Is this Bitcoin rally real? Michael Nadeau on liquidity and ETF flows

Transcript

When we corrected in October, we sort of broke the 50week moving average, which tends to serve as as a bull market support. And to me, that was sort of confirmation that we're heading into this what looks like to me like a wealth destruction mode. At the same time, I I've been expecting a retrace back to that level, which is about 100K, 101K. That would be very normal for me to to see a retrace. So, it feels like we're in that that process right now. Bitcoin and crypto are finally showing signs of life, but the Clarity Act seems like it's been postponed again. Is this just a dead cat bounce? Or is this rally the first sign that crypto is about to rejoin the bull market? Hello and welcome to the Milk Road Show, the podcast that knows that it is never a

good sign when it's unclear what's happening with the Clarity Act. I'm your host, John Gill, and today is Thursday, January 15th, and today we are joined by Michael Nato. Michael is the founder of the DeFi Report, an industryleading research and data advisory firm focused on decentralized finance. He's also a frequent guest on the Milk Road Show and one of the best analysts in crypto. Michael is going to break down everything that's going on in the markets right now from macro to crypto and his outlook for 2026, a lot more than that. So, if that sounds good to you, make sure you like and subscribe. Share this episode with someone who's going to enjoy it. Today's episode is brought to you by Bridge. send stable coin payments instantly, simple, global, friction-f free, and chain link links web 3 to Wall Street. And without further ado, welcome back to the Milk

Road Show, Michael. How are you, sir? >> John, doing great. Great to be here. >> I'm glad to have you with us. I think I wanted to start with an opening question. It's on everyone's minds right now. Is the Clarity Act going to pass? Is it dead in the water? And what are your thoughts on this situation with this postponement we've seen again for the Clarity Act here? >> Yeah, and uh great great opening line there. got a got a little chuckle out of me. Um, yeah, the Clarity Act does not look very clear uh right now. To be honest, this I haven't been following this super closely. Uh, there's just so much going on in the in the news cycle these days. Uh, I did see Coinbase pulled out of this yesterday.

And it looks like one of the meeting that was going to be held today, I think, actually got postponed or cancelled. And so, you know, this is not a great sign. This was potentially one of the um sort of bullish catalysts I think for for this year if this could have gone through. It sounds to me like the the banks are sort of holding this this up and whoever's sort of lobbying on on their behalf. Um a lot of this has to do with the ability to pay interest on on stable coins. I believe the crypto industry is trying to push for this and the banking industry is pushing back on it. you know, if you kind of just follow the incentives here, I think it's pretty clear why the banks are are are going to push push up on that. They don't want to

pay uh interest on their deposits. And I think the other element of it is if if you allow, you know, interest um to be paid directly to to stable coins, directly to the wallets that are that are holding those stable coins, then you're you're, you know, you're you're impacting the incentive of holders of cash to, you know, park their where are they going to park that? They're probably going to want to park it in stable coins where they can earn a yield. that is now impacting the bank's ability to make money because they make money when people deposit with them and then they create loans on that. So if you see, you know, hundreds of billions, potentially trillions of dollars that's exiting the banking system for that

yield, um you have an issue wi with the banks. So I think that's probably the message that they're pushing that this is uh actually going to be bad for credit creation and things like that. It's bad for their bottom line. It's potentially bad for credit creation. um unless stable coin companies or we see a new, you know, party come in that then starts to create loans off of stable coins as well. Um they obviously don't don't want that. That's even more disruptive to what they're doing. So you can kind of clear we have a clash, you know, of incentives from the crypto side, from the traditional finance side.

And it seems to be like that that they've kind of hit a sticking point on this. And you know, I think the crypto industry should put their feet down on it. And and I I kind of liked what Brian Armstrong said yesterday that like they'd rather have no bill than a bad one. Uh and so that's that's kind of I think that's I'm in line with that. I think Coinbase has really kind of led the charge uh on the regulatory front over the last few years um dealing with lawsuits from SEC and all this. Um so yeah, it's it's not great news. Um we'll see. I think it's kind of a wait and see and see how this kind of gets hashed out.

>> I'm going to pause there for a second. If you're listening to this and thinking, "Okay, but what is the move I should actually be making?" Then going Pro is for you. Every week, our research team drops a full deep dive on the biggest themes everyone else misses. Plus, you get access to our full Milkroad Pro portfolio that has real-time buy and sell signals and access to our Discord where our analysts will answer any question you have. If you want to level up, honestly, that's where you got to do it. Hit the link below. >> For somebody who's not following it closely, you really are well informed on the details there. That was a great overview. Um, but yeah, like you said, we're going to keep following this situation because it matters a lot to a lot of people. Um, Bank of America was also releasing things today saying that,

you know, $6 trillion could come out of the banking system. So, there's a big fight over a lot of money. U, so we we'll keep people informed on that as that develops. Um, Michael, I did want to talk to you about the most recent report you put out, which I believe is your outlook for 2026. Um, and I wanted to kind of start with the macro framework. Obviously on the Milk Road macro channel, I do a lot of that. Um, but that we talk a lot about the Federal Reserve and monetary policy on that channel. Your focus, I think, for this year for 2026 has been more on fiscal policy and I wonder if you could just talk us through a highle outlook of what you're seeing there and what we should expect in 2026.

>> Yeah. So, you know, on the the fiscal side, I think I think if we kind of zoom out and sort of start with sort of the idea that um the second year of presidential terms tend to not be the best year for financial markets. the the median return since like 1970 or so is like 0.93%. So it's the worst year of a presidential term in terms of in terms of financial markets. And if you kind of just start there and try to understand why why is that the case that's that's a decent data set going back to 19 1970 um I think you know it can in some ways be explained by sort of friction related to a a new administration coming in implementing new policies that direct money in different in different areas.

and there's sort of like a delay in terms of how that gets transmitted out into the economy and there's there's also like some friction related to that. I think right now what you have is kind of a shift from more government spending, you know, lots of infrastructure projects, tons of hiring within the government and healthc care sectors. That was kind of the the Biden years. And we're now seeing the Trump administration come in and try to reverse a lot of this. So, so you know, Trump gave a speech to the nation, you know, before Christmas. One of the things that he mentioned in that speech was that there's been zero all of the new hiring since he's come into office.

All of the new job creation has happened in the private sector. And so to me what we have is like this shift from you know sort of an economy that's focused on government spending government being the sort of nexus for you know for for for the economy um to you know more private sector where and this is where they really want to get these interest rates down as low as they possibly can and create demand for loans you know get the get small businesses going get the private sector going in a in a more sort of like healthy be I would say more of an organic economy type of type of way.

So I I we're in the middle of this transition. I think this is part of the reason why we need interest rates to come down. As this is going on, you've seen some sort of friction that's come up, you know, within the banking sector. the Fed has now come in and is is doing, you know, $40 billion dollars of T bill purchases um to sort of shore up what was looking like tightening liquidity conditions in the banking sector. So, this is kind of like my highlevel sort of like how I'm sort of framing this the current setup. There's a lot of things in here that that can that can change, right? If spending is sort of just not growing at the same rate that it was under the Biden years, that's one thing.

You also have tariffs that are that are actually pulling capital from the economy back into the government. So you have those two things that I think are just like on the margin impacting capital flows. You know this the things that can change here are you know is Trump are we going to go into a wartime sort of treasury mode here and you know is are we going to is Congress going to authorize like 500 billion more spending of the military that that Trump floated out last week. Those are the things that we don't know. This could this this can change uh pretty pretty quickly. But yeah, here we're looking at the tariffs and you know probably 300 to 400 billion on an annualized basis that's being pulled out of the economy uh right now.

And then you have spending. You know, we're not saying that spending is actually dropping or we're going to actually like uh balance the budget or anything like this. It's more just that during the Biden years it was going up pretty quickly and like on the margin uh some of this spending is coming down. So that's kind of like the the framing I think and this is why we need rate cuts to sort of backfill uh what's happening you know on the on the fiscal side. I'm not sure that this is like the sort of consensus view. I think the consensus view is that we're running it hot and we're we're you know we're we're we're the the on the fiscal side we're we're we're basically status quo from what we saw under Biden but on the margin that that is that is changing. So that's

that's kind of the the setup I think on just high level kind of fiscal framework. >> Gotcha. So you're you're saying that we're pivoting from this sort of like public sector, government spending, government job growth and more towards private sector tax cuts um and trying to stimulate and incentivize growth in that direction. Um I've heard this from other analysts too, but I think that the the the difficulty is switching is not from one to the other is not an immediate thing and there's a lot of uncertainty that comes from that transition process. Um anything about these other three slides here at the the beginning that you wanted to touch on? I wanted to ask about how this impacts the labor market because obviously that's a big change but you know anything else you want to cover before we move on to that? No, I think I think that makes sense. And you

know, when I heard Trump say, you know, that all the new job creation has come in the uh private sector, I went and kind of looked and like I think we have a slide in here. It's just showing, you know, employment from from within the government sector. And you can see that that story is playing out. You know, that line was going up under the Biden years. It's now trending trending down. You know, so these are government jobs. Less less uh government job creation. you know, any spending in that area is going to workers. Their income is somebody else's uh their expenses are somebody else's income. So, if they're cutting expenses or there's less job creation there, this, you know, it can it can feed through um into into the economy. So, >> Gotcha. Gotcha. Yeah. And I think that

we're we're seeing that playing out. Um yeah, I wanted to go on to this slide, the employment to population ratio. Um the the Federal Reserve has made a lot of comments about you know trying to balance between risks to inflation and risks to the labor market. Obviously the the rate cuts that they've um you know gone ahead and done kind of reflects them being more concerned about the labor market. What are you seeing in terms of labor right now? What's got your attention here? >> Yeah, I just think you know it's it's sort of I think it gives me more conviction on just this view that like things are starting to to turn over. You know you can see here the the blue line there is the employment. I think this is a pretty clean way to to just kind of look at the labor market employment to

population ratio and we can see like the gray bars are recession and when you start rolling over like kind of at the rate that we are right now it's sort of I would say early in that process but you're starting to roll over and it tends to you know escalate like we don't see too many periods there where it started to roll over and then it just snap back out of that um it tends to sort of escalate. I think there's some reflexivity that comes with this uh just related to employers and how they how they approach this. I think if you're you know starting to think you need to do layoffs, you try to postpone that as as long as you possibly can. Uh you don't want to show weakness, you know, to the to the market, but then if your competitors uh start doing layoffs, it

sort of frees you. It gives you the kind of green light to do it. I think that's why there's sort of a reflexive element to this. Um and you know we haven't seen a huge downturn. The unemployment rate is still you know relatively low. We are seeing like just more difficulty in people that uh are out of work being able to to to get back into work and a a a relatively high unemployment rate within the youth sector. So like 16 to 24 year olds uh over 10% unemployment rate right now. that is that tends to be a leading indicator um for for recessions. And then um I think it makes sense. You always don't want to be looking at like sort of the housing market and construction and

manufacturing as like cyclical stuff that tends to be leading. That's not looking fantastic as well right now. So I think it just gives me a little more conviction that like okay, we're in this transition period. There's there's definitely some friction that is building and I think we're seeing that expressed a little bit here in in the labor markets. Yeah, and I've been interviewing experts on the housing market on the Milk Road Macro channel and and discussing this a lot. Um, but this is a crypto channel, so I want to move in that direction and I thought a good way to segue um would be with a question around liquidity, global liquidity. You know, we've talked about spending and and how this is playing out in the economy versus in the market. Um, there's been disagreement about between among a bunch of analysts like, you know, Real Vision is saying that

liquidity is going to keep expanding. Michael How is kind of saying that he feels like we've topped. I'd love to hear your thoughts on where we are from a global liquidity perspective and what the picture you're seeing there is. >> You know, I I subscribe to sort of Michael Howell's sort of more more views on this and you know, I just think he's got a probably the most robust framework and comprehensive framework for tracking this. He's doing it, you know, not just holistically, but he's also separating it between sort of the the major economic powers. This this chart we're looking at here is the the US um liquidity cycle. And you know based on a lot of the work that he does you know it feels like we've kind of had a pretty typical liquidity cycle you know 60month cycle or so we've seen I think what you

would expect to see within that cycle in terms of um you know a Fed a Fed cycle you know credit creation cycle lots of you know capex investment that went into the AI sector um once that capex investment goes in then the market starts to look towards okay what are all the sort of raw materials that have to be used to produce all of that investment you know commodities have have sort of popped off here that that is sort of a late cycle type of uh characteristic in in markets and so when you put all these things together and then you see the liquidity cycle starting to roll over we talked about the friction with sort of the new administration coming in it kind of like

this is another factor for me that sort of builds on this idea that um you know we're kind of late stage here. I I think in the in the liquidity cycle, the the business cycle, the market cycle, investor psychology cycle, like all of these things feel um somewhat late late stage to me. >> Gotcha. Yeah. And I think that that's uh that's a helpful framework just from that long-term perspective there. Um, in terms of the short-term perspective in 2026 though, something that I think is kind of a question mark in my mind. I'd like to hear what you think about this, and you've alluded to this a little bit, but Trump is very aware he needs to boost both the economy and the market to perform well in the midterms. And this matters to him. He said he's going to get impeached if they don't win. So, you

know, he's ordered Fanny and Freddy to buy 200 billion of mortgage back securities. He's talking about limiting credit card interest, like you said. He's also, you know, calling for bigger spending on on the military and a lot of other things. Um, how do you see all of that and then the tax cuts? I mean, the list goes on, right? How do you see all of that impacting the liquidity situation? Do you see that as being possible? Um, there being a possibility that that starts to reverse this trend and we see liquidity rise through 2026 and kind of reverse that trend or what what's your outlook on that? >> It's it's possible. I think this is like the wild card. I think this is why this is such a difficult market right now.

you have um just a ton of stuff that's going on in the in the world geopolitically and I think that would be enough on its own but then you have a president who um is tweeting different things and throwing you know you never know if he's just throwing a curveball in one direction to distract you and then so it's a it's a difficult environment you have to pay attention right because if those policies are implemented uh it does it does change the calculus so um I I I think like my views on that are like if if we end up in a, you know, wartime situation that a lot of these things have to go through Congress. So, first that's number one is like, you know, Congress controls the purse. They're going to have to um, you know, approve of like all of this this

spending. And then the question for me is like, uh, we already are running, you know, pretty big, you know, debt to GDP, you know, we're running massive deficits already. And so how does the bond market start to process you know potentially like you know blowing out the deficit uh much much much more than we already are and and and then how does that you know does the Fed have to come in and actually start doing yield curve control because the bond market's going to you know I would expect the long end of the curve to go if if we come out and say we're going to spend 500 billion you know to to bolster the military here and so then that's the question to me And then you know everyone has to sort of

look at that and say do we want to be in equities if the 30 years going 6 7%. And how does that you know impact capitals that that that looks like it's lots of liquidity coming into the market but if the bond market if the yield curve is steepening and people are are reallocating capital I don't know if that's like boosting liquidity for for like financial assets. Um, so it's it's hard to it's hard to say. Like I think it's easy to just look at it and say, "Okay, they're just going to print money, but like there's going to be lots of friction and movement and and we don't we don't necessarily know." The thing that I try to anchor to is like if I see as a crypto oriented investor, as somebody who's focused on on on Bitcoin and and crypto, if I see yield curve

control where I it's clear that they're suppressing the long end of the yield curve, that's an indication to me that like no matter what like real interest rates are going to come down, those are good environments for crypto risk assets long duration. So, like that's kind of the main thing that that I'm kind of looking for um to say, okay, this is this is a a better sort of outlook for for crypto. Stable coins are the biggest use case in crypto right now. But let's be real, using them on chain is still way too complex. That's exactly the problem Bridge is solving. Recently acquired by Stripe, yep, that's Stripe.

Bridge helps businesses send, store, accept, and launch stable coins instantly. Explore the future of global financial infrastructure at milkroad.com/bridge. Sure, tokenized financial products are the future, but there is a big sticking point. They all need to speak to each other. This is a tough problem to solve. But Chainlink does exactly that. It's the universal language for financial markets, linking Wall Street to web 3, banks to blockchain, and so much more. See how Chainlink is linking the world by going to milkroad.com/chainlink. >> Gotcha. I I appreciate the thoughts on that. And just like you said, we'll have to pay attention and see because no one can really predict what the the the tweeter and chief is going to do. Um, okay. So, I I do want to bring this to crypto. I'm glad you brought that up

because I I I have a lot of questions about this, too, and we're already halfway through this conversation. Um, but how does crypto fit into this framework for you? Because I think Bitcoin has been ranging for months. Um, and just recently went up and tested, I believe, 98K. It's now holding above 96K. Um, so it's the first time we've seen some strength from the crypto markets. What are you seeing in in Bitcoin and in crypto overall? what what is your outlook on this right now? >> Yeah, so um definitely an interesting sort of pocket of of the market. I would say right now what what we've been been noticing and writing a little bit about is just Bitcoin's uh sensitivity to real interest rates. So real interest rates started to rise a little bit in midocctober and you know Bitcoin has extreme

sensitivity in a on a negative correlation with real interest rates at certain period during specific regimes. A specific regime that where it showed a very tight negative correlation was 2022 when the Fed was hiking real rates rose. That was a bad year for for crypto. It it actually had somewhat of a positive correlation 23 24. So, it's kind of caught my eye to see it like go deeply negative from October through the end of the year or so. And I what I think is happening is it's the reason it's regime specific is it's really comes back to demand for demand for crypto, right?

Everyone's sort of focused on narratives and liquidity and all these things. But like the thing that you really got to come back to is is market structure. And I think this sort of gives you a view of I think the the the cycle that has played out for crypto. Um we you know a lot of people you know focus on the four-year cycle that is what has you know tended to played out uh historically for for Bitcoin. I am a firm believer in cycles. I'm not anchored to this four-year cycle narrative or anything. To me, it's just like cycles are like a very real thing.

And if you're anticipating like a cycle to break or something, you know, a super cycle or something, it's hard it's hard for me to to to sort of align with that just because of the way that cycles work. And to me it's like there's a there's a process that plays out in terms of you know venture capital deployment you know early in a cycle and like the early bull period of a cycle and then how that transmits into you know innovation and more demand for capital within you know onchain markets.

So we saw DeFi you know active loans and defi you know expand massively you know in in this cycle. Um we've saw you know capital formation in terms of IPOs and digital asset treasuries. So you had like a you know a capital markets capital formation cycle. Um we've seen like you know a marketing a crypto marketing cycle right where you know new companies startup companies flush with cash they're spending on advertising on marketing. Um we've seen that sort of sort of come off a little bit. Um, so to me, like you know, when I sort of think about the cycle, I think about in these sort of three stages, you have early bully, you have wealth creation, you have wealth distribution, and then I look for all of those signs that I just kind of laid out to say like, okay, do I

have conviction that we went through that process? That's very similar to how traditional, you know, cycles work as well. Do I have confidence that that did happen? And then, you know, what is happening now in terms of market structure? really digging into that wealth distribution period to understand what is the do we have a lopsided market where there's lots of new money in the market at higher levels and and what does that mean? So back in October we we broke this sort of 50we moving average sort of bull market support and we corrected about you know 35% or so. Um the onchain data is showing a lot of you know sort of movement a lot of rotation of of coins um which which we can get

into. Um but I've been expecting a a retrace you know back up to that 50we moving average which is like that 101 101 101 102 um K range and it's starting to feel like we're kind of in that that process right now. I think we're trading around 96 97K at the time of recording. Um, and you know, we've seen a little bit of a bounce on, you know, a little bit of demand coming from the ETFs, uh, which which is a positive signal there. Um, we've seen a little bit less sort of long long-term holders, you know, degrossing, sending coins to exchanges.

We've seen that coming down uh, a little bit. At the same time, you know, I'm I'm I'm not convinced that this is going to be a durable move that actually, you know, pushes us through that 50week moving average. you know, gets a couple weekly closes there, starts to show that that's actually going to turn into support. That that to me is the key thing that needs to happen in the next, you know, few weeks or a month or so. Um, so, so watching watching pretty closely there. This recent move, you know, I was trying to understand, you know, what's happening on chain. It to me it looks a little bit like a, you know, idiosyncratic sort of uh positioning unwind in the options markets. we had a a pretty big, you know, short liquidations uh yesterday, the day before that that I think um have

contributed to this this rally that we we've been seeing. So, definitely something to keep an eye on. I think this is like we're kind of in a stage of the market where there's like you're almost at like equal bears bulls. Uh I think I'm not sure where I'd be curious what you think about that, but I think you you Bitcoin doesn't set you know local, you know, macro lows when you're in that environment. like you kind of need everybody to be to lose hope for that to happen. That's this is my style is really playing these these large cycles. And so I'm looking for like, you know, to have a pretty general sense of like the top and like a somewhat general sense of the bottom. So that's really what I'm looking for. So um still in a riskoff uh you know position right now.

Um and we'll see. I think we're we're going to have a good you know this is going to be a good little battle here for the next month or so. So, you see how it plays out. >> Yeah, I agree. I I agree with you. I've been looking for this retest of the the 50we moving average. I think that's going to tell us a lot of information. If we can get back above that, you know, that changes the story. If we get rejected, um that changes the picture in a different direction. Um Michael, we're we're coming towards time here. You got a lot of other slides to get through. So, I want to hear the story on we talked about global liquidity. I'd like to hear the the story on your outlook for global liquid liquidity as it relates to Bitcoin and why there's just

been this divergence that's occurred or maybe you don't see one. What what are your thoughts on this? Yeah, you know, I think I think um the reason for like a divergence to the extent that that we're having that I think I think has a lot to do with AI and commodities and what we've seen with gold and like you know part of the challenge here is that there just wasn't as much demand for crypto you know in the in this last cycle and I think a lot of that just is a you know there's other opportunities there's other things that people can can invest in and do well. So I think that's that's certainly part of it. I think that's also why the cycle feels like worse to people than maybe maybe it did especially if um you know if we have topped and people feel like they missed

that and then they're watching gold and silver and other commodities trade almost like crypto does when it's in a bull market um it's t it's tough and I think that's playing into a lot of the sort of sentiment and investor psychology out there. So I think I think those are factors and then you know I guess the the way I think of this and it's really following you know Michael Hal's framework is you know it feels like we've kind of gone through this typical you know 60month or so um you know liquidity cycle here and let's let's let's see that that orange line is is is rolling over a little bit there. It doesn't mean it's it's it's going to go into like a deeper correction like it like it did in 2022.

Um, but my base case is that we're kind of in like a 2022 type setup. I think that chart is kind of, you know, maybe I'm biased on this, but that chart to me is sort of reflecting what we talked about on the fiscal side, friction related to a shifting economy, public sector to private sector. I think that is sort of being reflected a little bit there, at least on the US side. >> Gotcha. Yeah. And I think that this has frustrated a lot of people and in some ways confused them about this behavior in the market. Um, you alluded to this a little bit before, but I want to hear more about this. We've seen a lot of institutional interest in digital assets leading this this rally, this bull market, and retail interest has never really fully picked up. What are you seeing in terms of ET ETF flows and is

there a story emerging there about where we are in this battle of bulls and bears? >> Yeah, so um I'm seeing very weak demand and this is the this is the key thing. I think we've seen about uh 6.5 billion of net outflows since that you know the liquidation event the midocctober or so. Um that's the most you know over any short period of of time that that we've seen since the ETFs came out which is you know still only um we're we're less than two years into this. Um the last period that we saw this this amount of weakness was like midFebruary to midappril. That was like after Trump came in, crypto started to show some weakness after like a you know pretty big rally in January of last year and then we had the tariff sort of tantrum

there. But but you can see kind of in the middle of the chart there like once it came back like it came back in in in for like demand came back in force and there were flows behind that that started in like midappril or so. Not seeing that right now. You know we're monitoring this. Um we did have a few, you know, big inflow days to start the year. Um they were unfortunately reversed with like four straight outflow days. Now we're starting to see it pick up again just with the recent price action. But it's not signaling to me like this this like thrust with like real flows behind it like we saw back in April. Um, but some something I'm watching and like this is the key thing like to me the reason that the the crypto cycle plays out similarly each

cycle is just the nature of of the cycle itself and and the fact that people were risk for for multiple years and if you were in that environment and you were you were like you know fully allocated in 2022 and you're you're kind of out of the market there's just not I I just don't think there's a ton of demand to be in the market at at these levels where not really seeing it. If if you if you assume this is sort of a proxy for investor or or institutional investor um demand for crypto, it it's not looking great uh right now.

>> Gotcha. So, I think what you're saying is that it seems like we're not seeing tons of dumping right now from this, but there's just not strength and demand that would support this idea that we're going back into a strong bull market. Um yeah, and I think we we need a catalyst to sort of change that picture. And maybe that'll be clarity, maybe not. Um, another big story that a lot of people paid attention to in Q4 of last year was this sort of like OG's selling and this idea of the initial IPO, if you will, of Bitcoin. Have you seen any signs that that like long-term hodler selling exhaustion has been achieved and they've stopped selling? What are you seeing on that?

>> Um, yeah. So the the idea that like the cycle ended because of that I think is like somewhat somewhat true. But I think it's true of like every crypto that that's basically what happens and that's why you know the the cycles end is like they start to get out and there just isn't enough demand behind that at these more elevated levels and you have a sort of lopsided you market structure with lots of new money that came in over over the last year. You know are those people going to be diamondhanded and and keep buying? Like that's always that's always the question. Um, you know, we keep an eye on what we're seeing with long-term holders and and and how they're, you know, their their their total balances and kind of what's happening on the margin. This chart that we're looking at

here is the 30-day moving average of um transfers to exchanges from long-term holders. It's come down significantly. So, you can see on the right side there, we we we came all the way down. we were doing it was averaging about 4,500 or so coins being sent to exchanges at the peak. We're now down to about 2500 or so. So, it's come off quite a bit and that's telling you that, you know, capital is changing hands. The capital base is sort of rotating under the hood here. Some new money is coming in. In my view, like it's not it's it's not we haven't seen any like like exhaustion, I don't think, just just yet. Um, what I'm looking for typically like good times to buy Bitcoin when you're closer to these

like sort of macro lows that that I'm looking for, you'll see that number come down pretty pretty significantly like oftent times under, you know, a thousand coins, you know, per day. So, that's kind of um what what I'm looking for there. in terms of like just you OG whales and that type of selling, we definitely saw like, you know, a good amount of that, but it wasn't, you know, when we compare it to what we saw in 21, it it wasn't like off the charts. Like it kind of just looked like a pretty normal cycle. I thought I thought this cycle was very similar to the to the 2021 cycle with the exception that you just had um a little bit more institutional participation this time and less less retail. If you look at a lot of the social metrics for crypto, we never came close in this cycle um to

what we saw like in 2021. And a lot of those metrics are like like at all-time lows uh right now. >> As you guys are listening to the show, you know that there's something hanging over the entire economy, and that's AI. And the problem with AI content is that almost no one explains what the news actually means for investors. Our new AI newsletter fixes that. Twice a week, we break down the moves, the winners, the risks, and where the puck might be going if you invest in tech at all. The link is in the description below. Check it out. >> Yeah, it's just you and me and the Milk Road family. Um, I uh I I know you have a couple more slides, but we're getting towards time, so I wanted to ask you, I think this is a question that a lot of people who are kind of like, you know,

still watching the channel, still long-term believers in in digital assets. um you have been risk off in your portfolio since I believe October and I believe you're 80 80% cash 20% crypto. What signals are you looking for to say that like okay it's time to start deploying capital and where are you looking to deploy that when it comes? Are you looking at L1s? Are you looking at DeFi? What what is your thought process on that? What's your outlook there? >> Yeah, so you know I'm I've been you know bearish kind of in the short term here but like long time longterm bullish um and that that really doesn't change. I feel feel great about kind of the the direction. I actually kind of enjoy bare markets if that's if that's in fact what what we're in here. Um but we anchor everything to Bitcoin. Um and so to me

like that's the thing that I'm that that is the driver uh of of the crypto markets. And so I'm looking to find a macro low in Bitcoin or at least you know have like strong probability. you know, it's all pro. Nobody can predict these markets, but you're trying to kind of look at a number of different KPIs, look at market structure, look at market psychology. You know, I think for me, what we would typically see at a low is you would see long-term holders kind of like stepping back in after like sort of exiting. So, exhaustion from long-term holders and then sort of a base being set. Um, you know, we we like to talk about Bitcoin in terms of like fair value. I I think fair value is sort of when the sort of average cost basis of

the network starts to collapse towards one. Um that tends to happen at the at the lows of of um the kind of macro macro cycles. Um we look for the um average cost to mine one bitcoin to sort of get to get to par with with price typically happens during um the the big cycle. The 200week moving average has been a pretty good indicator. Um that's about you know 56k and rising uh 5 57k or so in rising right now. Um and then you know we forced selling we really haven't seen like a ton of forced selling right now and this is like something that could be very different in you know in this in this cycle because we don't have we don't have CFI we don't have blockfi and celsius and

all these companies that that sort of blew up. We don't have Teral Luna algorithmic stable coins. There was sort of a a cascade to the bare market or there was like three steps to it in the last cycle in 2022. You had Teral Luna. Um maybe that's sort of like the 1010 liquidation is sort sort of similar and like it just big liquidations. Um, so you had that in April and then it was a few months later you probably had a lot of insolveny already in the market that that didn't surface at that time and a few months later you had um Celsius and Three Arrows Cap Capital that that happened in June that was like another leg down and and then you probably that probably created the the the the conditions for which FTX was basically

insolvent but we didn't learn about that until uh you know November. So that was like the final and the third leg. You tend to get a minor capitulation as well if their sort of input costs drop below the price of Bitcoin. Sometimes they have to sell their Bitcoin to meet, you know, you know, debt requirements, things like that. So I I want to see forced selling. I want to see some like the market structure kind of shift into a place where I think it's a little bit more um where we've sort of set a foundation and then you know a better outlook I think just on like the macro and kind of you know liquidity side. Um so those are kind of some of the things that that I'm looking for. I'm I will mostly allocate towards Bitcoin you know that tends to lead cycles. We will go

farther out the risk curve which with like 20% of our portfolio we tend to you know anchor to Bitcoin. We have long-term sort of core assets that that that we call those typically four to five assets and then we will also go like with a barbell towards like much riskier newer stuff sometimes like you know blue chip meme coins things like that. So we try to you know mix it up but Bitcoin will definitely anchor anchor the portfolio. >> Blue chip memecoins it's a great t-shirt idea. Um Michael I I really appreciate you coming on the Milkro show and sharing with our audience. I think that one of the things that we value so much, especially in our pro community, is being data driven and not trading on emotion, um, but but trying to educate ourselves and paying attention. And

something I want to hear our our audience to make sure they take note of as well. Michael gets a lot of, you know, flack for being bearish. He's he's not being bearish. He's trying to take information in from the market and adjust as he's going forward. Um, and so that can change pretty quickly. And there's a lot of uncertainty here, right? Like we we talked about the pivot from the government focus on um, public sector to private sector. there's uncertainties about how the Trump administration will deal with some of these crisises and what that'll be as an impact on the market. Um, and then, you know, we didn't talk about artificial intelligence, but there's companies that are applying that. They're going to bring down their costs, bring up their productivity that could lead to a broadening out of the bull run and and we could see how that plays out, too.

Um, so there's just a lot of uncertainty right now. There's still a lot of opportunity. What we're seeing in the crypto markets, as Michael described, is this sort of hesitation between the two. We haven't crashed. We haven't had this big flush out. And we also haven't ripped new all-time highs. So, this is a great opportunity um to to lean into some of these communities like the Milk Road uh Pro community and and the DeFi report to stay data dependent, not trade on emotion. Um and and make up your own mind about how you're allocating your portfolio here. So, just want to make sure people hear that because you're not just like outright bearish. You're just trying to stay informed in an uncertain environment. Um and that's what we're here for, too. Um Michael, before I let you go, I want to let you plug uh where

we can send people to find more of you and your work online because I think you do a lot of great work and I want to make sure our audience sees it. >> Yeah. No, I appreciate it and I appreciate the sentiment there. Like we we everything's probability based. Um and you know that that's kind of how we arrive at these these sort of conclusions and you always have to be open-minded to to changing your mind. I think that's really important. Um so I'm pretty active on Twitter just do it. People can follow there. Um the DeFi report uh we publish free reports uh on Fridays called the watch list. Those are like the investable projects that are that are on our watch list and we that we've initiated coverage with. And then we have uh TDR Pro which is a which is a paid research product that we we share

our portfolios with. So um people can can find us there. >> Awesome. And I love watching your earnings reports on Ethereum and Salana that you do with Banklist. Um and I think those are going to be really interesting. So we we'll see how that all plays out. Michael, thanks so much for being on the Milkard show. Really enjoyed the conversation. >> Thanks for having me, John. >> And thank you all for joining us. I hope you all learned something today. So until next time, stay safe, stay educated, stay bullish, and we will see you on the next episode of the Milkro Show. Thanks everyone. Bye. If y'all are making swaps or trades right now, highly recommend you check out Milkroad Swap.

This is a deck that we built in partnership with Cow Protocol. Why did we build it? Not to make money. Just honestly, so we could have a place to do our swaps for the lowest fees that we could find. This is the fees on Ethereum, Arbitum, and Bass are only.15% fees. Uh this is a huge difference from uh other centralized exchanges that charge half a percent or even up to 1.2% fees on their swaps. Also, you can swap on Salana all at swap.mmillgrow.com. Check it out today. You won't be upset.

And you can join me in my favorite place to make swaps on chain. Want insights on what's moving crypto markets and how we're trading each event? Subscribe to our channel and join the Milkro Daily and Pro newsletters and start investing like the top 1%. This show is for educational purposes only. Nothing we say is financial advice. Investing is risky.