 If we do see an increase in the number of infos going to exchanges again, that could signal a potential strong upwards movement. I think most likely as we see a recovery, where kind of valuations move back up to the, you know, 10k range. Today's crypto market discussion is sponsored by OKX. OKX, one of the leading crypto exchanges, has developed its own blockchain platform, OK Chain, and recently has launched a test step. OK Chain allows users to issue their own cryptocurrencies, create trading pairs and trade freely on it. Watch this video and go check out OK Chain. The link is in the description below. What's up YouTube? My name is Jackson. Today I'm joined by Simon Peters from eToro and David Greider from FunStrat. How's it going today guys? Yeah, good. Thanks. Everything's good. Great. So Bitcoin has seen some incredible volatility in the past week. What are your targets for Bitcoin's next move? Right. I look out over the next three, six months to 12 months. You know, I do see a number of scenarios, and I can walk through kind of some of the data behind how we get to them. You know, that range between kind of a bear market, you know, to, you know, around 2000, if we're with a low probability, a stagnant market, you know, maybe where you could see some range, where we stick kind of where we are with, you know, a minimal probability from my perspective, around, you know, maybe 10, 15%. I think most likely as we see a recovery, where kind of valuations move back up to the, you know, 10k range with, you know, multiple expansion on some of the valuation models I look at, which I put about 50% probability. And then, you know, there is some chance, you know, that you have a bull market in 20% range in my view, and then maybe a 5% probability you see another bull market similar to the one that we've seen in 2017 at like maybe a 5% probability. So I kind of handicap it in that, in that type of way. On March 16th, the Fed cut interest rates to nearly 0% in the face of coronavirus fears and stock market crashes. The European central bank's primary interest rate is already at 0% and the Bank of England recently cut their interest rate by half a point to 0.25%. President Donald Trump has also introduced a $1 trillion stimulus plan to bolster the American economy. Americans need cash now and the president wants to get cash now. And I mean now in the next two weeks. While inflation continues to be the main tool used to combat the financial crisis, what role will Bitcoin play as the situation worsens? Simon, let's start with you. Yeah, I think at the moment given what we have seen in the markets, sports central banks and governments around the world have been doing this, just trying to stop the bleeding essentially. We've seen this conversion of assets into cash regardless of which market it is. But there will come a point where due to this increasing amount that's been pumped into the system, that cash is going to lose its value. And then as the virus no doubt stems down and the number of new cases that are being reported tells off. The question to investors is then what do I do with all this cash that I have? And then they may look into other assets that can hedge against that essentially with possibly being one of them. I mean if we go back to the whole idea of where Bitcoin was born from, it was out of the financial crisis and the distrust for banks as such and to provide an alternative system for people to transact with each other without the need for a central party. So if you go back to those routes and I think the further we go down the line and the more people understand what's actually happening with their money going forward, then that may drive the push into the inscript certainly. What are your feelings on this, David? You know, well, it's a really good question. I think that in the broadest sense, if you look at central banking easing and liquidity, you know, intuitively it should be inflationary for a number of assets, right? If you think about, you know, you're printing more dollars in the system, but you have to think about it more nuanced than that, which is that the reason that central banks are pumping excess liquidity into these systems is because you have to offset, when you have dollars in the economy and then you have financial assets and you have asset values and asset values fall, debt falls, you're reducing the monetary supply in the economy, right? So even if you're reducing that and you're offsetting it by increased central bank money, you get to somewhat of an equilibrium. And, you know, I think that I'm not of the view that the dollar is in the position that it's going to weaken and Bitcoin is going to be strengthened because of money printing, right? You know, the US is still the reserve currency. It is still the place that globally a lot of capital flight in times of uncertainty is flowing to and you can see that now. Treasuries have returned positively in the year and the dollars returned positively in the years as the only two major asset classes and everything else. At the same time, you could see a lot of, you could see strength from Bitcoin and crypto, you know, not necessarily from what the Fed's doing, maybe part of it spills over, but I think you could see a lot of that from emerging market economies, other nations where you have, you know, capital flight that needs to exit the country. You know, I've seen a strong correlation between, you know, the Chinese capital account during times of their devaluation, you know, to Bitcoin's price. And, you know, I think that that liquidity, you can make it in to the markets and you could also see a scenario where the dollar strengthens as well because of all the global uncertainty. So I do think on net, it's very positive for crypto in general. And how do you guys feel that the volatility of crypto is going to play into this whole idea of, at some point, Bitcoin or crypto becoming hedges against the monetary system? Well, the volatility aspect, I suppose, takes away the idea of crypto being a safe haven. Generally, safe havens are there to provide stability. What I would say is if we, like I said, if we do see overall market liquidity proving this volatility go down, then the case for it to be a safe haven could greatly increase. How do you think the current economic crisis will affect the Bitcoin having? What effect will the decreasing inflation rate, which is fundamental to Bitcoin, have on Bitcoin's long-term success? Simon, would you like to start? Well, the crisis is not going to affect the halving because the halving is going to happen regardless, you know, as programmed in. So we will see that happen in terms of long-term effects post halving. We know there's going to be a decrease in the block reward, which theoretically should decrease setting pressure from miners. That's one aspect and that could provide room for upward price increases. But there's a lot more happening in the world equipped at the moment, not even considering this virus to where we were four years ago from the last halving. So there's a lot more play here and a lot more factors that could suppress the price. I mean, there's futures markets, there's options markets now, Bitcoin. Some do argue that the whole purpose of this was to suppress the spot price of Bitcoin. That's a not going debate. But we're at a very different stage compared to where we were four years ago with the last one. There's also same pressure from other means. There's this plus to compare mischievous ongoing at the moment where they're unloading significant quantities of Bitcoin and Ethereum onto the market. So at any point in time, we could just have significant set orders placed to suppress price. But I think in the longer term, my longer term outlook is is one positive bullish longer term. And based on what we have seen historically post halving a year, 18 months, 24 months has tend to result in the top of the next bull market. So you feel that the coronavirus and the economic crisis isn't really going to impact that long term bullish view? In the long, long term, I don't think so. No, because there will be a point where we get to an end of this virus. As I mentioned, the new case already in China has actually started to decrease and we haven't seen as many new cases developed there. So once the Western world follows or the world as a whole follows and we start to use cases to tail off, things should go back to normal. And with the halving decreases in selling pressure with this excess cash is in the system right now that may provide the right conditions for people to now consider crypto as an alternative asset and a means to protect themselves against any future inflation. Yeah, so I'll just check on one quick thing to the last thing I was talking about that Simon reminded me of when he talked about the economics of the economy and the GDP slowdown and the fundamental flow over to why stocks and bonds should see weakness makes sense, right? But the economic fundamentals of Bitcoin and another monetary commodity of work cryptocurrencies and then most of the digital economy of crypto assets doesn't follow the same economic fundamentals, meaning it's not about necessarily economic activity, GDP growth and earnings for the most part. The halving has been shown in our view at Fundstrat, Tom's view is that the halving is bullish for Bitcoin, right? That's the punchline. But how do you get there, right? Like Tom's done a lot of good work on what the net production and supply is on the market from minus seven, right? And as a supply demand asset, that is positive if you look at what that means for new supply coming onto the market, right? And I think from a demand side, a narrative economics, Robert Schilder has a very good book, narrative economics, and it talks about how stories drive investment themes in the ways that market behaves. And I buy into that and I believe that because there has been such success with prior halvings that you will likely get some cohort of investors who say, look at that, and then they say, okay, let's see if history plays out again. And history doesn't repeat but it runs. And I think that that's very likely too. You know, from another fundamental perspective, it's like as well, like it's not also just the number of new supply on the market, right? That determines the price. It's also existing holders who have the ability to sell. And again, you know, we mentioned most of those are underwater. So, you know, as you have, you know, a reduction in the current new supply, right, at current market prices coming onto the market, because that's the cost that it costs to mine and that marginal cost marginal revenue to miners, right? And then you have new demand from a narrative and then you have reduction in demand, right, that's not going to come on the market from the existing supply less likely because they're underwater, right, until it reaches again above peak levels. You know, I think that's a strong combination for prices to move higher. And that's kind of the framework under which, you know, I'm looking at the halving and we're looking at the halving and thinking about what that could mean for prices going forward. So, in a recent report, blockchain and crypto analytics firm, Chainalysis, found that large increases of Bitcoin inflows on exchanges are a good indicator of volatility. Transfers of 10 to 100 and 100 to 1000 Bitcoin were in total responsible for around 70% of all Bitcoin sent and received by exchanges in recent days. This suggests that professional investors and traders were driving the market, even though they were joined in selling and buying by a large number of retail holders. How can this information help us anticipate future price action? I mean, we have vision of inflows and outflows anyway, so I think if we do see an increase in the number of inflows going to exchanges again, that could signal a potential strong upwards movement. So, I think the community is always looking to see what the inflows and outflows are and to ascertain the movements that could happen, if that makes sense. So, I mean, going forward, that would be key metrics. When I look at that, and I think about what the market dynamic is that's driving the price right now, I'm going to add another data point, which is that the majority of those inflows that have been moving into exchanges now have been really largely coins that have been recently moved, newer coins, newer holders, not long-term holders. And if you take it from the perspective of that, you have both newer holders over the last year, let's just say, as opposed to five years, which is post the bubble we've seen in the onboarding of a larger, broader institutional class. If I think about that investor demographic, and what their incentives are driving this market, we've seen contagion, generally speaking, from all financial markets across the globe to all financial assets. And I think it's probably very likely that the subset of the market that's been possibly responsible for those inflows has been a traditional investment class broadly exposed to the market that maybe needs to de-lever, and that is part of the selling pressure, as opposed to early holders getting scared out. Now, what is the impact for retail? The impact for retail is if you ever have a market move like this, you get liquidity issues, and you get structural deleveraging, meaning when there's large flows and large gaps down because of some selling pressure and people aren't willing to buy, just because of general broad panic across all asset classes, then you get deleveraging like you've seen on BitMEX, you've seen the open interest fall from $6 billion, $7 billion down to where we are around $2 3 billion. You see deleveraging from a number of platforms where people can trade with leverage, not just with futures, and then you see deleveraging from a lot of the borrowing and lending markets, and that has that cascading effect. So I think that that's kind of in combination holistically what I'm seeing when I think about how the market's been moving and been driving from those types of inflows into the exchanges. So you feel that most of the professional traders and investors have already gotten out of crypto, and that's what we've seen in the past 10 days or so? Well, it depends how you define professional. Generally speaking, there can be an early class probably of what you would call crypto native, like crypto whales to use the term. And I think that to a large degree, they probably still dominate the majority of what's considered the float, meaning the float being the supply actively traded and available on exchanges that people can buy and sell, because the marginal liquidity in any market isn't the volume you see. If you look at the total supply on coin aging data, you can see you get somewhere between like maybe 1% to a few percent of the total supply that's ever traded. And that's what really moves the price. And then that supply can be turned over a bunch of times and then that's the volume. So what is that supply base? Who holds that in aggregate? And I think that probably you've seen an onboarding in 2016, 2017 of a traditional probably institutional, maybe a fund class to some degree, but not very large. But still prior to that, this was a very small market. And I think that it's still probably mostly dominated by early, larger crypto whales. And then if you think about what's happened in the last downturn, I think it's possible that a lot of these traditional folks who have been what you'd call traditional institutional investors have been maybe flushed out kind of like the retail audience was in December of 18, but not necessarily due to Bitcoin's reasons, but due to some structural reasons across the broader market. Like if you're a fund manager and you're holding, let's just say a basket, you have your stock allocation, you have your bonds, you're getting margin called on a number of leverage positions across your portfolio, right depending on your strategy, you need a rush for cash, not just for the sake of individually investing in this asset class Bitcoin. And what kind of circumstances would have to be in place for professional traders and investors to lose their ability to drive the market? I don't think they would lose their ability to move the market. I think that's always going to be there for them. What I would say is that at this moment in time, the crypto market that is to a degree quite illiquid and the total liquidity of the crypto market is spread across very exchanges. It's fragment at the moment. So it does mean that with a large market order, the market can spike significantly one way or the other depending on which way you want to move it pretty much. So once exchanges perhaps come together and this liquidity deepens, then it may be that large orders like this that we have been seeing may not have such an impact on price action going forward. So to sort of answer your question, as the liquidity improves and more people do get involved in the ecosystem, it could well be that the market orders that we have seen may not have such an influence on the market anymore. What are your thoughts on this, David? I think when you talk about who drives the market at any given time, it's a dynamic question. Again, price is always set by the marginal line of liquidity. As Simon rightfully mentioned, liquidity in Bitcoin and crypto is probably less than most people think just given some of the reported volumes when you think on a fundamental basis on that turnover. So who really drives the market at any given time can be a mix of factors and people can buy and sell for many reasons. So I think that it's not necessarily phrasing it the right way. But when I think about what drives the market, I think what drives the market and aggregate is probably a number of factors. I think structural reasons drive the market right now. I think that the supply demand dynamics we've seen from deleveraging, which force shorts, I think that that's one thing that squeezes a lot of people out and forces a lot of pressure. I think when you get a lot of underwater holders that are restricted from supply side that don't sell because they're underwater, which is 50% of the supplies I saw in some other data, you get a lot of lax in selling. And then that can create some scenarios where you don't need a ton of marginal demand to drive the market. And then if you get some catalysts in place and we see a number from our point of view, which one could be the happening. I'm going to talk about in a second because I know that's probably some touch on another one could be some geopolitical risks that we see more broadly on the horizon. And we think that that still plays a role. Another would be central bank liquidity globally being added into the system. And then I think another kind of thing that could take off some stress on the market could be the elections as well. There's some very thoughtful views from Tom Lee and that the White House will be less focused on crypto regulation perhaps if we're lucky. So I think that that's kind of, when you think about what drives the market, it's a bigger picture than kind of just, whether it's retail or professional in that way, I think is the way I view it. One suggestion you would like to make for our viewers, for anyone who's looking to survive or take advantage of this financial crisis that we're currently in. What is one thing that you would suggest to them? From my perspective on the crypto side, on the investment side, I think prices right now for Bitcoin particular and crypto in general are cheap when I look at fundamental valuation levels based on some models that I have are cheap prices that we haven't seen since December of 2018. And then we haven't seen these prices again since December of 2016. So from that perspective, if you have a long term view six to 12 months, I'm bullish there as well. So I think that that's kind of a framework that I would use for thinking about this. Simon, do you have a suggestion you would like to give our viewers? Yeah, just a second what David said. I think in terms of my own conversations with clients here at Atari, the first thing I ask them is, what's your personal objective? Because that would dictate what your strategy is and ultimately what assets you should be investing into. And if you have a short-term outlook, then perhaps risky assets like equities, ugly crypto, or perhaps not the things you should be looking to get into right now, and you really want to think more about capital preservation and a little return rather than high risk. But if you have a longer term outlook, then you can afford these swings in the market. I mean, I have seen over time, if you look at stock markets over history in the financial crisis or the dot-com bubble, if you had bought at the top of those then, or maybe not so much given the couple of weeks, but before that, we're still higher than maybe we're then. So if your outlook's long enough, then you can afford to take great and great risk. Great. Thank you guys for coming on the show. It was amazing to talk to you. Thanks a lot. Thanks for having us. That was Simon from eToro and David from FunStrat. If you enjoyed the video, hit the like button and subscribe to our channel. And guys, always remember to hodl.