Rate cuts are here: is crypto about to explode? with Michael Nadeau

Transcript

Once ETH kind of gets through all, if it can get through 5K and start to push towards 6K or so, then I think we could see the big move that everyone's looking for with meme coins and kind of that longer end of the the risk curve. So, that would be the ideal uh setup. I still that's sort of my base case of what should happen. That would be like in line with how things typically go. >> GM, good morning. Welcome to the Milk Show, the daily crypto show where Jerome Powell basically said, "Shots on me." And the whole market lined up. I'm your host Jay Hamilton. It's Thursday, September the 18th. The Fed cut rates by 25 bips in the first rate cut of 2025, and we could see up to 50 bips in additional rate cuts for the rest of the

year. Today, we'll break this down along with the rest of the US economy and the macro setup, why we think it looks so good as we head into Q4. We'll also dive into the outlook for the crypto sector. Specifically, we're going to look at Bitcoin alt season and some spicy spicy charts and predictions at where this cycle could end and how things could play out from here. Today, we are joined once again by one of our favorite guests, Michael Nado, investor, writer, educator, and founder of the DeFi Report. Before we jump in, I've been telling you guys this all week. If you are swapping, you should be checking out Milkroad Swap. Not because it's our product. We built Milkroad Swap because we wanted a place to do our own personal swaps that was low fee. That's why we

built this. So check it out if you're doing swaps at swap.mmillroad.com. Today's episode is brought to you by Figure Markets. Grow your cash like a bank. No lockups, just real returns. It's also brought to you by Ken, the verified distribution protocol, changing the growth game. With that, Michael, welcome back to the Milk Road Show. >> Great to be here, Jay. >> Pleasure to have you as always. Okay, let's start with the the news of the day, which is uh drone pow and the Fed and what came out of them. I'm just going to pull up a a summary here um from the Kobarasi letter. Uh okay, so Fed cut rates by 25 bips. Medium projection shows 50 bips in additional rate cuts for the rest of the year. Uh Governor Moran dissents in favor of wanted a 50-bit rate cut today. Um

always interesting when we see those uh very vocal descents. The Fed says downside risk to employment has risen. So, there's clear shift that they're really trying to focus on the labor market. Um, six Fed officials see no more rate cuts in 2025 and nine see two additional rate cuts in 2025. So, a real discrepancy there. Michael, what's your thoughts on this news? >> Yeah, big big day today. Um, you know, this is kind of like the the current catalyst for for the markets. And, you know, my view on this was the 25 basis point cut that we just got today was was priced into the markets. It was like almost at 100% certainty going into this. And so, uh, we'll see how the market, you know, reacts to that. I

think uh, the last time I the meeting just ended and I think markets were down a little bit. So, we'll markets are going to digest this and we'll see see where things go. But um a lot of the work that we've been doing is really to to get a good sense of like the state of the economy because I think the the key thing here is like if we're going into a rate cutting cycle and it looks like we have at least two more cuts um getting priced in before year end. Uh the key question that that I'm asking is, you know, are these rate cuts sort of more of the insurance cut type variety. Um which I view as bullish for the for the for risk assets. Um or is this sort of telling us that there's some, you know, something more going on in the economy?

The economy is weaker than we think. It's a sort of sell the news type type of event. So, I think we can kind of get into some of that macro data here and then sort of transition into what that kind of could mean for the the crypto markets later in the the show here. >> Yeah. Okay. Let me pull up uh some macro data. You shared as always some great charts with us before the show, which we greatly appreciate. Uh okay, let's go through some of these charts in the macro data. >> Yeah, I'm sure everyone's familiar with with the Bitcoin and global liquidity chart from uh Crossber Capital here. You know, the I think the takeaway on this one is liquidity continues to expand.

Um, that is obviously a good thing for risk assets, a good thing for Bitcoin. We can tell that Bitcoin is quite correlated to that uh global liquidity uh line here, which is the the orange line. You know, I think the the way I think of this is as long as liquidity is expanding, there is no like smoke alarms, you know, going on out there. liquidity should continue to expand with the Fed now cutting rates that could, you know, lead to some more bank lending and just sort of potentially more hiring, more more activity in the economy. So, I think this picture looks pretty good. I would say that just one thing people should keep in mind here is you'll notice that if you look at that second top of the last cycle, the the black line there, that second top, it

just, you know, Yep. Exactly. We can see that the orange line actually kept rising uh past the cycle peaked. So there wasn't necessarily a warning signal to investors to sort of get out of the market at that time. You could have looked at the global liquidity chart at the pico top of last cycle and said we're good. We're going to keep going up and that that wasn't the case. So people should just be aware that liquidity can still expand and then there's sort of a lag to that with with with with the change uh on the margin and then what can happen with with the price of Bitcoin and other risk assets.

So just keep that in mind. But for right now uh liquidity conditions look strong to me. >> Okay. What about the US economy? Let's look at some stuff around the US economy and the strength because I think that kind of gets back to your original question of like are these rate cuts bullish or bearish is always a difficult perspective. I mean I feel like trying to listen to Jerome Powell feels like trying to read a puzzle like as it's being laid out in front of you. Uh so let's look at some charts here. What are you seeing here? >> Yeah. So this is just the the retail sales uh data that we got uh yesterday. And this is this is important to me just because, you know, 70% of the economy is consumption. 70% of GDP is consumption.

And so, you know, we just got this data yesterday. Retail sales are still coming in strong 6% uh growth over last year. If there was like significant trouble in the economy and things were rolling over, we would expect to see retail sales, you know, sort of trailing off. That's not the case. So this is a this is a bullish indicator to me that there's some strength uh you know in the economy people people are still spending out there >> especially as we go into Q4 which is traditionally the biggest retail sale quarter of the season. So we have seasonality as well feels yeah it feels feels very strong. Uh okay labor markets what are we seeing in the labor side

because this is the side that's harder to read right now. This is what I is causing the Fed to to cut rates. You know, the Fed has been concerned about, you know, sort of stickier than normal inflation. But at the same time, we've had weakening in the labor market. We had 900,000 jobs that were revised out. And what this chart is showing is a divergence between retail sales, which is the lighter blue color that's going up, and the private payrolls, which is the darker blue color going down. And so, you know, this can't go on for this h this disconnect cannot continue. And so, either you're going to see payrolls rise to meet, you know, sales to show that the economy is stronger than we

think or um the the retail sales are going to drop to meet the the the private payrolls. We can see that like this also happened like about a year ago and it was actually a very similar time period just before the Fed cut rates. Uh they did 50 basis points last September. Um but you had a similar dynamic where those two lines were diverging. Um they they later ended up meeting where you can see the blue line kind of came down and then it then it moved up to meet the sales. And so you know I'm just looking at this. My base case is that that blue line that's going down is going to actually rise up because I view these cuts as more of the insurance variety.

And so, you know, the labor market, my view on this is like it's basically at equilibrium uh right now. So, and that's why the unemployment rate hasn't really, you know, spiked up. It's at like 4.3%. What's interesting is like that equilibrium point is happening at like a lower sort of job growth rate. So there's less demand for jobs partly I think because a lot of uh foreign workers are are leaving the country under the new you know immigration uh policies and so you have less demand in the labor market and and and the supply is actually shrinking as well. So you're at equilibrium and you know the Fed now has to step in and sort of prioritize this a little bit more. I think that's why we're seeing

seeing the rate cuts. You know, my view on this is if the if CEOs out there are confident that the red the Fed is going to continue to cut and lower interest rates, that should give confidence to CEOs hiring managers to be able to go out there and kind of start to plan for the future a little bit more, hire people, invest in growth, and and we should see the labor market recover here. That's that's kind of my base case of of kind of what these Fed these uh rate cuts uh the impact that they're going to have on on the labor market. Let's to continue on that. Let's take a look at the labor supply and demand because this perfectly is the next chart here.

>> Yeah, this just shows that you know we're at equilibrium. So, you know what can happen with the labor market when you start to see softness is if we did start to see more more layoffs coming it it tends to accelerate very very fast. And I think there's reasons for this. part of it is just um almost you know I don't want to call it copycat behavior but if let's say you're a business and you're sort of struggling uh maybe you're starting to think that you need to do layoffs uh but you don't want to do that because it makes you look weak uh in the market if you have to announce layoffs uh and you try to hold on till the very last point that you can you could hold on and if you start to see

your competitors other parts of the economy other industries starting to do layoffs it kind of gives you like the permission to do them yourself. And so that's part of why there's some reflexivity to the unemployment rate when it does start to get uh when when when the labor market gets weak. Uh that is what the Fed is trying to prevent from happening by by cutting rates. U but I think the key takeaway is that we're at equilibrium. So we don't have this like issue where uh there's there's not enough job. If you're looking for a job, there's as many jobs out there available as there is uh demand for them right now. We're just keeping an eye on this to make sure it sort of stays in equilibrium and hopefully more job openings come and you start to get a gap there between between the supply and

demand uh for labor. So, okay. So, labor market looking strong. Uh and obviously these rate cuts are only going to assist the labor market and assist the business cycle which um we've we haven't seen the business cycle really enter into uh a its typical form as it we all have been kind of expecting it to for uh a while now. So this these rate cuts should help with that as well. Um let let's just keep rolling through your charts here because I want to make sure we get through them all and there's uh lots of stories to tell here. Uh what do we got up next here? The US high yield index.

Okay. Yeah, go ahead. >> This is just a credit spread and and a good point maybe just to just to um to add on to what you just said about the business cycle there like the ISM uh which is one I think great way to measure the confidence in the business cycle has still been in a contraction zone. The the manufacturing ISM in particular that is like you know you 10 to 12% of the economy. So a lot of people are paying attention to that. does tend to be a really strong indicator when you see that move into expansion and get above the 50 zone. Um it tends to be good for for the for the economy and for for risk assets potentially going to see that breakout with these rate cuts as well. Um coming back to the the the credit spreads chart. This to me is this is something

we we are always monitoring is credit spreads. It's it's te giving us a sense of sort of risk on sentiment in the market. It's telling us that companies that have higher credit risk are are able to access capital right now. And we're seeing that in the in the market. You're seeing sort of meme stocks and a lot of like the sort of riskier far out maybe like the ARC funds, things like that are getting a bid in the stock market because um of the risk on environment, but also because those companies are able to access capital.

There's there's not a ton of risk uh in in in on their balance sheet right now. And so, you know, and also investors are willing to invest in those companies and take on that extra credit risk. So, to me, this this looks good and it it's signaling risk-on environment. With rate cuts coming, I would expect potentially for that line to actually drop even further and and and then this plays into sort of what you would see in sort of volatility in the markets with the VIX and things like that. Um, so to me, this is a signal that we're in a we're in risk on mode. >> Yeah. Yep.

>> Yeah. and and and we're in risk on but yet it doesn't feel it doesn't feel risk on. Do you know what I mean? Like the the sentiment certainly I don't know your take worried. >> Yeah. No, it's a great point. Um like I think we we look at a lot of the fear and greed indexes and things like that and you know there's a lot of sort of macro doomsday commentary out there right now. I think a lot of people are looking at valuations which are which are are pretty high u a lot of that's being driven by the the mag seven and so um you have like seven companies that are you know really driving that the difference here from like when valuations sort of detached you know in

like the tech bubble is like these companies um produce a lot of a lot of revenue uh over two trillion of revenue last year and and and expected to grow and so I think in some ways those valuations can be um you know we can sort of justify them and the rest of the market has has much lower valuation when you look at the smaller in in the midcaps. So I think that's driving it is just like the the market seems overheated. Crypto's been doing really well. Um a lot of like the meme stocks things like that are are going off and people are there's also just a lot of weird stuff happen like just in the geopolitics and politics and all of that. I think that is adding to people's psychology right now as well. So

>> yeah and I think as well like a lot of models are broken you know like we are we are in a time of change and a time of transition as a result of multiple exponential technologies crypto AI machine learning robotics you know I saw a wild chart today about um uh self-driving vehicles and how successful they've been in terms of limiting um accidents and you all these things. It's it's just it's a different world that nobody can predict. And I think it's leading to a lot of people saying, "I don't understand this, so I'm going to sit on the sidelines." Right? Cuz it's just like the easier thing to do. But it

definitely it it is a bit of a bizarre feeling to be here and feel like, yeah, this is this is the time. this this you know this next quarter is going to be could be could be a great quarter for for all markets but yet have so many people being like so bearish and so worried. Uh it's yeah it's it makes it makes it very difficult. It shows the need to to always have to always have patience right because you can >> for sure and you know it's this is why we have markets right like this is you know there's always going to be competing views out there and if everybody was bullish that makes me nervous. So in some ways I get more bullish when I if I have a view and I have a thesis and I know lots of people

disagree with it and I understand why they disagree but I still you know disagree with them. That uh that's a setup I like because you could have a situation where lots of people are sidelined and things just keep grinding up and then that's how you get that reflexive move because they have to chase the market later. Um so we'll see that could maybe that's the setup we're heading into here. >> Okay. What's going on with GDP? So GDP um again just showing strength. Uh the latest estimate from the Atlanta Fed was 3.4% for Q3. So uh we don't see like all of this data that we've been looking at like we're just looking for cracks in in in the economy and we're just not really seeing it. So this looks like, you know, earnings have been

strong, margins have been strong. We see that bank lending, you know, we look at like the banks obviously can print money as well. And so we look at at bank lending, the percentage of banks that are tightening lending standards that's been dropping uh throughout the year. And so we should see more bank lending and this is just telling this is just reflecting the rest of that that economic data that that we've been looking at. So the best audience to distribute your product to your super fans. Duh. But what if you haven't found them yet? That's where Ken comes in. They help businesses scale digital distribution at a price that makes sense. Ked's verified distribution protocol identifies the best users for your product and connects you directly to them. Ready to find real meaningful

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Okay, before we jump into crypto and outlook for crypto, uh let's take a look at the stock market because there's often a correlation there from a riskon perspective. Uh you got a great chart here of the S&P uh going back to what is this 1966. What are you seeing here? Yeah, this is kind of like uh there's been a lot of talk about just what we were talking about earlier with sentiment and valuations being at at pretty high historical levels. And this kind of pulls things into perspective a little bit here in terms of like where we're at in this bull market. So we're looking at the there's been nine bull markets since 1966 and the red line here is the current one and you know given

that the sentiment is you know sort of extreme in terms of valuation and things like that you know in terms of the the the actual gains this would be number seven out of the nine last bull markets in terms of gains. Um so yeah so that is an interesting point and then in terms of the length of the cycle it would be number six. Uh so it's not this is not a standout >> actually less bullish and less it's not what we think it is at all. It's so fascinating >> right and so there's some people you know I've seen like Tom Lee out there talking about hey we're we're midcycle right we're in the fourth or fifth inning. We're not in the seventh or eighth inning. And I think, you know, when you look at the ISM and you look at

um this chart here showing like historical bull markets, you can start to uh make a case uh for that. And we're just starting rate cuts right now. So So I think that's this is an interesting way to sort of put the sentiment into perspective. I think >> would that be your take on uh where we are in the cycle that we're midcycle? I think we are uh I think the stock market is is probably late midcycle is kind of is kind of my view. So I think there's there's room to run here. And the the main thing that I'm looking for is just sort of how things start to play out now that we have now that we've kind of crusted over this latest catalyst in terms of you know what the Fed's going

to start to do, what they're going to start to signal to the market. Um, I need to go back and actually watch the press conference and see what he said because a lot of times, you know, the market priced in the the rate cuts. Um, and what the market is going to start to look at now is like what is the for what is the forward outlook? What is the Fed looking at in terms of inflation, in terms of the labor market, um, and what is the dot plot um, look like in terms of like future cuts. But, you know, for me, and and we can get into like where we we think crypto markets are going as well, but it doesn't feel it feels to me like the people that think we're like, you know, totally over overinflated and and like heading for a recession, I just

don't see that in the in the data right now. >> Yeah. Yeah. It's I completely agree. Okay, let's go let's go crypto. Uh when we look at let's start with Bitcoin and then we can go down to alts and the rest of the market. what are you seeing from the bitco bitcoin perspective? >> Yeah. So, this is a chart which we're looking at the point in time uh total supply held by long-term holders. Uh we do we look at a at at sort of uh cohorts of of holders of Bitcoin. Um and we focus on Bitcoin here because if you think alt season's coming or I think we're sort of in alt season to be honest, we could talk about that. If if you want to see your alts rise, if you want to see ETH outperformance, soul outperformance, we do need to see

Bitcoin continue to to to do well, at least sort of grind up a little bit. And what we look at here is long-term holders and the behavior of long-term holders. This is onchain data only, so it doesn't include the ETFs. We can get to the ETFs in a minute. Um, and what my theory is sort of that uh in the last cycle, the first top of the cycle, which was in April, was kind of like the actual top, even though we actually went slightly higher in November later in the year. And the reason I say that is because that is kind of when the the most new money came into the market. It was also the period when long-term holders essentially distributed their

coins to that to that new money. And so we can see that in the the orange line if you look at the first uh drop there, long-term holders reduced their supply by 13.5% from like October of 20 to April of 21. Um and to me that's like that's an important thing to understand because then as time went on we didn't actually have like a new money come into the market. it was like very muted and it was mostly long-term holders like getting back into the market leverage and stuff that sort of ultimately pushed us back to the all-time highs but it but there was not much behind that and that's why we ended up uh going into that bare market. So now if we sort of take that framework and we look at what's played out so far this cycle sort

of a similar dynamic where most of the long-term holders have you know distributed their their coins they did that from the period of like Q1 of 24 after the ETFs came out we went we ran up to about 70k or so and we we can see that the orange lines is dropping so they're they're distributing coins. We also saw that lots of new money came into the markets early early in the cycle. So the short we we'll look at short-term holders in a second. Short-term holders uh spiked up. That's sort of that moment where okay, long-term holders are getting out, new money's coming in. That's pushing price up. And so we've seen like almost a similar reduction in terms of the

long-term holder supply through January of 25, which I think you can make an argument that that may that's like the true top true top in terms of like the most amount of new money that that came into the market. That's when Trump launches Memecoin. That's when, you know, the Coinbase, you know, app Phantom, like all the things you normally would see at like the peak of the market. um where sort of all the signals were were going off and and then it's sort of like okay, what are long-term holders doing now? And we see a similar pattern here where it's like now that line is going up just like it did after the like true top uh of the last cycle. And the question to me now

is if we're going to have an explosive Q4 or this goes into 26, there there does have to be new money that comes into the into the market. Uh so maybe if we go to the next uh slide, we can look at the short-term. So now we're looking at total supply held by short-term holders. And this is sort of the uh the the reflection of what we saw with uh long-term holders. So you can see the the reason I say the first top of 21 was the true peak. Look at how we can see that the most amount of new money came into the market at that time. Um, and then at the second peak, short-term holders did not the line did not spike

up at all. So, there was really like no new money that came in at that second peak. And so, now fast forward to this cycle, similar where you had the most new money come in earlier in the cycle at that kind of Q124 period and then again in January of 25. And so, looking forward, I need to see that line starting to move up. It is, you know, creeping up a little bit. So there is a little bit of participation uh over the last few months. Um but if we want to see Bitcoin go to 160 to you know 200K or so. We need to see that line uh moving up. We need to see new money. And so that's the question. Where's the new money coming from? We we know that most people that wanted to get into crypto

have had opportunities to do so. This has been the institutional cycle. The ETFs came out made it much easier for institutions to to participate. you know, who's buying Bitcoin at 120K that's going to come in and reflexively drive the price up. Uh I think that's like the question that that we're asking. We know the economic data look looks good. Um and we're just wondering like what is going to be this sort of catalyst to sort of kick off a more reflexive is is it going to be Michael Sailor coming out and announcing, you know, a bunch of purchases and there's a bunch of Bitcoin treasury companies.

There's a bunch of, you know, a long list down the down the risk curve as well. Now uh but this is something that I've been been thinking about and of course this is only the onchain data. So we need to look at the ETF data as well and we can look at that here. So this is just showing the the spot, you know, BTC flows, net flows for the ETFs. And so we need to combine this because we know a lot of the the capital is flowing here now. And it kind of tells the same picture that you see with the onchain data that the most money most new money came in in um around the January December January period of the cycle. Um we did see another like a pretty pretty good influx 146,000 Bitcoin of net flows. um that was from sort of like

after we got through the tariff mess um through um through like August or so. But if you look to the far side of that chart, like we need to see that we need to see some big green bars coming in there. If if we're going to see Bitcoin like um kind of push through I think what's the alltime high? 123 or something like that. We're going to see that shoot out to 150 160. Um we need we need new we need new money to come in. And so that's the question I think. Um, I'm asking and you know what's that catalyst going to be? It could just be, you know, gold's been doing really well.

So maybe gold investors are doing really well and they want to sort of get a beta play on gold and they want to rotate into Bitcoin. Like these things can certainly play out, but I think it's it's helpful to sort of ask the question and factor factor this into your your your >> what are the what are the two or maybe there's more than two, but um probabilities here. uh on one end new money doesn't come in and does that mean we've already seen the cycle peak and on the other end new money does come in and we still have a ways to go is that simplified >> I think that's probably a very simple way way to think of it and you know there was a I saw Chris Berneski put out a a tweet it was like a poll uh the

other day um just asking yeah I just screenshotted here shout out to Chris. He's basically, you know, asking the the Twitter, you know, how allocated are you to the market? And like most the 64% of the responses were like very well allocated. So, so 76 to 100% allocation. So, we know like, you know, most crypto natives are in the market, right? Like mostly in the market. Um, and they're hoping some that there's a new that retail comes in or there's a new wave of of users that that come in. This is the key question. Um I, you know, anecdotally, I'm definitely seeing like people have been asking me about crypto.

We're in one of those periods where like people are definitely like my like um friends and family and things like that are asking about it. So, so there could just be uh a new sort of awareness campaign. You know, Michael Sailor's on TV, Tom Lee's on TV and we sort of get that can certainly happen. Um but yeah, this is this is the the the key question and like institutions have been involved. So, like are institutions going to buy Bitcoin at 120K? Are they, you know, we know that they're probably more likely to sell as well? They're not like the same like like the true hodddler base uh of of these coins that we we used to have with more retail participants. So, it's a I think it's a it's a it's a hard thing to truly quantify and and add to to the

frameworks, but it's helpful to be thinking about like who's the marginal buyer um that that's going to that's going to be coming in. So, >> and as this this poll shows, it's not crypton natives. They're already fully allocated for the most. >> They're probably Yeah. And you know, this is somewhat uh you know, somewhat biased because this is on crypto. This is a crypto Twitter poll and most of these people are crypto Twitter users. So, you know, we're seeing that here reflected here. Um and yeah, so so it'll be interesting to see. I mean, my base I I I don't think that we've peaked. I do think there's more juice left. Um, but I think it's helpful to be to be, you know, thinking about this uh because it might make you change. It might impact

your, you know, just how high we we potentially could go. >> Okay. Another great uh signal is how much Bitcoin is on exchanges and the shift that's happening there. What what are you seeing there? >> Yeah, this is kind of like just another way to look at distribution of coins. So when we see the green bars spiking up, this is net uh net uh exchange net position change. So it's the amount of coins that are going into exchanges, you know, versus leaving exchanges. When it's going into exchanges, we assume people are sending coins from, you know, self custody and they're going to the exchanges they want to exit the market.

They want to sell. uh when we see the red bars it we assume that uh people are buying on exchanges sending coins to their self-custody because they want to hold and they're they're they're buying u so you know we look at the last cycle we can see that there were like four you know pretty significant green spikes uh that that happened like there were most of that activity happened again this was the first peak again kind of signaling that was when um you know most of the the selling or new money was entering um And then we've also had four peaks now in this cycle. So we had one early, you know, when the ETFs came out. We had the largest spike up uh was was in January, you know, during that sort of blowoff

phase. And um and we've had a few smaller ones over the summers summer here. What's interesting is like we're now seeing red uh is the last sort of like bar you see there, which looks like people are buying. So maybe that's maybe that's the answer to the question we were just asking. Like it does look like there's some buying activity happening at these levels uh right now. And that's that's a good thing to see for me for me here. And it'll be interesting to see if that starts to flip green if we do uh start to break out here. And and that would be an indication to me that like okay maybe this maybe we're heading into the final phase if we start to see that flipping green and heading higher. Um but yeah, just another kind of

perspective on just what's happening out there with with holders and um how they're how they're thinking about, you know, their investments. >> What what what I'm hearing is that you are uh that you are you're you're bullish. you still think we've got room to go, but you're looking at the charts and you're think you're kind of you're a little bit cautious and you're unsure and maybe you've lowered your I don't know if you have um price predictions on Bitcoin uh or you know cycle predictions. Uh but that's what kind of what I'm hearing is that you're you're you're cautiously optimistic. Is that correct?

>> I think that's fair. So when we when I look at the the economic picture, the business cycle picture, like that gives me confidence and like that it's hard to say that we're like super late cycle when I look at at that. >> Um when I look at the crypto data, it feels farther towards the end of the cycle to me than than the economic data does. So, like that is a little bit of a tricky thing to deal with because if we are going to just see um liquidity conditions, you know, banks lending and the the labor market picking up and all of these things that look like they could happen with rate cuts that should be bullish for for the crypto markets.

And so, you know, part of this is, you know, we've we tend to think in these sort of like four-year cycle frameworks and that has been the accurate way to to do this. And part of the reason for that is if that if everybody thinks like that then it it impacts the behavior of the markets, right? Uh if everybody thinks we're going to peak in Q4, then that this is almost a self-fulfilling, you know, prophecy to that. So the where I'm at, and this is a struggle and nobody has the answer, is just like, okay, we we think we're late cycle here. We're not like we we think we're going higher.

My price prediction for Bitcoin was 150K. I still think we we could hit that level, but I'm like cautiously watching that to see for the signals that we're going to get there. And then, you know, if Bitcoin continues to grind up, what I expect to happen is ETH to have another catch-up. So, ETH sort of had its like rerate moment uh over the summer. And I think there's another phase of that coming if Bitcoin gets that bid that we're looking for and sort of just we want to see Bitcoin sort of grinding up like not not too aggressive but kind of grinding up stalling and then like you see the wave come from ETH. ETH has been sucking liquidity from the altcoins.

We're seeing some of that um some alts have done very well over the last few weeks or so. Um, but once ETH kind of gets through all, if it can get through 5K and start to push towards 6K or so, then I think we could see the big move that everyone's looking for with meme coins and kind of that longer end of the the risk curve. So, that would be the ideal uh setup. I still that's sort of my base case of what should happen. That would be like in line with how things typically go. Um, but we're monitoring we we we we're constantly monitoring the data to potentially change our mind if if we see the signals of that.

>> To to me the great reminder there is that everybody needs to be cheering for Bitcoin to go up first as you said grind up style. And mostly everybody needs to be cheering for ETH to go up. Even if you're not invested in ETH and you're in other altcoins, everything has to follow ETH. like we need ETH to go up and that is usually what as you said if it can get to that new all-time highs if we get into 6,000 yeah then I think we can see that real altcoin season that everybody wants but that doesn't happen if I mean at least it hasn't in the past and I doubt it would again if ETH doesn't go first >> right right yeah I think that's 100%

accurate you should even if you don't hold ETH uh you should be rooting for that and and part of like the weight that we try to arrive that like where we think these the price could go is like uh a pretty fundamental understanding of like Bitcoin's sort of fair value which which we look at like the cost to mine one Bitcoin. And we look at, you know, if you if you look at the 200E moving average, which is like a 4-year moving average, Bitcoin tends to bottom out at the uh at the when the when when the price reaches that 200E moving average.

And then we look at realized price, which is sort of a proxy for the cost basis of the network. And all of those things look like they're going to converge around 60 60K or so. And so then you can say okay if that looks like that's going to be the bottom uh then what would be the if the top is 150 then you get a you're going to get a 60% draw down is probably you know I think a lot of people are think we're still not going to see these big draw. still think we are going to to get that. Uh but we factor that into like the the the true like sort of fair value cost basis of the network in terms of how high we can potentially go because we think we'll end up bottoming at those levels and

then you can say okay if it's a 70% draw down you know maybe you go a little little bit higher or so. Um, but I think I think that's that's the key thing. And you know, it looks everything looks there there's not a lot of like arguments that can be made to be like really bearish. I think uh you know I try to always like take the opposite view and try to see if I can understand it better than better than they can. And I I have a hard time being like bearish at these levels. But um but at the same time like you know we've been in the markets for uh since the lows. And so if you've been in like you're probably not fully allocated at these at these levels. So when I see the the Berneski chart and lots of people are fully

allocated um that's that's an interesting you know data point uh for me for me to factor in. So >> every everybody's still waiting for, you know, either either they they haven't had the gains because they're fully I mean fully allocated to alts or they are are still waiting for the the the glorious bull market that we all talk about so much. >> Michael, pleasure pleasure to get you back on the show today. Thanks so much for joining us. >> Yeah, thanks for having me, Jay. >> Thanks for listening in all. I got to remind you none of today's episodes financial advice. I'm not your financial adviser. Michael's not your financial adviser. This episode is for education andformational purposes only. And if you need help with your investments, you should speak to a professional. As I

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