Morgan Creek Capital CEO and CIO Mark Yusko discusses his crypto markets analysis as bitcoin (BTC) and most other major cryptocurrencies shrug off the 25-basis-point interest rate hike by the U.S. Federal Reserve.
Bitcoin and neither are holding steady shrugging off the 25 basis point rate rate hike by the Federal Reserve. Joining us now to discuss the crypto markets is Morgan Creek capital, CEO and Cio Mark. Yes. Welcome to the show Mark. Good morning. Good to be with you. Good morning. Good morning. All right, we are going to talk about this rate hike that everyone was expecting. Uh, the Federal Open Market Committee raise its benchmark fed funds by 25 basis points. The European Central Bank also just announced a rate increase. What's your reaction? Uh I think it was mostly a non event. Uh, you've seen that in, in the market reaction. Uh, it had been priced in the market for weeks. And you know, I think the thing that, that people really are paying more attention to or should be paying more attention to is the fact that despite the rhetoric on higher short term rates, uh they are still expanding the money supply. So M two has turned back up really since the bailout of SBB. And I think that's why you've seen things like, uh Bitcoin and other cryptocurrencies do so well. Uh because remember we don't, we don't price Bitcoin and Bitcoin. We price Bitcoin in dollars or yen or Euros and those currencies are all continuing to weaken. I want to talk about that increase in liquidity in just in just a minute. But the next meeting is eight weeks away in September. What's the likelihood we see another rate hike there? And do you think the market is going to react? Yeah. Look, I think the chairman was very clear. No more hikes this year. Uh, so I think we're, we're done with the fed funds rate. You know, the funny thing about the fed funds rate. I don't know about you but I don't borrow at fed funds. No one. I know borrows at fed funds. Uh, it's really a rate that is used for interbank, uh, uh, transfers and loans and it, a higher fed funds rate allows the banks to, to have higher spreads, higher net interest margins and it's good for bank profits. So I think that part of the market may, uh, cool down a little bit after having, uh, a nice run here lately, if there's not gonna be any, uh, more increases in fed funds. But overall, I don't think the markets, you know, looking at, at interest rates going forward, I think now everybody's focused on, oh, he said there's gonna be no recession. So now we can take the boogeyman off our back and focus on all this growth. Well, what growth I mean, II I don't see a lot of growth. Uh I don't see any inflation um and inflation was a big part of, of that growth and that prices were rising. So people put up higher sales numbers, but then they had higher costs. So the profits weren't going up as much. And look, I think the, the big thing for me is, is the earnings game that gets played. You just had a guest on talking about, you know, the meta beat. Look, if you told me a year ago, you were gonna make a dollar. You told me six months ago you're gonna make 50 cents. You told me last week you were gonna make 10 cents and then you make 11 cents. That's not a beat, right? That, I mean, ok, technically it's, it's a beat and it goes in the books as a beat. But to me that's like, you know, being the, uh, the, the high jump guy and you go up and take the bar off the rack, you put it on the ground, you jump over it and you call yourself the world champ, step over it. There's not even any jumping involved there. No jumping. Well, you, you mentioned the increasing liquidity. I want you to unpack that a little bit more for us. You know, you, you've said that um, the fed and other global central banks are quietly increasing liquidity. Tell us more. Yeah. So it started with China back in October. And you know, once again, China leads the way uh as they are prone to do uh in liquidity. They are the, the kings and queens of, of producing liquidity. You know, you go back to 2000 17 and you know, they said, oh, you know, the fed bailed us out and Bernanke was this hero. No, it was China. They printed four trillion with a T uh dollars. Uh And starting in October, they, they created about a trillion dollars worth of liquidity. Uh The US was still in, in qt uh quantitative tightening. Europe was still uh in tightening. And what's interesting, I haven't heard the word quantitative tightening in months and nobody's talking about contraction in the money supply because it's not contracting, it's actually rising. And when you have a rising money supply, you get a weaker currency and then you get an increase in the price of things that are priced in that currency like gold like Bitcoin. Uh And the like, so I, I think quietly they talk this, this rhetoric of, hey, we're still hawkish and, and uh we're still focused on inflation. Show me the inflation, right? We're at 3% probably heading to sub two. chairman said it's not going sub two, I'll, I'll take the under, you know, the one funny thing about the fed uh and not the chairman, but the, but the fed is an organization. You have hundreds and hundreds of phd s and they forecast inflation and GDP every quarter and they've been right, zero times out of, out of almost 300 estimates. They've never been. Right. I could flip a coin and be right half the time. So I just think it's interesting. So there's either some gamesmanship in that they intentionally try to be wrong to, you know, create an illusion of beat. Right. That, that's, that, that take the bar off and put it on the ground thing uh or some other reason but, but uh I'm not privy to that. Uh I, I want to change gears and talk about Bitcoin here. You recently predicted that the price of Bitcoin could reach a market cap equivalent to gold. That was on the Wolf of All Streets podcast. This would translate to a price of $300,000 for one Bitcoin unpack that for us. That is uh a big prediction. But when, when I heard you unpack it on the podcast made sense to me. Yeah. And, and it's not an overnight prediction, it's not tomorrow. Um It's, it, it goes like this, right? So gold is the only money in the world. And what, what is money? Money is an asset that exists in the absence of a liability. Now, everybody says, well, what about all this other stuff? You know, these, these dollars or yen or Euros? We use them as money. Well, no, we, we use them as currency and they're created by banks, central banks. Uh and they're backed by debt. So it's not that they're bad or evil. It's just, they're not. Money, money is an asset that exists in the absence of a liability. And so for 5000 years, it's a long time, you know, gold has played that role and we had experiments with other things along the way. Puka shells and stone wheels and things like that. But, but gold has survived uh through belief and custom and one ounce of gold for 5000 years has bought a fine person suit. So, from, you know, Cleopatra's time to a suit of armor to a suit suit in the twenties to Saville Row today, you or I could go to Saville and for a single ounce of gold, about 1900 bucks, we could get a fine suit, you know, and that's about what it would take. So what's changed? Well, gold suffers from two things. It's not very portable, meaning it's really heavy and clunky and it's not very divisible. Like if I had a bar of gold here and go pull it out of the safe and I want to give you half right. You know, because it's been a nice interview. I want to give you half even if I could break it in half, which I, I couldn't do. Um, and have a hard time stuffing it in the computer and sending it to you. So it's not very divisible. I can't break it in half and it's not very portable. I can't send it to you. Well, Bitcoin fixes both of those, it is equally scarce. Its stock to flow ratio is the same as gold. The amount that's lost or stolen every year roughly equals the amount that's created. And so it's a scarce asset. Well, why do scarce assets matter? Well, they a scarce asset which also exists in the absence of a liability. It wasn't created by a government with debt has an interesting feature of being a perfect store of value. So as people realize that in the digital age and Bitcoin being more divisible and more portable, I can punch a few buttons on my smartphone and send you Bitcoin immediately. You don't have to have a bank account. I don't need to have a bank account. We can make that transfer of wealth instantaneously. So the monetary value of gold to sum up is about $6 trillion. Give or take the total value goes about 11. But you know five I of that is jewelry and chalices and that doesn't really count. But the monetary that's in central banks around the world, about six trillion. I think Bitcoin can replace all of that. The monetary equivalent six trillion is about a 10 X from here. So it gives us a price of about 300 K. All right. Well, when you talk us on that journey, like I said, it, the pieces start to come together really quickly before we wrap here. How long before you think we can we reach that 300 K or how long before we reach this feature that you've just explained? So, look, I, I've said for years, so that was like a 10 year process and we probably 34 years into that. So I can still, I, I would say the next having not this having in 2024 but the 2028. And where do I get that? Well, every having we've added a zero, we've about 10 times the market cap of Bitcoin. So we went from 100 to 1000 1000 to 10,000. I think this having next April, we go to 100,000 as fair value. But in these movements during crypto fall, right? We're in crypto summer today until next June. Then after the having we go to Crypto Fall, that's the parabolic, you know, everybody's crazed and FOMO rules, we usually go above fair value. So I think we could get into the high hundreds, maybe even a couple 100 but let's call it the high hundreds 150 180. Uh And then we go into the next crypto winner. So we have our correction. Then for the next having in 2028 the fair value jumps to a million dollars and people say a million dollars that could never happen. Well, hopefully, by that time, we're not talking about Bitcoin. We're talking about Satoshi because the Satoshi is the unit of measure that we should all I think be talking about, which is there are 100 million Satoshi per Bitcoin. And then we don't have to think about Bitcoin is a million dollars. No, a single Satoshi is worth fractions of, of pennies at some point. All right, Mark, we gotta leave it there. Thanks so much for joining the show this morning. Thanks for having me talk to you again soon. That was Morgan Creek, Capital, CEO and Cio Mark. You.