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Foreign.
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It is April 29, 2026. Welcome to the report. Today's report is entitled still patient, question mark. I'm guessing that Mike is patient, but we got a question today which is, is this rally on borrowed time or is this the breakout rally the bulls have been waiting for? Traders don't think so. They are short in record numbers. They're getting squeezed hard and yet they're still doubling down. Is this cope or is this the short squeeze the bulls have been waiting for? We've seen these in previous cycles. What have they meant then? What could they mean now? We'll take a look at Michael Saylor's $2 billion buy. Short term holder cost basis fed QE. I actually don't know if we should call it QE. We'll get into that and what Mike means when he tells us to respect the cycle. Got to respect the cycle, stick around until the end. We're going to pop the hood on the portfolio strategy here. Look at the various sleeves, the core positions that Mike is intending to build, his strategy, his journal when it comes to allocations and the timing behind all of this. And also some interesting details on bitcoin dominance and what to watch there. Okay, Mike, so we've got the most negative funding of the cycle. Like shorts are very short and they're paying a premium for that Fed printing. I mentioned Saylor. He's still buying billions and he's propping up the market. The bulls say this is the setup. This is what we would anticipate from a, for a future face ripping short, squeeze up above 80k and beyond, but we still haven't punched above that number. Above 80k. Bulls are saying it's only a matter of time. What's the market telling you?
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Market is telling me that. I think the big question is, are all these people that are putting on these shorts out there, is the, are they the smart money out there or are they, are they the dumb money? I think that is the biggest question because we have the largest, you know, short position in, in the market, in the market that we've seen so far in this, this bear period over the last seven months or so. It's starting to come off a tiny bit, which is a little bit interesting because we're now starting to see a little bit of weakness from bitcoin. But, you know, I think what we can kind of go through today is really what is happening, you know, right now with this battle between the bulls and the bears. This has been going on for about 3 months in this channel between 60 79k or so. So we can really look at under the hood at some of that data and then start to look at market structure. And we've got, I went much deeper this week on sort of macro liquidity in that setup. So kind of get into that and hopefully put together a pretty good picture of kind of how we're seeing things out there.
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I think that's exactly what we need and we'll do that in just a second. But before we do, we want to thank our friends and sponsors over at Galaxy. Galaxy 1 is a consumer facing application for you. If you're an investor in crypto, if you're already holding Solana, that's the SOL token, you may as well be staking it. In fact, you should be staking it or you're giving up an opportunity cost of 6.5%. That is the variable staking rewards you can get on your soul. If you go stake with Galaxy One. There's no fees all the way through December 31st for doing this. So if you own Sol, you may as well be staking it with Galaxy Digital's validator infrastructure. This is the infrastructure that they use for their institutional clients and it's available for you, it's all integrated. Buy your soul directly in the app. Incredibly easy to do. Start staking SOL on Galaxy One. There's a link in the show notes as usual. Okay, last we left things, Mike, you were patient and the title of today's report is still patient. So I guess that's the question we're going to get into. Are you still patient and why? Can we open this up and take a look at the Bitcoin market structure? And I think this is the thing to focus on which is what are all of these shorts doing? This is the funding rates, futures, perpetual funding rates, all exchanges. And we can see all these red lines here, these red lines down, candles down. What is that telling us?
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It's telling us that the market participants, the traders in the market right now are so bearish that they're willing to pay a much higher premium to keep that trade on. They're paying the longs right, to keep that, that trade on. And that premium is now, you know, went to it's, it's highest level that we've seen so far in this, in this bear market. So this is pretty typical for what you expect to see during these periods where you have a, what we think is more of a bear market rally where you get up to a resistance level. We went right up to the short term holder cost basis. Basis, which is about 79k right now. And we, we bounced. That's the resistance line. And that's really what these shorts are defending, right? They have the view that, that that line is not going to get crossed. And they're aggressively saying, you know, we're going to reject, reject the price when it gets there. And we're gonna, we're gonna force the market to prove us wrong. There needs to be some sort of, you know, wall of buying activity in combination with all of these shorts out there to sort of flip that in the other direction. And that's kind of what I'm looking to see, you know, if this is going to play out. We've seen them, you know, they're getting liquidated, right? So we saw the third most liquidations of the last two bear markets, really, over the last week or so.
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So, so they're wrong so far.
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They're wrong, they've been wrong. They might not be wrong in the long term, but obviously in the short term you can get squeezed. And we've, we've been seeing some of that play out. And what I'm really focused on here is like this setup. To me, if you're bullish right now, like the bulls have to win this setup, right, you've got, you've got the perfect setup. If you're bullish and you think that these people that are aggressively shorting are wrong and that there's a real durable bid in the market, you've got to win this line, you've got to push into 80k, 80, 84k or so. And so that's kind of, I think the big question here is like, why has that not happened if we are truly in a durable move here? You know, we know that sailor is in the market. He's still out there buying. And I think that's one thing that I keep coming back to is like he's out there, he's putting, you know, he's doing his thing, he's on crypto Twitter, he's announcing his buys. People are getting excited. This is one of the main narratives right now, if you are bullish, is that sailors sort of setting a bottom for the market. But we're not getting that sort of durable move up. It doesn't mean, you know, we're not going to get it. But I do think it's sort of interesting. The other interesting data point here is, you know, we track about 30 assets on the Defi reports watch list and we measure the, the 14 day RSI. That's a momentum indicator. That's telling you if the assets either overbought or oversold or, you know, somewhere in the middle. And bitcoin is the most overbought asset on the watch list right now. So it's, it's sort of like made its move, right, it's made its move back to that resistance line and you know, we're going to see if this ultimately holds. It's been about three months now that we've been trading in this channel. That's a pretty long period of time. And so I do feel like, you know, timing is always really difficult to predict in the short term. It feels like this is going to get resolved one way or another pretty soon.
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So this is, this is the moment, this is the battle that the bulls really need to win versus the Bears. But sounds like the Bears and the shorts and the traders. Whether this is the smart money or not, we don't know. But it sounds like they are doubling down on their position. When we've seen short liquidations like this in previous markets, what has it meant? And maybe we can layer in a few other metrics that you show in today's report. One is spot volumes which still remain muted as far as we can see, and also ETF flows which are there but still weak. So what has this, what, what does this, when you cross this data set with the short liquidations, what does this mean to you about who's going to win and what has happened in previous cycles?
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Yeah, I'm, I'm really, you know, okay, so it's like we know what's happening in the derivatives market and you know, where the positioning is there. So now I'm looking at, okay, what's, what's happening in the spot market? Is there something in, is there any indication in the spot market that that activity lines up with, you know, sort of maybe more bullish sentiment out there? And I'm really just not seeing that right now. So spot volumes are currently, you know, pretty very, very low. There's just not a lot of on chain activity, not a lot of volume, not a lot of transactions on the bit bitcoin blockchain either. So that's one data point that sort of says, you know, maybe not. The other one that I think is, provides a lot of signal here is this short term holder supply and profit. And what this is showing is when the short term holder supply and profit spikes up, you know, this occurs even in, even in bull markets as well. When you see that line make a pretty big move up, you tend, it tends to precipitate a correction. And it's. And I think the reason for this, or at least the reason that this tends to happen more and bear markets is kind of what we were just talking about where the price is retracing back to the short term holder cost basis. And as that happens, people that came into the market maybe late in 25 or early in 26, they are collapsing to break even. Their unrealized losses are disappearing as that happens. And so they're, I think, trying to get out of the market. I think this is something we tend to see during bear markets where now they want to get out. They're selling to dip buyers that are convinced that, you know, the bulls are going to win this and we've already bought them. So I think that's the dynamic that's, that's playing out.
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And those would be, that would be the, the new money cohort that we were talking about so much last week. That's the, the short term holders.
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Yep. Yeah. So they're filling into that, that cost basis cohort. We covered this last week. That's between the 66 and 78K. So that, that did rise a little bit again. We looked at it again. It's up a little bit over last week. So you still have people that want to come in and buy at that level. And we think they're buying from short term holders that are, are closing in on break even. They've been since they bought. They basically been seeing, you know, down only and they're like happy to get out of the market at this point. So I think that's sort of the dynamic here. When you see that chart spike up the way that it just did, that gives me a lot of pause that, you know, this is, this is potentially not a great setup. If you're on the bul side that we're showing the seven day moving average of this. If, if we took out the, the moving average element of this, it is starting to roll over right now. The price, you know, we, we got up to about 79k or so. We're now down in the low 76s. So we'll see if this is like the move down or we're just kind of consolidating here, but that line is starting to roll over now.
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Okay, so you're saying we hit in the 2022 bear market. We hit that short term holder cost basis. Right now it's about 79k or so. We hit that a few times. We kind of bounced off of that like a rubber band. We went up to there and then kind of propelled down. This happened as far as I can tell from kind of the chart here, three times in 2022. And this looks like it's the second time that it's happening in this bear season of 2026. So you're just saying, hey, last. This is what we have seen in previous markets and we're seeing the same thing in 2026, correct?
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That's right. And, and yeah, that's, that's the main takeaway. And you know, we're pairing up some of this data, you know, just trying to understand what's playing out in the market with this cycle to cycle cost basis data that we've been updating people on. We cover this in detail last week so we don't need to get into, into too much here. But just to say that, you know, this is the structure out there. We're monitoring this what we view as like this kind of newer hot money that came in over the last year. We're waiting for that to like fully rotate into new hands. That process is, is playing out. I just don't think it's fully played out. And it feels to me like we do need to have like one more potential, you know, correction here. And then those numbers that we track on this cycle to cycle cost basis, I think they'll start to line up kind of more with what we saw last cycle and we may, that, that may give me more conviction that like okay, we're, we've kind of got to the, the macro low of this cycle.
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Where are we in the fear and greed index right now? Are we back into we're not in fear territory I would imagine. Are we back into the greed zone or not quite?
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We're not back in greed, we're kind of in the middle zone right now. So this is the first time we've kind of come out of, I would say the more fear, fear levels that we were at over the last six months. And so you know, you've got like sentiment rising if you go on crypto Twitter. I think it's a much more divided I would say in terms of my timeline.
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Mike on crypto Twitter is all about how wrong Ben Cohen is about everything and how he deludes people and just picks data sets where he's only right. And of course he is. He is in bearish territory right now, filling my timeline. Haha. Look, he was wrong. He's always wrong.
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Yeah, yeah. So you know, which side of the equation do you want to be on there? You know, I'm not So sure that those people are the ones. That's the boat that you want to be in at this stage. I know Ben does a lot of. A lot of really, really good work. And yeah, so that's, that's kind of the sentiment out there, you know, we can get into. So I think the takeaway of sort of market structure and kind of cost basis and waiting for coins to rotate, my view is that if you are a bull, this is the moment, like you've gotta, you've gotta push through 80k, get, you know, maybe up to mid-80s or so or so and hold those levels. The other piece here and we can get into, you know, macro and where things are going. But I think that's the key thing, is market structure hasn't turned over. And the setup, the setup is like, perfect for a short squeeze and like, you know, that bull move that you'd be looking for, and we haven't quite seen it, even with Saylor making quite a few purchases out there.
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So I think time is not on the bull side here. Right. Because the longer we stay under the 80k range, I mean, it indicates they're basically losing this battle against the shorts and the bears in this market.
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Right, right.
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So that's the backdrop with the on chain data. There's something else, though, that has been swirling in the conversation, and that is, what is the Fed doing? I called this maybe QE question mark in the intro. I don't know if you'd call this qe, but what we're seeing here is the Federal Reserve monetary policy. This is a chart from Feds of the Fed balance sheet. And we're seeing quite clearly that since December, the Fed has added 172 billion to its balance sheet. And so I look at this chart and I want to ask you the question, is this money printing? Is this Fed qe? Does this increase liquidity? This is also what some of the bulls are saying. It's just like, hey, the Fed's printing again. Liquidity is actually going up, at least in the US on, on the Fed side, that's going to be a good thing for crypto assets.
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Yeah, this is, you know, I think we talked about this on the podcast at the time, back in December when this program was, was implemented at the Fed. And you know, at that time, Bitcoin, I think, was still trading in the 90k range or maybe higher. And I think the market sort of viewed that as, okay, fair. The Fed's going to start doing qe. This is going to add liquidity. We're not going to have this four year cycle. It didn't really impact that. And at the time my view on this was what they told the market was we're going to buy roughly $40 billion of treasury bills. We're not going to buy the longer end of the curve. And that was the thing that I was more focused on, that if they're not removing duration, they're not really impacting the long end of the curve. That's probably not going to impact asset allocation. And this is more just like a Fed put for like banking sector liquidity which was really getting tight around this period. And so yeah, I think we've now kind of, we can sort of zoom out on this and see what has transpired. We've got 172 billion added to the balance sheet. The guidance on this was that this was really just to kind of shore up liquidity in the banking sector ahead of tax day. Right. So April tax day was coming. Shore up the balance sheet or shore up liquidity. And the question I have now, and we have a Fed meeting today, so maybe we'll, we'll learn a little bit more about this is is this program now just going to continue in perpetuity, which a lot of, you know, we know a lot of central bank programs tend to do that. That's one question I have is like what is going to happen with this, this is Powell's last meeting today. Is Warsh going to continue with this program? And then the other question is there's, it's hard to tell but there are some signs that maybe they were actually buying some duration. We've seen like the long end of the curve during the volatility during, during the Iran war. It wants to, it was wanting to go up, it wants to go up, it wants the, the 10 year wants to get above 4.4 or so and it seems to get smashed down every, every time it gets there. So I think there is a chance that they were actually taking some duration out of the market, kind of manipulating the yield curve a little bit to try to stifle volatility on the move index which is like very negative to liquidity conditions out there. And so there's a chance that the Treasury Secretary in working with the Fed has been able to kind of like they're playing like a game of whack a mole a little bit with what's happening with all the volatility around the war. And I think if you zoom out on it, you have to say they've done a good job Right. Markets are at all time highs. They've been able to get through this period. And I just think the big question here is like this appears to have goosed the markets a little bit over the last few months. If this punch bowl is taken away, what does that mean moving forward? I think again we'll know more once more gets into the seat.
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So will the punch bowl be taken away or is it somewhat permanent? Is it continuously getting refilled? I think when you, when you look at the Federal Reserve policy and what they're doing on the balance sheet, you have to combine this with the liquidity outflow side of the equation as well as the other things that are adding liquidity to the system and get sort of a balanced view. I know we've talked a lot about fiscal, we've talked about oil, we've talked about AI spend and bank lending and tax refunds. I want to get to this summary here where maybe we put all of this together because this was a fantastic chart. I'm actually not sure where you got it. It's great though. And on one side of the ledger, on the left side of the ledger, we see all of the outflows and drains to liquidity. This is a US view, so it's not the global view. You'd have to add China and other central banks here to get the global view. But at least in the US which is very important for crypto assets, we see a few sources of outflow. Those are the tariffs which are reducing fiscal spend, so negative 300 billion interest income because fed fund rates have lowered from 5.5% to a lower amount now. And also oil shock, which brings liquidity out of the system. When oil price goes higher, then GDP decreases and then you have some on the other side of the equation, the inflows, the supportive flows. One of course is the Fed balance sheet, which is plus 170 billion or so. We've got tax refunds that are going into the economy. We've got of course, the capex spend, bank lending. And then there's this middle zone of like what are we doing with fiscal deficit spending? Where does that look? So as you look at this chart, Mike, can you guide us through what these sections are and where you actually think this nets out and what maybe the most important variables to watch for us now are?
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Yeah, I think this is like, you know, this is really me just feeding this into an LLM and with coming up with a kind of a rough estimate of what I think is happening with flows right now. Oh, wow.
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So this is a TDR exclusive.
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Exclusive. It is incredible. Well done. So, and you know, I think we've, there's been a lot of discussion around liquidity conditions. I think there's some sort of dueling views on this right now. And to me this is like how I kind of, kind of think about this and the tariffs, we know that that's been ongoing. It's still at a roughly $300 billion a year clip right now. So we know that that is pulling capital out of the private sector and it's going to the government sector. You just mentioned the interest income. This is because interest rates have come down. That's less interest expense for the government, but it's less interest income for the private sector. We talked about oil. So we know like that that stuff is kind of baked in. I think at this point. I mean oil is now going up. It's, I think it's up 5% today. It's up around $105 or so. So this is interesting that now this is coming back into the market. And what I'm looking, looking at on the sort of liquidity supportive side is what we just talked about with what the Fed's doing. That's sort of a question mark if that's going to stay there. Right. We need to know what Warsh's policy is going to be. The guidance on the RMP program was that it probably would be ending around this time. So we'll learn more there. The AI Capex this is the big question to me and this is another narrative out there. 600 billion of spending going into the U.S. economy. This is for data center build outs. There's a lot that goes into that. There's real estate, there's H Vac, there's electrical. These are sort of good paying, you know, blue collar jobs type type of work. The question I have with, with that is how does that actually impact the financial markets? I think it's good for the economy and the real economy. But, but, but how does it actually impact the financial markets? And if a lot of these large tech companies are actually using some of their free cash flows to pay for that and they're not doing buybacks, you know that, that's, that's good for the real economy, it's bad for financial markets. So that's, that's one piece of it and then the other piece of it is that I think roughly half of that is actually money that's leaving the US and going to Asia and it's buying chips and other components. You know related to, to building out these models. So you know, I just, I think if that if, you know, that is a real thing and that spending is happening. But I don't know if that is a bullish catalyst for financial markets in 2026. I think that's the big question there.
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I just think this is interesting because that is a variable that's unknown. Then we also have this, I don't know if this is a narrative or whether this will come to pass is we have a lot of massive AI IPOs that are upcoming, AI and tech related IPOs, SpaceX, et cetera. And you sort of wonder if that is going to suck liquidity out of the system as early investors are, you know, essentially seeking exit liquidity. How many times have we seen that in crypto where we get too many tokens, we have exit liquidity. And that's a factor here too.
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Totally.
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But the other thing that seems like somewhat out of the, the US Government's control or the Fed's control is, is the oil shock. We just had Rory Johnson on Bankless, he's kind of an oil quant, let's say. And all of the oil analysts are saying that just due to supply shock, if the strait remains close, the Strait of Hormuz, then they expect oil price to exceed like 150 per barrel. And you're saying here at 100 per barrel sustained, each $10 additional per barrel in oil is a negative 0.3% in consumption. Right. And so that's going to be a liquidity drain out of the system. But anyway, when you see this, what's kind of your net, Are we net down in liquidity or like what, yeah, what's, what's, what does this mean for investors listening to this today?
- [25:13]
A
So, so I think right now things are pretty healthy. And the other element on the right side of that chart that I didn't mention is the bank lending that, that has been increasing. So and this is kind of how the sort of mental model that I have for what's happening from a high level is you basically have the Trump administration trying to use tariffs, right. For, for negotiations and stuff. That's pulling capital out. We know interest rates are down, that's pulling capital out of the, out of the private sector. And then they're trying to sort of like backfill that by, you know, reducing regulation on the banks, getting the banks lending. We're starting, we're seeing some signs of this and some of that lending activity, you know, is at about 6 to 7% year over year. Increase. So that, that's positive. It's not a boom. I wouldn't, I wouldn't say it's sort of like normal growth level, but it has been trending up. So that's, that's interesting to see. And I think that's the big question is like, are we going to start to see a, you know, a lot of demand for loans? Like, is, is Warsh going to be able to come in and get rates down? I think that is going to be extremely difficult with oil prices now rising. I think this is the big, the big question. And if oil prices rise and that hurts, you know, consumption in the economy, you would think that that would also hurt business activity, that would hurt demand for loans and things like that, where maybe this bank lending isn't going, isn't going to be able to backfill all of this. So that, I think that's the big, the big question. The AI CapEx thing we know is ongoing. I just don't think that that's really going to impact, you know, the financial markets. And it actually could be negative for MAG7 potentially because they're, you know, the, the flow story is shifting from, you know, buybacks to actually spending that money into the, into the real economy. So, you know, I think right now we've got tax refunds circulating. And I think if you look at some of the, just like kind of what's happening with people's bank accounts and stuff like that, it looks like there's some money that's been pushed out into the economy that typically gets spent pretty quickly. So the economy's, I think, fairly healthy right now. And you also have a bit of an oil boom now occurring in the, in the US So that can, that can offset some of that negative GDP shock that's related to, you know, lower consumption. You know, that's, that's helping the oil companies, people that work for those companies. I don't know if it's really helping the, the guy at the gas pump. So it's a mixed bag. I'm not like super bearish and like saying, okay, this looks like a recession to me. It's more that, like, is this the type of setup that's really good for risk assets and crypto and things like that? My take on it is, is it's really not. And it looks to me like we've, we've been saying that this year feels similar to 2022. I still believe that we've been wrong about where the Nasdaq's going or we've been calling for a 25 to 35% correction in Nasdaq. I think we came down about 12% or so and now we've rallied back to all time highs. So we'll see. I think the economy is fairly healthy. Oil prices are obviously a major thing to pay attention to here. I know Goldman, I'm gonna have to check out that interview that you did, but I know Goldman is calling for, you know, their base case is for a 20% reduction in global inventory at year end. So that, you know, that that could be $150 oil. You know, it's possible.
- [28:29]
B
I have this visual of us being sort of on a teeter totter. One side is, you know, liquidity going out and the other side is liquidity, you know, coming in to the system. And it's just pretty balanced right now. Maybe liquidity coming in is a little bit higher, but the question is, what's the direction going in? And you think the direction is liquidity drain out. Okay, so let's talk about what this means for a crypto portfolio, at least the way your investor journal, the TDR is playing it. So what is the strategy right now at the highest level?
- [29:02]
A
Yeah, so, you know, seven months into this bear market and you know, from a high level, I want to be sort of positioned for risk on like I want, I don't want to be, I want to be ready to buy is really kind of where we're at. And our portfolio reflects this. We still have cash, you know, ready to be deployed. And I think that's. That the main thing that I'm focused on is, you know, to do well in crypto, you need to be ahead of, you need to be on the right side of the market. Right. So we're in a good position right now because we made good decisions, you know, last year. Right. And so that sets you up for where you're at now. Now we're seven months in. We want to be more aggressive at the, at this stage. So that's, that's one thing that I'm anchoring to. And a lot of the work that we've been doing, you know, with the watch list and the weekly analysis that we do is to identify, you know, what are the key, you know, themes and sectors that I think are going to potentially outperform Bitcoin when liquidity returns to these markets. And so we've been doing a lot of work there and identifying these, these core themes and sectors. And this is really, you know, we, we, we, we anchor the portfolio in bitcoin. So typically, you know, 60% or so is going to be in bitcoin. And then we think of like these other sleeves where we think about the Ethereum ecosystem, we think about real world assets, we think about stablecoins and we think about, you know, digital identity and other use cases. And there's some assets that are going into that sleeve. We think about Solana and what is Solana, you know, most useful for? It feels to me like it's the high velocity defi consumer retail use cases. And so that's something that I want to have exposure to. And we're building out, you know, a sleeve of the portfolio that will, that will, that will be geared towards, towards those use cases. And then you have the other stuff, you have crypto equities, you have, you have privacy, which is becoming more of a emerging topic and theme in crypto. You have the perps markets and you know, what, that, what's, what's taking place with Hyper Liquid and some of the competitors there. So we're kind of building out, we know what the core themes that we want to have exposure to that we think have a chance at outperforming. We got to pick the right assets within those themes and then we have to have the right strategy to acquire them. And I think that's, we can kind of get into some of the strategy there. And I think we're at an interesting point in the cycle right now, seven months into a bear market where there's a chance that bitcoin dominance is actually going to drop here at some point and that most of the damage that has been done to the crypto markets over the last seven months has, you know, mostly hit the altcoin space. And so, you know, we had this strategy that we would wait to buy altcoins after we had conviction that bitcoin was bottoming. I was doing some more work on this topic and kind of came around to the idea that this, what's happening today is very similar to what we saw in 2022 when the altcoin sector really sold off aggressively in the first half of the bear market. Bitcoin sold off less in the first half of the bear market. And then bitcoin actually sold off more from June through December. So of 2022, because the air had already been pulled out of the altcoin market at that point there was really less, you know, move down from all coins. And so I'm starting to factor that into how I think about, you know, portfolio allocation here. You know, roughly seven months in and yeah, the chart that you have up there kind of shows what I, what I was saying here is, is early in the, the bear market, bitcoin dominance increased back in 2022. That's the blue line and that arrow going up on the left side of the chart there. And then once we got to, like the June period and we had that, you know, that sort of next leg down, that brought us down to about 20k or so. That was when bitcoin dominance actually dropped. So, so what does that mean? It means that bitcoin was falling, but bitcoin in relation to the rest of the altcoin market was actually falling as well. So it means the altcoin market wasn't falling as fast as bitcoin was in the second half of the bear market. It kind of makes sense when you think about liquidity. And, you know, bitcoin is what was way more sensitive to liquidity than the traditional markets. But also there's, there's more inertia to, to bitcoin. It's a much larger asset, and so it takes a little bit longer for it to kind of get to its, its, its cycle lows. Altcoins are even farther out and even more sensitive to liquidity. And so they kind of get hit first in the, in the early part of the bear market. So that framework is kind of helping me build some conviction around some of these assets that we've been keeping an eye on. And we've started to allocate. We're not done, but we started to sort of nibble a little bit on some of these core themes and sectors and the assets within those.
- [33:57]
B
So that makes sense that bitcoin dominance would increase in the first half, but then decrease in the second half of the bear market also due to the cohort analysis that you've been doing for bitcoin. Because you'd think of the hottest money would be down the stack, not in bitcoin, kind of all the new money that would be disproportionately on the altcoin side of things. And that hot money, that new money is going to sell first. And so they sell during the first part of the bear market, and then they're exhausted near the second part of the bear market. And so that, it sounds like, is a reason for you to start deploying into the altcoin market. We talked a little bit about that last week, I suppose, just to summarize the themes that you're seeing and kind of the sectors that you're seeing. I know it's still early and this might change, but you've got four, a bitcoin port core position and that's going to be, you know, 50, 60% of the portfolio. And then you have an ethereum ecosystem type of position that might be somewhere around 10%. And then you have a Solana ecosystem sleeve that's maybe another call at 10%. And, and then everything else is 10%. And so far I'm adding that up and I'm getting to like 90%, which reserves what, 10% remaining for cash. So during this, this cycle, during the bear market, you want to leave some cash even in reserve, even then, and get to something close to 90%. Is that about right?
- [35:22]
A
That's about right, yeah. And, and people that were following us even towards the end of the last bull market, we were still deploying capital. It's not like we're just deploying, you know, at the, trying to get the lows. We were still deploying capital at parts of the bull market. We deployed, you know, over the summer and there was, that was during the period where there was kind of like DAT season and all of that. So there's always times to continue deploying, especially as kind of the risk on market conditions kind of change. So. Yeah, always deploying. But, but those are the core themes that I'm focused on. And like, you know, I think people should just sort of pay attention. If you're eyeballing alts right now, like, it's, it's, it's not going to be true. What I'm saying is not going to be universally true. Like, I'm not saying that alts are not going to go down if, if Bitcoin goes down. What I'm saying is that like, if you're, if you're strategic in the assets that you're looking at, I think what you want to be looking at is charts that, you know, have been already flatlining, you know, for a little while on low trading volume that are down 80 to 90%. And sort of ask yourself, like, who, who's the buyer and who's, who's selling? Right. At, at the, at these levels. And I think if you start to, if you could start to get conviction that, you know, the thing is already down, you know, it's really beaten up and, you know, you're not seeing like this desire. It looks like sellers are basically being exhausted. That's kind of what I want to buy into that type of a chart. And also something where there's actually a capitulation. Right? Those are the two things that I'm kind of looking at, to say, okay, the, the one year to three year risk reward is, is in my favorite. I've gone to a place where I'm comfortable with the risk reward here. And when these things get down, if you have conviction on something that has fundamentals, you like the team, you know, it's well funded, it's easy for people to kind of look at when you get into the bear market. And I've been seeing this, even people questioning some of these moves that we've been making. It's hard to formulate a bull thesis at the bottom of the bear market. Right when we were buying sold, you know, in 2022, like the, the whole narrative was it's dead.
- [37:28]
B
Sam Bankman Fried killed it.
- [37:30]
A
Developers are leaving. The developers are leaving, you know, 11% of the supply. Like, like people could not imagine that Solana could come back. And when you're buying something down that's beaten, beaten up that much, it's almost like it, it, the odds are in your favor that it's actually going to go up from there. So that's kind of how I think about this. It doesn't mean they can't come down and they can come down significantly more. If you buy something down 90% and it goes to 95%, you could be looking at a 40 to 50% drawdown, you know, at, at that level. And you have to sort of think through that and say am I going to buy more? Do I, you know, or am I going to get scared? And, and that's where you get, you want, you want to avoid, you want to have a thesis and get excited if, if it goes down and you can buy more. Because what we want to get into is stuff that we feel good about, that we feel good about the team, we feel good about the use case. We think, we think it's just totally over, you know, oversold, forgotten. And at certain levels you can 10x something and not even be getting back to the all time high price of that token. Maybe in some cases, you know, 50% of all time high levels. And those are the charts that, that we want to be in. Obviously this is hard, it's hard to buy when things are down that much and it's, it's much harder to formulate the bull case. But to me that's the type of market I want to be a little bit more aggressive into.
- [38:48]
B
So the lesson here or the thing, the strategy that you're pursuing is to respect the cycle, realize that the cycle is in play and then while that cycle is in play. You think that bitcoin dominance will drop from current levels. You also still hold the view that the probability points to further weakness for bitcoin. But now might be the time because of that dominance drop, bitcoin dominance drop to start looking at attractive non bitcoin assets in crypto. And that's what you've started to do now. The selection here makes all the difference in the world. Because alts as a category, as an index could increase, it doesn't mean your specific alts will increase. So it's all about making high conviction bet on what you think has fundamentals going into the next bull cycle. And that's what the watch list really does, which is available to all TDR members. If you want to see the assets that Mike is looking at, fair market values, deep analysis for that, you can go access that. In fact, as I mentioned last week you made some deployments here recently in the last couple of weeks into I think four or five different assets that you think will appreciate and value heading into the next cycle. So all listeners, you guys can unlock that at any time. And I should just say if you want to take a peek into that, it's free, it's free for a month and then you can convert into a paid subscriber if you're continuing to get value for the service. So there's a link in the show notes where you can go ahead and do that. If you're following Mike's strategy, then you are staying patient at this point in time. And sometimes patience is the hardest part of being an investor. Got to leave it there. None of this has been financial advice. This is an investor journal. We're on the journey alongside you. Until next time, stay curious.