Bitcoin Is Crashing and Exchanges Freezing Up

0:00 In December 2024, the laseredeyed crypto

0:03 enthusiasts were taking a victory lap.

0:06 Bitcoin had just crossed the $100,000

0:08 milestone, and even the skeptics at FT

0:11 Alfavville were forced into a somewhat

0:14 brittle public apology for their years

0:16 of doubt.

0:17 At that moment, the narrative

0:19 was that crypto had finally been freed

0:21 from its regulatory shackles.

0:24 Wall Street was finally in the game, and

0:27 those who were once nervous about the

0:29 technology could now invest through a

0:31 convenient suite of ETFs.

0:33 The institutional-grade liquidity this was

0:36 supposed to bring was meant to smooth

0:38 out the volatility, finally etching the

0:41 digital gold thesis into the granite of

0:44 the global financial system.

0:47 Over the years, I've learned that whenever

0:49 someone tells you that a new era of

0:51 stability has arrived, it's usually a

0:54 good time to start looking for the

0:55 nearest exit.

0:57 Fast forward to today and

0:59 digital gold has behaved a lot less like

1:02 actual gold and more like a high beta

1:04 tech stock on a very bad day.

1:07 Bitcoin is currently trading down around 23% year

1:11 to date and it has shed about 45% of its

1:15 value since its October peak.

1:17 To put the severity of this move into perspective,

1:20 the 13% plunge that we saw on February

1:23 5th was the largest 1-day drop in

1:26 Bitcoin since the collapse of FTX back

1:29 in 2022.

1:30 One of the most fascinating

1:32 aspects of Bitcoin is its hydraheaded

1:35 narrative.

1:36 Whenever one claim of its

1:38 utility dies, three more sprout in its

1:40 place.

1:41 Over the years, we've been told

1:43 that it's an alternative currency, a

1:45 ticket to life-changing wealth, an

1:47 inflation hedge, and a digital gold that

1:50 would rally during geopolitical shocks.

1:53 Yet, while actual gold and silver hit

1:56 records this year, Bitcoin has

1:58 languished.

1:59 Stocks are up, and

2:00 geopolitical risk has certainly

2:03 increased.

2:04 Inflation isn't under control

2:05 yet either, but Bitcoin simply isn't

2:08 doing any of the things that we were

2:10 told it would do.

2:12 The Dow is over 50,000

2:15 right now.

2:16 The S&P at almost 7,000

2:19 and the NASDAQ smashing records.

2:22 As what Deodron of NYU points out,

2:26 Bitcoin can be priced, but it can't be

2:28 valued the way assets or commodities

2:31 can.

2:31 Assets are valued based on their

2:33 cash flows and the riskiness of those

2:35 cash flows.

2:36 Commodities are valued based

2:38 on their utilitarian supply and demand.

2:41 Bitcoin fits best into the category of

2:44 currencies and collectibles, which

2:46 derives their price entirely from

2:48 scarcity and desiraability.

2:51 But there's a catch.

2:53 Most collectibles like a Picasso or a rare bottle of wine

2:56 have some utility and are extremely

2:59 difficult to precisely replicate.

3:02 While Bitcoin is famously capped at 21 million

3:05 units, the crypto industry as a whole is

3:08 a factory for replication.

3:10 With over 10,000 active tokens now on the market,

3:14 the uniqueness of any one digital

3:16 collectible is constantly being diluted

3:19 by a sea of very similar alternatives.

3:22 If the only thing Bitcoin has going for

3:25 it is that it was the first one, that's

3:27 a very thin thread to hang a trillion

3:30 dollar valuation on.

3:32 A major reason for

3:33 this current crisis of faith is that in

3:37 a very real sense, the crypto industry

3:39 has finally achieved everything it ever

3:42 wanted.

3:42 For years, the dream was a

3:44 Bitcoin president, a friendly SEC, and

3:47 Wall Street ETFs that would finally

3:49 bring in the mom and pop investors.

3:52 By early 2025, those battles had all been

3:55 won.

3:56 But victory has turned out to be a

3:58 bit of a trap.

3:59 As the economist points

4:00 out, every major rally in recent years

4:03 was fueled by the anticipation of these

4:06 milestones.

4:07 Now that the forbidden fruit

4:09 is easily bought in every brokerage

4:11 account, there's no big story left to

4:14 drive the price.

4:15 The underdog narrative has been replaced by a reality where the

4:19 president's family is hosting crypto

4:22 conferences in a gilded ballroom at Mara

4:24 Lago and political figures launch their

4:27 own meme coins.

4:28 It's not exactly an

4:30 underground asset anymore.

4:32 We've seen the same story play out in the UK.

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6:05 Now, back to our video.

6:07 We've seen a similar story

6:09 play out in the UK.

6:11 After years of being

6:12 described as a total crapshoot by the

6:14 authorities, the UK government finally

6:17 brought crypto into the fold.

6:19 In October 2025, the government officially

6:22 announced that retail investors would be

6:25 allowed to hold crypto exchange traded

6:27 notes in their tax advantaged retirement

6:30 accounts.

6:31 It was, with the benefit of

6:33 hindsight, a classic piece of British

6:35 top ticking.

6:36 The decision was implemented on October 8th, 2025, almost

6:41 the day that Bitcoin hit its all-time

6:43 high.

6:44 Hilariously, Quasi Quartang, the

6:47 38day chancellor of Dixjeer behind

6:50 Britain's disastrous 2022 mini budget,

6:53 announced that he had been orange pill

6:55 last year, and had taken a role as a

6:58 non-executive director of a UK-based

7:01 Bitcoin treasury company in November,

7:04 not long after the all-time high,

7:06 essentially arriving at the party right

7:09 as everyone else was leaving.

7:11 According to FCA data, the number of Brits who own

7:15 crypto has fallen from 7 million down to

7:18 around 5 million people over the last

7:20 two years.

7:21 There's maybe a lesson here

7:23 that retail investors should take to

7:25 heart.

7:26 Whenever a sophisticated financial institution tells you that

7:29 they're democratizing a cool new asset

7:32 class, you should probably check for the

7:34 fire marshals and head for the street.

7:36 It's like discovering that you can

7:38 finally get a table at the city's

7:40 trendiest restaurant.

7:41 It usually only happens because the cool people have

7:44 already left.

7:45 The chef has moved on to a

7:47 new project and you're just there to pay

7:49 for the expensive leftovers.

7:51 By the time Wall Street democratizes an investment,

7:55 it's usually because they need someone

7:57 to hold the bag.

7:58 The Bloomberg journalist and friend of the show, Zeke

8:02 Fox, frequently makes the point that

8:04 crypto is no longer a young scrappy

8:07 technology.

8:08 He points out that Bitcoin

8:09 was launched in January 2009.

8:12 So, it's over 17 years old today.

8:15 For context, by the time the public internet was 17

8:19 years old, we had the iPhone and

8:21 Wikipedia.

8:22 Email was universal and

8:24 Amazon had put bricks and mortar

8:26 bookstores out of business years ago.

8:29 Crypto, after nearly two decades, has

8:31 yet to find a realworld use case that

8:34 doesn't involve gambling or in some

8:37 cases pig butchering scams run out of

8:40 Cambodian labor camps.

8:42 This helps explain some of the current exodus.

8:45 It's not that a single exchange failed like a

8:48 few years ago.

8:49 It's that the new

8:50 believers on Wall Street turned out to

8:52 be anything but.

8:54 They didn't get involved because they wanted to fix the

8:57 money.

8:57 They got involved so that they

8:59 could sell a financial product at a

9:01 markup or take advantage of the basis

9:04 trade, an arbitrage strategy where hedge

9:07 funds buy spot Bitcoin and

9:09 simultaneously sell futures contracts,

9:12 pocketing the price difference,

9:14 essentially manufacturing a high yield

9:16 savings account at a retail trader

9:19 demand for leverage.

9:20 For most of 2025,

9:22 that crypto yield was significantly

9:25 higher than anything you could find in

9:27 traditional finance.

9:28 But as the spread

9:29 compressed, Wall Street moved on to the

9:32 next good trade.

9:33 We can see the

9:34 fingerprint of this retreat in the

9:36 Coinbase premium.

9:38 This metric looks at

9:39 the price difference between Bitcoin

9:41 traded on Coinbase and Bitcoin traded on

9:44 Binance.

9:45 It helps you track US

9:47 institutional demand because large

9:49 professional American investors mostly

9:52 use Coinbase for their trades.

9:54 When it trades at a premium or is positive, you

9:57 can interpret that as meaning that US

10:00 institutions are buying or accumulating

10:02 Bitcoin.

10:04 When it's negative, it

10:05 indicates selling pressure in the US.

10:08 For months, it's been deeply negative,

10:10 which tells you that the selling is

10:12 coming primarily from the United States.

10:15 It's not just the arbitrageers.

10:17 It's a general loss of interest in the very

10:19 market that was supposed to be crypto's

10:22 new home.

10:23 As Bitcoin slides, it's

10:25 dragging the rest of the ecosystem down

10:27 with it.

10:28 Most other coins from Ether to

10:30 the board ape NFTts that people used to

10:33 pay hundreds of thousands of dollars for

10:35 are essentially just high beta bets on

10:38 Bitcoin's price.

10:39 When the king of

10:40 digital gold falls, the digital cartoon

10:43 monkeys tend to follow him straight into

10:45 the basement.

10:46 If you think the mom and

10:48 pop investors are having a tough time,

10:50 you should spare a thought for the

10:52 digital asset treasury companies.

10:54 We've talked about these a few times already.

10:57 But their publicly traded businesses

10:59 that decided that their actual

11:01 operations, whether it was selling

11:03 enterprise software or mobile chips,

11:06 were far too boring and instead pivoted

11:09 to becoming a giant leverage bet on

11:11 crypto.

11:12 The most famous one is Strategy.

11:14 The company formerly known as Micro

11:16 Strategy.

11:17 Its chairman, Michael Sailor,

11:19 has been dubbed the Bitcoin Alchemist by

11:22 Forbes for seemingly discovering an

11:24 infinite money glitch.

11:26 The trick was simple.

11:28 As long as his stock traded at a

11:30 premium to the Bitcoin it held, he could

11:32 issue new shares, buy more Bitcoin, and

11:35 the value of the company would magically

11:37 increase.

11:38 At least on paper, it was a

11:40 virtuous circle of hype, unhinged

11:42 tweets, and orange tinted memes.

11:45 As it turns out, alchemy only works as long as

11:48 the audience believes in the magic.

11:51 With Bitcoin sliding, that premium has

11:53 evaporated, and the Alchemist is now

11:56 facing the harsh reality of financial

11:58 gravity.

11:59 For the fourth quarter of 2025,

12:02 Strategy reported a staggering 12.6

12:05 billion loss, driven by the requirement

12:08 to mark its Bitcoin holdings to market.

12:11 Strategy is now in the awkward position

12:14 of running what looks like two different

12:16 businesses.

12:17 One is the Bitcoin alchemist

12:19 we all know who picked up another 2,486

12:23 Bitcoin just last week, but the other

12:26 business is a bit more traditional and a

12:29 lot more expensive.

12:31 To keep the game

12:32 going, the company has issued billions

12:34 in preferred stock with names like

12:37 Stretch, Strike, and Strife.

12:39 These come with high yield dividends.

12:42 The stretch shares currently pay roughly 11 and a4%.

12:47 Usually the plan was to sell stock and

12:49 use 100% of the proceeds to buy Bitcoin.

12:53 But this month, Strategy announced that

12:55 they had established a $2.25 billion

12:58 cash reserve.

12:59 They raised this money by

13:01 selling equity, but instead of buying

13:03 Bitcoin, they're keeping it in a bank

13:05 account to cover the dividends on those

13:07 preferred shares for the next 2 and 1/2

13:10 years.

13:11 When Michael Sailor starts

13:12 hoarding the very dollars he once

13:14 compared to melting ice cubes just to

13:17 pay his lenders, the infinite money

13:19 glitch starts to look like a fairly

13:21 standard corporate refinancing scheme.

13:24 As Bloomberg's Matt Lavine noted,

13:26 selling stock to buy Bitcoin is a great

13:29 story.

13:30 Selling stock to pay interest on

13:31 old loans is considerably less fun.

13:35 Then we have Gemini Space Station

13:38 Incorporated, the exchange founded by

13:40 the Winklvos twins, most famous for

13:43 their band Mars Junction.

13:45 In this photo, you can see that one of them has one of

13:48 those wallet chains, which I pointed out

13:50 before makes no sense for Crypto Bro.

13:53 You're supposed to etch your crypto seed

13:56 phrase on a stainless steel plate and

13:58 bury it in your backyard, not chain it

14:00 to your belt.

14:01 I don't get the impression

14:02 that he's the smart one.

14:05 Gemini went public last September with its shares

14:08 briefly spiking to around $46 a share.

14:12 Since then, the stock has cratered by

14:15 over 80%.

14:16 Recently, hitting record lows

14:18 near $6.

14:20 It hasn't been a great 6

14:22 months.

14:23 The share collapse has been

14:24 accompanied by a wholesale flight from

14:27 the seauite.

14:28 This month they announced

14:29 that their chief operating officer,

14:31 chief financial officer, and chief legal

14:34 officers were all leaving the company

14:36 effective immediately.

14:38 No successor has been named for the COO role.

14:41 Instead, the one with the wallet chain or maybe

14:44 the other one will assume those duties

14:47 himself.

14:48 Less than 6 months after the

14:50 IPO, they're laying off a quarter of

14:53 their staff and exiting markets like the

14:55 UK and Australia.

14:57 According to CoinDesk, they've told UK customers to open an

15:01 account at E Toro so that their accounts

15:04 can be transferred out.

15:05 They've told the press that the reality is that America

15:09 has the world's greatest capital markets

15:11 and America has always been where it's

15:14 at for Gemini.

15:15 This is a bit surprising

15:17 as I pointed out earlier that most of

15:20 the selling pressure seems to be coming

15:21 from the USA.

15:23 Their new grand strategy

15:25 is to pivot to prediction markets.

15:27 They've argued that betting on things

15:29 like elections and the weather will

15:32 eventually outgrow the entire global

15:34 capital markets, which would be a bit of

15:37 a surprising outcome.

15:39 I'd never want to

15:40 get into an argument with them over this

15:42 for fear that they'd come by my house

15:44 and play their music at me.

15:46 I believe that under the Geneva Convention,

15:48 playing a Mars Junction song at high

15:50 volume is classified as a war crime.

15:53 While the twins are busy leaning into

15:55 the vibes of prediction markets,

15:58 something much more ominous is happening

16:00 in the real plumbing of the

16:01 institutional market.

16:03 You see, while the

16:04 collapse of a retail exchange like FTX

16:07 makes front page news, the cracks in the

16:10 foundation of the professional market

16:12 often happen in total silence.

16:15 Earlier this month, BlockFills, a major Chicago

16:18 based institutional prime broker,

16:21 officially confirmed that it has

16:23 suspended all client deposits and

16:25 withdrawals.

16:26 Customers can continue to

16:28 trade, but they can't withdraw their

16:30 money.

16:35 Now, most people have never heard of

16:38 BlockFills, but they act as a liquidity

16:40 provider and lender to about 2,000

16:43 institutional clients.

16:45 They don't have a

16:46 flashy app for your phone.

16:48 They deal instead with hedge funds, family

16:50 offices, and some of the mining

16:52 companies that we'll talk about in a

16:54 moment.

16:55 Their options products are only

16:57 available to investors with digital

17:00 currency holdings of $10 million or

17:02 more.

17:03 Last year, they facilitated over

17:05 $61 billion in trading volume.

17:08 The company's statement cited recent market

17:11 and financial conditions and claimed

17:14 that the freeze was a temporary measure

17:16 to protect clients and the firm.

17:19 While the company has not provided a specific

17:22 reason for the freeze beyond market

17:24 volatility, the timing is hard to

17:27 ignore.

17:28 The announcement followed violent moves in early February that saw

17:32 Bitcoin plunge nearly 25% in a single

17:35 week, briefly touching the $60,000 mark.

17:39 For an institutional lender, this kind

17:42 of rapid price action is the ultimate

17:44 stress test.

17:45 If the value of the

17:46 collateral, the Bitcoin, falls faster

17:49 than the borrowers can top up their

17:51 accounts, the lender can find itself

17:53 with a liquidity mismatch where they

17:55 have assets on paper but lack the ready

17:58 cash to meet withdrawal requests.

18:01 What makes this especially noteworthy is that

18:04 Blockfills isn't some fly by night

18:07 offshore operation.

18:08 They're backed by CME Ventures and Susahana Private Equity

18:12 Investments, some of the most

18:14 sophisticated names in traditional

18:16 trading.

18:17 Historically, in this industry,

18:20 a temporary suspension has often been a

18:23 precursor to a restructuring or a search

18:25 for new capital, as we saw with firms

18:28 like Genesis and BlockFi a few years

18:30 ago.

18:31 For now, Blockville says that

18:33 they're working tirelessly to restore

18:35 liquidity, but this is a worrying

18:38 development.

18:39 If the institutional plumbing is starting to clog, it's worth

18:43 looking at the people who actually keep

18:45 the lights on for the entire network,

18:48 the miners.

18:49 Now, there's a common

18:50 misconception that miners are just there

18:53 to print new bitcoins.

18:55 But in reality, they play two critical roles.

18:58 They're the transaction processors and the

19:01 security guards of the system.

19:03 Every time you send Bitcoin, a minor has to

19:06 verify that you actually have the funds

19:09 and then record that transaction into a

19:11 block.

19:12 In exchange for doing this work

19:14 and providing the massive computing

19:16 power that secures the network against

19:18 hackers, they get paid in two ways.

19:21 Transaction fees and a block subsidy of

19:23 newly minted bitcoins.

19:25 But lately, being a bodyguard for the blockchain has

19:29 become a very expensive and very

19:31 unprofitable hobby.

19:33 The problem is something called hash price.

19:36 For those of you who don't spend your time in

19:38 industrial warehouses in Texas, hash

19:41 price is the industry's way of measuring

19:43 the daily dollar revenue a minor earns

19:45 from their computing power.

19:47 Since the beginning of 2026, it's been sitting at

19:50 record lows, meaning that for many

19:53 operators, the cost of the electricity

19:56 to run the machines is now higher than

19:58 the total value of the Bitcoin and fees

20:00 they collect.

20:02 My friend Ben Jordan, who

20:04 does spend some of his spare time

20:05 outside data centers in Texas

20:08 investigating the acoustic impact of

20:10 these places, explains that the way

20:12 Bitcoin mining works is often

20:15 misunderstood.

20:16 Many people understand that it's set up

20:19 such that the network difficulty

20:21 regulates itself to ensure that miners

20:24 stay profitable, but it's actually an

20:26 autonomous process with rigid

20:28 thresholds.

20:29 The mining difficulty only

20:31 adjusts every 2016 blocks, which is

20:34 roughly every 2 weeks.

20:37 If the price of

20:37 Bitcoin crashes or if electricity costs

20:40 spike in the middle of that window, the

20:43 difficulty doesn't know.

20:45 So the difficulty stays high.

20:47 As Ben points out, the system wasn't designed for

20:50 massive industrial data centers.

20:53 It was designed for hobbyists.

20:55 So while waiting for that twoe window to close and the

20:58 difficulty to ease up, these data

21:01 centers have to either eat a massive

21:03 loss or stop operating entirely while

21:06 their overhead costs continue to pile

21:08 up.

21:09 Ben also highlights that these data

21:11 centers usually buy electricity in bulk

21:14 contracts with fixed prices, which isn't

21:17 as flexible as your metered power bill

21:19 at home.

21:20 It's a bit like if everyone in

21:21 a city bought their electricity in bulk,

21:24 anticipating a massive heat wave, and

21:26 then the heatwave never came, and then

21:29 everyone underordered for the next

21:31 month, and then an unexpected heat wave

21:34 hits.

21:34 The power company can't just snap

21:37 its fingers and increase output.

21:39 This can create a massive mismatch between

21:42 the digital needs of the network and the

21:44 physical reality of the grid, especially

21:47 in places like Texas, where winter

21:49 storms in early 2026 have already forced

21:53 miners to shut down to save the local

21:55 population from blackouts.

21:57 Faced with shrinking margins and a hash price at

22:01 structural lows, some of the biggest

22:03 names in the industry have started

22:05 pivoting from being crypto miners to AI

22:08 data center developers.

22:10 Why spend millions of dollars in electricity to

22:14 solve arbitrary math problems for a

22:16 volatile token when you can rent that

22:19 same power to an AI company for a more

22:21 predictable high margin fee.

22:24 Wall Street is already cheering for this change.

22:28 Morgan Stanley recently initiated

22:30 coverage on miners with massive upside

22:33 price targets.

22:34 They argue that these

22:36 companies should be valued like

22:37 infrastructure reats because they have

22:40 what AI companies crave, time to power,

22:43 meaning that they already have the grid

22:45 connections and the sheds that big tech

22:48 is currently fighting over.

22:50 There is a catch, however.

22:52 If the American miners

22:54 all decide that hosting anime girlfriend

22:57 chat bots for XAI is more profitable

23:00 than securing the blockchain, the

23:02 network itself becomes a lot less

23:04 American.

23:05 Currently, the US has about 37

23:08 12% of the world's hash rate.

23:10 If they stop mining, the power shifts to Russia

23:14 and China, which have not traditionally

23:16 been seen as US allies.

23:18 For President Trump, who promised to make America the

23:21 crypto capital of the world, watching

23:23 the network move to Moscow and Beijing

23:26 while American rigs are busy training

23:28 LLMs would be a bit of an awkward

23:31 outcome.

23:32 Speaking of China, while the US

23:34 is trying to decide if crypto is a

23:37 commodity or a security, Beijing has

23:39 started reminding Chinese citizens that

23:42 they've already made up their minds.

23:45 In February 2026, the People's Bank of

23:48 China and seven other agencies released

23:50 a notice doubling down on their total

23:53 ban.

23:54 This time they specifically

23:56 targeted the latest industry buzzword,

23:59 realworld asset tokenization.

24:02 This is the idea that you can take something

24:04 useful like a building or a lithium mine

24:07 and turn it into a digital token to sell

24:10 to investors abroad.

24:12 Beijing has explicitly labeled this illegal

24:15 financial activity and also banned the

24:18 unauthorized offshore issuance of any

24:21 stable coins pegged to the Chinese one.

24:24 The Chinese government is fiercely

24:26 protective of their monetary sovereignty

24:29 and they view Shadow Wan tokens

24:31 circulating on global exchanges as a

24:34 direct threat to their control.

24:36 While the rest of the world is busy

24:38 democratizing digital assets, China is

24:41 building a wall around them.

24:43 As one commentator put it, it wouldn't be a

24:46 bare market if China wasn't banning

24:48 crypto.

24:49 While the miners are busy

24:51 becoming AI landlords, and the

24:53 institutional plumbing is freezing up,

24:56 the more enthusiastic end of the market

24:58 hasn't disappeared.

25:00 It's just moved house.

25:02 The new big thing is, of course,

25:04 prediction markets.

25:05 Platforms like Poly Market and Kalshi have seen a massive

25:09 surge in volume as traders move away

25:12 from trying to guess the price of a

25:13 memecoin and instead start betting on

25:16 real world events.

25:17 And I don't just mean

25:18 the next Fed rate cut.

25:20 You can now bet

25:21 on things like whether Jesus Christ will

25:24 return before 2027.

25:26 And because this is

25:27 the crypto industry, there's a separate

25:29 derivative market where you can bet on

25:32 whether the odds of the original Jesus

25:34 bet will go up or down.

25:36 Being able to gamble on the rapture obviously makes it

25:40 a bit more exciting.

25:42 Platforms like Cali and Poly Market have seen an explosion

25:46 in volume, recently logging a staggering

25:49 6.3 billion in trading tied to the Super

25:52 Bowl.

25:53 To put that in perspective, that's

25:55 nearly four times the volume of all

25:58 legal US sports books combined for the

26:01 same event.

26:02 And the most incredible

26:03 part, the prediction markets didn't run

26:06 a single Super Bowl ad.

26:08 While DraftKings and FanDuel were spending millions on

26:12 302 spots, Kelshi was becoming the

26:15 biggest brand of the Super Bowl simply

26:18 through the product itself.

26:20 Part of the reason that these platforms are booming

26:23 is that they found a clever legal

26:25 loophole.

26:26 By branding themselves as

26:28 financial derivatives regulated at the

26:30 federal level by the CFTC, they're able

26:33 to operate in many US states where

26:36 traditional sports betting is still

26:38 banned.

26:39 Prediction markets have become a

26:40 way to gamble on football in a state

26:43 that doesn't allow gambling simply by

26:45 calling your bet a swap contract.

26:48 This brings us to what Zeke Fox calls the

26:51 jugalo theory of crypto resilience, but

26:54 with a very important catch.

26:57 Zeke points out that on the surface, Bitcoiners look

27:00 a lot like fans of the band Insane Clown

27:03 Posi.

27:04 They have their own slang, their

27:05 own face paint, the the laser eyes, and

27:09 a shared sense of being misunderstood by

27:11 the normies.

27:13 But Zeke makes a brilliant

27:14 distinction.

27:15 Jugalos are actually more

27:17 honest.

27:18 If you tell a jugalo that the

27:20 music that they like is terrible, they

27:22 don't really care.

27:23 They aren't trying to

27:24 recruit you because your fandom doesn't

27:27 affect their life.

27:28 But in crypto, the

27:30 subculture is a financial pyramid.

27:33 Because there are no fundamentals to

27:35 talk about, no earnings, no dividends,

27:37 no underlying businesses.

27:39 The only way for a believer to get rich is to

27:43 convince other people to become a

27:44 believer, too.

27:46 The crypto subculture isn't just a community.

27:49 It's a global sales force.

27:51 The moment they stop being

27:53 able to recruit new jugalos into the

27:55 tend, the price stops moving and the

27:58 number go up magic trick fails.

28:01 This is where my friend Dimmitri Cafenus's idea

28:04 of financial nihilism fits in so

28:06 perfectly.

28:07 For the younger generation

28:09 who feel that the traditional system is

28:11 rigged and the American dream of home

28:13 ownership is out of reach.

28:15 Treating the world like a casino isn't just a choice.

28:19 It's a survival strategy.

28:21 In the financial nihilist worldview, Bitcoin

28:25 isn't a hedge against inflation or

28:27 digital gold.

28:28 It's just a high lever way

28:30 to yellow your way into a home deposit.

28:33 But as we're seeing, the casino might be

28:35 moving on.

28:36 It's more social to bet on

28:38 the Super Bowl with your friends than it

28:40 is to sit alone in a dark room trying to

28:43 recruit strangers into the digital

28:45 subculture that requires constant new

28:48 donations just to keep the lights on.

28:51 Once the ideological dream of crypto

28:53 dies, you're left just with the

28:56 gambling.

28:56 And as it turns out, the

28:58 gambling industry already has much

29:00 better content than the blockchain does.

29:03 This brings us back to the warning from

29:05 NYU's Azoderan.

29:08 The great irony of the last two years is

29:11 that by getting exactly what they

29:12 wanted, the ETFs, the institutional

29:15 respect and a crypto president, crypto

29:18 enthusiasts might have accidentally

29:20 killed the very thing that made Bitcoin

29:22 special.

29:23 Deodorant points to real estate

29:25 as a cautionary tale of

29:27 financialization.

29:29 For decades, he points out, real estate

29:31 was the king of uncorrelated assets.

29:34 If you owned a physical apartment building,

29:36 its value was mostly independent of what

29:39 the S&P 500 was doing on a Tuesday

29:42 afternoon.

29:43 It was driven by local

29:45 housing demand, local rents, and

29:47 physical scarcity.

29:48 But then came the

29:49 financialization of the sector through

29:52 real estate investment trusts and

29:54 mortgage back securities.

29:55 Suddenly your real estate wasn't just a building.

29:59 It was a liquid tradable ticker symbol.

30:02 And the moment it became easy to trade, it

30:05 started behaving exactly like everything

30:07 else.

30:08 Today the REIT market is highly

30:10 correlated with the stock market and

30:13 sensitive to financial flows, market

30:16 sentiment, and so on.

30:17 By making it part

30:18 of the system, it became subject to the

30:21 systems risks.

30:23 we might start to see the

30:24 exact same thing happen to Bitcoin.

30:26 For years, the dream was this idea of

30:29 decoupling.

30:30 The idea that Bitcoin would

30:31 be the one thing that stood tall while

30:33 the rest of the world burned.

30:35 But now that it's plugged into the plumbing of

30:38 Wall Street through ETFs, futures, and

30:40 options, that dream might be dead.

30:43 The moment a hedge fund can sell Bitcoin as

30:46 easily as they can sell Apple stock to

30:48 cover a margin call, Bitcoin becomes

30:51 systemically linked, it's now affected

30:54 by the same interest rate shifts, the

30:56 same risk appetite swings, and the same

30:59 liquidity drains as a grocery store

31:01 chain or a toothpaste company.

31:04 Looking forward, even if this crypto winter ends

31:07 and Bitcoin finds a new stable level, we

31:10 have to ask, will it ever be an

31:12 independent asset again?

31:14 Or has it simply become a high beta non-ividend

31:17 paying tech stock that we've

31:19 collectively agreed to call digital

31:21 gold?

31:22 If Bitcoin is not a currency, not

31:24 a particularly good inflation hedge, and

31:27 it's now tethered to the very financial

31:30 system it was designed to replace, then

31:32 what is it?

31:33 It's a collectible.

31:35 And as we know, the price of a collectible

31:37 depends entirely on the mood of the next

31:40 person in line.

31:42 Right now, that person

31:43 is looking at their S&P 500 returns are

31:46 looking at a gambling app on their phone

31:49 and starting to wonder if crypto was

31:51 just a very expensive ticket to a party

31:53 that ended years ago.

31:55 If you found this

31:56 video interesting, you should watch my

31:58 video on whether Open AI expects a

32:01 government bailout next.

32:03 Don't forget to check out our sponsor incogn using the

32:06 link in the description.

32:07 See you in the

32:08 next video.

32:08 Bye.

32:13 [music]