Is This Crypto's Time to Shine?

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0:54Is it time for crypto to shine? Hi, everyone. Welcome to the Real Vision Daily Briefing. With me today is Noelle Atchison, editor of the Crypto is Macro Now newsletter. Hi, Noelle. How are you? I'm well, Maggie. So great to be with you. How are you doing today? I'm doing OK. And we have a lot to discuss. There's a lot going on. Treasuries, oil, and crypto all on the move. The 10-year Treasury yield dipping once again on some more subdued jobs number. Of course, you have the big government report on Friday. Crude oil fell below$70 a barrel, hitting its lowest level since June. And Bitcoin is trading above$44 ,000 on the same day that Jamie Dimon came out swinging slammed crypto again in congressional testimony, saying he would shut it down if he were the government.

1:43So it's sort of interesting. The Jamie Dimon headline struck me, Noel, because it's certainly not the first time he's criticized crypto. We kind of know how he feels. But it's interesting, given all of the institutional interests that we see around this coming from banking, especially big banks like JP Morgan. Absolutely. Although to be honest, Maggie, I don't see a conflict in what Diamond is saying versus the bank, because the bank is not really interested in Bitcoin. It's interested in tokenization. It's interested in stable coins. It's interested in the enterprise value of blockchain. And even Diamond has said publicly often that he sees value there.

2:21But his his intipity toward Bitcoin, it's amusing. It's funny. It's not surprising, given his institutional role. And when it comes to shutting it down as if you were a government, I'd like to see him try. Yeah, well, I think that's moved on, hasn't it? Which is why, once SEC lost that case, why everyone's been sort of anticipating the launch of the ETF. Just on the institutional interest, and you're right, there is a separation between the blockchain technology and tokenization and all of that versus any particular cryptocurrency, right? And they all have their different use cases. I noticed you posted on LinkedIn today that SockGen launched.

3:03It's the first publicly traded bank stablecoin. Is it significant? What does that matter? What does that tell you? It's absolutely huge, Maggie. And we knew this was coming. I mean, they announced back in April they were working on this. But I confess I was surprised they actually, one, went ahead with it because how many bank announcements that were working on this do actually see the light of day? And two, that it happens so quickly because it's really complicated. What Sokjen has done is issued the first bank stablecoin, because JP Morgan has one as well, the JPM coin. They've issued the first publicly traded stablecoin.

3:39It runs on Ethereum. It's backed by the euros, and the euros are going to be held separately from assets at the bank. And there are some caveats. It's not quite as free as other stable coins, such as Tether or USTC, for instance, because only if you are KYC'd by Sokjin can you hold it. But you can buy it on Bitstamp. There's market makers in it. And people have asked, well, why do we need this? We have the other dollar-backed stable coins. Well, one, because Mika, the regulatory framework that kicks in next year, requires the main stable coins operating in Europe to be euro-backed. So this is going to be a blow to the dollar hegemony, perhaps.

4:18But right now, there's really not much demand for euro-backed stablecoins. This looks like this might change situation. And two, the utility of these euro-backed stablecoins in the settlement of the purchase of all sorts of tokenized securities, which we know the banks are all working on. Not just the banks, but even governments are working on this. So one, it's going to boost the circulation of euro-backed stablecoins. And two, it is going to facilitate the trading and settlement of the tokenization that we are seeing gathering force. Wow. So, I mean, we always say we're at the infancy of this.

4:53But when you get steps like this, it's just, you know, another move toward the future, which we're all trying to figure out. And luckily, we have you to be paying attention for us because I think that probably went right past a lot of people that headline. So if we look at the price of Bitcoin, which is more, I think, what people are paying attention to, at least on this side, and right now because of the moves. So Jamie Dimon, not a fan, but boy, this has been pretty impressive. I was just going through some of the numbers of 13 % for Bitcoin in the last five days, 25 % in the last month, and an incredible 165 % year to date.

5:33Now, clearly, it's well off its highs. We saw that really painful slide lower. So it's all relative to where, if you own it or if you were playing in it, where you got in and got out. But what do you make of this rally we've seen? It's what we've been waiting for. I know that sounds fairly corny to say, but we knew this was coming. I'm not saying that we are geniuses and we can predict the future, but Bitcoin has cycles. Bitcoin had a really bad year last year. And it was just a matter of time before the clouds cleared. We can agree that has sort of happened. And I would argue that the Binance settlement was perhaps the last shoe to draw.

6:13OK, maybe there are some others still. But that was the big one. Now that that's out of the way and the settlement has been digested, there are no other massively potentially bad surprises out there. We can start to breathe a bit easier. We have these. There's all sorts of forces at work here. One, the clearing of the clouds, the last issue to be resolved from last year, and the ability to move on into the next phase of the market. This is partly, the runoff is partly being driven by ETF speculation. It's looking likely that the spot Bitcoin ETF proposals will be approved in early January. The window that everyone is focusing on now is the 8th to the 10th of January, because that's right in between the end of the last remaining comment period and the deadline to make a decision on the ARC-21 shares proposal.

7:06So that's a very likely window. That's just in a few weeks, Maggie. So part of the run-up is that. Part of the run-up is the macro environment. Part of the run-up is the digital gold narrative, which we can talk about. And also part of the run-up is the technological evolution, which has been humming along in the background. Hey, everyone, we're going to take a quick break right now to hear a word from our partners. We'll be right back with more of the day's top analysis on the Real Vision Daily Briefing.

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8:34Yeah, a lot of people were working on what they call the rails, right? And a lot of that sort of infrastructure. It does seem like you have this confluence of events lining up. Ash spoke to Nico Corderaro and Chris Ryan in a recent ProCrypto episode on Real Vision, and they talked about some of these fundamentals underpinning the move higher. Let's have a listen, and we'll talk on the other side. I'd say inflation, I think if we learned anything over the last two years, the spare market is that when inflation was running hot near double digits, Bitcoin was down 64%. So I wouldn't say inflation numbers really drive Bitcoin price, but I will say that I do believe rates drive price quite a lot.

9:14And that goes back to what Chris was saying is that the lower rates go, the further money gets pushed out on the risk curve to make up for that lack of return, right? Particularly from an institutional investor, if you're a big investor, you have a target rate per year called six to 8%. Right now, you can put a ton of money in money markets, US treasuries, and you can make up a lot of that return or at least earn a lot of that return through fixed income. So what do you do? You the highest end of the risk curve all the way back down. So as rates continue to fall, I mean, that's probably our next big piece for this next big bull market.

9:46We talked about the ETF. We talked about the Bitcoin halving. If rates are now downward trending, you can expect that large capital base to start moving further down the risk curve, which only benefits crypto given how illiquid it is relative to how large the financial system is. That full conversation on their outlooks for 2024 is on the platform. And a programming note, we are going to be doing an Academy Live event next Thursday and Friday, where we are going to take a look at how crypto fits into the macro landscape and how people are sort of approaching this as we head into 2024 and some of the tools and knowledge that you're going to need.

10:25It should be really cool. So head over to the website to find out what's in store and how you can participate. We just found out we're going to do a really cool segment with Denise Shull there, too, in terms of getting your mental self ready for what's in store for 2024, no matter whether you're in macro or crypto. So come on over for it. It's going to be fun. So, Noelle, the interest rate backdrop was an interesting point. I think that's what you were alluding to maybe when you were talking about the macro fundamentals. Do you see that as one of the factors leading Bitcoin higher? And if so, what is your outlook for rates from here?

10:57Yes, it definitely is. I mean, Nico's quite right. Macro has been one of the driving forces behind the Bitcoin price over the previous couple of years, I would say, ever since 2021. And that's largely because the large macro investors started noticing Bitcoin, started treating Bitcoin as a risk asset. Therefore, it started behaving like a risk asset. And that is still very much one of the strong narratives driving its movements. You've seen the market rates expectations. I think they're kind of crazy myself, but, you know, we'll take them. The expectations are now for two rate cuts by June from the figures I was checking this morning.

11:31And yet that liquidity is going to favor investments in longer duration, higher volatility assets such as Bitcoin. And arguably, Bitcoin is one of the most sensitive of all risk assets to liquidity pressures because it doesn't have earnings to worry about. It doesn't have any cash flows to discount. Hey, everybody, sorry about that. Someone's joking in the chat that Jamie Dimon pulled the plug, but he didn't. But we are clearly having a little bit of tech difficulties, but we're going to push through. We were just talking about the fact that we're pricing and we've got this liquidity that should be supportive.

12:06Lena asking a really interesting question. Will the Bitcoin rally lead the broader market higher? Is it possible that the gains we see there and maybe the return of animal spirits in that part of the investing world will spill over and be generally supportive? That is a really interesting question, Lina. Thanks for that. My personal opinion is that no, I don't think that the broader market cares that much yet about Bitcoin. Sure, there are going to be plenty of stock investors who do also notice Bitcoin. Many of them already hold it. Some of them will start to come into the market, especially if we do get the spot ETF.

12:43Otherwise, I don't think the macro markets notice Bitcoin that much yet. And when they do, it will be as an alternative asset. So it won't necessarily be as correlated as it has been in the past. Yeah. Although some of the fundamentals that, as you point out, are going to benefit risk assets potentially could benefit the Nasdaq, right? I mean, it's some of the same dynamics. At least they were correlated before, maybe not this time. I think they will always still be correlated, especially if we see a strong stock market correction, which I personally expect. When things are going down, generally correlations go to one.

13:22We could see some sentiment in the crypto market get hit by bad sentiment in the stock market. But I don't think it would last for long if it happens because there's so much else going on in crypto as well. The macro narrative is strong, but so is the ETF speculation and the ETF impact, even when they actually when they do eventually get approved. We also have the digital gold narrative, Maggie, which is increasingly interesting. We've seen gold climb to all-time highs this week, and there's a reason for that. It's not necessarily as an inflation hedge because inflation is coming down. It's because things are weird out there.

13:55There are conflicts popping up, not just Ukraine, not just the Middle East. But I don't know if you saw earlier this week, Maggie, Taiwan has opened its first training center for combat injuries. That is kind of alarming. We're seeing strange things go on in Venezuela with the referendum to just simply annex part of the neighboring country. Is the U.S. going to get involved? Is it going to impose sanctions when it wants to keep the oil price low? There's what's going on in Africa as well in the Sahel region is quite nerve wracking when it comes to the distribution of essential minerals and not to mention the terrorism control that the U.S.

14:36has been trying to work on there. So there's stuff going on around the world that is enhancing the thesis for gold, earned by corollary also digital gold. So that's another narrative that's going on. And then we also just have plain old network growth and growing use cases. So that increases, that enhances the implicit value, the fundamental value that Jamie Dimon insists Bitcoin doesn't have. Yeah, and a great point, which is all of the things you mentioned. Let's throw in elections in a lot of places, including the U.S. and all the risk around that. You can understand why people are looking for some sort of diversification.

15:18And by the way, this is why we have an entire geopolitics section on the platform right now and have conversations about this regularly, because this is having a big influence over macro and will continue to do so. So, you know, that's something we're on if you, again, are not a full member on our website, come on over and check it out so you can get access to some of this stuff. Wanted to ask a question. By the way, it's not just Bitcoin rallying. We were having a conversation editorially today talking about Solana, right, that everyone thought was left for dead after the FTX blow up has also been on the rise.

15:55So this is not just a Bitcoin story. This is sort of happening across cryptocurrencies, isn't it? That is very true. Bitcoin is leading this rally still, and we can see that in what is known as the Bitcoin dominance. And that is just simply the percentage of Bitcoin's market cap. That is the Bitcoin market cap divided by the total market cap. What percentage of the total is Bitcoin? And that's going up. It's almost at 55 % now. Seriously, Bitcoin is almost 55 % of the total crypto market, whereas just a couple of weeks ago, it was 52%. So Bitcoin is leading this. But you're quite right. There are some astonishing gains in some of the other assets.

16:32I was looking at Dogecoin this morning. Dogecoin up something like 23%. so far this week alone. That's amazing. I got to give a shout out to Elaine Lay. She used to joke about that all the time, not just joke about it. So I'm going to have to hit her with that piece of information. I was not aware that that was happening. So we just had a question. I'll find it somewhere, but oil, this was on the list I mentioned at the very top, continues to move lower. Someone mentioned, I think it's wrecking everything today. there's been a lot of pain in that trade. Jason, crude oil futures breaking everything today.

17:14What's happening there? What's your outlook for oil? And has the move surprised you? The move has surprised me. We're looking at the traders not taking into account at all any type of potential supply disruption, which feels a little bit naive. And let's hope that they're right. Let's hope that that doesn't happen. But we have tanker or container ships sailing through the Red Sea that are having missiles raining down on them. The conflict in the Middle East, it's being assumed that that's not going to escalate. And that's a fairly rash assumption, especially given some of the other hotspots that are emerging in the region.

17:47Venezuela, if indeed the United States does have to apply sanctions because it has decided to invade a neighboring country, then what's that going to do with potential oil supply? So the oil market right now is saying there will not be any supply disruption. What is concerning, and this brings it back to crypto in a way, is the oil market is telling us that supply disruptions are not nearly as important as lower demand next year because of a global slowdown. And if indeed the traders are right, and that does overrule any type of necessity to price in risk for supply disruptions, then that means that the global economy is in trouble.

18:24And that is going to bring forward rate cuts, which is going to help the risk assets such as Bitcoin. So lower energy prices also, let's remember, are going to be very good for inflation, which is also going to give central banks around the world a bit more margin to lower rates. We're going to take another quick break to hear a word from our partners. We'll be right back with more of the day's top analysis on the Real Vision Daily Briefing.

18:52I think one of the things that we have Matt asking, what's Noel's timeframe on the stock market and crypto pullback? if you are expecting one. I'm not sure that you are. But I think one of the things that really, not confuses, but people have been grappling with on the macro side, but it affects crypto too, is if we get a recession and central banks are easing, there's more liquidity because of that, that's good, potentially positive for risk assets, maybe positive for crypto, maybe positive for stocks. However, if the recession is steep or it's painful, at some point, people don't have money and that can be negative.

19:33What's too weak for it not to be a positive? I think that transition period, I think a lot of people are scratching your head and struggling with it. Absolutely. Is the market pricing it in? It doesn't look like that at all. It's not even just so much a case of people not having money, although you're totally right, Maggie, that is definitely a big concern. It's people not having money, not being able to spend on products or services and companies starting to default because one high interest rates, they need to run over the debt, but they don't have the revenue to be able to service it. And that will lead to more unemployment, which will lead to lower consumption, et cetera, et cetera.

20:09So I personally do believe that we are in for a much sharper recession than the market is pricing in. And I do believe that that is going to start to impact the earnings forecast, which is going to impact the stock valuations. And I do believe that we are in for a sharp a sharp correction, but not just yet. I think that's not going to happen until the spring, I'd say March perhaps, and then I think I say is investment advice. And crypto, by March, crypto will have had the ETF listings. Crypto will be in a slightly different framework, will be heading into the halving. So the fall in sympathy from the crypto market will not be nearly as steep as it would have been without all these other supportive factors.

20:47Oh, that's so interesting. Yeah. And some of you have been pointing out, some of you watched Peter Brandt's interview with Samuel, his three trades and some of his forecasts. And then we had Paul Hodges on earlier this week, who is very negative. He also, just from what he looks at at the chemical industry, which he feels like is a forward leading indicator, says he's never seen it this bad. And he's very, very concerned about the global economy and just how weak it is and also thinks people are not really cognizant of it. They sound they can sound like they're in completely different camps. But a lot of this is time frame.

21:24We talk about this all the time in a shorter if you have a shorter time frame. and I'm not saying Peters is, listen to the interview, but in a shorter timeframe, it sounds like many people are expecting because of rates moving lower and in crypto's case, the ETF coming, that there is a lot of positive momentum. It's not until you get further out into the year and then you see what the recession's like, where the views maybe diverge. And that's where you could hit an air pocket and trouble, at least for stocks. Is that correct? Yes, totally. That's beautifully put. It's exactly, there's a difference this time around.

22:01I mean, we saw this the last cycle, 21, we saw corrections in both because crypto was acting like a risk asset, as we mentioned before. And now it is, but it's also going to be acting as a hedge, as digital gold. It's also going to be acting as an alternative. There are other narratives out there now that are much more mainstream than they were last time we were in the upswing. We have Larry Fink talking about digital gold, but Bitcoin's role of digital gold didn't happen last time. Last time it was just about the speculation. So it's different. And we don't know really what the correlation is going to be, whether even indeed Bitcoin does correct along with the stock market.

22:41My opinion is that it will, but that it won't do so much because timing, the halving is a very positive force for the crypto cycles because it does reduce the amount of new Bitcoin coming in. It reduces the sell pressure from the new Bitcoin. This is a different asset class that we have to wrap our head around, right? And a lot of this is a first. So we're not going to know the effects. I heard someone say that in the run-up to the approval of the Bitcoin, there has to be natural buying going on for firms that are launching an ETF. Do you feel like some of that's driving what we see now? And do we really understand how much they have to be buying in order to?

23:24Not much. I don't think much of that is what's driving the price right now, largely because, one, the timing that we're seeing some of the large orders come in. what triggered this week's move started in Asian trading hours. So I don't really think that's the main thing. But also, they don't really have to do much before they launch. Obviously, when they launch, there'll be a lot flowing in. And that's when the buying really will start. Interesting point there, Maggie. And that's another big difference this time around. Many will be commenting, and you probably had questions about this, that every single time the crypto market has had a key product listing, the Bitcoin futures ETF, the Bitcoin derivatives, the Coinbase IPO.

24:06That's been the top. That's marked the market top. This time could be different. I think it will be different because this time, it does actually involve Bitcoin buying. All of the other listings did not involve any Bitcoin buying at all. This is actually Bitcoin buying. And this is giving every single registered investment advisor around the United States, not just permission, but also the encouragement to talk to their clients about this now. Again, the other listings could bring that to the table. So it's going to be very, very different. The timing is going to be key, whether the stock market correction happens in the spring or is it going to be delayed a bit more in the summer?

24:43You mentioned earlier, Maggie, that we've all been surprised by how long this recession is taking to come. I certainly was wrong in calling for it to start this year. and I could be wrong in calling for it to start towards the summer of next year. It could take even longer. We overlooked how much businesses had refinanced their debt and were in relatively good shape, but that has a sell-by date. We overlooked how much savings people had left over from the pandemic so they continued consumption. Well, obviously that's starting to run out now as well. And so it's just a question of how much longer can the car keep running on fumes before it eventually has to start sputtering to a stop.