The Breakdown - Alt Season or Exit Liquidity? Parsing the Crypto Market’s Next Move

Episode Date: July 23, 2025

Bitcoin dominance is falling. Ethereum is rallying. Altcoins are exploding. Today on The Breakdown, NLW asks: is this the start of a new leg up in the bull market—or the beginning of the end? From surging ETH ETF inflows and treasury company buy pressure to warning signs of froth and echoes of 2021, this episode examines the competing narratives shaping the current moment. NLW unpacks the shifting risk spectrum, the legitimization of crypto through stablecoin legislation, and whether the explosion of altcoin treasury companies signals sustainable innovation—or just the next leverage bubble. Brought to you by: Grayscale offers more than 20 different crypto investment products. Explore the full suite at grayscale.com. Invest in your share of the future. Investing involves risk and possible loss of principal. To learn more, visit ⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠Grayscale.com⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠ -- ⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠https://www.grayscale.com//?utm_source=blockworks&utm_medium=paid-other&utm_campaign=brand&utm_id=&utm_term=&utm_content=audio-thebreakdown)⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠ Enjoying this content? SUBSCRIBE to the Podcast: https://pod.link/1438693620 Watch on YouTube: https://www.youtube.com/@TheBreakdownBW Subscribe to the newsletter: ⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠https://blockworks.co/newsletter/thebreakdown⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠ Join the discussion: https://discord.gg/VrKRrfKCz8 Follow on Twitter: NLW: https://twitter.com/nlw Breakdown: https://twitter.com/BreakdownBW

Welcome back to The Breakdown with me, NLW. It's a daily podcast on macro, Bitcoin, and the Big Picture Power Shifts remaking our world. What's going on, guys? It is Tuesday, July 22nd, and today we are talking about whether this old season that appears to be here is the next leg of the bull market or the beginning of the end for this Bitcoin cycle. Before we get into that, however, if you are enjoying the breakdown, please go subscribe to it, give it a rating, give it a review, or if you want to to dive deeper into the conversation. Come join us on the Breakers Discord. You can find a link in the show notes or go to bit.ly slash breakdown pod. Well, friends, there is definitely something happening out there

in the markets. Bitcoin dominance has been plunging this month despite new all-time highs. Over the past week, it fell from 64 to 60%, which is the sharpest decline since May. Heath Outperformance has been the major driver, with price gains of 50% in two weeks. But various altcoins also put on a strong performance, joining to push total crypto market cap to $4 trillion for the first time ever. Many are starting to get anxious that this is it for the Bitcoin cycle. Keith Allen, the co-founder of Material Indicators noted that stable coin dominance is also falling. We're rapidly approaching an all-time high for top 100 all-coins excluding Bitcoin in Ethereum, which is currently getting close to $1 trillion. Roman trading wrote,

Bitcoin dominance dumping and alt-running proves liquidity is rotating, ending the bull run. By alt while you can, Bitcoin is likely close to over. As another sign that conditions are getting frothy, XRP now has a bigger total market cap than McDonald's. And if you want some real deja vu, global NFT market cap was up 17% over the weekend. Now, the fear around alt season is simple pattern matching back to last cycle. In November 2021, Bitcoin saw its final peak. Price was cut by more than a third by the end of the year, but active crypto traders barely noticed. There was a raging bull market in alts and capital was rotating furiously out the risk

spectrum. Luna had already gone 2x during the fall and doubled again in December. This old season doesn't feel as violent, but it's still early days. The 2021 alt season carried on until the following spring. The problem for Bitcoin-only investors was that sentiment continued at full mania for months after the top was already in. For the rest of this year, the question will be whether history is repeating or if we're seeing an entirely new paradigm. In late 2021, it was plain that capital was moving out on the risk spectrum, but losing momentum by the day. Cryptonatives who saw massive gains from holding Bitcoin and ETH were doubling down on the next trade. All cycle, we've been discussing that this time could be different due to institutional demand and the

crypto ETFs being segregated from the rest of the crypto market. People who are buying Bitcoin ETFs and retirement accounts won't be pivoting to chase the next all-coin pump. But this alt season will be the first big test of how real that narrative is and how the two different crypto markets will interact. Still, one big reason this time could be different is that there's widely accepted fundamental thesis about major crypto assets. Bitcoin isn't trading like a risk-off asset, but the financial press seems to have finally internalized the framing of digital gold. That's a very different narrative to 2021, when the entire crypto industry was still painted as a scam in the mainstream. Investment Bank Bernstein believes that Ethereum

is now having its moment of legitimization, writing, The Genius Act was signed by the US President on Friday. Stablecoins are now legal digital cash. And given Stablecoin's dominant rail, Ethereum is finally having its moment. This is not a crypto cycle of the boom bus kind. This is a blockchain financial services cycle. And there are certainly a lot of blockchain financial services investors showing up in the stock market. The ETH ETF saw almost 2.2 billion in inflows last week, a new record in almost the same weekly inflow volume as the Bitcoin ETFs. For Tradfai, a big part of the narrative is that stable coins aren't that investable, but you can buy Ethereum to get some level of proxy exposure to the underlying infrastructure. And the potential for a violent supply shock is clear.

With Anthony Sasano tweeting, net new ETH issuance today, 8.8 million. Net inflows in the ETH ETFs today, $300 million. The ETH ETFs bought 33X more ETH than was net issued by the network today. The other big buyer of ETH this week has been the crypto treasury companies. S-Bet, the Ethereum Treasury company backed by Consensus founder Joe Lubin, has bought $840 million in ETH over the past two weeks. They basically exhausted their first tranche of equity funding and are seeking shareholder approval to issue another $6 billion in shares to fund the next leg of purchases later this week. Several smaller ETH Treasury plays are also ramping up purchases, contributing to a huge amount of fresh demand coming online. Van Spencer of Framework Ventures noted that Ethereum is a far smaller asset

class for all this buying. He tweeted, between the pace of ETF inflows picking up to 250 to 500 million per day and Treasury company buys, mid-11 figures have been added as buy pressure over a medium-term horizon, 12 to 18 months, for ETH. Ethereum equals 50 billion to 100 billion of inflows on a 400 billion dollar asset. Now, it's much easier to find the first 10 billion in buying pressure than the next, but it's still certainly a clear bullcase for Ethereum. Udi Wertheimer noted that that the sell side is also picking up, posting, there's 350,000 ETH queued up to unstake, about $1.3 billion. Last time that much ETH was being unstaked, it was January 24, following a 25% rally in ETH BTC in a single week. Went down only from there.

Now, the entry queue for staking is outpacing the exit queue, so there's probably not that much reason for concern. But the data does highlight that a big part of the demand is being serviced by old Ethereum holders cashing out. Further down the rankings, the Altcoin Treasury companies are also spinning up. There are several Solana. companies that are preparing to buy in the hundreds of millions of dollar range, rather than the billions we saw from Bitcoin and Ethereum treasury companies. Several other top 20 coins also have their own treasury plays now, with the most recent one being a Dogecoin company. The company's thesis was summarized as something-something-micropayments leaning on Elon Musk's promotion of Dogecoin from

last cycle. But realistically, the thesis is that 500 million deployed over a short period of time should be enough to send Dogecoin to the moon. Today's episode of The Breakdown is brought to you exclusively by Grayscale. Grayscale is almost certainly a name you know. They've been offering exposure to crypto for over a decade now and offer over 20 different crypto investment products, ranging from single asset to diversify to thematic exposure to crypto and the broader crypto industry. They have long been innovators at the intersection of Tradfai and Crypto, and one of the benefits for a lot of us is that Grayscale products are available right through your existing brokerage or IRA. Now, of course, investing involves risk, including possible loss of principle.

For more information and important disclosures, visit grayscale.com. Go to grayscale.com to explore their full suite of crypto investment products and invest in your share of the future. In other signs, the cycle is getting a little long in the tooth. Garga, one of the founders of the Bored Ape Yacht Club, teased his own play, tweeting, tweeting, the world isn't ready for NFT treasury companies, but they are coming anyway. Now, the original thesis for Bitcoin Treasury companies was that Bitcoin was the best treasury asset in the world, and that access to capital markets could be used to arbitrage dollar

debasement. Not totally sure what the thesis for a leverage treasury of board apes would be, but it's hard to see how it gets a buy rating from equity analysts unless things go completely nuts. Now, everyone seems to know this is unsustainable, but no one really has a good sense of how quickly the bubble will burst. Stephen Jang, the head of research at the block, is feeling the compulsion writing, we all know how these crypto treasury companies are going to play out, but we can't stop playing. Victor the D5 villain wrote a good breakdown of the mechanics, which I'd urge you to read in full if you're seriously looking at this new wave of treasury companies. He argued that early investors are basically risk-free because their shares are completely backed

by the Al-coin Treasury, retail traders that buy in it three times multiple, not so much. Victor wrote, Some people have understood that it's a guaranteed profit loop that they can rinse and repeat as long as the market still pumps the new Al-Coy treasury names. There are a lot of opportunities in the Crypto Treasury plays, but you must be aware of this dynamic going on against you if you are the retail that does not have access to the private deals.

Also be aware that this scheme can be used to get of locked all coins in some cases. Rand Nooner was one of the many calling out exactly how this is going to end, writing, Mark my words, every crypto cycle ends because of a leverage bubble burst. This cycle, the Treasury Company frenzy is the leverage that will end the cycle. Still, that's one of the curious things about all the doomsang. Outside of micro-strategy, basically none of these companies are levering up in a significant way.

Most of the smaller companies aren't even allowed to issue bonds. Instead, they're just issuing stock to raise funds to keep their flywheels going. The process is pretty risky for retail investors, at the price of the treasury asset falls, but there's not that much risk for a leveraged unwind. That is, unless, of course, Michael Saylor comes undone. Now, maybe expanding this just a little bit, last cycle's collapse had a myriad of causes. There was the bankruptcy of the crypto lenders, the Luna collapse, SBF fraud, but these catalysts all had a common vector for contagion, which was three arrows capital.

In late May of 2022, 3AC missed a margin call and had around half a billion dollars in loans called in. BlockFi and other crypto lenders began liquidating collateral in June, but it quickly became clear that there would be shortfalls across the entire crypto sector. 3AC's size wasn't sized, to quote one of the villains of last cycle, but they triggered a chain reaction that dragged down prices and put major losses on every balance sheet in the industry. The problem wasn't that 3AC defaulting on a few billion dollars in loans destroyed everything.

It was that the capital pool was so small that everyone was leveraged up off a few major counterparties. Once the lender started to blow up, it was all over, and the leverage done wine put us in a sustained crypto winter. One of the big differences this time around is that it's not clear where the the risky leverage is hidden. Like I said, the all-coin treasury companies are basically operating without leverage for the moment. There's micro-strategy with about $8 billion in debt as of March, but to most, that's hardly a massive concern with over $70 billion worth of Bitcoin in their coffers.

For most of these companies, their equity can trade at a discount and shut off the flow of capital, but it's difficult to see how a forced sell-off happens. Leverage trading firms like 3AC aren't really a thing this cycle. The few survivors like CMS just don't have the same access to capital they had in 2021. Basically, it's difficult to spot the entities that are way out over their skis this time around, as compared to last time when they were all screaming about the super cycle. One possibility is that the bear market comes from regular profit-taking rather than forced selling after a credit crisis. To that end, Bloomberg has come into possession of the profit and law statement for David Bailey's hedge fund. David Bailey is the CEO of Bitcoin magazine, one of the earliest and loudest Trump

supporters and advocates of the Trump family getting into Bitcoin, and apparently the money manager behind a dozen Bitcoin Treasury plays. Bloomberg reports. that is hedge fund, 210K capital, is sitting on 640% returns over the past 12 months. The fund has around 433 million in assets as of June. Around a quarter of that is their metaplanet position, now worth 106 million or roughly 1% of that company. Their other positions are presumably smaller, but represent more concentrated ownership of other Bitcoin treasury companies. At the moment, this all sounds pretty constrained. It's a novel capital strategy, but without leverage, the biggest risk is just figuring out how to get liquidity to payback LPs. But there also might not

be a lot of outside capital invested in the fund. The issue is really just how long the game can be played. Managing partner Tyler Evans told Bloomberg that 210K is evaluating investments in another 30 Bitcoin Treasury companies. It's not clear how many companies the market can support, but it seems like crypto investors are going to try to find out. At the beginning of the month, on-chain analyst checkmatey wrote, my instinct is the Bitcoin Treasury strategy has a far shorter lifespan than most expect, and for many new entrants it could already be over. It's not about a measuring contest. It's about how serious and sustainable your product and strategy is to sustain the accumulation. Nobody wants the 50th Treasury Company. I think we're already close to the Show Me phase where it will be increasingly

difficult for Random Company X to sustain a premium and get off the ground without a serious niche. Retail speculators buy startup treasury companies and they don't have infinite money. Hard to say on timing because I'm bullish Bitcoin here. It's a spectrum. Micro Strategy has a much longer runway than Treasury Company number 300. On the other hand, some people are already calling for an unwind with holistic guy writing, everyone knows the treasury companies are what blows up at the end of this cycle as they're all forced to unwind in terrible liquidity and dump the price back down to Hades. It's a good thing, by the way, means we get another opportunity to buy the lows from four sellers if you manage to retain capital.

Now, from where I'm sitting, it's difficult to see where the crisis will come from other than an exhaustion of crypto treasury companies, but without a leveraged unwind that probably doesn't send the entire market down 90% like we saw in 2022. Instead, I think one fairly rational thesis is that it could be a normal bare market, like in other assets, with a 30 to 50% pullback as confidence is lost. Now, I am confident that the crypto industry will find some way to build up too much leverage and then puke it all up and due course. However, just because the crypto treasury strategy plays are getting a little unsustainable doesn't mean a priori that they're going to cause a credit crisis. Point is, it might be getting a little frothy, but right now there are still

very few who think it's already over. As Meltem DeMir's tweeted, it's not the top until Chamath does a crypto treasury company. That's where we're going to leave it for today's breakdown. Appreciate you listening, as always. Until next time, be safe and take care of each other. Peace.