← The Bitcoin Treasuries Podcast with Tim Kotzman
The Bitcoin Treasuries Podcast with Tim Kotzman
Redefining Access to the Digital Economy with Jaime Leverton & Sebastian Bea of ReserveOne
00:43:47
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- [00:00]
A
Welcome back to the Bitcoin Treasuries podcast. I'm Tim Kotsman.
- [00:03]
B
I'm here with Jamie and Sebastian from Reserve One. Thanks for stopping by the studio today.
- [00:08]
C
Thanks for having us in.
- [00:09]
D
Great to be here.
- [00:09]
B
Can we start with a little bit of your background and maybe we'll go from there into Reserve 1 and then to some current topics?
- [00:18]
C
Sure. Why don't I kick off my background and then we can get Sebastian's. I'll try to do the Coles Notes version. I started my career in Tradtech, so started out working for IBM in 2000 and spent just under 10 years with IBM. And then the second half of my career transitioned into really transformation mandates of a variety of different tech companies. I spent some time at BlackBerry, a lot of work in the data center space, a little bit in Telco, and then ultimately in 2000 I had the opportunity to take over as the CEO of Hut 8. Hut 8 is a Bitcoin mining company and at the time I took it over it was distressed. It was trading just in Canada, had had a difficult year coming out of the COVID crash. And so I took that over in December of 2000 and really spent the next three and a half years on an aggressive transformation and growth mandate for Hut 8, which was amazingly successful and lots of fun. And I'm sure you guys are all familiar with where the story's gone since I left in 2024. I sit on the board of Riot platforms as well as New Syntech and Vertical Data. So a mix of companies in the digital asset space and in the high performance computing space. And this spring I started a new venture as the founding CEO here at Reserve One, which is based in New York. We announced our business combination agreement in July as well as the raising of our pipe, which was 750 million. And we are going through the process of working through the SEC to get approval which will hopefully happen in Q1. And then at that time we fund and deploy our strategy which I'll let Sebastian touch on.
- [02:08]
D
So as far as me 20 plus years in institutional securities at places you've probably heard of like credit Suisse and BlackRock. And then I went on my entrepreneurial journey and to a firm called One river and we created One River Digital which subsequently we then sold to Coinbase to create Coinbase Asset Management. So my experience is really in institutional markets, institutional securities and institutional asset management. And the opportunity to work again with Jamie, which I'll tell you about in a bit, was just too compelling to pass up in terms of my other pursuits, I actually am on the board of Row New York here locally. Before I was in the institutional asset management space, I was a rower for the United States for a brief period. And then back to my experience with Jamie. One of the things that we did at One river and then Coinbase, that was really early and powerful, was starting to lend to miners back in 2023. And it was early, early 2023 where I connected with Jamie and we found a way to help Hut 8 in its transition as it was making a transformative acquisition. And that was the time when Coinbase made its first ever loan to a bitcoin Miner back in 2023. So then in the spring when the opportunity came about to kind of get the band back together with Jamie, it was too hard to pass up. So happy to be here and looking forward to this conversation.
- [03:35]
B
Can one or both of you talk a little bit about how all of this kind of came together? A series of conversations and serendipities, or.
- [03:44]
C
Very much designs, A series of conversations, relationships, serendipity, all of it. So certainly played into it. We're blessed to have a highly engaged, diversified board of directors. Proposed board of directors, which includes Chin Chu from CC Capital, Reeve Collins, one of the co founders of Tether, myself, obviously John d', Agostino, head of strategy for Coinbase, Wilbur Ross, former Commerce Secretary, Gabriel Bed, who's the chair of the board of the world's largest crypto exchange. And we've all interacted in one way or another over the last number of years and really the opportunity for us to come together and build something truly unique in the space at a time when the regulatory environment in the United States was changing in such a profound way and really creating an entry point where people like Wilbur Ross and a Chin Chew felt like it was their time just to start looking at, exploring and ultimately getting involved in the space. And we were really inspired by what we were seeing from the Fed. So the strategic Bitcoin reserve makes up a really fundamental part of our strategy. Expecting to have about 80% of our asset base held in Bitcoin. And then the digital asset stockpile, which where the Fed has signaled their intention to maintain a few of the assets that they confiscate that they think have real value for appreciation over time, they've named Solana, Ethereum, ADA and XRP. So that's our intention to hold in the 20% alt sleeve, all of our assets will be put to work. As far as the alts go, we determine the weighting and so we're, we're overweight. Ethereum and Solana based on their free float market cap and their ability to generate yield. And then we've also embedded in the structure the opportunity to allocate up to 10% of our AUM into venture opportunities that support the ecosystem and really support what we're doing on kind of either side of our, of our space, whether it' on the accumulation side or the yield side.
- [05:48]
B
Got it. Anything to add and maybe to go into for someone that's like, okay, reserve one. I know the name.
- [05:56]
D
Sure.
- [05:56]
B
Or I like the name.
- [05:57]
C
Well, that's good.
- [05:58]
D
It's good.
- [05:59]
B
People know the name if there's a product, a service or both. Like maybe the, like the elevator pitch or the kind of like. This is what it is.
- [06:08]
D
Yeah. So at the highest level, it's a diversified digital asset treasury that allows you to own the upgrade. Right. Everyone can see that money and investing and spending are all being upgraded. Right. But do you want to own one? Singular? Most people would like to diversify if they can, to own this entire upgrade. And we say that term because it really fits with the ultimate portfolio. As Jamie mentioned, we have both a liquid portfolio, Bitcoin, Ethereum, Solana, Ada and Ripple or XRP rather, and also the ability to do private investments. So what are we doing in private investments? Primarily in venture. Right. So we can be early into these new protocols that are driving this upgrade. So between both the liquid portfolio and the illiquid portfolio, you get one vehicle, one company that is seeking to deliver that upgrade. And for investors that's a pretty attractive proposition, especially as we think about what's going to happen in the next couple of years. Right. Do you want to end up owning 5, 10 or 15 DATs? Probably not. Right. You probably want to have one team that's seen a couple cycles, knows the crypto ecosystem and the asset management ecosystem and can bring that all to bear in one efficient vehicle.
- [07:23]
C
Yeah. As well as the experience that we have with tradfi and government regulatory. I think it's a really unique combination of skills that we've pulled together to really allow an investor to have access to, to the upgrade in one equity. And if you think about back when I started at Hut in 2020 and Hut 8 myself as the CEO were the first public miner to say we're no longer selling the bitcoin that we mine, we're going to hodl for the foreseeable future. Really kind of kicking off the early days of what is now a much bigger market and certainly most of the public miners followed suit pretty shortly thereafter, which was in 2021. And so, and investors were coming to the, to publicly traded miners at that time because they wanted exposure to bitcoin, exposure to crypto, but they wanted it in a way that they were comfortable with. They wanted it in the form of an equity, they wanted to use their traditional broker, they wanted it in their existing portfolio. And so that was the best proxy that they had in order to do that was the miners. And then strategy came along. And so when you, when we think about what we've built here at Reserve One, it's a, it's a more sophisticated route to get act to get that same access to a more diversified portfolio. People that are more want exposure to the ecosystem, but again in that, in that more bite sized consumable fashion that they're used to as a, as is pure equity that is in their traditional financial vehicles.
- [08:57]
B
What would be the spectrum and maybe the lower band on clients for Reserve One?
- [09:04]
C
Well, our, our investors are our clients, so any and all our demographics of investors are welcome. I think it's more, it's more likely that we would resonate with newer investors to the space. The more people that have kind of dipped their toe in but want something a little bit more diversified, a little bit more, a little bit more exposure. The crypto curious perhaps that are looking for a leadership team like ours that is seasoned and diversified between traditional finance and the digital asset space.
- [09:41]
A
Got it.
- [09:42]
B
You want to switch gears to some current events?
- [09:45]
C
There's so many current events.
- [09:46]
D
Where do you want to start?
- [09:48]
B
We were talking a little bit.
- [09:49]
C
Just yesterday's.
- [09:50]
B
Yeah, yeah, just yesterday's. Maybe start with summarizing what 2025 actually was in your view, and then we'll kind of come to current day. Whatever you'd like to cover.
- [10:00]
D
Sure. Look, 2025 was momentous in many ways, except for returns. Right.
- [10:08]
C
Lead with the bad.
- [10:09]
D
Right. The reality is returns are not what investors were asking for, but they rarely are. Right. That's not how markets work. But if we look at the fundamentals of what is happening in crypto, they are only getting better. And 2025 is really a story of opening the aperture towards real regulatory integration. Right. And making that a permanent part of how we move forward. One of the issues with the, you know, the prior administration was that the regulators were interpreting the laws as they saw fit and the laws were not fit for purpose. Right. What we actually needed was new laws and we now have one called genius. Right. And last year we also had a lot of Success and a lot of momentum towards getting Clarity passed. Now, it didn't happen, but all of that work was not thrown away. In fact, what we're hearing is that Clarity might actually get a vote next week, second week of January, which is in banking. Yeah, yeah. And if in Senate banking. And if you get that all done, what we can look back on 2025 and say is that we've. We were able to actually get real legislation through that that tells us, you know, what's legal, programmable money and what's a commodity, what's a security, and how do we. How do we transact in these things compliantly? And what does that do for you? That opens the door for capital to flood in. Right. You can't use these networks if you don't know what they are from a legal perspective. And we are so close to that happening. So I think if we look back at 2025, people could be frustrated with some of the returns, but they can't be frustrated with the progress that we've made. And then there were some things at the end of the year that just kind of made things more uncomfortable in the short term and tested people's faith for sure. Right. We had tax law selling in crypto, because everything else was up in 2025 for the most part, but not crypto. Right. So crypto and its underperformance was probably exacerbated. Right. We also had clearly some whales selling, right. We look at a metric called Coin Days Destroyed, which looks at, for Bitcoin when, you know, big old, big amounts of old coin moves. Right. It's presumably because it's being liquidated. And Coin Days destroyed did spike up very significantly during parts of 2025. So that drove some pressure. Right. But that's all in the rearview mirror.
- [12:27]
C
Now, you're not going to talk about 10, 10, 10 10.
- [12:31]
D
There was one day that maybe was a little rough for the crypto ecosystem, but I think if we back up. So 1010, for those that aren't familiar. So October 10th, there was a bit of a flash crash in the ecosystem that was not great. Right. What did we see there? We were back to relative peaks in leverage. Right. And this is more of an offshore phenomenon, and a lot of investors and speculators looping and doing other types of things that were basically being a bit too aggressive. Right. And look, this infrastructure is still evolving, the market infrastructure, and some pieces of this market infrastructure were tested and failed. Right. And the outcomes of that were damaging for a subset of offshore retail investors. And that did Leave a mark. Right. That has definitely impacted sentiment, but that is a, a feature of a, of an emerging market that's still improving over time. Right. Where do we think crypto market infrastructure is going to be in Q2, Q3 and Q4? 2026? Do we think that October 10th will happen again? No, of course not. Why not? Because of regulators, actually, it'll be the ecosystem itself that's quickly moving to address those issues. So 1010 was, was definitely an issue, but this is what a free market looks like. And having these, these events actually makes us innovate and iterate a lot faster than you see in the traditional market system.
- [13:58]
C
Do you want to talk about your favorite year ending stat?
- [14:01]
D
My favorite year ending stat. Okay, I will say this. The most shocking part of 2025 from a returns and flow perspective was the performance that BlackRock's IBIT ETF put in. So year to date, returns for 2025 were down about 6%, but they brought in about $25 billion. Right. In the history of asset management, I've never seen a product raise so much money when the performance was negative. Right. It is incredibly rare to see investors buy, lose money and keep adding. That just basically doesn't happen. Right. So then we have to ask ourselves, why is it happening and what are they going to do next? Right. If we think about the outlook for flows in 2026, it's looking pretty good already. The start of 2026 has been positive with ETFs already bringing over over a billion dollars into, into Bitcoin more recently. And it suggests that we are going to see a continued strong trend for, for retail investing. It feels as though they just got started and they're going to continue to build that position. And so it could be a really strong year for, for Bitcoin in 2026.
- [15:17]
C
Yeah. And think about it. Jamie Dimon is slowly starting to talk positively about our space.
- [15:23]
D
Slowly.
- [15:23]
B
Yeah.
- [15:24]
D
Well, and Morgan Stanley, after two years, then decides that they're now going to launch ETFs. Right. I, I worked at iShares. The rule was if you didn't launch early, you didn't launch at all. Because the ticker, the liquidity, the market cap, all those things come together and it becomes almost unassailable to try to compete. You know, six or 12 months later, you had to plant that flag. It was literally the name of the strategy. So for Morgan Stanley to know all of that and then say, no, no, we're still going to go launch bitcoin and crypto ETFs in 2026. Total shocker. And I think it suggests that they're seeing things in their retail network that tell them, tells them, tells them it's still very early.
- [16:09]
B
Any other takeaways from more of an institutional lens?
- [16:12]
D
Well, the biggest real institutional news last year was that the Abu Dhabi Investment council, known as ADIC, made a large direct allocation to Bitcoin. Okay.
- [16:26]
C
Through iBit.
- [16:27]
D
Through iBit. That was a surprise, number one. Number two, it was quite surprising that they were willing to speak about it publicly. For most of my career, I've worked with very large institutions, whether it's in Singapore or in Hong Kong or in Middle east or here in America. And in general, these really large pots of capital do not talk about what they're invested in unless it's through some document that's been through every single lawyer. And they certainly don't talk about one singular investment, especially something that could be viewed as controversial. Right. So for Audic to go and one, make a very large purchase and two, be willing to talk about it specifically on the record, that's very different. And what that means for other institutions is that it's removing the career risk to copy that decision. Right. Last cycle, going back to 2021, there were folks like Ajit over, who's the CIO of the Houston Firefighters Pension Fund, and Katherine Molnar at Fairfax County. They were early leaders for institutions to make investments in crypto and they made great returns for their, for their investors, for their pensioners. But they got a lot of heat from the press. Right. We really needed someone like an addict, which every major pension fund knows who they are, to make that statement. Because now the next time that someone goes into a pension board says, hey, I think we should consider having a position in Bitcoin. No one is going to look at them like they're crazy. They're going to say, well, why didn't you bring it up last quarter? I mean, they're always in trouble, right? You're in trouble if you bring it up. Right. You're in trouble if you bring it up late. Right. And institutions pick your poison. Right? But that's. So I think from the institutional perspective, that was a big deal. The other thing I'll just say is the, the capital markets window finally open for crypto companies. Right. We had a bunch of really interesting companies come into the, the U.S. public equity market. And that has changed the nature of how some institutions view, view the space. Because before last year, you kind of had basically Coinbase and a few bitcoin Miners right now you've got many more notable companies that are part of public company portfolios that they might have with their external managers. And so now it's just becoming another industry for them. And that by the way is great.
- [18:52]
C
Yeah. And then the other big news this week we, that had been an overhang going into the end of last year that has now been released is, is the news coming out of MSCI yesterday that they will not remove what they see as digital asset treasury companies from their indices.
- [19:09]
D
I mean that is such a big deal because you know, at the extreme it basically would stop a bitcoin bank from existing in MSCI indices. So the idea that something that could be the currency of the world, well you certainly should be able to have a bank that uses that currency. But the structure that MSCI had put forward and the proposed removal of DAT codes and some things that look like it was, was really problematic.
- [19:37]
C
It was very broad. It would have captured almost all of the publicly traded bitcoin miners despite their, their diversification into high performance computing data centers. Strategy for sure impacted it was it was a real risk to how the industry would be viewed and how capital would continue to flow into the segment.
- [19:57]
D
And you know, we don't exclude oil companies if they happen to have a bunch of proved reserves right on their books. So it's just a commodity, Right? That's been made clear at least in the last few years. We know the Bitcoin's economy.
- [20:10]
C
We've known that for three years I think.
- [20:11]
D
So why is it that this, this commodity requires special and unfair treatment? Well, it sounds like it doesn't, at.
- [20:18]
C
Least for now, which is great, really positive news. So I think everything, we're only a week into the new year, but generally positive signs coming from all of the indicators that we would be looking at on a daily basis.
- [20:32]
A
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- [22:59]
B
I was having a conversation a few weeks ago and I gave the example of you had the first spot Bitcoin ETFs at the beginning of 2024 and maybe that things continue to develop over 2024, 2025. And then I kind of said maybe the big banks and the tale of banks is like a 2026, 2027 story. But here we are just a few days later and you have Morgan Stanley and maybe others to come with bitcoin products coming to market. What's your thought on is it are the banks going to have FOMO and that'll all kind of happen sooner because people can just change where they're banking or is this really a multi year story across a couple of these themes?
- [23:49]
D
I think one thing it might be helpful for the listeners to understand is the structure of the of the investing market us. Right? That an ETF existed was great, but that is just the start of how capital gets allocated. Right? I think we can all remember when we all thought that, you know, online brokers would do away with wealth managers. Not the case in the US we pick experts for things that are important. Right. We have doctors for health. Right. And in money for the most part many people rely upon wealth managers and those wealth management platforms. They have all these processes that take so long. I know you used to have to deal with many of these folks and it, it's difficult for them, it's difficult for us. But that then the end beneficiary is a client because they end up with a menu of things that have been vetted. Right. But that that menu takes a long time to put together, curate and update. Right? And the issue is that Even though these ETFs have come out, it's taken some time for many of these wealth managers to say, okay, now it's time to add these products and then they have to start, well, who do we use? How, how much? Right. And some of those things were very difficult to do in the prior administration. Now I think in the current administration it makes it a lot easier. So the question is, how is this going to play out? Well, we already kind of know a little bit. Again, back to an earlier point. We've never seen for the most part such a large flow into an asset when it actually underperformed. Right. That should tell you that something big is going on and we have just gotten started right now. One other dynamic listeners should be aware.
- [25:29]
C
Of is the key is started.
- [25:32]
D
Yes.
- [25:32]
C
And it's not going to happen overnight. We thought ETFs would replace mutual funds.
- [25:36]
D
And what they're still 50% is, is now it's a 50, 50, you know, 20 years later. I remember knocking on the door of iShares and BGI and they said, oh, ETFs are going over the world. This is 2002. And you know, it's happening but it's slow but slowly. Right. And so it's more likely to be this constant drumbeat. One thing that does accelerate things is obviously the current administration, but also wealth managers. Like the worst thing in the world is that they lose a client because the client wanted something and it wasn't available and they went to another broker to go buy it. Right. So that competitive dynamic is happening right now across all of the, all of these firms and they, they get it, but it's just their processes to make these changes. They just take time.
- [26:23]
B
How do you weigh in your mind and, or think about nation states, institutions and banks and ETFs because it's such a prominent bucket as far as weighting meaning like importance from a flows perspective over the next couple of years. Kind of an impossible question. But I mean we do see, right, the $100 billion in BlackRock. We see the 50, 60, $70 billion in strategy. Does the preferred market and digital credit kind of accelerate that potentially on the debt front or is all of this just like we'll have to wait and see.
- [27:05]
C
Obviously we're going to have to wait and see regardless of what our predictions are, think we're going to see increased accumulation by, by nation states in the US we're seeing it obviously with, with some of the executive orders and a lot of activity at a state Level, which I think is, is only going to continue the dynamics with, with mining as far as how jurisdictions have treated bitcoin miners historically. And that, that continues to be. To be a hot topic, I think, I think is fascinating. And miners relation. As people get more comfortable with how bitcoin miners can actually be helpful with grid stabilization, with power generation, with the economics of power creation and power consumption in jurisdictions, I think that we're only scratching the surface of where that could go as well.
- [28:01]
D
At the sovereign level. There, there is a potential outcome here where you see what's happening in gold in the last year, right. We have just scratched the surface at the central bank level by, on a country by country basis as to what could happen there. Right. I don't want to get people excited and they say, oh my gosh, Bitcoin's going to go to 1.5, $1.6 million a coin, right.
- [28:29]
C
In 2026.
- [28:29]
D
In 2026. We're not saying that. That's not. But you know, if you look at the value, that is the, that's the gold equivalency, right, today for bitcoin. So something that could have over a, you know, 15x type of return, even at what appear to be elevated levels. How can that be possible? Well, it's possible because of the problems that we have, right? What do we have? We have economies in the G20, right. 19 out of 20 have fiscal deficits and most of them also have way too much debt and most of them also have not enough growth. So if you're not, if you're spending too much, you have too much debt, you're not growing fast enough. We know where this is all headed, right. So people are watching balance sheets like a hawk to see how we are going to try to inflate our way out of this. Right. And the natural response is to think about assets that are that nominal anchor, like gold, right. Where if you can buy gold, whatever the dollar does, you'll still probably be fine in real terms. Right. And, and I think we don't know how this is going to play out, but you could look at bitcoin as really playing that, that even at this price level, which seems high to others, if it actually achieves its goal, it's only 10% of the way there. Right. And that, and that when you're an institution and you say, okay, it's 100% downside, but there's a, there's a potential 10x, right. And that 10x is solving a really bad problem for us. Like if bitcoin goes to $1.5 million. We've got lots of problems over here, right? It's very rare that you can find something that has a positive return in such a negative outcome that you like, even if the bad outcome doesn't happen, happen. Right? And that's where, that's where I think a lot of these sovereigns are looking at this saying, hey, we need to figure out what our game plan is. And that's why our administration's been very positive as well. They can see the issues.
- [30:27]
C
I think the other thing we need to pay attention to is the average consumer and how, how increasingly sophisticated and aware they are of inflation and the impact to their, to their purchasing power. And the more they're going to start looking and are starting to look for ways the time value of money and especially for the younger generation that's significantly impacted by inflation, they're more likely to start making moves into bitcoin over the next few years as that becomes increasingly ingrained in the zeitgeist of this generation.
- [31:11]
B
What are your thoughts on the geopolitical landscape? I saw a meme this morning of Marco Rubio with a sats hat on, right, because he's the, the head of the Bitcoin strategic reserve, which of course he's not. But you know, if we see more and more of this landscape changing, what does a Venezuela or trying to purchase Greenland or on and on and on. What does that say to you?
- [31:39]
C
Look, this administration really understands bitcoin. They really, they understand bitcoin mining, they understand its relationship with power. Obviously it's a big power story when it comes to Greenland and Venezuela as well as other rare earth minerals. Venezuela's had a long standing relationship with bitcoin and with bitcoin mining. Bitcoin mining has not been welcome in Venezuela. It was outright banned in 2024. But if you look at the global hash rate, they're still responsible for zero I 0.6. So just under 1% of global hash rate is coming out of Venezuela and it's predominantly coming out of, out of individuals who have set up mining rigs. Second secondary market purchase mining rigs in sheds in farmhouses where they're just trying to accumulate whatever, whatever bitcoin they can because they understand its value as a hedge against the debasement of their currency. That's been going on well since, I don't know, 2013, longer. So they were, they were early adopters of bitcoin mining back in like 14, 15, 16. A lot of the secondary machines coming out of North America were making their way into Venezuela. So you've got a country that is really astute, understands and has long standing familiarity not just with the asset itself, but the production of it.
- [33:06]
D
Well, maybe I'll just add, you know, so Venezuela has got folks talking about this idea of the return of the Monroe doctrine, right. From 1823. Back then we said, hey, if you're, you're we. We didn't want Europe coming in and colonizing and interfering with not just America, but the whole Western hemisphere. Right. So that was the Monroe Doctrine. Now they're calling it the Don Row Doctrine.
- [33:29]
C
Okay, he's calling it the Don Row Doctrine.
- [33:33]
D
If he's calling the Don Row Doctrine, I think that's good enough. I saw it Air Force One and Marco Rubio went on Meet the Press just this Sunday and said, listen, if you are an adversary or a rival of the United States, you know, we don't want you in our hemisphere. This is where we live. We want to ensure our safety. Now that is giving, you know, clear signal that we want to dominate in a, in the Western hemisphere as a country. And what does that mean for these countries? You know, it definitely could mean a safer environment. That's what we want for our own people. Okay. No one can argue with that. But from a crypto perspective, what it means is that American policies. Right. Will basically be viewed as the default in the Western hemisphere. What is that? Democracy, Real capital markets, free markets. Right. And what are some of the policies that are most pronounced in the US right now? Well, we're pro crypto. Right. And that sort of thing can only help to support, you know, you can think of Venezuela as like extending the U.S. you know, menu of policies to a much broader set of countries. Right. Over time. And that can only, we think, be supportive of bitcoin in particular.
- [34:50]
C
It's, it's fun. Still, funny to hear you say that because it's only been true for 13 months.
- [34:57]
D
I know, but, you know, we say this like in markets, like nothing happens for, for years and then everything happens in months or even days. And that's the hard part with markets is that you kind of, you want everything to happen right away. And sometimes it's just, you know, the market will test you. And obviously we, a lot of us got tested last year, but the underlying.
- [35:19]
C
Last year when it should have been peak bull.
- [35:21]
D
Yeah.
- [35:22]
C
Just the opposite of what every chart told us going, going into last year. But that, that also tells you that volatility is dampening, that, that the signals are changing, that we have to look at things in a new way, which is something that we've, we've wanted to see happen. And, and here we are. You're careful what, what you wish for because now you, you don't know what's coming next. But certainly very, very positive. And at the end of the day I think 25 ended up being most likely set up for 26. But to your earlier point, nothing moves quickly when you're, when you're dealing with this monstrous amount of change coming out of a legacy based system.
- [35:59]
B
Yeah. This reminds me of what Tom Lee is famous for saying, which is that most of bitcoin's returns happen in 10 days.
- [36:07]
C
Yes.
- [36:08]
B
And maybe it's 10 days period, but I guess we don't know when those 10 days are or which year it's in.
- [36:14]
C
No, no, we, we used to be able to predict with more accuracy because if you just kind of looked back on the four year cycle, you could, you could kind of tell where it was going to be within a few weeks essentially. But that just did not play out last year.
- [36:26]
B
Can we say it's dead now?
- [36:27]
C
What are, I'm on, I'm already on record saying it's, it's dead.
- [36:30]
B
O, we just want to repeat that many times.
- [36:33]
C
I do, I do believe it's dead. We need a few more data points to put the final nail on the coffin. I think, I think we need to see an all time high for bitcoin come ideally in the first half of this year. But if it comes any time this year, it proves the cycle is dead. Sebastian's a little more nuanced on his answer to the death of the cycle.
- [36:52]
D
Well, I think so we had an interesting conversation. At the end of the day, the reality is, is that we have seasonality markets. Right. And what is seasonality? That is basically humans acting irrationally on a predictable, in a predictable way. Right. So we have lots of people that have made money believing in the four year cycle. Right. And many of them were selling in Q4 and Q3 of last year because they see it and say, well listen, I know nothing else. So I'm going to hit the exits. Now that's a part of the four year cycle, but not, you know, I concur with Jamie, of course, because the four year cycle at the end when it really mattered, it was because the net flow that came from miners, you know, post halving was such a market decrease that just by holding demand constant you had to have price go up. Right. Well now we're where the happening is. Or rather the reward rate is for miners. It's just not material in the way that it was material before. So you can mathematically say like, look, it doesn't really matter, but the market psychology takes time to change, right? And I think we were, we were going through that the end of last year where October 10th we had the flash crash which is literally days away from the supposed, you know, peak for, for the four year cycle. And then you see this pattern recognition and people say, listen, I don't want to, I don't want to believe it's different this time, right? That's the, those are the most dangerous words in the markets, right?
- [38:24]
B
This time it's different.
- [38:25]
D
This time it's different, right? Yeah. But last year in many ways was so unique, right? You had people, you had investment opportunities in AI that people thought they could make ten or a hundred or a thousand x. Right. You had tax loss selling, you had, you had whales looking at the four year cycle, you had all these other things. And we had, you know, a little bit of a slowdown with clarity. Right. But all those things are in the rearview now and all the major fundamental issues that underpin the long term value of Bitcoin are still there. Governments aren't growing, we're not growing enough in the economy. We have too much debt and we're not saving. We're actually going further into debt. And so the only way out is obviously to drive inflation higher. And that's where an asset like Bitcoin outperforms.
- [39:10]
A
Does it all basically come down to.
- [39:12]
B
Liquidity or what else are you considering?
- [39:16]
D
Look, liquidity is a big deal right now. We were actually putting out a post today that, that looked, you know, financial conditions are actually good now versus what they've been. They're almost, if you look at the Chicago Fed data back to late 2021 sort of environment and we expect that rates will likely be coming lower over time with new Fed chair. So this is a pretty good setup for returns because you think that liquidity is good and getting better, right? It's not just about liquidity, but it's pretty important.
- [39:51]
B
Anything to add? Is it all liquidity?
- [39:54]
C
Look, liquidity is important. You can't ignore sentiment because in crypto that still drives a lot of action. And things like, like, things like 10, 10 can impact how, how retail, retail trades. And we are still heavily at the mercy of retail investors in crypto. It's still early. Large long holding institutions are early days in coming into this space. So the market does move a bit more irrationally. In our space than, than in other spaces. Liquidity is important, but you can't ignore sentiment shift shifts.
- [40:30]
D
I think also one last thing, we did touch on it earlier but the advent of AI and specifically agents, right. Could be a big deal for crypto over the next couple of years, but will probably more reflected in pricing this year. Right. Agents can't get bank accounts but they can have wallets, right? What kind of money are they going to want to have? Right. They're going to want the most permissionless programmable money out there. Right. And you know, L2s are now with Taproot we can, we can do much more than we used to do. And so I think it's the case. I think what one surprise we could see this year is the impact of the utilization of crypto by the agentic economy. Right? Because these guys, these guys, these, these, these agents, they need, they need wallets, right? They need, they need digital money. And it's, it's, it's likely that a lot of, of economic activity is going to be migrating towards these types of actors, but these actors are actually going to naturally prefer these type of crypto rails and I think that's not well.
- [41:37]
C
Priced right now or well understood.
- [41:40]
D
Yeah.
- [41:41]
B
Where's the best place for people to reach out to you, find you online, that sort of a thing.
- [41:47]
C
We are very easy to find. Reserve1.com we're on socials. Sebastian and I both have very unique name spelling. So easy to find us on LinkedIn, on Twitter. Feel free to reach out to us anytime. We're happy to engage directly with the community and answer any questions.
- [42:03]
B
Awesome. Jamie Leverton. Sebastian. Bea.
- [42:07]
C
There you go.
- [42:08]
B
Reserve one. Thanks for joining us, really appreciate your time.
- [42:10]
C
Thanks for having us.
- [42:11]
D
Thanks.
- [42:11]
C
Thanks guys.
- [42:12]
A
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