Why This Bitcoin Bull Market Is Different | Checkmate

22:50Checkmate:there about people consolidating while price is ripping but like mempools are pretty empty are you surprised that the mempool is so empty as price is ripping like this is a pretty new phenomenon right so it is and it's it's a little bit interesting because the last time we saw the market at all-time high for all the intensive purposes the last time we were at all-time high in the mempool was this dead was the second all-time high in 2021. Now, there's a scam all-time high. Which is a scam all-time high. Now, there's a number of differences. If you look at, I mean, pretty much any metric you want to look at, if you go back and look at that second all-time high in 21, now we can't really use these metrics today because they're a bit spoiled because of ordinals and inscriptions and all that shit.

23:32But you had a massive lot. We didn't have any of that back in 2021. So one active address was one active address. And I'll explain why it doesn't count today. one transaction was one transaction, right? It was all, we're all just talking about monetary transactions, broadly speaking. Massive lower high. That second all-time high in 21, all of these were like a big bearish divergence. MVRV, which is the unrealized profit held by the system, massive bearish divergence. So how can you have price at a higher level, 69 ,000 versus the first all-time high in April at 64? How can the price be higher, but everyone's unrealized profit is lower, it's because a bunch of people have now sold the top.

24:09You've got a pool of all these new investors with a very, very high cost basis. Now, that part is actually true today. The average cost basis is much, much higher. It's like 76K on average per person at the moment. I use a metric called the true market mean. I won't go into the details of it. Short-term holder cost basis is like 105K. And I've got these heat maps I look at that show where all the supply has been bought and sold, that 95 to 100K region, there's like 40 % of all the wealth invested. I've seen that realize cap before, it's above 90K. That's an extraordinary stat. 17 % of the wealth invested has a cost basis in our current trade range, 17%.

24:51For similarity's sake, everything below 50K, if you value every coin when it last moved, literally every coin below 50K, 17 % of the wealth. And we've got that in our current trade range. We've been here for two and a half weeks. So it just gives you a bit of a sense of scale of how quickly these things move. Now on the transaction counts and active addresses, we can't really compare them because the way that ordinals and inscriptions work and they play around with the witness data, you can fit more transactions in. So transaction counts are at all time high, but a lot of these guys are using either algorithms and bots to trade this stuff.

25:29Or they treat a Bitcoin wallet like an Ethereum address where they reuse the same address. So in order to not double count, one active address may be sending 20 transactions in a day. So it's still one active address. So some of those activity metrics are a bit bung at the moment. But the other one is on-chain volume is very, very high. So we've got a small number of transactions, but the size of these transactions is massive. So what does that really speak to? Big money. The network is being used by fewer transactions, like the skew has gone towards institutional size money. So we're not seeing retail punters.

26:08We're not seeing like in 2017, people used Bitcoin as the casino chip to go and punt on Binance. In 2021, we had that retail fervor because money printing and stimulus and all that stuff. This cycle, it's, you know, yes, there's an ETF component. Yes, there's a, you know, more of these institutions moving around, but like retail aren't on chain. That is a very, very different dynamic. How long it takes retail to come back? I mean, I see posts all the time saying when retail, when retail. It's like when retail, you don't want retail. Retail means end of days. Like that's the top. You don't actually don't want that.

26:43The fact we're not seeing retail right now is indicative of both the market structure. They're going in through ETFs, a lot of them, but a lot of them just don't care. They really just don't care. And really, in my last two years, I've had no phone calls from people who are no coiners. I've had lots of phone calls from Bitcoiners saying how to lever up. But increasingly, I am getting questions, and mostly in person, questions from people who actually have money. So these are people who've got wealth behind them. And they're saying, I'm not that scared about Bitcoin anymore. Can you tell me a bit more about it?

27:17And for those kinds of things, I know a lot of Bitcoiners have the same story. I don't try and orange pill people anymore. But if you have a question about it, I've got all the time in the day. And I think a lot more people are in that kind of world. And I'm seeing that interest from people who actually have money to protect. Increasingly, a lot of retirees as well who are going, I haven't been on this Bitcoin wave, but they're watching this low volatility climb and they're going, I think I actually need some exposure now. So I think all of this stuff is just, it's a different system.

27:46Checkmate:I think you're on the verge of saying this cycle is different but every cycle is different let's hold that for a second because I do have I was looking through your newsletter and there are a few really interesting charts that I wanted to pull up and get you to go through let me just get these so yeah I mean every cycle is different no no we're coming back to this because this behavior pattern is the same human fear and greed is the same so talk us through this chart we've got here yeah so Soper is my Swiss army knife I use this for everything so what we're looking at is short-term holders. So people who've bought within the last five months, people love to debate me and say short and long-term five months doesn't matter.

28:22The statistic says five months, the probability of a coin being spent once it's been held for five months is diminuous. It's so small, it's logarithmically small. And actually there's a power law. There's a very clean power law that Glassnode did a study on a couple of months back where they showed that it really is a power law between how long a coin has been held and the probability of being spent on any one day, which is pretty neat. And what we're looking at for short-term holders, 95 plus percent of the on-chain volume every single day without fail is short-term holders. So they just dominate all the coins, move around, move around, move around until they finally hit a cold card and go off market.

29:00Now, I mentioned MVRV before, which is the unrealized profit or loss. SOPA is the sister metric. It's the realized side of the equation. So it shows us the average profit or loss being locked in by coins that are on the move. So for short-term holders, there's this typical pattern is in bull markets, most of the time people are profitable. Short-term holder metrics are really, really powerful because they are literally the only ones who can buy the top. You cannot have a long-term holder buying the top because they haven't held their coins for five months yet. So when short-term holder SOPA goes into the red, it actually means that local top buyers They bought the top.

29:40They watch the market go red, red, red. And then they finally go, ah, damn it. I've got to sell now because I'll buy back later. And they sell the exact bottom. So for me as a hodler, that's when I actually DCA, when I see those kind of events. So what we're seeing in this bull structure is it's most of the time profitable with really healthy retests of that break-even level, which shows that those top buyers are getting flushed out. And then we spring back again. So it's got this structured bull market behavior. When we get too much profit taking, so the way that I think about this, if the dude who bought two weeks ago is looking at his portfolio and going, I'm a genius, then something like you're probably a little bit overheated in the short term.

30:21So whenever this metric gets too high, it doesn't mean that a top is going to get put in at some kind of global level. Short term holder metrics are generally speaking, they're more about local stuff. But for me as a hodler, again, bring it back to how I personally DCA. I'm probably not going to lump some, a big chunk in when there's stacks of people who are feeling quite happy about their recent swing trade starting to sell on my head. I'm going to wait until that cools down a little bit and then I'll step in. So it's just a tool to help me manage my emotions. It helps me manage kind of where the local cycle is.

30:54And just, I've been in this market long enough. I'm just tired of buying high and then watching it go lower when I know it always goes lower. It always goes lower in the short term. So I'm just like shifting my DCA over just a little bit to try and correct for that.

31:08Checkmate:All right. I want to go through all these charts because the question I have kind of encapsulates all of them. So then we've got the Bitcoin realized profit and loss. So talk us through this one. Yeah. So we mentioned before the realized cap. So the realized cap looks at every coin based on the price when it last moved. Some guy buys at 10K, sells at 120K. Someone had to come in with the delta. And this is actually, this is one of my favorite tools for measuring demand. Because even though Realized Profit is a sell-side metric, that guy had to come in with extra money. The original cost basis was 10K.

31:41The new cost basis is 120. He's got to come in with$110 ,000 times the coin value, right? If it's half a Bitcoin or whatever it is, he's got to come in with extra capital. So the reason that the Realized Cap increases is because old money is selling to new money. There is a rotation of the holder base. and this is really really important so for every buyer there is a seller for every price it literally requires a buyer and a seller on both sides of the book so when you're measuring sell side pressure which is what this metric is we're actually measuring demand because you're measuring the opposite the inverse when you see 80 000 bitcoin gets sold that means that someone came in and bought 80 000 bitcoin now it could be many someones but someone when sailor buys 21 ,000 Bitcoin and the price doesn't go up.

32:28I wonder why it's because someone sold 21 ,000 Bitcoin. You know what I mean? Like this is just how the system works. Now, the chart that we're looking at here is basically that volume. I've normalized it to BTC terms so we can pair across cycles. And I believe I do a four year just to like try and look for, you know, when is it hot? When is it overheated? Too much sell side? I've just applied a four year standard deviation. So usually in a ripping bull. When you get above two standard deviations, it's getting pretty steamy in the room. So really what I look at here, it's all about incentive and action.

33:05When people are feeling really profitable, we started this conversation by saying, you're feeling good. There's$1.4 trillion in the system. That's the incentive. If you wind that up to$2 trillion, $3 trillion,$5 trillion, suddenly someone out there is going to go, yeah, it's time for me to lock in that$10 billion worth of profit. At some point, it may not be you, it may not be your friend, but it's some guy out there is going to take that profit. What I'm trying to look at here is what's the incentive, unrealized profit and loss. And then this one is telling me, did they actually sell? Because you actually need sellers to create a top.

33:36If you don't have sellers, then the market just keeps climbing and climbing and climbing until it finds them. So really price is actually the result of that supply and demand balance. It's going to inflect higher when it cannot find the supply. It's going to inflict lower when it cannot find the demand. That is literally how markets work. And this just gives me a nice tool to understand when are we getting too much sell side relative to recent history? When are we getting too much demand, right? Trying to understand both sides of the equation. All right. And then the last one, we've got the bull market corrections.

34:09I mean, this is just such an amazing chart. I think I described it in the video for the post are saying like, this is one of those charts that is worth a thousand words. So for those who are listening, basically what I'm looking at is the last three bull markets. So 2015 to 2017, I used the 2018 bottom all the way through to the 2021 second top, and then our current cycle since basically FTX blew up. So ignore the drawdown from the all-time high. We're only looking at the drawdown within that bull market uptrend. How deep are they? So if you go back can look at the 2015 to 17 cycle, getting a correction of 30, 40, 50 % wasn't uncommon, but maybe not 50, 40 was like about as bad as it gets.

34:51The key difference between 2015, 17 and today, because we've only had two 30 % corrections. And we've got to remember that we are a hundred times bigger in market cap size than we were back then. And yet the drawdown profile is actually less bearish this cycle than it was back then, which is incredible because think about the amount of sell side pressure. We're not talking about a million dollars or$10 ,000 worth of sell side. We're talking about$10 billion worth of sell side today. And the market is barely clocking, like the bears can't get any ground, getting like a 30 % correction. The other interesting thing about 2015, 17 versus today, the drawdowns back then were much quicker.

35:34If you went away for a weekend and came back, you kind of missed a 40 % correction and then it's springing back to all-time highs. their corrections today may take six months eight months like they're much longer more drawn out processes which creates a lot of frustration and boredom but really the cycle's not actually that far away from where it typically is but we've got to remember that it's much much bigger but the middle period and and strangely enough this chart's actually really good to just i've been rethinking the idea of cycles a lot of people like to use the halvings and the bull market tops and the bull market peaks and all that stuff.

36:09I've actually been using a very different framework more recently. They're not too far away from those kind of delineation points, but I use two delineation points, and I think we've had three cycles, and this chart kind of shows it. The first cycle, in my opinion, ended on the 2017 top. So that period was very adoption-driven. You can see it in every metric. I mentioned the transaction counts and volumes and just you name it. there was a very different pattern back in that pre-2017 top era. Very organic. We barely had a trading view chart. There's very few hedge funds. There's no leverage. There's no stable coins.

36:45It was just buy Bitcoin and maybe speculate on some of these old coins. But it was a Bitcoin dominated organic cycle. And the psychological side of this is people were responding to Bitcoin as this brand new thing. No one knew anything about it. What is this cool thing? That middle period from the 2017 top until FTX blew up, very volatile. A great metric if you want to actually study this, just use the Mayer multiple, a ratio of price in the 200 day. You'll see back in 2017, it had this like nice rhythmic pattern. It continued to bounce off the 200 day and it was quite structured. 2018 to 22, massive amplitude, straight down, straight up, straight down.

37:26like we just had these boom and busts 2018 was just straight down 2019 was straight up then we had another bear in 2019 straight down covid happened we went vertical and then we just like it was really high amplitude moves with leverage right this is where retail suddenly got perpetual swaps on you name it token now since ftx blew up i think everybody knows we can see it in the price chart. It is trading differently. The drawdowns are shallower. The rallies, it goes up 40%, 50%, sometimes 100 % in a year, and then chops around sideways for eight months. So we do have a very different structure.

38:03It's much more of a slow grind. Yeah, very much so. And look, at some point, and I think we're probably on the cusp of this, truthfully, of moving into what I call the euphoria phase. So we've got the bear market recovery where there's a lot of PTSD. This is really 2023. Everyone was fearing the ghost of Sam Backman-Freeb was going to come back when we were going back to zero. But we just never got that lower high and it just kept drifting higher. Then we got the excitement phase. You start getting up towards the all-time high. I thought that we would have moved into the euphoria phase already because in past cycles we have, but I think we're getting there, right?

38:38Look at the treasury company trend. Derivatives leverage is pretty much at all-time high. We're closing on like 5.8 % of the Bitcoin market cap for futures and options. So it's getting leverage. As I said, I've had people call me saying, how do I lever up my Bitcoin to buy more Bitcoin? There's just a lot of things that are starting to feel a little bit like we're in a bulletproof bull. And that's okay, right? This is normal for this kind of the cycle, but things can really start to accelerate from this point forward, which is exciting for those who've been bored to death. There is a good chance that we get some serious momentum to the upside.

39:10But as that happens, if we leave this stair-stepping pattern, we do move into more unsustainable territory. And then you start getting closer

39:18Checkmate:to a meaningful top. So take maybe the sentiment out of it. And just purely from this sort of analytics perspective, do you think there's still a lot of room to run here? I think so. I mean, and I think when you say a lot, that's a relative term, right? So let's just kind of correct what we mean by a lot. If we go up to 150K, you know, we were at 100K a couple of weeks ago, we got to 150 we've added a trillion dollars to the market cap now we really proved that we're a trillion dollar asset in 24 chopped sideways for eight months every dip was bought we then said all right let's try two trillion and we chopped around there for six months right we had a correction back down to 75 and it was swiftly bought up amongst all the tariff tantrum in many ways we've kind of proven that yeah you know what we're a two trillion dollar asset so the real question is now how many trillions are we going to add how many trillions until people start to sell 80 ,000 Bitcoin is a regular thing.

40:12How high do we have to go before people really start to cash in? Now, this cycle is also quite unique. If you look at long-term holder supply, we've had two waves of sell-side, and they've both been very, very meaningful. I think in total, the amount of long-term supply that's come back to market has actually now eclipsed the 2017 cycle. So this is the largest in aggregate long-term holder sell-side event we've ever seen. but we've got to remember a lot of that supply people who bought in 2024 in that like 50k chop range a lot of those coins got resold for a quick 50 % move by hedge funds trading desks whatever else up to 100k now maybe they step back in and in fact a lot of the people who bought in the 85k range on that dip in uh in march and april a lot of those coins are now being sold up here so you know a lot of folks kind of miss that there's still a large trading cohort in and amongst the Bitcoin space, the sell side comes from people who bought 50 % lower because 50 % in like a three month period is astounding returns for TradFi folks.

41:17It's going to take them a long time to get used to just like buy and hold, but also their mandate isn't to buy and hold in many cases. Their mandate is to swap into Bitcoin, get out of it, move over to Nvidia, get out of Nvidia, go over and punt on Palantir. Like they move money. Their job is to move money. And the more they move, the more they clip the ticket, by the way. So, you know, in many ways, their performance

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43:28Checkmate:IRON are not just powering the Bitcoin network, they're also providing cutting-edge computing resources for AI, all backed by renewable energy. We've been working with our founders, Dan and Will, for quite some time now and have been really impressed with their values, especially their commitment to local communities and sustainable computing power. So whether you're interested in mining Bitcoin or harnessing AI compute power, IRON is setting the standard. Visit iron.com to learn more, which is i-r-e-n.com so let's get back to the cycles being different because like when at the bottom here we've got the three cycles um 2017 was just like parabolic upside um next cycle was like you said super volatile and this one's just grinding now i did a show with nick bartier very recently yes and he was saying i i really liked his framework he was basically saying he's like 60 sure the cycle's broken which is a rounding error from 50 50 but like the the market it is different now.

44:20Checkmate:We have the sort of sailors of the world buying massive amounts of Bitcoin regularly. And we've got the ETFs. Do you put any credence in the idea that even if it's not sort of quote unquote super cycle, it is an elongated cycle that doesn't have the same four year bull and bear? Yeah. So honestly, I really align very strongly with what Nick was saying. I think that's the exact way to think about it, which is I'm extremely flexible in how I'm thinking about this cycle moving forward. The truth is it is different, but every cycle is different. They all have their own unique characteristics. The one thing that is not different is human beings.

44:54We all have our own decision frameworks. There's a lot of Bitcoiners out there who are just simply going to hit a level of wealth where they go, I can finally buy the house. I can finally do that thing that I could never. Bitcoin gives people opportunities that they would never have had any other way. I was listening to Pete McCormack on Natalie's podcast this morning, and he was saying very similar things. At some point, your Bitcoin, if it's your savings, people are going to find things to do with it because that's what money's for. It's about improving your life. So at some point, people are going to realize those gains.

45:27And by the way, that's perfectly fine. That's what savings are for. So the cycle is most definitely different. Human psychology is not different. Bitcoiners have this internal sense. The longer you're around this market, the more your intuition builds. You know when things are getting a bit silly. This is why there's a lot of these debates. This is why the treasury company thing is a debate. Every single person who's looking at this can go, I think there's some merit here because they're looking at what Sale is doing. He's going after the bond market. That's pretty badass. That's pretty cool. And you can also look at it and go, it's also a bit Ponzi adjacent.

46:00You know what I mean? Like we're kind of sitting on this two sides of the fence. You can actually hold both of these views at the same time. Things are getting a little bit silly and we've probably got plenty of room to run. So I think that's the right framework for where we are. I'm very flexible. and you know that's why i'm i'm trying to live within the next like six months like i've got my models and i'm looking at where it is but like i'm under no illusions the market could just totally top out here and it could just be a sad little you know curl over and that's the end of it i don't think that's likely um i also think we may get a parabolic run but i also don't think that will be sustainable so i've got a couple of like anchoring ideas and the rest of it just allowing the market to just tell me, rather than me imposing what I expect to happen on the market, I just let the market, to the best of my ability, tell me what it wants to do, and just try and listen.

46:49At the end of the day, the data is this information. I'm just trying to listen to the best of my ability.

46:53Checkmate:One thing that I think could be different there is, I do agree with what Pete's saying in terms of this is money, and at some point you want to do something with your money to improve your life. That's for sure true. But I do feel like the narrative is becoming more pervasive that Bitcoin is here forever, or at least for our lifetimes. And what are you selling for? And this is something we've spoken about a lot. And I think the market might be understanding that you don't just sell Bitcoin for fiat. Yes. No, I fully agree with that. And I do believe that's actually a unique element here. I mentioned long-term supply has been sold off.

47:27We've had two waves and we've actually just start of the third wave of long-term distribution. What is unique? It's actually not the sell side that's unique. What is unique is that when we hit that peak in March 2024, long-term supply stops decreasing, and then it very, very quickly recovered. So when you think about long-term holder metrics, particularly supply, it takes five months for a coin to get to that threshold. The coin may chop around several times and move hands every so often, but eventually it hits that threshold. We have not seen in previous bull cycles, we see a massive sell side event, the top gets put in, and then those coins recycle themselves for ages and ages and ages in the volatility of the bear, because no one actually wanted to buy and hold it.

48:12This cycle is unique because we've actually almost recovered back to all-time highs twice now. And that is actually showing you about the buyers. We saw the sell side when the long-term supply decreases, but we actually see that the coins they got, the people who bought those coins are hodling them. Now, some of it's the ETF, some of it is hodlers, some of it is sailor. That is what's different. We've got a cohort of people who are now acclimatized to 100K. And I know people may not like a lot of Udi's views, but he's had these on this tirade recently about saying this rotation of holders. And I think this is very, very real.

48:46I'm not quite there on that we're going to 400k this year but there has genuinely been a rotation of capital from a 2011 whale to modern buyers like sailor treasury companies um etfs um retirees my old man my old man been in the bitcoin world since 2020 um that was his first kind of entry to the market so he rode the up he rode the down and i heard all about it now he's riding this low volatility grind up. He is sold during this market cycle to get his initial capital out. And he's now going, should I, what's the best way to maybe, I don't know, get back in. He doesn't care that it's a higher price because he's got his risk out.

49:28Now he's willing to take that risk again because he's become comfortable with it. There's a whole plethora of people out of there who now, they don't know anything except Bitcoin going from 50K to 73K to 110K to 120. And every time it does it, it goes there and it stays there. That's the history. They know the Ibit chart. They have no idea that Bitcoin came from two cents. They don't care about that period because it's not relevant to them. They see the Ibit chart, which is just an uptrend. It's only ever been in an uptrend. So you've got to think about where these people are coming from. We have acclimatized to these price ranges.

50:04I have long since given up 80 % drawdown, what, to 30K? Good luck with that. Like it's just not happening. So I've given up on that idea. So I do think that is different. And actually this is a bearish sign for all the other shit out there, all the altcoins, because people know that Bitcoin is the winning ticket. And I can only imagine how many shitcoiners are out there and they've got big bags of this stuff. They are looking for every exit pump they can because they know that everyone now knows you have to go back to Bitcoin. So the sell side actually is going to show up everywhere else because the rotation is towards Bitcoin.

50:42Checkmate:I like that take. We started this talking about vibes and we've gone through all the sort of positive vibes on the Bitcoin price at the moment. But there are a couple that stand out to me as being like potentially toppy signals. One being the fact that we're just getting a new treasury company every fucking day. And then the other is that shit coins are pumping again. Like ETH's been flying over the last few months. Do you see that as a sign that maybe the top is closer than we think? No, honestly, when you look at any asset, whether it's a bankrupt company or a shitcoin, they do not go down in a straight line, just the same way as they don't go up in a straight line.

51:18Every single one of these things is going to get a relief bounce. Now, I think it's actually quite interesting because the core reason I would say, the narrative I would describe, so for ETH, for example, they've been getting quite a bit of inflows for the ETFs. What is the event that might have happened? The genius bill. so there's a bunch of folks out there who are betting on uh usage of stable coins is going to benefit the underlying token and uh something actually i was talking i can't remember who was talking about this uh with yesterday uh it was actually peter dunworth i was having a phone call with him and we were talking about uh my view is that we're in a hard money world now not hard like you know gold or bitcoin hard but interest rates aren't zero we're no longer in a zerp world i've had this long-running thesis and we've seen this with altcoins they've really struggled to catch a bid this really is the first like actual bid they've had yes solana had a period of time but like even it's rolled over and its btc chart looks just the same as eth does um just earlier in that cycle i think the market generally speaking yes there's plenty of stupid stuff happening in the world but if you look at the russell 2000 it's doing pretty shit if you look at the not so magnificent 493 that's doing kind of average, really we're seeing this like concentration towards the winners.

52:33It's very much a winner take most, winner take all type environment at the moment. This is anti-ZERP. This is people actually being more discerning with their capital. I would say we're even seeing this with treasury companies. I did a study the other day. The drawdown most of these treasury companies have had from their IPO, I guess you call it like, I'm going to call it like an IPO pump. When they announce, oh, look, we're a treasury company. They go up 5 ,000 % and then they've just been in a horrendous downtrend ever since. It's kind of that initial pump. Strategy, yes, it hasn't blowing through all-time highs, but it's also not down anywhere near as much as most of these other companies.

53:09So I've had this long-running thesis that more and more people are going to be more discerning with their capital. We're not in a Zerp world yet. I also don't think we're going back to a Zerp world anytime soon. Maybe if Trump gets his own way. Yeah, maybe, TBC. But I think, I mean, I have zero edge in this, but I would assume that Powell's probably going to stick it out. And this is all just narrative, TBC. But yes, you're right. Eventually, maybe we get to that point. But the genius bill, just because people are using stable coins doesn't actually mean that ETH price benefits. It doesn't mean that sole price benefits.

53:43And I've run this exercise before, go and look at your all-time high gas consumption and compare it to your all-time high holdings. I did this back when I had my ETH back in 2022. I ran this experiment. I realized I'd bought 250 years worth of excess usage. I sold it all the next day and I was done, right? So that was just the end of it. So if you look at all those different dynamics, I think that a bunch of analysts are going to realize that there is actually no underlying demand for these tokens. And just because someone's using it doesn't actually translate into value, right? I think it's Tom Lee.

54:14He's saying that they have to buy the ETH to secure their network. I'm like, that sounds like you probably don't want that system, right? Is that really the kind of world that we want to live in? Like in that case, just run a database. If that's the case, just use JPM servers. Why do you need a token to go alongside this thing? And I think a lot of these institutions are going to work this out pretty quick. So it's an interesting point. I think if ETH rolls over in the next couple of months and just really struggles to punch a new all-time high, I think the red candles that come for alts, if that happens, and again, I don't know, maybe the world animal spirits just comes back.

54:51But if it rolls over, I think that is going to be just the reddest candle you've seen. Because that's the world realizing that there really is no demand for this stuff. And good luck to the true believers.

55:04Checkmate:Yeah. I do want to talk about treasury companies because you tweeted recently, the drawdowns most of these treasury companies will experience will be epic. 2012 Bitcoin grade depth, but with gold grade duration. Yes. Why don't we start with just your general take? Because I think we align, we talk about this quite regularly offline. And like, I think we align quite closely in that there's Sailor and then there's everyone else. Yes, that's pretty much where I sit. And interestingly enough, and again, people are going to find all the nitty-picky reasons why arguments are wrong. But think about things from a general perspective.

55:35We have seen this process before in shit coins, in penny stocks, and you name it. I use a framework of like extremes inform the mean. So let's go to the most extreme example and see where that puts us. If you look at strategy, right? If there was only one company doing this strategy, it makes sense that everyone has to buy that firm for it to do well. If everybody's doing this strategy, then what's your differentiator? Probably your size, your liquid options market, your access to debt. The truth is when you've got so many of these things. When you're printing a million shit coins a day on pump.fun, there's literally not enough money to buy this stuff.

56:18I also think about it from the smaller you are, the more your only option is to sell equity. That's the only option you actually have. All the other companies, if you look at strategy, for example, they can do all sorts of exotic preferred stocks and debt financing and you name it. That's going to benefit them in both the bull and the bear because they literally have more access to capital. There's obviously a spectrum, by the way, between all these things and different companies at different distances. But the chasm between strategy and literally everything else is, it's like saying, what's the difference between a billion dollars and a million dollars?

56:49It's about a billion dollars. So like the chasm is so large between strategy and everything else, it kind of doesn't matter to compare them. So then you've got this kind of middle bucket, you know, meta planets, probably the leading example of those. And then you've got the long tail. What is the differentiating factor between the long tails? I really struggle to see it. And there is a reason that these companies are hiring Bitcoin podcasters as their front men, because if they do not attract retail speculator capital, there is no other demand for this. Like, in my opinion, there is no serious institution buying a penny stock with a cold card.

57:24I just don't see it happening. So, you know, if they can't access debt, if they can only sell equity, eventually people realize, why the hell am I holding this thing? If there's Ponzi adjacent, unless there's more money coming in, and this is the thing with these MNAVs and these premiums. And by the way, this is not throwing out every single company. This is like a broad statement that we look at extremes and then there's going to be outliers. But if everybody's doing this and your premium expands very quickly, right? Let's just say a company has a premium expanded to 10X. They can either 10X their Bitcoin balance or the Bitcoin price can 10X or some combination of the two and your price can stay flat.

58:04And now you're an MNAV one. Now, yes, can they sustain a premium? Well, that depends on their growth metrics. When the Bitcoin price rolls over, the speculative capital will slow down and you will not get people going out on the risk curve. So this all works very, very well when Bitcoin is in an uptrend. By the moment it goes into chop solidation, where it's frustrating and boring, or it goes into a downtrend, which eventually will happen, I just can't see how these companies continue to attract capital. And as a result, once the engine goes out and this plane's flying in midair and your engine goes out, you've got no fuel to turn this thing back on because suddenly nobody wants to buy your stock.

58:43And then you're just like every other penny stock with a cold card. Now someone's tweeted at me and I think it's a valid point. It's better than penny stocks without a cold card. Agree. Agree. But the problem is that once their MNAV goes below one, and I do believe a lot of these companies will, once their MNAV goes below one, because there's just not enough money to sustain a premium they can't sell equity to buy the bitcoin but they can buy sell the bitcoin to buy the equity and buy their shares back and then you realize well you know if you're just a company who's like a shitty hedge fund who buys bitcoin at the top and sells it at the bottom to buy back your own stock do i really want to share in that yeah it's bitcoin accretive but like i can also just borrow money and buy ibid or borrow money and buy bitcoin so i think that people are over indexing on this idea that we need a treasury company in every jurisdiction they're basically taking meta planet success in japan which by the way is a unique selling point and they're saying oh well there's you know there's one in sweden and there's one in denmark and there's one in you know vietnam and like let's put a treasury company everywhere it's like if we talk about here in australia what is the real trapped capital here in australia you know people say in fact i was talking with pete about this yesterday he's like our superannuation funds which is like 401ks people in america all this retirement money it can only buy aussie equities and my point was truthfully if you're actually buying like for me i've got some of my investment that my super annuation fund in mstr why because it's really not hard to access so if we're talking about trapped capital that can only buy aussie equities are they really really that far down the risk curve they're going to go and buy a penny stock with a cold card no they're not like the truth is once this trapped capital, it's either not engaged in Bitcoin at all or barely even looking at buying the ETS so early in that journey.

1:00:32And anybody who is smart enough to know that this trade even exists is smart enough to open an account with a brokerage that can buy US stocks. I'm just really struggling to see this long-term sustained trapped capital thing. People have taken the MetaPlanet journey and said, we can replicate that in every country. And I think that's wrong. for me i think that there unless you have deep options unless you have deep debt markets unless you can finance without selling equity most of these companies are absolutely reliant on this speculative retail driven gamble of pocket money when you run out of that the engine goes out and this whole thing i just think these mnavs get crushed and by the way this is not saying these companies are going to go bankrupt i think a lot of these companies are gonna be fine But I think the people who bought the shares at the high premium, you're going to experience a 2011 Bitcoin bear market, which is down 95 in like three weeks.

1:01:29And then I don't think they come back. So I think then you get your gold level duration because how do you distinguish between literally every other treasury company? You don't. Once your engine goes out, rebooting that thing is going to be very, very difficult.

1:01:44Checkmate:Yeah, I totally agree. And I do think Metaplanet is different. I think that one probably will sustain. I think I spoke to Dylan recently on the podcast and he's definitely doing some interesting things. But the thing you hit on there, which I think is the most relevant, is the fact that Saylor is not only the largest in size, but he's also doing the most interesting things on kind of like the financial engineering side with these preferreds. And if he's being both the innovator and he's got the size, like how can you compete? And I think just selling equity to buy Bitcoin is probably done already.

1:02:12I agree. No, that's my base case. I think that's a line I've been using to try and summarize a lot of these ideas. The Bitcoin in the treasury isn't the product. That's not the product. It's a means to an end. The product is the means by which they accumulate the Bitcoin. For strategy, for example, the means by which they accumulate the Bitcoin is they construct bonds. They sell bonds. They're bond salesmen. They sell bonds to a market that wants to buy bonds, that is big enough to make it a justifiable market to go after it. the treasury is simply a means to an end to make it different to all the other bonds.

1:02:47MetaPlanet, the unique selling point there is that they haven't quite got to the sailor level of innovation, but they are providing a Bitcoin exposure. There's a tax arbitrage as well between spot Bitcoin and equities. They are tapping into a very unique set of circumstances in Japan, which by the way, is a massive economy. It's a massive, massive market. Australia doesn't register anywhere on the blip of anything. Now, I think I should also make a very clear clarification here. When we talk about treasury companies, I'm not talking about businesses that sweep excess profits into Bitcoin. That's two thumbs up.

1:03:22Be a penny stock with a cold card in that circumstance. There's no issue there whatsoever. This is all about the sailor all-in playbooks. And I'm very confident that if you do not go hard, you will go home. We saw this with GameStop. They kind of like half-assed, put a quarter of a toe in and the market said, get out of here and wiped out their stock. And I think this is the game. You are either all in with a very good, unique selling point or your MNav premiums are going to one like everybody else. And this is what happened to shit coins. They dilute themselves out of existence. And then what's your differentiator?

1:03:55I'll buy strategy because at least they're doing something interesting.

1:03:58Checkmate:Yeah. I want to just share this chart because one thing that I have probably said in the past but i actually don't think i was right if i have and what a narrative that i would fade is that this has any meaningful impact on bitcoin because so i pulled up this earlier um and let's say you take even the top 15 companies out of this assuming that some of those like some of these are different we've got like galaxy in here clean spark like they're not doing necessarily the sailor playbook but then if you go below 15 the amount of bitcoin that these companies hold is only, quote unquote, only 70 ,000 Bitcoin in total.

1:04:32Checkmate:Yeah, superior distribution, like most things. And like, again, in here, you have people like, I don't know, Hive, Bitdeer, Canaan, like Cypher. Like these aren't companies doing the sailor playbook. These are just companies that have stacked Bitcoin, fold in there. So like, if you even took 70 ,000 Bitcoin, like that's not going to make a material impact on the Bitcoin price, I don't think. So do you see this as being just bad for Bitcoin treasury companies, not necessarily for Bitcoin. Yes, yes, correct. So I am wildly constructive on Bitcoin. I think Bitcoin is, I mean, it's just an idea whose time has come.

1:05:06That's very clear. So I'm wildly bullish on Bitcoin. I'm also by, and let's just keep going down the risk curve here. If I'm wildly bullish on Bitcoin, it kind of makes sense to be wildly bullish on the entity that's got 620 ,000 something. I don't know if this website's updated, 620 ,000 Bitcoin. That's like a beach ball that's is going to inflate that company. Now, again, I should be very clear, it is much better for a company to have Bitcoin than to not have Bitcoin. So sweeping profits into Bitcoin is great. What I think is going to be a challenge is a lot of these companies, they come out the gates, they develop a massive MNAV premium, they may stack a couple of Bitcoin for the first couple of months.

1:05:45Investors get very excited, they buy into the stock price. This is Ponzi adjacent, because if you buy early in that trend, if you're in that Telegram group realizing that we're getting one of these scammy pipe deals, if you're in that Telegram group, you're going to be fine. If you buy early in the trend, you're probably going to be fine. If you buy late in that trend, you are being sold a dream and it's going to hurt a lot when it reverses. So I think that's the thing. It genuinely relies on old money exiting out to new money. I know this is how markets work, but these premiums are unsustainable for most of these companies.

1:06:22So it totally depends what premium you get in, what premium you get out, where you buy on that curve. So these are very, very dynamic systems, but you've got to think about the MNAV premium. That is actually the price you're trading. And buying those MNAV premiums at very, very high levels means the Bitcoin price can rip, their treasury can rip. And what we've seen is that the MNAV always has a gravity towards one. The bigger the company gets, the more their MNAV drifts down towards one. Even MetaPlanet, they blew up to like 10X. They're now pulling back down to what, I think it was like three last time.

1:06:59Checkmate:Three and a half or something, yeah. Three and a half. So people who have bought the top of that MNAV premium, they're down 50%, despite the fact they've probably added Bitcoin to their balance sheet, and Bitcoin's probably about to go on a run. It's going to take them a long time to get their money back, in my opinion. So the gravity, we get small companies with a large MNAV, large companies with a small MNAV, and the gravity is pointing from one to the other. The bigger you get, the smaller MNAV is going to get. So if you like, if we fast forward 10 years, what kind of MNAV do you think strategy will be sat on?

1:07:29Checkmate:Like, what do you think, as this market matures, what do you think the sort of, I guess, like, because I assume Saylor is going to sit at higher than one. Yes. No, I think they, and they have deservedly stayed at a premium above one. I mean, look at JP Morgan, look at their book value. Like in my view, it makes sense to be like, you know, 2X, 3X at a bull run and, you know, at book value in a nasty bear market. So, you know, what we're not going to see is thousands and thousands and thousands of companies with an MNAV of 50. It's, this is, you know, how many people have you managed to convince that Bitcoin is an important thing?

1:08:06Very, very few, most of us. Assuming that this is like the, we overestimate what we can do in one year and underestimate in 10 years. Bitcoin can hyper-Bitcoinize the world and the MNAV of these companies can still be two, right? It can still be 1.5 because the more normalized these things get, the less of a premium because it's new and unique and interesting. And by the way, the bigger the premium, this is the other thing, extremes inform the mean. If your premium is 50X, what's the company incentivized to do? Sell a boatload of stock. They want to dilute the price. Yes, they're going to buy a bunch of Bitcoin.

1:08:40that's going to generate a bunch of hype, but what are they actually doing? They're compressing that MNAV. Now, if you buy when that MNAV is small and you ride the wave up, you are relying on other people bidding the stock up to keep this game going until the engine goes out. And when that goes, then it's just down only from there. So 2011 Bitcoin depth, and I do believe gold level two decades of bear market when it finally hits, because there's no distinguishing factor for most

1:09:07Checkmate:of these companies ponzi adjacent i like it all right checkmate let's um let's close out with the price prediction so every time we do this you you give me a price and i tell you it's disappointing i'm not going to do that this time and where do you think bitcoin is by let's say the end of the year well this is important because you pete and i have a bet on this right and i think i think you're gonna win it i know yes so so at that level and again what was that 2023 we made that I think my price was$250. It's like the top level that we can get to in 2025. And fortunately, I have all the optionality of the downside because it's closest to the pin.

1:09:43Look, we could get to, if you want the most bullish level, and again, none of this is prediction. This is looking at where investor behavior changes. The 200-day moving average is just like a long-term price anchor. There's only so far you can stretch the elastic band away from that mean before it wants to revert. markets are mean reverting phenomena. So that's the simplest one. How far above the 200 day moving average have we got in previous cycles? And the answer is about 2.4. Sometimes it goes higher than that, but like we're in very rare air at that point in time. Now the 200 day moving average is obviously a moving target.

1:10:17It's evolving as the price evolves, but as it stands today, it's about 236 K from memory. So 236, if we teleport tomorrow into a parabola, you know, $236 might be$240 by the time we get there. $250, I may end up in the money almost on the dot, TBC. The other ones we can look at, which I put a lot more credibility into, is just looking at MVRV levels. And I use different variants, short-term holders, coin time adjusted with AVRV. There's a whole bunch of ones. It doesn't matter. The point is, show me at what price level We know where everyone's cost basis is. How high do we have to go before the average guy is feeling so bullish and so excited that the smart money is going, there's my target audience.

1:11:03I'm going to sell exactly to that guy. People eventually sell. How high do we have to go before they start selling? Now I have to remember here that those levels, we then have to say, well, are they actually selling? They have in every single previous time, but we've always got to check there's the incentive that's my idea that's my concept do they actually sell my assumption is they probably will we get to 130 140 that's where short-term holders are starting to get fairly fairly juiced up now that doesn't mean we probably top out there but i wouldn't be surprised if we bump our head and it takes a bit of time to get through that period if we just keep going and we get up to like 160 170 180 we're now moving into the territory where less than 10 of all trading days have been that stretched.

1:11:44Now, we could then go through a period of chop solidation, and that would allow all these means to come higher and start to mean revert and cools things down just by consolidation or even a correction, all of those things. So 150, 160, 170, we're starting to get into thin air. 180 at the moment is like sub 5 % of all days. Can it happen? Yes. 5 % of the time it does happen. Do we stay there? No. So there's a 95 % chance that we're probably not going to stay there. And I think this is also very important. Don't worry about trying to pick the absolute top wick. Nobody can do this. It's just like, it's nonsense.

1:12:20No one can do it.

1:12:20Checkmate:You did it. You bought it in 2017. Yeah, that was different though. That was different though. That is actually the counter signal. No, you're right. I did buy the absolute top. No, but that's the inverse. You're supposed to sell the top, not buy the top. So yeah, no, I got smoked in 2017, but that's part of the learning journey. So if we get to 180, we're getting really hot. Just every metric is going to be overblown. And again, I use my two personas, check the analyst, cannot in good faith say that we're at the bottom at 180K. I just can't because it would be dishonest. So again, they're moving targets.

1:12:51They'll continue to evolve, but that is where I expect investor behavior will really start to shift and change. And none of this is to say that Bitcoin is not going to go to a million bucks. It's just going to take a lot longer than people expect. And if you wake up one day and Bitcoin's at a million dollars, either the world is in a really, really bad spot and it's happening, or it's probably a scam, Wickham, they're coming down 80%.

1:13:13Checkmate:Well, I think I might just send you the 100k sats now. I think I said 282. I've already got it in my spreadsheet, man. It's already accounted for in my inheritance planning. And Pete definitely needs to send you his. He said 350. Yeah, yeah. That's not happening. That's not happening. Checkmate, I appreciate you, man. You're one of my favorite people to talk to. Where does anyone go to find the newsletter and follow what you do? If Pete wins that bet, I'm just thinking about it now. I mean, that's going to be the ultimate egg on the face moment, isn't it? I will be very happy to send him 100k stats if he wins.

1:13:43Truthfully, I'm perfectly hedged because I'll be a very happy man as well. You'll find me over at checkonchain.com. We've got our newsletter and charting website. So check us out over there. All right, man. Appreciate you.

1:13:54Checkmate:Thanks for the time. Thanks, mate.

1:14:02Thank you.