Four factors that will drive crypto prices up in 2025 with Frank Chaparro

Transcript

GM good morning welcome to the milk Road show The Daily crypto show that's as rewarding as finding cash in last year's winter coat I'm your host Jay Hamilton and today we are joined by Frank chaparo founding reporter and director of special projects at the Block also a fellow podcaster over at the scoop great show by the way today we're going to talk about what happened in the past two weeks this is our first show back after the holidays we had a bunch of pre-recorded episodes for you guys and I'm so stroke to be back and kicking off 2025 with all of you oh baby it's going to be a big year so we're going to talk about what happened tldr you didn't miss a lot uh good time for a holiday we're also going to talk about Trump is

getting inaugurated in just under two weeks January 10 20th we're going to look at some expectations there we're going to talk about how the Bitcoin debasement trade continues to gain uh attention JP Morgan putting out a report around that and we're going to talk a little bit about our favorite trafi stock coin that's coinbase and some projections that have come out there and why we are so Contin to be so bullish on coin base before we jump in guys 2025 is going to be a huge year for us for you for the your portfolio for it all and you can help us make it a big year by Smashing the like button subscribing wherever you're listening it'll help us bring on more great guests to the show we'll just take one minute to hear from

our sponsors who make this show possible meet odos the defi aggregator that makes your token swap smarter faster and a whole lot easier tired of trading like it's 2019 oos finds the best prices for your swaps across 900 liquidity sources and 14 blockchains so you always get more bang for your crypto Buck whether you're swapping setting a limit order or just avoiding gas fees like the plague OS has you covered it's like having a genius Trader in your pocket minus the coffee addiction join 3 million wallets already using odos to power over six billion in monthly trades start making smarter swaps today at milroad docomo Frank welcome to the milk Road

Show thanks for having me I I like um I like the breath at the beginning of the show I feel very Zen oh that's nice you know also I haven't even recorded a show yet this year so you're making me feel quite quite um hapless uh over at the scoop I I don't think our first show is till Wednesday well that's that's okay this is this is a little prep show for you we'll get you ahead that's what we do at milro we're always we're always on it every day every day okay let's let's start off with h just a little bit of a recap of uh for everybody who did take time off over the holidays which I I hope you all did because you deserve it uh if you were down in Florida like Frank uh or if you were like me chasing

winter across Canada with my various relatives but if you take a look let's take a look here let's just get up today Frank okay so Bitcoin had had its pullback that we all sort of expected to happen pulled back about 16% and then lo and behold it's back up about 10 and a half percent uh since since it's dropped so Bitcoin you know basically you did you didn't really really miss much one thing that I grabbed from a show that you guys put out Frank over the holidays was this this quote from CZ from uh 2020 CZ said waiting for the new headline to be Bitcoin crashes from one 101k to 85k and CZ wrote this in 2020 and look I

know we didn't even have a proper we didn't even have a proper draw down from 100 not really not really like we we we we came back but only only what only what did I say 16% like I I wasting more these are quite quite typical right I mean even at the bull market you have several um if you look at the past three Cycles several um 25 plus % draw Downs in in the price of Bitcoin this one I think felt a little more um painful given the holiday season but to your point it's not unexpected right uh you have that Tech sell off you also have sort of the you know Wall Street going offline uh for the holiday season and

this season was I've talked about this has nothing to do with markets but everyone I talk about this with relates to it you had Christmas and and New Year's both falling in the middle of the week so you everyone basic basically took that entire twoe period off unless you were like you know coal miner or something um but if you you sort of you know working in you know Information Services or financial markets like no one was really working the past two weeks and that includes you know sort of the pipes and plumbing of Wall Street so you had a ju position of like tax selling and everyone on the traditional side being offline so that kind of like pulls liquidity out of the market and so when you're going in One Direction you're going to kind of keep going in that direction till of course the New

Year came people are back to work and the inflows are coming back in as well so you kind of saw a quick reversal from that draw down to whatever it was I think 91,000 was the lowest print but in hindsight it makes a lot of sense right I think that you know people people need to maybe unplug a bit during the holidays because I felt a bit of nerves and anxiety and I saw I mean if you look at Financial press over the last two weeks Bloomberg had two different stories that said like basically the same thing like Bitcoins its Fizz or or or investors are are you know cooling cooling down on their their Bitcoin positions and it's like I mean the Market's basically offline to to to you know all things considered but we're

we're so back I guess you can say you just love it you just love to see though you know the media mainstream media can't help but they're they're they're they're attention grabbing and they're going to go one or the other way they're either going to celebrate that we're high and they're going to point out that things are crazy and that fcoin is hitting new all-time highs or whatever meme coin and or they're gonna slam us it goes in one of two directions and you know it it shows you do do really well to take a break and just put it aside you don't you don't miss much sometimes so that's a good thing let's take a look at uh at eth just to get up to date on the eth price uh so eth sitting at around 37 3,800 now

um oh no what are we at right now we're actually at 30 3700 right now as we record this this comes out in a few hours but eth you know Bitcoin drops 16% well eth is going to drop a little bit more the altcoins are going to feel more a little bit more pain eth dropped about 25% but then bounced back 177% so not not all the way back to where it was before the holidays uh but on its way back again I think same same same sentiment here showing that this was a part of seasonality a part of end of year everybody taking a break uh but we're on our way back up uh definitely not the end of this bull run everybody should still feel pretty good I'll move on to salana salana salana had a little bit more of a drop because salana peaked

really early salana peaked like in uh when did salana peak in this in Q4 it peaked in November mid November so it saw a bit more of a drop down 34% um from that high in November which was its high was like two 260 263 I think it hit and then dropped down hit as low as like 175 what a nice trade that would be and if you could have got I don't maybe not quite 175 176 that would be really nice if you could caught in there and then boom up up back up back to two almost 220 now as we record today yeah fairly fairly standard you know pullback everything's kind of tied to to macro right you know Bitcoin uh drawing

down from 100,000 was part of a broader story of a global um risk asset December selloff right and then once you sort of got some relief in the US dollar tied to basically a roll back of some of the stuff that Trump has said on us tariffs you kind of had a broader broader dollar gains and so I think that like interestingly enough a lot of this was tied to the holidays on cryptos front obviously the draw down was a bit more painful so I think that that's tied into it but there's also I think the market are getting a bit more bullish on the Trump trade of which Bitcoin plays a key component so I I sort of think about it in those two respects um uh the holiday

seasonality Tech selling and also sort of the market regaining some confidence in um uh broader macro but that's the question right like if you turn on financial TV right now the question is can we have a a a fourth year of 20% plus gains in the S&P seems insane which seems insane and but it's that's very much tied to uh you know if you look at the connection between crypto and US equities um if if if the S&P were to not do as well um then that would suggest that that crypto also has a bit of a bit of an issue yeah and and even though it seems insane uh I

think we've had some shows in the past where we've talked about how we're in a not a we've been in this uh current macro environment since 2008 when the money printer really turned on and the the FED started to really control the the inflation rate by using the interest rate and then also by printing a lot of money in order to simulate the economy so we've been in that but there's a slight difference since 2020 it's been a little bit different as well so it's possible that we could have a fourth year and all signs are indic ating that like it's going to go in that direction we you know everything still continues to look good from the macro perspective when we look at the year ahead and that's

obviously Trump hasn't even taken office yet which we know that based upon what happened last time he was in office things should go pretty well for the economy yeah and obviously uh one thing that's top of mind for a lot of investors is the extent to which sort of this money printing regime um impacts sort of um what we call inflation hedge assets which U you know many investors consider Bitcoin to be um at least in the in the medium to long-term alongside gold and over the past uh I think since 15 gold allocations increased um by non-bank investors globally according to the research from JP Morgan that you alluded

to it was about 1.6% in 16 and in 2024 we end of the year with a 3% allocation so you're talking almost a tripling of of that and that's really tied to this idea that you know the the the reemergence of of this debasement trade and you've also seen that in the appreciation of gold over the past year which is interesting and so when you have that underpinned by what a lot of large investors are um suggesting in terms of Bitcoin allocation this is a really nice setup um you've had Fidelity Canada to to to uh tip a hat to your I guess your roots

um up north suggesting that a 3% allocation to bitcoin for certain portfolios isn't unreasonable um I think black rock is also said something like one they said two 2% black Ro said 2% so yeah pretty good even better um exactly that's a lot that's a lot of money so you have a good sort of you have a there's three things there's three things that I've written about over the past year in the newsletter that are super important when thinking about why bitcoin's going up or down the first of which is flows this is the one of the most important things I tweet and it's kind of a joke good flows good price bad flows bad price and so when you look at the end of I hope I'm

not going all over the place but there's a lot of moving Parts when you look at the back half of the last few weeks of the year right you had record outflows of these funds of these TFS bad flows bad price I think we we we've clocked in some positive flows the end of last week good price but I I I have said historically that flows are just part of the picture and not to pay too much attention to that and I'll get to that in a second but the second piece obviously is macro so and you can just think of that as like what the S&P is doing the S&P is doing really bad then likely going to have correlation with Bitcoin price and the and the longtail of crypto assets and then the third component is politics and you know the

amelioration of uh the disastrous political environment in which Bitcoin was had found itself was was was Trump sort of getting reelected and there's a whole host of issues that that likely could solve putting on the table the grandiose ideas of a national reserve it there's some very basic things that that it means and and that basically is turning off the sort of power switch of this you know hands of an Angry God level assault on the crypto industry by uh the powers that be including the likes of Gary gendler and Elizabeth Senator Elizabeth waren and even still we're seeing the sort of tentacles of of

that know R the market I think I saw on Twitter I haven't confirmed it the FDIC uh sent out a notice like 25 Global Financial players that they they still should not uh provide a wide range of services in in crypto including crime brokerage custody Etc anyway so those are the three things to think about and in 2025 a lot of those macro is still an open question politically it seems like we've got a bit more clarity and then flows is something to keep an eye on and in terms of flows getting back I'm doing the the what's the thing that Trump says the uh he uh does the uh not the recall in his interview with um uh Joe Rogan he

says he does the the pivot backer I forget what it was yeah I don't know his term but yes I'm pivoting I'm pivoting um when you think about flows right this is a story that's going to pan out over a long period of time you saw a huge uh influx of investors mostly probably folks that are investing Vis of their like self-directed brokerage accounts or their Fidelity accounts or or whatever have you then individual investors who are uh bullish on on bitcoin for whatever reason there's still a whole host of capital that's tied to the wholesalers of Wall Street and so these are the folks that sort of like push product onto the IRAs and FAS

and not an expert on on this but I play one on TV whole host of people that that are plugged in that I talk to and when you think about these wholesalers a lot of them are only still in the early stages of of um pushing these products onto their onto their respective counterparties and clients and it's you got to think about why this is a long process um there are 10 different I think at least 10 or eight 11 different products so I mean at the very least these these folks have to buy into the idea that a Bitcoin ETF makes sense then you've got to think about which product do I use out of the whole you know 10 Galaxy bitwise itbit gemini or excuse me um what's it grayscale uh you got to

think which product works best for your clients each of them have different fees each of them have uh different approaches to dealing with like forks and whatnot and if you're working wholesale uh division of like Morgan Stanley like you know I mean these are herculine questions do I need to set up a wallet you know like how does it work and so you got to get through that you got to get through the management committees and you know you can kind of get a sense of like how big of a tall order this is and that's six 12 months out in in from what I can tell and so once that unlocks then you see a huge pipe into

the flows and so I see that being alongside the political environment a positive for Bitcoin story in this year again macro is always I mean macro is always just you you know really know it's just finger waving in the air to an extent and that can change with a whole host of different things ring from geopolitical to to sort of um the political climate um and and whether or not you know there can be some cohesion among Republicans and in a very tight uh Congress so those are the three elements flows again very important but try to think of them in the long term because there are so

there's so much work that is yet to be done uh in terms of like plugging in the trillions of dollars that sit in Wall Street to um our nent Capital markets um that process just takes a long time yeah so uh it it's all super interesting but that's how I think about um the market going in 2025 on the political front I I mean you're talking about poten potentially basically a green light and and this isn't a green light to do whatever you want it's a green light to do something I mean over the past four years Banks were effectively not allowed

and you saw this in in the work that Nick Carter has done to do anything with crypto and they were effectively able to sit on their hands in that respect to not do anything now they don't have that excuse which is very powerful they can't tell their clients well we're not allowed to because now you're I mean well as of Jan 20 you really can't use that excuse so at the very least starting next starting this month they're going to have to start and this is not on the ETF side this is more on the custody par brokerage trading side of things start to explore how to um enter this market and and that's a story that dates back to 2017 when uh you know a lot of these Banks from Morgan Stanley to City to

Goldman were exploring to uh facilitate trading in these assets um and that was put on Ice in in the Biden Administration and now now they've got to re-engage yeah I think you the there is so much Capital everybody who listen to this show will often make the mistake and I think a lot of people in spa space make the mistake of thinking oh everyone can buy Bitcoin now right it's an ETF can't everyone buy it and it's you pointed out no a lot of large institutions a lot a lot of big money a lot of Pension funds A lot of these

funds that play it very safe and then also a lot of the banks do not give access to their clients currently because this stuff takes time and so the flows the pipeline just gets bigger and bigger by the day and I think we don't even really truly appreciate how big it could get in the coming year with all the aspects that you mentioned all playing together at the same time it's uh yeah it's I I've I've I've never been in such a bullish stance I mean it's funny you come back over the holidays and I feel like I'm stuffed with turkey and I'm a little bit slow but I I just the energy is is so strong and you know on our team and I'm curious to know on your team but everything I see over at

the Block seems like you guys are also feeling really good about this year yeah and there's another element that um is almost secondary but also quite interesting specifically pertaining to our Capital our crypto Capital markets so this is separate from the three elements that I delineated in my um uh in my pontification at nauseum before and that's just the state of our our credit and uh lending market so when you think about previous Cycles where Bitcoin surged to all-time highs so 2021 that was really underpinned by a go go uh fervor of of H just a lot of um mishos and and

craziness ties back to so ties back to sort of credit element so you had a you know lending Market in crypto that was maybe 25 billion 30 billion something like that if we're using Genesis as a proxy and so the the sort of trading activity and the valuations were very much propped up on um a lot of froth and and bad credit and now effectively we have no institutional credit marketing crypto so when you think about and I don't know people might disagree but what I think about that if I ju suppose the two I think about the latter being much more organic and real

because you don't have sort of like trades put on Via bad collateral and and and credit back room deals where people basically sign a piece of paper that say that they're good for the money when they're really not that's effectively gone I don't think that it won't come back I mean if it it'll come back it'll come but I'm saying it just doesn't really exist right now so we're at 100K without sort of like you know three arrows and without the sort of like leveraging ftt is collateral to take out of 2 billion doll loan to invest in a bunch of frazy startups that doesn't exist and to me that seems quite bullish

right because it just feels more more robust more natural and then it feels bullish because if we do have credit come back it's it's probably going to come back in a more responsible way with collateral collateralized loans but most importantly better collateral itself a lot of people think about the credit C crisis well actually a lot of people probably don't it's probably me and like 10 other people but when I think about the credit crisis historically I've thought well it was a lot of under collateralized loans when in reality I've talked to Josh Lim at oralis um it wasn't so much that folks were lending on collat with lending on with without

in an under collateralized fashion it was that these loans were collateralized and then they quickly became under collateralized because the collateral saw a precipitous drop in in value and so I think in 2025 as the credit Market reemerges or or emerges out of the ashes of the Phoenix as it were people will think more smartly about the type of collateral that they take and there'll be more robust collateral requirements so you'll have a stronger lending Market um and and credit's very important to any sort of efficient Marketplace and so that's that's that's a fourth element if I were

to think about uh some more crypto specific crypto Market structure specific bullish points and you know when I speak with a lot of these lenders so that's like Galaxy and Kraken and coinbase the word that I hear over and over again is conservative it's slow and steady many of these firms don't even want to talk about their financing capabilities is because they don't want to be overrun with clients so it's totally different environment in that respect and I think that that will prove to be beneficial in the coming year yeah 100% yeah so well said I want to talk about coinbase you just mentioned them and we've got some

well first I got I got to bring up a tweet that you put out the other day that I just loved uh you said give a man of fish you feed him for a day teacher man to buy coinbase with his self-directed brokerage through his 401k and you feed him for life it's bringing back hor memories to to when I actually had to figure out how to how to do The self-directed Brokerage this is not Financial advice by any means but it's interesting uh I'm not very good with technology uh in many respects so that was a challenge I I had to like reconfigure through Slavic and then you know can set up a Fidelity self-directed Brook but I began allocating to a coinbase mid last year through my self-directed

brokerage for my 401k and anyway I'll get to why I think coinbase is cool obviously I know the management team and I think that it's one of our strongest companies and they really have served as a pillar and and stward in and out of various bull markets but the the thesis was quite simple um I knew that Bitcoin in the long run would do well and there're sort of the largest Capital markets player in the space so I thought they were super undervalued for what they were um early last year I mean I think the stock was trading at like $40 or something and the valuation would have put them at like 20 billion and this is in the wake of like when companies like binance and FTX were

raising capital or seeking Capital at like I think in the bull market Finance was looking at 300 billion um to to do a cap is so it just seems super undervalued to me and I thought you know worst case scenario like is you know just draws down it's my 401k it's not taxed so it's not a big deal draws down 50% just put in the S&P or something take the loss um but but I think about the stock historically Wall Street has never really understood it every single price Target is like always yeah yeah let me let me let me pull this one up here quickly just to

give some numbers what you're saying so here's here's the projection of what their Q4 could do somebody's projecting could be 2 point 2.2 billion in rev uh and $6 earnings per share Wall Street is projecting 1.6 billion in rev and $113 per share so Wall Street is possibly 37% under on rev and 437 per under on earnings per share historically historically it's always been Wall Street has has not done a great job um tracking this stock and what's funny is it should be at least historically it should have been fairly easy because you just sort of take the trading volumes and project out from there um but the

one key component is the the take rate that the firm gets on different type of Market participants and for the longest time they would look at like the the volumes that we can see which or you know coin market cap or whatever have you and you'd sort of take that and and sort of do some back of the on lops maths on how much of that is institutional how much of that is retail because the take R's different but then there's also the prime brokerage component which is off uh a darker Market I guess you could say and that can really change the game in terms of what they're doing from a trading Revenue perspective and that's through uh toia which they acquired I think in

2020 in 20 yes when that whole Prime verage War really kicked off and so I think Wall Street I it just like doesn't do a good job of of holistically looking at its trading revenues and then there's just a whole host of other elements that like they don't really pay attention to like base like their Venture portfolio I mean even the fact that like at the end of the day there's a lot of interconnection between uh crypto and and artificial intelligence and you know when you look at comps on the AI side like they're ripping um with haste and I don't think that uh coinbase benefits from that same Tailwind from that same

story that same narrative so there's a lot of elements that make it really attractive in my opinion and I just don't think that the people covering the stock can fully appreciate that namely because and this is sort of an important component a lot of the people that cover coinbase so these are the equity research analysts at like Wells Fargo and Bank of America you know I think they have like they have a bunch of analysts covering the stock like 20 plus they all cover like CME and CBOE and NASDAQ so they cover traditional us Equity markets or us Equity exchanges I could say options exchanges and that it's just like it's not Apples to Apples

um and so they're looking at like the opportunity strictly through the lens of like exchange and coinbase in many respects is like not just an exchange right I mean it's it's you know if you lean into their marketing right like they're building a new onchain economy there's a stable coin component there's payments there's AI there's there's there's nfts it's a it's a much bigger story so I think it's um a really compelling Equity yeah not to mention that coinbase will be joining the& P 500 uh which will obviously give exposure to coinbase to a lot of investors who are maybe not going to actively go invest in

coinbase but because they're they're holding the S&P 500 they I didn't know that is that true yeah that's yeah it's super exciting to see I mean it's just this just it's one thing after another it's one thing after another Frank absolute pleasure to have you on the show today uh Before I Let You Go pleasure any any any final words of wisdoms you've been through many cycles before I think this is your third or your fourth cycle uh as we head into this bull run any final thoughts to share with our audience just don't forget to tip your waitresses and and take profit yeah always take profit make sure to withhold

for tax season withhold for tax don't round trip take some profit and tip your waitresses that's that's Frank chaparo for the bo joining us today thanks so much for listening in everybody I hope you had a fantastic holidays Happy New Year's and we will see you again tomorrow on the show until then have a wicked awesome day as always if you liked today's episode please hit subscribe and make sure you follow us so you don't miss out on the next one there's also a link in the description to our free 5 minute daily newsletter where we simplify crypto for you while making you laugh and if you're willing to step up your crypto investing game we're going to also leave a link for

milk Road Pro you get access to our portfolio where you can see exactly what we are buying this is your number one resource to help you invest successfully in crypto one final note this show is for educational purposes only and nothing we say is financial advice investing in crypto or any asset is risky and you should never invest more than you can afford to lose thanks so much for listening in my friends have a wicked awesome day