Tim Draper, venture capitalist and founder of Draper Associates, discusses Bitcoin's role as money, the future of AI, and the most ...

What is a recent bitcoin price action signal in terms of sentiment towards the Bitcoin and the all coin spaces we're here to break this down with Benjamin Cohen he is the founder of into the cryptoverse welcome back Benjamin always good to see you good to see you tooDavid into the crypto versus a very thorough uh analytics dashboard that we'll talk about uh throughout this interview Benjamin also has a fantastic YouTube channel that everyone should check out we'll put a link down in the description below and you've been talking a lot about the Bitcoin dominance especially recently since it'sGone up to 51 let's start with that topic um when you're seeing that kind of percentage what's your first impression is that a signal for bullish action or that a signal for correction for Bitcoin at least I mean so normally when when the dominance breaks the Range High like itHas right now can you see my screen right now yes yes yeah so so normally when it breaks the Range High it signals that a correction is on the horizon um it doesn't have to happen immediately but if you were to look at at just this49 level so if we just grab this Wick right here breaking this 49 level was a very important level for the Bitcoin dominance to break and the reason that's the case is because normally when the dominant sort of breaks the Range High that signifies near the end of theBitcoin UIC rally if you were to Overlay the price of Bitcoin USD on the dominance chart you'll often find that it's where the dominance breaks the Range High that can often Mark sort of the the top or at least near the top of that of that rallyIt happened in 2018 and it also of course happened in in 2019 as well you can see there was a range tie back over here once we broke it in in June of 2019 uh at around 62 percent that also more or less marked the top of that of thatRally in 2019 as well so I do think there's a case to be made um that you know that the liquidity from the altcoin market has been fueling this rally by Bitcoin for you know the better part A half a year but at some point there's just not going to be sufficientLiquidity from the altcoin market to continue to sustain the price of Bitcoin that's not to say that Bitcoin can't go up anymore it could it's just that at some point I think during the prehabbing year we will reach a point where there's just no longer sufficient liquidity from theAltcoin market to sustain the valuation of Bitcoin USD and the reason why that's important is because the dominance rallies can can go that the dominance can rally whether Bitcoin goes up or down and there's actually a really an interesting thing that happened over here in in 2018 the dominance rallyStarted at 39 and it went to 62 percent but it was around that 51 to 52 level that marked the inflection point on bitcoin USD so we went from 39 to 52 or so on a rally but the dominoes continue to go up even when the Bitcoin priceActually saw about a 25 correction so 25 correction today would get Bitcoin back to run 23 000 or so and I mean that that might not that might not sound like a lot but if something like that were to happen it would be quite detrimental to the altcoin market and you'll find theSimilarities to today as well I mean the Dominus rally started at 39 um and and you know has gone up to about that 51 52 level and as far as I can tell there's plenty of momentum for the dominance to continue closer to that 60 threshold we have to put this dominanceInto a historical perspective and I want to make my own assumption so I'll just ask you um directly why is it that the dominance even though it's been going up is still low uh by pre-2017 standards yeah I mean I I think this initial phase over here is just sort of the theInitial capitalization of the altcoin market I mean all coins barely you know we're just then coming into existence but the interesting thing though that I I find is you know it is I think that's sort of the knee-jerk reaction like why is dominant so low there's a couple reasons for that one isIs there's just been a lot more liquidity in you know this time around courtesy of the Federal Reserve printing six trillion dollars so I mean I think that's one reason but another reason is actually the stable coin market so the stable coin market cap is is about aHundred you know just over a hundred billion maybe about 115 billion which represents approximately 10 of the overall cryptocurrency market capitalization if you were to go over and look at the dominance excluding stable coins which is what this chart is showing you can see that the dominance is already above 56 percentSo there's a big difference between the dominance including stable coins and the dominance excluding Sable coin so when you look at it like this you can also see that it recently broke its Range High from 2022 China's um you know at levels that really we haven't seen since April of 2021.Interesting and we have to again put things into historical perspective so you're right there was a time when Bitcoin was uh one of the few coins out there and then the rush of all coins came in this time people are saying that with the Advent of regulations crackingDown on things that are securities quote unquote we could see a complete Wipeout of anything that's not a significant coin so basically a washout of the altcoin market do you subscribe to this Theory not really I mean I I think that I I think that the SEC stuff is more or lessThe narrative that that will will go along with the price action but I I think the more important aspect of it is it's more so a function of just lower liquidity you know and I mean when you have a lot of liquidity pumped into the markets back in 2020 the higher riskStuff like the cryptocurrency market the altcoin market that can go up quite quickly when you take that away that market is one of the first markets to get hit so of course the narrative will be the you know it's a Black Swan related to the SDC but my argument hasBeen you know for you know over a year now that as liquidity dries up the altcoin market um you know will lose valuation not only on their USD pairs but also their Bitcoin pairs I do think you know there will be there will be some cryptocurrencies that will survive uhWhatever the SEC does also today we have to remember that every cycle even last cycle when the SEC wasn't even that interested we still we still saw you know thousands of all coins die out and it was more so not because of the SEC it was just because they they providedLittle to no value and and you know Market participants just got interested in the next cycle of or the next class of cryptocurrencies in the next cycle so I think that's something we have to remember you know the one thing I've said before is that every cycle especially with theAltcoin market we always reach the point where people legitimately think it's dead you know and and I think a lot of people pretended to think that the altcoin market was dead back in December but now that the SEC is coming after a lot of these all coins now a lot ofPeople are actually getting worried right now they're really starting to think all right well maybe it is that and that's that's a pretty common place to find ourselves in uh in the in the market cycle well one thing that's interesting is to examine the industry response to these SEC crackdowns so aVery very practical real responses exchanges delisting altcoins Robin Hood delisting polygon Solana Cardenas so on and so forth that has a very real impact on not just price but also perception and so whether or not this trend is going to continue is Up For Debate butWhat do you think that's going to do with the price yeah I mean it's not good for liquidity I mean you know when you have high risk assets like cryptocurrencies liquidity is everything you need liquidity to attract large players to the space if you don't have liquidity it's going toIf you have very thin order books there's a lot of larger institutions are not going to want to come to the table so certainly in the short term it's trending in the wrong direction though it's that exact fear that that a lot of people are starting to fall into nowThat will likely cause them to be the capitulation candle in the altcoin market and that's normally when you want to come in and scoop a lot of the altcoins up I don't I don't think we're there yet to be clear I I still think that we have a ways to go mainly becauseI think that the dominance needs to continue this rally uh for at least a few more months but you know maybe maybe by the end of the year or so the altcoin market will have um you know we'll have gone through a lot of the fear and and a lot of theseDe-listings that we're seeing and then by that point hopefully we can start to turn things back around we have to talk about the uh Bitcoin spot ETFs um certainly it's been a big piece of news for the Bitcoin Market Fidelity just jumped on the bandwagon following BlackRock do you think this actually hasAny significant price impact whatsoever not really I mean the the narratives are always there to support the price right so yeah I've always said before right like the narrative so so price does not follow narrative The Narrative will always follow the price so you know if if large if large institutions areInterested in Bitcoin you know they would have been buying six months ago it's not like they're just now coming in to buy or at least showing any interest right so I think that that's a narrative that a lot of people might fall into um I I think the real narrative is moreSo just it's a rotation of capital from the altcoin markets Bitcoin and and that's more or less where we are now whether they get approved or not uh is is a different story I mean I think long term right long term certainly having ETFs uh by these institutions would beLong-term bullish for you know for Bitcoin um at least I would I would think that it would be but in the short term I don't I don't really think it matters at all uh well let's talk about the price itself then the the Bitcoin prices hovered around thirty thousand dollarsFor almost a week now um borrowing the borrowing last week this is the first time that it's traded above thirty thousand dollars since last summer so it's been this pretty significant move um is this is this signifi is this uh resistance level um a significant psychological level BenI mean you know so sorry so we've gone to around 31 400 I believe um something like that when we started this year my high end Target for the and not not even to say that we're gonna get there but I I thought that the highestIt would go really this year would be around 35 000 and it was a very dubious way that I came to that number it was basically just looking at the time weighted average of of um or sorry let me let me fix that so looking at just the average of 2015 and 2019Year-to-date Roi and and sort of just overlaying where we are and if you actually look at the light blue line This is the 2023 year-to-date Roi and then the dark blue line is the average of 2015 and 2019 so you can see it's it's actually playing out uh fairly uhFairly close to what we normally see in pre-habbing years my general guess is that it it'll Bitcoin will go through whether it could already be going through it right some type of a topping process where the rally gets faded in the second half of the year not notNecessarily to immediately lows I mean normally when you when you look at um prehabbing years like like 2015 and and 2019 we tend the we tend to end the year up positive and in fact both of these years uh if we're right in sort ofIn between them now look if you look at the the final year-to-date Roi that they achieved normally what I would say though is that in the prehabbing year we get we spend about half the year going up and half the year going down and we are getting pretty close to the pointWhere we've spent about half the year going out right I mean we've we're now looking at about five months uh the first out of the first six months of the year five of them have have been Green in 2019 out of the first six months ofThe year five of them were green as well and in 2015 you'll also find about half green half red so my guess is that you know in the short term it's really hard to say if Bitcoin can push a little bit higher again my high-end Target would be35k if it can make it there but I'll tell you this David if if Bitcoin goes to 35 um it's not good for the all coin Market because the altcoin Market will likely just continue to get wrecked on their Bitcoin Pairs and then at some point uhBitcoin you know would would need to come back down I think it would have to retrace uh some of this move like it normally does in the prehabbing year and then at that point the altcoin market um goes down quite a bit more and and the dominance continues to go up so IMean in the short term it's nice to at least see that that Bitcoin held the line here but again the reason why I think this is not new money coming into the space is because if you were to switch this over to say the altcoin market total three which again isEverything besides Bitcoin and ethereum you can see that it's actually below its 20-week SMA right so like there's a very big difference between what was going on in 2020 when total three was trending up with Bitcoin and what's going on today where total three is trending down whileBitcoin is putting in new yearly highs and you can actually draw the same conclusion from the last prehabbing year as well look at this total three the altcoin market dropped below 20 week estimate back in in July of 2019 whereas Bitcoin did not drop below its 20-week estimate until September right so soBitcoin was able to hold up here for about two and a half months longer than the altcoin market was able to so total three told us two and a half months before Bitcoin did that that it was actually that the market was getting weak right but it took Bitcoin an extraTwo and a half months to fall back down and I think that was just because all that liquidity was getting absorbed by Bitcoin from the altcoin market I still think we're in that phase right now and it's really hard for me to know exactly where the turning point is whether it'sAt 31k whether it's at 32k 33k I don't know exactly but I don't really see new highs this year I you made a crucial point just now if Bitcoin goes to 35 K the all coins Get Wrecked now two years ago if we had this conversation a lot ofPeople I did have this conversation a lot of people two years ago during the actual bull rally and that the conversation was centered around the fact that if Bitcoin goes up the all coins would fall with a higher beta but now it's the reverse like what changed in the narrativeIt's a great question um retail interest uh look at I track something called the social risk so this this here is showing a lot of different crypto YouTube channels and it's showing new YouTube views to those crypto YouTube channels uh including my own and and back then we were seeing people comeInto the space right so you could kind of project that there would be a marginal buyer for your all coins a few months from now because the general Trend in Social sentiment was up but recently the general Trend and social sentiment has been down take a look atThis chart so let me let me actually show you really quick the um the social risk so the social risk tracks that chart I just showed you it also tracks new YouTube subscribers it also attracts a lot of things going on on Twitter and we normalize it between zero and one andYou can see here that the social risk continues to go down right so people are leaving the space right they're not entering the space so it's like you know again back in 20 20 when Bitcoin was going up that was quite bullish on on the altcoinMarket and I was actually bearish on the Bitcoin dominance because I could see people coming in right I could see people subscribing to my channel I could see you know just an influx of new retail participants today I don't see that at all I see people leaving I seePeople having wanting to have no having no interest in this anymore and you can see where we are in terms of the social risk it's at 0.176 now what's interesting if you overlay the social risk here which is the orange line over the Bitcoin dominance which is the greenLine you can see that as the social risk goes into the lower wristbands the dominance tends to go up right and that's what we're what's exactly what we're seeing today as well so that's the main difference there there's not the macro more so back then supported peopleComing into the space and taking on risk because they had all this excess liquidity today that liquidity is getting is is basically drying up and so people are basically just seeking the relative safe 50 of of Bitcoin over the altcoin market there it's the relative safety it's not to say that BitcoinCan't fall it's just that it's it's relatively safer than the altcoin market and liquidity's drying up which is why I don't see it playing out the same way that it did in 2020. that's a very interesting perspective and we mustn't forget also that Bitcoin dropped at around sixteen thousand dollars back inNovember of last year uh that's an almost you know double doubling of price almost since November someone drove up the price Ben if not for the retailers who are leaving who was driving up the price well I mean I think a lot of it is isAgain a rotation of capital if you were to if you were to look at this chart right here this is a coin market cap on April 16th of 2023 look at the price of Bitcoin the same price as it is today right I mean you can look at BitcoinIt's at 30 200. here it is thirty thousand three hundred but look at where ethereum was it was at 2100. look at where cardano was 45 cents Doge was at nine cents polygon was at 118 Solana 25 where are all those all coins today right they're much lower than that IMean we can just take a quick look you can go look at eight as at 27 cents polka dots less than five dollars Avalanche is at 12 Salon is at 16 and Matic is at 62 cents so a lot of it in my opinion has been a rotation ofCapital right it's just been a a rotation from from higher risk plays to lower this place and you can you can also visualize it this way um I I track the total market cap you know we've mostly been going sideways right the total market cap with some deviations by a couple hundred billionHere or there it's been mostly going sideways for you know eight months now why is that it's because it's just a rotation of capital from high risk to low risk to me it doesn't really represent a lot of new I'm not saying that no new money is coming in right IMean I'm sure some news come especially the the Die Hard crypto Fanatics such as DCA money in like that's still probably coming in but I don't think you're seeing an influx of a lot of new retail participants and I think that's quite easily visualized by just looking atThings like new YouTube views or just look at uh look at new YouTube subscribers to these crypto YouTube channels right it is basically non-existent right now so again I I think it's a rotation of capital more than anything else I have another explanation for that chart this is thisIs because I'm also a media people people generally avoid uh channels like ours the financial news because uh when bull markets are you know when when the animal spirits are rising everyone wants to see good news and people want to stay away from bad news when markets are downSo yeah I think that's another explanation but you're absolutely right let's take a look at ethereum um now ethereum has gone up along with Bitcoin it's one of the odds that actually Rose um you know it could so clearly Capital has been rotating into ethereum as well could you make the argument thatEthereum is not like the other Alton will likely uh actually Prosper if Bitcoin goes up more so I think you can definitely make the case that ethereum is in a different class than the altcoin market so I think there's Bitcoin and ethereum are the Blue Chips but I do think Bitcoin isRelatively safer than ethereum actually if you look at a lot of all ether pairs you will find that a lot of them are bleeding right so a lot of altcoins just lead against ethereum over the macro scale but we're also seeing ethereum bleed back to bitcoin soI I do think that ethereum is safer than the altcoin market but I also think bitcoin's safer than eth and really you know if you look at at the ethereum Bitcoin valuation this is just a series of lower highs you know each of these rallies by The EtherBitcoin valuation has just been a series of lower highs and my general speculation uh if you look at if you sort of zoom out here and look at this as monthly candles we can even switch this over to say like I cannotchi monthly candles my general speculationIs that we're in a in a in a phase where it's actually in the process of of collapsing actually um so you you kind of have your initial move up like we had back here in 2016 same thing in 2020 then you get your first distribution up here and then yourSecond one right here I think we're we're looking at that play out once again and I'm guessing that we're going to see um the the collapse of the ethereum I mean I've been saying this for a long time right but I do think we are witnessingUm at least the the collapse of the ethereum Bitcoin evaluation and I expect it to go to that 0.03 to 0.04 range what's interesting is if you look at it if you look at what happened last cycle um the ethereum Bitcoin valuation sort of fell down to you know to about .02And then about a year later it Revisited that range right about and this is these are monthly candles so you can see about 12 months later right it Revisited that low and I'm arguing that this low here that was back in June of last year wereAbout at that at that window where we're probably going to retest that level at about 0.05 you could see some type of a bounce from that level but I ultimately expect it to resolve to that 0.03 to 0.04 level and perhaps that will Mark the end of of the of the BitcoinDominance rally uh given well it's going back to the else per minute going uh given the Divergence of Bitcoin of the alts could you not make the argument Ben that uh just on a pure evaluation basis the risk return uh profile favors the alts right nowNow I don't think so if you look at at say total three I mean that's a great that's a great question because at some point I think you make the case that that is true right at some point because the altcoin market will just been bledSo much that it's like well how you know how much further can it go but here's a great chart to really visualize that this is the altcoin market divided by the Bitcoin market cap and I would argue that it that the altcoin market collectively is an oscillator at bestAgainst Bitcoin and I think it's in the process of bleeding back down to this range over here so it's currently at around 0.55 normally we go all the way back down to about 0.2.3 so I still would argue that um you know that you really could seeThis drop another 40 percent or so and at that point you might actually start to make that case that all coins are worth the risk you know the hard thing is if you look at things like the Ada Bitcoin valuation you know exactly four years ago it was at the same valuationThat is today you know this is June of 2019 same valuation as today six weeks later it had dropped another 50 on its Bitcoin pair only six weeks later so it's really hard to know exactly when to come in but I do think that just by looking at things like the altcoinMarket divided by the Bitcoin market cap I I think it really does show that the altcoin market still does remain a lot higher risk um at the current time can we take a look at your uh portfolio optimization dashboard and uh what it's recommending currentlySo if you if you look at at modern portfolio Theory uh with Bitcoin and eth the the portfolio which currently maximizes your sharp ratio is about 71 Bitcoin 29 eth the one that maximizes your sortino ratio which does not punish positive volatility is 76 Bitcoin and 24Each and if you want to minimize volatility completely it's 93 Bitcoin seven percent I think we're in the process uh like like if you were to ask me what this would look like six months from now I think it'll be an even higher percentage Bitcoin uh than it is todayBut by that point it'll probably be starting to what we'll likely be reaching the point where it could be time to actually rotate into into the altcoin market and if you add an altcoin onto this let's add Litecoin um and recalculate this and calculate out the efficient Frontier what does itShow it shows that zero percent Litecoin for both the maximizing your sharp ratio and your Source unit ratio you can add I mean you could add some other ones in there as well but you know but more or less like you could add uh you know xrp Litecoin andMonero and and recalculate this for all five of them but in general what I believe you're going to find yeah is that is that you can see like you know it's really small portfolio allocations for these altcoins mainly because it's not that they can't give you returnsIt's just that they tend to bleed against Bitcoin and they also tend to bleed against ethereum you know I mean this is David this goes for the macro scale it's not even just today I mean like look at look at the Litecoin ether valuation right it's just it's a macroBleeder more or less you know it doesn't mean that it doesn't occasionally pop up and and look at look at say like the Litecoin Bitcoin valuation um you're gonna you're gonna basically find the same stuff right it just it's just a macro leader so it's not thatThey can't go up in Bull markets it's just that they tend to bleed against Bitcoin and they tend to bleed and they tend to bleed against ethereum okay uh finally let's close off in the macro we can't ignore that um do you still think that the overall macro environment with equities and theRisk assets overall play a significant impact or a factor on the price Outlook or for Bitcoin yes for Bitcoin um I mean I it's really hard to predict exactly the way the macro is going to go if you look at and if you mentioned likeEquities as well well isn't so much of a projection question is so much of an impact question whether or not Bitcoin is still driven by the overall macro as much as it was maybe a couple months ago whether that uh rather than just uh you know uh micro news related to bitcoinAnd crypto yeah I mean I think it is somewhat related to the macro of course um but the macro takes place over years so it's not always obvious like you know as to what event specifically is triggering another event I also think that Bitcoin operates in a very cyclical manner as wellUm you know sort of outside of of some other things I'm not saying it's not affected by macro in fact I I do think that at some point we're gonna we're gonna see you know the uninversion of the yield curve we're going to see the unemployment rate go up my guess isMaybe like early next year if it hasn't happened by the end of this year and and at that point just like 2020 I imagine that risk assets would get hit I mean you know Bitcoin Bitcoin was not immune to you know to what happened back inMarch of 2020 it wasn't immune to that it also wasn't immune to the collapse of the stock market back in late 2018 um we've seen we've seen risk Assets in general like crypto do poorly when the overall Market does poorly or when the macro conditions start to worse and IThink recently though macro the the resiliency of the US economy is basically allow risk assets to stay elevated um for for quite a long period of time a lot longer than I think a lot of people were thinking they would going they were going to absolutely I think a lot ofPeople do agree with you uh you do excellent analysis Ben uh where can we follow your work and learn more from your dashboards yeah so I mean feel free to follow me on YouTube at uh my channel is just Benjamin Cowan also have Twitter into cryptoverse and then I have my websiteUm into the cryptiverse.com excellent all right thank you very much and uh appreciate your time as always we'll put the links down in the description below check out Benjamin's work and uh we'll follow up again next time thank you Benjamin thanks David pleasure to be hereAnd uh pleasure to host you and thank you for watching don't forget to subscribe [Applause] thank you

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