Crypto Update | Bitcoin's Role in the Upcoming Election

This short term price correction definitely is driving my interest. I mean, what's causing it when I look at Bitcoin, everything was looking great. There's a lot of momentum, but I think this is just a healthy consolidation. We had an amazing 2023 this year, we're still up over 40%. It's pretty healthy to have a price correction and some consolidation that's occurred. It's Monday, June 24th and you're listening to Markets Daily. This is a show where we get into the minds of some of the smartest and most experienced CEO S analysts, researchers, professors, anyone with a hot or smart take. Now, before we get into today's discussion, we're going to take a look at what's going on in the crypto markets. Bitcoin is down over 4% as of recording time this morning. Now, Bitcoin has carved out a double top price pattern. If we look at a technical analysis, this signals a potential bearish trend. Marcus teen who as we all know is the founder of 10 X research. He's been on this show. A bunch said that the double top formation could easily see a drop to $50,000 if not $40,000 ether is also down over 4% as of recording time. Some ether traders however, are buying for $1000 calls in anticipation of record highs. According to Amber data, some traders are buying these large numbers of either September expiry call options at the strike level of $4000 on there a bit. Now, joining us now to discuss what's going on in the markets and help us make sense of all of this news. I've just told you about is Swan Bitcoin, senior analyst, Sam Callahan. Sam Happy Monday and welcome to the show. Hey, thanks for having me on Jen. Appreciate it. Of course. Now, on the show, we do this fun thing called the Call of the Day and I don't want to put you on the spot. It can be absolutely anything you want. It doesn't have to be a prediction but like what's something that's really driving your interest or peaking your interest in the crypto markets lately? Well, I think this, this short term price correction definitely is driving my interest. I mean, what's causing it when I look at Bitcoin, everything was looking great. There's a lot of momentum, but I think this is just a healthy consolidation. We had an amazing 2023. Uh this year we're still up over 40%. It's really healthy to have a price correction and some consolidation that's occurred, especially like during previous all time highs or right around previous all time highs, you typically see this churn. So it's like what's causing the selling. Well, it could be a number of things, but on chain data shows us that this is actually long term holding that are likely taking profit or maybe they've been holding positions underwater for a long time and now they're getting out uh now that the all time high has been breached again. Um And so we're seeing this pullback and the sell pressure from long term holders. Also, it could be from miners after the h uh they built up this war chest to survive post H when their revenues get cut in half. And they've seen Bitcoin's price moves sideways at that exact time. So what's happening is they're selling off some of their Bitcoin holdings to try to survive this little short term winter so that when Bitcoin's price rises again, they can improve their profitability. Um The last thing is that the ETF outflows that are occurring, um You had a lot of uh increased demand for these ETF S uh in the first half of this year. And a lot of it was coming from hedge funds who are putting on this certain trade. Um This cause this is kind of like letting up potentially, we can get into that. But those are three things that I'm looking at that could be potential drivers of this short term price correction. Now, a lot to get into there, but I want to ask your opinions on Marcus teen's remarks that I just read. Now, Marcus Thalen has been a recurring guest on this show. His predictions are often correct. I will give him that he says that Bitcoin could be heading to the $50,000 mark or even $40,000 mark. What do you think? Um, the only reason that might happen in my mind is if there's some kind of broader macroeconomic, um you know, event that occurs where it leads to a cascading kind of credit event or contagion or equities start to fall, everything starts to fall, all the correlations go to one and Bitcoin gets wrapped up in that mess. Um That's how I see it down to that, that level. But honestly, right now, it's pretty par for the course when you look at bull markets, you know, usually there are multiple 20% draw down steering bull markets before it continues on. Like I said, it's people taking profit, um taking some chips off the table. It's normal to have this kind of price consolidation and it can get down to, you know, minus 20% multiple times in these bull markets. Uh So it is part of the course getting all the way down to 50 or even lower than that. I think it would take some kind of broader macroeconomic event for that to happen. Well, talk to me a little bit about where you think we go from here, if we look, let's say 12 months out, what do the markets look like to you? Well, 12 months out, I just look at the government's spending and the fiscal situation which remains unchanged. Uh The CBO just recently updated their projections showing that the fiscal deficit is gonna come in at 1.9 trillion. So they increased it once again another 27%. Um Furthermore, our interest expense, top military spending for the first time. That's a milestone, no country usually likes to enjoy. Um And so the moral of the story is the government keeps spending. And really when you look at Bitcoin's value proposition, it is a hedge against currency debasement. And when you look at the debt situation, uh when you look at how much they're still spending, uh you realize that one of the only ways they're gonna get out of it is to debase the currency. And so you're betting that that's gonna continue. And if you want, you know, a preview of how, what happens here, just look at what's happening in Japan, they're kind of further along and they're more accommodative monetary and fiscal policies in the United States and their currency is currently bleeding out um as they try to get those interest rates back up. And so the United States isn't as in debt as Japan, they're not as far along, but that's what happens is eventually the currency get sacrificed. And so I think over the next 12 months, what we're gonna see is you're gonna see the Federal Reserve either cut interest rates or really get close to talking about interest rates. Um, and you're gonna see the government continue to spend. And so in the, in that environment, I think this is what Bitcoin's kind of been uh teasing out more liquidity is gonna enter the system and Bitcoin is a liquidity sponge it just soaks it in. And so I think we're gonna see actually Bitcoin rise over the next 12 months uh to what that number is. I'm not sure. Um I do expect it to get somewhere close to the, the six digit range in the next 12 months. So if I had to pick a number, you won't give us uh an actual number like low six digits close to those six digits. I think it's kind of a foolish game to try to pick exact numbers. I just think it's going to go up higher than here because of those liquidity conditions. Uh It's pretty prime for Bitcoin. Bitcoin is really just a be a pure bet on that on, on currency debasement. And these, these politicians don't know how not to spend money. Now, given what you just said, if you're looking at the crypto markets, if you're looking at the various different crypto assets, and if you're thinking about how to allocate um a portfolio this morning, what are you looking at? What's appealing to you? Given what you've just outlined. Uh Bitcoin. Yeah. Only Bitcoin. Only Bitcoin. Yeah, I mean, yeah, you are from Swan Bitcoin. So I expected that answer from you. Now, speaking of Bitcoin, let's talk about the ETF S. Of course, we had that approval in January. There have been way more ups than downs with the ETF S. But in the beginning I asked for your call of the day and you said you were watching ETF out very closely, talk to me about what you're seeing there. Yeah, so the ETF S have been the most successful ETF launch launches of all time. I mean, they've been, it's been incredible. Um But up to this date, it's really just been primarily uh retail investors that's come from Fidelity blackrock, Van Eck, but the other largest, like the largest holder of ETF S right now are these hedge funds and these hedge funds have been putting on something called the basis trade. Um And what that is is there's a price discrepancy between the futures and spot markets. And so they basically just short the futures long, the underlying spot and then collect that difference, that premium um and it's an arbitra trade. So they just keep doing that, they're rolling it over and that premium has been really helpful for them, but that's been coming down. And so it's getting less attractive to put on that trade. And so I actually think a lot of what we're seeing in terms of the major outflows is actually perhaps these hedge funds beginning to take that trade off the table. Um because it's just not, it's, you know, enticing to them with the premium is not as large as it used to be. Uh And so it really makes sense because the largest ETF holders have been Renaissance technology millennium and these are, these are quant funds. And so that algorithm doesn't really care if they're training Bitcoin ETF S. It could be any ETF S uh could be corn, ETF S doesn't really matter as long as there is a arbitrage opportunity. And so this is what they do. And now you've seen that uh premium kind of start to shrink and perhaps these large head funds are beginning to kind of move on to other areas in the market that are more enticing with their capital. And so, so you see significant outflows over the month of June and, but I do think this will change. I think the inflows will continue to increase over the next 6 to 12 months in these ETS because like I said, most of the early wave buyers have been retail investors, it hasn't been institutional investors like the financial advisors, the Ria S, the uh you know, pension funds, we've only seen, you know, one major pension fund to come out. And so I think the 13 F filings that are gonna come out in the next month, we're gonna see more and more of these financial advisory firms as well as maybe pension funds, other institutional investors uh start to reveal uh exposure to these top Bitcoin ETS because it just takes slower for them to move and allocate, they have to do the due diligence on a new investment project. Sometimes there's compliance matters that prevents them from going in right away. And so I think you could see the second wave being lot driven by institutional investors, which is really bullish for the long term outlook of the ETF S and, and Bitcoin. Now, I want to talk about the Bitcoin narrative where you see it going for the over the next year. We've talked already about miner selling. We've talked about the ETF S. We've talked about Bitcoin being the only asset that you would put into your crypto portfolio. What's the, the narrative that drives Bitcoin over? I don't know the rest of 2024 or the next year. Is it ordinals? Is it layer twos? Do we need to be watching more closely what's going on in the Bitcoin ecosystem? From a technical perspective to make that bet. What do you think? Well, I think the narrative is there's only gonna be 21 million and they keep spending money. I mean, I hate to say it but it's a, it's a store value that can't be debased. And so it holds its value over long periods of times. And like I said, it benefits from increased liquidity in the system. And so if you're thinking about those institutional investors that I just mentioned, that's what they want to hear. They wanna hear about an asset that's extremely scarce, that benefits in environment and can actually add diversification to their portfolio. It's uncorrelated to other asset classes. And so I think that remains the primary narrative behind Bitcoin, these other like ordinals and these things. Um I think they're interesting, I think they're very, very early. I think we don't really know what's gonna become of them. Uh There's a lot of innovation happening on layer two. It's not just ordinals, it's lightning, it's, it's um you know, BVM, it's all different kinds of things and it's exciting but it's early and, but right now, the main thesis around Bitcoin is its ability to store value um to act as a protection against the currency of the basement and to add diversification to and enhance the returns of a portfolio. And I think that's what we're continuing to see moving forward with these institutional investors as they continue to learn about it. And you mentioned the elections um up at the top and I asked you for your call of the day crypto has become a talking point. It's yet to be seen if it will remain a talking point ahead of November. But what do you make of uh actually not, what do you make? What do you think of Bitcoin's role in the upcoming election. Yeah. I actually said, uh, back in 2021 I thought that Bitcoin was gonna be discussed in the presidential debates and here we are, I think we actually might see that. And it, it's not really surprising to me because so many Americans own Bitcoin, I mean, it matters to them and I haven't met anybody who hates Bitcoin as much as somebody who loves it. And so these politicians are starting to think what, what's the use for me to be anti Bitcoin? This only hurts me because if I'm anti Bitcoin, then I might even lose voters. Uh But if I'm pro Bitcoin, yeah, maybe some people might get annoyed. They, they don't understand it, but I probably won't lose their votes. And so this is the, you know, the game theory of Bitcoin playing out because you have one leading presidential candidate Donald Trump coming out and saying, hey, I'm, I'm pro Bitcoin, I'm pro crypto, you know, vote for me. And then you have another one that really has been very hostile towards this industry over the last four years. I mean, that's really not even debatable at every turn. It seems like he's made it harder for this industry to operate in the United States of America. And so, um I think you are gonna see this continue to be a political issue because tens of million people uh are into Bitcoin, tens of millions of people, voters are into Bitcoin and that's ultimately what these politicians care about is votes and you have a uh a voting base here that is very passionate and it can be very swayed. A lot of these people are one issue. Voters support my Bitcoin and I'll support you. Well, I actually wanted to ask you about that these, the concept of single issue voters. Do you think there are enough of these single issue voters who care enough about Bitcoin to potentially sway the election in November? Well, look, I think um all all forecasts are, are showing that this election is gonna be extremely close and I mean, estimated 50 million voters, that's not a small voting block. And I, I do think a lot of people really care about this thing. If you look at uh both sides of the political spectrum, one thing that they can agree upon is that inflation sucks. They are saying inflation is the number one problem that we care about right now. And so when you think about Bitcoin in that kind text, yeah, I bet they really care about it because Bitcoin has been up the last 18 months basically. And it's actually helped them preserve their purchasing power at a time when prices are going up and they're really starting to feel pain. It's probably when one source of hope that they look at in their, you know, portfolio that they say like, oh this thing's actually keeping up and even exceeding uh the rate, that price are going up, the rate that real estate is going up, it might actually help me afford, uh, the life that I want may have, afford a house, afford kids. And so they, they care about this thing. And so if you're going to come out and be ignorant and attack it and spread misconceptions about something that is actually helping them in their lives, I think it can uh sway their vote and, and perhaps even, uh, sway the election. Sam. It's been such a pleasure talking to you. Thanks so much for joining the show. Thanks so much, Jen.