Michael Nadeau of The DeFi Report on the early bull market case

Transcript

I think there's a chance that the setup for crypto right now is like the best it's it's really ever been. >> Bitcoin is pulling back and a lot of investors are scared. Is the bull market cancelled? Has all of this just been a fake out? Or is this a retest of support before the biggest bull market in crypto history? Hello and welcome to Milkroad Crypto, the show that is home watching charts and catching falling knives while everyone else in crypto is having fun at Token 249 in Singapore. I'm your host, John Gillan. Today is Thursday, October 8th. And today we are joined again by the great and powerful and very wise Michael Na who is the founder of the DeFi Report. He is one of the best analysts in crypto, one of the best performing portfolios in crypto right now too, I will add, and a longtime

friend of the show. I'm really excited for this episode. Michael is going to save Bitcoin today. So, if that sounds good to you, make sure you like and subscribe. Share this episode with somebody who's going to enjoy it. And as a reminder, our podcast today is free and that would not be possible without our partners at Nexo, the digital asset platform that lets you earn, trade, borrow all in one place, all from one account. So keep an ear out for more information on them later in the show. But for now, welcome back to Milk Road Crypto. Michael Nato. How are you, sir? >> I'm doing great, John. How are you? >> I'm good. The weather is great, but Bitcoin is not. And um I think that would be a good place to start the conversation. Bitcoin is pulling back here. We just bounced off of 81K as we

sat down to record here today. What's your initial reaction to this pullback? I know it's just happening right now on the charts, but is this surprising to you? Is it worrisome? Is it expected? What's your reaction to this? >> Not super surprising to me. Um, I've been looking. So, Bitcoin sort of established its what I would say technical confirmation of what I would say the the early bull phase with multiple weekly closes above the 50week moving average that played out towards the end of September. And we've kind of been in this elevated range here trading between 77 87k or so for roughly a month. And we're kind of processing I think sort of that initial move that we had in mid August after Besset came out and said they were going to protect the

long end of the curve. So I think the market's sort of processing this. Bitcoin has been performing quite well through what I would say is a lot of sort of darkening clouds in in kind of the macro space. And I've been looking to see I've been expecting that Bitcoin would come back and retest the 50week moving average which is still uh sloping downward. That's about 78K right now. So I think there's a lot of eyes on 83K because that's the the high that we established in May and we want to kind of maintain that level as sort of more confirmation that you know we're in an a secular upward trend here. But I do think it's it's it's totally normal that we would come back, retest that 50week

moving average. I think there's a lot of shorts that are that want to push the price that down there in in the near term. And that's really what I'm looking to see is how does Bitcoin respond once, you know, we go to that level. I don't know. It looks like, you know, the charts are going down today. Maybe we see that today, tomorrow, but I don't think this is any like major cause for concern unless we start breaking those levels and and and establishing weekly closes uh you know at lower levels. So, >> okay, let's before we get into some of these other topics, let's unpack those ideas a little bit more there. So, what I'm hearing you saying is that you're sort of expecting Bitcoin to revisit 78K or at some point hit that 50WE and you wouldn't get concerned unless it like convincingly lost the 50WE. Does that

kind of encapsulate your ideas on this and and and what time frame are you looking for that to happen under? >> Correct. Um on sort of the path here, you know, I think it it makes sense to me that we would come back, revisit the 50WE, and if we do that, drop lower, have a close, you know, weekly close, you know, at a lower level, maybe a multiple weekly closes at a lower level. and we're not seeing flows. You know, we've seen uh a pretty strong return of flows back into crypto markets over the last month or so, particularly in the ETFs. So, we'll be watching kind of the flows, how the market's responding, what the positioning looks like in the order books to see how this plays out. But, I would say the the sort of technical confirmation is in that we're kind of in

this what I would call the early bull period. That doesn't mean that that can't be invalidated. So, we'll be looking to see if that potentially gets invalidated in in the coming weeks here. >> This pullback on Bitcoin is scaring a lot of people and I am not one of them. So, if you want to see what I'm not selling and why, what's on my watch list and when I'm going to be deploying more capital into these markets, you can join Milk Road Pro today. It's just a dollar. The link is in the description. I answer questions day and night in Discord. I'll see you there. Okay. Uh something I've heard a lot of people expressing concern over is sort of the macro backdrop here. The Federal Reserve raised interest rates once. There's some uncertainty about whether or not they might raise again in October. yields on the long end

of the bond curve are are are rising fast and a lot of people are basically just saying that there's general macro headwinds from a lot of things and so they're sort of fading risk assets here. Your latest report from the DeFi report was titled quote keep fading macro and it seems like you have a different view on this. What are your thoughts on this macro landscape here and do you think that the macro is catching up to Bitcoin here? >> It could be. you know, we've been sort of following this for the last several months. And I think if we go back uh towards like the summer months, you know, we started allocating back into the crypto markets. We kind of went risk off around this time last year and we started allocating back actually in February. Bitcoin had a pretty steep draw down in February and we started

buying other, you know, parts of our portfolio, April, May period. But I was still kind of keeping some cash on the sidelines because I was looking at this macro setup with oil prices, you know, coming back up, still, you know, uh running into a lot of issues in Iran and and not seeing a resolution out there. Um we've seen the 10-year rise almost, you know, a full uh you know, full basis point. Um over the last uh or almost 100 basis points since June, we've seen real rates rising. Um, so this is not, you know, typically a a good environment uh for risk assets and crypto assets. At the same time, the thing that I've been sort of most anchored to in our research is really what's played out in the crypto markets over the last, you know,

nine months or so. We track this on a weekly basis. We're tracking market structure and really kind of like how the holder base of Bitcoin is rotating, you know, through through a market cycle. and we've just been tracking kind of like all the money that came in at the top of the market uh back in 2025 and sort of where those coins are rotating in in the bare market. And so I I have been of the mind that we've seen sort of a sufficient uh rotation of the holder base back into sort of like a a stronger foundation uh where most of the coins are sitting in between 56k and you know 85k or so. We've seen that sort of uh reshuffleling of coins into stronger hands. We've seen leverage pretty much

come out of the markets. You know, we saw Micro Strategy run into issues with its balance sheet. That's kind of a clear sign of, you know, leverage being cleared out of the market. There's a number of cycle KPIs that we're tracking. Supply and profit, NVRV, things like this. So, all of these all of these things that I'm track uh tracking, I'm kind of checking the box and saying, "Okay, that looks like it could be sufficient for a cycle low for Bitcoin." We're checking all these boxes. The one thing that I couldn't really check off was the macro setup, but because of sort of what we see in in the crypto markets in terms of market structure, to me, there are periods.

Bitcoin tends to be, you know, pretty moderately correlated to the stock market to to NASDAQ, but it does have periods where it's less correlated. And I think we're in one of those periods right now. And the reason for that is that the the crypto markets have gone through this reset already. There's just not a lot of sellers. we sort of have exhausted the sellers out there. And one signal of that is just that Bitcoin's been doing well uh in this in this environment. I think that tells you that we're in a different structure here. We're seeing now, you know, there's more concerns I think bubbling up more on the Trady side. Um and stocks have have come off a little bit the last few days.

there's kind of an interesting story to tell there in just terms of like the index is not really uh showing us like what's happening under the hood in terms of volatility and dispersion uh in the stock market. And so yeah, I've just kind of put more weight on market structure and everything we look at specifically in the crypto markets to say, you know what, like we've kind of had this full reset that we would expect to see in a bare market. If there's just not a lot of sellers in the market, then, you know, it's gonna be hard for Bitcoin to actually revisit the lows that we saw in June or possibly like break down below 75K or so. And that's kind of been been my view. So, I'm really kind of more in a, you know, fully riskon stance. Um, which may seem odd with all of these, you know,

darkening clouds uh in the macro space out there right now. So, >> yeah. Well, this kind of gets to the next question I was going to ask you is that some people on the timeline are calling all of this this move since August a a bull trap and they're still expecting us to get down to 55K and calling basically for new lows. Um, and you've faded this idea with a lot of confidence. I think you've said something like 85% confidence that we are now in an early bull phase. What gives you that conviction? I mean, you just kind of went through a lot of this year, but like why are you so like confident and expecting a higher low as opposed to a new low on this pullback?

It's it's really the confluence of of kind of everything I just went through there in terms of the market structure, the leverage and credit reset, um all of these KPIs that we're tracking. Um seeing strategy go from a, you know, kind of a forced seller of Bitcoin into now essentially repairing its balance sheet and getting that STRC product up close to par. I not sure if it's quite there just yet, but it's very close. And so um you could see a situation where strategy actually could become an issuer of that product that allows them to raise capital and then they come back into the market as a buyer. Um so there's all these kind of like like to me all the bad news already played out and sort of got priced in. We saw the you know Bitcoin came off 53% which is a

which is a shallower bare market and it played out over a 9-month period which is which is shorter than normal. So, I could see why people would sort of still hold on to this view that that we haven't bottomed and there's more weakness coming, especially if you fold the macro into that. But I just think that, you know, everything that we track on the data side specific to the crypto markets just tells me that we've seen the rotation. There's not enough like capital. there's not enough people like holding unrealized gains in my opinion because of the reset of the holder base to see you know a lower low. I I just see that I just think the probability of that is pretty low. It doesn't mean it it can't happen. We have had sort of the

early bull uh stage of a cycle get invalidated in the past. It did happen in 2020 because of COVID. So that was sort of like a black swan that kind of broke that uh sort of technical confirmation. And so it doesn't mean it can't happen, but I think it would take um something like that that you know I can't uh I can't invest around black swans. And so we kind of just say, you know what, that could happen, but we want to be in the market uh regardless. So, >> okay. You've been accumulating Bitcoin and a large basket of altcoins throughout the bare market. Are you accumulating on this dip here or are you just holding your bags and watching this confirm the breakout? What's your strategy around this this moment here?

So I am uh pretty much fully allocated um at this stage we were about so if I go back to like mid August we were roughly 85% in the market at that time. So even though we were highlighting these macro risks in our research and we were tracking all this you know we were buying Bitcoin because it was in our fair the fair value territories that that we had identified and I had confidence that the structure of the market was was in kind of that reset mode. So, we were buying and we were also building out our our altcoin portfolio. Roughly 44% of the capital that I put into the market went to Bitcoin during the bare market. Um, but it's actually only about 25% of the portfolio right now just because these other assets that we that we establish

some positions in have actually have outperformed Bitcoin. So, the my thinking right now is like we're in the early phase of the cycle. I'm not really looking to take profits even though we've seen some some outperformance and kind of a re almost a rerating of like quality altcoins and things like this off off of the lows. I think we're kind of in the process of just sort of rerating that. Maybe going from from fear to greed a little bit in the markets. Um but I'm not really looking to take profits. What I what I sort of plan to do is just monitor our positions throughout the cycle and when we think something has kind of detached or the thesis has played out, we may um you know sell that and then rotate that into Bitcoin if we still think Bitcoin has a lot of upside you know further in the

cycle. So I'm kind of like fully allocated for now and then we're just going to be monitoring the risk you know as the cycle goes and there there's rotations that play out you know kind of throughout the cycle. So >> okay that's very helpful. I want to spend as much of this conversation as I can really on your altcoin positions and and your thoughts on this. You've pointed out that almost every coin in the top 50 by market cap has beaten Bitcoin in performance over the last month. Um and I'm curious your thoughts on this. Do you think this is the beginning of a real alt season here or is this exuberance after the August short squeeze or or is there sectors that are doing well? Like what what's your read of the general alt space right now?

>> It's been interesting. You know, I think if we kind of go back like of kind of what's played out over the last quarter. So, you had Bitcoin increasingly looks like it was the cycle low on June 30th. That was like 58.5K or so. And then the next day on July 1st, Robin Hood chain launched and we kind of like immediately saw like this kind of return of the annual animal spirits I call them a little bit. You know, speculation, people excited to be on chain trading things. We've seen these new social trading apps come out and kind of kicked off a wave of a speech speculation on Robin Hood chain and that sort of like played out maybe over a six weeks period or so it peaked in early September but the sort of desire to speculate kind of shifted to what I would say is like

quality altcoins we've seen things like lighter hype uh near Zcash things like this have done quite well many others have as well and if you kind of zoom out a little bit actually as you mentioned like 96% of the top 50 coins uh on coin market cap have actually outperformed Bitcoin uh during the month of September. So, kind of looks like a little mini alt season in some ways. There's a lot of open interest and speculation around some of these hotter coins. So, uh my view on it is that it's not really an alt season. Um, it's more and this is kind of why you want to be in the market for when it turns because there's just a lot of this like easy money that comes because things get so oversold and there's so much fear in the

market that when it flips things go up like 100% in and you know a week or two's time and you're now just kind of getting back to what I think is like closer to you know a fair value range versus being like deeply oversold. So I think that is basically what has played out over the last, you know, month or two with with some of these quality more quality altcoins that were just deeply oversold. So I don't think it's like a, you know, something where we need to pause and we're just getting too out over our skis or anything. It's more just we were so oversold. Bitcoin came back. Now everyone kind of is relax more relaxed and like looking to allocate into crypto again. I'm noticing just just more interest broadly

in in the space. I think there's been a little bit of a flip in terms of just the uh social media interests in um crypto crypto media generally. So yeah, that's kind of kind of the view there is like it's really just we were so oversold and now we're just back getting we're sort of mean reverting um back to like closer to like fair value I'd say. >> Yeah, mean reversion is exactly what I've been that's the phrase I've been using too because Bitcoin is back to its mean like it's a year a year of price history. It's about back at the average level. The altcoins are doing that too. Uh let's talk about Ethereum here. The ETH BTC ratio has been breaking out.

It's it's retesting support this week. Uh Ethereum has retested its own support, too. I haven't checked. It may have gone through it, but um what is your outlook on Ethereum and ETH here? Do you think that ETH is going to outperform Bitcoin in this cycle? Are you paying attention to this ETH BTC ratio? What's what's your take on this? >> Tough tough call on if ETH is going to outperform Bitcoin. I think it it it could. it did not outperform Bitcoin from the lows uh in the last cycle. And you know, I've kind of like had differing views on ETH over the last over the years. I was a huge bull on Ethereum. I was like the creator of the Ethereum investment framework at one time and huge ETH bull and I sort of got somewhat soured on it a little bit just through the the L the basically the L2

roadmap and kind of what has played out on Ethereum in terms of like uh the product being fantastic and people wanting to build on Ethereum. We now have two large publicly traded firms with with L2s on Ethereum, Robin Hood and and Coinbase. But it's still difficult to see sort of the exchange of value that's playing out between these L2s that are coming in and leveraging all the liquidity and the smart contracts and all the uh work that's that's been done there. Bringing their distribution into that and and and doing quite well uh there, but maybe not enough value making it down to ETH, which drives, you know, fees and and and and pays the validator. So I've had I've

sort of struggled with you know what what is the narrative going to be for for ETH moving forward if it if its fee capture is really low and I know this is an ongoing debate in the market that whether it needs fees fees or not. I would say if it if it doesn't have fees then the narrative kind of comes back to just everything being built on Ethereum L2s stable coins you know finance coming on chain and then where does you know how do investors think about that? Do they what is the KPI they're looking at? Do they compare it to Bitcoin? I just think it's kind of in this tricky spot in terms of how investors are going to bucket ETH. If it's competing with Bitcoin on store of value, I think it loses that that debate. If it's

competing on this is the future of finance and there's other KPIs that we should be looking at to track this, I think I think it gets interesting and all the activity with Robin Hood is definitely a positive sign. One of the, you know, catalysts that I identified that may be interesting for ETH this cycle, seeing what Robin Hood, uh, has been doing with with its L2 is, you know, potentially these trady firms coming in, you know, launching an L2, having some success, bringing some users, bringing their distribution on chain, and then buying ETH in in the market and putting it on their balance sheet and sort of signaling to um the community and the in the broader space that they're aligned long term and they believe in the assets. that and that

that to me is kind of an interesting bullcase for how ETH could potentially outperform Bitcoin this cycle. Thought Robin Hood might might do this and buy some ETH. They they I think they announced yesterday they bought some Bitcoin. So kind of like hurts that story a little bit a little bit to me and I've always sort of anchored my portfolio with Bitcoin for this reason. I just think Bitcoin is the cleaner asset. It's the one that everyone wants wants to hold. I think it's the it's kind of won the store of value um story so far. And so that's kind of the anchor for me. It's I kind of separate that from everything else in my portfolio. We still hold some ETH and we have plenty of exposure to ETH uh with other assets, but um yeah, it's a bit of a rambling

answer, but I've also kind of had the view that like the best apps would also, you know, with good token economics, product market fit would probably outperform ETH this cycle. So, not a bear on ETH, just maybe, you know, struggling to see how it outperforms Bitcoin and some of the other things, you know, in my portfolio. So, >> I I think that that long rambling answer kind of is reflective of what the market is doing with Ethereum right now. They're figuring it out. Is it the apps? Is it the store of value? Is it all these things? Um, but I'm I'm bullish as hell and I'm excited to see how that all plays out. Uh, Mike, I want to talk about your portfolio. You have a lot of altcoins in your portfolio. Your portfolio has performed very strongly in 2026. You've gotten a lot of attention

for this. So congratulations. But um break down for me what has driven that out performance? Has it been a specific sector? A few projects you're welcome to name drop if you want to. But where's that outperformance coming from in the D5 report portfolio? >> Um so we spent a lot of time in the bare market. Uh we have something called the watch list. It's about roughly 40 assets that we've initiated coverage on and spent a lot of time the the bare market. We I always joke that it's kind of my favorite time because the the tide goes out. it gets a little bit easier to figure out, you know, what transpired in the last cycle, where's where's the market going, what has clear product market fit and is able to maintain uh users, you know, in a bare market. So, we identified one of the uh themes that

I was was obvious to me with hyperlquid success was PERS. Um PERPS have clearly become the sort of trading vehicle that retail prefers. I think roughly 5x more volume on per trading than on than on spot trading and just seeing the success of Hyperlid with with onchain per. I missed Hyperlid in the last cycle and what we were doing was kind of just looking at the per sector and trying to identify if there were other ways to get exposure. So, Lighter was a project that um that we got into that we covered in the watch list back in uh April and I think it was trading at a roughly $250 million market cap at the time. Nobody everybody was kind of focused on

Hyperlid at that time. I kind of did the onboard experience on lighter. I thought it was an easier onboard actually than on Hyperlid because of its it its proximity to Ethereum. I thought it was interesting in terms of the way that they're using Ethereum to, you know, basically uh record all the accounting that that that plays out on lighter. There's like an escape hatch where you can kind of withdraw assets through Ethereum on Lighter. I thought this was kind of interesting in terms of security and where institutions may uh want to want to use and in and that onboard experience was interesting especially when you consider that there was a relationship between uh Lighter and Robin Hood. Um, so at that time we

thought maybe there was a chance that that could get integrated into Robin Hood. So we established a position there. I think per is is a category that will do very well and I think lighter uh may be the number two onchain per decks and just looking at that to potentially get integrated into other trady distribution. There was some news that Robin Hood is using bitstamp uh currently for its per in the main app. Lighter is still in the Robin Hood chain app, but we we'll see. I don't think that story has played out. I still think there's a chance that Lighter actually gets integrated there and that's that Robin Hood's selection right now is really more for uh regulatory reasons.

So, I think there's some catalyst for PERS. We we should see regulation in this category, open these products up to US users. Um, so I think there's still a lot of upside in PERPS. Also looked at the onchain options uh, space and kind of went back and sort of kind of drew out how pers grew over the last 5 years or so as a product starting as a centralized exchange product and then ultimately moving into um, onchain onchain um, protocols. And we kind of think that a similar process is going to play out with options where it starts with a very centralized solutions um through centralized exchanges. We're now seeing onchain options and so we um established a position in derive which

was trading at a very low market cap um earlier earlier this year. Um so that's onchain options onchain perks two areas that I think have a big addressable market. also, you know, DeFi, you kind of want to be around where trading, that's kind of where most of the economics happen in crypto. Those are two categories. The other third, the maybe the big one, um, and the largest position I established outside of Bitcoin was in Pump, building a thesis for the social trading uh, space. We built out a dashboard on Pump over the over the bare market. And I was just really surprised at the user retention, at the revenues it was doing, at the at the amount of money that creators were earning on on the platform. And we

started to get loud about it. One of the nice things about being able to get on X and put stuff out there, you get kind of immediate feedback in a sense for like how the market views things. And so we started talking about Pump and, you know, just getting a lot of feedback, a lot of really negative feedback uh coming back my way when we were sort of sharing our thesis. So, that was a really good thing. I really enjoy when people disagree uh with me because then I can sort of put together a full list and see if I can sort of debunk the things that they're disagreeing with me with. So, we actually did a report, built a dashboard, put our thoughts out, got feedback, and then we wrote a second report going through all of the sort of naysayer arguments around pump um to see

if, you know, any of that was true. we still had trouble sort of aligning with the bare case on that. So we ended up building a pretty large uh position in pump. Um and that's that's playing out uh quite well as well. So those are kind of the three main categories I would say. We're also have some exposure to stable coins through through Athena was another one. Athena had a really rough bare market but I pretty bullish on on what could come there over the next couple years. Um but yeah, I'll pause there. Those are kind of the main, I guess, uh, themes that we identified. >> You know, one of the weird things about crypto is that the longer you're in it, the more accounts you seem to end up with. You buy in one place, trade somewhere else, earn yield somewhere else, and if you actually need capital,

you end up having to sell something that you probably wanted to keep. That's why we at Milk Road are partnering with Nexo. These guys keep the whole thing under one account. You can buy, trade crypto, earn interest on what you already hold, and even borrow against your capital without having to sell it. All in one spot, all in one account, all on Nexo. So if you need liquidity but you don't want to give up your position or you're already holding crypto and you want to be able to do more with it, I think Nexo is worth your time. We love working with them, I think you will, too. Tell them Milk Road sent you. >> Okay, I have a whole bunch of questions here, but let's just stick with these three for right now. All of these have have proven to be good calls, right?

Like ultimately, they've all performed very, very well. And I think a lot of people right now in this moment, especially seeing some alts pulling back here, are wondering, is it time to take profits on some of these big moves? Is it time to add on these dips? are you just holding through all this? What's your thought process on that and and how are you navigating that in these assets or just broadly in the portfolio? >> Yeah, so I think we have seen uh a rerating and some of these things are up um 2 three 400%. Uh we have lighter for example um is down roughly 33 35% since um since Robin Hood announced it it was going to use Bitstamp in the in the main app. So we're seeing you know a little bit of a correction here on some of these and I I expect that. I think if

you really want to to outperform, you got to be able to hold. You got to be able to hold stuff. And you know, we in the in the last bare market, the large holding I had was was soul or largest altco coin holding. And you know, that was pretty volatile. It went up a lot, you know, in late 2023 and then it went up in 2024, but then there was probably three or four corrections of over 40% that we held through uh during that period. And that's tough, you know, when you're up a lot on something and you sort of feel like you got the call right and then the market turns on you. I think for me it's more about like building a really sort of fundamental view of like what what we think where when we make the investment actually writing out why we're making that

investment and and what we think uh the market is missing and then what are the catalysts that we're looking for. So once prices start going up, I'm kind of revisiting that work and saying, "Okay, we thought this was going to happen. We thought lighter would get integrated into Robin Hood. Okay, that's actually happened." Uh, and the price went up because of that. And so, and then you're kind of re-underwriting that and saying, "What are the future catalysts from here? What is the relative valuation to other like assets? Where are we at in the big picture of the cycle?" Um, so we've been doing a lot of that work. I wasn't expecting to do it. honestly wasn't expecting the portfolio to be up to be doing as well as it is this early in the cycle, but it's forced me to do more risk management and kind of go

through some of that work and for now I'm, you know, I'm happy to kind of just hold my hold the positions that we have. So, >> okay, that's a very clear answer like you've evaluated this and you're you're along for the ride. Um, Michael, I want to talk a little bit more about your framework for evaluating altcoins because like you said, you you write coverage on something like 40 different uh altcoins and you have only about I think a dozen or 15 or so that are actually in the portfolio. Talk to me about the decision-m process for adding something to the watch list to do coverage on it and then what you do to whittle it down to what you actually want to allocate capital to. What's that framework look like for you?

>> Yeah, I I think this is some of the most important stuff that that we do. There's there's um thousands uh tens of thousands of crypto assets that are that are out there. I think there's probably like maybe 50 or so that are investable and we probably don't have all of those in the watch list. But really what we're trying to do is take the broad universe of crypto assets, narrow that down to the ones that we think fit the the sectors that we like the most, the themes, the categories that we like, and that sort of check boxes in terms of, you know, their their market position, the the team behind that, maybe the investors or the people that are associated with that that project, the the token economics, you know, product market fit. We're trying to essentially identify the things that we think are

most interesting as investment opportunities and then just initiate coverage on that. We build dashboards. We cover the assets on a weekly basis. And this is kind of what informs uh you know active portfolio management in terms of things that I may be looking to to identify and establish a position in in the bare market. Um, and then once that's all built out, now we have all that data that we can sort of track through the bull market and just see if our thesis um, is playing out. So that's kind of how we build, I guess, the watch list. The actual portfolio falls out, you know, from from the from those 40 assets. And it really comes down to, I think, just the work that we do in the bare market to say, okay, the this is the sort of universe of investment

opportunities. These are the sectors themes that make the most sense. And we kind of lay that out and then we just pick the ones we think are going to have the strongest economics, the strongest, you know, use, you know, fundamentals, um, use cases and things like that. And then try to identify the assets within that that we think are either oversold or the market's missing something. It's, um, it's a lot of work. It's a lot of zooming in on sort of individual projects and really getting in the weeds and then trying to zoom out as well and sort of manage risk through the the bigger cycle. So, >> Gotcha. Okay. So what what exactly goes into saying how much capital or what what's the position sizing strategy on this? So how do you size these things?

Because these assets are very different both in their market cap and their value drivers. How do you think about deciding how much capital goes into a specific project and and what position or what percentage of your portfolio you want to have allocated to one one or another? How do you make those decisions? Yeah, it's um you know, historically I've been closer to 60 to 70% uh Bitcoin and I think over time we've sort of moving more towards things that we think have more upside you know for the portfolio. So 44% of the capital went into Bitcoin that was less than I you know did last last cycle. But I think in terms of like the the waitings it really comes down to the conviction that I have. Where's the asset trading at when we buy it? I think the most important thing for me is

getting the entries right, which is really hard to do in a in a bare market. We try to scale into things and just get into a position and some of these positions that we've done well on, we were we were underwater, you know, pretty significantly on u because it is really time hard to to time the bottom. But in terms of building, you know, pump is this was the second largest and honestly it was just we did a ton of work on pump and I couldn't find anyone that agreed with my view on it. So that when that happens, it just like I I I get more conviction and if I can't, you know, it's like a Charlie Munger thing like you you you want to understand the opposing's view better than they do. And if I feel like I have that, then it's it's one of those things you got to back

the you got to sort of, you know, move into that with conviction. It was the same process. It's the same exact process that I went through when I first got into Bitcoin as well. when I kind of formed my own view, went out and talked to all of my friends and family that work in finance and technology and everything and nobody agreed with it, but I couldn't I couldn't align with why they disagreed with, you know, when you have those opportunities, those are great investment opportunities in my in my opinion. And so, it kind of just comes down to instinct, I think, a little bit on on that. Obviously, there's more risk. You we we will also hold memecoins in our portfolio and those are smaller allocations. We'll put, you know, I think we I think our portfolio has it's up because these positions are up. It's about 11% of our

portfolio, but we try to put like roughly 5% of the capital into memecoins. We do fundamental research. I know it sounds weird, but we actually do fundamental research on the holder base of memecoins. And we're trying to identify things that we think have data that stand out from from others that we can sort of hold and buy when they're, you know, extremely sort of um oversold. And so that was kind of the strategy in the in the bare market as well. But yeah, a lot of it's, you know, it's I always say it's like it's a combination of of art and science, right? We do a lot of data work and we're in the weeds on data, but there's art and instinct and just sort of judgment. I think that that sort of overlays uh some of that work as well. So

>> I also think it takes a lot of guts, which you definitely have to be to be doing fundamental analysis on memecoin. So more power to you. Um, Mike, I I want to get your thoughts on DeFi here because I've heard you talk about the difference between fast DeFi and slow DeFi. What do those terms mean to you? How do you invest around that? And which one do you think is where you want to have your capital most allocated to in this bull market cycle? >> Probably the easiest way to uh explain the thinking on this is like I think of fast DeFi as stuff that has uh high velocity. And so things that have more velocity, this is typically going to be things like perks, things like social trading, things that things that just have lots of trading volume are going to produce uh stronger economics than

something that has less velocity, less trading volume. So when I think of like DeFi, you could you could think of it as like um you could look at the market for onchain lending and and credit markets as as one category and then you could look at you know per trading or social trading use cases as as another category and I would say the per trading social use cases have much uh larger economics much larger addressable market because of the velocity of the user activity with with those applications. So like I I tend to favor those things over something like a Morpho which is a fantastic protocol really important to DeFi has really good fundamentals but maybe the business model is is a little

bit trickier in terms of most of the economics of like a lending app or acrewing to the supply side that's depositing that's uh the the lending activity there. Most of the um the fees are going to them rather than to the morpho protocol. Uh there's also other third parties in there. there's vaults and things like this. So just the business model of it means that less economics are acrewing to the protocol which means they have less that they could potentially use for token buybacks and things that drive value to the token. So that's kind of how I think of it is like what can produce the most economics and then is there enough to actually be able to compensate your supply side uh in the in the case of something like pump right they have to

be able to compensate the creator right this the supply side of pump is the creators of those tokens they need to be able to be compensated pump also needs to be able to charge enough fees for to run itself and then if it has leftover to to do buybacks that's telling you that there's a business model there that really works that has velocity has has strong economics. Um, and so that's kind of how I think about those those two different kind of options, I guess, uh, within DeFi. >> Okay. So, you're you're generally leaning towards favoring the fast Defi option. Is that what I'm hearing you say?

>> Correct. Correct. Yep. >> Okay. I'd like to get your thoughts on this because, you know, we've talked about lighter, we've talked about derive. Um, and I think I'm not fdding anybody's project here. I think they're both great projects. They're both building great things, but their market capitalizations are both tiny compared to a competitor like say Hyperlquid, right? Like it's like 2025 billion market cap versus like 1 billion and like a half a billion I think for Derive. Um, but these these products are all in some way in competition with each other, right? They're all trying to do like Derive is focused on options. Lighter is focused on Per, so they're trying to bring options to market as well. Hyperl is trying to do the same thing. When you're evaluating your investments on these things into a specific sector or thesis, do you try to

just pick one winner? Do you pick two or three that are all trying to compete for the same market share? Or do you just like go with the one that the market has already chosen like hyper like how do you think about those choices and what goes into evaluating those decisions for you? >> Yeah, it's a great question and it's it's super difficult. I would say this is like uh really hard especially in crypto because when something comes in and it works then there's a bunch of copycats and you can spin up competitors pretty easily by forking uh protocols and things like this. We just sort of saw this play out a little bit in the social trading space when Robin Hood chain came out. Um we saw pawns you know launch over there as a launchpad on Robin Hood chain and sort of capture the

market for for a brief period. you know, in terms of like how how I you it's harder to build conviction when you're in a in a um category like this that we know something has worked and it's worked on Salana with Pump Fun. Now someone else is launching it over on on Robin Hood chain. We actually bought into Pump or sorry, Pawns at a pretty pretty low market cap because we just thought, you know what, our thesis is working. Let's double down on it and get some exposure to to Robin Hood chain. So I actually own both of those. um as as one example I guess in the in the perp side of things I sort of think of it as you have Hyperlid and Hyperlid is more of an app that you know has really strong traction but it's also a a chain itself and you have third party builders

that can come on there and build you know a lighter somebody could build a lighter or you know we already see with trade XYZ so there's I think I think hyperlquid what what what is unclear is if people are going to go build on top of hyper Hyperlid build, you know, lighter competitors on top of of Hyperlid. Are those going to are are people going to want to use that over just using the Hyperlid app itself? Like what is the future of of Hyperlid? Is it infrastructure or is it really just the Hyperlid app? If it's just the app, then I think there are going to be multiple winners, you know, in this in this category. And I think that it makes sense to me that one of them would be

attached to the Ethereum ecosystem. Ethereum's the largest smart contract network, has the most security, the most Lindy. I think that's an area that Trafi sort of trusts at this point. And so something that's built there that's recording all of its accounting to Ethereum that has an escape hatch to Ethereum, I think is very interesting for potential uh integrations with other Tradfi. So the question for me is like when tradi comes in you know decides we once we have regulation and everyone wants to build you know per trading and and offer that to their distribution.

What does that look like? Are they going to build on hyperlquid or are they potentially just going to want to integrate with like a lighter who's already solved all all these problems um has a really nice um really nice app and they can kind of plug into that build their own interface or whatever but lighter is actually settling underneath. That's kind of interesting to me. That's what's happening on Robin Hood right now. So, you know, we we'll see. I think my general view is that like real world assets are coming on chain. That's very exciting, but I think it's going to actually play out more on pers trading than on tokenized stocks first. I think it's harder to spin up a tokenized stock market and get liquidity and get trading there. It's much easier to just spin up a a per market for any real world asset.

So, I think we're going to see that um really grow in the in the next cycle. and you know it was kind of worked out in my favor that I missed hype that have kind of forced me to look into some of these other areas and I think hopefully you know worked out but um you know we'll see I think it's hard there's no like clean answer on on on that one I think so >> I sense I sense an Ethereum bull within you and I'm looking forward to seeing him come out more but that is very helpful because I think a lot of people are wrestling with these questions that don't have clear answers so just hearing how you think about it is is really helpful um I I want to get some thoughts on this. The altcoin space overall has been in a bare market for almost 5 years

at this point. You've obviously done extremely well with alts this year, but that's not the case for every alt or for every investor. What are some of the mistakes, the common mistakes or biggest mistakes you see people making when they're trying to invest in the altcoin space and and how would you tell people who are listening to this to sort of like help protect themselves in their portfolio from making some of those mistakes? >> Great question. I think for me, I can only speak to stuff that I do, but I think what we try to do is just like really have a view on the cycle. Um, and that's mostly just focused on what Bitcoin is doing. This is getting a little bit trickier because we're seeing more dispersion. We're seeing like altcoins that can trade independently of Bitcoin. We saw a lot of that during the

bare market. But I think the mistakes really come from just not, you know, basically if you're buying things because they're going up, right? For me, I think that the reason we've been successful is we built out a view before the markets went out. Like when everything was going down and and Athena is down 95% and everyone's trashing it, like I'm getting more interested in Athena, I'm trying to figure out what's the team doing, what's what's happening here, what's the bull case, how could this sort of narrative shift. So, I think getting excited when prices go down is actually the proper um strategy here. and getting into a position before it moves because when it when they move off the lows, this is that's when a lot

of the easy money is made. And so I think just having a plan, doing the work, it's a lot of work, right? It's a lot of work to be locked in and the crypto markets move very fast. There's lots of news. There's there's tons of data to sift through. So I think it's just, you know, having a a fundamental view, having a thesis. we we put out fair value price targets to try to help me, you know, not that we're going to get that perfectly correct, but it's sort of a guide for me of when I want to be really interested in some of these things. And so, yeah, I think that's that's probably the advice is just, you know, really lock in, do the work, and have a view, and then let the, you know, let the market and then and then what does the market think? If if the market

is totally off, you think the market's totally offside from what you think, you might be sitting in a really good investment, you know, opportunity. That's kind of the approach, you know, that I take. >> Gotcha. Okay. So, invest in your education, not just into assets. Really helpful there. Mike, we're getting close to time. I promised I'd get you out of here on time, but I got to get some thoughts on you uh for the outlook for the end of the year. You know, we're we're going towards uh the midterm elections. A lot of people are seeing a lot of uncertainty in the markets here. You've called for this cycle as potentially being one of the biggest ones for for Bitcoin's performance. I'm curious your targets for Bitcoin, not just in the short term here, but like where do you think this bull market actually does take us on Bitcoin? What

is your upside target here? And how do you go about arriving at those projections? >> Yeah, this is I think I I think this is a chance that um the setup for crypto right now is like the best it's it's really ever been when you kind of zoom out on everything that's that's transpired over the last, you know, even just going back over the last cycle, but really over the last 10 years. Um, you know, this I would say the stigma of crypto, uh, I don't know about you since you've gotten into crypto, John, but to me, it's wearing off. I think it's wearing off a little bit. It's a little easier. People are finally accepting that I have a real job, you know, in my life. So, I think that, you know, that's a good sign. So, the stigma of crypto is wearing off. Wall Street has, you know,

essentially taken the baton and they are now the salespeople of this asset class on Wall Street. And so, you know, you have financialization of Bitcoin. We have basically the distribution for those products are now all all in place. And so that that's a positive signal. We just we're coming off of the shortest and shallowest bare market that we've ever had. Bitcoin volatility is coming down a little bit. You know, I wonder if that makes large capital uh allocators more interested in Bitcoin. If it's only if they're seeing that it's only come come off 53%. maybe the volatility is coming down a little bit and it's easier um to to to allocate there. So I think on a from a distribution perspective

from the setup in terms of you know shorter bare market, shallower bare market that you know some people might say well maybe Bitcoin doesn't go up as much because it didn't come down as much. I think there's a chance that it's a much bigger cycle when you start to look at the macro setup on top of this. And I think the Trump administration is incentivized to uh utilize stable coins. You know, we have this problem with with too much debt and too much treasury issuance to support that and to continue to to spend, you know, at, you know, 6% 6% deficit uh of GDP. We need to keep spending. So, it means we need to keep issuing new treasuries. Um, there's a lot of things happening in geopolitics that make that difficult. So, you need a

new buyer. And I think they've identified that crypto is going to be kind of that marginal new buyer. So, I'm looking for stable coins supply to start growing here. And the interesting thing about that, if the government is incentivized to push for that, the knock-on effect is that they're going to end up incentivizing a bunch of speculation and I think, you know, possibly a larger, you know, bull market for for crypto as this starts to play out. So, I think I just think there's like a lot of stuff lining up here. The other thing I uh that makes me happy to see is that we we're finally getting to this place where we have like I think the right KPIs to do fundamental comparison of crypto projects. Ever

since I got into crypto, I've been wondering, you know, what are the KPIs going to be where we can really compare, you know, crypto assets and do it where it's like this indisputable. It tells you something indisputably about the um value of one project relative to another. And I think token buybacks are potentially that that KPI. And the reason I say that is crypto projects um on their own are asset light businesses. The best crypto projects uh have very small teams. They're leveraging uh infrastructure, global infrastructure and distribution from some of these larger chains. So they have smaller, you know, marketing teams because they have token buybacks and because they have, you know, online communities that

becomes your marketing department. And so your operating costs are much lower than a traditional company would be. And so and then you have if you have velocity that gets really interesting because you can have uh a lot of economics and the ability to do buybacks. And I think the projects that can do buybacks are telling are sort of signaling to the market that we have product market fit. We're lean. We we have a you know marketing expense is low. We're using our community for marketing. So to me it signals that these are outstanding businesses if you're able to do uh token buybacks. So anyways, like fundamentals, you know, the markets are maturing. Um and I just think this is the a pretty interesting setup for for crypto. U probably the

best one I've seen since I've been in the space to be honest. So >> well, Michael, I'm looking forward to the day when people I know also agree that I have a real job. Um I I've loved following your work throughout the bare market and the bull market. I always learn a lot from you and I always find it fascinating. You and I always see things slightly differently, but we almost always come to the same conclusions and I I I think that's a great place to to be and I just appreciate the work you're doing. I love the episodes that you put out with Ryan Sean Adams every Wednesday. I listen to them in the gym. Uh it's a great a great workout companion for for all of that.

Uh so thank you so much for being on Milk Road Crypto. I got to get you back on the show more often, but for now, thanks for being here. I got to get rid of you, but uh where can we send people to find more of you and your work online? Yeah, appreciate it, John. Happy to come back uh whenever whenever you'll have me. And uh yeah, I'm at just do it on X and we we people can Google the DeFi report. We do have uh one month free. I think there's a link right on my X profile if people are interested in checking out DDR Pro. >> All right. Well, I got like I said, I I told you to get you out here on time. It looks like we just barely made it, but thank you so much for being on Milco Crypto and I hope we talk again soon.

>> Appreciate it, John. >> And thank you all for joining us. I hope you all learned something today. This was a fun one. So until next time, stay safe, stay educated, stay bullish, and we will see you all on the next episode of Milk Road Crypto. Thanks for being here everyone. Bye. >> Thanks for listening to Milk Road. If you enjoyed the show, make sure you like and subscribe. And if you're struggling to find winners in the market, that's exactly what Milkroad Pro is built for. Our analysts have called some of the biggest winners early, and Pro lets you see what they're buying next, every trade they make, and the research behind every position. Check out Milkroad Pro at the link below. Everything you hear on Milkroad is forformational purposes only. These are our personal opinions, not financial advice, and we may own some of the investments we talk about.

Always do your own research and make the decisions that are right for you.