← Coin Stories with Natalie Brunell
Coin Stories with Natalie Brunell
Lyn Alden: Bitcoin's Next Move, Strategy's STRC Volatility & the Protocol Debate
00:59:57
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- [00:00]
A
I don't think there's anything coming to save Bitcoin. The kind of the bear move we've seen in bitcoin aligned with that prior capital drain I mentioned for AI stocks. It became, at least temporarily, the fastest source in the race. Bitcoin's already kind of near the bottom of its historical valuation range. The asset just has to survive on its own merits.
- [00:16]
B
Let's talk a little bit about strategy.
- [00:18]
A
Stretch was doing very well. It did become the biggest preferred ever done. People did apparently build a lot of leverage on top of strc. So they ran into a pretty big volatility event. There is tail risk, it's got a big reserve backing it, but it's not inherently guaranteed. If bitcoin crazy price action, in addition, it can, it can depeg.
- [00:41]
B
Lynn, it's so great to see you. Thanks so much for joining me on the show again.
- [00:45]
A
Always happy to hop on.
- [00:47]
B
I feel like there's so much to talk about. I'm not sure where to start. So why don't we maybe go with the bigger picture first? You've had some great analysis in your recent reports, so why don't you summarize what you feel is happening with the market right now. Certain areas outperforming, hyperscalers, AI, gold and Bitcoin underperforming. But how do you see it all?
- [01:10]
A
Yeah, right. So I think, you know, it surprises. Nobody listened to this. And of course AI is the biggest trade on the market. Names associated with AI. And of course there's, there's winners and losers from that dynamic. And these have kind of come in phases. I mean, obviously one of the early winners was Nvidia. You know, selling the GPUs. That powers a lot of this. Once they already ran a lot. And, and especially once we shifted from chatbot style AI more towards agentic AI memory became very much the bottleneck. So we've seen a huge surge in the memory stocks and really since autumn of last year. So autumn of 2025, that's when the hyperscalers, so we used to refer to them, some of them as the Mag 7. The big Internet companies. We all know, the Microsofts, the Metas, the, you know, the alphabets, Amazon, these really big companies, they used to be extremely free cash flow positive. You know, they, they would operate things like shows, you know, Google search or, you know, network effects, social media, you know, really sticky operating system software that they have very high roi. You know, they, they spend a lot in absolute terms, but they only had to spend a small percentage of their profit. So they could, they could channel all those extra free cash flows into, into buybacks or dividends and things like that. But ever since autumn or kind of the second half of last year, they've made very aggressive catbacks to build out data centers to buy these chips that are increasingly expensive because there's supply demand mismatches. And so we've seen virtually unprecedented fall off in their free cash flows. Some of them have gone free cash flow negative, some of them have gone out to debt markets trying to raise as much capital as possible rather than just purely funding it from, from cash. They've generally reduced or halted their buyback. Some of them have increased their share counts and the market has not been, they've been a little bit concerned around that because free cash flows dried up. They have to hope that years from now that these investments pay off with the returns that those hyperscalers hope they will. The other side of that, of course, the chip stocks, especially the later round of RAM stocks, and then companies that make the machines that let the RAM stocks make the chips, like there's, there's kind of a whole like cascade of dominoes. Those have done amazing in recent, you know, months. Other losers in this kind of market dynamic are of course, a variety of software companies that are perceived, it's not clear if it's right or wrong yet, but they're perceived to be, you know, likely going to be very disrupted by AI. So far it's not really shown up in their fundamentals too much, but it's shown up in their share price, kind of discounting the future. And then we've also seen pretty poor performance from both gold and bitcoin. Bitcoin kind of peaked roughly when the free cash flows just drained and everything kind of fled into these high performing memory stocks. And so some of them, there's obviously capital rotating out for cause and effect. And there's other ones where the marginal source of capital that might have been chasing that really big gold rally that there was or might have considered bitcoin the fastest horse in the race. As Paul Tudor Jones once said, they see memory stocks going up, doubling in months, and then going up in some cases 10x in a pretty short period of time. So a lot of capital has kind of gone into those markets. And I think a lot of that move is rational. I think the rise, of course of chip stocks is rational to a point. Like many big moves, I mean, these things tend to get ahead of themselves to some extent. So you can always overshoot and you almost certainly will you know, you almost never invest exactly the amount and value a new thing perfectly. Usually you, you overshoot and then undershoot in the other direction. So yeah, there has been kind of a big capital drain and a rotation toward especially the second wave of kind of semiconductor rallies.
- [05:00]
B
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- [06:25]
A
Yeah, so I think, I mean I think there are parts that are bublicious. You know, there's parts that I think are too expensive and therefore I'm avoiding the purchase of those securities. And I think that, you know, like any sort of mini bubble like you, I mean you can, you could pull back some of these massive gains if something goes up 10x and then loses a third or half of its value, let's say it loses half of its value, it's still up 5x from the prior move. So it's like there were maybe bubble periods at the end of that move, which you only know in hindsight. And so I think that there are those many ones. I think that where I kind of disagree with the fully bear view is the idea that AI is not really going to matter much and that this is, you know, 80 or 90% just, just malinvestment or overspending and that. But when this is all said and done, it's going to virtually give up all of its gains or most of its gains. That's the part that I gently fade. I do think that AI is powerful enough that it's going to be kind of a multi trillion dollar market for the foreseeable future. And I do think over time it'll gradually reshape especially what white collar work looks like. In many cases it already is. I think it'll continue to trickle out into more and more professions, especially as it gets better. I mean models now are way better than they were six months ago, which are better than they were six 12 months before that. And so I think it's real. But like any real thing, it can get overdone. I mean the dot com bubble is kind of the classic example because obviously a lot of that was built, was useful. I mean the Internet did change like everything. The, the companies went bankrupt laying all that fiber optic cable, you know, but it was still very useful assets. It just, you know, they kind of, they kind of assume too much upfront demand. They priced for like clicks and not in like top line. A lot of those didn't really have strong profits. One of the big differences here is that at least parts of the market do have profits, mainly the chip bakers. So if you kind of like segment where the economic mode is here, the AI models themselves, I would be concerned about investing in those because they've demonstrated that there's pretty low switching costs. If you're the best model and then the second best kind of leapfrogs you and becomes the best customers will start switching over to that better model. And unlike an operating system or a social network, they don't really have this entrenched network effect or high switching costs. So I would even open source ones is generally only some months behind in terms of how effective they are. And so I think that's a part of the market that I think is somewhat flimsy. The bear case would also point out that a lot of things can grow quickly if they're underpriced. That's kind of how startups work. Like Uber for example, would lose money on every ride. But the point was to reach a critical mass that they could then later raise the prices, which they were eventually kind of forced to do and had to. And the AI models themselves are currently operating like that. They're Basically selling you AI services for less than it costs them to provide them. So you know, they lose money despite being obviously some of the most used like applications in the world now. And their hope, you know, I don't want to paraphrase exactly what all their strategies are but their hope is that as these, you know, the costs keep coming down on kind of a per, as Moore's law keeps getting, you know, stronger and as you know these, these models improve and get more efficient over time. They hope that you know, that all the kind of balance out once they hit scale and once, you know this is more entrenched and they have to keep, they don't have to keep spending as much as they have been. But that's kind of the weaker part of the market. The hyperscalers are kind of the next part which is again they're making really big investments. They are seeing revenue from it for the most part. They're not yet seeing kind of like this, the profits from it just because the investment upfront is so big. That's the part I think that there's a genuine question there. And so for me I generally like to see discounts on valuation before I would kind of take a risk. I mean there's a certain price I was willing to pay for Alphabet once it ran up considerably. I was less enthused about that investment. For example and the chip stocks, I think that's the part that at least fundamentally is kind of a no brainer. They are making just insane amounts of money. I think Samsung just posted that they made more money like they're making more money this year or expected to than they did in like a quarter, yeah like a quarter century or more of like their prior semiconductor business. And I, you know, I don't think that like numbers like that will necessarily last but they are the real bottlenecks and they hard, they are hard to displace. So while there are, I mean there's always pockets of concern, I mean I, you know, I, I'm a value investor at heart. So when I see something go up 5x or 10x I'm inevitably concerned that it's going to pull back some of it then I think some of these will. But I think that the move as a whole is not like an entirely a bubble. There's bubble issues, aspects and what is otherwise, I think a pretty big step wise change in technology.
- [11:32]
B
Those are such great points. I always am amazed by the stories where they talk about how much companies are spending on some of these models. And I just think about Today, just in our own lives, how many subscriptions we're paying for. Like now you add these because most of us are probably using more than just to kind of experiment and see the differences. Like I use Claude and chatgpt and Grok, but once you start adding up these subscriptions, I mean, it's so much money. When are we ever going to see deflation in some of these technologies?
- [12:01]
A
Right, yeah, that's why, I mean, some corporations are already getting concerned about that because they have their token costs for their employees just kind of out of control. And some of them incented like there are some kind of reported bad incentives where companies want to encourage more AI use. You know, it's kind of like encouraging someone to delegate so they encourage more AI use. But then a lot of employees just kind of use AI for the sake of using AI, which is expensive without actually having gotten productivity from it. So I think obviously the incentives have to align. You know, I think that right now for like a business, if you have a couple different subscriptions, it's still a fairly low cost compared to the value you get out of it. Especially because as the subscriber you're getting that discount. You know, the company's losing money to basically give you something that's more valuable than what you're paying at the moment. I mean, that can't last forever, but it's kind of the current period. So this is kind of the time to experiment. If you're a free cash flow business, you know, generally if you're a consumer, you have a little bit less, usually a little bit less kind of financial flexibility to have multiple models. So yeah, there are real costs with these. And unlike a pure software business, this is a significant hardware component, significant energy, significant water, significant, you know, obviously the chips themselves, you know, even just the electrical equipment and stuff like that. So that there are, you know, real tangible costs here. Unlike the 2000 and tens, which was largely social media is not super computationally intensive. Just taking things that were popular on the Internet and then transporting them over to mobile. The whole kind of the build out of everyone having a smartphone and just that changing things. While of course it uses a lot of computation compared to AI, it wasn't very computational heavy. So those were for the most part software businesses and now we're in a more hardware era and that that does have costs.
- [13:48]
B
It's interesting to see that the bitcoin miners that made this pivot to AI data centers, cloud computing, they really benefited from a lot of this boom, whereas others are coming to it a little bit later and their stocks have suffered.
- [14:01]
A
Well, generally if you're early and right, you get rewarded. So that makes sense. It was, there was a time where it was a little easier if you were first to try to secure energy contracts and, and chip contracts and stuff. Obviously you got an advantage generally the ones that came in later with more bottlenecks and more prices. In general, bitcoin mining and AI have very different economics. And so bitcoin miners, there's somewhat less upfront capex, but then it's more like the sheer amount of electricity they use. So they need very, very low electricity costs. It's hyper competitive. But they have the advantages of they don't really have. They don't need high bandwidth. They can go in the middle of nowhere with a starlink and monetize what they're doing. And they can have off time because the network keeps functioning even if miners are coming on and going off. It's kind of the whole point of a decentralized network. And so bitcoin miners are better at getting energy on the periphery, kind of stranded energy, either in terms of time or space. So if you, if you have an area with a ton of renewable, if you have a ton of solar and wind electricity like parts of Texas and things like that, and you are generating a lot of electricity one part of the day and then less so another part of the day, they can turn on and take a lot of that curtailed energy for nearly free and then shut off when that energy has gone away. So they can do that in a way that a data center can't do because users care about uptime for these high performance compute data centers. High performance compute data centers also care about latency. They generally want all us being equal. They want to be somewhat close to a population center and they need very high or somewhat high bandwidth. So bitcoin miners that are positioned with energy resources that are more persistent, it does make sense economically to shift more toward AI. And I think that kind of pushes bitcoin miners toward the scrappier parts of the market, the ones going out to get the stranded natural gas, the ones that are able to shut off at certain parts of the day with no problem. In exchange for having the lowest electricity rates, you're kind of the maximum flexibility in exchange for the lowest rates. And if anything, that should be decentralizing for the network. I'd rather have a bunch of scrappier companies around the world trying to find all the stranded energy either in time or space, than these kind of massive, huge Concentrated data centers, which is generally more suitable for AI.
- [16:29]
B
Where are we at in terms of the cost to actually mine bitcoin versus the spot price I don't have in
- [16:38]
A
front of at the moment. I mean, right now, pure bitcoin miners, it's rough out there. And you know that, that that number will vary somewhat because it depends on, on the individual miners electricity costs, generally speaking. The ones that invested with pretty high energy costs, hoping that they'd have just persistent, you know, six figure bitcoin, they're the ones that are kind of in the most trouble. Whereas the ones that have really low energy costs because they're really good at getting that stranded energy, they're the ones that are generally holding up. But it's a rough time out there for miners.
- [17:10]
B
So when do you think capital will rotate back into bitcoin?
- [17:15]
A
So I think partially the current chip move has to slow down because there's something just soaring upward that's going to draw a lot of attention. So I think that, and there's already there was a, like a spook in the market kind of, you know, like last week when Meta came out and said they have excess compute. We did see a kind of a sharp sell off in a number of chip stocks and kind of a shift in momentum that we haven't seen since April. So that, that might be, you know, a temporary reversal. I think, you know, bitcoin's already in kind of near the bottom of its historical valuation range based on a number of different metrics. So I think that we're closer to the bottom. I try not to call absolute bottoms because just sharp price moves and unexpected things can always happen. But I think generally speaking, in order for bitcoin to start getting a bid in a more structural basis, one which I think is we've mostly already done, which is the fast money generally has to be out. So the fast money coins people have already sold. They're on the AI. The coins gradually rotate to entities that are rarely going to sell. And then that's making the marginal supply demand balance is just more kind of locked in. And so it only takes a small amount of capital to want to come back in. It could be entities saying, hey, from technical analysis, it looks like bitcoin might be bottoming. It could be fundamental contrarian traders that say, hey, I used to be in bitcoin, I jumped to AI, but now all these things are up 5x or 10x and Bitcoin's over there down in a bear market, so maybe I'll rotate capital back in and then once it starts climbing you get momentum traders involved. So I wouldn't try to predict the exact timing, but I think, you know, I think there's not a lot of obstacles in its way other than just probably AI has to or chips have to slow down a little bit to let other parts of the market be, become a little bit more interesting to those that have otherwise just been going straight up.
- [19:16]
B
Do you forecast that bitcoin could reach a new all time high this year? Do you think it'll take longer? Because you know that chart that everyone shows the appreciation of bitcoin, it's like green, green, green, red, green, green, green, red. And then last year we had a red, but it was like very small compared to the previous red cycles it was like minus 5% or something. I almost feel like we're going to get two reds in a row for the first time and they're both going to be not as bad as the previous ones. But we need maybe a little bit more time to regain the momentum that we had last year.
- [19:47]
A
I think all patterns eventually break. No pattern lasts forever because if a pattern is super persistent then people will start trading on it and it kind of becomes, it starts defeating itself. My guess is that we're unlikely to reach new all time highs this year. I wouldn't say it can't happen. I mean bitcoin has a ton of volatility and that's both the upside and the downside. So a bunch of things could come together. It only takes a little bit more than a doubling for bitcoin to have new all time highs from current levels. But that wouldn't be my base case. I think that a few, a couple years out I expect to see new fresh six figures and then hopefully climbing above the prior high this year. I think the base case that I would hope to see is just a lack of new bottoms in place and that kind of like a, just a better kind of technical picture pointing kind of flat to up rather than that the kind of flat to down that it's been in for a period of time here.
- [20:51]
B
Let's talk a little bit about strategy. You wrote in some of your recent reports about Stretch. You asked probably the most poignant question on the earnings call where you were an analyst. Just about some of the leverage that ended up being built on top of Stretch. And what happens when there's pressure, there's cell pressure in the market. And we have not seen Stretch fall as much as it did this last month. Basically just below $75. When the target range is obviously 100. Share your thoughts on what exactly happened, what the company maybe has done right. Maybe some areas where you feel like needs improvement. I know you mentioned just specifically surrounding guidance in your recent reports, but what's your big picture when it comes to strategy and Stretch?
- [21:41]
A
Sure. So I think, I mean I've been following that company since August 2020 when they announced their bitcoin strategy. And when I've been on 2 of their earnings calls, one was back in, I think it was autumn of 2025. And my question there, I generally know that people that go on the calls are on average are going to be pretty bullish. And so the way I try to be helpful is often to ask a critical question for a company that otherwise want to do well. And so back then it was near all time highs. And so my question is mainly about bear market stress testing. Kind of like how banks like the Fed puts banks through a stress test. It kind of models an adverse scenario and sees how the banks are expected to hold up to try to avoid what happened during the global financial crisis, for example. And so my view was when times are good at the company, what kind of downside snare are they making sure that their capital structure is able to withstand? So that was kind of my first kind of somewhat bearish question. Then when I came on it was like six months later, basically I skipped one earnings and I was on the next. The one after that, that was in February. And at that point Stretch was doing very well in terms of market size. I work in the venture space in bitcoin and I had seen just kind of coming across my desk some companies looking to build on top of Stretch say, you know, they want to use Stretch as an asset, they can build other products on which you know, it's just like well what if, what if Stretch deep eggs. I mean nothing, nothing holds it fixed to, you know, its target range. It can always move around. So combination of knowing that obviously tradfi leverage can build on it, something like a carry trade, if, if someone sees a low double digit yield and they can borrow for less than that, they can lever up and buy that which obviously adds risk to the trade, but then also potentially creates forced selling should that asset start to depeg combined with the potential of an early stage of other products built on top of it. So my questions was around kind of reestablishing their guidance for their USD reserve and seeing if they're monitoring this type of leverage, building on top of it. And there are risks if they, you know, If a company kind of makes a product sound like it doesn't have any downside risk, and if it's much higher yielding than things like Treasuries or, you know, margin rates that people can get, it does kind of encourage leverage on top of it. So that was just kind of the concerns I was monitoring for what is otherwise a pretty interesting structure.
- [24:17]
B
Like they downplayed the risk.
- [24:21]
A
There were, I mean, there were some statements like we take away the, the downside risk or I, I don't want to quote them, I don't want to incorrectly quote them. I, I do think that on average you want to be conservative with how you market a product like this, but, you know, I would leave others to kind of point out that aspect, but I do think they have to be careful around how they market the product. And you know, I, I would push back a little bit on social media because I would see, you know, not strategy, but other people would say, you know, why wouldn't you take out as much? Why wouldn't you borrow a ton of money and buy this? And like, well, because there, there is tail risk. I mean, the dividend is not, not super. You know, it's, it's, it's, it's got a big reserve backing it, but it's not inherently guaranteed. If Bitcoin has crazy price action, in addition, it can, it can depeg. And so especially if you have callable debt, you have to be very careful. So, you know, it's, you know, it's a product that, when it was announced, it was announced on the first earnings call that I was on. And I came out and said, I think this is gonna, I think this is gonna be successful in the market. And it did become the biggest preferred ever, Ever done. It's the, it's the biggest preferred security of the market. But then, you know, as after it's out a while, it's like, okay, well let's make sure that this is stable and that it's, you know, kind of backed up. So for the earnings call that came after that, I wasn't on that one, but when they were gathering questions, I did post and say the reserve was 24 to 36 months. That was the prior guidance. And at the time it was 18 months, so it had fallen somewhat below the prior guidance. My view was, is there updated guidance for what the reserve is going to be going forward? And then in the recent weeks, they got as low as six months of reserves. I, I say that, you know, that it's always easy to kind of Be an armchair analyst on these things. But from an investor perspective you generally do want to see company give a guidance and then kind of generally stick to what they, you know, guided that they're going to do with. Generally from an investor perspective you don't want to see surprises. I mean, it's nice to see upside surprises, but you generally don't want to see downside surprises. And so yeah, they got very low on reserves. Obviously this, we had a bitcoin bear market and people did apparently build a lot of leverage on top of strc. So they ran into a pretty big volatility event. I think the actions since then have been quite reasonable. So they've, they've recommitted to building their reserve. They put kind of board level lines in the sand for how low that reserve can get without board approval. I think it's 12 months and they're currently back up to 17 months of actual reserves. But that, that kind of board level I think is 12 months off the top of my head. They've, you know, they've put in facilities that allow for the repurchase of their securities if they perceive them to be trading at, you know, like a level that is accretive to the company to buy, which I think makes sense. So I think a combination of just maintaining substantial reserves, kind of keeping within guidance and you know, being willing to take advantage of arbitrage opportunities if they come along is about the best the company can do. And everything after that really comes down to bitcoin price action. Obviously, if you're a levered entity on Bitcoin or gold or whatever the asset might be, if that asset falls, generally speaking, a levered entity is going to be in for a rougher time. And if that asset goes up considerably, that asset's often going to outperform. So I think that they've taken actions that I think are very reasonable with the criticism that, you know, it would have been nice to just not have the reserve fall so far out of the prior guidance. But once the market sent them that signal, I think that they did act, you know, very quickly to it.
- [28:14]
B
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- [30:12]
A
I mean, so I think there's a spectrum here. I mean I, I would first say that I think the best bitcoin is self custodial bitcoin. Just like the, the best gold is, is self custodial gold, not like a gold ETF or, or anything like that. So it's, you know, when you have relatively few assets that are liquid and you can self custody, often the best way to actually use it for that purpose basically do what you can't do with stocks and things like that. And so I think that's the first thing. The second thing where I do push back against some of people that are super critical in any corporation owning it is that there's no world where bitcoin becomes a multi trillion dollar liquid asset that is somehow magically only owned by retail investors. Any sort of large pool of capital. If they get bullish on the asset at a CEO or a board level, it makes sense for them to want to have some of that asset as well and benefit their shareholders or whatever they might be doing, whether it's a corporation, an insurance company, a sovereign wealth fund, central bank, whatever the case may be. If they get bowled up on bitcoin and it's liquid and large enough that an entity of their size can actually take it seriously, which they couldn't do in 2013, it's just too small and too illiquid for a large pool to capital to get involved. But now that bitcoin's pretty big, it makes sense for some of them to want to get involved. And I think that's rational. And then I think from there it comes down to specifics. If someone says you shouldn't own bitcoin, you should only own bitcoin proxies, I would generally push back on that. Unless someone is saying, hey, if you only have a retirement account, at least if you're bullish on bitcoin, at least there's products for you now. Right. But I would generally push back on people trying to get people to not hold actual bitcoin and get into these securities. But that's not what a lot of them are doing. I mean, you know, you can pull out individual remarks. I'm not going to say what every, every person out there has said, but there, yeah, there are kind of walled garden pools of capital, retirement accounts, things like that. There are pools of capital that have mandates. You know, they, they, they have to own bonds or they have to own certain types of securities and these make them. If you happen to be a bitcoiner in a seat that has to run that type of capital, then you have bitcoin securities, you can potentially do bitcoin miners, you can do bitcoin. Treasury companies, there are these avenues available. So I think that there's a spectrum. If someone's bullish on levered bitcoin, if they're bullish on bitcoin and they want leverage attached to it that's not callable, the treasury companies are able to provide that. They can generally structure their leverage different than you would at a margin on an exchange or time sensitive option of some sort like a derivative. So I think there's a market for it. Yeah, I'd only get concerned really when it's being marketed that you shouldn't buy bitcoin, you should only buy the securities or if any way those securities are kind of like marketed incorrectly. There are also times where a company might get Too leveraged and I'd be concerned. But I think that whenever something's good and doing bad and price action, there's going to be more pushback. And whenever something is doing really well in price action, there's kind of hero worship. So I think that both in the upside and downside, these things tend to get amplified. Whereas the truth of it is in this case a company bought, you know, a little over 4% of Bitcoin and they levered it and it, you know, it's, it's going to depend on how well they execute.
- [33:42]
B
Who do you think a product like Stretch is for? Because it kind of surprised me when Fong came on the show a couple months ago and said 80% was retail. And obviously, I mean this type of volatility might have been unexpected for some of the holders or even some of the companies that put it on the balance sheet. So who do you think a product like Stretch is for? Because I'm sure it's not. I mean we obviously already see seda. There are probably going to be other digital currency credit products like it.
- [34:08]
A
I would assume it's for investors that don't want 100% of their capital in Bitcoin, like say they're Bitcoin enthusiasts but for one reason or another that either a segment of their capital, they want to be in Bitcoin or they want more price stability but they still want to be tangentially attached to Bitcoin. And so many times you'll have, you know, you can buy Treasuries, obviously you can get, you can get you know, 4 plus percent from them or money market and get you know, 3 to 4%, whatever the current yield is on those with very minimal risk. But if someone says, well there's this company that has 24 months of USD reserves, they've got more Bitcoin than they have liabilities. And if someone's bullish on bitcoin or the multi year view, they can say well if this is well managed and I can get way, way higher yield from it, then it might be worth that risk. You know, there's an added tail risk in exchange for higher average yields should that tail risk not come into play, which would be basically a major bitcoin crash on a persistent basis or things like today if you lever it. There's also from a trading perspective, some people do carry trades on it where again they borrow it at a low rate, invest in it. I wouldn't recommend that. I would say it's kind of like Bitcoin adjacent investors that want some of their capital in that kind of yielding lower volatility product, which is then it comes down to execution and how well it's managed in terms of the defenses to try to keep it kind of at the lower volatility scale that the company aims it to be at.
- [35:46]
B
It's interesting when I hear the criticism because sometimes it's so obvious that a lot of this can only work if bitcoin works. But if you're betting against bitcoin as a bitcoiner, like what are you actually doing? Right? Because I mean obviously a levered play on bitcoin will only work if bitcoin continues to go up. Now there are going to be drawdowns, there are going to be periods where we're sort of chopping sideways. And you predicted a lot of that for I think this past year. But ultimately, if bitcoin is going to do what we think it's going to do, a lot of these companies are going to do well, right?
- [36:23]
A
Yeah, as long as they manage their liabilities. So there's a path dependence here. You can lever something and still blow up when it goes up if you get shaken out at the bottom too hard. So if a company is somewhat countercyclical and it's thinking it is able to get leverage, benefit from the upside, manage the downside risk, and if the asset goes up, then yeah, they and their shareholders should do well. The other caveat there is not buying at very, very high M naps. Some of these are trading at exceptionally high M navs. So buying on the low to mid side of that where possible is the other option. I think one of the disappointing things this past cycle is that there really wasn't a lot of new retail demand for kind of bitcoin. The asset when you look at just on chain addresses that hold a small but non trivial amount of bitcoin, so not like dust and just kind of one time use addresses, but basically chunks of bitcoin getting off exchanges and kind of sitting in what is presumably cold storage. Not as high as I'd like to see. And I think some of the critics would say, well basically this has been the corporate cycle, so a lot of the new capital that came in was corporate. And that's where I think the bulls and the bears would differ because some people would say well if we didn't have the corporate adoption, we wouldn't had almost anyone coming into bitcoin this cycle. Whereas the other ones would say well if we didn't have the corporate adoption, maybe more of those would have come into actual Bitcoin. And I think counterfactuals are always hard to say. But I do think that as Bitcoin gets bigger and more liquid, to the extent that that keeps happening, it's going to appeal to more types of pools of capital. So in the early stage it could only really be used by individuals, but once it got large enough it can be used by entities of various types. And there was this kind of underserved market for a long time. Bitcoin ETFs weren't allowed. GBTC had its own, it was traded over the counter, it fluctuated in terms of premium or discount to the underlying Bitcoin. And so there's a ton of capital held, managed by RIAs or in retirement accounts that just for years couldn't access Bitcoin. So it makes sense that this cycle is how they start coming in. They get in with either some of the securities that are out there or some of the ETFs that are out there. So that's kind of like a pent up demand I think entering it. I wouldn't want to see that as every cycle where it's always these Bitcoin proxies that are gaining a lot of it. But yeah, I think that as a liquid asset it's going to be to the extent that it's successful, it's going to be held by all different types of entities. So I think that kind of the best we as Bitcoin enthusiasts can do, and this is why I work in venture for the space, is to keep trying to fund solutions that we believe are going to be successful in making people able to use Bitcoin directly. Payment companies, wallet companies, all these brokerages that let people buy Bitcoin and take self custody of it. And so I think it's important, or privacy solutions for example, I think all of those are extremely important. But then alongside that there is going to be again, assuming it continues to be successful, there is going to be corporate adoption, some degree of sovereign adoption and just other types of balance sheets that want to either arbitrage it or just hold it for their stakeholders.
- [40:00]
B
Has Bitcoin's price diverged from M2, supply, growing and liquidity? Because you did that long report with Sam on the correlation between liquidity and Bitcoin. But it seems like there's been a little bit of a divergence.
- [40:13]
A
Yeah, when we did that study we found that 17, well 83% of the time Bitcoin goes in the direction of global M2 and 17% of the time it Diverges. This has certainly been a time where it has diverged. I mean, global M2 overall it's been pretty decent. It's not been soaring, but it's been to the upside. And this has been, you know, pretty rough period for bitcoin, obviously. I think some of the reasons for that are one, I do think that some of the price action we would have seen in bitcoin instead showed up in the M Navs of some of these companies. You know, when strategy was trading at 3 times m NAV, metaplanet was trading at like 8 times m NAV. You know, that all else being equal, if those are trading at lower MVAVs and just more of that enthusiasm poured into bitcoin itself, we probably would have seen a somewhat higher high this cycle. But I think it's not, I think an accident that the kind of the bear move we've seen in bitcoin starting in autumn of 2025 aligned with that prior capital drain I mentioned for AI stocks. So as soon as the hyperscalers free cash flow started to collapse and everything kind of shoved into those memory stocks and the other kind of like chip stocks out there, I do think that trade was so powerful that it, it sucked liquidity out of multiple places, probably including bitcoin, because a lot of investors were just kind of looking around and saying, well, this is, you know, it's a decent asset, it's not soaring. But these other things are just, just going straight up. So I think that they, you know, they became at least temporarily the fastest source in the race. So that was kind of the new proxy for, for just things you want to own. I think another thing kind of weighing on Bitcoin is the broader crypto space, which I've been structurally bearish on. This is the first cycle where they didn't really get a cycle. And moreover, I think that there's kind of an increasing widespread view, which goes back to what a lot of bitcoiners were saying, which is that there's really no there there outside of bitcoin, outside of stablecoins. I think the vast majority of the rest of that space. Some other things, you can tokenize gold, you can tokenize real world assets. I mean there's a market for that. But once you get into really circular speculative things, there's just not a lot of structural demand for it. They go through a hype cycle after they're invented and then they stagnate. And when you have a multi trillion dollar stagnating structure around what is otherwise a good asset I think that weighs on it because there is cross ownership. There are people that own crypto XYZ that's just down 90% or whatever. And they also own some bitcoin. And many of them will have to sell bitcoin for various reasons. And outside capital that hasn't gotten in yet looks and just sees meme coins. And we kind of went through the narratives. There was ICOs, there was the idea of DeFi, there was NFTs, there's just compute on the blockchain. And then it kind of just, there's a lot of VC pump and dumps where instead of a VC investing in a company and you know, generally having to hold it for 5, 7, 10 years until they get some sort of professional exit, either that either the company that they invested in gets acquired by a serious company that analyzes it or it manages to go public. Instead of that, you have VCs that are, you know, they lock up for maybe two years and then they're able to dump on retail even if the underlying product itself has little traction or the traction is so obfuscated by speculation of the token that they walk away rich. And then the thing just kind of rolls over and collapses. And then this final cycle is basically just memes. It was kind of like the end stage cycle, which is no one's even claiming there's actual value there. It's just like player versus player. How hard can you bid something up and get out before it, it pops.
- [44:08]
B
And I think that, including our president, you know.
- [44:11]
A
Yes, I think that, yeah, and I think that does weigh, I think that the crumbling crypto kind of just market out there does somewhat weigh on bitcoin. I think it's inevitable. I mean, I think that that has to gradually fail over time back closer to a total addressable market, which again, outside of bitcoin, stablecoins and a few tokenized real world things I think is very small. And I think that's, that's, you know, that's kind of weighing on bitcoin even as other, other parts of the liquidity are decent.
- [44:44]
B
Yeah, you can really feel it too. I mean, 2021, 2022, before the FTX blow up, it was like cryptomania. Every conference I went to, there were so many people working in crypto. Obviously some were bitcoin focused. But now a lot of those crypto folks are, I don't know, they've pivoted away. Maybe they're working on AI or something else. But it's definitely, it feels different and it has felt like just, just not a lot of attention, not a lot of care from retail investors about bitcoin in general. So I hope that turns around and we see like a real like a big bitcoin bull market. I think a lot of the, a lot of us have been waiting for that before we start to wrap up. Do you think that the Clarity act is going to get passed? Because I'm a little bearish on it actually happening this year.
- [45:28]
A
I don't have a firm view. I'm kind of watching like the, that play out like anyone else. But I still again, I think that you know, while that while some of the aspects of it are useful, I think what really benefits bitcoin is just simplicity. Just like protections on letting people self custody it, you know, ways to spend it in kind of de minimis ways that are not taxable to relieve the accounting burden and things like that. A lot of this other stuff is more financial institution stuff which is fine, but I think the market always wants the next thing. I remember one of our podcasts early on in this new administration was about the strategic bitcoin reserve is brought up and either on your show or others, I tended to fade it whenever it was asked. Obviously the it has to be asked because is it was the thing at the time and my view was I think they're going to ring fence the bitcoin they have probably. I wouldn't bet on them just you know, buying a million coins or anything huge like that. I'd rather be surprised at the upside than, than assume they're going to do that in my forecast. And yet there are a lot of people that were super hyped up about it and I think we're kind of a maybe not, not, not quite that situation. But I think that you know, while investors are going to watch these things and while especially certain companies have to have to watch the passage of this legislation, I don't think there's anything coming to save bitcoin. I think bitcoin has to kind of either its merits are going to be seen by the market and it's going to be bought, you know, by players in the market and they're going to take advantage of, you know, cheap sats and a lot of the fast money washed, washed out and a lot of the parts of the ecosystem deleveraged and then it'll climb its way up. And then once it starts climbing its way up, that of course gets outside money interested again. That's what makes it become fast money. Something's bottomed and rolling up you get again, the technical chartists that come in and say that's actually a pretty good chart. You get the momentum traders, you get the FOMO traders, and you get all the marketing around bitcoin, one day reclaiming 100k and then reclaiming all time highs. And it just kind of feeds on itself. And until then, I think the asset just has to survive on its own merits. It's the most liquid way to store and send permissionless value. It's a strong money in the digital age. And I think those fundamentals are what allows it to make higher highs and higher lows through bear markets. And from what I've seen, I've seen way weaker sentiment this bear market than the 2022 bear market. We were at Pacific Bitcoin in 2022 and energy there was high. I mean, bitcoin was crashing to 16,000. Energy was still very high. I think this one, I think the combination of the broader crypto space, like truly running out of good narratives, or at least temporary narratives that hit in some way, combined with that this wasn't a very retail heavy cycle, is more of a corporate cycle. And then kind of the fact that bitcoin just didn't reach the highs that many people thought is just disappointing for a lot of people. So this is, yeah, this is the lowest sentiment that I've. I've personally seen on bitcoin.
- [48:48]
B
I agree with you. And I think we are also seeing a lot of infighting, not just about, it's about digital credit, treasury companies, also about protocol changes. I'd love if you would share your take on protocol changes because so many people respect you not just for your market analysis, but also your technical analysis because you have your engineering background and I know that you can understand it in a way. So many of us on the retail or mainstream side, like we, we just can't analyze it properly on the technical components. What do you think about some of the proposals happening? Because some of it's very confusing, the messaging. There's a lot of harshness and hostility in some of the messaging and it makes it hard to understand what the signal actually is. Jeff is Booth, who I know you work closely with, at ego death. He recently did a show where he signaled support for a protocol change. Like, where are you at with all this?
- [49:38]
A
Yeah, good question. I mean, one is, from what I recall, Jeff mentioned he's running knots. I don't think he signaled anything about a protocol change, even though those are sometimes considered the same thing. It depends on what version of knots you're running. So I would let him say whether or not he signals for a protocol change. For me, whenever there's a concerted effort to change Bitcoin quickly, I tend to be more pushed back against it. So a few years ago, this was kind of the taproot wizards push to make bitcoin more expressive. My view, the only kind of the technical concern I had was adding things that could add MEV to bitcoin, basically things that make mining more complicated, that could potentially result in centralization of mining. And for me. So I would analyze these technical arguments from those either for or against. But for me, the bigger concern was venture capital money raised to try to push that change and people claiming that that change is inevitable. Because as soon as I hear that, I'm like, well, okay, I'm not changing them. You've successfully pushed me to not change if you're going to market it like that. And I think we've seen somewhat the other direction this cycle, which is, I think there are reasonable concerns around non monetary stuff winding its way into bitcoin. I certainly wouldn't support changes to Bitcoin that make it easier to either block size increase or loosening of the consensus rules to let more of that happen. I would not be in support of that. Then the question is our ways to restrict it reasonable. The current proposal, it still lets those things into bitcoin. It just slightly increases the cost of doing so. But then it's being phrased as an existential thing that absolutely has to pass. And where they start saying, well, instead of getting the normal level of consensus for a soft fork, we're going to lower the consensus and just do a contested soft fork and people claiming it's absolutely going to pass and say that bitcoin is going to fail if you're not going to pass. Again, that puts me into the camp of, okay, it's kind of an attack at that point. I'm not going to be pressured to make a change claiming something's existential when it's a minor technical update. If those consensus rules had existed years ago, I'd be like, okay, I mean it's fine. But kind of rushing to put those in and calling it existential is generally what I would push back on. We have a block size limit for a reason. It keeps the blockchain from expanding too quickly. It keeps nodes from getting too unwieldy for most individuals to run. And I think that has to stay in place. And again, I certainly wouldn't support ways to make bitcoin more expressive at the consensus layer. And then a lot of this debate previously was around filters and things like that. So if you have consensus, there's standard transactions versus non standard transactions. For me, I'm pretty focused on the consensus layer itself, not what individual nodes choose to transmit to others. So for me, I think a lot of it's blown out of proportion because again, this change is actually not that big. So I think framing it as existential is incorrect marketing.
- [52:49]
B
Well, and I just am concerned about some of the messaging out there. It's like people being called evil if they don't side with one or the other. And again, it's like a lot of infighting when I think what the general public just needs is calm, rational people explaining what anything is, how it works, why they're for or against it. And I just don't think we've seen a lot of that. And now it's just a lot of like, hostile back and forth. And there's going to be a fork in August. I don't know. I'm just, I'm. I'm curious how that will all play out, but I'm guessing a year from now it will be seen as not as big of a deal as some people are making it out to be.
- [53:29]
A
That's how I view it. I mean, again, because the fix doesn't actually address the things that they view as existential. So, yeah, I mean, I would like to see better discourse on this topic. I mean, there's a variety of technical complexities that went into this. Basically, again, there's a consensus layer. We could have a whole podcast on this. It's hard to do at the tail end of a podcast, but there's a consensus layer, which is what transactions are actually valid once they're in there, versus there's nodes that generally have a more restrictive set than the consensus that determines what they are willing to send to other nodes. So something could get into consensus, but that does not meet what that node is willing to send to other nodes. And there is a dispute because generally speaking, if that higher filter is too strict, then the network starts finding ways to go around that. It can go straight to miners, or it can go through certain nodes that loosen their own restrictions, and then those standard transactions become just less impactful. And so when Bitcoin Core loosens some of its kind of restrictions, they didn't change consensus in Core 30, they changed the layer above that. A lot of people viewed that as kind of endorsing spam. The core proponents would say, well, it's already happening. We're trying to make sure that if they're going to spam, they do it in the least harmful way to the network. It doesn't make sense to have a gate that people just hop over the fence and go around anyway. And that's where this technical dispute started. But then it becomes a matter of people like ad hominem attacks, existential claims on bitcoin, which I think again, there's a reasonable technical debate there around how to structure a very complex network. And yeah, I think that none of this is at current time existential.
- [55:17]
B
Agree. Thank you so much for that. Always thoughtful, Lynn. All right, last question to wrap up. I mean you're known for the gradual print. We've got folks waiting for the big print. Any just update on that? Because I think it's really interesting you mentioned armchair analysts. A lot of folks, especially bitcoiners, are just sort of waiting for us to go off that cliff, something to trigger the big print. A lot of people feel like we're really close to that. It's almost like there are a lot of crash anticipators. Right. But you always kind of come in and say it's going to happen a little bit more gradually. It's not going to be this like big whoosh necessarily. So do you still feel that way?
- [55:56]
A
Well, the update is it has been a gradual print. Like we did that, we did that in, I think it was September of last year.
- [56:02]
B
Yeah.
- [56:03]
A
You know, the balance sheet is not, not much different than it was back then. You know, for a couple months it kept going down. And then of course they did their December, you know, they ran into those liquidity problems. They started increasing. Has been a gradual print. I expect the gradual print to keep happening. When the Iran war broke out, that was kind of the first real test of the gradual print because it's like, well, I mean, people were worried about $2 oil and it's like, well, what if the worst case scenario happens? I was like, sure, if certain worst case scenario happens, we can breach above my base case gradual print. That's what major crises and wars tend to do. But I was like, I wrote at the current time, nothing about this conflict leads me to break out of the gradual print base case. And we haven't. And at the current time, as we sit here recording this in early July, when I look over the next several months, I don't really see anything that would deviate my base case away from the gradual print. So we have broad money supply gradually grinding upward, but not at an unusual pace. Banks are Making their fractional reserve loans at a kind of a moderate pace. The Fed is increasing its balance sheet at a pretty slow pace especially they actually slowed it down since tax day, which they basically announced they would do. The new Fed chair claims he wants to reduce the balance sheet. It's hard to do. It's not impossible to do, but it's hard to do. Generally speaking, if they're going to do it, they have to kind of stuff more treasures into banks on average. So they have to kind of make it easier or incentivize banks to be able to hold Treasuries more. That's kind of a liquidity neutral move anyway. So I generally would take the under on the idea that they're going to like radically cut the balance sheet, but they might find clever ways to just have a slower print than say if Powell had another term, for example. And so yeah, I view the gradual print as still in play. None of my current investment theses, whether it's certain stocks, whether it's bitcoin, whether it's gold, whether it's XYZ is contingent on some massive crisis and huge print around the corner. Instead it's hinging on fiat currency is going to keep debasing. You generally want to own scarce, high quality assets that are leaders in their category at levels that are not super euphoric or overvalued. And of course the way you value a stock is different than the way you value a hard money. So different metrics and investors will apply what they think is right. But yeah, owning scarce high quality things at low or mid sentiment and good valuations is how I approach things well.
- [58:42]
B
And that's why you've outperformed so many other analysts. So you heard it right there. We're not getting a big print anytime soon. I'm not going to be able to refinance at 3% but that's okay. Lynn, thank you so so much as always. I know that people are frustrated right now in this bear market. I've, I've felt it too a little bit. It's just we want the, the retail, you know, interest to come back and we want people to appreciate and understand bitcoin. But hopefully maybe next year we'll see some of that. So in the meantime, I hope everyone checks out your fantastic reports. I'm going to link it in the show notes so everyone can head there. Linalden.com and thank you just so much and I hope to see you in person soon.
- [59:28]
A
I look forward to it as well. Thanks for having me.
- [59:30]
B
Thank you so much for checking out this episode of COIN Stories. This show is for entertainment and educational purposes only. Nothing should constitute as official investment advice, and you should always do your own research. My inbox is open. If you want to share feedback or guest suggestions, just reach out to us@infoalkingbitcoin.com make sure you're subscribed and turn those notifications on so you never miss new content. I'll see you next time.