Bitcoin’s “Great Hardening” Has Begun

0:00Hey, hey guys, welcome back to Les Noise and TBL, the collaboration that we just recently started. We had our first show, I think, going live in August. And now we're recording the second one. It's great to have Joanne back on the show. Thanks for being here. Nice go. Nice. Hey, how have you been? I'm doing great. I enjoyed the summer. And it was volatile with cold card and with all the price action. And yeah, I think we'll dive in later. But now we're having the liquid hack. So I mean, it's a fall down all angles. Yeah. Yeah, the temperature is still hot, not even outside, even though summer is supposed to be ending here in Europe. But then again, temperature wise, it's hot. BTC, everything is going hot. So yeah, you mentioned the liquid network. I actually read it pretty life yesterday night when I was preparing for this as well,

1:00just ruminating a little bit or spending some time on X. And then I read somebody posting the liquid network just got gott and I was like, what does it mean? And then I saw this unfold more or less in real time. And so it's crazy. How have you heard about it? Yeah, so in hindsight, I saw your text message from yesterday evening with the liquid hack. I just saw it this morning when I woke up. But yeah, it's another hack, presumably by white hackers, white hat hackers. So yeah, we'll have to figure out. But for the people who don't know what liquid is, I think we need to establish what it is. And then we can talk about it. But I think Bitcoin is the, no, Bitcoiners to grow the network and to grow the features. Bitcoiners, it's at like Stoshi in the beginning, Elfini, like we need to build layers on top of layer one to prevent for like catastrophic failures in the whole system. But with other altcoins, they some chose other paths

2:04to do as much as as much features as possible on the layer one. But I think we're now seeing with AI, or probably due to AI hackers see a full vulnerabilities in the structure in the code basis. And they see bugs that can exploit. And it's weird because liquid is this layer two made by Boxstream. It has this 11 out of 15th multi-sick wallet where the federation keeps the Bitcoin. And basically there's this one on one pack. So you can get some liquid Bitcoin, but you have to first put in one Bitcoin, like real on-chain layer one Bitcoin. And then you can receive a liquid Bitcoin. And I think what happened is hackers found a way to ask all the, yeah, all the other nodes or other companies, because I think there are like 15 also

3:04because there are 15 keys, maybe there are 15 like nodes or you know, exchanges, those are part of the federation. And they, the hackers found a way to ask for a false redemption of here you get 4,000 liquid BTC, give me the 4,000 real BTC. And the check wasn't right and the nodes, they approved for that transaction. So not keys were stolen, but basically the transaction got approved and the hackers caught the 4,000 Bitcoin out of the federation Bitcoin wallet. I think you're right, as we speak, things are still coming together from what I gathered. It's like, yeah, you were right, it's liquid, it's this federated model as you just described. Some people would say it's not really a sidechain, it's just a better, more sophisticated, multi-sick, which I tend to kind of agree back in 2022.

4:04I think I was writing a paper with my company at that time and we were 70 pages about Bitcoin on DeFi, everything that's coming along. And there, I remember looking at the liquid in more detail. Now it's already four years ago, so it's kind of hard to recall it all, but you're right, you just described it correctly. There is like this federation who can authorize these pegouts because as you said, if you create LBTC, it needs to be backed by a real BTC. And from what I gathered on access that like, it wasn't really a failure of the federated model because the federation, when they saw the pegout transaction to be approved, they didn't see that it was a wrong transaction. They felt like they are actually approving real BTC or real LBTC to be redeemed for BTC. I think the attacker, what they figured out from what I could gather is really that they figured out how to exploit a buck that then kind of made them, made it give them the possibility to create LBTC,

5:06which were fake, but then got accepted by the nodes as you described and as real LBTC. And once they were kind of moved to that side swap thing, which is one of these federated, or like one member of the federation where you can actually peg out the BTC, then all the federation members had to approve. But once that was already happening, everything was already kind of a game because they were just seeing things going according to plan. So yeah, that kind of shows it's so complicated, these models and yeah, as you also said with AI, I think things are only gonna get worse, I guess. It is kind of fascinating that this is coming from blockstream, which I would argue is one of the most esteemed companies all throughout Bitcoin, they have like 20 to 30 or whatever team of the best experts across Bitcoin. Also when the quantum thought was going on earlier this year, they were kind of giving some counter points.

6:06Why quantum might not be around the corner and why they are also working on quantum proof stuff for Bitcoin and I have high regards for them. I know some of them personally who have been working with blockstream, but it still kind of goes to show that even if they fail, fail sort of anybody can fail, which just humbles you again here in BTC, I would argue. Yeah, I mean, it's weird and I agree with what you say about blockstream, I think one of the maintainers of the library, the lipsec 265, the Rob Hamilton, the extensive review on, I think I forgot his name, but the maintainer was one of the few libraries that was almost like impeccable, like spotless. And the maintainer now worked at blockstream and also after the cold card hack, they show that the Jade is generating

7:11or presumably generating real like 128 or 265, 56 bit privacy. So I think to your point, it's a well-steamed company and it shows how hard it is in this time and age with AI, with AI, but it also seems that they found this bug, begin of August, they wrote the fix. And there's a pool request out for, I think, or the other federation members to update, but that was last week, one September. So I think the red team from Rob Hamilton found this vulnerability probably with AI, but it wasn't upgraded yet throughout all the federation and the members, it looks like something like that. Yeah, exactly, yeah, that's exactly right. I mean, this red team was established

8:11after the cold card hack, I guess, and from what I could gather, talking to people who know Rob Hamilton and Kale and all the people involved, I mean, they've been spending 10,000 of dollars just to go through all these libraries and code and snippets and bits and it's been crazy, but it just kind of shows you again, it's this cat and mouse game I wanted to say, where you truly have to be as fast as possible, but then again, there's always somebody out there who might be even faster. And so that's just something that's gonna be increasingly with us. And yeah, again, all I can say to me, it is really, it shows that humility is one of the best traits you need to have or one of the most important traits you need to have in Bitcoin and like above and beyond, I would argue in your life generally, just because you never know if, if, yeah, fate comes at you and the chickens come home to roost because I don't want to shit on anybody,

9:12but it's just sort of, some people are pointing to fate and irony that it was sense and more when all these people hating on all the Ethereum people and now they, they see that they have been attacked as well. And so to me, it's just like, yeah, stay humble always because what we're building here is larger and where we're building something like this. Yeah, stuff will happen as we said already last time. And so, yeah, have some decency and some, yeah, humbleness I would argue. For sure, because I'm myself, I'm a user of the Aqua Wallet. And you know, it's weird because some people were forced to move their funds from Blink because I think Blink is going to change policies around rack regulations. So, you know, people transferred funds and I transferred to Aqua Wallet. But we also saw that Aqua Wallet was using bolts exchange

10:12to swap out currencies like UCT and Bitcoin and Litecoin and Lightning and Bitcoin on Liquid. Bolts stopped their process, their operations because of the full vulnerabilities found. And then now they tried to set up their own swap and now I'm not sure if it's connected, but I mean, it really shows how hard it is. And I think people are talking about the great hardening. So this, this period in Bitcoin will look back at the great hardening because I think now also with the BTC server, there was also a BTC server fix needed. So people are Lightning, who used BTC a base server to get paid. And what I'm seeing is all those projects are getting featured out. So no new features, maybe some features,

11:14get it out in first, you know, back to basic, really harden the core because we need more resilience, you know, less leaks, less for vulnerabilities, instead of more features that maybe got the heck. So yeah. Yeah, yeah, yeah. No, that's exactly right. I mean, I don't know, this is something we can probably point out, I can't talk to this too much because I'm not under NDA, but I mean, it's just stuff that I can't talk too much about. I mean, I work at the bank here in Switzerland, which is at the forefront of BTC. We're also looking at stuff like Lightning Network and beyond to generate yields for our clients. And then I'm also working with some other people, personally, who are very at the forefront of this. People close to the red team and all that, everyone that you mentioned. And they have been telling me, and I didn't know because I wouldn't really, I see a few tweets on X, I see the red team posting,

12:14but these people have been telling me, especially in the July weeks. Bitcoin was under constant, like many Bitcoin protocols and wallets and software, they were constantly being attacked and they were even saying they sometimes saw the IPs of the attackers that were straight from China. And so there's this war going on because of the AI revolution, which is happening as well. And so I mean, I just want to put it out there. I mean, people don't really are probably not aware of the fact that there's actual war going out there and Bitcoin is being attacked. And as you said, it's the hardening phase. It's not just a Bitcoin price-wise seems to be kind of getting out of the bear market, but also in terms of like with all these attacks, I mean, the software is hopefully only going to get stronger out of this. And I mean, just my last point is Bitcoin is always the first thing to be experiencing stuff like this because it's still sort of the freest market and the most exciting market and maybe also the one

13:15that is most unproven and that's why all the attacks are targeted towards it. But I'm just wondering what is coming for the outside world. We're first, that's Bitcoin is again. Yeah, and it makes all the sense of world that Bitcoin is first because Bitcoin is digital and it has value. So it has like economic value. So maybe white or blackhead hackers can attack other databases, but it's just easier to steal like real coins that you can exchange. There are exchange because there are no exchanges for, I don't know, personal database or maybe there are on the black market, but there's nothing as liquid and as easy to move as Bitcoin. So I think it makes perfect sense that Bitcoin is the first one to go after if you have, yeah, if you have the new tools and I think it's leading the way in the cybersecurity and it also shows that it's so important

14:18that the layer one is very simple, very robust and it's very ironic that the whitehead hackers are using up return to communicate, know they're communicating literally online by doing transaction and adding text to the up return of possibility. Yeah, yeah, exactly. Speaking of the whitehead hackers, do you have any insights there? Do you think they're going to return those BTCs at all or was this just sort of a scheme and a story that they were spinning up or any insights that you have so far? No, no insight, but my, so two things, I saw that I think it's a CTO from Ledger. He said, this is weird that whitehead hackers are doing it this way and not just email block stream or get in contact with them and just point them at the vulnerabilities in the code base, but on the other hand, I think it makes sense to first get the Bitcoin out because what you're just said,

15:19you know, Bitcoin is continuously under attack and I think maybe if you wait on people to exploit this, maybe you're too late and maybe they found it and they thought, all right, first we'll get the Bitcoin safe and then we'll tell it to blockchain because otherwise maybe in one hour, some blackhead hacker finds it and then we don't have the opportunity to store it somewhere safe. So I think in this, at this point, it does make sense to me. So and they actually literally texted that they want to give it back. So for now, my gut feeling is that they will return funds. Yeah, yeah, yeah. No, I mean, that's exactly right. I think they're probably wanting this to become an example of the situation and sort of the, the severeness at heart because as you said, and maybe we can kind of transition over to the next topic, AI. I mean, I said it in my last video that I put on my YouTube channel

16:22that weekends from me nowadays are all about token maxing. I discussed it with you just before we started. I got myself a new computer, which is quite powerful. So I can actually handle the workload that is coming my way. But yeah, it's crazy what's what's being possible through these AI models. And hopefully I can only use it for good and never to kind of blackhack something. But then the white hackers, yeah, I mean, that would also be a good sort of, yeah, way to use that. But I think this is only going to accelerate because Austria just came out. Some people are already speculating. Maybe it was no sort of coincidence that this now happened with liquid after Austria has been out in the public for a few days. And so to me, I feel like this is only going to accelerate because I also think the AI trade is going into its last innings. And there I feel like frontier labs like OpenAI and Thropic, they will almost certainly launch multiple groundbreaking models

17:24into their IPOs to stir up additional frenzy and demand and with all of this, I think we just need to be ready. There's more bigger waves of this still coming. I don't know how you see that. Yeah, I think your reasoning make absolute sense regarding the IPO. So it makes sense that they wait, you know, they continuously prove that they have the capability to come up with good models and improve on themselves. But yeah, it makes sense that they put out the best ones nearing when they're nearing the IPO moment and what you're saying about demand, like token demand, if they can make projections out of the new future, how much demand there will be somewhere saying there, it's the first year, it will be insatiable demand for tokens. And I mean, yeah, we'll see, but it makes sense. And for the people at home who doesn't know, we like, ostracized the new OpenAI GPT 6.0 model that came out.

18:27And yeah, it's good. Thanks. You actually describe it. Yeah, because sometimes I feel like I'm just taking it for granted. Yeah. Yeah. And you mentioned also a Jensen's tweet. Maybe you can talk a bit more about it. Yeah, exactly. Let me share it for the audience. Maybe too real quick here. I have it up here. Yeah, I think you should be able to see it now. Jensen, Juan, the CEO of NVIDIA, he just recently joined X. I think it was a couple of weeks ago where he joined. And a lot of people were like celebrating and some were already saying, oh, this is top AI Jensen now getting on X. And maybe putting it at top. Yeah. He marked every influencer, he has like one, one million followers in it. Yes, exactly. That's that's true. But then there's another post, not just recently on 6th, 6th. I think yesterday where he said this and a lot of people were freaking out over this as well. AGI arrived.

19:27So artificial general intelligence and some people were also referencing Astra, the newest model as being super, super, super good. And that's why it feels like AGI. And yeah, I mean, I don't really know how to define AGI. Some people would just say it's singularity. It's when human beings are time is over and the robots will take over. And so I don't know what to really make of this. But I just find it interesting from a from a trading investing perspective. That's Jensen Wang. Yeah, he's now saying this. It feels like there is these messages. He's a top-be messages or top heavy messages as Jack, on Jane usually says because I would think AGI is not here yet. Even though it's hard, we don't we would have to properly define it. But it just goes to show that there's a lot of enthusiasm here. And I feel like that's why I said in the beginning, AGI is probably moving into its last innings of the trade,

20:30which doesn't mean it has to collapse tomorrow. I think this can still go on for a couple of months, even years. But I feel like especially the IPOs, as I already said, once they're around the corner maybe next year, maybe we're down and due for some stall-ness or things might be stalling out a little. But yeah. Yeah. In your opinion, what is the best AGI trade? How can people best expose themselves to the AGI possibility? Yeah, I mean, that's really something that we're trying to ask as well at our bank. And I feel like obviously there's the very straightforward things that you can do, the semis and all the things that have already gone quite heavily and quite good. What we're actually doing at the bank as well, which is interesting. And we're using AGI for this as well. So we're writing prompts to write prompts to write prompts. And what we've been doing is trying to figure out with AGI,

21:33which are maybe the companies attached to AGI, which are maybe four, five, six steps down the road. Not the ones that will immediately benefit from this, because if hyper-scalers are scaling up, semis will benefit. Everybody knows of this already and price has already showing this. But what are other companies adjacent to this who might be profiting further down the road? And for this, we felt like AGI is very good, because it can figure things out that only experts know, because you're so deep into the weeds of how everything is connected. And I, again, I would need to be an engineer or something, which I'm not, but with AI, this can help me. And so I just encourage people to look for these things as well. But then obviously I come back to Bitcoin as well, which I feel like is really the trade, the AI trade. And maybe just quickly, I had this realization, because Jordy Fischer, who everybody knows on X by now,

22:34he has always spoke of this sort of sentence, why Bitcoin is the biggest AI trade? And it really never dawned on me. I was like, okay, just this mean all the agents will run on lightning and on the Bitcoin protocol, or how will this work? And reading this article by Nick Baudia, I think you guys had it up on the Bitcoin layer, I don't even remember which one it was. I think it was around here. Yeah, this one, the US Treasury against the AI economy, great article. I was reading this and there it really dawned on me that it is really government spending and the AI investment cycle, which is putting that money into the system. And because all of this has to be financed, either government that needs to kind of finance its deficit, or then all the AI cat-packs infrastructure, you also as Nick so neatly explained, you need this capacity to roll that debt continuously. You need the capacity to roll it to finance it.

23:34And this is how you guys also at Bitcoin layer define liquidity. And that's where I feel like, okay, that's why the system has to make sure that liquidity is provided going forward. And that's why I feel like Bitcoin will profit off of this or benefit from this. And that's why I feel like now it kind of made sense to me. It's all a debt play, even in the positive sense, not in the sense that everything has to implode, but everything has to be kept on refinanced. And that's why Bitcoin will be doing well in that scenario. I don't know if you have any thoughts on this. Yeah, so two thoughts. What also stand out for me, it was also Nick was telling this to Danny Knowles on what Bitcoin did last week. But people are looking now at the long bond yields that all rising through the entire world, like the US, Japan, Germany, France, UK, all a long bond yields are increasing.

24:35And people are usually looking for one reason why that's happening. So they say, all right, it's because of inflation expectations. Yeah. But usually it's way more nuanced. There are way more reasons. You know, it's like this, this combination, like markets is the combination of reasons. And then you have this or positive or negative effect. What I think a lot of people are missing is maybe like yields can go up when when other people are selling the bonds. And people have multiple can have multiple reasons to sell their bonds. Maybe Japan is selling bonds to sell dollars to buy back yen. To intervene. So that could be a reason to sell bonds. Why? And then the yields go up. Other reasons are because maybe other institutions are not trusting the US government anymore because we saw, you know, with Russia and with Iran that they might say that

25:37they don't pay the money back if you hold those bonds. So they use the bonds as a monetary weapon against you. So that could be a reason. So like central banks, one more sovereignty, but there are more reasons. One reason that people may sell bonds is because there are just better alternatives. And I think Nick was alluding to this to this AI trade. You know, when you have Google selling debt corporate bonds and if Google has are giving better yields and are also getting a lot of revenue, so those those yields are incredible. And then so then you have a maybe a better alternative. And another reason could also be that no, so so those are all different reasons for why people can sell bonds and and yield can go up. So I think I think that's important to to to take in mind

26:41because it's not always about inflation expectations. It is so valuable and important point, I think, because people make this connection. They jump from long and yields arising, which is bad risk assets. Like yeah, why this shouldn't be why are risk assets still doing okay? Why is Bitcoin up and and the equities are maybe the kind of wobbly, but they haven't tanked and what people would expect. But you're exactly right. You really have to see where is this coming from? Why what is actually driving? And I feel like as you write the explain, it is really not that much driven by sort of the inflation expectations that are sort of lurking as well in the system, but it's driven by growth. And you can really see it. I have this other chart that I saw on X just want to share with people. So they saw see it. I mean, this is here that the job sort of miracle happening because of AI in the US.

27:41That guy was posting the jobs, upper clips is postponed. The AI jobs boom is here. And you can really see that like a lot of jobs all across the industry are added. And I think a lot of it is because like these AI hyper scalers are putting on growth. And in terms of like, as I said, they're investing. They're really putting out that cap ex and then they get all the money and put it back into the economy. And then you need plum merch. You need people who do the electric electric electronics and everything. So this is pretty much why growth is being fueled. And then again, as you said, rightly so, you are just in as an investor. You would say, why would I hold bond if I can hold better alternatives right now? And so this is really something that you cannot forget. The problem is probably if this were to kind of reverse itself. And if the AI trade came to a stop and then they would not spend that much anymore, then I guess long and yields couldn't be more heavily driven by inflation expectations.

28:45The term premium, everything that you explained with the fears of government, not being able to sustain itself. And that's probably that would be the point in time where I would think things could turn sour for risk assets. So that's certainly something you want to be looking out for. But so far, we're not really seeing this at the horizon. No. And one other point that I want to tell, and I just remembered it. I was listening to a Dutch podcast between Bert Schlachter and Paul Baiting. And they were talking also about, they were comparing this, you know, is this AI freighter bubble? And if yes, you know, what what will happen? And they compared it to 2001 with the com bubble. And they pointed out a few very important things. They're in the 2001 dot com bubble. Some companies, you know, almost every company went down in fell fell, fell, fell evasion, but out of that came really big companies like Amazon, like Google or Google,

29:49maybe only after it, but not everything was a failure. So that's one part. And I think that's the other part that I pointed out was, and to your point, why Bitcoin could be like the right asset to own during this AI trade is, you know, with companies, you need to be right. If you own stocks, you need to be right about exactly that company. And we saw with the dot com bubble that you had like alt a vista or you have other companies that didn't made it. So you need to be exactly right if you put your money at one company, but with Bitcoin or gold or hard assets, you don't have to be just right about the company. You know, you know, you just need to be right about the debatement trade basically. Yeah, it's, you know, you have other risk with Bitcoin and gold, but those are less centered around management making the right decisions because Bitcoin doesn't have management and gold neither.

30:53So it's more like the possible hacks and the possible things that can go wrong holding Bitcoin. But it's not really tied to, yeah, which company will make most growth or something. Yeah, which again leads me back to the thinking of Jordy Fischer, who's saying exactly this as well, like Bitcoin. It has all his other risk as you explained, but it doesn't have the risk of maybe also being kind of out competed by AI and being made obsolete. Has a lot of companies in the S&P 500 potentially could. I guess he's probably also a little exaggerating, but I feel like this is exactly right through AI. I see it with my own stuff that I'm doing. I'm now also working on dashboards trying to do stuff that I was never able to do before. But then I feel like, okay, if I can do it, everybody else can do it as well. And so the value of a dashboard, maybe it helps myself because I can better make sense of the market,

31:54but then do actually go out there and potentially sell it to clients and people out there. It's going to be tough because all the other people are going to put it up as well. And so yeah, I see this is going to happen to companies just as much I would assume that they, their modes are just kind of decreasing because of AI. And that's why you might also want to hold Bitcoin as the biggest AI trade, because I feel like AI can't do this to Bitcoin yet. It can maybe try at some point to come up with a better Bitcoin, but as we know from the past, Bitcoin cannot be recreated because of the immaculate conception that it had. And so that even AI probably can't replicate this, I would argue. No, I think one of the strongest arguments about why Bitcoin might not get, you know, why there's not a better alternative yet for Bitcoin is like Jeff Booth pointed out about the 10X network effect. If a thing has a network effect,

32:54then to be bypassed by a new innovative end-rend, then it needs to be 10 times better. You know, if somebody makes a social media like a new Facebook, and it's like 10% better than Facebook, not everyone's going to jump ship to the new one, you don't need 10% improvement is not enough, not even 100% improvement. You need like a thousand, a thousand percent improvement to really incentivize people to really say, all right, this is the new thing. It's so much better we cannot ignore this. So exactly. It's a zero-to-one innovation that Peter Teal talked about. Like it really has to be mind-boggling and kind of like, practice, this thing is intensely better, as you just said. And that's why you might then be able to move over. But as you said, there's path dependency. People just stick with the things they know. And so, yeah, maybe we can move to the last section

33:55of this sort of talk here. And it would be about Bitcoin and where it is added. And maybe we can start off real quick with Macregan effects, FET, Hiking in September. Is that a problem? Will that kind of stop Bitcoin from going higher? And then maybe we can also look at Bitcoin itself. So any thoughts that you have on the big picture stuff again? So usually I'm letting this to Nick. This is his domain. So I'm going to ask you the same question. But one thing that I'm looking most at is just rates. And the three-month rate is, I can share my screen real quick. Here it is. You can see that when the three months can be predictive like the market is forcing. So this is the FET Fund rate in, it's not the blue one, but these are the upper and the lower band of the FET Fund rate.

34:58You have so far in this and the interest reserve balance rate. And what you can see is most of the time like the three months rate is around the interest rate that the FET pays to the banks or reserves. But sometimes the market is saying you need to cut rates or you need to increase rates. We saw it in the way up. The three-month rate went up. And the market was six signalling or you really need to hike rates or sometimes you really need to cut rates. So I would argue that we're going to see a hike increase because now it's at 3.86. And that's exactly the, basically, that would be the new effective rate if we got a 25 base points increase.

35:59But there's one thing that is against my argument. And that was July because we saw the exact same move and we didn't saw a rate increase. So I'm not betting my house on this. Normally I would really be inclined to say, I will see a right rate hike. But July tells me otherwise. And the other thing I think on polymarket is now 50%, 50%. And you had other, I saw you tweeting or sharing other, or I think it was in your sub-stag that you showed this, see me at what, 60, 40, I think. Yeah, exactly. No, I mean, maybe I can add some color by sharing as well. I mean, I see your point for sure, definitely. I mean, if you just go by the market, as you said, it probably makes sense. But then I think there's just this whole politics

36:59that's playing into this as well. And for people interested, I wrote a sub-stag as he said, just recently published a few days ago. I also had a video up where I kind of explained why I believe like the grand plan that they have is bigger, the Trump bests and then washed the horseman of our time. And so I feel like the political sort of picture is just leading me to believe that they're not going to a high grade. So they tried to postpone it as long as possible. And as you said, they already tried in July. Maybe they're doing it again in September. And you're right. If you go, I had this report also where I published, you saw different sort of possibilities. Exactly. The market is kind of saying, hey, you should be high-king. But then again, when we were listening to wash and wash all these fed representatives, they were giving us a lot of clues that I all explained in this report. Why I think or why they kind of rude for not going higher with the interest rates just yet. For example, wash was kind of shitting,

38:02sorry for my friend's here, but they were was really letting all over the Taylor rule, which supposedly is in for one of the basis points rise. But then again, he was dismissing it, which kind of shows, okay, he wants to set the scene here. And then also Waller was pointing to the fact that now casting seems to be showing that the rates are still contained somewhat. And from what I can get, the main problem really is like these higher oil prices. I mean, this is really the decisive factor for me. And we will get PPI and CPI, I guess, in a few days. And then we can have some more information. But this is really to make it or break it moment. Because 2025, all of these, the oil price was significantly lower for the entire year of 2025. Now it's been significantly higher for 2026. And the question is, will this kind of see through into core CPI? And that would then be the problem where I think

39:03central banks could no longer be kind of preventing rates from going up to your point that you were showing earlier. But then I also, and that's maybe the last thing I want to add on this. I have this theory now that I feel like maybe, let's put it this way, bullish rate hike since it could lower the long and yield. That's a theory out there that I'm trying to entertain as well. Because as you rightly said, central banks are currently pausing because they're not sure about, they're uncertain about, OK, it's just going to feed through into core inflation, the higher oil prices. But because central banks are pausing and not hiking, this puts upward pressure on the long end. The long end is sort of revolting and telling, hey, guys, you should actually be acting here. Because you're arguably way too accommodative in your stance, relative to growth and what's happening in the underlying economy. And so maybe, wash and these guys will figure this out that if we hike on the short end, we'll

40:04bring down long-term yields. And that might not even be so bad. Because then again, long-term yields are usually one-on-one good for risk assets, which is explained before why you cannot think that easily in that sense. But still, this is something I try to entertain as well. So maybe we're in a situation where it will be bullish anyways. But maybe it's just me trying to talk my book, yeah. No, I think you make a great point. And I think Linn Alden talked about this much, much earlier, also because about liquidity and about interest payments that go into the financial system again, during fiscal dominance, if you hike rates, who hold those bonds? And the investors just also get paid more dollars. And there's more dollars into the system. So at some point, hiking rates will also increase, was dollar liquidity, and this is so at some point. And then they need to spend more,

41:08because of the interest payments, so they borrow more. And I mean, it's becoming very crazy cycle. Yeah, sorry, I'm just smiling that you bring this up because the argument that you just made, I feel like there's a lot of validity to this, but it is really an MMT argument. It's really the MMT argument that government interest rates, high interest rates are actually good, because they're putting money into the economy through government, the interest that it has to pay. And it's just find it interesting that, within big coin circles, you usually are not allowed to talk about this, but I'm just bringing it up, because just next Monday, I will interview, Douglas Peshad on my show again, and he's one of the most prominent MMT thinkers out there, which I believe is one of the more level-headed guys, not very like a boulevard MMT guy, he's just prominent, but somebody who's also understanding the Austrian theory and everything, but he makes exactly this argument as well,

42:08and I will probably double-click on this with him on my show, but yeah, you're right, this is something to consider. And I don't want to say that I don't find it a good idea, I'm not pro MMT, but it's more like at some point. Yeah, it's more, it will happen, and when the debt burden is lower, then you can hike rates to really calm down economy, but if there's also so much debt, then increasing rates, it doesn't have the same effect that people use to think that it has with lower debt level. So I'm just not making a point for MMT here, but just trying to explain possible second order effects, and I don't blame you. I drew away from this very normative thinking of, oh, this is Austrian, this is MMT, this is Keynesian,

43:09I can't entertain this thought, this is all bullshit to me, I'm like nowadays, okay, what is actually informing my view of the world, what helps me to better understand potentially the world, it might even be a conflicting theory with my morals, but sometimes I have to abstract from this, and then okay, see things as they are, and so this is certainly the right thing, I guess, and in the end, at least I'm always trying to be descriptive, I'm never trying to say, okay, this will need to happen, but I'm like, okay, this is most likely to happen because of this, this, and this, and so, it's really hard in our world, because most of people are then just like kind of putting you in a corner and like, oh, you are no more a libertarian, you're now no big corner anymore, and so, yeah, it's a hard stance, but I think it's the right one. Yeah, maybe turning to Bitcoin, maybe you have some stuff that you can share, if we now abstract away from all the macro that we were just talked about, like, what is the outlook for Bitcoin? Yeah, this is my favorite topic,

44:10so let me, let me, let me, experiment with the screen, but for the listeners, I just wanna ask you, because I wrote about a bear mark, a friend, and you posted, like, asking for a friend is bear mark after a real thing, and I just wanted your opinion, like, was it a joke? Do you mean it? Do you think it's a real thing or not? No, I think it's a real thing. I was just kind of juggling, because like, obviously, we're always trying to get more granular with the wording, with the vocabulary. At some point, I feel like, okay, maybe at some point's words lose all their meaning if we're getting every more granular, and you're like, okay, I can also call it this, and it's now it's a bear mark, it's uptrend, and so, okay. And, but you're right, because at the other side of the spectrum, it's like, we're always talking in either bull or bear mark, and I think this is also way too simplistic. It's way more complicated. It's probably, I think, Jack on chain called it, or James Jack called it, this bear mark,

45:10to bull transition that is currently going on, and you could also call it the bear mark, it's uptrend, but I was just juggling, because, yeah. This is the thinking, mate. But are we in this bear mark at uptrend? That's what I would like to know from you. Yes, but I wanted to ask you, because it's at the stage a bit, and it's maybe it helped people to think about it. And I'm gonna share why I think it's a real thing, and I'm gonna share with this chart. This is one of the chart you can look at, but this shows the supply and profit. So, in the main thing, you see the Bitcoin price, and you see the 50% of the, so supply and profit. So, what I wanted to point out is, I'm not gonna prove there's a bear mark uptrend, but I'm gonna prove there's a bull mark down front.

46:12And if there's a bull mark down front, then there probably should be a bear mark uptrend too. But, so, because, you know, you should ask yourself, what is the definition of a bull mark in the bear mark? And I'm, I made this, I'm gonna show it later on, but I'm thinking in this quadrant. So, you have valuation and trend, you have high valuation, low valuation, and you have up and down trends. And I think that's the best way for me, it's the best framework to think where Bitcoin is, because it looks like the four-year cycles really going to die this year, because last year we had a red year, and this year, I think if we end up off $87,000, we have a green year, so there would really be the nail on the cuff enough for your cycle theory. But if the four-year cycle theory dies this year, then you need to think for yourself, like, all right, what will be my anchor, and how am I gonna define where Bitcoin is?

47:14So, let me share my framework with you, Pascal, and with our listeners. And so, what I did is my definition of bullmarked is, like, when the valuation is higher than average. So, through the cycles, and you can look at different metrics, and you get different answers, you can look at the affee ratio mean, or the MVRV ratio mean, those are ratios between Bitcoin price, and the realize price, or Bitcoin price, and the true market mean, and if you get the mean ratio, you get, like, on average, there's a ratio, like, 1.2, and 1.2 is equivalent to, like, $90,000. You can also look at, like, the supply and profit, and you can see during bear market, we have the mean of the supply and profit is 77.5%

48:15over the whole history of Bitcoin. And you can see those when we're above 50%, or the 77.5% then we're usually in a bull market, and if we're below it, we're entering a bear market. Now, in 2019, we went above, but most of the time, during a bull market, as, like, X also fuels, and to yourself, it feels like a bull market, the profit, the supply and profit is above the 77.5%. Only in 2021, after the China mining Exodus, we went below it, so that it invalidates this theory a little bit, but we have other metrics that not every, not any metric fits like everywhere perfectly. But you can really see, like, the bull market

49:17and the bear market in 2022 and 2023, and then the bull market in 2024, 25, and then the bull and the bear in, like, 26. So, and what if I'm gonna zoom in, we entered the bull market, so we had the bear in 2022 and 2023, and basically we crawled out of the pit here, but we were still in the bear market, but we were in an uptrend. And then after, like, when President Trump got elected, we really went into the bull for the bull uptrend. But we have also this sideways consolidation or with the April 2025 liberation day, we still were in a bull market, where we're still on a long uptrend,

50:20supply was still above the mean supply and profit, but you have a downtrend from, like, January to, like, end of March, beginning of April. So you have downtrends within a bull market, and I think I believe you have uptrends in bear markets, until on certain point, I think until on certain valuation, and the valuation here, if we, if I tell you, we'll aren't 80%, because that's a bit above the 77.5%, it's $90,000. And I think the, I think the racial mean and the envy of the racial mean are pointing to the same numbers. So that's why I think from 60 bottom to nine, you will be, that's what I call a bear market uptrend. And about 90, there starts bull market. That's my reasoning behind it. Interesting. Do I understand you correctly or read you correctly? That also means that if we truly are in a bear market uptrend,

51:23this doesn't mean that everything has to go up in one straight line now to 90, and then we go above it, and we're back in the bull market. We could also still see like pushbacks and pullbacks, where BTC goes lower, but because we're already in a bear market uptrend, it's really hard for this uptrend to be like materially impaired. If not like for some very crazy thing that Black Swan nobody had on its mind, that Bitcoin, like also technically speaking, on chain speaking, things are already looking very good, and that's why basically all dips are for buying. Is that sort of a fair assessment? Yeah, I think that's a fair assessment. I think that's where there's the characteristics of a bear market uptrend and a bull market uptrend is your expectations around how much price can really gain. And I think last time it took us,

52:24so in 2022, 2023, we went from $16,000 to $23, but before we really entered a bull market, that was like the end of the year. So there was like nine months later, and during that period, like crawling out of the pit, crawling out of the bear market, winter, crypto, winter, you know, we have real easy, you have bullbacks, still a lot of uncertainty, and still that also gives the bear some hope, some hope, yeah, we're still gonna see new lows and stuff like that, but you know, I have a lot of anecdotal evidence that still people are who are Bitcoiners, but are not fully allocated yet. So I am of the belief that bullwacks will be bought up, and then you see this, this gradual crawling out of the pit and then eventually when you break 90,000 or for 100,000,

53:28for sure, but I think then we will see probably a real bull market uptrend. Now there's very much aligns with my theory, and I would put it out there that I think the four-year cycle has already died, and why do I think so? It's because like if we also go back and look at prior cycles, as I'm not, if I'm not mistaken, prior cycles, it was always the case that Bitcoin put in a lower low in Q4 of that bear market year, or like that last inning, but nowadays also reading or like trying to synthesize what you're now telling me, I feel like the lower low for Bitcoin won't be coming along anymore, and then because there would not be a lower low in Q4, then it would be different to prior bear markets, and that's why I think this four-year cycle thing has already put it aside. But then if we end even greener or green at the end of the year,

54:32then it would really be the last nail in the coffin, but yeah, it's very interesting. What is your like, if we finish off here, how can people think about it in the very, very short term? Like I think AD, we try to break above 81K, 82K, like in two attempts for the last couple of days, we didn't manage to. I think that level is very important, right? Because it was already back in May, it was sort of a zone of confluence and then on-chain, there's also things coming to get there, technical analysis, I think the 50-week average is also somewhere around this level, and so yeah, maybe you can take it away. Yeah, so I think the important levels to watch is, so to the upside, around 80, 81, 82, $1,000, as this just important technical levels that we need to gain, there's in blue, there's the 50-week simple moving average

55:32that you pointed out, we have the ETF cost basis at 81,000. Exactly, yeah. Capitalized price, that's not realized price, but it's weighted by US dollars invested, it's around 80,000. So we have a lot of confluence of different metrics that all coming together around at 80,000 dollars. So that's the real James Check, called the bear marks last stand, like if we're going through the 80s, 80,000, and we close above, especially on a weekly basis, then it's done for the bearers, like they should go hibernate and come back in a decade or something. But to the downside, what's important to look for there is the short and holocaust basis at around 70,000, because usually we shouldn't lose that level again. If we're in an uptrend, where price needs to keep above the short and holocaust basis,

56:37I will try to get that to, we're gonna show it here. Let me, let me like look at trends. Yep, let's take this one. This is a combination of multiple trends, looking to different EMAs, but first the orange one, that's the short and holocaust basis at 70,000. Now we got rejected a couple of times in the downfriend. There was a fake out in May, but we really need to keep above the 70s. The 200 day moving average we gained, it's now 69. We need to really keep above that one. And my EMA cloud should, the 21 day should be above, I think, the 87.

57:40So those are important trend levels. And one more thing, it's the three day super trend. I'm also tracking, it's also around at 70,000 dollars. So a lot of conflict went there. So we have 80 is above us, and basically 70 is below it. I think as long we keep above those 70, I think we're remaining in an uptrend. And yeah, then it's looking for newer, newer ones. Yeah, exactly. I mean, I'm just reminded now, just maybe one last bull post here from my side, you know, again, this post by Joe Colessori on X, I don't know if you know him, but he asked Grock just a couple of days ago, Bitcoin has now close above its 200 day moving average for 15 plus consecutive days. Has this ever happened with it going back into, like slipping back into a bear market and Grock was quite clear and like, no, it has never happened.

58:40But yeah, it's just one more indication. I mean, there's always a world first. So let's hope this is not going to be it this time around. No, just as you said, a lot of confidence is pointing to the fact that we are, in fact, in this bear market uptrend and maybe soon to be turning over into a bull market again. And so at least I learned this new vocabulary, this word, great. And so I learned a lot of things as well. Today again, we just crossed the hour. I think we can leave it at that or anything else that you still want to put out there, Johan. No, one thing just more like a reminder for the people who are listening. I'm basically, I'm always at the Bitcoin layer and myself too. You already alluded to the fact that we're thinking in probabilities. And sometimes I'm not mentioning it every time I say it, but it's not impossible for price to get below, to get to new lows. It is possible.

59:40But when I think you and I are thinking in probability, so if I'm saying that we're an uptrend, I'm not saying it's impossible to go lower, but it's most probable that we keep up it and uptrend. And then we give our levels, our invalidation levels to the downside and to the upside when maybe it accelerates. So I think that's one thing worth pointing out that sometimes we're not mentioning it, but we're always thinking in probabilities. And of course, everything is possible. But what I think carries the most signal for you as a listener is the most probable thing. Yeah, yeah. No, that's exactly it. Well said, I mean, there's pattern out in the world and we try to detect them. And at some point, if the odds are in favor of a lot of these patterns, then the likelihood is just getting higher that things are going to turn out this way, even though we don't have a silver crystal ball

1:00:44to actually tell the future, but we're trying to assess it through probability. So thanks a lot, Johan, for doing this again. Looking forward to doing this again, maybe in October and so forth. Enjoy the rest of your September, which is going to be excited for sure. Yeah, absolutely. So thank you, Pascal, really enjoying these conversations and looking forward to the next one. Yes. Bye, guys. Thank you. Bye-bye.