← CRYPTO 101
CRYPTO 101
Ep. 651 How Hedge Funds Are Trading The Crypto Volatility & Their Top Meme Coin Pick
00:45:03
Loading summary
Transcript59 lines
- [00:00]
Bryce
Foreign, everybody. Welcome back to another high caliber action packed episode of the Crypto 101 podcast. I'm your co host, Bryce, as always, joined by my trusty compadre from the other side of the country, Mr. Brendan Veeman. I just got back from your state actually. How are you doing?
- [00:27]
Brendan Veeman
Doing good. I'll tell you what, I am surviving this volatility. You know, we're out of hurricane season here in Florida, but it seems like we're in hurricane season when it comes to the markets a little bit. But no, doing well, all things considered. You know, there's a lot of volatility and, and with that, it really brings a lot of opportunities. So we brought in this special guest and the last time we had him on, it was a completely different market environment.
- [00:52]
Bryce
Yeah, this is, this is a real treat for, for us personally as well as all the viewers at home who are tun. And we're joined again by Renick Paley, who's the founder, the CEO of an incredible crypto investing firm called Stratos. And we're very pleased to have you on to talk about volatility in kind of the crypto market specifically. But maybe we'll touch on some of the, the macro stuff as well. But, but Renick, how are you doing, my friend?
- [01:19]
Renick Paley
Doing all right. Doing all right. Good to be here. Awesome.
- [01:22]
Bryce
Hanging in there kind of throughout the volatility.
- [01:26]
Renick Paley
Look, it comes with the territory, at least for crypto, I think certainly there are some unprecedented features of what we're going through at the moment, but definitely keeping things interesting.
- [01:42]
Bryce
Yeah, absolutely. Look, you guys have a large crypto fund. You've been in the business, I believe, since 2016, but probably investing a little bit before that. Just catch us up. For anybody who hasn't watched our prior episode, a little bit about yourself and Stratos before we kind of dive into the meat and potatoes here.
- [02:02]
Renick Paley
Sure. So I founded Stratos in 2016, have been investing in crypto since then. Today we have around nine figures under management. We have four funds. Three of them are early stage venture funds, one is a liquid hedge fund. All of our funds have had top decile performance. One of our funds is the best performing fund in crypto and it's vintage. So our performance across the board has been pretty good. And hoping to continue that. Before 2016, I was an analyst at a hedge fund in New York in Tradfi, doing global equities. And it was that experience that kind of trained me to invest the funds. Today, the fund that I used to work at is now about 85 billion under management and highly respected, exceptional performance as well. So lucky to have started there and stumbled upon ethereum then in 2015 and realized it had the potential to be the future of finance. We'll see how that plays out, changes by the year, but here we are.
- [03:23]
Bryce
Yeah, the rest is history. From finding Ethereum to starting a fund, to having some of the best performing funds in crypto, it's quite a journey. And a lot of people that I talk to on my day to day, there's kind of two camps. There's the people that are really short term minded and trading every day and they see all these really, really, really big volatile moves and they think that this spells the end of the bull market. And there's kind of those longer term folks like myself I kind of find, I find myself in the camp. You know, I'm looking out 10, 20 years for my portfolio construction and I think this is a, you know, a really awesome sort of buying opportunity for bitcoin in particular. How do you kind of square all this in your mind?
- [04:07]
Renick Paley
Yeah, so I think the right way to start is to say we think about bitcoin and then everything else is in two separate buckets. Now they're related, but you really have to think about them separately. So my view, our view at the firm is that this is not the end of a bull market. We do think that there is likely to be a shift away from the four year cycles. We probably will have something resembling a four year cycle where we have a top sometime later this year or early Q1 of 2026. But we probably won't have the same extreme drawdown in bitcoin that we are used to seeing. Unless we hit the high end of the range. We could see 250k bitcoin in an upside case and then yeah, maybe we'll retrace back to 100 and in that case it'll be 60, 65% drop and then it will be kind of more similar to some of the declines we've seen in the past. But bitcoin as an asset has really changed since the last cycles and so its volatility is clearly dampening. If you look at the historical volatility of bitcoin over time, it's moving asymptotically down into the right. So one should expect that this bear market will probably be a bit less extreme. But I don't think we're in one right now. And forgetting the four year cycle mythology and why this shouldn't be the end of the Cycle just given on where we are relative to the having. Just looking at where we are from a macro perspective. Because in our view the thing that really matters most is global liquidity. That that is the key thing. And so the question is, well, is global liquidity going to increase or decline over the next six to 12 months? And our view is that it is extremely likely to increase. It's already increasing. If you look at, you know, typically you can lag the price of Bitcoin on global M2 by about three months. Liquidity peaked at the end of 2024. Now what we're seeing right now is basically the retracement on Bitcoin and especially alts and even now equities as a result of liquidity just declining in Q4, but also it turned around and now is actually back to the highs from 2024. Liquidity is therefore, assuming we continue that three month lag, which seems pretty likely, we should actually be getting close to a bottom here. And we could potentially see new highs in Bitcoin sometime by the end of Q2, early Q3.
- [07:02]
Brendan Veeman
So you're still looking at this saying, hey, new all time highs for Bitcoin even by the end of this year is still something that's not only possible, but it could be more of a likelihood. It's fully still on the table, right?
- [07:15]
Renick Paley
Yes, yes. Look, just to go back to this framework, if you look at what happened in Q1 of 2022, liquidity was starting to fall off a cliff globally because we had just printed a huge amount of money. 40% of the monetary base was printed in 2021 and inflation became a concern and inflation was on its way up. And the Fed basically was very active as well as other central banks, very active in reducing liquidity from the market. Looking at today, we're on the other side of that. Inflation is clearly coming down. If you look at truflation, we got a cool CPI print today. All of the stuff with tariffs, which I'm sure we'll get into, is very likely to slow economic growth, which is likely to bring inflation down. There may be a transitory period where inflation spikes due to tariffs, but the secular trend of inflation is down. And looking at truflation, it suggests that the annualized rate is somewhere below 1.5% right now. Plus you have Europe printing, they've already said they're going to go out and print because they need to finance their own defense spending. China is already printing. They've come out and said we're going to inject a ton of stimulus. Remember, bitcoin is a global asset. It's not just a US Asset. So it benefits from money printing from any of these places. So I think it's very likely we're going to see much higher bitcoin by the end of this year just because of money printing. I also think what's going on with tariffs and just the geopolitical issues help accelerate the end game for bitcoin as being the sovereign monetary asset.
- [09:04]
Advertisement
You just realized your business needed to hire someone yesterday. How can you find amazing candidates fast? Easy. Just use Indeed. Stop struggling to get your job posts seen on other job sites with Indeed sponsored Jobs. Your post jumps to the top of the page for your relevant candidates so you can reach the people you want faster. According to Indeed data, Sponsored jobs posted directly on indeed have 45% more applications than non sponsored jobs. Don't wait any longer. Speed up your hiring right now with Indeed and listeners of this show will get a $75 sponsored job credit. To get your jobs more visibility@ Indeed.com podkatz12 just go to Indeed.com podkatz12 right now and support our show by saying you heard about Indeed on this podcast. Terms and conditions apply. Hiring Indeed is all you need.
- [10:02]
Bryce
Yeah, no, I think there's, there's. I mean, man, there's so much to unpack there. And I kind of want to go back to this concept of like, inflation versus deflation. And there's lots of different, you know, forces at work here. Like how, like, I know a lot of people, you know, think of Bitcoin as a hedge to inflation, similar to, like, you know, equities are. Right. You know, how. How does bitcoin kind of perform in a deflationary environment and what even, you know, it is a deflationary environment. What does that look like?
- [10:29]
Renick Paley
Yeah, so I think you have to separate the idea of inflation from monetary debasement just to start there. Okay, so inflation is the consumer price index that the US Government publishes. That is a basket of goods that people, the average person theoretically tends to consume on a regular basis. Then you have debasement, which actually you can see that coming out more in asset prices than in goods because consumption goods benefit from the deflationary forces of technology, Food as a percentage of gdp, technology, things like that as a percentage of GDP per capita have come down. Therefore they're actually bringing down CPI because they're in the basket. The thing that's actually been holding CPI up is the cost of rent and owner equivalent rents, which actually is just the price of real estate is an input to that. So debasement is what is happening to our currency, how much money is being printed, and then what's happening to asset prices. And so the reason why I say that is you can have deflation when it comes to cpi, but at the same time you could actually end up having longer term asset inflation or debasement. And so the reason why I say that is if we have any sort of pronounced period of deflation, the Fed and central banks will have no choice but to print huge amounts of money. That's actually where China is right now. If you look at their bond yields, they're collapsing because people are looking at those and saying, actually our inflation is negative, therefore they're willing to buy very low yields in yuan denominated debt. And you have to print, when you are a highly indebted country, you have to print money to be able to repay your debts. Because remember, debt is denominated nominally. So if you have deflation, debt becomes that much harder to service and repay. And that's the big thing in the global economy right now is every large country is heavily indebted, the consumer is heavily indebted. Literally, we cannot survive in a deflationary environment. And so the money printer is there for that. And so in the short run, you could see asset prices go down. In the long run, you'll see debasement increase, asset prices will go back up, and things like Bitcoin especially are going to benefit from that disproportionately.
- [13:18]
Bryce
Wow. So it's a, it's a continual sort of boom, bust cycle, is that. And that kind of is probably going to perpetuate, but it does seem like something that Trump is trying to do is to like get us out of debt. Right? Like he's trying to talk about we're going to use, you know, all these different tariffs and so on in order to reduce America's debt. What do you think is kind of going on there? Like, is that really about the US debt? Is it really about, you know, these trade relationships and kind of do that, does that play into the debt? Does if we onshore manufacturing, does that play into the debt?
- [13:58]
Renick Paley
Yeah, there's, there's a lot of angles there. I have to preface my response by saying I'm not smart enough to play 4D chess. So I'm just going to give you what I think is going on. But anyone, I think, who says they know for sure what's happening here and how it's all going to play out, I think I would Be a little bit wary of that. So first of all, there's a difference between the deficit that the US is running, the federal deficit, and our existing base of debt. So right now we've got about $37 trillion of debt, give or take. Looks like it's going to 40 trillion by the end of this year. Very hard to stop that train. Where is that coming from? It's coming from the level of deficit that our federal government is running, which is in the 2 1/2 trillion annualized range. Although interestingly, so far this year, the US government has issued more debt to finance its deficit than it did in the entire year of 2022.
- [15:04]
Bryce
Wow.
- [15:05]
Renick Paley
And we're just at the beginning of Q2, so that just gives you a sense that this is actually an accelerating problem, which is part of the reason why we have DOGE and the tariffs and these things that are hoping to kind of solve this or slow this down. So you've got basically the income side of the equation and the expense side of the equation. On the income side of the equation you have taxes and then you have now tariffs, which really are a form of tax. The current expected tariffs based on where things are at yesterday, which is basically a 10% cross the board tariff, plus 125 on China, actually brings in about 500 billion of additional revenue to the government every year. Yes, it helps cut the today, right now there are things that will change with that. People will consume less offshore, therefore the tariffs might come down. There are ways of, if the economy shrinks, people will consume less. So just based on reasonable assumptions, it looks like 500 billion, which is only 25% of the deficit. It's actually less than that. So it helps, but it doesn't solve the problem. On the other hand, the Republicans have been talking about there being a tax cut, potentially zero income taxes for anyone below $150,000 of income, which would basically offset that. So what you're doing is you're taking, you're reducing taxes for people under 150k and then you're shifting the taxes back to just a consumption tax on imported goods, which I actually think is more fair. I think that's good. I think that the lower income that below 150k has a higher propensity to spend their marginal dollar than the more wealthy people. And so it's more stimulative to reduce taxes for those people and then have a consumption tax on the other things. But anyway, that's the income side. So then on the expense side you've got Doge, how do you create government efficiency? Maybe there's another couple hundred billion there. I don't know if you guys noticed, but we haven't really heard anything about that in the last few weeks. I think that's because they're realizing, yeah, there are things here like with Social Security and USAID and all that stuff, but at the end of the day, it's really, really hard to cut this government spending. You don't want to cut entitlements, you don't want to cut defense spending. In fact, the new defense budget of a trillion dollars is actually higher than it was. So, yeah, I think the way I look at that is this is the first administration to come into office that really has tried to do something about the deficit. And I think what's going to end up being clear is that the deficit is extremely hard to solve.
- [17:57]
Bryce
It's been, it's been, yeah, it's like a snowball that's been rolling around for, you know, 100 years. Like it's, it's, you know, and to think that you could just solve it in a four year term is maybe optimistic at best, foolish at worst.
- [18:11]
Renick Paley
Yeah, the best outcome, which I think, you know, I have a huge amount of respect for. For Scott Besant, the Treasury Secretary, I think he has the clearest articulated approach to solving this, which is get the deficit down to 3% of GDP, get the US economy growing at a 3% real rate, and then basically enable ourselves to grow out of our debt slowly. Because if your deficit is lower than your growth rate and it costs you less than you're growing to, to service, to pay your debts, then you actually grow out of your debt slowly over time or it becomes a sustainable system. Because right now we're in a debt spiral. Does it become untenable in 3 years or 10 years? Hard to say. Things will happen, but you need to get out of that. And that is, I think one of the reasons why the 10 year has sold off in the last few days after coming in, which is that people are looking at this and saying if we create a recession, tax receipts are actually going to be worse, even with tariffs, because a big portion of the tax receipts that the government generates comes from capital gains. So if you kill everyone's gains, then your deficit actually blows out.
- [19:30]
Bryce
That's one of my favorite memes from this cycle is everybody's like, Trump said he was going to eliminate capital gains tax, but he didn't mention that. He just was going to keep the tax but actually eliminate the capital gains to be had in the market.
- [19:45]
Renick Paley
Yeah, I, I only half laugh at that because I'm like, yeah, that kind of feels like that's actually happening.
- [19:51]
Bryce
So it's kind of a gut punch. I will say.
- [19:55]
Renick Paley
Yeah, yeah, I try and laugh. On my good days, I laugh.
- [19:59]
Bryce
Yeah.
- [20:00]
Brendan Veeman
Well, you know, if we look at everything that we just talked about, you know, there's so many different factors going on. But what it seems like is that the big takeaway from this is that despite everything that's happening in crypto and everything that's happening in the greater macroeconomic landscape, we're looking at this and saying it, it almost is breeding a perfect storm to actually be beneficial for an asset like bitcoin. And we're looking at all these different factors and we're not saying, oh man, bitcoin's in trouble. In fact, you know, we're kind of looking at this and saying, hey, bitcoin could really, really succeed at a time like this. And a lot of the positive stuff that we've talked about, even price predictions are still on the table, right?
- [20:42]
Renick Paley
Yeah. Like I said, I think this is accelerating the end game for bitcoin, which is million dollar bitcoin at some point in the next decade. But also I think the, this is also just forcing Europe and China to print more money. And that's going to be beneficial for bitcoin in the next six to 12 months as well.
- [21:11]
Brendan Veeman
Let's also talk about who else or even what verticals could be winners inside of this, because I think a lot of us agree and even a lot of the listeners, they agree, they come in here, they're like, yeah, we all kind of agree that bitcoin is going to go up into the right. But outside of that, I think that's really where Stratos comes in here. And you look at a lot of these different projects that are being built, you look at a lot of these emerging companies inside the crypto space, and that's what you look at for potential investments. And, you know, one of those industries that you all have looked at I know specifically through Goldfinch and maybe even some others, has been this talk of tokenization. And I know that word has been tossed around a lot. We always see Larry Fink trying to shield the tokenization train, but I think it's for good reason. There's a lot that's going on there. Is that still something that you all are looking at and going, man, this could play a big role?
- [22:03]
Renick Paley
Absolutely. I mean, in my mind, there is no doubt that eventually all of Finance will just exist as a token on chain. The question is whether does it look like this original idea of decentralized finance where you have these protocols with no control, no centralized control, where you have some of these interesting concepts like AMMS and the like, where there's no counterparty, or is it just tradfi on chain where you have centralized intermediaries, basically just using the blockchain ledger to confirm the movement of assets which have just been tokenized? I think it seems to me that both will coexist, but that most of the growth is going to come from the latter and it's going to be driven initially by stablecoins. And so I think blockchains outside of bitcoin have a very bright future. I just think that it's going to be more intertwined with tradfi than maybe we thought it would have six or eight years ago when there was more of this hope that hey, we're going to build this parallel alternative financial system and eventually this will take over.
- [23:30]
Bryce
Yeah, I know that Scott Besant, who you mentioned, the Secretary of Treasury, he had a kind of a presser the other day and he was talking about towards the end of it, how blockchain is going to be a real part of the American government and corporations and all that kind of stuff. It'll make things more efficient. So it's really good that now we have like people in the administration and in the cabinet that are actually pro blockchain and pro bitcoin and we haven't even touched on the strategic reserve or anything like that. But I think like I was talking to my dad about this last night and he's a boomer and you know, I've been doing crypto stuff for, for like now eight years and he like, he just now got into crypto this year because of the administration. He's like, oh, like now I like, I could kind of cut off that sort of tail risk of this. You know, bitcoin and ethereum are going to go to zero or I'm going to put my money in there and then it's just a scam or I'm going to lose. Like, you know, now he's got the ETFs, now there's all these like, you know, really incredible sort of things. But I think what really does it for a lot of Amer like, you know, middle class Americans is like, hold on now, now there's a president that is talking about crypto now there's a whole administration backing it. And I think that kind of changes like the psyche of the market, which, you know, bitcoin, sure, it's, it's still going to, you know, remain volatile and all that, but it does seem like it, you know, it's going to be more integrated into our economy and our society and people like maybe aren't pricing that in yet. You know, I think that, you know, these, these are like really, really, really big concepts. But I guess that the long winding question, long winded way of, kind of the question is like, where to invest in light of this sort of huge secular trend shift because maybe like, you know, maybe the defi platforms are going to get outshined by JP Morgan's platform or whatever. So it's like, do you actually, is there actually an investable case for like defi altcoins and, you know, that kind of stuff, or is it like, actually, hey, you need to focus on company equity, where that's going to be where the value is.
- [25:36]
Renick Paley
Well, so I think that every company, whether it's a crypto company or not, is eventually going to tokenize their equity. So I think the idea of investing in a company today that says, hey, we're a crypto native business and we're going to try and go public via IPO would be kind of a strange response. Now, I understand why people would want to IPO today, but if you're investing in a seed stage project that three to five years from now are going to launch a token, then it seems to me like skating to where the puck is going is to just launch on chain. How do I think about the existing alts? I think that just to take a step back, when Trump got elected and it was clear that it was going to become possible to return capital to token holders with buybacks or dividends, it became clear to me one, that a certain aspect of the meme trade was dead and two, that going forward, most alts would be valued on fundamentals. And what I mean by fundamentals is not what's the level of fees that they're generating or whatever, it's how much value are they returning back to the token holders, period. It looks something a lot more like traditional equity valuations in that you say, okay, I have this asset that is going to return some capital. To me, it's generating some clear identifiable ROI over time. And therefore this on chain business, whether it's a dex or whatever, is comparable to me going out and buying some SaaS company on the NASDAQ, because eventually all of those companies on the NASDAQ will also be tokens. And you'll go on Coinbase or you'll go on Hyperliquid or Robinhood and it will all look the same. You could invest in owning a share of DocuSign is the same thing as owning a token of hyper liquid. And so people are going to basically compare the valuation of these things side by side and they're going to look at the existing defi blue chips and say why are these things so expensive? And so I think it's very hard to get excited about investing in those at least over a longer time horizon. Now I think alts are going to pump this year along with liquidity and some of these things will perform well. But I think thinking about things from more of like a venture mindset, a long term viewpoint, I think it's going to be either the defi blue chips and everything else have to significantly re rate into a lower valuation multiple to be comparable to more traditional businesses or new ones have to be created. And that will be a lot more interesting from a token investment perspective. And I think Hyperliquid is a great example of something that launched at a low valuation, generated a lot of traction, then became hyped, was greatly overvalued for a period, now has come back down to a more reasonable valuation and looks like something that is investable from a fundamentals perspective. They're buying back the token, they're generating real economics. Now I don't think it's going to be the best performing asset in alts because I do think that there's still a subset of memes that are going to be the best performing, but I think it's going to be up there and the price performance yesterday kind of.
- [29:18]
Bryce
Shows that I'm very curious about those meme picks. I want to go back to some of the defi valuation stuff and the buybacks and if you think about some of these like neo banks or whatever that trade at like, you know, really high valuations, I don't know, maybe 50x forward earnings or like, you know, and then you have something like AAVE or Maker that trades like maybe single digits in terms of their multiple. Are you just saying that basically like for maker, like those buybacks aren't actually accretive to the shareholder or the token holder yet or in like that multiple is kind of a facade?
- [29:56]
Renick Paley
Well, I think it depends on what multiple you look at because there's a difference between fees and revenues and then how much of those revenues revenues actually flow through to the bottom line. That's one thing. And the last time I looked they were more like in the mid-20s fully diluted token value to earnings multiple if you want to call it that. And look, the neobanks I wouldn't necessarily think of a defi protocol is something that should be valued similarly to a neobank because they're really quite different businesses. A neobank you have very long lived customers that you can add additional services to over their lifetime. Banking tends to be very sticky so the market is basically projecting out some long term growth trajectory for that and so giving them some benefit there. Whereas I think one of the things that's challenging about these defi blue chips is that their earnings are a function of TVL and TVL is highly correlated to the Ethereum price if you're an ETH based defi. And obviously the Ethereum price has not only been pretty challenged lately but is an extremely volatile asset. You know it's a hundred percent annualized volume asset and so it's very hard to build a sustainable business with earnings that are stable on the back of 100 volume asset. One of the reasons why SaaS businesses are so highly valued or had been is because they have very predictable cash flow streams. So and I also think ultimately there's not a lot of staying power for these DEFI protocols. The AAVEs, the compounds, the uniswaps are things that kind of Crypto natives the 2020 DFI Class Associate with that brand and know it. But I think to go back to what we said earlier, if JP Morgan is using some on chain functionality and that's what ends up bringing the masses on chain, they're never even going to know what maker or uniswap or AAVE are. And so it's hard to really want to ascribe a huge forward earnings multiple to these based on some growth that seems kind of unlikely to materialize.
- [32:40]
Brendan Veeman
What do you think are going to be some of the best performing memes? Is that going to be the kind of memes that we've seen in the past or are they going to have to evolve into something maybe a little bit different?
- [32:54]
Bryce
Fart, coin, one word fartcoin.
- [32:58]
Brendan Veeman
Is that just it like we keep it high level, we keep it simple, we don't overcomplicate it and we look at I guess do you think like that's the proper approach with memes? Because there's a bunch of different ways and it seems like everyone on the Internet has their own opinion about what the proper way to play to play the meme carp, the meme market is, is like do you wait for the project to explode past a certain point and then you run with. With what's already winning. Do you try to catch the projects as they're coming out? You know, do you try to stick to a narrative? I know some people are looking for like a viral moment in a viral point in time, and they're like, oh, that's how I should be meme coin investing. Some people are saying, oh, you know, should I be looking at these famous people's pets and trying to create coins of those and ride those up? Like, what is your whole opinion on this?
- [33:47]
Renick Paley
I think there's a lot of different ways that it can be played. I would say, look, the whole point of memes is either to be left curve or right curve. Don't mid curve it. And it seems like now that people realize that there's a lot of money to be made in memes, they're kind of mid curving it. The reason why we really like Farcoin is if you talk to any normie person, that's the one that they're going to be drawn to. It's very clear Tradfi is marketing it for us better than we could. And then, yeah, you can see the metrics of how many holders there are. You can see how its relative price performance is. You can look at the chart, you can see all these things and say, okay, this is worth a bet. And I think a lot of the other memes that are kind of between Farcoin and Doge are all kind of like, yeah, they're all just different versions of animals or dogs or whatever. Pepe has a much smaller mass appeal than Farcoin, and yet Farcoin is less than a fourth of the market cap. So we think there's a lot of return that's going to just possible there.
- [35:11]
Brendan Veeman
Well, for the people who are listening out there, maybe they're new to meme coins. What sets Fartcoin apart from some of these others? I mean, is it a tokenomic structure? Is it just a public bias? What really differentiates it? Why is Fartcoin the one that you feel like maybe tradfi is pushing more or that it's performing better, or it's like the people's chosen coin at this point? Like, what is. Is kind of making it stand out?
- [35:39]
Renick Paley
It's the people's coin because the people are retarded, which I include myself in. Like, guilty. You know, it's. It's funny. It's. It's easy to say. It's like, it's so dumb that it's like, you know, I guess you're right. It's funny. And I think all of these other memes, like broccoli and peanut and you know, you can go down the list, like, yeah, they're, they're funny for a day or two, but like, far coin is so dumb that it, it just transcends, you know, all generations.
- [36:15]
Brendan Veeman
You know, and you make a good point because if you think about all these other ones, like you said, like peanut or Pepe or all these other things, like, you can say that to someone and they're like, like, what is the joke behind peanut? Is it like an actual peanut? Is it a meme? Like, there's.
- [36:31]
Bryce
Yeah, you got to go explain and call back to like that moment in time. Like, well, that was, you know, like a year ago. That's not relevant anymore. And like, it decays because it's like no longer relevant. But something like fart coins, like, people are farting like seven times a day.
- [36:43]
Renick Paley
Yeah. All over the world. Aliens must fart.
- [36:45]
Bryce
Yeah. Hot air rises.
- [36:47]
Brendan Veeman
Oh, you beat me to it. I was so close.
- [36:50]
Renick Paley
The fundamentals are sound.
- [36:54]
Bryce
Do you, do you like, barbell? Like, you know, I know you've got many funds and stuff and like, obviously you've got like that, that sort of fundamental, you know, investing in the venture funds. Then you have like a liquid book. And like, if we kind of take a look at the liquid book, like, do you barbell it with like, you know, you're carrying a lot of cash and then like a lot of memes, like the, like the safe haven and then like the really speculative stuff. Or do you like, how do you kind of parse your portfolio like that?
- [37:20]
Renick Paley
Yeah, right now we are heavily in bitcoin in our liquid fund. Our view is that basically alts are toxic waste until proven otherwise. Which is to say when the Fed is accommodative, when liquidity is entering the market, you want to own alts. Alts can be a great trade, but by and large you mainly want to hold bitcoin because over the long term it's very hard to outperform bitcoin. And literally there's not a single alt that over a multi year period actually outperforms bitcoin. And so you have to be very aware of where you are in the cycle and where you are in terms of liquidity impacting the market before you want to own alts. So we were holding a lot of cash over the last six weeks or so and have since deployed that we were buying basically the lows in bitcoin over the last few days and then faded the pump a little bit yesterday. But looking at this point to start positioning into some alts, actually just given the impact of liquidity, that's likely to hit the market over the next couple weeks. If you look at the M2 chart, it inflected up basically exactly three months ago. There's typically a three month lag. My view is as soon as Powell comes out and says we're cutting rates, you want to go heavy into alts and you want to pick the fastest horses which are far coin, hyper liquid, et cetera. And you can see the market starts to show its hand on days like yesterday because you can see what the outperformers are. So that's what we'll be buying in size. I love it when the Fed pivots.
- [39:24]
Bryce
I love it. And it's a good approach. It's something that you've got the fundamentals and then you've got sort of the speculative. And I think it's a really explosive combination. And you know, I guess my, my last question, just on the, on the liquid side of your book, do you kind of like, how do you think about managing risk and like, is it, do you use stop losses on, on like altcoins or do you kind of say like, hey, we've kind of underwrote this for a long period of time. We've got enough sort of cushion that we could, we could keep buying if it goes down.
- [40:01]
Renick Paley
Yeah. So our, our two main primary tools for risk management in the portfolio overall are holding cash and holding Bitcoin. Because holding cash is a good way of expressing short term bearishness. Holding Bitcoin is a good way of saying, hey, we don't have great ideas right now and we think that over the long term Bitcoin is a great asset. So even if you're willing to endure some downside volume, you're going to be okay in that position longer term. And then with, with alts, we do use stop losses. We have gone short. You know, it just depends on the situation. By and large we are just long alts. We don't use leverage and we don't use stops. But in some situations either, you know, we put a trade on and we think it's possible we're catching a falling knife, we'll use a stop, a tight stop. In other cases, let's say we put a trade on and you know, we think we're benefiting from a short term powerful bounce like what we got yesterday, we'll run a stop Loss up. And so we'll basically put stops and start adjusting them upwards as the market moves in our favor so that, you know, we can automatically exit the position or a portion of the position once the market comes back to us.
- [41:28]
Bryce
Awesome. I love it. And then, yeah, the final question I had, and not that it's any of our business, but I figured I'd ask it because it could be a learning moment for all of us, but can you tell us what your best trade of your history as a crypto manager was and your worst trade and then what are some general, like, lessons learned from, from both of those?
- [41:49]
Renick Paley
Sure. I think our best trade, our two best trades were both WIF and farcoin.
- [41:59]
Bryce
Nice.
- [42:00]
Renick Paley
You're in both of them early. We rode them up to the highs. We sold them both along the way, but in both cases held most of our position at the top. I personally sold out of my position at basically the giga top of barcoin. We didn't do all of it in the fund, unfortunately, but we did a lot of it, sold a lot of it. And I think with, we, we wrote it, we, we sold with before the death spiral, but frankly we got a little bit greedy and we should have sold more at the top. There was a clear double top that happened in December and we should have just taken that to the bank. So I think. And then again with Far Coin, we bought back into farcoin a little too early and we have been adding to our position lower, which is fine because we have conviction. But I think in both of those cases, the mistake that we made on WIF was just being greedy and believing the narrative too much. Believing being too married to our bags because we had been holding it for a year at that point. Wow. And then with Far Coin, I think, and this is related to WIF as well, if you look at what happened in the market, ALTS basically ran super hard from the day that Powell cut rates 50bps to the day that he came out in December and said, we're worried about inflation again, we're going to pause our cutting cycle. It's perfect to the day. And then ALTS topped that and started coming back down. We ignored the regime shift. And so even though we reacted well to the prices by selling, we ignored the regime shift when we bought back in too early instead of saying, look, we're in a different environment now, we need to wait. It's going to take time for these things to play out. So I think there's the micro game of trading the chart and seeing where you're at and the macro game of saying where are we in the broader picture? And I think today it's kind of a similar thing. I think we're still in kind of a downtrend to choppy period, but I think we are still in the midst of a bull market and we're going to see much higher prices. So the key is just kind of knowing, all right if you're buying here, you could see things go lower. I think we actually saw max pain earlier this week just with the 10 year selling off and then you know, Sunday night type activity. So I'm not sure we'll see lower lows in bitcoin. But at the same time I, I wouldn't be surprised if we see mid-70s again. But I think ultimately that sets us up for, you know, 150 plus.
- [44:59]
Bryce
I love it. Renick. This was, this was a tour de forest. This was awesome. We really, really loved getting your insights and you know, hearing about how you're thinking about the market and some tales from along the way. So we can't wait to, to speak with you again soon. Hopefully after this, you know, this dark cloud of the market kind of passes and we could look at some sunshine and have another conversation about some other things down the line. But until then, I salute you. Thank you for everything that you've been doing for the space over the years and you know, we, we wish you, we wish you well and happy trading during the volatility.
- [45:35]
Renick Paley
Thank you. Same to you.
- [45:36]
Bryce
All right everybody at home, thank you so much for watching today. If you checked us out on Spotify or Apple, check us out on YouTube so that you could see see our mugs and leave us some comments and and we'll talk to everybody soon. Thanks again.
- [46:01]
Advertisement
Breaking news. T Mobile Network outperforms expectations in all sectors because T Mobile helps keep you connected from the heart of Portland to right where you are on America's largest 5G network switch. Now keep your phone and T Mobile will pay it off up to $800 per line via prepaid card. Visit your local T Mobile location or learn more@t mobile.com keepandswitch up to 4 lines of your virtual prepaid card allowed 15 days qualified unlocked device, credit service report in 90 days device and eligible carrier and timely redemption required card is no cash access and expires in six months.
- [46:31]
You just realized your business needed to hire someone yesterday. How can you find amazing candidates fast? Easy. Just use Indeed. Stop struggling to get your job post seen on other job sites with indeed sponsored Jobs. Your post jumps to the top of the page for your relevant candidates so you can reach the people you want faster. According to Indeed data, sponsored jobs posted directly on indeed have 45% more applications than non sponsored jobs. Don't wait any longer. Speed up your hiring right now with Indeed and listeners of this show will get a $75 sponsored job credit. To get your jobs more visibility@ Indeed.com podkatz13 just go to Indeed.com podkatz13 right now and support our show by saying you heard about Indeed on this podcast. Terms and conditions apply. Hiring Indeed is all you need.