to pompscryptocourse.com. We've developed a curriculum with the top teams across the industry. It's a three-week intensive training program with over 50 events packed into that three-week time period. Go to pompscryptocourse.com to learn more, and I'll meet you guys for the next episode.