Preston Pysh (00:03:11):

So, for a person who is potentially not intimately familiar with Lightning, and you use this terminology, no implicit default risk, walk us through opening a channel, and then, why there’s no implicit default risk for a person that would open a channel and participate in the rules in a ethical way.

Joe Consorti (00:03:32):

So, there are a couple of risks when it comes to operating a Lightning channel. One of the first ones is hot wallet risk, right? So the risk that a bad actor, if a channel does have a whole lot of Bitcoin within it, then a bad actor could potentially hack into one of the participants in that channel and then drain funds. So, there is a little bit more risk associated with a Lightning channel than something like cold storage Bitcoin. Essentially, to back it up even further on the Lightning Network, essentially, it’s a way of making Bitcoin more scalable, because the main blockchain for Bitcoin doesn’t have a lot of transactional capacity, seven transactions per second, compared to Visa’s 40,000 or something to that tune. Bitcoin essentially wouldn’t function as something like a medium of exchange without a scaling solution in order to make it more viable.

Joe Consorti (00:04:21):

And that’s where the Lightning Network steps in. Essentially, you can open up a channel between participants and essentially, in the simplest terms, you can hold Bitcoin in escrow between two participants and then, basically add and subtract from a ledger, just between you two, who owes who what, right? So for example, going into a coffee shop and ordering a coffee, the channel between myself and the coffee shop owner, basically balances just get updated within our personal ledger, as opposed to having to record that transaction on the main Bitcoin blockchain. And we can transact between each other infinitely, until we decide to finally settle up and then close off our channel on the main chain. And the beautiful thing about the Lightning Network is that participants can use channels that have connections that aren’t directly to them. So instead of every single new person who goes into this coffee shop having to open up a channel with the coffee shop owner, let’s say I have a channel that’s opened up with my friend, who’s opened up a channel with the coffee shop, my payment gets routed through his channel into the coffee shop.

Joe Consorti (00:05:25):

And so, essentially, what you’ve got is this web of interacting channels with one another, that liquidity gets routed through. The beautiful thing about it too, is your payment is going to go through the channel that is routed most efficiently, IE has the lowest fees. And so, it really attacks one of those pain points of Bitcoin, which was it’s extremely expensive to move funds on chain when there’s a lot of demand for transactional capacity and Lightning Network really came onto the scene and provided a solution for that. So, there are various risks with having a channel. There’s hot wallet risk, there’s inactive peer risk, which let’s say the coffee shop owner goes offline and we can’t settle up on the blockchain. There’s forced closure risk, where whether it be an inactive partner or some other reason, our channel gets forcibly closed.

Joe Consorti (00:06:16):

There are a lot of risks in operating a Lightning channel, but for various reasons, not unlike goldsmiths, being the individuals who held everybody’s gold in reserve and then, they managed the ownership between participants, I believe, and Nik and I believe, that something like Lightning banks will emerge, where these entities who can allocate capital most efficiently, who can manage these channels, who have the technical wherewithal to manage these channels, they will be the ones who end up routing liquidity, managing these channels over time, as transactional capacity increases for the Lightning Network.

Preston Pysh (00:06:55):

Just an important highlight there, you were talking about the forced closures between channels on the Lightning Network. What I think people need to understand is when we say there’s risk there, let’s say you and I open a channel together and you drop off the network and I just can’t communicate with your node anymore and we have an open channel. I can force close that channel and if you continue to be gone and off the network, after a certain number of blocks, it’s going to close that out. We’re going to adjudicate the on chain fees in order to write that into the layer one Bitcoin, and you’re going to get your Sats, and I’m going to get my Sats in that situation, even though you left the network and it turned into a forced closure. So it’s not that the funds were at risk because the other network participant disappeared, we can still close it out.

Preston Pysh (00:07:47):

It’s the time that I think would probably be quantified as the risk of funds being locked, as you’re going through that forced closure situation. And so, I just want to highlight this, because people that aren’t intimately familiar running their own node, having open Lightning channels and things like that, they hear things on the surface and they’re saying, “Oh, my God. It just sounds risky. I don’t understand any of that.” And the real risk I would say is just the lack of understanding and the execution of doing something like this, but your funds are very secure. I mean, the node that I’ve run, I’ve never run into an issue or a concern of I’m not going to get my funds back that I opened the channel on. I don’t know if you would have a different way to quantify that and I’m not trying to under sell risk here, but it’s way different than putting it on a centralized exchange and lending out coins. It’s not even in the same universe as far as risk goes.

Joe Consorti (00:08:46):

Right. That’s exactly right. I mean, exactly as you mentioned, the risk here is more so that your funds are inaccessible for a brief amount of time. And the fact that this is a risk that isn’t even having anything to do with lost funds, it just goes to show, we’re reaching the try and find risks that are on the Lightning Network.

Preston Pysh (00:09:04):

Yeah.

Joe Consorti (00:09:04):

Whereas in traditional capital markets, right? Let’s say you move your way up the risk curve to something venture capital or equities, there’s far more associated risk with that. There’s far more associated risk with other cryptocurrency on the Lightning Networks. I make this argument that because there are so few risks, as we mentioned, and a lot of these risks actually don’t involve permanent deletion or inaccessibility to funds, then it is considered more risk free than the moniker that we give to base layer money, like United States treasuries, which do incur explicit and implicit default risk. I mean, we’ve never defaulted on our debt in a major way, as far as I’m aware, but we can, right? That is an explicit risk. The implicit risk of holding a negative yielding bond, right? There are various associated risks with traditional finance instruments that just aren’t present, I feel, to the same degree on Bitcoin and Lightning.

Preston Pysh (00:10:04):

Hey, I just popped up this picture of this risk curve that you were talking about. Let me pull it back up here and then, just describe to the people that are listening what we’re looking at and what this really represents as far as you’re concerned.

Joe Consorti (00:10:20):

Of course. The way that we can quantify a capital market is by plotting the different financial instruments in said capital market, based on their risk profile. And we do that, for the people who are listening on audio, we have a return on the Y axis and risk on the X axis. And essentially, as you plot these instruments against one another, you have lower risk profiles at the bottom of the curve, all the way up to very, very high associated risk at the top end of the curve. And this is a pretty easy way of visualizing risk in any capital market that you’re dealing with. And so, up here on the screen, physical gold is at the very bottom of the traditional finance risk curve, specifically because, not unlike Bitcoin, when you’re custodying it on your own, there’s no default risk. There’s no counterparty risk, no custodial risk, right?

Joe Consorti (00:11:12):

If you hold it physically and you’re defending it and it’s done securely by the owner. Obviously, the trade off here is that you have to have the security in place, you have to have the technical wherewithal to defend it. So, that comes with the trade off, right? Not only is it non yielding, but it requires a lot of additional work to secure it well, and that’s why a little bit up the risk curve is US treasuries. Now, for people watching on video, I’m not saying US treasuries are much further up the risk curve than physical gold. Obviously, it’s been said many a time that they’re as good as gold, but as I mentioned, there’s explicit and implicit risk with holding US treasuries. Moving up the curve yet still, our corporate bonds. Obviously, they have higher default risk.

Joe Consorti (00:11:58):

And so, they trade at a spread to US treasuries. And so, every single rung up this risk curve, it demands a higher rate of return because of the increased associated risk with it. And so, this is the easiest way for market participants who are hunting for collateral to take a look at all the instruments available to them, and based on their risk tolerance, whether they’re a corporation or a sovereign or an individual, to take a look at this risk curve and then determine where they want to allocate their capital. This is the traditional finance risk curve in a nutshell, basically.

Preston Pysh (00:12:32):

You know what’s interesting, is I’m looking at this chart and what’s really noticeable about the shape of it is, it’s not linear. It has this bow in it as you’re going higher up into the riskier categories and I would argue that as you get into a currency debacle or situation that we’re currently experiencing on a global level, that this probably shifts to being more linear than the shape that you’re seeing on this chart, where the US treasuries are still having… The risk is going up as the return is being diminished and you’re not getting this shape that you have displayed here, but I’m not criticizing the chart. I just find it maybe as an interesting observation as to the current macro setting that we’ve been experiencing here in the last few years, that maybe the shape of some of this stuff is getting all out of whack from what we would typically see.

Joe Consorti (00:13:31):

Oh, absolutely. I mean, you take a look at emerging markets, they have record levels of distressed debt. As of right now, actually over the last week or two, corporate credit spreads have been coming down, investment grade and high yield. So, some credit stress is being alleviated, but you’re absolutely right, in situations where maybe your country doesn’t have dollar denomination in its capital market and you’re a really distressed Fiat currency. I mean, look at basically all of Southern Europe right now. They’re about to enter crisis mode and they hiked 50 basis points for them. It was their first hike in over 10 years, right? So for more distressed nations, more distressed currencies, you’re absolutely right. I would say it’s more linear.

Preston Pysh (00:14:14):

Hey, so let’s talk more on the specifics of the Lightning Network and this yield curve. I’m going to put up a chart right now that I find really interesting and I’m curious as to why you’re seeing this bump that’s being displayed here. So, this is the Lightning liquidity weekly average annual percentage rate from May till August. You see, it looks like it’s trying to hover around 2%, but you have this jump in June that it surged up to 8%. I’m curious what caused that and then, just more generally speaking, some of your thoughts on just interest that’s being received here.

Joe Consorti (00:14:55):

So as for the spike in June, and for people who are listening, what we have up on the screen right now is, this is from Amboss Technologies. They recently launched earlier this year, something called Magma, which is actually a Lightning channel marketplace where market participants can go and they can lease liquidity and essentially, this is one of the first major examples of a widely reported interest rate. And we’ll talk about why that’s important in just a second. As for the bump in June, it’s in all likelihood due to increased demand for channel liquidity and the reason it 4Xs all the way up past 8% there, is because as of right now on Magma, I’m looking here, there’s only 31 Bitcoin deployed as of right now. 667 channels opened, so it has a very, very small liquidity profile.

Joe Consorti (00:15:45):

And so, demand shocks in my estimation are probably what spiked that significantly up. I think, we talk about transactional capacity, over time, as there’s more transactional capacity for things like Lightning, as the Lightning Network emerges as this layer that people want to earn or return on and it’s liquidity profile increases in tandem with that, then ultimately, this APR and other interest rates that are drive for the Lightning Network will smooth out, but this technology is all in its infancy. Most of what I wrote about is conceptual. So to me, it’s just pretty remarkable to see all this stuff widely reported.

Preston Pysh (00:16:25):

I have not played around with Magma, so how would a person go about pulling this up? Just walk us through the steps if somebody at home wanted to try it out.

Joe Consorti (00:16:35):

For sure. Yeah. So, you can go to amboss.space/magma. And basically, you can log in with your node. They have a process for doing that. And you can also… You don’t need a node in order to peruse all of the different information on there. So, on the homepage, you could see the total amount of Sats earned in interest. As of right now, it’s 8 million Sats. So again, relatively infantile network, only 10% of the Bitcoin has been earning interest as of right now, but you could also scroll down. And again, this is a liquidity marketplace. So you can take a look at every single channel that’s up for lease, the minimum and maximum APR, the history of the market participant, it’s all transparent, so you can choose these nodes based on the time that you want to lock up or the time that you want to lease the liquidity for the reputation of the individual, not unlike a traditional fixed income market, which is really remarkable.

Joe Consorti (00:17:32):

I mean, this is the first instance in Bitcoin. One of the first instances, I know that Lightning Labs had something similar with Pool, but this is one of the first major instances of participants being able to peruse and lease liquidity over Lightning. Again, not unlike a traditional fixed income market. Another graphic I sent was the Bitcoin Lightning risk curve and it’s basically the same thing as the traditional finance risk curve, the same concept, but I’ve gone ahead and replaced each point on the risk curve with these different Bitcoin capital market instruments. So cold storage Bitcoin, obviously doesn’t have any yield, doesn’t have any counterparty risk as you’re custodying it on your own. And then, this Lightning Network liquidity lease is another rung up the risk curve and it’s trading at a basis point spread, not to get too technical, just like traditional fixed income markets. And then, again, numerous other instruments that are available on the Lightning Network. And this is conceptual. Again, what we’ve seen in implementation is Magma and a couple of other, Amboss and a couple of other liquidity marketplaces, excuse me. But if anything, what it demonstrates is that there’s a structural demand for secondary markets of liquidity. There is demand for the use of Bitcoin as a place where people can buy and sell collateral as they need to.

Preston Pysh (00:18:52):

So, I’m a little familiar with Pool. Is there much difference between Magma and Pool? And if there is, what are some of the differences?

Joe Consorti (00:19:02):

I’m not the best person to comment on that. For this piece in particular, I dove especially deep into Magma because they have a pretty fantastic UI. Very, very friendly user interface. Pool, I think is a little bit more complex. I’m pretty sure it’s closed off to node operators. For Magma, I mentioned to the listeners, you could hop right on and take a look at all the event available channels for sale, whereas with something like Pool, I’m not sure that somebody who isn’t a node operator could do that.

Preston Pysh (00:19:30):

Oh, okay. And can somebody who’s running an Umbrel node, just log into that ambosss.space/magma and set this up easy peasy?

Joe Consorti (00:19:42):

Yeah, absolutely. You can.

Preston Pysh (00:19:43):

I need to try this out. I’m very curious.

Joe Consorti (00:19:47):

Yeah. It’s cool. I mean, if you’re an efficient capital manager, if you’re efficient at channel management, you could earn a rate of return on top of your existing routing. It’s pretty cool.

Preston Pysh (00:19:57):

It sounds awesome. I’m going to definitely check it out. Okay. So, for the last 260 days, we’ve been in a bear market, a pretty aggressive bear market. For people in traditional markets, they would describe it as a death spiral bear market. What are some of your thoughts on the leverage and really Ponzi like situation that’s unfolded with Luna and 3AC and all these others? What are some of your thoughts?

Joe Consorti (00:20:30):

Most definitely. I mean, I think the best way to describe it is a chain of dominoes, right? So with Luna, again, in the truest sense, Terra Luna mirrored a Ponzi scheme almost one to one. They would burn and create new tokens amongst both of them as new participants entered and exited and then, when there was a huge dash for the exits, there wasn’t enough liquidity to go around and the token went to zero, both of them. And so, that was the finger that knocked over this chain of dominoes of extremely fragile market participants, in terms of their balance sheet fragility, namely Three Arrows Capital, right? Three Arrows Capital, obviously $58 billion fund for those listening, for those curious, that’s the same size as Bernie Madoff’s fund, right?

Joe Consorti (00:21:18):

So, it’s absolutely major. A lot of people are calling this the Lehman moment for cryptocurrency, more broadly. And I tend to agree, right? You had major players, FTX, Deribit, BitMEX, BlockFi, Genesis, Voyager. Voyager went bankrupt, right? They declared, I think it was chapter 11 bankruptcy protection. And so, you had all these different market participants that were very highly intertwined with Three Arrows Capital and they were lending… A lot of them were lending to Three Arrows Capital undercollateralized or with no collateral at all, based on reputation alone. For example, Voyager, they lent Three Arrows, $665 million completely uncollateralized. Completely uncollateralized. And so, when word got out that Three Arrows was having solvency issues, places like BlockFi, they had a $1 billion collateralized loan, 80% margin requirement. They were able to liquidate it. They were fine, but because places like Voyager, they essentially lent to 3AC based on reputation alone, and they got smoked because of it. Client funds out the door, who’s to say how much of it will be recovered. Players like Celsius, also very heavily intertwined with this. Celsius was more so taking customer funds and putting them into these yield protocols.

Joe Consorti (00:22:38):

We just spent 20 minutes talking about a real way to earn yield, but for the listeners and viewers, the way that Celsius was parking their funds in these different protocols, they were earning essentially yield from nowhere, yield from nothing, yield from printing these worthless tokens, and essentially, over two months, Bitcoin, right? As a result of all this, experienced $5 billion in sell pressure. $5 billion. And it was still able to find a cohort of buyers around the $20,000 area. So, absolutely remarkable. I’m of the belief that we’ve seen the worst of it, but who knows? I mean, Lehman occurred after the majority of the turmoil had already gone by. As far as I know, I was seven years old at the time, but who knows? There could still be some skeletons in the closet for Bitcoin.

Preston Pysh (00:23:28):

Hey, so I’ve got the chart that you just said these numbers, and I mean, this is a massive number. 236,000 Bitcoin liquidated by large known entities since May 12th alone. And yeah, luna was massive. 80,000 Bitcoin out of that Ponzi scheme. The other one that you didn’t mention by name here was Tesla. 29,000 Bitcoin sold into the market. I’m curious on your thoughts on Tesla, in general. So, when Tesla made this announcement that they were going to buy Bitcoin, and I’m just looking at the stability of their free cash flows, and it’s gotten better since they’ve made that announcement, as far as their ability to demonstrate some semblance of bringing cash through the door, but up until that point, they were not stacking free cash flows. They didn’t have free cash flows.

Preston Pysh (00:24:31):

So much of whatever was coming through the door was subsidies from the government. It wasn’t good, organic, free cash flows. And so for me, the announcement that they were putting on the balance sheet, just… And I even told… Anthony Pompliano and I were talking about it when they made the announcement. I was like, “This caught me totally off guard.” This would’ve been one of the last companies that I would expect it. He said he had the opposite opinion. What are your thoughts? This seems inevitable to me, that they would be a seller at this point. You’ve got to have free positive cash flows in order to stack Bitcoins. Michael Saylor’s a great example of that point.

Joe Consorti (00:25:10):

I mean, Tesla’s a company living off of subsidies to put it bluntly and we actually did a report on this, over at the Bitcoin Layer, Nik and I. We talked about, essentially, this was just window dressing, right? From Tesla. We titled it, Tesla’s New Drapes. On their Q2 earnings call, it said they sold 75% of their Bitcoin. So they still have some Bitcoin, but you’re exactly right. In my purview, it’s just an accounting gimmick, right? By selling the 29,000 Bitcoin, they were able to add 936 million bucks to their balance sheet, right? Their cash balance actually would’ve shrunk by $117 million and it would’ve been their first quarter of the year where they had a negative cash balance. And so, in my purview, it’s just window dressing.

Joe Consorti (00:26:03):

Tesla is still the second largest corporation in terms of the Bitcoin treasury. But I mean, in times like these, it’s important to remember, right? Cash flow is king. I mean, Michael Saylor’s doing it right with MicroStrategy. They have a solid software business. They can rely on those free cash flows. Tesla, not so much, right? It was pretty bold of them to add a Bitcoin strategy when, as you said, they’re really struggling with cash flows, even now and they rely heavily on good regulatory environment from the United States government to stay afloat.

Preston Pysh (00:26:37):

Yeah. It just amazes me online, you just see so many comments from people that just don’t understand the basics of companies producing free… I don’t know if it’s the market environment that everyone’s just used to, “Oh, just do another fundraising round.” Or “Just sell more shares.” It’s like earnings just don’t matter. Maybe that’s the hardcore value investor background in me coming out, but what the…

Joe Consorti (00:27:05):

No, you’re right. I mean, we’ve had more zombie companies than ever. I mean, money has been essentially free. People have been able to borrow at a small spread to the T-bill for since 2008, basically free money.

Preston Pysh (00:27:17):

Yeah.

Joe Consorti (00:27:18):

You’ve seen the impact of that, now that the effective price of money, right? I mean, the policy rate right now is what? 2.50. People can’t survive when they’re borrowing at a spread to that. It’s quite remarkable.

Preston Pysh (00:27:32):

It is. I’m going to throw up another chart here, going back to what we were talking about earlier with the risk curve versus the return, and you have it adapted for Lightning and walk us through what you’re showing here. And it looks like you’re… I’ll let you… Yeah, you describe what you think here on this.

Joe Consorti (00:27:55):

For sure. Yeah. So there’s one aspect of the risk curve that I’ll describe when we get there, but I mentioned Bitcoin’s capital market and its risk profile can be illustrated best with a risk curve. So, we talked about the traditional finance risk curve. You’ve got gold at the bottom. The least risky, least… No counterparty risk if you’re holding it on your own, no custodial risk unless it gets demonetized and then, venture capital all the way at the top, being the riskiest. And what I’ve gone ahead and done, and again, this piece was very conceptual. This is the future conceptual Bitcoin Lightning risk curve. The reason I wanted to do this was so people who are very adept when it comes to building instruments like these, they can take a look at this and become inspired.

Joe Consorti (00:28:41):

I took a lot of inspiration from Nik’s original piece way back in 2018 to adapt what he did there and bring it into the present and give people an update on the way that these protocols were evolving in tandem. But at the bottom of the risk curve is cold storage Bitcoin, right? Obviously, it’s non-yielding, obviously, but it’s non-custodial counterparty free and unlike the United States government, obviously, we’ve never defaulted on our debt, but physical cold storage Bitcoin could be considered completely devoid of all counterparty risk, all default risk, all custodial risk. So it mirrors physical gold in its risk profile. And if you play these two risk curves back to back, you could see how these instruments align with one another, in terms of having similar risk profiles.

Joe Consorti (00:29:32):

And then, a step above that is the Lightning Network reference rate. This was originally coined by Nik back in 2018, in order to describe basically a standardized rate of return that people could earn through parking their capital on a Lightning channel. This is at a spread to cold storage Bitcoin, because obviously, it incurs all of the Lightning risks inherent to the protocol that we talked about earlier. The utility of publishing a Lightning Network reference rate is just to show market participants, right? That Bitcoin can be a fully fledged capital market in and of itself. The idea of having a widely reported return on your investment, the idea there is that it attracts liquidity to the ecosystem. So that’s a step above cold storage bitcoin, obviously requires a little bit more work to manage. Then, the Lightning liquidity lease, this is to illustrate marketplaces like Magma, these liquidity lease marketplaces where, not unlike a bank issuing a loan, somebody can put up their channel liquidity for lease.

Joe Consorti (00:30:36):

People can come purchase it for specified periods of time and underneath it, you’ll notice I put LNRR plus 50 BPS, right? Now, this is not alien talk. This is mostly just to illustrate how this emulates traditional fixed income instrument. So LNRR is Lightning Network reference rate and something that’s a little bit more risky, something that incurs things like the risk of the marketplace going down and other associated risks. It trades at a basis point spread to Lightning Network reference rates, right? So it’s a little bit more expensive than the proverbial risk free rate of the Lightning Network. And then, one step above that, I’ve put Taro asset lending, and we could talk about this, but Taro by Lightning Labs is essentially a protocol that’s in development by them that would allow for asset issuance, any asset, on Bitcoin and Lightning, right?

Joe Consorti (00:31:34):

So essentially, the reason this trades out of spread to LN liquidity lease is because obviously, that incurs all of the associated risk with anybody who issues an asset on their own. And then, at the very top, off chain lending, that incurs the most risk and so, it’s the most expensive, but you also have a pretty high potential for return. Obviously, when you’re off chain, you incur default risk. You incur counterparty risk. Counterparty risk at a level that isn’t present with all the other four risks on the curve and really, this is just a way of illustrating every single instrument on Bitcoin’s future potential capital market, based on the way I see things are going.

Preston Pysh (00:32:14):

Yeah. On the Taro asset, so this is something that I think maybe I’ve talked about it once or twice on the show with guests. This is very similar to what Adam Back did with the Liquid Network, but it’s on top of Lightning and I think that’s the key difference between what Adam did with Liquid and what Taro at Lightning Labs is trying to do here, but don’t you think that from a risk standpoint, because that’s what we’re talking about, so much of it comes down to what that digital asset is representing? So if it’s representing a token in a video game, that’s one thing, but if it’s representing something physical in the real world or an NFT or whatever, it really depends on what that digital token is representing. So as far as the 150 BPS that you have listed there next to that, plus your Lightning reference rate, I’m assuming that’s a very flexible spread depending on what type of digital asset you’re talking about.

Joe Consorti (00:33:21):

Absolutely. That’s definitely variable because somebody could be issuing stable coins or somebody could be issuing a photo of a monkey. So, similar to the fixed income space, it all depends on the credit worthiness of the issuer. It all depends on the reputation of the issuer. That spread is absolutely variable, but it’s interesting. I mean, Taro is… You can issue assets on the Bitcoin main chain, but it can be sent over Lightning, which is the real innovation, in my purview, but ultimately, what’s made possible through this is any asset you can think of, primarily in my mind, what that immediately jumps to is all the world’s currencies, right? We’ve got dozens, hundreds of Fiat currencies, all circulating and those currencies can be traded between market participants and for goods and services between participants and in and amongst one another, right?

Joe Consorti (00:34:24):

So inter and intra currency all over Bitcoin denominated financial rails, right? So, it’s using these Satoshis, these 100 millionth units of a Bitcoin, as the vehicle for sending these currencies back and forth. And so, even if people aren’t a fan of monkey JPEG’s trading on… Using the Bitcoin and Lightning Networks as transmittal rails, I think what people should be looking at is that any increase in demand for transactional capacity will also come with increased network liquidity on Bitcoin in order to facilitate those transactions. And so, to me, for participants who live maybe in El Salvador or other countries that are thinking about adopting this technology, a major onboarding milestone would be the ability to hold Bitcoin and dollars in the same wallet, right? Right now, that’s reliant on a third party, right? Like Strike, they create the user interface and they’re not in the same wallet, but they’re in the same application. And Taro jumps directly over that and allows for all these different currencies to be held within one Bitcoin wallet. It’s pretty remarkable.

Preston Pysh (00:35:40):

That’s crazy. So, if you wanted to hold now, obviously, Tether, USDC, all of these tokens that are being issued by those entities, have the risk of those entities actually owning dollars or whatever they’re using as the peg in some type of account to represent that token that’s issued, but you’re saying the token itself, even though it’s USDC or Tether, can now be physically held in your Bitcoin wallet over the Taro network. Did I describe that correctly?

Joe Consorti (00:36:18):

You’re basically entirely on point. And the fantastic thing about this is that the only thing that the channels on the Lightning Network need to know is that they’re routing liquidity. And that’s already what they do. They don’t need to know what asset they’re routing, all they know is their routing Bitcoin, right? So if I wanted to send USDC to you through the channels, the first hop into the Lightning Network, per se, it gets converted… My Bitcoin or my USDC gets converted to Bitcoin, gets sent through the Lightning Network in the most optimal way. And then, on the last hop to you, gets converted right back into USDC, which sounds a lot like Strike’s business model, right? Strike…

Preston Pysh (00:36:55):

Yeah.

Joe Consorti (00:36:55):

…the idea that you could send dollars, somebody receives Bitcoin and vice versa, but this essentially takes that business model and embeds it… Creates a method for embedding it into Bitcoin and Lightning itself. It’s pretty cool.

Preston Pysh (00:37:07):

How is that possible?

Joe Consorti (00:37:09):

Yeah, right.

Preston Pysh (00:37:09):

How the heck is anybody smart enough to piece that together? Is the question, it’s unreal.

Joe Consorti (00:37:18):

Nuts.

Preston Pysh (00:37:19):

It’s crazy. Okay. You have said to me, “Rates lead the dance.”

Joe Consorti (00:37:26):

Yes.

Preston Pysh (00:37:27):

What do you mean by this?

Joe Consorti (00:37:29):

If you want to pull up the chart, what I’ve done here is I’ve mapped the United States two year treasury yield against the federal funds rate upper bounds. So fed funds is obviously the policy rate that gets set by the central bank, the Federal Reserve, and as you can see here, every single time that the two year yield falls below the federal funds rate, the Fed pauses their hike cycle, right? And then ultimately, when it becomes a precipitous fall below the federal funds rate, then they’re forced to pivot their hiking cycle in the other direction. This is a historical precedent. For those wondering, the reason the two year yield was chosen is because the two year yield trades with forward policy rate expectations. So the two year yield can be thought of as where the market believes the policy rate is going to be.

Joe Consorti (00:38:20):

And so, that’s essentially one of the charts that you can use to gauge whether or not a pause or a pivot would be coming. And as of right now, the two year, it bounced this week, but it’s channeling sideways in that range as of right now. And at the Bitcoin Layer, we’re not saying a pivot is coming. We’re just reading the charts. We try to play things probabilistically as opposed to being extremely granular and trying to make all these minute predictions, but looking at this and then, taking a look at fed funds futures, which is something that is derived with overnight index swap data, which also shows that a policy rate pivot or at least pause, is coming early Q1 next year. For those reasons, we presuppose that the September could be the last hike we see before a pause. Not the terminal rate by any means, unless something extreme were to blow up, credit spreads blew out and then, the Fed was forced to jump in. We don’t view that as likely. We don’t view it as if that’s coming soon, but taking a look at the two year versus fed funds, and then also, this overnight index swap policy rate expectation, we’re taking a look that the Fed is… They’re walking a pretty tight rope here.

Preston Pysh (00:39:46):

I love this chart. And you’re exactly right. I mean, look at when those two intersect and every time they’ve paused, at least since 2000 on this chart that we’re displaying. And I’m sure if you went back another 10 or 20 years, you’d see that this continues to hold true to where they’re at. And thanks for the future’s chart here and showing everybody where… A lot of people will throw out comments. “Yeah, I think they’re going to pause at the beginning of the year.” But they don’t understand the analysis or the data that’s supporting that opinion. And that’s exactly what you’re showing us right here, so…

Joe Consorti (00:40:25):

Absolutely.

Preston Pysh (00:40:25):

What do you think is going to happen in the fall? I mean, it really feels like things are going to start getting spicy here in the fall. What do you think?

Joe Consorti (00:40:32):

Oh, absolutely. If rates continue their precipitous fall and they fall below fed funds, then we could see a pause sooner than we think. The upper bound of the terminal rate that we’re at right now is if we actually go beyond this, if in September, which by all accounts, they are going to, Jerome Powell is going to speak late August about probably give some for guidance about what they’re actually going to do, but when they hike another 50 basis points or 75 and we’ll get a better understanding of what consensus is as we move forward, then that will be the first time since, I’m pretty sure the very early ’80s, when Volcker hikes to 17, 18%, that the terminal rate for this hike cycle will be higher than the terminal rate for the last hike cycle, which would be pretty remarkable, especially considering debt to GDP has what? Doubled? Tripled in the timeframe since the last hike cycle?

Joe Consorti (00:41:29):

It’s insane. The Fed, in order to bring down this inflation, which obviously is their mandate, right? Because they’re also facing a pretty big credibility problem. Jerome Powell is as Jeff Snyder says, he’s channeling his Paul Volcker, he’s trying to do his best impression of somebody who’s willing to fight inflation to all costs. And they stand the risk of bankrupting all these fragile sovereign nations that hold this dollar denominated debt. It’s a crazy situation. I think in the fall, Southern European nations, other emerging markets, we see defaults ensue over there, among the more fragile ones in terms of their credit risk. It’s not a pretty look for the fall, in my opinion.

Preston Pysh (00:42:11):

Yeah. What do you think about… And I know this is really short term. Like you, I like to talk about the longer moves, but what do you think of this bounce that we’re seeing right now? So for people listening, a lot of people from the future listening, it’s three August, we’ve had quite a bounce in equities. I’ll tell you my opinion after you respond, because I don’t want to… Go ahead. What are your thoughts on this bounce?

Joe Consorti (00:42:36):

So there’s two schools of thought. There’s a school of thought that this is a bear market rally spurred on by the fact that, “Oh, my gosh. In a month, we saw 15%, 20% losses to the NASDAQ, to the S& P.” And people are buying euphorically, thinking that a pivot or a pause is coming. And there’s the school of thought… There are a couple of different schools of thought, so I’ll stop saying schools of thought, but there’s also the idea that, okay, two years are trending down. 10 year fell pretty precipitously. At its highest [inaudible 00:43:09] it was 3.5 and now, it actually [inaudible 00:43:12] down to 2.5. And so, the risk is forward looking. And so, there’s an idea that, okay, because risk is forward looking, they’re seeing all these key rates begin falling. Okay, now it’s time to rally once again. Potentially, balance sheet conditions moving into the next year are going to be more optimal because maybe by some miracle, these companies were able to roll their debt in such a way that these massive rate increases haven’t impacted them. There are a lot of different scenarios, but I think the most doomsday scenario, I think it was Alessio on Twitter, Alessio Urban, great macro guy. He put the fractal of when Lehman went under late…

Preston Pysh (00:43:55):

I saw this. I saw this. It was…

Joe Consorti (00:43:59):

Yeah. And so, the S&P would have room to fall to 1100 if that was the case. So, there are a number of different scenarios, more taking a stance of absolute doom and gloom versus, okay, this is a relief rally spurred on by lower rates. And as of right now, basically we’re just… Myself and Nik and what we do at the Bitcoin Layer, we’re just trying to weigh things probabilistically, right? So whatever the charts are telling us, we try to relay that information and give all the probabilities, but those are your scenarios, I’m guessing.

Preston Pysh (00:44:30):

Yeah. I’m a little suspect on the last one, because I think back in 2008, when that all happened, I think they were still trying to wrap their head around, what is this that’s happening and why is it so… Why is the liquidity and the credit in the system seizing up like this, right? Now, I think they’re looking at it and they’re well aware of it getting that bad and I think as soon as they even get a hint of it turning in such a direction, their response is going to be there, but who knows? I’m in the first scenario you described, I think this is a bounce. I think we’re in a very bear market. When I look at the 10 and the two, and I’m seeing that we’re almost hitting all time lows in a negative… I think we’re a negative 0.3 between the 10 minus the two.

Joe Consorti (00:45:25):

Yeah. Negative 3.7.

Preston Pysh (00:45:27):

Negative 3.7. I think negative 0.5 is the deepest that we’ve seen back in 2000 and in 1989. When you look at that and you look at the unemployment rates at those exact moments in time, unemployment has always been at its fever pitch low and that’s exactly what we’re seeing right now. So what comes next is typically, from an unemployment standpoint, pretty disgusting when this starts to reverse itself. And so, for that chart, because it’s just been so accurate throughout time, it’s a little hard for me to suggest that or to think that we’re going to be able to… There’s obviously other factors, but I’m not buying it for a second. I’m just not. Hopefully I’m wrong for all the people that are in long positions, but…

Joe Consorti (00:46:18):

Most definitely. Yeah. You mentioned unemployment, a lot of people have been, and even the Fed does this, they take a look at things that are still looking good, but they’re lagging indicators like unemployment, and then, the Fed will use that. “Well, we’re still at 3.6% unemployment.” And they’ll use that to job on the market as if it’s a good thing, but that thing’s lagging.

Preston Pysh (00:46:36):

So lagging.

Joe Consorti (00:46:38):

Yeah. It’s unbelievable. I mean, I’m sure Jerome Powell can afford a Bloomberg terminal, just take a look at all the jobs data that’s coming out, all these other really important economic releases that are coming out. Things are getting more dismal. The labor market’s extremely tight. As you said, the last… We actually didn’t get below 3.6% unemployment the last hike cycle in 2019, before that started to rise too, and then, obviously COVID happened. So, yeah. Not looking ideal.

Preston Pysh (00:47:08):

Hey, so I want to put up a chart here. I really like this chart that you shared with me, for people listening. This is the S&P 500. And on the bottom, you have the three month note and what you’re doing is you’re showing how once they started tightening and you see the three month coming up on the yield and selling off, you see a corresponding almost down to, what is this? A weekly chart, down to the week of when the S&P hit its peak and it started to begin its sell off. So, walk us through why you’re choosing the three month as the indicator here and just some of your general thoughts on this chart.

Joe Consorti (00:47:50):

If anything, I think that the broad strokes for anybody watching is that rates lead the Fed and rates guide risk. Risk is forward looking six to 12 months and they see essentially… The reason I chose the three month was because of all the different maturities, of all the different tenors across the United States treasuries, the one that gets borrowed against the most I’d say or considered the proverbial risk free rate would be the three month. Obviously, the further you go out along the yield curve, the more duration, the more interest rate risk you incur. And so, the reason I use the three month was because, again, corporates borrow at a spread to this. And for that reason, I felt… And actually, Nik published this initially, so I’m taking a little bit of his thunder, essentially this is what corporations borrow at, so naturally, you could extend that out and say, that’s what things like the S&P would be the most responsive to.

Joe Consorti (00:48:48):

And it’s pretty remarkable. The moment you saw the three month kick up, I think the [inaudible 00:48:54] didn’t even go as high as 50 basis points. You saw the S&P begin a pretty substantial move down. And that just goes to show how dependent on cheap, cheap, cheap debt we are. We talked about zombie companies earlier, and I think this is the easiest visualization for anybody to see how overlevered everybody is on this cheap debt. We’ve been able to binge on it for the last 14 years, since the great financial crisis, but also during COVID when the Fed decided to backstop, literally everything and inject the economy with all of this liquidity. And now you’re seeing, okay, once the music is up, the S&P has been brought down a pretty substantial amount and has only started to rally once rates have begun to level off and reverse.

Preston Pysh (00:49:43):

Let’s go to this next one, which is basically the exact same chart, only you now have Bitcoin at the top. And when we were trading notes before we started, you had a statement that Bitcoin has been a leading indicator to market moves. And I think a lot of people in finance would agree with this. And here, you’re demoing that where the price started selling off on Bitcoin well before the three month started to also sell off. What do you think is causing that? Why do you think Bitcoin would lead the market on recoveries and whatnot?

Joe Consorti (00:50:23):

For sure. So, Bitcoin leads other traditional risk assets for a couple of reasons, but I’ll also preface it with Bitcoin also acts as a false alarm sometimes. Bitcoin has these extremely volatile swings and sometimes, and in this case, when Bitcoin started to decline eight weeks before the three month started it, increasing, in this case, it wasn’t a false alarm, but if you look back even just on this chart, back to last May if you looked at that and then thought that broader risk was going to puke too, you were wrong. If you looked at that and thought, “Oh, rates must be increasing relatively soon.” You were wrong. But by that same token, Bitcoin does get it right sometimes. And the reason I feel and we’re going to publish a longer form piece on this, we’re going to do a longer form S&P 500 versus Bitcoin study is because of Bitcoin’s very, very tiny liquidity profile compared to the S&P 500. That’s reason number one.

Joe Consorti (00:51:23):

So Bitcoin’s market cap is 450 billion, roughly, and the S&P 500 is right around 35 trillion. And so, Bitcoin being a fraction of a fraction of the S&P 500, but also trading with very high beta to other risk assets, it means that as Luke Gromen puts it, Bitcoin can be a fire alarm. When you’re looking for something that could be a leading indicator on the direction of risk, Bitcoin, in this case, it led the S&P 500 by eight weeks. The other thing is this extreme excess of leverage. So obviously, we had this massive leverage unwind, sparked by the collapse of Terra Luna. And then, all these insolvencies that we talked about, 50 some odd billion dollars, or excuse me, 5 billion some odd dollars of sell pressure. And I guess it’s just a symptom of a free market. A market where there aren’t a tremendous amount of regulations in terms of leverage on the balance sheet, but also leverage with these various exotic financial products that people can take on.

Joe Consorti (00:52:25):

And as a result of that, when leverage gets purged, the price tanks pretty expeditiously compared to other risk assets. But that said, while Bitcoin can sometimes be unreliable, it led the 2017 S&P 500 top by something like two months. It led the 2018 top by something like six months. And then in 2021, the one that we just showed, it led it by eight full weeks. So obviously, as Bitcoin monetizes and its market capitalization comes closer to that of the S&P 500, it’ll be a less effective fire alarm. But as of right now, it’s a moderately reliable indicator for when things are going south in traditional markets.

Preston Pysh (00:53:03):

Hey, we talked about the 10 year minus the two year, I talked with Alf last week a little bit about this, your chart here that you shared with me, when you’re looking at the largest disparity from a negative spread standpoint for the 10 minus the two year, on these previous periods, going back to the 2000, basically right as 2007 started, you didn’t really hit a recession until one year later, which is your red lines here on the Bloomberg chart. Then, let’s go back and look at the year 2000. It was about six months later, you were officially in a recession. And then in the 1989, when it was at the peak negative, .5, it took nearly a year and a quarter to a year and a half before you had officially hit. And I’m completely disregarding COVID there in 2020, because I just think that was maybe a little bit of a different scenario of just an unprecedented type event, but this looks so similar to what we were seeing there, and you had mentioned earlier about how this is a much better leading indicator to a recession. Are there other leading indicators that you would pay attention to beyond the 10 year minus two year?

Joe Consorti (00:54:31):

There are, yeah. The 10 year, two year, just to provide some context as well, I mentioned how [inaudible 00:54:38] trade with policy rate expectations tends to trade with forward growth and inflation expectations. And so, the way… Because this chart’s been thrown around a whole lot, the way that this can be interpreted from 30,000 feet is below the red line, when these curves invert, is when growth expectations, forward growth expectations, annual inflation, the Fed targets at 2%, are below the policy rate expectations, right? So in other words, the price of money, right? Policy rate, is higher than expected growth, which is very bad, which is why this two, 10 spread is such a good indicator, but looking at the rate of exchange there, that’s not good. A couple of other things I tend to look at, Nik tends to look at are the five year, five year inflation swap. Not necessarily as a recession barometer, but how forward growth expectations are looking.

Joe Consorti (00:55:31):

As of right now, things are channeling relatively steadily. We know that the Fed actually looks at the five year, five year inflation swap first in perspective as to whether or not inflation expectations. And this means inflation expectations six to 10 years from now are coming down. They’re increasing and that’s what they use to dictate their policy rate. It did start moving down steadily, but it’s continuously channeling around that 2.5 level. So we’ll see. And then, the other thing that we tend to look at is the three month, 10 year treasury spread and that, as opposed to twos tens, because the fed likes to wait until the very, very, very last minute.

Joe Consorti (00:56:12):

They like to look at the three month, 10 year spread for when, “Oops, we’ve gone too far. Time to reverse course.” Ultimately the Fed, they could be a lot more ahead of the curve if they looked out further on the yield curve and addressed issues with monetary policy, when the longer tenors on the curve started to invert, right? When 5s10s begins to invert or even 10s30s. Nobody takes a look at 10s30s, nobody takes a look at 10s20s, especially not the Fed, but if they did, maybe they’d be able to adjust monetary policy ahead of some of these major, major cataclysmic events happening. Instead, what they monitor is the three month tenure, which is perhaps the shortest inversion and the most severe inversion you could possibly measure. I don’t know why we pay these people. I really don’t.

Preston Pysh (00:57:01):

When I’m thinking about just the way they’re reacting, I think so much of it is they just can’t deal with a negative yield curve, from a management of banking balance sheets. All of these banking balance sheets, for them to have quote, unquote, assets in a fractional reserve system, it’s all based on the duration arbitrage that they have on their balance sheet. So as soon as the yield curve starts flipping that way, they’ve got to act because it’ll get messy real fast. And unfortunately, I think that that’s what’s brewing right now is in short order, but we’ll see. All right, Joe, these charts are phenomenal. This is amazing. There was one final one that I want to talk to you about. This is much more Bitcoin related. You have a confluence indicator that you and Nik have worked on. Let me bring it up here for folks so they can look at it and walk us through, as I’m pulling this up, talk us through what this is.

Joe Consorti (00:58:05):

Of course. So the first chart here is our fair valuation framework. And basically, this is something Nik and I worked up a month or two ago when we were trying to figure out the clearest and highest signal way in order to value Bitcoin. Oftentimes, people will get way too muddled when it comes to whatever indicator they’re using. They lean too heavily into on chain or they lean to heavily into technical analysis. And ultimately, your chart ends up looking like a five year old’s finger painting more than an actual financial analysis chart that you could derive signal from. And so, basically the idea behind this was that simplicity, 30,000 foot view will give us the highest signal. And really, the way we went about this was going across three completely separate financial disciplines in order to find the floor in every single one of them.

Joe Consorti (00:58:55):

And what I mean by that is we went through on chain, right? On chain analysis. We went through traditional technical analysis, and then we went through energy. And the three metrics we derived in order to create this floor are realized price, 200 week moving average, and actually, proprietary metric that I created called the Electricity Hash Value. This was based on Charles Edwards Bitcoin Production Cost. And basically, the way that gets derived is multiplying Terrahashes per Bitcoin, by it’s… I’m losing it, but essentially, it’s the production cost of one Bitcoin. And basically the idea is that if you zoom out, even I have this chart up to 2019, because I think it’s helpful to just take a look at the most recent cycle or couple of years, but if you zoom out, you can see every single one of these floors moving in a stepwise function underneath the Bitcoin price. And this is very helpful, because when Bitcoin approaches or falls beneath these floors, you can identify, okay, Bitcoin is cheap. Bitcoin is closer to its fair value.

Joe Consorti (00:59:59):

And when the spread between these widens, you could say, okay, Bitcoin is overvalued, right? And the reason we capped it at only three metrics was because again, we feel that you could derive the most signal if you eliminate all of the unnecessary things.

Preston Pysh (01:00:13):

And so, I just toggled to the next chart here, where you combined those three, the realized price, the 200 weekly moving average and the electrical hash value into a single confluence price and people can look at that. I’d be really curious to see, I’m assuming it looks really good if you continue to zoom out.

Joe Consorti (01:00:33):

Oh yeah, it does. Not to toot our horns at all. I mean, so many people have come before in terms of doing similar charts to this, I know I’m certainly not the first person who has used the word confluence to create a chart that describes a floor, but again, the fair value framework you do, taking that idea of simplifying it even further, we literally just a simple average, add all three up, divide it by three. And it provides a whole lot of signal as to whether Bitcoin is over or undervalued. One of the cool things is that we also put an oscillator underneath, so you could see whether Bitcoin was expensive or cheap. And we publish this every week on our Substack for free, every Saturday. We do a weekly update and this is one of our top of the line charts.

Joe Consorti (01:01:21):

We have a whole monitor that we go through. We talk about Bitcoin’s correlations, it’s prices, and this is one of the charts that we include, because I think really anybody who takes a look at this can understand, okay, what does this mean? In the top left corner, it says exactly the inputs, the value of all of those inputs and then, at the bottom, I put expensive and cheap underneath that line to show when the spot price of Bitcoin falls below the floor. And it’s a really simple, I feel, high signal way of determining whether or not Bitcoin is over or undervalued.

Preston Pysh (01:01:57):

Let’s say that the doomsday scenario in macro plays out here in the coming two quarters. How do you feel about a model like this holding up considering the period that Bitcoin has existed relative to not really experiencing a 2008, 2009, like scenario? Some might argue that COVID you saw it, but I think they came with such a fire hose of Fiat printing in such a short, quick response way that Bitcoin had a massive sell off, but it rebounded within literally days, back to levels that it was before. I think it recovered within 60 days of where it was at. So, for people that might read this and be like, “Oh, well, it’s below the price.” But not necessarily having appreciation for the macro setup that we’re in and there really not being a historical precedence. How do you think through that? And what would you say to a person like that might be looking at this chart and getting excited?

Joe Consorti (01:02:58):

Right. Absolutely. So you really have to look at all of it through… What we try to do at the Bitcoin Layer is look at Bitcoin through a macro lens, look at it through the lens of what rates are telling us and the geopolitical landscape and how things are playing out, because if you take a look at this chart, it doesn’t paint the full picture. You have to consider what credit conditions are like, what rates are telling us about how expensive money is at this certain point in time, what the fed is telling us about how it’s going to guide monetary policy. So looking at any one chart, especially a chart like that, doesn’t paint a full picture. In 2020, I would say we definitely didn’t see a sustained recession. As you said, you tend to discount when the curve inverted in 2020. I do as well.

Joe Consorti (01:03:45):

It wasn’t a sustained recession, as you said. The Fed backstops with liquidity almost immediately. They created several new institutions in order to do so, and chances are they will in the next one. But as of right now, the Fed is being extremely hawkish with sucking liquidity out of the economy and their tenor, apart from a couple of minute things, it hasn’t changed much. And so, the question has to be asked, how is Bitcoin going to perform in what might be its first sustained recession or major economic contraction? However, they decide to change up the definitions. And I would say that the best thing you could do there in order to try and figure out how Bitcoin’s going to perform is taking a look at these historical levels, combining that with the adoption trend of Bitcoin, how many new people are coming onto the network and more so than anything else, understanding that Bitcoin leads other risk assets in this regard.

Joe Consorti (01:04:45):

I think Bitcoin stands to continue channeling around this level for a pretty sustained period of time, unless we see a pause in rate hikes, which very likely, there’s a scenario in which that could happen, then Bitcoin could begin an uptrend. But as of right now, I wouldn’t expect Bitcoin to massively break up or massively break down. We saw that there was a huge buying cohort around the 20,000 level. So really, anything can happen. The Fed has, again, they’re hawkish in that they’re not ending their liquidity draining from the economy anytime soon and Bitcoin actually trades basically one to one with global money supply. I didn’t include the chart here, but two weeks ago, Bloomberg has a very, very nice indicator that basically compiles every single reported country’s M2 money stock and just like other risk assets, Bitcoin rises and falls and rises and falls.

Joe Consorti (01:05:41):

And so, as of right now, the year over year change for global liquidity, it’s the lowest it’s ever been. It’s the lowest it’s ever been in the last three or four decades. You take a look at the rate of change for the policy rate, it’s the highest it’s been in several decades. And so, you have to wonder how much longer can the Fed keep up with draining liquidity from the economy and the answer, in my purview, is not very long before bankrupting, not just corporations, but emerging markets, other very fragile entities. And when they eventually reverse course, right? That’s when Bitcoin stands to benefit, because of Bitcoin’s extremely low liquidity profile, really any major player stepping in, which would undoubtedly happen if the Fed were to pivot, would send Bitcoin flying. So as of right now, cautious until the Fed changes its tone, but that’s where we stand.

Preston Pysh (01:06:35):

I just can’t even imagine the consolidation of the hands that are buying these prices for this long through this and like you said, if it continues to go sideways in the low 20s, and even if it dips back below 20 again, those people that are buying and gobbling up all those sellers coins, I just cannot imagine what that’s going to entail when you eventually do have a Fed pivot and it seems to me like, with whatever this thing is that’s brewing, they’re going to have to come with a fire hose of liquidity that we have not even remotely seen historically is what I suspect. And I’m assuming you see it the same way, but…

Joe Consorti (01:07:21):

Absolutely. Yeah. New and creative ways of pumping the economy with liquidity is the Fed’s third mandate. So…

Preston Pysh (01:07:29):

I like that. What a pleasure talking to you, Joe. Your charts and just your analysis and ability to communicate is just phenomenal. Really enjoyed this. Please give people a handoff, your Twitter feed is amazing. We’ll have a link to that in the show notes, but give people a handoff to anything else you want to highlight.

Joe Consorti (01:07:49):

Absolutely. Thank you for having me on, Preston. You could find me on Twitter @Joeconsorti, and I’d also redirect listeners to my Bitcoin and macro Substack publication. I do it with Nik Bhatia, author of Layered Money. It is at the BitcoinLayer.substack.com. It’s a premium Bitcoin and macro newsletter and we also have a free post that go up quite frequently, in terms of high signal, that’s basically where everything’s going. So, point people to the Bitcoinlayer.substack.com.

Preston Pysh (01:08:21):

Fantastic. Joe, thanks for making time and coming on the show and looking forward to chatting with you more in the future.

Joe Consorti (01:08:27):

Absolutely. Thanks, Preston.

Preston Pysh (01:08:29):

Thanks. If you guys enjoyed this conversation, be sure to follow the show on whatever podcast application you use, just search for We Study Billionaires. The Bitcoin specific shows come out every Wednesday, and I’d love to have you as a regular listener. If you enjoyed the show or you learn something new or you found it valuable, if you can leave a review, we would really appreciate that and it’s something that helps others find the interview in the search algorithm. So anything you can do to help out with a review, we would just greatly appreciate. And with that, thanks for listening and I’ll catch you again next week.

Outro (01:09:03):

Thank you for listening to TIP. To access our show notes, courses or forums, go to the investorspodcast.com. This show is for entertainment purposes only. Before making any decisions, consult a professional. This show is copyrighted by The Investor’s Podcast Network. Written permissions must be granted before syndication or rebroadcasting.