Transcript 0:00 Bitcoin is down over thirty percent in the past month and a half, from a hundred and nine thousand down to seventy-six thousand dollars. 0:09 We're recording this on Wednesday when there is signs of relief from the tariff troubles brought on by President Trump. This is pretty terrifying if this is your first Bitcoin cycle, but for a lot of you, this isn't. 0:24 Paul and I are going to break down the past few years of Bitcoin pullbacks and see where this really stacks up in the grand scheme of things. 0:31 Bitcoin Season two is brought to you by Arch Network, the platform building bridgeless apps on Bitcoin. More on Arch later on in the show. Let's kick it off. 0:39 [upbeat music] This one time, Bitcoin went from six cents all the way to thirty-six cents, and then it crashed down to twenty-one cents. 0:54 And then another time, Bitcoin went from eighty-five cents all the way to twenty-nine dollars, and then it crashed to three dollars. And then another time, Bitcoin went all the way to two hundred and 1:08 thirteen dollars, and then it crashed all the way to seventy dollars. And then another time, Bitcoin went all the way to eleven hundred dollars, and then it crashed all the way to two thirty-nine dollars. 1:23 So the moral of the story is, don't buy Bitcoin because you know it's going to crash again. Wise words from a wise man. Wise words. Uh, if you heard it anywhere, you heard it here, don't buy Bitcoin. 1:34 It's definitely going to crash. And as we all know, it can keep going down. Um, at the time of recording, which is Wednesday afternoon, April ninth, Bitcoin has soared above eighty thousand dollars. 1:47 But we're down, Colin. We're down from the all-time highs. Will we ever recover? Yeah. To quote, uh, Bitcoin crash guy, this one time, Bitcoin went up to a hundred and nine thousand dollars and crashed to 2:02 seventy-three thousand dollars. So moral of the story, don't buy Bitcoin. But yeah, just to, uh, open the show's intrigue, we'll be talking about price, as Charlie said. 2:18 Right now, Bitcoin is up with the rest of the market, but it has been getting... It has been generally kicked around with everything else. It's bleeding year to date alongside other markets. 2:33 And looking at the S&P and the Nasdaq Composite and Bitcoin right now, for instance, Bitcoin year to date, Bitcoin is down fourteen percent year to date. 2:43 The S&P is down about eight percent, and the Nasdaq is down eleven percent. Uh, despite the eye-popping rally that we saw today, where the S&P gained, what was it? Like nine and a half percent over the course- Yeah... 2:56 of the day, and it was the third-highest one-day return since nineteen fifty. The only two other highest returns, that were our daily returns, came in October of two thousand and eight, r- following the Great Recession. 3:12 What we're basically looking at right now is a kind of international panic related to Trump's tariff policy, which markets are totally schizophrenic on because they don't know what to expect. 3:24 Last week, the Trump administration was full steam ahead with reciprocal tariffs on every single trading partner. 3:30 It was, like, over a hundred and eighty countries, that those tariff rates were largely based on the trading deficit that the United States had with a country divided by their exports to the US and US dollar value. 3:47 So you ended up getting kind of tariffs all the way from ten to, like, you know, upwards of, like, forty percent for certain countries, depending on the size of the trade deficit. But now, notably, 3:58 Trump is walking this back. Um, he says that there have been more than seventy-five countries that have called to negotiate the tariffs, and as a result, he's putting a ninety-day pause on them. 4:09 He's going to slap a hundred and twenty-five percent tariff on China, and for all the other ones after the pause, there will be a ni- a ten percent tariff flat across all of the trading partners. 4:22 And the stock market loved this, hence why the S&P was up over nine percent over the day, and Bitcoin recovered accordingly. 4:29 Now, again, we are recording this on Wednesday, and literally every twenty-four hours, the entire narrative shifts. As Colin says, things are schizophrenic. 4:37 And we're recording on Wednesday because we are about to go to our technical conference up next in Tysons, Virginia at MicroStrategy, so we have to be ahead of the game. 4:46 When you listen to this on Saturday morning, a lot could change, which is why Colin and I are gonna probably limit, um, how much we exactly say what's gonna look like going forwards and why we're going to focus mainly on what has happened because, um, what is it? 5:02 Something about the future, study the past, something like that. And, uh, and we wrote a newsletter, um, which was published on Tuesday, really just yesterday, 5:14 um, uh, where I and Colin compared the various, uh, crashes in recent modern Bitcoin history and kind of explained how they, uh, how they stack up. 5:23 Now, the interesting thing is, now Bitcoin is, you know, was down thirty percent, roughly. Really technically like thirty-two percent, maybe twenty-eight percent, um, uh, at the time of writing. 5:35 And, uh, and when we look at like the previous crashes, like the FTX crash, the COVID crash, um, the Terra Luna crash, tho- that is actually not, uh, the biggest one. 5:47 In fact, it falls somewhere around the middle in terms of, uh, scale of pullback for Bitcoin. 5:55 But yet the entire, uh, broader market worldwide and trad markets are apoplectic.Is a new word for those of you trying to, uh, write, learn new words. So the, uh... 6:10 But the thing is, and, you know, each of-- We're, we're gonna break down. We're not gonna spend too much time. Well, this will be a quick episode 'cause we don't wanna talk about price too much on the show. 6:18 We're talking about what drove each of these crashes, why they happened, and then maybe a little bit of personal reflection and perhaps some anecdotes on them. So, I'll toss it to you, Colin. We're gonna, 6:28 um, I think we're gonna kick it off with the COVID crash. 6:31 Yeah, we're gonna kick it off with the COVID crash, but I wanna contextualize some, a few things before we hop into the COVID crash, because the COVID crash in twenty twenty arguably is the one that resembles the current crash the most. 6:44 The bull and the bear case for our beloved King Crypto as it stands currently. 6:50 The bear case, as I can see it at least, the short-term bear case is if a recession does hit, typically liquid assets are the first to go in a recession in terms of people trying to meet requirements for loans or shore up capital and store value in dollars for uncertain times ahead. 7:09 If you kind of accept that as a maxim of how people react in a declining market environment and a suffering economy, Bitcoin will, would get hammered, I, personally, I think, in a recessionary environment in the short term. 7:25 We- that's what we've kind of seen so far, right, with the current crash in twenty twenty-five and the market r- um, the bear market that we've seen with equities. 7:34 The S&P, I believe, and the Nasdaq slipped into technical bear market territory recently. They slipped twenty percent below their all-time high. And so far, like, that's kind of proving out. 7:45 There was a lot of talk last week on Friday about Bitcoin decoupling from the Nasdaq. Typically, uh, finance bros have traded Bitcoin like a tech stock because that's what the only thing they can really compare it to. 7:57 They're not quite so deep in the Bitcoin rabbit hole and podcast to have this kind of cosmic view of Bitcoin as the most pristine digital, you know, uh, bear asset. 8:07 It's digital, it's digital energy that turns- It's digital energy, digital gold... into black gold. It's gonna suck all the hyper, hyper saylorization, whatever. It's a cyber hornet. It can cure AIDS. 8:18 It's all of these things wrapped into one, right? So- You can eat a Bitcoin, actually. [laughs] It's... So they typically treat it like the Nasdaq, and it correlates pretty tightly with the Nasdaq. 8:30 Now, on Friday of last week, during the whole tariff panic, all of the stocks were puking, and everyone was parading the fact that Bitcoin was up, like, two percent on the day. 8:39 And then the weekend came, and it tumbled down to about thirty-seven, thirty-four K. Good reminder that Bitcoin usually precedes or lags mass liquidity events like we've seen recently. 8:49 And that kind of leads to my next point here, where what is the bull case for Bitcoin on a long enough time horizon? 8:57 If you take a look at probably every Bitcoiner's favorite chart, um, if they're looking at anything macro, 9:04 uh, Bitcoin is, truly is, as people say, in my opinion, a hedge against inflation in the sense that on a long enough timeframe, it retains your purchasing power better than any other asset it has, or at least it has over the last ten years or so, right? 9:21 And that's what this chart kinda shows. So this shows global liquidity M2 supply. 9:26 This is the money supply and things like checking accounts readily available, um, funds that carry people's, uh, you know, money and things like that. 9:36 And then Bitcoin's price, and as you can see, as M- global M2 money supply ticks up, Bitcoin's price ticks up as well. And this is, like, honestly, like, s- so simple that it's almost kind of dumb. 9:50 Basically, like, more dollars means more money-chasing assets. It means Bitcoin price appreciates, at least historically, that's what we've seen. And this matters in the context, 10:03 uh, specifically of the US when we look at the US's fiscal deficit. So this shows yearly, uh, f- US federal fiscal deficit over time. 10:13 Twenty twenty, there was a lot of printing going on, three point thirteen trillion dollars, uh, in the US's fiscal deficit. This was not a only a time when the Fed was pumping cash into the system, 10:27 um, for its monetary policy, but Congress was also issuing stimulus checks, and there was a lot of fiscal stimulus that was pumped into the US economy. And what did we see in twenty twenty and twenty twenty-one? 10:41 Bitcoin's historic rise up to roughly seventy K in twenty twenty-one. And that kinda goes back to the M2 money supply thing I just mentioned, right? 10:51 As more dollars are pumped into the system, an asset like Bitcoin, a hard asset where there's a finite supply, like same thing with gold, there's a reason gold's been going on recently, they tend to do well. 11:03 Now, the reason I point to this is both to tie it back into COVID here in a second, but also to mention that on a long enough timeframe, the only way out of this current situation, this is the US debt clock, 11:16 is for the US to devalue the dollar so that its outstanding debts on a nominal basis are worth less, right? So the US government is thirty-six point seven trillion in debt, 11:34 and a lot of... There's been a lot of hullabaloo with Doge, right, um, trying to reduce federal spending to try to balance the budget, and also tariffs play a role in this. 11:48 Trump is saying that that's going to be additional tax revenue, um, through what he calls the external revenue service, bringing in tariff levies from all of these importer, um, these, these companies that are exporting goods to the US from overseas. 12:02 But-Thirty-six point seven trillion is almost an impossible number to shake. 12:07 The only way that the US government is going to be able to get out of this is by defaulting or by devaluing the dollar to ease the burden of the current debt, right? 12:16 If you dilute the dollar, you're also diluting the value of this debt, and you have to print it as well and to pay it off in some regards, especially if your receipts are not enough to cover it. So all that being said, 12:29 currently, maybe as a dose of hopium, Bitcoin is in the doldrums. 12:33 But if you kind of assume the Lyn Alden nothing stops this train model of thinking with regards to the US's fiscal deficit, all roads lead to printing at some point, especially if the US government or the Federal Reserve lowers rates this year to try to get the bond market in check. 12:50 We're not going to cover this right now because it's honestly a-above my head and it's a little bit too complicated. 12:56 But part of the rationale for tariffs was to lower interest rates on US Treasury bonds so that the T-bills, which are short-term bonds that are due soon over the next year or so, could be refinanced at a lower rate. 13:11 A lot of those T-bills were issued when the Federal Reserve, after the Federal Reserve hiked rates up, and they were is-issued around, like, the four to five percent range. 13:17 Well, the bond markets recently did the exact opposite of what people wanted to do. They, they dipped initially after the tariffs were announced, and they absolutely ripped over this week. 13:27 Like, I think the ten-year went back up to, like, four point, uh, three or four point four or something percent. And 13:36 the only way for them to control that if, uh, the market is not doing what they want to do, want them to do with those rates, they're going to probably have to lower rates to try to drive those yields down. 13:49 Um, so all that being said, I know that was kind of belabored, but all of these macro considerations are weighing on Bitcoin currently, and that takes us back to- That takes us to- 2020... 2020, the big COVID dump. 14:06 Now, if you weren't around, maybe you're like a class of late 2020, maybe a class of, like, post-COVID, COVID light era where, uh, you may not have March 12th burned into your mind. 14:19 Um, many of us remember March 12th as a Black Thursday, where this was, like, the, the week where America just randomly decided that it cared about COVID all of a sudden, after two months of, you know, weird conspiracy people out there saying this COVID thing in China sounds a little dangerous. 14:38 So anyway, that, that surprising week, uh, in, uh, second week in March when mark- when markets puked, um, Bitcoin puked the most. 14:48 And as Colin said, as we wrote in our newsletter, this is what, to us, this current tariff fear feels the most like. Now, we can change. We can change our views based upon information. But let's go through. 15:00 This is the first crash, the COVID crash in March 2020. Fear and panic. Yeah. Yeah. 15:06 Uh, just to kind of under, uh, score what Charlie just said there, this was honestly, like, everyone in Bitcoin who has no life and spends all their time on Bitcoin- Yeah... 15:17 Hub remembers this is where they were at this point. Not to- Yeah, I remember this better than 9/11. That's how I'll put it. I'm glad that you said that. [laughs] I know, I know what the color of my chair was. 15:26 9/11 is kind of a blurry thing. I thought, like, a train ran into some building in New York. There was a plane. In this case, uh, some might say even worse by some metrics- [laughs]... 15:36 uh, according to the- Well- If we look at the market, this was a, a pretty terrible moment in the market. Yeah. 15:42 And not to diminish the great national tragedy that was 9/11, but if we look at this, this is, it's, it has a similar place in terms of being burned into Bitcoiners' memories. 15:52 I remember when this candle that I'm looking at right now, this red candle on the 12th, uh, was occurring. I c- I remember exactly where I was, and I was looking at the chart. I remember where I was texting. Yeah. 16:02 And it was amazing to see Bitcoin basically get cut in half and s- watch your net worth evaporate before your eyes. And what we're basically looking at here is, you know, Bitcoin was rallying in 2020. 16:15 It was really struggling to break this 10K barrier, right? And then over the course of about a month, it starts to wane, it starts to drop. 16:23 You know, it goes down to about nine thousand on the, uh, uh, just before the week of March 9th. Yeah. It's pretty normal variance for, like, a month in Bitcoin. Yeah. 16:34 But then- And then the Black Thursday happened, and there was an absolute liquidity crunch all across US markets and international markets, and Bitcoin gets absolutely crushed from some cascading liquidations, leverage getting unwound, and people, like I said earlier, in a recessionary environment, they are going to sell the most liquid assets first to try to cover their books elsewhere and to build cash to weather out the storm, and that's exactly what happened here. 17:04 Now, the important thing to note also, I did the six-month chart on this, uh, so, or I, I did about a six-month chart, yeah, to June to show you how long the recovery took from this. 17:16 Not gonna say, not gonna offer any promises. I don't know what the next six months will look like for Bitcoin here. But within six months, anyone who bought this dip was doing a little jig. 17:25 It really was in three months, actually. I mean- Yeah... from mid-March- That's true... and by early- Yeah... June, and by early June, the market was back up to normal. 17:33 If you had just, like, gone on a long vacation, if you were a European and you summered early, and you turn your phone back on in June, you would have thought nothing happened. Yeah, and even, yeah, I misspoke there. 17:43 Thank you, Charlie. Three months, even really two months, if you look at May, it was back just kissing 10K. And at the time, for people who had conviction, this was just an amazing fire sale. 17:54 You're basically y-you had a moment there where I think, I think the lowest part of the candle, like, dipped just below, like, 4K. And you basically- It was, it was thirty-seven, thirty-eight. 18:04 It was three thousand-3700, 3800. I'll actually offer the most interesting anecdote, I think. 18:10 And I think this, this is a story now probably lost to, uh, just an lost to time where, um, uh, Arthur Hayes, who was recently pardoned, uh, by President Trump, one of the co-founders of BitMEX, which was, like, the, the defining ICO 2017 era, like, degen trading platform where you could go 100X long or short. 18:33 Um, BitMEX was one of the leading exchanges, and at this time, um, Bitcoin had kept going down and down and down. And literally around four thousand dollars, BitMEX began to run out of buyers. 18:46 Rather, began to run out of market makers with liquidity below 4K. And BitMEX experienced a very conspicuous, quote, finger quotes, "outage," um, that fateful, like, middle-of-the-night US time. 19:01 BitMEX pulled the circuit breaker. They literally pulled the circuit breaker saying it was some technical issue. They obviously, like, you know, were a little ambiguous. But the thing is, like, everyone... 19:13 I don't think anyone really complained because we all knew that we were, um, we would be royally screwed. And that let the market restructure. 19:20 So that, like, seemed to have let the market, um, kinda, like, uh, that was, like, the backstop that slowed everything down, and we're able, like, let people get back in order, let the books fill up. 19:32 So Arthur Hayes has a, a bit of a legendary position, like a legendary status in Bitcoin trading pantheon because I think that it probably would have gone lower had that not happened. How low would it have gone? 19:46 We don't know. But, um, yeah, we were, we were full down total liquidation across everywhere. Yeah, 100%. It was an absolutely unprecedented event for Bitcoin. 19:58 And going back to what I was saying about the fiscal stimulus, if you go back and consult this chart from the US Treasury, 20:08 2020 had three point thirteen trillion dollars in, or the, the US government was running a thirteen point thirteen trillion dollar deficit in 2020. 20:16 Um, just compare that to the last time we had a surplus, which was 2001, at negative, you know, a surplus of a hundred and thirty billion. I mean, that's just an absolutely staggering number. 20:29 And, you know, everyone knows what happens next. Inflation ramped up after that. Assets across the board, all the way from Bitcoin to stocks to houses ripped, and we are in the environment that we are currently in. 20:42 And it's also ironically furnished the ability for the pain that we're seeing right now because, you know, the stock market has never been higher. Um, or it was ne- it had never been higher as of the end of 2024. 20:54 I think most of the indices peaked in, like, January at all-time highs. 20:58 So that, the COVID crash, just to reiterate, I think is the one that is most germane for our topic today because it really is a kind of, it's, it's Bitcoin being wrapped into a global financial panic. And, 21:14 you know, for all the people who love to beat their chest and say Bitcoin is a risk-off asset, it currently is not a risk-off asset. It currently, it, it, it operates like a risk-on asset. Yeah. 21:25 I don't care what you say. I too believe it should be a risk-off asset, but it is a risk-on asset as it is currently treated. And, and there may be a day when it does trade on that risk off, 21:38 uh, where it earns that risk-off designation. You know, gold trades like a risk-off asset, but not always, right? Like, it also suffered during the COVID crash before it 21:50 went on a, the run that it is currently on right now. It's at, like, thirty-one hundred dollars an ounce, or just above it. It's been at all-time highs. 21:58 But the day for that to come for Bitcoin, I think, will be, like, much further out in the future when there's more liquidity, and when you start having not just investors, but also nation-states approaching it as a kind of a neutral asset for their portfolios. 22:12 But- We're seeing little, we're seeing little hints of that and, um, you know, things move faster in Bitcoin land, so, um, we could, by the time this episode comes out, people may have forgotten that tariffs were ever even a thing. 22:24 That's how quickly the narrative changes. Um, so maybe a year from now, we could see Bitcoin look totally different. We will totally see. 22:32 Then Colin and I will actually have to call our gold bug fathers on the podcast and interview them about gold. What was it like in, uh, during the OPEC crisis? 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I, I, I distinguish them as different things in my, uh, in the article that we published earlier this week. 23:26 But, um, uh, so I think Terra Luna might actually kind of be a bit forgotten by now because FTX- Yeah... 23:33 was so massive and sucked all the air out of the room that people forgot, like, the years that led up to it, which was already about as shitty as you could possibly imagine. 23:40 So, uh, a little guy by the name of Do Kwon, uh, had, um, uh, a great Ponzi going called Terra Luna, um, which was a algorithmically backed stablecoin where they took crypto assets and they backed them, uh, they backed a stablecoin with them called Terra. 24:02 One day, those all kind of unwound, and they were forced to sell a bunch of assets, namely like three point five billion dollars of BitcoinUm, or yeah, a bunch of billions in Bitcoin, eighty thousand Bitcoin. 24:14 And, um, that caused Terra, that caused the stablecoin to collapse. 24:18 It caused a bunch of, uh, uh, ven- a bunch of, uh, liquid funds to go out of business, nam-namely Three Arrows Capital, which had knockoff effects into DCG. 24:29 And even we talk about on the mining pot a lot, how that even roiled the mining business. But enough about that. 24:36 Basically, um, this stablecoin, uh, wiped out so much money and leverage and caught a lot of people with their pants down to the tune of we are still seeing who was caught dead today in the year of our Lord twenty twenty-five. 24:51 So at the time, we saw Bitcoin crash, um, about thirty-five percent. 24:56 May, the second week of May twenty twenty-two, pri- declined thirty-five percent in under a week from thirty-nine point four k to twenty-five point three k. 25:06 Um, this is now well into the bear market, half a year into bear market. The US had started tightening their fiscal policy, or they weren't just, di- weren't as printing as much money. 25:18 And- Yeah, and they were raising rates. The, the- Yeah... Fed started raising rates at this time, if I recall correctly. Exactly. And the broader market, uh, was also in a downtrend. 25:29 I mean, twenty twenty-two was a bear market for stocks, and I think that that bears mentioning here because it does show that there are... 25:37 This, the, the Terra Luna crash was a secular event largely, but the twenty twenty-two downturn was no doubt fueled by the fact that these, uh, that, that equities in general were on a downtrend a-and liquidity was just generally drying up within markets. 25:56 It kicked off a series of events. But, you know, if we wanna look at it, um, thirty-five percent in drawdown in under a week is not quite as much as this past month's, 26:09 um, roughly twenty-eight to thirty percent drawdown from the all-time highs. 26:14 So even just looking at like, uh, a historic pullback, which is actually not really that, not remembered or referred to as often in my subjective experience, um, the current pullback in Bitcoin is not really enough to go down in the, in the history books as something significant. 26:32 Um, and then Colin, uh, you did make an interesting comment on the, um, 26:40 the drivers of each of these, where COVID was an exogenous event, things happening outside of Bitcoin, which drove that broader market pullback, versus the, uh, the Terra Luna market, uh, crash, which was endogenous. 26:57 That is something coming from within the crypto ecosystem. Um, if we look at tariffs, tariffs are an exogenous event. 27:05 Like, these are things which have, which is, this is a narrative which you don't have to have any Bitcoin to care a whole lot about, which is roiling across all markets. 27:14 And so if we're making analogies to how each of these compares, so far COVID feels the most analogous. Yeah, I would agree. 27:23 And going back to that kind of endogenous shock, you can see I've zoomed in when the Terra Luna sell-off s- really kicked off on like May fifth, and then we had a quick bottom down to as low, the candle dips to as low as twenty-five thousand on the next week, on May twelfth. 27:43 And then it slightly recovers, but as you see, as we go into June, there's another sell-off from about thirty-one thousand all the way down to like the twenties, and then it gets down to eighteen as you see some spillover effects with the failure of certain funds like Three Arrows Capital and some other, you know, um, funds being blown up and some, some large players losing their positions and having to liquidate. 28:09 The Terra Luna thing is just interesting, I think, because it, it kind of accelerated what was already happening within Bitcoin, where we were, we were entering a bear market. 28:18 And anyone who's been around for long enough knows that you're going to have a pretty severe drawdown after you have that volatility to the upside. 28:25 But it's also good in the sense of this Terra Luna and the funds like Three Arrows Capital that were purged because of it, much like FTX, which we'll talk about soon, it was like a cleansing period for the industry. 28:40 A lot of leverage was unwound. Grifters were cycled out of the ecosystem and kind of lost their relevance. Well, they were, they were sidelined. A lot of those grifters, I, I still see their names everywhere. 28:50 I don't know what they're still doing here, but, uh- That's fair. Yeah. [chuckles] That's fair. They were, they were sidelined, you know, at least for a time, uh, for, for, for a certain amount of time. 29:01 We truly are in- And I think it'll be notable- We truly are in Eternal September. It, it, the, the memories are so short. Well, yeah. 29:07 I mean, Bitcoin is a, and crypto in general is a honeypot for some of the worst actors just because it's such a high... 29:14 It, it's such a, um, high velocity, um, and abstruse industry where people have asymmetric advantages over other investors just based on honestly a lot of ignorance and not understanding how certain things work. 29:29 It's actually why I think like Bitcoin is one of the safer things for people to try to wrap their minds around and allocate to as an investor is because like the kind of ceiling for what you have to understand, it seems very high, but there, the, the, the ceiling doesn't move, right? 29:44 Whereas like with any other cryptocurrency, there's always a new thing to explain or a new market dynamic or a new application that someone is saying is game-changing for X, Y, and Z. 29:56 Maybe Michael Saylor is totally on the ball when he says it's encrypted wall of digital cyberhornet capacitor time-traveling energy, whatever the hell. Um, uh, maybe, maybe that is what we should have been... Yeah. 30:08 Well, maybe I'm just too reluctantTo, uh, admit that the, the grug brain take is the correct one. So- You, you have to lean into the grug, you have to lean into the cringe. 30:19 Going back to Terra Luna really quickly before we do FTX, this is something you point out in the newsletter, Charlie, that I think is really important, that Terra Luna was, on a percentage basis, a much harsher drawdown than FTX. 30:31 I mean, we went from, like, roughly, like, forty-ish, high thirties right before the crash, all the way down once e- all of the knock-on effects were fully felt to, like, twenty K. 30:45 And Bitcoin just puttered around in this kind of twenty K range for a few months until November, when it, it, uh, puked from twenty-one down to a low of about fifteen when FTX went insolvent. 31:01 I also remember this very clearly because I was on the last night of my honeymoon [laughs] and- [laughs]... 31:08 I tuned in to Bitcoin Twitter because I was, like, totally offline for, like, the entire thing, and then, like, the first thing I see when I get back on is, like, the largest exchange, one of the largest exchanges in the US, or, uh, globally, going insolvent, and I checked Cash App, and sure enough, I saw fifteen K Bitcoin. 31:24 Last time I had seen that was, like, what? Like, August or September of twenty-twenty. So, um, this one, though, didn't phase me as much. I was just, like, kind of, like, used to it at this point. 31:35 I was like, "Okay, cheap Bitcoin, that's great." But you point out in the newsletter, while this was, you know, um, twenty-one to fifteen percent, like, not a huge drawdown- Yeah, really not that big. 31:44 That would be, like- Yeah... not even a... That'd be a, a bit of a trip in a bull market. Like, people would just- Yeah... forget that a, a week later. Yeah. 31:52 I mean, granted, it's about a thirty percent drawdown, twenty-eight or thirty percent, not as big as, like, a fifty percent drawdown, like we basically saw in COVID, uh, uh, from, you know, a monthly standpoint from the beginning of the month until, um, we reached the bottom there. 32:07 Also not as big of a drawdown as what we saw, um, right before the Terra Luna crash down to twenty. That was almost fifty percent. Um, and nominally not as big, but the sentiment- The sentiment... 32:19 the sentiment was- Oh, man. The sentiment... absolute dog doo doo. It was the end of Bitcoin. It was the end of crypto. People were calling for ten K. 32:30 People thought we were going back to the prior cycle's low in twenty eighteen, which was, like, three or four K. It was, it was dark, and a lot of people were pretty shook up by this. It... 32:43 Yeah, I would say, like, the sentiment was so unique because, I mean, from so many reasons, and I, some of my takes are, like, um, there was real questioning whether crypto had a role in a respectable first world nation anytime going forwards. 32:59 Um, this was previously where you had pullbacks from, you know, the twenty seventeen run, the twenty thirteen run. Um, like, when those went down, it was just kind of like you, um, alone experiencing those drawdowns. 33:12 But this one was, like, everybody you know asking about it, and everybody, everybody you know mocking you, your industry, everything. And it was the big- the biggest admonishment of, like, any legitimacy we had. 33:27 Um, and then what we saw the next two years, we saw the real ramping up of Operation Choke Point two point oh. 33:35 No doubt, given a ton of tailwinds because of the vast fraud and absolute terrible conduct from our industry, namely the SBF FTX, uh, franchise. 33:48 So, um, like, yeah, it was, it was an, an incident, I mean, even among the optimists, like I myself, operating in the Bitcoin mining world. 33:57 I went from being able to have productive conversation to every single counterparty that I tried to talk to was absolutely not having any kind of, uh, desire to do any kind of business with. I think... 34:09 And yeah, that was definitely the, uh, the sentiment bottom for [laughs] many, many people, uh, that I know. 34:16 Oh, do you-- I see you have a nice, uh, visual, uh- An aid to help us understand It was all because of this madman right here. This is the man behind your busted stops. [laughs] Bro. Bro, bro, bro. He is currently... 34:30 Here's a crazy... Now that I got a captive audience, he's currently in Oklahoma, my home state. Wait, really? He's being... 34:36 Yeah, he's, he's being held in the Oklahoma, Oklahoma City, like, like, holding pen-penitentiary. He was moved from his, like, original s- place somewhere in the northeast to, like, Okla- Oklahoma City, so. 34:49 That, that's crazy because I know that he was in the same prison as, like, uh, Sean Diddy Combs, P. Diddy- Yeah... for a while. He, he mentioned that. Wasn't he, like, were they cellmates? 34:58 Was he actually cellmates with P. Diddy or- I don't know if he was cellmates with him. That would be wild. That would be like the university winking, the universe winking at us. 35:05 [laughs] So for those who are on, uh, who are on audio and not video and who haven't divined who we're talking about, this is Sam Bankman-Fried, the CEO of FTX, the disgraced CEO, I should say, formerly of FTX and Alameda Research. 35:20 And maybe just some context on, like, how the whole blew up happened. I think we just kind of assumed 'cause it was such a huge... 35:25 I mean, this made headlines all over the place, and it became a huge news item and national scandal. Basically, TLDR, FTX 35:35 or Alameda Research, which was their f- trading firm, was dipping its hands into FTX user deposits to fund their book on the Alameda side. 35:44 And so they gambled with FTX funds and covered losses from Alameda, um, using, uh, customer deposits, and they were, were completely insolvent. They blew through, like, what was it? Like six to eight billion dollars. 35:56 Just something absolutely insane. But- It's re- Yeah, they ran literally the casino, and they also had all the money, and they managed to just lose it all. Yeah. 36:07 Um- Inspiring many a conspiracy theory, everything from Sam Bankman-Fried was a Democratic plant to discredit crypto and BitcoinTo even saying that FTX was used to launder funds for the Ukraine war Ukraine. Oh, yeah... 36:23 which is the, which is the wildest one. Um, I don't give any credence to it, but people do get creative. 36:30 And, um, you know, anyway, it, it inspired a lot of question marks, especially considering Sam Bankman-Fried kinda just came out of nowhere, and he was treated as this kind of boy genius 36:44 mega trader who had an edge over everyone else because he was just a super good quant. 36:51 Whereas, then you would talk to other people who had been in meetings with Sam, met him, or had just been following him, thought that he was, like, kind of just mediocre and that there wasn't anything to justify the hype. 37:03 He was kinda just an amphetamine hopped up, you know, incel boy who just spent too much time on the internet. But he was surrounding himself with, like, they had a, um, conference in the Bahama- or w-where was it? 37:17 They had a conference and Bill Clinton was one of the keynotes. Um- Oh, yeah. Oh my gosh, I forget. 37:22 There's so much lost to the FTX lore There's a lot of weird stuff, specifically, like, the fact that Sam Bankman-Fried's legal counsel, Mark Cohen, was also representing Ghislaine Maxwell during her trial. 37:38 It was Mark Cohen, right? You just fact-checked Mark- Yeah, it was Mark Cohen. Yeah. Um, that's, you know... 37:43 So b-but you can't help but, like, put on your tinfoil hat with some of these things, considering where did this guy come from? No one knows. We're not gonna make any... 37:52 Or we're not gonna make too many insinuations here. Well- But- You'll have to read in between the lines. 37:58 We're not gonna say- You'll have to read- We're gonna provide you the, the breadcrumbs so you can defi- you figure it out for yourself. Yeah. 38:05 All I'll say is that, uh, if you're wondering where all the money came for FTX Arena in Miami, for the Miami Heat- [laughs] Well, let's just say, if you don't know who the sucker is at the table, it's you. 38:20 [laughs] Well, um, only one of those suckers is in prison, and that would be Sam Bankman-Fried. And, uh, he's, uh, he's got a few more years on his sentence- Yeah... at the very least. Um- At the very least. 38:36 Might get out with good behavior. Okay. We've strayed a little bit far away from our original point. Yeah. Let's bring it back home and tie a bow on this. 38:44 So the whole point is that Colin and I, um, you, listener, maybe by the time this comes out, you're listening to it over coffee, taking the kids to soccer practice, or maybe you are the kid on your way to soccer practice on Saturday morning, and, uh, you're listening to this, and you're like, "Oh, my gosh," your hands are... 39:03 You're wringing your hands and you're wondering what happens next. Well, we're not gonna tell you what happens next. We're just comparing h- like, historical sentiment with historical price action. 39:12 This is where Colin and I do, um, play some armchair price talk, guys, and we tell you what it felt like at those times. 39:23 And, um, I will always be the perennial optimist and I'll say, it doesn't feel to me like this is the end of things. But, um, you know, it's, it's Wednesday and, uh, 39:38 and we started the day out pretty, pretty terribly, but by the end of the day, the stock market had its best performing single day in, uh, seventeen years, and third-best performing in sixty or seventy years. 39:54 Those are the facts. Um, I think the couple takeaways are, uh, you can't go wrong desaying Bitcoin, and, uh, things are just going to get wackier and more chaotic from here. 40:05 They never get less chaotic, they only get more chaotic. There's your mental model. We are con... Yeah, we are converging on maximum chaos. 40:12 To your point, this could come out Friday, and we could be back down below our- Yeah, we could be back down... the, the, the year-to-date lows for all the assets that we talked about from Bitcoin to the S&P. 40:22 Trump could tweet a picture of himself with, you know, a plate of sushi or a hot dog and people could react accordingly that some crazy tariff is about to come out, or, you know, he might just say something insane on Twitter and markets might react. 40:39 Or someone could come out with fake, you know, something fake or something maybe not fake, but too early, uh, right? Like, in the beginning of the week. That's funny 'cause like that- Yeah... 40:46 Walter Bloomberg tweet is literally what happened today. So yeah. Yeah. Wild. Right. And so, like, Walter Bloomberg tweeted, I don't know where he got it from or if he heard it from somewhere. 40:58 Um, there, there was kind of like the Spider-Man pointing meme. It's like CNBC pointed to Twitter, Twitter pointed to CNBC, and, um, like all the other, uh, outlets that reported on it pointed to CNBC. 41:10 But basically, there was a fake headline that said that Trump was pausing tariffs, caused a rally earlier in the week. Then it... the White House said that there's no plan to do that. Then assets tanked again. 41:19 Now, they're saying there is a pause for ninety days, assets are up. Who the hell knows what could be coming this weekend? 41:26 So the only thing we do know that's coming this weekend is the Bitcoin Season 2 writer's room episode. [laughs] That's right. And Up Next, which- And Up Next... it's too late probably. 41:34 By the time that you hear this, Up Next will be, uh- Yeah, if you're listening to this and this episode just dropped, go to our social media and watch the stream. 41:42 So drop your kids off to soccer practice, pull out your phone, go to Blockspacepod on Twitter or Bitcoin Magazine, the main handle, and watch Up Next live. 41:51 Get yourself some deep technical discussion from the best and the brightest minds in the industry. Um, thank you so much for listening to Bitcoin Season 2. 42:00 Make sure to check out all our social- Wait, there's one thing that we do know for sure, Charlie. Oh, my gosh, I'm seeing it. It's on a cross- [outro music]
