Bitcoin treasury companies, MicroStrategy and institutional demand

Transcript

Digital asset treasury companies are taking over Wall Street. There are already hundreds of them with more launching every day. Each one is focused on a different asset, different playbook, and the market seems to be changing daily. Why is all of this happening? How does it fit into the overall macro picture? And most importantly, what do investors need to know in order to navigate all this safely? Hello and welcome to Milk Road Macro, the podcast that wonders how much Bitcoin Sailor needs before he rebrands to macro strategy. I'm your host, John Gill, and today is Wednesday, August 13th, and we are joined today by Charles Edwards, founder of Caprioli Investments, a systematic absolute macro return hedge fund specializing in Bitcoin and digital assets. Charles is renowned for finding unique insights from quantitative models that integrate

onchain metrics, macroeconomic signals, and technical indicators all into one to evaluate Bitcoin's value and market cycles, and a lot more than that. Charles is one of the best guys in the world to talk to if you're trying to understand what's going on with digital asset treasury companies. So, if that sounds good to you, make sure you like, subscribe, share this episode with someone who would enjoy it. For all of you YouTube listeners, please subscribe, hit that like button, drop a comment below, and if you're one of our podcast listeners, a fivestar rating or review would mean the world to us. So, it really helps us grow, helps us bring this content to as many great people as possible. Today's episode is brought to you by Figure Markets. Grow your cash like a bank. No lockups, just real returns. And Nexo, the platform that grows your capital without locking it

away. And without further ado, thank you so much for joining us. Charles Edwards, how are you today, sir? >> Going great, John. Good to be here. And uh alltime high for Bitcoin as well, right? I think as we're recording. >> Yeah. >> Yeah. >> Yeah. I was going to say I wanted to be checking the price during this, but I wanted to focus, but I'm not Bitcoin. >> Yeah. >> Yeah. Well, it feels good to be knocking on alltime highs. Yeah. >> Um All right. Well, let's let's take this back from alltime highs. Uh it's 5 years ago, I believe this week actually, that m Micro Strategy, I almost called it macro strategy, uh announced their first Bitcoin purchase. Uh and now there are over 150 different publicly traded companies that have Bitcoin on their balance sheets in some capacity. You've been monitoring this very closely,

paying attention to the the market as it's grown. Why is this such a popular investment vehicle right now and and what's driving all of this? Yeah, look, I think obviously there's a lot of there's a big story here, but Michael Sailor and his and the strategy company he manages obviously has been a huge story for the last 5 years. He obviously was very innovative in jumping in on this early big believer in Bitcoin, adopting it and utilizing traditional finance markets to effectively arbitrage acquiring capital at low cost or no cost in some cases and then pumping that into Bitcoin which historically has a you know 30 to 40% annualized return versus debt markets which might be you know 5

to 10% in the long run. So, he's done that and filled the balance sheet with Bitcoin and Bitcoin's gone up a lot and that and his stock has obviously formed exceptionally as everyone knows um better than uh all or most of the S&P 500, right? So, people have caught on to that and I think, you know, most people thought it would fail. You know, he was underwater deeply in 2022 when FDX went down, but he stayed strong to his strategy. He he proved that he didn't get liquidated as many thought he would and it's outperformed, you know, almost everything in that horizon in the equity space.

And so that success track record of, you know, four, five plus years combined with the massive amount of regulatory changes we've seen, I think that's probably the key driver here actually in the last 12 months. you know, under the Trump admin, but support of of Bitcoin adoption at the the state level, the Genius Act, you know, the the the end of choke point.2, the banking rule, you know, where banks were just basically closed to crypto for several years um between 2022 and 2024. There's, you know, five or six major uh, you know, legislative policy changes that have occurred which have made institutions go, okay, it's here to stay. We trust this as in Bitcoin generally. we want to have a piece of the pie and then they

see the success of Mark Strategy and they just want to copy that and obviously that's seen in the last year alone we went from 60 treasury companies and back then really 60 were tiny and negligible and not really doing a lot and they were mostly miners to now over 150 actively buying Bitcoin every day. >> Gotcha. Yeah, I think it's been really interesting to see this grow. Um, as Sailor said himself, you know, his convertible bonds, his equities have been the most interesting thing on Wall Street, and there's just been a lot of attention and economic energy going into this. How do we see this or how do you see this playing out going forward? Do you think that there's going to continue to be such a thing as a digital asset treasury company? Like, is this niche going to continue to exist or are we

going to move to a paradigm where just all companies and individuals are in some way holding digital assets and we just think of them as companies? >> Good question. I think it depends on the time horizon. I think near-term we're in a bit of a, you know, if you will, a hype cycle of treasury companies. What I mean by that is we're, yeah, we can go through some charts, but the the the relentless growth rate on the number of Treasury companies, the amount they're buying, you know, they've gone from, you know, 5 to 10% of to of total Bitcoin supply in about a year. You know, these growth rates are unlikely to be, you know, long-term. you know, if you're the you now got 150 public companies around the world buying Bitcoin,

uh, and that's oftentimes their only strategy. If we fast forward and we've got three, four, 500,000, if you will, at some point the incremental new treasury company is going to find it very hard to compete with the other 150, 500,000 companies in terms of their unique offerings. I think that at at that some point, you have to have more than just we're going to buy Bitcoin. You have to have some something unique. could be unique access access to capital markets. It could just be your regular business as a company is is really compelling. So the just pure Bitcoin treasury company um cycle if you will I think is going to be relatively short term. Could be a year, could be two. I I can't put a number on it but there's

going to be some form of saturation I think where you know how do you differentiate yourself? It's going to be very hard. So that's near-term. So that's you know I think call it 6 12 months we've got really great upside opportunity in the market because they're buying we can look at some charts in this but they're these companies are buying upwards of you know 5 600% of the daily Bitcoin supply so we have a huge supply demand imbalance which is squeezing price up and every time that happens you know over the next 3 6 months price usually goes up over 100% on average so there's huge you know flywheel effects driving that but as I said at some point we're going to saturation I think and then we may see something fall back in the opposite direction. Um but then if we fast

forward even further into the future the question really comes down to you know the value of money and and if you think Bitcoin is going to be successful or not. So if you fast forward 10, 20 years, do you think Bitcoin is going to achieve its goals of being whether that be store of value or a cash monetary system as Satoshi envisioned? And if you do, then I think the answer is yes. Almost every company in the world is going to have at least some exposure to Bitcoin. Um so that that's kind of like the philosophical question of the the long run success of Bitcoin as well.

>> Yeah, I think I agree with that. I think uh the way Sailor himself I think articulated this was like Bitcoin is either going to zero or it's going to a million and I think every investor kind of has to decide for themselves uh which one they believe and then kind of act accordingly. Um I want to get your thoughts on some critics. I I also want to dive into some some some quant and quantitative analysis and charts. But before we get into that I want to hear your thoughts on some of these criticisms about um digital asset treasure companies specifically about Micro Strategy. Earlier this week, the What Bitcoin Did podcast put out a debate between uh Lynn Alden, who's kind of a personal hero, uh and Andy Constson, who is another great uh thought leader in the space from a macro perspective, but they were debating

something. The the topic was is MSTR, Micro Strategy stock, is it a Ponzi? Last month there was another debate. Um Jim Chanos has been, you know, talking about why he's so heavily short on Micro Strategy. Uh and Michael Sailor when he's asked about this says that some people say it's a Ponzi. I would call it an economy. Uh so he's compared it to real estate in Manhattan. Why are so many people bearish on these treasury companies specifically on Micro Strategy? Are they right? Are they missing something? Or is it just a difference of opinion about is Bitcoin going to zero or a million?

>> Yeah. Like right now I see it more as an the whole market ecosystem in terms of treasury companies as more of an arbitrage where so many um so many people in the population still don't understand Bitcoin, right? like it's obviously much more adopted now, but you know what what's the number? Was it 10 20% are dieh hard believers in Bitcoin and they've spent the hours it could be 100 hours or whatever it is investigating it and the deeper they've read they realize yeah this is going to change the world and and it's pretty rare I think sailor said this four or five years ago if you actually spend 10 hours whatever it may be but to deeply investigate Bitcoin you know read a book on it read the white paper it's

pretty rare you come away and go oh yeah this is going to go to zero if almost everyone realizes yeah this is the, you know, the money we were meant to have it, you know, incorruptible, you know, distributed, cap supply, all that sort of stuff. So, um, I think that's kind of the arbitrage right now is you've got, you know, call it 70 80% of the world don't get it yet and they're operating on the traditional finance markets where, you know, debt costs, you know, in the range of 0 to 10%, 5% a year. Uh sometimes if you structure it well as market strategy has that you know you pay no interest on your debt um and you have some kind of convertible option but if they'd actually spent the time to understand

what this what this you know what what Bitcoin is and how it's performed in the past is it is still the best performing asset class every year pretty much and it's often times still ignored for that and just how it's now escalating to the government level implemented you know policies are being implemented regulations are being struck around at every big financial asset manager in the world is involved in it. The big banks are now involved in it. And even you, you know, right a couple years and they were like saying it's a scam or it's, you know, it's used for crime, but yet all these companies, all the brand name companies are in the space now. So, it's what they do, not what they say. So I think it's it's the reason this strategy has done so well for Micro Strategy um

or strategy now and and all these other treasury companies is because it's an arbitrage of the lack of understanding of Bitcoin and and and leveraging of those lowcost markets versus an understanding Bitcoin and how it has outperformed everything. So I think that's part of the journey is that at some point you know might be 40 or 50% of the world is on board with Bitcoin. They're holding Bitcoin. and they're invested in it, you're not going to get these massive outperformance of these treasury companies probably because again you're going to have market saturation but also just the returns of Bitcoin with time will decay when it's a you know 5 1020 trillion asset.

>> I really appreciate the insight there. I think uh what comes up for me when you say that is uh it's not what you don't know that kills you. It's what you know for sure that isn't so. Yeah. And I think there are a lot of people right now in the market who have convinced themselves that they understand Bitcoin and are still on that journey. Um, I want to move now, I have a lot more questions about this, but I want to move now to something you're a specialist on, uh, which is quantitative analysis, datadriven analysis. You've recently published a very powerful tool that offers investors a lot of insights and analytics on Bitcoin Treasury companies. Uh I'd love you to tell us a little bit about this, walk us through it and tell us like what have been some of the most important takeaways you've uh derived

from this analysis so far because I think you're leading the industry on this right now. >> Yeah. So um so Cap really you know in short we we've been you know using quantitative models to manage Bitcoin digital assets for the last six years. We've published a lot of them. Many of you might know hash ribbons and many others have done um and our charts being used across many platforms. So we decided to, you know, make our own professional platform with our proprietary metrics, but also some others that aren't necessarily ours, but we like and we find high signals. So we're trying to consolidate this to be just a select set of metrics that are really valuable for navigating the market. And then about two weeks ago, we we launched a suite of um Bitcoin

Treasury company metrics because basically for all the reasons we just talked about and the massive demand versus supply imbalance that these companies are causing, I think this is probably the most important data point to be monitoring this cycle. Um this cycle being the next one to two years probably the institutional demand is the the key factor here. So if we just look at um institutional holdings here as a percentage market, this is probably my my favorite chart um at the moment for these companies as a as a high level. Uh wrong one, this one here, buying u because this tracks there's a lot of lines here, so I'll just pause to digest it. But the blue line is basically just the sum of all institutional buying of

Bitcoin every day as a percentage of market cap. So you can see that right now they're buying about 0.016% of the market cap every day and that's com combination of ETFs and the treasury companies in in orange and you can see the orange is a big driver of the recent spikes up in this metric. But what's what's really cool about this is the red line is just the amount of Bitcoin it's mined every day from from Bitcoin miners. And every time the blue line has gone above the red line, so institutions are buying more than is available from miners, we see a massive supply demand imbalance and price basically goes through the roof. So we saw that and this bottom oscillator here just tracks the difference between the the red and

the blue line. So when it's green, we got more institutional demand than there is supply. And so you know, we saw Bitcoin go from 10k to 60k in 2020. uh more recently we saw in 2024 went from 40k to to 75k uh under the same conditions and uh you know 40 50k here to 100k and this all happens in very short stints. You can see it's you know 1 to 3 months perhaps and then again uh a couple months ago we went from 80k to now 120k. So, you know, huge moves are typically 60 70% plus in the last year of three moves of that.

And then back in 2020, it was like 150% or so. So, you know, the average move is around is is over 100% if you average those those those moves. So, we're currently in a period where the demand is 600% higher than the supply. So, which is massive. So, you know, anything over two to 300% you've got a a huge imbalance. And as long as those conditions hold, you can expect price to go much higher. So for me, this is the most important data point really to be monitoring this cycle because as long as that imbalances there, I just think we continue to go higher. Um, if it collapses, that's probably a very big riskoff uh warning to consider as it has done for short periods um already in the

last 12 months and that's been in line with some dips we've had. So you know and and you have to also remember these are this is a relatively small segment of the market still. It doesn't consider retail and all the other OG Bitcoin holders. They do you know the institutions do represent 11% of market cap now which is massive. Um you know up from 5% a year and a half ago. So >> it is the most you know the biggest you know for me it's the biggest data point which is driving appreciation and acquisition of Bitcoin >> and it's the most important data point to monitor. So that's why we built this suite of metrics. Um, and there's a lot here we could dive into that help with navigating the risk management at an aggregate level. Why do people invest in real estate? Because it spits off cash

flow. But I'm not here to manage rental properties. That's why I'm looking at Figure Markets. Their new democratized prime product backs your money with real cash flowing assets and returns up to 9% APY. It's the first real world asset borrow lend pool built for everyone, not just institutions. Ready to lend like a bank and get more than the 5% A is offering you, download the Figure Markets app today and get 9% on your idol funds. Go to milkroad.com/figure markets. If long meetings and judgmental bankers are your thing, Nexo is probably not. Nexo is a premier wealth platform built for people who value their time and money. It's built for people who

have idle cash lying around and want it to grow fast. Whether it's Bitcoin, Ethereum, or even Forex pegged assets like USDT or USDC, Nexo offers up to 14% annual interest and access to cryptobacked credit in under 24 hours. Your assets need a platform built for growth. Join Nexo. >> Yeah. So, this is really helpful, really powerful. I think a lot of investors this cycle have been looking for indicators to sort of help them get their minds around the changing market dynamics, the changing market participants, um, and to really kind of like get a look at like, okay, are we going up? Is there more buying pressure?

Where is it coming from? So, this for me was really helpful, um, to to get a look at this. Um, I want to go back to a couple things you said here, but you said as long as those circumstances don't change, in other words, as long as demand is outstripping new supply by 5 600%. um you know obviously the price is going to continue to go higher as any any first year economist can kind of tell you right um what in your mind from a macro perspective you know this is milk road macro what in your mind from a macro perspective is driving this institutional demand because you know the chart isn't always at five or 600% it seems to be it's materialized you know in more recent days what are some of the key like things feeding into keeping that high like that keeping that

demand so strong and how do you see that potentially changing in one way or another or saying being sustained like how does that play out? >> Yeah, I think the main factors are what we've already touched on. So you had the huge success story market strategy the last four or five years where they've outperformed everything um they're arbiting this you know 30 to 40% compound annual growth rate uh or kagger for for Bitcoin versus the the low cost of the debt. They've proven it's sustainable long term because they survive these p you know this 80% draw down. So people that can replicate that can are hoping to see something comparable or or near the performance of Micro Strategy. And a lot of the companies adopting this method are ones

that have been in a big decline typically or or have not been performing well in their own industry for the last few years and they see this as an opportunity to add shareholder value. So that's the the one key driving part um factor of interest. And then it's also just a narrative and a story that's come to its time in the sun. And a big factor for that is the other elements you touch on the legal and policy changes that have happened under Trump. So our company for example was debanked three times for no reason between 2022 and 2024 as part of choke point 2.0 where the Biden admin was cutting off all banking rails. So the capital was just not able to flow into this industry unless you're a tier one like Coinbase.

It was basically stopped. So there you know this model would never have worked in that environment which is you know also where you see you know a flat line in the you know the institutional growth and share of market through that period as well. Then you have you know the US has added a bitcoin treasury. Uh you had the genius act enabling stable coins. You've the the US government and white house has officially killed choke.2.0 And you've got in the last week the 401k policy which allows over 10 trillion of capital in the US to now actively look at and consider buying crypto. You have huge tailwind legislative policy which is giving comfort institutions that okay we can buy this asset we can you know

take part in this and we see a future in this and it's you know there's a lot more legal certainty that things will be robust into the future. So that's the main that that's probably 80 90% of the whole picture to be honest. The other factor you obviously have is liquidity right into the market. So the global money supply for example has been in a massive uptrend um through basically all history but um uh especially so it's the blue line here versus the S&P 500 but it's you know we're atund 12 trillion in global money in US dollar value and especially in the last you know 3 4 years it's gone up about 20 trillion as you can see 90 95 trillion in 2022 when Bitcoin bottom so there's a

strong correlation here with Bitcoin as well. Uh you can look at year-on-year growth of that. So how it's changed over the last year. And if we change this to Bitcoin, we can see a pretty clear relationship that when the year-on-year money supply growth rate is going up, Bitcoin tends to go up. Um and when it's going down, um Bitcoin has more trouble. So just very quickly, you know, the big run up 2017, there's a correlation between high money supply growth rate and then it starts to decline and when it's a negative territory, you know, not a lot happens for Bitcoin. Uh same thing in 2020 and then voila, we've had it kick off in the last year as well. So in

the last 12 months, we've seen a big influx of positive capital across the world and that is just basically firepower for Bitcoin to go higher as long as those conditions exist. So that's a big um you know supporting element but I think the main parts of this story are the success of micro strategy in an overarching environment where fiat money is just devaluing every year. Gotcha. So it's a combination of narrative of market success of uh rising liquidity and you know a bunch of fundamental you know let's say regulatory legislative supporting things welcoming back institutional capital into the space. Um, very helpful. Yeah, I think so. A question I had looking at

this is like, you know, I I agree with your analysis there. I think a lot of the price action is following narrative here and fundamental changes that don't really have much to do with with Bitcoin. It's all like exogenous things. Um, in in this situation, I've heard a lot of people say the only analytics you really need then for a digital asset treasury company or Bitcoin treasury company is what is their MNAV, right? like what's the premium they're change trading at to their value of the underlying Bitcoin that they have. Um so beyond that, a lot of people are kind of dismissive of analytics on these Bitcoin treasury companies. Obviously, you've gotten a lot deeper than that. Um tell us about like what people are missing if that's the only picture that they're looking at and and why you think there's value in digging deeper into analytics

for these treasury companies. >> Yeah, so MNAV's definitely useful. So those don't know, it's basically the market cap or sometimes the enterprise value. So basically the net value of the company um divided by the total value of the bitcoin it holds. So if it's um if it's one if mnav is one the they hold a company holds exactly as much bitcoin as the company is worth. So this can be really useful because if it's a lot more than one you could argue maybe the company's over overvalued if their only business is a bitcoin treasury company. Um, if it's less than one, you could say, okay, they own, for example, you know, a billion dollars Bitcoin, but the company's only worth 500 million.

Maybe it's undervalued and the price the company should appreciate to match the liquidation value of that Bitcoin. So, MNAV is really useful in that regard and you can use it, you know, to to track over under value and and different trend relationships. Um, but there's also a lot of other valuable data. So, we've got this analytics page here with 150 different assets. So, just looking at Micro Strategy, for example, there's a lot of charts, so I'll probably delete some as we go. We got market cap here. You can track. I'll just remove it so there's more space. You can see the company treasury holdings. Um, you can see how much they're buying every day.

This is the green lines here, the green bar charts. Another big factor apart from MNAV, which we are tracking down here in the blue. So, the MNAV mark strategy is 1.5. um that's market cap mnav uh is the yield. So this here the green line is the average yield that these companies generate on their Bitcoin portfolio over the last several purchases and it demonstrates how quickly they're stacking their Bitcoin. So you also have descriptions of all these metrics here for those who want to have a look later. It's a daily growth rate in their Bitcoin holdings. So at the moment strategy is growing their Bitcoin by approximately 0.2% 2% every day. So in a week um you know they're

they're gaining you know about 1% of their Bitcoin. So people look at that and say a high growth rate can justify a high MNAV because they're going to be able to you know grow their stack quicker than you know and to to achieve effectively a fair valuation if you will. So even though their MNAV's 1.5 because of their high stacking rate you can calculate what's called a day's cover metric here and this says that it's 233 at the moment. So in 230 days so less than a year um Micro Strategy is expected at the current Bitcoin stacking rate growth rate here to reduce their MNAV to one. That's all assuming the price of the asset doesn't move, which

of course it will, but it's saying that the their market cap today is fully justified by their growth rate in their Bitcoin or their recent purchases within 230 days. So, this is also a really useful metric because you can then rank companies by the lowest days cover or or highest yield to see which ones are expected to um grow their Bitcoin stack quickly and surpass their current market cap. And so you can dive into the analytics for each each asset. Here we also have price sensitivity uh which tracks how the share price has reacted to uh certain buys over time. And when it's green it's generally you know you get good price appreciation. So that can be a useful filter as well to look at

here for micro strategy. And then you can um you know cluster and and group the assets into different criterias. So we've got many different options here. One I quite like um taking inspiration from Warren Buffett is the cigar butts chart. This is basically identifying all of the current uh treasury companies with an MNAV between zero and one. So in theory, if you value it just on their market cap, they're undervalued because their Bitcoin is worth more than their company at the moment in terms of market cap. Um, we'll also be adding debt metrics to this in the future to to to help get some more insights, but um, >> Gotcha.

>> Yeah. So, that's there's different ways of slicing and dicing it, and there's days cover for the same thing as well. >> Yeah. I think that's what I wanted to get across to the audience is that there's a lot more to these companies than just one number, the MNAV, right? there's there's a lot more going on in in terms of how they're accumulating more of the asset, how they're deploying it, and each one of these companies has a different strategy, to use a pun, uh a different strategy for how they want to, you know, outperform and differentiate themselves in the market. Um, so I think yeah, it's it's a mistake to think that these are ponzies, that it's going away. Um, and we'll we'll have to kind of see, you know, how long the demand lasts and and who are those survivors, winners and losers. Um but yeah, I just wanted to

like kind of like highlight that for the audience is there's much more in the data in the analytics um that that can inform an investor about these treasury companies other than just the MNAV. Um we've talked a lot about Bitcoin treasury companies. Um obviously there's a huge universe, a galaxy really of other digital asset treasury companies. Ethereum is getting a lot of attention right now, heat in the market. Um Tom Lee is aiming to get 5% of the Ethereum supply. Are you watching any of these other treasury companies outside of Bitcoin treasury companies? Do you think you're going to expand these analytics to to capture those as well or like what's your view on that right now?

>> Yeah, so um short answer yes. So we only added the treasury companies on the website um in the last couple weeks uh for Bitcoin. We'll probably add Ethereum and others later. Um, but I still think Bitcoin is if you're looking at it from a macro perspective on on the opportunity and risk in the asset class of crypto generally the Bitcoin one's the most important because if they turn for the worse or they go turn even more positive that is going to be the driving factor of all capital in this asset class. So if tomorrow Bitcoin regular companies would decide to start unloading and we have different metrics to track the buy sell ratio um and it can flag that quite early on on the chart platform. Uh it wouldn't really

matter what the ETH companies are doing I don't think because at some point it's all going to buckle. A lot of what you learn from navigating Bitcoin and crypto through the years is that it's capital flows downstream from the biggest market cap assets that that also applies for equities and bonds. So bonds drive the equities market, equities drive crypto in many cases or gold, it depends which you know which period you're in. And then uh Bitcoin drives altcoin performance etc. So you don't get a good alt market until Bitcoin is in is in a great strength and breakout like it is today. So that's the kind of aggregate picture. So Bitcoin one metrics here are the most important. That said, Ethereum and others are obviously seeing quite a

lot of this as a a new movement as well. And it's not just Ethereum. It's it's the L2s and other side chains and all sorts of things. So, >> Right. Right. Yeah. There's there's a lot of them, a lot of people deploying this uh this digital asset treasury company for a lot of different digital assets. To that question, how do you think about just, you know, personally or or dealing with investors? How do you frame the difference between getting an exposure to a digital asset or to a company that's treasuring that digital asset? Right? So like you could do this for Bitcoin, Ethereum, many others. But how do you think about differentiating those and what are some of the things you think are the key things to pay attention to if you're trying to make that choice?

>> I think it depends what your goals are and level of you're involved in this, right? If you're deeply analyzing the analytics of these companies, you can find some really, you know, some gold nuggets. But if you're just interested in exposure to Bitcoin or ETH or what have you, you're probably better off going to the core asset and getting involved there because there is probably, you know, there's more esoteric risks with these companies. You have to think about their debt. You have to think about their core business. All sorts of different factors which, you know, will they keep the strategy longterm. So there's lots of different questions you have to consider. Whereas if you if you can see that for Ethereum for example, it's in the last I think 6 weeks gone from 5 to 8% or or even more.

It's basically doubled the market cap share these treasury companies own. Um so it's growing extraordinarily fast and it's a massive amount of buyer pressure which is a really big tailwind for Ethereum. You know, the simp the easiest option is to identify that and say, "Okay, we're seeing massive out stripping demand versus supply for Ethereum and it's even higher than Bitcoin right now. Maybe I should you should if you're interested consider just allocating some Ethereum and then changing um your allocation when that that when the when the data changes.

That's the easiest way of doing it and lower risk in terms of you can just look at the aggregate metrics. um you can have certainty of what Ethereum you know the Ethereum isn't gonna unlike a treasury company is not going to necessarily disappear overnight and and finally um yeah it's it's just it's a lower risk strategy for from for yeah for those reasons basically. Yeah. >> Yeah. So every every investor has to evaluate this for themselves and to understand the the specific digital asset treasury company they're interested in the asset. Um so yeah okay that makes sense there.

>> The only thing I would add to that was the liquidity. Um you have much better liquidity in crypto 247. Uh whereas if you buy a treasury company some of them some of them are really small market cap or they're just trading eight or nine hours 5 days a week. Whereas you can very quickly and easily manage a risk if you're trading 24/7. That's another it's easy to overlook, but it's a big factor in this market which moves quickly. >> Yeah. And it matters a lot when it does matter. Uh I want to move now to a macro and the the larger market cycle for Bitcoin. Um because I think you've recently made a lot of comments on this that have been fascinating and compelling for me. Last week, um, I had a great interview with Michael Howell,

the godfather of global liquidity, uh, from Crossber Capital about the current global liquidity cycle. Michael is predicting that this cycle is going to peak sometime around Q1 of 2026. For any audience members who are listening who missed that interview, I recommend you go back, check that out. Uh, Michael laid that out in great detail. Uh, Bitcoin's price, generally speaking, is going to lag the the liquidity cycle two to three months. That's what we've kind of seen in in recent uh recent history at least. um that would put the the peak of Bitcoin sometime in the first half of 2026. Do you agree with this forecast? Do you think we're going to get this sort of right translated extended Bitcoin cycle or or do you think this will top out more in the fall of 2025 or go even longer than that? Like what's your what's your view on this right now?

>> Yeah. So, I I wouldn't put a date on it like he has because I think that's impossible to forecast. But, um I do think it's a right translated cycle for a few reasons. I wrote a recent newsletter on it's also on the website um for those who want to look at it with the four or five main points of why I think it's a right translated cycle. One is the what we've talked about a lot today the regulatory things that have only happened in the last 6 months whereas in the preceding two years it was a very tough environment for bitcoin and that wasn't necessarily the case in prior cycles. Uh the other big factor is the treasury company flywheel has only really started or really gone exponential last few months and as long as demand strips supply you can't really expect a bare market. You know that

could change in a week and we'll review the position accordingly. But right now there's a there's big driving factors for a right translated cycle. And then you had liquidity um cycles like we this man's talking about and what we showed in the on screen. It's just gone positive quite late in the cycle and every time it's been positive, Bitcoin's had great performance. So, I'm a big believer that the best of the cycle could well be ahead of us in the next months. I don't want to say 6 months or 2 years because this could if it's, you know, Bitcoin's moving a lot slower and more efficiently these days. We haven't had any kind of um parabolic phase like we haven't had in prior cycles. So this could continue for a long time, but it

could also change very quickly if you know liquidity was to dry up on the macro scale across the world or if treasury companies were to get saturation like we talked about and potentially start unwinding positions. So there's many factors to monitor. So I kind of tracking this whole cycle generally on a daily basis based on the data available. And right now it tells me the outlook is extremely positive. But I know from this industry things can change quickly and I'll be open-minded to adapting that view at any time. But yeah, my base case if I had to put a number on it is we've got at least probably six months of of really strong opportunity. Um but I would want to, you know, review that on a day-to-day basis, >> right? Yeah, I think that makes a lot of

sense. That's kind of my my attitude about this, too. I can definitely see a case for a more extended bull run. You know, as you said, a right translated cycle, but I could also see a scenario where we get, you know, this parabolic market exuberance in the fall where everybody piles in and thinks the top is never going to come and we get a blowoff top in the fall, you know. So, it it really is uh follow the market day by day and be open-minded, right? Don't be dogmatic about what must happen. Um, so I appreciate that that insight and that outlook for the audience. Um, do you think that the the four-year cycles for Bitcoin are dead? I I think that there's been a lot of debate about this. Some people are saying that, you know, the cycles are going to continue. It's just

that what's driving them has changed. Some people say it's a thing of the past and it's just going to be up only forever. Like, what are your thoughts on that? >> Yeah, I I think I spoke um in the last recording with you guys a while back on my thoughts on this, but um >> this is why I asked about it. >> Um yeah, it's it's a hot topic. It's a good one. I like being agile and flexible and monitoring data dayto-day like you just said is is just so important. I think that being dogmatic is a real big risk factor in this industry that you know you see people make extreme amounts of wealth in a short period and then lose it all or lose a vast majority of it. Give up on Bitcoin and crypto and just exit. That's happened many times in prior cycles and

then they've missed all the long-term opportunities. So, you got to be flexible. You got to manage your risk and look at this data day to day. So whatever where you project now is interesting and maybe a guy a useful guide, but it you should monitor this stuff and understand it yourself. Um that's kind of the first thing I put out there. Yeah. Is the cycle dead? So I I think the yeah the impact of the cycle is more or less dead. So historically the the bitcoin cycle was driven by bitcoin miners and they they had huge impact on supply um you know in day one they were all of the supply available and that's now dropped today to less than 1% of you know bitcoin has sorry the annual growth

rate of bitcoin supply is less than 1% today so less than half gold so that occurred in the last h havinging last year when the um when supply rate dropped in half and since then For me, that's been the key um the key change is that the impact in supply is so low, it's now the hardest asset with certainty in the world. Um so we we have clear visibility of what's ahead. We know the miners don't have a great impact to supply. They're not going to be responsible for a lot of the draw downs and and reallocation of capital that we saw through minor capitulations in all the prior cycles.

So that's gone. Uh that's it. There are still other factors which can drive a cyclical dynamic. Uh probably the biggest one is just reflexivity. If enough of us Bitcoin OGs or uh or traders and investors think um there's a cycle, then they'll act on that and they're investing and they're buying and selling and they might take some risk off and that can in in in its own way drive a new cycle, right? So I I would never eliminate it completely um because markets often move by that psychology and sentiment. And then there's also a whole sway of data we can look at onchain data MV uh dynamic range NBT for example which track the relative value

of Bitcoin to when it was purchased or the relative value of Bitcoin to its market transactions. So if that ever goes exponential or hits a euphoric phase um as it has at the top of all prior cycles, I'd be much more open to okay on a riskadjusted basis this is making less sense um and the risk for a cycle top is is growing, right? So you can kind of wait and stack all these metrics to help get a picture of where you are in a cycle. Right now it's super healthy on the onchain space, on the sentiment space. So, I'm I'm open-minded for, you know, less volatility, less draw downs, and kind of a slower, more efficient grind up as we've seen the last couple of years. Um, that said, a

big risk factor here is the treasury companies. I think that while they're the biggest opportunity this cycle in terms of price movements up, they're also a big risk factor in a downward spiral if they decide to unload. So, that could be from a few reasons. It could be they take on too much debt, too much risk and they can't sustain it. It could be triggered by a pullback in Bitcoin which puts them underwater and shareholders are asking questions. It could be supply saturation because there just too many of them and they can't compete and they just start to unwind and what starts to trickle could very quickly become uh you know a flowing river of capital exiting. So I I I that's why we're tracking a lot of this data in great depth and granularity and

it's monitored 24/7 because it's it's it's amazing for the upside opportunity but it's also a risk factor to consider um especially later stages. So yeah each cycle we've seen less draw down. So it you know there were 90 95% and then the last cycle was just under 80% and it's consistently less and less. I think we can expect that to continue maybe the next peak cycle draw down 60% for example I can't put a number on it but there's for all these reasons that we just discussed I think we shouldn't expect 80% plus um you know pending some new information or overlever in the whole market across

treasury companies for example so it's just really important to say to to be dynamic monitor the data and not be dogmatic on when things should happen >> right yeah I think that that makes a lot of sense And I think that this is sort of the perspective I wanted to kind of bring to the audience right now is like not to get dogmatic, stay open-minded, keep watching the data, keep watching the tape. Another thing I wanted to ask about before we we we're coming up on time here, so we'll have to wrap soon, but I wanted to ask about this difference in this cycle of institutional buying pressure, institutional market participants versus retail. I think retail is still here, but they're largely in other assets in the digital asset space, whereas institutions have been predominantly the ones driving the Bitcoin adoption.

I don't think we've really seen how they respond in a bare market, right? Like we don't know if they plan to hodddle through that. We don't know if they're going to, like you said, first a trickle, then a flood of people stampeding out of it, you know, just kind of like we've seen with retail, but institutions doing that. Like what what are your thoughts on this? Do you think that how do you see that behavior being different? Do you think retail eventually does come into to Bitcoin and and support those institutions or just like what are your thoughts on this divergence between retail and institutions right now? Yeah, it's it's really fascinating how retail seems to be kind of missing out a bit on this cycle. I think there's overlap in how they'll both they both behave. So, while so many institutions are very dogmatic

and like this is our strategy now we're going to do this. I think when they're 20 30 40% underwater and their shareholders are all like what's going on let's kick out the CEO let's do XY Z that's going to change pretty quickly. So, you know, there there's going to be quite a few that will at some point give up the strategy. In the long run, as we've discussed earlier, I think more and more companies will do this strategy. So, I'm not bearish on it at all, but it just depends on the horizon and you have to accept that people will be under a lot of pressure with this strategy as well. So, that's one element. The other is just institutions in general tend to have a longer term holding periods and investment cycles.

So it will take large companies, funds, pensions, you know, multi-billion dollar entities like many many months to make a sizable investment in anything. Uh often multiple quarters. So things go through investment committees, due diligence, uh they're monitored for long periods of time. Then they might go into board meetings and then they might review it and say, "Okay, let's discuss it next meeting and see how it tracks." you know, so these things can take 6 12 months to action sometimes, especially if it's a big change like becoming a Bitcoin treasury company or not that it could take years, right? So they're less likely to puke like retail will and to sell at 4:00 a.m. in the middle of the night on a on a per exchange. So that there's definitely a lot of that's all

in itself is a big reason why we probably won't get the same magnitude of draw down, the same just absolute liquidation cycles. You know, we saw in 2020 you know, Bitcoin went down like 50 60% in like 24 hours because of liquidations effectively driven by BitMEX. So those days are gone. Um, and that really protects the downside quite a bit, but we shouldn't expect that they won't unload at certain times. So I kind of view institutions in this space as long-term holders in Bitcoin in prior cycle. So you can track long-term holders based on how long they've held coins in their wallet. And you can see they behave generally very smart. They increase their holdings in the bare markets and they sell down into profit

nearer at the cycle tops. And that's occurred like clockwork every cycle. We're seeing it this cycle too. Uniquely this cycle u we're starting to see growth in long-term holders in the last 3 to 6 months. Again, basically driven by these treasury companies. So I view them as basically a whole new audience of long-term holders which have just jumped into the market represent more than 10% of the market now and it's growing every day. So that's extremely bullish longterm and it's will smooth out a lot of the downside volatility even further. Um so long answer but basically uh that yeah that that those entities will be more long-term thinking and limit downside risk quite a lot and then at some point yeah retail will jump

back in of course I think um I think we're probably entering that horizon now above 120k we're double almost double the last cycle's alltime high and you know these headlines and what's happening at institutional level they can't be ignored forever and people are going to probably jump back in at some Gotcha. Well, the the risk of puking, I guess, is lower now, and we're hoping that these institutions are are hodlers. Um, but yeah, there's always a risk somebody pukes sometimes. Um, Charles, I really appreciate the insight. I the the perspective. Um and I think you know as retail does come back in if if they are coming back in and and this is one of their entry points. I really think this is a helpful perspective about you know having an analytical and fundamentals driven view being open-minded and and

not dogmatic about your positions about about what must happen but being open to what does happen and what can happen. Uh where can we send people to find more of you and your work online? >> Yeah, sure. So I'm pretty active on Twitter or XCriol.io um where I share charts and data and insights. Um, obviously we got our website caprio.com which is the hedge fund there, but also caprio.com/charts where you can check out all these charts and more that we've discussed and monitor it in real time, set alerts and um be ready for when the data changes. >> All right, so well we'll keep an eye on things and we'll keep an eye on you and your work and uh thanks for coming to Milk Road MacO. Really appreciate it, Charles.

>> It's great to be here. Thanks, John. >> Thanks for joining us everyone. We'll see you on the next episode. If y'all are making swaps or trades right now, highly recommend you check out Milkroad Swap. This is a DEX that we built in partnership with Cow Protocol. Why did we build it? Not to make money. Just honestly, so we could have a place to do our swaps for the lowest fees that we could find. This is the fees on Ethereum, Arbitum, and BAS are only.15% fees. Uh this is a huge difference from uh other centralized exchanges that charge half a percent or even up to 1.2% fees on their swaps. Also, you can swap on Salana all at swap.mmillroad.com.

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