 There is a bull run now, we saw incredible gains in January and the million dollar question is will those incredible gains continue? New bad news is good news for Bitcoin, but also bad news is bad news for everything. It means people have less money to invest in things. For a store of value, I'm actually not looking for that value to go up necessarily, I just want to know what the value is in a year, five years or ten years. What's up guys? I'm Giovanni, welcome to our weekly crypto market show. This time with us, Giordi Pasquale, CEO at Bitwell Capital and for the first time on our channel, Sam Bankman-Fried, founder at Alameda Research. First of all, thanks a lot for being with us today, it's a pleasure to have you on our crypto market show. Well, thanks for having me. Thanks Giovanni, great to be here. What's your reading of the current situation in the crypto market at the moment? So we've seen a lot of pretty jerky moves over the last few days, it's sort of been a little bit reverty, but it hasn't been just drifting around. There's been a lot of sure jumps up, jumps down and I wouldn't be shocked to see that continue. I also wouldn't be shocked to see it break out of this range and I think it could happen in either direction. I really do think that it could happen downside as well. I think that there is a sort of setup here where if there were the starts of big sell-off, I wouldn't be shocked to see a gather momentum. And so I think that anything could happen, but maybe the thing I feel that disagrees the most with market sentiment here is that there is a significant chance of a large downward movement. Giovanni, do you see this chance of a downward movement? So definitely I do and I think being contrarian has helped us a lot at Bitbol in the past. Well the last time we saw this 9,500, going past the 9,500 resistance was of course in October with the Xi Jinping news about blockchain support in China. But we then went all the way back down to 6,800 in November and testing it again in December. So definitely, but this time we're seeing some other strong factors of supporting Bitcoin's price. I'm actually much more bullish now than I was at the end of October. What kind of supporting factors are you talking about? I'm talking about this acceptance of Bitcoin as a flight to safety asset with what we've seen when the coronavirus news is coming out with China that Bitcoin, gold, oil are strong with the killing of General Soleimani, Bitcoin skyrocketed, other events like the halving of course are coming up. So there's just a lot of strong support for Bitcoin. There's also a ton of open interest on the futures market over 4 billion on exchanges like Bitmex, OKX, Derabit, etc. So I see all of those as supportive factors also contributing to volatility but overall bullish. Sam, do you also see this latest global crisis as a positive factor for Bitcoin which should be reinforcing the bullish position? I don't know. I mean, I've heard a lot of those cited as bearish cases to the open interest I've heard cited both ways. It's super inconsistent how Bitcoin's been reacting to coronavirus, like there has not been a consistent positive or negative data. I think it's pretty hard to look at what's happened and have a strong opinion on whether it's been good or bad for Bitcoin and this is sort of representative of the unique space it holds to some extent where it's both sort of thought of as a hedge for traditional market issues in which case obviously bad news is good news for Bitcoin but also bad news is bad news for everything and it means people have less money to invest in things and we've seen sort of those two things fighting and in the end historically Bitcoin's had about a zero beta from traditional market moves. And recently it hasn't been displaying a consistent beta from ENCOVE either. So I don't know, I'm sort of not myself sold on them. I'm not sure they're wrong. They absolutely might be right but sort of I don't personally feel convinced that these are sort of netting out to be positive or negative factors. Okay, you have more of a nuanced view on this theory of Bitcoin seen as a safe haven asset in times of crisis. Yeah and to be clear it's way more of a safe haven asset than most you know than basically any stock. All stocks go down together and Bitcoin doesn't but we also haven't necessarily seen Bitcoin go massively up in those periods and it's been just sort of mixed. I'll disagree with that because for example I remember the evening of January 2nd when Bitcoin went down from 7180 to something like 6,800, 6,850 and then as soon as General Soleimani was killed and there was kind of seen as global unrest, the possibility of war, Bitcoin absolutely spiked up to 7,400 and beyond and it's been on a tear since then. And I think you have to attribute January's upswing to something and then I would say what could it be attributed to other than these those several factors? Yeah, more buyers than sellers. I mean like my honest instinct is that a lot of this is just bought a lot of Bitcoins and even if that person sells out then maybe we'll go back down and if they've got more to buy then maybe we'll keep going. We're seeing a lot of things that seem market driven instead of news driven you know and today's run up like you could try and attribute it to the Bitnext Ripple future listing that seems to have been the local cause. Sells don't really make any sense. It's not clear that should be good for Ripple particularly like you could have argued that it would be bad as well and it's not clear why it should be good for other points that sort of makes maybe the least sense but but yeah I don't know I don't mean to express the super strong opinion here I don't feel confident. I guess a lot of what I'm trying to express is just my lack of confidence in which direction it's going to go and you know you may be proven right. The head of research at the Fundsrat Tom Lee said that Bitcoin is primed towards 200 percent average gains in the next six months after recovering the 200-day moving average in January. So he basically said that when you when you're back above your 200-day moving average you are back in a bull market. Whenever Bitcoin breaks back into its 200-day its average six months again is 197 percent. What do you what do you think about this forecast? Do you agree? Do you disagree Joe? Well if it's me first what I'll do is just do a quick screen share of some technical analysis and in general I think I do disagree with Tom. I think he's too bullish in this case. We do see I would say this almost so after October we saw this death cross where we saw the 50-day moving average moving below the 150-day moving average as you can see where is that cross around here. But then what we see here is this green line this orange line almost crossing again in the opposite direction the golden cross. So people are the recent moving average is is moving up above the longer-term moving average. It's a very bullish sign. He tonally predicted 27k by the end of summer. That's a very optimistic I would say. If we move past 10,000 we can certainly go up to you know 14-15,000 but that would be my the limit that I could see based on previous chart analysis. Yeah Tom's view seems extremely bullish. What's your take on this Sam? I've got some bitcoins if you want to pay 15k for them. But seriously yeah it's insane. Like it's claiming that 27k is like the expected value for bitcoin in six months. I mean if you actually thought that you could make a fortune. But no one thinks that. I think saying that's like the upside case that's if things go spectacular would be more reasonable and that there's like a 5% chance. I think that seems way too high to me. But I think you could justify. And maybe I'm wrong. You know you could make an argument for there being a 5% chance for getting up to 27k. I would disagree but maybe I'm wrong. Claiming that this is like the expected case is insane. So you don't think that the fact that bitcoin recovered this 200-day moving average is a very bullish sign? We've got like six effective data points here right? Like he's looking at like six rallies and there's a billion factors you can look at. And he chose to look at moving above the 200-day moving average. That's out of like a stable of like 300 different technical analysis things he could have been looking at. And one of them is going to show a 200% increase because it's just like only a few data points and bitcoin moved a lot a few years ago. So you know I think if you want to argue that on the margin that makes him a little bit more bullish I think that would be a reasonable claim. I might disagree but it would be reasonable. You know if you were saying I expect a 10% increase in it. It's on average over the next six months that would be sort of a reasonable claim. But 200% that's you know that's quite the bullish take. Yeah and Joe you have anything to add about this? I completely agree. The thing about crypto and bitcoin is that because of you know the I guess the herd mentality with it really we see these they're bull runs until they aren't right? So we saw last year with the Facebook Libre news when bitcoin ran up to 14 000 that the next several months were down and even October was down until that that that news out of China. So which was the one up month in the last six months of 2019. So there is a bull run now. We saw incredible gains in January and the million dollar question is will those incredible gains continue? I'm it seems like I'm a little more event based than Sam in my analysis. I think if there is continued unrest if things with coronavirus get worse if there's other sorts of global unrest parts of oil and gold going up I see bitcoin continuing to increase and if not it could have a slide back to 6800 as we saw in November and December. So Tesla is making headlines lately because its stocks have been skyrocketing since last fall if I'm not mistaken and apparently they even beat bitcoin in January as the best performing asset of the month and many are making a parallelism between Tesla and bitcoin back in 2017 when there was this bull run this very abrupt surge which at the end was accompanied by abrupt fall in the price of bitcoin and so even Mike Novogratz in an interview with Bloomberg defined both Tesla and bitcoin bubbles. What do you mean it's like bitcoin? You know bubbles and there's a Tesla bubble going on there's no doubt about this as a bubble bubbles happen around things that normally change the world. Do you see this parallelism between the behavior of Tesla and the behavior of bitcoin back in 2017 what do you think Sam? I mean you could try and draw that parallel I think that like first of all I just think there's like a limited amount you can get from like that like there's so many graphs you can look at that you could be comparing this to and but I think if you wanted to play that that analogy out I think what you'd say is like what happened to bitcoin and why I think the why is the crucial thing and like if you just say well bitcoin crashed so Tesla will crash it just says everything crashes that's not a helpful analysis I mean sure things crash sometimes but when how much will they go up first and you know that that's just saying like sell anything that went out and some things keep going up and others don't I think maybe the more helpful way to look at it is something like why did bitcoin not sustain its gains and I think one thing you could say is the speculation got ahead of the use case and technology and and products that you know there is incredible uh you know incredible fomo incredible uh upwards buying pressure on bitcoin driving up to 20k but it's not like bitcoin was taking over the world then it was just taking over the world's imagination and you know at the end of it starbucks didn't announce their accepting bitcoin's payment no minor country announced that they were throwing out their currency and replacing with bitcoin and goldman didn't decide that they were going to start out offering bitcoin investments to their customers you know the cme futures were kind of a flock when they first listed and that's maybe one thing because the turning point of like there's a giant bullhorn going up into it cme futures listed no one cared no one traded them and the world's like oh wait maybe we got a little bit ahead of ourselves here and so I think you want to kind of draw that analogy out maybe what you'd say is like well what's behind this Tesla bullhorn like is this just like people being like man Elon I want to be him maybe if I own his stock I'll be more like him in which case yeah I would sort of expect this to revert or it's just being like man we're wrong Elon knows how to run a company um he's going to take over his industry and in fact he is and if it's that case then it's just going to keep going up and so I think the real question I'd be asking is is Tesla going to deliver you know sure there's a lot of excitement right now what this comes down to is you know when the cyber truck comes out is it going to be the truck of the year is it going to sell a million trucks um you know is the Tesla just going to keep getting more and more market share is Tesla going to beat out all of its electronic rivals and our country is going to be moving increasingly towards electric cars or do you think that in a few years yeah Tesla will be one of 15 companies offering electric cars but everyone's going to have them forwards it's going to be just as good as well you know as will Nissan's and like Tesla is just going to be sort of a second rate car manufacturer that only has one business line and I think that's are going to determine whether this is the start of something even bigger or a FOMO driven ball run that's just going to revert when people get their sense so what's your take is it FOMO or is it like a company that is uh doing great because it's great management it's a great idea what you know I'm I'm bullshitting here I'm not an expert on Tesla if I had to make something up I don't know doesn't seem crazy to me like it seems like this is a high upside play banking on Tesla doing better than just well banking on it having a non-trivial chance of becoming the world's premier car manufacturer you know churning out 10 percent of all cars in the world um you know 15 20 percent something like that and that is the future of car manufacturing and you know I think there's a chance of that and I think a lot of this is an upside play driven by thinking that there's a non-trivial chance that if I had to make something up I'd say like you know the median case is that Tesla falls that it gives up some of these gains but that doesn't mean that's the mean case and that there's you know some real chance that it massively outperforms what it's done so far and I don't it doesn't seem crazy that you go up a lot on those hopes given that I think it's overall uh been obviously made some huge fuck ups last year but been playing its cards kind of recently recently mm-hmm what do you think Joe uh do you agree with Sam do you see the parallelism between Bitcoin and and Tesla I do agree with Sam uh and what I agree with heartily is that you know what we what's baked in right now to the Tesla and the Bitcoin price is this future promise of both of them becoming uh even larger and more used than they are obviously Tesla has many great lines of vehicles and many of them are sold out but the absolute the volume is a lot smaller than larger car manufacturers but you know sitting in Silicon Valley with companies valuations that we see like with Uber and Tesla and other things it's it's based on people's imagination of what those companies could be as Sam said the one thing I would say is that's an interesting parallel with Bitcoin and Tesla is that when we're in these true bull markets and days and the price spikes up um you will often also if you wait sometime you'll see some you know some drop in the value so just like yesterday we saw prices of Bitcoin at 9100 or so and today it's back over at 9500 I expect the same with Tesla or any stock that has a you know a boom time you'll see some some recursion as well happening so I guess if I were to invest in Tesla I would wait for for the herd mentality to go away a bit and then pick some up in a recent streaming a famous youtuber and the Bitcoin educator Ivan on Tech brought up a very interesting topic which is the the topic of volatility and the store of value he basically said that these two concepts which usually tend to be mutually exclusive so if you have an asset which is a good store of value is not volatile and if you have an asset which is volatile is not got is not a good store of value he basically contested this this paradigm saying that it's actually not true that actually volatility is not mutually exclusive with good store of value always think that if something is not volatile it has great store of value it has great store of value and it's basically perfect for having your wealth and so this is wrong as I mentioned in the beginning of the stream and we have the best example which is the dollar which is the dollar that has lost all of its purchasing power but yet it's quite stable it's quite not volatile yet it's a bad store of value so you see not volatile and terrible store of value so volatility and store of value really is not connected so do you agree with this analysis sam uh no um and and I think like just to start off with a few poll people in the world said what's the best store of value in the world the us dollar would win that poll by a landslide every almost every financial institution almost every person would say us dollar you get some votes for gold and a few for bitcoin I don't know I think he's kind of stretched to say the us dollar is a terrible store of value now maybe he's talking about I don't know what he means when he's saying that it's lost a lot of its parts like he's just talking about inflation because you know to that extent like it's absolutely true that the one thing I will say is that like there's a risk return thing here going on right like if you want to risk absolutely none of your money you're not going to get the highest returns so dollars under a mattress are not a high yielding object but treasury bonds yield more than that as do bank accounts and if you want to invest in things like stocks that yields has you know on average yielded more but obviously come with uh you know a bunch of volatility um so there is this risk reward thing um but that's not sort of what I would think of this store of value so much as like as yeah you know you you take on more risk you should get paid for that and and in general you should expect to but but in general I think that exactly because it's not volatile because people think it's the least likely thing in the world to have a massive crash uh most people think the us dollar is the best store of value and I think most people do think that bitcoin's volatility is a significant knock against its store of value now there's a separate thing which is like speculative interest which is pretty different from store of value and big one has a lot of that and that's related to its volatility and so if there's people hoping to get rich off it then absolutely but I think when people say store of value they don't mean odds at hundred x's I think most of the people are saying like can I put my money here and not be too weird exactly that's not true of bitcoin that Joe what do you think about it are you also skeptical about this uh this theory of uh Ivan on tech I am skeptical I don't consider I the US dollar is clearly much stronger store of value currently than bitcoin because of a few things one is bitcoin's volatility that does actually negatively impact the store of value so I do disagree with that analyst in in this case uh and then also um the we uh right now as we've discussed what we're doing is investing in bitcoin for its uh its promise and so we don't yet have enough use cases to you know it's not accepted as many places as the US dollar let's just say that so we'll see what happens with bitcoin it's a it's an extremely exciting asset and there's a lot it could very much appreciate but to me that's um that's a in conflict with the with the store of value unlike the US dollar so you you don't see the loss of purchasing value that the that the dollar suffered because of inflation as something that compromises its state its status as a store of value in terms of the store of value the point I'm making is that for me when I invest in something as a store of value I want to know exactly about how much that will be worth in a year five years 10 years I know that with the US dollar yes I know that the dollar is you know deflating over time essentially but at least I can expect that with bitcoin you don't know where that will be in a year five years or 10 years so that to me by definition makes it a bad store of value because for a store of value I'm actually not looking for that value to go up necessarily I just want to know what the value is in a year five years or 10 years what's the most common misconception about blockchain technology or your company in particular which you find yourself clarifying over and over again well I'll start with misconceptions about companies and then blockchain so for us at Bipol capital we run crypto hedge funds and I think people often assume that our returns might be correlated with cryptos returns and people don't yet understand fully how to profit off of volatility but so you know we've had consistently months when we're up when crypto is down and so I think that's just a misconception about hedge funds people don't generally understand active management versus passive management in general that's one thing then in terms of blockchain I guess you know it's funny there was this rise of blockchain I go to many conferences and now with crypto and blockchain there's kind of some skepticism in the larger investor market which is being overcome but I think the you know I was listening to Ben Horowitz of Andres and Horowitz speak recently and he mentioned just how you know in the beginning days of let's say the iPhone people were even you know not they didn't know what could be built on the iPhone and I think with blockchain people don't people are expecting too much too soon of it and are maybe skeptical of it because they don't truly see the developer potential that it does but I see the talent in the area and the developer talent in the area especially in Silicon Valley and so that's part of my confidence in it right and what about you Sam what's the most common misconception that you find yourself debating with most of the time so I think that like these have been getting better over time I think slowly the you know rate of misconceptions has been going down one thing of anything still isn't correlated enough is just how much of crypto is operational that you know you look at Wall Street and if you want trade stocks there's like these things you have students very well find it can be a huge pain but then you do them and you can trade stocks and that's how it works and you look at crypto it's very different within three minutes you can do your first crypto trade but it takes years to build up infrastructure where you can kind of trade as effectively as possible between getting banks that'll work with you understanding transfers exchange accounts that work well understanding the differences between different products thinking about capital distribution between different exchanges and and there's just like so many factors that go into this because it's not a well integrated well oiled infrastructure like traditional finance but on the flip side it's really lower barrier to entry means that it's it's not sort of this binary like you have a crypto trading setup or you don't it really is this like you get what you put into it and that sometimes you'll find the best trade in the world and you won't be able to do it because you don't have a bank that's willing to wire money to the right place or your straw limits are too small somewhere or something like that and you're like but I figured out the trade I did the hard part no the hard part is getting that bank account sometimes and getting those withdrawal limits and everything like that and so I think a lot of being able to trade crypto well is is really getting you know putting just a ton of effort into getting the best operational setup you can. Okay cool so basically you're saying that the crypto space so far has some dysfunctionalities especially for people that know how to trade for example while people that are completely new in the trading sphere can access crypto space much easier than what they would do in the traditional finance system. Yeah it's way easier to get into but it takes just a ton of work and creativity to get the best setup you can. What do you think Joe do you agree? Oh absolutely the setup of appropriate trading systems takes months and months if not years and years so I absolutely agree. Cool because actually that leads me to one question that I prepared which is a research by cryptocurrency exchange Deribit I think it's pronounced so basically the research claims that crypto exchanges are kind of evolving towards towards the financial traditional financial models like for example banks they are transforming themselves into crypto banks so offering services that usually banks provide like for example tax services interest the possibility to earn interest rates or interest accounts and they are just improving those legacy finance services and that's those features that belong to the traditional finance world are those that seem to be capable to spark mass adoption in the crypto in the crypto sphere that's why crypto exchanges according to these analysis are moving into that direction do you agree with this forecast? Yeah so I think that you know a lot of what what crypto the kind of infrastructure industry is trying to do right now is is combine the best parts of crypto with traditional finance you know combine together a lot of the infrastructure and power that exists in traditional finance you know he's here mentioned you know interest and and tax services but I would add on ease of moving fiat around simplicity of settlement and connectivity of various venues while keeping sort of the how quick it is to use crypto venues and so you know keeping how quickly you can create accounts how quickly even a novice can understand the various products and really dig into them and get to a point where you can have sort of the most sophisticated suite of services offered by wall street sort of at your fingertips in the same way that crypto exchanges are at your fingertips. Joe what do you think about it? Yeah I agree and actually not only Derabit is thinking about that but Coinbase recently had an event for funds where their CEO Brian Armstrong spoke and he spoke about something similar where you know as you know they not only can you buy and sell but there was also a time where they started listing tasos and it was just to actually hold your tasos there and earn interest so even Brian Armstrong's talked about the Coinbase itself's roadmap and it was not only to be in exchange and to buy and sell but then also to stake and you know as to where you own interest maybe eventually vote with delegation and possibly even earn for interest coins and lend in the future so definitely these exchanges not only in Derabit but Coinbase and others are as well are thinking of extending to a traditional suite of services. There are five entities in China which controls almost 50 percent of the hash rate produced to maintain the Bitcoin network so if one single miner can control more than 50 percent of the Bitcoin network it could bring potentially big problems to the Bitcoin network. Do you see the concentration of all that mining power in five entities in China as a threat to the Bitcoin network as a system Sam? I think it potentially is. I'm going to ask I'm not an expert in this I think others just know more than I about how worried to be about this in particular but in general I think this is a significant like thing that crypto is going to have to work out over the years and I think that you can find a lot of cases of people thinking they've solved this when they haven't. I think you look at decentralized prediction markets as sort of a microcosm of this where you have some sort of voting based mechanism for what the truth is and but nothing ties that to the real truth you're trying to get at and that sort of creates this danger zone where if incentives are misaligned you know it could end up just claiming things that look nothing like what you think it should be and I think this is a really hard problem to sort of solve in a really fundamentally satisfying way. Do you see other systems an alternative to to proof of work as somehow potentially a better alternative than proof of work like for example proof of stake? I don't think it's obviously better I mean it has its own demons right like you know that's what does proof of stake really mean it's that's often even more centralized like you look a lot at the proof of stake coins and like one party basically has half of it so it's sort of wazzy centralized in some sense that party can't say what they want now of course it would be really bad for their company if they did this so probably they won't and I'm not claiming that this is necessarily an imminent problem and that things are are going to go to shit and I would sort of argue against anyone who puts a very high probability of that happening for very prominent coins over the next year but but that doesn't that doesn't solve the fundamental problem here that yeah it's a little shaky and and you know if you have like pretty decentralized proof of stake like I don't know why are people going to tell the truth well someone just like bribes everyone to lie about you know what the right block is how do you stop that you know and and you can come up with lots of things that seem like pretty reasonable answers none of them are going to be like oh yeah that fundamentally solves this problem um and and I don't know I don't have any great ideas for how to like absolutely fundamentally solve these problems what about you Joe do you see it as a as a problem absolutely I mean I think one thing we all saw Ethereum Classic with a you know over a million dollars was stolen from that from that blockchain in the in the 51 percent attacks just you know what two weeks ago three weeks ago so it's certainly a problem that was in of course Ethereum Classic but with Bitcoin the the kind of the news that I'm hearing about it is that it actually would take a lot less um uh than we think to do a 51 percent attack uh and so that is a concern I I think seven I seem like we're both a little bit contrarian on this where we actually are concerned about 51 percent on an attack on Bitcoin when I talk to most people they seem not concerned about it but that is a concern and that could happen um so yes it's a concern and do you see any solutions for this problem uh people are working on new and innovative technologies all the time I know um you know in addition of proof of stake we've been looking into files coin proof of space time as well and so uh I don't know of any actual solutions at the moment like Sam I remain skeptical about even alternative solutions uh but um I also have enough confidence in technology that I know that it will be figured out so that to me isn't a fundamental argument against cryptocurrency to me um it's just simply something that we're in the primordial stages of still and we'll be solving thanks a lot Joe and Sam it was a very cool discussion I hope you will be with us soon on our channel and you guys always remember to like subscribe and hodl coin telegraph like subscribe and hodl