Bitcoin DROPS As Treasury’s $6 BILLION Bond Rescue BACKFIRES | Matt Cole

Scott Melker (0:00)

Bitcoin price is dropping as Treasury's $6 billion bond rescue backfires. Also, PPI numbers just came in slightly hot and markets are not loving it. But I think all of that is noise. And I'm excited today to have a conversation with Stripe CEO, Matt Cole, about all the things that actually matter. And I have a feeling we're going to talk quite a bit about that bond intervention and macro. Can't wait to get into this one today, everybody. Let's go.

Good morning, everybody. Happy Thursday and welcome to the show. Before I bring Matt on, I just want to unpack one thing that's literally too embarrassing to do with Matt on stage, which is talk about what I wrote my newsletter about this morning. Hunter Biden's laptop hit $400, now it's 80 cents. I'm sure that you guys were all watching with bated breath the entire saga of the laptop meme coin launch that happened yesterday, but this went exactly as it was always going to go. And once again, thousands of retail investors were damaged. Now, this thing went to, I think, a $144 billion fully diluted valuation with a $48,000 liquidity pool, meaning that a few people got really excited and bought the hell out of it, and so did bots. It went absolutely flying. There was no liquidity. People bought it, and there's reports of people putting in 200 grand at the top and it being worth less than 200 bucks, just a matter of hours later. I mean, the fact that these things are still happening, at least we can have bipartisan agreement on family grift.

The fact that this doubled almost the evaluation of the Trump Token, by the way, in a matter of hours on paper is so absurd. Now, if you didn't see it, Hunter Biden did respond and of course, he blamed the evil media for their coverage and said, it's doing great in case you were wondering. But here's the 15-minute chart of that. So we're now down at 280 million. Once again, this went to 144 billion, $400 down to 80 cents, 75 cents right now. I just got the update. So doing great. So listen, this is the corner of crypto that we purposely ignore. And there's a reason for it, but I can only just say this is a cautionary tale once again, not to participate in any of this nonsense. I'm going to go ahead now and bring on Matt so we can have a conversation about things that actually matter. Good morning, sir.

Matt Cole (2:41)

Hey, Scott. How are you doing, man?

Scott Melker (2:44)

So how much laptop did you guys add to your treasury yesterday?

Matt Cole (2:50)

Absolutely zero, actually. I hadn't heard about it until this morning.

And I purposely waited to retweet. I was going live with you until you were done talking about it.

Scott Melker (3:04)

You're a serious person. I'm going to start a laptop treasury company now that we've got. Maybe you can give me some advice on how to do that. Okay, so first of all, let's dig in.

Well, we've got quite a few lead stories here today, but I think the biggest one and the one probably that I want to hear the most from you, since you're a bond guy, is this treasury intervention. Obviously, we have the bond market, rebuffs US treasury plan to buy back 6 billion in government debt. Now we've effectively tripled the original plan. Here's a quick chart of the 10-year.

Matt Cole (3:33)

Oops.

Scott Melker (3:35)

This thing is absolutely flying. That's on the weekly chart. So the idea here, obviously, and what makes it probably most interesting for us, is that the first announcement of this intervention is actually arguably the spark that sent Bitcoin up. And it's remained relatively high since then. But markets are not believing this. The bond vigilantes are not believing this. And that's the world that you were in for over a decade.

Matt Cole (3:58)

Yeah, I wrote about this in depth in late August. And I never expect when I write about something for it to play out so quickly.

But sometimes it's better to be lucky than good. But the bottom line, and I guess starting with buybacks, is you can actually learn a lot about buyback strategy by looking at corporate America, and even looking in the quote, dat land.

And I think sometimes what you see is buyback start as a marketing strategy, where there will be a release that we are going to do buybacks, whether you're a Bitcoin treasury company, a dat, or you're the US treasury, and you're Scott Bascent. And so I think that's what he did. And I think in every single instance, using it as a marketing exercise does not work, because it kind of shows that you see the problem, you're going to make an announcement. And I think the hope for some of those strategies is that the markets do the work for them. They say, oh, the treasury is about to buy a bunch of 10 years, we're going to get in front of that. But what happens in practice most of the time, and I think should be the base case, and a learning here is that the market does the opposite. They say, okay, they see the problem, that they're not actually stepping in with the size necessary to fix the problem. And ultimately what needs to happen is if your security is trading substantially cheaper than it should, and you firmly believe that, you got to step in with size, and you got to step in with size whether you're a corporation, or you got to step in with size if you're the US Treasury. And so the US Treasury obviously has the TGA, which is close to a trillion dollars, not quite a trillion dollars of capacity to do these types of buyback interventions. Besant has said that kind of floated that out there that he would use it, and then he increased his buybacks from 2 billion to 6 billion. We have 40 trillion of debt, right? It's laughable. And I think that's the problem, the market's sniffing it out. And what the Post I laid out in late August called for was the 10-year, and I used the 10-year over the 30-year because it has more long-term history, it's easier to look at, that it would break into the 5-6 percent range where he ultimately blinks. I thought it was interesting this last week that Luke Grohmann called it potentially go to as high as 7 percent, which I do think is the natural rate. I think the question is how much pain is Basent and Warsh willing to take before they step in with size. And I think if you throw a 5.5 handle or something like that on the 10-year, I think they'll come in with size. But until then, I think the market's going to test them, and it'll be interesting to see how risk assets respond in the meantime.