The Practical Islamic Finance Podcast

Market Awakening: Truth and Hype

March 09, 2024 Rakaan Kayali
The Practical Islamic Finance Podcast
Market Awakening: Truth and Hype
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Market Awakening: Truth and Hype

This podcast episode delved into various aspects of the current market landscape, emphasizing both opportunities and risks. From discussions on anticipated rate cuts to insights on Bitcoin's volatility and investment theses, listeners gained valuable perspectives on navigating the financial realm. Furthermore, cautionary notes were provided regarding meme tokens and scams, urging prudence in investment decisions.
 The episode underscored the importance of staying informed, conducting due diligence, and actively engaging in the investment community.

Time Stamps:

  • Introduction and Market Overview (0:00 - 0:26)
  • Market Anticipation of Rate Cuts (0:26 - 3:24)
  • Troubles in Banking (3:33 - 4:17)
  • Impact of Layoffs and Technological Updates on Jobs (4:26 - 5:34)
  • Bitcoin's Volatility and Price Analysis (5:41 - 8:53)
  • Bitcoin Miners' Performance and Bitcoin Mining Outlook (8:53 - 13:26)
  • Investment Thesis for Bitcoin and Solana (13:33 - 14:10)
  • Warning Against Meme Tokens and Crypto Scams (14:17 - 16:23)
  • Closing Remarks and Q&A (16:29 - 18:21)



Our podcast is about helping people ethically build wealth. We cover a broad range of topics including stock and crypto investing, product reviews, and general financial well-being.


Anything you hear in this video is an opinion. It is not personalized financial advice. Make sure you do your due diligence before making any investment decisions.

As-salamu alaykum everyone, I hope you are doing well. A lot of happenings in the market that we're going to cover, a lot of opportunity in the markets, and a lot of scams and things to avoid. So let's make sure we're able to know which is which, maintain our and grow our product required data, and that's exactly what we're going to do in this video. So without further ado, let's get started. Not financial advice, be sure to do your own due diligence before making any investing decisions. And oh, by the way, while I have your attention, do leave a like, it helps a lot. So the market is anticipating rate cuts in June. This comes on the heels of some comments by Fed Chairman Jerome Powell, wherein he emphasized that they don't want to cut rates too soon because inflation is yet to be at the target that they have. But also they recognize that keeping rates higher for longer may end up damaging the economy, and that's also something that they don't want to do. So at current, the market is digesting those comments and the data that's coming from employment and inflation and putting a target for June for the first rate cut this year. Now we have seen some signs of trouble pop up. So for example, the New York Community Bank said it lost 7% of its deposit in the past month, and that caused a private equity group to have to step in to save the bank. And really it highlights, number one, you should probably own some Bitcoin. The banking system is, I mean, basically any bank is a few headlines away from being in crisis mode. And number two, the crisis in banking that we saw last year, and a lot of people have sort of relegated it to distant memory, that crisis is perhaps persists, but under many people's radar. And I wouldn't be surprised to see if rates maintain their elevated levels, at least compared to recent history, I wouldn't be surprised to see more banks falling on harder times. And especially in light of the fact that just the risk of a smaller bank and these headlines and the thoughts that it sort of provokes in the minds of customers, just the possibility of something like this happening to someone's bank causes a lot of people to migrate their money to larger banks, the too big to fail banks like Bank of America and JP Morgan. And so even banks that perhaps didn't have any underlying issues, if they're smaller banks and they're not deemed to be too big to fail, may suffer from headlines like these. So number one, make sure to have Bitcoin as part of your investment portfolio, at least that's something that I would do, not financial advice. Number two, don't be surprised if you see this banking crisis, these banking problems pop up with other banks. It used to be that bank runs required, you know, news to disseminate and people to actually walk to their bank and make a request for withdrawal for a bank run to happen. Now you see a couple headlines and panic spreads and people can move their money on their phones. So bank runs are a lot more of a distinct possibility today than they have ever been. Now, in addition to bank runs, we've seen layoffs increasing. So, for example, the level of layoffs has risen to the highest for any month since February, highest for any February, I should say, since 2009. Now, this is partially due to the economy. But I think the larger reason for this is the fact that technological updates are changing the nature of jobs. So companies implementing robotics and automation, in addition to AI, have noted that they've experienced many job reductions. And so this is and a lot of the people who were laid off have actually been able to find other jobs pretty quickly, as is as is indicated by the fact that the unemployment number isn't really increasing that much. So something to keep in mind, something to actually instill in your children is an expectation that the jobs of today are going to be changing and one must maintain a high level of adaptability if they want to, you know, sustain themselves in the future economy. Now, let's talk about the main character of the markets these days, and that is Bitcoin. So Bitcoin experienced a lot of volatility this week, but it's basically maintained the closest to the highest level it reached. So as of taking this shot, Bitcoin's price was close to 68,000. And we're 41 days away from the Bitcoin halving. Historically speaking, the price of Bitcoin was closer to 50 or 40% off of the all time highs at this point in the cycle. Now, that being said, we're still seeing some encouraging signs with regards to the price of Bitcoin. So, for example, if you look at this blue line here, which represents the number of hodlers or long term holders of Bitcoin, which many people refer to as being the smart money holding Bitcoin. That blue line typically experiences a pretty substantial dip when the price of Bitcoin peaks. So, for example, if you look at 2018, you see a substantial dip in the blue line and then a peak in Bitcoin's price. In 2021, 2022, the same phenomena happened where long term holders were selling to the short term holders that came in because of the hype. That's when Bitcoin peaks. But recently, there hasn't really been that a similar dip in long term holders. So this suggests that perhaps there's a lot more room for upside here for Bitcoin. Now, if we look at another metric, which has been pretty reliable historically, if we look at the market value versus realized value and we look at the Z-score, so the variation of that market value is basically the price right now and realized value is the price that the owner of the Bitcoin actually paid. And so the difference between them, the variation of that difference from what it is normally, the variation of that typically has to reach levels close to a seven, the Z-score does for Bitcoin to have reached the peak. So that's the red horizontal bar at the top. So that's when the Z-score is telling you, OK, Bitcoin is at or near the peak price. But currently, we're closer to a three. So still some ways away in terms of Z-score that suggests that the price a bit still has some room to run. So I like looking at these hard data facts and putting aside all the hype that you hear in the market to ascertain where exactly we are in this bull market. And corresponding with my video yesterday about Bitcoin miners, they actually earned the second, they had the second highest daily earnings in history. The last time they earned a similar amount was in 2021. And they earned close to 75 million yesterday alone. So and, you know, considering that we're coming up on this halving and the ambiguity with regards to which Bitcoin miner will actually make it, which Bitcoin miners are going to thrive and which Bitcoin miners won't, this ambiguity being removed post halving, I think this sets up for the winners in Bitcoin miners and Bitcoin mining to have a pretty strong second half of 2024. Now, I wanted to share with you guys this email that I found compelling because it's a great lesson in formulating a thesis for an investment. And anytime you buy something, you should have a thesis and it should be easily explainable and it should have another aspect of it. And that's what we'll highlight here. So this is an email that the CEO of Pantera Bitcoin Fund sent out when they decided to buy Bitcoin for $104 in 2013. And he says, I was discussing Bitcoin with an investor yesterday and he replied somewhat dismissively. It's just like buying gold. No, it's like buying gold in 1000 BC. 99% of the financial wealth has yet to address Bitcoin. When they do, Bitcoin is either going to be worth zero or it's going to be worth $5,000 per Bitcoin. The current market price of 100 implies only a 2% chance Bitcoin succeeds. I think it's north of 50% chance that the world adopts a global currency or payment system in which free cryptography replaces the very expensive trust charged by banks, Visa, MasterCard, Western Union, PayPal, etc. Bitcoin dominates cash, electronic fiat money, gold bearer bonds, large stone discs, etc. It can do all of these things that each of those can. It's the first global currency since gold. It's the first borderless payment system ever. If you plan to invest or invest more in Bitcoin, it's my opinion that now is better than later. For those that have a half position on now, I sense two possible scenarios a year down the road. The first is we split a bottle of wine over good stories of how the Bitcoin project seems so promising, but it just didn't work. We're each out a small fraction of our net worth, no tears. If it's trading at 5,000, might need something stronger to erase the feelings of regret. So what I want to highlight here is the components of a good investment, right? He has a very clear value proposition. It's superior to the options that are available right now. He has a very big opportunity, very clear use case for the value proposition that this new investment is offering. And currently it's being priced at a 2% chance of success. So if things go badly, he loses his principle. And he's not saying that he knows how things are going to go, but if things go badly, he loses his principle. But if things go right, then there's an opportunity for a hundred X based on the size of the opportunity. So this is a really good example of a good investment thesis where the justification is very clear. It's easy to communicate. The downside is limited, but the upside is unlimited. And I just wanted to share this with you so that you're able to identify a good investment opportunities when they come your way. Now, interestingly, Pantera and the person who sent this email, the CEO, are now interested in another cryptocurrency. And that is Sol, which the native cryptocurrency of the Solana blockchain, which Alhamdulillah is one of the components of our PIF crypto portfolio. Pantera is looking to purchase discounted Solana tokens with its new fund. And perhaps this explains some of the pump that Solana has experienced recently. That being said, there's a lot of fanaticans that are going on in the market right now. Some of them are quite funny actually. So with the meme token mania that has swept the markets, we've had some new meme tokens with basically political figures with their names misspelled. And Geobudden, apparently everyone who invested has made 200k. However, I should mention that, you know, just because you have a paper gain of 200k doesn't mean you actually can realize that gain. So if you look at the liquidity, and I've mentioned here many times that liquidity is a very important thing you need to look at. So a lot of these projects have very limited liquidity. So if you try to take your money out, you try to sell your tokens, you're not going to be able to sell them for the price that the last person paid to buy theirs because of the limited liquidity. I should also say, I mean, these things are basically money grabs. I wouldn't, I wouldn't touch them. A fool and their money are soon parted, as the saying goes. And, you know, at the end of the day, you are going to be asked on the day of judgment, how you made your money. And it's pretty hard to explain. Well, you know, I was invested in Geobudden, you know, I can't really make that argument. So I would, I would stay away from these things. When hype gets real, and you start seeing people making a lot of money from their crypto investments, people start to get desperate. I mean, on both ends. So there's desperate selling of these crypto scams, and there's desperate buying of them as well. And no, you will not be able to, you will not be able to invest $30 and not work for a year. So don't try to. With that being said, if you'd like to follow our investments, then do consider joining our community. We'd love to have you. And if you enjoyed this live, then do leave a like, I'd appreciate that, and subscribe and hit the notification bell so you know when we go live next. So with that being said, so let's go to questions very quickly. Is monetization on YouTube high? Well, I think that, so if you don't monetize, Google attains the right to monetize your videos anyway. And also, if you do monetize, and you're connected to your Google account, you can specify which ads you'd like to have on your videos and which you don't. So I think there's some advantages to monetization. As-salamu alaykum. How can I join your Discord community? You can do so by becoming a PIF member. Link should be in the description. As-salamu alaykum. When do you think the better miners will start following the Bitcoin climb? Well, historically speaking, I spoke about this yesterday, so do watch yesterday's live if you haven't already. So typically the majority of Bitcoin miners' gains happen after the halving. And this is partially because the winners become clear. So I suspect that miners will go on their run post-halving, go on their substantial run post-halving, even if they perform well from here until halving. That being said, you really need to know which miners you're invested in and only choose the best. I mentioned yesterday, make sure they have strong balance sheets, make sure they're efficient in their mining, make sure they have very aggressive growth plans. And I do think that hodlers, so miners that are holding Bitcoin, are going to do better than miners that are not holding Bitcoin because of what I expect the Bitcoin price to do, which is go up. So I hope you found this useful. Until next time, take care of yourself. As-salamu alaykum and peace be upon you all.

Introduction and Market Overview
Market Anticipation of Rate Cuts
Troubles in Banking
Impact of Layoffs and Technological Updates on Jobs
Bitcoin's Volatility and Price Analysis
Bitcoin Miners' Performance and Bitcoin Mining Outlook
Investment Thesis for Bitcoin and Solana
Warning Against Meme Tokens and Crypto Scams
Closing Remarks and Q&A