00:00 Speaker A
I was recently asked, where are you putting your money? How are you investing? Where do you think the market is going on a Coinbase podcast? And I made the claim that this was effectively the most confusing market that I’ve ever seen in all of my almost 50 years on the planet.
00:23 Speaker A
So I started to dig into some of the data and I’m certainly not the only one who is very confused and doesn’t understand why markets are behaving the way that they are. If you take a look here, the end of last year, the World Uncertainty Index, global GDP weighted average hit an all-time high and it wasn’t even close. You can drill into this chart and see where it was during Covid under 60,000.
00:52 Speaker A
It almost doubled that, meaning that people around the world have absolutely no idea what’s going on and feel uncertain about almost everything. And who could blame them?
01:12 Speaker A
We get different headlines every single day about what’s happening in the war. We can’t trust a tweet or a truth from basically anyone because it gives us conflicting information from what we just saw yesterday. And markets aren’t reacting any better. We would think that right now in a time of geopolitical strife, gold would be making all-time highs, bonds would be a safe haven. But instead, we’re getting maximum risk. We have the Russell 2000 hitting a new record high yesterday.
01:50 Speaker A
For those who don’t know, this is small caps. This is the riskiest corner of the stock market, following the rest of the market and making a new all-time high.
02:05 Speaker A
Add that to the fact that we just had a 10% drawdown in the market after the war had started, and then the fastest V-shape recovery in the history of the stock market, and then making new all-time highs. And it seems that everyone’s expectation is that every single dip is going to get bought, that markets can only go up, nothing bad can literally ever happen.
02:44 Speaker A
So right now, I think that there’s mass confusion and the assets that you would expect to be performing in a certain way are not.
02:54 Speaker A
That said, this brings us, of course, to Bitcoin, and I would make the argument that Bitcoin gets a very, very unfair wrap in situations like this. People on the news go on TV, and they say Bitcoin is maximum risk on asset. It trades like a tech stock, it dumps every time there’s geopolitical uncertainty.
03:22 Speaker A
I’m going to take a look here first, just for the unfair treatment of Bitcoin, at what’s happened of late. Bitcoin topped at $126,000, came down back below 60,000. That took about 122 days. And Bitcoin drew down about 52, 53%.
03:52 Speaker A
On the right, I have the chart of silver, which made it a new all-time high at almost $125, and then dropped almost 50% about the same as Bitcoin in a week. Now, I tune into the media and all I hear is about the brutal Bitcoin market, but nobody’s talking about the brutal bear market in silver, which had a more aggressive drawdown in far less time, just as hard, and has failed to recover much better.
04:22 Speaker A
So, when you take a look, you wonder why Bitcoin gets this unfair treatment, because here’s the facts. Bitcoin outperforms in every crisis. This isn’t my opinion as a biased Bitcoin maximalist, which I’m not anyways, these are the cold, hard facts going back all the way to January 3rd of 2020.
04:51 Speaker A
After 60 days, except for in the Yen carry trade where Bitcoin still was up in the green every single time, we had Bitcoin out performing every other market and it’s not even close. US Iran escalation 20%, COVID outbreak, 21%.
05:11 Speaker A
Oh, by the way, everybody talks about the raging stock market after COVID, how it pulled a 2X off of those March 2020 ws, Bitcoin went up 17X from there from under $4,000 to $69,000. US banking crisis, 32% for Bitcoin. That’s when Silicon Valley Valley Bank failed, and naturally, people rushed to Bitcoin in that situation.
05:40 Speaker A
And right now in the Iran conflict, we have stocks up a few percent. Gold, which is supposed to be the ultimate hedge is down 8% and Bitcoin is up 12%. And this guy is going to explain to you why.
05:58 Speaker A
And if you’re wondering who this guy is, this handsome gentleman, like perfect hands, beautiful tie, haircut that I would die for. This is the guy that was in the Charles Schwab video yesterday, who was educating Charles Schwab customers on the risks of Bitcoin in their portfolio. Now I
06:33 Speaker A
I obviously told you the story yesterday about how Charles Rob is offering Bitcoin and Ethereum spot trading to their customers and how that’s coming soon. Well, now they’re getting ahead of that by explaining the risk. And he basically broke down how much Bitcoin you should have in your portfolio.
06:53 Speaker A
Now, anyone who manages a portfolio knows that having any asset that’s uncorrelated to other assets that offers idiosyncratic risk is effectively the holy grail for your portfolio. Having 1 to 5% of something that has a chance to do something other than what everything else is doing helps your Sharpe ratio massively.
07:19 Speaker A
Now, sometimes an uncorrelated asset actually goes down when everything else goes up and you feel like an idiot. But it’s still very good for your portfolio construction. And that’s what he explained in this video where he actually said that for their more aggressive investors, the appropriate Bitcoin allocation could be 6.9%.
08:00 Speaker A
He was about two or 3% for their more moderate uh risk adjusted investors. Think about that. There was a time recently when we thought, wow, it would be a huge move if we would hear a black rock or a Morgan Stanley or JP Morgan say, you should allocate 1% of your portfolio to Bitcoin. Now we have them saying 3% if you’re not aggressive and up to 7% if you are and they didn’t even talk about the upside of having it in your portfolio.
08:38 Speaker A
So, we’re in a regime very clearly right now with all of this insanity where liquidity is trumping logic, right? We talked about why markets are all over the place. We have no idea logically why certain assets would be up and certain assets would be down. But what we do know is that liquidity drives all of it. and there’s an expectation when there’s bad news because we live in the Stranger Things upside down, that liquidity will come in because of the bad news, because governments will intervene, they’ll start printing money,
09:27 Speaker A
they’ll have the Fed cutting, and naturally risk assets will go up, which of course helps rich people and disproportionately hurts poor people. That’s what’s likely coming liquidity out ranking logic. And we know where the liquidity is coming from for Bitcoin. Spot Bitcoin.
