Matthew Sigel on Bitcoin miners pivoting to AI infrastructure

Transcript

Bitcoin is my largest position in the strategy. It's 11% like we did add a little bit on the on the LEO day. So definitely uh exposed there. Bitcoin is showing signs of seller exhaustion, but the bulls still have not come back in full force. Are Bitcoin miners pivoting to AI? Is this bullish or bearish for crypto overall? And what do investors need to know about all of this? Hello and welcome to the Milkro Show, the podcast that knows that seller exhaustion is just dumping your bags at 3:00 a.m. I'm your host, John Gillum. Today is Tuesday, August 11th, and today we are joined by Matthew Seagull. Matthew is the head of digital assets research at VANC, where he leads research on cryptocurrencies, tokenized assets, and the onchain economy. He also serves as a portfolio manager for the related strategies, and sits on

investment committees for the firm's private funds. Matthew is going to share a ton of alpha with us today about crypto and a lot of other things. So, if that sounds good to you, make sure you like and subscribe, share this episode with somebody who's going to enjoy it. A reminder, our podcast today is free, and that would not be possible without our wonderful sponsor at saber.money. the stablecoin payments platform built for Asia. So keep an ear out for more information about them later on in the show. But for now, without further ado, welcome to the Milk Road Show. Matthew, how are you? >> Hey, John. Good to be with you. >> I love how every podcast I see with you, you start with that same good to be with you line. I think it's a great canned greeting. And I'm I'm glad to have you

with us. Um I I would really like to start this conversation uh with something you've been very bullish on for a long time which is this intersection of Bitcoin miners with um artificial intelligence and Bitcoin miners pivoting in that direction. Obviously this morning there's a big announcement or maybe it was yesterday but Anthropic signed a $9 billion contract with Riot which is you know historically a Bitcoin miner. Talk to me about the thesis here. What are we seeing happen in the markets here and and what's your take on all of this? Yeah, the the basic story here is that there's there's an arbitrage at work that you know Bitcoin miners uh essentially manufacture tokens, Bitcoin tokens using electricity and you know anthropic open AI um big tech companies also manufacture tokens. They're AI

tokens and the value of the AI tokens is like 10x higher than the value of Bitcoin tokens if you denominate it in electricity which Bitcoiners are are very used to. So we noticed that arbitrage uh a couple years ago and the most interesting part of it is uh when you add leverage uh to the situation. So Bitcoin miners historically were unable to raise debt to buy Bitcoin mining machines. um you know it was an equity funded business and their revenues would fall by 50% every four years. So you know just involved a lot of dilution and obviously now you know GPU is a debt financable asset we can see this

occurring across the world and so these companies are able to finance uh their buildout using a combination of debt and equity and so that's bringing down the cost of capital for these stocks at least versus two years ago. We could talk about what's happened in the last two months and you know cost of capital is like the huge input to stock prices. So if you're if you can borrow more cheaply your your stock price goes up. So give us the thesis on how all this comes back to the Bitcoin miners here because a lot of people have been speculating on AI on crypto on other things but I think you've been more so than most analysts I've seen very focused on how Bitcoin miners benefit this for directly directly from this.

Sorry. um talk me through that updated thesis on there. Does that still hold for you? How long do you think they they benefit from this? And what what are your thoughts on that? >> Yeah, so the I think the structural story is that electricity is a huge percentage of the input costs of Bitcoin. So, Bitcoin miners are very good at sourcing lowcost electricity via land purchases and then developing the land, adding an electricity substation, the other infrastructure requirements necessary to turn that electricity into usable power. And uh that pipeline of land became much more valuable as uh the Frontier Labs began to sign these

multi-billion dollar leases. Uh so it's a story of you know these stocks are a story of what's the value of the leases that they've already signed. Uh and you can kind of do that math pretty uh simply with kind of a discounted cash flow analysis. They give you the inputs that you need to value those leases and then you can value the uncontracted pipeline. Uh and then you can value the part of the pipeline that hasn't even been developed yet. So that's the exercise that we're going through to try to value these companies. Um now there's a market dynamic over the last couple months which has flipped right. So you can see it in the price of the semiconductor stocks most obviously

things like Micron and Heinix where the market is clearly doubting at this point that the AI capex boom is sustainable and is starting to price in I'd say a peaking out of that investment maybe as soon as like 2028 2029. So you know stocks have corrected quite a bit and and now comes the point where you know you your conviction is really measured. How much of this weakness is due to things like you know fears of the Fed hiking interest rates and as I said the cost of capital is a huge determinant in the value of these businesses uh and and how much of it is built on an actual bare thesis for AI

coming to fruition. So for for our side uh during the worst of kind of the situational awareness uh forced selling of a couple weeks ago uh we we doubled down in these stocks u you know our and I'll tell you why but our long-term conviction was you know relatively unchanged and so if you have a long-term view and there's a forced seller in the market you're really doing your investors a disservice by not picking up that stock uh at at a discount. So why did our conviction um why is our conviction strong? I I think it comes down to first the uh financial results from the hyperscalers especially in their cloud businesses and CEO of Amazon

Andy Jasse saying the return on capital for this AI investment is similar to what they saw in the cloud 1.0 evolution you know 10 or 15 years ago. So that was really encouraging. Uh there's been data out just like canvasing the S&P 500. Uh how many of these companies are calling out the impact of AI in their quarterly reports. Uh that percentage continues to rise. They're pointing to concrete margin enhancements as a result of adopting this technology. So so that keeps our conviction high. Uh we look at the financial uh metrics around some of these leases that are being signed.

what's the how many millions of dollars per megawatt are the tenants paying those numbers keep rising uh and then we look at uh the debt side how's it being structured how is it being securitized uh and you know there's been a bare case about you know oh this is like a great global financial crisis type buildout you know irresponsible leverage and I think back on I I was in the markets those days and uh I remember the ninja loans no income no job no assets that uh banks were financing these and then flipping them into the securization market and they ended up on the the balance sheets of German retail depository banks. So there there's no

such thing happening in AI. In fact, some of these Bitcoin miners are the best example of ninjas in a way, right? They're developing data centers that have no leases, but the early construction, the speculative part of that business is still funded by equity capital or convertible notes. And then once the project is derisked uh and signs a investment grade tenant uh then uh the the developer can access uh you know the traditional bond markets and there's some securization happening there but there there just isn't the level of abstraction between the sponsor of the project and the end user like there was in GFC. So yeah, all of those

kind of put together uh are, you know, keeping us relatively constructive on the on the long term here. >> Hi everyone, this is John. Listen, our Milk Road Pro analysts nailed this AI bull market. They had dozens of calls pay off in a big way for our community. If you want to see how our entire team of analysts are positioning for the crypto bull market that's going to come after this bare market finally ends, you can join us now at Milkroad Pro. It's just a dollar. Link is in the description. and you'll get access to all of our analyst trades, their watch list, and see how they're navigating this in their portfolios and get access to ask us questions in Discord anytime, day or night. It's just a dollar links in the description. Milk Road Pro, join now. I'll see you there. Okay. So, when

you say, just to back up, one one thing I want to clarify, when you say you doubled down on some of these stocks, are you talking about semiconductors, hyperscalers, Bitcoin miners? What did you double down on when that you know that Leopold selling bottom kind of came in? What what was the the position you were strengthening there? Yeah. So the way we came into it, I mean the strategy I manage, it's called onchain economy. So we're we're looking to invest across the entire value chain of Bitcoin and digital assets. And that can be anywhere from the energy infrastructure uh to the coins themselves to the fintech and e-commerce companies that are adopting this this technology. And we started out very diversified a year and a half ago kind of anticipating, you know, Bitcoin was

close to an all-time high. it's not the time to take these hero bets. Let's start really diversify, focus on good governance, lack of leverage, and then if things draw down a whole lot, we'll we'll concentrate the portfolio into our best ideas. So, that strategy really played out for the first year, we we dramatically outperform Bitcoin at, you know, comparable levels of volatility. And now with both both Bitcoin and some of these miners down 50% from their peaks, we thought it was a good opportunity to concentrate into our favorite names. So we jettisoned a number kind of of the lower volatility peripheral type stocks like utilities which were directionally exposed to the same theme uh but u much less volatile

uh and we doubled down on some of Leo's names u the the powered land uh landlords uh where we saw force selling >> now unfortunately you know it worked out for like a day or two and then this uh like Texas data center moratorum we can get into that um kind of hit last week. And so some of those names, you know, you're starting to see a differentiation here as the market is now really uh paying for execution and not just the dream of of land. U so there's some green shoots that maybe this Texas thing might not be such a big deal, but yeah, that's that's what we bought.

>> Okay. Well, you just raised like a half a dozen different subjects. I'll come back to all of those. I want to kind of continue on this Bitcoin miner thesis here because you did publish a framework for valuing Bitcoin miners as AI infrastructure. Um, but I'm curious how that has evolved and how that has changed. And then um, you know, like talk to me about some of the risks here because obviously you know New York has issued a data center moratorum. Other jurisdictions have followed suit and there seems to be like some rising backlash to that. How do you discount that in the investment thesis here and where does that shake out for you? Yeah, for for our framework for valuing these uh we do a bottoms up sightby-sight analysis handicapping the possibility that the data center will actually get a lease and become

energized. Uh what economics might be likely, what's the cost of capital of the sponsor? Uh and um that you know we use kind of our best guess at at what the deal economics would be. uh and that can give you a value for for a specific site and you can add up all those sites and handicap their probability of reaching um energization. Uh and that'll tell you kind of what the existing capacity is worth. Uh then you can look at the pipeline of the company beyond what is actually leasable. Uh and that becomes like a you know then then you can answer the question is the market paying anything for the pipeline? So what's really happened in the last

month? Uh I guess there's three elements to valuing these companies. One is just the discounted cash flow of the of a lease which is signed and most of these leases are being signed by in investment grade counterparties. So you get a pretty good idea of u you know the probability that that they'll actually get paid on it. The second part is what's the terminal value of that asset. These are very long uh dated deals. Some of them are 20 years old long. So at the end of that the uh the developer the Bitcoin miner will still own the facility. How much will that facility be worth? Um so did I give the the three things? I said it was the the current value of the lease um the terminal value

and then the uncontracted pipeline. Right? So the decline that we've seen in the share price is basically the market is no longer paying in some cases it's not paying anything for terminal value. Uh and then in most cases it's not paying much for the pipeline. So you can buy these names uh some of them for just the value of the existing contracts that they've signed. From my point of view that's a pretty good margin uh of safety. Your second question how is it evolved? I mean it's evolved because the prices have come down. Uh so that kind of no the lack of terminal value lack of uh value for the uncontry pip uncontrated pipeline that's new. Um but it's happened for a reason. Uh first

was the New York moratorum. Governor Hochel delaying new data center construction uh for about a year. And then last week the Texas governor introduced a new audit uh which may delay uh what comes online in Texas by a couple months as well. Uh so the market quickly removed all of the uh pipeline optionality from many of the Texas exposed uh names. Okay. I want to ask you about the valuations on these things because there are a lot of crypto businesses or Bitcoin mining businesses that theoretically stand to benefit a lot from this this new market participant, this new demand source from AI. However, a lot of their stock prices

are not reflecting this. And one of the biggest ones that we've been focused on here at Milk Road is Galaxy Digital. They have this great, you know, institutional-grade crypto business. They also have a huge amount of data centers and power for AI, yet the stock price is is still showing a lot of weakness and the market still seems to not be understanding how to value these things. What are your thoughts on this? When do you think this turns around? And what do you think needs to happen for the market to start to appreciate the the value and the opportunity here? >> You're really trying to bring out the Galaxy Maxis on my timeline, huh? They are uh Yeah, they're an eager bunch. >> Um they're passionate people.

They are they are Galaxy has a great asset with that Texas Helios data center which they've leased the first couple of tranches to to Coreweave. Uh and actually they have a large amount of power which theoretically could be leased uh irrespective of this Texas delay. So it it probably won't deliver until 2028. Uh but I think the hyperscalers have indicated they're now leasing for for 2028. So there is um a lot of optionality and great value in that asset. Uh the downside I would say is that their initial tenant uh coreweave um you know wasn't an investment grade tenant when they signed

the deal. Um, and many are they say many are asking Galaxy to just spin off this business and have like two publicly traded companies, but their data center assets are very geographically concentrated and it's basically, you know, the lion share of the value is in that one Helios asset. So, I'm not sure if the public equity market wants a stock with one asset. Um, and then there's also significant tax implications, I would imagine, if they were to try to spin that off. So, it it, you know, it's it's still looks very cheap to us, but for kind of TRDFI institutional investors who are looking

to access this arbitrage, um, there's other names that have like more favorable leases, more favorable tenants, and maybe a more uh diversified pipeline. So, I'd say that's why Galaxy has lacked. >> Okay. Well, I hope you enjoy the Galaxy Maxis coming after you for this, but I I think that's also some some helpful insight on on the context there. Uh, Matthew, there's a ton of things I want to talk to you about, so I want to move on now to, you know, something you've referenced a couple times, which is this uh the ticker is Node, which is the VANC onchain economy ETF. This is an actively managed ETF that I believe you're supervising. Um, and that, you know, when you're talking about these trades you're making, a lot of this is going on in this ETF. Could you talk to me about what this product is, why you brought it

to market, and what makes it unique among some of these crypto ETF products that are on the market today? >> Sure. Uh, so I joined VANC now six years ago, and we had a bunch of Bitcoin and Ethereum on our company balance sheet and a lot of uh venture investments. Um, but we didn't have any products for for clients and and that was in large part a regulatory barrier. Uh so first it was Bitcoin ETFs, Ethereum ETFs. Uh we ran a number of experiments in Europe. We have uh more than a dozen like single token, multi-token baskets for crypto. Uh so we've we've learned a lot and one of our biggest learnings was that passive

investing doesn't really work in this space. Uh all of our active strategies have just trounced the the passive indices by a wide margin. And uh we can get into into why that is. I think it's pretty obvious from looking at all coins uh why that is. But we wanted to uh develop active strategies to avoid the pitfalls in the space. And then after the election uh we just got a lot more bearish on on altcoins. Uh we reasoned that much of the capital formation in the space was going to come through public equities. uh that the lack of enforcement would actually put kind of scams and legit projects on an equal playing field in a way which was not

going to be attractive to to investors. Uh and um with the bank charters um and other positive regulatory developments in the kind of in the regulated part of the space, right? Circle has a blockchain, Stripe has a blockchain, Coinbase has a blockchain. a lot of the value uh was actually going to be captured by public companies. Um so that was the idea to combine uh public companies and crypto tokens into one flexible mandate. Uh and then we when we looked at the peer group what we found is there are kind of other uh products that specialize in crypto equities but they tend to be super concentrated uh market cap weighted often and you so you

end up owning uh the most leveraged stuff at the top of the market. Uh so many of our benchmarks had like 10% micro strategy weights and we just we thought okay we've got a rising tide here in terms of tokenization adoption. Um, you know, Bitcoin we have kind of long-term conviction in. There's no need to add a bunch of leverage and concentration into the space. Let's just bring a relatively lowcost product to the market. Stay diversified, avoid the pitfalls. And that worked really well since inception May of last year through uh the end of June or or so of this year. We were beating Bitcoin by, you know, almost 100 percentage points, more than that. uh and and then we had this

correction in you know the the part of the market that was generating our alpha Bitcoin also corrected. So that more diversified lowervall approach I I don't think it makes sense at this part of the market where we're uh you know I think we're kind of bottoming out for for some of our favorite stuff. Uh so we've concentrated the book uh we've sold probably 15 stocks and doubled down on our favorites and now the fund like fair warning uh I have to change my pin tweet but it's no longer a low volatility approach to the space now it's a you know high conviction Bitcoin's down 50% uh our favorite names are down 50% so uh let's double down you know one thing we've talked about a lot on this show is

that crypto is quickly becoming a huge part of the global payments infrastructure and nowhere is that more obvious than in Asia But if you're actually running a remittance company or a payment business, you know that the hard part isn't moving the stable coins. It's dealing with local banking partners, compliance, liquidity, and all of the operational headaches that come with sending money into places like India and Southeast Asia. That's why today's partner is Saber. They give payment companies stable coinpowered infrastructure to collect and make payouts across Asia without having to build all of that complexity themselves. They've already processed more than $3 billion in transactions across 40 different countries. So, this isn't just a concept. These guys are actually doing this for real. If you're building payment infrastructure or expanding into Asia, make sure you check out saber.money. Okay, so you're doubling down. That's that's good to hear. Some

confidence here as we go through this bottoming process. I want to talk more about that. But first, you know, you said in your answer, and I've heard you say this before, you have a preference for some of the cryptofocused equity names that you do you like as opposed to the liquid tokens themselves, especially at this point in the market. Could you just elaborate a little bit more on that? You said you've trimmed a lot of positions, you've doubled down on some winners. We talked about how you're very bullish on Bitcoin miners. What else falls into that bucket of things that you're bullish on at this point in the market? >> Uh well, I'll start with with like what we're not really in uh which is alts. Um so, you know, some of the kind of Ethereum DATs. Um you know, these are these are big big parts of the of the

crypto equity benchmark. Um so we we we never really participate in in the DAT story. just feel no need to add leverage on top of what's already a very reflexive asset. So our um our alts exposure is uh is pretty small and the uh is the fundamental thesis there is that these it finally on its third attempt the corp chains are finally winning. You know institutions that adopt blockchain they they want predictability. So the the fees that say Ethereum, you know, had last cycle, super volatile, really hard to predict if you're an institution with a lot of

flow, what you're going to be paying for transactions. Uh and and meanwhile, you know, for all of the deregulation, banks still can't touch open source. So it doesn't seem to me like that's going to become a a mainstream, you know, multi-trillion dollar uh financial rails. But these quasi kind of open customizable corp chain blockchains uh are finding you know some product market fit. So uh that's where our focus has been probably in in kind of um you know call it fintech and infrastructure names. Uh but but those stocks also have this headwind of like crypto is making it easier to to

enter look at hyperlquid like entering new markets very quickly very nimly CME is trying to follow but it's bringing down pricing across the space so it's a it's a it's great for the consumer I think there's a lot of consumer welfare that's being generated through uh lowerc cost trading options I'm not so sure it's it's amazing for for the stocks u so you know our our favorite space where we've concentrated now is in Bitcoin, Bitcoin miners, uh energy infrastructure, uh I'd say Bitcoin value chain.

>> Uh I appreciate the the thoughts on that. I I want to ask about how you go about thinking or navigating rebalancing this ETF and and making decisions like this? Like was there a specific catalyst, you know, this deep into this bare market that made you decide to cut so many names and to double down on these concentrated positions? Was there a specific catalyst that you saw that drove this or or what was the thinking there? >> Yeah, the the catalyst was uh situational awareness um you know busting. So there were you know a couple days there the last days of July when uh yeah there was a narrative shift and you know the companies that were spending a lot on capex were suddenly getting punished by the market. So the market definitely shifted in June. Uh but the

degree of the selling in those last days of July was pretty obvious. There was a liquidation going on. Uh we have no leverage. Uh so I'm not getting any margin calls and and it just it feels like the responsible thing to do actually uh to buy those uh favorite names from from a forced seller who who took on too much leverage. So yeah, that that was the catalyst. But but remember at the outset I said like some of our north stars in this space uh the economics on on GPUs. Um the the the sizes of the leases that are being signed uh what S&P 500 companies are saying about the adoption of AI

specifically with regards to their margins uh and their revenue opportunities. all those things, you know, heading in the right direction, prices heading in the wrong direction. Of course, you have to ask yourself like where might you be wrong? But where um I kept coming back to that we would be wrong was on macro things that you know our companies can't really control things like uh interest rates uh and so you know the fact that tenure was already at multi-year highs um you know just gave me the sense that the responsible thing to do is actually take the other side.

>> All right. Well, sometimes the responsible thing to do is to double down and I think that's helpful cuz there's a very highly volatile moment in the markets for a lot of people and hearing your thought process for how to navigate that I think is helpful for people. I want to pivot to Bitcoin and I think a way to to to make this segue is to ask, you know, a lot of people are hearing about a lot of these Bitcoin mining companies pivoting to AI or maybe not pivoting completely but adding that as an optionality, another thing that they can do with their their power, their compute. Is there a risk in your mind to the Bitcoin network's health if so many of these miners begin to power AI as opposed to Bitcoin? Or do you think this is really just going to help their business and bottom line but not

fundamentally damage the Bitcoin network? >> I think it has damaged Bitcoin uh in the sense that these companies are sellers of Bitcoin more than they used to. Uh they're not adding hash rate. They're not they're not buying AS6. Um so hash rate has been falling. It's been a record amount of time now that hash rate is falling. It's it's very unusual. Um, and I think it does lead to, you know, less confidence in the network, but that that's kind of the case every four years. Um, you know, folks find a reason to think that, uh, no one's going to be buying Bitcoin machines anymore. And then, you know, for for whatever reason, um, well, we know the reasons. You know, it's because government money printing

continues. And you know people increasingly want uh hedges to to that debasement and the the power that Bitcoin uses is actually a you know geopolitical strategic. So a lot of countries are mining BTC without the the economics in mind. Uh but it these things just have a way of of reversing and the folks that stay hooked up to the network will earn better margins uh as things improve. So I I think it's self-correcting, but if you look at your brokerage statement every day, like the correction, you know, often cannot come soon enough. So it just takes patience.

Um, you know, not spending all of your kind of double down money uh in one shot, being judicious about it. We I you hear it all the time, the dollar cost averaging, but that that you know, we really do try to practice that. Um uh just take your time, be patient. Well, this is a great segue into the next question that I had for you. Last week on the Milkroad AI channel, I interviewed Yan Banek, who's the head of Vanek. And uh for anybody who missed that conversation, I highly recommend you check that out. We talked about Bitcoin, crypto, AI, a lot of things there. Um, but Jan told me that the disagreement right now at Van is just not around whether or not to buy Bitcoin, but how to go about getting into that position. And he is more on the side of just just get the exposure.

and he said that you've been advocating more of like a DCA approach and and targeting October to have the full allocation. Could you walk me through what these conversations have been like internally at Vanek and how you all are think about getting positioned on Bitcoin here? >> Yeah. Well, I think one of the reasons he said that there that there isn't too much disagreement is that actually one of our oldest portfolio managers who was pretty anti- Bitcoin just retired. Uh so it's like one less bearish voice which I think is totally you know symbolic of of how this asset evolves. Uh you know I often compare it to video games where you know 30 years ago it was only kids playing video games. Now Elon's 55 still plays video games. So people don't don't quit but the old people who never played

video games retire. And that's kind of the same thing that's that goes on I think with Bitcoin and and tokens. Uh so yeah coming into this year Jan nailed it. he was quite bearish on on Bitcoin. Um took some profits and then um you know the second time that BTC hit 60, a lot of folks here started to started to warm up. Um and yeah, I think he's just got like a a longer term horizon where he's not trying to beat his benchmark every month and uh you know feels like if you don't have exposure here uh you know down 50 is a really good spot to to start adding. Um, you know, from from my perspective, I'm like a little bit more worried about don't want to catch that

last down 30% and, you know, I'd prefer maybe sometimes to push in once I see the price move on good news and there's some volume associated with it. Like I don't need to uh bottom tick the exact the exact bottom. So, um, yeah, that's I guess that's kind of where the where the differences are. >> Okay. Well, let's talk about this because there has been a lot of attention to strategy selling some Bitcoin. However, the market price of Bitcoin is not really reacting to that anymore. And some people are indicating that this is a sign that the bottoming process is is played out, right? That we may not get that last 30% drop um that last puke, but some people are still worried about that. What are your

thoughts on that? Do you have any more confidence that we have seen Bitcoin's bottom be put in here or are you still concerned that we'll see another drop between now and the end of the year? Yes. No. I mean, like the the anecdotal bottom indicators are are starting to add up just in terms of like the headlines that you see when you can play the two sailor clips back to back. Never sell your Bitcoin and then, you know, they've sold billions of dollars of Bitcoin. Uh Bitcoin ETFs are closing. Um I just saw a uh some DAT M&A in Europe yesterday. Like that's pretty interesting.

um DATs are now uh net sellers of Bitcoin. So there there's definitely a lot of I think bottom indicators that are starting to you know tick and in a year I I think this is going to look like a really good entry price. Uh but you you have this kind of coiled spring in terms of the volatility where Bitcoin volatility is at an all-time low. the gap between the 50-day moving average and the 200 day moving average. There's only like $5,000 between that gap. So, there there will probably be a resolution, a volatile resolution here over the next couple months. And I I don't know anyone who has who can have super high conviction on how something's going to move in two months. Uh there's

just tons of variables that that go into it. So, yeah, I think I'm being a little more careful on the Bitcoin side in terms of pushing all the way in. just want to see it go up on good news. >> Gotcha. Yeah. Well, Yan said something that stuck with me. He said, "Don't get cute and just get a position on Bitcoin." Um, which I I like that that perspective as well. Um, but I do want to get your thoughts on this, Matthew. It seems like there's broad consensus that the bottom of Bitcoin will be in October or around October of this year. And to me, it seems like because everyone is expecting that, there's an increasing likelihood that people are going to start frontr running that and that the price is going to react in a volatile way. but to the upside and then a lot of investors are going to be

chasing that. What What are your thoughts on this? Do you think that there's any worry in your mind about this like broad consensus of a bottom in October and that the market won't actually play out that way because everyone's expecting it to? >> Yeah. First on the on the don't get cute, I don't want to overemphasize my my my position here. Bitcoin's my largest position in the strategy. It's 11% like we did add a little bit on the on the LEO day. So um definitely uh exposed there. But I think for the folks who are saying um what you said which is hey if everyone already thinks it's going to bottom in October then the bottom will probably come before October. Then you have to get into counting days like okay what happens if we're at you know we go up by a little

bit every day between now and o and September 15th and we're at like 74k and on September 15th. Well October is still a couple weeks away. like at some point that exhausts itself just because things don't don't go up every day. Uh so it just depends on the details like where we are. What's what is the derivatives market looks like? What is positioning? Um you know what's the macro? You know we we we have this like three-pronged um analysis that we use. It's um global liquidity, you know, what's happening there. Ecosystem leverage um like you know what does it cost for calls versus puts? What's open interest like? how is that changing? And then the onchain economy um four-year cycle um you know

uh hash price things like that um and you know it's not a perfect science but those are kind of the three things that we look at. >> Do you have a specific indicator that you're watching to say I'm I'm convinced that the bottom is in. Is there a specific price level that you're looking for Bitcoin to clear or or some other metric you're looking at to say like that's my signal? I know you said you're you're looking for um the market to react to good news and for volume to come in to support that price action, but just give me a little bit more thoughts on what would confirm a bottom for you.

>> Yeah. So, like big picture, we're down 50% from the peak and volatility is also down 50% from last cycle. So, you know, last cycle was an 80% decline. So, now volatility is half of what it used to be. So like 40 to 50% actually you know unless something changes I think it's going to look really good in a year a 60k entry price. Um other than that it's it's the individual positioning like are funding costs negative? That would mean people are totally wiped out and there's nowhere to go but up. No funding costs are not totally negative. Uh are people paying twice as much for puts as for calls? Uh well that was the case in April the first time BTC hit 60K and we we saw a really nice rally off that

level. It's not the case now. So, we we don't get the sense that the market is super wrongway positioned bearish for Bitcoin. Modestly, yes, but but not in a way that that gives me comfort. Oh, okay. The next three weeks are going to be up only, like let me go all in. Okay. Yeah, that's I think that's very helpful. Um, you know, we talked in this conversation about how you're not particularly bullish on anything in the alt space right now, but just outside of Bitcoin, you know, you said you added a bit to the Bitcoin position on the Leupold dip. Is there anything in the the the crypto space that you are bullish on? Maybe as like a narrative, right? Like are you particularly bullish on pers or on DeFi or or like what are you looking at um to get into in addition to or outside of Bitcoin in

crypto? I still have a little ETH and Soul um you know, Clarity Act odds are so low that any positive surprise there in September probably leads to a decent rally for L1's. Although I don't know how you know sustainable that'll be unless we see some follow through but um like Ethereum changes at the governance level that happened earlier this year I think are are positive u so have some exposure there have some some hype you know just emerging competitor to to CME um Zcash I think Zcash leadership uh in this market is is pretty interesting and they were really the first project to face I'd say like an existential threat

from AI uh in the sense of like who uh who found that vulnerability. So which project actually had to react uh earliest to make themselves futurep proof to to to AI software. Um so I think Zcash leadership is a really kind of interesting dynamic and uh have some of that as well. Matthew Seagull, head of digital assets research at Van, thank you so much for being on the Milkro show and sharing all these insights and wisdom with our audience. I know everyone's going to love this episode. So, thank you so much for being here. Where can we send people to find more of you and your work online?

>> Yeah, follow me at matthew_seagull uh on onx or vanac_us and we put out two research pieces a month. Uh very transparent. All our holdings are updated daily on vanac.com. Um so yeah, check us out there. >> For anyone who hasn't read it, Matthew wrote an amazing very long article comparing the AI capex expenditures to the railroad boom. Uh, and I think that's worth everyone's time. So, make sure you check out Matthew's work. Uh, but Matthew, I hope we can talk again and catch up uh once the bull market comes back. I think it'll be an interesting conversation. Thanks for being here.

>> Thanks, Sean. >> And thank you all for joining us. I hope you all learned something today. So, until next time, stay safe, stay educated, stay bullish, and we will see you all on the next episode of the Milk Road Show. Thanks for being here, everyone. Bye. The European Blockchain Convention returns to Barcelona on September 16th through 17th, bringing Europe's digital asset marketplace to life, where the continent's fragmented markets converge into one room. 5,000 plus attendees, 300 plus speakers, 90 plus countries, two days, one deal floor, the institutions, capitals, builders, and infrastructure providers you need to be across all in one place all at the same time. What normally takes months of crossber travel happens here in 48 hours. Use code milkroadpro_15 for 15% off your ticket. Link is in the

description. Want insights on what's moving crypto markets and how we're trading each event? Subscribe to our channel and join the Milk Road daily and pro newsletters and start investing like the top 1%. This show is for educational purposes only. Nothing we say is financial advice. Investing is risky. Never invest more than you can afford to lose.