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Is bitcoin a good investment 2023? What will bitcoin be worth in 2030? Can ethereum reach $10,000 in 2023?
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TimeStamps:
00:00 Intro
00:51 Who is Darius Dale?
02:09 Macro vs Macro Risk Management
03:22 Prepare for Deflation in 2023
07:25 Will Bitcoin Go Lower in 2023?
10:39 Bitcoin in NEXT 6 Months?
13:25 Austin Asks a DUMB Question About “When to Buy?”
16:26 The #1 Thing to Watch For in 2023!! | Investor Tips
18:40 The Fed is TELLING US to Prepare for a Recession in 2023
20:30 Understand “Dynamic Dollar Cost Averaging”
21:33 Final Thoughts
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We have a view that the the US economy Is still you know several quarters away From a recession that a lot of the sort Of pain that we've observed in the Financial markets in 2022 is very likely To spill over into 2023 for at least a Few more quarters um in terms of when to Think about buying risk assets it's you Know it's when we get those ambulance Sirens but you don't buy when there's Blood in the streets I mean you hear That all the time in finance you don't Buy them in this blood in the streets You buy when there's a catalyst to come Clean it up [Music] All right welcome back everybody to Altcoin daily my name is Austin joined With a macro expert and founder of 42 Macro Darius Dale thanks for joining me Hey what's up Austin happy holidays man Thank you for having me on the show yes You two men and I've seen you on do Other people's channels I think you're Dropping great perspective on the macro Environment so I wanted to have you on Just for the audience could you just go Over your background and also what 42 Macro is yeah absolutely so I've been Doing this for a while now I'm in my 14 Year on the job as an Institutional Investor in finance uh sort of cut my Teeth on that side of the the cloth um You know sort of really been you know
Kind of charged with building out uh Multiple sort of quantitative macro risk Management Frameworks uh particularly For the buy side uh when I left my prior Shop a couple years ago I left with the Idea that hey look there's a lot of sort Of there's a lot of new market Participants both in the digital asset Ecosystem but also in traditional Financial markets um retail investors That are being supercharged by Information you know Finance Twitter Crypto Twitter Etc and I thought that Hey look I think I'm you know one of the World's best at what I do uh certainly I've been proving that on the buy side Um in terms of services that we provide Uh and thought it would be a good idea And opportunity for um you know to Educate the broader masses with what I Think is um you know quite frankly you Know information that is useful for Everybody everyone and I think we Learned this the hard way at least a lot Of investors learned this the hard way In 2022 which is everyone needs a Legitimate back risk management process Everyone doesn't eat macro and you Notice I keep saying the difference There's macro and then there's macro Risk management I think we do an Excellent job at the ladder so what are Your general thoughts let's Jump Right In general thoughts on macro into 2023
Yeah so uh so let me start by uh further Espousing upon the difference between uh Macro and macros management because that Will sort of lead me into our general Thoughts so macro is sort of you know Kind of the school of thought that just Says hey look this matters now so let me Focus on it and then when that no longer Matters and they go to the next chart uh It's usually a chart that uh you know It's kind of uh investors tend to look At you know maybe once a cycle once Every few years et cetera et cetera and Then it no longer becomes popular Anymore what I mean by macros management Is hey what's the system has had a Systematic way we can sort of uh you Know kind of isolate the variables that Matter most to predicting dispersion Within and across asset markets and um You know time and time again we've Proven this on on the institutional side Already and I think it's becoming really Proven on on the um on the Non-institutional side which is growth And inflation are the two bigger drivers Of of macro of markets over the long Term and the reason their biggest Drivers of markets of the longer term is Because those two variables interplay Very nicely in dovetail quite nicely Into what I believe is the third biggest Variable or at least in 2022 is the Primary variable which is the liquidity
Cycle and so in terms of what our General thoughts on this in terms of you Know how we think about the next let's Call it you know six to nine months two To three quarters of risk management you Know I think you you go out further than The year you're generally going to get In trouble uh you know we start with our Uh 42 micro grid framework you know this Is a systematic tool that we use again To help investors predict dispersion Within and across asset markets what We're effectively trying to do is say Hey where will the economy be in rate of Change terms at these various intervals And how is that you know historically Sort of dovetailed in financial markets Particularly vis-a-vis through the lens Of the policy cycle the liquidity cycle And so it's our belief that you know the U.S economy large parts of the global Economy Um if you look at our our broader model Are calling for deflation and the Deflation means simply without getting To the kind the technical aspects of it All is that growth and inflation are Likely to be slowing simultaneously and At an increasing frequency once you get Into the spring and summer of next year And that's a problem and the reason That's a problem is it goes to our sort Of second um sort of thing that we Discussed a decent amount in at 42 macro
Which is that's an issue because the Liquidity Cycles actually still in a Downturn you know typically what happens Is that you know asset markets tend to Not to like that that deflation quadrant For growth and inflation are slowing Simultaneously tends to be the most Negative for digital assets Bitcoin Ethereum et cetera all coins Etc and What's compounding that is the fact that You have the FED ECB Bank of England now Bank of Japan pretty much every major Standard Bank including the People's Bank of China all tightening liquidity Conditions at the same time the world is Heading into that uh deeper uh deeper Outcomes and deflation so that seems to Suggest that a lot of the sort of pain That we've observed in financial markets In 2022 is very likely to spill over Into 2023 for at least a few more Quarters so liquidity lessening of Liquidity obviously bad for markets bad For Investments deflation in very basic Terms is that better or worse for Investors versus inflation Oh uh so it depends your asset class uh For uh the digital asset asset class uh Historically deflation has been worse But for stocks and credit uh inflation Has actually been um been been a little Bit worse I think we have some slides on That as well as the deck the team to Keep a here we go yeah so crypto so we
Back test everything that that takes Through the lens of the expected returns Percent positive ratios volatility Covariance again this is all the sort of Institutional Frameworks in our process And what we've seen is that historically Speaking you know you pretty much have a 50 50 chance of making money in crypto And inflation that obviously didn't come To fruition this year uh deflation that Back tests on unexpected return basis is A little bit worse is much worse from a Percent positive ratio basis so we're Expecting worser conditions uh more Deteriorating conditions from a price Perspective uh in the digital asset Ecosystem perhaps less of a speed of a Decline in stocks because historically Deflation is a little bit less bad for Stocks relative to inflation that's Where you typically get the biggest Margin compression is in the that Inflation regime and then ultimately We're likely to see bonds and stocks Start to diverge again once we get past Several critical thresholds on inflation Our models are at least our math which We've taken and studied Um you know data going all the way back To the 1800s is that bonds and stocks Tend to have positive covariance that They tend to trade Um you know with the positive Correlation uh whenever inflation's you
Know kind of north of five percent in That three to five percent range that Tends to be slight positive correlation To slight negative correlation and then Typically when you get under that three Percent range which is where our model Has inflation in the back half of the Year that's when you get into that Inverse covariance so I do suspect at Some point in the middle of next year We're going to start to be able to Allocate the bonds again but I'm not Quite so sure that we're through with That process yet just given the fact That hey we have this liquidity cycle Downturn that's going to be ongoing at The same time inflation is still well Above um that that critical threshold of Three to five percent and we're likely To see a significant increase in Treasury uh Supply at least in the first Quarter perhaps even in the second Quarter of next year so in layman's Terms Bitcoin at around 16k you're in no Rush to buy given the macro environment No no look I mean I think we're you know We're getting closer and closer to Levels where it makes sense to start Dollar cost averaging but to get you Know we pride ourselves on being able to Time uh these big Financial Market Cycles and quite frankly I think we've Done an excellent job of getting Investors out of of crypto and high beta
Risk assets broadly uh going back to November of last year November 2021 when We pivot it Um and you know we expect to have you Know similar uh timing uh in terms of uh You know getting into getting into the Near or near the lows so the answer is Assuming we we're you know going to Continue to be good at timing uh we Don't think now is the appropriate price I mean just looking at our net liquidity Model and this is projections through The red dotted line is projections uh Through the um the march of next year Based on our expectations for some of The changes in the treasury general Account balance and some of the changes In the Super Bowl facility balance on Top of quantitative tightening Um it's very likely you could see Bitcoin in the area code of 15 000 by The end of next year maybe it'll start Getting attractive by then but my fear Um by then is that hey you know if if if We're you know because we have a view Let me take a step back we have a view That the the US economy is still you Know several quarters away from a Recession I think if we have a variant Perception is that the resilience of the US economy is likely to continue to Contribute to resilient Um outcomes in the labor market and Ultimately resilient outcomes with
Respect to inflation Um vis-a-vis you know the feds two Percent Target and as a function of that Resiliency it's very likely that this Liquidity cycle downturn is phase one to What we call this bear Market phase one Is the liquidity cycle downturn uh it's Likely to extend itself well into the First uh part of next year phase two of The bear Market is the recession the Recession risk is that's the credit risk Portion um and that's you know and at Least according to our math when you Look at things like Goldman tax Financial conditions index next 12 Months earnings yields uh investment Grade credit spreads and then the sort Of ratio between High beta stocks and a Little bit of stocks you know none of These indicators have even come close to Pricing in a recession so it's our Belief that at some point in the you Know first half of next year maybe by The middle of next year we'll start the Price in that phase two credit cycle Downturn and so uh sorry that does the Catalog let it answer to your question But you know to understand the ultimate Depths of the decline in Bitcoin you Sort of have to understand that when the Timing of phase one ends and when the Timing of phase two begins because if Phase two starts at or near the end of Phase one we're going to be declining
And pricing in a recession From Below in The market from a low and broader risk Assets Um that's an issue um that's how you get To maybe 33 000 on the S P if you look At some of our evaluation work um you Know like on slide 32 or sorry what side Is that yeah so we get to like 3 000 on Sap if we pry uh median price to sales You know 2 000 median Market Capital Gross domestic income that's if phase One and phase two are together if you Get phase one pause maybe for several Months or a couple of quarters then you Price in phase two then Bitcoin can Rally from let's say fifteen thousand to Twenty thousand and then go back down to Fifteen thousand if it goes from fifteen Thousand you have to start phase two From fifteen thousand this is how you Get to ten thousand Bitcoin How likely in this uh the audience at Home it's all just speculation but How Likely would you think a 9k Bitcoin Could be in the next six months again Based on our modal outcome expectations That a recession is likely to be you Know three to four quarters away in the U.S economy probably not that likely Um you know so again we you know there's A few indicators that we look at Um to sort of give us indication on Timing of recession so there's a few Let's start let's say the understanding
Recession is this sort of very you know Kind of non-stationary very stochastic Process that you cannot you cannot Predict Um you know you're certainly not using Any models that that would hold up that Would hold water in normal down and Distance Um and so you know what we do is we look At market-based indicators survey based Indicators Um and relationships between you know Various hard data to give us a sense of Okay when is a recession likely over the Next you know next 12 months time Horizon anything beyond that is Typically not risk manageable from a Perspective of a buy side investor Um you know so now we have the Euro Curve inverted history shows that hey The subversion which just occurred uh in The month of October suggests that hey Look zero to six months forward Historically speaking you typically only Have uh you know kind of a you know you Typically have a zero percent chance of Going into recession so basically Between now and April history would Suggest based on the historical time Series the historical patterns in this Time series uh that you're actually Unlikely to have a recession between That interval you you're still unlikely To have a recession in the six to 12
Months forward basis again the percent Positive ratio math on that is 75 Percent Um so you really have to get into the 12 To 18 more time frame 12 to 18 months Four time frame to swing that math in a Way that's supportive of actually having A recession Um so we have that for the yield curve We have that math for jobless claims Jobless claims continuing claims as a Percent of the labor force and so Ultimately we still believe that hey a Recession is a kind of a Q4 2023 event Um in terms of starting that maybe it's A Q3 2023 event Um but again ultimately if you pull that Forward um and obviously there's a Number of things out there that could Pull that forward my apologies I think My series uh talking to me no offense I'm sorry my apologies um but if you Pull that forward Uh to you know let's say second quarter Of next year maybe even the first Quarter next year if we have some Significantly adverse at Price action in Financial markets Um that's how you get into phase one Phase two being Bunch right again right Against each other and that's how you Get to 9k bitcoin but again that's not Our modal outcome expectation our mobile Outcome is that hey phase one ends
Sometime in q1 Um in terms of liquidity cycle downturns Sometimes like q1 early Q2 and then Ultimately maybe have to you know Three two three four five months to Price in you know kind of a reprieve a Pause before we had the price in phase Two Um that could change Darius this next question maybe a dumb One feel free to tell me that there are No dumb questions man okay then Obviously the pro move to buy Bitcoin or By any asset is to dollar cost average Near the top you're never I mean near The bottom you're never gonna bottom You're never gonna get the exact bottoms But when you're looking at all this Recession data generally speaking is There a better time to buy during a Recession for example is it when the Government announces it should it be a Little before is it start dcing in the Quarter that the recession is called is Their best time Yeah so it's just so there's a load of Questions so Um what we know is that that pivot's Doing bear markets are almost always Bullish for risk assessments you know This table is a very busy complicated Table and so we certainly implore anyone Who uh is more curious about these types Of Dynamics to come check us out at 42
Macro but um you know what we know is That historically speaking you tend not To get an inflection in the bear Market Until we get an inflection in the Liquidity cycle this is the 17 bear Markets that we've had um you know Looking at the S P 500 uh going back to You know kind of the start act one of The Great Depression and what we know is That on a median basis the bear Market Tends to bottom one month after the Inflation in the liquidity cycle which Could easily be sometime Um you know in the second half of next Year uh maybe you know the markets are Currently pricing fed uh to Pivot in September of next year Um you know or you you can make the case Or I do make the case that a pause in Fact is a pivot Um and so you know you could very well See a pause uh by let's call it March of Next year and so is that is that the Bottom I'm not entirely sure just given The guidance that they are unlikely to Cut Um so it may be the case that the FED uh The actual pivot the market in terms of The market interpretation may be when They actually start cutting which I Disagree with the market pricing market Pricing is currently for the FED to get Uh to get going in Earnest uh in September of next year we just think
That's a we think that's wrong Jay Palace told us that's we're going to be Wrong and ultimately we think the Resiliency of the economy I.E not being In recession at least until the start of This this time period will suggest that They're unlikely to cut until the first Part of next year and so um in terms of When to think about buying risk assets It's you know it's when we get those Ambulance sirens I mean I'm sure a lot Of your viewers have seen me on other Programs I'm talking about this concept Which is hey look you know you don't buy When there's blood in the streets I mean You hear that all the time in finance You don't buy them in this blood in the Streets you buy when there's a catalyst To come clean it up you buy when Jay Powell and Lyle Brainerd and Janet Yellen get into that ambulance and turn On the sirens and start you know coming To save you Um and that's uh ultimately it could be Could be a year away from that that Particular Um that particular Catalyst and so Obviously markets will start to try to Firmware on that given how much forward Guidance we now have to live with as Investors But ultimately it's still Probably a late you know kind of second Half late late 2023 uh or deal so that's It's not necessarily shape enough to be
A great year again for risk assets Particularly at high data front Any final charts to show us before we Flip it back on just us Uh yeah so I mean again look it's it's I Think you know I don't want to boil down You know the macro uh to kind of you Know Occam's razor uh uh you know kind Of a you know variable but again if There's one thing you had to look at uh To start which is understanding hey the Relationship between phase one and phase Two at the spare market and right now We're still in phase one in this Liquidity cycle downturn that very much Looks to be ongoing through at least the First quarter of next year perhaps well Into the second quarter of next year you Have a lot of other central banks Joining the party in terms of the ECB uh Tightening rates the bank of England Tightening rates Um in terms of their forward outlooks For for interest rates Japan just Wideness uh policy rate band with Respect to yield curve control policy And so all these central banks this is Uh fed fed funds relative to or sorry The one-year uh US dollar treasury yield Relative to the Taylor rule estimate Which is a measure of what policy rate Should be based on some you know very um You know thoughtful assumptions around Inflation and the target you know so
These banks are still well behind their Respective inflation fight at minus 518 Basis points versus the Taylor rule Estimate minus 867 for the ECB minus one Thousand eight basis points for the bank Of England and minus 432 basis points For the bank of Japan so it seems to Suggest that hey look even though growth Is slowing broadly you know we got the Whole world in deflation what we talked About earlier we've got deflation likely Accelerating starting to accelerate to The downside in terms of the economic Outcomes starting in the second quarter Of next year for most of these economies And ultimately the central banks are Going to have binders on with respect to That and historically speaking that's Usually one of the worst outcomes for Financial markets Um in terms of you know risk assets and Risk appetites so uh it's unlikely that We see Um you know a significant rally you know Off of a very you know kind of Structural investable low anytime soon From a dollar cost that averaging Perspective but I do believe you know by The time we get into the second half of Next year your antenna should be very High in looking for some of these signs Of a potential pivot and more Importantly a potential pivot after We've really begun pricing in phase two
And Earnest to check in our model Suggests we're very very um far away From doing that so the FED is already Implicitly forecasting a recession in Fact I would like to show a chart on That because I think it's an important Chart to understand that hey look the FED might not come bail you out as Quickly as you think we are as you used To you know this chart here shows the Universe uh you started the u3 Unemployment rate the headline Unemployment rate uh at 3.7 it's Historically low and the FED is calling For the fork their forecasts are calling For a 4.6 unemployment rate by the end Of 2023. Um that's a 90 basis point Delta Positive Delta relative to where we are Today well if you look at the history of This time series there's never been a 90 Basis point positive Delta in the Unemployment rate over a 13-month time Frame so from November of 2022 through December 2023 that didn't correspond to Recession so this is the Federal Reserve That implicitly is forecasting recession And I would argue they're explicitly Telling us Market participants anyone Who has the ability to do quantitative Economics you know that hey look out Where no one's a recession coming we're Probably we're not going to respond to It if you look at our Dot Plot and so
Ultimately I think investors you know Their willingness to sort of speculate Early on in phase two which is again the Credit cycle downturn the pricing and The actual recession I think they're Willingness to speculate early on in Phase two might get tempered by the fact That we could very well see a very Hawkish pow very hawkish fed and more Importantly a very hawkish ECB and Bank Of England and Bank of Japan despite Markets really starting to price move to Price in phase two so I think there's Going to be a time next year where Markets are going to get really ugly and It could be very ugly from a low price If phase two begins right right at the End of phase one it could be very ugly From a you know a more healthy price uh Phase two begins from you know kind of a Multi-month pause in between those Processes so to me that understanding The timing of phase two relative to Phase one is the most important thing I Think you can understand as an investor As it relates to kind of starting your Dollar cost averaging process again And by the way one final thing I'd say Try to understand this concept of Dynamic dollar cost averaging um you Know at the Hat tip to a friend of mine Who gave me uh gave me a thought process Around that which is hey look use the Macro Cycles the liquidity cycle the
Grid regime cycle to speed up or slow Down your dollar cost averaging we made A great call um earlier this past year I'm really going back to the fall of 2021 which said hey look you need to get Out of all your your digital asset Exposure um that was an excellent call But more importantly throughout the year Various intervals we kept getting you Know is this time is this you know win By when is this by the as you buy the Dip here do you buy the dip there and The cutting off process say look the Clinicians both liquidity cycle and grid Regime cycle suggests we should at the Bare minimum be having a very tepid slow Small dollar cost Avenue process if You're committed to to investing in that Net that principle Um we would argue you could you still Have plenty of time in respect to Dynamic dollar cost averaging um to Really turn that dial up I would give it Least six months perhaps not I want to have you back on in about Three-ish months we'll go over these Charts but the links for all your stuff Are down below I encourage the audience To check it out thanks man Yeah awesome man thank you for having me On the program look let's have a great Year I know a lot of people lost a lot Of money this year but guess what I'm a Great mentor of mine said this and I'm
Not sure I'm sure it wasn't him but it's Uh he's the one who taught me so I'll Say it when you put on a trade you Either make money or you get smarter Never both and so hopefully a lot of Investors learned some things this year I'm looking forward to putting that in Their toolbox and taking it into the Next year in term for the rest of their Invest insurance so I'm happy to be part Of that
