Onchain Data w/Checkmate
Summary
TLDRThe transcript discusses the recent all-time highs in Bitcoin's value across different countries, suggesting currency debasement against the USD. It highlights the importance of understanding Bitcoin as an international asset and the impact of market fluctuations on retail investors. The conversation emphasizes the significance of on-chain data in analyzing market psychology and the potential for ETFs and new market dynamics to influence Bitcoin's future. The speaker shares insights on Bitcoin's organic growth, the role of human psychology in its price movements, and the potential for ETFs to bring new dynamics to the market.
Takeaways
- 🌐 Cryptocurrencies like Bitcoin and gold are reaching all-time highs in various countries, reflecting currency debasement against the USD.
- 📈 The speaker monitors Bitcoin and gold prices in Australian dollars, highlighting the impact of currency fluctuations on asset values.
- 📊 There's a noticeable market cap all-time high for Bitcoin, ranking it among the top global assets.
- 📉 Silver is experiencing a tough day, but the speaker suggests that Bitcoin's price milestone of 100k USD could be a significant psychological marker.
- 🚀 The 2022 down cycle in the market was damaging, leading to retail investors being more cautious and possibly preventing them from participating in the current market.
- 🔄 The concept of unit bias is discussed, emphasizing the importance of focusing on percentage gains rather than price and the role of passive investment flows.
- 📝 On-chain data is considered valuable for understanding market psychology, but its reliability depends on the quality of the analyst interpreting it.
- 🧠 Bitcoin is seen as a reflection of human psychology, with its price movements being influenced by fear, greed, leverage, and capital.
- 🔄 The speaker suggests that if traditional financial assets had block-level data, similar patterns of human behavior would emerge.
- 🔄 The introduction of Bitcoin ETFs and other financial instruments will bring new dynamics to the market, but their impact on on-chain data is yet to be fully understood.
Q & A
What has been happening recently with Bitcoin and other countries' currencies?
-Bitcoin has been hitting all-time highs in different countries, indicating that their currencies have been debased against the USD.
Why is the speaker looking at Bitcoin and gold in Australian dollars?
-The speaker is looking at Bitcoin and gold in Australian dollars because these assets are tradable in every currency and serve as an international benchmark.
What does the speaker notice about the British pound, Euro, and Bitcoin's market cap?
-The speaker noticed that the British pound, Euro, and Bitcoin's market cap have all reached all-time highs, with Bitcoin being the 7th largest global asset.
What is the significance of Bitcoin reaching an all-time high of 100k USD?
-Reaching 100k USD is a significant psychological milestone for Bitcoin, and the speaker believes it will lead to increased mainstream media attention and public interest.
How did the 2022 down cycle affect retail investors?
-The 2022 down cycle was damaging for retail investors, many of whom got burnt and may now be unable to afford Bitcoin at its current prices.
What is the role of unit bias in Bitcoin investment?
-Unit bias refers to the focus on the price per unit rather than the percentage gain. The speaker believes that re-educating investors about this concept is crucial for understanding Bitcoin's value.
What does the speaker think about the future of passive investment in Bitcoin?
-The speaker believes that passive investment, where people allocate a certain percentage of their portfolio to Bitcoin regardless of the price, will be a significant driver of future demand.
How does the speaker view on-chain data in relation to Bitcoin?
-The speaker views on-chain data as a reflection of human psychology within the Bitcoin market, providing insights into investor behavior through transaction patterns and other metrics.
What is the speaker's perspective on the reliability of on-chain data?
-The speaker believes on-chain data is reliable when interpreted by skilled analysts, as it provides nuanced insights into market dynamics and investor psychology.
How might the introduction of Bitcoin ETFs affect market dynamics?
-The introduction of Bitcoin ETFs could bring new dynamics to the market, such as quarterly rebalancing and seasonal performance effects, but their impact will depend on the percentage of the coin supply they represent.
What does the speaker suggest about the market's response to completed cycles?
-The speaker suggests that as investors complete cycles, they may experience compound growth, leading to meaningful amounts of capital that can be used for significant purchases or investments.
Outlines
🌐 Global Currency Highs and Market Insights
The speaker discusses the recent phenomenon of various countries hitting all-time highs in their respective currencies, highlighting the debasement of the US dollar. They mention observing these effects by looking at assets like Bitcoin and gold in different currencies, emphasizing the importance of understanding international currency dynamics. The speaker also reflects on their initial struggles with currency conversion in the industry and how they've developed a deeper understanding over time. The conversation touches on the significance of Bitcoin's price reaching 100k USD as a psychological milestone and the impact of past market cycles on retail investors' behavior and affordability.
📊 On-Chain Data and Bitcoin Psychology
This paragraph delves into the significance of on-chain data in understanding Bitcoin's market behavior. The speaker argues that on-chain data reflects human psychology, as it captures every transaction and decision made within the Bitcoin network. They discuss the importance of the quality of analysis behind on-chain data interpretation and how it can reveal patterns of human behavior, such as fear, greed, and leverage. The speaker also introduces the concept of 'SOAPA' (sum of all profit and loss), comparing it to the funding rate in futures markets, and suggests that on-chain data can be a reliable indicator when interpreted correctly. They conclude by discussing the potential impact of ETFs and other market structures on the interpretation of on-chain data.
💡 Bitcoin's Market Cycles and Capital Reallocation
The speaker explores the concept of Bitcoin's market cycles and the impact of capital reallocation on individual investors. They discuss the idea that as investors complete cycles and accumulate more capital, they may choose to release some of that capital for personal use, such as buying a house or a car. The conversation also touches on the potential for new buyers to enter the market, which can absorb the capital outflow from experienced investors. The speaker anticipates that the upcoming cycle will be interesting due to the introduction of ETFs and other financial instruments, which may bring new dynamics and seasonality to the market, but also notes that these changes may not significantly affect the overall market structure in the long run.
Mindmap
Keywords
💡All-time highs
💡Debasement
💡Bitcoin
💡Unit bias
💡On-chain data
💡Psychology
💡ETFs (Exchange-Traded Funds)
💡Market structure
💡Leverage
💡Cycle
💡Re-education
Highlights
All-time highs in different countries indicate currency debasement against the USD.
Bitcoin and gold are assets that can be traded in every currency, making them useful for international comparisons.
The speaker has been studying data and markets full-time, noticing effects of currency devaluation on asset prices.
The British pound, Euro, and Bitcoin have all reached all-time highs recently.
Market cap of Bitcoin has also reached an all-time high, ranking it as one of the top global assets.
The speaker recalls the significance of Bitcoin's price milestones, such as $1,000 and $10,000, and anticipates a similar impact when it reaches $100,000.
The 2022 down cycle in the market was damaging, and many retail investors were burnt, which may keep them away.
The unit bias is a significant factor in Bitcoin investment, with many focusing on percentage gains rather than price.
Passive investment flows and ETFs are becoming more important for Bitcoin exposure.
On-chain data provides insights into human psychology within the Bitcoin market.
The quality of analysis is crucial when interpreting on-chain data, as it is nuanced and new.
On-chain data reflects every transaction's fingerprint, offering a rich dataset for market analysis.
Bitcoin's price movements are organic and reflect human responses of fear, love, fear, and leverage.
The speaker believes that on-chain data is reliable when used by skilled analysts.
Bitcoin is seen as a perfect free market, with its data reflecting human psychology.
The cost basis pricing model for Bitcoin is constructed to represent the average value over time.
If traditional markets had block-level data, similar patterns to Bitcoin would likely emerge.
The compound growth of Bitcoin investors across market cycles leads to meaningful capital and new opportunities.
ETFs and other financial instruments will bring new dynamics and seasonality to the Bitcoin market.
The impact of ETFs on Bitcoin's market structure and on-chain data will depend on their proportion of total supply.
Transcripts
another interesting thing that's been
happening I think recently is that we've
been in hitting alltime highs in
different
countries yes and every country we've
hit alltime high before the USD just
proves we've been debased against them
like the British 100% I've actually
noticed myself that um when you look at
either Bitcoin or gold or whatever asset
because they're they're the kind of
assets to trade in every currency right
I'm not looking S&P 500 in AUD but I am
looking at B coin and gold in Australian
dollars because it's it's it's an
international currency for many regards
and you do notice those effects like the
more time you spend looking at this
stuff and particularly me I'm spend all
time studying data and markets and
what's going on I remember when I first
got into this industry and you're trying
to do ratios to understand like what
what's like fractions with shitcoins and
Bitcoin you can't get your head around
it's the first time you've done like
live fire currency conversion but now
you can see it and you can actually get
a feel for hang on a second when not at
all all time high in that currency but
we are in mind that just shows that the
AUD has gone down versus the the US
dollar yeah exactly I mean we had the
British pound I think the pound and the
Euro uh alltime High yesterday yes we
also have the we also had a market cap
alltime high as well right yes it's over
Silvera actually so it's it's number
seven I think in the world in terms of
global assets um so poor old silver is
having another Another Bad
Day interestingly though I I've only had
a small handful of the phone calls or
the texts from people saying yeah like
two or three I think we have to get over
the alltime high and get the mainstream
media just going crazy about it I I
actually think it might even be once it
goes over 100k because I think that 100K
data point is just it's just huge it's
like this huge marker I mean I remember
back in
2017 when we went over
$1,000 I remember that clearly and I
know we'd been over it before I think we
Wicked over in didn't we get 1,200
previous cycle yeah 2013 then I remember
10,000 now I think 100,000 like
USD I think that's going to be a big day
and I think that's when the phone calls
will be the the only difference this
time is I think a lot of people go just
can't afford it this time yes no I think
there's there's a few layers to that
right I think a lot of people if you go
to the retail side I think people
underestimate how damaging La the 2022
down cycle was because it like you know
if you buy a shitcoin and it goes down
90% 99% it's painful if you buy anything
or Bitcoin and it goes to zero because
some guys are scammer that's a real
painful like that's that's a zero that's
return of capital not return on Capital
so I think um people got really really
burnt in that cycle um so I think that's
definitely a component that keeps retail
away but I I think the the unit bias is
definitely part of it and I think that
for for Bitcoin it's going to really be
about the passive flows now I want to
have exposure it's x% of my portfolio I
don't really care what the number is um
I'm buying a $45 ETF all I really care
about is give me that 1% allocation I
think that's going to be where a lot of
this comes from now well it's it's a
process of re-education now in helping
people understand that unit bias
understand it's about gains percentage
wise not price I also I could also see
some of the exchanges flipping to start
just pricing stats I think so yeah no I
I've always wondered that just as like a
product developer you you'd be wise to
at least have the option and just see
how people respond to it right let
people toggle between the two and um see
if you get different different effects
yeah yeah all right man well listen look
I know you got some charts for us
looking forward to this do you want to
run through it yeah no I mean we started
talking about the the shrimp I can't
remember if it was like slide two or
three um Danny but there's one with with
shrimp bounds which I think is actually
a pretty nice nice place to start well
let before we get into this like we're
clearly we're clearly covering onchain
data uh there are different opinions on
onchain data some people's like it's
like Voodoo some people like it's
nonsense some people think it's good
like how much can we rely on on chain
data that's a great question um the
truth is it depends who's interpreting
it right like like ta how many ta charts
do you scroll past you you never go back
and be like hang on a second this guy
was dead wrong um like anything it's the
it's it's the quality of the analyst
behind it that that makes all the
difference um at the end of the day what
is on chain data and and the lens that I
come at from is I mean it's not unique
but it's it's certainly something that
I've tried to Pioneer and push forward
is it's all about psychology right
Bitcoin is and we all know this it's a
very organic creature it it captures
something that no other even when you
look at the price chart there's just
something very organic about it
everything comes in twos you get like
two pumps or two rounded tops or two
triangles in 2017 19 there's just
something about it that's quite
structural and my lens over the top
is because it's the most hated and loved
and feared and revered asset ever right
it justs people up on both sides you get
a very human response and my lens is
that it's essentially human psychology
right what is price price is fear and
greed coupled with a bit of Leverage and
capital um plotted Against Time onchain
data is just all of that information
baked into the Bitcoin Ledger every
decision you make um every transaction
you send look there's people who will
say that all the trading happens on
exchanges um I did some calculations the
other day on any particular day between
30 and 60% of the spot trading volume is
occurring in inflows and outflows to
exchanges by deposits and withdrawals
like billions of dollars a day and every
particular the inflows every single one
of those transactions has a fingerprint
did it come from a guy who's held it for
two years is he locking in big profits
is he bailing out in a fat loss um and
when you aggregate all this stuff
together there can be error bars around
the individual but in aggregate it
actually tells you what humans are doing
and one of my favorite charts because I
get this question a lot I'm talking
institutional clients they're trying to
they're coming from a traditional
Finance world they're trying to get
their head around why are they should be
looking at or considering onchain and
when you plot one of the metrics that I
love to use which is called soapa it's
it's how much profit or loss people are
locking in it's the exact same chart as
funding rate so you're measuring the
leverage and the amount of directional
um um leverages in Futures markets and
it looks exactly the same as the amount
of profit or loss the people are locking
in in spot and what that's telling you
when you've got lots of guys locking in
big profits some other gu is paying a
huge funding rate and going lever long
at the top so they're telling you the
same story and there's so many of these
analoges where different data points
tell you the same thing um so look in my
experience I think it's reliable but it
does depend whose hands it in because
it's it's nuanced it's new there's lots
of jargon there's lots of headlines
where like people read the the title of
the and they don't actually what it's
doing oh cool this says it's Wales it's
like yeah but it's you got to understand
what that actually means when talk about
Wales so do you think do you think in
some ways Bitcoin is almost like the
perfect free market and it yes it's it
the data is telling you uh it's like a
replay of human psychology yes and and
the metric I was talking about before
that pricing model that's dead in the
middle which um Dave and I we spent a
lot of time working through it at a like
very fundamental level like by the way
way it's constructed and measured and we
didn't know this was the case we just
kind of discovered it I put it in the
bucket of a discovery rather than
invention um it it it's constructed to
be the the cost basis but then we ran a
very longterm what is the average value
and what is the median value as price
oscillates around it it was one and one
now in a statistical sense that means
it's literally dead center on the
average basis and it's also dead center
when you look at like how many
observations there are so it is very
organic and these things that come from
first principles then appear to actually
be in the middle and I reckon I like if
gold and the S&P and all this had Block
Level data you could see what was going
on every 10 minutes and you just
aggregate it I guarantee you'd see all
this stuff the same because you know
it's why price charts in the 1920s look
exactly the same as now one of the
things I've always been interested in as
well is that with these markets
replaying the same every kind of cycle
is that you you do have a bunch of
people who maybe have completed their
first cycle maybe their second even
their third and if you're even your
second and your third you've got that
interesting kind of compound growth like
if by your second cycle say you had a
million in Bitcoin and then the next
cycle you had like five million you
start to see like meaningful amounts of
money and thinking about things you
could do with that maybe you buy your
parents a house or a car or have a
holiday and so you have to release some
of that Capital to do those interesting
things that you just could not do before
and if the Cycles are replaying the same
there's enough new buyers coming in the
market to soak up the E the outflow of
capital from those
people absolutely and and I think that's
what this cycle is going be really
interesting for right lots of folks are
saying oh look these ETFs are going to
take coins off chain so therefore the
the data is going to degrade and it's
like well how many analysts when they're
analyzing the global economy only look
at money moving around on one system
right if money is moving around the ETFs
you study the ETFs if money starts
moving into lightning then you add that
layer on lightning um with exchanges do
you filter them out do you keep them in
you know this this is the value of this
stuff it's like you know how do you work
out what matters and these ETFs they're
going to bring all sorts of new Dynamics
like rebalancing quarterly performance
there'll be all this seasonality that
will come into it but we're already you
know we're only talking about single
digit percentag of the coin Supply so
whilst it's very meaningful right now
it's because it's coming from zero right
we're going from zero to a couple of
billion once it's a you know 50 billion
which is the size of gold and I saw a
chart the other day I think we're
actually 50% of the gold ETFs already
which is uh pretty pretty brutal but um
you know once we get to these meaningful
size the ETFs will kind of hit a
saturation is kind of level where it
starts having more of the rebalancing
flows you know you can't have half a
mill half a billion dollars every day
forever um maybe you can we'll find out
but you know it's one of these
interesting Dynamics where we're going
to see how Market structure shifts as a
result but it depends it may cap out at
you know 5 6 7% of all Supply and that's
not really enough to kind of move the
the needle in some ways we'll find
out
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