The Practical Islamic Finance Podcast

A Buyer's Market

March 20, 2024 Rakaan Kayali
The Practical Islamic Finance Podcast
A Buyer's Market
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A Buyer's Market

In this podcast, we dive into:

  • The current state of the financial world.
  • Focus areas: Bitcoin, interest rates, banking.
  • Discussion on the potential benefits of buying Bitcoin amid recent fluctuations.
  • Exploration of the impact of rising interest rates on smaller banks.
  • Advice on safeguarding investments in the current financial climate.
  • Addressing audience questions on various topics including Ethereum's latest upgrade and ethical investment practices.



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. We are back. It is nice to see you all. And today is Tuesday, Bitcoin is 64,500 and it's a buyer's market. And I'll tell you why I think it's a buyer's market in a second. So without further ado, let's get started. Now financial advice, be sure to do your own due diligence before making any investing decisions. All right, so tomorrow we have the big interest rate decision. Now it's not big because people are wondering whether or not the Fed will cut interest rates in March. The actual probability of that happening according to what the market is pricing in is only 1%. Interestingly enough, there's no probability that the market is affording to an interest rate hike. So there's a 99% chance that we stay at the levels that we're at right now, at least that's as per the market's pricing. And June actually has risen compared to yesterday at least with regards to the probability of experiencing an interest rate cut in June. So yesterday there was a 40% probability that we don't get a cut. Now that has dropped to only 36%. Now, regardless of whether we get a cut or not, I think the larger picture is completely agnostic to the answer to that question. The larger picture is one where things are clear in terms of asset prices. And the larger picture suggests that these asset prices should continue to go up with time. And in fact, dips and pullbacks should be increasingly short-lived and increasingly an exception to the rule. So why do I say this? Well, if you look at the amount of debt in the United States from 1996 to 2002, it took us basically six years to add $1 trillion in debt. And every bar on this graph that you see is how long it takes to add an additional $1 trillion in debt. And so now if you go all the way to 2024, we're adding a trillion dollars in debt, basically every three to four months. And it doesn't take a mathematician, an economist, a physicist to understand that this is not sustainable. It also doesn't take a specialist to understand that when priced in US dollars, things are going to continue to go up. The monetary policy may have a marginal impact, and definitely short-term it will have an impact. But the larger trend here is pretty clear, and that is the debasement of the US dollar. I don't think the US is going to voluntarily just default on its payments, its servicing of the just anticipation of hitting the wall. So long as it hasn't hit the wall and it continues to be able to print money, it will continue to print money. And this means that you don't want to hold this money for too long. So regardless of what comes out of Jerome Powell's mouth tomorrow, this doesn't change for me the larger picture, which is that we need to be invested in hard assets. Further still complicating the Fed's job is the fact that banks, many banks in the US, specifically 280 banks with more than $900 billion in assets are in trouble. These are smaller banks, but the reason that they're in trouble is because a lot of their deposits were used to purchase treasury notes or treasury bills when the interest rate was close to zero. And now that interest rates have risen, the value of these bills has fallen. And therefore, if there were to be larger than expected withdrawals, then these banks, if they were to sell their deposits, and perhaps if they had something like a run, like we saw with Silicon Valley Bank last year, if they were to try to sell their assets, which have now decreased in price substantially, and they realized their losses, they may not have enough to pay back all of their deposits. So from this, take two things. Number one, the banking system is not healthy. You should not be surprised to see in the headlines, some bank failures start to bubble up. Number two, if you have your money in a smaller bank, I would probably move that money to a larger bank, something like JP Morgan or Bank of America. These are banks that are considered, you know, they're sort of too big to fail. Although I think eventually, if things remain as they are, all of these banks will fail. But the first of all will be the smaller banks. So you want to be in larger banks. And really a failure of a bank like JP Morgan or Bank of America would only come, you know, at the height of a very severe crisis that basically got out of the government's ability to handle. So I think your money is safer in larger banks than it is in smaller banks. There's really no reason to keep your money in smaller sort of community banks. Yes, I understand there is insurance up to a certain amount, but you don't want to go into that process, right? You don't want to go into a lengthy process to get your money back. I think if, you know, one or two banks fails like what we had last year, then I think there'll be pretty swift payment of depositors. But if we see, you know, a larger number than that, then maybe a lengthy process to get your money. So just a word of caution for people. But this this pressure that banks have on them with the higher interest rates will further complicate the Fed's job and the decisions that they make. And this is why, you know, interest rate hikes are pretty much off the table at this point. And interest rate cuts would cause a lot of the assets that banks are holding on their balance sheet to appreciate and make their it will make their financial state a lot more more sound. So the Fed maybe did have has incentive to do that, even if the inflation picture is not necessarily where it ideally needs to be in their minds. Now, as it relates to Bitcoin, we mentioned Bitcoin fell. Now it was I think it peaked at around seventy three thousand today. It's well, as of now, it's sixty four five hundred. But yesterday, GBTC experienced its higher highest ever outflow of around six hundred and forty three million dollars. And the reason for this is because I think a lot of GBTC holders were waiting for some weakness in BTC price in order to get out of their GBTC positions because the fees on GBTC are comparatively, you know, four to five X what their competition is. And they wanted to reduce the tax impact, the tax implications of getting out from their GBTC position. Since we had some weakness over the past few days in the price of Bitcoin, a lot of GBTC holders decided to pull the trigger on the move out. And this is why the second lowest net inflows, if we look at the BTC ETFs in aggregate, the second lowest number was recorded yesterday. Now, this is largely due to the GBTC outflows. So the net inflows were the second lowest since the BTC ETFs launched. Now, in response, Grayscale CEO says, oh, hey, you know how we were fleecing our customers for that, you know, trusted us for all these years and invested with us. And we took advantage of the fact that they were kind of stuck with us because they were sitting on so much profits. And so we didn't really reduce our expense ratio to something competitive. You know how we were doing that in light of yesterday's hijra of capital out of GBTC. Grayscale CEO came out today and said, oh, well, you know, maybe in the future we're going to, as the market matures, whatever the heck that means, as the market matures, we might decrease our rate of fleecing our customers. So, yeah, they got knocked to their senses by the market, deservedly so. Now, if we want to put this pullback in perspective, it's really nothing to write home about. It's quite, it's quite normal. It's quite healthy, to be honest. If we look at previous bull markets, we see that the average pullback is actually falling in terms of percentage points. So 2016, 2017, an average pullback was 32%. And 2020, 2021, the average pullback was 24%. And 2023 to 2024, it has so far been 21%, the average pullback that is. So really nothing abnormal here. And when we look at the MVRV score, the Z-score of that, that is, we saw a similar thing happen last time. So in December of 2020, when the Z-score reached around three, we saw a modest pullback in the price of Bitcoin. And that's that intersection between the two gray lines. And we're seeing the same thing here. This time around, we reached the MVRV Z-score of around three, and we're seeing a bit of a pullback in Bitcoin. But as you can see from the chart, it quickly rebounded and made new all-time highs. And when in doubt, all you need to do is zoom out. So when we look at having one, two and three, we see that after the halving, there was a sharp increase in price. And right now we're pre-halving and we've already experienced a pretty substantial move upwards. I think this is largely driven by the Bitcoin ETFs, which were not present in halvings one, two and three. And therefore, the dynamics that caused the upward appreciation after the previous three halvings are still in play this time around, only they will be turbocharged by the Bitcoin ETFs. So we're still sitting in a good position, I think, where this bull market I don't think is over. So it's a buyer's market, in my humble opinion. And it's all about perspective. So remember, when we reached 64,000, how rich you were feeling. And now just because we were at 73 and now we're back at 64, you perhaps feel a lot more, a lot less rich. So just remember that a few weeks ago, only a few weeks ago, 64,000 made you feel incredibly rich. And that said, for those who maybe were looking at Bitcoin at 73 and wondering, hey, did I miss the boat? Well, now you have an opportunity to enter at something below the all-time highs for the asset. And like I said, generally for this, the general theme here, if you're measuring things with US dollars, the general theme is the basement of US dollars against hard assets like Bitcoin. You can't really get that much harder than what Bitcoin is, especially now with the Bitcoin ETFs hoovering up 10 times what is being mined every day. So with that, if you'd like to follow our portfolios, our buys and sells, make sure to become a PIF member and join our growing community of Halal conscious and really friendly, honestly, really just high quality people that we have in our community and very helpful people, very generous with their time and with their inputs. So definitely consider becoming a PIF member to make the most out of this bull run, inshallah. So with that, let's go to our questions. Salam brother, can you refer to yourself as crypto or can? How can you talk about crypto? Perhaps I'll consider it. We'll see how much movement is behind that name. Salam or Ken, are you still bullish on Iron and Meiji as before or would you rotate into other Bitcoin miners? No, I think that they, you know, obviously Mosin, I mean, it's a very, I mean, tiny, tiny, tiny part of our portfolio. So this was just, you know, it's an asymmetric trade, right? Because if you lose, what you lose is your principal, but on the other side, considering how it's being valued, you could come out with a pretty, a pretty healthy profit. And, you know, considering the price of it, it's a, it's, it's not inconceivable that returns are, are good. That said, I wouldn't put any like substantial money behind that. This is the one of the lowest quality miners. However, as Bitcoin goes up in price, the lower and lower tier miners will, will surprise to the upside. And Iron, I consider to be one of the higher, higher quality miners. Salam or Ken, hope all is well on your end. Love this timing of the live stream. Okay. Noted Rashad. Thank you. What do you think about Ethereum latest upgrade? It was kind of a non-event, right? Kind of didn't do much of anything. I mean, if anything we saw after the upgrade, perhaps influenced by the upgrade, we saw Solana shoot up because, you know, perhaps one of the things that was keeping Solana down was, you know, anticipation of this Ethereum upgrade and what it was going to mean for competitors of Ethereum. And it kind of turned out to be, I mean, kind of a nothing burger, but we'll see. I think it's probably a bit earlier, early to tell, but it was the sort of quintessential, if you are an Ethereum investor, the quintessential buy the rumor, sell the news type event. Should we sell our coins now or wait until having, well, I think I, I think I answered that Lukna. Obviously this is what I do. So not financial advice, do what you think you're most convinced with. I'm always a long term buyer, but with these fluctuations, I kind of questioned my strategy. So for this, I would say, you know, you have to look at both your, like your risk tolerance from an objective perspective, like, can I actually take on this risk? But you also have to look at your personality. Like, do I have an appetite for this risk? Or is this amount of, like, even if you have the, your, let's say you're investing money, you know, you're not going to need in the short term. So you got that done. So you're doing right by, as it relates to your objective risk tolerance, but you may not have the personality for these types of fluctuations. Like it may actually lessen your quality of life. And in which case you need to reduce your exposure to these volatile assets and crypto being, you know, the most volatile of assets. So ask yourself, is this like decreasing just my quality of life? And if it is, then even if you have the money to do it, don't do it. There's, there are things that are more important in life than maximizing your returns all the time. Your presence when you're around your family, the, the amount of, you know, in the moment that you can be is much more important. And this time doesn't come back. You know, one of a good friend of mine posted on LinkedIn something, and usually LinkedIn posts are extremely cringe, but this was kind of insightful. He mentioned, you know, that we talk a lot about the time value of money, but there's also the time value of time, which is basically the idea that the time today that you have, you should value in some respects more than you value the time that you expect to have later, because your expectation may not come to fruition or what's guaranteed is this present moment. And so you don't know how much time you have left. So value the time that you have right now and make sure you organize your investments in a way so that you can make the most out of it. Is crypto futures haram? Yes. I am uncomfortable with crypto futures from a not halal perspective, even if you're only long selling. And I actually have a video on this. You're welcome to take a look. I don't think we'll survive. I think Cardano is a zombie coin. And yeah, I don't see any reason why it's it's, you know, one of the most overvalued coins that we have not used for anything, basically, especially when compared to Solana. If if Solana were to be valued on a user basis, the way Cardano is valued, then it would be north of a trillion dollars at this point. So, yeah, I don't see why I would buy Cardano over Solana, but that's just me. Options trading. I have a pretty deep dive into that also available for on YouTube or on my blog, Practical Islamic Finance dot com. Best platform to purchase crypto does seem like as it relates to Coinbase, it is quite suspicious that when Bitcoin is going up, it will often crash. But when Bitcoin goes down, it doesn't crash. It's always, you know, working like a well-oiled machine. So what gives? I tell you, I think there's a lot of shenanigans that go on with most crypto exchanges. I think Coinbase is probably better than some of the, you know, offshore crypto exchanges. I've heard Kraken was a decent choice, but I haven't actually used them. Ali asks if I mainly focus on crypto or stocks. It kind of depends on what season we are in. So right now, crypto is, you know, older age. A lot of people are interested in it. So I've been talking about crypto more often. But most of my investing is in stocks, actually. New to investing in crypto miners? Well, I would. There's a wealth of resources online to get started with that. Short selling I cover? I don't really think so. Oh, thank you, Bilal. That was really nice of you. I appreciate it. I think you should be good if you don't take profits from interests. No, as it relates to short selling, you're also selling something that you don't own. And you are creating more risk than the amount of products and services in the market naturally creates. And therefore, you're creating risk out of nothing. You're adding to the risk in the market. And short selling is responsible for overshooting on the upside and overshooting on the downside. And therefore, it's something that I think is negative for the market overall. And a lot of people say, oh, well, short selling helps with price discovery. But does it really? I mean, I think price discovery would be completely fine without short selling. So I would stay away from it. I would stay away from China stocks altogether. I don't think they have the necessary transparency that would give me confidence to invest in them. I also don't think that large companies in China have freedom from their government. Their government is typically pretty involved in whatever they do. And we've seen with Uyghurs in China how the Chinese government treats them. And we don't want to be in any way associated with that. So I stay away from China. Basically, anything that has big presence in China, I try to stay away from it. All right, guys, we have 105 people. So if everyone hits the like button, we'll reach our goal for this video of more than 100 likes. Thank you all for coming. I really appreciate it. I hope you're enjoying Ramadan. And I should say this about Ramadan, like, I understand it's tough. It's tough on me too. But that's the point of Ramadan is because toughness builds character. And with you can't really have a meaningful building of character without some without some adverse experiences without some tough experiences. This is what builds character. So yes, it is tough, but that's what it's supposed to be. And therefore appreciate it for what it is. We live in such privileged times where we never feel hunger unless voluntarily. I mean, most of us. So, you know, compared to the rest of the human population, we have an advantage as Muslims because we voluntarily expose ourselves to the feeling of hunger, which is something that, you know, the rest of humanity has forgotten. Most of the rest of humanity has forgotten. And therefore, it has positive impact on our appreciation of food for the rest of the 11 months of Ramadan. And it has a positive impact on our bodies, and it has a positive impact on our character. So I just want to remind myself first of this, because I know that we're at the point in Ramadan where, you know, it starts getting harder. So yeah, hopefully that's useful. All right, guys, until next time, make sure to take care of yourself. Leave a like on the way out. As-salamu alaykum and peace be upon you all.

Introduction and Bitcoin market update
Analysis of the upcoming interest rate decision by the Federal Reserve
Discussion on the probabilities of interest rate cuts or hikes
Analysis of the challenges facing smaller banks due to rising interest rates
Insights into recent fluctuations in Bitcoin's price and investment strategies