Crypto Underperforms: What's Going On? | REKT Vision

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0:45Well, hello, everyone, again. We're here for another episode of Rectivision. It's myself and OSF. As is Rectivision tradition, we seem to be selling off as soon as the show has gone live. Bitcoin is hanging out at 57K. Everything looks pretty precarious going into the weekend. We've got a bunch of stuff we're going to talk about this week. How are you feeling firstly about the market though osf i don't know what to think i mean it's had such a strong week for tradfi such a strong week for in terms of macro data like lower than expected ppi lower than expected cpi huge beat on retail sales we're ahead of potential consecutive months of rate cuts starting next month in in about a month less than a month of time possibly i think um and stocks are rallying like stocks are doing well and just crypto just can't seem to catch a break right now and i don't know if it's just technical selling because of us government bitcoin mount gox ftx estate jump trading i mean the fact that i can mention a few of them is in itself says quite a lot doesn't it but um yeah i just yeah i don't know I just don't know what it takes now to get crypto going.

2:08It's no longer like the traditional, like let's join the risk rally thing. It's become back to its own sort of idiosyncratic risk bucket, I think. Yeah, that's definitely something to, and I can already feel from your sentiment in the conversations that we have that you're getting a little bit more worried about how crypto is trading. I think it's just more like a summer lull, to be honest. And I think long-term drivers behind crypto haven't really changed. But it has been a very, you know, a positive week for macro. that this week looks like it's going to be the best week for stocks in about nine months.

2:38So a big, big rebound in tech stocks. We spoke about how they actually looked a little bit precarious, but they've all come soaring back. NASDAQ kind of regained all of its losses almost on the back of basically economic data not looking that bad. And I think there was some talk about it It was a Kamala style sell-off that doesn't seem to have held. And the yen unwind trade seems to have also largely gone a little bit quiet. So I think that's kind of meant that everyone's felt a little bit better. You had retail sales come out yesterday, which was stronger than expected. You had initial jobless numbers come out okay, slightly lower than expected.

3:22And then you had CPI and PPI both come in slightly lower than expected too. So you have this situation where we could have a bit of a soft landing. Inflation is dropping and maybe the economy isn't as bad as predicted. And I think people are a little bit more confident about that. And you've seen money 100 % flow right back into macro. At the same time, as soon as those figures kind of hit, crypto sold off, which I thought was slightly strange. Do you think people are just rotating out of crypto even more? We've had quite a bit of an underperformance of crypto versus some of these tech stocks over the last 18 months.

3:58let's say beside maybe Solana and Bitcoin. But it does feel as though as soon as that figure hit, suddenly everyone was like, well, I want to be in tech stocks rather than crypto again. Yeah, it just feels like because you've had so many traditional stocks this year perform very well. And not just like micro caps, right? Like large caps, something like Nvidia, for example, like the return on that in the last 12 months is way greater than many altcoins which are down in that same time period so you just had such a strong return on a bunch of tech stocks mainly driven by ai that those guys don't feel like they want to pivot into crypto to chase additional returns and i think that's the thing that i kind of didn't see this year because last year nasdaq was up finished the year up 40 and this year i was like well it's not going to put another 40 year so this is the year that people start to you know dip further into the the risk bucket and look at crypto again and it started off like that and especially with the etfs i was like you know it's so easy for people to do that now i mean it starts off by seeing that sort of flow but the ai narrative just became so strong and the numbers were so so good that we just never really saw that i don't know like introduction of capital in additional capital into crypto and it just crypto to me and this is purely an anecdotal statement just has felt like the same people that were involved last year or the year before it doesn't really feel like we've had many new people and that's maybe why there's some frustration as to why price hasn't risen that much and yeah like we've had Bitcoin ETS but you know what's the inflows there like 14-15 billion dollars of inflows just into Bitcoin like that's a pretty good number but we don't know how much of that has been the basis trade so the net number is not as high as that it just feels like we haven't seen the inflow yet and there's an argument to say we're early because we haven't seen it yet and um you know we haven't really fully started the cycle yet because we had some left translation because of the UTS etc so there's an argument to say the best is yet to come um but you know if you've been in crypto for the last let's say at least two years maybe even one year you're definitely starting to feel the frustration now and it does feel very much like last summer all over again yeah I mean that's that That was a sentiment popularized, I think, a couple of weeks ago by Kobe, who's kind of a well-known crypto figure who is saying that he doesn't even think this is a proper cycle, that we might see a cycle maybe in a year or two years, which is quite a dangerous narrative for people, I think, looking at crypto, because you're like, oh, it'll be next year that we rally.

6:39But this doesn't feel like a classic cycle in terms of, I would guess, increase in mindshare. it's interesting what you said because I think there's been kind of two halves you have people like Buffett who is increasing his cash pile to owning more treasuries than like the Fed like unbelievable amounts of cash he's sitting on defensively positioned and you have fear about the revenue gap for some of these AI companies that maybe Magnificent Seven won't deliver on the revenue gains you need to see from AI that's maybe slightly separate from NVIDIA and that kind of sentiment that you were hearing a few weeks ago.

7:17But then as soon as the economy seems to be a bit more risk-on, I think crypto performs best when there's debasement, when there's money printing.

7:30Potentially, I think that crypto could have performed better if people felt like we were going into maybe a light recession, because that would mean more money printing. And the gold-style aspects of Bitcoin, I think, become more attractive in that world. If we're going to see strong economic growth, I do think that people might put their chips more towards stocks. And I think that's kind of what you saw over the last week. But let's see. I think there will be money printing globally regardless, but it does feel as though for it to really go parabolic, you probably want to see actually weaker economic data could help crypto over the medium term.

8:04But yeah, that's kind of what we felt. As soon as that CPI figure came in below expectations, macro ripped, crypto dipped. and it's kind of, we're looking increasingly precarious, it looks like today. We'll go into kind of some of the technicals around it, which is the second bit that you mentioned, which is that we have actually seen a bit more distributions come out. We saw around 2 billion more of the Mt. Gox Bitcoin. Looks like it's about to be distributed. That's like the final bit. That's kind of going to BitGo, which is one of the major custodians. And that's, I think they already made distributions to Kraken and an exchange in South Korea.

8:43So that should be kind of it, but that will be a slow trickle, I think, of selling over the next year, two years. It's good that we're kind of seeing the back of it, but there's definitely been some distributions there. There was a movement of, I think it was 1 ,000 or 10 ,000 Bitcoin from the US government, which is around 580 million. And that, I don't know if that's going to be sold. It was kind of unclear whether that was just being moved to Coinbase for custody or if that was going to be sold. But that caused a little bit of flood. And then, as you said, Jump, which is one of the major trading firms, continues to dump its holdings, mainly its ETH holdings.

9:22We saw again today that it's been selling. So there's been some slight dissipation, let's say, of supply there. And then we also saw that Bitcoin, from a technical standpoint, also had a death cross on its weekly, which has been a lot of the chartists across crypto, of which there are thousands, kind of came in and started pointing to much lower levels. This was on the weekly, so it's kind of a high timeframe sort of indicator. And yeah, what did you think of crypto here then, given those two things? Hey everyone, we're going to take a quick pause and hear a word from our partners. We'll be right back.

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11:06I think if I was in a position where I was up profits on the year and I hadn't taken anything out, I'd be selling a bit here. Yeah. And I think you can't stamp yourself to your portfolio all-time highs. I think that's a mistake lots of people make. Because you think, oh, when it gets back there, I'll sell it. and it may not get back there. So I think if I hadn't taken any money out already this year, I would be monetizing a little bit here because I have taken like a decent amount of profits out. I think I'm just holding here, but I'm definitely not adding risk. I think for me, I think we need to see, I'm not saying this will happen, but I think I would need to, given the way that crypto is trading, I think I would need to see like a 20 or 30 % drop in Bitcoin for me to want to put risk back on like put my fiat back into crypto I think we did get that I mean yeah 49k didn't it yeah we hit 49k which is yeah I guess that's 20 % isn't it

12:14and I think that's the level that I would like start to DC and I wouldn't like put in my whole amount there I would like sort of DCA there but because I think my fear is that we get to a level like that if not lower and it takes us a while to bounce back we don't have this like v-shaped recovery and and i'm still really bullish crypto over like let's say 12 months for example but i just fear that given everything that's happened we may we just maybe need to have this clear out and maybe take some time for a lot of supply to be absorbed and you know the recovery takes a little bit longer than we're hoping for i don't know it's just i'm basing that really more on like how things have been trading rather than the fundamentals because i think the fundamentals are still extremely bullish for crypto and nothing has really changed there other than maybe like trump um losing steam in the elections but i think fundamentals are still like extremely bullish but when the price doesn't behave the way you expect it to it's either a buying opportunity or you have to you know reconsider what's going on and for me to reconsider i need to see like at least you know a few months of like price not behaving the way i wanted to and it feels like it's been like that for a few months now right it's been since february we've just been chopping so for a good six months we've been chopping and it's just like despite you know look at the six month price action in tech stocks versus crypto i don't know i mean it just yeah i don't know it's a real tough one it's a real tough one because you could just sell sell some here and in a few weeks time thinking fuck what was i what was i thinking of course crypto had unperformance due on that performance but it just that's just been the thought process for a long time now and i'm a bit worried we need to see a bit more down and a bit more of a clear out before we can really get that up yeah i'm holding on i think we saw that the other day 277 000 and why i like doing these weekdays is it kind of makes me think about what i was thinking about last last week or week before i did feel as though we weren't going to see v-shaped recovery after that sort of liquidation.

14:16When you liquidate 277K traders, basically in a 48-hour period, it felt like I felt, and we have this, what we've just said, like tech stocks looking attractive, increasingly kind of dunking on crypto in certain ways. I felt as though people might just be like, you know, I can't be bothered to stick around and wait for this. That being said, the way the crypto always acts is it gets out of these periods of chop violently. and kind of maybe at unexpected points. I continue, and I've said it for weeks and weeks and weeks now, that I think that now crypto rallies, we get out of this range probably after the election, maybe in like, or maybe the week before, you know, like people start to feel a little bit okay about both scenarios, whatever happens, and we start to see a bit of a rally there.

15:08And that's kind of where I start to think that the underlying strong fundamentals of crypto mean that people kind of get back into it. Right now, fear and greed indexing crypto is down at like 27. I think we could go a little bit lower, but I also think it's a bear trap. And I think a lot of people are just losing faith because of how long these chops are. And I remember this last year, like the amount of people that would lose faith as we looked like we were going to fall off a cliff and then it would just bounce straight back and i i kind of feel like it's going to be be like that i think we could have another one of these tests down to like 45 50k but if you are going to get those moments i think you've got to take advantage of those moments or sell now to buy later i think you've got to be very adept getting in on those dips so i think you'll see a lot of fake outs just like we saw fake outs to the upside right i think we're going to see fake outs to the downside here and in this in the same sort of way we hit 71k like what is it six or seven times and now it feels like the consensus at least is that we might be heading a little bit lower or we look precarious and could head to like the high 40s or or maybe even mid 40s and i think that when that starts to become consensus and people start to lose faith i do like those moments so for me i'm looking at the other way i'm looking for well maybe not the other way i'm just not selling i'm looking to buy on on any sort of major major dip because i don't think bitcoin as an asset below 50k just seems like a great buy to me so uh i'm gonna stick to probably to majors i do think what we're increasingly seeing is that pvp sort of environment it's one of the more risky stuff that people are just losing faith in but i just think it's an obvious buy if it goes if it goes some of the down to some of those levels if solana gets down towards 100 again eth kind of heads to 2000 i think those are just obvious buy points but i do see what you're saying and i think this period could actually hurt a lot of people both ways um because what a lot of people will do they'll wait for it to hit 50k and then they'll sell you know they'll they'll get caught up in the panic and i think if you feel and i know you're more of a short well you understand how to trade so but i i i think there's a i agree with you that I think there's like an above 50 % probability here that we're going to go to maybe the high 40s again, maybe even mid 40s again.

17:40But I think you have to be very, very quick at buying those periods. I think that's one thing I would say, you are right. Like it does feel like it's very consensus now that we're going lower. And, you know, that's often can be a good point to buy and fade it. But the reason why I think it's consensus that we're going lower is not because people are short. I think because everyone's long and people are just like, oh, fuck, I kind of want to sell now. This hasn't worked. That kind of, it feels like that sort of consensus. It's not like consensus we're going lower. It's just like consensus frustration.

18:13Do you know what I mean? Yeah. And that's a different, if it was like everyone's short and we think we're going lower, like that's a different thing, but it doesn't feel like that to me. It feels like everyone's in the same boat. Like we're all long and we're just like, ah, this is just like, this sucks. Like that is the consensus of that, the type of consensus it feels like to me. Yeah, I would agree with that. I think just if you are here for the medium term, just kind of ignore everything, go on holiday, touch grass, as they say. And hopefully it will be over by November and I think everyone will be kind of pretty bullish again.

18:49What we have seen, though, is a bit of a rotation, actually, in terms of what people are actually looking at. I think the main thing has been over the last, well, actually over the last three weeks, but it's really picked up over the last week. All the major winners this week and kind of last week even as well were these DeFi coins. There's been a few things there. You've seen, firstly, that the TVLs are heading back towards 2022 levels. You're seeing the number of active participants in these EGIF systems go up, and you're seeing people getting more bullish on some of the airdrops around the DeFi protocols.

19:26Plus, you've seen the switch from many of these to a fee-sharing model, which has been quite a big deal, and maybe some expectation that the SEC will lose or at least back down from its Uniswap case, which people are getting a little bit bullish on. I think this is good because I do think that DeFi has got a future. they just need to get the governance protocols actually sharing fees the right way and people getting bullish on this sort of stuff i think they these sort of protocols can be applied you know traditional finance and these are the kind of the building blocks that you can build let's say the the the new uh rails upon so i do get bullish when this starts coming back and it makes me kind of feel like people are returning to some of the more long-term fundamentals in crypto.

20:17What do you make of this shift? Yeah, I'm starting to see it as well. A lot of these coins or tokens which actually have real utility or real fundamentals behind them are down like 90-95%, right? And we've spoken at length about the reasons why, like VC Unlocks, all that kind of stuff. And they've just kind of been shunned aside and people have been focused on Bitcoin and left curve meme coin stuff and that's just kind of been the theme of the year. I can't say I can think of like a specific catalyst for stuff shifting back to this, you know, to DeFi and to altcoins, et cetera. But what I would say is if I, you know, wasn't really that involved in crypto and someone came to me and was like, hey, look, all this stuff is down 90%, would you just throw a bit of money in just to see what happens i'd think yeah you know what probably i would and if i think that right now i think yeah like you know why would i not just put in like a bit of money into like a few different things that are down 90 sort of write it off as like a bet or a gamble but you know if once that stuff if that stuff does start moving then you could make a lot of money so i kind of view it as like a out of the money option if that makes sense that's the way I would view it I still don't that's not to be confused with me saying I'm bullish altcoins and DeFi now I can see that stuff returning I said a couple of weeks ago that I thought the election there was also Schumer who's one of the top Democratic senators came out and said that we could see crypto regulation by this year if that does come through I do think DeFi is the main winner from an update in policy in the US.

22:09But that could be the catalyst. I do think some of these are also election or let's say a softening of policy to crypto trades. Hey everyone, we're going to take another quick break and hear a word from our partners and then we'll be right back.

22:27Yeah, that's true. That's fair. I still think policy-wise, I think it will take a long time for things to be implemented. but if you start to see consecutive positive headlines, then that can start to, you know, surmount an effect. But that still doesn't feel that strong enough to me. I don't know. Like I think it's clear like Bitcoin is in its own league and will always be in its own league. I'm just wondering if the other stuff will ever really bounce back. But at the same time, like you look at market caps, you look at the crypto social market cap and how tiny it is versus everything else it could do.

23:07And you can sit here, on the one hand, you can sit here and think, well, there are so many different coins. Which ones do I buy? There are so many different meme coins. Which one do I buy? But when you think about it in the context of stocks, there are tons of stocks out there. Which ones do you buy, right? And stocks can still do well. So yeah, I don't know. It's another tough one. It's just like you're starting to be in this position where you have an opportunity to take these contrarian trades and take the other side of things that are down a lot. but they've had such strong momentum that's kept them down and it's like it's literally like bag holder central right so you really need something to like strong to turn that momentum around in the other direction and that's the thing I'm just not confident enough on to go out there but cool I'm going to allocate a ton of money into altcoins now you know or DeFi yeah I think last week when we spoke about L1s I'm more bullish on L1s.

24:06I can get involved with L1s because I just think they actually capture a lot of the value in crypto and they are probably one of the safer risk reward bets. DeFi has been a catch a falling knife for years now. And there's been several times where it's bounced and everyone's been like, oh, get back in all the DeFi coins. And then they go down another like 40 to 60 percent, like tier one. some of the biggest DeFi protocols out there. The main criticism that always got leveled against them was the governance protocol one. Why would you ever own one of these? If you do see shifts there and suddenly you see policy come through, those seem like medium-term tailwinds for these.

24:54But at the same time, we know charts like that. And, you know, their bag holders have been holding this all the way down and they'll probably sell on a 2X. So it's difficult to think that these trades are like a 2 or 3X trades, particularly not like over a short term, before you start to get another opportunity to get into them, because I think you'll see big selling on any of those moves. But I can imagine in the altcoin space, this sector actually outperformed for a little bit. But I think this is interesting to know. And for people who are like DeFi from the last cycle, maybe got burnt on some of their coins, maybe check in things like Aave is having decent moves.

25:34A lot of the perp decks is. It just feels as though people are getting more bullish again. And some of those DeFi protocols are sort of in huge, huge volumes. So it feels like it's not the worst risk reward, but I think the upside is not insane. So I kind of agree with you. In terms of other stuff that we've seen in terms of DeFi, let's say integration, or at least payments integration, Apple Pay actually came out. Well, the CEO of Circle came out and said that it looks like USDC, which is one of the main stablecoins in the market, is going to be available for Apple Pay, which I think is quite a big integration.

26:19after it opens up its NFC, it's being forced to do this. So we could see USDC being used for Apple Pay sort of integrations. I guess that would be linked to your MetaMask or your Ledger wallets through your iPhone or Phantom or something like that. But to me, again, that seems like you could see huge throughput of stable coins here. I would be most bullish on things like Solana for this as it comes through because I think that's where you'll see a lot of the payments happen. But you could also say some of the Ethel 2s could see huge volume here. But, you know, Apple's never really embraced crypto.

26:55But if you can get an integration like this, then it kind of does, doesn't it? Yeah, you know, I think these big headlines of big corps adopting crypto, it just feels like diminishing returns right now. like if you had this headline three years ago people would be like losing their marbles and be like oh my god like apple's entering crypto and you know bitcoin would be up 20 percent like stuff would really move whereas now it's felt like over those three years it has happened it's happening like we're getting the adoption but it's not really like yeah i mean it's great but it's not really a needle mover in terms of price and at the end of the day like most people in crypto just care about the price.

27:41So I kind of feel like we've had a few of these headlines. I can't recall the others off the top of my head, but we've had a few of these headlines this year. Someone using Solana. Who's adopting Solana? Well, we've had all the major payments networks come in. Stripe. Stripe. Yeah, that was at Stripe. PayPal, Visa, Mastercard have all had various different integrations for payments. It does feel as though there's been bullishness, particularly on Solana. on that side, you saw some big throughput go through on stablecoins. Payments, I agree with you though, it's kind of a no-no. People aren't getting massively bullish on it at the moment, but these are the fundamentals that build a long-term bull case.

28:25I agree, they won't save us from Bitcoin going to 48k, but it is the sort of reason why it won't go to 20k. Do you know what I mean? Don't jinx yourself. Why are you so bearish suddenly? I'm not bearish. I'm just frustrated. I have been on the show for the last three or four weeks now. I feel like I haven't really... Yeah, I felt like as soon as that Japanese yen trade unwound and it kind of felt like we had a little bit low, it did feel very precarious. It just doesn't feel like that marginal bar is around at the moment. So any sort of wobble, people are like, well, who's actually going to buy my bags?

29:07One thing I would say is it is summer. Summer is quiet. In August, you're in the depths of summer and all the big boys with capital are just chilling in their Hamptons' houses and all that kind of stuff. People are not engaged right now. We'll see how things are in September. Historically, also August and September, I think are the two most bearish months for Bitcoin price action. We saw this week that Morgan Stanley and Goldman Sachs came out and said they own, I think just over$600 million of Bitcoin ETFs combined. And Morgan Stanley's wealth division has now been given the green light to start selling these things.

29:47I'm sure that will cause a bunch of the different major wealth management companies, whether it's UBS or maybe even Goldman themselves, to start selling it too. That feels like a post-Hampton's trade or a post-Santropay trade, you know what I mean? Post-Hampton's trade, yeah. That's what we're hoping for. September and October, everyone gets back and decides they need to own Bitcoin ETF. And those guys, you know, they're buy and hold, by and large. It does feel as though a lot of the money that comes in there, at least that's what BlackRock have been saying, that the vast majority of the buyers of their ETFs have been buy and hold star investors.

30:21So that's a good sign for things. We'll do one more just before we go to the left curve corner. But the final thing is Polymarket. Oh, which one was that one? Yeah. Polymarket I'm going to go to. But yeah, Polymarket may get regulated. This is something that we've spoken about a little bit,

30:45that Polymarket has been kind of the major beneficiary this year as like crypto's killer app. And we've seen that CFTC came out basically this week or last week and said that they may look to regulate Polymarket and could go and try and cancel their ability to do bets on gaming, but also politics, which I thought was quite a big deal. You saw some of the major crypto VCs come out this week, which was Dragonfly came out, I think it put out a response, and also Polymarket themselves, along with a host of others, basically saying this could be an overreach. This one, I think, kind of sucks, because it's been the one shining light of crypto this cycle.

31:32we've seen huge volumes go through on political betting. It's kind of taken over a load of the DGEN betting this week. That was the other thing we had just up there. We had people betting$4.5 million on just what Trump would say in a speech. And I think there was another million and a half bet yesterday. So crazy, crazy volumes going through. Do you think the CFTC is overreaching here? There is some talk about the fact that they don't even have, after the Chevron deference ruling, I think it was in June, that these three letter agencies just don't really have the power to kind of come in and regulate these things.

32:11What do you think? Yeah, I don't know. Conceptually, that makes sense. But at the end of the day, the SEC is still out here saying things and albeit they're losing their court cases, etc. They're still trying their best to put in regulations. so I think until you have like a change in personnel there probably and you get to a situation where we're not asking these questions like it's written out a lot more clearly then I don't really see that happening but yeah that could be like I think the Chevron thing is like signs of the wind changing perhaps and getting some more clarity on like where the regulation should sit with which board and whether it's SEC or whether it's CFTC and whether this is a security or a commodity, etc.

33:01But the problem is until someone spells it all out and it's all absolutely clear, it will always be an ongoing question. And I think for whatever reason, there are so many anti-crypto people in the US. Anyone who's in a position of power will do their best to try and clamp down on it if they're anti-crypto. And right now we've seen attempts of it by the SEC and they've been unsuccessful attempts so far. Well, the Chevron Deference, I think, basically says that we need, or you need Congress, or you need policy to be written, that these three-letter agencies aren't there to which you write policy or decide things on which there is no policy.

33:42They're there to implement it, yeah. Yeah, they're like, they're not here to do this sort of regulation by enforcement, you know, like you only really know because they lost a case versus the SEC or the CFTC. So it really tries to basically stop overreach from these agencies into areas where policy hasn't been written. That being said, I do think that this polymarket stuff does feel pretty wild at the moment. People are betting on individual words being said by Donald Trump in a speech at the moment. If Donald Trump now, it could be anyone going forward. I think there's already bets being made right now on what Kamala is going to say at the DNC.