A (2:49)

You also get the benefit, Mike, of some cheap prices and certainly we're seeing those cheap prices. Before we get in to this episode, there's a message from our friends over at the Raya Protocol. They are a crypto perps trading application. Crypto perps traditional trading has a problem right now, you think at the speed of a centralized exchange or the security of a dex, which is often way too slow if you're trading in serious size. So Raya is closing the gap. They've got a first of its kind based roll up with ZK proofs. This is sub 1 millisecond trading, 0 trading fees. Also because it's a base roll up inherits Ethereum's uptime and security. That's 100% by the way. So there's no sequence or risk. The market has noticed already. You know, perps are a pretty big deal and Raya is now routinely in the top 5 top 6 perps DEXs. They also have an upcoming token which ETH Maxis will love this. 80% of the token fees go to Raya. 20% is actually bought ETH. So they're going to buy back and burn ETH. If you want to go figure out what this is, get trading on Raya you can do so there's a link in the show notes Bankless CC Raya. All right, Mike, here's what we're going to do. First, I want to take some time to recap where we are. We had an episode over 30 days ago, I think came out on October 21st. So what transpired since then? Then we'll get into where we are now. We'll zoom out a little bit, look at the cycle and lastly we'll talk about what's next and how to play it. You ready?

B (4:20)

Sounds great.

A (4:21)

All right, where we left off, our last episode was right here. It was entitled is the Cycle Over? And I think my hope was no. And you were saying yes, unfortunately, Ryan, you have to accept the truth that the cycle very well could be over. Just to give bankless listeners Some context. You and I started doing these episodes on Bankless about six months ago and the goal was really to use some of your insights to look at on chain data to make better crypto investing decisions. And your orientation has always been long term permeable on crypto, but you play the cycles and you buy quality on the dips. So I said in the intro that you've been probably the most correct cycle investor that I've seen. And I think part of the reason for that is something we'll get into. I call that, I'm calling this Cyclamentals, which is maybe the Defi report's unique brand of using on chain data to predict these cycles. So let's get into your calls back in October. Right now of course, bitcoin price looking kind of ugly. 84,000 at the time of recording. Eth price 2,700 at the time of recording. Bitcoin is down 22% on the 30 day. Ether is down 30%. Other down market assets of course down to greater degrees. So this is feeling kind of bad right now. The first indication that I received that you were moving towards a risk off position was this email that appeared in my inbox on October 10, 2025 and it said portfolio update shifting to risk off. I looked at this and I thought, oh shit, Mike is going risk off. Last I checked he was like, you know, 25% cash, 75% crypto assets. So what's he doing? What's going? What's risk off? And you gave some reasons for this. You said bitcoin had some lackluster trading volumes even it had kind of this run from 108k at the beginning of October, end of December to 125. You felt like that was lackluster. But mostly I think you were seeing a lack of demand signal and there number of other things that maybe awoken you to the fact that something was feeling off in these markets. Something was feeling kind of end cycle. And so you made a decision, I believe on that Thursday to switch to a risk off position and move to like 60% cash from 26% cash. And then that day, that same day, later that day on Friday, October 10th, we had the 1010 flash crash and it was pretty obvious that something broke in crypto. Maybe I'll just pause there. In early October, right before the 1010 event, what were you seeing in the markets that caused you to send this email and switch to a risk off mode?

B (7:15)

Yeah, so I think at the time, and again always just kind of trying to play the probabilities, what we're looking at is really market structure for Bitcoin and we look at a lot of these sort of holder cohorts to understand what the market structure looks like. And Bitcoin had basically traded at an average price of about 102k over the last year from October to October. And so all of the sort of new money that came into bitcoin at the time is coming in at that sort of elevated price range. And we could see that the sort of more longer term holders were exiting the market while that was taking place. So that the market structure was tilting more towards sort of like newer money, possibly weaker hands sort of sitting at the top, while at the same time we were starting to get nervous about the sort of, the amount of leverage that was in the system at the time. And so you kind of have this like kind of lopsided, lopsided market structure set up with lots of leverage building. And then we were starting to get nervous that the liquidity conditions in the market were starting to sort of turn over. We're starting to see some, some tension in the repo markets, a lack of liquidity in the banking sector. And that sort of lined up with our view that like the, on the, on the margin fiscal spend was, was, was sort of winding down and you have tariffs also pulling liquidity out of the markets. And so when we kind of added all of these things up, we started to feel like, okay, the probability is actually pointing to a risk off stance. That was, that was the call that we made. We were, we were sort of confident that the, every stage that we would expect to see play out in a, in a crypto cycle had essentially played out. Even though you didn't have sort of that euphoric period at the kind of like October peak, which I think was around like October 6th or so.

A (9:10)

That's right.

B (9:11)

So that was kind of the, the summary and it's really kind of adding all of these things up to kind of land out like, okay, the probability points to risk off. We've had a good cycle. You know, we were, we were buying at the lows. And so it's, it's kind of time to take risk off. And, and so that's, that's, that's what we did and that's, that's how we're playing these cycles. And now it's kind of pivoting towards where is fair value potentially going to come in for btc. If we are in fact heading into a longer term bear market set up.

A (9:39)

Here that's exactly right. So not only did you make this call in early October and interpret these indicators correctly, but you also did it with conviction. And I will say this was definitely a contrarian call in crypto circles, like long term bulls like me. I mean, we don't want to believe it that the cycle's over because the indicators had not been hit at the time. And so you came on the podcast, this was our monthly October podcast, or you know, like into November, October 21st, and you were saying, likely the cycle is over. At the time, though, this was even after the 1010 event, it felt like a flash crash. Markets had partially recovered and you were saying, hey, it's more than fair odds. My base case is that the cycle is over, unfortunately. But at the time of recording, Bitcoin was 110k and ETH was 3900. So people kind of hated the episode, to be honest. Mike. Right. And that's, that's how you know you're at least in a contrarian place. Turned out that call has been contrarian. Right. And we'll talk about maybe that was your October call. And let's talk about November, because November was, I think, the market scratching its head and waiting for a confirmation. This is probably you looking at some of the data and waiting for confirmation as well. So you had this November 5th report on the Defi report website and the title was has the Bear market arrived? At the time you were like 75% cash, I think. So you were, had already placed your bets that basically it looked like it. But you were open to alternative data and you said this. The bull market structure hasn't technically broken yet. We're looking for weekly closes below the 50 week moving average. At the time that would be about 103k bitcoin. You're waiting for that. The 50 week moving average 2 closes below for confirmation. But you said your base case is the cycle is over and you're open to data proving otherwise. Let me, let me just ask this, this chart, the 50 week moving average, this is, folks are looking at the chart. This is from, from the early November. Have we broken those Weekly closes of 50 week moving average for Bitcoin being below the 50 week moving average, has that now happened yet? Do you have the confirmation you were looking for in early November?

B (11:56)

We do, yeah. So we do have this confirmation. The 50 week moving average is around the 100k mark. And so that has served as in the last few cycles, that has served as bull market support. We can see that in the, the kind of the green arrows there, we've kind of been bouncing off of it. Whenever bitcoin has a, a little bull market correction, we now have broken through that. So, so now and, and we've had multiple weekly closes on that. And I think, you know, the market sold off pretty hard last night and you know, we had a big sort of monthly close at, you know, Sunday, 8pm last night came in kind of lower than I think the market was hoping for. So it looks like some of these critical resistance points are turning into resistance and not support. What I would have been looking for to potentially change my mind would be that, okay, maybe we reclaim that and it starts to serve as support, then you can start to turn bullish. But seeing it get rejected and then the market reaction to that with a pretty hard sell off last night tells me that this is deteriorating further. And it's sort of my, the probabilities of a sort of a longer term bear market are starting to be confirmed for me.

A (13:12)

Okay, so this November was definitely confirmation. And by the way, this 50 week moving average, why is that important? My understanding is that the past cycles in crypto, every time we've had at least two weekly closes, multiple weekly closes below for bitcoin as below the 50 week moving average. In the fourth year of the cycle, it's been over. It's been, the cycle's been over and then we see kind of a more prolonged bear period of time where prices dip and we get kind of, you know, very negative sentiment for, you know, 12 months or so. So that has always been the case in previous cycles. And you're just saying now we have that confirmation here and you're saying that's like it's always been the case previously, so why wouldn't it be the case now?

B (14:00)

Yes, I think so. But it's also, I think important for people to maybe, you know, it's one indicator and you know, we're looking at a number of data points here, but this, if we want to sort of go under the hood and think about this one indicator and why it tends to, tends to work, I think it comes back to the market structure and we talk, what we talk about in terms of the sort of holder base and how that has sort of gotten lopsided. So if you think of the width, the 50, 50 week, that's about a year's worth of moving average. And we just, I was mentioning earlier the, over the last year, the average price is about 102k or so. So all of the new money that came in is coming in at that, that higher level. And now we're sort of breaking off of that. So those, that, that Holder cohort is now has a, has an unrealized loss, they're sitting on losses. And what tends to happen is when the, when we break down from that, we will see some bear market rallies. And what I'm looking for is like when you get those bear market rallies, are these people that came in like as tourists over the last year, are they selling as we get the bear market rally? Because they just want to get out at like a, you know, as close to break even as possible. I think that's the sort of market structure that sits underneath, you know, that indicator of the 50 week moving average.

A (15:17)

Okay, so that's what you mean by market structure. So it's not just one particular technical analysis indicator and a moving average indicator. This gets into kind of maybe your brand of fundamentals, what I called earlier in the episode the TDR cyclomentals, which is you're using some of this on chain data to kind of predict the stage of the cycle. Right? That's the cyclamental and something that has come across in all of your work like this post that you wrote in mid November, the question of the bitcoin market structure. You said the bitcoin market structure is broken. When you say market structure, you're really talking about this long term holder activity. I know that's just one data point among many. Yet your work seems to focus on long term holder activity and in general holder activity more than I think any other cycle analyst I've seen in the space. Why, why is holder on chain holder activity so important to you? And was that the key data set that you use basically to make these calls in earlier October?

B (16:25)

I think so, yeah. So it's, it's. I view this, this data, this is like a gift that you know, we get with on chain data. And I was actually sort of having a conversation with some family members over Thanksgiving about, you know, imagine if you could tell what the sort of holder base of the gold market looks like right now.

A (16:42)

Your dad doesn't have that, right? He doesn't have that insight.

B (16:45)

So this is like, you know, this is kind of like a little cheat code that we have. If you have access to this, this data to be able to see actual market structure. You know, there's, there's plenty of analysis that we're also doing on, you know, looking at the macro set up and looking at the business cycle and looking at all these other things. But then we can come back to this and say, well, if we don't feel really strongly about the macro setup, the liquidity set up, and we know that the sort of, the market structure has shifted to this sort of like lopsided top heavy structure, then it just adds to that conviction. I think that's what allows us to kind of make those, those bets that maybe seem to be really bold contrarian views. But for us it's just, hey, this is what the data is telling me.

A (17:28)

But why is it so we have this data, it's a gif that we have in crypto where we can track holders over time and how long they're holding kind of their sort of a proxy for cost basis of the cost at which they acquired the assets, whether it's Bitcoin or ether or some other crypto assets. So we have that data. We don't have that in other markets. You don't have that in equities, you certainly don't have that with commodities or gold. We have that in crypto. But what's the intuition as to why it should be the case that long term holder activity and whether they are accumulating or whether they're, they're, they're selling, why should it be the case that that actually dictates the cycles here?

B (18:07)

Well, it doesn't have to. It certainly doesn't have to. And I think the way that I would think about this is like if, if we know that historically long term holders tend to come in and sort of set the bottom of markets, they tend to sort of, you know, exit markets when, when there's a separation between their cost basis and kind of the market price. I think, you know, if we know that that's sort of the probabilities, we could say, well wait a minute, you know, how could we be wrong on this? What would it look like if we're actually wrong about this? And I think that that's where you have to have some clear catalyst for a new wave of money or there's new money, there's a new buyer, something happened, whether it's in regulatory or that you feel confident that there's a new buyer that's, that's happy to buy Bitcoin at 100k or so. And we couldn't really find that that catalyst. You know, sailors, you know, kind of tapped out. Most of the debt buying, you know, had sort of played out, you know, over the summer months. And so I think, I think that was the factor where it was like, okay, we could be wrong about this, but what is the catalyst. If you have to replace what typically is the market participant that sets the bottom. Who is going to do it? We couldn't, we didn't have clarity on that.

A (19:25)

Okay, so you didn't identify a source of demand. But it does seem to be the case that bitcoin assets, and maybe crypto assets more generally, because bitcoin kind of, you know, moves the liquidity of the entire crypto market right now it seems that it happens in these like accumulation adoption types of waves with different cohorts across each cycle. And maybe that's just a structure of the market. Maybe that's the market structure. So first you have like weird crypto anarchists and early believers. And maybe then at some point they kind of exit some of their assets to sort of the, the early hedge funds and early VCs and they sort of exit to the next. And now we have, it seems to be the case that we have some larger institutions, not maybe the largest institutions of the world. We still don't have kind of the, the sovereign funds maybe have not entered in size, but we, we do have the blackrocks of the world. And that demand source has now exhausted. But you know, kind of the earlier adopters have sold into that net new demand source and, and now the demand source is exhausted and we kind of roll into another cycle. That's essentially maybe the narrative story for why this on chain data actually matters for you.

B (20:36)

Yeah, I think so. I think that that lays it out pretty nicely. And something that we should also mention here is that this is, this is constantly evolving. Right. So we are looking at, when we look at this glass node data here, you know, and really the whole cohorts, this is on chain only. So there is a growing part of the market now that's as Bitcoin gets more financialized, you have the ETF products, about 6% of the supply is now held in those ETF products. And so this is potentially getting more challenging as we go as Bitcoin becomes more financialized in almost like some of these KPIs become a little bit more off chain. So that's not something I'm looking forward to as an analyst because this is fantastic data for us. But it's something we do factor in. And we, we've actually been doing some work to actually try to understand what's the sort of average cost basis of the ETF holders as well. But yeah, I think, I think just kind of the way you're, you're laying this out is correct. And I just view this as like it's out there, it's available. This is unique data and you can't get this type of data in the traditional markets and I find it like really, really helpful even though it's not perfect either. Like these are sort of proxies for what we think the cost basis is and what we think sort of the setup is with with different holder cohorts, but it does tend to provide really really good signal over the last few cycles.

C (21:57)

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A (24:38)

Finance. All right, so that's a recap of where we are now. Let's zoom out on the cycle for a minute and you wanted me to include this slide, the classic psychology of a market slide where hopefully everyone is seeing this on screen on YouTube or Spotify video. But this is the classic disbelief, hope, optimism, belief, thrill, euphoria. And then the market spikes up and then you get complacency and anxiety, denial, panic, and then it levels off into anger and depression. Right. And that's a, that's a full cycle of a bubble basically, or any large market cycle. And something that we've seen recurring in crypto. I guess my question as we look at the psychology of a market here, Mike, is okay, where are we now? Where would you place.

B (25:25)

Us? I think we are. You know, what's kind of weird about this is that we didn't really have the euphoria in October. When I think about, when I think about the cycle, I sort of think of the euphoria really came really Q4 of last year into January, into sort of when Trump was, was coming into office. We had, you know, the Trump meme going launch and that was kind of when the, that was probably the most euphoric period of the market. I think this threw people off a little bit, but I think it was kind of similar to what we saw in the 21 cycle as well. I think the first peak was in April of 21, around when Coinbase went public. And I think that was really sort of the euphoric top of the 21 cycle. We did end up going back and getting up to like 66 carrots, but it was kind of a muted sort of end to the cycle. I think we had a similar setup that actually played out in this cycle. I think that threw people off, just that we didn't see that sort of euphoria at that time. I think we are in complacency now and I think that was sort of the conclusion that I was coming to even back in early October, that the market was too complacent and that there was quite a bit of pushback on sort of my view at the time. I think that is becoming a little bit more consensus now. But as this plays out, as bitcoin continues to drop or sort of chop around in the 80s and the longer it goes and it's sort of breaking these technicals and the market structure that people are looking for to confirm maybe a more bullish view, then we start to get into the anxiety phase. And that's when maybe people that came in over last year, when they see a little bear market rally, they kind of want to get out and that starts to fool the market a little bit. I saw somebody come up with an analogy for bear markets and it's think of it as a bouncy ball going downstairs. It's going down. But you do get these bounces when things come up. And it's that the market structure is such that I'm concerned that these, like, sort of weaker hands might just try to look to get out. And then once that's all done and we get, you know, maybe we still don't know if there's bad debts out there that sort of need to come to the surface. And things like this, this. This happened in the last cycle. We had a number of, like, CFI companies that were in trouble and that that all had to get reconciled. And you typically have a few more legs down as that plays out. So that's sort of the setup, you know, moving forward. And I think the market is, you know, based on what I'm seeing on X, we are certainly not in the greed buy zone anymore. It does seem like we're kind of coming off to the right side of that.

A (28:19)

Chart. Definitely. Yeah. I think October maybe was more complacency and then some denial. Now I feel like we're in anxiety mod and denial. I think a lot of the folks listening to this are probably anxious, listening to you as you speak here. So that indicates where we are maybe not quite panic, although I don't know how much of a panic we'll get this cycle. But it is roughly, the psychology here is roughly playing it out as it has in previous cycles. Let's maybe map this to your idea of the stages of a cycle. Right. And so talk about this chart. You've got four different stages of the crypto mental cycle, let's call it, or cyclomentals part of the cycle. You've got the early bull, you've got wealth creation, you've got wealth distribution. And I'm guessing we are now in the wealth destruction zone. October 25th. So talk about this and why are you putting it on this specific chart? Is this a price.

B (29:22)

Chart? Yeah, this is a price chart. So that's, this is kind of like the, the 25 cycle here. So it's kind of starting in early 23 when Bitcoin had just kind of bottomed after FTX and you had this early bull period, which was really kind of like the first part of 2023. And like something that I always come back to with sort of the early part of markets and also the later stages of markets is that most market participants will be late to actually acknowledge a bull market in the early stages. So an example of this is like, you know, By October of 23, Bitcoin was up 100% or so on the year. But I don't think people sort.

A (30:04)

Of, they did not feel.

B (30:06)

Bullish. Did not feel bullish. Right. It was still kind of like, it's almost like people don't want to admit there's a. The bull market's on until you actually go back to all time highs and crossover all time.

A (30:16)

Highs. But also they just open their portfolio tracking app and they see that they're still down, they're still down from the previous all time highs. So then they don't feel bullish because they didn't position themselves in a cash position across the cycle and they weren't buying that October 23rd, that Q1, October 23rd play.

B (30:33)

There. That's probably why there's no FOMO at that point. Right. That's the interesting thing to me is that you could be up 100, up 100% off the lows, very little FOMO. So that's kind of the early bull period. And then in this cycle, the wealth creation period was sort of an interesting period because we had the Bitcoin ETFs came out and that happened before the having occurred. And we actually went to all time highs before the having, which is the first time that that's happened. And so that was another period where okay, now people are feeling good. I think everyone's back to, you know, just feeling good about where the markets are. You're probably getting, getting more FOMO at this stage as bitcoin's. The price of bitcoin is probably moving past sort of the average holder's cost basis and people start allocating again and then this starts.

A (31:24)

Pushing. That was a move from like 35k Bitcoin all the way above 100k Bitcoin by January 2025. So and the 100k felt like quite a milestone to be above that for the first.

B (31:34)

Time. Right. And by the end of that, by the time you got to January 25th, you know, a lot of the people that were buying in the early bull, some of them are happy to exit. They're up, they're up 5x or so. They're, they're happy to exit. So you're already starting to get a, like we talked about market structure. You're starting to see the market structure, turnover once you get to those elevated levels. And that's the thing, that's the thing to pay attention to because that leads into the wealth distribution zone there which played out over the last last year or so. And we can get into some metrics that we look at from in terms of like the cycle, cycle metrics here. But as you get into wealth distribution we didn't, this is part of the reason we didn't get the euphoria as like people, long term holders were happy to exit at you know, 3 to 5x gains. But we didn't have the, you know, the new buyer coming in at that time to really steady the ship and allow us to go to new highs. We did have a lot of leverage in the system I think because of the dats. And I think people got complacent thinking that there's a price agnostic buyer in the market with these debts. Let's go ahead, let's put the leverage on a lot of this was more in altcoins. And then that leads to those big liquidations which I think that the one that we had on October 10th really kind of broke, broke the market structure, broke the psychology of the market a little.

A (32:58)

Bit. So January 2025 to October 2025, there's a wealth distribution phase and now we're in presumably if all of this is lining up correctly, you think the weight of probability is we're in a bear market wealth destruction phase for what, nine, 12 months maybe? We'll talk about the next early bull market indicators in a moment. But is that how you're anticipating this plays out, wealth.

B (33:22)

Destruction? Yes, I think we are sort of in that zone right now. And I know people don't want to hear this. Doesn't feel good hearing it. I think that's kind of where we sit and we can get into kind of what's coming.

A (33:36)

Next. I think before we do though, you mentioned the cycle key performance indicators, like the main metrics that you're looking at for 2025. And these are some of the on chain metrics. So I guess this is mapping them to the different points in the cycle. Right, Right. So for each metric we're looking at early bull, wealth creation, wealth distribution, and then where we are today, presumably early wealth destruction phase, let's say. So what are these metrics? And like how would you explain these numbers across the different.

B (34:10)

Phases? Yeah, so this is kind of what we use. This is just a small sampling of some of the data points that we look at. But as you can see, so if we just look at maybe the market value to realize value, the MVRV there, that is measuring what we think the average sort of cost basis of the network is relative to the market value of the network. And so we always want to buy Bitcoin when it's under one, because that means sort of on aggregate as a proxy for the average cost basis, the price is below that. So in the early bull, you know, bitcoin, Bitcoin price in back in early 23 is, you know, just around 20k or so. And the, you know, average cost basis of the network is sitting around 24k or so. So when you, when you have that disparity, that's like a flashing green sign to go ahead and buy and buy Bitcoin in my view. And then as you can see as you go to the next stage of the cycle of wealth creation, you can see now you're above one. So maybe it's not like perfectly fair value to be buying bitcoin at that time, but you are in a bull market structure, you know, it's pretty, you can still buy Bitcoin that you're probably buying it at, you know, 50k or somewhere, somewhere at that stage and you still have some nice upside left. But then as you get into later into wealth distribution, you can see that the market value has now detached Considerably from the average kind of cost basis of the network, we only got up to about, we didn't even hit three as a peak in terms of that ratio this cycle. So we were expecting it to get a little bit higher earlier when we were making our calls earlier in the cycle. And so it was slightly muted. And then you can see now it's starting to trail off, it's kind of going in the opposite direction. So that's just kind of one metric that we look at the, we're also looking at the, you know, we talk about market structure. A lot of that is looking at the percentage of the bitcoin supply that's held by long term holders, you know, versus short term holders. You can see there's kind of like a, a process here where in the early stages of the cycle you tend to have a much larger base of long term holders dominating the market. And then as you go later into the stages of the cycle those, those folks exit the market. And so you can see the percentage of long term holders starts to decline as you go through the cycle. And then we can also look at like, you know, are they in profit or are they in loss? And you can see a story there where when you're at the bottom of the market or the early bull, a decent percentage of even the long term holders are actually at a loss. And then you know, as you go through the cycle that, that comes down typically you get to a place where actually 0% of the long term holders are in loss. That's, that's once you get up to all time highs again today we're at 12%. So now we're, we're kind of going back in the other direction. So these are some of the, the key metrics and this is just how we anchor, you know, to, and it allows, allows me to sort of sit back and have conviction over because we know what the return profile can look like based on these types of metrics over 1, 2, 3 year.

A (37:34)

Periods. And so this is also an indicator of when you should buy back in, I suppose, which we'll maybe talk about. One question before we discuss what's next and how you think about this part of the narrative that you're talking about. You're talking about long term holders basically selling, basically exiting their positions to the newer entrants in the market. There was an article that I read, I think I mentioned to you by Jordy Deere. It was entitled Bitcoin Silent ipo why this consolidation isn't what you think. Now he was setting up this article to say, hey, this is just a temporary bump in the road, temporary dip and you know, longer term things get bullish. I think he was maybe talking about some more shorter term. He wasn't predicting a bit end of the cycle as maybe you are, but he was saying effectively that early bitcoin holders, this is kind of their IPO moment, basically where you've got ETFs and they're exiting to newer holders. And is that what you're seeing in the data? Effectively did whales and long term holders kill this cycle? Is the bitcoin silent IPO narrative.

B (38:46)

Correct? I think there's some nuance here and I read Jordan's piece and I thought it was a well written piece. He didn't have a ton of data in his piece. So I was, this is something we've been tracking and you know, we're following this structure and we've been pretty vocal saying, hey, yeah, like long term holders are exiting the market. The structure is a little bit, a little bit lopsided, but you know, is that actually like materially different from what we saw, you know, at the peak of the 21 cycle? That's, that's really what I wanted to investigate a little bit further. And you know, my conclusion here is that probably not, you know, there did look to be a little bit, you know, higher levels of kind of inactive supply. So what we're looking at here is total supply that was inactive over a three to ten year period. So this is like the stock of bitcoin that has been inactive over from a three to ten year period. And so we kind of look at this to get a sense for did this come way down in this cycle relative to the last cycle or the 17 cycle? You can see the blue line kind of goes up as coins age into this cohort, right. As time goes on, more coins that haven't moved are aging into it. It's growing. And then as bitcoin kind of goes into price discovery mode, you tend to see that blue line drop down where those red arrows are and you see that kind of on the backside of each cycle. We can see a pretty significant move there in a 17 cycle, a much smaller one in the 21 cycle. And I think I'm kind of guessing here, but it feels to me like there were a lot of whales that probably thought that bitcoin was going to get to 100k last cycle and we're maybe planning to sell at that point, but never got the chance to. And those, those whales seem to have, you know, Stepped in and, you know, made their coins act active again. And that's what shows up in the data here. But why don't we flip through a few of these slides because we can kind of start to tell a story here. So, so what we did there, you know, we just kind of looked at the chart to see if there was anything visually that's like really making us think that there was a big change this cycle. What we're looking at here is we're actually quantifying the total amount of coins within that 3 to 10 year inactive supply cohort that actually became active in the year before the price peaked over each cycle. So we're doing a relative comparison in terms of the total number of coins within these inactive supply cohorts that actually became more active. And then we're normalizing that to the amount of the total bitcoin supply at the time of the price peak for each cycle. And so we can see that actually this is sort of interesting because the, the amount of inactive supply actually grew in the year leading up to the 2021 peak. So more coins were just aging into this, this cohort. And it tells you that maybe there wasn't a ton of selling or a ton of movement of these coins. And we can see that in, in this cycle, about 2 point, I think it's 2.9% or so of the, of the circulating supply actually in loot within this cohort. So that tells me, okay, that looks like, you know, maybe that that narrative is correct. And, and that's, this is the key thing to pay attention to with those stats is that's just tracking movement of points. It's not telling us for sure if somebody sent their coins to an exchange. Sure, it could just be somebody moving some bitcoin from one wallet to another and they didn't actually sell. But it's going to show up in that data. So I wanted to then look at, hey, can we confirm that with what we know to be actual transfers from long term holders to exchanges? This gives us a totally different view. It actually looks like there was less movement of coins that went to exchanges. This data is going to pick up everything that was a direct transfer to an exchange. It's not going to pick up an OTC sale, for example. And this just kind of gets into a lot of the nuance with this data. An example of an OTC sale that wouldn't show up there would be like galaxy process, like a $9 billion. Yeah, I remember that one. May in July. Right. So that would show up on the revived supply. Right. It's going to show up on this chart, but we're not going to see it on the transfer to exchanges because that was an OTC sale. So that's why we look at both of these. There's a lot of nuance here because I think a lot of people will see people putting charts up on Twitter or something and it just, it's easy to sort of look at that and say, oh yeah, that's, that's obviously what happened. But there's quite a bit of nuance to.

A (43:46)

This. I think maybe what you're saying is. So the question of did whales and long term holders kill the cycle. Cycle is the answer to your question. Yes, but not any more than usual. This is how cycles always end. So this was nothing special. This is always how they end. And of course long term holders are selling to shorter term.

B (44:06)

Holders. That's kind of how I think of it. I didn't find anything that totally jumped out to me. And the reason I say this is that to me it's really more about you lost the marginal buyer. You lost the marginal buyer and it wasn't an issue in July when you had someone dumping $9 billion of bitcoin. We were at 117k bitcoin. The market absorbed that pretty well back in July. But once we move through that, there just wasn't that marginal buyer to capture that. Yes, there were certainly large whales and long term holders that were selling. I think it was mostly in line with what we've seen in past cycles. And just like in past cycles, they tend to end when the marginal buyer just isn't there.

A (44:53)

Anymore. So for all the talk, this cycle has played out a lot like previous cycles, right? I mean, we didn't get some of the euphoria or we didn't feel like we did, but everything else has played out pretty, pretty.

C (45:08)

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A (46:57)

Information. Let's talk about what's next. And one of the other indicators that I know you look at besides the on chain data is macro indicators like Michael Howell's Global Liquidity Index. Can you talk about global liquidity and how that factors into what you think happens next for for crypto? So weight of probability is we're in a bear market. What do you think the global liquidity conditions will.

B (47:21)

Be? Yeah, and I recommend I know you interviewed Michael recently, so I recommend people check that out. We source from a lot of his work and I think this is really helpful to sort of map out not just what we look at in terms of the crypto native data, but then to kind of come to conclusions about where we think we are in these liquidity cycles. And when we were kind of getting a little bit concerned, you know, late September, early October, we were starting to see the signs that the global liquidity cycle might be sort of, you know, topping out. And you know, I always want to like understand why like I'm not just going to look at the chart and be like okay. It's topping out what's actually going on under the hood here. And to me, we're in a period of transition and a lot of this has to do with the Trump administration tariff policies and really what's happening in terms of like the, the, the fiscal side of what, of what we're seeing from the US Government. And I think it's like probably not a super well known thing that the fiscal deficit actually came down for FY25. Trump was only in office for, you know, about two thirds of that, that FY25 ended at the end of September. And so we're still running a big deficit, but on the margin it's actually coming down a little bit. Part of that's because tariff revenues are increasing. And then the other part is that the spending levels are just not growing at the same rate they were under Biden. And so when you add those two things up, that is liquidity negative to the markets. Just in terms of what we're seeing in the United States, I think there's this view that we have a new Fed president likely coming in. It sounds like Trump is close to making a decision on this person. Market expects this person to be very dovish, lower interest rates. And I think that is the setup. But I'm not convinced that that is going to actually be really positive for risk assets. And part of the reason for that is if you have less, less capital like going into the markets from the treasury in terms of just treasury spending and on the margin that's just not growing as much, if we see a Fed president come in and cut rates 100 basis points or so, that's going to be even less. That's, you know, that that potentially is going to increase and boost liquidity with bank lending. But you're actually lowering fiscal spend, right? Because where if we're paying interest on $38 trillion of debt, and so if you drop that by 1 1%, that's hundreds of billions of dollars less going out into the economy. And I don't think the market is really appreciating this. It's sort of just, oh, it's going to be, the dollar's going to drop, interest rates are going to drop. Good for risk assets. I'm not sure about that. And that's part of the reason that even with this sort of like more maybe dovish Fed president coming in, we're not convinced that this is going to be great for liquidity and great for.

A (50:31)

Markets. So you think the Gil, this global liquidity index, Michael House will Continue to taper down, at least for a while. We're at the end of one large cycle and there's going to be drawdown first before there's an injection re injection of global.

B (50:46)

Liquidity. That's basically my base case. And this is global. So it's factoring in all of the major central banks and you know, what China is doing and everything as well. But we really think the United States is kind of driving the bus. And you know, we tend to have these, you know, sort of periods of transition. We had one when, when Biden came into office during, also during the midterm year where we had to get, you know, we had to kill inflation. And so it was a little bit of a different transition where the Fed was, was hiking rates and you had, you know, we were ramping up fiscal spend and then we were hiking rates. This time we're going to be dropping rates and lowering the fiscal spend. But I think the outcome is going to be a bear market for each.

A (51:27)

Scenario. That's interesting and that's why investors should stay tuned to obviously your work, but also Michael Howell's work. Because I think if you look at the headlines and you're like, oh well, Trump is just getting a very dovish Fed chair next and we've already started the rate cuts and so we're just going to cut, cut, cut. Well, what if those cuts actually don't impact global liquidity in the positive way? What if, you know, global liquidity, the big picture story is actually it continues to taper down. Well, it doesn't do what people expect and that's why they need to dive a little bit deeper on some of these numbers. Okay, so the setup, we've looked at the on chain data, we've talked about global liquidity. So that is going down. So I guess what's next, it sounds like is some sort of prolonged, measured in months kind of bear market. Can we talk about how to play this? So I know your style is to look at the cyclomentals and like trade these, trade these things, trade kind of the four year, the six year, whatever it ends up being. Rather than buy and hold. Some people listening to this might just be like, Mike, this is still too complicated. You got lucky. Okay, good calls in September, October, but you kind of got lucky. I'd rather just buy, hold, dollar cost average my way through these cycles. That's how I've always done it. What do you think of buy and hold versus a trading these cycles type of.

B (52:52)

Strategy? I don't hate it. I Definitely don't hate it. I think if you're. It's definitely a personal decision for people and there's kind of a few schools of thought that I guess I have around this. For me, I prefer to try to buy, you know, the lows and have conviction and look at, you know, have be rooted in data to do all this and then, you know, try to try to get out of markets once we think like some of the sort of bull market metrics are being hit. The reason I like this is we can, I think you can get better returns. I like the idea of being able to sort of re underwrite the thesis, you know, every few years as we kind of go through, through cycles.

A (53:37)

Because different cycles have different winners too, right? Presumably bitcoin and ether, they win some set, but then there's going to be some breakouts down market.

B (53:46)

100%. And that's the other piece of it is we're still so early in crypto, it's hard to be just fully long term on anything besides maybe like bitcoin and a couple of the majors. And so we do think there's going to be new assets that come in and new projects that we will likely be interested in. So it gives us a chance to kind of step back books and profits. At the end of the day, what we're trying to do is increase the amount of bitcoin that we're holding through cycles, improve our returns and then be able to underwrite maybe other big bets as well. I get that this is complicated. This is something we're in these markets looking at data every day, doing this 24, 7. If you're just a professional and you're just looking to kind of build some wealth by holding some crypto assets, maybe it is better for you to just try to buy when you think you're in a bear market. And some of these more fair value metrics are being hit that we report on and maybe you don't sell, you sell maybe a very small amount and then you just try to fire more again in the bear market. So I think there's different ways to play it and it's kind of a personal.

A (54:58)

Decision. Okay. Just as I've watched you play it through the Defi report. And all Defi Report subscribers of course get access to your portfolio on kind of like a weekly basis or if there's some sort of catalyst type of event. Just, I mean you've been in your risk on mode. You were like, you're close to, you know, 15%, 20% cash and the rest fully deployed into crypto. After the events of October, you've kind of reversed that. And I think, you know, October, the morning of October 10th, you were like, you know, 60%, 50 to 60% cash, something like that. And the rest crypto. Now you're 80% cash and 20% crypto. And that's really how you play these cycles, right? You want to be primarily cash so that you can redeploy into cheap assets with strong fundamentals. And fortunately that's the position that you're in. And I guess listeners, their case will somewhat vary. But now for those with some spare cash looking to deploy across this cycle, let's talk about when maybe they should deploy. At what price point? So you wrote this post, there was a report earlier in the month of November which is like what, what would it take for Michael NATO to turn bullish? Like at what price point? What are you looking for? May, maybe we'll talk about bitcoin. You said we can track several key indicators to gauge where we are in the cycle and in bear markets we expect the bitcoin price to drop somewhere near the intersection of the realized price and the 200 week moving average and the cost to mine one bitcoin. He also said there were some additional indicators that you were going to look at like the 40% of long term holders in profit, price below the ETF average cost, which gets into some of the off chain metrics I guess, price below the sailor and the microstrategy average cost and the 12 month RSI approaching 40. And so that's when you are going to start to get bullish. I read a Chris Bernitsky post. I think he put this out on November 20th and he said there's so much pessimism and short term thinking on crypto assets you can start to get tilt towards long term optimism. That said, not yet. He said I shared my view, 109k that Bitcoin only starts to get interesting below 75k. So he's saying Bitcoin starts to get interesting below 75k and a revisit of the 200 week simple moving average is always possible which is at about 50, 56K currently. So below 75K. Chris is a buyer. What about your indicators? What price point are you kind of looking for and what metrics are going to tilt towards? Okay, Mike is back on, you know, nibbling on in the risk risk on.

B (57:44)

Mode. Yeah. So the 200 week moving average is definitely a really good one and I like that Chris, Chris mentioned that that's around 57k or so right now. And bitcoin actually drops below that in the last cycle. It was the first time it actually dropped below, just below it. I think that's going to probably, it's a rising, you know, it's, it's a moving indicator. It's rising over time. I think that's probably going to land somewhere around 65k or so over the next 6 to 9 months or so. The realized price is also actually sitting around 57k right now. And so I think that's also a rising number as new people come in and buy at these more elevated prices. So I'm thinking we're probably going to see an intersection somewhere around 65k or so. So I will probably be getting interested, similar to Chris, around the 75, you know, K level and then looking at all these metrics, looking at market structure, looking, looking at sort of the outlook for macro and everything moving forward. But these are the areas I would say that you know, we're targeting. I think I would be very happy to be able to buy Bitcoin at 65K. That's, that is, you know, that's like a 50 correction. So it's a, it's actually a, a lower correction than we've seen in the past. I think we went down 75% in the last cycle, closer to 80, 85% in prior cycles. So this would be a much shallower bear market for this.

A (59:14)

Cycle. Well, do you think that could be the case since we never got the heights of a super euphoria? Maybe during the bear market we don't get the depths of super despair and it's sort of a shallower high and also a shallower.

B (59:26)

Low. It makes sense to me that that would be the case. Exactly. You didn't get the euphoria and just because of what we've been talking about, the market structure, that you're actually going to be setting a higher base, I think and this should continue as we move forward and we could just continue to see even less elevated bull markets and maybe quite slightly shallower bear markets as bitcoin continues.

A (59:53)

To. But Mike, you do expect this to take some time to play out because for all of the reasons we mentioned already, it's, you know, sellers have to feel that point of kind of exhaustion and despair and just like you like check out completely and the tourists have to leave and then you have to start to start a floor of now the long term holders are coming back in and they're saying hey, you know, still here, crypto's still here, it's still growing and they have to start nibbling at the edges. And then as the cycle, the next cycle progresses, you have to establish a new group of buyers. Maybe this will be sovereign wealth funds in the future, maybe this will be central banks. Who knows what the next new crop of buyers might be. But that doesn't happen overnight. We don't just flash crash down to like below 75k bitcoin and then, oh, we hit the numbers. Like this is kind of like a grueling month by month where markets go apathetic and mainstream, stops talking about crypto and bitcoin altogether. And they just say, oh, there's another bubble. Right. That's how you expect this to play.

B (60:54)

Out. That's the base case, unfortunately, is that, yeah, like, I think, I think there's still, probably still some people in the market that, that are looking at rate cuts and still thinking, you know, that that's going to, that's going to be, you know, big for, for, for risk assets. Maybe it is, it's possible it is. But I think where that depression and sort of the later stages kick in potentially is if you start to see the rate cuts and it's not, you know, we end. We were going to be ending qt, I think, you know, basically very, very soon here. I think this must be beginning of December. So that's ending now. I think when that was announced about a month ago, most people thought that was going to be bullish for risk assets. So let's see how that starts to play out. Let's see how the market starts to react to maybe, you know, an announcement on who the next Fed chair is going to be. And I think that's where depression potentially starts to set in, where like these views that people maybe had that were these catalysts would be bullish. If they're not bullish, then that, that's where you kind of get the capitulation. And, you know, we're already starting to see, it's fascinating to see how the psychology shifts where I'm seeing a lot of content now about more of the, you know, I don't know if I'm going to call it spot, but I think it's, I think it's actually fair criticism. But like, you know, quantum computing is going to break bitcoin. These are the types of stories that you see in bear.

A (62:16)

Markets. So these narrative following Price as well, right. All the bearish news, everyone's like, oh, it's because of quantum. That's why price is down.

B (62:22)

Obviously. Right, right. So, yeah, these are the things I'm looking at. And I do think, you know, historically, you know, we, this cycle did play out, you know, so far has played out similar to last cycle. So I would, you know, my, my base case is that the bear market probably plays out similar to, to past bear markets as well. I saw an interesting stat actually on X the other day on midterm years, and I was not aware of this, but since 1926, the average drawdown in a midterm year is.

A (62:53)

18.2%. For equities as.

B (62:56)

Well. Yeah, for equities for the S and P S and P500. So for whatever reason, midterm years tend to be, tend to be bearish. I think the market still thinks that Trump is just going to somehow will the market up, which is next.

A (63:08)

Year. For those that don't follow U.S. politics, next year is a midterm year.

B (63:11)

2026. And so next year is a midterm year Base case is that probably a bear market for.

A (63:18)

Crypto. Okay. All right, let's talk about if people want to play this the way DDR is playing it, if they want to. Because I've been looking at your work, reading the reports on a weekly basis. We've been doing these episodes. We will continue to do these episodes on Bankless on a monthly basis to update you with everything that's going on in Mike's head. We're actually considering maybe doing a weekly episode here too and maybe publishing that elsewhere. So Bankless listeners are interested in that, let us know because we'll do more of this content because this is the most energized I think Mike actually is, and he is looking both at this cycle data set. He's also you're compiling a watch list, I believe, of crypto assets beyond the majors. Right now that 20% you hold in crypto assets is kind of the majors. Right. It's like bitcoin and a little bit of ether as well. But during these bear cycles, you like to go down market and find assets with strong fundamentals. As you're kind of like resetting everything and you're saying, okay, like what's going to do? Well, what looks strong from an on chain perspective. So you are compiling a watch list on the defi report that is available for subscribers of assets that you're essentially putting in this bucket. I don't know if there's going to be 10 to 20 to 30 or so of these that you have not yet taken a position in, but you are watching and they're of note. So I think you're going to be publishing that for Defi report subscribers, but just in general, how are you, how are you playing this moving forward in terms of the assets that you're going to allocate to and how are you keeping your subscribers.

B (64:57)

Informed? Yeah, and this is why I like the bear market. So the watch list is essentially a curated list of projects that in some of these we actually were invested in during this past last cycle. These are projects that maybe they came out this cycle, maybe we've had an eye on them for a while and we're tracking. And when we get into the bear market, we get a lot of signal as to which ones are going to be the ones we think are going to emerge on when we get into more bullish conditions. And so that's the watch list that goes out to all of our free subscribers. It's a report that goes out every Friday. Based on fundamentals, we typically share a data dashboard, a dune dashboard that goes with that. And what I'm looking for, I guess broadly within the portfolio is a lot of these sort of fair value metrics that we track for Bitcoin is we want to have clarity on when we were going to buy Bitcoin, when those metrics hit, and then we want to know, we want to know which of the products on our watch list are the ones we feel most strongly about so that we're ready not only to buy bitcoin, but when we think those other assets are at fair value or below fair value, that we're ready to add those to the.

A (66:06)

Portfolio. So you're looking for entry prices for those.

B (66:09)

Assets? Yeah, yeah, exactly. That's the idea, is to put them on the list. Let's track fundamentals, let's have a view. And then the ones that we think we feel most strongly about get, you know, basically make it into an even smaller list. And those are the ones that we'll be looking to add to the.

A (66:26)

Portfolio. This is effectively what you did during the bear cycle of 2022, I believe, and into 2023. And I think you, you picked up some big winners. Right. Was one of those that you noticed in kind of the depths. It's like, hey, there's on chain activity here, there's stuff going on here. And you bought that on the lows. So are you looking to kind of repeat that, that level of.

B (66:44)

Success? That's the idea, yes. And you know, that was an interesting one because at the time Solana was a new project, it was a little Bit harder to have, like really strong, you know, fundamentals. But it was more of a bet on the developer ecosystem at the time. And so yeah, we, we felt strongly that Solana was just like way, way, way oversold. And that was a big winner coming out of this. We were allocating to assets like Robinhood and Coin as well as crypto equities, making it into the portfolio and yeah, that's the idea. Let's find what we think is the strongest projects that are just wildly oversold, kind of at the bottom of the bear.

A (67:19)

Market. Looking for gems here, Mike. This is going to be a lot of fun. I think it's got me more energized. Even though we are in a bear market, I don't like to look at prices but we get to do more research and of course this asset class we are both bullish will be do very well from a long term perspective. So maybe we will leave it at that. I will be following your work at the Defi report. We'll include a link in the show notes. There's an option to be a free subscriber, you can access to the free reports or a paid subscriber where you get access to two weekly reports, all of Mike's portfolio holdings when he does what, where he's allocated and also access to some of those watch lists assets. So we'll include a link in the show notes for that. Gotta leave you here of course. You know none of this has been financial advice. 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.

B (68:14)

Lot, Sam.