Bitcoin Rips as Dollar Dips with Beimnet Abebe

0:00Alex Thorn:Welcome to Galaxy Brains.

0:26Alex 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. Bibnetta Beebe from Galaxy Trading, and I will discuss the big green candle day today on August 19th. Bitcoin up as much as like 6.5%, touching 69K, almost 70K. Other assets up as well. This on the back of an announcement by the Treasury Department that they were going to double the size or the capacity of their long-end Treasury purchases. purchases if they needed to. That has sent risk assets and gold higher. I mean, honestly, it's really sent Bitcoin and gold and oil higher and then crypto adjacent stocks higher.

1:09Alex Thorn:Rest of the stock market, basically flat. NASDAQ down smalls on the day, S &P 500 up small. So it's really seems like a hard asset rally story in which Bitcoin is also participating, which we haven't seen in a while. So fun to talk with BIMNet on one of a on a rare big green candle day. here in the last year or so. Before we get to that, I need to remind you to please refer to the link to the disclaimer in the show notes and note that none of the information in the show constitutes investment advice or an offer recommendation or solicitation by Galaxy or any of its affiliates to buy or sell any securities.

1:42Alex Thorn:I'll be back in New York next week for an in-person office recording. But for now, let's go right to our friend, 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. Exciting day here for the Bulls as we record on August 19th around lunchtime. Bitcoin's up 6.5 % on the day. Right now trading at 68.6. What as high as 69.7? Almost 70K. Mm-hmm. I saw this morning some big news. The Treasury Department is going to be buying or supporting the back end of the treasury curve. So presumably, what, 30-year bonds?

2:26Alex Thorn:They're, what, buying? Tell us what that story was, because everything appears to be up pretty much on the news.

2:32Beimnet Abebe:So the Treasury currently has an operation where they buy back, you know, off-the-run issues and, you know, debt. There's a 10 - to 20-year bucket and the further out stuff. And the reason they do it is to effectively manage the yield profile of the securities they've issued. And so normally, you know, when you have a dislocation in the bond market, you know, the Treasury is more aggressive buying. And what they do once they've retired the bonds is they issue at some different point in the curve. Typically, it's like T-bills. And what the Treasury announced today was that they're doubling the size from$2 to$4 billion per operation, which will give them room.

3:17Beimnet Abebe:But the way I would think about it is that it's more of a signal that Scott Besant does not like where long-end treasuries are currently, and that he is afraid of, you know, kind of a big move higher in yields. And so it's an effective way of implementing yield curve control by spooking the market, telling them that you're going to be aggressive reacting to moves that you think aren't kind of favorable in a way.

3:46Alex Thorn:So as people sell the 30-year, for example, and the yield goes higher, the Treasury can buy those back, and he's now doubled the size of his cannon that he can use to buy those back. Correct.

3:58Beimnet Abebe:But I wouldn't – the doubling of the size isn't really the most important part because it's not really that much. An extra$2 billion per operation isn't like a lot of money. it's the most important part is the signal that it sends is that we will make sure that the back end of the curve behaves in a way that we think is appropriate. And in theory, like the way the markets work is that you, if you want to control the bond market and make it artificial in a way, your currency will bear the brunt of that impact. Because effectively, you know, what's happening is the treasury is buying back these longer dated paper, um, and they're going to issue bills.

4:42Beimnet Abebe:Oh, look, the Fed is currently in a bill buying program to, you know, make sure that there's ample liquidity in the front end of the system. Um, that's all to say that the Fed is actively doing QE right now. Um, and the treasury is, is doing stuff to, to keep the backend kind of controlled. And so you have massive, you know, balance sheet manipulation happening. Uh, it is QE because by definition that the Fed balance sheet is expanding currently. But most importantly, when you're effectively viewed as engaging in this type of stuff, like your currency should depreciate. And then that's exactly what we've seen today.

5:19Beimnet Abebe:The dollar index is down a ton, euros up like 70 basis points. And you actually got a really big move in gold as well. So gold's up 3 % on the day. And so it does make sense that, you know, if the Fed is actively engaged in and the Treasury in kind of manipulating the curve, you know, hard assets should do well, like Bitcoin and gold. And so that's the reaction you're seeing today. And it comes off of the back of like a couple of different things that make it even more obvious to folks. And so one, you had the BOJ intervention by Besson. And, you know, there's some sentiment in the market that that was done in order to make sure that there was still enough liquidity in treasury markets, right?

6:11Beimnet Abebe:So in theory, if, you know, Japan's intervening or going to force, you know, domestic asset holders to repatriate money back into Japan, that essentially necessitates like the generation of dollars via selling of dollar assets. Now, the other way you can do it is you can borrow dollars in FX swap line or borrow dollars against dollar assets and then go purchase the currency. But point being is some of the intervention was likely done in an effort to kind of support the treasury market. So that's kind of one side of the story. And then you've got this whole Fed credibility issue with Kevin Morsh, where the response function isn't really clear to markets.

6:52in terms of how certain data points

6:58Beimnet Abebe:equate to certain policy outcomes. And so you had a really big cheapening in the back end of the bond curve because the market lost a bit of confidence in the most important person in central banks and monetary policy. And so when you string together all three of those things, you get a move like you had today where people are like, hmm maybe dollars aren't the place to be uh and the best alternatives are you know things like gold swiss and bitcoin um but by and large you know that that's kind of the macro story and we've been talking about it you know in the last two pods you know we we've been saying that you know the risk to bitcoin is that it goes higher from here and that you bought it and that narrative would follow price action.

7:50Beimnet Abebe:That's right. And so you're kind of getting to the point where, okay, Bitcoin just had a 6%, 7 % day, took out resistance level, same thing with ETH, and there's all of a sudden a new macro narrative. And so, you know, it's looking increasingly likely that you have put in a bottom, a four-year cycle bottom for Bitcoin.

8:13Alex Thorn:Let's pause on the Bitcoin cycle because we're going to get to that in depth. I just wanted to point out too for the audience. It's very interesting because you're right. We have gold up today. Again, this is about 12.50 p.m. Eastern on Wednesday, August 19th. Gold's up 3.7%. Silver's up 3.9%. Oil, like front-end CL1, you know, commodity oil is up 2.1%. Dollar's down 0.8%, DXY. NASDAQ is basically flat. S &P 500 up, you know, smalls. But then Bitcoin up 6.5%, Ether up 9.2%, Sol up 6.6%, yada, yada, yada. And then if you look across the broader sort of like crypto equity complex, you got MSTR up 14.5%.

9:03Alex Thorn:Coinbase. Coin up 12%, almost 13%. Circle, you know, we can't talk about our stock. A lot of crypto stocks up a lot here. Yep.

9:12Beimnet Abebe:Yeah. And I think it speaks to the fact, one, there's been seller exhaustion, like a bunch of those charts like are at local lows. And, you know, there are probably some shorts out there as well. And so you just had this mad scramble to buy crypto and crypto adjacent assets. And one factoid that I found very interesting was this was the single largest buy skew in IBIT in two years. Yeah. So the ratio of retail.

10:11Alex Thorn:as it was ripping earlier this morning. So, you know, it's funny to be short, you know, at 63.5 or 64, as we've talked about. I mean, you know, the juice had been squeezed out of that lemon over the last, you know, 10 months. Let's talk about the cycle. I posted a bunch of Bitcoin cycle charts today on X. Just, you know, the drawdown compared to prior cycles, the halving cycle charts, the cycles from cycle load charts, all of them really show that we are, you know, if not sort of at the end, you know, sort of nearing the final innings on that classic four-year cycle clock. Like you've been talking about this since like literally last October that you would, you know, you said then that you'd be a buyer most likely by Q4.

11:01Alex Thorn:I think we all kind of agree now. And I wrote this in June that like the top was more muted and therefore the bottoms probably not therefore, but also the bottom will probably be more muted. And now as we look at this, it just looks really hard. And not just today. We were saying this over the last several weeks when we were like pinned in the 63 area that just below 58K where it had tapped a number of times just did not seem likely at this point. Right. There was not a lot of sellers left. And not that many more Bitcoins to be mined. There's not that much. I mean, it's scarce. Most of the tourists have been washed out.

11:34Alex Thorn:I post all that stuff about the dormant coins. I mean, you can see from this year alone, the first half, we're not even close to the pace of dormant coin distribution we were at last year and the year before. There's a whole bunch of reasons here. You think we sort of grind higher? Obviously, there's twists and turns and ups and downs, but if bottoms in, what would be a bullish target for the end of the year or over the next several months? How high could this really run?

12:00Beimnet Abebe:Oh, that's a really hard thing to say. But, you know, just back in the envelope, 80K sounds pretty reasonable. But I think your risks skew to much higher, right? 80K would kind of be my base case. But I would not be surprised if you got to move above that. What I'm more comfortable in is that this regime, you've gone from a regime where you sell rips to you buy dips. If you thought you were in a downtrend, you're now in an uptrend and you kind of have to trade it that way. And so you buy to sell instead of sell to buy back. That's right. Um, and so I think that the, the market psychology, uh, basically, I think it, this is kind of the, the Rubicon, this, you know, the 65, 4k level that you took out and liquidated people, this huge sentiment shift on fed and credibility and balance sheet policy.

13:00Beimnet Abebe:These are, and you know, potential four year cycle bottom. This is enough narrative to justify, uh, owning the asset. And at the same time, you've eliminated left tail risk with MSTR, uh, where, you know, they're in a much stronger position than where they were two months ago. And so, you know, absent like a broader macro shock, which I think is, you know, is reasonably possible because you still have a raging conflict in the Middle East and there is no kind of end in sight. And as you mentioned, like, you know, front crude is at 86 bucks a barrel and negotiations don't seem to have gone anywhere.

13:36Beimnet Abebe:And even overnight, you know, the Iranians were talking about plans to potentially strike European US bases. And so there's still kind of this escalation risk. But outside of that, it kind of seems like your left tail of potential outcomes is you should assign a lower probability to it. And so your expected value of where Bitcoin needs to be or should be needs to move higher by definition.

14:03Alex Thorn:Yep. I think that makes a lot of sense. So much of it has come down to time. You know, we talked about this, like how much time that, you know, former bulls who didn't sell the top, they had many opportunities to sell throughout the last, right? I mean, we were up to 82, 84. And in April, we were back up higher than, you know, as we were coming down at the end of the last year and into the early winter, you had opportunity to sell at 90, right? There's just no more clear sellers at this level. But I do think if we move up to 80, you'll have some of these 64 buyers selling for their, take their gains at 80.

14:40Alex Thorn:I think, I haven't shared this chart yet, but I will, the URPD chart that I love, the UTXO realized price distribution chart, I believe it's called. Basically, it's the entire supply cut up by the price at which it last moved. So the price is on the x-axis and the volume of Bitcoin that moved at that price. Basically, 64K is the largest candle or column in all of Bitcoin's supply, except for, you know, sub 1 ,000, which is because it includes like Satoshi's coins. If we take out, you know, zero to$1 ,000, like as a band, then it's by far the most Bitcoin that has changed hands now has a cost basis effectively around 64K.

15:22Alex Thorn:So you've reset that much lower than where it was. and that gives people, I think, to your point about the ability to sort of, you know, buy dips and sell rips instead of the other way around. Like now you've got a nice chunk of people who when it goes to 68, they're actually in profit as opposed to all those prior people that have been in loss having bought at a hundred or above. That does materially change the psychology of the market, right? Or at least it, or it reflects the change in the psychology because of the makeup.

15:51Beimnet Abebe:Precisely. I think you just nailed it. It is now reflexive to the upside. right? Where the higher it goes, the more people that are in profit, the more comfortable people get, the more inflows, you know, products get, the more calls that get bought, you know, maybe that start trading at a premium again. So the more Bitcoin that, you know, they can potentially buy by issuing shares and, and buying back spot. And so I think you've, you've kind of flipped from a negatively reflexive market to, to positively reflexive market. And, you know, the on-chain statistics support that. Yeah, I agree.

16:28Alex Thorn:And I think I'm trying to look at the strategy's dashboard here. I think they have the MNAV as slightly positive by their own calc, although their dashboard is...

16:36Beimnet Abebe:It should be slightly positive today because it was slightly under par yesterday, depending on how you look at it. And the rip here. Now it just ripped. And so, you know, I think, you know, I'm about as bullish as I've been all year. You are.

16:51Alex Thorn:You've been, I joked over the year, You were BIMnet the bear. No, but you've been very clear about this, I think, historically, you know, on this show, but also over the last couple of months, you know, like six, eight months ago, you were targeting more in the 40s. Right. I wrote about that, not what you said, but I agreed that sort of would be a reasonable place for the historical analogy to play out. But over the last month and a half or so, we've both been saying here, it just didn't really look like it wanted to go lower where we wanted it. I would have loved to buy like 50K BTC. I haven't been given the chance.

17:25Alex Thorn:You're not going to get it. It doesn't seem like we can. Yeah, because, you know, again, it was like at 58K, it was like a, you know, a beach ball underwater. Just not able to go below that. Like tried, tried a bunch of times.

17:39Beimnet Abebe:The beauty about the cycle is, you know, like the people that sold at the highs or sold on the way down, like these are still people that believe in the asset class, particularly a lot of the whales. And so, you know, while they might have used the money for other things, you still have like a deeply committed community that, you know, believes in the four-year cycle. And so part of the reason why, you know, these bottoms form is those guys start stepping back in and dying, right? And there was some Bloomberg article out yesterday where apparently some large wallets, whale wallets, have started accumulating again.

18:19Beimnet Abebe:and so that kind of holds and like the reason the four-year cycle holds is because people believe in

18:24Alex Thorn:it yeah and so and this is despite us i mean i didn't want to believe in it uh over the last year i i had thought that the institutional adoption you know the etfs maybe the sbr etc these sort of net new phenomena in this past cycle would prove that that was untrue you know the etf buyers they don't know about the four-year cycle as a theory really um but yeah the you know a large number of whales selling a lot of Bitcoin can absolutely create a top. And again, you know, we've been pointing this out and I'm happy to be perplexed by it. But empirically speaking, it did basically follow the four year cycle almost to a T in some ways a little bit accelerated.

19:04Alex Thorn:And we talked about so it actually would make sense. You know, the prior sort of cycle analogy would put the Bitcoin bottom firmly around September, October. Here we are in the middle of August, slightly earlier. That makes sense. We didn't quite get to the levels we wanted. We didn't quite get to the bottoms we wanted. So why not be a little bit earlier? The shape looks similar, though, you know?

19:26Beimnet Abebe:Yeah, I mean, I'm just picturing the amount of people that have been, like, waiting for the September-October bottom. And they're looking at today's price action. I bet you if they didn't catch it. Like, they wanted it lower, but I bet you they have so much FOMO. Yeah. I mean, the amount of FOMO, you know, like, I don't even know how to quantify it. But I feel it in my bones.

19:51Alex Thorn:I mean, I posted yesterday Bitcoin's 30-day realized volatility. It's effectively at all-time lows. The implied volatility, I think, actually was at all-time lows. And then, of course, and I said, you know, coil spring. Literally, the visual looks like a coiling spring, and that volatility is likely to pop. I will say, like, you know, is this the beginning of a sustained, you know, near term move? Or is it merely sort of the milestone that you talked about? And we've talked about about, you know, bottom probably is in, I think, is a fair, at least we both think that. Of course, we don't know, but we think that we've been clear about that.

20:26Alex Thorn:But, you know, we are in sort of like recent historically apathetic times for Bitcoin price, right? I mean, low vol. I, you know, and please come to the desk if you're interested in anything.

20:39Beimnet Abebe:But I think that the best way to one of the best ways to play for Bitcoin upside is by buying, you know, call options when vol is really low and it's still somewhat low, particularly by historical standards. And so I think you're at the point now where, you know, you want to make sure that you're in the asset, but you have kind of defined risk. And so the risk reward profile on just buying calls is pretty attractive. And so, you know, while, you know, I'm not saying buy one week calls, but buying like three to six month type of horizon stuff, I think absolutely makes sense here.