Why Ethereum may be better placed than Bitcoin for the next cycle

Transcript

What's up, guys? It's LG here. Today's video is an excerpt from our most recent Milk Road Pro AMA, which was recorded live in the Milk Road Discord on January 28th with our co-founder Kyle and our macro host and analyst, John Gillan. These AMAs take place every single week in Milkroad Pro, along with monthly updates to our all access portfolio and our weekly research reports on crypto, macro, and AI. Hit the link below and join us in Milkroad Pro. Otherwise, enjoy the clip. the market is, I guess, bored in crypto um because we don't have a lot of new crypto assets coming. Retail loves new assets. They love to invest in brand new things and that's not what crypto is doing anymore. We did that over the last 10 years. We recreated, you know, finance and we created memecoins and we created NFTts and we created, you know, ICOs and Dows

and all this stuff. It's not really sexy to launch another one of these things anymore, right? And in fact, because there's not a lot of new capital coming on chain, it's not even a good idea really to launch equity on chain at the moment, right? So, there's not a lot of new tokens and TGES coming out. That's a good thing. Number one. Number two, the thing that's sexy in crypto now is the thing that I think most retail just doesn't like or more so just doesn't understand, which is things like private credit coming on chain. This is one of the biggest themes that I think I'm most excited about, which is there's hundreds of trillions of dollars of credit that exists in the finance world. This is what finance cares about is like yield from credit, right? From loans, whether that's mortgages or funding companies

or, you know, the list goes on. Treasuries, like the list goes on and on. That's all moving on chain because credit you have more opportunities on chain. It's faster. You can get better yields. You can capital formation is much much much faster and easier global. Um, and so like all that's moving on chain. That is a massive opportunity that no one is seeing or paying attention to right now. But it's boring for people because it's not number go up technology. It's number stay the same but provide some yield at 5 to 10% you know uh APY if you can and people don't really care about that. But the thing you got to understand is like DeFi summer came in 2020 in 2020 which was all from like Ponzomics creating yield from tokens that were just being printed from thin air. So that wasn't

sustainable. All this tradi yield and this and this credit that we're moving on chain this is sustainable yield which is creating a strong real ecosystem on chain. Again, it's boring for most, but it truly matters for crypto to take its next step forward. And then on top of that, Nvidia and like gold and all these other assets that people care about in Trady that are all coming on chain. For crypto people, we don't care, right? Because again, these assets have existed for forever, especially in the US. You can buy all these things. But that again is what crypto needs to become a legit ecosystem, a a legit capital market, right? um you can't have a capital market if you don't have credit and if you don't have the best stocks in the world and if you don't have the best commodities in the world you've got the

best ETFs and that's what's all coming on chain and that might not be sexy to crypto people but that is what makes crypto the biggest and the most exciting financial market in the entire world and that's what we are betting on that's why we stay here and we stay convicted so I just people need to wrap their head around it's not about the sexy weird that we used to do it is bringing the grown-ups on chain because they have trillions of dollars of capital [clears throat] right and memecoins aren't bringing them on chain. It's credit and boring But that's the thing that should get you excited right now. >> I fully agree with that. It's almost like we had this conversation just an hour ago and said all these same things.

Uh yeah. >> You know how I know that you believe in that, John? Do you know how I know that you agree with that? >> How do you know? >> Because you're wearing a suit. So, of course, you like things, [laughter] >> you know? Look, I But this is it's really true, though. It's like it's like the the the thing that is is most powerful and exciting about this asset class is the migration of trillions of dollars of real economic activity onto these ecosystems and into these assets. That's the the value proposition here. The the all the the booms and the speculation on memes and stuff that got a lot of people's attention. Um and like sort of the casino vibes and the the leverage longs and all this stuff and and hyperlquid and everything. All that is just sort of like speculation on that

value that is coming. But it's not yet here yet. That's what is exciting though and that's what I think is the big disconnect right now is people have gotten impatient. They've gotten bored. They've gotten like, you know, disillusioned. They're chasing pumps in other places. And that's, you know, frankly speaking, that's where a lot of some of these questions are getting at is like people want the pump right now. Where's the hot ball of money right now? And I'm more interested in where is the next century of finance going to be conducted. Um, so I think that that's kind of the disconnect and and again that's the opportunity. >> 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 chain link 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 chain link is linking the world by going to milkroad.com/chainlink. Let's move on to this question, which I think kind of gets at what we've just been talking about here. Um, we're getting close to the end of the question, so if you have more that are coming up, feel free to drop them in Discord. But, um, gold and silver are surging, risk off. I don't know if I agree with the characterization of that as risk off, but um, I don't think so. >> Gold and silver are surging. Yeah, exactly. U, while NASDAQ and Russell are near all-time highs, risk on, and crypto fundamentals seem strong. What explains crypto's unusually weak price action?

We've touched on this a bit, Kyle, but you want to like speak to this some >> market structure and clarity. That's all it is. >> Okay. Yeah. Well, I'll elaborate a bit more on this. So, I don't think that this speculation in gold and silver is a riskoff bet. I think it's uh a lot of capital moving from the global debt markets um which is many hundreds of trillions of dollars. Like central banks have a lot of capital um and it's it's trying to find a new home because there's a lack of faith in sovereign debt. Um you're seeing this in Japan. You're seeing this in a lot of other other western uh uh nations. Um also in China, but you're also seeing uh you know some hesitation or let's say uh less stability and trust in the United States and and our bonds as well. So

that that's where a lot of that capital is going. It's just that that those pools of capital are so big that when they do look for a home elsewhere and you know China does try to recapitalize their markets around gold as a as a backing that that means multiple trillions of dollars are going to go into those markets. Um, so that's what's happening there. I don't think it's so much a riskoff play. Um, I think that the the overappreciation of the assets in terms of price, that is the risk on element of this, right? That's what's pushed this so high and driven these like sharp rises in prices. So that's speculation. That's the hot ball of money. And I think that's part of the riskon thing. The reason crypto hasn't followed this, we've kind of touched on it a little bit, but just to recap

quickly, like the market structure's been delayed. 1010 wiped out a lot of leverage and a lot of people in the market. Um, and it's kind of killed the sentiment in the market. Then there was the TGA refill with the government shutdown that to took a lot of liquidity out of the system and Bitcoin's the most sensitive to that. All of these things are sort of things we've like worked through though now and we found a base. We found support. We found some strength and the the bet that we're making is that it's more likely that crypto closes those alligator jaws and and catches up to the rest of the market in Q1 here. It may not outperform it right away, but that catch-up should come and then I think that that could be the momentum that brings the speculation back. So that's kind of my thoughts on this.

Don't forget also whales were selling in Q4 because of the four-year cycle thesis um which we don't believe in. Uh and so they were doing that naturally, right? Bitcoin had gone up a bunch. These guys became billionaires. They needed to diversify. Um and so we had to kind of churn through that as well, similar to what we had to do the year prior when like Germany was selling and Mount Gaus was selling etc. So um you know we we turned through that. I I haven't actually looked at the chart of crypto whale or Bitcoin whale. So, I don't know if that turn is done yet. I'm not sure if you have looked at that recently, John.

>> I think that it's stopped. Look, it depends on how you look at these things, right? Like there's there's ETF inflows, there's exchange volumes. There's a lot of different ways of trying to measure this stuff, but in general, the the what I've seen is that the outflows have stopped, but they haven't come back yet. So, ETF volumes sort of stabilized, but they haven't gotten radically positive again. And then I think that what's happening is that there's a lot of accumulation quietly going on behind the scenes of both ETH and Bitcoin. Um, and you know, and you see things like the president is rotating from Bitcoin into Ethereum uh in his wallet. So there's a lot that's going on behind the scenes quietly though because a lot of people who want these best most pristine digital assets want to get them without everybody noticing or stampeding into

the market and moving the price against them. So um yeah, but I think that that massive selling of and distribution of whales has has kind of stopped for the moment. Um, and we've kind of cleared that. Okay, I'm going to go on to the last questions as kind of a one-two punch because they're kind of a combination around allocations. Um, so the first part of the question is with $20,000 cash left, should I keep it liquid until the market bottoms or invest it now? Um, so that's part one. And then part two is about how to allocate that. If investing now, would you allocate that 20K across stocks versus Bitcoin versus other crypto?

given I bought crypto near Bitcoin's 115K uh and I'm currently down. So basically the question is would you deploy 20K in cash now if you had it or wait for a better entry opportunity and if you're going to deploy it now where would you deploy that? What are your thoughts on this Kyle? >> Um so if you go back to the first question should I wait for the bottom? Uh hey if you can do that and you can tell me when the bottom is please let me know. [laughter] So I would just say never wait until the bottom because no one knows when the bottom is. Um, we could be at the bottom right now, right? Or or I guess technically the bottom could have been whenever that was, November 21st. Um, so yeah, that's a tough one to to say. So 20 cash left doesn't really help us

understand the bigger picture because I don't know how big your portfolio is. If your portfolio is like 5,000 and now you've got 20,000, that's very different than if your portfolio is a million and you've got just like 20k left. Do you know what I mean? Uh, and you're well diversified, whatever. So like, I don't know. But if I was to invest 20K right now in crypto, where would I put it? I would put it in two areas. Uh I would put a lot of it into ETH and maybe a portion of that into ESB/BMR as kind of a levered bet on ETH. Um I would put some into Bitcoin. Um though my view right now is that um the next kind of like move we have here. I think ETH is going to actually outperform uh Bitcoin.

uh and likely um well I don't know about the smaller L1s but um that one's just kind of tougher to choose but I do think ETH will will outperform here uh mainly because I think the market structure bill is it's bullish for Bitcoin and ETH but it's mainly bullish for ETH because it's going to be the thing that allows people to start bringing all their assets on chain. So I think that's a really big deal and that's the big trend for 2026 and what makes me so bullish. Bitcoin like indirectly benefits from that but not as much as ETH does. So, um, I'd be buying, uh, a lot of it in ETH as well as a little bit in ESBet and BMR as my sort of leverage bet, even though it's not actually leverage. The other thing I would likely buy is a little bit of DeFi. Um, but more OG

solid, like the ones we have in our portfolio, which are A and Sky, and I know Martin's doing some work into looking more things like Syrup and Pendle and trying to like really gauge what's going on there. The problem with those ones is they're newer, so their tokens are a little bit um, still diluting and inflating. um whereas Sky and A they don't have that. So they're ready for for real scale. And I think both of them are incredible I want to say companies but they're not entities um that um that will thrive in an environment where more assets come on chain because if more private credit comes on chain Sky has more yield uh um to diversify into and if more assets come on chain a has more assets that they can they can put in for lending and borrowing. So um I'd be across Bitcoin,

ETH and then uh and then a couple DeFi plays. anything you would add to that? >> Uh, I think that the thing I would just underline is what you said about Ethereum being best positioned in terms of structure in the market. Um, most pos poised to benefit from the the the Clarity Act. Um, and then I think, you know, I do agree with Tom Lee's thesis that in terms of the riskreward, Ethereum is the strongest macro bet for the next decade. >> Want insights on what's moving crypto markets [music] and how we're trading each event? Subscribe to our channel and join the Milk Growth Daily and Pro newsletters and start investing [music] like the top 1%. This show is for educational purposes only. Nothing we say is financial advice. Investing is risky. Never invest more than you can afford to lose.