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- [00:00]
A
Odds are that bitcoin will be trading materially higher a year from now.
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Not my words, but those of Matthew Siegel from Vaneck.
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Matthew is one of my favorite people to talk to when I want to break down exactly what's happening in markets. And he has the resume to prove
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that he's been right. You can look at his own fund node to see how much it has broadly outperformed bitcoin and the crypto market.
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We talked about open USD, the new stablecoin consortium.
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We talked about his fund and how they're positioned.
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We talked about bitcoin miners moving over to AI and basically every relevant topic
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in the crypto market right now. You're not going to want to miss this one. Let's go.
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C
Let's do.
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A
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B
about that happened this week. I think one of the biggest stories, obviously, was the announcement of Open USD, a consortium between 140 of the biggest. I'll just call them logos. They're companies. But for me right now they're just a lot of logos on the announcement to compete effectively with Circle and Tether. So I would love broadly your thoughts on that announcement.
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C
Yeah, I, I think if you look at the portfolio that I'm managing, we've been overweight the infrastructure and underweight applications. And I would say stablecoins are an application and so we have some exposure to Circle. But this news highlights that the barriers to entry are Relatively low in the space when it comes to tokenization, when it comes to stablecoins. And that could, that could weigh on margins. So that's what the market was pricing in the other day when Circle fell 17% on that news. Now, launching a product and achieving network effects and scale are two different things. And so the history of these types of consortiums is that there's nobody who's really incentivized to drive business activity and sales. And so you can hold those two thoughts in your head at the same time that the consortium will struggle, but that it's not great for circ. And that's where we are. So we added a little bit later in the week after the stock had already kind of cratered. So I think the risk reward at this level for Circle is pretty good. This news doesn't change their earnings for this quarter or for this year. It may impact kind of the terminal value that people put on the business.
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B
Let me ask you this question then as a continuation, then we'll circle back specifically to Open USD. I think what does meaningfully impact the bottom line of a stable coin would be interest rates coming down. We know that the bulk of the earnings for Circle and certainly Tether, but they're not publicly traded. So you don't have to be concerned with their stock price is being attached to how high interest rates are and how much they custody. Right. So the model effectively for stablecoins is monetizing the float. Right, Right. The USDC is the product, but the business is the float. And Open USD is effectively going to split that float among everybody who uses it as opposed to keeping it as the issuer. So I mean, how do you kind of play that when valuing a stock like Circle or any stablecoin moving forward if the float model changes?
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C
Yeah, a couple things. So first of all, rates have been especially the 10 year but you know, even even T bills have been kind of higher for longer than people expected. So in the near, you know, the earnings season is around the corner, the stock's extremely volatile. Like if they beat earnings, stocks going up and it's on its rear end right now. So I don't think the rates are kind of the near term issue. And then longer term there's other businesses, you know, brokers like Schwab Interactive Brokers, where float is a meaningful part of their earnings and it's easy to get bearish when rates are coming down. But usually when rates are coming down, it means animal spirits are elevated and business activity is strong. And maybe Bitcoin's working and on chain wealth's being created. Stablecoin AUM is growing. So I don't fully buy into that. Like low rates are bad for Circle. I think there's kind of more going on. It's a reasonably high quality earnings. But my comment on the pricing pressure and I agree with you that OUSD is at least saying that they're going to return essentially all the float to the ecosystem. But I still kind of land on who's the business exec who's going to drive that. Like a lot of these 140 companies have other ways that they can earn float. Maybe it's going to be other business lines competing. Exactly, exactly.
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B
This is like when we always have the argument about BRICS replacing the dollar and you're like there's a long history of dictators not working too well together.
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C
Exactly. Just consortiums tend not to work and so that, that be the, the bear case
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B
you guys. I mean Nick Yan sun is behind a stable coin himself. Right. Agora, is that correct? We've talked about that in the past.
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C
Yeah. And that one from the beginning we were, we are you know planning to basically return all of the float to, to distributors. So that thesis from the beginning was there's room to undercut Circle on price and to maybe white label some of this infrastructure but I think we've done a reasonable job. But we have 100 and some odd million in AUM for Agora. Nick does and you know Circle is, is close to its all time highs. So lots of competition has not eroded that the network effects of usdc. Every new stablecoin that launches needs to be interoperable with usdc. You know you could argue every. So you know, you can argue it's good for everyone.
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B
What about the Coinbase side? It seems like they're involved in both.
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C
We'll see. They are due to either extend or eliminate the partnership with Circle this year. I think that Coinbase makes a lot of money off that partnership. It's instrumental to the base development. There's a lot of things going on with Coinbase at the moment as they try to pivot from being an altcoin play to having their fingers in like every part of the financial business. And there's a lot more competition in prediction markets and perps so you know, stocks down a lot. That's another one where we've been, you know we've been underweight these exchanges and brokers relative to you know, bitcoin miners where valuation I think is cleaner and the story's Been more straightforward.
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B
Yeah, that makes a lot of sense. We've seen this trend now. I mean Robinhood had a big announcement this week that they're launching Robinhood chain which is their own layer 2, 7% yield by participating in DeFi by lending USDG DYDX rebranded to become the Dex that's on Robinhood chain. So it's a way to pitch the news that just happened. But it's also a clear trend that all of these major what were once viewed as exchanges are now trying to become everything apps for everyone. Right. So full, full breadth of both stock side, but also the crypto side, but also the Rails but also defi and also having a chain. I mean they're all trying to do everything here.
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C
Yeah, totally. And Robinhood's had a, had a great move for the stock. It's up, you know, 50% from the lows. And just this week they reported some really June preliminary numbers which imply record volumes for these prediction contracts for options for equities. So numbers, earnings estimates appear to be going up for Robinhood. They look well positioned.
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B
Yeah. Okay, so pivoting from all of that, let's talk markets. Obviously the big debate endlessly is what's going on with bitcoin? What's going on with the crypto market? Why is it down? When will it go? Does the four year cycle exist? I mean just give me your once again broad strokes kind of on where we're at.
- [09:44]
C
Yeah, you know, we respect the four year cycle and it's been one element in kind of not buying every dip in bitcoin this year. And you know, that's one of the reasons why node at least is up, you know, 20%. Bitcoin's down 20 or 30%. Not to say we didn't buy some of these dips. The first time that Bitcoin hit 60k, we noticed some really one sided positioning in the derivatives market and then we got the bounce into the low 80s, ran right into the moving averages. And on this retest there hasn't quite been the same type of capitulation signals in terms of, you know, liquidations or the premiums that people are paying for puts versus calls. And I think that the market noticed that. And while there was definitely a lot of bearishness, we didn't see that same type of capitulation. That said, puts are still really expensive versus calls by historical standards. We're seeing that like in the 80th percentile so it not quite the 99th like we saw you know, the first time. BTC hit 60k. But puts are expensive. Realized losses are in the 90th percentile historically so people are dumping losses. So you know there is maybe some hint of sellers exhaustion that may emerge here. And then we've also seen the older cohorts kind of two year plus holders have slowed down their, their selling. So that's another maybe hint of, of sellers exhaustion. And I think that's what's kind of leading to this bitcoin bounce here in the latter half of, of the week. But I, I'm still kind of waiting and, and watching to get more, to get more aggressive
- [11:53]
B
with that in mind as you look at what previous cycles have done. Is it really so easy as we go back up in October? I was not a believer that the four year cycle was intact by the way. And it's looking more like maybe it just is. I guess we need to see what happens at the tail end of this. But if we had almost to the day the top in October, usually the next fall after about a year is when things start to rise again.
- [12:20]
C
Yeah, I mean it really depends on your kind of individual positioning and risk reward. What I've been telling clients is that you want to have your full position by October. So you know, putting in some type of like time based buying where you add a few basis points every every month or so until we get into Q4 that seems like a reasonable strategy. You know, I can't say I know exactly what's going to happen but the fact that we that the four year pattern matched up so well, like you got to respect it a little bit.
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B
What's the bear case right now?
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AI, you know, continues to I think pose challenges for flows but also for fundamentals. I think what happened with zcash was a, was an interesting example where of you know, anthropic and these frontier models just directly competing with software stacks. And that's the bear case. One of the bear case. Obviously there's other things around the edges like, like quantum but I think bitcoin's actually made some considerable progress in getting the community aligned on a path forward and brain hiring their first quantum engineer who comes from the blockstream DNA. Seems to me like that problem is more behind us than in front of us in terms of the market realizing that something has to be done. The election is probably is still out there and that's why I think a lot of people are centering on this October idea for a bottom is you know you could arguably the front pages of the newspapers have not really grappled with what a blue sweep would mean for the pro growth agenda, not to mention the crypto agenda. So that bear case is looming and then, you know, the Clarity odds are still reasonable in poly market, but there's a, there's more people saying they just don't have the time to do it. And my conversations with institutions around altcoins especially is that the disclosure regime inside of Clarity is, is really important. People are, don't want to do business with these tokens when there's all these related party transactions and opaque relationships between the labs and the foundations and you don't really know who owns. But you know, you see it in the disclosures court like a quarters later, like with Trump's crypto stuff. Right. If the disclosure regimes had been in place, you would have seen that more or less closer in real time.
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B
Yeah, I've been putting clarity at 5%. I know markets have gone 70, 60, 50, 40. But even all of that considered in the time, I just don't think they can come together in an ethics clause. And this week you have Trump's disclosures, obviously, you know, people putting it anywhere between 1.4 and 2.3 billion in earnings in 2025, or if you extend slightly back on the crypto industry alone, I don't understand how they would possibly get seven Democrats in the Senate on board with voting for something that did not prevent that action.
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C
Yeah, I think that's a reasonable case. Like some of the crypto lobbying groups in Washington, you know, we're signaling that there might be a compromise on that if the language and the ethics doesn't explicitly target his, his kids. But you know, your take is fair one.
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Yeah.
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So that means that we could get a bitcoin reversal. But if everybody's waiting for clarity and we don't get it that the Alcord market could continue to languish relative to bitcoin, Right?
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C
Yeah, but, yeah, it could, but does that ever happen? And you know, what we're seeing today with, you know, Sol and some of the other alts are up quite a bit more than bitcoin. So I still have some little positions in the alts. And given the volatility, they do move the needle for the portfolio. But my general 30,000 foot view for this year and I haven't made a ton of changes, is that publicly listed companies are extracting a lot of the value that the open source blockchains might have gathered. And ousd, one example, Circle and their Ark blockchain, another example, Robinhood chain Coinbase. The list goes on where the users on the enterprise side don't want volatile fees. And just to pick on eth for a minute, that was the issue. You can't build a business around transaction fees that are that volatile. And then I think we've had regulatory clarity that on open source institutions can't do it. So that leaves these kind of quasi corporate chains as maybe the best hope to onboard large scale blockchain users. And so we've been underweight alts and kind of overweight the equities in the space that that's been okay for now.
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Listen, one thing I think that I got very right very early in 2025 is that I said that we had alt season. It was just in the stock market.
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C
Exactly.
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And it sounds like what you're saying there pretty much aligns with that is like people were like when will alts go up? But I kind of made the point that all the money went into crypto adjacent equities during the entire year and that was the money that would have been pumping those exact altcoins. So it sounds like that's.
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C
Yeah.
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B
You're talking about how you've to a certain extent why Node's doing so well.
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C
Yeah, yeah. Although you know, you also had to avoid kind of the second half of the IPO season last year. So the dats. Right. Most of those have completely round tripped. We were able to sidestep those. And then some of the smaller cap IPOs that came later, like Gemini Bitgo, these stocks have really, really struggled and they're not profitable. So the market, you know, doesn't, doesn't want to pay for unprofitable companies in a very fragmented landscape. So yes, sticking with the larger ones has also helped.
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B
What else is Node focused on? I mean, you're one of the rare people who's actively, you know, managing obviously a fund portfolio here, a product. And so you have to not just have opinions, but make real decisions. You mentioned obviously miners. Is that on the back of them pivoting to AI, which is the hotter narrative?
- [19:28]
C
Yeah, absolutely. So, you know, we launched last May and through, you know, Thursday, July 2nd, we're up 56% and Bitcoin's down 40%. So that's 100 percentage points of outperformance. And we did that by underweighting DATs and exchanges and overweighting miners because the valuation arbitrage between what they earn from selling bitcoin versus what they can earn from pivoting that data center capacity to serve the AI market, you know, it was really extreme. It's still quite pronounced and we haven't, haven't brought down that exposure a great deal. Part of the reason is I feel increasingly confident that a number of these companies are going to be able to convert to REITs over the next couple of years and that should bring down the volatility even more. The credit markets continue to fund kind of GPU purchases directly. It's really bringing down the cost of capital for these names. And then on the supply side, bringing on new power continues to be challenging in the US and after two decades of not investing in, or more even of not investing in power infrastructure because the world was globalizing, now it's de globalizing. You can't store your sovereign AI data in another country, so everyone has to duplicate the capacity after a couple decades of underinvestment. So I think that's going to take a while to catch up and I want to focus on stories where we can value the cash flows. So those names you have to look at.
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Yeah, I mean, what does that phenomenon mean for bitcoin mining? Right, because obviously hash rate has effectively crashed. Like debt difficulty has come down massively. Some of that, I guess, is obviously the market. But it seems like miners are more incentivized to become AI data centers than bitcoin miners. It's more profitable and they're willing to sell instead of hold to fund that. So you kind of have downward sales pressure and them eventually maybe going offline as bitcoin miners entirely. Right.
- [21:48]
C
A number of them will go offline as bitcoin miners. They may keep a small piece because for now, look, our fund is pretty small. But if these names exit bitcoin mining completely, then I would have a harder time owning them. So that would be a negative. So they may keep some just to have the optionality. It makes the hash rate of the pure plays even more attractive to the extent that bitcoin can stage a recovery. So like in the last downdraft when, when BTC hit 58, we didn't add to spot bitcoin, but we did add to like Bit Deer and Mara. And those are two names that are relatively pure play on the mining side. They're trying to pivot to AI, but you know, Bit Deer is completely vertically integrated now from the chips to the mining machines to the data centers. And so their margins would see, like, could see enormous tailwinds if bitcoin, if bitcoin recovers. So I feel like there's enough exposure to the coin via the pure play miners. But you raised the existential question if everyone leaves, then what's left? And one thing we noticed is that this decline in the hash rate, the bitcoin hash rate's down year to date. It's actually the longest time that it's fallen without making a new high. And some of that is definitely reflecting the listed miners leaving. And our thesis, or my thesis has been that sovereigns would pick up the slack. And some of that's happening. Ethiopia, Kenya, Kazakhstan, but not big enough to make up for the overall hash rate decline. And that's a major question mark I think for bitcoin. Once that is rising again, I think people will be happier to buy even if we're up off the bottom when it occurs.
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B
Makes you wonder if maybe a great investment right now would be bitcoin mining equipment.
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C
Yeah, it's been a graveyard. But one of our best stocks, one of our best stocks this year, there's this Taiwanese company, Global UniChip 3443 is the ticker in Taiwan. They're the largest design partner for the Asics manufacturers. So back in 2017, 20 Bitcoin ASICs were double digit percentage of their business. It's now very, very small because the Asics market's been so weak. But Global Unichip is now designing AI chips for Tesla or Google and the stocks tripled here over the last year. So it's a great example of how bitcoin and AI, they don't just share the electricity. You know, there's a common supply chain and for those suppliers that are able to serve both markets, a lot of optionality. So you know, Global Union chip is an example. Raspberry PI, that's been another one of our winners this year. You know, they make the cheap computers that people use to mine Ethereum and started out as a toy, just like Nvidia chips started out as a toy. Now 80% of their sales are to enterprise and those enterprises are using Raspberry PIs to perform inference, basic inference at the edge. That's an interesting story. So I like to look at these areas where the supply chains overlap, pay attention to valuation and try to compound at a lower volume than what of these altcoins do.
- [25:33]
B
When I asked you the bear case for Bitcoin, I noticed that you conspicuously left out the inevitable collapse sarcasm of Michael Saylor and strategy.
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C
Yeah, it's been a couple of years,
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B
that's what I've heard.
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C
Yeah, it's funny how leverage works. Feels really good on the way up and then you become a forced seller on the way down.
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B
And
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C
we'll see. Last week internally we were like, okay, well now the ball is in Saylor's court. He's going to have to make some decisions. And they did that over the weekend. I think those decisions were sound to sell some bitcoin, basically. But does that mean the stock should trade at a premium to nav? I mean, you're buying a hedge fund that can trade five things, its own capital stack and bitcoin. What PE do you pay for such a hedge fund? I pay very low.
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B
Yeah, I agree. I think that he said what he needed to say on Monday to kick the can far enough down the road that he ceases to be the main character for a while. And I think that that's what the market was. I just feel like we got over the past few weeks to a peak in nonsensical takes about how bad it was, given that he wasn't in a comfortable position. I'll concede that. But saying, listen, we've raised massive Runway and we can sit here and basically do nothing and wait out the market seemed like a very astute way to approach. Also, I kind of noticed that the messaging from strategy, not him specifically, although that counts, but from some of the others, the hubris disappeared over the past few days that had been there, you know, for the past few weeks, like they were really trying way too hard.
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C
Agree. I think I said it up to you a year ago. Was one idea that I had for these dats when all these stats were ipoing and merging is like they, they should have a living will in their prospectus that if the stock trades below the, you know, a certain M nav for a certain amount of time, that they will just unwind the company, sell the coins, management loses their job and you just return the cash to shareholders. And if, if that existed, you know, you might see these stocks trade a lot closer to. To the M Nav because the minorities would feel that they have a path to realize the value. And as someone who covered emerging for a long time, conglomerates in Asia, like, they can trade at 0.3, 0.4 times NAV for a long time. If minorities are observing entrenched management control, related party transactions, tax considerations to unwinding. So those are. It's through that lens that, you know, we've been underweight, those types of names.
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Yeah.
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B
So I know we're approaching time here. I mean, just broadly, what excites you right now about the space and what, where the market is likely headed? I mean, you talked about where you're obviously positioned. But I guess in a unicorn scenario, where would you like to be positioned a year from now?
- [28:47]
C
I still think bitcoin is going to be materially higher in one year. And if that's the case, we may lag some of our leveraged peers on the way up, but will do just fine. But I think a lot of the market is going to wait for some, for some fundamental catalyst to get more excited and people are okay missing the first 10 or 20%. If there's a piece of news that's really fundamentally positive, whether that's clarity. The White House has been teasing some progress on bitcoin strategic reserve now since Vegas and that that hasn't occurred. That could be something. And, and then the, the sovereign adoption I think is a. Is a continual story. We're now up to 22 countries that are either mining bitcoin or holding it at the sovereign level. It. It basically goes up by like one or two countries a year. If that trend will stop or reverse, that would force a reevaluation. If Bitcoin's not above its all time high by Q1 20, 28, that forces maybe a thesis rethink, but otherwise just stay the course. Don't get too excited either. Which way?
- [30:16]
B
Yeah, I tend to agree with all of that. Matthew, thank you so much for your time. I know that this was a little briefer, but I think we covered a lot of ground. So I really appreciate it.
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C
Yeah. Great to catch up. Scott.
- [30:29]
B
Speak soon. Thanks man.