Bitcoin & Crude Oil.

The two most dangerous periods to dick around in the markets are at the peak and the trough. Problem is, most people don’t know they’re in them until it’s too late. In peak times the sign is usually when your dumbest friend or complete stranger gives you stock market tips or talks about their crypto buys. At the bottom of the market, there’s a whole new crop of pushers that are far more dangerous. That’s who we’re talking about today; and I’m going to go through the basics of crypto and the current investment landscape.

But first, I’m going to tell you a story. A filthy story. A cautionary tale to show you that no matter how much you think you’re invested and informed, you’re not. I’ve been vocal for a year that if Trump was elected he would run the economy into the ground. Not just because he’s uncertainty personified, but because he would tear apart the regulatory framework of markets and industry, blow up social safety nets and treat the treasury like a speculative piggy bank. I mean, the guy wants to create a sovereign wealth fund so he can direct its investments without oversight. Imagine the world’s biggest grifter in charge of the world’s biggest piggy bank.Here we are at the precipice of recession, which means we can actually spot the moment that we head into that trough. And that means the speculative vultures will be out in full force and tempting you with serious crypto FOMO bro. I mean, Bitcoin was over $100k once already this year and it’s starting to rebound. Could be time to buy! Or not. Just don’t miss out.

Beware the speculator in times like these.

‘Twas Ever Thus

It’s said that Papa Joe Kennedy got rich by preselling the ‘29 crash on insider trading, a practice he was often accused of. His punishment? They made him the head of the SEC.

Some of the biggest trading houses in the stock market used to run schemes called front running where they would make personal trades before inputting trades from institutional clients that were big enough to move the market.

Did you know it’s illegal to trade onions as a commodity? In 1955, two commodity traders named Vincent Kosuga and Sam Siegel hatched a scheme to corner 98% of the market by physically storing onions, running up the price then dumping them. So Eisenhower made it illegal to trade onions in the Onions Futures Act of 1958.

Hedge funds and investment banks built out fiberoptic networks to get information faster and trade even faster using algorithms generating a form of electronic arbitrage by always being milliseconds ahead of market moves.

Point being. You’re not in charge. There’s always someone bigger, richer, faster and more reckless than you with money to spare and an offshore account to backstop their bullshit. They’re going to get rich off of you and in spite of you. We all know the big stories and they’re all the same. Onions. Mortgage backed securities. Enron. Madoff. Stories about schemes that were too good to be true because they were built on a speculative lie. But there’s another story that few people talk about. One that demonstrates how far up these things go, how easy it is for fat cats to manipulate the system and how easy it is for them to get away with.

Mack the Knife

I’m going to retell a story we shared from the early days to ease us into the conversation about speculation. In the summer of 2008 the financial world was just beginning to melt down. The housing bubble was about ready to pop. The entire global economy was in deep trouble but only a few people understood just how bad things were about to get. The liquidity crisis had begun. Wall Street needed money. And it needed it fast.

At the time, the head of Morgan Stanley was a guy named John Mack. Mack was more than a wealthy Wall Street executive. Mack was an oilman. In every sense of the word.

Under Mack, Morgan Stanley amassed a formidable group of companies involved in every aspect of oil, from refineries to home heating oil, a move that partly enabled Mack to navigate through a storm that brought some of the biggest American investment banks to their knees. And the whole world picked up the tab. By exploiting regulatory loopholes and throwing caution and conscience to the wind, Morgan Stanley, along with Goldman Sachs, artificially thrust oil prices to record levels.

They didn’t call him “Mack the Knife” for nothing. But Mack was just utilizing the tools available to him.

Mack ran Morgan Stanley through the ‘90s before accepting the job as co-CEO of Credit Suisse First Boston (CSFB), a leading investment bank, in 2001. Mack left CSFB in 2004 to pursue options outside the large investment-banking world but was wooed back to run Morgan Stanley in 2005. Upon his return, Mack’s Morgan Stanley went on an aggressive oil-buying spree, but not necessarily the kind you might expect.

On May 24, 2006, Morgan’s resident oil expert announced that integrated oil equities were “15% undervalued” and in a research report, he wrote that “independent refining and marketing remains the largest sector bet in the global model energy portfolio.” Soon after, on June 18, 2006, Morgan Stanley acquired TransMontaigne, Inc. and its subsidiaries—a half-billion dollar group of companies operating in the refined petroleum business.

How convenient…after their oil analyst decides that this portion of the industry is looking up, Morgan Stanley gets into the oil business and buys an oil terminal company. However, itss not likely it only took 25 days to conceive and work out the TransMontaigne transaction. This had to be a long-planned, well-thought-out takeover. One that worked for the great benefit of Morgan Stanley’s future oil plans, as TransMontaigne also owned one-third of the nation’s oil terminal storage capacity.

Morgan’s investments in the oil business continued aggressively over the next year into the far corners of the industry. In short order it closed the circle of the supply chain by acquiring Heidmar, a shipping company that owned 120 massive oil tankers, as well as various stakes in foreign-based energy supply companies. It even snagged a contract from the U.S. Department of Energy to store 750,000 barrels of home heating oil at its corporately owned terminal in New Haven, CT. Morgan Stanley, which was at the time the largest trader in oil futures, was now a serious international oil company.

On March 14, 2008, Morgan’s analyst—a man named Doug Terreson—said that oil would settle around $95 per barrel for the remainder of 2008. Moreover, he also concluded that oil would retreat to around $83 per barrel for 2009.

This would be his last forecast for Morgan Stanley.

Two short months later, Dow Jones Newswires reported that the analyst had been ousted in a round of layoffs. Two weeks after that, Richard Berner—Morgan Stanley co-head of global economics and chief U.S. economist—issued a statement saying that crude oil could easily reach $150 a barrel.

This forecast set off a round of speculative fervor never before seen in the market. Goldman Sachs immediately followed suit by forecasting oil to roar beyond $150, saying it could hit $200 a barrel in the near future. Oil prices were off to the races, with the investment banks in full lobbying mode while pointing the finger at China and India. Remember that this was smack-dab in the middle of what we now know was one of the worst liquidity crises in banking history.

For a brief moment, oil did indeed hit $147 per barrel, a record never before reached and likely never again. Congress finally stepped in and asked what the fuck was going on, and former regulators and traders themselves copped to the con and said the entire thing was cooked up. It was pure greed. Pure speculation.

But why? Why get so out of control? What happened to the so-called perfectly functioning and self policing free markets?

Well, timing matters here.

Remember it’s 2008. Let’s say for a moment that you run Morgan Stanley and you know what most of America is about to discover: the bubble is about to burst. Not to mention that over the past few years you made a couple of bad deals. Okay, so it was more than a couple, but not as many as your friends at Bear Stearns and Lehman Brothers. Regardless, you’re going to need cash. Fast. Thankfully, you have remarkable control over the price of oil—just by forecasting it. All you have to do is say the words and the markets will follow.

Pick a number. $100? $125? $150? Whatever helps you close the gap and fill the coffers.

It’s no small matter of convenience that you also own one-third of the oil storage capacity in the country and control several global shipping routes. What’s more, the government has handed you a contract to store 750,000 barrels of home heating oil for the Northeast United States, and you founded and still own a public exchange that handles energy trades that no one can really see. Win. Win. Win. Win.

Safe Harbor

Billionaire Ray Dalio, founder of the world’s largest hedge fund Bridgewater Associates, has issued a warning that the United States is “very close to a recession” that could potentially be “worse than [the 2008] recession if this isn’t handled well.” Dalio’s concern carries some weight as he issued similar warnings in 2007, just before the Great Recession took hold. The current precarious position stems largely from President Trump’s aggressive pursuit of global trade tariffs, which Dalio characterizes as causing a “breaking down of the monetary order.”

The simmering trade war has escalated dramatically, with Trump imposing tariffs up to 145% on many Chinese exports to the U.S., while China has retaliated with 125% levies on American products. The conflict has expanded globally, with Trump adding a 10% tax on goods entering the U.S. and giving many countries a 90-day deadline before reinstating higher charges. This economic brinkmanship has sent the ICE U.S. Dollar Index tumbling below the 100 level, indicating serious pressure on America’s currency.

Market sentiment reflects this pessimism, with betting markets placing recession odds between 40% and 60%.

In these kinds of environments, investors typically flee to traditional safe harbors—Treasury bonds, gold, and other stable assets with reliable returns and historical resilience during downturns. Yet paradoxically, these periods also witness capital flowing into highly speculative investments, including foreign currencies from developing economies and, increasingly, cryptocurrencies. We recently unpacked the correlations between the U.S.Dollar and 10 Year Treasury, which split recently and caused very real panic.

This seemingly contradictory behavior stems from several psychological and financial factors. Some investors seek to preserve wealth through proven safe havens, while others chase outsized returns to compensate for anticipated losses elsewhere in their portfolios. The currency markets, both traditional and digital, become battlegrounds where these opposing investment philosophies collide. Nowhere is this more prevalent and apparent today than in the crypto markets.

The cryptocurrency ecosystem has evolved dramatically since Bitcoin’s inception, sprouting various specialized digital assets such as stablecoins, memecoins, exchange coins and payment coins. Stablecoins are designed to maintain consistent value by pegging to external assets like the U.S. dollar, gold, or other financial instruments. These coins aim to reduce volatility, making them suitable for everyday transactions.

Memecoins are bullshit vehicles inspired by internet jokes and trends with little inherent utility beyond community engagement and speculation.

Their value derives primarily from social media hype and viral trends rather than fundamentals. These coins—like Elon’s ridiculous Dogecoin—are characterized by extreme volatility and risk, though some have achieved significant valuations through celebrity endorsements.

Exchange coins are issued by cryptocurrency exchanges to provide utility within their platforms. Their value is intrinsically linked to the success of the issuing exchange.

But Bitcoin stands apart as a payment cryptocurrency or “payment coin” whose primary purpose is facilitating decentralized peer-to-peer value transfers without intermediaries. Unlike stablecoins, it isn’t pegged to any asset; unlike memecoins, it wasn’t created for entertainment; and unlike exchange coins, it wasn’t issued by a trading platform. In regulatory terms, Bitcoin is often classified as a commodity in the United States, similar to gold, due to its scarcity and use as a store of value, but as easy to manipulate as crude.

You see, despite increasing mainstream acceptance, cryptocurrencies are fundamentally speculative assets. Unlike stocks representing ownership in companies that produce goods and services, or bonds backed by government or corporate earning power, cryptocurrencies exist in a realm of pure belief. Their value derives exclusively from the collective agreement that they should have value—a circular reasoning that becomes particularly problematic during economic crises.

Bitcoin’s scarcity (capped at 21 million coins) provides some theoretical underpinning to its value proposition, but this manufactured scarcity differs fundamentally from the practical utility that gives gold its enduring value beyond mere rarity.

The “greater fool” theory often applies here—assets have value primarily because investors believe they can sell them to someone else at a higher price, rather than because of intrinsic worth. This speculative bubble dynamics becomes especially dangerous as recession looms and the pool of potential “greater fools” contracts.

Even though cryptocurrency infrastructure has matured significantly, with enhanced exchange security and regulatory oversight, substantial risks remain that traditional financial investments simply don’t face. Smart contract vulnerabilities continue to expose billions to potential exploitation. Exchange hacks, though less frequent than in cryptocurrency’s early days, still occur with sobering regularity.

The cryptocurrency space also remains plagued by market manipulation tactics long banned in traditional markets: pump-and-dump schemes, wash trading, and various forms of front-running occur with minimal consequences. Regulatory frameworks are developing unevenly across jurisdictions, creating uncertainty and enforcement gaps that sophisticated bad actors exploit.

The Crypto President

It should be said that both sides of the aisle have accepted disgusting amounts of campaign contributions from the crypto industry. Even the Biden administration had loosened its stance toward crypto as a commodity though officials were far more skeptical, generally, than the Trump team. With Trump now in office, all bets are off.

Trump‘s 2.0 administration is staffed with vocal industry proponents from the top down. President Trump himself has become a vocal advocate, establishing a Strategic Bitcoin Reserve and signing executive orders supporting the industry. His administration features David Sacks as “AI and Crypto Czar” chairing the Presidential Working Group on Digital Asset Markets, Bo Hines leading crypto policy efforts, and Paul Atkins, recently confirmed as SEC Chair—all known for strongly pro-crypto positions. The administration has already dismantled enforcement-heavy regulatory approaches, disbanded dedicated crypto enforcement units, and shifted focus away from industry oversight. This political environment, while celebrated by crypto enthusiasts, creates a dangerous regulatory vacuum precisely when market volatility demands more vigilance, not less.

While there are individual investors, early crypto adopters, day traders and normies with wallets and experience, the fastest growing investor segment is institutional.

Current estimates suggest institutions, governments, and corporations collectively hold nearly 15% of the total Bitcoin supply, with $108 billion allocated to Bitcoin exchange-traded funds (ETF) alone. Nearly half (47%) of traditional hedge funds now maintain cryptocurrency exposure, a substantial increase from 29% in 2023.

The trend shows no signs of slowing—a January 2025 survey found 86% of institutional investors either have cryptocurrency exposure or plan to allocate in 2025, with 59% intending to commit over 5% of their assets under management to cryptocurrencies. American institutions and hedge funds lead this allocation surge.

This institutional presence, coupled with an administration populated by crypto enthusiasts, creates a perfect storm of risk. Hedge funds, which account for nearly half of institutional crypto exposure, typically operate through leverage—using borrowed capital to amplify potential returns. This amplification works both ways, potentially accelerating market crashes when positions need unwinding during economic stress. With regulatory guardrails weakening and institutional leverage growing, the systemic risks have never been greater.

With the total cryptocurrency market capitalization reaching $3.7 trillion in December 2024 and 83% of institutional investors planning to increase their crypto holdings in 2025, the potential impact of a coordinated institutional retreat from digital assets during recession could trigger unprecedented volatility—volatility that will likely face minimal regulatory response from an administration ideologically committed to laissez-faire cryptocurrency policies.

The warning lights are on. There’s smoke coming out of the left engine. Seat backs and tray tables are in the upright position and the flight attendant just double buckled and turned on the fasten seat belt sign.

Joe Kennedy. Vincent Kosuga. Bernie Madoff. John Mack. They’d be moving their money offshore, buying U.S. treasuries and holding cash. But they’d be telling you to buy Bitcoin. They wouldn’t be betting on it themselves. They’d be betting on you to bet on it because they would have staked a position on the downside. Just like John Mack did with crude oil. He didn’t just make it on the way up, he made it on the way down as well. Because he was behind it all along.

If you mine Bitcoin. Have at it. You’re Daniel Plainview at the bottom of the well he dug by himself. But I don’t care if it’s oil, currency, crypto or onions. Doesn’t matter to the speculators because they’re not betting on the instrument. They’re betting on you.

Here endeth the lesson.