Is Base capturing Ethereum's value?

Transcript

GM. Good morning. Welcome to the Milk Road Show, the daily crypto show for markets that feel as uncertain as when your partner says, "I'm fine," but you really know it's Code Red. I'm your host, Jay Hamilton. It's Friday, May the 2nd. Please note this conversation was recorded yesterday, Thursday, May the 1st. Today, we are once again joined by Michael Natu, investor, writer, educator, and founder of the DeFi Report. We are breaking down two topics today. two of our favorite topics, Ethereum and Bitcoin. First, we're going to talk about Michael's recent report and the ongoing conversation, which is how is Ethereum going to acrue value in the long term when so much value is going to the L2s? Michael asked this

question in his recent report. Is it is Bass just stealing all of Ethereum's GDP? We're going to talk about that and what his outlook is for Ethereum and might even talk a little bit about Salana, too. Second, we're going to talk about Bitcoin. Bitcoin is at a monumental moment right now. We're all talking about the decoupling. We're all talking about this shift of Bitcoin becoming more of a global reserve asset. What are the onchain numbers saying? Is that happening? And what are we looking for in the coming weeks to indicate whether that is truly the direction that Bitcoin is headed in or is this just another fake out? Before we jump in, I got to ask, do me a quick favor, y'all.

If you're listening to this and you like the channel, you like the show, give us a quick like, a subscribe, a follow, anything you can do helps us out and helps us get more guests on the show to help you guys get educated and invest in a safe manner. Today's episode is brought to you by Leen. Get cash without selling your Bitcoin. It's also brought to you by Coin Shift, powering top crypto treasuries with their yield bearing stable coin, CSUSDL. With that, Michael, welcome back to the Milk Road Show. Great to be here, Jay. Great to have you as always, my man. Okay, I'm gonna start with bringing up your most recent report and I'm going to read the first paragraph because this really uh really really synthesizes what's going on with ETH right now. So

about a month ago, Standard Chartered made headlines when they put out a report titled Ethereum midlife crisis and the report estimated that base removed 50 billion from Ethereum's market cap while taking its GDP. The conclusion east end price target was cut from 10,000 to 4,000. Ouch. This begs the question, are they capitulating at the bottom or are they onto a new trend? Yes, this is the key question and I think there's been a ton of discussion around this. Obviously, Ethereum has gone through a period of I don't know if we're going to call it disillusionment, but there's been a period where I think a lot of eyeballs on ETH, a lot of eyeballs on on leadership, and a lot of

eyeballs on just like how is this actually all going to come together? Are these L2s actually going to to drive value back down to ETH and and we've been doing a lot of work on this? you know, there's this question on like is is is what's good for Bass actually good for Ethereum or can Bass sort of build on top of Ethereum capture most of the value from that and there's not a not a lot of like benefit to to ETH validators, ETH holders. Um, so we've we've kind of gone through the data on this and and gone very deep just on like is this symbiotic to bass and we can kind of start there and just kind of look at the data for bass. So I don't know if you want to just pull up a few of the the charts. we kind of go through

some of the key key metrics. Keep going down a little bit just to get to Bass. Yeah. So, here's where things start to get interesting for Bass. So, Bass has done about $106 million of of fees. Those are the user fees coming into Bass uh since since inception. That looks that looks pretty good. Bass is the number the fastest growing L2. Uh I think everybody's aware of this. You can kind of keep scrolling down a little bit here. GDP. So, base annual GDP $768 million. This is the we define this as the the revenue or the or the fees that are being earned by all the applications building on top of base. So they've they've been able to bootstrap an ecosystem fairly quickly, grow a GDP.

They've been able to do all that by building an L2 and not having to set up their own validator sets, which is very costly, very complex. So this is working out very nicely uh for base. You can kind of keep scrolling down here. These are the new users. So, there's been 157 million new addresses on base. Yeah. So, we don't know. We haven't dduped this. It's it's almost impossible to ddup this and figure out how many of those are like new users that came from Coinbase and where they're leveraging their distribution. Um, but we know there's quite a bit of activity on base. Um, so you can kind of keep coming down here.

So, here we're looking at the total ETH bridged, right? So, so Bass has been able to benefit by being in L2, you know, having a a native bridge right from ETH L1 up to L2. You've got about almost 2 million ETH on base. That chart is moving up and to the right. Uh, looks looks pretty good. You have some of those are liquid staking tokens as well. This is just showing the the flows. We can kind of skip through the the the net flows there. And then you got stable coins, right? So you have uh almost four bill over four billion4 billion dollars of stable coins on on base. Most of that is USDC. So you know you're growing the network effect of of these stable coins and increasing the the throughput uh by doing it on on the L2. We can keep going

through this. So this is kind of interesting. This is showing the total amount of native assets that are being minted on base. That's the the pink. So that's about six billion. And then we have the canonical assets that are being moved from ETH L1 up up to base. Uh that's uh another $3.3 billion. And then you have some assets being bridged from other ecosystems. Uh which is a smaller number there. But we can see that you know BAS is basically tokenizing assets and growing you know the network effect of these assets throughout the ecosystem.

So really the takeaway here is this is this looks good for Bass right? Bass has been able to accomplish their goals by very fast, right, within basically two years, becoming the fastest growing L L2. And they've been able to do this in a much cheaper way by not having to set up their own validators. And and it's worked out quite well. So that's kind of the base piece of this. Now we can move down and and this is really the question I think everyone's asking is is this going to work out for Ethereum? Is is a venturefunded? you know, all these LTS are venture-funded companies. They're they have investors, right? They have to return value back to those investors. Uh and and it's in their it's in their

interest to to to do that and and get the get the best margins they possibly can. So, let's look at sort of what these margins look like for for Ethereum. Uh so, this is this is the total rent that B is paying down to L1. It's only been about $4.5 million since they've moved to to Blobs. This is post EIP4844. Um, so you know it's it's it's it's something but you can see just even recently there's very little value uh moving down down to the L1 there. So transactions per second. So what is Ethereum trying to get out of this? They want fees. They also want throughput, right? They want the user experience to to increase out of this. Like if you think of this as a partnership between

Ethereum and Bass. So we're seeing that, right? We're seeing transactions per second increase, right? Right. So, Ethereum's getting getting something uh out of the deal there and we can kind of keep coming down a little bit. And then, you know, the question is like, did Bass steal uh Ethereum's GDP? I would say the answer to that is yes, right? That's that's kind of the point of the L2 uh road map is, you know, as these L2s grow, the most, you know, the most active applications on Ethereum should move up to to the to the L2. And we've seen that with with a with unis swap with with basically all the top applications on Ethereum are now also deployed on L2s as well. And so that's

taking away some of the fees, some of the transactions, some of the the burned ETH on the L1. And and so I think it's true that that yes, Bass is stealing Ethereum's GDP. The question is like this is sort of a shortterm sort of you're sort of like disrupting yourself in the short term if you're Ethereum. And so what we're trying to do from here now that we've established that that is happening is model out you know what does this if base were to 10x its uh transaction throughput and we saw you know more L2s do the same what does that start to look like and this is probably the meat the meat of the analysis uh right here. So, and this is where I'm

getting somewhat concerned, I would say, uh, in terms of the ability to to grow transaction throughput at L2 and keep the fees, uh, you know, under two cents or so for those L2s. And we we use Tim Robinson's uh, simulator to to model some of this out. And so, you can kind of go through some of this done. So, so what we're looking at here in this first simulator, this might be sort of hard to see for people, but what we're doing here, this is the current state, and we're just assuming one L2 and that's base and that's the transactions per second that it's doing today. And you can see this is sort of the value acrrual down to Ethereum L1. Those are the highlighted numbers at the bottom

there. and you have, you know, less than two ETH, you know, being burned per day, uh, you know, less a little over $3,000, uh, worth of ETH burn coming from Bass. That's just today. So, doesn't doesn't look great, right? So, you can start to, you know, think about what what if Bass, you know, 5xed its transaction throughput, it's its transactions per second. So, then we did that that scenario. That's the next one. And and just so people know like Ethereum is, you know, scaling out its blobs and so we factored that in. So they have the Petra Petra upgrade is coming in May. We have factored that in here. So the blobs per block is is six uh at this uh that's sort of how we're we're modeling this

out. And so we can say, okay, 5x increase in transactions per second. What does that mean for Ethereum L1? We can see, okay, it looks good. You're get you went from a few ETH per day getting burned to 42 ETH getting burned per day about 67 million that was at $1,800 ETH price. So it looks better and you've kept the L2 cost per transaction under two cents which which is great. Um so that looks pretty good. So now we keep going. All right. So now can we go to 10x? What if what if Bass you know onboards we have some really good devs come on to base build some cool apps.

things start to take off and we have 10x the the transaction throughput we have today. It starts to get a little this is where things get a little little little go off the rails a little bit. So you can see at the bottom the fees go up, right? So this is great and this sort of looks like what we saw on Ethereum L1 back in 21, right? when you get congestion, when you get lots of activity, the fees spike. Uh, and it looks good for the chain, it looks good for validators, but we can see there that the L the cost per transaction, that is the cost per user transaction on L2 jumps up to 35 cents per transaction.

That's at that's at 10 10x transactions. Again, we're using the um Petra Petra upgrade here. So, this is post Petra upgrade in terms of the the number of blobs per block. The numbers look pretty good, but is that actually what's going to happen? If all these L2 these users are paying 35 cents a transaction, I think they're going to leave and go go elsewhere as we saw, you know, in 21 when people started to look to Avalanche to Salana to to other chains. So now the question is, okay, well, we know Ethereum is working on this. They're aware of this. Let's now scale out those blobs per block a little bit more, right? So we take um the same 10x. We haven't changed the transaction throughput, but we what we've done here

is doubled the blobs per block from 6 to 12. So this is Ethereum scaling. Uh and we can see what the impact then would be on user transactions and uh value to ETH. And we can see we got the the transaction cost down again. So that's the 00018 number there. So that's great. But then what happens to value acrruel to ETH? comes down significantly once again to the point where it's about it annualizes to about 48.9 million um not not a lot, right? So, so you can kind of see this this pushpull where okay, it looks like the chain is going to get congested congested and then you know

they're going to do some scaling upgrades and then the fees are going to drop way down again. So, you're going to have this it looks like there's going to be this sort of pushpull as we go. If you keep scrolling down a little bit, we keep kind of going with this analysis. So here we're saying, okay, well this there's going to be there's obviously more L2s. So let's assume that arbitum and optimism also scale their transactions 10x over the same period. So now we have three L2s all doing 10x what Bass is doing today. And we can see, okay, now the numbers look really good, right? you get up to 17.7 billion dollars of of blob fees burned, which is almost double the peak fees that the L1 did uh for 2021. U but we can see that

we've got a problem where the transactions at the L2 level have jumped up to 64 cents uh in this scenario. So again, now you got to now you need to increase your your blob your blobs per block. So, we did that again and we can see we we got down to 17 cents by by bumping it up to 24. So, we doubled the blobs per block again, but that's still that's still too high, right? So, now it's like, okay, we're still can Ethereum keep up with this the pace these L2s are growing. That's still too high. We we did one more analysis here to go to 33. If you went to 33 blobs per block, which is more of a long-term sort of target for the Ethereum Foundation and where they're going with this, that

would get your transa your cost per transaction back under two cents at the L2 level, but your annualized fees would be 1.4 billion from blobs. This is just just from blobs. That's what Ethereum did this this past year. Uh 1.44 billion. So this I would say we have not made any like concrete conclusions on on all of this just yet. We're still doing doing a lot of work here. And ultimately where we're going with this work is to say okay we think there's like three different buckets of revenue that can acrue to ETH uh in the future. One of them is is blobs and and this this is this is not factoring in priority fees which we think there will be priority

priority fees with blobs as well. You're going to have the L2s and the blobs. You're going to have still activity on L1. We don't think L1's just going to go away. So, you should have some activity there. And Ethereum is now focused on scaling L1. And then you have restaking. So, like, you know, protocols that are using IGEN layer, you can take your your stake teeth, deposit it there. There's additional revenue that you could potentially get um through actively validated services. And ultimately what we're going to do is sort of model that out and get to what we think is a reasonable place for the real yield for ETH moving forward from those three buckets. Um, so this is ongoing work, but we're in the we're in the middle of it. This is almost like bare market work for me where I'm trying to get to a

thesis trying to get to a thesis of like once we you know ultimately we think we'll have a bare market at some point. We want to have a very clean thesis for what we think is the winner coming out of that. And that's that's what a lot of this work is for. So where does this leave you with your final like takeaways on ETH right now? Concerned. I would say I think it's fair for people to be concerned. You know, I put this out there. I want feedback from the community. So, and one of the things that I think was somewhat concerning for us is that we are always looking for people to audit the work. Um, and we were working with, I won't say the name, but we were working a fairly prominent, you know, research arm in in Ethereum,

and they kind of ghosted us. Um, because the numbers weren't looking like sort of Ethereum propaganda. So, I, you know, that concerns me even more that that that that happened. Um, I do think that Ethereum is turning a quarter right now. So, you have new leadership coming in. Bank list did a fantastic podcast with um, Dankrad and another researcher from the Ethereum Foundation. I think they were pretty honest about what has gone wrong over the last few years and and are trying to turn a corner. But to me, this throughput issue at being able to scale blobs is the key the key thing.

And then can you corral all the L2s and get them on this like blob standard, create the interoperability, create the user experience. Just a lot a lot of work to to come here. Like I said, I haven't uh we haven't fully come to our conclusions yet, but it's I would say concerning to to start with. I would say selling your Bitcoin should be a last resort when you need cash. That's why there's Letin the trusted platform for Bitcoin back loans. You can unlock cash in as little as 18 hours with no monthly interest payments and no prepayment penalties. They've issued over 9 billion in loans and never lost a single Satoshi of client funds, even during the chaos

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Built by the team behind Coin Shift, which is trusted to manage over 1 billion in business treasuries on chain, including a Gitcoin, and hundreds of leading institutions. see why CSUSDL is gaining traction at milkroad.com/coinshift. And if we look at this soul versus ETH chart that you ended your report with, where do you think this heads and what are your predictions for let's let's tie in soul here as well. Yeah. And we we did a little bit uh analysis I shared on Twitter yesterday where we're kind of looking at just the real value that's available to token holders for each network. And that kind of strips out, you know, value that's uh either token

incentives where it's not coming from users or it's me that's getting captured by like block builders and searchers and not going to to validators. And Salana did 488 million of real value available to token holders. That's year-to- date 2025. And Ethereum was 147 million. So there's just significantly more economic activity available to token holders which to me that is the key metric that investors will sort of hone in on. There are there are monetary premiums and we can talk about that and like that that's added on to what that real yield is going to be. But to me, this is uh still mispriced based on the fundamentals and

what the data is telling me is that Salana is just doing more. Um there is still more TVL, there's still, you know, more network effects, I would say, on Ethereum. And what I'm really looking for is what do we start to see from traditional finance firms? Are they going to build within the the Ethereum ecosystem and choose to do that with L2s? And then this work that we're doing to project out value acral will give us more insight uh into you know how that starts to play out. But um it does feel to me that those the two assets are still mispriced as in they're they're overpriced is is your view. Well well I think uh they they might they both might be overpriced but I would say uh Ethereum is mispriced

relative to Salana. So that gap between Ethereum and Salana should close needs to shrink. Yeah. Yeah. Right. Right. Are you for for this cycle for right now, are you trading Ethereum and Salana? Are you in them at all? I am out of Salana. So, we were bullish on Salana uh after FTX and we rode Salana all the way up to basically the Trump inauguration. And I'm I'm I'm out of Salana right now. I still hold some of my ETH. And what we're with some of this work I'm trying to make that I'm come to that conclusion of like when we start to buy assets with conviction again which one are we going to buy and like we will share that analysis uh I haven't made a decision on it just yet and we'll see where things

sort of settle like maybe you know if we enter a be bare market at some point um we'll see kind of where things settle out at. All right well we'll get you back on the show at that time to talk about those those assets. Okay, let's shift now from Ethereum over to Bitcoin because that is the that seems to be the the trade of of of the day, the trade of the week, the trade of the month. Uh not just in the crypto side, but also on the macro side. It's amazing to see how many macro institutions are piling in and still on the sidelines and coming. Let's talk about your thoughts on what are what are your overall thoughts on Bitcoin right now and then we'll jump into some charts from your report. Sure. So, um, overall

thoughts, you know, if we kind of just like take a step back, I always like to zoom out a little bit and just kind of give people my view. We all have sort of different perceptions of like what's been playing out or what's what has played out. You know, when I think about what's happened since, you know, we got pretty bullish after FTX. And to me, we've seen like the typical stages of like a a bull a bull run where you had kind of the the early bull phase in 2023 where Bitcoin starts to repric. You start to see a little bit of uh onchain activity coming back. Salana started to get a bid. We had like a I would say a wealth creation phase there where I would say that was really going back to Q1 of of last year. Bitcoin hit all-time highs before that the having and and and

then we sort of went through a a period of chop consolidation for for six months or so and then the period from I would say like October through um January felt to me like kind of a blowoff top to be honest similar to what we saw like when Coinbase went public maybe in 21 as kind of that was sort of when Trump came into office as sort of that final sort of point of the cycle that with that said, you know, and and my my what the way I've been viewing it is sort of like, okay, we may be in wealth destruction phase right now. I think that's unclear.

Um it's still unclear. When I was on a few months ago, I think I said that what we were looking for was to see, you know, corrections. We we've seen a lot of that with, you know, the the chaos in the markets with tariffs and the macro setup right now. Um, and then we've been looking to see sort of these a rally back up and we're in that right now. So, I wrote a report that went out last week kind of like moment of truth for Bitcoin. And to me, like we are in that phase. There's a chance I think that we are going to actually go up all the way to to alltime highs and potentially break all-time highs. And we can go through some of the data that I'm looking at if you want on the on that Bitcoin report because to me it really

kind of comes down to ETF flows. um is kind of the first place I kind of want to talk about Bitcoin. So if you yeah scroll this down. So really what tends to happen uh after you've had what feels like a little blowoff top is short-term you get the the paperhanded folks um the the sort of transients the tourists leave tend to leave and and they will try to leave when you get these sort of uh retraces back to critical support zones. So the 95 to let's call it or 92 to 100k or so is a critical support zone. So we're looking we're watching what's happening with short-term

holders. Um I think a lot of that activity is now happening with ETFs. So the data the onchain data is sort of evolving now that we have ETFs and other in other data points. But we saw a massive shift in the ETF flows last week. So there was about 4.4 4 billion of outflows going back from February through about last week. That, you know, made a massive shift and and this chart cuts off a little early here, but um we've had 3.6 billion of inflows over the last week. So, you almost reversed all of those outflows.

Uh so, very aggressive like shift there. And to me, that's important because uh what we've seen, and we'll get to the long-term holders, is long-term holders are stepping back in the market as buyers, which tends to set a nice base uh in in in the market, but you need short-term holders to push you to all-time highs. And this is a signal to me that that that could be could be could be coming here. So, if we come down, you know, I'm looking at a bunch of things on chain. Spot volume is still down. So, spot volume's down. Active addresses are down about 20%. So, we haven't seen like the sort of frenzy that we Yeah, sorry about that, Jay. That's We're gonna fix this.

I am a subscriber. We haven't seen Yeah, I know. We haven't seen the frenzy period. So, it's like, you know, let's see where the where this goes. What tends to happen with onchain data is price can move first and the reflexity reflexivity of the markets means that the actual onchain data picks up later. So, I'm I'm looking to to see if that starts to play out. Uh, coming back to short-term holders, you know, this is kind of what I was talking about. So, the price, we are now back to the short-term holder cost basis. And we're going to learn if these guys are paperhanded or if they're going to be diamondhanded, hold, and potentially buy more as, you know, as we show strength in the markets right now. Um, I did just

look at this number before we jumped on and we're seeing a lot of selling from short-term holders or at least, you know, we know they're sending coins to exchanges. We, you know, we assume those are sales. There's been about 13 billion. So, that has continued as price has moved up. We have seen in the ETF flows look great on with the onchain data. We're seeing short-term holders sending coins to exchanges. So, um, that's kind of offsetting, I guess, some of the the positive momentum. Yep. That's that's this chart here. And this has continued. Again, this is a few days old, but that that activity has continued. It's about 13 billion over the last week or so. So, something something to keep an eye on. And then, so the the question here, and this is kind of my what I think is going to

happen, or at least my base case of what's happening right now, is is long-term holders have stepped in. Um, this chart doesn't show it really well, but that blue line is is trending back up. And so, you do have long-term holders stepping into the market. this is like the smart money of Bitcoin. These are the people that have conviction, you know, are going to be here for a while. Um, that seems to be setting an interesting base for for Bitcoin. So, it's as you see that happening, it's less likely that Bitcoin can correct, you know, eat more and more. Exactly. So, you're getting some support there. Um, which is interesting.

If you want to come down to the next chart, so this is an interesting chart. It's showing the the ratio of long-term holders to short-term holders. And I and the reason I think this is important is because again long-term holders set the the base for the market and short-term holders tend to push, you know, into into bull markets to all-time highs. What we tend to see is that the price peaks in cycles when that ratio is at its lowest, meaning there's a more short-term holders in the market than than not not more, but there's an increasing number of short-term holders relative to long-term holders. So we saw it in 17, we saw it in the first peak in 21 and then we saw that also just just

in this past in Q4. So the question here is are we potentially going to see a repeat of like kind of what happened in the second leg of the 21 cycle. So if you look at the pink line there and you look at the second blue peak from 21, that pink line was up. So basically short-term holders kind of got out of the market. long-term holders were stepping in and that was enough to push us to new all-time highs six months later. It was kind of a weak sort of second thrust, you know, of the market, but to me this is this what's playing out right now uh as well. And so what does that mean? it to me it means like we might break all-time highs but it

might and maybe we get to 12130 but it's hard to see like a like a really big you know blowoff top again it might it it looks like it might look similar to to November of 21 could be wrong on that but that's kind of what the data is telling me I'll pause pause there if you have any comments yeah I was just gonna just time frame that for us when you say that we might break all-time highs what's the time frame you're thinking about But it feels like it could come. I mean, this I'm actually I'm sort of surprised at the momentum that we're seeing even today. More momentum for Bitcoin, NASDAQ. It's it's very correlated with NASDAQ. So, the market is is moving right now. I'm sort of surprised by I think there's a lot of

dark clouds forming uh at the same time. So, to me, it has to probably happen in the next month if it's going to happen because what I'm concerned about is like the sort of hard data. There's there's stuff happening with tariffs with sort of like uh we're starting to see that there's less shipping coming into the LA ports and you know we'll see like we'll see what the Fed does next week with FOMC next week if it starts to feel like they are going to cut uh next week. There's it's a 3.6% chance right now. So I don't think it's going to happen but they could indicate that they're going to cut in June and that's about a 60% chance right now. that could, you know, start to that could the market could

just look past May and and start to, you know, price in cuts and we could see a bigger bigger um, you know, bull market. So, yeah, that's kind of the the short-term views. Longer term views are really really really positive, I would say, for Bitcoin. And a lot of this comes down to what we've seen with tariffs. You know, something that I've kind of flip-flopped a little bit on is like the fiscal spending piece of this in Doge. When I saw Elon Musk getting really aggressive with Doge early on in Trump's administration, you know, I started to think, wait a minute, this is not good for Bitcoin. We fiscal was really what drove the markets and drove liquidity the last few years. And so, you know, what I've been looking at

there is fiscal is not we're actually spending more. The budget deficit's getting worse uh than it was. And so, I'm just looking at that. I'm looking at the rest of the world, Europe, more fiscal spending. Um, we know the Fed's going to have to step in at some point here. And so longer term, I think, you know, looks really good for for Bitcoin and gold, uh, as well. Uh, gold looks like it maybe it's Bitcoin sort of catching up to gold now. Gold gold had its run. Now, Bitcoin's catching up, but yeah, non-s sovereign store store value assets. Yeah, I want I want to touch on this chart that you have in your uh in your report which is um investors exposure to global risk assets and the change that is happening here kind of ties into what you're talking about

right right now. Yep. Yeah. So, you know, investors are sort of like stepping onto the sidelines right now in terms of risk assets. Everybody wants to have some cash. Uh people are concerned about, you know, how long tariffs could take and um is it the right time to be to be getting into risk? I mean markets are going up though so uh certainly some people are are taking on that risk. This this is interesting. You know, it looks if you normally I would look at this and say buy, right? That looks like everybody's out of risk assets. Go in and buy. At the same time, you have I would say that the equity markets haven't really repriced to a level that I think is appropriate given the forward

looking earnings. And that is probably the the biggest concern I have with the in conjunction with the uncertainty with tariffs, with inflation. It's so uncertain that the Fed is not giving really forward guidance uh right now. Maybe we get something uh next week. But for me, like the way I think of this, and I'm a long-term investor. I'm not This is like a trader market to me. I'm more of a long-term investor. And I like to buy Bitcoin when the market value to realize value is, you know, around one or or under one. It's it tends to go below one uh below zero even uh during the depths of of bare markets. We're at like a 2.2 right now. So the realized value for Bitcoin, which is a proxy for

the cost basis of all the tokens circulating, it's a proxy. It's not an exact, but it tends to tends to be a pretty good indicator. That's about $44,000 right now. I think it'll continue to go up and probably get up to 60,000 or so. But when Bitcoin bottoms, it tends to collapse towards that realized value. There's a few other factors as well. That's when I like to I see a confluence of those factors. Back the truck up and buy crypto. So, I'm kind of like watching the market right now for for the most part and staying uh on the sidelines. Who knows? We'll see.

We'll see how how that that works out. But for me, I like to I like to wait for the indicators and then have conviction for for a long for a long term. So, let's just talk about uh I want to go a little bit further on how you're playing it right now. So, it sounds like you're you're mostly holding cash, sitting on the sidelines. You're you're unsure about this this current pump right now, this rally right now. you know, is that is that a continued rally because everyone's going to go risk on? Feels unlikely unless something changes on the macro side and I don't know, Trump and China shake hands tomorrow and boom, we've got a deal and everything's back

in order, which is possible, but unlikely. Uh so, are you just talk us through how how you are playing it right now? Are you buying anything? uh what do you and then maybe let's talk about what you're looking for and what might um make a change in your structure and how you're allocating. So b uh bought a little bit of Bitcoin at 77,000. Um I would I'm still heavily weighted towards cash. Happy to like collect the four four and a half% in CDs until I have more more clarity. You know I'm following all this data and just trying to get a sense of of where we're going.

I'm not feel I'm not feeling the FOMO to like buy in. What I would like to see, I can tell you what I would like to see. Uh, and what I think would be healthiest for the markets to actually go to higher levels would be we get sort of this we realize the market's out over its skis. I think the market's out over its skis right now. And we'll see if I'm right about that. But there may be a realization that okay, some bad news is coming. China like this China stuff is going to take a very long time. That's my base case. And so, you know, the impacts of the tariffs start to become real. Growth slows down, unemployment picks up, you know, we get a recession, and and finally the Fed cuts. There's no scenario in my head. If

that is true, if that if I'm right, directionally accurate with that, there's no way that Bitcoin doesn't, you know, correct. What I would like to see Bitcoin do in that if that does happen would be to stay above the sort of bull market support zone which would be like 70k and maybe we just chop around through the summer. Summer sell in May go away. Summer months are usually not great for Bitcoin and you sort of kind of like last year you range in there a little bit and then we start to get more clarity on tariffs. the Fed starts to ease global liquidity uh comes back and and a lot of investors have had time to think about okay we're taking money out of US markets out of the MAG7 where are

we putting it are we going to gold are we going to Bitcoin so to me that is a very nice setup for then a bigger a much bigger move in Q4 that could go to you could take you to 250,000 Bitcoin or something like that that's that's in play I think uh but the key thing is that if we do get the recession or the the bad news, we don't break the like prior all-time or the 70k zone. If you break that, I would be worried that it's more a longer term uh like bare market setup. Yeah. Because I think quite simply if we break that then the the investor sentiment will change, right?

Exactly. you know, you instantly if we break that 70k and get down into the 60s, maybe we could handle the 60s, but if we for sure if we got down into the 50s, everyone's back out with it's a scam, it's not real, it's you know there's there's no real intrinsic value here and that story picks up steam again and it's that's difficult difficult to deal with. Totally. And and people forget that like when the price goes down like that miners the cost to mine Bitcoin right now is like 50,000. So you get these minor cap you have like this cascading effect. Usually there's hidden leverage that gets exposed and you just get this like nasty sort of reflexive move down just as you do going up. So

you got to stay out of that. uh if you can stay out of that, I think it's a really interesting recipe for like a big move uh in Q4, which would almost look like the I think the 17 uh cycle. So that's that's kind of the scenarios how I'm how I'm looking at things. Not to mention uh at the the liquidity setup as well, which is also very uncertain right now because as you said, we're not getting clear policy from the Fed right now. We don't we don't know what they're going to do other than Jerome just saying we're we can be patient you know no worries. Um which you know doesn't doesn't bode well that we might get rate cuts or QE anytime soon. But as you said the you know a lot can change if we

we're looking out to Q4 if that if the Fed changes their tune and we do get liquidity injection which seems very likely. We're still in a debt cycle. They still have a lot of debt to refinance. There's, you know, a lot of a lot of things point towards that. It is it's it's very this just this current the past two weeks have been I did not expect this type of rally this quickly. Like markets are is why markets are so difficult to predict. Like I thought we might rally a little bit, but now Bitcoin's like we're getting up to 100K here. It's, you know, and then the decoupling story is picking up steam.

What What do you think about the decoupling? like you see this go ahead. Yeah, I would love to see this decoupling story play out. I think it's a little early on it. Um to me that this idea of decoupling in Bitcoin which which to me decoupling is more Bitcoin moving to like a risk risk off asset. It's a riskon asset right now mostly is correlated with with NASDAQ. What especially during like volatile periods it's correlated with NASDAQ. the the decoupling to me that will happen if we see large central banks buy Bitcoin and it's public and we know it because that's why gold is a risk off asset because central banks hold it. That's the thing you go to. So, and that could

happen. We know some smaller central banks have have done that. We know there's a bit Bitcoin strategic reserve. So, and we should get to some more clarity on that I think in the coming months as well. To me, that's the moment that Bitcoin becomes a riskoff asset. But for now, I would say it's it's likely going to move with NASDAQ for the most part. Yeah. Well, two two very important dates to be watching are one is uh July 4th will be 90 days from the tariff pause, right? So, everybody should be watching that. Scott Bessant recently said that they're going to there will be a new income tax plan on July 4th as well. So, you know what what

happens there? Could July 4th be a big a positive news day? And then July 23rd is the deadline for uh the the proposal to be made by the crypto um not the crypto summit but the crypto council uh of David Sachs and Bohines that that Trump put together. They have to submit their report by July 23rd. So we got you know that's why it's the sell and may go away. I don't know this summer. This summer feels it's harder. It's harder to, you know, usually I really buy into the SMA and go away, but this summer I don't know. It's it's difficult to tell.

There's just so much noise right now and so you don't know when that noise is going to settle down. Yeah. Yeah. And the way I've played it is, you know, I have like long-term BTC that we just hold and don't sell. There's some ETH as well there. And, you know, if we have this wild, you know, if we have this correction phase, I will scale back in, right? If I see that look, we're going to that scenario we just laid out where we sort of stay above the support zone and you see the macro conditions improving, then I will start adding back looking for looking for that blowoff top that could come, you know, Q4, maybe into 26. Yeah. Yeah. Michael, pleasure to get you back on the show today.

Thanks so much for joining us. Thanks for having me, Jay. Thanks for listening in everybody. Have yourselves a wicked awesome day and we'll see you back tomorrow. Another great episode in the books. Thanks so much for listening in everybody. Truly appreciate your support. People often ask me which crypto credit card I use and I use the Crypto.com card for a few simple reasons. Number one, there's no annual fees. Number two, you get cash back in crypto. So you're building your onchain dollars. No need to on-ramp. Number three, you get lots of benefits. Netflix subscription, Spotify subscription for free. And finally, you get lounge access if you get one of the higher level cards. Check it out. Link is in the show notes. you won't be upset. Thanks y'all.

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