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- [00:00]
Michael Naito
Foreign.
- [00:04]
Ryan
Station. Welcome to our monthly Crypto Fundamentals podcast. We got a few topics to discuss today. Are we forever stuck at like 107k bitcoin 2500 ETH and 150 Solana? Feels like we've been in this zone forever. We're going to talk about that. Also, are alts the most hated asset right now? And if that's the case, are we actually going to get an alt rally, maybe a hate rally?
- [00:27]
Michael Naito
And.
- [00:27]
Ryan
And where approximately are we in the cycle? Feels like some summertime blues, maybe. And when the bull market comes, will it actually come to our crypto native assets, or is it all going to stocks that none of us own? We've got Michael Naito here. Mike, how you doing? Are you feeling bullish? Are you feeling bearish?
- [00:44]
Michael Naito
Hey, Ryan, Great to be here. I am feeling bullish. I think we are in an interesting spot in the markets right now. You know, bitcoin, it sort of feels to me like bitcoin is like a beach ball that's trying to be held under the water right now and think, you know, we've been trading in this range now for going on seven months, you know, seven, eight months. So that is like, a very interesting setup in terms of just like, we've chopped up the markets a little bit. Feels like bitcoin is somewhat of a coiled spring, but it's still not breaking out at the same time. We are in this sort of summer months where there's. There tends to be a little bit less volume, a little bit less interest. People are taking vacations. We have holidays next or this week. So, like, really near term is, I think, like, kind of up in the air. But the setup, to me looks very good and looking forward to getting into that in this episode.
- [01:40]
Ryan
So, guys, these episodes, Mike and I get into the. On chain data. So the analytics. This is a crypto fundamentals podcast, and we're doing this monthly, usually the first Tuesday of every month. This is coming out on Wednesday because we had some special Robinhood things to cover. That's in your podcast feed. The idea is we're trying to figure all of these things out. In about 45 minutes, we're going to get you a few major investment ideas backed by this on chain data. And at the end of the episode, Mike is going to make some calls on some assets. Okay, so we're going to peek into Mike's portfolio. I'm going to ask him what he's buying, what he's selling, how his positions have moved between this episode and last episode. So all of that we're going to cover today. Mike, I just want to tee up with this. This was an article I actually like, read prior to this episode I read earlier this morning. And here's kind of the title. The Hodler's Fallacy Rethinking Conviction in a Naturally Extractive Market. Okay. That's the title of the article. And basically the thesis is none of this crypto asset stuff is investable. You can't really hold it long term. The exception may be of bitcoin, but the author says the Hodler's Fallacy is the belief that in time, uh, the market leads to long term upside. But this article impacts why crypto rewards execution, not conviction. Crypto is pure arbitrage masquerading as an investment market. I feel like this sets the tone for how a lot of people are feeling right now, which is basically there's nothing investable in on chain assets aside from maybe bitcoin. It makes no sense to hold things for long term. Horizon, you're a fundamentals guy and I know part of your thesis is based on. No, there are investable assets in crypto that you can hold for years and hold for decades. What's your reaction to this kind of sentiment?
- [03:27]
Michael Naito
My reaction to this kind of sentiment is that we still are in a period in crypto where these markets are still, you know, largely unregulated. And I think, you know, as we sort of move through regulation, what, what I expect to happen is sort of this bottoms up sort of movement amongst people like, like the Defi report, others that are in the market that are trying to deeply understand how value accrues to tokens, how it accrues through the, through the tech stack and through that process, like we are going to, I believe, force these projects to return value to tokens. And then that's where this narrative starts to, to shift a little bit. But I would say it's sort of fair to look at it right now and say, like, how could you hold an altcoin? Like, how could you have a long term thesis on a lot of these things when we still aren't at a place where you can hold the uni token, which, and we know Uniswap has a fantastic protocol and it does a lot of economic activity, but can you hold that token? Do you have confidence that the value is going to go to you as a token holder and not to the equity holders? And I think this is something that, you know, regulation will suss out and these tokens will certainly, I think, be valuable in the future and we will be able to have these these more long term thesis for for how value is going to accrue to the token holder itself.
- [04:49]
Ryan
So you feel like some of this commentary is is captures where we are in the market, but this is the process, this is how we figure it out. We're in this purgatory period now and we've got to figure out what the actual claim of these assets are on productive cash flows and other other fundamentals. Right? That's the work we're doing here essentially on this episode.
- [05:07]
Michael Naito
That's why we're here.
- [05:08]
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- [07:04]
Ryan
All right, well, let's talk about the main question that's in my mind at least, which is like, are we stuck? Mike, is bitcoin stuck? It feels like it's been ranging, I don't know for how long, but it feels like we've been here for a while between 100k bitcoin and 110k range. What are you seeing when you look at some of these charts? I know the first one you asked me to pull up was this, which is a bitcoin holder accumulation ratio. What are we looking at here?
- [07:31]
Michael Naito
Yeah, some, some glass node data here. And you know, I'm looking at the, a lot of on chain data and trying to pair up. Like, why is bitcoin just kind of not moving? It's, there's all these treasury companies out there starting to buy up bitcoin. Michael Saylor and Strategy have purchased, I think 4000 BTC over the last few months. The, the macro setup looks pretty, pretty good. Like there's enough of like a hint of like that, that liquidity is going to be coming back. Trump won't stop talking about reducing the, you know, cutting the fed funds rate so that we can, you know, refinance our debts. So you can kind of see that there's a, you know, a pretty interesting setup out there. And I'm trying to pair that up with what I'm seeing on chain. And what we're seeing right here is just the BTC holder accumulation ratio. And it's telling us that people that already hold bitcoin, there's more people selling their bitcoin of the current holder base than are accumulating right now. That's that you look at the right side of the chart, the blue line there, that's the like 43% or so that are accumulating bitcoin right now. So we need to see like holders actually start to, to accumulate. I think a lot of people are sort of holding, expecting like another thrust here maybe into Q4. This is showing you like the existing holders, right? So if existing holders are not going to step into the market, we need new money to come in and that's that's sort of like what that's telling me right now. It's important to remember that this on chain data from Glassnode does not pick up the ETFs, which ETFs are holding roughly, you know, 6% or so of the supply. It's also not picking up what's on exchanges. And I think when you add those two up, it's about 18%. So we factor that into this when we look at this data. But it's just telling us that existing holders were actually most bullish in the beginning of last year, actually. And so I think this explains a little bit of why Price is just kind of ranging a little bit right now.
- [09:36]
Ryan
Okay, so this is telling the story because this has been down since what you said was the beginning of last year. And what do you want to see from this, this blue line here that is the creeping down towards 40%. Do you want to start seeing it kind of like, ebb up? What would make you bullish indicator?
- [09:50]
Michael Naito
Yeah, I would expect that, you know, let's say, you know, Powell comes out and he. We start to see like a little bit of a shift from like, a more hawkish stance towards, like, it's becoming more clear that we're going to see rate cuts. Maybe July could, it could take until September. But I think if the market starts to sniff that out, I think existing holders will get back into the market and also, you know, new money will come back in and you'll see that line shoot up a little bit. But like I said at the beginning, where we're in like, the kind of summer months where there's not. People are enjoying their lives a little bit more and less, like, glued to their. Glued to their screens, you know, buying crypto right now. So.
- [10:31]
Ryan
So you want to see this. Holders start to accumulate more. Here's another indicator which I think shows holder metrics. So this is the number of addresses with a balance above 10,000 bitcoin. That's quite a hefty balance. So is this kind of some, some sort of a. A whale indicator here? And we're, we're seeing this, this purple line here which seems to oscillate around the number 100. What are we looking at here?
- [10:55]
Michael Naito
Yeah, and, yeah, exactly. Mass. These are the, the hu. The largest whales in terms of the cohorts of, like, holders of bitcoin. And this just also sort of explains why Price is just having a tough time breaking out, I think, because this cohort is, has been selling really over the last few years or so. So they're scaling out. This is not like a massive, there's only 100 and when we started this cycle there were 120 holders of greater than 10,000 bitcoins.
- [11:25]
Ryan
This is not like 120 addresses that have over 10,000 bitcoin. You're tracking all these big whale addresses then?
- [11:31]
Michael Naito
Exactly. And that's down, it's under 100 now. So we've lost some of the, you know, largest holders are now under that threshold. So it just tells you like, okay, like you know, we know the conditions look pretty bullish out there but there are people that have been, if you own 10,000 BTC, you're probably in very early and so you still have some of that sort of sell pressure. People that are up, you know, tens of thousands of percentage on their bitcoin are happy to sell, you know, 100, 100K Bitcoin.
- [12:01]
Ryan
So this is another indicator of that. You're looking at kind of long term holders. So this is bitcoin long term holder supply and you've got bitcoin price in orange and then you have the long term holder supply in purple here. So what are we looking at? What does this tell you?
- [12:18]
Michael Naito
Yeah, this is on sort of on the other side of this. So the first two charts are kind of telling me, okay, this makes a little sense of, you know, why we're seeing price just kind of range bound. This is a positive indicator to me. So that that long term holder supply is now back to all time highs. We saw a dip in that. So long term holders were taking some profits earlier, earlier this year and we've seen basically that them step back into the market as buyers. In some cases that line will come up. Just if people came into the market, even if they came into the market at the all time highs and they just didn't sell, they become long term holders over a period. So it's, it's, it's sort of a reaction of that time and it's also you know, long term holders adding to their, their wallets. So that to me is, this is very positive. This is like 74% of the supply is now held by long term holders. And that's usually a pretty good base for like if we see speculation come back into the market then you get the new money coming in the short term holders. So that's what I'm looking for, you know, as we move through the summer months here.
- [13:24]
Ryan
Okay, and then how about this one to round out the bitcoin story here, Liquid supply.
- [13:28]
Michael Naito
What's this same idea Long term hose. This is bullish to me. So illiquid supply is at an all time high as well. And what this is doing, Glassnode, is just basically looking at all the wallets that have held Bitcoin and determining based on how much they're buying and selling. Like are these illiquid wallets. And so it's kind of like looking at all the, the onchain data to tell us that hey, like most of the supply looks like it's in strong, you know, diamond hands right now. And so again, that's another, that's another bullish indicator. And like when we see like big moves in bitcoin, you do see that that line kind of oscillate down a little bit because people are moving their coins to exchanges to, to cash out. So it feels like we were setting a very like strong base is kind of, I think the key takeaway for, for some of this data.
- [14:24]
Ryan
Okay. So when you add all this together, you're seeing a strong base, maybe a pause in terms of long term holder accumulation, but it's still pretty high and the long term holders are still holding. And after all, that's what seems to drive bitcoin price. Right. It's just like more people holding it more as a store of value asset over time and not selling. And then when you, when you have that effect, you see bitcoin price rise so long as you have net new sources of demand.
- [14:54]
Michael Naito
Exactly that, that's it. And I think the market is waiting to see what, what Mr. Powell is going to do and who's going to win this, this fight between, you know, Trump and Powell. And I think that's, that's the final domino, I think to go. Everything else looks pretty well set up to me.
- [15:12]
Ryan
I know we'll get your insights in macro towards the end of this, but it does seem like pressure is mounting on Powell or whoever his successor is. Right. Which could be like a real fact in this situation here. But let's turn to some of our other bags. So if bitcoin's in kind of a hold place, but you're expecting further increase, further accumulation, price appreciation, what about altcoins? So I think last time we had this discussion.