Art of Trading - with Light, Su Zhu, and Hasu

Welcome back to Uncommon Core, where we explore the bigger ideals in crypto from first principles. Today I sat down with Susu, who is the CEO and CIO of three arrows capital, as well as Light Crypto. Light is a real crypto OG and one of the largest and most successful prop traders in this space. We have known each other for two years now and I have tremendous respect for a skill and clarity of thought. He is usually very secretive, so we are thankful that he has recorded his first ever interview with us. In this conversation, we go very deep into the process and mindset of trading, as well as Su and Light's current views on the market and how they are positioning going forward. My name is Asu, I'm a researcher, investor, and writer. If you enjoy this podcast, you can do us a big favor and give us a rating and review on Apple Podcast. You can find the link at anchor.fm/uncommoncore or in the show notes to this episode. And now enjoy. I'm really excited to have you with us today, Light. We usually don't ask biography questions on this podcast. We are more about concepts and how to think about them, approach them from first principles, but given that this is your first interview ever and you are one of the biggest pseudonymous prop traders on crypto Twitter, I think our audience is very interested in learning a bit more about your history. So, who is Light? Yeah, I mean, thanks a lot, Asu. I was super asked to join, given the moment that we find ourselves in crypto markets today. I got my start trading, trading equities and equity options. About 10 years ago, there was this great opportunity where, you know, activists, short sellers like Muddy Waters and Citron started out and they were publishing the information on Twitter. And so it was sort of an information trade and like a timing trade. And if you saw it first on Twitter, you shorted that thing into the ground and made tons. And that trade kind of survived for a couple of years until people caught and gone and market maker started sort of adjusting to it. And I went back to playing poker, which I played as a hobby when I was when I was much younger and spun up a little bit of trading capital that way. And, you know, a lot of people, I think, have made the active decision. To go into crypto trading, but I didn't, I got incredibly lucky because back in 2016, a poker site that shall remain nameless would refuse to withdraw me in any normal payment rail and was like, you can either take Bitcoin or you can take nothing. And so I decided that as soon as I got it, I was going to dump this thing. I didn't know anything about it. And it just so happened that they sent me this Bitcoin at the bottom in 2016 and around $365, $370. And so that kind of dragged me into the space instead of me kind of jumping into it, which has kind of changed, I'm a bit different, I guess, than most people who made the active decision, right, because I kind of got lucky. And I'm a bit more cynical about the space. And in 2017, all happened and everyone made a lot of money and we moved on after all to trading mostly derivatives and by 2017, 2018, I think, at some point to about 1% per month of all of the swap flow on BitMex and the experience trading before in options sort of helped me go down that road. And now continue to kind of trade a mix of all when when there's meat on that bone and then also trade a lot of derivatives and including now, a lot of options where my partner is in our probably some of the biggest sort of just call buyers in the market for the past year. So in certain spots. So many of our listeners know I also played online poker for a long time. So I became curious what kind of format and stakes did you play just because when I hear someone played online poker, like I usually can derive from there were like a low stakes grinder or play heads up or played one variant over the other I can I can tell so much about their personality just from that. Sure, yeah, I feel that I was I started playing cash, but I didn't really I wasn't cut from the correct cloth and I moved over to tournaments and then I ended up being I think maybe top 50 in the world in terms of in terms of ROI by the time that I retired, I guess, from poker. So and but you know that tournaments are just incredibly soft compared to cash like the sort of calculus is much simpler and like you just need to grind to make money. I think it's much simpler and easier to make money in in tournaments than an online cash. And so that's that's how I kind of spun up capital so that I could actually make money by trading. Yeah, I guess that's a very typical story. Yeah, I think the I think the warm up at one point. And that was sort of that's what set it off someone asked this on Twitter recently and I thought it was an absolutely brilliant question, a bit different than what most what most podcasts asked their guests in the beginning. So instead of like when did you find crypto, when do you plan on leaving crypto? What are your what are your goals that you want to achieve here before you can say I'm done with this shit. That is an incredible question. For me personally, I like the idea of fuck you money and I'll leave crypto when I stop having a material edge in trading it because I I no longer really trade just for the money and I never have I trade because I love playing the game. Right, it's much like trading is almost identical to poker and that it's a game. It's a zero sum game to game of incomplete information and the one key difference. I think between trading and poker that I find to make trading a much better game to play is that the rules constantly change. Whereas in poker, the rules are fixed in the meta is sort of the thing that's dynamic and trading the rules change and the meta changes, which is sort of creates these incredible problems that reward people who can get a little bit closer to whatever. The concept of truth is in these games. Yeah, that's a great point. So I think I've experienced the same. So I was like such a one trick pony and poker. Yeah, like one or two games, one or two player sizes, like heads up mostly in short handed and study the shit out of that and get really good at that. And then you can just play that for 10 years, right? And in trading, I started trading, start looking a bit more in the trading the last few months and I just find it so much more complex. Yeah, then poker. I thought the one thing that I kind of took away from poker that's very helpful is the idea of just having good bankroll management, such risk management. Can you talk about that? Yeah, I think that that I mean, it's easy to make money in markets. I think it's harder to figure out the opportunity of cost of capital and where to deploy capital at any given time and how to manage risk and understand sort of what risks you're taking, right? Because there's a lot of unknown unknowns to most participants. And poker teaches you, for instance, in tournaments, it taught me like the value of asymmetry of payoffs, right? Because like you pay a buy in tournaments and you can win some multiple that buy in, right? So those asymmetric payoffs are very valuable and they also make risk management just naturally easier because it's incredibly difficult if you don't kind of situate yourself with that large payoff. Small cap downside situation because there will always be risks that you are not fully aware of. And so structuring it that way prevents you from from the floor being pulled out under your rent. I think that's a good segue into how you approach the crypto markets. So as I understand, there are many different approaches to trading, many different individual markets, even inside, like what we call the crypto market or the equity market, many different products, many different time frame. So what would you say is your approach? I think that I agree with what you mentioned before that specialization in zero sum games is the way to sort of maximize expected value. But crypto markets are still in their infancy and they're so soft. And what I mean by that is that there's so much edge for the taking that I think that if you are strong enough in a variety of disciplines, you can tend to be a generalist. And that kind of solves another problem that a lot of people have, which is that sort of the man with a hammer syndrome, where like if you, if all you do is is trade alts, what you're going to do is just continuously long alts, right. But if you can trade derivatives, if you can then trade alts, you can kind of figure out what tools correct for what time in the market. And so from a bird's eye view, I blend a bit of behavioral economics and sort of the idea that narratives drive reflexive prices. I have like a decent amount. I tried to have a decent amount of asymmetric information and the edge that that generates versus market participants. And then probably my favorite, I think is actually just the old school of reading the tape and order flow and kind of just getting a feel for markets, if you spend enough time just sitting and staring at market orders coming in from an aggregate of different exchanges. You'll generally have a feel for certain situations, and that will kind of trigger an emotional memory or some sort of pattern recognition in your brain of a previous moment that this has happened. And so with experience in the markets, you'll kind of get a feeling and you'll know to certain things and say, "Hey, I've seen that before, usually this starts and then something else follows." And then you start trying to match those patterns in your head and finding the one that fits correctly and then kind of determine the different scenarios. I think that's really interesting, and definitely something I've noticed when poker players switch over to crypto, I think there's two big edges that they tend to have. One is that the pattern matching, they can do it on a very first, you know, a very bottom-up perspective where they are watching the actual markets, you know. And whereas a lot of people, they don't put in the work to actually do that, they don't put in the work to see, "How is this market maker moving his prices? How are these prices moving on the screen?" So I think just the willingness to do that gives you like an edge over 90% of people straight up. I think it's also interesting where you mentioned there's so many of a variety of games, it's quite similar to the experience that we had where when we came in, we wanted to do certain types of trading, and just do that only because we knew it very well. And then as the market, you know, as we got sort of more comfortable in the markets, we kind of saw opportunities here and there for, you know, long-only style stuff for more, a liquid strategy. So I think that's definitely the right approach. Like you said, in this space now, we can't even agree on what is the base money of crypto, we can't even agree on. You know, what is the value crew of smart contract platforms, we can't agree on what the governance value of token is. So, you know, it's definitely too early to be a specialist of any one of these games because this game might not exist. I mean, the 2017 people said, "Well, I'm an ICO specialist. I specialize in pricing the presale round or pricing like these rounds." And so it's good to always have your zoomed out view for sure. Yeah. Yeah. And regarding what you said about watching the market and kind of becoming this pattern matching machine, building this kind of intuition over time, Robin Hansen, the economist on Twitter had a great, great advice the other day. I think he said, "If your profession doesn't have this kind of, what's the right way to put it, this kind of study that's equivalent to a musician just training the notes every day, then you're doing it wrong." Because every profession has this kind of thing where you can just get incredible at the basics and you should. Yeah. I think that's well said. One thing that kind of makes that very tangible for me is watching something where the constant ritual of improvement is visible. A documentary that I tell people to watch all the time when it comes to training is zero dreams of sushi, right? That slow process of becoming a master at something. And I think you're dead on when you say that if that doesn't exist or if you can't dissociate and see that in yourself, then I don't think that you are approaching it in the correct way. And I'd like to kind of add one more thing, which is that in markets as in life, there's nothing new under the sun. I think that most of my training ideas don't come organically. I read books about markets and speculation, especially pre-regulatory before the turn of the 20th century, because I think that crypto markets, you'll see, they follow incredible parallels of what speculative markets have looked like for centuries. For instance, there used to be in reminiscences of a stock operator. There used to be this part about painting the tape and not just meant back then that the ticker tape would print every single trade that happened and people, people who ran campaigns to promote their stocks would just keep making these wash trades back and forth with themselves. And when you take a look at coin market cap these days, that's literally what happens with Alts, right? On a big red day, you'll have a coin with like a very tight circulation and these guys will just rip it 50% because it's free advertising and it makes everyone look at your, your Alts and consider buying it because what do people like buying, they like buying Alts that are going up, right? Yeah, I think what he just said about basically studying pre-regulatory, quote unquote raw markets, I have the kind of raw emotion, animal spurts that you have in crypto, to gen basically predict what price are going to do in crypto and what people are going to do ultimately. That is an incredibly concept that I haven't expressed before. So I would definitely pick up on that. And regarding your earlier point, so I am very interested in learning how to hold myself accountable for trades. So I can say very bluntly that I don't have this kind of feedback yet where I can make a decision that is closed in itself and that when the decision is done, I can at some point say, okay, this was a good or a bad decision. And I have no, I don't know yet how to approach this problem and I feel like it's really important to become a good trader. So I have two of the best traders in all of crypto years. So I'd really laugh for you to like walk me through how I can do this like conceptually, how I can make this process. I think it's a great question. It's obviously the holy grail because it's much easier said than done. So so anything I'll say right now, I'm probably myself can't do half the time. But, but I think one important concept is, I think you have to have an idea of what your thesis is going into the trade and you have to have an invalidation both from a price point of view and from a thesis point of view. So I think some people they get into spots where they don't have an invalidation for their idea from a price point of view. And that obviously just means that you can go bankrupt in trades right because no matter how smart you think you are, you're still going to be wrong like all the time. And that I think is the hardest part about trading for so many people because the way that we've structured society now is we don't like feeling wrong right like everything is about not making you feel wrong. So like, you know, like in school, you know, you the teachers tell you you're right, you know, your friends tell don't tell you when your fly is down, you know, like no one wants to tell you that you're wrong usually. So so so when the market is telling you that you're wrong via your profit, if you have built in an invalidation for your thesis, that saves you a lot of money because if prices start moving against you quite heavily, likely it could mean that it's a better buying opportunity. But in general, it doesn't right in general means that you misread the market and and so just having invalidation is super key, I think I think on the flip side of that is you should have a rough idea of what it would look like if you're really right. And how much do you plan to make when you're really right that gets back to what light was saying about, you know, asymmetric risk reward right like in general, it's a cliche encrypted, but you should still try to target a reward that is higher than your risk right. Whether that's an arbitrage trade even or or a directional trade, you want to be in a spot where you can be right like half the time or more and make much more than than than then one first one, you can if you can make three verse one when it's 50% that's a great trade right. So I think that with that in mind, you kind of get a sense of where people generally tend to go wrong crypto mean you think about 2018, you know, people buy let's say they buy a presale and then they start holding it or they buy it all they start holding it and then they're obviously down money because the thing bleeds out and then they're like, you know what, I'm going to buy more because it's a lower price than where I just got it. And soon you end up owning like a lot of it and the liquidity tries up as well right. And so I think being able to to be willing to be wrong is is a huge part of the battle and I think the by far the biggest leak that beginners have. Yeah, fuck me that's the biggest leak I have so I mean hearing you break it down is is always good right sometimes you kind of remember these things and you forget them and then you rediscover them and then forget them again as you go through your career. I mean to kind of build on that I think that there's this sort of three ways that I think I found to be helpful. First and this will be near and dear to your heart also is that every successful poker player at some point learned that it was always about optimizing the process never never the result right and that's what we learned about about expected value versus outcome. Because when you put in aces into kings pre flop you are going to lose what 19 20% I forgot the math now but if if he banks a king on the river does that mean that you made a bad decision no but in poker it's a bit easier to see this but in in markets. Because we have such incomplete information and the outcomes are so so different than anything that we could reasonably expect a priori. The a lot of people conflate the volatility and the addiction to volatility and the actual result that happened and focus on that instead of the result and that kind of dilutes them I think that's that's where the market sort of tricks the participants and that's I also think why you can have guys that are 50 or 60 and they're still making the same fucking mistakes that they were making for 30 years straight. Because they never focused on the process and introspective the process and try to improve it. The other thing that I'll say is that people often conflate timeframes and I think that maybe that is kind of similar to what Sue was saying but you start with as a trade and then suddenly you become a bad holder right and there's nothing more dangerous than having that happen to you. to you because the human mind is pretty amazing in what it can rationalize, right? And like if it starts as a trade and the market starts moving against you, like Sue said, and you start adding on weakness in a market that where returns are heavily autocorrelated, you're just gonna get absolutely demolished. And then I guess what say Coda said, right? Like everyone gets what they want out of markets. Most guys wanna come into the markets and they wanna be right, right? They wanna prove that they're smart, that they know what they're doing. And they're gonna get that every single time because you're always right, if you wanna be. Or if you wanna gamble, which a lot of people do, you can come into crypto and you can gamble 'cause I think that they're just one giant gray area 'cause you know, but if you wanna make money, making money is boring sometimes. It's tedious, it requires patience and discipline. It's not fun. It's the same way when you play poker, playing fun poker, where you have a few drinks with friends. You VPIP 50% of your hands and you splash around with your boys, but playing good poker very rarely involves that, especially on a nine handed table, right? So. - So something that I took from poker. And it's basically how I'd say when my career and poker really took off one key insight that I had was that it's all about simplifying the decision tree. So you have this insanely huge decision tree, but you don't know which of the decisions actually matter, which of them make you money and which don't. And I feel like I got more into this process as we started to study using solvas. So solvas like chess computer about for poker. So you create these toy games, these very simplified versions of the real game of poker, which then the computer can solve and you can study the result. So this kind of gets you into this output of, hmm. So the kind of the human mind doesn't actually work that they're all the different from the kind of regret minimization algorithms that we use to solve poker with a machine. So maybe I should just borrow this mechanism and apply it to I study poker as well. And like one obvious way of that is, okay. So maybe these 50 hands are basically all the same. So it doesn't matter if I have like A's king or king queen or king jack, maybe all top pairs are really the same on this board and it doesn't matter. Like that you can all treat them the same and thereby dramatically simplify your decision tree or another example is there are many spots where for example, the opponent open raises pre-flop, you call out a position and then you have a lot of boards where the kind of the opponent's range hits this board so much better than you do. And so you should never lead out into the pot. You should always check and then see if the opponent bets or not and then react. And this is a thing that a lot of players do right in this kind of very simple situation on the flop order position, but so now it's like that exists all over the game tree actually. And if you can find them, I think you can do a really good job. So I want to, I would like to learn more about how I can apply this thing that I think it really should apply to trading but I don't really know yet how I can apply it. So do I, for example, set all of my traits to be the same time frame? So I basically have to say they are validated or invalidated after a fixed time unit and do I make all my traits the same size? So just to remove these kind of complexities where I think they may not be all that relevant but really stress me out and make thinking about the check so much more difficult. - Yeah, I think there's a lot to unpack there, but the sort of the abstract concept that you're saying just hit like a struck accord in my brain because I remember learning something from poker which was that you noticed that a lot of the mediocre players that never made it, what kind of come to you with these very specific hand histories where they're like, I have a second set on the turn, I bet the guy check raises, there's like an open ender. And this is like a decision that's so nebulous that has such minimal EV between the different options that we're talking about, you know, a couple bigs maybe per hundred. But then this guy is like opening a H jack off under the gun, nine handed, right, on a hard table and just, just hemorrhaging money, right? So just finding the leaks first is super important and I think that what you need to do is also with the ability to evaluate looking backward. So you need to record your traits because there's all sorts of cognitive biases that are brought on by volatility in markets, by sort of the addictive nature of information and price movement and the pain of losses and all of those cognitive biases that come from prospect theory that behavioral economists have been talking about for a couple decades. And so first you need to have a recording of what you've done, why you did it, right? So trade journals and then reflection after the fact, especially if you're a discretionary trader. I think if you are mostly dealt with neutral, I think that it's a different game but for people who are directional nature and discretionary, it's incredibly important to be able to look back on trades and break them down and have some sort of recording because otherwise you'll keep making the same mistakes over and over and then that way you can also leak find, right? The equivalent currently of just firing off on different exchanges and being able to bet millions of dollars on some random hunch that you have or just because you're angry at someone that day is like the equivalent of playing poker without poker tracker or hand histories. Like it's insane when you look back on it that way but like I think that's what a lot of guys do. And it still works because it's like kind of like poker in 2000 and I don't know, 2005, you know, where you could sit out of a sit and go go to the store, get yourself a pack of cigarettes and you'd come back and like five people have busted and you'll get a min cash somehow, you know? Like that's where we're at still. And the game is just gonna get harder and harder and the goal for you as a trader is to improve your edge versus the market in a zero sum game faster than your competitors and new competitors who are coming in the space. Like I knew in 2017 that this shit would happen, right? But I underestimated how fast and how quickly, incredibly sharp people would come into the space and just deteriorate edges, especially on the Delta neutral side because I think a lot of the legacy finance guys came in and that was a trade that they could port over, like the cash and carry sort of stuff. Directionals still, they're still like, they don't wanna get burned 'cause they don't really fully trust it 'cause it's super scary where the risk is not really definable to them and stuff like that. And so the edge I think has been more robust, but even that I think obviously is going to disappear slowly as the markets move towards more efficiency. - I think one way too that has helped us simplify is you can kind of bucket crypto markets into, you have Bitcoin regimes, you have application layer regimes and you have sort of like older all style regimes, right? And I think that there's not that much sample size yet but the human psychology has been such that if you have a structural view on some of these sectors that helps inform what kind of spots you're looking to get into, right? So like in 2018, one of the things that impressed me the most about light was that here people were still trying to find what else to buy whatever and we were talking about like shorting alts, right? We were talking about, because the beauty of BitMix actually was not that you could trade even per se, but that you could short alt BTC, right? At that time in 2018, open interest was massive, right? You had people buying XRP BTC at like 20% contango in May 2018, right? EOS, BTC at 15% contango, right? And like the opportunities in 2018 for being short alts versus Bitcoin were tremendous, right? It was a tremendous time for that. And so I think that in retrospect, now like everyone looks at it and says it's so obvious, but very, very few people were actually looking at it then thinking that way. They were still thinking about, okay, like, I remember Novograz he said, you know, the public markets may be coming down, but private markets are still great. He was still trying to buy sats, right? He was still trying to buy ICO. So I think the one way that I think is really important to simplify it like always is like, what is your baseline view on various things? Because then you can take trades that you believe you can be asymmetric at, right? And you can have an edge at it. If let's say like everyone is bullish on alt or on DeFi coins, but you think you know something that they don't, you think you know that you can recognize when it's starting to top or when there's no new money coming in, that gives you a huge edge because it's quite asymmetric. You can sell knowing that you can be invalidated quite easily by more money coming in. And if you're not invalidated, then, you know, that gives you a nice half life, right? Where you kind of can simplify the trade, say, here's my thesis, here's my schematic that the market always does these cycles and we're in this part of the cycle. You can kind of be very approval about if you have a feel for that market, right? So I think you generally want to have an idea of who you are, what information you have, what kind of studying you've done, right? If you're studying the tape a lot, if you're studying the markets a lot, you can probably guess when Bitcoin's about to break down, more than half the time because you'll say there's a lot of these signs, right? There's like a bunch of nuke and if you're looking at all too lot, you can probably know when like a small cap is, you know, going to a hard fork, going into an event. So there are all these ways to make money, but you have to be able to define what your general schematic is and how you're planning to be better than most people at it. Yeah, yeah, that that sounds dead on to me. I think one of my friends floored me a couple of nights ago at dinner when he said, he said, he said the fall and he said, it isn't the things that you don't know that that get you. It's the things that you think you know that just ain't so and people get in trouble all the time here because they have these sort of frameworks that are overly convoluted and like more is much worse in complex systems with a lot of risk, which which I think markets are dead on. And so I think that making distinctions between investing and trading are really important because I think most people kind of lump them together. And investing requires a different set of questions. It requires sort of almost ontological questions in this space. So what is Bitcoin? What is all, um, whereas trading doesn't like, how do we value these things? Where trading doesn't really require that, right? Because trading just requires making having something go up when you're long for an appropriate amount of like risk taken, right? And then running that back over and over and trying to capture that expected value. Yeah, I, I, I think with DeFi as well, especially like I remember when DeFi like made a blow off top and then I was saying a lot of people like I think it like some kind of top is in at least for like a couple, a couple weeks, uh, plus, right? Like not like not a normal top where you like, you buy the dip the third day and it's up. And I remember people saying like, well, these assets are bad and they'll go down, but I have the blue ship ones and but those are be good. And I think it's like, there's a lot of composability on the way up with all with, with, with calling and there's a lot of composability down to. So people recognize the composability on the way up and they're like, okay, yeah, this total value locked ties with this. So they all go up together and then when it starts coming down, they're fast to say how their bags are somehow decoupled from this reality, but the other bags that they don't own are the bad ones. So they basically believe in this decoupling when to an outsider looking at it, there is no such thing, right? Like they, it's, it's for sure. So I think I learned that very early on in the stock market because I started in 2008, 2007, where we all know in stocks that on the way down, they correlate, coalitions go to one. And in a bull market, coalitions can disperse of it, but on the downside, it goes heavily correlated. So I think just being aware of these kind of very basic truisms can get you like just to get outside your own head and say, okay, what do I have to do here? Do I have to hedge? Do I have to, you know, be prepared? Like what would a panic look like? Will people be panicking what I, right? To hold yourself accountable, you need to hold yourself accountable to, to, to, to something, right? And you have to decide whether you're investing or speculating or trading as an investor, I think that you're targeting some sort of equilibrium value that is, that is hidden from you, right? And price oscillates around this theoretical number driven by supply and demand and sort of investor psychology and the cycles of narrative and emotions of euphoria and depression. And you can kind of think of of price oscillating around this value as, you know, the, the beings in Plato's cave, right? That are, that you can't see, they're obscured from you and prices the shadow that's being illuminated, right? But as an investor, you have to have some sort of philosophical framework for what value is, how it's reached, et cetera? As a trader, though, if you are a trader and you hold yourself to that standard of accountability, having those beliefs that are absolute is only dangerous, right? And so you, you have to hold yourself to something different. There were these sort of incredible stories where guys would say, hey, I think, I think so and so is, is cheap, value-wise, but they don't have a valuation model, right? Like how, how can you say that compound is cheap at say, you know, $50 or $80 when it's impossible, we currently have no satisfactory valuation models with which to value them. Even with Bitcoin, we're struggling kind of reaching into the dark, but at least we have something a bit more stable. And, you know, a lot of guys, I think, just, they try to prove their hypothesis. So, which is that the most asked backwards way to do something, and trading and the thing that's going to lose you the most money, because they say, hey, I have these bags, or I want to buy these bags, or I'm long already. How can I go find 13 good reasons why I should continue to do this bullshit, right? Whereas the correct way to do it has always been from even in the scientific processes to try to nullify the hypothesis, right? That's, whenever I have a trade idea that feels good, the way that I actually spend time playing with it is by trying to figure out all the reasons why this is a terrible idea. And then if I can't come up with something conclusive, if I can't nullify the hypothesis, then I feel more confident, right? And that requires you to put yourself in the shoes of the other participant on the other end of your of your trade and say, this guy is wrong for these, he believes this, and he is wrong for these reasons. And I think that if you can't say that, or if you even haven't haven't thought at that level, then you're doing it the wrong way. And then there is no accountability because you can always find other reasons to rationalize your behavior, especially because of all the sort of behavioral foibles that humans have, right? Why can't people sell on the way down even though they're supposed to hold all the way through the old cycle and then sell once it's obviously cracked? Well, it's because they regret not selling at the top. And then the next time it spikes, they hope that it goes back because they have, in their mind, a snapshot of their highest AUM or personal balance, so they can't sell on the up thrust. What do they do once it crashes again from the up thrust that didn't clear the high? Now they sell the bottom because they panic, right? And that's because they keep trying to find reasons to justify what they want rather than what what reality is. And your job as a trader is to kind of just listen to the market and try to reduce those biases that make it so that, you know, 99% of people will end up being losers in their participation in markets. Oh, yeah, it was, it was a few weeks ago. I don't know what it was, some kind of bearish event. I think it was BitMex, BitMex, the lawsuit going up on Twitter. And I asked one of you, I forgot too, but I asked, is this should I panic? And Bitcoin was already down if I did. And I think the response was, no, it's too late to panic now. This kind of illustrates this whole, like, you don't skate where the pockets is Ed Wrenner, right? How do you panic immediately? Or you shouldn't panic at all? Yeah, that dovetails pretty nicely into sort of figuring out the sort of like the state of the market, right? Because I think that the way that the market behaves when it comes to news is pretty telling about sort of, it's almost like market participants kind of show their hand. And you get a bit of information because you see how they react to events. And then they kind of tell you what their line is going to be in the future by giving how they react. So when you have, so all this slew of bad news, and I think this was sort of the party line in a lot of places that people realize you have this non-stop series of bad news in the market, barely budgets, right? So, and then you have like a few pieces of like excellent bullish news and the market just absolutely rips. Now, was it the news or was it the market structure? It's probably a combination of a bit of both, but I think it's really important to kind of take those signs. And people kind of miss the force for the trees, sometimes like they say that like, right, bull markets are made by climbing a wall of worry and bear markets are built on hope. And you can see that, right? When people clung onto narratives like backed or product launches and shit like that when prices are tanking, this is a reflexive asset. It's built on narratives. When people aren't making money, some people are going to dump. And there was this old story about, you know, every time a journalist has to write an article about about why copper did so and so. And they all, they pull out all these reasons, right? A lot of the Bloomberg reporters are like this in crypto. They have to come up with some fucking reason to explain why something happened. And then one guy couldn't find a reason one time. And he just said, you know, the market went up because there were more buyers than sellers. And that's what's happening in risk assets today, right? Like you have a reflation trade that's occurring and people need to deploy their fiat and stuff. And Bitcoin is sort of a shelling point for all of those arguments about that start that made it created in 2008 in the first place. Yeah, I do want to talk to you about the macro like Bitcoin against the word a bit later. But I also want to explore kind of the crypto market. And so how are you currently positioning crypto? What is your thesis for maybe the next couple of months? So a few months ago, I was, I was an honest farmer, right? Because the opportunities there were we're absolutely incredible in terms of sharp ratios. And the narrative was there basically that this thing was new and exciting. And it had like unlimited potential. And then you kind of saw, you kind of saw that breaking down. And maybe, maybe people like putting, putting the cart before the ox at a certain point when you had, you know, part-time students and other promotional men releasing products that people were piling in hundreds of millions of dollars into and then those are some of the things I think Sue you mentioned it on a previous on the one podcast that I've listened to this year about once you start seeing the mimics and like the con men come in the supply of these things is just increasing at such a rate that demand can't possibly match it right because the cost of creating safe or some other mimic is basically nothing and so who's who's going to buy these things and so you could see sort of the euphoria and like the the new paradigm sort of views and then the market kind of softening the crash and then it couldn't reach the high and people I think kind of got lost because the uniswap launch kind of obfuscated it and made people complacent and that was there's always a little trick like that that happens right which makes people hope against hope or the reality the other thing is that I think that they they held on because they wanted to believe that because they everyone wants something more they want to make more money rather than what the market gives them right they want the market to give them what they want but anyways I in I think in September I dumped the last of my ults I think it was on the uniswap launch because it was just incredible exit liquidity on things that you wouldn't have otherwise been able to get exit liquidity and I felt like a fool the next Saturday and Sunday because I think after that there was that big rip in all it's in that that also gave exit liquidity and people who were very disciplined those were the days that they were selling you don't sell on the way up because these things always go way further than you can ever anticipate you sell on that first up thrust once it's clear probably that the market is topped and then you have an invalidation because it hasn't topped and you just get back and then that's okay you know but my positioning ever since then which I kind of said I think was that I rotated into stables and bgc I thought the market was fairly uncertain back then and I was worried about ults and defy being a contagion on Bitcoin then I saw that Bitcoin wasn't going down and so I started adding a shit ton of just naked calls outright and I want to kind of talk about a bit about that because I think it's really interesting and it's a source of alpha for a lot of people even if you don't feel comfortable trading options which is that if you understand the way that the flows work in the options market they come from two sources one people who are hungry for yield right so these are traditional macro dudes who are like buying spot and then selling covered calls because there's no yields and they feel comfortable enough to do this then there's structured product flow that has been used as a lure to miners and other whales who are fairly unsophisticated financially and they say hey I love I would love to get you know some consistent steady income stream and especially when markets are quiet they're willing to sell that for the stream but when you sell those options or they're repackaged as a structured product by some of these companies that are operating and catering to these people like you give up the whole reason that you own an asset like Bitcoin right and you give it up for pennies on the dollar sometimes and so I think structurally those forces have made it so that implied volatility is consistently mispriced in the market and it has that like it gives the opportunity if you're selective about the times that you buy volatility and you also get to buy cheap leverage on Bitcoin it makes for an incredible opportunity I don't know how many times you've just run over people by just buying a shit ton of calls like I think in 2019 in April it was mind-boggling that people were just religiously selling upside and you can always tell like the heuristic that I use is when people get really gunko about selling volatility so there was this article that I always tell people about which was that rain in Bloomberg that was like in crypto bear market survivors find a rare lifeline and that lifeline was selling Bitcoin calls covered calls at $3,000 to $4,000 in the bottom of the market in 2019 right so when those guys start selling a bunch of those calls because they don't think that there's upside is when the market has the most upside and it's being sold to you for the cheapest prices I think Sue you kind of convinced me that that like basically in these markets because it's such a money game and there's constantly flows between the Alts and VTC and back and into stables that the pain trade is usually like it has a higher probability than it should have of happening because part of the game is that I select few people of like who are strong holders kind of just get into something beforehand and then wait until everyone else starts running into it and then they dump their bags near the end of that cycle and then they rotate back right and people won't really talk about that because we rely on Alts to drive action exchanges needed we needed as traders ICO teams needed because you can't sell tokens unless people need it and no one's willing to say it but it's the greatest lie right like at the end of the day we all know that if you work to go into a coma tomorrow for 10 years and you you had now one chance to set your crypto portfolio would you own Bitcoin yeah you probably own Bitcoin would you own Filecoin would you own Compound is that the things that you would put into your portfolio if you were to go into a coma next year for 10 years I don't I don't have the answer to that question you know or maybe I do but I don't want to say it you know like the beauty of the beauty of options right is that you don't have to look at it the same way it's a lot like poker if you're a fish playing poker you don't have to care about Evie about like VPIP you just play your hand right and there's also a lot of hope that happens there too like if you're a fish you actually care about hitting your flush like you want to like hit a flush you want to hit your hand whereas I remember like when I first started trying to get better poker someone told me like you should never be hoping for any card you should be thinking about how you play on different cards and I'm like yeah but I wish I hit my hand so options is very much like that where the like the people that are treating it not like from a directional view they just it's from a it's from a vague hope it's from a vague hope that they get their yield and like they they can keep rolling it and you know the like the biggest way at first understood this is that people prefer the physically delivered options in the OJC market also in part because they never have to think about the P&L right because if you sell calls on your bitcoins and the price goes through the roof like on derivative it shows your damage a little money right because you're unrealized P&L is super negative but if you sell an OTC physical deliver call nobody sending you like any statement showing you your down money all that happens that at expiry you send your coins and you're like yeah but I would have sold them there anyways if I sell a 4k call I would have sold their anyway as it went off because that's what that was my level for those coins so you see what I mean you can it creates these tricks of the mind and that's that makes a great two way market because then you have people who are saying I think the probability is good for this trade and you have people saying I I like the way that this trade I like the cash flows and I like the I like the risk profile of the trade so that's how they get hit all the time right because everyone wants the consistent high probability payouts they fucking love that shit and they don't like losing consistently death by a thousand cuts so there's like and these these markets are so so emotionally like they they tug at like the heartstrings or whatever you want to call it and so people are making these gross errors in terms from an expected value calculation because of that right because they're just satisfying a primal like an animalistic need to feel good rather than going back to that secoda quote right like if you want to feel good in the markets and have like a small and consistent winds and then blow up or like literally pass up on a once in a lifetime opportunity sometimes by selling upside volatility you can do that you know and people are gonna some people are gonna be happy to soak that up like I think we've been probably one of the largest buyers of some of this covered call writing that's been happening like every single month you know we show up people messages because they know that we're like the the marks basically right they say oh boy boy do we have some more calls to sell you and you say yeah fuck yeah sell me those calls again and like I've seen it now it's almost shocking I think soon I we talked a couple months ago I asked you is it really it was it really going to be this easy again right like are people really doing this again where they're overselling this stuff and they're just like selling it because it's working right now and because realized bulls coming in like below implied and they just assume that it's going to be pinned forever and I think you were saying the same it's like how do people not remember previous regimes right it's almost like the market participants get tricked into thinking that whatever is now we'll continue to happen in the future without ever thinking about you know things that could change I think you're you guys are both quite good at kind of sort of thinking about what could happen in the future that is different from today and I think that that always makes good like macro and directional guys who kind of anticipate what could happen and what things could change and catalyze those changes when you have a view on the market such as Bitcoin is probably going to go up in the medium term how do you how do you figure out what is the best way to express that view with with the trade what kind of instruments and so on I think I structure most of my positioning based off with a couple things one is liquidity and the second most important one is is how how to approach the risk of the trade. So on the first, in terms of liquidity, I think that when you get to a certain size, you have to start selling sort of in sub-optimal spots and buying in sub-optimal spots. Like, for instance, if you look at polychained buying YFI, I think that some people who are like big, they just have to do certain things like they have to buy on the way down. They have to sell on the way up because they can't really time it. And that impacts X anti when you're deciding to enter a trade, whether or not the liquidity will be there for you to exit and exit cleanly because like the slippage and price impact all hurt the EV of the trade. So the bigger of a position that you take, the higher the threshold has to be in terms of expected value or sharp of the trade. Because if it's very marginal, the other price impacts are going to just eat up any edge that you have, and then you're just flipping coins with people that you don't know. The second, in addition to liquidity, a sort of risk management, and I'll kind of walk you through an example of this year. So in March of 2020, after the market completely imploded, going margin-long on BitMex with a hundred X leverage on multiple accounts was an incredible play because the mark price that is used for liquidation was trading at 4,000 when the swap and futures were trading at 3,000. So now you have, I think it was actually not 4,000 and 3,000, but there was a 10 percent discrepancy where the thing that was being used to liquidate was 10 percent higher. So if you buy longs, you have a 10 percent buffer instead of the usual 60 fucking basis points that BitMex normally gives you on a hundred X long. You open a shit ton of accounts, you margin-long all of them, you have capped downside, and you just destroy when the market rips, which will inevitably, probably do, unless Bitcoin is going to zero, which you very well could of that day. But and you get to collect funding and you get to do it on hundred X leverage on all of these accounts, right? So there that trade has that sort of risk management. Now later, now when we get to like nine to 12K and on the pullback, I hold spa, and instead of holding margin-longs that I get trapped into with no liquidity if I'm wrong, I want calls, right? Because now I've developed another way to cap my downside, but allow myself to have the exposure in case my macro thesis is correct without having to get stuck with everyone else in a sinking ship if we're wrong, right? And so that's in combination with the fact that people are selling these calls for dirt sheep. It ended up being incredibly alluring as an opportunity because you say, hey, I can capture all of the upside, and I don't get trapped if I'm wrong, and people are letting me take their upside for free, basically. Like, it just ended up being this incredible, incredible trade, and like, it's why having Deribit come into the spacing grow a lot. It's been so important because it affords you these abilities to sort of tailor make your own sort of risk profile of your trades, right? So you can give yourself some more room to be wrong if you want to. You can take bigger positions and that payoff when you're right. That's sort of the, like, I guess, I don't know what you would call it the institutionalization of the space or like, just the development of the space that gives people more tools to trade and express their views in a way that makes sense from a risk management perspective. So we've talked about the thesis for Bitcoin and why you see DeFi, maybe in a downtrend at least for the next two months. So what about Ethereum, too, especially if you've been very vocal on Twitter that you're very constructive on Bitcoin, but actually very bearish on Ethereum comparison. So what is the reason for that, especially in the last few days, Ethereum actually kept up quite nicely? Yeah, I think first I should preface by saying that I just shipped post a lot. So I think as Ether was going up, I also shipped post a ton. And I think almost like every Bitcoiner I knew, I would ping them once a week and be like, I just showed like a chart. Like I was doing this to fidelity and stuff and they were not pleased. They were not pleased. But yeah, no, I think that Bitcoin is the clear denomination for the biggest players in crypto. That's whether you're CZ, whether you're the big miners, the big exchanges, the biggest players. It is the base currency in my view. So knowing that I think that there's a big foundational understanding which is that when Chama said he was going to put his family office into three assets, Bitcoin, Amazon, and the L.A. clippers, or it was a golden state warrior, sorry, I think it was golden state warriors. Yeah. MBA is an anomaly, but the point is like he's not going in and being like, I'm buying a basket of coins, I'm not going in and buying a basket of internet stocks, and Michael Sailor talked about this point a lot too, where he says you want to buy the one that is the clear dominant factor and bet on the rest of the world coming to see that, because that's how you get a network effect to work for you. That's what the Bitcoin catch people didn't understand which is that you can say you're better on utility on this, but if you don't have the network effect, then you have nothing. You can't possibly compete. So I think Bitcoin has the network effect as the base money that is very hard overcome. I think Ether right now, it's still pricing in too much of a base money effect, where people think that there needs to be two base monies. I don't think that there need to be two base monies actually in crypto. I think there only needs to be one. And so I think 2017 also has created some really high wicks. So because of those wicks, people now look at those wicks and say it could get there again. And I think that's dangerous for two reasons. One is that the first big wick of May 2017 was in a period of before the Bitcoin having, I mean, before the Bitcoin hard fork, right, where people were very scared about flipping in, people were very scared about, you know, what would Bitcoin become? And people were quoting Bitcoin left to right. I remember Raul Paul, he said, at 2000, he's selling all his Bitcoin, this fork is too dangerous, right? Like, maybe it will buy either. And then you had, you know, later on in 2017 where, you know, you had BCH, BDC at 0.45. If you had, you know, a lot of questions about that, that environment is not the same as the one we're in now where, you know, Bitcoin three years later is far more Lindy than it was then. It's 40% more Lindy, right, roughly. And I think in terms of years that normies have seen Bitcoin, it is like 10x more Lindy. I don't almost never hear anyone say Bitcoin is a scam anymore. I always hear them say, you know, is it too late, you know, how much left or, you know, what can I get it? But there's no one that will even say it's a scam anymore. They'll be sheepish to say it now. Even the people who used to call Bitcoin a scam, like a lot of people from the Ethereum community, especially, and the altcoin community, they now say Bitcoin, Bitcoin is a quote unquote meme coin or a religion coin. And they don't even realize, like how bullish in itself that statement is. So they think they say something that's kind of denigrating Bitcoin, but in reality, they just make the point. Yeah. The Robert Schiller, and this is the Nobel laureate. This isn't a joke that this is his name wrote a book that a colleague Vance recommended to be called narrative economics, and the first chapter is on Bitcoin, right? The guys who are inside the crypto bubble, they're lunatics. If they think like your average 50 or 60-year-old family office manager, we've just spent ten years convincing him that this thing is not a Ponzian agreement, and that it's not a stone-cold fraud. And now people are like, I wonder which corporation will be the first to put F in their treasury? That's a bridge too far, right? You know, these people have barely signed on board for owning magical internet money, but alone something like Ethereum that, like my views haven't changed on this since John Feffer wrote an institutional investor's take on crypto assets. Feffer's paper is probably the most lucid sort of attempted valuing both Bitcoin and Ethereum that I've seen to this day, and I have yet to see a compelling rebuttal to it. That said, I think that Ethereum, whereas Bitcoin's valuation comes from most, the narrative now mostly that it's a store of value, with Ethereum and Alts more broadly, I think that they've always just been speculative vehicles for a transfer of wealth and for the ability to gamble. And that's what really gives them value also because they're kind of trend following. And those things, the narrative is so important, right? Because with Ethereum, you have this F2.0 narrative and sometimes that narrative breaks down, right? When they don't deliver it, you can see the narrative breaking down. And then the price starts following, and then price also buys that narrative further and further because we deal with so much uncertainty in how to value Ethereum. It is, it's a dark forest, right? That's one of my favorite turns of phrases that I've heard in this space. And no one knows how to value it, so we have to resort to narratives and to looking at price. Right? So there's a full reflexivity there because no one knows how to value it. So if the price goes up, then Ethereum is valuable. If price goes down, Ethereum is a piece of trash, right? And we're currently in the stage where Ethereum is underperforming. It's not even underperforming just on a risk-adjusted basis. It's actually underperforming just straight up on numbers on CoinGecko basis, which is insane, right? Because you demand, you need to demand so much more return to take on the risk of owning Ethereum versus Bitcoin, and you're just not getting it now, and people are realizing it. And the best part is that as they realize it, they start piling into Bitcoin out of Alt, out of Ethereum, which just makes more people perpetuate into Bitcoin, right? And that was sort of the metaphor with the sinking ship when everyone's on one side of the ship except a few people who got ahead of the crowd, and then everyone starts running in. And I think people are going to make this mistake where they, people, I got a bunch of messages in the past week about what I think about Alt's now, right? Or whether it's a time to rotate back into Alt's, you know, now that Bitcoin has had a move up. I think that the burden of proof is on people to prove that you should take your Bitcoin, move out of an asset that has an incredible macro backdrop, and is currently outperforming everything else on a risk-adjusted basis. And for some reason, buy Alt because you think that that trend will change. It doesn't make sense to me in a reflexive asset, and I haven't heard any sort of compelling argument as to why Bitcoin will stop outperforming. So it just, it seems like people just want to be contrarian for the sake of it rather than because they have a pretty strong reason. And you see it literally today, Bitcoin kind of paused at like after it touched 13, and people started punting on Alt's again. And like, like, you know, those short-term rotations, I think usually get punished, and everyone wants a continuation of the Alt season right now, I think that, like, the pain trade could just be that, like, Alt season is a year or two away. Although, I still think that DeFi, with the caveat that I think DeFi will, at some points, some of it will do very well again, because I think that there is something really transformative happening that allows, like, a pretty valuable regulatory arbitrage to happen. And I think that if Feffer updated his paper, he would probably say that, you know, maybe we're getting closer to having value capture mechanisms on these tokens that make at least some sense and capture some of the value, whereas before in 2017, there was nothing there, right? That could be valued in any way, I think. Fantastic points. And I think another thing too, which is like crypto-natives, they massively project their own views on normal people that are coming in. And they're incredibly, they're incredibly, like, like, unaware of how normal people think, right? Like, a lot of the big coin buying over the next few years, I think it will be people not trying to get rich, but people are trying to keep pace, right? That's actually why people buy most things in all markets, because they want to keep pace. Like, when people buy equities, it's because they're neighbor buys equities. It's because everyone they know buys equities. So that is what creates the shelling point. Like, people normally don't wake up and think they can outsmart everyone and, like, buy, like, you know, the Bitcoin killers. Plebs do. And Plebs might be able to get away with it in some parts of the market, but, like, in general, you know, with the 50 year old family office guy example, he's not just trying to save his job by not taking risks. He's also trying to make sure that he's coordinating correctly with people, right? He's trying to go to the right party, because if he goes to the wrong party, not only does he lose money from that thing going to zero, he also didn't go to the right one, right? So the loss is absolute. So he needs to first buy enough where he's at the party. Then maybe he can gamble with some other stuff. Like, you know, if he feels a big wealth effect, I think you always get all seasons. I don't think you just, like, get all to dead, like, ever. But I think that I don't think any coin can track Bitcoin as a base money going into a more hyper monetization phase, because there's no reason for it to, right? You're not comparing two different things. And so I think my personal view on Ether, especially now, too, is like, you're in, it's actually in a far more precarious situation than people realize, because one, you have the ETH to roadmap being very complex, and they're kind of realizing that a lot of it, the research has failed. The roll-up roadmap is, I think, promising, but will not deliver the things that people are hyping it to be. People always hype it way too much, right? And then they realize you can't actually do that much with it. And this is in a backdrop where you have very credible contenders now for D5, for smart contract chains. You have Polkadot, which is three years in the making. You have Cosmos, which is several years in the making. And these are all a lot of main net projects now that have serious developers, serious people. And so I think what will tend to happen is that Ethereum, right now, is still being valued as a base money by a lot of people. I think eventually it will be valued just as a smart contract platform, same as Polkadot and Cosmos. So it'll leak a lot of value to Bitcoin from that base, that kind of base money demonetization. And then it will also have to compete for this nebulous smart contract, market cap pie, which no one really still understands how to value what this overall pie should be worth. And moreover, people only now are starting to realize that the application layer of Ethereum and of all these coins should be worth the most, actually. And this is something that I can get behind. And speaking with some of the smartest minds in Ethereum, you know, like you know, there's something challenging about the EF thesis, when the smartest minds in Ethereum believe that you should buy the tokens that build applications on Ethereum, right? Because they would say, you know, well, in Web 2, you had Zenga, and Zenga had a lot of problems making money because they were deplatforms and all that kind of stuff. So Web 3 enables like radical, you know, app building, you know, like anyone can build an app and get tons of users. Well, if that's the case, then you would assume that the apps are going to accrue more of the value in crypto than the base layers. If they didn't, I mean, this is the capitalism, right? If they didn't, then why would make any sense? It wouldn't make any sense. So I think the vision of where you have massive application layers that are on all chains that are on Solana, they're on Polkadob, they're on Cosmos, they're on ETH, and they work really well, and users don't even know that they're using blockchain. Like that, I think makes a lot of sense. I think it makes less sense that a smart contract platform can achieve some kind of maximumism, which people are trying to assign to it now. And I think that this is quite short-sighted, and it's primarily a bagholder thesis, I think if you zoom out and you explain it to other people, they'll just say, why does Ethereum deserve to have this smart contract mantle? Is it because they're the nicest? I think that's what the, you know, because it can't be that that they have the best community. That can't actually be the real reason fundamentally. What people don't realize is that every roll-up chain is in itself a different blockchain, and there's really no difference between apps and users coordinating on going to Cosmos, going to Polkadob versus going to the same roll-up. You have the same kind of coordination game with being on the same blockchain, being on the same shared state, and that's one reason why I'm pretty structurally bearish, Ether right now, and the second is that you have this competition for where the value is going to go that you also touch on. Someone who's maybe constructive on DeFi, right, so are they going to buy Ether as a sort of ETF on basically the whole DeFi space? Are they going to buy any DeFi tokens? And in the future, I mean, every roll-up surely is going to have its own token as well, right, because these are all VC backed and VC's all want to make their exit. So you're going to have roll-up tokens, you're going to have application tokens, and then you're going to have e-space layer tokens. So that's, if you compare that to Bitcoin, Bitcoin is the shelling point for so many different narratives, and there's for all of them only one option to buy VTC. And if you look at something that's happening inside Ethereum, even in that narrow space, Ether is basically one of many ways to express a constructive view on that kind of event, and that's kind of a reverse shelling point almost. That's what's really worrying me right now. Yeah, now that you guys have kind of put it this way, it actually scares me for anyone who has like ethics exposure, because you have this enormous narrative problem, right? The fact that this discussion, I'm in this space every single day, and some of the points that you guys made on the tech side are complex enough where I don't fully understand them even though you conveyed them decently, like that points to a marked narrative problem, right? Bitcoin's current narrative is incredibly elegant and simple. Everyone can agree on it, as you said, with Ethereum, I don't even know what the narrative is anymore. That can be sold to people, and like that narrative is key for price appreciation, and it currently doesn't exist or it's conflicted. The fact that it's so complex and convoluted means that it cannot be spread, right? Quickly to people that could potentially buy this asset, and that seems to be incredibly worrying from a trading perspective for me. The other thing that I think is fairly simple is that Ethereum is just underperforming Bitcoin. Like the market is clearly signaling that you should be in one asset, and people, I don't think many people really think for themselves. In this world and so you know and I don't either you know when I see that Bitcoin is outperforming I will come up with a reason to explain that and I'll make sure to be long Bitcoin You know and you just don't want to be the last guy who catches on or or fights his his like mental biases last because you Were holding out hope that maybe something will reverse in the trend these are trending autocorrelated markets and for good reason right because we don't know what these things are worth So prices are leading variable for value and so You do whatever the smart money and other people are doing by voting with their wallets and buying stuff and right now that is buying Bitcoin Yeah, and I Think that I mean that the last Bitcoin soft fork was three years ago, right? That's hard to wrap your head around and people people say Bitcoin is stagnating right Bitcoin is not evolving but I think what's really happening is that The norm is right a kind of that the people who are not watching crypto so closely nothing happening in Bitcoin is actually the best thing that can happen to Bitcoin Nothing happening no news nothing that is Except like you know people buying Bitcoin That is that is what it takes to build the kind of Lindy effect that we I don't even I mean with the different would sort of the volatility of Of Alts in terms of their monetary policy in terms of the technology I feel like you almost can't establish sort of any sort of Lindy effect Because it's it's constantly pivoting right there's new faces people weaving Actually, I guess I kind of walked that part back I don't think that the people really matter, but the fact that it's constantly changing at that rate means that it's difficult For that effect to take over and to to demonstrate solidity which is what these guys want right because they're taking an enormous reputational risk right like if Michael sailor is wrong He might not care, but other people in his shoes are going to be that that guy who's like the You know The crazy dude who bought this thing that was obviously a scam and five years later. It's down 95% right and so Bitcoin being around and being Kind of similar and it unpredictable is super important for these people because I think that they know what they're going to get and You don't have to worry about you know if it's all like Deciding to skip at 2.0 and going to at 3.0. I actually saw on Twitter today Paul to that Jones going on CMBC and saw the clips being shared and Listen to them and I saw Him say something that nobody had pointed out until that point and he said I've never seen a store value Where you also have such great intellectual capital behind it and I'm paraphrasing But when you short the bond market as an inflation hedge you are really betting on the fallacy of mankind rather than its ingenuity So he what he's saying is that other inflation hedges are fundamentally Barish on humanity whereas Bitcoin is it's kind of bullish human ingenuity and bullish humanity and You know, I've kind of always felt that I've never seen it expressed in such a way Bitcoin is always sold as When when the Bitcoin us a ride the world is going to shit So if you buy Bitcoin you're you're buying Doomsday pretty much it's at best you can you can say okay Maybe it's like a small like doomsday hedge or whatever And that shift what do you think about that? I think the optimism actually you can even see it in the way that the average Bitcoiner View something like the Substate problem right like I've always kind of believed that the people who think that Bitcoin will have a fee problem I think it's like the middle of the bell curve view because I think like like the very low Side of the view those just not even know what a fee subsidy is that they don't even know and they won't care And they'll just be like I bought Bitcoin and I'm up and I'm gonna buy more and then on the other side of it You say well, there are all these ways it could get fixed and The market will find a way because these are the things that we've all collected together Haven't we so we've all come together as a world and collected these things and and stated that this is our new Maraer. This is the way that we distribute value. This is the way that we collect value They're like like there's an optimism on both sides that Ongenuity will find a way to preserve this value right? So I think like the the idea of where you know, they just won't figure it out and then all value will go to zero Like that actually is like the ultra pessimistic view of human ongenuity, which is that we spent all this time buying all these coins Doing all this proof of work, but we couldn't figure out the fees. We couldn't figure out this stuff all goes to zero by some other coin Right like that's actually hyper nihilist in a way and and so I think like The like the fact that Bitcoin buyers don't even need to know as much about it But believe in this shared like concept of a digital money that was the first incipient blockchain I think that that is why like if the guys like him they see it as inherently optimistic whereas Like you said in the past people didn't quite see this optimism as clearly. It's a strange It's a bit of a strange place because it attracts both some of the smartest and Some of the stupidest people that I've ever encountered and I'm not quite sure exactly why it does that maybe maybe for different reasons But it's almost it's almost actually quite fitting because I think I think Ben Hunt had a good point about how like narrative She says you don't want to be too smart by one half Because then you don't get anything and that's similar to sort of that that meme right where you have the 120 IQ Dude we just sit in there just getting just getting demolished on both sides and then you have the guy with 80 IQ and the guy with a 140 IQ and those guys are doing the same thing as well and Like you like you have like people like Just commenting on Paul Tudor Jones like a guy like that That level of thought is is fairly unique given the valuation in the space and there's a there's a few other people I'd like to think in my opinion including you two that like Compose some similar quality of thought that like it just seems like just based off of the ratio of valuation of the space to the amount of people who are who are kind of participating in it that seems on a relative basis very cheap Compared to a golden petershift, you know It's very hard to have a constructive view on something like gold like on the very on the very long term It's it's an inherent inherently regressive bet. Yeah, I think it is I think maybe that's why it attracts some of these people because There is a way to both on a normative basis Feel positively about the space right like I keep my philosophical beds at the door because I'm a trader But like it's unquestionably compelling to me in a lot of ways that I agree with them that they kind of highlight like Like the positives and humanity, right? That's unshackled from some of the the things that we've developed as a society and governments that we may not have Intentionally done, but yet here we are, you know, and this offers potentially a way to rethink the system It seems I never found those arguments that I would want to hold Bitcoin if the financial system collapses financial system Collapse I don't really give a shit about you know eating cans of cat food Like that's not really why I'm here. I'm here because I think that it's a potentially a step forward towards like a problem Right and it is a humanistic solution in that way Yeah, and then Sue you and are we in 2019 especially that was kind of the center almost for Of the articles that we wrote the kind of skeptic series on Bitcoin that humanity kind of advances with cooperation And you get cooperation via this kind of social institutions and they work by By restrict actually restricting human behavior, right? That is what enables trust and cooperation the Knowing that the other guy can't screw you in in ways that you you can't predict and you you can't ensure against And that's fundamentally the thing that Bitcoin and cryptocurrency and smart contracts enable and why I think It seems so because they seem restrictive to people but people don't realize that restriction is actually the driver of cooperation at the driver Of growth of humanity Yeah, I think trust minimization Is a huge concept there and I think that also gets back to the question of you know Can there be another base money in crypto besides Bitcoin and I don't think you can get that kind of trust minimization anywhere else very hard to replicate the fair launch Some people will say it's unfair, but I mean nothing is it look ever truly fair, but as far as you can get I think you can't replicate it now given how much attention there isn't so and you can't replicate the idea which is that it's going to just be The store value right you you can't come out and say I'm also just going to be a store value anymore because there's a cardinality Which guys like Chamath understand and I And I think the wealthiest people in our society understand as well right where you know Let's say the ultra prime area of a city right the real estate there The ultra rich in that city they can all agree easily on what is the ultra prime of their city It's not something that they can have different opinions on we can all agree that You know the parts of Manhattan nearest to Central Park on the south are the best parts and need to be worth the most right And so wealthy people are very used to this idea of a shelling point for money, for stores of value, and so because of that, there's money thesis and tech thesis and crypto, and I think the tech thesis guys, they've done a lot of good stuff, right? We can use a lot of cool blockchains now because of what they've done, but I think that the value accrual of most of the native tokens of crypto ultimately will go with the money use case, where it has now enabled trust minimize currency to exist, and so I see all the other chains, they're ultimately feeding back into Bitcoin, and making it more viable, showing people what its properties are, and why they're valuable, and why they can't be replicated easily, so. I think you've mentioned, you've made a pretty compelling case for that shelling point argument for Bitcoin, and I think that it warrants asking the question of whether that thesis can be wrong, and whether an alt, or some combination of them can achieve that sort of game theory solution as well, and I think where a lot of people get it wrong, unless I'm kind of strumming them, is that within an alt system, within the Salona system, that alt is quote unquote scarce, maybe less scarce than other things, but still scarce, and they just view the system in a vacuum rather than understanding the whole context of the space, where there is no scarcity within alt versus Bitcoin because so many exist, right? That removes the scarcity each of these separate sort of universes impede the claim to scarcity within other universes, right, or rather not universes but solar systems, whatever you want to call it, and so it becomes orders of magnitude more difficult to reach a shelling point as an alt because of this lack of scarcity and differentiation, whereas there is only one Bitcoin, right? It's always been Bitcoin versus alt, that narrative has been maintained ever since you had feather coin, and it also continuously becomes like reiterated when things like feather coin, like coin, and other projects like this become dead projects usually, and then they become replaced by something else. And we've seen so many cycles of this that it almost becomes impossible after your first alt cycle, after you kind of say I want to find the next Bitcoin because I need to catch up to these people that have been around for a long time, right? This sort of plebian mentality of wanting to get money quickly versus the mentality of those who have been around in the space for a couple turns of the wheel of time and have seen, they've seen these things die over and over, and it goes back to the idea that if you go into a coma tomorrow, there's no fucking way that your portfolio is going to be made of ripple, okay? Like that portfolio is probably made of Bitcoin 95% of it potentially, or maybe maybe a market weight allocation between Bitcoin and Ethereum if you feel very strongly about it, and then maybe a few speculative type bets, right? Like that are like very small percents of the portfolio, like that would be the construction that gun dad right now I would have to put myself in. Now I'm not even sure if that would, it might just be a hundred percent Bitcoin at this point. And I feel like I'd be kind of embarrassed to tell some of my friends from traditional finance my views, but I think that it's an interesting time to talk about this because I think that we're clearly out of the analogue of the Nikkei in the 80s. Now, and I think conclusively on Bitcoin, right? And again, I say price also buys narratives and you see that Bitcoin is clearly not sort of having a death rabbit the way that the Nikkei did, right? Because people are hoping that it would run it back, like I look at it now in the way that it's moving and sort of the macro backdrop. It would make me embarrassed, but I think it is more, more likely than not that we clear the all-time highs at this point within, within let's say this year or the next, right? Which seems like an outrageous claim to make because I think that, you know, based off of the skews model, I think you look at those options, they say 20k or over is priced at 7 percent currently, right? With the simplifying assumptions that they're using, like that seems ridiculous to me. Like it seems ridiculously cheap to me. And like, but it's hard to say something like that with strong conviction because it sounds, I sound like a limit, you know?