Bankless - Are We Headed for an Altseason Melt-up? | Michael Nadeau’s Defi Report #1

Episode Date: May 27, 2025

Is altseason finally here or just getting started? Michael Nadeau of the DeFi Report joins Ryan to break down the data behind a potential crypto rotation. We cover why ETH and select alts may be poised to outperform, how macro conditions are fueling risk-on sentiment, and why fundamentals—like protocol cash flows and MEV—matter more than ever. Michael also shares his current portfolio and reveals what he’s buying right now. If you’re positioning for what’s next, this is your rotation signal. Michael Nadeau & The DeFi Report: https://x.com/JustDeauIt https://thedefireport.io/research/altseason-melt-up https://docs.google.com/presentation/d/1g2H1VaAKHWB5trl1tRHRYc68lIqZ8tWnzcLnkasAVYk/edit?usp=sharing --- 📣SPOTIFY PREMIUM RSS FEED | USE CODE: SPOTIFY24 https://bankless.cc/spotify-premium --- BANKLESS SPONSOR TOOLS: 🪙FRAX | SELF SUFFICIENT DeFi https://bankless.cc/Frax 🦄UNISWAP | SWAP ON UNICHAIN https://bankless.cc/unichain 🛞MANTLE | MODULAR LAYER 2 NETWORK https://bankless.cc/Mantle 🌐SELF | PROVE YOUR SELF https://bankless.cc/Self 🟠HEMI | BTC & ETH, ONE NETWORK https://bankless.cc/hemi --- TIMESTAMPS 0:00 Intro 0:23 Vince McMahon Meme https://x.com/QuintenFrancois/status/1925543793371054122 1:10 DeFi Report #1 & Crypto Fundamentals 7:07 Mike’s Trading Time Horizon 9:13 Alt-Season Melt-up? 15:43 Macro Catalysts 25:57 2021-2022 Cycle vs. Today 29:03 Bitcoin & ETH Moving Average Chart 32:46 Different Types of Trading/TA Fundamentals 36:36 Long-Term Holder Supply Chart 43:09 MVRV Z-Score 48:39 ETH/BTC Ratio & Altcoin Season? 53:02 Mike’s Portfolio 1:00:40 When to Sell 1:02:33 How Durable is Solana’s MEV Infra 1:04:59 Closing & Disclaimers --- Not financial or tax advice. See our investment disclosures here: https://www.bankless.com/disclosures

Bankless Nation, the question today, are we headed for an alt season? Meltup. Man, I sure hope we are. We've got Michael Nato on the podcast. Mike, how you doing? I'm doing great, Ryan. How are you? I'm doing pretty well.

You know what? I'm wondering if a lot of people listening to this episode on Bankless are kind of like, have you seen this Vince McMahon meme? So for those who can't see, this is a tweet. Wow, Bitcoin is all-time high. You must be so rich. Me with 99% of my net worth in alts. Vince McMahon, and he's just crying because he's not getting that upside. I'm wondering how many

people are feeling like this meme right now, Mike? I think a lot of people are. I think a lot of people are, you know, ETH made a pretty big move a few weeks ago, and it looked like BTC dominance may have been peaking. We've seen Bitcoin diamonds actually sort of come back a little bit since it fell after the ETH rise. But yeah, a lot of people out there are ready for alt season. I think there's a lot of animal spirits kind of ready to come roaring back. So excited to talk about it today. Yeah, we'll get into it. Mike's got a lot of data points around this. I know it's something that you've been studied. You know, what we should do is we should just tee up this episode before we get into the alt season conversation. So Mike's been on the episode before, on bankless before a number of times.

And Michael is the founder of the defy report, which is my number one destination when I want to read reports about like crypto fundamentals, what's really going on. And we've actually partnered with Mike to bring these episodes to you every single month. So if you want to think about this episode, this is an episode about crypto fundamentals. And Mike and I are going to be recording this and we're going to be providing this episode in the bankless podcast feed on the last Tuesday of every month. We're going to bring these episodes to you with kind of a fundamentals analysis. Mike, I'm wondering if you could give folks a taste for how you think about crypto as an asset class. And when I say the word fundamentals, what that actually means for you.

I've been at this since 21, trying to understand how value accrues through these networks. And I think the only way to do that is to be really, really deep in the data and to be thinking uniquely about valuation. It's been interesting to see like this topic of real economic value, you know, getting hot on crypto Twitter. very cool for me to see, I've been very focused on fundamentals. And so, yeah, for me, I mean, how do I think of this? It's really data-driven. You know, everything for us starts with data, and then we kind of build our thesis from there. So super excited to do this show with you and get into a lot of this really deep data that we cover in a lot of our research.

Certainly crypto is like super data rich, and we're still early on the journey of fundamentals. I know you and I have talked about this analogy before, right, this idea of like, well, what did the early U.S. equities market actually look like. And when we think about fundamentals and equities, where did those actually come from? You know, someone like Warren Buffett, okay, so he bought his first stock. He was like 11 years old. It was 1942. And at that point in time, there was really no concept of fundamental valuation for a stock, for an equity. The idea of discounted cash flow had just come out in like 1938, something like that. And it was this esoteric book. But the consensus narrative around most stocks at that time was they just traded on narratives.

It was like kind of animal spirits, like discounted cash flow of like discounted future cash flow. Like what even is that? And over the decades to come as equities and stocks really matured, there started to be a consensus view on what fundamentals actually look like for the asset class of stocks. And of course, people like Warren Buffett played this game very well and bought things for cheap and bought assets that had strong fundamentals at very low valuations. And he is the most notable, successful equities investor in history as a result. It feels like we're still in the 1940s, let's say, with respect to crypto fundamentals. 100%. I think that's a really good way to think of this. And, you know, I think something that's really interesting about crypto is you can

go back and look at past industries as they were emerging and see tons of parallels. And I think in terms of valuation, we see this in terms of how do we value these things? What are the key KPIs that investors should be looking at? How is the market eventually going to sort of converge on a consensus or a social construct around valuation? You know, that certainly has not happened yet. And it's been mostly speculation. And that's just normal. That's how any industry forms. And so we'd mostly see speculation and a lot of sort of relative valuation based on Bitcoin. and it's sort of store of value and comparing that to digital to gold.

So, you know, I think over time, we're going to see the market start to kind of converge on a key set of KPIs to do relative valuation for specific assets, specific sectors. And this is just going to evolve over time. But I think it's important for people to realize that, you know, DCF is a social construct, right? That's something that Benjamin Graham sort of brought forward

in the 1930s, and it's really just the market saying, okay, we think this is the best way to do relative valuation of equities. And so the market converged on that, that does not mean that that is how crypto is ultimately going to converge. This has been a hot topic. People, you know, have sort of divergent opinions on this. In my opinion, it's going to be a combination of, you know, sort of cash flow and some other KPIs that, you know, we can get into on this show.

But that's kind of how I think about it. We are in the process of figuring this out and achieving consensus, which will become the new sort of valuation criteria. So if you guys are trying to get a sense of what Mike and I are going to do in these episodes, which again is going to be last Tuesday of every month, is basically we're going to be on a quest to figure out what the fundamentals in crypto truly are. We'll be looking at a lot of charts, looking at a lot of on-chain data, open-minded, but also like trying to figure it out aggressively.

And this is going to be very data-driven because Mike brings a mindset and a set of skills with respect to analytics that David and myself just don't have on bankless. And so we're going to be looking at just in-depth charts, the data, every single episode. And another thing I should say, Mike, is I think your orientation to crypto

is similar to ours at bankless, which is longer-term time horizons, right so again this is the spirit of war in buffett what is what is what is was buffett a trader no he was a buy and hold investor he bought things for cheap based on the fundamentals and then he held them you know we've not really been i'm not a success i'm not a good trader mike okay and so i prefer yeah okay so what what's your time horizon when you think about fundamentals as applied to crypto and when we even think about these episodes uh are we talking about like weeks to months to years holding time periods? Or like, how do you structure your own portfolio?

Yeah, this is, this is super important. I think a lot of people come into crypto because they, they want to get rich quick, right? That's kind of usually the first thing. That sparks the curiosity, and then you start learning. We, that is, you know, I don't think that's the right approach to come into this. I think you want to deeply understand what these things are. If you do deeply understand what they are, then you can start to think about, okay, what is fair value for these things? How can we start to look at data to determine where that fair value is, build a thesis, a really strong thesis with conviction, and then, you know, buy assets and hold them for years on it. But that's really my style is to basically have a set of data that we are always monitoring

to figure out where we are kind of in the cycle. Like, we tend to have these cycles, which are evolving as crypto matures as an asset class. But it's really deeply understanding where you're at in the cycle, and then combining that with fundamental analysis of specific assets, developing conviction, and then backing the truck up, what do you think it's time to do that, and then holding for long periods of time. So that's the style. I love it. All right. So if you're into data, on-chain data, if you're into fundamentals and long-term holding horizons for this asset class that we call crypto, this is what, you know, you're the listener that these episodes were really built for. And one other thing I'll add is, Mike, at the end.

of every single episode that we do together, I'm going to ask you what positions you're taking, okay? What are the Mike Nato bags? And, you know, what have you decided to allocate to and change your position on a month-to-month basis? So I guess there'll be some copy trade opportunities for folks, although I don't think you'll be able to copy Mike Nato's conviction around these assets, but you can certainly read the analysis that went into them. So with that, we should get into the topic of today's episode, which is my question to you and a title of a recent report that you put out, are we heading for an alt-season melt-up? Okay?

And before we address this question, I guess when someone says alt-season or alts, what does that mean to you? Is that everything aside from Bitcoin essentially or is it a collection of assets? Yes, yeah, that's important to kind of define like what is alt-season. So I think of old season as a period in time where for every new dollar that comes into crypto, more than 50% of that is going to assets outside of Bitcoin. Right. So historically, you know, Bitcoin's dominance is around 65%. Historically in cycles Bitcoin is sort of the leads the market.

And you see the all-coin market tend to follow. But you do get like a key inflection point typically in these cycles. that tends to come towards in the last year of the cycle. There's a few other factors that we look at in terms of like macroeconomics, liquidity conditions, and just sort of like market sentiment to determine like when is that sort of nearing. But I think we are sort of nearing this point where we are going to see this rotation. Bitcoin has shown a ton of strength of late. But we have seen some interesting signals in the market that that is potentially

going to shift here. So, Mike, for people who haven't been here in previous crypto cycles, right? Like, I guess when we talk about these things in cycles, we're saying that this has happened before. So in other, you know, periods of time, I don't know if you'd say four-year periods of time or something like that, we've seen Bitcoin dominance increase, and then we've seen it decrease relative to other assets, which implies the other alternative assets are increasing a substantial amount after a Bitcoin run up. But it's not clear to me why all of this should play out in repeating fractal cycles. Right? It's like, do we like, is that, how do we know that just because it's played out the last, you know, three or four times this way? Like, why is this time not different? Why are we even

assuming that there would be a cycle to any of these things at all? Yeah, I think it's a fantastic question. And, you know, there's this saying like, you know, history doesn't repeat. It rhymes. You know, I kind of think of it more like history doesn't repeat, but human behavior repeats. And so, you know, if you tend to believe something based on how it's played out in the past and everyone sort of has a similar view, then it becomes sort of this self-profilling prophecy. And so I think that that certainly plays into it. And I like to sort of think about my own psychology as, as an investor as well, and think about how that applies to the broader market. And like, you know, we can get into, you know, kind of what I'm doing later in the show.

But for myself, I'm not as interested in Bitcoin at this stage of the cycle right now because I think there's potentially larger gains to be had farther out the risk curve. And so I kind of apply that to the rest of the market as well. Most people in crypto have a fairly large percentage of their portfolio in Bitcoin. If you've already had significant gains on those, the market's heating up. It just makes sense that people want to rotate and just capture, you know, the end of the cycle, in some riskier assets, and have some fun. And I just think that's sort of why it tends to repeat. Imagine if your checking account and defy wallet finally spoke the same language.

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wallets for air drops or governance participation. And then last, secure verification. Apps validate your proofs instantly on chain, like on cello, or off chain. Audited by ZK security, the self app is live on iOS and Play Store. Visit self.xy-Z and follow self-proticle on X. Okay, well, let's start with maybe the macro catalyst for some of this and set the background context, and then we can start applying this to crypto. So when you look at macro catalysts and kind of the setup here, what sort of things are you looking at? Yeah, so we were getting, I would say, pretty bearish towards the end of last year, beginning of this year, started to take some risk off the portfolio.

As Trump came in, there was a ton of uncertainty, obviously, in the markets. And crypto was sort of looking like it was kind of having a blow off top, like as Trump came in at the end of January. And since that time, we've been really focused on, you know, we were expecting a pullback and then really focused on where. Does Bitcoin sort of settle? Does it maintain its bull market structure? It did. It ended up bottoming around 75K or so. And now we are sort of, you know, seen about a 50% move off of that. So I'm watching this. I'm watching global liquidity conditions. And then, but really the big thing for me is this shift from the Trump administration from what looked like we're going to be policies of austerity, you know, trying to balance the budget. We have Doge, you know, and, and,

And you tend to not want to bet against Elon Musk when he comes in. And they were pretty aggressive early. But it looks like a lot of that's, you know, mostly sort of just kind of politics. It doesn't look like it's going to be a huge needle mover. And so it looks like the debt is going to continue to increase. It looks like the budget bill just went through Congress. That looks like it's going to pass. That looks like just more and more fiscal spending.

and something that's been interesting to me as an investor over the last few years, I've been studying more this concept of MMT, modern monetary theory, which is really just a description of how government finance works. And this has really helped me understand the importance of the fiscal side. And it's almost like the Fed is irrelevant to me right now. They're sitting on their hands, but the Treasury is really in the driver's seat to me. and what has become clear, I would say, over the last month or so, is we're going to see a continuation of fiscal spend. And I believe that is now, that is driving the market. Okay. And that has positioned you as bullish, like bull market resumes kind of positioning, right? Exactly. Yeah.

Okay. So let me understand this. You were looking in Q1, you're kind of looking for indicators of whether we would have sort of bull market in crypto or bear market in crypto. though. And first you're seeing some bearish signals, right, around, you know, like Doge, austerity, how many government workers would be laid off, things like this, the tariffs as well. That's kind of like a pie shrinking sort of move. It can be sort of an austerity move. And then I guess coming into this quarter, we've seen, particularly in May, we've seen a relaxation, right? It seems like Doge is just like not doing a whole lot with respect to government spending. And it also seems like

tariffs have relaxed. We did an episode with Arthur Hayes and he's basically like, look, tariffs, Trump pushed as far as he could. It's not geopolitically. He's not able to geopolitically push any further. It's not popular. He's got the Republicans have to get elected again. So the tariff season is kind of over or it's at least diminished. And now we have the fiscal bill, Republican bill, I believe. And this is like a bill. It was like three to five trillion to the deficit. It would add over the next 10 year period. period of time. So are you seeing these signals and you're saying, okay, well, if we're not going to austerity and if it looks like we're going to money printing and something like MMT,

and that equals resume the crypto bull market, do you feel like you have the signals to just basically say this at this point and are you positioning accordingly? Yes. So yeah, the way I think of this is we are going to continue to see fiscal spend. And I think the key takeaway for people on this is when the government is running a huge deficit, that is a surplus to us, right? That's money that they're printing and pushing out into the economy. So it's a deficit in terms of the government budget, but it's a surplus going out into the economy. And so that is what's going to drive this liquidity. What, you know, I'm a little bit concerned about is just, you know, so the way I'm thinking

of this short term is we have a nice little pocket here. And I think we are going to see like animal spirits. it's already starting to happen. It looks like we're going to start to see a little bit of an all-season for specific coins. But I do have a little bit of concerns maybe once we get into like July-August period, because that is when these tariff pauses are coming. We're going to get more hard data in terms of what is going on in the real economy. These tariffs, it takes 60 to 90 days for that to start to kind of make its way through the economy.

So looking at, you know, we're going to have labor reports coming. There's a bunch of data that's going to come. We're going to get more CPI data. We'll see if that's impact. The tariffs are impacting that. And so, you know, I do think we have a nice little pocket right here. But there's still some darker clouds, like potentially in the summer months. And also the bond market, you know, is, has, you know, as Trump would put it, gets a little yippy around the 5% level, which we are getting back towards.

So, you know, there are some dark clouds out there, but I feel like we are in a wrist-on environment right now. And I'm just kind of watching that and then getting ready for potential correction maybe in the summer months. Yeah, what's unclear to me is if some of those dark clouds are just kind of bearish for crypto as an asset class or bullish. Because you can interpret them as bearish. You say maybe supply chain tariff issues start to look like the U.S. is in a kind of recession decline. and like that fuels may be bearish for crypto. On the other hand, doesn't that just mean that the government is going to at some point in the future sort of step in and the money printer is firing? And so therefore, you know, crypto number go up. You could say the same about bonds. Okay. So if the bond market is getting a little yippy, when you have like, you know, long duration treasuries above 5% interest, well, doesn't that mean that there's some sort of treasury fed intervention that needs to be taken to, like, you know, long duration treasuries above 5% interest? Well, doesn't that mean that there's some sort of treasury fed intervention that needs to be taken to, like go, I don't know, do some form of quantitative easing. And so maybe it's, maybe some of these bumps are bad in the short run, but you could also interpret them as, as bullish. And it's really

hard to know how the market, the crypto market will interpret these things. Yeah, totally agree. And I think the stuff that's coming, you know, the policymakers are very aware of this, right? So, and they've been watching how the bond market has been receiving their policies. And so I think there are plans here. And what I think is going to happen is, you know, there's a lot of treasury issuance that that is coming. And you can already see the signs of like how they're going to deal with this with there's like these potential changes coming to the supplemental leverage ratio. And that just basically allows banks to hold more treasuries and lever them up. So if you get changes there, which I think the regulators can put through, then all of a sudden

you can kind of stuff the banks with with this new issuance. And then we've heard, you know, Bessent talk about the Treasury doing more stock buybacks, right? And so that becomes sort of a form of liquidity. It's sort of like shadow QE. And I think what we're seeing is like Bitcoin sniffing this out and crypto sniffing this out. Definitely. And so to me, like the policymakers sort of understand this and they're developing ways to sort of allow for all this due Treasury issuance without disrupting the bond market. But we'll see. We'll see if there's some turmoil as that kind of plays out. One last catalyst. And this is sort of a, I guess, a macro catalyst, but it bumps up against being a crypto catalyst, which is the genius stablecoin bill legislation.

And I mean, I think talking to people closer to D.C. than I am, Mike, I think that's going to pass. I think we will get passed in the Senate. It'll go to the House, maybe some revisions, but it ultimately will pass there, it's a Republican-dominated House. And of course, Trump's going to sign it. And what do you think about that as a catalyst? Because so far it doesn't maybe feel like the market's reaction reacting to this yet, or maybe it is in your mind.

You think this will be net good for crypto and will reflect in prices? I do. I think this is huge. I think it's kind of being discounted in the markets right now. You know, it looked like this may not pass about a week ago, but it looks like it is going to go through. It's also incredibly important for the larger crypto bill that will be coming. So this is huge.

I mean, this is in coming back to sort of, you know, Bessent needs to sell treasuries. Like this is another vector where they can essentially issue more debt, put that into stable coins, which I think is just incredibly bullish for the U.S. in many ways, in the U.S. dollar, actually. But this is huge. I mean, back in 21, when alt season really kicked off like really early in 2021. That was our last alt season, right?

21. 2020, yeah. Like, it was very early in 21. Okay. Eath made a massive move like the first week of the year. And what people don't, I don't think is appreciated so much is there was an OCC ruling related to stable coins right before that that happened. And then Eath made like a, you know, I think it was like a 65% move in one week.

And then we just had like, you know, then you have NFTs, then you have everything else that sort of came after that. So that is a potential catalyst here, this stable coin bill. I'm thinking back now. You got me thinking back to 2021 and the last, I guess, cycle and the last season, right? So if I'm recalling, Mike, we had 2020, which by the end of 2020, there was a pretty massive Bitcoin, like a price appreciation at that point in time. I remember a lot of people were saying, hey, again, similar to what they're saying now, it's Bitcoin's world.

Bitcoin's doing it. You don't need any other, you don't need Eith. You don't need other assets. It's just like Bitcoin, right? And then maybe Bitcoin plus DeFi or maybe Bitcoin from NFTs. And then in 2021, Alt season kind of kicked off in the price with a massive jump of ether. Ether kind of led alt season. And I guess that lasted all the way until the end of the cycle, which I call that maybe

Lunantera collapse, April 2022. My God, after that, everything came crumbling, right? It was not fun after that. So that was a pattern of the previous cycle. You had a Bitcoin run. It was Bitcoin's world. Then you had an Ether run. And then you had a whole bunch of other assets downstream of that.

that run and that alt season lasted about maybe like a year and a half. I'm wondering if you think the contours of the 2021-2020 season will look similar to this. It feels like we're heading in this direction. I think the big difference here potentially is just that, you know, we are four years later. We are four years more mature in terms of data in terms of the protocols themselves and their ability to show their fundamentals to the market. Some of these are producing pretty good cash flows. They're doing buybacks. And so, you know, one thing that I think will be interesting in this alt season, if we do get this, is the dispersion.

And I'm looking to see, you know, the assets that do have an interesting fundamental story, do those, you know, start to separate themselves? I think it'll be a combination of this. So what I sort of my base case for how this will play out is, you know, we will get, you know, ETH will appreciate against Bitcoin again. It got to, you know, 0.08 in the last cycle. If you, you know, if you got to 0.08 right now, I think you're, you know, you're at close to like 9K or so for ETH, right? Just that's a type of re-rating that can occur.

And so, you know, if that happens, I expect to see the animal spirits and I expect to see the things that we saw earlier in the cycle also, you know, come back. So meme coins, definitely not fading meme coins. And we can talk about some of those at the end here. But I think you're going to get a combination of like things with really strong fundamentals. And then also, of course, you know, crypto, animal spirits and speculation. And so you'll see like this barbell, I think, of like the really highly speculative things that get lots of attention. And then the things that have fundamentals that may be like, you know, funds are allies. allocating towards as well.

I think when you say fundamentals and meme coins in kind of the same breath, people go, huh? So you'll have to tell us about that in a little bit. Okay. So now let's get into it. So that's the macro setup here, right? I guess kind of looking good, looking okay. There might be some blips as we get some other economic data in the summer you're saying, but looking pretty good at least right now. So can we look at some of the metrics that that you pulled out for maybe the beginning signs of alt season. We're looking at Bitcoin moving averages here. Can you explain the chart? Yeah. So this is the 50 day and the 200 day moving average for Bitcoin. And we can see that there was a death cross a couple months ago. And important

understand, this is backward looking data. So when you have a death cross, it's telling you the price has already collapsed quite a bit. And that's when the 50-day movement. moving average dips below the 200, the longer 200 day moving average. So we had the death cross. You tend to get a pump actually after the death cross, which we got. And now we've actually just now achieved the golden cross, where the 50 day is now in a bullish pattern and it just pierced through the 200 day. So that's telling you, okay, again, that's something that just played out.

So that was, I think we've had almost a 50% move or so in Bitcoin just over the last six, six weeks or so, which is pretty, pretty aggressive for, you know, a $2 trillion asset. And so, you know, what should we expect in the short term here? Golden Crosses can be this, this can be like a bearer signal, like a counter signal to me, where it's telling you, okay, you've already had an aggressive move. We could see a little correction here. So that's something I'm watching for. there's also a chance that it just continues to rip higher.

It did this in 23. We had a golden cross early in the cycle, and a lot of people were saying, oh, it's going to sell off, and there'll be another buying opportunity. And it just never came. It just ripped all the way up to like 45K. So we'll see.

It's hard to say short term. For me, I try not to predict too much on the short term because I'm not really a trader. But I think people like to know just kind of like where we're at currently. So that's Bitcoin. We have ETH in here as well, which looks a little bit different. So with ETH, you can see like the 50 day is trying to now make a run up towards that 200 day. The 50 days, the pink line there. And it's obviously there's a gap there.

So it looks a little different. But we may see a golden cross for ETH if it starts to catch up to Bitcoin in the next two to four weeks or so potentially. And what price point would that be where we'd see the golden cross? If you'd just kind of like extrapolate these lines forward. Yeah, so if we see the golden cross, it's a moving average. So the price is going to shift a little bit. But it looks like it'll probably occur somewhere around, you know, a little over 3K is probably where I would project that.

Is that kind of some data point confirmation above 3K and sustaining that Altcoin season is arriving? It could. It could. You know, hard to say. But I do think there's just, that's, when you look at that BTC, the ETH to BTC ratio, like it just has like a big, there's still a big move coming, I think there. And so it could happen pretty fast.

I'm watching the kind of the ETI flow to see if there's like larger capital allocators that are going to start to rotate from BTC over to ETH. Actually, I wanted to ask you a question about these types of charts, you know, golden crosses and death crosses, this kind of thing, right? So is this TA? Is this technical analysis? So I've seen a lot of TA kind of traders over the years. They put charts together and they put triangles on them.

They try to predict movements. Generally, most of the TA stuff that I see is much more short term. And I've always kind of like, I don't know, just not develop that skill. Again, not being a trader. this kind of looks like TA, except the timeframes are much longer, right? And this is the type of stuff that feels more, I guess, legitimate to me, I want to say, or it's just like something I can kind of buy and hold based on. But what's your perspective?

Like, what's the difference between TA, technical analysis, looking at these averages, golden crosses, death crosses, and fundamentals to you? Yeah. You know, I don't do TA. I do appreciate the TA chartists out there. There's definitely some artwork there. And it's really more, I would say, short-term, you know, thinking, looking for sort of, you know, areas where there's resistance and it looks like things are going to break out. You know, not, you know, for me, it's just, like, really, really hard to have conviction and, like, short-term thinking.

I think of these moving averages as more, like, momentum indicators. and really like the longer term moving averages are really where the highest signals are. So I actually put a report out on Bitcoin and how I think about fair value for Bitcoin. And there's some interesting data points over longer terms that tend to confirm for me when Bitcoin is at fair value. And one of them is it tends to, the price of Bitcoin tends to collapse to the 200 week moving average. This is a 200 day moving average here. So 200 week is more like, you know, four year, a very long period of time. It tends to collapse to that 200 week moving average at the bottom of bare markets.

There's other factors that we look for and then that you get the confluence. But yeah, I would say, you know, to answer the question, this is more long-term thinking. It's also just kind of more momentum and understanding like what just transpired. Like when you get a golden cross, it tells you, okay, that something, you know, an aggressive move to the upside just happened, you know, the probability probably starts to wait towards a correction, you know, if you're thinking short term through that. Okay. I mean, so you would say this is sort of long-term momentum, which maybe get, is that a fundamental

in your mind or it's some, it's useful context maybe. Yeah. It provides you sort of the backdrop for, you know, your allocation here, but, you know, fundamental or not? I would say not fundamental. This is not a fundamental. This is more of a awareness of sort of what's happening in the market, I would say. And then you pair that with maybe on-chain data that that's telling you, okay, interesting. We just had, you could look at this and say, okay, interesting. East, you know, it's showing signs of life there with the 50-day just starting to peak up. And then you could go and look at on-chain data and look at Dex volumes or look at

there's a number of things that we look at to confirm whether or not there's like animal spirits coming back on chain and then you pair that type of analysis with this moving average. You're looking at the broader cycle as well and then we pair up the macro. So there's a bunch of different pieces that come into it. And then combining all those just I kind of try to let the conviction just kind of emerge within me based on the confluence of different factors. How about this factor right here? This is another chart.

This long-term holder supply, I believe, of Bitcoin. What are we looking at here? Yeah, this one, this is something I tend to monitor with Bitcoin because it's again, sort of where are we at in the cycle, you know, type of sort of longer-term thing to be looking at. What tends to happen at market peaks is the long-term holder, that pink line there, will start to sort of crest over. or let's say not necessarily peaks,

but when the market is, you know, heating up, that starts to crest over. That's telling you that long-term holders for Bitcoin are starting to pass their coins to short-term, short-term holders. Interesting. What tends to happen is the long-term holders set the market bottom because they come in and buy the dips. And then as momentum comes back,

it's really coming back from like new entrance to the markets, especially late in cycles. These are the short-term holders. And so long-term holders are passing their coins as short-term holders. As that happens, the price tends to, you know, it can rise rapidly. And then eventually, you know,

there's too much selling coming from the long-term holders as the price is rising that you tend to get the correction. So what this is showing here is that over the last few months, so after we had the correction, we've seen long-term holders come back in. You know, part of this,

is, you know, long-term holders, you know, going on to exchanges buying tokens, but it's also, you know, just the period of time. So if you bought some Bitcoin and you had never held any, you know, six months ago, three months back, you were not a long-term holder, but going forward, you become a long-term holder. So it's also people that just haven't sold their Bitcoin, you know, as you see that line rising like that. So kind of what I'm expecting to see, and actually, we go to the next chart because that will give us the short-term holder perspective as well. So this is the ratio, long-term holders to short-term holders. This data we're getting from Glass Node, and they're using on-chain data.

It's all just on-chain data, so we don't have the exchanges or the ETF, so it's just kind of important to back that out here. That's about 18% of the supply. You know, the data is evolving here. This is something I pay attention, but these metrics, to me, have not longed. any of their signal with the ETFs coming. But this is showing just the ratio. So long-term holders to short-term holders.

And these arrows are showing sort of local tops, cycle tops and local tops. And we can see a correlation between, you know, the peak of the price for BTC tends to correlate with the bottom of the ratio of long-term holders to short-term holders, meaning long-term holders have exited. And now short-term holders are in the market more so than they were. previously. And so what are we seeing like right now? We just had one of those. So back in January, February period, we had a local top and we had a local bottom in terms of long-term holders getting out of the market, short-term holders coming in. We then have the correction, and now we're seeing that line drive up again. I'm watching this just to see how high that goes before it starts to fall back again. And when it starts to fall back, that's,

to sign that the market's sort of getting overheated. Okay, so I guess these indicators are showing us that we've got momentum in the positive direction and that there's space for that to continue as well. Correct. And, you know, we're just starting to see long-term holders look at the price of Bitcoin again and say, like, let me take a little off the table. Like, we're just at the very beginning of that right now. Okay, except Michael Saylor.

He never does that, right? Exactly. He's only buying. You know, important point here is like this, when people make, when people say, oh, Bitcoin's going to 500K, you know, that I take that with a grain of salt because it just doesn't happen because of sort of the way of markets work, people take profits. You get corrections. Like if that happens, it's a much longer period of time.

So, you know, I can't see Bitcoin just like running up to 200K or something really fast just because of people are going to take profit. Yeah. I guess there's fewer at the size of a Bitcoin as well. In long term, short term, there's, it's just hard to see it teleporting in that way. Just like suddenly one day we wake up and, you know, Bitcoin is 500K. But it kind of oscillates then. Exactly.

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staked fraxUSD. And for bankless listeners, you can use FRAX. dot com slash r slash bankless when bridging to fractal for exclusive fractal perks and boosted rewards. What is this metric? MVRV Z score. Yes. So some more glass note data here. And what this is showing is market value.

MVRV is market value to realized value. Realized value is a proxy for the cost basis of all the bitcoins on the network. So really interesting. So it's kind of telling you like what is the average cost. of all the coins that were purchased, and that is about $46,000 right now. And then the Z score, and then you're comparing that to the current market value,

and then the Z score is just telling you how many standard deviations you are from the average price. And so it's telling you if the market's overheating or not. We can see that there's like a law of diminishing returns in terms of that pink line there. It's sort of sloping down to the right over a long period of time.

And this is just, you know, Bitcoin's becoming a much larger asset. And so it's not able to sort of the market value is not able to separate, you know, 10 times over the realized value anymore. And that's really what you're seeing in this chart. Like most recently, we got to four. This was back in Q4 of last year. So that's telling you that Bitcoin holders on average were up like 300% when we got to a level of 4 in Q4, we then came back down.

We're at a level of 2.8. So it's like, you know, you can think of it of like, okay, the average holder is sitting on that percentage of gains. And also, okay, that is 2. Right now it's 2.8 standard deviations from Bitcoin's average price. Okay. This is, so for those listening, this is why you also need the visuals that accompany it. And maybe, Mike, we can put these kind of slides and graphs that we're going to, you know,

in the show notes or something or reference them, send some links. But what we're seeing on screen is kind of this Z score, as you're saying, there's an axis that goes from 2 all the way to 14. And I think what we're looking at right now is we're in kind of the, you know, the 2 to 4 range, I suppose. 2.8 right now, yeah. The 2.8. Okay.

And the higher the Z score, the hotter the market is, basically. Like the more, I guess, out over it skis the market, the more euphoric, bubbly, unreasonable the market is being. And that's what we've seen in previous cycles. We've seen it get as high, I guess, in the 2021 cycle, as high as seven, it looks like. Yeah, it was over seven. It was over seven. Yeah. So we're at 2.8 now.

It's been over seven in the previous cycle. The cycle before that, it got even higher. It got almost to 12. Is it what I'm okay? Yeah, which is crazy. People are just the average, that means the average Bitcoin holder was at like 1,200% profits at the peak. Okay. And it looks like each of these peaks, the Z score is kind of like less amplified, right?

And so 2021, it only, it didn't get, it only got to seven or eight, something like that. Anyway, this is implying that we still have a ways to go. It may not get to previous cycle highs on this particular score, but like we're not all that high right now, are we? Right. I think that's how I would think of this. And important to think through to like, you know, where could that potentially get to? When you understand the realized price is $46,000, you know, if you're calling for a $150,000 Bitcoin, then, you know, it's good. That's, that's getting you know, up to the four level or so.

If you went to, you know, four and a half, five, now you're getting into like the 180K range for Bitcoin. So that gives you an idea. And something to keep in mind here is the realized value, it gets harder for that. It's the denominator. It gets harder for it to be fully separating because if long-term holders are selling their Bitcoin to new entrants, then the realized value of the new entrant is much higher than the person who has bought their Bitcoin at 20K or so. So it gets harder for that to sort of really separate at the end of the cycle.

So, you know, where could that go to? Like, I think if it gets to five, like, you know, that's pretty high level. And that would be sort of consistent with this, like, law of diminishing returns as well. So it's 2.8 could get to five. And I guess just some intuition around this. This is basically, like, as the price of Bitcoin increases, is a greater incentive for long-term holders to essentially sell. Because they might be thinking, well, you know what?

I made a lot. I want some, I have all these paper gains. I want to buy something in the real world. It's time for me to go buy that thing. Or they might just be saying, look, I've been playing these markets for a while. I know when the market gets overheated. I'm going to sell now and then I'm going to buy back in the other debt. But it just increases the temptation of long-term holders to sell effectively.

Yeah. And talking about alt season, maybe they're selling and buying some alts, right? That's the other piece of it. And that's the wealth effect that creates alt season as well. So that's important piece of alt season that you have all this wealth in Bitcoin. people want to, you know, realize some of that maybe for lifestyle reasons. And then also maybe they just want to take a small percentage of their profits and put it into like meme coins or alt coins or things with fundamentals.

And that's part of why alt season kicks off. Okay. Well, let's talk about the asset that has kicked off many of the alt season, which is ether, the asset. So this is an eth versus Bitcoin ratio. I'm very familiar with this ratio. It's been going down for a long. time. You've got an arrow pointed up though.

Yeah. Talk about that. Yeah, you can see, I mean, it really, it just kept going down. I mean, this surprised me. I didn't expect it to go all the way back to, you know, where it was really in mid-2019 or so. But it did go all the way down to that kind of resistance ban there. And we've seen a little, you know, tick up. We had a big, big move in this a few weeks ago. Bitcoin has now shown some more strength. So, like, I'm waiting to see the next sort of thrust of this. That was that week where you did have a teleport moment where it just like was 50% in a week. Yeah.

Yeah. Which is just amazing for a, you know, $250 billion to buy a dollar asset to move like that. So this to me, like this is just a matter of time. I don't think there's any like I would not fade, you know, sort of gaining ground on Bitcoin here. It's just just a, you know, a matter of time in my opinion. So the question, I guess, as we get to, are we headed for all season melt up? What's the answer to that question? I think the probabilities point towards that happening.

It's kind of how I would phrase it. Nothing is certain in markets. I think a lot of people that have been in crypto for a little while, like there's like the fundamental analysis, there's the macro that we look at. But then you also just have like, I think people build like crypto. Donative intuition as well. And I think like when you line all of these things up, like it does feel to me like this is this is where we're heading. I would just caution people that like asset selection is critical here. I don't think that you know everything is going to rise.

Like if you were sitting in NFTs and you know the middle of 21 like those things just went off and it didn't matter what you were holding. Like I don't think that's, I think there's just too many coins out there now. and I think the market is becoming a little more sophisticated. So it's really like, okay, get into the right assets. And then if you do want to speculate, you know, just make sure you're on things that are, you know, that are, you know, attention-based. We do actually do fundamental analysis of meme coins. Maybe we can get into that at some point. But I think, you know, that is very risky.

And I wouldn't advise it unless you sort of really know what you're doing because it's all about timing and asset selection. So you are a yes on alt season. This is something that the way Arthur Hayes convert, like portrayed it was, you know, I was like, hey, do you believe in alt season? He said yes, but it might not be your alts. Yeah. Okay. So the asset selection is very important.

It does feel like traditionally ether has been a beneficiary of this. Are you assuming that ether maybe with less magnitude or maybe more magnitude, but that ether will be squarely a beneficiary of alt season? I do. I do. and it's just so hated, you know, I think when something gets so hated and the sentiment gets as negative as it has,

you know, there's just going to be a move here. I don't have a real strong opinion on ETH versus Seoul. I think they're both going to do well, unclear to me, you know, which one of those will do well. I think because Eth has been so hated, it actually has a chance of outperforming Seoul moving forward. But to me, yeah, East had a time, tough run these last few years. I do think it's turning the corner. And, you know, I would expect

a rotation here, especially, you know, if you're, if you're like just new to crypto and you're like a fund or something that got into crypto in this cycle and you've done well on Bitcoin and, like, you're just starting to look at all these charts and stuff and you're seeing like, okay, it's starting to break out of its moving averages and like you understand the history of these things. Like, you've got to rotate some capital. And so, you know, this is where Bitcoin starts to see less of a, you know, it's just, it's still rising, but it's kind of just grinding up and the capital is starting to rotate. All right. So it's time to rotate then would be a message, at least the probability points to that. So at the end of these episodes, Mike, I'm going to ask you this,

the same question, the end of every episode, because I think people want to know. So what's in your portfolio right now? What are you doing? What looks good? Maybe first, can you give me the allocation of basically cash versus crypto to kind of show how all, how in are you in this market? So what's kind of your cash reserve position versus crypto? Yeah. And, you know, for me, cash is a position. And I've always, I sort of have a rule that I actually always keep probably

a much larger cash position than most. I'm usually at least 10% cash. I'm weighted more towards 30% right now. So the way that, you know, I've played the cycle was, we were really bullish post-F-CX. And we were talking about Salana back then. Wait, wait. This was back in when 20.

This is late 22, early 23. Right. Was kind of the back-the-track-up moment where all the indicators are saying, bye, bye, bye, so we've kind of been very bullish and just like rid in the cycle up to the December-January period. And that was when I was like, okay, starting to try to do the probability analysis. of like, is this possibly the Pico top? It felt very similar to the like stuff

that we were seeing like in 21. That, you know, I've sort of changed my mind on that. And what we did was we started to actually buy into the correction. So we sold a lot, kind of got into a very nice cash position, and then started to get back into the market. And what I've been looking at now as conviction builds with, you know, alt season is just starting to go more onto the risk curve. So my Bitcoin position is about 60% of my crypto portfolio, 30% cash.

And then I'm kind of split like 19% each ETH ecosystem that includes ETH, the asset. And then some, you know, I sort of express a view of ETH with Pepe as well. Wow. Heath with Pepe. Yes. Because of the beta of the culture coin, I think. I think Pepe is sort of the culture coin of the ETH ecosystem. And so Pepe has very high beta to ETH.

So if you think ETH is going to go up, Pepe is going to go up multiples on ETH. It's also going to go down multiples on ETH if Eith doesn't go down. So I like to express, if you have a view of the L1, can you capture some more upside by expressing that in something else as well? We do the same with Bonk in Solana. And so what I've been doing is like allocating a little bit, taking some profits from earlier in the cycle and then putting those further out on the risk

curve. So the memes we like are Bonk, Pepe, SPX, 6900, and giga. Those are the four. Those are the far we do. And we have covered memes from a fundamental perspective. We do. We have a lot of data on this that allows me to develop conviction. These are not the long, we talked a lot about long term investing. I don't view these as like long term investments. So I don't want to contradict myself too much. But it's like I'm also in crypto. I want to have some fun. We're at the end of the cycle. And so that's kind of how I think of like just putting a little bit into memes and having fun.

And it keeps me curious, right? Like if we never invested in memes, we never would have gone really deep on the data and really tried to understand like, is there something here? So yeah, that's kind of how I think of it. Okay. So by the way, we don't have time in today's episode. We should do another episode at some point in time of like you got to tell me about fundamentals behind meme investing and how you kind of get there with the on-chain data. But we'll put that aside.

So you are 30% cash, the rest, the remainder deployed into crypto of that. Largely, that's in Bitcoin. But now you are allocating even further from Bitcoin down the risk curve. And that includes positions in ether. And also, positions maybe, I don't know if you have anything in Solana at this point in time. But for some of these leading ecosystems, you're also doing the base. bet, which is like, what are the blue chip memes of ether? Or the respective ecosystems, you're betting on that.

Yeah. Yeah, I don't have any soul, actually. I do have some eth. I don't have any soul right now. I'm expressing views on soul with some sort of beta, the beta assets. Yeah. Monk. Yeah, exactly.

So that's kind of how I'm playing that. And then we also, like, have been doing some research on Celestia. We've done quite a bit there. That is one that I think is sort of a bet on the DA space. and it's been so depressed that we were buying that in like the, you know, $2.30 range. And so we bought some of that as well. And then the other one on Ethereum that I think is interesting is WorldCoin from like

potential AI perspective, Sam Altman. The WorldCoin L2 is actually the second number two in terms of blobs paid down to L1 right now, which I think is a little bit underreported in the industry. So I think World Coin is an interesting. It's also a low-flow token. So you have to be careful with low-flow tokens can be very interesting at an inflection point in the market because it's low-flow, right? So not a lot of capital needs to come in to really move those assets.

But you also have to be careful that you don't really want to hold that during the bare market because you're just going to have tons of inflation and unlocks coming as well. So okay, that's fascinating. Just another question on WorldCoin. So the thing that scares me about WorldCoin is actually in general that low float, right? So what we mean is there's not very, most of the supplies with investors, basically VCs, large VCs, right? And so we only have of the fully diluted market cap of WorldCoin, which is like $5.2 billion right now, which seems like a lot, only $2.3 billion of that is actually available on the market. So what's, that implies is there's a lot of investor unlocks, not just investor unlocks, but the World

Coin Foundation, whatever, whoever has the founders, whoever, that could be dumped on you. And so that always scares me about this particular asset. Like, the FDV is so high, even though I see the fundamentals here. Is this a long-term kind of hold for you? Or are you, is this kind of a, I hold through the cycle, I don't want to hold this asset during the bear market, but I definitely want to do it during the bull cycle. Yeah, this is, I would say this is a, I put this in the category of like why I allocated to memes. This is like a risk on bat for the end of the cycle.

And I typically would not buy something like this long term because of those, those unlocks. And, but I think also important to realize that the low float can work in your favor during like an inflection moment in the markets just because there's. less buying power needed to move the asset. So I think that goes in both way. You really need to know what you're doing there. But you definitely don't want to hold assets like this, you know,

into bear markets because you just have this persistent unlock coming from, you know, early investors that are up 100x, even if the tokens down 90%, they're still up 100. You think it's a buy and they're still, you know, dumping into you. So, yeah, that's kind of the view of the view on world. I think this is a,

speculative bet for the end of the cycle. So Mike, we probably don't have time in this episode, but at some point in time, I'd like to hear more about your kind of cell plan, because I'm guessing you're the type of person that when you enter a position, you also sort of plan your exit. And some of these high beta type positions, you know, have a time in place where you actually want to actively exit. But in general, are you kind of playing the rest of the cycle and are you sort of dollar cost averaging out at some point for some of these riskier assets?

at what point do you hit sell? Yeah, I think it's personal, you know, for everybody in terms of, you know, what you're holding, when you came into the market, you know, what are your lifestyle needs, what's your income levels, all of those things. I think it's a very personal question. For me, I think because we were so bullish, you know, at the lows and have remained convicted in that all the way through today, or mostly through, you know, Q4 of last year, it is like for me it's like you just want to be sort of scaling out and then looking

opportunistically to potentially add and that's kind of what I'm doing so yeah it's a process I think of scaling out I'm not I'm not selling at these levels right now and we always have you know some long-term Bitcoin that that I'll never sell you know that may turn into another L1 asset a lot of the work that we've been doing recently with the defyreport and our research and data is to go really really really, really deep on these alt L1s so that we have really strong conviction during the bear market. I love that. So the idea of the rest of the bull run is you want to kind of exit these positions and end the bull run in a much stronger cash position so that you can buy back on the fundamental

assets during the next bear market. It's playing kind of a long-term game, accumulation game here around these crypto networks. Speaking of some of that research, by the way, I haven't got a chance read this yet, but I flagged it. It's a post that you put out called How Durable is Solana's MEV infrastructure. And I'm guessing this is part of the kind of conviction play. Right now, you're taking the Salana bet through meme coins, interestingly enough, and thinking about that as a beta play for Soul. What are you doing in this piece? Are you getting some, I guess, conviction or a thesis behind Seoul into the future and its ability to generate fees? And also, you know, things like Gito that are powering that?

What's this paper about? Yeah, I think this ties into this debate that's been going on about real economic value. You know, my thinking on this is like that there's multiple angles that we're going to be valuing these assets. I sort of view it as there's like three primary categories. So you have like the capital asset piece of this and that's the real yields. That's in that comes from MEV. you have a commodity asset element and then you have a store value

asset element there's other is that triple point that's a triple point that's a triple point I remember that 100% and then you know there's other things we may end up sort of having some sort of GDP element or asset secured element and then to me the monetary premium

is like the brand and the community you know how big of a cult do you have so that's like my how I think about valuing these things we've been focused on MEV on Solana because the value that accrues to sole holders comes from MEV, which comes through GEDO. And so we want to deeply understand the infrastructure of Solana so that we have a thesis on whether that MEV is durable

or if it's sort of just related to meme coins. And there's just like a few sharks in the water that are just like profit being off of everybody else on Solano. We want to really go deep on this and deeply understand Gito and the role that it plays in returning value to sole holders and then have a view on like, you know, how does this play out even as, you know, potential, you know, this is an interesting development with private dexes on Solana, starting to think through like what happens to MEV if like BlackRock like builds a private decks on Solana. So we went through some of that in this report. And we can link to this in the show notes for folks. That's awesome. This is great stuff. Mike. This episode was a blast. Thank you so much for doing it. I'm going to see you next month, my friend, as we're going to have the second in this monthly series. Again, that'll be the last Tuesday of every single month if you want to follow Mike Nato and myself on our quest to further understand crypto on-chain fundamentals. You know how to get it, that's on the bankless podcast.

I should end with this, of course. Maybe this is super appropriate. None of this has been financial advice, guys. Crypto is risky. You could lose what you put in, but we are headed west. This is the frontier. It's not for everyone, but we're glad you're with us on the bankless journey. Thanks a lot.