Why Bitcoin, Ethereum and alts could keep rising through 2026: Jamie Coutts

Transcript

The relationship between global liquidity and asset prices is exceptional. It's like one of the strongest things that I've ever seen. But that doesn't mean that the R squ or that relationship that explanatory factor of one other doesn't wiggle and change over time because markets are totally non-stationary. But should it obviously should it matter in the end 100%. Because every extra unit of liquidity or currency that goes in the market finds a home, it generally finds it a home in asset prices. And then you start looking at which asset prices are the most sensitive to the increases in liquidity. And of course, you've got tech, crypto, Bitcoin. GM, good morning.

Welcome to the Milkro Show, the daily crypto show that has been counting down the days to Q4 like a kid waiting for Christmas. I'm your host, John Gillan, and today we are joined by the brilliant Jamie Coots. Jaime is the chief crypto analyst at Real Vision, a financial media platform where he specializes in cryptocurrency, blockchain strategy, and delivers lead industryleading insights on market trends, liquidity cycles, and digital asset investments. With over a decade in traditional finance, including launching Bloomberg Intelligence's first crypto research project, Jaime is one of the best analysts in the entire world at bringing institutional-grade frameworks to crypto. Today, we're going to discuss everything. Jaime's outlook on Bitcoin, his recent deep dive report on smart contract platforms, what investors need to know, and finally, I'm going to have

him give us some alpha on Real Vision's most famous metric, global liquidity. So, if that all sounds good to you, make sure you like and subscribe. Share this episode with someone who needs to hear the wisdom. And for our followers, our YouTube listeners, make sure you're liking, subscribing, commenting on YouTube, and if you are a podcast listener, a fivestar rating and review means the world to us. So, it really helps us grow if you can give us that. Uh, and today's episode is brought to you by Nexo, the platform that grows your crypto without locking it away, as well as Figure Markets. Grow your cash like a bank. No lockups, just real returns. And without further ado, welcome to the Milkro Show, Jamie. How are you, sir?

>> I'm really well, thanks. You Thank you, John. >> I am glad to have you here. I think before the show, we were talking about how you always seem to find your way onto the show during times of distress in the market to calm people down. So, I'm really glad to have you back. Um, I thought that would be a good place to start today's conversation. Just what are your general thoughts on the market? Are you panicking? Are you scared? Are you uh running and saying the sky is falling or are you having a different more calm perspective on where we are today? >> Reasonably relaxed. Um, I know that the market is fixated on cycle tops and peaks. Um, that's just a legacy of having so many of these massive bull markets and the long corrections, deep corrections that we've had in the past.

And I guess the I guess the cookie cutter approach of looking at what's happened in the past and and applying it to the present or the future. Um and I think that is causing anxiety because you know generally if it were to follow that formula then really market should be peaking right now or maybe we've even topped the data and the analysis that we do real vision doesn't suggest that at all and you know there's always criticism that you're sort of moving the goalpost but like basically when you look at financial markets there are financial relationships which are either strong or weak. weak and even the strong ones are non-stationary. But if you sort of

approach it from a first principles basis of understanding what are the key drivers of markets then if the factors that are supporting higher prices are still moving in the right direction or importantly are about to inflict in the right direction then it's very difficult to be bearish. >> Well some people are still managing to pull that off. I think that would be really helpful to start out here. Um, you know, you talked about in inflection and and and where we are in terms of like the market cycle tops. Um, let's start with Bitcoin and and use that as a way into the crypto markets right now. A lot of people have been a little bit frustrated with the stagnation that we've seen in Bitcoin's price. It hasn't kept up with some analyst expectations.

What in your view are some of the drivers of this stagnation in Bitcoin's price? What's been holding it back in this in this sideways period we've seen? I think firstly if you just look at global liquidity that has been that's been expanding for but really since 2023 uh but it has been moving at a slower pace than in the previous cycle. So if you have people who are investing or started to invest in crypto in the last cycle or have even come in this cycle and they're just looking one cycle back then what they would have seen on most of the global liquidity metrics that now everyone has been popularized by people like RA obviously and and Michael how he's been doing this work for many many decades. um you what you're seeing is

that you know there is a more gradual ascent in terms of that liquidity um factor in the market and I think that is also that's been somewhat of a um um not a drag but it just hasn't meant that you know it's lived up to people's lofty expectations. Look 2020 and 2021 was exception exception to the rule in the way that liquidity was really pumped in. Not to say that it can't happen again in some sort of future crisis, but like it was very extraordinary. So to apply that framework to today is in terms of like the degree or the um velocity of the liquidity impulse I think is um is probably catching a lot of people off guard or disappointing.

But also the way in which you know the the way that that last cycle was extraordinary has impacted the liquidity contraction that we've just gone through being longer than it has in the past. If you look at proxies like global liquidity like global uh total liquidity that is so looking at you know the bank balance sheets the also the so the the monetary base the central bank balance sheets FX reserves then you know that has been um that's been moving higher now but actually we've actually only just gotten above the global liquidity high point or high water mark from the previous cycle in April of this year. So

for 3 years, global liquidity actually went sideways. You could say it sort of contracted. Now at the same time, debt has continued to explode higher. The largest borrower in the world, the US government is growing at sort of 10 10 to 11% a year and liquidity has not matched that. So whilst I think that global liquidity has been slower up to this point as a sort of a um a response to the excessiveness of the last period that's impacted the business cycle which has not really moved into expansion and now I think it is starting to and then we're going to start to see those sort of the the final piece of the cycle

equation come into play which is the business cycle so economic expansion at a time when the or the Federal Reserve at least and and I would also say like you know most central banks are cutting. So you've got financial conditions easing 6 to9 months into the future but it feels very sluggish because we haven't seen expansion and expansion usually would have taken place by now. You would think the ISM would be somewhere around 55 56 57 by this stage. It's still at 49. It's the longest time in many decades that it's remained below 50 for an extended period of time like it has. But that is sort of the missing piece in the analysis on sort of risk

assets and we all know that liquidity in the business cycle. What are the most sensitive assets to those uh you know to those factors and it's obviously long duration assets tech but also bitcoin and and crypto. So this is one of the reasons why I really appreciate your work and why I think it it was really timely to bring you on at this moment is that you bring a very macro perspective to this emerging asset class of digital assets in crypto and at a time when there's uncertainty in the market and things are pumping it's always helpful to zoom out and take that larger macro perspective.

So thank you for that. I want to bring this back to a focus on Bitcoin though. Something else I love about your work, you come up with a lot of great metrics um in to support your analysis, one of them you've been pointing to to to kind of like, you know, I guess argue against the bears who say that Bitcoin has topped is your Bitcoin cycle risk score metric. Um walk us through this metric or maybe just like to get more focused on Bitcoin specifically. Do you think we've seen a top in Bitcoin? Why or why not? And what makes you so confident that we haven't topped yet? Uh well really for the same reasons that I've outlined but also that the you know if the 125 high from July was really the top uh it was extraordinary in a sense that it didn't have the associated

euphoria in a lot of the metrics that I look at which I think are important for identifying tops in Bitcoin. And so if that is and if I'm wrong, then what we've got here is a a distributive um sort of a distribution top which is slower and sort of more moderated because we didn't have the parabolic move at the end of the bull cycle that we've seen in the previous cycles. So the Bitcoin cycle risk score does look to capture uh those sort of factors which are you know non-liquidity well there's a liquidity element to it but really looking at onchain data and derivatives data and you know we just we

didn't see um you know things like funding rates explode to the degree that they did in really early 2024 when the ETFs arrived or even in Q4 of 2024. before after the um the new administration came in with a pro- crypto stance. So, you know, for me it doesn't feel like it has it has the attributes of a major top. Uh and then when you sort of marry that to what's happening with global liquidity and the fact that debt has grown a lot faster than liquidity and unless they want things to break, that liquidity spigot needs to inflict a lot higher. At the same time as the business cycle seems to be turning and central bank policy sort

of cutting into that. I think um you know leads me to the view that actually you know where 2026 at some point maybe sort of around mid 2026 is going to be the real peak. Um but definitely if you look at just the chart John and I know that you sort of look at technical you look at sort of multi-disiplinary approach as well. Um what you can see on like the long-term chart in Bitcoin is this sort of momentum divergence or a momentum breakdown. We're starting to see, you know, the last peak the RSI actually was lower than the previous peak and the one before that. So there's bearish divergences. Um, so if you were just a technical analyst and you were looking at it purely based on that, you'd be screaming from the rooftops

that the top is in because a bearish divergence on a weekly chart using the RSI in Bitcoin. To my knowledge, it's the first time it's ever happened. If it happens in the S&P and the NASDAQ, usually there's a major um sort of pullback around the corner at some point. But that's what I think the sort of multi-disiplinary approach is designed to do. is designed to give you context to signals and if that's happening when are these other things are starting to turn I'm not as concerned as I necessarily would be if it had occurred after a parabolic move derivatives positioning went all one way leverage increased um and we started to see you know more turnover from long long-term holders of the Bitcoin um

holder base for example then those ingredients together would be very clear but that's not what I'm seeing >> this is really helpful too. I think that this is something that I try to remind myself as well is that no one indicator is going to tell you the direction of the entire market and I think it's Coin Glass has a a repository of 30 different Bitcoin cycle top indicators that they track and none of those have fired either. So this is really helpful. You know, like if you're looking at one thing that oh maybe this looks toppy, you still have to put that in the larger context of the market. So that's just really helpful perspective. Thanks for that insight on that. Um, I wanted to save this for the end, but since we've gotten deep into this liquidity conversation, let's just keep going on this track. Um, you all at Real Vision

are really now famous for popularizing this idea that crypto is tightly correlated with the liquidity cycle. A lot of people are posting this on X, all different kinds of charts on this that don't really understand the analysis and get it wrong. Um, and they're they're saying now that Bitcoin has started to deviate from this liquidity. Um, what are people misunderstanding here? Have you seen this on Twitter? Does this frustrate you? Can you clear this up for us? Like what what is what is the the truth of this because you're you're uh your work is getting ripped off in a lot of different ways and it's not always helpful, you know?

>> Yeah. You'd have to be living under a rock not to have seen that chart. But I can't take credit for the for the chart that I think you're referring to, which is really the chart that I uh Ra and Julian posted a long time ago, which is global M2 with Bitcoin and that divergence where M2 sort of basically um you know forward looking at there's a lag in the Bitcoin price, but generally with a round about a sort of 10 to 12 week sort of lag, Bitcoin generally follows the global M2. Um you're right for putting out and thanks for giving the context around it because you know one chart on Twitter doesn't tell the whole story and the work that Julian and Ral do on global liquidity in their

product which is really the GMI product which is the institutional product of which real vision members get a uh get a portion of that within the pro tier. Um, so all of these charts you're referring to are in the pro tier, but um, the work that they have done is, you know, second to none. I, I mean, Michael How has obviously been doing it for a lot longer and is amazing. And I, you know, I I I I would put a lot of my understanding um around global liquidity um is a result of his work and also RA and Julian's. But I just want to talk about RA and Julian for just a second and not take away from all the other great liquidity analysts that are out there because the one chart that you're talking about is sort of been, you know, passed off and

some people aren't attributing it to them and then they're going and putting their own context on it and they're not actually looking at the breadth of work that they've done. So what is important in the current market is total global liquidity. You know we live in a global economy and so USM2 is just one component one major component of that. The other thing is that I guess the to answer the question more specifically is that the TGA so firstly I would say when you try to marry correlations exactly within time frames like that it's when you start to use it that it will definitely break that's just Murphy's law but that's not what RA and

Julian were saying that was their that was just one chart that they put up total global liquidity is far more important than just US M2 it includes the global uh central bank balance sheets. It includes the money supply of other markets. It includes FX reserves and there's other factors which go into looking at it. Look looking at collateral levels in the shadow banking market. Importantly here the TGA the US government's checking account essentially which sits at the Fed which is most likely the reason why we've seen that divergence of late because in the last couple of months the US government has been refilling its accounts. been issuing a lot of short data bonds or bills that's been taking liquidity out

of the market. That's taken the TGA from around I think 200 billion to about 750. So that refilling of their account is liquidity negative. Now that they've reached that level, that liquidity drain is effectively over. And so that could be the reason why um Bitcoin has not kept up with um I guess the the global M2 metric. But all of that content and all of that context is over at um over at Realvision. Um I would just say that look in my analysis is that you know I I come from a technical analysis and a sort of quantitative systems background and the relationship between global liquidity and asset prices is

exceptional. It's like one of the strongest things that I've ever seen. But that doesn't mean that the R squ or that relationship that explanatory factor of one another doesn't wiggle and change over time because markets are totally non-stationary. But should it obviously should it matter in the end 100%. Because every extra unit of liquidity or currency that goes in the market finds a home, it generally finds it a home in asset prices. And then you start looking at which asset prices are the most sensitive to the increases in liquidity. And of course, you've got tech, crypto, Bitcoin, um, some more than others. So, you know, an an element of that increase in liquidity finds its way into these assets.

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citation on that. Okay. >> Yeah. No, absolutely. Look, credit where credit is due. Absolutely. So, bringing this back to crypto, Bitcoin has has been lagging. What is your prediction or what are you seeing as the path forward for Bitcoin in Q4? Are you expecting this to to catch up with some of the outperformance of the rest of the market? Do you think we see a blowoff top? What are you seeing as Bitcoin goes into Q4 here? >> Generally Q4 is uh seasonally a good period for Bitcoin and crypto. Um like seasonality those seasonality uh charts are are pretty sort of dicey as well in terms of just like trying to look at them as sort of some sort of guide. But generally Q1 and sorry Q4 and Q1 are strong for crypto in general. Um I look

I mean it it all really depends on the dollar. The dollar is the massive swing factor here because central banks although they're cutting in terms of interest rates which is liquid liquidity positive but really only at the margin it doesn't make a massive difference to asset prices. It does to the business cycle which has a knock-on effect for you know capital expenditure and consumer spending. They're generally all very very positive. But without central banks actually uh expanding their balance sheets, then really the what happens with the dollar is the most important thing right now to track. So I just constantly look at what the DXY is

doing. The DXY had one of the largest declines in Q1, Q2, and really into Q3 uh in decades. And that's the reason why I think even on you know the last time I was on the show John was one of the main reasons I published like the bullish trinity report um you know at the start of April saying I think risk assets and crypto are going to go up a lot because of that the the speed of that decline was so significant um now we're seeing the DXY sort of hold around sort of 90 98 99 um it really m the next leg of that move whether it's a retest of 101 or a breakdown below will I think be

incredibly important for risk assets. My view is that we'll probably test around a h 100red and so it might be a couple more weeks of chop but eventually with interest rate cuts and what Trump is is trying to do with best enter bring the dollar down that there is another leg lower and so at some stage in Q4 maybe in November um we'll start to see crypto start to really catch a bit again but you know there's probably some assets that are worth buying right now um with a view to the next sort of six months particularly good.

>> Gotcha. So, you're anticipating So, just to kind of recap this section, global liquidity is still rising and we've had the Treasury General account refill where they, like you mentioned, they extracted about a half a trillion dollars of liquidity from the market, which dragged liquidity and dragged crypto. Now, that's over or or about to end. And so, the the bull run can continue. And you're saying maybe some more chop, but eventually as we get deeper into Q4, you're expecting this to go higher. Um, I think that's something that a lot of people have been wondering about, and I want to get your thoughts on this, too, is now that the Fed has started to cut interest rates, we've gotten one cut in September. We're expecting to get another one in October.

Some people are saying even another one before the end of the year. How important is that for crypto markets in your mind? Does that have a big impact on digital assets? Is it going to impact Bitcoin, but not the rest of crypto? How big of a deal is this, or is this already priced in? I >> I think it's important for financial conditions in the business cycle. So cuts will uh I guess supercharge the ISM and bring it back above 50 and sort of I think continue or accelerate the improvement on that end. But I don't think it's as important for like just just asset prices in general. I think asset prices respond to more of the quantitative policies from central banks. And at the moment even though it's marginal the Federal Reserve is

still tightening its balance sheet. is still they're still conducting QT. So, I don't expect them to change. Like, we just we don't have a federal um a Fed chief that's I think going to while he's in charge, you know, retire that policy, but it's coming to an end at some point. So, you know, whether it's with the the new Fed share next year, I if you just look at the way central bank balance sheets have always have always clipped major turning points in crypto. I think that's more important than interest rate cuts. But that doesn't sort of that's not to say that they're not important because the business cycle needs interest rate cuts. Interest rates are

too high relative to the economic growth. They need to bring that down. They want to bring that down. interest rates down so that they can unlock equity in home in you know people's um primary asset and sort of spur economic growth through you know the um the uh the home the property market. Uh, so all of these things are definitely positive for um for crypto, but it's not, you know, it's not the good old days of the 2010s where it was QE2 3 QE infinity and, you know, everything just responded on a dime to those um quantitative measures. But I think those I think those policies get retired and also there's probably another trick up their sleeve with adjusting like the the

government adjusting the SLR, the supplemental leverage ratio for banks. So they can increase liquidity into the market through more borrow sorry more lending. Um so that would be you know that would directly flow into M2. >> Gotcha. Yeah it's really helpful insights on that and I do think that this is something that is really important what you mentioned the the Fed is continuing their quantitative tightening even though they are still now starting to cut rates. Um so there's there's a lot that you've brought up here that like I said before gives a much bigger picture here. Really helpful stuff. I want to move now um to a recent report you wrote for Real Vision on smart contract platforms because I think that there was a lot of great alpha in this um and just like like I said a really institutional-grade framework to

take to the crypto industry. You highlighted at the start smart contract platforms have processed 57.8 trillion uh since 2020 and they're compounding at a 7 approximately a 78% uh annually. what is driving this explosive growth in this and what do investors need to understand about this huge trend because this is enormous amounts of liquidity we're talking about here. >> Yeah. So I I hadn't done this analysis really since 2022. uh and the data providers are getting a lot better with capturing settlement volumes and settlement volumes uh in this in the in the crypto context means they are tracking you know settlement flows which are related to peer-to-peer transfers of

the native token on an L1 transfers of any uh other tokens related to that L1. So in Ethereum it's ERC20 and on Binance it's their token um protocol. So it basically assets moving onchain, but also peer-to-peer transfers of stable coins and DEX volumes. There's also NFTs, but NFT volumes are really sort of negligible at this point. So you put them all together and you come up with like total settlement volume. The problem at the moment with this data is that even though the data providers are sort of um are scaling it up, when you look across chains outside of Ethereum and Salana, you don't have all the data for those different um activity cohorts,

but you get a pretty good proxy. So it probably underounts well it definitely underounts total settlement val volumes but most of the volume is actually quite concentrated in Ethereum and Salana and also Tron and there the data is a lot more comprehensive so you've got a pretty good proxy. Now the you know the biggest drivers are DEX volumes uh actually which are you know on Ethereum and and also on Salana um account for a large portion of fees. So you could argue, hey, it's just speculative activity. It's DGEN's doing DGEN stuff.

The the reason why I did this analysis is that I think it's so important for everyone who's investing in crypto or thinking about investing in crypto is like where will we be in the future? So the you know the subjectivity that I experienced when I started working as a crypto research analyst at Bloomberg Intelligence you know and you get the you know you get the sort of sniggly remarks that you know this kind of settlement volume is not the same as settlement volume on payment platforms like Visa and Mastercard and PayPal and whatnot. Well really was it what was it showing initially? who is showing that the technology can scale is far more efficient. The velocity of money that moves inside the crypto economy is

magnitudes more than the fiat economy. What is the problem with the fiat economy? Velocity has been declining for decades upon decades. Despite the Keynesian economics economics models and theories saying that they could tweak it through government policy and monetary policy, that has not happened. Although we've seen a spike since um co but generally that trend has been down low or declining money monetary velocity in any economy is not good. Um it shows that capital is not moving it's not moving into productive use use cases. Um it's not spurring uh activity and entrepreneurship. In fact, you know, I would argue that the main reason or one of the reasons that velocity is going

down is because that all new money or most money is flowing into investments, not into productive uses, not into the real economy. In Australia, the banks won't give you a small, you know, a small business loan. They'd rather lend against your house in a property market that's like, you know, trading on 16 times median earnings. So, this is a huge problem. Meanwhile, this parallel system full of dgens and you know libertarians is showing that they can move money, move immense amount of value. And that value that the crypto economy has moved in the last 5 years is almost as much as Visa, Mastercard, and PayPal, but it's growing at seven to eight times that in terms of annual

growth rates. So within two years, it's going to overtake. What happens when Visa, Mastercard, PayPal, which they're already doing, start moving all of their value flows or the settlement volumes onto blockchains? So, you get this exponential explosion again. And then the critics can't really argue that it's just dens anymore because it's actually them paying for their coffee or, you know, paying for their Amazon um gift card. So it was just really um a a way to sort of go back to basics. The analysis I doing 2022 I was looking at Bitcoin and Ethereum specifically. Now look at the entire layer ones and go hey like these guys are growing at a clip and now all the payment companies are going to

actually integrate with them and that drives the asset price that drives the value of the L1 token. The L1 token is the settlement token of the of the chain. And even with new chains coming on that are stable coin specific, everything is growing the pie. There's going to be winners and losers, but the pie is growing substantially. And we go from, you know, 80 trillion, you know, in five years. We do that in like one year in two or three years time is is my expectation.

>> There's a ton of alpha in what you just shared. I think you answered like half of the questions that I wanted to to ask about this. So, I want to take this piece by piece and kind of break down this a little bit more. Um, and I want to start with I think the the way that this drives value to the native tokens of these ecosystems and explaining that more so investors can understand that, our audience can understand that. Um obviously you know what you're talking about here is like a movement of the crypto industry all these smart contract platforms Ethereum Tron Salana all the other ones like you've mentioned move that from just a tool for speculation but to becoming really important um transaction settlement infrastructure um why does that matter for the native

value of these assets and how yeah connect that that transition back to the token prices and number go up and and and draw that that connection for us. So in the report there's a lot of uh statistical analysis and what I uncovered is maybe slightly counterintuitive and that is that when you see large spikes in settlement value on chain usually at the moment because crypto is a lot of that value settle that a lot of that value that's settling is related to speculative activity dex trading NFTTS that when you see large spikes it actually it actually correlates with negative forward returns over the next 6 to9 months which was interesting. Now

that's a function I think of the type of activity that's on chain now. So if I was to speculate going forward, if more settlement volume is of the variety like traditional payment rails, merchant payments, um, BTOC, then that volatility in the settlement volume uh will decline um but it will supercharge it and actually what it will do is underwrite the value of the of the tokens themselves. Every settle every dollar that settles on chain pays a transaction fee. that transaction fee goes to the security of the network uh and in some instances a you know a tokconomics model where it burns so it supports the token price through that mechanism as well and

so you know it's important ultimately at the end of the day the value of L1 tokens are driven by the utility of their network the growth in the act in the growth in the um network and also how much of the L1 token is being used to collateralize the network. And so if settlement volumes increase, validator returns increase, token burning increases, more capital gets staked, more capital goes to L1 token and used in collateral pools in the dexes and in the lending um in the DeFi applications and also you know validator returns will also increase as well. So it's a it's a flywheel effect. The problem at the

moment is it's extremely cyclical based on speculation that that should moderate over time. >> Gotcha. So yeah, you're describing an economy, right? And that's what I think I want uh our listeners to understand is that by turning these platforms from just a tool for speculation and more into this like longlasting um settlement layer infrastructure, it moves a lot of lasting sustainable economic activity into these ecosystems and these native tokens are at the heart of that and that can drive an enormous amount of long-term value there. Um, so you talked a lot about um the the the growth and and ways that this analysis can help you identify assets that might be primed for outperformance. You pointed to Hyperlid

as the strongest growing settlement platform in the recent past. Um, but I think the other thing is that, you know, people have started to figure out that there's trillions of dollars that's being settled building their own L1s, launching different competitors. And so I thought taking Hyperlid as an example would be interesting for that. There's some strong competitors like Aster and others that have launched to compete with them on their per volume. How do you see this impacting Hypes future growth? And I guess you could take this really for the broader ecosystem for all these different smart contract platforms, but yeah, how do you see this now? Like all this competition coming in to try to compete for this capital.

Where do you see that going as as these different competitors fight for market share? Yeah, like I mean with blockchains uh when you're early in your adoption curve there is very little moat. So the ability for a competitor to start up and compete with you know with a high degree of incentivization to bring activity on chain is a constant threat for these protocols. The question with hyperlquid is did has it reached some level of escape velocity that even though these competitors who are coming in now who are basically replicating their model can actually uh in the long term you know destroy hyperlids emergent network growth that it's

already uh that it's already got. What do I mean by that? So, Hyperlquid in terms of um settlement volumes, this is one this is one asset that the data providers haven't really broadened out their um settlement volume information on apart from DEX volumes. So, we only got that to go on at this point. And in all fairness, uh it's really such a young L1, there's not a lot of other types of activity. But if you want to look at a clue in terms of whether there will be more activity, more diversity of activity on the L1 in 12 months time, then look at the number of applications that are building on Hyperlquid today versus at the start of the year when

they launched. It's sort of, you know, it's gone from essentially one, which they're perplex to around sort of 30 or 40, which is on par with sweet's been around for a couple of years. It's one of the emergent sort of L1s, not a tier one L1, but an emergent L1. And so these are the signs that you sort of look towards in the future for it to be able to okay lose market share in the short term as competitors come on, but broaden out its um, you know, its revenue, its fee income across different parts of the DeFi stack and sort of sustain itself going forward. So I think the outlook for hyperlquid is still very strong. Um there is definitely a degradation in the

last month or so in terms of per volumes, dex volumes, fees, TVL. Um but that is kind of like I wrote about um Hyperlid in April I think it was and I said by October these are the things you got to worry about. You got to worry about the unlocks and you got to worry about all the competitors that will no doubt come in because this as I said is like essentially a a free and open market. it's open source um open source uh code people are going to copy it and that's going to be the major threat is can they get to a certain level that can sustain themselves over the long term and um I I would argue that you know it it for me it takes this position in the portfolio and I'll be holding it unless I start to see the team start to do

anything extra not extraordinary the unlocks are a real threat it's whether they really start to um you know dump a lot in the market which would destroy confidence So I can't see them being sort of that would be suicidal for their for their network right now given the competition that's out there. So it'll be interesting to watch. But I'm still reasonably confident in Hyperlid longterm. It's trading at a multiple too that you know if you look at it like S&P 500 software and tech stocks that is pretty much the median of of like traditional equities. So you're not overpaying for it either. But in everything in in in crypto, it's not so much the valuation that matters, it's the growth. So if it can't sort of get

through this period of plateauing and then start to grow again into next year, then yeah, I mean there's an argument to be made that it's lost this momentum. Yeah, I I think that's really a helpful analysis of the situation on hyperlquid, but I think it applies to so many other things too because anytime any business, but particularly in crypto, um finds product market fit, immediately tons of competitors come to compete with it. And in some ways that's, you know, uh a bad thing, but in many ways it's a very healthy thing because it it that competition forces new improvements. It gives leads to better outcomes, better user experience, more innovation. Um, but yeah, you saw this with the the copycats that came after Bitcoin, the copycats that came after Ethereum, with

unis swap, all all down the line, there's always been anytime anybody finds a business that works, a lot of competition comes in to try to do it better and and the market keeps moving forward. So, I think that's a really uh helpful insight on that. I was really curious when I read this report. Smart contract platforms have been around for many years. What prompted you to decide to write this now? Has this been research you've just kind of been revisiting every few years or was there some like particular catalyst that prompted you to write about this particular subject at this point in the market? >> So, it's it's really a a part of a series of reports that I'm writing that I think will get me to the point where I've got a rounded model for scoring these assets. So, I wanted to tackle

each of what I thought were the major sort of pillars of value or valuation for these um L1s and look at it in isolation and sort of build up the picture as I go over the next couple of months to get to a point where I think there's um you know there's the ability to score, rank and also build systematic portfolios based on the characteristics that I've uncovered in in this sort of journey. I would have liked to have done it like a year ago, but so many other things sort of pulled me in in in directions, whether it was Bitcoin onchain analysis, whether it was my macro framework. So, I've come back to something that I actually started at Bloomberg Intelligence um back in 2022 and 2023. Um, and yeah, sort of it's

it's going to be it's going to be a series. The next one I'm looking at is like how important are collateral levels in the DeFi ecosystem um and the role that they play on the L1 token price. So look, I mean I can't promise that I'm going to uncover the unified theory of crypto asset valuation. it doesn't exist. But hopefully there is a better framework um to guide investors through rather than the um for lack of better a term x flicking that goes on in on on Twitter and the narratives and the shilling and all of the um content creators out there who are just trying to pump bags. There has to be a more thoughtful systematic approach to this

investment class. And that's entirely what every institutional investor who's now creating a desk or creating a team are starting are training their team to do as well. So it's it's just a matter of time that it sort of matures into this direction. >> Yeah, when you do find the grand unified theory of digital asset valuations, I look forward to citing you when I rip it off on Twitter. Um I'm really looking forward to that, Jamie. Um really helpful insights on this. I I think that that it's it's helpful to just hear how you're thinking about this, right? There are so many different things in crypto that are need your attention and analysis like just like every investor.

Um but to to always come back to things to revisit to update the models to continue to to develop your analysis along with the developing market. I think that's a really helpful perspective too. U we're getting close to time here. I want to end this question with what's in your wallet. You are one of the the leading digital asset analysts in the world. Now you mentioned that Hyperlid stays in your bag for now. um what else is in your wallet going into Q4? Where are you most allocated? What do investors need to be paying attention to as we go into the the last quarter this year? >> So, look, I mean, I maintain a really boring portfolio. Bitcoin's the core of my portfolio. Um you know, if you looking at some sort of more um I guess risk-taking um opportunities that are out there, uh you would be looking at

smart contract platforms. So what I've been doing over the last really since March is I've been allocating into smart contract platforms and the ones that I'm you know I'm feel confident in because they have the network growth and the sort of characteristics which I think make them resilient are things like Salana Sui as a smaller but a more emergent um L1 Hyperlquid Tron um which is sort of on my negative watch at the moment because I'm is trying to see if there's any sort of momentum degradation in terms of its stable coin volumes from the new chains that are starting up. But if you look at the chart on um on Tron, it never gets talked about. It is like one of the most

unbelievable charts you've ever seen. And so uh based on that, based on settlement volumes, the fees, the buyback, the tokconomics there, um you know, separate Justin Sun, which is hard to do and is definitely a major risk. it is still one of the assets that I think um and has been doing really well that deserves a position in the portfolio just based on looking at it from like you know market share and growth of the important metrics like like um settlement volumes and fees um and I'm sure I mentioned hyperlquid but hyperlquid as well um these are the ones that I've um focus on but I've got a couple of on the watch list for real vision pro community um that I'll be sort of updating on in the next couple

of weeks because I think you know there's one sort of there's one more opportunity for the altcoins as the shift happens from Bitcoin into alts which we didn't really talk about but started in March I think was crystallized in July and should continue as the business cycle expands business cycle expansion correlates wonderfully well to outcoin h sorry altcoin outperformance so yeah that's where the sort of the risk takings or the how the portfolio is shifting >> yeah so I I really appreciate that answer I'm not going to take the bait on the Tron question, but I do think it is an unbelievable chart. However you want to interpret the word unbelievable there. Um, but I think what I would tell our our audience to take away from this

though, um, Jamie is right. We are seeing this rotation into alts start to happen. There is more room in the bull run. There is more liquidity coming. This is a great time. Now, you don't have to mirror Jamie or my portfolio by any means, but this is a great time to really revisit your research, revisit your portfolio, your your thesis. Um, and just make sure that you're allocated properly going into Q4 because there is still some some opportunity here. Jimmy, you something else to add? >> Don't use leverage. Don't go skinnies. Position size accordingly. If you're buying a asset that has 4x the volatility of Bitcoin, maybe you should have a smaller position size for that asset in case you don't get it right.

>> Yeah. And the recent round of liquidation, something that I saw was actually kind of like you were saying like bullish for alt season was there was so much leverage that was washed out further down the risk curve from Bitcoin. It was mostly in Ethereum and in altcoins. So people are getting just like you said over their skis, over anticipating alt season and taking out leverage where they probably shouldn't be. So thanks for preaching the gospel on that. Uh Jamie, this has been really helpful. I feel much calmer, much more secure and and much ready more ready for for Q4. Where can we send people to find more of you and your work online? >> On at Twitter, Jamie Woots and over at Realvision on the Pro platform. Come over and check it out. We've got um actually a brand new launch of the entire website which includes a whole

lot of AI integration dashboards, not just the research and the videos. So come and check it out. >> Well, thank you. I look I just speaking for myself but also for the rest of the community. We really appreciate the work you're doing. Keep it up and best of luck to you. Thanks for being on the show today. I hope we can have you back again really soon. >> Yeah, likewise. Keep up the good work too, John. Thanks. >> Thanks, Jamie. Thanks for being here and thank you all for joining us. Uh, and we will see you all on the next episode of the Milk Road Show. Stay safe, stay bullish, stay educated, and enjoy the bull run. >> We're sending Kyle Reedhead, our head of research, to the UK's largest web 3 summit. I'm talking about Zebu Live happening October 21st and 22nd in London. Want to join? Use our code milk

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