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- [00:00]
A
I think bitcoin being this global accessible digital capital and digital commodity is very important. Anybody who hold Bitcoin in Venezuela in the last couple of years, right. I think it's like multiple acts better off compared to a lot of the average citizens who just holding their local currency.
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Value capture has shifted away from layer ones. A new Coindesk research report reveals that while layer one still holds 90% of market cap, they now capture only 12% of onchain fees. Explore the structural changes defining 2026 from Bitcoin's post quantum risks and Ethereum's rollup economics to the new era of compliant privacy with input outputs. Midnight@coindesk.com research hello and welcome to the 2026 debut of Markets Outlook. I Jen, I'm Jen Senasi. Geopolitics is already muscling its way into the new year following the US operation in Venezuela and today we're asking if Bitcoin is finally proving its mettle as a non sovereign safe haven. Joining us now to break it all down is Charlie Hu, co founder of Bit Layer a Bitcoin layer two with a total value locked of around half a billion dollars last year. Charlie, welcome to the show.
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A
Hi Jennifer, great to be here.
- [01:18]
B
Great to have you here. Happy New Year. We are kicking off 2026 today. Talk to me a little bit about what you're watching in the markets.
- [01:27]
A
Sure. I think today we had a pretty good Monday. Consider this a relief rally. Hopefully we can have a continuation the rest of the month. I think a lot of people coming back to work right after the pretty good Christmas season. There's some interesting events we need to watch including the Bitcoin treasury company, some of the key companies and some of the events as we want potentially we'll talk about from Venezuela. It is important to reconsider what is Bitcoin involvement across all the global movement. And for us we're building things for Bitcoin financialization. So it's important for us as well.
- [02:11]
B
If we look at what's going on in Venezuela. Talk to me a little bit about the financialization of Bitcoin. How are you watching the events unfold there and how can we relate that back to crypto?
- [02:22]
A
Sure. So I think before I answer the question about how we think about the event. Right. I think for our mission to build Billayer, since we built that since two years ago is to bring the programmability and the productivity for Bitcoin as a network. Right. Bitcoin started actually 17 years ago. Right. On January 3, 2009. Right. Basically 17 years and two days ago the Bitcoin network started. Doesn't really have too much network transaction right in the beginning. And then people start using Bitcoin as important alternative assets. It's incorruptible digital commodity. Right. We can send Bitcoin transaction across the globe in a pretty fairly fast way. But obviously there's no programmability that you can't really do a lot of financial activity on Bitcoin. So this is kind of our main mission, right. To start a bit layer to talk about the recent event. Right. Venezuela is a very unique country, right. It has a lot of natural resources and but the last couple of years due to various reasons the country's inflation has been extremely high. Right. It's like about 300% every year due to a lot of macro reasons. So I think for people who live there, who wants to access to the modern global finance market, it is very difficult. Right. While you have all the prices in all the goods just increasing 30% per month, it's pretty much impossible to do a lot of financial activities. Right. So I think Bitcoin being this global accessible digital capital and digital commodity is very important. Anybody who hold Bitcoin in Venezuela in the last couple of years, I think it's like multiple X better off compared to a lot of the average citizens who just holding their local currency. Right. So it's very important. And also by holding Bitcoin, if you don't really do onchain activities, there's only one thing you can do, buy and hold. Right? So what do we want to empower is the bitcoin holders potentially for in some countries like Venezuela as well as. Well, right. To have potential yield such as like annual return like 4% by doing providing its on chain programmability. So this is kind of the key product we're building. One called ybdc, the other is our BVM power layer two. Yeah. I think this is global accessible, right. So it doesn't matter. You are in a country like Venezuela which is hyperinflation or stable established country like United States or like Singapore as well. Right. So this is very important and we have been growing since last year we launched a mainnet. We have users from all over the world and I think this is very important. Bitcoin is the most decentralized global network and it's going to continue to be like that in the next upcoming years. And of course as assets it's become the most well adopted assets, right. Due to all the ETF and institution and hopefully they can bring value for extreme situation countries like Venezuela as well, right. Especially for the citizens there.
- [05:26]
B
Now we're sitting here at the beginning of January 2026. It seems like geopolitical tensions are only going to intensify from here. How do you expect bitcoin to act or perform moving forward?
- [05:39]
A
So I think a lot of people know bitcoin perceived as this digital capital, right? This digital gold. And obviously gold has been a very successful big rally last year, right. It hit multiple times, all time high. I think although I am very on the bitcoin side of the team, I think gold and some other precious battle potentially could do very well in this year as well and continue to be like that. Right. Because of a lot of the macroeconomic reasons. And I think bitcoin because potentially going to follow the liquidity cycle while we have quantitative easing potentially upcoming, the liquidity flow. So I think bitcoin will have an interesting rally. I'm not sure how, how big is the bitcoin dominance level will hit this year, but I think bitcoin as an asset in the, in the crypto market is contin to be the winner. We might see some extreme events happen, right. Due to the global macro market. People are going to perceive bitcoin as the important alternative pact, as digital gold, as digital capital and also as the new bet. While gold and silver continue to hit all time high, some liquidity will flow from the precious metal to the digital version of the capital. And I think last year all these companies, especially the bitcoin treasury companies, the bitcoin ETF already brought a lot of adoption and a new liquidity to the space. And this year hopefully we're going to see the new trend with a lot of the pension funds, big, you know, endowment fund continue to have the adoption because they've been taking the time last year. So I think last two months has been a bit challenging but a pretty good consolidation period. Right. We have fairly low volatility of the bitcoin price and a lot of people has been in a confusing but contrarian bet. Bitcoin has been bottom up. Hopefully that was kind of the bottom. Right. We can see an interesting relief rally in this month. And if bitcoin sits in this position for quite a while, we might see a very strong pushback, right? You know, because they're going to follow the trend like gold last year and the liquidity we're going to flow to the digital commodity digital capital. So yeah, we are very bullish on bitcoins this year financialization activity. We're going to come to bitcoin as important assets, most decentralized network. Yeah, we'll see how it goes.
- [08:08]
B
Now from your standpoint, you are working in bitcoin defi. What's the biggest bottleneck do you think, preventing more bitcoin from entering defi? And how important is it that more that people start doing more with their bitcoin for the bitcoin network?
- [08:23]
A
Great question. So as people know bitcoin as assets, it's very well adopted. A lot of people have been holding bitcoin but there's no native yield, right? You're not getting any interest return, any yield by holding a bitcoin. It's sitting in your cold wallet doing nothing. So for a lot of OG bitcoiners it's been like that as a status quo in the last 15 years, right. And now we're getting a lot of new people and users holding bitcoin through etf, through all kinds of new vehicles, right. And there's been a lot of people asking, okay, so now I'm holding bitcoin, is there any return I can get by holding these assets? Right? Anything which is relatively safe with some underlying kind of yield sources people can understand. They want to have a taste, right? So that's kind of the demand that we've been seeing from the market. I think the financialization layer and capability for bitcoin is very important one for the sake of the continuation and the sustainability of Bitcoin's network. Right. So as people know, bitcoin has been very little on the activity side, right. There's been very few transactions happening on the mempool in the last 14 months is pretty much actually two years ago that was very congested. We started actually during that kind of period when bitcoin had a crazy interesting rally of ordinals on kind of derivative assets being inscribed on bitcoin network. Right. At that period it was very congested. But due to a lot of other kind of reasons, Bitcoin has been slowed down on chain transaction. Mempool has been pretty empty. So for bitcoin miners there's no really strong fees and as revenue they're making while having a very high level of hash rate. Right. So if we can bring the financialization activities on bitcoin network doing bitcoin defi, it is very important for miners to keep, you know, providing security budget, right? As you know, providing the hash rate. And that is very important for the long term security of bitcoin. Right? So that's one side of the reason the Second side of reason, as I mentioned, there's more and more people holding bitcoin and asking, okay, now that I have the assets, what are the safe sustainable yield we can potentially get? Not extreme yield like 20. Right. Like which is taking excessive risks, but it's better than just zero. Right. So I think this is kind of the, the spot that we want to hit by providing on chain verifiable, transparent sustainable yield. Roughly around like 3% to 6% kind of range, Very, very various. Depends on kind of the risk appetite and also the duration for the bitcoiners we're working with. So currently we are working with a lot of bitcoin whales, some of the bitcoin mining pools and potentially some of the institutions like Franklin Templeton who is our leading investor and many others who are being really pushing on bitcoin adoption. Yeah. So these are all the users we want to work with and they want bitcoin yield. They don't want to take excessive risks, but they want to see what's the possibility.
- [11:30]
B
Value capture has shifted away from layer ones. A new CoinDesk research report reveals that while layer one still holds 90% of market cap, they now capture only 12% of on chain fees. Explore the structural changes defining 2026 from Bitcoin's post quantum risks and Ethereum's roll up economics to the new era of compliant privacy with input outputs. Midnight@coindesk.com research I want to come back to Venezuela for just a second. You know Venezuela is one of the top countries when it comes to crypto adoption. We spoke a little bit, just a few minutes about the benefit of buying and holding bitcoin in a country like Venezuela. Stablecoins has filled that need for a lot of people in Venezuela. This morning, according to coin market cap, stablecoin market cap is above $317 billion. And my question for you is when you see that stablecoin adoption, you see that folks are already able to buy, hold stable coins, earn yield on stablecoins, does that change the value prop for, for bitcoin in an environment like we're seeing in Venezuela, do you think?
- [12:37]
A
I think stablecoin is very important. Right. Stablecoin is the fundamental assets for the onchain defi. Right. Like across all the defi protocols, Stablecoin is the most important assets. I know we have the biggest stable coins mostly are US Backed. Right. Usdt, usdc, and a lot of other new kind of derivative of stablecoin assets coming along the ways. Right. And if I, I think, if I remember Correctly every year there's tens of billions of dollars of USDT value being transacted across like Venezuela, you know, companies, even with the government. Right. Because there's a lot of global trade they've been doing. So stablecoin has been pretty well adopted in Venezuela as a country. Right. Because they have a lot of natural resources, they've been doing a lot of international trade. So it's very important adoption. Right. As you said, it's important as a safe haven assets for people who wants to have a fairly stable value assets compared to their local currency which is hyperinflated. Right. I think back to the question, it's like two parallel kind of assets. Right. For people who want to have store of value and actually have important sound money, I think Bitcoin is still the most important digital commodity, digital capital. Right. So for users, for people from all over the world, not just Venezuela, for other countries as well. Right. Holding Bitcoin is an important financial strategy for companies, even for the government. Right. And also for the citizen. Whereas stablecoin is important assets as a tool to do like financial transactions, payments and so on. Right. For a country which heavily depend on global trade like Venezuela, I think having and using USD based stablecoin assets for financial activities in daily basis is a very important tool and a very important financial kind of technology. So I think these two are not competing with each other. It's very complementary with each other. So for us, we believe people should hold Bitcoin. They want to hold Bitcoin as assets, but we want to make the Bitcoin productive. Right. So this is the kind of infrastructure we want to build for the bitcoin holders while they're still going to have and hold their USDT or other kind of stable coin to do all kinds of financial activities for payments, for lending, for other things. So yeah, I think these two things going to happen at the same time and yeah, it serves different demand.
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B
We are in a midterm election year now. Historically it's not been good for markets. How do you think that's going to impact crypto markets or will it?
- [15:13]
A
Yeah, personally I wouldn't say I'm a very geopolitical savvy on the midterm kind of a situation. I think there's a lot of unknown, unknown to builders and people like me. So I think I'm humbly to learn. I wouldn't really give too much opinion about the midterm election results and so on. People actually betting on poly market, the prediction market on that. Right. I think 2026 is interesting for Poly Market as a very important niche right. In the crypto space. While having said that, I think this is a very important year because bitcoin has been a pretty tough year in 2025, right. We had a crazy rally. We hit a bitcoin all time high twice last year. Right. A lot of people really strongly believe we're going to have a very strong rally and going to hit another all time high, including myself. I think it really comes down to the liquidity flow, the liquidity cycle either and a liquidity flow if that actually move to the bitcoin and all the digital assets in the Web3 space. And I think we're going to have a very interesting year upcoming with a lot of adoption and infrastructure being very well built and well established. So this is very important. This is the year, I would say for us as an industry to have very important adoption. The midterm election is important. If we have a lot more kind of regulation clarity, especially with like we already have the Genius act, right? If we have the clarity and many other kind of regulation clarity, more companies will come on board, more countries, more companies actually will do their bitcoin treasury strategy, you know, and so on. Right. Which is very helpful. Bitcoin as assets will be more adopted across the globe and then more potential users will actually explore solution like what we build as well. Right. So it's very important to companies like us.
- [17:02]
B
And Charlie, just before I let you go, I want to broaden the question now. A lot going on, a lot to watch from macro perspective. Global M2 money supply is reaching levels we haven't seen since the pandemic. President Trump is expected to name a new Fed chair at some point. Bank of Japan just raised rates. What are you watching? What are the important indicators you're watching as you build?
- [17:26]
A
Great question. So yeah, you mentioned a lot of good indicators. So I'm following a lot about M2 supply, right. Because we believe the liquidity cycle is very important. Eventually comes down to if we have a lot of new liquidity come to the market, right, to bitcoin, all those assets, then we have very sound fundamental rally and not just some short term speculative price rally. Right. So that's important for us to look at. And then the second thing we need to look at is stablecoin, right? Stablecoin has a huge growth adoption last year and I think going to continue to be. So in this year, a lot of companies across different kind of countries will, you know, have their stablecoin strategies. For me, I'm actually based in Asia. So I know we have a very active Asia community. I'm going to follow a lot of the countries such as Korea. I think this year South Korea going to have a lot of stablecoin strategies. Rumors going to say they have multiple kind of KRW packed stablecoin gonna be fully licensed and on board soon. So we are following that kind of trend very, very closely. And yeah, I think on chain defi is very important, right? We are building bitcoin defi infrastructure. So on the level, the amount of on chain verified liquidity assets across different infrastructure, this is the very important indicator, right? When we see a lot of assets being staked, different kind of layer one, layer twos, right? All these idle assets being used into the defi activities. For us, that's like adoption indicators, right? We're saying, okay, actual users are using defi activities. Those are the very important indicator to see, okay, sentiment is back, activity is back, adoption is back. When we have that right, then we really can see we have some fundamental sound rally coming back.
- [19:14]
B
Charlie, thanks so much for joining the show today. It's always a pleasure having you on and we'll continue following your progress over at Bitlayer.
- [19:21]
A
Thank you very much, Jennifer.