Bitcoin Consolidates While Rates Rise with Beimnet Abebe

0:00Alex Thorn:Welcome to Galaxy Brains. An infinite amount of cash. I'm your host, Alex Thorne. The U.S. banking system is sound and resilient. Bitcoin made a new all-time high. If you're not long, you're short. Satoshi's going to come on there, laugh hysterically, go quiet, and all Bitcoin's going to be erased. Bitcoin. Bitcoin's the best crypto asset. Bitcoin is going to zero.

0:28Alex Thorn:Welcome back to Galaxy Brains. As always, I'm your host, Alex Thorne, head of firm-wide research at Galaxy. Bitcoin, not zero. We have a great episode for you this week. Bim Netabibi from Galaxy Trading and I will discuss markets. Bitcoin taking a little bit of a breather here in the mid-80s after a 30 % run in 30 days. We are trading above the 50-week moving average. What does that mean? We'll talk with Bim about that. Also go into depth about a big move in the rates market today on Wednesday, September 23rd. that shows, I would say, flashing warning signals for risk markets. Bill and I will talk about what it means for the fiscal situation in the U.S.

1:10Alex Thorn:And does Secretary Besson have a bazooka big enough to calm the long end of the rate curve in particular? No interview this week. And I have to tell you, I'll be off next week. I'll be traveling in Korea. So hunker down. And before we get to all of that, I need to remind you, please refer to the link to the disclaimer in the show notes. And note that none of the information in this show constitutes investment advice or an offer recommendation or solicitation by Galaxy or any of its affiliates to buy or sell any securities. I am fresh off the airplane back from D.C. where I was at the Bitcoin Policy Institute's Freedom Tech D.C.

1:46Alex Thorn:summit. A great gathering. Congratulations to all the folks at BPI for throwing an excellent event covering open money and open intelligence. the intersection between Bitcoin and AI, and also just the dual rising of both, with major policy implications and market implications. Really fantastic. They live-streamed the whole event on their X handle, which is just Bitcoin policy. So I recommend checking that out. You can replay it. Also, obviously, they'll put out videos. But big shout-out also to the team at PubKeyDC who threw a fantastic event last night on Tuesday, the 22nd. Fantastic beefsteak.

2:25Alex Thorn:thank you to josh and thomas and megan and dan and jerk and uh everybody on the teams there let's hop right into it with bimnet abibi let's go now to our friend bimnet abibi from galaxy trading as always bimnet welcome back to galaxy brains thanks for having me um so i just got back from dc i haven't been uh like literally moments ago and i haven't been following markets that closely though of course i did see that Bitcoin ran all the way to 87 yesterday on the 22nd. A little bit of a pullback now in the 84K range. Still above the 50 week, and it's been up about 30 % in 30 days. Where are we now in your mind with Bitcoin?

3:09Yeah, so I think the move that you've seen in the last 24 hours is a function of kind of leverage, getting taken out, late longs, kind of getting hosed. If you looked at kind of the liquidation maps going into today's move, it looked like all the shorts have basically already gotten liquidated. And who's left to liquidate now? It's the longs. Yeah, so there's not that gas from liquidating shorts to drive it up higher. Correct. And some of the moves you had in alts were just breathtaking. like if bitcoin moved 30 some of these things moved 60 70 percent um and people were were buying the highs and so the move you had today was kind of like a little bit of a leverage unwind um you know i haven't looked at the exact liquidation data but i'd probably guess like at least like 300 maybe 400 million bucks of of licks across crypto um also just like looking at things like open interest like you know one of the metrics i always look at is like the difference between ethoi and bitcoin oi and ethoi got up to about 19 billion versus like 30 billion for btc and it's like in the context of the market cap difference which is like 1.4 1.5 trillion dollar difference it seems like you know people have probably piled into alts a little too heavily or at least a little too heavily too quickly.

4:39Alex Thorn:Yep. And so where are we now? We are above the 50-week moving average that sits at 78K. We are right around the timeline of when we expected crypto to bottom, like just September, October area, one year after the prior high. And so it looks constructive, and the narrative is certainly there from the innovation exemption stuff, the fiscal irresponsibility. A lot of it's there. But unfortunately, it is a market that lacks an immediate catalyst. And so it's really hard, I think, for folks to crazily engage without knowing that there's like something positive like coming up like with equities for example every quarter you have earnings or they announce a new chip or nice if we could get you know the president of bitcoin to schedule a quarterly update on how everything's going great yes um but yeah and so i i right now i am cautious but constructive yep i'm a little bit worried about the broader market simply because of the rate move that you had today.

5:59Today, we have seen parts of the U.S. rate curve move as high as like 20 bps higher. The 10-year point made fresh highs trading at, I think it got up to 5.12%. And the 30-year point was almost at like 540.

6:19Alex Thorn:The 10-year, and you tell me, but we're at the highest yields on that 10-year since 2007 or something, right? Yeah. It's almost 20-year highs. Yeah. Yeah, it is 20-year highs. It's crazy. Yeah. And it's happening at a time when the curve is flattening on this move, where we've been flattening, where the front end has been rising faster than the back end. Theoretically, the front end is supposed to be low and the back end is supposed to be higher. Yeah, you need positive term structure. Right. You have it, but it's not. Just barely. It's not really enough to compensate people for taking that amount of duration.

7:01Right. Why not?

7:01Alex Thorn:What is this when you look at like 2's 10's? 2's 10's, 5's 30's. Yeah. So you expect to be paid a lot more for holding debt for that long and not. You're not. And so it's really interesting, especially in the context of the Treasury and Besant, you know, after having like made this whole push being like, oh, we're going to increase the size of our buybacks. And all of a sudden, like even with oil lower, even after a Fed hike that, you know, probably regained some credibility, you're still testing these really high levels and you keep going. And so I think it really points to something that's happening that is quite structural in nature rather than kind of like, oh, we're correlated with energy prices.

7:45Oh, there's a lot of IG debt. People and investors are demanding a higher premium to own this paper. Yep. And you can see that in real yields that have continued to push higher. And so, yeah, I think normally when you see very quick rate moves, that's normally kind of a risk-off signal. Because one, it tightens credit conditions. All these companies that have to go borrow money next year, it's going to cost them more. Every time I invest in something, my discount rate needs to go up by a lot. There's a ton of debt that has to get refinanced next year. like including the u.s government that has like trillions yeah in paper that need to get refinanced at these higher rates like that is going to have a real impact on like like the fundamentals of like everything yeah uh and so i am i'm watching the rate market close so yeah i think today was probably a function of one you had a week auction a three-bip tail the second highest tail in the five-year auction history.

8:55What does that mean, tail? Tail, so it means relative to what was implied going in. So you trade these things called when issued. Yep. So you can trade the 10-year in advance of it being auctioned. And so if it clears worse in price terms than what was implied going in, that's known as a tail. And this was a very big spread between like historic spread versus.

9:18Alex Thorn:They were struggling to sell it more than usual. Yeah. More than usual. Yes. A lot of those indicators. And so when you have like normally, like a lot of times when you have like huge rate sell-offs, the auctions, people are like, oh, I get to buy cheap and they're very like well, you know, subscribed auction. But this is like rate market was shitty and the auction was bad. And so, and I really am not sure what stops the train outside of two things. a huge correction lower in the energy complex caused by a resolution of the Iran conflict. I don't see that as imminent. And would a resolution even a...

10:00Alex Thorn:It'd have to be like the most durable, grandest revolution to actually cause them to... Energy prices to go down that much, right? Like... Yes. You know, like a decent deal doesn't bring us down to like the 60s or 50s. Absolutely. But it's also like you just have so many other things. Like there's refining capacity has gone down, right? And so just because you have more oil flowing doesn't mean you'll necessarily like, you know, cause a huge decrease in like diesel prices. Like it should, right? But it's still going to remain kind of like elevated. Do I see that there was a – Considering a 30, 90-day – Not just the ban, although I think the White House, they denied the story that they were going to consider a ban on diesel exports.

10:42Alex Thorn:No, but like a trucker strike? Yeah, no. Oh, so I think on October 1st, a bunch of truckers are planning to strike. You're talking about these are the logistics providers of the United States. Correct. The diesel prices are so absurd. Right. Like I'm watching videos of guys being like, I just filled out my tank for like$1 ,500. Yeah. That leaves me with like$200 in take-home pay after a week. I saw a video like this as well. A lot of truckers are affiliated with trucking companies, but a lot are also independent. And I saw a video of a guy who was like a trucker who basically said the same thing.

11:22Alex Thorn:You know, they want me to haul this from, you know, Tennessee to like Texas. But it's some giant thing, whatever it was, was like a huge container. I mean, literally really heavy mass. And he's like, it's going to take me, you know, a day and it's going to cost me like three grand more because of how heavy it is. it's gonna cost me three grand to to um drive the goods there and i'm only they're only gonna pay me 3200 or 3400 it's like why would i do that he's like i literally turned right around and dropped it right back off i said like find somebody else i'm not gonna spend a day trucking this thing putting all that wear and tear on my rig to make 300 like yeah i know the math isn't math that's right i mean these guys i've seen them being like i'm better off like doing uber yeah i mean that's than like trucking.

12:09Alex Thorn:So one of the inputs is the high cost of diesel, right? Absolutely. And that trickles. It's not just the petroleum products or the tightening credit for the corpos means they have to raise their prices or they have less cash to invest. But it's also like, it's going to be more expensive to deliver everything. And so everything will go up. But at the same time, like this shock in energy prices isn't really having like a huge negative impact on the economy, right? because this AI trend is just counteracts it. Like the services PMI number that came out today was gangbusters. 57 or 58, something like that, like beat expectations.

12:48Like the composite PMI and the manufacturing PMI were also pretty strong. The labor market's really tight, right? And so you have like really strong like undercurrents in the U.S. economy and inflation is there as well. partially because of the strength in the economy, but also because of the supply shock.

13:09Alex Thorn:Yeah. And so it's kind of like a little bit of a double whammy for the rate market, but it's also so interesting from the standpoint of like, like the fiscal issues getting so much more attention these days, I think. By market participants. By market participants. Because I want to ask you about this, because when the rates are higher, especially on the long end, but in general, it is a scorecard on our credit worthiness, basically. Or how do you think of that? Yeah. It's a, yes, it's a scorecard on the credit worthiness, but I would, like, the U.S. is a good credit. It's a great credit. Okay.

13:46Right? It's just, do they have the willingness to, like, actually do anything to actually assure the market that things will be fine? Because, like, think about it. You either need to tax people like crazy. Yeah. Which you can do. Because the wealth in the U.S. is staggering. covers more than the debt we've issued. Yeah. Right? Or you got to cut spending. There's no appetite to do either. None at all,

14:11Alex Thorn:because both have dramatic political consequences. It's absolutely staggering. I wanted to ask you this too, because, you know, Besson, we talked about a couple of weeks ago when he did whatever, I don't know what we ended up landing on calling what he did, but he, you know, he doubled the size of his bazooka that he could use, but from pretty small to bigger, but it was this, you know, he's telling the market that his willingness to do so was what he attempted. It briefly brought rates lower, but now they're well above even there. How big of a bazooka does this guy need to bring? And then the second question, is there even a bazooka big enough?

14:46Alex Thorn:Because that's what the market seems to be. I mean, they're testing him here, basically. Yeah, no, I mean, effectively, we can enter like a formal yield curve control market dynamic. That's going to need a lot more than the$4 billion. No, that's going to need the Fed to actually use their balance sheet to buy the back end at a certain level. Now, the issue with that is you start printing money to buy your own debt, people are going to be like, what do I do? They're going to buy gold. They're going to buy BTC. That's right. That's the most clear debasement thing that can be done. It's the number one debasement thing.

15:22Yeah. But it almost seems like an eventuality because I don't see them like – you know, to effectively get rates down, you need like growth to slow down, right? They're not going to try to slow down growth. No. This is a very pro-business administration, right?

15:44Alex Thorn:And how much of this is so, and you said it before, structural, and I think we've now enumerated many ways that it is and aspects of it being structural, but it really isn't, this may be one thing that really isn't about Trump, right? This is like, you know, if the, we'll call it the political uncertainty that some of the market believe this administration causes, if that resolved, I mean, you get the, whatever the softest, most predictable hand is in 28 in the White House, that's not going to bring rates down much in the end, right? Because this isn't, it's not really a political story. It's a fiscal story, right?

16:20Correct. Yeah. And no matter the administration. That's what I mean. Like the political party aside, they're all going to spend. Yeah. Right? Like if it's AOC in the White House or DJT, like both are spending. Yeah. And I don't know if we're going to get a rain on that anytime soon. I don't think we are. But that's what the market is asking for. Like figure your stuff out or we're going to need higher prices. We're going to charge you more for this. The issue though is like the higher we take front end interest rates, right, and the higher rates go, the bigger the interest rate burden. Yeah. Right?

16:53Alex Thorn:And so either already like well over, I think 10 % of the national, well over. Yeah. Federal. What is it now? I think it's closer to like 20%. Yeah. Meaning like when you pay taxes, 20 % of that or, and whatever other revenue sources the government has, they're just going right back to paying bond. Yeah. I mean, I correct. I need to look into it, but. But it's like if you carry credit card debt, I just mean for the average person and you make, you also have income, but your debt is so high that you have to put a lot of your income just to paying off debt. Not even principal. Just pay interest.

17:24You're just paying – nobody's paying principal down.

17:28Alex Thorn:Yeah, I don't know when – did they pay any principal down even during the – no. No. You know what would help with paying principal down? $5 ,000 checks to every American. Oh, yeah, that would help. That would help. No, but it's easy to make fun of it. But realistically, going back to your comment about credit worthiness, like it is it is not really like like the u.s is incredibly wealthy because everybody else is also pretty bad fiscally as well very bad and it's still the best house on the block like yeah gun to my head you asked me to buy any paper in the world like that paper outside of like you know corporate companies with like great cash flows and things like that sovereign paper i'm buying the u.s government yeah you want to buy the japanese that are like you know in terms of debt to GDP like way higher?

18:17Right. Or do you want to deal with Europe? Like, or you want to go to emerging markets? Like, I mean, maybe the Chinese actually.

18:23Alex Thorn:There's probably like one or two little ones around there that have really good profiles, but they're also small, right? Yes. Everyone's scalable, large, liquid. Something could move billions of dollars in and out. Yeah. You know, and so like, don't get it twisted. Like the U.S. is still fine. But the cost to borrow money is going up for everyone. Let me ask you another question unrelated to the – well, related, but sort of a little bit more far afield real quick. The NASDAQ yesterday hit new all-time highs. We talked about the rate story today on Wednesday, the 23rd, impacting risk markets a bit.

19:02Alex Thorn:We're down a bit since that all-time high. But so much of this driven by great earnings, a lot of that driven by efficiency gains, a lot of it from AI. How, where we've talked about the AI trade and the wall of worry, you know, the sort of duality of like on the one hand, it's essential for our economy. It's the key to the uprising, but also it could destroy the economy. And no one, you know, in February, it was like, oh no, like I was setting everything lower because the AI is too good. It's either going to save us or kill us all. Just in, you know, September of 2026 now, you've got obviously the pace, the frontier versus the who knows what.

19:39Alex Thorn:And I think Sam Altman and Dario Amadai were at the UN. They briefed the UN Security Council on AI safety. Just as a market participant and a risk taker, where is your head now in like the wall of worry of AI? Or like how is AI now impacting people's view of the markets? There's so much dispersion in the equity market that you really need to kind of hone in like sector by sector and like company by company right so you had yesterday you had a handful of financial names sell off because they're worried about uh agents you know kind of eating the moat of you know some of these companies like for example take like the idle cash that you have in your schwab account yeah right if you have an agent that's like constantly optimizing like for all your cash balance across everything companies make money on that float and deposits right yeah or if you're some private wealth guy and it's like wait like ai knows all the the tax advantaged accounts what you should be doing for for your kids like estate planning like you know like what's the optimal equity allocation if i'm trying to retire at this age i'm making this purchase like ai can do all of that right and so why is some you know asset manager or private wealth guy charging me a percent for something.

20:59Rea's and stuff. Yeah. Right. And so, um, at the same time, you're like, well, these ancient organizations like clearly should benefit from AI. Like they can maybe reduce their workforce by 20 % or 15 % other costs, other costs, whatever it may be. It's that jitters though. It's

21:16Alex Thorn:like either good. No, it's bad. No, we're not sure. Yeah. And then it's like, okay, like, agent use goes up. People need more power. People need more compute. Who benefits theirs? It's getting very hard to trade it from a macro perspective. You have to go sector by sector. Companies are booming and thriving from it. Others, people are scared and worried. It's just such a fascinating time. I'll let you go now, my friend Bimnet Abibi from Galaxy Trading. Thank you so much. Thanks for having me.

22:19Alex Thorn:We'll see you next time.