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Institutional support, maybe four-year cycle, I don't know. Maybe we're ameliorating the four-year cycle now that institutions are learning more. Uh but the bottom line is we're in the bottoming process and I do think uh liquidity is going to give us the next uh big burst. Most people watching this right now are going to miss it completely.
Cathie Wood just hinted at something that doesn't show up on charts. Something already unfolding beneath Bitcoin and the entire crypto market. While everyone is arguing about price targets and the next move, a different game is being set up. One that rewards a very small group of people who understand what's actually happening.
And here's the part no one is saying out loud. The moment this shift becomes obvious, it's already too late to position. Because this isn't just another cycle. It's a transition. Where Bitcoin stops behaving like what you think it is and starts becoming something else entirely. Some will see it early and move.
Most won't even realize it happened. So before you decide what to do next, listen carefully. Because what she's about to reveal changes everything. There are a few things going on right now. Uh and and it was interesting. So I gave we took our first position in 2015 and uh we we were uh really we were made fun of back then.
I bet. Uh I I you may or may not have been around and in the industry at that time, but uh you know, uh many people thought this was just a a marketing gimmick. And that's when I really knew that wait a minute, we might be on to something big here. When that many people make fun of you or just dismiss, it's and a lot of it was dismissive.
Um [clears throat] that makes me even more interested in it in a technology. And so we have a global monetary system uh that really is Bitcoin. Bitcoin owns that space. Uh DeFi, so so Ethereum, Solana, um uh I think they they are running with that space. Hyper liquid giving them a bit of a challenge as well.
Um the institutional interest, I think we needed Larry Fink actually to change his mind. Yeah. [clears throat] He was saying uh he was the leader of the pack almost and it was interesting that that the leader of the largest asset management firm in the world um was making it his business to dismiss Bitcoin.
But his conversion was so extreme and and his conversion had to do with a vision and and imagining the tokenization of everything. Finally understanding that wait a minute, uh you know, the the the internet was not built with a financial layer. And because nobody understood that commerce and investing uh would take place on it uh in the early days.
It was just information exchange. Some people thought it was just for gambling and and other illicit activity as as much of innovation um gets accused of that in its early days. Uh and and so uh I think that he his opening his eyes to future tokenization of everything um was really important for uh the institutional uh investor and product development specialists to begin to imagine participating in this new age.
Uh so I give him a lot of credit for that. At first uh we were battling uh him and Jamie Dimon and uh but then when his conversion took place, it gave the industry permission to say wait a minute, if I don't get on board here, I might lose out. If he's saying this is important. And of course uh BlackRock uh has something called Aladdin, which is a uh a technology platform for asset managers.
Well, if he's saying it's important, then I better learn something about it. Wait a minute. Did she just hint at institutions like BlackRock quietly validating Bitcoin's role in the system while everyone else is still arguing about whether it belongs there at all? That tension sits at the center of what Cathie Wood is really saying.
The common belief is simple. Bitcoin follows gold. But the data tells a different story. Weak correlation, delayed reaction. And that delay, historically, it's not a flaw. It's the setup. Gold moves first. Liquidity shifts and then Bitcoin responds, often violently. So while some see stagnation, others see structure.
Higher lows, resilience, compression. Not confirmation, but preparation. Now layer in what's happening globally. Quiet easing despite hawkish headlines and a surge of deflation driven by technology where cost collapse and productivity explodes. That combination has always ignited asymmetric moves in risk assets.
Still, the contrarian view matters. As liquidity tightens again, this thesis stalls. That's the risk most ignore. But if it doesn't, then this phase isn't the move. It's the positioning before it. And by the time the signal feels obvious, the window may already be closed. Listen closely. So I wrote a letter at the beginning of the year and in it you'll find a matrix of the correlations uh among asset classes and specifically trying to understand Bitcoin.
Um many people because we call Bitcoin digital gold, they think, oh well surely it's highly correlated to gold. It is not. In fact, and we did the analysis from 2019 um which is when real institutional interest started uh evolving uh uh a little more intensely. Uh the correlation between gold and Bitcoin over that time has been 0.14.
Uh but if you look at the last two cycles, you'll see that gold rallied before Bitcoin did. And we think the same thing is happening now and we we monitor uh we monitor Bitcoin to gold uh and I I feature it regularly in something called In the Know, which I do uh once a month. And on that chart, you'll see uh yes, Bitcoin relative to gold has had a significant drop.
But if you look at the longer term, you'll see higher lows in terms of the very long-term trend line. Uh and so we think that that the Bitcoin bull market is still intact. I realize we've been through what many would call uh a bear market uh yet down 50% is a victory compared to down 85 or 95%. for ants, Cathie.
Yes, exactly. Exactly. So, [clears throat] you know, that is still intact and uh we do believe that uh Bitcoin will um will get to uh you know, new all-time highs um in this next cycle. Many people don't uh but we do and you know that we're uh on record uh saying that our base case uh for 2030 is uh 730,000.
Our bull case is 1.5 million. We took a lot a lot of flak for or I did for for saying that stablecoins had usurped some of the role of Bitcoin um which is true, certainly in emerging markets. Um but what uh what people missed when I was making that statement was that gold was rallying. So the store of value role of Bitcoin is also moving up.
Uh and in fact, the two cancel each other out. Actually, the the stronger uh the stronger move has been gold relative to Bitcoins in terms of the impact on the Bitcoin price. Uh so uh we we think that we've Yeah, sure. We're in the bottoming out process. Uh you know, David Puell who does our on-chain analytics says the absolute uh ca- capitulation would occur, meaning uh it we may get there.
I doubt it the way Bitcoin and other assets are acting, uh but that drop-dead uh price range is in the 50 to 55,000 range. Um as I said and and you also uh are alluding to, we're seeing liquidity moves around the world. And uh many people because the headlines are always talking about the Fed being hawkish, not wanting to ease.
Well, guess what? The Fed funds rate is down 100 175 basis points. And yet uh the the narrative out there is, oh, they're too hawkish. They're too hawkish. They have started easing and I think we're going to have um I think because inflation is going to surprise dramatically on the low side of expectations uh and I'll give you an anecdote um Pepsi.
Now, what the heck does Pepsi have to do with this story? Well, we noticed that Frito-Lay about I'm going to say about 3 months ago cut its pricing 15% and today it announced that its volume surprised relative to expectations significantly. That's what should happen in a low inflation world. You cut prices, you get more unit growth and that's certainly the case in the technology world and we're seeing massive deflation with AI training costs dropping 75% per year, AI inference costs, so how much does it cost chat GPT uh to answer your questions?
Uh those costs are dropping 85 to 95% per year. So, I think we're going to see a massive wave of good deflation uh out there. Cathy Wood is pointing to a shift most aren't seeing. This cycle isn't just retail driven anymore. While headlines frame this as a typical crash, institutions are treating it like an entry point, learning the rhythm, averaging in and replacing weaker hands that got flushed out during forced liquidations.
That massive unwind, billions wiped out in cascading deleveraging, looked like chaos on the surface, but underneath it may have reset the market and here's where it gets uncomfortable. If institutions are accelerating their understanding, the traditional 4-year cycle might already be breaking, which means waiting for the perfect bottom could be the mistake because this phase isn't just a downturn, it's a transition where ownership quietly shifts before liquidity returns.
And when that liquidity hits, it doesn't announce itself, it moves fast. So, the real question is, are you watching price or watching who's positioning? Listen closely to how she explains it. So, uh I think what's instructive is to watch what has happened to the ETFs, the the the Bitcoin and the ETFs, you know, how strong have those holders been?
Uh they've been pretty strong throughout this downcycle. Now, if you're an institution and you learn about this new asset class and you hear about this 4-year cycle you're you'll you'll start you'll dip your toe in and you know, start learning more especially about this 4-year cycle and you see a 50% drop in Bitcoin and as a traditional asset manager, you know, that is a severe bear market, right?
So, that looks like an opportunity. So, we do believe we've seen some averaging down here. Sure, you've had weak holders who have exited but you've had them backfilled by institutions who are really beginning to understand what this new asset class is. So, I think that's what's going on right now. Was this uh uh the 4-year cycle?
I don't think we'll ever know because we had the 1010 flash crash. That caused auto deleveraging. We who know a lot about uh the DeFi ecosystem uh I and I'm not speaking for Lorenzo, David and Ray. I'm sure they knew more than I did but as a portfolio manager, when I heard what auto deleveraging was where, you know, it happened automatically on Binance and Binance did not cause this.
I know I'm on record saying that. I as I learned more about it, you know, it was another round of tariff turmoil that, you know, flipped the switch but then there was a software glitch on Binance and there was auto deleveraging and those who thought they were hedged but were operating on two exchanges found out they were not hedged at all and that ended badly for a lot of people.
I don't know if the final washout was 28 trillion or 30 trillion. I mean, billion. Sorry about that. 28 or 30 billion but we think that has washed through. And so, that washing through, institutional support maybe 4-year cycle, I don't know. Maybe we're ameliorating the 4-year cycle now that institutions are learning more but the bottom line is we're in the bottoming process and I do think liquidity is going to give us the next big burst. Increased liquidity will give us the next big burst.
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