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Bitcoin At $70k & SBF Gets A 25-Year Slap On The Wrist: TBL Weekly #87

Joe Consorti and Nik Bhatia

Mar 30

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Welcome to TBL Weekly #87—the free weekly newsletter that keeps you in the know across bitcoin, rates, risk, and macro. Grab a coffee, and let’s dive in.

See our Bitcoin & Macro Term Glossary for definitions

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Happy Easter! We’ll keep it tight this morning so you can enjoy time with your friends, family, and loved ones.

Bitcoin’s consolidation seems to be in its end stages of completion before resuming the march towards $100,000 per coin. After breaking back out of its support range between $60,000 and $64,000, it has once again found $70,000 as its home and has been rangebound there since Monday, still changing hands.

As buyers and sellers duke it out here for the time being, the direction of the overall market paired with bitcoin’s own native factors and cyclicality has us very confident that $100,000 will be here sooner than many realize:

ETF inflows are picking back up after a significant slump last week. Roughly $200 million is coming out of GBTC daily, still, since it has kept its 150-bps management fee and driven capital to the lower-fee alternatives, mainly BlackRock and Fidelity which continue to dominate inflows. With momentum on bitcoin’s side and the halving less than one month away, this continued institutional interest is a vital component in shortening bitcoin’s path to the elusive $100,000 mark:

Sam Bankman-Fried has been sentenced to a light 25 years in prison for the crimes of stealing ~$10 billion in customer funds, fabricating financial statements, wire fraud, commodities fraud, money laundering, and securities fraud. Bernie Madoff stole $65 billion and was sentenced to 150 years in prison, while SBF stole $11 billion and was sentenced to 25 years in prison—that works out to 0.43 years/billion stolen for Madoff, and 0.44 years/billion stolen for Sam Bankman-Fried. Count on TBL to bring you the finest metrics!

Sam got off with an equal than Madoff on this years/billion stolen basis, but this doesn’t account for the billions of dollars more that were eviscerated when the fraudulent exchange went down and customers were left destitute with most of their “crypto” bags made worthless. Considering everything that played into the FTX saga, this sentencing is a slap on the wrist, but not a shocking one.

Given his high-level connections in Washington and $100 million in donations to the DNC, this was inevitable. He will likely be pardoned thanks to his patronage, serving 13 years before being released on good behavior. When it comes to white-collar financial crime, if you cozy up with the elite, you’re insulated from true punishment, which would be far harsher than what was laid down here:

The S&P 500 rose 10.2% to close out Q1, which is its largest first-quarter gain since 2019. From a historical perspective, the S&P 500 has been in one of its longest, largely uninterrupted runs in history. Its RSI has been above 60 for the longest single period since 2017, highlighted below. Extreme, lopsided strength is an understatement:

Nvidia has been the story, up 82.5% in Q1 as the AI craze is in full swing with no sign of losing steam. Google search results show AI is roughly 3x more searched for than bitcoin is currently. This rocket boost to the stock market has caused it to be highly concentrated in momentum.

The crowding into the 99.8th percentile of momentum above COVID levels, above 2008 levels, and nearing peak tech bubble levels. If there were time for a correction in the equity market, it is soon. That’s not to say the secular trend won’t remain intact, just a word of cautious observation from a historical perspective:

This question of overextendedness leads us to the yield curve in our second of two final charts for today. The 3-month/10-year US Treasury yield curve has been inverted for 16 months, just one month away from being inverted for the longest period ever. According to Don Johnson from MacroEdge, inversions longer than 9 months identify recessions with just one exception, and the current bout of inversion without recession would add to that list should the US be able to avert one:

The will-it-won’t-it recession saga for the US economy may yet have a resolution, and we can glean it from how banks are positioning themselves. Cash reserves at small banks are rising as a percentage of total bank reserves for the first time in over a year, potentially indicating that a pullback in economic activity is in its starting phases.

Powell commented last week that he expects tighter financial conditions to come and cool the labor market, hence the Fed’s preemptive plan to cut interest rates as soon as this summer despite CPI inflation still high and unemployment still low. If that happens to be the case, banks behaving this way serves as confirmation that the easy financial conditions that have brought clear skies for markets may soon make way for darker, more uncertain weather. Time will tell:

Next Week

In the week ahead, we’ll be the recipients of massive amounts of economic data and the potential to shape the conversation around the strong economy. ISM manufacturing and services both print this week, two of TBL’s guiding lights in the data deluge. On the employment market, we’ll also see JOLTS survey and nonfarm payrolls. Rate cuts continue to be priced in for this summer, and we are genuinely anticipating those trades to start approaching “locked in” territory during April—said otherwise, we expect a June rate cut to reach the full 25 basis points in the market, and even potentially give May a little bit more of a 50-50 chance for the first cut of the cycle.

As we mentioned above, reserve percentages at banks rising is a sign of something on the horizon, and that something most likely will come from the economy itself. Instead of projecting bad economic data, we will instead interpret it as it comes and watch the rates market for the true signal. As rates stay suppressed, and specifically 2s staying inverted to Fed Funds, the market is ready to put the nail in the coffin of inflation worries:

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Here are some quick links to all the TBL content you may have missed this week:

Monday

In this episode, Joe is joined by Lawrence Lepard, an investment manager with Equity Management Advisors. In this all-encompassing discussion, he breaks down why Jerome Powell's tapering of the balance sheet and rate cuts are to support the US Treasury, why gold and bitcoin are reflecting easy money conditions still to come, and what individual investors can do to position themselves properly in this deteriorating fiscal and monetary landscape.

Check out—Bitcoin & Gold Know Fed Has Lost Control Of The Money

Tuesday

News chyrons and Twitter feeds alike have been aflutter with buzz about MicroStrategy recently, and for good reason. The first company to add bitcoin to its corporate treasury, and the only company that holds BTC as its primary reserve asset, has had a storybook start to 2024.

Check out—MicroStrategy has been the best trade of 2024

In this episode, Nik is joined by monetary researcher Ritik Goyal. Ritik gives a masterclass on monetary mechanics, including how the Treasury creates money when it spends instead of borrows, why fiscal dominance and the interest income channel are contributing to strong GDP, and what the criteria would be for a recession. Monetary students should be prepared to go through this fantastic learning episode twice.

Check out—How The US Treasury Creates Money

Wednesday

In this episode, Nik is joined by geopolitical analyst Jacob Shapiro. Jacob breaks down the latest monetary policy adjustment from the Bank of Japan, but more importantly, he shares his vision on how Japan might be on the cusp of a major transformation. Additionally, Jacob brings us up to speed on the Chinese economy and discusses the symbiotic relationship between the Chinese and Japanese economies. Finally, he brings us context on the current fiscal woes in the United States.

Check out—Japan's Economic Revival & How It Impacts China

Thursday

Even as risk-bears continue to receive anecdotal and even outright economic evidence that monetary policy is restrictive, risk markets themselves have loudly disagreed. In what feels to be an overdue global macro and chart pack update, I’d like to analyze price and situation for each major asset class as we approach the second quarter on Monday. We’ll begin with some bitcoin price talk.

Check out—Global macro chart pack

In this episode, Nik brings us a quarter-end global macroeconomic and markets update. He begins with a look at US inflation, walks us through Treasury yields and Fed expectations, and discusses the tug of war between fiscal dominance and restrictive monetary policy. Finally, he closes with some important thoughts on bitcoin price action.

Check out—Global Macro Update: Bitcoin Is Going Higher