Great question about the BTC $35k prediction.

Let me explain the basis for this prediction and what it really is about. There are two components to it.

Betting on volatility

The $35k prediction is a bet on volatility.

It is inspired by two experiences:

• In January 2018, Ari David Paul, CIO of BlockTower Capital, made the bet that BTC would hit both $6,000 and $60,000 at a time when BTC was trading above the $10,000-range.

This was an astute bet on volatility, as BTC traded as low as $3,200 later that year (and indeed at $60,000 in the next bull market).

• In May 2021, I bet Robert Leshner (founder of Compound) that the bitcoin price would stay within the Rainbow bands for another 5 years, and lost.

Robert later explained:

Being short Rainbow is long gamma, collecting theta, e.g. a fantastic position to be in.

Robert was right and I learnt my lesson. Don't bet against crypto volatility. Bet on it.

The Year of the Dragon

Now, let's keep in mind that bitcoin was trading at $42,000 around the time that I made this prediction, so it wasn't even a particularly bold volatility bet by any measure to think that we'd see a -17% drop.

We knew the Bitcoin spot ETFs were around the corner and that we we're heading into a halvening and a likely bull market.

The tweet that solidified my own personal bull stance was curiously this one. The fact that several Bitcoin maximalists had gone from attacking Nic Carter at every corner they could to supporting him in his campaign against the sloppy journalism at The WSJ showed to me in a symbolic way that the market had purged the last ounces of negativity and was finally primed to embrace a new rally.

"This is like a Galadriel-thing", I said to Nic. "The world has changed: I feel it in the water. This is actually how the universe works."

That is why the first prediction of that thread you're referencing was that we'd see a new Bitcoin ATH in 2024, which has now happened.

So where does that leave us with the $35k?

Obviously, there are two ways this could have happened, $35k hitting before the ATH, or after the ATH. If we had nibbed it before the ATH it would undoubtedly have been easier, but that was not my only framework for predicting this. There is also a bearish scenario. So let's get into that.

If you look around, you'll notice that the S&P 500 is at all-time highs. Gold is at all-time highs.

What's the reason for this? Is the stock market suddenly super valuable? Is gold suddenly super valuable?

No, these aren't the reasons. While I do expect an AI-driven tech boom to eclipse all other cycles in the coming years, that's not quite what is happening yet. And even though you could argue that there is a heightened geopolitical role for gold right now as we're heading into a New World Order, that's not quite what is happening either.

The real explanation behind what is going on is much simpler. Inflation.

The M2 US dollar broad money supply has risen from 15 trillion to 21 trillion since 2020. There is a massive amount of printed dollars out there in circulation still, and I very much do not believe that hiking interest rates to 4.5-5.5% for a year in 2023 means that our inflationary woes are over.

You don't need to wait around for CPI numbers to show you that there's an abundance of dollars out there waiting to buy things. You see it in the stock market. You see it in the gold prices. Travel the world a bit and you'll see it anecdotally. It would be a small feat for inflation to re-surge in consumer goods again.

In fact, to combat inflation, there is a chance that we'd even have to hike rates further and face the recession head on. We have not had a recession. Rates at 4.5%-5.5% for a year is a brief period, not enough to break the camel's back.

The purpose of these interest rates is to make credit expensive—to make loans less abundant, to force the stock market, the real estate market, the gold market, the consumer goods market and the bitcoin market to share a thinner slice of dollar liquidity between them. But it needs to go on for a while to take effect.

We must always remember that we have not yet seen bitcoin in a true recession.

So you still think $35k could happen?

The market is the best signal we have and the market is telling me that $35k now is a -50% drop instead of a -17% drop. Of course the odds have worsened.

And it is also true that while ETF inflows have slumped in the last few days, we have not yet seen the lion's share of what these ETF inflows are capable of. Most RIAs are still not approved to allocate to these instruments yet, and yet the inflows we've seen in spite of that have been surprising even to the bulls. The ETFs are bullish, there's no denying that, and there could be more to come.

There's also even the chance that in a recession, bitcoin doesn't perform as poorly as one would expect if the trust in institutions plummet alongside it.

But I do not rule out the possibility of $35k yet, no. My fear of inflation looms still. I think about it all the time and do not discount the possibility that we could go into a real recession.

It is the Year of the Dragon. I'm clenching my buttcheeks and wearing my seatbelt, and so should you.