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- [00:00]
Michael Naito
Foreign.
- [00:04]
Ryan
Station. The big question everyone is asking is where in the heck do we go from here? It's not looking great out there. Crypto is down. Everything else is up. What is happening in this cycle? How long will the pain last? We've got Michael Nado on the episode. You guys know we've been doing these episodes on a monthly basis or so trying to dig into this cycle fundamentals. I want to find out what Mike's forecast for the rest of the year is. Also, there is a new Fed chair. His name is Kevin Warsh. How does this change things? And stay tuned till the end where, Mike, I'm going to ask you for your entry price predictions. I know you're not a buyer yet, but you're going to be for Bitcoin eth and Solana. Michael Naito, is this it? Is, is this the blood in the streets we've been waiting for?
- [00:50]
Michael Naito
That's the big question I think out there right now. We, we recorded an episode last week and I said that we were sort of in no man's land, right, Trading below, support around 93k or so above like critical support at that 80k line. And last Friday we ended up breaking down from, from 80 and we've dropped about, you know, 15% or so from, from 90K last week. And I think that's the big question. There is some blood in the streets where, where my head is at in terms of like where we are in the cycle where, where the, the markets are at is that up until last week, I think if you had a bull thesis, you, you could still sort of hold on to that. I think the bulls still were willing to, to, to say that the, the market could reverse and the momentum could reverse. I think now going into this week, it's, there's probably less bulls out there and there's probably more acceptance in the market that this is playing out how crypto bear markets typically do play out. And so I think that's where we're at. So I, I'm not ready to say we're hitting a macro low for, for the cycle just yet. When, when we do go there, you know, I expect that it will take some time, right? I don't think once you go to a macro low, it's not like there's all these buyers that are just ready and then it just takes off, you know, once you hit that low. So in the last cycle we had three to four months of, of period where bitcoin was actually trading below its realized value. So on the MBRB of less than 1. We are still at like 1.4 today. And so. And even in going back to the cycle before that, you also had like a three to six month period where, you know, you get these really fantastic entry opportunities. So I think we made a lot of progress just, you know, the last week or so of kind of like, where are we at? And I think the market's starting to accept, you know, a lot of this. But I'm not ready to say that this is like a macro low. Just. Yeah, we can kind of get into that, I think, in this episode.
- [02:59]
Ryan
All right, well, there's blood in the streets, but maybe not enough blood for Mike yet. He's not yet a buyer. We'll find out where he is a buyer, but we're certainly no longer in no man's land. We are somewhere else. We are maybe in one of the seven layers of hell right now of the bear market. And that's what people are feeling on the week.
- [03:16]
Michael Naito
So.
- [03:16]
Ryan
So let's get into all of that and more. But before we do want to thank our friends over at Kraken because they just dropped something cool. You can make yield at any time, whether you're in a bull market or a bear market. The product is called Defi Earn. So this is the easy button for defi. It brings on chain rewards right into the Kraken app that you're already using. You don't need a new wallet. There's no seed phrase, no manual transactions. You guys know on Bankless, we talk about the defi mullet quite a lot. This is Kraken's defi mullet because they're using defi and a set of vaults in a protocol strategy behind the wallet. This is all administered by Veda. There's rewards for this as well, so you want to check that out. And the yield is variable, but it's up to 8% right now. 8% APY. That, of course, is not guaranteed. It does fluctuate, but some fairly, um, fantastic rates. So this is defi yield without the headaches. If you want to go check this out, there's a link in the show notes. You can find that at bankless.cc/kraken. Okay, let's get to the prices on the week. We are at 78k on Bitcoin at the time of recording. So this is not feeling great on the month. That's about 12% down. Ether down about 23% on the month. Mike, I. I gave you a shout out on Twitter earlier this week because you've actually been calling for these numbers for quite some time, at least since the, the end of October when you made some, when you made some moves with the Defi report. And I, I called you the most correct cycle caller that I'm following closely. And you know, that is true. You've been talking about Bitcoin at 65k since the end of October. And I want to recap for folks that maybe have missed some of our previous episodes on Bankless. So the end of October you pivoted to cash. Actually you pivoted right before the 1010 event into, you know, majority of cash and then you further pivoted later into October. And you did this because you saw some things, you call them cycle fundamentals or cyclomentals that were signals to you that the cycle, the bull cycle was over. What was the main thing you saw back in October that caused you to pivot to cash?
- [05:38]
Michael Naito
Yeah, appreciate the shout out, Ryan. And yeah, I think if I go back to sort of September, October period, you know, we were kind of coming out of a period where we had sort of a dad season and risk on what was in the market. We didn't peak on euphoric like a real euphoric period like we did in 2021, but it was a risk on environment in terms of you had that season. So you had lots of new treasury companies buying bitcoin putting that on their balance sheet. You had the same thing happening with lots of companies doing the same with, with ether. We even saw like a longer tail of all coins. And I think what happened was if you have a price agnostic buyer coming into the market like that, what it does is it gives traders or people that are putting leverage into the market sort of a free pass to do that when, when they know somebody's in the market bidding up the tokens. And so we did have a pretty big move in a lot of altcoins eth. That was the period that eth did really well. And then bitcoin ultimately got up to about 125k or so. And the reason I started to get nervous was just that the, the amount of leverage that, that we were seeing built in the market. And at the same time you sort of, you're, you're developing like what, what I view as like a little lopsided, you know, market structure where you have all this new money that came in over the last year. You have long term holders and sort of like OG investors that, that have been in bitcoin for, for you know, up to a decade. They are degrossing, they are exiting the market at the same time that you have sort of this, what I would call more of like a weaker handed market structure at the top with all the leverage. And then you had all these narratives that I was kind of starting to disagree with. You know, just this idea that Trump is just going to pump the market. There's a new Fed chair coming in which we can get into in this episode. I think there's a lot to discuss there, but I think a lot of the narratives I was having trouble aligning with those narratives. And then when you look at the lopsided market structure and sort of a reduction in demand right from the bottom up to buy Bitcoin, you know, that was kind of what, what made us go risk off at that time. You know, looking back now, that looks like it was, it was the right call after we made, you know, after we sort of went to risk risk off. The next question is, okay, where are we going? How do we get there? You know, we've been targeting a fair value of bitcoin at around 65k and you know, over the weekend we got down to 75k or so within four months of that call. You know, bear markets and bitcoin have typically, you know, lasted up to a year or so. So we're about four months in and now we are in sort of what I think is potentially a new regime with this new Fed president or new Fed chair that's going to be coming in. You know, what does this mean for some of these price targets that we've been putting out there? And we're doing some of that, a lot of that work right now.
- [08:44]
Ryan
Okay, so let's talk about maybe where we are now. And I know you entered January, of course, you had a post that was risk on or risk off for your outlook in 2026. And you were definitively on the, the risk off side of things for crypto. So I've kept 80% in cash. Now let's talk about where we are now with this Fed Chair and maybe some of the macro fiscal types of things that you're seeing in the data. So, Fed Chair first, his name is Kevin Warsh. This is the Trump appointee. I believe he is coming in April. But Trump just announced Kevin as the incoming Fed chair late last week. What's your take on him and has it adjusted any of your predictions for the rest of the year?
- [09:36]
Michael Naito
Yeah, so still processing this. You know, I, I think I was kind of lucky that I, I had spent a decent amount of time. Just, you know, looking at some of his interviews, he was the one I probably had the most information on before Trump picked him. So, you know, I think, I think this is, this is an interesting moment here. So Kevin war, she's very 55 years old or so. He's a little bit younger. He has served as a governor on, on the Federal Reserve Board. He did so when he was 35 years old. He was the youngest to ever sit on as a Fed governor. He has been an advisor to, to the, the White House in the past. He, he works with Stanley Druckenmiller at his family office currently and he teaches at, at Stanford. The reason, I think the markets sort of sold off when he was announced on Friday last week. And gold and silver in particular really sold off.
- [10:36]
Ryan
Wait, wait, so what did happen on Friday? I wasn't paying attention. So I know gold and silver sold off. I don't know if that was Kevin related or not, but did other markets sell off as well?
- [10:47]
Michael Naito
The stock market I think was down. Maybe we should double check this. But I think the stock market was down a little bit. Nothing. Not a huge, huge sell off. But I think the markets were immediately trying to process, you know, what, what does this mean? And you know, the narrative that's been in the market is that this new Fed president was just going to be fully aligned with, with Trump and you know, he would just come in and cut rates to zero and you know, we would see how the market processes that. I think that what we're learning more about with Kevin Warsh and the potential policies that he is aligned with Trump on, I think that he is aligned on this idea of bringing rates down, but he's also talking about reducing the size of the balance sheet. And so how do you reduce the size of the balance sheet? That's quantitative tightening. That's the opposite of qe. That's the opposite of these policies that the market sort of expects the, the Trump Fed president to, to implement. And so this is the big question, you know, is he, is he, you know, he's talking about reducing the Fed balance sheet by trillions of dollars and, and signaling that to the market. And he thinks the market can actually digest that. And, and sort of we can create a new regime here. And he's using that to say that if we reduce the, the Fed balance sheet, we can bring interest rates all the way down. And that's this, is this, you know, my view since Trump has, Trump has come into office, is that him, the Treasury Secretary, they want to sort of get the government off of this, like this, like, high that it's been on in terms of, you know, fiscal spending, too much fiscal spending, too much government blow, too much fraud, waste and abuse. And we want to transition away from a, like sort of the government as a nexus of the economy to let's get rates down and let's let the, the market, the free market work where rates come down, demand for loans goes up, and we have a little bit more of like an organic economy based on, on lending and rates coming down. It's good for small business and it sort of takes some of this bloat, you know, out of government spending. So that's been my view and I'm this, this Fed president looks fully aligned with that, with that view he's talking about the Fed, you know, is overreaching. It's getting into too many different things. Its balance sheet is too big. So he seems like a kind of a free markets guy. The question, and this is what I think the markets were processing on Friday. This is why gold, you know, sold off. This is why bitcoin's been selling off. And it's unclear what this really means moving forward. But it's not necessarily good for crypto. Right. If you're talking about a guy who's going to. Part of my thesis was that the economy is sort of weakening here and I would probably be getting ready when we get to a bottom in bitcoin, there might be some turmoil in the markets and we would probably need somebody to come in and do yield curve control. Right. QE again. And that's usually what gets bitcoin and the crypto markets going. This guy's talking about, you know, not doing that. So you could have a situation. And this is what I've been trying to process over the weekend where if, you know, I think the labor market is pretty susceptible to a potential. If we saw a drop in the stock market, a significant drop, 10% or so, the labor market, I think, is pretty susceptible to something like that. And it could create more layoffs and then what does that mean? It means you're probably going to get rates down. Rates can come down a lot. But are they going to do yield curve control? Are they going to do the other things, the bailouts, all the things that we've been seeing over the last 20 years, since 2008. Are we going, is that done? And are we in a new regime? And it's going to be, there's going to be creative destruction and things like that that we haven't Seen. So that's what I'm trying to process here. We've got a chart up right now. Just looking at this is a consumer confidence chart that just shows the job's hard to get, which is the blue line and the job's plentiful. When the blue line is rising and the red line's coming down, when those two things meet, it's typically led to a gray bar there. That's the recession. So they look like they're about to meet. You know, we'll see. But, but I'm looking at a lot of labor market data. I'm looking at quits data, I'm looking at the confidence in the labor markets and you know, the, the unemployment rate is still pretty low, but kind of under the surface it looks like the labor market's pretty weak. This is a chart of data center construction, just kind of an interesting chart just showing, you know, the massive investment that's gone into this space and it's now rolling over. And so, so where, where's sort of the, the growth in the economy going to be? If, if the market's process, Warsh as a hawk, and we have a sell off, how does that impact the labor market? Does it lead to a recession? And then are his policies going to just bring rates all the way down? But there's no yield curve control, there's no buying of long end Treasuries and adding to the Fed balance sheet. What does that look like? We haven't seen this since pre 2008 or so.
- [16:34]
Ryan
What's fascinating about that is that sounds so counterintuitive what Kevin Warsh is saying, what his posture is, if it's more hawkish on Fed balance sheet. Because like I think a lot of the market thinks of, certainly I think of Trump as someone who just wants easy. The easy button is kind of the, the perpetual short termist just wants to juice the market as much as he can for political reasons, particularly in a midterm year. Right. So he's, you know, gotta win this election. And so I mean, could there be a difference between what Kevin is saying when he's outside of the pilot's seat and then when he gets in, he basically has to do what Trump says or else, you know, he goes, he is also tossed out and he's no longer in, in the favor. I guess when you mount all that together, it's hard to know what Kevin is going to do until he's actually in the position itself.
- [17:30]
Michael Naito
Right.
- [17:30]
Ryan
But if you're right, if you're right and things are more hawkish and things are moving from more public to more private. Is it a continuation of Michael Howell's, you know, global liquidity index, which is like the liquidity is rolling over and total liquidity, especially coming out of the US Is actually decreasing on the year. And that's a bad picture for risk on assets and for crypto in particular. Is that what you're seeing, is that the net of this, that it is net detrimental for global liquidity?
- [18:06]
Michael Naito
Yeah, I think so. You know, the view has been, you know, we have another chart in here too that just showing us in particular global liquidity, which I think is more, more of an indicator for the crypto market. So that's, that's rolling over. We, we've seen the global liquidity line actually start to go up again a little bit because China, there's a lot of liquidity right now in China and Japan. So kind of in the Asian markets, we've, we've seen them doing well and.
- [18:31]
Ryan
That'S like helping gold, we think. Right. This is so, so if it's, I mean, one shortcut for this that we talked about on the, the TDR episodes is if China's printing money, gold, precious metals get a boost. If the US Is printing money, risk on assets, US Capital assets, crypto assets get a boost. And so now we're in a place where the US Isn't printing and China is printing. So gold, precious metals are catching a bid, but crypto assets are not.
- [19:01]
Michael Naito
Yeah. And I think that's sort of the regime that we're in currently. When we look at the fiscal side of things. The, you know, this is, we're, we're not suggesting that we're balancing the budget or anything like that, but we did come down. So the, you know, fiscal year ends in September 30th. We came down in 2025. And it looks like we're going to be at like kind of a similar level this year. So we're still, we still running large deficits, but we're not increasing them. Right. We're not increasing them like we were during the Biden years. I think what happens on the margin there's does matter. So this is what was kind of leading into back in September, October, saying, okay, well, liquidity looks like it's rolling over. In the US we saw a lot of tightness in the, kind of the repo markets and in the banking, banking sector liquidity. Now we have a Fed president coming in that we, we, you know, I believe he's aligned with Trump and, and that's not the question. The question is more, what is that alignment? Where does that alignment go? Because it's possible. He's just.
- [20:07]
Ryan
And you think that alignment goes with a downturn of U.S. liquidity, basically. You think that's what it means?
- [20:15]
Michael Naito
It's possible.
- [20:15]
Ryan
Trump wants that.
- [20:16]
Michael Naito
It's possible. This Kevin Washington, we're going to learn more and we're going to find out if he's sort of speaks like a politician or if he's sincere, but he's, he's. Some interviews that he was doing, even just in October, talking about the Fed needs to align with Trump's Main street policies. We need to reduce our balance sheet and take that money and deploy it to Main Street. Like, these are direct quotes from a, from the guy who's now the Fed president just three months ago. So he's talking like a politician talks to Main street into parts of the market, which is kind of, you know, and you can imagine this is what he told Trump, right? This is probably why he got the job. So the big question for me, and something I've been thinking a lot about is just the, it is the most important thing to pay attention to populism in the United States right now in terms of, we've already seen, you know, we just saw Mamdani get, get elected in New York, and he's getting elected. The, the, the, the reason he got elected is, is about affordability and bringing attention to these, these issues. We've seen Trump talking, you know, trying to get, you know, let's cap credit card interest rates, let's get mortgage rates, you know, down, let's, let's make homes more affordable. So you can see that he needs to address this affordability issue. And now he's bringing in a Fed president who looks like he's gonna, he's got the same talking points at the same time. Like, Trump sort of goes both directions, right? He says he wants, he says he wants to make homes more affordable, but he doesn't want to bring the prices down for boomers. Like, you can't, you can't really have it both ways. So we'll see. I just think it's important to kind of, let's, let's, let's take this guy at his word. Let's look at what he's saying, let's look at what he did in the past. He was against a lot of the things that came with QE and stuff after the 2008 big, you know, great recession. So to me, we got to kind of wait and see. Here and if the economy starts to roll over and the Fed starts cutting, I like, that's what I expect to happen. Like, like he's aligned with Charlie. He's going to bring rates right down. But is that like when you're cutting into a recession? That's not usually, that's not going to boost the markets right away. You're just cutting into a recession, you bring your rates down. And if he does that, what ultimately will happen to the long end of the curve? If they think inflation's coming back and they're not going to cap that, they're not going to go out and buy the long bonds. We could have a total. We're in a different regime here potentially. It's possible that he's talking a big game right now and when it comes to it, they're just going to do the same thing they've always done. That's very possible. But, but I think we need to be prepared for like a potentially, you know, different regime based on the way that this guy's talking.
- [23:14]
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- [25:06]
Ryan
Let's also recap where we are in the cycle from your perspective. So this is kind of a chart that you've been publishing on the DEFI report for the last couple of months. But this chart indicates that we're basically since October, crypto has both been in the, the fourth part of the cycle, which is the wealth destruction part of the cycle. You have first the early bull and you have wealth creation, then you have wealth distribution. And this is generally how crypto cycles have gone in the past and it's exactly how this one seems to be going. And now you said late last week we got confirmation that we're no longer in no man's land. Some people were still holding out and saying, no, we're still in wealth distribution. This is just a blip. But now there's been a lot of capitulation and acknowledgement that we are squarely in the wealth destruction phase. Can we talk about this phase for a bit longer? How long does it last? What else can we expect to see during this wealth destruction phase? And what signs can we be looking at that it has bottomed and that we're about to enter a new phase?
- [26:13]
Michael Naito
Yeah. So I do think it's pretty clear that this, this is where we're at now. I was sort of open minded to potentially, you know, bouncing out of some of those, those zones we were in. But yeah, it feels like we're in, we're in wealth destruction. Bear markets for crypto, you know, have historically lasted about a year for, for bitcoin. So and, and I'm sort of like anchoring to what has happened in the past has been playing out. I think it's fascinating to me how the market fades this oftentimes. But to me it's like it's kind of worth it just to let, let bitcoin play out. And if it starts to waver from the path it normally takes. Then, then you can kind of shift your stance. But I think like you for me like probably anchor to this is going to take a year to play out.
- [27:03]
Ryan
Just because that mean a year from now or like January or a year from February from now or is it a year from October? So kind of it bottoms by October of next year or something like that.
- [27:15]
Michael Naito
That's what I would. Yeah, that would be where you'd measure it from. So where you peaked beginning of October to a year out. That doesn't mean that it's just like you know it's going to be like this kind of like consistent sort of movement down to that place. In the last cycle we had a very aggressive move from like April to June and bitcoin came all the way down. You know under 20K. We came below the, the, the MBR became under one, which is what, what we typically look for to as a buy signal. That happened in June and then we didn't actually get to a full cycle low until December. Right. So and you had a pretty big period there to, to be buying at pretty good levels. So you know I'm kind of anchoring to a year but you know it's possible we get down, you know, we're only four months in and we've come, come quite a ways so things, things can, can move faster. This we're just looking at here is like how we measure kind of cycle awareness and where we're at in these cycles. And really what I'm looking at here is if you look at the far right column that says today we're looking to see some of those metrics start to look very similar to what we saw in the early bull. That's kind of the game that we're playing. We measure this through the cycle. So when you look at the market value to realize realized value. Realized value is a proxy for the cost basis of the entire network. So we're looking for that to kind of come to a collapse to one. It actually went under one in the last few bare markets and so you know we're at 1.4 right now. So that looks like it's got a little bit of ways to, to move. We look at the supply held by long term holders, this typically is going to be a little bit lower early in a cycle. It picks up as people come in and buy and then during wealth distribution it drops off. We can see it dropped off during wealth distribution. Now we're seeing long term holders actually starting to step back into the market a little bit. So that's, that's an interesting metric that we keep an eye on the supply and loss for long term holders. You can see that in the early bull period it was like 36%. It comes down as bitcoin rises, goes all the way to zero and then it starts to come up again. So we're up to 19%. We're looking to see that get closer to 30% or so. The price to the 200 week moving average. Bitcoin typically will trade down to its 200. It's a longer term 200 week moving average. That's about a four year moving average. In the last, you know, few bear markets we came to it, we went below it in the last, we're still above it here. We look at the 12 month RSI. It's more of a momentum indicator but that's something you know, we will look at. That's already down to 45 or so. It usually gets down to about know 40. That's a momentum indicator. And because we've come come off quite a bit, it's, it's already getting down to those, those levels. And then the other thing that we look at is the hash rate. What's happening with miners, Hash rate's down about 15% or so as the price comes below sort of the average cost to mine one bitcoin. For certain mining entities they have to either shut off their, their machines to conserve, conserve energy, sometimes sell their bitcoin. And so these are the things that we're kind of anchoring to and monitoring to get to. It's possible those, those metrics will just start to line up which with where we think we're going closer to that, you know, October time frame, I don't know for sure but we kind of anchor to the data and the timing is less important. But I sort of just anchor to like what has happened in the past typically will play out again. It's not, it's not random. It's because of the way cycles, you know, how financial markets work and how cycles work. You know, we've talked about that, you know, in our writing in previous episodes. I won't go into it but it's not random. But I would sort of as a base case say it might, it might take a year or so.
- [31:17]
Ryan
Yeah, the market psychology is similar. Certainly the liquidity is similar. Certainly this is playing out as other cycles have in the past. If you were to equate this to kind of a price range for bitcoin. So some of These numbers obviously can be equated like the 200 weekly moving average certainly is that around 65k or what is the range here?
- [31:42]
Michael Naito
Currently the 200 week moving averages is like 58k or so. That is rising as we go. It's a moving average. We believe that the fair value is roughly around 65k for Bitcoin. That doesn't mean it can't go below that. Right. So, you know, it's possible it could go below. It's possible. It doesn't totally, you know, get there, but we think it's around 65k. That's where the realized what we think the realized value is going to get to like as time goes on and that's also 58k right now. So those two metrics, realized price, 200 week moving average, like that to me is kind of your fair value metric. And last cycle we did go below that. So that's like a extreme, you know, those are like extremely good opportunities if you actually go below that. But yeah, that's, that's kind of what we're tracking. And the big, the big question is just, you know, are we in like some new regime here with this new Fed and how's the market going to start to process this? I think, yeah.
- [32:42]
Ryan
And your answer to that question is you don't think we're really in a new regime. You think it's a continuation of what's been happening in kind of late 2025?
- [32:51]
Michael Naito
Yes, I do. I don't think there's any change from fiscal, you know, we do have the Trump, you know, tax cuts that are coming and that, that can be positive. But I don't think there's any like major changes on that end. And right now the Fed, if you look at just the chances of the Fed, this is like the next few meetings are still Powell. Right, so, right. So we do have a few more months to go here. The chances of a cut in, in March, which is the next meeting is 15% right now and then it's like 28% for April. So the market's kind of like, okay, there's probably not going to be too much coming here. And on the fiscal side we kind of know what to look for. We've been seeing a lot of interesting, you know, looks. It looks like there's been some degrossing on, you know, in the, in the tradfi markets we saw gold and silver moving quite a bit. That's very late stage type activity. Commodities tend to go last in market cycles and we've Typically seen bitcoin act as like a liquidity index in some ways. And so when bitcoin has gone down in the last few cycles, the Nasdaq has followed at some point. And so that could be the next, the next like kind of thing to drop here. That's going to give us some more clarity on where bitcoin's going.
- [34:13]
Ryan
And if we are late liquidity cycle, and if China is primarily the central bank and government, nation state government apparatus that is printing money, it would make sense for gold and silver to continue to rip, in particular to continue to go up relative to crypto assets. So maybe that's how you explain that. And you had a report on that of, you know, why is bitcoin underperforming gold on the Defi Report? Actually an episode on that, on the Defi Report podcast which you guys have, if you're not subscribed to that, stop what you're doing and go subscribe to that as a separate feed. Mike and I do one of these episodes on a weekly basis every Wednesday. And it's a report just where we are in the market and we focus on one particular thing. So go do that. Let's not talk about bitcoin versus gold though. Let's actually talk about bitcoin versus stocks, Bitcoin versus the nasdaq. And you, I've got a chart up here. Can you explain what is happening in this chart and what we should be looking at for the relative price of Bitcoin versus the nasdaq?
- [35:25]
Michael Naito
This is. Yeah. So this is a bitcoin versus nasdaq. It's, it's the ratio. So this is the ratio between Bitcoin, the NASDAQ Composite index. So bitcoin price divided by NASDAQ composite index. And it kind of looks like your bitcoin chart, right? It, it shows the, the, the cycles, but it's actually priced in, in, in nasdaq. And the reason I think it's interesting, we did this exercise last week and we looked at gold relationship between the ratio between BTC and gold. And we're trying to project out, you know, you know, how big was the drop in the past. And then what, what could that look like for this cycle? And then what could the price points of each asset look like if we, if we got there? So what we're showing here is that in the 17 cycle there was an 83% decline in the Bitcoin to NASDAQ ratio from, from peak to tro.
- [36:22]
Ryan
During that wealth destruction phase, there was an 83% decline, that's your year long.
- [36:28]
Michael Naito
Bear market right there. And that's the same idea that we had. This is actually stretching it out a little bit because we're going from the first peak of the 21 cycle, which was in April of 21, down to late 2022. So this is like a little bit longer period. But we had a 67% decline in the bitcoin to NASDAQ ratio. Right now we have gone to a higher high. So the chart looks very clean. You're establishing higher highs in each session, in each cycle, and it looks like we'll have another higher low as well in this cycle. Right now we're down 43% from peak to tro. We were down 67% in the last cycle. So similar exercise here of kind of thinking, okay, well, you know, bitcoin tends to lead right when bitcoin sells off, you know, and we're down roughly 40% or so, there is usually a lag. But NASDAQ usually sells off as well. And so that could be what's coming. We don't know, you know, for sure. But if that starts to play out, then I think it sort of gives you more conviction. Okay, Bitcoin's probably going to bottom, you know, sometime in the last cycle it bottom around the same time NASDAQ did. So we're going to start to see if the traditional markets, how they process this new, this new Fed share. What are the liquidity conditions out there? We think it's rolling over in the U.S. are we going to have like a period of disillusionment from like the AI sector and just all the investment that's gone on in there. Like these are the questions I think that I'm starting to ask to see if maybe we get a little sell off in nasdaq. Bitcoin sells off some more. Maybe that gets you to that, your cycle low.
- [38:16]
Ryan
What's fascinating when you look at the Bitcoin versus NASDAQ on the ratio and you see it's a 43% decline and last cycle there was a 67% decline. And so if you just project a little bit further, but we might be in the 50% type range, decline to 60%, something like that. You also look at the same for the gold ratio as we were doing on the Defi Report podcast last week, and we look at kind of the, the ratio, I think it was 17 at the time of recording, got as high as 40. And then you anticipate it's going to drop to something like 12. And in the previous cycle drop down to 8. And you look at these on the ratio difference when you compare NASDAQ and gold and you basically see that it is playing out the way every single previous cycle has played out out. And the reason that is interesting to me is because what you're hearing in kind of the short term sentiment right now is starting to be along the lines of crypto is dead. You should have held NASDAQ for the past five years. Stocks would have been better. Gold would have been a hell of a lot better. Why are we even in this asset class? I was promised some kind of return and I'm not getting it. All of these things like, crypto will never recover. We're getting close to the bitcoin is dead type territory. But when you look at these ratios, this is like it's already been written in the stars, basically. It was always going to happen this way if it followed previous cycles. And why should anyone be surprised that it's following the pattern that it has in previous cycles? It's just like not nearly as dire as the sentiment, at least on crypto. Twitter tends to indicate that it is. You know, people talking about Tom Lee being under, you know, loss of $5 billion on his debt. Michael Saylor even this week dipped below his cost basis with, with strategy. And now they're starting to look like they're moving from genius to idiot type of phase. And that's when I guess the market gets attractive. But it's just the way this always plays out isn't really is.
- [40:28]
Michael Naito
And you know, I think, you know, part of the reason for this and one of the reasons that crypto has these like, kind of nastier, I think bear markets is there's the mimetic nature of these assets. And a lot of this is, is belief and confidence and conviction. And we see it every cycle where right at the peak is when people are most confident. And as soon as like there's like some serious risk that gets introduced to the market, the narrative can flip. And I think we're kind of in that mode right now where FUD starts to take over and there's other assets that are actually doing better than bitcoin. We're now getting into these weird periods where like the bitcoin price is converging into cost basis of Michael Saylor. You know, the narrative becomes like, this guy invested, you know, how many billions of dollars over the last five years and he's down on, he's down on all this, right? Peter Schiff is having his moment. So yeah, it's just like you just get piled on, right? You're just going to get piled on. I think the one thing we don't have working against us in this bear market is like the Biden administration trying to choke off the entire industry. So we don't have that to deal with. But we are going to have this like period of disillusionment. And you know, it is, it is what it is. This, this is what happens at each cycle. And I view these, these as opportunities because crypto has this mimetic nature to it because it's very reflexive asset class. These, this creates opportunities, I believe. And this is a feature for me as an investor in this industry. But you have to realize what you're, the game you're playing here. And it is a different, these are different skill sets for investors. Not only do you need to be anchored to data, but you need to understand these sort of more idiosyncratic, idiosyncratic sort of intangibles that you deal with in this asset class.
- [42:24]
Ryan
So let's get really tactical here and talk about how you are playing this at the Defi Report. And again, the Defi report is basically one crypto investor's journal of how they're playing it. That's why it's so valuable to me. So, I mean, you can have a different way of approaching these markets than Mike. I tend to really like the way you're approaching it. So you have different sleeves that you're looking at. So right now you are 80% cash. So you've already prepared well for this wealth destruction sort of area that we're in. But you're not yet deploying. But when you do deploy, you have four different sleeves that you deploy to. One is Bitcoin and that's I believe 65%. You call that kind of the anchor type sleeve. And then you have core assets, 20%. These are usually some high conviction assets. I think you go up to five, maybe three to five high conviction assets that you want to hold through the cycle and that's 20%. And then you have a category called long term holds, which is 10%. Now these are newer, they're less understood projects, generally higher risk reward. They haven't been around maybe across multiple cycles, but they're still long term holds. And then you have your hot sauce which is 5%. And this is towards the tail end of these wealth creation types of cycles where you might do small caps or blue chip means or things like that, and that's 5%. So those are the sleeves by which you approach this. And if I'm correct, Mike, it's always. It's always first allocated to the bitcoin sleeve. So there's a. There's a sequence to this as well. Is that correct?
- [44:05]
Michael Naito
That's correct, yeah. So. And that's why we spend so much time on, you know, the, the way that this journal that you could. That you call it, which I like, I think that's kind of what it's like to, you know, be a pro subscriber on the defi report. The journal is essentially cycle awareness analysis for Bitcoin specifically. And we overlay macro and we use a lot of data there. But the reason we focus on bitcoin there is because bitcoin is. Is kind of the. The dog that whales wags the tail. The rest of the altcoin market is mostly going to come in. And I believe bottom after Bitcoin that that doesn't mean there's a law that says that it has to go that way. But we put most of our attention on bitcoin for that reason and then for cycle awareness, and then we spend a lot of time also doing individual analysis on different projects that we are on the watch list. And that way, when bitcoin does hit where we think the macro low is, we don't expect we're going to get that perfectly. You know, we want to be generally accurate and have the probabilities on our side at that moment. But we want to have these. We want to be ready in these other sleeves where we have some assets that we've already done quite a bit of work on that we believe can actually outperform Bitcoin as well.
- [45:18]
Ryan
And you're not buying all at once either. You're sort of scaling into these positions, you know, across the sleeves.
- [45:24]
Michael Naito
Yeah, that's right. That's right.
- [45:26]
David
Hey, Bankless Nation, it's David. If you're hearing this, that's because you are listening to the free Bankless podcast feed. Did you know that there is a premium Bankless RSS feed? The premium feed has extra interviews that I do for my own personal research and just deeper questions that I want answered about the crypto industry. Questions that I want to answer so I can be more informed as an investor, both at Bankless Ventures and also just in my own personal portfolio too. Also, there are no ads, which means if you listen to the premium feed instead of the free feed, you'll get about 20 hours of your life back every year because you choose to support Bankless directly. So if you're Interested in getting extra content all while skipping the ads or.
- [46:00]
Sponsor/Ad Reader
You just appreciate what we do here.
- [46:01]
David
And want us to keep doing it? We'd appreciate it if you signed up for Bankless Premium and there is a link in the Show Notes to get started. Cheers to a good 2020 2026. Few people in crypto put real skin in the game when they make public top or bottom calls. The Defi Report is one of them. The week before the October 10th flash crash, Michael from the Defi Report emailed his entire newsletter saying he's going aggressively risk off and sold the majority of his book from crypto into cash. This is when eth was about $4,000 and Bitcoin was 110. Michael runs the Defi Report, an industry leading research platform built on data cycle awareness, risk management, transparency and most importantly, science.
- [46:36]
Sponsor/Ad Reader
Skin in the game.
- [46:37]
David
We like Michael at Bankless. We like his analysis and that's why you hear him on the Bankless podcast.
- [46:41]
Ryan
About once a month.
- [46:42]
David
And the Defi Report is giving Bankless listeners one free month of access to the Defi Report. So if you're looking for some sharp data driven analysis to make better informed decisions around your portfolio, you can learn why and how Michael called the top and what he's doing next all in the Defi Report Pro. Check it out. There is a link in the Show Notes.
- [46:58]
Ryan
So we talked about your fat pitch target as you call it, for bitcoin that was 65k. How about some other things on maybe the watch list? I know Ether's on the watch list. I know Solana is on the watch list as well. What are some of the price targets for those assets?
- [47:15]
Michael Naito
Yeah, so Ether came down so peaked around 4,900 or so. I think we actually got all the way down to 2200, which is actually like the sort of high end of our Ether price target. We've sort of bounced off of that a little bit and we're not changing changing this just yet. So we're going to keep these targets for now. But a lot of the work that I'm going to be doing this week is really kind of getting comfortable with this new Fed president. Do we think there's a regime shift? Do we think that we need to actually update any of these price targets? So we're going to be kind of going through this and looking at this for Sol. You know we've got a price target around 75 to $90 for SOL. Haven't made any updates to this. We shared these a few a few weeks back. We do have a, about 30 asset watch lists that we share with with pro members and we, we're tracking targets on all of these assets and then we have data dashboards and, and research that we publish on Fridays in the Defi report that goes out to everybody for free. So this is a lot of the work we're doing this work now because we think we're going to have some really good opportunities here in 2026. And so far, you know, these calls have, have been, have been accurate and where we're kind of just like letting the market come to us. I've been really kind of preaching, you know, patience for, for, for in a lot of the research that we're doing. And this is why, you know, it's kind of odd but you know, I do sort of enjoy the bear markets because you, you get, you can get a lot smarter in a bear market than you can in a bull market. I think that's really what it comes down to is it gets easier to do some of the analysis. We, we can kind of see what's real when, when the tide goes out a little bit and get some clarity over like what is the next three to four years of this asset class, you know, look like. We know it's really hard to outperform Bitcoin through, through a cycle. And so this work that we're doing is to identify the assets we think can actually outperform bitcoin.
- [49:25]
Ryan
And it does look like you're starting with Bitcoin regardless. Right. So some of these prices really will come downstream of whenever you go risk on for bitcoin. And I mean maybe just start to close this out. Mike, if I had to ask you about the next trigger, maybe the signal that is most going to move you from your vast majority cash position back to nibbling back to risk on particularly around bitcoin. What are you looking for? Maybe there's just one signal, maybe there's a few that you can name like what are you looking for in the next couple of weeks or months to tell you that we have bottomed.
- [50:12]
Michael Naito
Yeah. So I like to say the, the onus is on bitcoin to show me is kind of how I, I think of this and what, what that will look like is we will eventually, you know, hit, hit some sort of macro macro bottom. Usually there is like a bit of a capitulation, you know, before that that happens. I don't think what we just saw here over since, you know, Friday and over the weekend. It's, you know, we did it's 50. We dropped 15% or so over a week. But it was pretty controlled. I don't, it was somewhat orderly and it didn't feel like a full on, you know, capitulation and for selling. So you, you do sort of, you know, this is like a little bit more instinct to sort of identify this type stuff, but you typically will see that. And then after that period it just gets quiet. There's no bulls anymore. There's almost not even like a ton of FUD in the market anymore. And it just sort of gets kind of quiet. And I don't think we're there just yet. And just because this has happened in the past like this, it doesn't mean it's guaranteed to happen again. But I would say like for me right now it's kind of like bitcoin has to, Bitcoin has to do something different than what it's been doing and what I was forecasting that it would do for me to kind of come out of this stance that, this risk off stance that I'm, I would say I'm much more, you know, closer to risk on than I have been. But I'm waiting for bitcoin to show me. I'm waiting for, I'm going to just, just watch. You know, I've got a plan for what I think is going to happen and I'm kind of waiting for bitcoin to show me that it's.
- [51:46]
Ryan
So you're looking for a big capitulation spike down possibly and then some sort of apathy it might not happen. With a spike down, you might just get the apathy and things floating to that 65k and below, you know, weekly moving average. You have said though, you're also open to the possibility that bitcoin still spikes up. And you said previously that you think it's possible that bitcoin could resume above even 100k and that still wouldn't change your outlook. Do you see, do you still see that as a, as a possibility? Let's say this felt like a, you know, kind of a local bottom and things start to reverse. You know, maybe once we get to kind of 90s again or into, into even the 100k again, people might say, okay Mike, you were wrong, that was actually the bottom and haha, you missed it. Is that still a possibility in your mind? And if we get into the 90s or if you get even back to 100k bitcoin, would that change your mind?
- [52:49]
Michael Naito
Yeah, so definitely still a possibility. And I would say, you know, where we're at right now, having seen weakness over the last week, you know, probably somewhat locally oversold. And so I would, you know, I would expect probably a retracement. I'm not, I'm not betting on this. I'm not trying to count trade counter trend rallies or anything, but I think the odds sort of point to like, okay, we might bounce back up, we might bounce back into the 80s or so. We were expecting a retracement after we had initially come down. We came down from the highs in October. We came all the way down close to 80 and I was expecting a move back up to a hundred. We got up to 97 or so. This was kind of early in January when this happened, but, but we got rejected there and, and then we came back into no man's land. That's where we were last week. Now we've come into like, I would say a closer. We were like, like one, I think we're one sort of like level off of where I would say fair value is now. And because we're locally oversold, I do think that the probability is now pointing towards a retracement rally. What I would be looking for there is like, it's actually going to set a lower high. So it's not even going to be able to get to the 97k that we got to last time. It sets a, you know, a lower high. Maybe it's 90k, I don't know. But that's like, it's, every time it does this, it's giving the weak hands a chance to like get out at slightly higher levels. And this is why you get that like sort of bouncy ball action where you come down, you bounce up and, and, but you just can't get back to where you were previously because there's too many weak hands and the market structure is too lopsided. And that just kind of goes on for a little while until you ultimately get to like where the, the, the selling activity has been exhausted in, in the market. And that's a lot of instinct. We're looking at a lot of this data to like, you know, to identify that. But that's kind of where I'm at right now. You know, if you're, if you're, you're not in this every, every day studying this and you're just, you just, you think like, you want to hold this for 10 years. Like these are probably, these are great levels, like you could probably just buy here and be fine. So I think it's up to personal, you know, preferences what, what I sort of anchor to myself is that if, if you might be close to, you know, a really good buying opportunity, but if you drop another 20, 25% or so, like that can be pretty meaningful if you're going to allocate, you know, if you're going to allocate quite a bit and hold that for a long period of time. So that can be meaningful. But if you're not trying to play it cute like these are pretty, pretty decent entries I would say for long term investors.
- [55:30]
Ryan
So let's end on a note of optimism, Mike, which is the big picture. And I know even though you sound bearish in this episode, long term you are an absolute bull on this ass and this space. And because I think when those numbers continue to get lower, say into the 60s or maybe lower, it's going to take some courage for investors to go hit that buy button because all of the sentiment around them is going to be telling them the opposite. And so can you give us some courage for those moments? I mean, where do you see the price of bitcoin, the price of crypto assets say, you know, three to five years from now and where will they go into the next bull cycle?
- [56:15]
Michael Naito
Yeah, so very much a long, long term bull. You know, my thesis is that we'll see, you know, bitcoin over, over a million dollars and yeah, where do we go next cycle? I haven't, haven't done the work just yet to kind of put that out there. I don't want to put anything out there just yet, but I certainly think we're going to see all time highs, you know, for, for crypto and any of the, the assets that we think are here to stay. We, you know, this idea that, you know, crypto is going to have maybe a period of, of disillusionment again. Like, the reason I think that that's a feature is because I think that the entire financial system is going on to crypto rails. I believe that we're going to have stocks and bonds and like everything's coming onto to crypto rails payments. And so like that's my thesis. I haven't changed on that. So when we get these periods where there's just like this total reversal of that vision in the opposite direction where people are totally questioning it, to me that's an opportunity because I haven't changed my mind and there's nothing to me that's. If anything, if you look at 2025 and Trump coming into office, you know, the SEC coming out and saying, hey, we want to bring, you know, finance onto crypto rails. And we're, we, we saw progress on the regulatory front that has sort of like hit, hit a stalled period here. But to me, the, the way we've sort of like, we're crossing the chasm to this, being fully deployed, you know, into finance, into like these, these use cases we've been calling for, for a really long period of time, yes, there's going to be like some, you got to get in the right assets to capture that. But that opportunity is still there. And so that's what I'm excited about. And that's why these bear markets are opportunities. And I think it's a really good time to be locked in right now.
- [58:10]
Ryan
Well, let's end it there, Mike. It's always great to have you. We will have you back next month, once again, the first week of next month to see where things are. Bankless listeners. In the meanwhile, if you want to get the episodes that Mike and I publish on a weekly basis, those come out every Wednesday. They don't come out on the Bankless podcast. So what you're going to need to do is go to Spotify, your RSS, wherever you subscribe to, podcast your YouTube channel and go search the defi report and subscribe there in order to get our next episode this Wednesday. And I think in that episode, Mike, you've got a report maybe where you're going to talk about crypto versus stocks and the S and P and where you see some of that bottoming. So we'll be discussing that on Wednesday. If you want to catch that episode, you're going to have to add it to wherever you listen to podcasts. Go do that now, guys, got to let you know, of course crypto is risky. You could lose what you put in. But we are headed west. This is the frontier. It's not for everyone, but we're glad you're with us on the Bankless journey. Thanks a lot.
- [59:14]
Michael Naito
Sam.