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Institutions are different in that they don't like to chase price. They understand that markets go through ups and down cycles.

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So in my view, they're gonna sit there and they're gonna wait until the price is right, and they're gonna buy in, and people aren't gonna see it.

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Crypto Twitter is gonna be as bearish as they ever are, and they're gonna sell the bottom, and it's gonna be the exact same as every single previous cycle, and the smart money's gonna come in and take it running.

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And what I think is really different is the allocators who buy in this downturn, they're not looking for a ten percent move. These are gonna be like just forever allocators, where they just put it away.

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And the mar-- Once the market finds that level, we've built a floor at a significantly higher price with a whole new like... I've been calling it the great rotation.

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The old hands who've been around since like twenty ten, they've finally been able to exit their ten thousand Bitcoin positions for the first time ever and not have the Feds up their ass for suddenly having a billion dollars in the bank account.

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So they've been able to exit, and these new entities who are relatively price insensitive because they're just so big, they're actually on the buy side. So I think it's just a real switching of the guard.

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Um, so the market moving forward will be different to the market. And I think we're in this like estuary between like the old crypto Wild West and what is gonna be a new, much more institutionalized asset.

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Welcome back to the Blockspace Podcast, brought to you by CleanSpark. If you're enjoying this podcast, please leave us a five-star review on whichever podcasting app or platform you are listening on.

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It helps us out a lot and takes less than five seconds. If you're listening on Spotify, there's a little wheel at the top you can click to rate.

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And if you're on Apple, you scroll down to the bottom of our feed, and you'll see a spot to leave a review. Again, thanks so much. This helps us out a lot. Now on to the show. Howdy, y'all. Charlie here.

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Watch our new documentary, The Bitcoin Professor, featuring StarkWare co-founder Eli Ben Sasson, as he and I hit the road to meet with real Bitcoiners in the American heartland.

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We visit a Bitcoin mine, a Bitcoin cattle ranch, and a local Bitcoin meetup. Discover how Eli and StarkWare are building tools to supercharge the Bitcoin economy. Watch the full documentary today on our YouTube channel.

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Link's down below in the show notes. Welcome back to the Blockspace Pod. I've got James Check Checkmate, co-founder of CheckonChain, in the house today.

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He's gonna tell us definitively without a shadow of a doubt whether we're in a bull or a bear market. Obviously, I'm not serious about that. He is an analyst, longtime analyst. Welcome to the pod, James.

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How you doing, mate? Oh, mate, we're definitely in a bear market. Look at the price. [laughs] Terrible. It's, it's all over. Yeah. Bitcoin's dead once again.

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I mean, if you check the news, everybody's talking about AI, which that's fun, but my money's in Bitcoin. Um, and this is one of your first pods back in a while.

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I think you've kind of laid low, enjoyed your holiday, but I have to ask you, be honest, were you able to unplug during your, uh, well-deserved holiday break? Yes.

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And pro tip to everybody out there, just delete X from your phone. I've done it for like six months, and I'll tell you what, it's fantastic.

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I, and I, I log in like every so often on the-- on desktop to just see what's happening. I'm like, "It's the same shit. Nothing's happening. I'm, I'm, I'm good. I'll come back in two weeks time." Yeah.

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And, you know, maybe we'll at the end of this we'll, uh, get into just general commentary on X.

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But I wanna kick this off with like you've-- it's been a little while since you've done some public commentary, I mean, maybe a month or two. Um, Bitcoin, fun, interesting price levels, got a lot of people on edge.

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Give me an overview of what you see as the current market structure for Bitcoin right now. Yes. So I think the...

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If we just summarize what happened in twenty twenty-five, uh, I would say there's two things that really stand out to me. One is everything else ran except Bitcoin.

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So, you know, the first part of the year was actually pretty good. Bitcoin hit multiple new all-time highs. Sure, they weren't as high as people probably wanted, but Bitcoin was performing alongside everything else.

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And as we came into October, we got a very meaningful divergence, and that has more or less stayed in, in place. I think the S&P hit a s- uh, all-time high yesterday. Uh, we had the, uh, gold hit a new all-time high.

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Silver's gone a tremendous run. So I would say that the, the feelings a lot of people have is FOMO for other things, right? The... And, and by the way, just, just take a moment.

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This is literally how the rest of the world feels about Bitcoin every single other year. So the feeling that you're having right now is what gold bugs have felt for seventeen long years. They've given their pump.

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So that's the first thing.

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I think that sentiment of like watching something else go, and that's actually a very interesting dynamic because psychologically, from a market perspective, there's two ways that-- I mean, there's three ways is there's major pain in markets, all amplified by leverage.

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First one is down, right? Price goes down, it just sucks. The other one is time pain. It just takes a long time for some things to resolve, and you get frustrated, and you sell.

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But actually, like they've measured which one is more painful, it's actually FOMO. Wishing that you were on a train that you're not on. And that is actually why I think sentiment took a really big hit.

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And I would just throw in there some extra spice of people got slaughtered in treasury companies.

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People thought that was gonna be the, the ticket to Valhalla, and it turned out to be just another shitcoin that went down quite savagely, right?

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There'll be phoenixes that come out of the ashes for sure, but I think that component is really important. Now, the other thing in twenty twenty-five is the sell side. There was just so much sell side.

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Uh, we can debate and try and work out why they did it. Um, you know, I've heard stories about, oh, Puerto Rico in fi- you know, twenty fifteen, all these old whales. There's all these... It doesn't matter.

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Lots and lots of old coins and momentum traders. So if we think about, uh, we use the term long-term holder supply, uh, it's everything over five months.

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And it-- Like people can argue whether it is or isn't a long-term holder. Take that away. If you've held an asset for five months, there's opportunity cost.

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I don't really care if a dude buys a coin and transacts tomorrow. It doesn't really matter.

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But if you've held it for five months, you've taken some amount of price exposure, so it's enough time, and statistically speaking, it is. There's enough time that people have now been invested.

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They are a serious investor in Bitcoin. Momentum traders exited because they want to move something else. A lot of OG whales, a hundred K was just their price. Um, we saw, you know, Mr. Eighty Thousand Bitcoin.

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There was just a ton of sell side. And that sell side, it takes time to digest because the guy who bought itMay not exactly be the guy who holds it at the end of the day.

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He's gonna trade it to someone else, and he's gonna capitulate because of time, down, FOMO, whatever it is. Um, so as we come into 2026, I think we're digesting what has been a tremendous amount of sell side pressure.

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Um, but if you actually just... And I'm writing a piece on this today.

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If you really look at where Bitcoin price is right now, I'm actually gonna title my piece Dead Center, because we are right in the middle of choose your valuation model.

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You wanna do it based on mining, you wanna do it based on people's cost basis, you wanna do it based on power laws, like, choose your weapon. Everything... Bitcoin is right in the middle.

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And by the way, if you think about statistics, it's all a big bell curve, right? Everything is mean reverting. Bitcoin is in the middle of the bell curve. What is it-- What else is in the middle of the bell curve?

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Literally all the other days. So it-- this is, like, the most normal place for us to be. So I would, I would say right now, this, like, 90K, let's just say 90K for easy numbers, by every metric, that is fair value.

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That is the fair value for Bitcoin. Now, as we know, as Bitcoin is, it belongs above fair value because it's heading higher, right?

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It's, it's, it's got the properties to exceed that, and that fair price keeps going higher. But right now, we are dead center. There's no gravity in either direction. We're smack in the middle.

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You touched on a bunch of things which I'll double tap and circle around on, like treasury companies, long-term holders. I think ETFs are a really interesting one- Yep... for you as an on-chain analyst.

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Um, mate, let's just do ETFs then. I mean, so, like, you cut your teeth and kind of grew up and really wrote a lot of the, the, the playbook on the on-chain analyst game. ETFs complicate that, I feel.

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I guess, like, what's your take? Like, do ETFs make, uh, uh, on-chain analytics, uh, more difficult?

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Or how do you, like, how do you, how do you interpret the new regime of, like, data that we can find out publicly, uh, from this new major market participant?

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Um, no, they actually make it easier, and, and let me explain why.

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So I wrote a piece a little while back called The Exchanges Are Running Out of Coins, exclamation mark, because how many times do you see on Twitter some dude's posting, "Oh, look, exchanges are running out of coins."

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And they're always at two and a half million because there's data errors and blah, blah, blah. So my case was, what is an ETF? A- as, like, if you're an on-chain sleuth, what is an ETF structurally?

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It's a big pool of coins, and then they trade around off-chain the inside. What is Binance? It's a big pool of coins that trade around... It, it's the exact same thing.

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So the exchanges are significantly larger than the ETF, so, like, the people have been saying, "Oh, the ETF break all this data."

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It's like, well, the data worked before the ETFs, it kinda works after the ETFs, and that's because it actually do- none of this matters. So, uh, from my perspective, the ETFs have actually given us another lens.

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So what I love about on-chain data is, a- and having tested this for many, many years, people love to focus on the nuances. "Oh, that's not really a sale. That was just me moving my coins from A to B."

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That is true of all data in all markets always. Like, not every trade of Tesla is a real sale. It's a wash sale, it's a tax loss harvest, it's a, a moving bet-- you know, between entities.

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This, this stuff happens all the time. Markets are full of incomplete data.

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But the beauty is when you look at the individual, yes, there's gonna be error bars around them, but when you do the big aggregates, it actually doesn't matter because for every dude who's taking a tax loss harvest, another dude is taking profit because he's moving to his different brokerage account.

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So they all just seem to balance each other out. And there's other components, which is we look at metrics that are spent and unspent, coins that are moving and coins that are not.

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The ETFs by and large don't move that much. What really matters is the inflows and the outflows.

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So what is really cool about the on-chain data side of things, I like to view all data as a survey of different parts of the Bitcoin population.

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If we look at the ETFs, we see the biggest inflows at the top, we see the biggest outflows at the bottom.

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When we look at the futures market, we see the biggest funding rates at the top and the, the lowest funding rates at the bottom.

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When we look at on-chain data, we see the biggest profit-taking at the top and the biggest loss taking at the bottom.

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So when you see all of these three things line up, and they do, at the right time, you're like, "That's telling me that the, the buyers in the ETFs are doing the wrong thing, the buyers in the degenerate futures exchange are doing the wrong thing, and the guys on-chain are taking big profits.

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What am I gonna do? I'm gonna do what the smart money's doing and, like, piece this all together."

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So what the ETFs have actually done is just give us another lens of, or a sector of the market we can survey and compare it to the other sectors of the market and say, "Are we getting a very consistent, coherent story?"

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And, like, ninety-nine percent of the time they speak the same language, and that gives you a lot of confidence as an analyst.

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So yeah, that, that, that's insightful and, uh, 'cause a lot of these are regulated entities, we-- they- there's a little more transparency in their public filings and...

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But, you know, you know, given that we've got ETFs and they've been buyers largely since genesis- Yep... until, I think, if I'm, if I'm looking at the data right, until recently.

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The past month or two has been a period of outflows for ETFs. How do you interpret this? And then I guess, are the ETFs still in the driver's seat for Bitcoin price? I, I know. Yeah, yeah. What's your take on this?

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So, so the ETFs, there's two ways to look at this. We've seen about six and a half billion of outflows over the la- let's just say, uh, since November, I would say.

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So at six and a half billion, it's the biggest, uh, absolute value of outflows. Price is down thirty-five percent from the all-time high.

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The total AUM i- in Bitcoin terms held in the ETFs is down, like, I think, I think the AUM is down, like, four percent or three percent, and if you look at it on a dollar in versus dollar out, like a dollar flow basis cumulatively, that's down, like, nine percent.

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So that six point something billion is, like, nine, ten percent of the total that's gone in.

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So price is down thirty-five, total AUM is only down three or four, and that's because a lot of those inflows were at much lower prices.

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At sixty percent, if you price every inflow to the ETFs, sixty percent of the inflows were at a higher price, so they're underwater in theory.And yet we're seeing single digit outflow volumes.

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And then here's the, the kicker to the whole thing. When you overlay how much CME open interest, so the futures exchange for regulated entities, when you look at how much the open interest has changed, guess what?

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Six and a half billion worth of open interest has declined. This isn't investors who bought Bitcoin directionally, and they wanna be long, and they're saying, "Ah, the thesis is busted and I hate this thing."

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This is act- in my opinion, a lot of this is just a very technical, it's the end of the year, coming into twenty twenty five, I'm gonna close... I'm a hedge fund.

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I wanna close out my CME basis trade where I'm long spot via the ETF, short the futures. I'm gonna close that position out, um, put a nice little P&L statement on my thing, send it out to investors.

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"Look, I made you twenty-five percent or ten percent, and then I'm gonna rethink what I'm gonna do in the next year."

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So a lot of those outflows are actually, in my opinion, very, very technical and like mechanical part of the basis trade.

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So, um, that's not to say that it doesn't impact price because the ETFs are less liquid than the futures are, so the sale of the ETF to exit that position can be a, a bit of a weight on price.

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But I don't think we're seeing like, "Get me out of this thing."

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In fact, I- if I was to describe the ETFs, I've been calling them the extraordinary ETFs because they just keep hoovering up coins, and they don't seem to be like these...

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You know, the original thesis, uh, was they're orange poker chip holders, right? It's just gonna be TradFi guys coming in and just playing in the casino. No, no, no.

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It seems to be people who buy the ETF are just like dollar cost averaging, stacking away. Could be retirement accounts, um, could be institutions who just don't care, and they're just buying.

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They'll-- It's like.01% of their portfolio. Who cares if.01% of your portfolio goes under.05%? They just rebalance, and it's like an irrelevant speck in their, in their P&L statement.

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So for the most part, I don't think the ETFs are actually bearish in any way, shape, or form. I think it's a very constructive sign. Yeah. You, you ma- you bring up a good point.

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Like, the ETFs are a very different market participant than I think we've seen. Um, like I think about my dad, right? Been trying to get this guy to buy Bitcoin for forever. Oh, yeah. He's not opposed to it.

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But that, that iBit, you know, DCA buy is so easy for him. I'm curious, like you look at the data a lot.

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Do you ever talk to folks, like just interviews, like who are like the typical ETF buyer, and like what's your takeaway? What, what do you hear from those folks? Yeah.

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So the last time I ran a study, which granted is a little bit out of date, something I did into a... need to refresh. But the last time I looked at it would've been probably this time last year, I think.

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Yeah, it probably would've been the end of '24, start of '25. Uh, and I basically looked at the makeup of the ETFs, and it was like twenty percent institutions, eighty percent retail.

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So I think a lot of the ETFs are literally sat stackers who suddenly just wanna put it into their stock portfolio as well. Probably got a big spot corn bag, and they just wanna keep adding it to it, uh, via the ETF.

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Maybe they wanna lever it up. Uh, maybe they just wanna have it in their brokerage as part of their collateral system. There's all sorts of reasons why people do this. But, um, also retirees.

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Re- like my old man's the same story, like getting him to actually buy spot Bitcoin and also just like having to deal with it if anything goes wrong, like there's just, there, there's so many curve balls.

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Um, uh, here in Australia, we've got, uh, um, self-managed 401(k)s called self-managed super funds.

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Uh, and a lot of people there, it's like for me, it was literally easier than me having to deal with like all the accounting and the auditing and all that stuff to having spot Bitcoin.

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Whilst you can do it, I also kinda wanna diversify my custodies, like if anything does happen to me, my retirement account just gets packaged up and, and moved.

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So the ETFs are actually a much better option for me in that front as well. I've got too much other stuff on my plate. So I think there's a lot of people out there who it-- The convenience is a very, very real thing.

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Uh, so I actually think a lot of Bitcoiners are using the ETFs as well. Um, now the other way to look at it is the twenty percent of the institutions, and these are the ones that have got to file their...

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I forget the name of the form, but um, they've basically got to file and say like, "Here's the amount of assets that we have." And my study of that basically showed there was two different buckets.

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It's like a big sliding scale, but you've got the smaller institutions, right? These are like $100 million AUM firms. Some of these entities are like five percent, ten percent.

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Some of them are 100% because they're clearly like a Bitcoin long fund. But like we're talking about single digit percentage points as like Bitcoin allocation.

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And then you go up to the, the other end of the spectrum, the trillion dollar, the $100 billion asset managers, and they've got.0001%. And that is like, you know, $10 million.

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And I'm like, what happens if these guys wind up to.0002 or.05? You know what I mean? Like suddenly you're talking about hundreds of millions of dollars that start flowing in.

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So in my view, we just haven't really seen...

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Like I called that piece dipping a toe because it really is institutions like, "I'm gonna put the, the smallest hair of my little toe in and just like see what this thing is."

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And now they're kind of watching the market that, you know, they're gonna get a feel for these things. And institutions are different in that they don't like to chase price.

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They will wait for the right opportunity, and they will buy when it is dire. They understand that markets go through ups and down cycles.

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So in my view, they're gonna sit there, and they're gonna wait until the price is right, and they're gonna buy in, and people aren't gonna see it.

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We're gonna be as bear- like crypto Twitter's gonna be as bearish as they ever are, and they're gonna sell the bottom, and it's gonna be the exact same as every single previous cycle, and the smart money's gonna come in and take it running.

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And what I think is really different is the allocators who buy in this downturn, they're not looking for a ten percent move.

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These are gonna be like just forever allocators, where they just put it away, and the mar- once the market finds that level, and it will, once it finds that level, like we've built a floor at a significantly higher price with a whole new...

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Like I've been calling it the great rotation.

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The old hands who've been around since like 2010, they've finally been able to exit their 10,000 Bitcoin positions for the first time ever and not have the feds up their ass for suddenly having a billion dollars in the bank account.

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So they've been able to exit, and these new entities who are relatively price insensitive because they're just so big, they're actually on the buy side. So I think it's just a real switching of the guard.

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Um, so the market moving forward will be different to the market, and I think we're in this like eddy current in between these two, this estuary between like the old crypto Wild West andWhat is-- can it be a new, much more institutionalized asset?

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Let's, uh, let's talk about these, like, old, old head Bitcoiners, if you will. Um, this was certainly a narrative this past year confirmed by what we saw on chain. Yep.

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We had the big, what, eighty thousand Bitcoin whale, whatever, billions, and then Galaxy sold it. That was a fun, you know, event last summer. A nine point six billion dollar top pick. Well done, mate.

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I mean, you gotta give the guy credit. Yeah, honestly. Great. Yeah. At the top. Amazing. I mean, a hun- you know, a hundred K was a lot of people's unfathomable, literal beyond the moon price. Yep.

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So I get it, and you've covered this. We've covered, you know, the, the, the long-term whale narrative and, um, I guess my question is, are, are, are these folks probably done selling?

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Are the long-term whales out of Bitcoin? Um, so revived supply, which is the metric I use to track this, um, is falling off a cliff.

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In fact, it's basically the lowest level we've seen since the twenty twenty-two bear market. So, um, absolutely. The amount of sell side like we have seen, that has stopped.

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Uh, now it doesn't mean that those coins have found a new home.

136
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They've still gotta go and find a HODLer, so they're gonna migrate between, you know, the speculator who bought it at a hundred and five and was, like, praying that it goes back up, and here we are down at ninety at some point.

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I don't know if it's now. He doesn't know he's gonna capitulate, but he is.

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At some point- [chuckles]...he's gonna capitulate those coins to someone else, and eventually a HODLer's gonna put them in the cold card, take them off the market, and then we start to move again.

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So, um, there's a process of digestion, and it is a process, and I think that's what people get caught up with.

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They think that when the selling has stopped, that is a headwind that is gone, but there's still all that short-term holder churn that goes on in the background, so that will take time to actually fully clear out.

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As you say, there's, like, a lot of the FOMO that the Bitcoiners have of seeing everybody else make money except for them. For once, they're on the other side of the coin.

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Um- They hate, they hate being the Peter Schiff in the equation. Oh.

143
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Oh, man, we spent all the, we spent all these years, uh, narrative constructing that everyone's gonna flood into Bitcoin, and then they, they bought Nvidia, which more power to them. Good trade.

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But, uh, you had a tweet a couple weeks back on gold and silver, and this is-- this you know, I think this surprised me most that, like, Bitcoiners getting butthurt about the gold and silver rip after decades of being sidelined.

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Um, you said, "Surprisingly unpopular opinion, gold and silver do not need to slow down for Bitcoin to do well." Riff on this because I share this view. Uh, I own gold and silver.

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I think it's kind of a no-brainer thing to own if you're a Bitcoiner. What are your thoughts? Yeah. So, uh, a-again, people have given me so much stick for being a, a gold HODLer.

147
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I've always wanted to be about ten percent of my, my holdings. That's actually been quite hard to achieve because Bitcoin keeps going up.

148
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So, like, for me as a gold and Bitcoin HODLer, it's been extremely difficult to get my gold to my target allocation because Bitcoin's been kicking its ass.

149
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It actually required Bitcoin to sell off from t- hundred and twenty-six to ninety for me to get to my ten percent allocation. That's actually what it required. [chuckles] Right?

150
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So, like, it, it, it required Bitcoin to do terribly, um, and terribly is down thirty percent. Oh, no, terrible.

151
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For me as a gold HODLer, the reason I actually own it is precisely for this, this current moment, not because gold's going up.

152
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The reason-- I mean, for me, I'm in Australia, um, our-- my inflation rate is our housing market, which is completely and totally out of control.

153
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Uh, so chasing that housing market, Bitcoin has really been the only thing that has been possible, um, uh, to actually chase it. Gold as well, but really only recently.

154
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Now, my logic was, let's say right now I go out there and I find the house that I wanna buy. I would kick myself if I had to sell my Bitcoin at ninety K to get the deposit.

155
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It, it would kill me because I know that's a terrible trade. My gold on the other hand is there ready to be sold right now, wouldn't even blink about it. Thank you very much. I'll go and get the deposit.

156
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Now I'm happy to move. So for me, the gold is doing exactly what it needs to do. Be the same trade, but just not go down as often as much and like just, just be stable. Just be stable sound money.

157
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So for me, it's actually a portfolio construction decision. It's the same trade, and I don't believe that you need gold and silver. Like, gold and silver, they will peak at some point in time.

158
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We'll get a consolidation and a correction, and there will be gold bugs and silver bugs who rotate some of that down into Bitcoin. That will happen.

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But Bitcoin can also do just fine, even if gold and silver keep running. Why? Because it's all one trade, you know?

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And I think that, uh, what my general framework of how I think about these assets, particularly gold and Bitcoin, they're more than assets. They're actually information.

161
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So, like, obviously all price is information, but I think gold and Bitcoin because they-- they're just monetary assets. They, they don't-- I mean, you don't use Bitcoin in dentistry.

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There's no industrial use case for it. Its only thing is the price. That is, that is, like, ultimately its product. So a- and for gold, I mean, like, you know, I say this to Peter Schiff.

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Well, I've stopped saying it now because he doesn't listen. If you actually valued gold based on its dental demand, mate, you're not gonna wanna see the price. It's gonna be terrible, right?

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It's gonna be fifteen bucks, and we're all gonna have them.

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So I, I think it's one of those things where when you compare those two, gold is a long-term information signal about what's going on with the monetary system, what's going on with trust in governments, what's going on with interest rates.

166
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There's all sorts of components. You got geopolitical risk. Gold tells you the long, slow story. It's like a fast, slow moving average. Gold is the high signal.

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Um, it only moves once every forty years, and when it moves, don't ignore it because it's clearly s- it's sending a signalBitcoin is the fast-moving average.

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In between all the market cycles and, like, the near-term liquidity pockets, what the economy is doing in the very, very short term, Bitcoin's gonna be really sensitive to all that stuff.

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But over the long arc of time, it's gonna trend in the same direction as gold because they're just monetary assets, and they're really the only two neutral sovereign level, right, secure type assets that can fill that role.

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So I think they're both heading in the exact same direction. I think gold is telling us where we're ultimately heading.

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Bitcoin is telling us that right now, if you, like, look at the overall economy, I actually don't think the economy's in a great place.

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Like, I think generally speaking, you like-- you talk about K shapes and, you know, PMIs and all this stuff, and it all looks kind of, kind of really average. We're like bumbling along at, like, barely neutral.

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That's where most of the market is in the real world. But then you've got this, like, financial pockets where the government has backed the AI trade.

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Um, th- you know, they're, they're spending trillions of dollars in CapEx, which stimulates certain parts of the economy. There's huge parts of the economy that aren't doing so well.

175
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So I think Bitcoin is just a lot more sensitive to the internals, like a fast slow-moving average, but ultimately is heading in the direction of where gold is.

176
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You know, my, uh-- our editor-in-chief at Blockspace, Colin, says, like Bitcoin or rather s- uh, gold going up just increases, uh- Yep... the floor for what the, the terminal price of Bitcoin could be. Um- Exactly...

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I belie- I belie- I believe will be much higher. So gold going up, I think that's, uh-- that, you know, tells your boomer dad or mom that, "Look, Bitcoin can go even higher than you think." So, okay.

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Over the past year, really over the past few months, a l- you know, if you were to go back and look several years back and people were talking about, it's cliché, the four-year cycle.

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The four-year cycle would have peaked over the past four to six months if you're-- if we look at like time from the halving, if you're one of those folks. Um, and, uh,

180
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but I don't really have anything else to go off but vibes here, and it just feels-- it feels like something's different. And I'm not saying four-year cycle like super cycle. I'm just saying it, it feels like, uh,

181
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uh, we are not following the conventional Bitcoin cyclical price behavior. Um, I know this is a bit of a leading question. What are your thoughts on this?

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I bet you get this a bunch, but I'm gonna bid you for maybe a, a different perspective. I'm trying to get not a no. Yeah. Yeah. So, um, I think the four-year cycle was always bullshit, honestly.

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And I think people-- like we, we love to assign it to the halving. Um, honestly, the halving, I w- I consider it to be a completely and totally arbitrary date.

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Just from a very simple, like a very, very simple perspective, I think the halving does two things. One, it makes miners way less profitable. That's it. Like that, it makes them way less profitable as a business.

185
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And the other one is it, it's like a, a reinforcing of Bitcoin's pro- it's a reminder of its, like, core properties.

186
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But like if you really look at the amount of mining issuance that decreases compared to any metric volume, um, you know, the-- here's the case in point. Um, miners get like four hundred and fifty coins a day right now.

187
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The long-term holders selling has been like ten thousand coins a day for like six months. Ten thousand coins. So when people say, "Why does Michael Saylor buy ten thousand coins if the price goes down?"

188
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Because hodlers sold twenty thousand Bitcoin yesterday. So like it-- there's just been more selling. So like the... It just doesn't matter.

189
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The-- No matter which way you wanna describe it, the halving hasn't mattered for, I would say, a decade in terms of general scale. I would agree. Yeah. So it, it's not driven by the halving.

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Then people say, well, they'll, they'll try to retrofit some other four-year thing like, "Oh, it's a US election cycle." It's like, okay, maybe.

191
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But like also, when you like dig around and actually look at how US elections work, it totally depends are you in a populist period or not? Um, which party? Does it look like they're gonna be a switching over of power?

192
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Um, you know, there's all sorts of things in there that like change your distribution of how does an election year go, how does it not go. There's all these different things.

193
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And when you look at the Bitcoin statistics, we're only talking about, what? A sample size of three or four. And honestly, in the bull market, if you remove 2017,

194
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suddenly it all just doesn't quite look so good anymore because like 2017 was just so unbelievably powerful that it makes all the statistics of those years look better if you remove that. And that was its own thing.

195
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That was an adoption-driven cycle. So there's just very, very different components I think that people like to anchor to. You know, it could be business cycle, it could be liquidity conditions.

196
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But like my general framework, and I actually looked at this across multiple metrics, on-chain, technical.

197
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Um, for folks in the audience who wanna kinda replicate this study, just take the MA of multiple, divide price by the two hundred day moving average over its full history.

198
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If you look up to 2017, it had a very unique pattern.

199
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So everything from genesis to 2017, I would describe as like pure organic retail, no institutions, no leverage, no stable coins, just spot coin, people speculating on, on altcoins.

200
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Then there's a middle period of 20-- the 2017 top until FTX blew up. So let's say 2018 to 2022.

201
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That four-year period, which is four years, any oscillator you choose, high amplitude, straight down, straight up, straight down, straight up.

202
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It was like a period of boom, bust, leverage, chaos, and that was really like the Wild West. I'd say it's a lot-- where a lot of crypto natives kinda grew up. That's where I grew up.

203
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Um, that's where I kinda really understood what Bitcoin was. When FTX blew up, then we just s- all of these oscillators have a very different pattern.

204
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Uh, if you look at it on like a Z-score basis, just comparing to its own average, it's oscillating around the mean. It used to find support at the mean or break significantly below in that middle period.

205
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So I think there's been three regimes: organic retail adoption, just like chaotic Wild West 2018 to 2022, and now we're just in a much more mature, slower, grinding, like much more institutional type structure.

206
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Um, it is still structured, but it's not structured like any of the previous cycles.

207
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So yeah, I thinkHonestly, my base case, and I, I, I dunno how long I've been talking about this, probably since '23, my base case was that the bull market is not gonna look that much different from previous bulls, and I think that's, that's more or less the case.

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Sure, we didn't get the parabolic run, but we didn't get the parabolic run last cycle either. So I think that the bull cycle would look much the same, but the thing that's gonna trip people up is, is this bear.

209
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This bear I think is gonna be very different to previous bears. I don't think we're gonna get the depth. Um, even if we go and hit price models that we've hit in previous bears, the drawdown depth will be, like, 50%.

210
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It's not gonna be your 80%. Uh, there's a lot of things that I think are gonna be very, very different this bear.

211
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And, like, are people gonna r- let's say, just for argument's sake, let's say we've already bottomed at 80 or let's say we bottom at, like, 60.

212
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Are people gonna reset their cycle charts like they did at FTX or COVID or when the 2018 bottom went in or the 2015 bottom?

213
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Are, like, people actually gonna reset their charts and say, "Oh yeah, that was a complete and total flush-out"? I think people are gonna get lost because then... Because if we then go down 50 and then go back to 200K,

214
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suddenly are pe- like, is it a super cycle or is it a new bull cycle? Are people just gonna lose their minds? They're not gonna know what to do.

215
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So I think that using old rules and pretending that Bitcoin is anything like it was in the past, it will make people confused.

216
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So I'm being very, very flexible with my thinking and just kind of allowing the data to tell me where I, I think it's going.

217
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So, um, I think being flexible moving forward and not anchoring yourself to the four-year cycle is going to be helpful. Last analytics and price question.

218
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In light of what you described, what, uh, maybe to the average viewer, what are the three...

219
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What are, like, the handful of things they should be paying attention to to dis- to divine where we are in that eddying, in this estuary that you describe, um, directionally coming out of it?

220
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What, what pieces of information should they be paying attention to? Yeah. So I, I could actually distill it down to one, uh, and that's the realized cap. The realized cap is just the most amazing metric.

221
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It's the backbone of just about everything we do in, in on-chain data.

222
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Uh, the way to d- basically, the way to think about it, the market cap is every coin in the supply times the current spot price, which is kind of useless because Satoshi's coins haven't moved since a price of zero.

223
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Um, hodlers haven't moved since 2019 or 2020 or whatever. The, like, coins, we're better off actually valuing coins when they last transacted. So we actually look at the on-chain, um, footprint, the UTXO set.

224
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When did every coin last move? Give me the price and assign it to it. So Satoshi's got a million Bitcoin, but they're worth zero in realized value terms. The guy who bought yesterday, his cost basis is, what, $91,035?

225
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That's his current cost basis. When someone, Mr. Whale, he bought it, like, 20 bucks. He sold it 126,000 or 124,000, whatever it was.

226
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The delta, someone else had to come in to buy those 80,000 Bitcoin at that higher price, so that's a capital inflow.

227
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Now, when the realized cap stops going up, which it has, it has now plateaued and is now trending lower, that means that coins that were bought high are now being sold low. So what is a bear market?

228
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It's a revaluation of c- of expensive coins to a new buyer at a lower price.

229
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So when that realized cap starts to bottom out and then start to climb again, that is actually telling you that we're now moving from a regime of loss dominance back into a regime of profit dominance, where people can actually take profit, new capital's coming in and absorbing it, and the price keeps moving higher.

230
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So, um, at this point, the realized cap has basically petered out. It's starting to, to descend. That is telling us immediately you just gotta have bear market lenses on until that turns back around.

231
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But I also think that it's gonna ta- like, I don't think we're gonna get the depth because there, there's a m- a whole series of price models that we can talk about. But where we are right now, 80K, that bottom,

232
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to go below that level, that in the previous cycle is 30K. Now, what did it take to go below 30K? Luna had to market sell 80,000 Bitcoin, uh, and be a fraud.

233
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Three Arrows Capital had to borrow billions of dollars in unsecured capital, and that was a fraud. Uh, we had FTX that was selling Bitcoin that they didn't actually have. That was a fraud.

234
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Uh, we had Genesis who was playing all sorts of games with GBTC. Like, choose, um, uh, Celsius. Y- you choose your weapon of how many, like, fraudulent enterprises were in the background and were all forced sellers.

235
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What does that look like today? I can't quite picture what that will be. Now, that doesn't mean we can't have a serious drawdown, but I don't know what the...

236
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What's the nuke that's sitting there under the surface that no one's aware of? And I, I, I, I'm not really aware.

237
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I, I mean, strategy, but strategy's got a balance sheet that, like, you know, point to a guy on the street. He's got a worse balance sheet than Michael Saylor does.

238
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So I'm really not that concerned about strategy, and that's kind of the only thing I can think of that's, like, big enough, angry enough, and ugly enough to cause some kind of FTX-grade collapse.

239
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Maybe something happens with a big exchange, but again, we're talking about tail risks here. So, um... And also completely and totally unpredictable. So from my perspective, I think the bear's gonna be different.

240
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When the realized cap starts to bottom out and start trending higher and we get profit start to come back into the system, that's your clear signal we've probably hit some kind of a major capitulation low, and then it's happy days.

241
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Outside of the analytics, you've been in Bitcoin a long time, created and destroyed your own biases, and I feel like s- nobody, like, stays in the game for, like, more, like, that long unless they have, like, other reasons they care about Bitcoin.

242
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Um, what's one of your favorite things happening in Bitcoin right now that's not related to price, not related to market structure? What interests you right now?

243
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Uh, honestly, I've been kind of intrigued by the quantum debate, um, simply because, like, I kn- it's one of those interesting dynamics.

244
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So first of all, I cannot for the life of me handicap whether quantum is real or not. Can't. Couldn't do it if I tried. [laughs] Yo, me neither. I just made, like, a two-hour podcast on it. [laughs] I have no idea.

245
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Total, total.

246
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A- a- and what I love about this is everybody has an opinion, and I guarantee you that none of those people could handicap it either, 'cause they don't understand itAnd it doesn't matter how much you look into it,

247
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you'll find so much s- like narrative and story, and like I've, I've h- a great way I've heard it described, and I, I would believe this from what I've seen, the only industry that has more grift than the crypto industry is the quantum industry.

248
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[laughs] It's just full of physicists trying to get funding, and like w- what I love about it is that Bitcoiners historically are fairly skeptical people, and also there's a lot of...

249
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You know, it's one of those classic examples of like everything you have ever discussed has been discussed in depth in 2012 on Bitcoin talk forums. Like Bitcoiners have covered all of this forever in every detail.

250
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And you get Bitcoiners on both sides of this debate, uh, trying like... And u- ultimately we, none of us are gonna agree on whether it's a threat or not. But what I like is it's, it's kind of...

251
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I mean, first of all, it broke us out of that just noxious pit of talking about spam all day. Um, not that that's not an issue, like for the people who are sensitive, that's an issue, but like c- we can't...

252
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Like come on, we need a new topic. So I'm glad quantum came along to actually just like break that up a little bit.

253
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But it's also interesting 'cause it, it helps people think about fork logic, um, because in my view, the way that I think we should handle quantum, because we...

254
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I, I just don't think anyone can honestly say they can handicap the likelihood of it.

255
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You know, it hasn't factored numbers bigger than like 21, and like even that was many, many years ago, and like there's a lot of evidence to say that like they kind of gave the computer the answer, and they got the answer and they go, "Hey, look, it worked."

256
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It's like y- okay, do it again. Do it again with a different number. So we haven't quite solved any of those problems yet. Um, so my view is that we should have...

257
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Because there is capital, there is capital from like the investig- I mean, we saw Ray Dalio saying, "Oh, w- what if quantum is a threat?" It's like, A, as if you can handicap it as well. [laughs] Yeah.

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You know what I mean? Like, so, so there are clearly investors who are concerned about it. We've heard this from many, many people, including, uh, people who are in like Bitcoin VC space.

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There's capital that's now going, "Oh, I don't understand it, don't get it." I think that we should have a solution, right?

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And whether it's BIP-360 or whatever it is, and I know BIP-360 doesn't make it quantum resistant, but if Ray Dalio can be like kind of fooled by the grift that is the quantum side of the equation, and we just have like, yeah, no, we've got the tools.

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Like we've built the tools. That's gonna be enough to clear the narrative. So in my view, I like the mental exercise of saying like, how do we actually deal with this risk? We should have a set of solutions.

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What I like about BIP-360, uh, to the best of my understanding of it, is it, it at least makes Taproot kind of better. So like we can in theory just roll it out because it's a better upgrade to Taproot.

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In that regard, we can kind of kill the narrative that there's a problem and not really ch- we don't have to put in any complex quantum safe algorithms and all this kind of stuff. We can just have a plan.

264
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And when we start to see evidence of things really manifesting, then we start to implement it.

265
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So to me it's been, uh, I mean, really since Taproot the first time we've actually had a serious conversation about like fork logic, how do you actually get these things installed. You could...

266
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You know, gotta give it to the spam debate, they also raised fork logic, but probably not quite in the way they would have hoped.

267
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Um, so, and just thinking about like that whole concept of how Bitcoin upgrades, how you go through the social mechanism, how does, how do you, how does it work when you've got BlackRock and these big institutional holders?

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Um, Saylor doesn't like upgrading anything for any, any reason. So you've got all these like big counterparties, and it's gonna be very interesting to how we just kind of piece this all together.

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So to me, I found that intellectually stimulating for the first time in a long time, um, because I'll tell you what, I can't talk about, I can't talk about spam anymore. It just drives everyone mental. Uh, same.

270
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Exact same thing here. I, you know, I like to think of quantum kind of like, uh, like soft fork war games. Yes. Almost like we can...

271
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Um, it's very important to demonstrate that we can win or we can do a thing, and that demonstration often is, you know, we don't actually have to flex the muscle. And it also, it gives people a lot of confidence.

272
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Um- Because there's risk in doing something as well. So, so- Yeah... you know, not doing something is a decision, doing something is a decision, and then doing the wrong thing is a decision.

273
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So there, there's, and there's, you know, there's an infinite amount of things you could do. So, uh, getting those right I think is really interesting.

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Yeah, and then also it's fresh to actually learn something new about like how things work technically, and I think that's always fascinating. So I learned, learned a lot about quantum, and, uh, science is fun.

275
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You know, w- man cannot live on podcasts alone about, uh, Bitcoin. Okay, so I wanna resurrect an OG, OG blast from the past for you. I,

276
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uh, I think I started following you on Twitter many years ago back when you were interested in Decred. Oh, yeah. That's a time capsule. And I think it's pretty cool. This is not, this is not a puritan podcast.

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This is a intellectually curious podcast. I'm kind of curious like if reflecting on the past five some odd years of you being in the public and public, uh, you know, figure talking about these markets, um,

278
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you know, how, how has your view of Bitcoin itself evolved over time? Yeah, so that's a, that was a, a, what was it? 2020, maybe 2019 through like 2020.

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Um, I was a, a contractor for the Decred, uh, Project, which was, again, it was an amazing experience. And what I liked about Decred is just the, the, the hybrid proof of work, proof of stake system.

280
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It forced me to really understand how consensus mechanisms work, what the trade-offs are between proof of stake, proof of work, and like actually go down the, the...

281
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'Cause the, you know, the whole shtick is it's all about governance. And then you get to see like is governance actually a useful thing, and now you can compare it to Bitcoin.

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And like a- as all Bitcoiners, I think a lot of Bitcoiners if you, if you really like look at the, the core fundamentals, I think a lot of Bitcoiners have gone through a journey where it was like, yeah, Bitcoin, but like I kind of like Monero or I kind of like Decred.

283
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Yeah. There was always like- Yeah... there was like one like sidekick Robin to the Batman- Everyone's got their fav- every... Yeah. All the, all the Bitcoiners I like have their pet like- Yeah...

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crypto asset where they're like, "Oh, well, I like... " Yeah. Yeah. So- And, and what's interesting is they tend to be the same names pop up. There's the same- Yeah...

285
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like couple of entities, and they're all like Bitcoin-ishVery few of them are like, "Oh yeah, I really love Solana."

286
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It's like, you know, maybe, but like also I think, yeah, there's a whole, uh, in terms of L1s, their value capture story is a whole different animal.

287
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But anyway, I, I learnt a lot about the consensus system, uh, how forks work, um, how governance works in Bitcoin and elsewhere, so just like understanding those components.

288
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But also when you've got a proof of work, proof of stake system, the on-chain signal is also very, very interesting, and Decred had a very unique on-chain profile in terms of how it works.

289
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So I cut my teeth in terms of just like thinking of novel metrics that didn't exist to describe the behavior of a system. So for me it was a massive educational journey.

290
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Um, I forget what the actual thrust of your question was. I was ask- I was asking you to reflect on, you know, your... how your views on Bitcoin have evolved, uh- Yeah... you know, if at all. Yeah, yeah, no, massively.

291
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So, um, I went through a period where I was like, I can see that there's a bunch of flaws in Bitcoin.

292
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Uh, and then the more I've gone through this process, it's helped me refine what is actually a risk, and what I think is actually a risk is privacy. I think privacy is a risk, but then I also play back the story.

293
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Let's just say we had, um, uh, just for argument's sake, uh, Bitcoin and Zcash as two options for Satoshi.

294
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If he had have chosen Zcash, I don't think the system would've survived because people couldn't trust that he didn't print coins in the back room.

295
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So the fact that Bitcoin was transparent from the beginning is I think why it's successful.

296
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But then also it's in the modern era, it's also makes it a bit of a challenge 'cause like to be fair, it is easier to launder money with a gold coin than it is with Bitcoin.

297
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And it's, it's like a great counter narrative when the ECB is saying, "Oh, it's only used by criminals." It's like, well, why aren't you using it? Because that's the perfect use case for you.

298
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Because it's a permanent record immutably like carved in the stone that no one can get rid of. It's a terrible tool to do crime with.

299
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So I think privacy is definitely an element where Bitcoin has a bit of an Achilles heel.

300
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But also honestly, when I like really reflect on that whole time of like thinking through all these components, one of the big challenges with Decred is it just never got any kind of market appeal.

301
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It just never hit any liquidity pocket. It never had the demand side of the story.

302
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And what ended up happening is the project started sh- saying, oh, they s- they did what every hodler does, and they blamed the miners, they blamed the sellers. The sellers are keeping the price down.

303
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So then they changed the consensus mechanism so more money went to stakers, and then they changed it again so it's like 99.9% going to stakers and like 1% going to miners, and the price still goes down. It's like it...

304
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Guys, you didn't have a supply problem, you had a demand problem. So it taught me a lot about product actually, and what I think Bitcoin is just such a special asset. It just is so elegant. It's just a force of nature.

305
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It ju- like people market it because they wanna market it. There's no books written about Decred. There's no like [laughs] podcast series that like make any of these things interesting.

306
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Bitcoin has like a book coming out every six minutes, you know? There's just pe- th- faster than Blockspace. Every 10 minutes, a block and a book. Yeah. I know.

307
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So, so people just like the, the marketing department is Larry Fink now, you know what I mean? Like we've got marketers in every facet of every part of the world.

308
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I mean, I hinged my whole business to this thing 'cause I'm like, I just think I need to leave engineering to study this thing full time. Why the hell did I do that? 'Cause I'm like, there's something here.

309
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So it's so elegant, so simple, so resistant to change. Uh, every time you think you wanna change it and it needs to change, you're like, actually, you know what? It's kind of working just fine.

310
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But then there's al- and that then comes back to the quantum argument. It's like, but sometimes there is a reason why we have to do something. But then is there, you know what I mean?

311
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Like that's what I think is so interesting about Bitcoin. It completely took away the keys to being able to change stuff.

312
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And, uh, even just from the on-chain profile, it's so simple and elegant, and yet I've got 600 metrics that I push from my own node to my charting suite every day.

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I mean, I, I'm the only one who knows what most of these things do, but like they're all interesting. Every single one of those tools is a part of the Bitcoin blockchain that only sends and receives.

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That's all it does, and yet it's such a detailed system, so elegant, so simple. It's incredible. James, check, check matey, check on-chain. Thank you so much for coming to the Blockspace Podcast. Appreciate it.

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Maybe we'll have you, uh, every 100K or so, and, uh, we can keep it so- Uh, 100K blocks or 100K price? Uh, whichever comes first. [laughs] Anyway, thank you so much for, for joining the podcast. Good on you, mate.

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Thanks for having me on. [outro music]