Crypto Bounce: Are We in the Clear? - REKT Vision

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0:45Well, hello again for another week of Rect Vision. Here again with OSF, who's looking remarkably different since last week. Went through a complete makeover, it looks like. Fully shaved, fully haircut. You look about 12 years old. It's going to be interesting to see how it all grows back over the coming weeks. yeah i appreciate that um yeah i felt like it was due a change the the long hair lifestyle was getting very frustrating in the british summer and having a baby and all that so uh yeah i was sort of like mandated to have a haircut you wanted to look like a young dad did you i wanted to look like a young dad i wanted i just wanted to feel young again that's what it was i was like have i still do i still have some resemblance of youth and and here we are yeah well you clearly do uh you're gonna need the check for id um at a pub at the moment anyway we'll get into it because it's also been a bit of a crazy week again in the markets hopefully today we break the curse and we don't get absolutely wrecked as the show goes goes live it did get wrecked though after the last friday show um we were speaking about how some of the things facing crypto were slightly more medium term and that a drop might not just lead to automatic buying.

2:06There'd been that 60K to 70K range, which could have just traded basically the last six months. And at this time felt slightly different. I think a few people probably thought we'd lost our nerve, but it did actually kind of completely break over that weekend. People got very, very nervous about crypto. A range of different things were looked at. But by Monday, we had Bitcoin trading at 49K. We had Solana trading about 109, 110. We had ETH trading at 2000. Huge moves, 30 % to 40 % moves over the space of that week. It feels like the main things driving it was the unwind of Japanese carry trade, which I think a few people have spoken about since Monday.

2:51But this was the trade that we had flagged before, kind of the weakness in the yen. and it was a trade that I didn't think would hit crypto as hard because not many people are doing this trade where you borrow in yen and you buy risk assets. That being said, there's a lot of contagion and crypto being the only market open that weekend, I felt like a lot of people who've been doing this potentially in tech stocks or in fixed income, they just felt like crypto was a good thing to smash lower and we saw some horrific wicks. The Nikkei opened, I think it's lowest two days in like 40 years. It was down about 12 % on that Monday and things completely fell out of bed by the European morning.

3:31Time in NASDAQ opened again. We kind of rebounded and we're now sitting here at 60K roughly on Bitcoin, which is kind of where we were at yesterday's last week's show. Like it was 61 and a half or 61 area. So maybe down about 2 % week on week. Solana was around 155, which is where it is now. the one that's really underperformed is ETH which is still hanging out around 2600 now which is quite a big dip lower. What did you make of the last week? Do you think now that we've had that massive freak out it's kind of in the rear view mirror? It's a weird one. The weirdest thing to me or kind of like the scariest thing is the VIX hitting levels that we haven't seen since COVID or the great financial crisis like the VIX I think hit as high as 61 on was it on Monday or Tuesday 65 geez was it Monday or Tuesday I think it was Monday right yeah so these are like insane insane levels and then there was that funny meme someone was posting which was like showed you like the VIX and it's sort of like this and then there's like one big spike and there's another big spike and then there's another big spike and the first spike says like GFC the second spike says COVID and the third spike says slightly weak payrolls numbers.

4:53That's what it says. So to me, I guess we know we have that payroll stuff, we have the recession fears, and then we had this unwind of the yen carry trade. But to cause a spike in the VIX of that magnitude, comparing it to two of the, well, the two largest market crashes we've seen in the last 15 years is pretty crazy. and so you can either you can look at it two ways you can look at it one way saying well well that was crazy that's weird i can't believe everyone just freaked out over that and now we've rallied back and we just move on that's one way to look at it the second way to look at it which i think i'm more in the camp of is that's an insight into how much leverage there is like in this system now and that was just like a you know people told me people who are all my tradfire friends tell me it was like cta driven no one could really work it out but it really was like kind of scary to see whenever you see an unwind like that a liquidity cascade like that it means people are just too long people have too much risk on and they probably have it on with leverage and we know that was the case given you know the young carry trade and you know apparently Bloomberg reported during the week that 50 to 60 percent of that trade had been unwound and then we had the BOJ saying they wouldn't raise rates um in terms of market instability but to me it just feels like the market rhetoric has sort of changed from two years ago when like everyone was down in the dump super bearish worried about recessions worried about rising rates and no one really had the risk on whereas now we're sort of like quite late into the cycle and quite late into this into this crazy move in in tech stocks where everyone's like oh ai is amazing we're all chasing these like extra gains on these trillion dollar market companies and we're just using leverage to go gig along to like get the extra juice it kind of feels more like that to me now kind of like how it was um um in jimbo when the market like crashed in 20 was it 2018 i think the market crashed and then um again like in 20 uh 2022 i guess when people just like when rates here were low and people just had like crazy amounts of leverage and and were taking all these crazy risk just to chase any bit of return.

7:03I don't know. I just don't think you see a move like that and it goes away forever or it goes away for a long time. And that's what's got me feeling a little bit concerned. Yeah, I think that's a very fair point. Moves like that, we have seen this sort of not full V-shaped recovery, but clearly Bitcoin and Solon, like I said, kind of back to roughly where they were at this week's show. They'd obviously had a bad week before that, but definitely seen a bit of recovery. 277 ,000 traders were liquidated on Monday. I think over a billion dollars was liquidated in a day. It's huge liquidations even the week prior to that as well.

7:42So to me, that's a move where you kind of just have to take a step back and know that a lot of people probably got burned in the last week on that move. Some people will throw in the towel. I think it's a little bit tough for crypto. In terms of macro, I think JP Morgan made that estimate about 50 % to 60%. I think no one really knows. This yen carry trade has been going on for many, many, many years. It's kind of unclear the state of dollar asset ownership by either the Japanese banks or individuals out there. So I think it's still a bit unclear. What I do think is that crypto probably is not the place which feels the full force of this.

8:24I do think what you're saying there, that when I started bringing up all what's really run up, particularly on this trade, has been tech stocks. People borrowing cheap in yen and buying risk assets like tech stocks. I don't think many people are doing margin loans in crypto. And I think that you just get taught to buy every single dip in the Magnificent Seven, buy every single dip in tech stocks. My guess, we had some people talking for an emergency 75-bit rape car. on Monday. People went absolutely crazy. The Fed is not going to do an emergency rate cut. And I saw a Bloomberg poll today, which said economists think they're only going to cut it by a quarter point next month.

9:09So I think volatility could be here to stay for the next month. I'd be more wary on tech stocks than I would on crypto, just given the relative performance of both of them. And also where I see that yen carry trade still probably has some pain to unwind, if I'm honest. Bitcoin volatility is at a two-year high. Obviously, the VIX is volatility. It's a volatility index. That going all the way to COVID is crazy. It just tells me that volatility is going to be back. I'd be a little bit more wary if you're doing anything in leverage, that you probably are going to have to hold through some bigger swings, it feels like at the moment.

9:51it was something that I think people had seen coming. I remember Rauch even on our show was talking about that's the thing to look out for. I think the violence of the initial reaction people didn't necessarily see. My guess is that crypto is slightly more insulated to a fallout in tech stocks here just because I don't think that's where the majority of that trade is happening. But it's still a little bit scary and I think we probably have until the next Fed meeting to kind of see the end of it. Next week we have CPI, which I think a lot of people will be looking at and could go both ways. What do you make of that CPI, Bigger?

10:28What it can mean for crypto? It's a tough one because we've been kind of like geared towards thinking low is good now for the last three years, possibly even four years, probably three years, I would say. And now is that still the same? Because we saw how much things panicked when we had that really low payrolls number. And if we had that number maybe six months ago, I think markets would have rallied, right? Because it would have been, oh, wow, the Fed's really going to cut rates. But the market actually panicked on the payrolls number. So for me now, if inflation comes like materially lower, I think the markets will not take it that well.

11:05I think they'll be a little bit scared. I think if it comes marginally higher, I think the markets will be okay with it because we're talking about 3 % inflation here. We're not talking about the levels that we saw back in 2022 and 2023. We're talking about 3 % inflation. So the number coming at like 3.1 % versus 3 % expectations is not really like that big a miss. And that shows you that the economy still has a bit of strength in it. I think 3.3 % was the last month actually, and 3.2 % is the expectation for this month. So the expectation for last month. so um but if it comes in low if it comes in like three or two handle i think people are like oh fuck like this is this is starting to get a little bit dicey now in terms of recession fears and you know the fed gets put in a tough spot well the fed's not put in a tough spot because the fed will just cut rates the real toughest spot the fed gets put in is if it comes in a lot higher like 3.5 or 3.6 while you have those weak payroll numbers then it's just like oh no hey everyone we're I'm going to take a quick pause and hear a word from our partners.

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13:17Yeah, I think any extreme outcome would be bad. I do think that low inflation here, like something that comes in materially lower, the real worry also on Monday, I mean, there's a lot of things. Yankari trade unwinding. there was still which there still is fears about iran um iranian attack on on israel which over the weekend crypto was trading on it felt like recession fears was was the big one though it felt as though alongside the japanese yen people were suddenly thinking that the us was about to dive into recession we've seen some better economic data in terms of initial jobless claims this week but if we have a really low cpi figure people will assume that's another signal for um a more harder landing.

13:58I don't think many people are calling for a complete collapse of the US economy. I think it was growing at 2.8 % last quarter, but it does feel as though there are questions over that soft landing. And how crypto would react in a recession, most people think it would do. Well, it depends, but I think at least the initial reaction could be a little bit lower. Obviously, the bullish take here is that we're probably going to see more stimulus in every single scenario and that you're meant to buy all dips, but you just saw how violent that move can be on the first pieces of bad news as we get towards that.

14:30That was a move from 70K to 49K. That's a huge, huge move in Bitcoin. And most altcoins got absolutely destroyed in that move. So definitely one to be aware of, I'd be a buyer of volatility in crypto, I still think, for the next month or two. we did see out of the majors as I just said Bitcoin and Solana did retrace pretty well although they had a bad week beforehand but kind of back to where we were ETH was the one that really fell out of bed. Now we've been a bit more bullish on I think we like the story for all three but we've definitely been more bullish on Solana on this show for the last week.

15:17Sol ETH broke out to a new all time high this week it broken through a resistance it hit at around seven times I think before and broke out to the upside. It's retraced a little bit today that ratio what do you make of it here like ETH is now at one stage it raised all of its 2024 gains I think it was on Monday I think we've spoken about the whole ETH trade at length of the show and I think I've sort of transformed from being bullish at the beginning to sort of giving up hope towards the end and I think the whole market just gave up hope on it really. You had lackluster ETF flows. It was kind of good because the Grayscale stuff was selling fast but then we realized no one really cared about the tiny amount of flows that were occurring in terms of the inflow outflow number.

16:10Meeting the Bitcoin ETF though, this week at least. Yeah, that's true. You look at the amount that jump sold and it's just it's just like a lot has had to be has had to be absorbed by the ETF so I don't know it just it was already struggling with the narrative I think the ETF stuck disappointed it happened at a time the ETF happened at a time of like crazy market volatility and you had the ETH foundation also selling all year and I think selling some more as well and I think there was some more fud around like other people needing to sell as well I don't know if that ever really materialized very old wallet moving um yeah i was for the chinese police or something like that yeah so um is it over for eth i think that's what i said i just said which which one here now that do you think i was i was i was saying it's over for eth because that's what i've been asking myself a lot but um um i don't think it is and i think this may be a like a good entry point for ETH versus Bitcoin and Solana, but it's not something that I feel like I'm comfortable now holding long-term anymore because before it felt like you can own Bitcoin and ETH.

17:26ETH is the higher beta version of Bitcoin. ETH is the best programmable money version. But if you look at the performance of Sol versus ETH, the cycle, it's just been a crazy, crazy outperformance. And now that's just kind of proven the theory to me that you can't really, away from Bitcoin, you can't really be an L1 maximum on the list of anything. And it's not long before something can get displaced pretty quickly. So with that in mind, it's like, well, do I really believe I can hold ETH for like 10 years when there's just so much competition? The conclusion was that for me, ETH has fallen outside of my long-term holds because I think it's been proven that it can be displaced by something else.

18:06Bitcoin can never be displaced by anything else, I feel like. Bitcoin is Bitcoin. It has so many different properties that actually none of the other coins have. I know it's funny because the future of apparently the other coins are the properties they have that Bitcoin doesn't have. So yeah, like Ether's falling out my long-term holds. I think I like holding Bitcoin and Solana right now and knowing that Solana could also be displaced by something else next year or next cycle or whatever. So that's kind of where I stand on that now, which is a big change for me. I've never really helped Bitcoin.

18:41ETH has always been my main holding. I've been dabbling in Solana pretty heavily this year as well, but I think that's a big change for me. That is a big change. I mean, I think maybe not displaced is not the right word, but it can definitely be competed against on some of its main things, and that makes the valuation, I think, a little bit more tricky at times. I still like owning all three because I like to own all three, and I think there's obviously some things about ETH. with its supply, sorry, with its inflation, it's much better than Solana, for example. And people would arguably say decentralization is better.

19:16But I agree that over the next years, decades, I think we're always going to see new, faster, quicker L1s. There's always questions about it. I think there are questions about some of the old L1s from last cycles where they're just tougher holds. Interestingly, we'll go on to the next topic there, which is by XRP, which was one of the main ones of the last cycle. They actually settled with the SEC this week. XRP rallied 20%. I don't think it's kind of back lower again today. It looks like this was seen as a very lenient judgment. $125 million, the SEC were asking for billions and looks like their liability is limited on future attacks against securities breaches.

20:04It doesn't look like the SEC is going to try, well, reportedly is going to appeal this. But I think the main thing that rallied on the back of this again was Solana. I think this generally is being seen as Ripple was a pretty centralized entity which kind of made a lot of mistakes during the release of XRP. And even they weren't really taken down. So the idea of going after other ones which are a little bit more cautious is going to be more difficult. Do you think this is, first, do you think this is bullish for Ripple? Is it going to come back? And then secondly, do you think this is just bullish for crypto?

20:40It's definitely bullish for crypto. I don't know if it's that bullish for Ripple. It feels like we've had the surprise factor of this news flow, I think, within the last couple of years or so. I think three years ago, it didn't look great. and then as this case has progressed it seems increasingly likely that Ripple would win and we've had some news flow with regard to that in the past as well so yeah like sure getting out getting away with this fine you know small fine is a great outcome once again it shows like the weakening grip of the SEC but it doesn't feel like it's doesn't feel like it has that surprise factor that maybe it once had a year ago that's how I feel about it Yeah, it was rumored for a while that this was coming.

21:28There have been lots of mini pumps in XRP in anticipation of this, and already it feels like that's kind of been sold down. It's down kind of 10 % from that peak. If you actually zoom out, if you look at the five-year chart here, XRP has barely moved over, I think it's kind of at levels from 2021, maybe even close to the peaks of 2020. So yeah, I think that's what people are scared about. with L1s is that sometimes they can just be seen as old tech in many scenarios. And it's definitely something that I maybe failed to appreciate until this cycle, really. It does feel as though they might appeal, although there's been a lot of talk this week, again, of softening of the Democrats' approach to crypto.

22:18there is a Harris for Crypto campaign, which is kind of being led by Mark Cuban, along some other crypto advocates, definitely trying to push more into being supportive of crypto. Reportedly, I saw from Tyler Winklevoss today, she didn't even turn up to the first meeting of this group, which I thought was pretty funny. But do you think crypto is anything to really be super afraid of now, this cycle? I know we might have a preference, but do you think now we're going to see a better scenario in both cases? Because it also feels like Kamala's chances are going up a lot. Hey, everyone. We're going to take another quick break and hear a word from our partners, and then we'll be right back.

23:05The question is, is crypto as big a deal as we think it is when we live and breathe crypto? And we're so fixated on the things they say about crypto when Trump has mentioned it like twice. and obviously came to the Bitcoin conference. Kamala hasn't mentioned it once and she's not even turning up to these meetings. So I think Trump has used it really for like a way to get donations. Like very clearly, he's probably gotten a large amount of donations.

23:35I don't know. Like there's not enough meat on the bone for me to say that there's going to be some form of bipartisan support. Like I think I've, you know, I've said like the stuff that Trump has been saying is extremely, extremely bullish for crypto. These are big structural changes and they are, but you know, if he gets elected, we also have to see the implementation of some of these policies. And how long does that take to actually implement? Like, is it days, weeks, months? Is it going to be, is it years? Is it going to be a priority for him? Is it not? Like these are all unknown factors. So I kind of feel like even if he gets elected, we'll get this like great big rally.

24:12But then for me, that may be like a local or potentially even cycle top that election because I think people may be, I have a gut feeling people may be disappointed by how long it takes for these things to be implemented and we just don't know anything about the Democrats really. We know they're exploring it and looking into it but we have no idea really what their true stance on it is apart from what we've seen for the last four years which has been a strong stance against crypto. Yeah but crypto they did hit an all-time high in that process as well, Bitcoin did at least. I guess what I'm trying to say with what you said, I don't think it's going to be as good as everyone thinks it will be under Trump, just because you said there'll be delays in implementation and it probably won't be his first piece of policy, for example, or maybe even like his fifth piece of policy.

25:01And it probably won't be as bad as people think it would be under Kamala versus, let's say, Biden. I do think that this, over the short term, though, I don't buy into it. And this whole Crypto Vargas thing just feels like her trying to defend what is clearly like a populist movement for Trump. He's got a lot of populist support with it, at least in crypto, which is a remarkable number of holders in the US. And she probably feels slightly outmaneuvered. So she's done this, but to not even turn up. And apparently it was a video meeting. So all she had to do was get a Zoom link and turn up. And she didn't.

25:42It just feels like this isn't really that genuine. And there's clearly going to be people in that administration which are not going to be pro-crypto. So this short-term move feels very political without much substance to me, to be honest, from Kamala. Even though I don't think her presidency will mean the end of crypto by any means. I kind of feel like people get a little bit too crazy on the median term impact of these things. Yeah. Then I think the other things that we wanted to hit on was mainly the ETF side of the stuff. So we saw Solana get a new ETF potentially in Brazil. That was the first ETF globally.

26:26It looks like it's going to be approved. And then secondly, which I think could be a big unlock for crypto is Morgan Stanley is going to allow its advisors or wealth management advisors to now push for crypto. Now, Morgan Stanley is one of the biggest wealth advisors in the US. There had been some talk about some of these bigger wealth management companies or asset management companies were waiting to do due diligence on the Bitcoin ETF, see how it fared over the first few months before allowing their advisors to start selling it to clients. Morgan Stanley now doing this, I think, will push a lot of the major wealth management companies in the US to buy Bitcoin.

27:02This got me pretty bulled up. in terms of what could be unlocked on the second half this year in terms of demand for crypto, X kind of global liquidity going higher. I saw this and I saw that the FTX estate also looks like it's going to be giving back 12.7 billion or was ordered to by a judge this week. Do you think we're in for a stronger amount of demand? Maybe post-elections where we see the majority of the gains, but do you think this is now setting us up for a strong H2? Look, I think it's funny because we always talk, we have often been talking about h2 the second half of the year etc etc i mean we're in the middle of august now nothing happens in summer and then you have september october november december nothing happens during christmas time so you really have like three to four months left until the end of the year um right around election time which is a time of uncertainty you know it's probably going to be very tepid trading and risk deployment in the the months building up to it i think um so i don't know like i don't really have crazy expectations for the rest of this year i think i really i think if trump builds a lead and wins i think crypto rallies into that i think risk rallies into that actually um and then we'll see what happens afterwards and then on the flip side if he doesn't win i think risk sells off a little bit but i don't know i just feel like with levels where they are right now i feel like i'm not bearish like i want to emphasize i'm not bearish but i think i'm cautious you know like this is different this is different to a year ago where it's like let's just go gung-ho and get balls deep and risk you know it was a year ago michael when we were like buying pepe and like selling like e for like higher beta of stuff right like we're like let's get let's get down the risk curve and have some real risk on because we're like you know super bullish for the next 12 months that's not where we are right now i don't think i feel like i want to own defensive things maybe even sell them to strength because i just think things are uncertain we're just at levels but we had two killer years for stocks and nasdaq was up almost 40 last year it's up almost 20 this year like those are two big years is it going to be up another 20 next year having had one of the worst pullbacks we've seen in a you know for for many years yeah i don't know like i just i just for me it's like i'm not saying you shouldn't i'm not saying you should sell i'm not saying you should be short because that's a very different message but should you be balls deep long risk with leverage right now no like should you have been balls deep long risk maybe not leverage but like high beta stuff a year ago yes and and i think that's changed like i think my positioning has changed as well as a result of that it's like i want to own more defensive things i want to sell to strength like i want to i feel like i want to have more stables now to be ready to buy any dips like yeah no i just think the story is changing a little bit here that's how i feel yeah i think that's a very fair point and you even saw that you know bitcoin and solana solana in particular was one of the best performers off the bottom.

30:16It beat a lot of altcoins, beat a lot of meme coins even, which tells you the first thing that people want to buy are probably the majors. And you can hold them through the volatility, I think, even if we do see a bit more volatility in stocks. I agree with that sentiment. I think we have both kind of consolidated more into majors over the last few months. It's not, I personally think that we will see a strong rally post the election. I still think that Trump will win. And I think we will see a rally because I also think global liquidity is going higher and that would just be that would be the, you know, another tailwind for the market.

30:56So I think, let's say, in the banana zone scenario, I think I still think it may be delayed until after the election. That's kind of what I said last week. We will kind of go into the left curve corner section now, which is kind of going into the more high risky stuff. and maybe we'll get a better judge of what's been going on. We have this cool graphic now to describe the left curve corner. Number one, here we are. So there was another Trump coin this week. The Trump theme coin, which was RTR, was the name of the coin, Restore the Republic coin, was announced yesterday. There was a lot of furore about it.

31:45It went up to 150 million straight up the gate. It was launched by a team which was kind of known in the NFT space attached to the Kangpai Pandas, which had some advisors that previously worked at the previous White House administration with Trump. It was looking like it was going to get a Trump endorsement and then was pulled out last minute. Dropped 95%. A lot of people on crypto Twitter this week were very, very annoyed about this. This has been the second or third Trump-related meme coin, which has had a similar move like this. We had one which was apparently linked to Barron Trump, and another one also linked to Trump Jr., which also has fallen pretty dramatically off the back of this.

32:26A lot of people on crypto Twitter were annoyed about this and thought that this might actually shift the sentiment, which has been so incredibly pro-Trump, to maybe not being as pro-Trump, because this is the third time or fourth time people have been hurt on Trump-related meme coins, where clearly the team had been speaking to the Trump family, and there was like a semi-endorsement, which was maybe pulled at the end. It looks like they're going to announce the Trump, Eric Trump and Trump Jr. said they were going to announce something DeFi-related for next week. But the Trump family in general, they are not in anyone's good books, it feels like.

33:07Donald Trump has kind of been away from it all, but I think people have assumed that a Trump family endorsed coin would basically have his endorsement. And this was another major, major issue. We'll kind of maybe go back to that at the end, OSF, because I know you probably have some thoughts. The second thing to bring up was SUI. SUI was the leader in L1s this week. I know they've spoken about quite a lot here at Real Vision. I know they've been a sponsor of the show. They got a grayscale trust, actually, which is kind of what obviously happened with ETH and Bitcoin and actually Solana as well.