State of the Bitcoin Bull Market with James Check

16:13Beimnet Abebe:You know, what we need in markets is Paul Volcker-esque courage to do what's hard, not Powell. Paul has said that Volcker

16:21Alex Thorn:is his idol. maybe he's tired. He looked tired. I mean, not literally tired, but I mean, in some photos, he looked in Jackson Hole like, gosh, man, I've been doing this a long time. I'm exhausted.

16:33Beimnet Abebe:Yeah. It's been an exhausting run. To your criticism of the Fed, which I totally respect, by the way, like we did make a policy error by having policy way too easy for way too long during COVID. That's right. Right? And if you had raised rates much sooner and constricted the economy, like maybe we wouldn't have as much of an inflation problem right now. And so but at the same time, you could pass blame to Congress as well. Like, oh, yeah, you sent out helicopter money. What do you think that's going to do?

17:01Alex Thorn:Oh, yeah. And even now I saw Trump is talking about more possibility of more helicopter money that some of the funds earned from tariffs could get rebated to Americans. Surely they could just not do the tariffs and let us keep the money in the first place from our goods not going up. But anyway, that doesn't have the same headlines. he likes to put his names on the checks. Didn't he sign them himself or something the last time during COVID? I'm sure. Realistically, you understand

17:29Beimnet Abebe:that it just gets wired into your account. That's true. I didn't get a check. If you did get a check, it's based on your tax returns. Yeah, and it's based on...

17:39Alex Thorn:Maybe if you mailed your tax return in, then you got a physical check. Most of us just ACH it or whatever. Alright, well, we'll keep following it. my friend bim netabibi from galaxy trading thank you so much thanks for having me let's go now to our guest james check from check on chain james welcome back to galaxy brains thanks having me on alex always good to be on galaxy brains thank you so much for coming and i always love to have you on sort of at the the as we're having or when major market moves or shifts in sentiment are happening uh we talked once i think back in uh april of this year uh while we were both maybe you had just gotten to bedford and i was yet to arrive um and then also we talked last year sort of right towards the end of chop solidation i think maybe in september um and so we've been talking about this and this feels like an incredibly apt time to talk to you you've been writing as you always have but prolifically about this sort of latest move now people should remember we hit an all-time high of what almost 125k just less than two weeks ago or about two weeks ago.

18:42Alex Thorn:But since then, sentiment has degraded significantly Bitcoin with Bitcoin trading at like 110, as low as in the 109s, but around 109, 112K, as we record this on Wednesday, August 27th, around 112K. And people are incredibly bearish. How would you characterize, before we get into why, we're going to talk to you a lot about your take on the cycle and all of that, but how would you characterize how people are feeling? Because it seems incredibly bearish out there. It is. It's a really interesting dynamic because when we talk about major market moves and sentiment shifting stuff, you know, we're what, 10 % below a fresh all-time high.

19:17This has been one of the key things that's interested me so much is watching the social narrative and then kind of looking at the data. And, you know, we'll talk about why this particular pullback, I think, may have a bit more energy to it. But at the same time, like, you know, we're just, it's more flat, but it's flat over a year-to-date period. Let's anchor to the 1st of January. But now let's go a 12-month view. Oh, suddenly you're up 60%, 70%, 80%. So it's one of those things where I think just people's lens is kind of changed by how sideways this market has been. And it's not really recognizing that the drawdowns are 10%, 20%.

19:54I was marking out a chart yesterday to just try and say, like, if we were to have a drawdown like 2024, if we were to have a drawdown like 2025. and I put like a little pin on my chart to show like how deep we would have to go and then overlay some price models to kind of see how we line up. And it's like, wow, really, we really haven't pulled back this cycle at all. And I'm using the hourly chart too. So I'm trying to get like wick to wick. And I'm like, you know, if we go to 100K, that's like a nasty correction, this cycle. So it's a very interesting dynamic. I think there's also a lot of people who've been somewhat trapped by Bitcoin's performance, which has been tremendous all cycle.

20:32And until very, very recently, ETH has really not performed. So I think a lot of people were kind of trapped on that side of the leg. And I can only imagine a lot of people rotated out at the bottom. And then, you know, the pain of watching something that you used to own or wanted to own ripping to the upside when you could have been there is actually worse than taking an L. I think a lot of people got caught up in the treasury company hype and those have compressed, you know, they've grown their balance, but the stock tickers got crushed. So I think a lot of people have just held the wrong thing.

21:03That's a big part of it. But also just there's a lot of sideways price action. And my kind of base case, I think sophisticated market actors kind of understand that you look at the price chart, you go, guys, it's a monthly macro scale uptrend with very few pullbacks. But then folks who are kind of going, but I'm not rich enough yet, they're kind of stuck in that world where it's like, but Bitcoin was promised to go up 100x. It's like, yeah, but it's also$2 trillion. So just getting those kind of expectations aligned, I think, has been a bit of a challenge for people.

21:31Alex Thorn:Yeah, I agree. And the pullbacks, we had some pretty much more substantial, really, several pullbacks last year during that chop solidation. We did have this giant pullback from over 100K to like 75K in April when everything, the sort of, what do they call it, independence. The tariff tantrum. Yeah, Trump's tariff tantrum. and Bitcoin rallied hard off that, like a V-shaped recovery and Ether didn't, right? Or did eventually, but Ether had gotten so low. And I love that you make this point because we're seeing this in some of the flows in general, that there is rotation into ETH right now from Bitcoin.

22:07Alex Thorn:It almost feels a little bit like a 2017, early 2018, where like some gains appear to have been taken to bring us down from 125 in Bitcoin and possibly been rotated into ETH. And you're right, I think for Bitcoiners watching what has been about a 3x move from Ether just since April hurts when Bitcoin only went up 50 % or 60 % back to its all-time high and then can't hold it. But I think that's part of it as well. People are dancing on the grave of ETH in April. And then they've had this bullish narrative with people like Tom Lee seeming to have more of an impact on ETH than Michael Saylor and David Bailey are having on Bitcoin.

22:54And sort of like, that's not fair. But I would remind people when it comes to Ether, that was building off a very low base.

23:03Alex Thorn:That thing had gotten destroyed. And the other thing to think about is that Bitcoin really did a lot of the lifting, you know, like it kind of elevated the value of sats and, you know, Ether still significantly below its merge price in BTC terms. So, you know, it's still, if you were to really take an honest view, there's a very, very high potential. We just have another lower high here on a macro scale. So there's that element. And whilst I'm not yet there and we can talk about this more, I'm not quite there to draw a direct comparison here. the last time I saw this specific event happening where ETH just ran was in May 2021.

23:40Bitcoin's peaked, come off its high. Suddenly everyone goes, that's it. Let's go. Alt season. ETH rallies. Next thing you know, everything's down 50%. And I don't think we're going to have that kind of an event, but it is not the kind of stuff you see at bear market bottoms. It's the kind of stuff you see later in the cycle.

23:56Alex Thorn:Yeah. And I use the 17 Bitcoin all-time high and then Jan 18 ETH all-time high. It's probably a bad example because that would imply that it was the end of the cycle. And I don't think I see a lot of evidence of that. But it does look like sort of some intra-cycle rotation a little bit, also contributing to both Ether's rise and Bitcoin malaise here. But let's step back. Let's talk about you wrote a great piece about wondering, is this pullback a dip or is it some perhaps portending of a broader pullback or even the beginning of a bear market? You had a couple of key takeaways. Generally, I think if I summarize, you're saying we're not yet at the level where you have to consider it to be more than a dip.

24:38Alex Thorn:What makes you think that? Yeah, there's a few different angles here. And I think the first one to start with is I often describe, just to simplify everything, you've got the demand accelerator and you've got the sell side brakes. And we're very lucky in Bitcoin where we can see both of those, how depressed those pedals are across many, many lenses. and this is a whole topic to itself, but there has just been an extraordinary amount of sell side this cycle. HODLers, OGs, whales, all sorts of entities. You just see this consistent pattern where the market is rallying and old coins come back to life.

25:11Coin days get destroyed, profits get taken. You just see these volumes. And like, you know, people can debate how much of it is actually sell side. It seems to happen every time the market goes up. And when it happens too much, the market stops going up. So, you know, we can just draw a very simple cause and effect. So that's the sell side breaks. That's been pretty significant. Although this rally, as you said, from April up until now, there has been meaningful sell side, but it's a fraction, you know, 30 % or so of what we saw in November and March last year. So the sell side hasn't been as high.

25:42And actually, it's tapering off. And there's an idea I've been floating around. There's almost this like symbiosis between hodlers and the Bitcoin price. They know when they have the capacity to sell. It's when the market's ripping, demand's coming. ETFs are there, sailors there. A lot of these whales, they will distribute when that demand is there. When it backs off, they actually tend to back off their sell side. There is this very interesting dynamic there. So on the demand front, the ETFs have slowed down meaningfully. As you mentioned, the ETFs have been taking in multi-billion flows. Bitcoin's been having some outflows.

26:16It's been a real softening over recent weeks. So the ETFs have been a main driver and they have been much, much softer. The other one is the treasury companies. So I've been thinking about the ETFs as like a consistent passive bid, and it has really performed that way so far, certainly in 2025. The treasury companies have been this kind of aggressive buy as much as you can bid, but is totally dependent on their MNAV premium staying high. And they have been compressing quite sharply across the board. So suddenly you just don't have as much treasury company buying. And I also think the treasury company buying has been overstated.

26:49A lot of people are looking at BitcoinTreasuries.net, which shout out to NVK, great website. super useful. However, when new treasury companies are added, or for example, I won't call out specific names, but there are some that take the Bitcoin that's already on X's balance sheet, and they put it on Y's balance sheet, and there's like swap of coin for share agreements and all this stuff. It's not actually new buying. So people can overstate the actual bid side that's been there. Sailor, no question. But really, once you get outside Sailor, it's not huge in terms of the overall demand profile. So, you know, it's growing, but it's also compressing.

27:25So your demand accelerator is coming off significantly, but so are your sell side brakes. And if you've got both your feet flat to the floor, the car goes nowhere. If you take both off at the same time, the car kind of also goes nowhere. And that's very much the dynamic that I see that we're in.

27:40Alex Thorn:Yeah, I think that's right. And you have seen significant whale selling. This is one point that some people on X and in social media, I would say in a conspiratorial manner, sort of refuse to acknowledge, despite the fact that you and others have been pointing this out, there are claims that the price is being suppressed artificially, manipulated. Things like paper Bitcoin, which is also kind of funny because the Vibes Capital Management guys like to joke about paper Bitcoin summer. They're talking about the treasury companies. But the old idea used to be some sort of form of derivative-based manipulations.

28:16There's also FTX, like, yeah, they don't actually have the coins and sailors haven't got, you know, sheets of paper.

28:21Alex Thorn:Exactly. Selling coins that don't exist. We've talked about that on your prior appearance about the sort of false double top in 21 possibly being caused by FTX. It was very low network activity then. So maybe it was artificial, perhaps created by like FTX artificial paper Bitcoin. But again, the sell side volume, How has it compared? Or maybe thinking about old coins coming online. How has it compared to prior cycles? This cycle is massive. Like the dollar terms, in dollar terms, the amount of sell-side pressure we have seen this cycle is extraordinary. For a bit of a sense of scale, when we look at the realized value of every coin, so take every coin in the supply and price stamp it when that UTXO was created.

29:08So when did the coin last move on chain? Satoshi's are worth zero. The guy who bought the 2018 bottoms were$3 ,000. I've got a bunch of heat maps to kind of show how this evolves over time. There's a bunch of guys down there who bought the FTX bottom, and that's still a really dense supply zone. If you look at the USD value of all the coins in the supply, 60%, 60 % has a cost basis above$90 ,000. So when you actually think about what that means, like Bitcoin is$90 ,000 plus. That is when people have their, call it recency bias. It's literally where they've invested their cash. Yes, there's going to be exchanges that have moved coins there.

29:44Yes, there's going to be ETFs that have moved coins there. But the point is, that is where the last coins have moved. That's where people's anchoring bias is. And when we talk about sentiment, this is actually a really key. We mentioned before, how do I try and distinguish between a dip and a more serious bear market? We can look at when coins go in and out of profit because we can see their cost basis. So in aggregate, we can see how much of the supply is underwater and how much of it is in profit. Long-term holders right now are sitting on about$1.3 trillion, with a T, of unrealized paper profit.

30:16If they all sold their coins tomorrow, obviously they wouldn't get that out. But the idea is that's a big buffer. It's kind of difficult to be too upset when like 95%, 98 % of your portfolio is significantly up and the last$1 ,000 you put in is down. So generally speaking, we look at the ratio between or a comparison between paper profit, and this is not paper in the paper Bitcoin summer sense, unrealized profit versus unrealized losses. And if you compare those two, how bad are the losses? How bad is it? So right now, short-term holders, about half of their supply is underwater at about$108K.

30:53That's their short-term cost basis,$109K. Generally speaking, when we go below that level, it's actually quite normal for bull markets, certainly this bull market, but it's also the point when short-term holder sentiment just takes a bit of a punch because suddenly more than 50 % of their coins are underwater and their unrealized losses start to increase. However, in our current dip, the price really has to go significantly down into that 100K, 90K. You've got to get that huge demand cluster, that 60 % of all of the dollars invested. you not only have to get that underwater, but you've got to get meaningfully below it because people being down 5%, they don't really care that much about 5%.

31:34They don't really care about 10%. Once you're down 30%, now it starts to impact it. Oh, maybe I should just wait for the next, or actually this dip feels kind of no good. So there's this dynamic of like where sentiment is. And from an unrealized loss perspective, you kind of have to put a microscope on the chart to actually see how small it is. It's really irrelevant. It's not even remotely close to what we've seen in 24 and 25. Price is going to get down to about 90K before we start getting to like your typical 2023 plus cycle dip. So the damage just isn't there yet. And, you know, I use the crocodile Dundee meme where it's like, that's not a dip, right?

32:13This is a dip. It gets significantly worse before I get too concerned. So as you said, cautious bull, certainly looking at things saying, look, it has the potential to deteriorate. But here's some key thresholds. We've got to get below 109K because until you do that, it's still a bullish trend. The odds are I think we may probably test that and give it a bit of a... But then we've got to see whether that 90 to 110K zone, massive, absolutely massive demand cluster. It's been demand in the past. I think a lot of people are going to see it as demand in the future. And therefore, it kind of sets up a very simple framework.

32:47We should find support in that zone. If we don't, then suddenly you've got all those people who are going to flip into a loss. And now you may actually have a more protracted bear market type problem. And then you start thinking about how far can you go below there? And, you know, it's not about predicting the future. It's about trying to understand where are those tipping points for human sentiment? Yeah, and I think from my perspective,

33:07Alex Thorn:we kind of tested that post-election high as support in April of like 74, 75. And so that's where I would always be looking post. It's so funny though, because the sentiment right now seems almost more bearish than when we dumped to 75. Yeah, it's wild. I honestly think it's because people have been crushed in treasury companies. I think that's a big part of it. People have just not got the performance they expected just because of nav compression. A lot of these companies literally have more Bitcoin and yet their stock price is sideways and probably down, which is, it's tough. Yeah. I mean, some headlines I see today, one in three Bitcoin treasuries slip below value as quote, spiral of doom fears grow.

33:47Alex Thorn:That was a headline yesterday. I saw a headline today in Bloomberg, strategies, Bitcoin strategy falls on its face. Right. So like there is negative reporting. It is clear to like the and that's obviously, you know, I think then, like you said, that the actual prices of the stocks, you know, have languished a bit. I mean, MicroStrategy's not made new all-time highs since after the election. And you have these others. There's a lot of them, too. There's so many of them. And if you want my, like, let's just say, right, I love to play in scenarios because in markets you have to. Let's say we're in a bear market right now.

34:26And you start thinking about, okay, well, how low does it go? We start breaking through 110. Next thing you know, we're at 100. Things start to cascade. People have to cash in their loans. You can kind of see this all playing out. what is the most beautiful, perfect headline that's going to hammer out a bottom? I don't think it's down 80%. I'm struggling to see how Bitcoin goes down in like 20K, 30K, 40K. Like, good luck with that. So therefore you're like, okay, well, how deep is a modern bear? Let's just like ideate what a bear could be. Right now, the average inflow cost basis for the ETF, so it's kind of our best estimate of where the cost base is, 78K.

34:58What's Michael Saylor's cost basis? 74K. What's the average cost basis for everybody on chain? It's about 77K. and no matter which way you want to slice and dice this, all the headlines of Michael Saylor soon to be liquidated, BlackRock investors get wrecked. Just name it, name it, name it. That like 75 to 80K zone is just absolutely perfect and you've got the top of the chop, which is that 24 zone of accumulation and that would be about a$1.5 trillion asset in terms of market cap. Now, I just can't bring myself to believe anything in markets can happen. So this is not saying it can't happen, but a trillion dollar market cap is 50K, thereabouts.

35:39Bitcoin's a trillion dollar asset. I'm sorry, I'm going to bid that thing all day. And I'm sure there's a lot of people out there who will. Bitcoin, if we go down below 50K, for me, I'm all in. Because at that point in time, I'm all in already, but more all in. 50K, it's a trillion dollar asset now. It's got to go higher than that.

35:59Alex Thorn:Yeah, I agree with you. I like the convergence there. And like you said, the accumulation zone, that's the post-election level. That's also the April tariff tantrum level. And if we go down$35 ,000 from here, which puts us around 75K, that's only a 31 % decline. That's what I mean. When you overlie the worst possible correction, you're like, is that it? Is that it? I think it's just, it is that. But it's funny. it's like it i don't know it's hard to put yourself in the shoes of last year the chop solidation was pretty rough for people um the the mental but we kind of i'm pain it's exhausting time pain this kind of feels like that because we opened the year at what like 108 or 100 i mean actually at that sailor's party which i was at were you at that party i can't remember no no he should come out to australia make it easy for well somebody was joking is he gonna have another 100k party if we test it to the downside um it was a great party by the way but um that we were actually sub 100k so we actually opened the year in like the mid 90s and so we're up a cool 10 from there or more 15 right uh right now at this moment which by the way is pretty good and if you extend the clock back to 12 months it's up like you know 60 it's like that's pretty damn good actually yeah yeah yeah it is it is people i don't know what people think do you You think it gets, does it get harder?

37:26Alex Thorn:You sort of alluded to this, but it gets harder to go higher, the higher you get, right? I mean, it's a bigger asset. It is, it is. And you just simply need bigger flows. But at the same time, we've also got bigger flows. And Bitcoin has always done this. As it grows up, you get larger and larger entities and institutions starting to come in. Starts with libertarians, starts with retail, starts to move on to your hedge funds. Now we're moving into the world where we've got pension funds and sovereign nation states now. You know, they have large balance sheets and they also are fairly price insensitive.

37:56They're just willing to accumulate because they view it as a long term asset. But they also move much slower. You know, and that's why whenever I look at the sell side story, a lot of people think like, hang on, sell sides bearish. Like, yeah, but for every seller, there's a buyer. We're measuring demand by proxy. And if you look at the ETFs, they're about, by my estimation, about 20 to 25 percent of the demand profile. If you just look at how much the realized cap changes over time, you compare that to the ETF flows, it's about right. We occasionally get, and actually it's been a key factor here, is things like the CME arbitrage where they'll buy the ETF, they'll short the futures.

38:29Very often you'll see ETF inflows and outflows very much correlate with changes in CME open interest. Not all of it is cash and carry, but a pretty meaningful chunk is. Those premiums have compressed. They're like, last I checked it was like 6 % or 8 % or something, and they used to be 12%. So, you know, suddenly you're talking about a couple of base, you know, 2 % above your risk-free rate. And suddenly it's not really worth it. There's other rates out there that people can get. And I've also been looking at Saylor's Preferreds. I think Saylor's Preferreds, because they are this kind of yield curve type dynamic, and there's all different ones.

39:02Like Strike, for example, is now trading below its$100 face value, $95 or whatever. Strike is his, really, these are representations of how likely the market thinks he's going to pay the coupons. Because if he's going to pay the coupons, then they're probably going to be worth something. Stride, which is the optional coupon, is down below its IPO price, means that the market's starting to sense. Maybe he's not going to be able to pay this coupon. He might have to put it into the icebox for a while. Strike has like an embedded, what do I think MSTR is going to do? If MSTR is not going to do very well, and that's the market's view, then he's not going to be able to use the ATM as aggressively.

39:39Suddenly, you can start seeing that it actually is a really nice price signal when his preferreds aren't doing great. when they're trading below that$100 face value, it's suggesting that the market goes forward looking. I don't think you're going to be able to pay these coupons the way that you said you would. And that's like an almost forward view on where Bitcoin is going to be. So I think there's all of these signals just saying, like, it's probably going to be a little bit softer on the road ahead, but also it's got to get a whole lot worse before it's like true bear market potential.

40:06Alex Thorn:Yeah, I think that makes a lot of sense. You know, another thing I wanted to ask you about is how people are going to position. I don't know if you think about macro, you're more of an on-chain guy, but like, for example, last week we had in Jackson Hole, this sort of, it's hard to characterize the way BimNet on my team and on this podcast characterizes it, is not that they gave up the 2 % target, but that they have publicly said they're more concerned at the moment about labor than they are about inflation. And that is what's going to lead to cutting you know stocks have basically made an all-time high since then um but bitcoin languishing is it secular bitcoin is it just it's just inside do you think that we're getting the double-edged sword you alluded to this about the the the treasury companies not delivering these wild upside that maybe some thought they would like is it is it inside the bitcoin market or does do you think it's part of a any kind of change in the long-term view especially quickly as it relates to macro?

41:07This is a great question. And I would consider myself a macro tourist. I love studying it. And I actually listen to most of my analysis consumption is macro in the economy. What I don't have is the ability to just pull charts and stats and give the actual numbers. So I very much, what's the right word? I vibe analyze macro, right? I've got my gut feel and my thesis. In the long term, I think Lynn Alden's dead right. Nothing stops this train. I think in the immediate term, there's a couple of, I'm going to call them orange flags. I've read a couple of posts. And again, I'm not going to opine. I'm no expert on equities or AI or any of this stuff.

41:44But like gut feel, when I looked at the treasury company, I was like, yeah, I think the gravity is that MNAV goes to one. And then I've tested that idea and it seems to have played out. I just have this gut feel that we're investing a lot of money in AI data centers and chips. And I've used AI. I would not say I'm a prolific user. I prefer for all my analysis and my work, I like to actually use my brain because that's actually the fun part for me. So I don't use it for any of my writing or my videos or my charts. I use it to like, you know, maybe do some of my actual code in the background faster, which is very much programmatic.

42:18But even then it's 80 % there. A lot of the time I've like, I'm like, I have to turn it off because it just makes edits that I don't want. And suddenly I hit tab and it's like broken something in my code somewhere. I certainly don't use it for copy. And I just look at my own usage of it. And I'm like, it's okay. That's kind of where I'm at. It's okay. And I also know that the revenue models don't work. And I love the analogy to Bitcoin mining. Bitcoin mining is a CapEx and OPEX heavy industry. And then you're producing a commodity that you don't control the price of and is volatile. If you look at what AI is doing, it's even more CapEx intensive because the chips only have a use by date of two years before they're outdated.

42:59Sometimes they're outdated by the time they've even built the facilities. These chips are moving so quickly and they're so expensive and you're charging like 20 bucks a month? Like, I don't know, man. I don't know if this kind of CapEx cycle can continue. And then you look at like the stock indexes and NVIDIA is the stock index. And by the way, NVIDIA's customers are the other part of the stock index. So if any of this slows down, like suddenly the whole thing can turn quickly. So I think I would summarize a lot of this as fragility. The Japanese bond yields just keep going high. if you look at that chart, it looks like a shit coin coming off the bottom, right?

43:32It's a tremendous, tremendous chart in terms of Japanese yields. And there's just so many things. I'm like, what if? What if tariffs start to bite? What if you just get a slowdown from all these things? What if NVIDIA doesn't have the sales that they think? And there's just like layer upon layer of it's just concentrated risk. So my base case is that Bitcoin, I actually think is far more powerful as a global index than people realize. I think people are slowly coming around to it. Something happens on a Sunday, you better believe your favorite gold bug is posting a Bitcoin chart because he thinks that that's going to, you know, look how shit Bitcoin is.

44:07Like, no, that's what your equity portfolio is going to do on Monday morning, sir. That's what's going to happen there. So I think Bitcoin is really a global index. And like, I look at this slowdown and the demand coming off. Ultimately, why does the Bitcoin price go up? Because people are buying it, people aren't selling it. At this environment, we're not getting people buying it. Why are people buying it? Maybe they're actually concerned about other stuff. So that's one way that I like to look at it i just think it's got that global index factor that i may not understand all of the ai stuff and i don't spend any time studying it but like feels like a bit of a slowdown as told through

44:38Alex Thorn:the lens of bitcoiners sam altman even recently used the word bubble and describing the the sense of it i i happen to think we're going we need a lot more build but i i agree there have been some studies i think mit put out an interesting study i saw reporting about that um some large percentage of companies that they had surveyed that had done pilots with AI to gain productivity. Like 95 % of those projects did not result in more productivity. So there's definitely, I think, some fragility. And it's fair. I think humans, I mean, Bitcoin's been through this many times as well. Like humans get really interested in an important new idea that oftentimes is real.

45:16Alex Thorn:You take the internet bubble in the early 2000s, right? In the late 90s, like that was real. We did. Super useful. You know, pets.com was a great idea, it turns out. Now it's mostly Amazon. But like, I mean, you know what I mean? These things that were bubblish ended up, you know, the bubble occurred because people were rightly excited about a big new idea. And it's sort of a timing and an exuberance question, not a fundamental question. I think that's the case with AI as well. And things get commoditized. And I think AI is very much a commoditized system, right? It's just a race to the bottom with a high CapEx cost, which Bitcoin mining isn't, to be fair, because it's a race to the bottom in the mining sense, but the asset tends to go higher.

45:56Whereas in, really, you've got to keep charging people less because people are less able to pay because of inflation and cost of living and all that, and people will just move. So I think it's a commoditization challenge.

46:07Alex Thorn:All right. So sort of a final question here, James, and you've covered a lot, by the way. I encourage people to listen again to what James said about 15 minutes ago. We won't repeat it, but I wanted to ask you about it, which was sort of your criteria for when to become concerned about moving lower. I think that's one of the more important things we discussed here. But sort of like, I was asking myself this in Vegas at the conference, the Bitcoin conference. Are we at the end of the beginning with Bitcoin or the beginning of the end game with Bitcoin? And I don't know the answer, but it feels, said another way, it feels a bit to me like we're sort of entering Bitcoin's second or third act that the early days are surely over.

46:47Alex Thorn:Now, we may still be early in terms of where we ultimately end up, but this is not the Bitcoin market of your libertarian friends or even your friends and family from the last two cycles. There's something you're talking about, big, giant demand and big, giant sellers. Where would you peg us in the long-term maturity of Bitcoin as an asset, James? I think that's about right. And I've had a handful of circumstances recently where I've actually been able to orange pill friends and family somewhere because they came to me. I rarely kind of push it in there anymore. I've done my time with that. I'll wait for you to come to me.

47:23If you've got questions, I've got all day. So I've actually had more luck with people who are talking about, man, cost of living here and the economy there and this doesn't make sense and all our politicians are monkeys and don't know what they're doing. I'm like, yeah, this is the reason. Maybe it might be because global trade and blah, blah, blah. And they're like, oh, interesting. And then I often find that I say, this is why gold and Bitcoin are just going to do so well. And you lead with gold and they go, yeah, okay, I understand that. And they go, tell me more about that Bitcoin thing. That's interesting.

47:51So I've had more of that success, which to me is it no longer is the immediate, it's a scam. We've passed a big chunk of that. This is on the retail side. On the institutional side, I mean, it's just, I'm sorry, you can't have tens of billions of dollars being sold on a regular basis without institutional capital. We're not talking about, you know, retail pocket money anymore. This is serious money. This is why the drawdowns aren't as big. The volatility capture strategies that are in there is why we get a lot of this sideways price action, right? Options are growing. And actually, this is a really important point.

48:21If you look at the ETFs, at all of the ETF complex, since January, if you take away Ibit, ETF flows are flat. They've gone nowhere. And when did that start to diverge? And suddenly, Ibit is the market for ETFs around November. What happened in November? The options went live. So this is really showing, going back to that paper Bitcoin idea, I actually wrote a piece called Paper Bitcoin where I said, guys, without derivatives that are deep, liquid, and massive, you can't have big institutions putting in serious capital because they need to be able to hedge their risk. And we're actually seeing IBIT just tear away 57 % by AUM now in terms of dominance.

48:59That is the scale of the maturation.

49:01Alex Thorn:The regulators did just approve like a 10x increase in outstanding contracts for IBIT ops. I mean, it's just going to keep exploding higher. Exactly. And it is way ahead in the derivatives game there, for sure. So in terms of the macro cycle, I actually view it in three. I think there's been three approximate cycles. 2017 was the first end of the early adopter, retail only, barely had trading view spot, a handful of shit coins. There really wasn't a... It was Bitcoin. It was a Bitcoin market. And also, key to note, Bitcoin was the casino chip you needed to bet on altcoins on Binance. So it was the casino chip.

49:36There was that middle period between 2018 and 22 when FTX blew up. So the 2017 top through to FTX, believers in Bitcoin could see the future and go, I think this is where it's going. And this was my formative years in 2019, really onwards. That era was believers plus leverage plus just boom and bust. We had the collapse of 2018. We had the Ponzi scheme in 2019. We had March 2020 stimulus. And then we had FTX and everything blowing up in 22. to. It was just straight up and straight down. And since then, we've just got this much more cyclical structure. I mean, the price chart looks different. Every oscillate you want to look at, whether it's MVRVs, which is on chain, you can look at price in the 200-day.

50:19Those two breaks, there's a clear shift in the regime of how the market trades. So I do think we're at that phase where it's beyond a household name. It's starting to get that 0.1 % to 1 % to 2 % portfolio allocation. People don't think it's a scam anymore. We've flushed out all of the degenerate leverage. We've still got a couple of Ponzi adjacent games being played left, right, and center, but that's part of it. I mean, the whole world's Ponzi adjacent. Let's face it. That's like kid-ass novels. The whole fiat world is Ponzi adjacent. This is just our take on it with treasury companies and the like.

50:50So yeah, it's a fascinating point in Bitcoin's history.

50:53Alex Thorn:Well, there you go. James Check, my friend. Thank you so much from CheckOnChain. Check out James as CheckMatey on X and CheckOnChain.com. Thank you, James. That's it for this week's episode of Galaxy Brains. Thank you to our guest, James Check from CheckOnChain and our friend Vimnetta BB from Galaxy Trading. As always, everyone have a safe and happy week and we will see you next week.

51:21Alex Thorn:Thanks for listening to Galaxy Brains, the weekly podcast from Galaxy Research. If you enjoy the show, please like, rate, review, and subscribe wherever you get your podcasts. To follow Galaxy Research, sign up for our weekly newsletter at gdr.email, read our content at galaxy.com slash research, and follow us on Twitter at glxyresearch. See you next week.